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4. Constitution

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Queensland University of Technology

Constitution of Trusts Inter Vivos (Recourse for Beneficiary where Settlor refuses to Transfer) Constitution • Complete constitution = effective assignment—requirements of writing & form • Trust by declaration (settlor declares they hold property they already own on trust) o → trust constituted on declaration—no need for transfer O  [←B] • Trust by transfer (settlor transfers property to trustee to hold for beneficiary) o → trust constituted once goods transferred: Milroy v Lord (1862) O  T [←B] Effect upon beneficiaries for consideration O  T [$←B] • Transfer refused → Beneficiaries can enforce the transfer (compel trustee to sue: Pillan v Koe)| as well as the trustee • ← The passing of consideration binds the receiver’s conscience and creates a constructive trust until the goods are passed  ← Equity regards that as done which ought to be done Oughtred v Inland Revenue Commissioners [1960] AC 206 (Trustee holding shares X for B1 (life interest) & B2 (remainder)—oral agreement that B1 transfer shares Y to B2 in return for B2’s remainder interest in shares X  when shares transferred (consideration), constructive trust established → agreement enforceable) Valuable Consideration in Equity Similar but not the same as at law— • Valuable consideration— o Need not be sufficient: Milroy v Lord (where consideration was one pound) o Some suggestion that nominal consideration will not suffice o Not a deed under seal (recognised by law but not equity) • Marriage consideration— o Money contributed by respective spouses and families (may include future property), o Only be sufficient consideration for the husband, wife and issue of the marriage, but others would be volunteers (such as the grandchildren) Provider of Consideration • Beneficiary • Trustee on behalf of beneficiary: s55(1) PLA • Where a person (promisor) accepts consideration from the promisee, which is an offer to do something for someone else (the beneficiary), the beneficiary gains some contractual rights against the promisor: Trident v McNiece (1988) 80 ALR 574 per Deane J Effect upon volunteer beneficiaries • Trust completely constituted → allows beneficiaries can enforce the trust obligation, because they have the equitable interest: Ellison v Ellison (1802) o Even if the beneficiaries are volunteers • Trust not completely constituted → volunteer beneficiary will not be able to enforce the promise | only trustee will have right to enforce • Equity will not perfect an imperfect gift: Milroy v Lord (1862) o ← A declaration of an intent to transfer of property is a trust by transfer—will not be saved by equity classifying it as a trust by declaration: Milroy v Lord Andrew Trotter LWB241 Trusts Exceptions—perfecting an imperfect gift Everything which must be done by the settlor to transfer the property has been done: s200 PLA; Milory v Lord (1862); Corin v Patton (1990) [see requirements of form] Remedies for volunteers 1. Agreement under seal enforceable at law • Agreement under seal not recognised in equity as valuable consideration—beneficiaries cannot get specific performance • Deed enforceable at law o = where a trustee enters into a deed with the settlor, and the settlor covenants to transfer property to the trustee to hold on trust for the beneficiary, that may be enforceable under general contractual principles: Cannon v Hartley o → damages:  for the loss of the beneficiary (better view), or  the trustees losses (negligible) • Available where: o Settlor intended under the deed to transfer property in a trust; o Intended the beneficiary have the benefit of the failure to transfer the property • A person can be added as a party to the deed if the property is land: s13 PLA 2. Trust of the Promise • Alternative construction— o No transfer of property from S to T for B—Trust of property has not been fully constituted o Promise of transfer of property by S to T for B—Trust of chose in action is complete • → Beneficiary can compel trustee to sue on promise • Two Conflicting cases— o Promise held on trust in Fletcher v Fletcher (1844) (S covenants to transfer £60k (present property) to T for B—S dies without doing so  B can compel T to sue) o No promise held on trust in Re Pryce [1917] (S covenants by deed to transfer future property to T for B (next of kin—outside marriage consideration)—S refuses  no remedy for B) • Reconciling the 2 cases: o Old view—only possible with present property, not future property: Re Cook’s Settlement Trusts [1965] (S promises sale proceeds from paintings  future property— no trust of promise) o Preferable view—depends on an intention to create an immediate trust of a promise  Re Pryce [1917] comes from an era when the courts were reluctant to infer intention to create a trust (cf. now not so: Bahr v Nicolay; Trident v McNeice)  Where the parties agreed/intended to protect the interest of a third party, and a trust relationship is the basis for protecting that interest, then courts should infer it: Bahr v Nicolay  Must infer an intention to—create an immediate trust of the promise + a deferred trust of the property Effect • Completely constituted trust of the promise → trustee holds the chose in action (suit against settlor) on trust for the beneficiaries, and the beneficiaries may compel the trustees to exercise the chose Fletcher v Fletcher (1844) • No trust for promise → the beneficiaries will be mere volunteers, and the trustees cannot be compelled to sue for the benefit: Re Pryce [1917] Andrew Trotter LWB241 Trusts o In fact, the trustee will be holding the promise on resulting trust for the settlor, so it would be futile to bring an action
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