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EXCEPTIONS TO THE RULE THAT EQUITY WILL NOT ASSIST A VOLUNTEER
THE FORMATION OF TRUSTS - COMPLETING CONSTITUTION
'equity will not assist a volunteer to complete and imperfect gift.'
Milroy v Lord  4 De GF & J 264
Three ways a voluntary settlement can occur:
1. Outright transfer by way of gift
2. Transfer to trustees to hold for another
3. Self-declaration and transfer by the self-proclaimed trustee accordingly
Incomplete constitution?If any act remains on part of the trustee, to make the conveyance effectual, the trust will not be completely constituted, and the court will not complete it
Exception:If the trust document contains a self-declaration by the settlor the settlor has done everything in their power to complete the trust and some further step is to be done by a third partyO'Flaherty v Browne  2 IR 416, 434A voluntary trust may be created by a declaration of trust, or by a complete assignment of the legal ownership to a trustee, but it is impossible to turn an incomplete, conditional or postponed gift into a trust, where there is no intention to create the relationship of trust and' trustee.
THE GENERAL RULE
Milroy v Lord  4 De GF & J 264
Testator executed a voluntary deed (no consideration) whereby he purported to transfer 50 shares from a bank to the trustee to hold on trust for Ms. Milroy.
Transfer of the shares required entry in the books of the bank itself. It had to be a written entry. This never happened. Handed over the deeds to the trustee but at the date of death the shares remained in the testator's name.
To render a voluntary settlement valid and effectual,The settlor must have done everything which, according to the nature of the property…was necessary to be done in order to transfer the property and render the settlement binding upon him.'Didn't do everything in his power required for transfer of that specific type of property
The methods: self-declaration, outright transfer, declaring another a trustee - are mutually exclusive.If a transfer is to take place but never did, the court will not declare a trust because it would mean 'every imperfect instrument would be made effectual by being converted into a perfect trust.'
Richards v Dellbridge 1874 LR 18 Eq 11
Mr Richards employed his grandson Edward. He wrote on the back of a memorandum for a leasehold - 'this deed and all thereto belonging, I give to Edward.' The title was not formally transferred though... This was an imperfect gift, therefore. Claimant Gson was trying to argue that the leasehold was held on trust for him, but there was no mention of the lease in the will either.Not an effectual transfer for that type of propertyHe either could have properly transferred it by deed of transfer or said, 'this deed…I
declare___to hold on trust for Edward,' which would allow a trustee to then finish the transfer. But he hit the limbo which rendered the transfer impossible. Imperfect gift will not be completed
Re Rose  Ch 499
Testator transferred the shares effectively however the company fell-short in registering the shares,
and it the legal title thus was not technically passed over.Mr. Rose did properly execute the share transfer form and delivered it with the appropriate certificate to his wife, who was then entitled to have the shares registered in her name.Gift is valid in equity from the time the donor does everything he is obliged to do to constitute the property
Milroy distinguished:The uncle had not done everything in his power to transfer titleIf there is only a bureaucratic step to be done and this remains in the hands of a third-party
- courts will construe the trust as having been completely constitutedSettlor did everything in his power, correctly, to transfer the titleTransferor regarded as Trustee of the property for the Transferee pending the action of a third-party THE CASE LAW
Re Fry  Ch 312
Concerned a resident of America who was the donor of shares in a British Company. He wished to transfer to his son. To do so required permission of the British Treasury. He completed the transfer form in favour of his son however he died before the treasury gave him permission. Argued that while he still held legal title, the equitable title passed to his son when the forms were submitted.Beneficial title didn't pass until the donor obtained (rather than just applied for) permissionThere is a chance the treasury may have asked for further information -thus the donor, by failing to provide that info may have had an opportunity to evade his own gift.
Very anti-intention, contingent and hypothetical, would probably be decided differently post-re rose.
Re Kayford  1 All ER 60
Mail order company. accountants instructed company to pay money into a separate bank account and pay money into it for goods not delivered to the customers who they were worried would not get their goods before insolvency.
Withdrawal could only be on the basis that the goods were delivered.
Went into liquidation and the day after receivership, the accountants realized that the company didn't follow the instructions and kept it in a dormant account under the company's names. The accountants thus rang the bank and demanded them to change the name to the customer's trust deposit account.
Court analysed the actions - are they trust funds or for normal creditors?
