constitution of trusts

A trust is said to be completely constituted when the settlor has vested or has done all that is required or necessary to properly vest the trust property in the trustee. Except the property has been transferred, the trust cannot be enforced, as equity will not perfect an imperfect gift or aid a volunteer. This is so because where it is the intention of the settlor to create a trust by transferring property to others to act as trustees, then the trust is incomplete until the transfer is made and until that time, it cannot be enforced by the beneficiaries. The settlor, whatever other legal obligations he may have acquired by his declaration is not trustee of the property he holds and the beneficiaries cannot act against him on the trust. Milroy v. Lord (1862) 4 De G. & J. 264.

The factors which determine the mode of constitution of a trust are:

• a. The nature of the trust property: Where the nature of the trust property is personalty, mere delivery, provided that it is accompanied by the necessary intent to transfer on trust, is sufficient. Where, however, the nature of the trust property is realty, the settlor must comply with all the requirements of the law. Land must be transferred by conveyance by deed and equitable interests can only be transferred in writing.
• b. Whether the settlor is both settlor and trustee: Where a settlor creates a trust by declaring himself to be the trustee of property then, provided that the requirements of formality and certainty are satisfied, the trust is complete and the beneficiaries acquire rights under it. This is because the property is already vested in the intended trustee, in this case the settlor. This is even true where the settlor declares the trust intending the property to be held on trust by himself and others as trustees. Even though the other trustees have not yet received the legal title, provided that the settlor has shown an intention to make an irrevocable transfer to himself and the others as trustees, he is bound and can be required to carry out the terms of the trust by transferring the property to the trustees as a whole.

In situations where the settlor has neither constituted the trust nor declared himself as the trustee of the trust property, there is nothing for the beneficiary to enforce; and no interest passes to the beneficiary. Equity has no special regard for the form of the undertaking to constitute a trust. It may well be in the form of a covenant under seal but this in itself will have no special significance. Equity will intervene to enforce any promise to settle only on behalf of beneficiaries who have given consideration.

There are circumstances where a trust not completely constituted will be enforced and constitutes exceptions to the equitable maxims that “Equity will not perfect an imperfect gift.” The exceptions are considered as follows:

• a. The rule in Strong v. Bird: This where the intended donee has gained title to the property by being appointed administrator of the donor’s estate. This can arise under two circumstances and they are:

• 1. Where the donor appoints the donee as executor.
• 2. Where the donee is appointed as administrator in the case of intestacy. Re James (1935) Ch. 449.

• b. Donatio mortis causa: This is where the intended gift is imperfect but was given conditionally in contemplation of death.

• c. Proprietary estoppel: This is where, because of the donee’s injurious reliance on the donor’s promise, it would be unconscionable to allow the donor to refuse to carry out his promise.

• d. Testamentary disposition: Where disposition is made under a will, once the will is duly executed and probate of the same has been obtained, the beneficiaries are entitled to the gifts, irrespective of whether they are volunteers or not. Where the executor of the will failed to convey the gifts, the beneficiaries can sue the executor for specific performance notwithstanding that they have not furnished any consideration for the gift.

For the rule in Strong v. Bird to apply, the following conditions must be satisfied:

• a. The donor must have intended to make immediate inter vivos gift to the donee. If the intention relates to the future and is not immediate, the rule will not apply. Re Freeland (1952) Ch. 110. It is immediacy that makes the rule to apply to existing specific gifts. Thus, intention to make a gift by will does not come within the rule. Re Stenart (1908) 2. Ch. 251.
• b. The donor’s intention to make the gift must have continued till the time of his death. In other words, it has to be established, that such intention of the donor endured till he died. Where however, the donor has taken some steps which is at variance with the expressed intention to make a gift, the rule will not apply. Re Wale (1956) 1 W.L.R. 1346.
• c. The intention of the donor must relate to a specific item. If the intention is vague and does not relate to some specific item, the rule will not apply.

The conditions for the validity of a donatio mortis causa was stated in the case of Cain v. Moon (1896) 2 QB 283.

• a. The gift must have been made in particular contemplation of death and not in respect of death someday.
• b. The subject matter of the gift or means of control or obtaining it must have been delivered to the donee.
• c. The gift must have been made under the circumstances as to show that the property is to revert to the donor if the contemplated death did not occur. This condition is not one that is usually expressed but is to be inferred from the surrounding circumstances. Thus, if the donor recovers from his illness or revokes the gift while alive, the gift fails.