Creation of Trusts
Cases
Hickey v Hickey
Supreme Court of Judicature.
Court of Appeal.
24 April 1913
[1913] 47 I.L.T.R 137
O’Brien L.C., Holmes, Cherry L.JJ.
April 24, 1913
O’Brien, L.C.
The Court thinks that the judgment of the Master of the Rolls upon the construction of this will is not right, and that it should be reversed. It is always well in dealing with cases on the construction of wills to see whether it is necessary from the point of view of the ordinary person to invoke authorities to discover whether there is some occult meaning in the document which it does not primâ facie bear. It is quite possible that a man may intend to cut out his wife or his children. The law gives him the right to make the will one way or the other; and we cannot unmake the will because we think he ought to have done one thing or the other. Approaching the will from that point of view the words are:—“I bequeath to my wife, Catherine Hickey, my entire worldly effects to be managed as best she can for the benefit of our children.” Could anyone say that in that short sentence he intended that the persons for whose benefit the property was to be managed were the only persons whom the Court was to cut out of the will? He does not use words which would include the wife in that beneficial management. Therefore, looking at the will from that point of view, untrammelled by authority, it is to me perfectly clear that the wife took the property for the benefit of the children and the benefit of the children only. That may be harsh, and the harshness may be due either to want of care or to deliberation. It is admitted that it would be as bad to cut out the children and give to the wife as to cut out the wife and give to the children. We have been referred to a number of authorities dealing with the construction of wills in cases similar to this; and I am glad to see that in the case of O’Connor v. Butler, Lord Chancellor Walker, who had a life-long experience of documents of this kind, took the very view I suggested during the course of the argument. The high-water mark of the authorities in support of the view that the wife took beneficially is Mackett v. Mackett; but Walker, L.C., points out that Vice-Chancellor Bacon founded his judgment on the primary gift, which was made, without qualification, for the married woman’s sole and separate use; there was no restriction laid on the legatee; it was not merely a simple gift, but an absolute gift in words expressing absolute property; and the Vice-Chancellor reconciled his judgment with the direction as to the application of the proceeds by saying that the direction was only an expression of the motive for the gift. The class of cases of which Mackett v. Mackett is a specimen are all outside the present will, where there is nothing showing in any way whatever an absolute gift to the mother. Therefore, the view I take is that cases like Mackett v. Mackett can afford us no help. In Greene v. Greene, which was pressed upon us, the bequest was:—“To my dearly-beloved wife, well-knowing her sense of justice and love to her family, and feeling perfect confidence that she will manage same to the best advantage for the benefit of her children.” That case does, at first sight, appear to come nearer to the view urged by Mr. Norwood, but I think if we examine cases of that class they can be differentiated from cases like the present, because they are cases of precatory trusts; cases where the Court came to the conclusion that there was nothing more than the prayer or confidence. They can afford no light or leading where the will states without any words of qualification or restriction that the property is to be managed for the benefit of the children. I do not think it is necessary to say anything about Berryman v. Berryman. It appears to me that on the true construction of this will there was no intention that the widow should take any estate; that the words “for the benefit of our children,” although not apt conveyancing words, are sufficient to give a beneficial interest to the children. The appeal must be allowed.
Holmes, L.J.
This will is very short. It is capable of but two constructions: that all the worldly effects of the testator must be given either to the children absolutely or to the widow absolutely. The question is which of these two constructions do the words bear. [Reads the will.] It seems to me that if the words “to be managed as best she can” were out of the will there could be no doubt about the case, because the document would then run: “I bequeath to my wife, Catherine Hickey, my entire worldly effects for the benefit of our children;” in other words, in trust for the children. Can it be said that the introduction of the words “to be managed as best she can” can alter the construction which should be put on the will if the words ran the way I have stated? The persons for whose benefit the property was given could receive nothing if we were to construe the words in the way suggested by Mr. Norwood. I am quite unable to give the words any construction except the second alternative—namely, that this is a bequest to the children, and that it is not a beneficial bequest, in any sense, to the widow.
Cherry, L.J., concurred.
M’Garrigle v M’Garrigle
Chancery Division.
21 January 1903
[1903] 37 I.L.T.R 42
Porter M.R.
