Legal Formalities and Equitable Principles in Property Administration

Introduction

The laws regarding administration of property, such as the Law of Property Act 1925 or the Wills Act 1837, are clear on the need of formalities to create enforceable trust. These laws require the person transferring a property to complete such formalities. This essay will examine whether providing such responsibility is sufficient to enforce a trust in case of non-compliance. This essay will examine whether equitable principles supplement legal formalities in case of non-compliance to legal formalities. It will examine the position that equity and formalities occupy in regard to creation and enforcement of a trust. This essay will thus examine the significance and limitation of formalities in regard to creating an express enforceable trust, and assess the extent equity supplements the law. For students who are seeking guidance on this particular complex topic, expert law dissertation help offer the most valuable insights and support. For students who are seeking guidance on this particular complex topic, expert law dissertation help offer the most valuable insights and support.

Formalities cannot stand alone without equity to make enforceable trusts.

Trust bases its origin to the concept of equity, which embodies the principles of justice and conscience. A trust is enforceable by application of equity principles and is recognised by the court in equitable jurisdiction based on an express trust document or common law and equitable doctrines. A trust is either in the express form where the settlor commits a conscious act or makes a declaration, or in imputed form that does not have any conscious act or declaration, but enforceable by legislative and judicial rules in defined, remedial situations. In terms of an express trust, a deed evidencing the trust validates its existence. For an express trust, a written document is necessary to verify its existence. This indicates the importance of the formalities required in creating a valid enforceable express trust. The later paragraphs will examine the significance and any limitation associated with such formalities. If the trust is as a Will that will take effect on the demise of the settler, it is a testamentary trust that must complete the formalities. The Wills Act, s9 provides that a Will must be in writing and signed establishing the intent of the testator. Non-compliance to this formality invalidates the Will. As such, prescribed formalities ensure creation of the trust and transfer of the property to the trustees. They ensure the trust becomes valid. Likewise, in a trust for transfer of land, legal formalities of creating the trust are provided under the Law of Property Act 1925. Its section provided 53(1)(a) provides the a written Will can effect creation of an interest in the land belonging to the settler. Considering this legal requirement of formalities, to what extent such formalities ensure enforceability of the trust? If they are not followed, what is the extent of equity in giving effect to the trust? The case of Milroy v Lord concerned a voluntary deed of trust, which did not vest the legal title of the shares in the trustee as the transfer was not registered as legally required. The Court of Appeal held that there was no trust created and as such it did not constitute a declaration of trust. It held that the settler must have done everything that was necessary to give effect to the transfer of legal title in the property to the trustees. This would have made the trust valid and

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1. Edward Reed, England and Wales’ in Charles Gothard and Sanjvee Shah, The World Trust Survey (Oxford University Press 2010) 203.
2. Ibid, 86.
3. Graham Virgo, The Principles of Equity and Trusts (Oxford University Press 2020) 115
4. Milroy v Lord (1862) 4 De GF & J 264.
effectual. It was ruled that a declaration of the trust must be made so that there is no equity to perfect an imperfect gift. It is argued that this interpretation of making effective trust ensures that a certainty in law is brought into effect. The Milroy ruling thus validates a trust only when a legal title is passed to trustees, and that an intention cannot be characterized as a trust to validate the trust.

The principles laid down in Milroy requiring completion of legal formalities is reflected in the Wills Act, s9 and the Law of Property Act 1925, s53. Both these laws require the trust to be expressed in writing and signed. Section 53 provides that the transfer of property must be through a signed deed of conveyancing. This is understandable as legal interests are created by a deed and registration. It brings into effect the legally enforceable ownership, which is reflected in both the legislations mentioned above. Creating the legal interests entitles the holder of such interest to take legal action to enforce their rights. The case of Public Trustee v Cooper demonstrates how requirement of legal formalities enables enforcement of interests in a trust. In this case, the court did not approve the trustees to sell the property, which was a significant part of a trust fund. The court found that the trustees did not show any compliance with regard to holding a meeting and proper documentation on how the decision was made. Jones v Lock ruled that in absence of an express trust where there is no evidence of intention to make the gift, no trust could be declared. Equity will not make an imperfect gift perfect. Non-compliance to formalities may not give effect to a trust. However, if the intention of the settlor is certain and express as to how they would desire to dispose or hold the property, will a limited construction of the law deny them their right? The case of Strong v Bird demonstrates that they cannot be denied. In this case, the deceased intended to gift property to another person. However, the gift was not made, but the person was named as executor of the deceased’ estate. The court held the gift a complete gift. Equity principles come up. It creates equitable interests that enable enforcement of a trust. To create equitable interest, the formalities may not be needed to create transfer a property, as will be see in cases mentioned later. Equitable interest does not mean legal ownership. It, however, provides a wider protection than legal interest, such as what restrictive covenants do. For example, the equitable principle of proprietary estoppels entitles the promise to claim an interest in land if they were promised the interest, had believed it and acted upon the promise. It is not just a defence but a claim, which can be established without the requirement of the promise being in writing. This is supported by the case of Gillett v Holt, where a farmer promised and assured the claimant of inheritance. It was held that the absence of any written deed did not deny the entitlement of the complainant to the benefit of the promise made by the farmer. Oliver J, in Taylor Fashions v Liverpool Victoria stated that it

