Formalities and Constitution of Trusts

Introduction

We know from Chapter 2 that the **three certainties** must be satisfied to create a valid express trust. But certainty is not enough: a trust must also comply with the relevant **formalities** and, where the settlor uses the transfer method, the trust must be properly **constituted**. This chapter explains the formalities required to create **express inter vivos (lifetime) trusts** and to dispose of **equitable interests**, the two maxims that **equity will not perfect an imperfect gift** and **equity will not assist a volunteer**, the exceptions to those maxims (notably **proprietary estoppel**), and the **rule against perpetuities**. Testamentary trusts are dealt with in Wills and Administration of Estates: such trusts automatically comply when executed in accordance with the **Wills Act 1837**.

Assessment focus

For SQE1 FLK1 you must be able to apply the formality and constitution rules to a **realistic client scenario** and reach the correct conclusion on whether a trust has been validly created. Key examinable points are: trusts of **personalty** require **no formalities** (Paul v Constance); declarations of trust **respecting land** must satisfy **s 53(1)(b) Law of Property Act 1925** (evidenced in writing and signed); a transfer of a legal estate in land must be by **deed** and **registered**; shares must be transferred in accordance with the company's articles (stock transfer form and registration). You must know that **equity will not perfect an imperfect gift** (Milroy v Lord), the limited exceptions (the **Re Rose** principle, the rule in **Strong v Bird**, **donatio mortis causa**, **Choithram / Pennington unconscionability**, and **proprietary estoppel**), and the **125-year** perpetuity period under the **Perpetuities and Accumulations Act 2009**. Questions are single best answer questions (SBAQs); this is a closed-book assessment.

Study tips

1) Separate the two questions: **(a) formalities** (is writing required?) and **(b) constitution** (has legal title actually passed?). 2) Memorise the property-type grid: **personalty = no formality**; **land = s 53(1)(b) LPA 1925 writing for the declaration + deed & registration for the legal transfer**; **shares = stock transfer form + registration**. 3) Remember the maxim chain — a **failed gift is not rescued as a trust** (Milroy v Lord; Jones v Lock); equity does not treat one method as another. 4) Learn the **exceptions** to 'equity will not assist a volunteer', especially the four **proprietary estoppel** elements (assurance, reliance, detriment, unconscionability) from Thorner v Major and Guest v Guest. 5) For perpetuity, the modern period for instruments taking effect on or after **6 April 2010** is **125 years**; non-charitable purpose trusts (where valid) are confined to **21 years** (or a life in being plus 21 years).