The incidence of express private trusts
The two cases provided are both concerned with the incidence of express private trusts. It is essential to consider the background law and some of the cases decided prior before considering in detail what these cases demonstrate in relation to express private trusts.
It must be first understand the ways in which an express trust can be created, there are essentially two ways the first of these is by the settlor transferring the property intended to be the subject-matter of the trust to persons as trustees upon certain trusts declared by him or alternatively by the settlor declaring that he himself will hold certain of his property as trustee upon certain trusts.
A purported voluntary transfer of legal title is ineffectual both at law and in equity were something remains to be done by the transferor in order to render the transfer effectual and this was the position in Milroy v Lord.
In this case Thomas Medley executed what was treated as a voluntary deed purporting to assign 50 shares in the Louisiana Bank to Samuel Lord upon trust for the benefit of the plaintiffs. Samuel Lord held at the time a general power of attorney authorising him to transfer Thomas Medley’s shares, and Thomas Medley, after the execution of settlement, gave him a further power of attorney authorising him to receive the dividends on the banks shares. Shortly after the execution of the deed, the settlor had delivered to Samuel Lord the certificates for the shares; and on the death of the settlor, Samuel Lord gave up the certificates to the settlor’s executor.
Turner LJ gave the leading judgement and stated this, in relation to the law on express private trusts:
If it is intended to take effect by transfer, the court will not hold the intended transfer to operate as a declaration of trust, for them every imperfect instrument would be made effectual by being converted into a perfect trust. In Re Rose, F, a resident of the United States, owned shares in an English company which he transferred by way of a gift in favour of his son. By reason of wartime restrictions imposed upon the transfer of securities the English Company was prohibited from registering the transfer without Treasury consent. The Court of Appeal held that R had done everything in his power to transfer his legal and equitable interest in the shares on the date of the transfer in March 1943. In Pennington v Waine Ada owned 1,500 out of 2,000 shares in C Ltd which had custody of her share certificate. P then told Harold of Ada’s gift, saying Harold need taken no further action and asked Harold to sign the necessary form of consent to act as director now that he had qualifying shares. Harold signed the form and Ada as director countersigned it. Lord Browne-Wilkinson concluded that:
This case falls between the two common- form situations mentioned above. The foundation has no legal existence apart from the trust declared by the foundation trust deed. Therefore the words “I give to the foundation” can only mean “I give trustees of the foundation trust deed to be held by them on the trusts of the foundation trust deed”. Although the words are apparently words of outright gift they are essentially words of gift on trust”
The gift is effective at law when registration of the transfer is made, and until this is done a transferor who complies with (1) and (2) above is a constructive trustee for the transferee.
In the case of a gift of an equitable interest statute requires action only by the donor so that there is no scope for Milroy v Lord. Legal estates in freehold or leasehold property must be transferred by deed or in the case of registered land by a transfer form which is subsequently registered. In that part he held that the execution of the stock transfer form could take effect as a valid equitable assignment without the need for actual delivery of the stock transfer forms or the share certificates, provided the execution of the stock transfer forms were intended to take immediate effect. Of course equity will only recognise such a trust if Ada is obliged to transfer to the legal title to the donee, so it might be argued that she will be under no such obligation unless the subject matter of the transfer is unique, such that the court will order transfer of the legal title in specie.
Personal chattels must be transferred by delivery or by deed of gift. A declaration of trust, to be effectual, need not be literal. Before TCP died the gifted property was not vested in the other Trustees, so it was alleged the gift was an imperfect gift.
Lord Browne-Wilkinson for the Privy Council held in context that “the words ‘I give to the Foundation’ can only mean ‘I give to the Trustees of the Foundation trust deed to be held by them on the trusts of the Foundation Trust Deed.’ Although the words are apparently words of outright gift they are essentially words of gift on trust.” In substance, it seems that TCP was regarded as having said “As sole legal beneficial owner of the assets and as legal trustee of the foundation I’m giving my beneficial interest on trust for the Foundation and so as trustee now holding such interest on the trusts of the Foundation deed.”
Lord Browne-Wilkinson then dealt with the fact that he had not actually transferred the gifted assets to all seven Trustees, including himself as one of the Trustees:
There can in principle be no distinction between the case where the donor declares himself to be sole Trustee for a donee or a purpose and the case where he declares himself to be unconscionable and contrary to the principles of equity to allow such a donor to resile from his gift… in the absence of special factors, where is bound by the trust and must give effect to it by transferring the trust property into the name of all trustees”
As it happened, the four companions had altered their share registers after TCP’s death so that legal title to the shares actually vested in the remaining six Trustees. It operates in personam and on a case by case basis and therefore it is difficult to draw an overriding principle.
Tags: declaration of trust, express trust, general power of attorney, judgement, plaintiffs, private trusts, subject matter
