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Trust Formalities - Coggle Diagram

- - - - Notice in writing to the debtor or to the bank s 136 LPA 1925
      - Legal title passes once notice has been received
    - - Or (ii) by delivery of the chattel with evidence of the transferor’s intention to transfer it
      - Re Cole
      - Either (i) by deed of gift
    - - Common for the company to require the share certificate or an indemnity in respect of the transferor’s ownership
      - Legal title passes when the transferee is registered in the company’s internal register of members
      - Transferor signing a stock transfer form and sending it to the company
    - - Transferred to a third party (i.e. someone other than the named payee) by the transferor endorsing the cheque by signing their name on the back
      - According to the Bills of Exchange Act 1882
    - - Registered with the Land Registry under s 27 LRA 2002
      - Legal title passes on registration of the new owner at the Land Registry
      - Made by DEED under s52(1) LPA 1925
  - - - The donee has legal title, the donor has no more rights to that property and cannot ask for it to be returned
    - - Trustee has legal title and holds it on trust for the beneficiary
  - - - In a lifetime trust, egal title must be transferred using the correct method
    - - When distribute the estate, personal representatives must transfer legal title to recipients of any testamentary gifts and the trustees of any testamentary trusts
      - If personal representatives also appointed trustees, will already have legal title and will hold it in their capacity as trustees
      - At death of the testator, personal representatives must obtain legal title to the testator’s estate
      - If a trust is created in a will, constitution will take place via the will
  - - - "Equity will not assist a volunteer" by compelling the settlor/donor to transfer legal title to the trustee/donee.
    - - If legal title has not passed to the donee the gift is imperfect and the donor can change their mind
    - - If trust property is NOT vested in the trustees, the trust is incompletely constituted and is therefore VOID
  - - - Transferor did not intend to take on the obligations of trusteeship and should not be treated as having done so
    - - They did not intend to take on this obligation and will not be treated as having done so
    - - Transfer on trust
      - Self declaration of trust
      - Outright gift
  - - - Effective declaration of trust was found despite the fact that Mr Constance was seemingly unaware of what a trust was
    - - Fact settlor not transferred legal title to all the trustees did not prevent the shares being held on the terms of the trust
      - He was a trustee and it would be ‘unconscionable’ for him to deny shares were subject to the trust
      - Reasoning
        
        Straightforward transfer on trust to independent trustees
        
        Settlor transferred legal title to one of intended trustees, this would constitute the trust
        
        Trustee would be required to ensure legal title was vested in their co-trustees
        
        Self-declaration of trust
        
        If sole trustee, trust would have been a self-declaration which would be automatically constituted
      - Settlor had legal title, trust was automatically constituted upon declaration, putting him under a duty to vest the shares in his co-trustees
  - - - The transferor had done EVERYTHING WITHIN HIS OWN POWER to effect the transfer
      - The documentation ended up in the HANDS OF THE PERSON CAPABLE of effecting the legal transfer
      - The CORRECT METHOD of transfer had been used
    - - Not necessary for the transferor to send the documents to the person capable of completing the transfer
      - If the correct method of transfer has been used, the transfer will be irrevocable if the transferor puts the matter BEYOND THEIR OWN CONTROL
      - Extended Re Rose to registered land
    - - Unconscionability?
        
        Arden LJ said that there could be no comprehensive list of factors that make it ‘unconscionable’ for the donor to change his mind
      - Difficult to reconcile and relies heavily on Choithram v Pagarani ‘unconscionability’
      - For Re Rose or Mascall v Mascall to apply, Ada should have done all in her power to transfer ownership to Harold BUT document with her own agent, an extension of herself, and so she could revoke her decision at any time
      - Zeital v Kaye and Curtis v Pulbrook suggest it will only be followed where the facts are similar
      - Equity would perfect an imperfect gift in any situation where it would be UNCONSCIONABLE for the donor to resile from it
      - Doctrine of proprietary estoppel
        
        DETRIMENT
        
        If proprietary estoppel is established, the claimant can bring an action against the defendant
        
        RELIANCE
        
        Court has a discretion to award the remedy which it considers most appropriate
        
        Unlike Re Rose, proprietary estoppel does not necessarily give rise to a constructive trust
        
        ASSURANCE
    - - Re Fry
        
        Matter was within the control of the transferor
      - Zeital v Kaye
        
        NOT done everything in his power to transfer his interest
        
        Handed over the stock transfer form signed by the registered shareholder but not the share certificate
      - Sent the documents to their own agent e.g., solicitor/ accountant, NOT be sufficient as agency is revocable
  - - - Strong v Bird will apply even if the intended recipient is one of several executors
      - Conditions:
        
