TOPIC: INTENTION, SUBJECT MATTER AND FORMALITIES [UNIT 1 + UNIT 2: SU 1]
Defective Transfer Questions
STEP 1: Identify the type of disposition and necessary declaration.
GIFT
[Definition] The disposition at hand is an outright gift, which is when a donor simply transfers over property to
a donee who then gains absolute ownership with no strings attached.
[Requirements] In order for a gift to be valid it must satisfy the three certainties.
[INTENTION] Firstly, there must be certainty of intention, which can be manifest from words or
conduct, but must be identifiable at the time of transfer of the property. (ATF). Furthermore, the
donor must have the necessary mental capacity to form an intention to make a gift. This requires the
donor to be able to comprehend the nature and consequence of giving the gift, with the degree of
understanding necessary varying positively with the relative importance of the property (Re Beaney).
(ATF).
[SUBJECT] Second, there must be certainty of subject matter, meaning the property being gifted is
certain and must be a tangible benefit that can be enforced (Sprange v Barnard).
[Clearly Worded] Therefore, a gift which is unclear will not be enforceable (Palmer v Simmonds),
whilst gifts which are not exact but are supplemented by a workable formula may be enforceable (Re
Golay). (ATF).
Always clarify:
[If a portion of TANGIBLE like items → Clearly Segregated] As the subject in question
includes a portion of tangible like items, (ATF), the items being gifted must be clearly
segregated from the other like items (Re London Wine Company (Shippers)). (ATF). ****
[If a portion of INTANGIBLE like items → No Segregation Required] As the subject in
question includes a portion of intangible like items, (ATF), the items being gifted do not need
to be clearly segregated to be valid (Hunter v Moss). (ATF).
[OBJECT] Thirdly, there must be certainty of object, meaning the donee(s) are clearly defined and
identifiable. (ATF).
TRUST WITH SOMEONE ELSE AS TRUSTEES
[Formalities for Declaration of a Trust]
1 THREE CERTAINTIES
[Requirements] In order for a trust with (ATF) as the trustee to be valid it must satisfy the three certainties.
[INTENTION] Firstly, there must be certainty of intention, which requires a high degree of certainty
that the settlor intended to create a trust. Intention can be ascertained through words and conduct
and is not necessary for the word 'trust' to be used (Paul v Constance). However, mere precatory
words, such as 'hoping that', will not suffice as certain intention (Re Adams and Kensington Vestry).
(ATF).
NB: When intention is unclear - usually when settlor wants another to hold money to be spent on xyz
Always state: “Query if this is an outright gift or a trust.” (Then do analysis on how the
wording will not satisfy the certainty of intention + mention: regardless there would also be a
problem with certainty of subject matter s it is not clear how much should be spent on [Y]).
Therefore, this will be construed as an outright gift to [X] and [X] is free to do use the gift
however they want.
1
, Note: usually it will be a oral statement which will satisfy the intention → therefore briefly go through
this but check if they stated it in an email/letter etc to highlight how it is intended
[SUBJECT] Second, there must be certainty of subject matter, meaning the property in question is
certain and there must be a tangible benefit that can be enforced (Sprange v Barnard).
[Clearly Worded] Therefore, a subject which is unclear will not be enforceable (Palmer v
Simmonds), whilst those that are not exact but are supplemented by a workable formula
may be enforceable (Re Golay). (ATF).
[If a portion of TANGIBLE like items → Clearly Segregated] As the subject in question
includes a portion of tangible like items, (ATF), the items being transferred must be clearly
segregated from the other like items (Re London Wine Company (Shippers)). (ATF).
[If a portion of INTANGIBLE like items → No Segregation Required] As the subject in
question includes a portion of intangible like items, (ATF), the items being transferred do not
need to be clearly segregated to be valid (Hunter v Moss). (ATF).
[Money in a bank account] As the subject matter at hand involves money in a bank account,
this will be considered sufficiently certain if the money has been transferred into a separate
bank account (Re Lewis of Leicester Ltd). (ATF).
In addition, the settlor must clearly identify the size of property, and where this is not done then the
share between beneficiaries is deemed to be equal. (ATF).
[OBJECT] Thirdly, there must be certainty of object, meaning the donee(s) are clearly defined and
identifiable. (ATF).
[Fixed Trusts] As this is a fixed trust, the courts will use the 'Complete List' test to determine
certainty of object, which requires conceptual and evidential certainty (IRC v Broadway
Cottages). This states that it must be possible to draw up a comprehensive list of of the
beneficiaries. [Case Example] (ATF).
