EXCEPTIONS TO THE RULE THAT EQUITY WILL NOT ASSIST A VOLUNTEER
INCOMPLETE CONSTITUTION
THE FORMATION OF TRUSTS – COMPLETING CONSTITUTION
‘equity will not assist a volunteer to complete and imperfect gift.’
Milroy v Lord [1862] 4 De GF & J 264
Three ways a voluntary settlement can occur:
1. Outright transfer by way of gift
2. Transfer to trustees to hold for another
3. Self-declaration and transfer by the self-proclaimed trustee accordingly
Incomplete constitution?
- If any act remains on part of the trustee, to make the conveyance effectual, the trust will not
be completely constituted, and the court will not complete it
Exception:
- If the trust document contains a self-declaration by the settlor
- the settlor has done everything in their power to complete the trust and some further step is
to be done by a third party
O’Flaherty v Browne [1907] 2 IR 416, 434
- A voluntary trust may be created by a declaration of trust, or by a complete assignment of
the legal ownership to a trustee, but it is impossible to turn an incomplete, conditional or
postponed gift into a trust, where there is no intention to create the relationship of trust
and’ trustee.
THE GENERAL RULE
Milroy v Lord [1862] 4 De GF & J 264
Testator executed a voluntary deed (no consideration) whereby he purported to transfer 50 shares
from a bank to the trustee to hold on trust for Ms. Milroy.
Transfer of the shares required entry in the books of the bank itself. It had to be a written entry. This
never happened. Handed over the deeds to the trustee but at the date of death the shares remained
in the testator’s name.
To render a voluntary settlement valid and effectual,
- The settlor must have done everything which, according to the nature of the property…was
necessary to be done in order to transfer the property and render the settlement binding
upon him.’
- Didn’t do everything in his power required for transfer of that specific type of property
, - The methods: self-declaration, outright transfer, declaring another a trustee – are mutually
exclusive.
- If a transfer is to take place but never did, the court will not declare a trust because it would
mean ‘every imperfect instrument would be made effectual by being converted into a
perfect trust.’
Richards v Dellbridge 1874 LR 18 Eq 11
Mr Richards employed his grandson Edward. He wrote on the back of a memorandum for a
leasehold – ‘this deed and all thereto belonging, I give to Edward.’ The title was not formally
transferred though... This was an imperfect gift, therefore. Claimant Gson was trying to argue that
the leasehold was held on trust for him, but there was no mention of the lease in the will either.
- Not an effectual transfer for that type of property
- He either could have properly transferred it by deed of transfer or said, ‘this deed…I
declare___to hold on trust for Edward,’ which would allow a trustee to then finish the
transfer. But he hit the limbo which rendered the transfer impossible. Imperfect gift will not
be completed
Exception:
Re Rose [1952] Ch 499
Testator transferred the shares effectively however the company fell-short in registering the shares,
and it the legal title thus was not technically passed over.
- Mr. Rose did properly execute the share transfer form and delivered it with the appropriate
certificate to his wife, who was then entitled to have the shares registered in her name.
- Gift is valid in equity from the time the donor does everything he is obliged to do to
constitute the property
Milroy distinguished:
- The uncle had not done everything in his power to transfer title
- If there is only a bureaucratic step to be done and this remains in the hands of a third-party
– courts will construe the trust as having been completely constituted
- Settlor did everything in his power, correctly, to transfer the title
- Transferor regarded as Trustee of the property for the Transferee pending the action of a
third-party
, THE CASE LAW
Re Fry [1946] Ch 312
Concerned a resident of America who was the donor of shares in a British Company. He wished to
transfer to his son. To do so required permission of the British Treasury. He completed the transfer
form in favour of his son however he died before the treasury gave him permission. Argued that
while he still held legal title, the equitable title passed to his son when the forms were submitted.
- Beneficial title didn’t pass until the donor obtained (rather than just applied for) permission
- There is a chance the treasury may have asked for further information -thus the donor, by
failing to provide that info may have had an opportunity to evade his own gift.
Very anti-intention, contingent and hypothetical, would probably be decided differently post-re
rose.
Re Kayford [1975] 1 All ER 60
Mail order company. accountants instructed company to pay money into a separate bank account
and pay money into it for goods not delivered to the customers who they were worried would not
get their goods before insolvency.
Withdrawal could only be on the basis that the goods were delivered.
Went into liquidation and the day after receivership, the accountants realized that the company
didn’t follow the instructions and kept it in a dormant account under the company’s names. The
accountants thus rang the bank and demanded them to change the name to the customer’s trust
deposit account.
Court analysed the actions – are they trust funds or for normal creditors?
McGarry J
- Writing not essential to create a trust
Looked at the certainties: intention, beneficiaries, and subject matter all certain
- Separate bank account not essential to transfer title. Everything else was clear.
- Segregation not necessary where the subject matter otherwise clear.
Mascall v Mascall [1984] EWCA Civ 10
A father executed a registered land transfer document to gift the land to his son. He handed this,
with the land certificate, to the donee – legal transfer has now passed. However, the father later
reacquired the land certificate – thus putting him in a position to not go ahead with the gift. He had
a falling out since giving title to the son, so wanted to revoke the gift.