        Intention must continue until the donor’s death (Re Gonin)
        
        Intended donee becomes an executor (or one of the executors) of the donor’s estate (Re Stewart)
        
        Intention to make an immediate gift (Re Freeland)
      - Extended the principle in Strong v Bird
  - - - The gift is CONDITIONAL on death
        
        It is not intended to be fully effective until then and can be revoked before death
      - There is DELIVERY of the property
        
        The donor must part with ‘dominion’ (control) of the property by handing it or something which represents title (not simply possession) to the donee- Sen v Headley
        
        Chattel
        
        Delivery (with intention) is sufficient to pass title to the donee and entitled to keep the property after the donor’s death
        
        Other property (e.g. land, shares or bank accounts) more must be done to transfer title
      - The gift is made in CONTEMPLATION
        
        Though not necessarily expectation
        
        Death from an identifiable cause which the donor believes to be imminent
- - - - Complies with s. 9 Wills Act 1837
  - - - Seek directions from the court if trustees consider doing so
  - - - Settlor can choose NOT to create the signed, written evidence of the declaration
      - Absence of any facts rendering it UNCONSCIONABLE for settlor to deny the trust (such as proprietary estoppel) the beneficiary will NOT be able to assert any interest in the land
    - - Settlor changes their mind and makes no attempt to constitute it, the trust will not only be UNENFORCEABLE under s53(1)(b) but also VOID for lack of constitution
        
        Subject to any additional circumstances which may make it unconscionable
      - Settlor transfers legal title but does NOT comply with s 53(1)(b) it would be prudent for the trustee to seek directions from the court as to their obligations
  - - - Settlor’s intention
      - Terms of the trust
- - - - Declaration of the trust (i.e. creation of the beneficiary’s interest)
      - Constitution of the trust (i.e. vesting the trust property in the trustee)
    - - Exceptions
        
        Charitable purpose trusts
        
        Non-charitable purpose trusts
    - - Online Trusts Registration Service (‘TRS’)
      - Obligation for express trusts which have incurred a tax liability in a given year
      - Obligation upon the trustees of the trust, rather than the settlor, and also to keep the information up to date
    - - Certainty of SUBJECT MATTER
      - Certainty of OBJECTS
      - Certainty of INTENTION
- - - - Meaning is ascertained by reference to:
        
        Any relevant contextual features of the document
        
        The facts which were known to or assumed by the author(s) of the document when it was created
        
        Their natural and ordinary meaning
        
        Common sense
      - Intention of the author(s) of a document is ascertained by identifying the meaning of the words used
    - - A transaction characterised by the transacting parties as a trust is not conclusive as to its nature
      - A transaction characterised as something other than a trust does not prevent it taking effect as a trust if it generates the duty which is characteristic of a trust
      - Good indicator that a person intends to create one
      - Nature of relationship/ transaction determined by reference to the substantive rights and duties it creates NOT how is characterised by the parties
    - - Neither necessary for creation of a trust nor conclusive evidence a trust is intended
      - Must be considered within the specific factual context
      - Good evidence of an intention to create a trust
  - - - Problems
        
        Identifying subject matter by description
        
        Company cannot create a trust of its ‘net assets’ because ‘net assets’ does not describe any specific property of the company (Wilkinson v North)
        
        It is not possible to ascertain how much of a residuary estate constitutes the ‘bulk’ (Palmer v Simmonds)
        
        Trust will fail for uncertainty if it is not possible to ascertain the trust property from the description
        
        Identifying subject matter out of larger mass
        
        Fractional interests
        
        Provided the wider mass of assets has been clearly identified
        
        NO problem with creating a trust over a fractional interest of a wider mass, regardless of the nature of the property
        
        Specific number of items from larger mass
        
        Fungible and non-fungible
        
        Fungible assets are identical and readily exchangeable e.g., ordinary shares
        
        Non-fungible assets do not have the same value and are not interchangeable e.g., diamonds
        
        Tangible and intangible
        
        Tangible assets are physical assets e.g., diamonds/ cash
        
        Intangible assets do not exist in physical form e.g., shares/ intellectual property rights/ debts
        
        Distinguish between tangible and intangible assets
        
        It IS possible to declare a trust over a specified number of INTANGIBLE, FUNGIBLE assets forming part of a wider bulk without identifying the specific assets forming the subject matter of the trust
        
