Class Notes: Seminar 9 - Constitution of Trusts & Perfection of Gifts
1. Background and Development
Express Trusts: An express trust is created when a settlor
intentionally transfers property to a trustee to hold for the benefit of
beneficiaries. The trust must be properly declared and constituted to
be valid.
Constitution of Trusts: A trust is constituted when the legal title to
the trust property is transferred to the trustee. If the settlor declares
themselves as the trustee, no transfer is needed, but the declaration
must be clear and intentional.
Perfection of Gifts: A gift is perfected when the donor transfers
ownership of the property to the donee. Equity generally does not
assist in perfecting imperfect gifts or constituting unconstituted trusts,
as it does not aid volunteers (those who provide no consideration).
2. General Rules
Milroy v Lord (1862):
o Rule: To create a valid trust or gift, the settlor must do
everything necessary to transfer the property according to its
nature. Equity will not perfect an imperfect gift or construe a
failed gift as a trust.
o Methods of Transfer:
1. Outright Gift: Transfer the property directly to the donee.
2. Transfer to a Trustee: Transfer the property to a trustee
to hold on trust for the beneficiaries.
3. Declaration of Self as Trustee: The settlor declares that
they hold the property on trust for the beneficiaries.
o Key Principle: The settlor must have done everything in their
power to transfer the property. If not, the trust or gift fails.
3. Special Rules and Exceptions
Re Rose (1952):
o Rule: If the settlor has done everything in their power to transfer
the property, the trust is constituted even if some formalities
(e.g., third-party approval) are pending.
o Application: In Re Rose, the settlor had signed the share
transfer form and handed it over, but the directors' approval was
pending. The court held that the trust was constituted because
the settlor had done all they could.
o Distinction from Milroy v Lord: Re Rose relaxes the strict
requirement of Milroy v Lord by focusing on the settlor's actions
rather than the completion of all formalities.
Pennington v Waine (2002):
o Rule: A gift can be perfected if it would be unconscionable for
the donor to revoke it, even if not all formalities are completed.
o Application: In Pennington v Waine, the donor signed the share
transfer form but did not deliver it to the donee. The court held
that the gift was complete because it would be unconscionable
for the donor to revoke it.
o Criticism: This decision is controversial as it undermines the
principle that equity will not perfect an imperfect gift.
Strong v Bird (1874):
o Rule: If an imperfect gift is made during the donor's lifetime, and
the intended donee becomes the executor of the donor's estate,
the gift is perfected when the property vests in the donee as
executor.
o Application: In Strong v Bird, the stepmother forgave a debt,
and the stepson became her executor. The court held that the
debt was forgiven because the stepson had legal title as
executor.
o Limits: The donor must have had a continuing intention to make
the gift until death.
Donationes Mortis Causa (DMC):
o Rule: A gift made in contemplation of death, which becomes
absolute only upon the donor's death. It does not require the
formalities of a will.
o Requirements:
1. Contemplation of Death: The donor must be
contemplating death from a specific cause (e.g., illness).
2. Delivery of Indicia of Title: The donor must deliver the
property or its title documents to the donee.
3. Conditional on Death: The gift is revocable until the
donor's death.
o Application: In Sen v Headley (1991), the donor gave the keys
to a safe containing title deeds, and the court held that this was
sufficient to transfer the property under DMC.
4. Test and Reasoning Approach
Milroy v Lord Test:
o Step 1: Identify the method of transfer (gift, transfer to trustee,
or declaration of self as trustee).
o Step 2: Determine if the settlor has done everything necessary
to transfer the property.
o Step 3: If not, equity will not perfect the gift or constitute the
trust.
Re Rose Test:
o Step 1: Determine if the settlor has done everything in their
power to transfer the property.
o Step 2: If yes, the trust is constituted even if third-party
formalities are pending.
Pennington v Waine Test:
o Step 1: Determine if it would be unconscionable for the donor to
revoke the gift.
o Step 2: If yes, the gift is perfected even if not all formalities are
completed.
Strong v Bird Test:
o Step 1: Determine if the donee has become the executor of the
donor's estate.
o Step 2: Determine if the donor had a continuing intention to
make the gift until death.
o Step 3: If yes, the gift is perfected when the property vests in
the donee as executor.
5. Application in Problem Questions
Problem 1 (Hannah's Gifts):
o Whitesands: Hannah declared herself trustee, so no transfer
was needed. The trust was constituted.
o Wildacre: Hannah declared herself trustee, so no transfer was
needed. The trust was constituted.
o Shares: Hannah did not execute the share transfer, so the gift
was imperfect. Equity will not perfect it.
Problem 2 (Richard's Deed Box):
o DMC: Richard gave the key to the deed box in contemplation of
death. The gift was conditional on his death and would be
perfected upon his death.
Problem 3 (Eugene's Pen):
o DMC: Eugene gave the pen in contemplation of death, but he
recovered. The gift was revocable, and Eugene can reclaim the
pen.
6. Summary
General Rule: Equity will not perfect an imperfect gift or constitute an
unconstituted trust.
Exceptions: Re Rose, Pennington v Waine, Strong v Bird,
and Donationes Mortis Causa provide exceptions where equity may
intervene to perfect a gift or constitute a trust.
Key Cases: Milroy v Lord (general rule), Re Rose (relaxation of
rule), Pennington v Waine (unconscionability), Strong v Bird (executor
rule), and Sen v Headley (DMC).
