Formalities & constitution of trusts

TR.02 — Formalities & Constitution of Trusts

Two separate hurdles. A trust can satisfy the three certainties yet still fail if (a) the required formalities are missed, or (b) it is not constituted. Get both right.

Formalities (creation)

• Lifetime trust of land: must be manifested and proved by signed writing — s.53(1)(b) LPA 1925. This is an evidential rule: an oral declaration of a land trust is valid but unenforceable until written evidence exists. Writing can come later.
• Disposition of a subsisting equitable interest: must itself be in signed writing — s.53(1)(c) LPA 1925. Failure makes it void, not just unenforceable. (Grey v IRC; contrast Vandervell v IRC — transferring the whole legal+beneficial title is not a s.53(1)(c) disposition.)
• Trusts of personalty (incl. shares, money): no formalities — a clear oral declaration suffices (Paul v Constance: "the money is as much yours as mine").
• Testamentary trusts: must comply with s.9 Wills Act 1837 (signed writing, two witnesses).
• Resulting, implied and constructive trusts are exempt from s.53(1)(b)/(c) — s.53(2).

Constitution (the trust property must be vested)

A trust is constituted by the settlor either:

1. declaring himself trustee (title already vested — nothing more needed), or
2. transferring legal title to trustees using the correct method (deed for land; stock transfer form + registration for shares; delivery for chattels).

Core rule: Milroy v Lord — equity will not perfect an imperfect gift, and will not treat a failed transfer as a self-declaration of trust.

Key exceptions to "equity won't assist a volunteer"

• Every-effort / Re Rose: transfer effective in equity once the settlor has done everything required of him and put the matter beyond his control (e.g. signed transfer + share certificate handed over).
• Unconscionability / Pennington v Waine: transfer upheld where it would be unconscionable to resile.
• Donatio mortis causa, the rule in Strong v Bird (donee becomes executor), and proprietary estoppel.

Common traps

• s.53(1)(b) = evidenced in writing (unenforceable if not); s.53(1)(c) = made in writing (void if not). Don't conflate.
• "Imperfect gift" is not saved by reinterpreting it as a declaration of trust (Jones v Lock).
• Three certainties ≠ constitution — both must be present.
• Personalty needs no formality; only land triggers s.53(1)(b).