Property Law about Self-Declaration of Trusteeship - Essay Example

?Property Law Assignment There are two ways to create an express trust; the settlor may transfer his legal to a person or persons appointing him trustee(s) of the property for an intended beneficiary or beneficiaries who acquire the beneficial interest in it. Also the settlor may appoint himself the sole trustee or one of the trustees’ of the property retaining the legal title and transferring the equitable title to the intended beneficiary or beneficiaries(Milroy v Lord)1. The latter is called the self declaration of trust and may sometimes pose a problem for the courts to ascertain the requisite intention in absence of “imperative words” (Wright v Atkins) from such a declaration. Whereby, courts of chancery may have to strike a balance of conscience between “equity will not perfect an imperfect gift” and “equity looks at the intent not the form”. Where the settlor is the sole trustee there is no further requirement that the subject matter of the trust are vested in them, ‘constitution’ is automatic. The duality of ownership principle in this type of trust has been justified by three very prominent cases providing for varied approaches in their reasoning. The House of Lords case of Vandervell v IRC2 held that the settlor’s original equitable interest passes to the Beneficiary by the presumption of its existence ab inito. Whereas Lord Browne-Wilkinson in Westdeutsche Landesbank v Islington LBC3 proposed a different view of this reasoning stating, the original equitable interest as “dormant” and being “carved” out of the settlor’s legal interest. Also consider the case of Re DKLR Holdings4 in the High court of Australia where Brennan J opines “An equitable interest is not carved out of a legal estate but impressed upon it”. This legal reasoning was also applied by McLelland J in the later case of re Transphere Pty Ltd. Practically these justifications form no part of judicial reasoning in reaching decisions but provide for the legal reasoning behind the creation of trusts. The first certainty the courts are looking to satisfy in an express trust is the certainty of intention i.e. words construed as to be imperative (Knight v Knight)5. Courts may apply deductive reasoning to ascertain or infer an intention but three requirements need to be satisfied to identify it. Firstly, “what did [the settlor] intend to be the sanction? Was it to be the authority of the court of Justice or the conscience of the devisee?”- LJ Christian (McCormick v Grogan)6. The word ‘trust’ is not important to legitimise the intention of the settlor to create a trust, only his intention of a binding obligation need be conveyed(Re Kayford)7. Secondly, the intention is made manifest (Re Vandervell’s Trusts (No.2)). Precatory words to benefit another are not sufficient (Jones v Lock)8 reaffirmed in Lambe v Eames9. Also the courts may take a different approach in finding such an intention in the contested declaration, it was held in Comiskey v Bowring-Hanbury10 that the courts will consider the context of the words used as important and may infer an intention to create a valid trust. Thirdly, the test of construction of the manifested intent is objective irrespective of the settlor’s actual intentions (Gissing v Gissing)11. As mentioned earlier precatory words are not sufficient to ascertain a valid self-declaration of trusteeship but the courts have not gone so far as to particularize words deemed to be sufficient. In Richards v Delbridge it was stated that the settlor does not need to use particular words: ‘…he need not use words ‘I declare myself trustee’, but he must do something which is equivalent to it, and use expressions which have that meaning.’ In Re Cozens, Neville J stated what was required in order to establish that an owner had effectively declared himself trustee of his own property: ‘….in each case where a declaration of trust is relied on the Court must be satisfied that a present, irrevocable declaration of trust has been made.’ Ultimately, whether there has been an effective declaration of trust or not will be for the courts to determine on the facts. The authorities and precedents give some indication as to what is necessary. Considering Jones v Lock(1865), a fathers’ gesture of making an outright gift of a cheque of ?900 in his own name for his infant son, saying “look you here, I give this to baby, it is for himself, and I am going to put it away for him, and will give him a great deal more with it’ was argued to be a self declaration of trusteeship but Lord Cranworth LC rejected this argument basing no legal repercussions would have entailed even if the father had failed to do so as on the facts of the case no such legally binding intention could be concluded. Whereas words which do not show legally binding intent on face value but are supported by conduct as in the case of cohabitants Paul v Constance12, the CA held that ‘…it is not easy to pinpoint a specific moment of declaration’ but Mr.Constance’s (settlor) reassurances over a period of time that