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5. Alastair Hudson, Equity and Trusts (Taylor & Francis 2016) 226 -227.
6. Ibid, 226.
7. Nicholas Hopkins, Modern Studies in Property Law (Bloomsbury Publishing 2013) 345.
8. Public Trustee v Cooper [2001] WTLR 901.
9. Ibid.
10. Jones v Lock [1865] L.R. 1 Ch. App. 25.
11. Strong v Bird [1874] L.R. 18 Eq. 315.
12. Nicholas Hopkins, Modern Studies in Property Law (Bloomsbury Publishing 2013) 345.
13. Richard Clements and Ademola Abass, Complete Equity and Trusts: Text, Cases, and Materials (Oxford University Press 2018) 121.
14. Gillett v Holt [2001] Ch 210.
would be not conscionable for a person to knowingly or unknowingly deny that what he allowed or encourage another person to detrimentally assume. Although the element on unconscionability provides a wider protection to the done, it needs more than that. There has to be representation made, reliance on such representation and a detriment because of such reliance. These three key elements must be present to exercise proprietary estoppel. The cases where equity comes in demonstrate a fact that the settler was not clear in the way they wanted to handle, dispose, manage or hold the property. The lack of a formal approach may be cited here as the reason for such scenario. Formal approach prescribed by statute brings clarity and uniformity. For instance, a testator must ensure formalities are complete to avoid the trust being invalidated. Non-compliance may invalidate a Will. Compliance may prevent fraudulent inducement to make a Will. As such, any noncompliance to the formalities prescribed under the Wills Act 1837 can invalidate the trust. The reason being that such compliance ensures intention of the testator is expressed and accurate and is devoid of any unlawful pressure. If these objective of formal compliance is read with the ‘three certainties’ test, it could be derived that equity principle and legal principles work for the same objective, which is just and fair principle. Equity provides a broader concept of protection of rights and interest and legal principles provide a standard path to that effect. Lord Langdale MR in Knight v Knight provides the ‘three certainties’ test. Certainty must in the settlor’s words. The subject matter of the trust must be certain. The done as intended by the settler must also be certain. Such equity principles reconcile rights of parties. They prevent conducts that conflicts with judicial conscience. The cases mentioned above where equity principles were applied demonstrates that just and fair result could be achieved in absence of compliance to legal formalities. If the settler has done everything necessary to effect the transfer, it is not an incompletely constituted trust. This was seen in the case of Re Rose. In this case, the donor has done everything that was necessary for the donor to make the title in property transferred by way of a gift. She failed to complete the formalities by registering the transfer. The court held the gift effective as the testator has done everything by transferring the relevant shares to the donee, Mr Hook, along with relevant certificates. Registering the transfer was at left at the discretion of the company. This case ruling is an exception to the principle that equity will not assist a volunteer. Equity will create an equitable interest to transfer the title. In Pennington and Another v Waine, Crampton and others, the deceased settlor made a gift of shares by executing a transfer. As per the term of the transfer, the donee must become a shareholder to become a director in the company. The transfer was delivered to the agent of the settlor and not to the company. The transfer was not registered. The court held that the transfer was valid as the legal requirement was to execute a valid transfer and does not

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15. Taylor Fashions v Liverpool Victoria [1982] QB 133, 151-2.
16. Yeoman’ Row Management Ltd v Cobbe [2008] 1 WLR 1752, 1782.
17. Richard Clements and Ademola Abass, Complete Equity and Trusts: Text, Cases, and Materials (Oxford University Press 2018) 123.
18. Graham Virgo, The Principles of Equity and Trusts (Oxford University Press 2020) 121.
19. Knight v Knight (1840) 49 ER 58.
20. Charlie Webb and Tim Akkouh, Trusts Law (Macmillan Education UK 2013) 39.
21. Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752, 92; Ben McFarlane, Nicholas Hopkins and Sarah Nield, Land Law: Text, Cases, and Materials (Oxford University Press 2015) 177.
22. Re Rose [1952] Ch 499.
23. Alastair Hudson, Equity and Trusts (Taylor & Francis 2016) 227.
24. Pennington and Another v Waine, Crampton and others [2002] EWCA Civ 227.
necessarily provide for registration. Equity principles recognised a constructive trust in this transaction. Principle in Pennington focused on the unconscionability, which gives a broader concept leaving to the court to determine the case. The case of Re Rose applied a narrow question of fact to determine whether the donor had done everything he could to effect the transfer.

