⇒ The person creating the trust must have the capacity to do so.
⇒ A person is presumed to have mental capacity unless the contrary is established (Mental Capacity Act 2005, s1(2))
⇒ In all decisions, the level of capacity required depends upon the seriousness of the decision. For example, the level of capacity required of a person giving £5 to a charity collector would be much lower than the level required to decide to dispose of one’s estate by will, or to sell or give away one’s home
⇒ Children (aged under 18) can, if they have capacity, create a valid trust, but the trust is voidable
⇒ The child may repudiate (i.e. abandon) the trust, either under the age of 18 or within a reasonable time of reaching that age
⇒ Note: a child may not hold a legal estate in land (LPA 1925 s.1(6))
⇒ In general trusts don't require a specific formalities → so they can be made orally as long as they are not of land (which need to be evidenced in writing) or testamentary (which must be in writing, signed by testator and attested by two witnesses: Wills Act 1837, s9)
⇒ The basic rule is that a settlor may create a trust by manifesting an intention to create it
⇒ Legal ownership of some forms of property can only be transferred in writing or by some other formal process.
⇒ Land: must be transferred by deed (s. 52(1) Law of Property Act 1925) and the requirements of the Land Registration Act 2002 must be observed.
⇒ Shares: must be transferred by the form of transfer laid down by the Companies Act 2006 together with the stock transfer form prescribed by the Stock Transfer Act 1963.
⇒ Copyright: must be transferred by writing (s. 90(3) Copyright Design and Patents Act 1988) e.g. IP
⇒ Bills of exchange: must be transferred by indorsement (s. 31 Bills of Exchange Act 1882) (i.e. signing on the form itself)
⇒ The Law of Property Act s.53 provides that transactions for the creation or disposition of an interest (either the beneficial or legal interest) in land must be in writing and signed (s.53(1)(a));
⇒ Express trusts of land must be evidenced in writing and signed (s.53(1)(b)
⇒ Any disposition of an existing (‘subsisting’) equitable interest (i.e. beneficial interest) must be in writing and signed (s.53(1)(c)) – if not, it is void
⇒ These provisions do not affect implied, resulting or constructive trusts (s.53(2))
⇒ I.e. a person will be precluded from relying on her common law or statutory rights where to do so would enable her to carry out a fraud on another person
⇒ Where a person is fraudulently relying on s.53(1)(b) to deny a trust in land, Equity will not allow the person to retain the beneficial ownership of the land or the interest in land.
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⇒ A disposition of an equitable interest must be in signed writing (s53(1)(c)) and not merely evidenced in writing), otherwise the disposition is void
⇒ The purpose of this section is twofold: first, to prevent hidden oral transactions in equitable interests defrauding those entitled to property; and, secondly, to enable trustees to know where the equitable interests are at any one time
⇒ Also see the cases of Vandervell v IRC  and Vandervell’s Trusts (No 2): White v Vandervell Trustees 
⇒ The transfer or conveyance of land, and the transfer of shares both require formalities
⇒ If the person making the transfer, whether as an outright gift or as part of a declaration of trust, does not complete the formalities required, is the transfer valid?
⇒ However, even if the formality requirements for the transfer of legal title are not fulfilled, can the beneficial interest in property pass to the transferee in equity?
⇒ Gifts and trusts are both ways in which a person voluntarily transfers the beneficial interest in property to another.
⇒ With gifts, the legal title is transferred along with the beneficial title. In the case of the trust, the legal title is transferred to a trustee or can remain with the legal owner
⇒ So a declaration of gift coupled with delivery, is sufficient to transfer absolute title in a chattel (chattel = things that don't require formalities). A gift may also be made by deed
⇒ Where there is an ineffective transfer of legal title, as a result of a failure to complete the required formalities, it would be possible for Equity to complete the gift, by holding that the legal owner holds the property on trust for the recipient e.g. Oughtred v Inland Revenue Commissioners 
⇒ In the case of incomplete gifts, the following maxims are applicable:
⇒ So, if a person purports to make a gift, but the formalities are not complied with, then, as a general rule, Equity will not step in to aid the beneficiary: who is, as not providing value, a volunteer.
⇒ The general rule is, if you make a gift and that gift fails, the court will not transfer that into a trust. See, for example, Milroy v Lord (1862)
⇒ However, under some circumstances, Equity will step in i.e. there are circumstances in which equity WILL allow a transfer to occur even though the formality requirements have not been complied with:
⇒ Where land is conveyed to a minor, the transfer will have no legal effect, as land cannot be legally owned by a person under 18 (so the original owner will remain the legal owner).
⇒ However, by TOLATA 1996, Sched.1, the land so conveyed is to be held on trust for the minor → so it becomes a statutory trust
⇒ Donationes mortis causa (DMC): where the donor makes a gift conditional upon, and in contemplation of death, then title will pass upon the death of the donor.
