FORMALITIES FOR THE CREATION OF AN EXPRESS TRUST Declaration of trust

The old rule emanates from the case of M’Fadden v Jenkyns which made it clear that for there to be a valid declaration of trust over personal property, no formality will usually be

required as long as it is clear that the settlor intended to create an immediate trust over the property.

Some trusts can be created without a formality at all, such as in Paul v Constance which shows how in some instances you can informally create a trust. Trusts of personalty (money, shares, chattels) do not require writing and an oral declaration will suffice However particular formalities must be adhered to in certain situations and these are set out in statute; one of the maxims of equity is that it looks to substance as opposed to form:

- Inter vivos: trusts created in a person’s lifetime

- Testamentary: a person is dead and has left their property in a will Formalities of a trust are closely linked to the constitution of a trust.

In declaring a trust the formalities depend on the nature of the property involved and the time at which it was made

On death

If you want to leave property on trust after your death there are formalities

Section 9 of the Wills Act 1837 provides that ‘’no will shall be valid unless

• It is in writing, and signed by the testator, or by some other person in his presence and by his direction; and

• It appears that the testator intended by his signature to give effect to the will; and

• The signature is made or acknowledged by the testator in the presence of two or more witnesses present at the same time; and

• Each witness either:

o Attests and signs the will or

o Acknowledges his signature, in the presence of the testator (but not necessarily in the presence of any other witness)’’

• Effectively it must be in writing, must be signed, and must be signed or witnessed by 2 or more witnesses. Failure to comply will mean the will is invalid

Inter VivosTrust Over Land

The basic notion is that in regards to trusts of land, where it has been declared orally the statutory formalities will not have been regarded as satisfied and the trust will therefore not be enforceable by the intended beneficiary

If you wish to make trust of land in your life time (inter vivos) it is governed by under Section 53 of the Law of Property Act 1925

• (1)(b) ‘’A declaration of trust respecting any land or interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will

• (1)(c) A disposition of an equitable interest or trust subsisting at the time of disposition must be in writing.’’

It is clear that you cannot create a trust of land in your lifetime in the absence of writing:

• Oral declaration is deemed to be valid but will not be enforced by the court until it is done in writing

• Where you wish to declare a trust of real property you must abide by section 53(1) (b) of the above mentioned act and declarations of trust in regard to land must be signed by the person declaring the trust

• Requirement of writing serves to evidence the settlor’s intention to declare a trust This is different to a disposition of an equitable interest:

• If someone wants to dispose of an equitable interest, then 53(1)(c) says how a disposition of an equitable trust must be in writing if it is to be valid or

enforceable

• When you are an equitable owner 53(1)(c) applies to all property

o Once you are a beneficiary of land or money and you own an equitable interest then it must be in writing

o Declaration of trust should not be confused with a disposition of property which starts with an equitable obligation

• These formalities are imposed to reduce the chances of mistake, fraud and ill-considered and hasty dispositions of property by a will

Inter Vivos Trust Over Personal Property

No formalities required for an Inter Vivos declaration of trust for personal property; oral agreement will satisfy the criteria as shown in Paul v Constance

• An absolute owner of personal property may declare himself to be the trustee of such property or may declare that such property is to be held by trustees on trust without the need for any written formalities

• Where you declare a trust in your lifetime of personal property this can be done informally and will be valid

• Once a trust is validly declared it is unviable

• This case demonstrated that for trusts of personalty, such as money, shares and chattels, writing is not required; an oral declaration of the trust is sufficient

What if the Trust is not Express?

If the trust isn’t express, in accordance with Section 53(2) of the LPA 1925, ‘’this section does not affect the creation or operation of resulting, implied or constructive trusts.’’

• Once a trust has been expressly declared, equity will not allow the statutory requirements to be used as instruments of fraud and so may impose a trust in certain cases

Equity acts on the conscience of people, and so just because someone has legal title of property, if they try to use the property for themselves then equity will step in and make it unconscionable for them to rely on such legal rights

Where the courts find a trust, this is called implied/constructive trusts therefore showing how the court recognises how not all trusts are made in an express manner

• In the cases where the court finds a trust, then the formalities are bypassed

• The requirements under 53(1)(b) and (c) do not apply in situations where it is the court constructing the trust

Equity, on that notion of rejecting fraud by using statute is backed up in Rochefoucauld v Boustead; essentially no valid trust will be found to have been formed where there was no valid declaration of such a trust, therefore avoiding fraud.

• A fraud will arise where land has been transferred subject to an oral understanding that it is to be held on trust and then the person to whom it has been transferred tries to deny the trust and claim absolute title