EQUITY AND TRUST GROUP 4

2014 QUESTION 1
As a trust involve the holding of right on behalf of another, it must be
possible to identify what rights are to form the subject matter.
The statement borders on subject matter in the declaration of trust
specifically in relation to identification of specified property out of a larger
bulk Palmer v Simmonds. In this essay, the focus will be on the discussion
on strictness of the rules that property cannot pass in unascertained goods
S. 16 of Sale of Goods Act 1979, and whether equity has introduced some
amount of flexibility in the application of this strict rule. The statement by
Lord Mustil in Re Gold Corp Exchange which states that A right of
property, whether legal or equitable cannot exist in the air hovering over
undifferentiated mass of property which is ascertained affirms the principle
in Re London Wine.
In Palmer v Simmonds, the phrase the bulk of my said residuary estate
was held to indicate too uncertain a portion of the residuary estate to
establish a trust. The judge did assume that bulk meant mere than half but
that was too imprecise. By contrast, in Re Golay, a gift of a reasonable
income to go along with a life interest in a flat did not fail for uncertainty
Ungoed-Thomas.
Oliver J stated in Re London wine that, where customers had paid and
obtain title certificates of bottles of wine which remained in a warehouse of a
company, the courts held that since nothing has been done to appropriate
the wine to individual customers and the existence of the certificates proved
little, the goods could not be ascertained and the subject matter was
uncertain and therefore a trust of wine had not been established. This was
the strict application of the rule in S. 16 of SGA 1979.
However, where there is a trust of part of intangible property such as shares,
the courts have held there is no need to identify the specific shares to be
held on trust.
In Hunter v Moss which concerns tangible property, Dillion J distinguished
Re London wine on the basis that unlike cases of wine or other tangible
property these shares were indistinguishable from one another, therefore no
segregation was required as holding any 50 of 950 shares on trust will
achieve the same thing. The courts decision distinguished tangible assets
such as wine and intangible assets such as shares. The courts after Hunter

v Moss appeared to have established a separate principle that applies to

tangible goods. This can be shown in Re Gold Corp Exchange as discussed
above where the courts follow Re London Wine as it has to do with tangible
objects.
Hunter was followed in Re Havard Securities as representing the law in
England. In White v Shortall in New Wales, the Supreme Court criticized the
reasoning in Hunter in great detail and refused to follow it. He preferred the
proportionate shares approach as have the trial judge and the court of
appeal in Re Lehman Brothers International.
There have been many a number of criticisms of law in this area. Hayton
questioned Dillion LJs argument that there is no difference between a
testator giving 50 shares to a legatee in his will and a settlor declaring
himself trustee of 50 shares. He also argued that difficult questions may
arise in the event that the trustee sells part of his holding that is liable? This
could be considered in Worthingtons argument that such issues could be
resolved through the rules of tracing.
Hayton also questioned whether there is a broad distinction in the cases
between trusts of part of unascertained bulk of tangible and intangible
property. These criticisms clearly show that the courts of equity have
introduced flexibility in dealing with certainty of subject matter in order to
provide sympathetic results in a particular case.
In conclusion, these inconsistencies will have an adverse effect on the
operation of the common law since lawyers will have difficulties in advising
their clients as to the possible outcomes of their litigation since the common
law is based on the principle of certainty. The common law will not thrive as a
result of uncertainty of the law.

2014 Zone A Question_2

For a trust to be properly constituted property must be in the hands of the
person bound to be a trustee. According to Turner LJ in Milroy v Lord there
three modes by which a person can benefit another with property, namely
i
ii
iii

Absolute transfer of title (both legal and equitable)

Transfer to a third party to hold on trust
A self declaration of trust

Different legal rules apply to different sets of properties according to the

nature of the property and render the settlement binding, example; transfer
of interest in land must be created by deed and must be registered in the
land registry.
It was therefore established in Milroy v Lord as a general rule that, equity
will not assist a volunteer to perfect an imperfect gift. However, there are
instances where the courts have departed from the general rule since the
ruling in Re Rose where the courts applied common sense in perfecting an
imperfect gift while in Mascall v Mascall and further in Pennington v
Waine appeared to settle on unconscionability.
The assertion by Penner that it is also not clear why it was unconscionable
for the father to change his mind about a gift of land to his son in Mascall
would be analyzed in the following discussion.
In Re Rose, Mr Rose properly constituted a trust, filling a form and delivered
with the appropriate share certificate to his wife who was then entitled to
have the shares registered in her name. The courts held that in equity such a
gift is valid from the time that the donor does everything he is oblige to do to
transfer the shares. According to the courts at the time that the settlor
requires the assistance of the third party to perfect the trust there will be
gap between the time when the donor does everything within their power to
perfect the gift or trust and the when it is actually perfected by the change
into her name.
The courts held that the settlor was a constructive trustee at this point and
therefore held the property on trust for the donee. The effect was to allow
him escape the application of tax. A constructive trust was properly imposed
to help the donor escape tax. The beneficial title passes as soon as Mr Rose
completes the share transfer forms and any dividend from the shares to Mrs
Rose. According to Penner it is not clear what justifies equity anticipating the
transfer of the legal title. Is it the position that the court is aiding the
volunteer? If a dividend is declared it would have gone to the donee and a
trust would have been effected according to Lord Evershed. He would have
held it on constructive trust.
In the case of Re Fry where the transferor has not done all that was
required of him by law to make good the transfer, equity will not perfect the
transaction. The courts in Mascall v Mascall held that, as soon as the father
executed the transfer and had given it with the land certificate the gift was
complete in equity and so he was ordered to hand over the land title to the