        It is NOT possible to declare a trust over a specified number of TANGIBLE assets forming part of a wider bulk, whether or not they are fungible, unless the specific assets forming the subject matter of the trust are identified
      - Where a trust is created by transferring assets to a trustee, the trust property is the assets transferred
      - The assertion of an equitable PROPERTY RIGHT is futile unless it is possible to identify the property against which the right is being asserted
      - The DUTY to hold property for beneficiaries or to apply it for their benefit is meaningless unless it is possible to identify the property to which it relates
      - A trust is characterised by 2 principal features: a DUTY and a PROPERTY RIGHT
    - - Objective assessment
        
        What constitutes a ‘reasonable income’ is more difficult and turn on specific facts
        
        Trust valid on the basis that ‘reasonable income’ is an ‘objective yardstick’.
      - Power to determine beneficial entitlement
        
        Make clear what would happen to property if C couldn't/ wouldn't exercise the power e.g., default power to trustees
        
        A trust can fail for certainty either when it is initially declared or, subsequently
        
        If C dies before making the selection, trust will fail because no longer possible to ascertain what beneficiary entitled to
        
        Initially no problem because there is a mechanism for determining beneficial entitlement
      - To the extent that it is not possible to do so, the trust will fail
      - It must also be possible to ascertain the nature and extent of the beneficiary’s interest in that trust property
  - - - Equal distribution between class
        
        Trustees must know who ALL the beneficiaries are at the time when begin distributing the trust fund
        
        COMPLETE LIST TEST: it must be possible to draw up a complete list of all the beneficiaries (IRC v Broadway Cottages Trust)
        
        Some fixed trusts require trustees to distribute property equally between the members of a class of objects
        
        It follows that such trusts require both conceptual and evidential certainty
      - Conceptual certainty
        
        The precision of language used by the settlor to define the class of persons whom they intend to benefit
        
        If the objects are NOT clearly defined, NOT be possible to draw up a conclusive list and the trust will FAIL
        
        AKA "linguistic" certainty
      - Beneficial entitlement
        
        If identifiable beneficiaries have a beneficial entitlement not dependent upon the entitlement of the uncertain beneficiaries, they can still take their interest
        
        If a fixed trust intended to have multiple beneficiaries, but uncertainty to identity of one or more of those beneficiaries, the trust will not necessarily fail completely
        
        The beneficiaries and their individual entitlements are "fixed"
        
        A fixed trust is a trust in which the settlor sets out the entitlement of each beneficiary in the trust instrument
      - Evidential certainty
        
        The extent to which the evidence enables the trustees to identify the objects
      - If there is uncertainty, the trust will fail (in whole or in part)
      - The trustees must know exactly who is to benefit (certainty of objects) and how much they are to receive (certainty of beneficial entitlement)
      - A greater degree of certainty is required because the trustee is required to divide the property exactly as the settlor has instructed
    - - Conceptual certainty IS still a requirement
        
        If the definition is unclear, there will be categories of people of whom it is not possible to say with certainty whether they are intended to be objects or not
        
        Potential claimants will not be able to determine whether they have a right to compel proper administration of the trust
        
        If there is an allegation that trustees have made a distribution to someone outside the class, the court will not be able to say whether the trustees have acted inside or outside their powers
        
        Trustees will not be able to properly survey the class and will not know the scope of their powers or duties
      - Is/is not test
        
        Able to say with certainty whether ‘any given individual is or is not a member of the class’
        
        The ‘any given postulant’ test
      - Evidential certainty
        
        If they cannot prove that they are in the class, they are considered to be outside it
        
        The trust would be valid, notwithstanding the presence of some degree of evidential uncertainty
        
        Sachs LJ indicated it is for the claimant to prove to the trustees’ satisfaction they are within the class
      - The extent depends upon the breadth of the class of objects
        
        Small family trust: consider every individual before exercising the power
        
        Large commercial trust: not necessary to actively consider every single object before exercising the discretion in favour of a particular individual
      - Rather, trustees must carry out a survey of the class which is appropriate to the particular trust
      - Courts can apply a less stringent test of certainty because trustees are not required to divide property between all the objects, and thus do not need to be able to identify them all
      - Administrative unworkability
        
        In McPhail, Lord Wilberforce said that a discretionary trust is VOID if the class of beneficiaries ‘is so hopelessly wide as not to form “anything like a class” so that the trust is administratively unworkable’