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I.e. the making of a trust

Milroy v Lord
Turner LJ, there are three ways you can give property away:
1. Outright gift
2. Transfer property to trust

You can make yourself trustee for the benefit of beneficiary

Constitution= refers to the giving or transfer of legal title from one person to
1. Trust property must be vested in trustee

A trust will be properly constituted when


Settlor has vested the legal title to the trust property in the

Or he declares that he now holds property as trustee

(a) Settlor wishes to be trustee:

Of property already in his hand, the court must be satisfied that the
subject matter of the trust is clearly identified and segregated from
their other assets. A present binding declaration of trust has been
made complying with the requisite formalities.

Declaration need not be literal, what is necessary is some form of

expression which in the circumstances shows that he intended to
constitute himself trustee and another person beneficiary even if he
didnt know that the obligation he was creating amounted to a trust.

(b) Settlor wishes another to be trustee.

Should comply with all formality requirements governing transfers of

the relevant type of property.

(a) Inter vivos transfers of legal interests


Three examples:
1. Land- s52(1) must be made by deed, s1 of LMPA tells us of the
requirements of a deed
2. Chattels- by deed or by an intention to make a gift AND delivery (Re

Shares in a private company- Companies Act 2006

LPA 1925, ss 52, 136

If the subject matter of the trust is legal title to land, then conveyance
to trustees must take form of a deed.

If registered land then the transfer must be entered into Land Register
LA 20002 ss29 annd 30

Copyright Act 1988, s 90(3)

Must be done by writing

Bills of Exchange Act 1882

Legal title of chattels must be transferred by delivery or by deed of a

gift, a bill of exchange must be transferred by endorsement.

Companies Act 2006, Pt 21

Law of Property (Miscellaneous Provisions) Act 1989, s 2
(b) Equity will not assist a volunteer

Mere recipient of property who doesnt give consideration= no


Ineffectual transfers wont be reinterpreted as effectual declarations.

Once a trust is completely set up validly, the fact that a

beneficiary gives no value is irrelevant. Unless the settlor
expressly reserves a power to revoke the trust at the time when
he created it, the settlor cant undo a completely constituted
trust or revoke it on the basis that the beneficiaries are merely

But if the trust hasnt been completely constituted the position is


Milroy v Lord (1862) 4 De GF & J 264 (HM 231)

Facts: a deed created purported to transfer 50 shares in a railway

company to Lord(L) to hold on trust for Milroy(M). Transfer was meant
to be carried out through an agent, no reregistration of any transfer
had happened= M had no rights to the shares. M tried to argue that
the intention of the transfer to L ought to mean that the current owner
ought to be considered trustee of the shares.

Held: ineffective gift doesnt constitute a declaration of trust

without there being clear intention to create a trust in this way
(Re Rose challenges this)

No matter how clear there may have been an intention to create a

voluntary trust by transferring property to trustees, if the intending
settlor has an ineffectual method of transfer, then transaction will not
be reinterpreted by court as an effectual declaration of trust with
settlor as trustee

Turner LJ- in order to render a voluntary settlement valid and

effectual, settlor must have done everything necessary to
transfer the property and render the settlement binding on him

When does this not count:

Pullan v Koe

A person isnt a volunteer if they provide value or can bring themselves

within a marriage consideration, equity will help by treating settlor as
having done that which ought to have been done and impose a
constructive trust.

An intended beneficiary who ISNT a volunteer can enforce settlors

promise because he simply doesnt fall under scope of the rule.

Richards v Delbridge (1874) LR 18 Eq 11

Facts: Delbridge was a tenant of premises from which he carried out

business. He was assisted by his grandson Richards, a minor. Shortly
before his death, he endorsed and signed the following memorandum
on the lease: This deed and all thereto belonging I give to Edward

Bennet to Richards, from this time forth, with all the stock-in-trade. He
then gave the document to the boys mother to hold for him. On his
death there was no mention of property.

Held: there was no effective transfer of the lease because it wasnt

under seal (requirement no longer exists). Moreover there was no
declaration of a trust.

Jessell- for a man to make himself trustee, there must be an

expression of intention to become a trustee.

(c) Exceptions to the rule that Equity will not assist a volunteer
1. Proprietary estoppel(dont need to know)
2. Rule in Re Rose

Rule in Strong v Bird

1. Doctrine of donation mortis causa

(i) The rule in Re Rose
Re Rose [1952] Ch 499

Facts: A wanted to transfer shares to B, A take out a form and signs it

in Bs favor and gives it to the companys registrar, but surprise A dies
before the company registers B as the new owner, does so after A has
died. So when did B become owner of the shares?

CoA: equity sees as done that which ought to be done

Principle: Applying this maxim: once A has done everything in his

power to give their property away, effect = A holds as trustee for B on
a constructive trust until B is registered. So the courts will intervene
and remedy the actions of a donor who has done everything within
their own power necessary to transfer the gift, even if acts to be
performed by third-parties have not yet been completed.