7. Further Reading
Halliwell (2003): Discusses the evolution of the rules on perfecting
imperfect gifts.
Garton (2003): Explores the role of the trust mechanism in the rule
in Re Rose.
Rules and Citing Cases in Table Format
Rule Case Citation Key Principle Application
The settlor must do
everything
necessary to
General Rule: transfer the If the settlor fails to
Equity will not Milroy v property according complete the
perfect an Lord (1862) to its nature. Equity transfer, the gift or
imperfect gift will not perfect an trust fails.
imperfect gift or
construe a failed gift
as a trust.
If the settlor has
In Re Rose, the
done everything in
settlor signed the
their power to
share transfer form
Relaxation of transfer the
and handed it over,
the Rule: Settlor property, the trust is
Re Rose (1952) but the directors'
does everything constituted even if
approval was
in their power some formalities
pending. The court
(e.g., third-party
held the trust was
approval) are
constituted.
pending.
In Pennington v
Waine, the donor
A gift can be signed the share
Unconscionabilit perfected if it would transfer form but
y: Gift perfected be unconscionable did not deliver it to
Pennington v
if for the donor to the donee. The
Waine (2002)
unconscionable revoke it, even if not court held the gift
to revoke all formalities are was complete
completed. because it would be
unconscionable to
revoke it.
Rule Case Citation Key Principle Application
If an imperfect gift
In Strong v Bird, the
is made during the
stepmother forgave
donor's lifetime, and
a debt, and the
Executor Rule: the intended donee
stepson became
Imperfect gift becomes the
Strong v her executor. The
perfected if executor of the
Bird (1874) court held the debt
donee becomes donor's estate, the
was forgiven
executor gift is perfected
because the
when the property
stepson had legal
vests in the donee
title as executor.
as executor.
In Sen v Headley,
A gift made in
the donor gave the
contemplation of
Donationes keys to a safe
death, which
Mortis Causa containing title
Sen v becomes absolute
(DMC): Gift in deeds, and the
Headley (1991) only upon the
contemplation court held this was
donor's death. It
of death sufficient to transfer
does not require the
the property under
formalities of a will.
DMC.
If the settlor
In Paul v Constance,
declares themselves
the settlor stated,
Declaration of as trustee, no
Paul v "This money is as
Self as Trustee: transfer of property
Constance (197 much yours as
No transfer is needed. The
7) mine," which was
needed declaration must be
held to be a valid
clear and
declaration of trust.
intentional.
If the trustee of one
In Re Ralli’s Will
trust coincidentally
Coincidental Trusts, the same
becomes the
Receipt: Trust person was trustee
Re Ralli’s Will trustee of another
constituted by of both trusts, so
Trusts (1964) trust, the trust is
coincidental the trust was
constituted without
receipt constituted without
the need for a
a formal transfer.
formal transfer.
Rule Case Citation Key Principle Application
For DMC, the donor
In Woodward v
must deliver the
Woodward, the
Delivery of property or its title
Woodward v donor gave the
Indicia of Title: documents to the
Woodward (199 keys to his car,
Essential for donee with the
5) which was held to
DMC intention of parting
be sufficient
with dominion over
delivery for DMC.
it.
In Re Lillingston,
A DMC gift is the court held that
Revocability of
Re revocable until the a DMC gift is
DMC: Gift
Lillingston (1952 donor’s death. If the conditional on the
revocable until
) donor recovers, the donor’s death and
donor’s death
gift can be revoked. can be revoked if
the donor recovers.
In Curtis v Pulbrook,
A constructive trust
Constructive the court imposed a
may arise if it would
Trust: Arises constructive trust
Curtis v be unconscionable
when where the donee
Pulbrook (2011) for the donor to
unconscionable had relied on the
revoke an apparent
to revoke gift to their
but ineffective gift.
detriment.
In Mascall v
For land, title must Mascall, the father
be transferred by handed over the
Formalities for deed. If the deed is deed to the son,
Mascall v
Land: Transfer handed over, the and the court held
Mascall (1985)
by deed trust is constituted the gift was
even if registration perfected despite
is pending. the lack of
registration.
Formalities for Re Fry (1946) For shares, the In Re Fry, the
Shares: Transfer transfer must settlor failed to
by share comply with the obtain Treasury
transfer form company’s articles consent, so the
and the Companies transfer was
Rule Case Citation Key Principle Application
Ordinance. If
Treasury consent is incomplete, and no
required and not trust was
obtained, the constituted.
transfer fails.
A promissory
estoppel may arise
if the donor makes a In Luo Xing Juan
Promissory Luo Xing Juan clear promise, the Angela, the court
Estoppel: Binds Angela v Estate donee relies on it, applied promissory
donor’s of Hui Shui See and it would be estoppel to prevent
conscience Willy (2008) unconscionable for the donor from
the donor to go revoking a gift.
back on the
promise.
Key Takeaways:
General Rule: Equity will not perfect an imperfect gift or constitute an
unconstituted trust (Milroy v Lord).
Exceptions:
o Re Rose: Settlor does everything in their power.
o Pennington v Waine: Unconscionability.
o Strong v Bird: Donee becomes executor.
o Donationes Mortis Causa: Gift in contemplation of death.
Formalities: Different rules apply depending on the type of property
(land, shares, chattels).
Constructive Trusts: May arise if it would be unconscionable to
revoke a gift.
This table provides a clear overview of the key rules, cases, and their
applications in the context of constitution of trusts and perfection of gifts.