Formalities Notes

Formalities

Creating a trust usually requires only the formation and expression of an intent to create a trust, plus constitution if S is not to be a T. However, there are exceptions to this, such as trusts of land.

s53(1)(b) LPA 1925 – Declarations of Trusts over Land

1. s53(1)(b): “A declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will.”

   1. This does not require the declaration itself to be made in writing. There must just be a signed document which evidences the existence and terms of the trust (could be long after S expresses his intention to create a trust).

      1. Rochefoucauld v Boustead weakened the section, holding that oral evidence is sufficient.

      2. Ong v Ping further weakened the section, holding that where the written and signed document is by itself insufficient to satisfy s53(1)(b), background circumstances can be taken into account to prove the declaration of trust.

   2. Once the signed document is created, the trust is to be treated as validly declared from when S made his initial oral declaration (Gardner v Rowe).

   3. s53(2): “This section does not affect the creation or operation of resulting, implied or constructive trusts.”

      1. BUT: This is superfluous. s53(1)(b) only applies to a ‘declaration’ of trust formality rule is irrelevant if the core trust duty arises “by operation of law”, e.g. by proprietary estoppel.

   4. Justification: Land is more important than other property (socially, economically, politically) it matters more who has a claim to it more certainty and clarity required. Also, dealings involving land are slow and commonly involve lawyers requiring formality is not much of a burden.

      1. Justifications for formality rules generally:

         1. The provision of evidence

         2. The promotion of caution

         3. The protection of A from fraud

s53(1)(b) brings all of these benefits

4. The provision of publicity

s53(1)(b) does NOT bring this benefit; where A self-declares a trust over the property for B and transfers his freehold to C, B’s right is prima facie binding on C even though the written record of the trust was only made after C acquired the freehold (Gardner v Rowe) s53(1)(b) does not help C in discovering B’s pre-existing property right.

1. BUT: This poses few problems for C, because the conveyance of the freehold to C will take priority over B’s interest under the trust of land unless B’s interest under the trust of land is protected by a notice on the register (s33(a)(i) LRA, s29(2)(a)(i)) or B is in actual occupation of the land at the time of the conveyance (s29(2)(a)(ii)) – both of which are discoverable.

   1. NB: This is why it is important not to look at s53(1)(b) in isolation. Given the LRA provisions, it may be justifiable to apply a more lenient formality rule when considering the acquisition of such a right.

2. The nature of the rule: two views…

   1. Rule of validity

      1. On this view, unless and until there is a signed document which provides evidence of the trust, there is no trust.

      2. Supported by some cases (Gissing v Gissing, Hodgson v Marks, Lloyds Bank v Rosset) BUT these statements are weakened by the mistaken suggestion that the declaration of trust must be made, rather than merely evidenced in writing.

         1. In Hodgson v Marks,

   2. Rule of evidence

      1. On this view, writing is not needed to create a trust of land, but signed writing is needed for a person to prove the existence of the trust to a court. Failure to satisfy the requirement just means there is an unenforceable trust.

      2. Supported by Gardner v Rowe – when the document post-dates S’s declaration of trust, the trust is to have been validly declared when S made his original oral declaration (it is just only enforceable once the signed writing is created)

         1. A consequence of this can be illustrated: A has a freehold over land which he rents out; A makes an oral declaration that he holds the land on trust for B, so pays the rental income for the first month of 1000 to B; when A and B fall out, and A stops paying B the rental income, B cannot prove that A is under a duty to pay him the rental income; but A cannot claim back the initial 1000 he paid to B – if B keeps the money, he is not unjustly enriched at A’s expense – there is a legal basis on which B can keep the money (they are interpreted as gifts?)

         2. BUT: Webb: This is still compatible with the ‘validity’ view. The trust would just take effect retrospectively once the document exists.

   3. Thus there is no clear answer from the caselaw.

      1. Webb: If we take the ‘evidence’ view, then a court will not be able to enforce a valid trust over land, simply because it is not evidenced in writing better view may be the ‘validity’ view and treat a declaration of trust over land not (yet) backed up by documentation as wholly ineffective.

3. Self-declaration of trust. s53(1)(b) is uncomplicated where S seeks to self-declare himself T of land the trust is unenforceable if there is no writing.

4. Transfer to a trustee. The effect of s53(1)(b) is more complex where the A transfers land to B to hold on trust for A or C, but fails to evidence the declaration in signed writing. The transfer of title from A to B remains effective who has the beneficial ownership in the land?

   1. Two-party cases (i.e. where A transfers to B to hold on trust for A)

      1. Rochefoucauld v Boustead, although more complex (the mortgagee sold the land to B to be held on trust for the mortgagor A), is treated as a two-party case. The CoA held that equity will not allow a statute to be used as an instrument of fraud. To deny the existence of the trust would amount to a fraud by B against A. The trust over land could be evidenced by oral evidence, rather than the signed writing required by s7 Statute of Frauds (now s53(1)(b) LPA) dilutes the importance of s53(1)(b).

         1. Lindley LJ: “The trust which the plaintiff has established is clearly an EXPRESS trust … The trust is one which both plaintiff and...

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