Correct method of transfer must be used- this case related to

shares= so stock transfer form was correct

Documents must end up in the right place- in this case

documents went to the company registrar.

Re Fry [1946] 1 Ch 312,

Similar type of facts, but consent needed to be received and transferor

died before this consent was ever received. Court said doesnt count
because such consent may never have been given.

Mascall v Mascall (1984) 50 P & CR 119

Watered down Re Rose

Facts: father wanted to transfer legal title to son, father filled in all
relevant documents and gave them to the son, the son hadnt logged
the documents with the land registry. They fall out and father says give
them back, son says no lets go to court.

Father used correct method, did everything in his power BUT the
documents didnt end up in the right place.

CoA: the rule in Re Rose still applies because the father was now
unable to revoke the documents- the son had them and he
couldnt do anything to interfere

Pennington v Waine [2002] 1 WLR 2075 (HM 232)

Relaxes the rules mentioned so far even more- watered down

requirement in a sad way. Terrible case. She was an old lady= maybe
sympathetic interpretation of the facts.

Facts: Mrs Crampton, a shareholder in a private company, told

Pennington, a partner in a firm who acted for the company, that she
wished to transfer some of her shares to her nephew. She wanted him
to be director and company rules say you can only be a director if you
owned shares. She later signs a share transfer form to this effect and
gave it to Pennington who was the company accountant (NOT the
company registrar). Pennington was supposed to give it to registrar,
but he just files the files away and does nothing. Pennington told the
nephew theres nothing else you need to do, you can be director now.
Pennington took no further action

Issue: Harold (the nephew) took on the role of director at her death,
but had the shares been transferred to him?

Under a constructive trust he wasnt a beneficiary as Mrs C

hadnt done everything in her power to transfer the power,

Pennington was only acting as an agent, she never told the


CoA: yes the shares had been transferred. But reasoning differs in the
two main judgements:

Arden LJ: upheld Re Rose, and held that the fact that there was
clear evidence that Mrs C intended an immediate gift of the
shares amounted to an assignment of them to the nephew
anyway. On the facts it would be unconscionable in view of all
that she had done to transfer the shares to then turn around and
change her mind and say that they were not his.

Test for Re Rose= unconscionability- Arden LJ doesnt

define what this means

Clarke LJ: differed but concurred on the result

Either the settlor must have put it out of his power to stop
the transfer proceeding, or else circumstances akin to
proprietary estoppel must make it unconscionable for him
to insist on ownership of the relevant property

(but cf Zeital v Kaye [2010] EWCA Civ 159)

Principle applied to an attempted transfer of beneficial interest in

shares where on the facts transferor hadnt done everything in his

Pennington should be confined to its facts i.e. cases that are similar

So what are the material facts of Pennington- no clear answer

One suggestion: where A, or their agents make a representation

or statement to B and B relies on this detrimentally= a
constructive trust will arise

Sounds like proprietary estoppel, is this what Arden LJ was

basically doing?

T Choithram International SA v Pagarani [2000] 1 WLR 1

Facts: Pagarani dying from illness executed trust deed establishing

foundation that would act as an umbrella for four charities of which he

had established. Immediately after signing, he stated that all his

wealth, including shares in a number of companies would now belong
to the trust, he himself was one of the trustees. He told his accountant
to transfer all his money to the trust but failed to assign the necessary
forms, and to duly register the trustees of the foundation as
shareholders in the companies in which he held shares. After Pagarani
dies his family claim he hadnt effectively transferred his wealth to the
foundation, so it accordingly belonged to them.

Privy council: the trust was properly constituted and decision rests on
two points:
1. Pagarani had made a declaration of trust- didnt use the word
trust and his actual words seemed to indicate a gift but the
context of the words clearly indicated a trust- he intended to give
to the foundation
2. It didnt matter that the trust property wasnt vested in the other
trustees as Pagarani had executed a solemn declaration of trust
and it would be unconscionable to allow him to go back on his

(ii) The rule in Strong v Bird

Originally case applied in case of creditor and debtor

Strong v Bird (1874) LR 18 Eq 315

Facts: creditor owed money by debtor. Creditor appoints debtor as

executor = debtor takes legal title of the estate, debtor hasnt repaid
the money but gets title of Cs estate because hes executor= rule
debtor is to be released from the debt= its a rule about forgiving


A mustnt change his mind (Re Gonin)

B must be executor or one of the executors of As estate (Re


An executor is chosen by testator inference= A intends for B to

get the property. As intention in making B executor justifies the

Common law treats the appointment as extinguishing or releasing the

debt- in this case court of equity decided common law should prevail=
executor didnt have to account for the debt

What is traditionally known as the rule in Strong v Bird has now

developed into the principle that:

An imperfect immediate gift of specific existing real or personal

property will be perfected if the intended donee is appointed the
testators executor or administrator alone, or with other so long
as the intention to make the gift continues until the testators