son in order for him to complete the transfer of the legal title into his name.
The court was still applying the Re Rose principle.
The ambit was widened in the court of appeal decision in Pennington and
waine where the shareholder properly completed a share transfer form for
her nephew but instead of passing this to the company for registration
delivered it to one of the companys auditors. She also informed her nephew
of her intention to transfer the shares. However, unlike Re Rose the
transferor haw not done everything in his power to secure the share
transfer. The court of appeal held that the shares were held on trust for the
nephew and it would be unconscionable for the transferor to renege on the
transaction.
Notwithstanding the above discussion Arden LJ held that it would be
unconscionable for the settlor to change his mind and go back on the
transfer. The settlor has given the transfer form to Pennington so that he
could do the registration. She told the beneficiary about the gift and no
action on his part was necessary. Moreover the beneficiary (Harold) had
agreed to be a director for which a shareholding was needed.
Clarke LJ held that equitable title could transfer without registration.
Completion of forms and delivery to a company was enough in Re Rose but
be recognized that delivery to the company was not a further essential step.
It was enough that the transfer was intended to have immediate effect. The
focus is on the intention.
I agree that the principle in Pennington v Waine is an extension of Re Rose
since the courts applied unconscionability depending on the fact of the case,
i.e when the settlor has declared adequate intention but has not done
everything within his power to divest his interest.

2014 Zone A Question 6

This problem concerns secret trust with both secret and half secret trust and
issues and concerning the timing of communication to the secret trustees,
witnesses to the and an oral trust of an interest in land.
Daniels (D) bequest made to Edmund (E) -Cottage

The statement that I hereby leave my cottage to my dear friend, E to use as

we discussed indicates an imposition of trust on Edmund provided it meets
the requirement of a HST.
In Ottaway v Norman, Brightman J held that for a secret trust to exist the
following requirements must be proved;
i)

ii)

iii)

The intention of the testator to subject the primary donee (i.e the
intended trustee) E, to an obligation in favour of the secondary
donee (i.e intended beneficiary) Judy (J). I n Kasperbauer v
Griffith, Peter Gibson emphasized that all three certainties must
satisfied. From the fact it can be inferred that D gave the cottage to
E not for his benefit but for onward transfer to J establishing the
certainty of intention, the object relates to J and the subject matter
is the cottage.
For HST communication must take place before or upon execution of
the will (Backwell v Blackwell), while for the FST, communication
can be made any time before the testators demise Wellgrave v
Tebb . In the fact the issue of J being the beneficiary of the trust
was communicated to E before executing the will. The
communication must also be in accordance with the terms of the
trust (Re Keen).
The final requirement is acceptance. The secret trustee is required
to accept or at least acquiesce in the obligation bestowed on him by
the testator. After the testator communicating his intention, Es
silence could be inferred that he has acquiesced in the obligation
bestowed on him by the testator Moss v Cooper.

The secret trustee/beneficiary as witness

S. 15 of the will Act 1837 states that a beneficiary or his spouse cannot
benefit if he attests to the will. In application of the fact, J cannot be allowed
to benefit once she has attested to the will. However in Re Young,
Dankwerts J upheld a HST in favour of a witness since the trust took effect
outside the will, the wills act did not apply.
Tthe attestation by the trustee of a HST should not affect the validity of the
legacy and therefore of the trust because he is not a beneficiary on the face
of the will, Creswell v Creswell. Therefore validity of the will in this given
fact will not be in doubt.

Oral trust of land

S. 53(1)(b) of LPA 1925 provides that a declaration of a trust of land must be
evidenced in writing. Applying this to the facts, the secret trust settled by D
should be evidenced in writing. However this is not so as D failed to comply
with s. 53(1)(b) of LPA 1925, and the property will result to the estate of the
settlor contrary to his intention In HST, should the trust fail the property will
move back to the estates of the testator. This would be against the intention
of the testator. Thus the testators intention will not be upheld and it will be
unconscionable to do so as that will mean using the statute to perpetuate
fraud on the beneficiary (Rochfoucauld v Bousted). The court is likely to
uphold the intention of the settlor by imposing constructive trust as in T
Choithram v Pagarani.
J is the beneficiary of the cottage for life and the remainder after her death
will go to Ryan.
The statement The Remainder of the Estate to Ryan appears to be a gift to
Ryan on the face of the will. However the instruction in the sealed envelope
indicates R was meant to be a trustee for himself and Kate (K) to share
equally. This indicates an attempt to create a fully secrete trust. For a fully
secret trust to be effectively created the Testator must communicate both
the intention and the terms of the trust. This is required to be done at any
time before the death of the testator and it may be done by his agent or
representative (Moss v Cooper). Even though Edmunds may be acting as
an agent his email to R that his father had a big news and a big favor did
not clearly indicate an intention. Thus even though the instruction of the
trust can be contained in a sealed envelope as established in (Re Keen) the
intention was not effectively communicated to R, and thus the trust is likely
to fail on this grounds.
If the property is allowed for R to take as a gift then it will be fraud being
perpetrated on the intended beneficiary and the testator (McCormick v
Grogan). However the court may uphold the intention of the settlor by
imposing a constructive trust on R to hold the property on trust for himself
and for Kate.