EQUITY & TRUSTS REVISION NOTES
OVERVIEW:
WHAT IS ‘CONSTITUTION’?
• As trusts impose legally-binding obligations, they must be defined with sufficient clarity for
trustees to understand their duties and for courts to enforce them.
• This involves two processes:
1. The first process: formality requirements relating to the creation of the trust.
2. The second process: formality requirements relating to the transfer of the trust property to the
trustees. For a trust to be ‘completely constituted’, the settlor must vest the legal title to the
trust property in the trustees (i.e. property has to be validly transferred to the trustees) – this
process is known as ‘constituting the trust.’
CREATING/ DECLARING A TRUST + TRANSFER OF PROPERTY =
CONSTITUTION OF TRUST
HOW DOES THE OWNER MAKE THE GRATUITOUS TRANSFER?
• In Milroy v Lord, Lord Turner expressed that there are three ways of making this gratuitous
transfer (a free transfer/ a transfer with no consideration):
1. Declaration of a gift: where the property is transferred to the person for whom the owner
intends to provide.
! However, a valid trust cannot be created through a gift. A declaration of the gift will only result in
an outright perfect gift.
2. Declaration of trust: where the owner of the property transfers the legal title of the property
to a trustee and the beneficiaries, by way of equitable interest.
3. Self-declaration of trust: where the settlor “declares that he himself holds it in trust.”
, EQUITY & TRUSTS REVISION NOTES
SIGNIFICANT EQUITABLE MAXIMS:
• There are two important conflicting maxims to consider throughout this topic:
“EQUITY WILL NOT ASSIST A VOLUNTEER.”
• Volunteer: one who has not offered consideration for property.
→ A, having not made any contribution to B, will not be able to seek equity’s assistance.
⇒ Midland Bank Trust Co v Green: Lords stated that although the consideration given was £500 and
the house was worth £10,000, it constituted money’s worth.
! However, if the volunteer is a beneficiary, equity will assist them.
“EQUITY WILL NOT STRIVE OFFICIOUSLY TO DEFEAT A GIFT.”
• This maxim upholds the relations the transferor has tried to bring into being.
⇒ Lord Browne-Wilkinson in Choithram International v Pagarani: “although equity will not aid a
volunteer, it will not strive officiously to defeat a gift.” This was approved in Pennington v Waine.
⇩
1. CONSTITUTION OF A TRUST:
I. PRELIMINARY CREATION OF THE TRUST:
• There are two ways of creating a valid trust, as identified by the Court of Appeal in Milroy v
Lord:
A. DECLARATION OF SELF AS TRUSTEE:
→ Where the owner of the property becomes a trustee themselves.
• A trust will be created if the person who holds the legal title to property declares themselves
the trustee of the property.
• From the moment of declaration, that person will hold the property on trust and although
they will retain the legal title, the beneficiaries will enjoy the equitable interest in the
property.
• In this scenario, there is no need for a transfer of the property. Instead, the owner will have
simply changed their status from an absolute legal owner to a trustee.
IT MUST BE CLEAR THAT THE SETTLOR HAS DECLARED HIMSELF TRUSTEE:
OVERVIEW:
WHAT IS ‘CONSTITUTION’?
• As trusts impose legally-binding obligations, they must be defined with sufficient clarity for
trustees to understand their duties and for courts to enforce them.
• This involves two processes:
1. The first process: formality requirements relating to the creation of the trust.
2. The second process: formality requirements relating to the transfer of the trust property to the
trustees. For a trust to be ‘completely constituted’, the settlor must vest the legal title to the
trust property in the trustees (i.e. property has to be validly transferred to the trustees) – this
process is known as ‘constituting the trust.’
CREATING/ DECLARING A TRUST + TRANSFER OF PROPERTY =
CONSTITUTION OF TRUST
HOW DOES THE OWNER MAKE THE GRATUITOUS TRANSFER?
• In Milroy v Lord, Lord Turner expressed that there are three ways of making this gratuitous
transfer (a free transfer/ a transfer with no consideration):
1. Declaration of a gift: where the property is transferred to the person for whom the owner
intends to provide.
! However, a valid trust cannot be created through a gift. A declaration of the gift will only result in
an outright perfect gift.
2. Declaration of trust: where the owner of the property transfers the legal title of the property
to a trustee and the beneficiaries, by way of equitable interest.
3. Self-declaration of trust: where the settlor “declares that he himself holds it in trust.”
, EQUITY & TRUSTS REVISION NOTES
SIGNIFICANT EQUITABLE MAXIMS:
• There are two important conflicting maxims to consider throughout this topic:
“EQUITY WILL NOT ASSIST A VOLUNTEER.”
• Volunteer: one who has not offered consideration for property.
→ A, having not made any contribution to B, will not be able to seek equity’s assistance.
⇒ Midland Bank Trust Co v Green: Lords stated that although the consideration given was £500 and
the house was worth £10,000, it constituted money’s worth.
! However, if the volunteer is a beneficiary, equity will assist them.
“EQUITY WILL NOT STRIVE OFFICIOUSLY TO DEFEAT A GIFT.”
• This maxim upholds the relations the transferor has tried to bring into being.
⇒ Lord Browne-Wilkinson in Choithram International v Pagarani: “although equity will not aid a
volunteer, it will not strive officiously to defeat a gift.” This was approved in Pennington v Waine.
⇩
1. CONSTITUTION OF A TRUST:
I. PRELIMINARY CREATION OF THE TRUST:
• There are two ways of creating a valid trust, as identified by the Court of Appeal in Milroy v
Lord:
A. DECLARATION OF SELF AS TRUSTEE:
→ Where the owner of the property becomes a trustee themselves.
• A trust will be created if the person who holds the legal title to property declares themselves
the trustee of the property.
• From the moment of declaration, that person will hold the property on trust and although
they will retain the legal title, the beneficiaries will enjoy the equitable interest in the
property.
• In this scenario, there is no need for a transfer of the property. Instead, the owner will have
simply changed their status from an absolute legal owner to a trustee.
IT MUST BE CLEAR THAT THE SETTLOR HAS DECLARED HIMSELF TRUSTEE:
