Essay question
'The rules governing the constitution of trusts are clear in principle but have become muddied by exceptions that threaten the coherence of the law.' Discuss.
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Model answer
The constitution of express trusts remains governed by the framework articulated in Milroy v Lord (1862) 4 De GF & J 264, which prescribes three routes to validity: transfer to trustees, transfer to the beneficiary outright, or declaration by the settlor that he holds as trustee. Where the settlor has failed to effect the intended mode of constitution, the maxim that equity will not assist a volunteer dictates that the beneficiary has no remedy. This principle is indeed clear and rests on coherent policy foundations: equity's remedies are discretionary and historically have not been deployed to enforce gratuitous promises, respecting freedom of disposition and avoiding the imposition of fiduciary duties on unwilling trustees. However, a series of exceptions developed in the case law—Re Rose, Pennington v Waine, Strong v Bird, and the doctrine of donatio mortis causa—have introduced elements of discretion, unconscionability and reliance that some argue undermine the rule's clarity. This essay will examine the classical rule, evaluate the coherence of the main exceptions, and consider whether the law has indeed become incoherent or whether the exceptions can be rationalised.
The classical rule and its rationale
Turner LJ in Milroy v Lord laid down that if a settlor intends to create a trust by transferring property to a trustee, 'he must do everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property'. Failure to complete that transfer leaves the gift imperfect, and equity will not 'convert the imperfect instrument into a declaration of trust' contrary to the settlor's intention. This rule serves two purposes. First, it respects the settlor's autonomy: the settlor who wished X to be trustee should not have a trust imposed on himself if the transfer to X fails. Second, it protects volunteers from windfalls: donees who have given no consideration are not entitled to equity's intervention to compel the donor's performance. The law's refusal to perfect imperfect gifts mirrors the common law position that gratuitous promises are not enforceable.
This clarity is doctrinally attractive. It allows donors to retain freedom to change their minds until the moment of completed transfer, and it ensures that trusts are not lightly imposed. The alternative—allowing equity to enforce every clear manifestation of donative intent—would blur the line between intention and obligation, and would bring equity uncomfortably close to legislating generosity.
The Re Rose exception: doing everything necessary
The first and most orthodox exception is the rule in Re Rose [1952] Ch 499. Jenkins LJ held that where the settlor has done 'everything which it is necessary for him to do', equity will regard the beneficiary as entitled even if some third-party act (such as registration by a company registrar or the Land Registry) remains outstanding. The rationale is that once the settlor has placed the transfer irrevocably beyond his control, his donative intent is complete, and it would be artificial to deny the beneficiary an equitable interest merely because of an administrative delay by a third party. Re Rose is reconcilable with Milroy v Lord: the settlor has completed his part of the process, even if legal title is yet to pass. The trust is constituted in equity, and the legal title will follow in due course.
This exception is coherent. It distinguishes between acts within the settlor's power and acts dependent on others. It maintains the principle that equity does not assist a volunteer in compelling the settlor's performance (since the settlor has already performed all that is required of him), but recognises that equity regards as done that which ought to be done. Mascall v Mascall (1984) extended the principle to registered land, and the reasoning is consistent: once the father had executed the transfer and delivered the land certificate to the son, and sent the documents to the Land Registry, he had divested himself of control.
Critics might argue that Re Rose is artificial because the settlor retains legal title until registration and thus retains de jure power to deal with the property. However, as a matter of equity, the settlor holds on constructive trust for the transferee and would be restrained from exercising any inconsistent legal powers. The exception is therefore a legitimate application of the maxim that equity looks to intent rather than form.
Pennington v Waine: unconscionability unleashed?
Pennington v Waine [2002] EWCA Civ 227 is harder to defend. The testatrix executed a share transfer form and gave it to her solicitor (who was also the company's auditor), but the form was not delivered to the company, nor was the share certificate handed over. By the Re Rose test, the testatrix had not put the transfer beyond her control: she could have asked the solicitor to return the form. Nevertheless, the Court of Appeal held that it would be unconscionable to allow the estate to revoke the gift, having regard to the nephew's reliance (he signed a consent to act as director) and the testatrix's clear intention.
Arden LJ's judgment effectively introduces a new test: has the donor done enough to make it unconscionable to resile? This is a radical departure. Unconscionability is notoriously elastic, and its deployment here risks collapsing the distinction between intended gifts and completed gifts. If the donor's final intention, coupled with some modest reliance by the donee, suffices, then equity is assisting the volunteer, contrary to the maxim. The nephew gave no consideration and (arguably) suffered no substantial detriment (agreeing to be a director of a company in which he believed he held a share is circular reasoning). The decision thus appears to enforce a gratuitous promise.
Clarke LJ sought to root the decision in the donor having done 'all she intended to do', but this collapses subjective intention into objective divesting. Many donors intend a gift to be final when they hand a document to their solicitor, but equity has traditionally insisted that intention must be accompanied by completed acts. Pennington is difficult to reconcile with Milroy v Lord and with Zeital v Kaye [2010] EWCA Civ 159, which insisted that the donor must have put the matter beyond recall. The better view is that Pennington is wrongly decided, or at least should be confined to its facts (a director-shareholder situation with reliance). It certainly makes the law less clear.
Strong v Bird and fortuity
The rule in Strong v Bird (1874) LR 18 Eq 315 allows an imperfect gift to be perfected if the donee becomes the donor's executor, provided the donor's intention to give persisted until death. The vesting of legal title in the executor at common law, combined with equity's recognition of the donor's continuing intent, results in the executor holding the property beneficially rather than on trust for the estate. This exception is pragmatic but unprincipled. It depends on the accident of appointment as executor, and different donees (e.g. children who are not executors) are treated unequally. Moreover, it contradicts the policy that equity will not assist a volunteer: the executor-donee is a volunteer, yet equity perfects the gift post-mortem.
Some defend Strong v Bird as a means of preventing unjust enrichment of the estate at the expense of the intended donee, where the donor made clear his wish and merely failed to formalise it. Yet this reasoning could justify perfecting many imperfect gifts. The rule is best understood as a narrow historical exception, unlikely to be extended further.
Donatio mortis causa
The doctrine of donatio mortis causa is anomalous but long established. It permits a deathbed gift, conditional on death, to take effect despite non-compliance with the Wills Act, provided there is delivery of the subject-matter or essential indicia of title. The rationale is that the donor is in extremis and equity should not allow the gift to fail for want of formality. DMC is an exception to both the rule against imperfect gifts and to testamentary formality. It is tightly confined (contemplation of death, conditional on death, delivery) and courts do not extend it liberally. Sen v Headley [1991] Ch 425 extended it to land, with delivery of title deeds, but emphasised the exceptional nature. DMC does not threaten the coherence of the constitution rules because it is a distinct doctrine with its own strict criteria.
Statutory intervention: the 1999 Act
The Contracts (Rights of Third Parties) Act 1999, s 1, enables a volunteer beneficiary to enforce a contract made for his benefit. This statutory exception operates in parallel to the equitable rules. In a covenant-to-settle scenario (S covenants with T to transfer property to T on trust for B), if the 1999 Act applies, B may sue S directly for specific performance or damages, bypassing the question of constitution. The Act does not repeal Milroy v Lord; rather, it provides a contractual route to enforcement. The result is a bifurcated regime: where there is a contract falling within s 1, the volunteer is protected; where there is merely a failed gift, the volunteer is not. This is coherent, if complex. Settlors and trustees may exclude the Act by express provision, and many do.
Conclusion
The principle in Milroy v Lord remains the cornerstone of the law on constitution, and it is clear: equity will not assist a volunteer to perfect an imperfect gift. Re Rose introduces a sensible qualification that respects the settlor's completed acts and recognises an equitable interest where the settlor has done all in his power. Strong v Bird and donatio mortis causa are narrow, well-established exceptions that do not seriously disturb the coherence of the law. The difficulty lies with Pennington v Waine, which imports an unpredictable unconscionability test and undermines the objective criterion of divesting control. Zeital v Kaye has curtailed Pennington to some extent, but until Pennington is overruled or its ratio confined, there remains a degree of uncertainty. The law would be clearer if the courts reaffirmed that unconscionability and reliance are relevant only within the established exceptions (estoppel, DMC) and not as a general route to perfecting gifts. In sum, the classical rule is clear and principled; most exceptions are justifiable; but Pennington does threaten coherence and should be reconsidered.
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(Word count: approximately 1,650)
This model answer demonstrates the expected structure for a tutorial essay: introduction with thesis, systematic exposition of the rule and exceptions, critical evaluation drawing on case law and academic commentary, and a clear conclusion. It cites leading authorities by name and engages with the policy rationales underpinning the doctrine.