⇒ i) The donor must be contemplating the real possibility of his death: this may be because of illness, going on active service or a hazardous trip. The mere reflection that we all die does not suffice to make a donatio mortis causa; nor does a gift conditional on death automatically become a donatio mortis causa: death must be either imminent or a real possibility i.e. doctrine only ordinarily operates in cases of people acting in extremis
⇒ ii) The gift, or title to or means to obtain the gift, must be physically delivered to the donee. This may be the chattel itself or something like a bank-book, cheque or title deeds. A gift should be distinguished from a bailment, to place the goods in safe keeping
⇒ iii) The gift should be conditional upon death, and does not take effect if the donor recovers or survives
⇒ Land may be the subject of a donation mortis causa: it may prevail over the requirement that a transfer of land must be in writing → this is confirmed in the case of Sen v Headley 
⇒ Also, in Vallee v Birchwood  and King v Dubrey , title deeds to property were handed over with words to the effect, ‘I want you to have my house when I go’. In both cases, the High Court found a valid DMC
⇒ Note: in all 3 of the above cases (Senn v Headley; Vallee v Birchwood; King v Dubrey), where land was transferred as a deathbed gift, it concerned UNREGISTERED land
⇒ If a person, contemplating his death from one cause, actually survives the contemplated cause but dies from another, unexpected cause, does the DMC take effect? → Yes it does (In re Richards. Jones v Rebbeck  → here they considered this very issue and confirmed it does)
⇒ Wilkes v Allington  → The donor was suffering from an incurable disease, and made a gift in the knowledge that he had not long to live; as things turned out, he had an even shorter time than he imagined, for he died two months later of pneumonia; it was held the gift remained valid
⇒ If the donor has made every effort to effect the transfer, but has been unable to complete it because of circumstances that they are not in control of, then the court may, following the case of Re Rose, complete the gift.
⇒ This was established by CA in Re Rose  in which an earlier unconnected first instance decision, coincidentally also bearing the name Re Rose , was applied and followed → remember that these are two distinct cases, but both are relevant!
⇒ See Re Rose (decd), Midland Bank Executor and Trustee Co Ltd v Rose  (i.e. the 1st case)
⇒ See Re Rose (decd), Rose v IRC  where the Court of Appeal approved the decision in Re Rose  and held that the equitable interest in the shares had been transferred as soon as the transferor had completed all of the formalities, which he was required to complete i.e. as soon as transferor completed all the formalities he could there was a constructive trust over the shares
⇒ The principle requires that every effort has been made.
⇒ If the transferor purports to make the gift, but omits a step, then the principle set out in Milroy v Lord applies (i.e. an ineffective gift does not constitute a declaration of trust). So, a failure to hand over the share certificate, as well as the share transfer form, would prevent the ‘every effort’ rule from applying.
⇒ See the case of Pennington v Waine , which has been criticised by academics because the ‘every effort rule’ was not applied → rather a wholly novel position was established in this case: it was said that an ineffective transfer will take effect in equity where it is unconscionable for the transferor to change his mind
⇒ In the recent case of Kaye v Zeital , the Court of Appeal took a more orthodox approach in the application of the every effort rule. In that case, it appeared that the share certificate was missing. The Court of Appeal held that the donor had it in his power to obtain a copy of the certificate, whereas the donee did not. By not taking steps to obtain the copy, the donor had not made every effort within his power, so the transfer failed.
⇒ This is also known as the fortuitous vesting rule. It is based on the Common Law rule that a person cannot bring an action against him or herself.
⇒ When a person dies, their property becomes the property of their executors. If a person is an executor of the estate and a debtor of the testator, they cannot, as executor of the estate, bring an action against themselves as debtor. This means that any debts owed by an executor are, under Common Law, unenforceable.
⇒ E.g., a woman with 3 children makes a will leaving all her property to be shared equally between her children. She appoints the eldest child as executor. Ten years before she dies, she lent the eldest child £30,000 as a deposit on the house. The loan was interest free and the eldest child was paying it back over 20 years: the eldest child still owes £15,000. At her death, the woman’s estate was worth £150,000. Should each child receive £50,000; or should the eldest receive £40,000 and the other two £55,000?
⇒ In Equity, the rule in Strong v Bird provides that the debt is released only if that was the intention of the testator; and the intention continued until the date of death.
⇒ See the case facts of Strong v Bird (1855)
⇒ The principle in Strong v Bird can also be used to complete an imperfect gift: if a person has a continuing intention to give, but does not complete the gift before death, then if the recipient is appointed as executor, legal title is vested in them by operation of law. This is sufficient to complete the gift.
⇒ This was an unusual case in that TCP (i.e. Pagarini) was trustee of the foundation; in his own right he was the legal owner of the property; the intention was the property would vest in the trustees of whom TCP was already one (i.e. TCP was a trustee of the trust) → so if somebody holds property as a trustee they don't need to transfer legal title because they already have it
⇒ “Although the words used by TCP are those normally appropriate to an outright gift—'I give to X'—in the present context there is no breach of the principle in Milroy v Lord if the words of TCP's gift (ie to the foundation) are given their only possible meaning in this context.”
⇒ So whether a donor is a sole trustee or part of a group of trustee there is to be no distinction to be made; So what this means is, is that because he is giving the property to the trustees, and he is one of those trustees, he is giving the property to himself as one of those trustees to hold on trust for the foundation
⇒ So although it looks like a word of gift on its true construction it can have no meaning other than words of trust
⇒ And it is not important that there are 6 other trustee because if someone receives property as a trustee their conscience is bound and they are bound to hold the property on the terms of the trust
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