[Discretionary Trusts] As this is a discretionary trust, the courts will use the 'Given Postulant'
test which only requires conceptual certainty (McPhail v Doultan, Re Baden (No.2)). This test
requires linguistic certainty in so that a person must be able to tell with certainty whether
any given person fits the criteria. (ATF).
3 further tests developed:
1. Sachs: a commonsense approach - people must prove they are inside the class
2. Megaw: a substantial number must be able to prove themselves within the class (less
strict)
3. Stamp: if there is someone who cannot be categorised as within or outside of the
class then the trust fails (strict test)
2 BENEFIFICARY PRINCIPLE
In addition, the trust must satisfy the Beneficiary principle that requires there to be ascertainable human
beneficiaries who can enforce the trust (Morice v Bishop of Durham), unless any exception applies. [Apply
exceptions where relevant: Honorary Trust, Charitable Trust, Denley Trust (Explanation in next answer
structure)]
3 RULES AGAINST PERPETUITY
The Rules against Perpetuity need to be satisfied in order for a valid transfer to be made and have been put in
place to keep money moving freely. Therefore,
[Discretionary Trusts] in a discretionary trust, the rule against remoteness states that trustees must
vesting the interest within 125 years (The Perpetuities and Accumulations Act 2009), (ATF).
2
, [Non-Charitable Purpose Trusts] in a non-charitable purpose trust, the rule against alienability states
that the trust will be void from the outset if the trust capital is not freely alienable within the
perpetuity period (21 years). (ATF).
[Formalities - ONLY FOR TRUSTS OF LAND]
[If Land] As the trust property at hand is land, namely (ATF), it must be in evidenced writing and
signed by the transferor (s.53(1)(b) Law of Property Act (LPA) 1925) to be a valid declaration. (ATF).
Note: if not mentioned you can assume it is met.
Note: the signed written declaration does NOT need to be the actual declaration - ie if a
father way holding himself as trustee over land for his daughter, but wrote a signed letter
declaring this to the mother, this will suffice!!
[Non-Land] As the trust property is non-land, (ATF), there are no requirements needed for its
declaration, however writing is desirable. (ATF).
TRUST WITH SELF AS TRUSEE
[Same formalities as above]
But also:
Formalities - ONLY FOR TRUSTS OF LAND x Self as Trustee
[If Land] As the trust property at hand is land, namely (ATF), it must be in evidenced writing
and signed by the transferor (s.53(1)(b) Law of Property Act (LPA) 1925). (ATF).
Note: the signed written declaration does NOT need to be the actual declaration - ie
if a father way holding himself as trustee over land for his daughter, but wrote a
signed letter declaring this to the mother, this will suffice!!
[Non-Land] As the trust property is non-land, (ATF), there are no requirements needed,
however writing is desirable. (ATF).
STEP 2: Where there is a transfer -> consider if the correct formalities been met.
CHATTELS
In the case of chattels, such as (ATF), the only formality that is required is for the property to either be
physically delivered (Re Cole) or transferred by deed (Jaffa v Taylor Gallery Ltd). (ATF).
SHARES
[Outside CREST System - Private Companies] As the shares at hand are of a private limited company, they will
be outside the CREST system. Therefore, transferor must sign a ‘Stock Transfer Form’ which must be sent to
the company along with the share certificate, under s.1 Stock Transfer Act 1963. (ATF). The transfer is only
complete once company updates its register. (ATF).
[Inside CREST System] As the shares at hand are not of a private limited company, the shares will be within the
CREST system, whereby shareholdings are recorded electronically, and everything is computerised. Therefore,
the transfer will be done electronically, and the legal title will be transferred immediately after the shareholder
instructs the stock broker. (ATF).
3
, LAND
As the property in subject is land, namely (ATF), the transferor is required to execute a valid deed under
s.52(1) Law of Property Act 1925. A deed must satisfy conditions under s.1 Law of Property (Miscellaneous) Act
1989 to be valid. Therefore, the document must be stated or signed to be a deed, (ATF), and the person
making the deed signs the document in the presence of a witness, who must also sign the deed, (ATF). In
addition, the deed must be sent to the Land Registry to register the transferee as the new legal owner and the
legal title is only transferred when the registration is complete. (ATF).
Note: if on the facts it says that the new owner is registered as the proprietor on the Land Registry → this
means a valid deed has been made as they Land Registry would not otherwise have registered them!
