Equity and trusts problem question answers

This scenario relates to the purported creation of a trust. We are told that Michael has said to his daughter that “I promise to transfer to you within the year certain
property”. The first issue to determine is whether this is sufficient to create a trust. One of the principal requirements for the successful establishment of a trust is
certainty, and in this instance, certainty of intention is relevant. Knight v Knight (1840) established that the “three certainties” must be present; certainty of
intention, of subject matter, and of object. Also of relevance here is the equitable maxim that “equity look to intent, not form”. This means that it is not necessary
for the declaration explicitly to include reference to the word “trust”. The fact that Michael does not refer to a “trust” does not, therefore, defeat the attempt to
establish a trust. By way of example, in Paul v Constance (1977) the words “the money is as much yours as mine” in reference to deposits in a bank account were
sufficient to create a trust. There is no requirement that the declaration be in writing either, unless the trust property is land.

The second “certainty” that is required is certainty of subject matter. What is the trust property? In this instance, Michael has sought to create a trust over “certain
property”. This will fail for evidential uncertainty; there is no clear specification of what the trust property is. Lord Hailsham indicated in his judgment in IRC v
McMullen (1981) that the courts are generally reluctant to invalidate a trust for uncertainty of subject matter and will, where possible, apply a reasonable
construction to the wording of the trust in order to make them valid. In this instance, however, there is no reasonable construction that could make this vague
declaration sufficiently certain. Michael goes on, however, to specify this property as being his Cartier watch, his shares in ABC plc, the legacy he expected to
receive from his uncle’s will, and Tranquil View, a freehold house. This, then, will meet the evidential certainty criteria.

The next issue to consider is who the trustee is over each of the trust properties. Michael’s watch is a chattel. A trust only becomes fully constituted once the
property is in the hands of the person properly bound to be the trustee. In this instance, the bank is holding his watch. The bank, then, becomes the trustee as soon
as the declaration is made. In Milroy v Lord (1862), Turner LJ set out his famous three modes of making a gift; an outright transfer of the legal title to the property,
a transfer of legal title of the property to a trustee to hold on trust, and a self-declaration of trust. As we have seen, Michael has transferred, by his declaration, the
legal title to the watch to the bank. There is no delivery requirement as it is already in the bank’s possession. In relation to Michael’s shares in the public company,
the Re Rose (1952) case is relevant. Another equitable maxim is that equity will not assist a volunteer, meaning that in order successfully to create the trust, Michael
must have done everything possible to transfer the legal title to the trust property. In Re Rose, the Court of Appeal upheld a trust where the donor had done
everything he was obliged to do to make the trust valid.

In relation to the shares, Michael will have to execute a stock transfer form in order to create the trust. This principle was extended by Pennington v Waine (2002),
although this still required the execution of a stock transfer form. Michael has also sought to create a trust over future property, his expected legacy from his uncle.
This is a mere “expectancy” rather than a trust. Equity will only enforce this as a trust if some consideration was given for it, which does not appear to have been the
case in this instance. It is a gratuitous assignment and is not therefore legally enforceable. Tailby v Official Receiver (1888) is authority for equity enforcing an
imperfect transaction where consideration was given. In relation to the freehold house, a trust over real property can only be fully created in writing (unlike trusts
over personalty). There will not be a properly constituted trust, then, over the property.

Michael has also verbally promised to his mistress that she will have the freehold house. This is a case of donationes mortis cause, or deathbed gifts, which are
made inter vivos. What distinguishes this from a deathbed gift, however, is that it is not conditional upon Michael’s death, as he says “whether I die or not”. Cain v
Moon (1869) is authority for the fact that deathbed gifts must be in contemplation of death. He also gives his mistress the keys to the safe which contain the title
deeds, and thus he has delivered to her the legal title, in essence. This is sufficient to create the trust although as mentioned this is not a donationes mortis causa.

We come to Michael’s will which was validly created, and which takes effect upon his death. The £200,000 trust to create a sports ground for the employees will be
successful as it is sufficiently certain as to the trust objects (i.e. the beneficiaries). This is a trust for a purpose, and pure purpose trusts will be invalid, however.
Equity will not recognise a trust to carry out a purpose as the benefits of carrying out a purpose cannot be localised to specific individuals (see Morice v Bishop of
Durham (1804)). The trust for the purpose of erecting and maintaining a monument will be invalid following Re Endacott (1960) in which a gift of some £20,000 was
made “for the purpose of providing some useful memorial to myself”. This was invalid. The trust for the purpose of looking after his pet tortoise will be valid as an
exception to the no purpose rule, following Pettingall v Pettingall (1842), in which a trust was valid for the purpose of looking after a horse. The gift for the purpose
of educating his children is obviously no longer relevant so the trust property will revert to Michael’s estate.

Finally, he leaves a legacy for the purpose of building a new clubhouse. Gifts to unincorporated associations were discussed in Conservative and Unionist Central
Office v Burrell (1982), and the lacrosse club meets the criteria for an unincorporated association. Once the association is dissolved, the property which is held by
the members of the association is not bona vacantia but there is no resulting trust because the property was held under a bare trust. The members can therefore
distribute the property among themselves as they see fit.