Jan. 21, 1903
Summons. The testatrix, Rose M’Garrigle, who died on 14th March, 1898, by her will made a bequest as follows :—“I leave and bequeath to my son, Edward M’Garrigle, £250; same is at present in the Hibernian Bank, Strabane, in our joint names; my executors to have charge of my son Edward’s money, and to supply it to him as he may reasonably require same.” The will contained a provision as follows :—“Should my son, Edward M’Garrigle, die leaving or possessed of any of the above money left him by me, I order same to be handed to my son, Charles M’Garrigle, or his surviving children, share and share alike.” The testatrix appointed as executors of her will her son, Charles M’Garrigle, and another. Edward M’Garrigle having claimed payment in full of the legacy of £250, the executors brought this summons for the opinion of the Court on the following question arising under the will:— “Whether Edward M’Garrigle is entitled to the payment in full of the legacy of £250 bequeathed to him by the will, or whether the legacy is payable to him in such amounts and at such times as the executors in their discretion may determine, *42 having regard to the reasonable requirements of Edward M’Garrigle.”
Representation
Patchell, for the executors.
Cusack, for Edward M’Garrigle.
Cases cited:—
Twopeny v. Peyton, 10 Sim. 487;
Mills v. Johnston, 1894, 3 Ch. 204;
Re Skinner’s Trusts, 1 J. & H. 102.
Porter, M.R.
I am clearly of opinion that this is an absolute gift to Edward, and he is entitled to receive payment of the money in full. The will contains no gift to any trustees for the benefit of the son. No doubt, it is open for a testator to give property to trustees with power to exercise their discretion, but here the original gift is a gift direct to the legatee himself of money then held in the joint names of the testator and the legatee. The testator evidently intended that the money should be kept by the executors, who should supply it to Edward as he might reasonably require it, but there is no case like the present, where the trustees were given power to exercise a discretion for their own benefit. The only difficulty is the clause which is in the nature of a gift over, but that clause does not explain or cut down the absolute gift, and a gift over of a sum left absolutely would be a repugnant and inconsistent gift.
In re Delahunty
O’Connor v Butler
Court of Appeal.
12 June 1907
[1907] 41 I.L.T.R 155
Sir S. Walker Bart. L.C. FitzGibbon Holmes L.JJ.
Sir S. Walker, Bart., L.C.
Even if there were no authorities on this point—and many of those cited to us have no very direct bearing on the will before us—I should be of opinion that the words “to be applied” are mandatory and create a trust. In cases of this class the existence of a trust may be negatived in two ways—(1) The gift of the property may be in such terms as to imply a negation of a trust, and thus to explain and qualify words which follow it, and which might otherwise seem to be inconsistent with an absolute gift; (2) the existence of the alleged trust may depend upon words of dubious import, as in cases where the alleged trustee is clearly intended to derive at least some benefit from the fund. Machett v. Machett belongs to the first class. In that case Bacon, V.-C., founded his judgment upon the words “to and for her own proper use and benefit for ever,” and held that the words which followed—viz., “the proceeds to be applied by her in the bringing up and maintenance of” her children—merely expressed the motive of the gift, but laid no restriction on the legatee. Lambe v. Eames comes within the second class. The testator in that case gave his estate to his widow “to be at her disposal in any way she may think best, for the benefit of herself and her family.” In that case the Court of Appeal pointed out that these words, and also the gift which preceded them, were inconsistent with the idea that the widow was intended to be no more than a trustee for her children. In the will now before us there is merely a gift to Michael Delahunty “to be applied” by him as the testatrix directs. I do not see how the case can be brought within either of the categories which I have enumerated, and, therefore, the appeal should be allowed.
FitzGibbon, L.J.
I concur. It seems to me that this will is free from ambiguity. The words “to be applied” are co-extensive with the gift, and, therefore, must govern the application of all the property which passed under the bequest. The purposes of the gift are clearly defined, and the question is not embarrassed by any of the considerations which would have arisen had those purposes included a benefit personal to Michael Delahunty. Meredith, M.R., appears to have attached some importance to the epithet “dearly-beloved,” but, if for dearly-beloved husband we were to substitute dearly-beloved friend or brother, it could not seriously be contended that the friend or brother, and not the children, would be the object of the testatrix’ bounty. A father is bound to support and maintain his children, and is, therefore, the natural and proper person to whom a fund intended for their support and education would be entrusted. I think that Michael Delahunty had a discretion as to the manner in which this property should be expended in the maintenance or education of his children, but he was not the beneficial owner. We shall merely declare by our order that the property representing the estate of Maria Delahunty is not assets of her husband, Michael Delahunty.