EQUITABLE INTERESTS
As the transferor intends to transfer their equitable interest, they must satisfy the conditions under s.53(1)(c)
Law of Property Act 1925. Therefore, it must be done in writing (Grey v IRC) and must be either signed by the
person disposing of the interest, or by an authorised agent, or in a will. (ATF).
[Exceptions] Consider: Resulting Trusts, Constructive Trusts, Proprietary Estoppel. (ATF).
Note: if the facts are that the settlor wants to gift shares that are held by a nominee → this will be gifting the
equitable interest → refer to Vandervell if formalities not met
STEP 3: Where the transfer has been defective -> consider if exceptions.
THE DONEE IS THE PR
The exception in Strong v Bird may apply at the point of death of the intended donor and where a gift has
failed on formalities, (ATF). The exception states that a gift will become perfect and the legal title will be
transferred if:
1. First, the donee becomes the donor’s personal representative or executor/executrix of the will. (ATF).
Note: [If PR] → Walton J in Re Gonin noted that becoming PR and co-acquiring the legal title
is a matter of complete chance, therefore the rationale of Strong v Bird for the chosen
executor to release from debt is absent.
2. Third, the intention must be to transfer an immediate gift, not in the future (Re Freeland). (ATF).
3. Fourth, the intention remained unchanged until the donor’s death (Re Gonin). (ATF - QUERY whether
intention remained unchanged).
Note: you will only need to consider Strong v Bird if the donor has died and the donee has become the PR
or executor → if not quickly dismiss it by saying "because the donor is alive or/and the donee is not the PR
or executor, the rule under Strong v Bird will not perfect this gift."
EVERY EFFORT TEST
Under the 'Every Effort' test, a gift will be complete in equity, even if the donor fails to correctly transfer the
legal title, given that the donor did everything they could to transfer the legal ownership to the donee.
Therefore, the only outstanding matters should be in the hands of a third parties. In addition, Mascall v
Mascall extended this exception to cases involving land transfers and clarified that once the exception was
met, the transfer was irrevocable, even if the transferor changed their mind. (ATF).
UNCONSIONABLE
In some specific circumstances, courts may find that it would be unconscionable for the transferor to be able
to retract a gift, even when every effort was not made to transfer the property (Pennington v Waine).
Although there is no decisive definition of what would be unconscionable, Arden LJ provided a some factors,
including:
4
Defective Transfer Questions
STEP 1: Identify the type of disposition and necessary declaration.
GIFT
[Definition] The disposition at hand is an outright gift, which is when a donor simply transfers over property to
a donee who then gains absolute ownership with no strings attached.
[Requirements] In order for a gift to be valid it must satisfy the three certainties.
[INTENTION] Firstly, there must be certainty of intention, which can be manifest from words or
conduct, but must be identifiable at the time of transfer of the property. (ATF). Furthermore, the
donor must have the necessary mental capacity to form an intention to make a gift. This requires the
donor to be able to comprehend the nature and consequence of giving the gift, with the degree of
understanding necessary varying positively with the relative importance of the property (Re Beaney).
(ATF).
[SUBJECT] Second, there must be certainty of subject matter, meaning the property being gifted is
certain and must be a tangible benefit that can be enforced (Sprange v Barnard).
[Clearly Worded] Therefore, a gift which is unclear will not be enforceable (Palmer v Simmonds),
whilst gifts which are not exact but are supplemented by a workable formula may be enforceable (Re
Golay). (ATF).
Always clarify:
[If a portion of TANGIBLE like items → Clearly Segregated] As the subject in question
includes a portion of tangible like items, (ATF), the items being gifted must be clearly
segregated from the other like items (Re London Wine Company (Shippers)). (ATF). ****
[If a portion of INTANGIBLE like items → No Segregation Required] As the subject in
question includes a portion of intangible like items, (ATF), the items being gifted do not need
to be clearly segregated to be valid (Hunter v Moss). (ATF).
[OBJECT] Thirdly, there must be certainty of object, meaning the donee(s) are clearly defined and
identifiable. (ATF).
TRUST WITH SOMEONE ELSE AS TRUSTEES
[Formalities for Declaration of a Trust]
1 THREE CERTAINTIES
[Requirements] In order for a trust with (ATF) as the trustee to be valid it must satisfy the three certainties.
[INTENTION] Firstly, there must be certainty of intention, which requires a high degree of certainty
that the settlor intended to create a trust. Intention can be ascertained through words and conduct
and is not necessary for the word 'trust' to be used (Paul v Constance). However, mere precatory
words, such as 'hoping that', will not suffice as certain intention (Re Adams and Kensington Vestry).