The further aspect to determine here is whether the narrow concept in Re Rose is more effective than broader concept applied in Pennington. In the case of T Choithram International SA the testator, intended to make an immediately absolute gift to Choithram International Foundation. He, however, did not vest the property in all the trustees of the donee. It was argued that the gift was not perfect. It was held that applying equitable fairness trust property was vested in Mr. Pagarani himself. This was sufficient to validate the trust deed. In this light it is correct on the part of LJ Arden to state that a donor does not need to do everything that he could to effect the transfer. However, the principle of equity may not always be capable of delivery just and fair result. What is the ‘three certainties’ test could not be undertaken. What if the equitable principle of proprietary estoppels could be determines? What if the principle of Re Rose could not be applied? These questions are relevant when there is no clarity, which only a legal formality could bring. For instance, legal requirement can prevent uncertain circumstances that may arise from ‘half secret’ where the trustee holds a property for an unnamed person. It may prevent issues arising from ‘full secret’ where legatee holds the property for benefit of a person, but the property is left to him beneficialy. Both of these scenarios will create problems as they do not comply with formalities of the Will Act 1837. In such cases, equity may even not be capable of providing a solution as there is a problem in identifying the person who would declare the trust when the testator is death.

Conclusion

equitable assignment of shares by way of gift,



delivery of the share transfer form, though required, could be dispensed with in some circumstances. In the instant case there had been a clear finding that the donor had intended to make an immediate gift equitable assignment of shares by way of gift,

delivery of the share transfer form, though required, could be dispensed with in

some circumstances. In the instant case there had been a clear finding that the donor had intended to make an immediate gift

Formalities are required in creating a valid enforceable express trust. This essay has demonstrated their significance. A written document verifies its existence as seen in Milroy, the Wills Act, and the Law of Property Act 1925. Their limitation is in the form of application form of equity principle. Equity does not require formalities to effect a transfer. Principles of proprietary estoppel in Gillett or Taylor Fashions, unconscionability in Pennington or the ‘three certainties’ test in Knight are proof of this. However, equity may provide a wider net of protection but cannot cover for issues arising from ‘half secret’ or ‘full secret’. Legal requirement can prevent uncertain circumstances by obligating parties to comply with formalities to bring

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25. Mohamed Ramjohn, Unlocking Equity and Trusts (Taylor & Francis 2017).
26. T Choithram International SA v Pagarani [2001] 1WLR 1 (PC).
27. Graham Virgo, The Principles of Equity and Trusts (Oxford University Press 2020), 122.
certainty and better enforceability. Considering the case laws discussed here, any law reform would mostly be on better and easier administration of the formalities.

Legislation

The Law of Property Act 1925 The Wills Act 1837

Dig deeper into Judicial Review of Executive Decisions in Public Emergencies with our selection of articles.

Cases

Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752

Gillett v Holt [2001] Ch 210.

Jones v Lock [1865] L.R. 1 Ch. App. 25.

Knight v Knight (1840) 49 ER 58.

Milroy v Lord (1862) 4 De GF & J 264.

Pennington and Another v Waine, Crampton and others [2002] EWCA Civ 227.

Public Trustee v Cooper [2001] WTLR 901.

Strong v Bird [1874] L.R. 18 Eq. 315.

Re Rose [1952] Ch 499.

Taylor Fashions v Liverpool Victoria [1982] QB 133, 151-2.

T Choithram International SA v Pagarani [2001] 1WLR 1 (PC).

Yeoman’ Row Management Ltd v Cobbe [2008] 1 WLR 1752, 1782.

Bibliography

Books

Clements R and Ademola Abass, Complete Equity and Trusts: Text, Cases, and Materials (Oxford University Press 2018)

Hopkins N, Modern Studies in Property Law (Bloomsbury Publishing 2013)

Hudson A, Equity and Trusts (Taylor & Francis 2016)

McFarlane B, Nicholas Hopkins and Sarah Nield, Land Law: Text, Cases, and Materials (Oxford University Press 2015)

Ramjohn M, Unlocking Equity and Trusts (Taylor & Francis 2017).

Reed E, England and Wales’ in Charles Gothard and Sanjvee Shah, The World Trust Survey (Oxford University Press 2010)

Virgo G, The Principles of Equity and Trusts (Oxford University Press 2020)

Webb C and Tim Akkouh, Trusts Law (Macmillan Education UK 2013)