Rule: if an incomplete gift is made during the donors lifetime and the
donor appointed the donee his executor, then the vesting of property
in the donee completes the gift

Re James: extended the rule to administrators

Re Stewart [1908] 2 Ch 251

Strong v Bird extended by Neville LJ

Negatively left the situation as it was at law, since he positively

treated the gift as effective though the law did not, so perfecting
an imperfect gift made by the testator in his lifetime to his wife
who was one of his appointed executors. He said:

Where a testator expressed the intention to make a gift of

personal estate to one who upon his death becomes his
executor, the intention continuing unchanged, the
executoris entitled to hold the property for his own benefit
1. Vesting of the property in the executor at the
testators death completes the incomplete gift made
in his lifetime
2. The intention of the testator to give the beneficial
interest to the executor is sufficient to countervail
the equity of beneficiaries under will

This case has been followed many times at first instance

and treated as good law by CoA.

Re James [1935] Ch 449

This case extended Stewart

Farwell LJ: housekeeper by the fact that she was appointed as one of
the administrators had the right to the property when the donor died
intestacy, as equity didnt need to step in and perfect her title.

e. the rule in Strong v Bird will apply even if B is the administrator of

As estate, this is problematic however.

A doesnt choose B, the court does.

Its a rule based on intention. But Re James says that if fortuitous

by luck of draw B is chosen= gift passes.

Re Gonin [1979] Ch 16

Extension to administrators in Re Stewart doubted in this case, in

obiter by Walton J and rejected by the British Virgin Islands CoA in Re

After all it is the voluntary act of the testator in appointing his debtor
as his executor that extinguishes the debt at law, so that the fortuitous
appointment by the court of an administrator who was a debtor of the
intestate didnt extinguish the debt. And so Strong v Bird wouldve
been differently decided if the D had been an administrator and not an

However the reasoning of Neville J suggests that, what, perhaps,

should more aptly known as the rule in Re Stewart is only
concerned with the acquisition of legal title like the tabula in
naufragio plank in the shipwreck doctrine. This doctrine confers
priority upon later equitable interests whose owners somehow
manage to obtain the legal estate

Walton- reluctant to follow Re Gonin

Whether or not the rule in Strong v Bird can be extended to the constitution
of trusts:
Re Brookss ST [1939] 1 Ch 993

Facts: mother creates trust makes Lloyds Bank trustee for her son.
Trust is such that from time to time, mom can add property to the
trust. The son sets up a separate trust naming the same bank as
trustee for his own family (wife and kids), and feeling very generous he
makes an enforceable promise to voluntarily transfer any property that
he receive from mom in his own trust, to the trust he created for his
family, automatically.

Issue: Mom did give lots of property, question arose, since the
trustees were the same could we say that the moment mom gave
property to Lloyds, the property was automatically constituted to the
other trust?

Justice Farwell: no you cant because the only person that can
constitute a trust is settlor himself, so until and unless the son puts it
on trust the property was the sons absolutely.

Principle: if A intending to make a gift of the beneficial interest to C,

fails to comply with formality requirements = he cant be forced to
make good on his previous intention by perfecting his imperfect gift.

What if A dies?

Re Rallis WT [1964] 1 Ch 288

Bad Case

Facts: father creates trust naming a set of trustees for two

beneficiaries M and H. M takes for life and H for remainder. H promises
to assign what she had to a different set of trustees on trust for some
other beneficiaries. H died, then M died- M only has a life interest so
that interest terminates and although H is dead it should go to Hs
estate. There was a coincidence that the trustees all died as well (Hs)
and there was only one person surviving.

Barclays J: obiter-if he were asked the question we could say the rule
in Bird applied but Re Brooks wasnt cited by him

Principle: where the imperfect gift is to trustees and one or more of

them is appointed the donors executor, this should perfect the trust,
the equity of the beneficiaries under the intended trust of the property
being sufficient to countervail the equity of the testamentary residuary

(iii) Donationes mortis causa (in outline)

Death bed gifts:
Essential requirements for DMC to apply:
1. The donor must have made the gift in contemplation though not
necessarily in expectation of death
2. He must have delivered the subject matter of the gift to the donee or
transferred to him the means or part of the means of getting at the
subject matter. E.g. delivering a key, like car key, or a key to a box
containing essential indicia of title, intending to part with dominion
over the property to which the key relates

The circumstances must have been such as to establish that the gift
was to be absolute and complete only on the donors death so as to be
revocable before then. A condition to this effect need not be expressed
and will normally be implied from the fact that the gift was made when
the donor was ill.

Kane v Moon

A gift made in contemplation of death- if I die you get my property and

if I dont die you dont get it, if that person delivers that property to the
other person e.g. delivering deeds, keys to a safety box etc= if the
person actually dies then the gift is constituted and if he doesnt die
then the gift goes back to him.