This is an extract of our Constitution Of A Trust document, which we sell as part of our GDL Equity and Trusts Notes collection written by the top tier of Cambridge/Bpp/College Of Law students.
The following is a more accessble plain text extract of the PDF sample above, taken from our GDL Equity and Trusts Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
CONSTITUTION OF A TRUST
Three ways of transferring property:
o 1) An absolute gift (complete constitution is necessary)
Milroy v Lord (1862) - Settlor attempted to create trust of shares, but only handed over the share certificates, failed to complete share transfer certificate, failed to register this transfer. Held no trust;
equity will not perfect an imperfect gift.
o 2) Transfer of legal title for trustee to hold on trust for a beneficiary (complete constitution is necessary)
o 3) Self-declaration of trust, settlor retains legal title holding it on trust for a beneficiary (legal title does not move so complete constitution is not necessary but intention must be clear)
Jones v Lock (1865) - husband puts £900 cheque in safe for baby after failing to bring it any presents.
Intention to give to baby not clear (more likely just to end argument), therefore no self-declaration.
Paul v Constance  - Cash in the bank account was used for bingo winnings of Claimant and her deceased partner, used this money to pay for joint holidays etc. Deemed held on trust, intention was clear from the treatment of the account.
If the settlor attempts one mode of transfer and fails in this method, then the court will not help out and construe it as a different type of transfer: This is in part due to the onerous burden of trusteeship
Rules for transferring different types of property:
o Freehold Land must be by registered deed (s.52(1) LPA
o Leasehold Land must be by deed (s.52(1) LPA 1925), which must be registered if >7years.
o Chattels (goods) must be transferred by deed of gift or by actual delivery (Re Cole) with unequivocal intention
o Shares under s.1 Stock Transfer Act 1963 require a signed stock transfer form to be sent to the company's registrar with relevant share certificates who then update the share register of the company
Debts and other choses in action (including rights under bank accounts) are transferred by writing, complying with s136
o Equitable interests must be in writing and signed under s.53(1)(c) LPA 1925.
If the trust is completely constituted - it cannot be revoked - Re
The strict approach:
Under Milroy v Lord (1862 above) the transfer had to be complete and exact
If the final stage is not reached, the gift is not perfect and Equity will not perfect an imperfect gift and Equity will not assist a volunteer
Re Fry  - Settlor was abroad during the war and wished to transfer shares for the benefit of the son. In order to do so, he was required to gain consent from the treasury.
This was given but before it formally arrived settlor died.
Held trust not completely constituted therefore failed.
o In favour of strict approach:
Predictable & certain
Adheres to the application of equitable maxims
Consistent and respect rights of other parties
In favour of a more relaxed approach:
Strict application may give rise to unconscionable conduct
This can come accidentally, if the settlor dies before the process is completed - no fault
Harsh prevention of settlor's intentions
In other areas of law, changing ones mind on something that is not legally binding is not unconscionable
Exception 1: The Rule in Re Rose (NB two cases of same name,
o Re Rose  - First instance decision. The testator handed a transfer of the relevant shares to the donee, Mr
Hook, together with the relevant certificates. The transfer had not been registered by the date of his death. Under strict rules this was invalid and property should have been distributed on intestacy rules.
Held that Court: transfer was completed in the lifetime,
even though the formalities were not fully complied with, settlor had done everything in his power to divest himself of his legal title.
'Equity looks as done on what ought to be done'
o Re Rose  - Precedential CA decision. Stock transfer form completed and sent to the company to be registered.
The company failed to register this for more than three months.
Tax liability depended on whether transfer was effective from date of registration or date the form was sent to company.
Held transfer deemed completed at the moment the transferor had done all that he could have done. Would be unconscionable to change mind.
What makes a change of mind unconscionable?
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