Holmes, L.J.
I concur. If the testatrix *156 had wished to give this property to her husband she need not have any will whatever. In my opinion, the words “to be applied,” &c., must govern the construction of this will. If we were to give effect to the respondent’s argument we would be obliged either to strike out these words altogether or to place an artificial interpretation upon them.
Smith v Cregan
Court of Appeal.
1 December 1885
[1886] 20 I.L.T.R 10
Lord Ashbourne C., Fitzgibbon, Barry L.JJ.
The question in this case turns upon the construction of the will of Christopher Cregan, dated the 15th January, 1876. He died on the 17th January, 1876, leaving him surviving his widow, Catherine Cregan, and several children, five of whom are still minors. Catherine Cregan, the widow, on the 30th April. 1883, married John Clark Finnegan, and died on the 17th July, 1884, leaving the said John Clark Finnegan her surviving.
The controversy here is between the minor children of the testator and John Clark Finnegan, claiming through and representing Catherine Cregan, the testator’s widow.
The portions of the will upon which the question arises are not very long, and are certainly not very technical in their language. After giving legacies to his daughters of £1,200, and to his sons of £1,600, the testator had (amongst others) the following clauses or provisions in his will:—
(1.) “And it is also my will that my said executors shall, as soon as conveniently may be after my decease, realise the above-named legacies out of my property, and lodge same in bank, or invest same in the public funds, in the names of each of my children and of my said executors, to remain and bear interest for the use and benefit of my said children; and it is also my will that my said children shall be educated and supported and cared by my said wife in the manner best suited to their conditions during their minorities, or until they are paid their respective legacies; and I trust my said executors shall see that my said children are thus cared and provided for, and that they be put to such trades or professions as may be best suited for them and for their advancement in life; and I hereby give my said wife and executors every power and authority in this respect.
(2.) “It is my will and desire that my dear wife, Catherine Cregan, shall continue to manage and conduct the business heretofore carried on by me, and that she shall remain unmarried, and see to the education and advancement of my said children, as hereinbefore mentioned, out of the residue of my property, and for that purpose I bequeath to her all the rest, residue, and remainder of my property, subject, however, as follows: I direct that, out of my said residue, my said executors shall invest the sum of £4,000 in the Government funds, in their own names and that of my said wife, the dividends on same to be paid to my said wife so long as she remains unmarried, but, in case she marries again, it is my will that said dividends shall cease to be payable to her, and said sum shall be distributed, share and share alike, between such of my said children as shall be living at the time of such marriage, as in the discretion of my executors shall seem best.
(3.) “I hereby nominate my said wife, Catherine Cregan, my residuary legatee, and I nominate and appoint my said wife executrix, and P. Smith, James Foley, and Rev. P. Murtagh executors, of my will, and guardians of my children.”
This suit having been instituted to administer the real and personal estate of the testator and to carry out the trusts of his will, the Master of the Rolls, on the 7th August, 1885, made his decree, and thereby (amongst other things) declared “that the minor defendants, the children of the testator, are entitled to be maintained and educated out of the residue of the personal estate until they respectively attain the age of twenty-one years,” The defendant, J. C. Finnegan, appeals against the decree in so far as it makes the said declaration, and asks to have it declared instead that the residue of the personal estate of the testator, subject to the payment of a small legacy and the costs, belongs to the said John Clark Finnegan, the administrator, with the will annexed of the said Catherine Finnegan, otherwise Cregan, the widow of the testator
That is a contention that the widow took the residue absolutely for herself, and counsel, when pressed in argument, had to submit that if the widow had died in the lifetime of the testator the gift of the residue would have lapsed. A vast number of cases were cited in the course of the argument, the majority of which will be found in 1st Jarman on Wills, 398, but in none of them are the same words or the same order of words found as in the present will.
In the words of the second provision which I have read from the will, three things may be noted in the following order:—
1. The testator expresses his will and desire that his wife should remain unmarried and see to the education and advancement of his children out of the residue of his property,
2. He then states that it is “for that purpose” he makes the bequest, and
3. He then, after having so stated his will, desire, and purpose, makes to her the bequest of the residue of his property.
