How a trust is constituted
In order for a trust to be constituted there must be a full and legal transfer of
the title of the trust property. This must be done clearly and carefully as the common
law position is that “...if you want the assistance of the Court... and the instrument is
voluntary, you shall not have that”1 and so any mistakes made by the settlor will
generally not be rectified by the Courts. In Milroy v Lord2 it was held by Turner LJ
that in order to fully constitute a trust “...the settler must have done everything
which... was necessary... in order to transfer the property and render the settlement
binding upon him”3 and that a settlor could constitute a trust in one of two ways;
“transferring the property to a trustee for the purposes of settlement, or declares that
he... holds it in trust”4. The transfer could also occur by way of a gift to the intended
beneficiaries. If an attempt to create a settlement via one method fails then the
Courts will not allow for it to succeed under another, as demonstrated in Jones v
Lock5 and Richards v Delbridge6. The exception to this rule can be found in Re Rose
(deceased)7 and confirmed in Re Rose (deceased)8 where as long as the settlor has
done everything in their power to exact the transfer of property then the Courts will
hold the trust to be constituted where a private company refuses to acknowledge the
transfer of title. This is known as the doctrine of every effort.
There have been cases where it seems that the Judiciary is disregarding its
own precedent such as in Choithram (T) International SA v Pagarani9 and
Pennington v Waine10 where it was held that even though the gift was imperfect the
intention to create a trust was clear on the justification that “...equity will not aid a
volunteer... and... it will not strive... to defeat a gift”11 and in both cases a trust was
created. This has been widely criticised as both decisions are completely at odds
with the established precedent. It has been said that “The legacy of Pennington v
Waine may be... greater if the Courts use their discretion to give effect to ineffective
transactions where it would be unconscionable to do so.”12 However despite the
many criticisms, it is possible to argue that in these cases the material difference is
that the settlor died before the trust was fully constituted but left clear instructions on
their intention to transfer the title whereas in the main case law in this area the settlor
simply failed to fulfil the conditions necessary to properly perfect a trust/gift. The
intervention of the Courts may be justified by the fact that the settlor had done
1
Ellison v Ellison (1802) 6 Ves 656, per Lord Chancellor Eldon at pg. 662
2
(1862) 45 E.R. 1185
3
ibid, per Turner LJ at 274
4
ibid
5
(1865) 1 Ch App 52
6
(1874) LR 18 Eq 11
7
Midland Bank Executor and Trustee Co Ltd v Rose and Others [1948] 2 All ER 971
8
Rose and Others v Inland Revenue Commissioners [1952] 1 All ER 1217
9
[2001] 2 All E.R. 492
10
[2002] 4 All E.R. 214
11
ibid, Per Clarke LJ at 243
12
Halliwell, M., Perfecting Imperfect Gifts and Trusts: have we reached the end of the Chancellor’s
foot; Conveyance and Property Lawyer, 2003
[1]
, everything within their power to transfer the title as after death there is nothing more
that the deceased is able to do.
Exception to the Rules of Assisting Volunteers
The case of Strong v Bird13 presents an exception to the maxim set out in
Ellison v Ellison14 in that where an inter vivos gift is made but the necessary
formalities of the gift are not completed in order to fully transfer the title (see above)
then the usual effect of an incomplete transfer may be avoided if, when the donor
dies, the donee becomes the executor of the will or the administrator through
intestacy then the gift will become a perfect one as the donee has acquired the legal
rights to the property and this will override the claims of those that would ordinarily
benefit from the will. In order for this rule to apply there are four criteria that must be
satisfied; the donor must have intended to create an inter vivos gift, the intention to
create the gift must have lasted to the death of the donor, the donee must have been
appointed as the executor or administrator of the donors will and the gift must be
capable of continuing past the donor’s death.
The application of this rule in subsequent cases has sparked much academic
criticism. Jaconelli argues that the case “...involved waiver of debt rather than the
purported transfer of property and [is] thus somewhat removed from the standard
type of situation in which the rule is invoked today.”15 The rule itself as an exemption
to the maxim that the law will not assist a volunteer has also attracted scepticism as
the justifications for the other exceptions (e.g. donatio mortis causa or the doctrine of
every effort) do not seem to apply and so less obvious justifications have been
suggested.
One such suggestion is that by releasing the debt, the equitable rights of the
debtor become equal to or even greater than the equitable or intestate rights of the
legatees of the will.16 This supported the judgement of Neville J. in Re Stewart17
where it was said that “...the intention of the testator to give the beneficial interest to
the executor is sufficient to countervail the equity of beneficiaries under the will...” 18
This approach can be criticised as there is no real basis for allowing the equitable
rights of one person to supersede the other in either statute or case law and it would
be practically impossible to formulate a method of balancing one person’s rights to
property in instances such as this over those of another.