(ATF).
NB: When intention is unclear - usually when settlor wants another to hold money to be spent on xyz
Always state: “Query if this is an outright gift or a trust.” (Then do analysis on how the
wording will not satisfy the certainty of intention + mention: regardless there would also be a
problem with certainty of subject matter s it is not clear how much should be spent on [Y]).
Therefore, this will be construed as an outright gift to [X] and [X] is free to do use the gift
however they want.
1
, Note: usually it will be a oral statement which will satisfy the intention → therefore briefly go through
this but check if they stated it in an email/letter etc to highlight how it is intended
[SUBJECT] Second, there must be certainty of subject matter, meaning the property in question is
certain and there must be a tangible benefit that can be enforced (Sprange v Barnard).
[Clearly Worded] Therefore, a subject which is unclear will not be enforceable (Palmer v
Simmonds), whilst those that are not exact but are supplemented by a workable formula
may be enforceable (Re Golay). (ATF).
[If a portion of TANGIBLE like items → Clearly Segregated] As the subject in question
includes a portion of tangible like items, (ATF), the items being transferred must be clearly
segregated from the other like items (Re London Wine Company (Shippers)). (ATF).
[If a portion of INTANGIBLE like items → No Segregation Required] As the subject in
question includes a portion of intangible like items, (ATF), the items being transferred do not
need to be clearly segregated to be valid (Hunter v Moss). (ATF).
[Money in a bank account] As the subject matter at hand involves money in a bank account,
this will be considered sufficiently certain if the money has been transferred into a separate
bank account (Re Lewis of Leicester Ltd). (ATF).
In addition, the settlor must clearly identify the size of property, and where this is not done then the
share between beneficiaries is deemed to be equal. (ATF).
[OBJECT] Thirdly, there must be certainty of object, meaning the donee(s) are clearly defined and
identifiable. (ATF).
[Fixed Trusts] As this is a fixed trust, the courts will use the 'Complete List' test to determine
certainty of object, which requires conceptual and evidential certainty (IRC v Broadway
Cottages). This states that it must be possible to draw up a comprehensive list of of the
beneficiaries. [Case Example] (ATF).
[Discretionary Trusts] As this is a discretionary trust, the courts will use the 'Given Postulant'
test which only requires conceptual certainty (McPhail v Doultan, Re Baden (No.2)). This test
requires linguistic certainty in so that a person must be able to tell with certainty whether
any given person fits the criteria. (ATF).
3 further tests developed:
1. Sachs: a commonsense approach - people must prove they are inside the class
2. Megaw: a substantial number must be able to prove themselves within the class (less
strict)
3. Stamp: if there is someone who cannot be categorised as within or outside of the
class then the trust fails (strict test)
2 BENEFIFICARY PRINCIPLE
In addition, the trust must satisfy the Beneficiary principle that requires there to be ascertainable human
beneficiaries who can enforce the trust (Morice v Bishop of Durham), unless any exception applies. [Apply
exceptions where relevant: Honorary Trust, Charitable Trust, Denley Trust (Explanation in next answer
structure)]
3 RULES AGAINST PERPETUITY
The Rules against Perpetuity need to be satisfied in order for a valid transfer to be made and have been put in
place to keep money moving freely. Therefore,
[Discretionary Trusts] in a discretionary trust, the rule against remoteness states that trustees must
vesting the interest within 125 years (The Perpetuities and Accumulations Act 2009), (ATF).
2
, [Non-Charitable Purpose Trusts] in a non-charitable purpose trust, the rule against alienability states
that the trust will be void from the outset if the trust capital is not freely alienable within the
perpetuity period (21 years). (ATF).
[Formalities - ONLY FOR TRUSTS OF LAND]
[If Land] As the trust property at hand is land, namely (ATF), it must be in evidenced writing and
signed by the transferor (s.53(1)(b) Law of Property Act (LPA) 1925) to be a valid declaration. (ATF).
Note: if not mentioned you can assume it is met.
Note: the signed written declaration does NOT need to be the actual declaration - ie if a
father way holding himself as trustee over land for his daughter, but wrote a signed letter
declaring this to the mother, this will suffice!!
[Non-Land] As the trust property is non-land, (ATF), there are no requirements needed for its
declaration, however writing is desirable. (ATF).