- Re Rose applies to land
- As soon as the donor had executed the form and handed the certificate to him, the gift was
complete in equity
- Son was ordered to hand over the land certificate to the son so the latter could complete
the transfer of the legal title into his own name
INCOMPLETE CONSTITUTION
THE FORMATION OF TRUSTS – COMPLETING CONSTITUTION
‘equity will not assist a volunteer to complete and imperfect gift.’
Milroy v Lord [1862] 4 De GF & J 264
Three ways a voluntary settlement can occur:
1. Outright transfer by way of gift
2. Transfer to trustees to hold for another
3. Self-declaration and transfer by the self-proclaimed trustee accordingly
Incomplete constitution?
- If any act remains on part of the trustee, to make the conveyance effectual, the trust will not
be completely constituted, and the court will not complete it
Exception:
- If the trust document contains a self-declaration by the settlor
- the settlor has done everything in their power to complete the trust and some further step is
to be done by a third party
O’Flaherty v Browne [1907] 2 IR 416, 434
- A voluntary trust may be created by a declaration of trust, or by a complete assignment of
the legal ownership to a trustee, but it is impossible to turn an incomplete, conditional or
postponed gift into a trust, where there is no intention to create the relationship of trust
and’ trustee.
THE GENERAL RULE
Milroy v Lord [1862] 4 De GF & J 264
Testator executed a voluntary deed (no consideration) whereby he purported to transfer 50 shares
from a bank to the trustee to hold on trust for Ms. Milroy.
Transfer of the shares required entry in the books of the bank itself. It had to be a written entry. This
never happened. Handed over the deeds to the trustee but at the date of death the shares remained
in the testator’s name.
To render a voluntary settlement valid and effectual,
- The settlor must have done everything which, according to the nature of the property…was
necessary to be done in order to transfer the property and render the settlement binding
upon him.’
- Didn’t do everything in his power required for transfer of that specific type of property
, - The methods: self-declaration, outright transfer, declaring another a trustee – are mutually
exclusive.
- If a transfer is to take place but never did, the court will not declare a trust because it would
mean ‘every imperfect instrument would be made effectual by being converted into a
perfect trust.’
Richards v Dellbridge 1874 LR 18 Eq 11
Mr Richards employed his grandson Edward. He wrote on the back of a memorandum for a
leasehold – ‘this deed and all thereto belonging, I give to Edward.’ The title was not formally
transferred though... This was an imperfect gift, therefore. Claimant Gson was trying to argue that
the leasehold was held on trust for him, but there was no mention of the lease in the will either.
- Not an effectual transfer for that type of property
- He either could have properly transferred it by deed of transfer or said, ‘this deed…I
declare___to hold on trust for Edward,’ which would allow a trustee to then finish the
transfer. But he hit the limbo which rendered the transfer impossible. Imperfect gift will not
be completed
Exception:
Re Rose [1952] Ch 499
Testator transferred the shares effectively however the company fell-short in registering the shares,
and it the legal title thus was not technically passed over.
- Mr. Rose did properly execute the share transfer form and delivered it with the appropriate
certificate to his wife, who was then entitled to have the shares registered in her name.
- Gift is valid in equity from the time the donor does everything he is obliged to do to
constitute the property
Milroy distinguished:
- The uncle had not done everything in his power to transfer title
- If there is only a bureaucratic step to be done and this remains in the hands of a third-party
– courts will construe the trust as having been completely constituted
- Settlor did everything in his power, correctly, to transfer the title
- Transferor regarded as Trustee of the property for the Transferee pending the action of a
third-party
, THE CASE LAW
Re Fry [1946] Ch 312
Concerned a resident of America who was the donor of shares in a British Company. He wished to
transfer to his son. To do so required permission of the British Treasury. He completed the transfer
form in favour of his son however he died before the treasury gave him permission. Argued that
while he still held legal title, the equitable title passed to his son when the forms were submitted.
- Beneficial title didn’t pass until the donor obtained (rather than just applied for) permission
- There is a chance the treasury may have asked for further information -thus the donor, by
failing to provide that info may have had an opportunity to evade his own gift.
Very anti-intention, contingent and hypothetical, would probably be decided differently post-re
rose.
Re Kayford [1975] 1 All ER 60
Mail order company. accountants instructed company to pay money into a separate bank account
and pay money into it for goods not delivered to the customers who they were worried would not
get their goods before insolvency.
Withdrawal could only be on the basis that the goods were delivered.
Went into liquidation and the day after receivership, the accountants realized that the company
didn’t follow the instructions and kept it in a dormant account under the company’s names. The
accountants thus rang the bank and demanded them to change the name to the customer’s trust
deposit account.
Court analysed the actions – are they trust funds or for normal creditors?
McGarry J
- Writing not essential to create a trust
Looked at the certainties: intention, beneficiaries, and subject matter all certain
- Separate bank account not essential to transfer title. Everything else was clear.
- Segregation not necessary where the subject matter otherwise clear.
Mascall v Mascall [1984] EWCA Civ 10
A father executed a registered land transfer document to gift the land to his son. He handed this,
with the land certificate, to the donee – legal transfer has now passed. However, the father later
reacquired the land certificate – thus putting him in a position to not go ahead with the gift. He had
a falling out since giving title to the son, so wanted to revoke the gift.
- Re Rose applies to land
- As soon as the donor had executed the form and handed the certificate to him, the gift was
complete in equity
- Son was ordered to hand over the land certificate to the son so the latter could complete
the transfer of the legal title into his own name