13
(1874) LR 18 Eq 315
14
Above at n. 1
15
Jaconelli, J., Problems in the rule in Strong v Bird, Conveyancer and Property Lawyer, 2006
16
Maitland F.W., Equity: A Course of Lectures, CUP, 1936
17
[1908] 2 Ch 251
18
Ibid, per Neville J. At 254
[2]
In order for a trust to be constituted there must be a full and legal transfer of
the title of the trust property. This must be done clearly and carefully as the common
law position is that “...if you want the assistance of the Court... and the instrument is
voluntary, you shall not have that”1 and so any mistakes made by the settlor will
generally not be rectified by the Courts. In Milroy v Lord2 it was held by Turner LJ
that in order to fully constitute a trust “...the settler must have done everything
which... was necessary... in order to transfer the property and render the settlement
binding upon him”3 and that a settlor could constitute a trust in one of two ways;
“transferring the property to a trustee for the purposes of settlement, or declares that
he... holds it in trust”4. The transfer could also occur by way of a gift to the intended
beneficiaries. If an attempt to create a settlement via one method fails then the
Courts will not allow for it to succeed under another, as demonstrated in Jones v
Lock5 and Richards v Delbridge6. The exception to this rule can be found in Re Rose
(deceased)7 and confirmed in Re Rose (deceased)8 where as long as the settlor has
done everything in their power to exact the transfer of property then the Courts will
hold the trust to be constituted where a private company refuses to acknowledge the
transfer of title. This is known as the doctrine of every effort.
There have been cases where it seems that the Judiciary is disregarding its
own precedent such as in Choithram (T) International SA v Pagarani9 and
Pennington v Waine10 where it was held that even though the gift was imperfect the
intention to create a trust was clear on the justification that “...equity will not aid a
volunteer... and... it will not strive... to defeat a gift”11 and in both cases a trust was
created. This has been widely criticised as both decisions are completely at odds
with the established precedent. It has been said that “The legacy of Pennington v
Waine may be... greater if the Courts use their discretion to give effect to ineffective
transactions where it would be unconscionable to do so.”12 However despite the
many criticisms, it is possible to argue that in these cases the material difference is
that the settlor died before the trust was fully constituted but left clear instructions on
their intention to transfer the title whereas in the main case law in this area the settlor
simply failed to fulfil the conditions necessary to properly perfect a trust/gift. The
intervention of the Courts may be justified by the fact that the settlor had done
1
Ellison v Ellison (1802) 6 Ves 656, per Lord Chancellor Eldon at pg. 662
2
(1862) 45 E.R. 1185
3
ibid, per Turner LJ at 274
4
ibid
5
(1865) 1 Ch App 52
6
(1874) LR 18 Eq 11
7
Midland Bank Executor and Trustee Co Ltd v Rose and Others [1948] 2 All ER 971
8
Rose and Others v Inland Revenue Commissioners [1952] 1 All ER 1217
9
[2001] 2 All E.R. 492
10
[2002] 4 All E.R. 214
11
ibid, Per Clarke LJ at 243
12
Halliwell, M., Perfecting Imperfect Gifts and Trusts: have we reached the end of the Chancellor’s
foot; Conveyance and Property Lawyer, 2003
[1]
, everything within their power to transfer the title as after death there is nothing more
that the deceased is able to do.
Exception to the Rules of Assisting Volunteers
The case of Strong v Bird13 presents an exception to the maxim set out in
Ellison v Ellison14 in that where an inter vivos gift is made but the necessary
formalities of the gift are not completed in order to fully transfer the title (see above)
then the usual effect of an incomplete transfer may be avoided if, when the donor
dies, the donee becomes the executor of the will or the administrator through
intestacy then the gift will become a perfect one as the donee has acquired the legal
rights to the property and this will override the claims of those that would ordinarily
benefit from the will. In order for this rule to apply there are four criteria that must be
satisfied; the donor must have intended to create an inter vivos gift, the intention to
create the gift must have lasted to the death of the donor, the donee must have been
appointed as the executor or administrator of the donors will and the gift must be
capable of continuing past the donor’s death.
The application of this rule in subsequent cases has sparked much academic
criticism. Jaconelli argues that the case “...involved waiver of debt rather than the
purported transfer of property and [is] thus somewhat removed from the standard
type of situation in which the rule is invoked today.”15 The rule itself as an exemption
to the maxim that the law will not assist a volunteer has also attracted scepticism as
the justifications for the other exceptions (e.g. donatio mortis causa or the doctrine of
every effort) do not seem to apply and so less obvious justifications have been
suggested.
One such suggestion is that by releasing the debt, the equitable rights of the
debtor become equal to or even greater than the equitable or intestate rights of the
legatees of the will.16 This supported the judgement of Neville J. in Re Stewart17
where it was said that “...the intention of the testator to give the beneficial interest to
the executor is sufficient to countervail the equity of beneficiaries under the will...” 18
This approach can be criticised as there is no real basis for allowing the equitable
rights of one person to supersede the other in either statute or case law and it would
be practically impossible to formulate a method of balancing one person’s rights to
property in instances such as this over those of another.
13
(1874) LR 18 Eq 315
14
Above at n. 1
15
Jaconelli, J., Problems in the rule in Strong v Bird, Conveyancer and Property Lawyer, 2006
16
Maitland F.W., Equity: A Course of Lectures, CUP, 1936
17
[1908] 2 Ch 251
18
Ibid, per Neville J. At 254
[2]
