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FORMALITIES (If a person wants to give the benefit of their property to…
FORMALITIES
If a person wants to give the benefit of their property to another, there are 3 basic methods Milroy v Lord (1862)
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- transfer legal title to a 3rd party to hold on trust for B 'transfer on trust'
- Retain legal title but declare that he holds it on trust for B 'self dec of trust'
In each of these cases, A begins as sole legal and beneficial owner but not eq owner as no need to separate eq titke when already legal title owner absolutely
Also, B becomes the sole beneficil owner of the property. in example 1, no need for separate eq title as B is sole legal and beneficial owner. HOWEVER in 2 and 3, a new eq interest is created in favour of B as no one is holding the legal title on trust for B
Once a trust has been formed for B, equity recognises B has property right under trust. B is therefore able to deal with his eq interest in the same way A dealt with legal int
B might: 1. assign interest to C (effectively making a gift of); 2. direct T to hold his interest on trust for C instead of B; 3. Contract to sell his eq interest to C for valuable cons; 4. Declare himself a trustee of his equitable interest for C; Direct T to transfer legal title absol to C
Under this chap, we are considering formalities of creating new eq interest or dealing with Bs subsisting eq interest. Not considering requirements for dealing with legal title
Declarations of Trust
if a person wishes to create a trust on death, they must comply with s9 Wills Act 1837. All testamentary dispositions must be in writing, signed by testator in presence of two witnesses present at same time, who must attest their witnessing of the signature. In Paul v Constance, we saw they can be declared informally unless there is a specific requirement for them to be declared in writing, which is the case for transfers on trust and self decs of trust . All that is needed for creation of eq interest is compliance with 3Cs (transf won't take effect until validly constituted)
Land
S53(1)(b) LPA 1925 states trust of land requires some evidential writing before recognised by courts. Not necessary to consider in context of testamentary trusts because requirements of s9 Wills Act 1837 are more stringent (would automatically comply). Non-compliance with 531b will render unenforceable, not void which means poss to declare trust orally but later provide evidence of the dec in signed writing (also applies to self decs of trust). (in addition to constitution)
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DIRECTIONS TO TRUSTEES
Grey v IRC trustee held 18,000 hares on bare trust for Mr Hunter. Orally directed trustees to hold shares on trust for his grandchildren. Hunter and his trustees later executed a deed confirming the benifical int was now held for gchildren instead of Mr Hunter. Intended via oral dec as if he had assigned, he would have received large tax billl. In Rev challened validity of oral dec claimed none compliance with 531c and therefore void. HOL agreed seeing no diff between direct assignment to a new ben and a dirction to Ts to hold trust property for new ben. CONCLUDED: eq int passed under later deed
Contrasts Vandervell v IRC. V was sole b of a trust of shares. Legal title to shares held by bank. V orally instructed bank to transf shares to Royal College of Surgeons. IR challened validity of direction, arguing non-compliance with 531c. HOL rejected first argument . OUTCOME: where a trustee holds property on bare trust for a B and that B instructs the trustee to transf property absolutrly to a 3rd party, transfer of legal title will take the ben int with it and no separate written disposition of eq int necessary.
The differnce between the cases is that in GREY the legal title does not change but eq title passes from one person to another- clear disp of int and must comply with 531c. Vandervell, legal title DOES change hands and eq title goes with. No trust at end of transaction. There is simply an outright legal owner who does not require protection of 531c. BUT, it is necessary for that tranfser to be perfected as it is legal title
Declaration of sub-trust
Where a B under an existing trust declares self as trustee of eq it for a 3rd party, B is in effect creating a sub-trust . Key issue is whether a sub-trust amounts to a disposition of B's ben int. Nelson v Greening Sykes Builders Ltd suggests that subtrusts amount to decs of new trusts, rather and disps of subsisting eq int. Also in Sheffield v Sheffield- supports that 531c does not apply to subtrusts
BUT there is also an argument that 531c should always apply to subtrusts as they always entail a PARTIAL disp of bs subsisting eq int. BUT this is generally not the view courts take
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