TRUST WITH SELF AS TRUSEE
[Same formalities as above]
But also:
Formalities - ONLY FOR TRUSTS OF LAND x Self as Trustee
[If Land] As the trust property at hand is land, namely (ATF), it must be in evidenced writing
and signed by the transferor (s.53(1)(b) Law of Property Act (LPA) 1925). (ATF).
Note: the signed written declaration does NOT need to be the actual declaration - ie
if a father way holding himself as trustee over land for his daughter, but wrote a
signed letter declaring this to the mother, this will suffice!!
[Non-Land] As the trust property is non-land, (ATF), there are no requirements needed,
however writing is desirable. (ATF).
STEP 2: Where there is a transfer -> consider if the correct formalities been met.
CHATTELS
In the case of chattels, such as (ATF), the only formality that is required is for the property to either be
physically delivered (Re Cole) or transferred by deed (Jaffa v Taylor Gallery Ltd). (ATF).
SHARES
[Outside CREST System - Private Companies] As the shares at hand are of a private limited company, they will
be outside the CREST system. Therefore, transferor must sign a ‘Stock Transfer Form’ which must be sent to
the company along with the share certificate, under s.1 Stock Transfer Act 1963. (ATF). The transfer is only
complete once company updates its register. (ATF).
[Inside CREST System] As the shares at hand are not of a private limited company, the shares will be within the
CREST system, whereby shareholdings are recorded electronically, and everything is computerised. Therefore,
the transfer will be done electronically, and the legal title will be transferred immediately after the shareholder
instructs the stock broker. (ATF).
3
, LAND
As the property in subject is land, namely (ATF), the transferor is required to execute a valid deed under
s.52(1) Law of Property Act 1925. A deed must satisfy conditions under s.1 Law of Property (Miscellaneous) Act
1989 to be valid. Therefore, the document must be stated or signed to be a deed, (ATF), and the person
making the deed signs the document in the presence of a witness, who must also sign the deed, (ATF). In
addition, the deed must be sent to the Land Registry to register the transferee as the new legal owner and the
legal title is only transferred when the registration is complete. (ATF).
Note: if on the facts it says that the new owner is registered as the proprietor on the Land Registry → this
means a valid deed has been made as they Land Registry would not otherwise have registered them!
EQUITABLE INTERESTS
As the transferor intends to transfer their equitable interest, they must satisfy the conditions under s.53(1)(c)
Law of Property Act 1925. Therefore, it must be done in writing (Grey v IRC) and must be either signed by the
person disposing of the interest, or by an authorised agent, or in a will. (ATF).
[Exceptions] Consider: Resulting Trusts, Constructive Trusts, Proprietary Estoppel. (ATF).
Note: if the facts are that the settlor wants to gift shares that are held by a nominee → this will be gifting the
equitable interest → refer to Vandervell if formalities not met
STEP 3: Where the transfer has been defective -> consider if exceptions.
THE DONEE IS THE PR
The exception in Strong v Bird may apply at the point of death of the intended donor and where a gift has
failed on formalities, (ATF). The exception states that a gift will become perfect and the legal title will be
transferred if:
1. First, the donee becomes the donor’s personal representative or executor/executrix of the will. (ATF).
Note: [If PR] → Walton J in Re Gonin noted that becoming PR and co-acquiring the legal title
is a matter of complete chance, therefore the rationale of Strong v Bird for the chosen
executor to release from debt is absent.
2. Third, the intention must be to transfer an immediate gift, not in the future (Re Freeland). (ATF).
3. Fourth, the intention remained unchanged until the donor’s death (Re Gonin). (ATF - QUERY whether
intention remained unchanged).
Note: you will only need to consider Strong v Bird if the donor has died and the donee has become the PR
or executor → if not quickly dismiss it by saying "because the donor is alive or/and the donee is not the PR
or executor, the rule under Strong v Bird will not perfect this gift."
EVERY EFFORT TEST
Under the 'Every Effort' test, a gift will be complete in equity, even if the donor fails to correctly transfer the
legal title, given that the donor did everything they could to transfer the legal ownership to the donee.
Therefore, the only outstanding matters should be in the hands of a third parties. In addition, Mascall v
Mascall extended this exception to cases involving land transfers and clarified that once the exception was
met, the transfer was irrevocable, even if the transferor changed their mind. (ATF).
UNCONSIONABLE
In some specific circumstances, courts may find that it would be unconscionable for the transferor to be able
to retract a gift, even when every effort was not made to transfer the property (Pennington v Waine).
Although there is no decisive definition of what would be unconscionable, Arden LJ provided a some factors,
including:
4
