BPP GDL Study Notes: Ch 4 - Formalities

Question 1

Do trusts of pure personalty need to be declared formally or informally? What does this mean on a practical level?

Answer 1

Informally. This means they can be declared orally or by conduct.

Question 2

What case makes clear that there are no formalities for declaring a trust of pure personalty?

Answer 2

Paul v Constance

Question 3

What are the four functions of formalities?

Answer 3

1) cautionary function
2) protective function
3) evidentiary function (ie evidence of creation of trust and its details)
4) channelling function (ie standardising functions effectively)

Question 4

What constituted the declaration of trust in Paul v Constance?

Answer 4

• numerous discussion between Mrs. Paul and Mr. Constance

- Mr. Constance’s repeated declarations that the money in his sole account was intended to be shared betweeen them.

Question 5

What governs the formalities for creating a trust of land?

Answer 5

s53 (1)(b) LPA 1925

Question 6

What are the formalities for creating a trust of land?

Answer 6

• needs to be evidenced in writing

- needs to be signed by the settlor

Question 7

What happens if the formalities for creating a trust of land are not met?

Answer 7

the declaration of trust is “unenforceable”.

Question 8

What controls the formalities around implied, resulting and constructing trusts? What are those formalities?

Answer 8

• s53 (2) LPA 1925.

- requirements of s53 (1) do not affect the creation of these trusts

Question 9

Give a case that evidences the formalities surrounding implied, resulting and constructive trusts.

Answer 9

Hidgson v Marks. No formalities required for their creation

Question 10

What governs the disposition of pre-existing (subsisting) equitable interests?

Answer 10

S 53 (1) (c) LPA 1925

Question 11

To what types of property does s53(1)(c) LPA 1925 apply?

Answer 11

All property

Question 12

What are the formality requirements for a disposition of a subsisting equitable interest?

Answer 12

• in writing
• signed by person disposing of the interest
• OR signed by his agent who has been authorised in writing.

Question 13

What does “disposition” mean? Give some examples.

Answer 13

• any act by which a person ceases to own the item of property in question
• eg:
• sale
• gift
• assignment
• declaration of trust
  etc

Question 14

What is the key case where a beneficiary directed trustees to hold property on trust for another? What was the intended purpose?

Answer 14

• Grey v IRC
• attempting to avoid stamp duty (which is leviable upon documents transferring property, and was levied on a percentage of the value transferred)

Question 15

What was the conclusion in Grey v IRC?

Answer 15

• an oral direction was an attempted disposition of subsisting equitable interests
• oral directions do not comply with s 53 (1) (c) and therefore are invalid dispositions.

Question 16

What rule arises from the Vandervell v IRC case?

Answer 16

• where absolutely entitled beneficiary instructs the trustee to transfer legal title to a third party,
• if B intends to also pass equitable title then equitable and legal titles pass together
• this is not a disposition and s 53 (1) (c) does not apply

Question 17

What rule came from Neville v Wilson?

Answer 17

• contracts for the sale of unique items give the buyer the right to exercise specific performance and force the sale
• this creates a constructive trust in favour of the transferee
• therefore governed by s52 (2) not requirements of s53 (1) (c)

Question 18

How can a beneficiary create a sub trust that is not subject to s 53 (1) (c)?

Answer 18

• if the B maintains some active duties in the sub trust (eg if the sub trust is discretionary)
• or if B declares a sub trust of only part of his interest (eg to c for life, remainder to D)
• in this circumstances B is creating a new trust and therefore is not bound.