Equity and Trusts Problem Question: Constitution of Trust
Question:
Sheridan owned 50 shares in Chadwick Ltd, a registered company. Prior to his unexpected
recent death, he had wanted to transfer the Chadwick Ltd shares to Delaney. In front of
witnesses, Sheridan signed the necessary share transfer form and sent it to the company
secretary at Chadwick Ltd. Unfortunately, the secretary took no further action.
Aware that he was getting old, Sheridan had recently met with his friend Lauriche and gave
her the keys to a safe containing deeds to his house, 21 Legatt Street. Sheridan told Lauriche
that 21 Legatt Street would soon be hers. Sheridan did not pass over door keys to 21 Legatt
Street to Lauriche. At their meeting, Sheridan also gave Lauriche a cheque for £25,000 by
way of a gift.
Following his death, it transpired that Sheridan had written a valid will. In the will, he left
Mara, who is the executor of the will, a collection of valuable manuscripts. At the time of
Sheridan’s death, the manuscripts were locked in a safe owned by Edwina. Before the date
of the will, Sheridan had orally told Edwina: “these manuscripts are yours, although I shall
be their trustee.” On his death, Sheridan also owed Mara £30,000.
Advise Delaney, Lauriche and Mara.
, Answer:
The issues faced by Delaney, Lauriche and Mara concerned with constitution of a
trust. They wish to construct a valid trust or gift so that they are entitled to Sheridan’s
shares and properties respectively.
Delaney
In order to advise Delaney, it must first be determined the intention of Sheridan,
whether the 50 shares in Chadwick Ltd (CL) was transferred as a gift or a trust. As the
question did not mention that he expressly declared himself as a trustee or saying that
shares to be held by Delaney on the benefit of someone, the shares is said a gift [Jones v
Lock]. Next, as in Milroy v Lord, to construct a valid share transfer using correct formalities,
the share transfer form must be filled and registered by the company, but the latter had not
been observed in Delaney’s case since the secretary takes no further action after receiving
the share transfer form, hence the transfer is incomplete. Generally, no equity shall perfect
an imperfect gift, as Milroy went further to state that a gift that fails cannot be rescued by
interpreting the owners intention to be one to create a trust, as a trust render a division on
title, whereas a completed gift render an absolute ownership possessed by donee.
One of the exceptions was laid down in Re Rose, as the court held that as long as the
settlor had completed all he can do to transfer the title, and the defective transfer was due
to third party’s fault, he will make himself the trustee and the trust was constituted . Paul
Todd (1998) opined that there is no evidence at all to show his intention to create a trust,
and it is unreasonable to impose on his conscience, but the adoption of the rule continues.
In practice, Delaney’s case is expected to rule in the same way as above, as Sheridan had
signed the necessary share transfer form and delivered it to secretary of CL. However, the
question is silence on the existence of share certificate, as in Zeital v Kaye, the absence of
handing over the share certificate to donee will render the exception in Re Rose
inapplicable, as the settlor had not done what is necessary. Thus, if the share certificate was
passed to Delaney, transfer will be valid at the moment Sheridan fulfilled his parts [Marcall v
Mascall], but in fact it did not happen. The concept of unconscionability in Pennington v
Question:
Sheridan owned 50 shares in Chadwick Ltd, a registered company. Prior to his unexpected
recent death, he had wanted to transfer the Chadwick Ltd shares to Delaney. In front of
witnesses, Sheridan signed the necessary share transfer form and sent it to the company
secretary at Chadwick Ltd. Unfortunately, the secretary took no further action.
Aware that he was getting old, Sheridan had recently met with his friend Lauriche and gave
her the keys to a safe containing deeds to his house, 21 Legatt Street. Sheridan told Lauriche
that 21 Legatt Street would soon be hers. Sheridan did not pass over door keys to 21 Legatt
Street to Lauriche. At their meeting, Sheridan also gave Lauriche a cheque for £25,000 by
way of a gift.
Following his death, it transpired that Sheridan had written a valid will. In the will, he left
Mara, who is the executor of the will, a collection of valuable manuscripts. At the time of
Sheridan’s death, the manuscripts were locked in a safe owned by Edwina. Before the date
of the will, Sheridan had orally told Edwina: “these manuscripts are yours, although I shall
be their trustee.” On his death, Sheridan also owed Mara £30,000.
Advise Delaney, Lauriche and Mara.
, Answer:
The issues faced by Delaney, Lauriche and Mara concerned with constitution of a
trust. They wish to construct a valid trust or gift so that they are entitled to Sheridan’s
shares and properties respectively.
Delaney
In order to advise Delaney, it must first be determined the intention of Sheridan,
whether the 50 shares in Chadwick Ltd (CL) was transferred as a gift or a trust. As the
question did not mention that he expressly declared himself as a trustee or saying that
shares to be held by Delaney on the benefit of someone, the shares is said a gift [Jones v
Lock]. Next, as in Milroy v Lord, to construct a valid share transfer using correct formalities,
the share transfer form must be filled and registered by the company, but the latter had not
been observed in Delaney’s case since the secretary takes no further action after receiving
the share transfer form, hence the transfer is incomplete. Generally, no equity shall perfect
an imperfect gift, as Milroy went further to state that a gift that fails cannot be rescued by
interpreting the owners intention to be one to create a trust, as a trust render a division on
title, whereas a completed gift render an absolute ownership possessed by donee.
One of the exceptions was laid down in Re Rose, as the court held that as long as the
settlor had completed all he can do to transfer the title, and the defective transfer was due
to third party’s fault, he will make himself the trustee and the trust was constituted . Paul
Todd (1998) opined that there is no evidence at all to show his intention to create a trust,
and it is unreasonable to impose on his conscience, but the adoption of the rule continues.
In practice, Delaney’s case is expected to rule in the same way as above, as Sheridan had
signed the necessary share transfer form and delivered it to secretary of CL. However, the
question is silence on the existence of share certificate, as in Zeital v Kaye, the absence of
handing over the share certificate to donee will render the exception in Re Rose
inapplicable, as the settlor had not done what is necessary. Thus, if the share certificate was
passed to Delaney, transfer will be valid at the moment Sheridan fulfilled his parts [Marcall v
Mascall], but in fact it did not happen. The concept of unconscionability in Pennington v