McGarry JWriting not essential to create a trust
Looked at the certainties: intention, beneficiaries, and subject matter all certainSeparate bank account not essential to transfer title. Everything else was clear.Segregation not necessary where the subject matter otherwise clear.
Mascall v Mascall  EWCA Civ 10
A father executed a registered land transfer document to gift the land to his son. He handed this,
with the land certificate, to the donee - legal transfer has now passed. However, the father later reacquired the land certificate - thus putting him in a position to not go ahead with the gift. He had a falling out since giving title to the son, so wanted to revoke the gift.Re Rose applies to landAs soon as the donor had executed the form and handed the certificate to him, the gift was complete in equitySon was ordered to hand over the land certificate to the son so the latter could complete the transfer of the legal title into his own name The transfer was completely constituted when there was nothing left to be done.
Re Challoner CHD 22 Oct, 1997.
A member's club was in difficulty. Membership was via subscription, and when the company fell into arrears it had informed all customers that any payments would be deposited into a segregated bank account and would not be touched until the future of the club was known.
Money was transferred into the designated account. The company subsequently went into liquidation, and the liquidator was applying for directions as to whether the money was available for other creditors or whether it was trust property for the benefit of customers.Kayford distinguished on the basis of certainty.The circumstances in which the payments would become unconditional had been referred to in several different ways and were inadequately defined.Uncertain as to subject matter - given the difficulties of the future of the club etc. it would've been extremely difficult for the directors to be able to spell all of the circumstances in which the funds coming in could be spent.Where did the beneficial interest line stop for the members and what could be used for the club, basically.
McArdle v Donohoe unrep 1999
Created a trust fund but never taken any steps to transfer the money into it.No self-declarationNo transfer of the trust property to the trustees
So, gift - but didn't complete all the steps and equity will not perfect itYou can enforce a trust if you pay consideration to the settlor to compel enforcement of a trust that is incompletely constituted
Choithram International SA v Pagarani  2 All E.R 492
Rich businessman intended to transfer almost the entirety of his wealth on trust shortly before his death. Having just executed a deed of trust establishing a charitable foundation and declaring himself a trustee, he orally indicated that he 'gave' (gift) all of his wealth to the foundation. He never properly executed the documents - failed to transfer the shares into their names. He didn't do all he could've done, so the gift is on its face - imperfect.
This case is novel. It falls between valid methods of transferring title e.g. either by way of a gift where it has been effectively transferred or by trust. It couldn't possibly be a gift because he expressly intended to create a trust. However, the trust deed wasn't executed in order to vest title in anyone. words are precatory as he said, 'I give'. In neither case has the title been constituted completely. The courts said this is a gift on trust and he is a trustee instead.Interpreted his words of gift as a declaration of trustsThe trust was perfectly constituted because he himself was a trustee - thus, the trust property was properly vested
As trustee, conscience was bound to give effect to the trust and thus it could be enforced by beneficiariesBy saying, 'I give all of my wealth to the foundation' - declaring himself a trustee - meaning he was holding it on trust for them.
While equity will not perfect an imperfect gift,It will not go out of its way to construct an obstacle if its unconscionable to prevent an otherwise valid trust
Pennington v Waine  4 All ER 215
The deceased wished to transfer 400 shares in a company to her nephew.
Signed the transfer form, gave it to company's auditor. He placed the signed transfer form in a file and took no further action prior to her death. He wrote to Harold to inform him that the firm had been instructed to arrange for the transfer and that he need not take further action.
In the will, no specific mention of the gift. The transfer form was never actually delivered. Was the gift effective when the form was given over and signed?Valid applying Re Rose - but went even furtherPlainly intended to make a gift of the shares and the delivery of the share transfer certificate not necessaryMerely passing a transfer form to one's own agent sufficient to allow the courts to give effect to a gift, even though legal and equitable title remain with the donor.
In Re Rose - the transfer did happen it just wasn't registered. Here, the transfer never happened.
Goes beyond Choithram because he was a self-declared trustee so the property was vested.Main basis is unconscionability - of which there can be'no comprehensive list of factors which makes it unconscionable for the donor to change his or her mind: it must depend on the court's evaluation of all the relevant considerations.'
The principle that the court will not perfect an incompletely constituted trust can be transgressed:The courts will try to give a favourable construction even if benevolent, 'if that interpretation is permissible as a matter of construction.'The objective of the principle that equity will not perfect an imperfect gift, is based on the rationale that donors can and should be allowed to 'change their minds at any time before it becomes completely constituted.'
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