the “money is as much as yours as mine” and the common usage of the account by him and the intended beneficiary was sufficient to constitute an express self-declaration of trust. The cohabitant situation in this case should be appreciated for forming such a positive judgement. It can be safely assumed that every day conversation on its own does not merit a ruling in favor of the contesting beneficiary unless a direct act or repeated indirect assurance of some kind may it be words written,oral or conduct entails it. In Milroy v Lord, it was held that the courts will not apply a mode different from that intended by the settlor simply to perfect an imperfect gift/trust. For example equity will not treat the intentions of a donor to make an outright gift, where the property fails to pass from the donor to donee as a self declaration of trust. Equity will also not perfect an ineffective transfer of the legal title to property to an intended trustee to constitute a trust by treating the intending settlor as having made a valid self-declaration of trust. Though consider the Privy Council’s decision in Choithram v Pagarani13.The Court of Appeal had deemed his attempt to make an outright gift a failure upon construction of his declaration as he had failed to transfer the trust rights into the name of all the trustees thus the gift failed on “constitution” of the trust. Whereas the Privy Council focused on a technicality providing for a successful trust being created in favour of the charity, that being he was one of the trustees’ and need not transfer the rights in the name of all the trustees for the creation of a valid trust because if considered separately and not collectively his intention could constitute a self-declaration of trusteeship thus constitution of the trust being automatic. The Council held that it would be unconscionable for him to resile from this declaration. This reasoning can be criticized and it can be argued that courts are simply intervening to perfect imperfectly constituted trusts. A progressive approach in finding a self-declaration of trust can be seen in Choithram v Pagarani by the Privy Council to encourage a noble cause it seems. It has been observed that in cases where the contesting beneficiary has detrimentally relied on by words of promise of a gift or have been encouraged indirectly or directly to do so and it can be objectively deduced that the contesting donee/settlor was aware of his mistaken belief than the courts may infer an intention of self-declaration of trusteeship in favour of the intended beneficiary. Consider the case of Dillwyn v Llewelyn14, a conscious departure from Milroy v Lord. Though it has been argued as a case of a constructive trust but the courts stance in finding the intention in cases of “detrimental reliance” should be appreciated. Express trusts where trusteeship lies with the settlor are also under the ambit of s.53(1) (b) Law of Property Act 1925 for declarations of trust regarding land to be enforceable in a court of law. Therefore in cases where rights concerned are proprietary in nature, words or conduct of the settlor is not enough to constitute a valid self-declaration of trust. His intentions of declaring a trust in favour of the intended beneficiary must also be evidenced and “proved by some writing signed” by him. The statute relieves the courts from any missionary work on the basis of the facts to determine a valid declaration of trust though the courts have taken a stand and put the statute in “abeyance” to prevent a fraud being perpetuated in Rochefoucald v Boustead15 by allowing oral evidence to be admitted and enforced with respect to proprietary rights. Judicial determinations may turn on the facts of the case as in Choithram v Pagarani, Rochefoucald v Boustead or in cases of detrimental reliance on part of the contesting beneficiary but it would suffice to say that these cases do not form the general approach of the courts. What can be reasonably justified based on the case law discussed above is that the courts will not support loose conversation as a valid self declaration of trusteeship and further take into account the context, conduct entailing or precedent to the contested declaration of words, and the relationship of the settlor with the intended beneficiary or beneficiaries, to construct a legitimate intention of declaration of trusteeship of/by the settlor. Also where the case is concerned with property regarding land a further formality of evidential proof being a statutory requirement may be disregarded by the courts where a fraud may be executed. Lastly, precedent guides that the courts are bound to apply the “reasonable man” test in concluding a manifested intent of a valid self-declaration. References PENNER, J. E. (2010). The law of trusts. Oxford, Oxford University Press HAYTON, D. J., MITCHELL, C., & MARSHALL, O. R. (2005). Commentary and cases on the law of trusts and equitable remedies. London, Sweet & Maxwell. MARTIN, J. E., & HANBURY, H. G. (2009). Hanbury & Martin Modern equity. London, Sweet & Maxwell. Read More