We are asked here to ignore that will, desire, and purpose, and to say that, after so safeguarding his meaning, he gave, and must be assumed to have intended to give, the residue absolutely to his wife. Almost all the cases cited before us against the children contain first *11 words of absolute gift to the donee, with some indication of some beneficial enjoyment, and then superadded words of motive. We were pressed not to attach too much weight to the words “for that purpose,” and referred to the case of Thorp v. Owen (2 Hare 607), where it was decided that the widow took absolutely for her life. The testator then desired that everything should remain in its present position during the lifetime of his wife, and after her decease gave his real and personal property to other persons, and then added—“I give the above devise to my wife, that she may support herself and her children according to her discretion, and for that purpose.” It is hard to imagine a greater contrast between the words in Thorp v. Owen and the words used by the testator. In Thorp v. Owen there was first the absolute gift to the wife, with words showing she was herself to have some benefit, and that “according to her discretion.” There, as in the case of precatory trusts, it was rightly held that subsequent words showing a motive for the gift would not create a trust.
The personal representative of the widow here asks to have the declaration I have read struck out of the decree, and that has been his sole contention before us. The minor children are satisfied with the decree, and adopt and support its declarations. Under these circumstances, it is sufficient for me to say that I, at all events, go as far as the Master of the Rolls in the construction of the will in favour of the minor children; and I am of opinion that his decree should be affirmed, and the appeal dismissed with costs.
Fitzgibbon, L.J.
I concur, and as a question might appear to be left open on the Rolls’ Order as to the extent of the second husband’s interest in the residuary property, I will add a few words upon that subject. The property appears to me to have been given by the testator to his wife in order that out of it she might maintain and educate their children. This is the purpose of the bequest: the words of gift to the wife do not occur until after the provision that she shall remain unmarried and see to the education of the children. If the disposition had stopped there it would have been nothing but a gift to her upon this trust, and the subsequent words, in my opinion, only emphasise that gift by the introduction of the words “as hereinbefore mentioned,” which appear to me to establish that the direct legacies to the children are not the gifts to which the directions for their maintenance attach. I do not find here any absolute gift to the wife, nor is it a case of precatory trust.1 This testator has devoted his residuary property to be administered by his wife for the benefit of his children so long as she remains unmarried, of course giving her the incidental power and advantage of maintaining herself also. The arrangement is natural, sensible, and not unusual. The children are entitled to be maintained out of both principal and interest, as may be required for that purpose, and the stepfather has no claim on any part of the fund which it may be for the advantage of the children to expend upon them.
Barry, L.J., concurred.
Appeal dismissed with costs.
Re Wilson
: Grove-White v. Wilson
[1933] IR 729
JOHNSTON J
“The late Mr. W. H. Wilson of Carrick mines was very generous in his benefactions to his relatives, servants and friends. Most of his gifts were perfected by one or other of the methods by which a valid gift may be regularly and legally made – methods which are set out comprehensively by Turner L.J. in Milroy v. Lord (1862) 4 De G F & J 264; but in the case of two of these alleged gifts a certain amount of doubt has been suggested as to whether the deceased had, in the words of Turner L.J., “done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him.” A gift is a gift, and, of course, if a donor, while expressing an intention to give something and taking certain steps in the direction of giving it, has not gone the whole way, the expectant donee has no equity to compel the completion of the gift. This is good sense and good law. As Grant M.R. put it in Antrobus v. Smith (1806) 12 Ves 39, there is a locus poenitentiae as long as the gift is incomplete. Story (London Edit., 1892, p.176.) puts it in this way: “For, regularly, equity is remedial to those only who come in upon an actual consideration, and therefore there should be some consideration, equitable or otherwise, expressed or implied.”
The first matter arises in regard to a transaction that took place in December, 1918, just after the termination of the late war. The deceased was at the time a member of the Dublin Stock Exchange in partnership with his nephew, Mr. Ion Grove-White, and he resided in Carrickmines. He had had three sons killed in the war and he was anxious (as I am informed through the affidavit of Mr. Gerald Grove-White, who, also, is a nephew of the deceased and one of the executors of his will) to provide a sum of £5,000 by way of gift for his only surviving son, Mr. John Hugh Wilson, who is one of the defendants. To effect this he is said to have credited his son’s account in the clients’ ledger of his firm with the sum of £5,000 and to have debited his own account in the private ledger of the partners with the same sum. This sum was balanced on the other side of the account by £10,000 Manilla Railway Company preference shares and £3,000 United Havana Railway Company ordinary stock. These securities were in the name of the Hibernian Bank (with other securities) as collateral security for the testator’s loan account. I am informed also by Mr. Grove White that from time to time these investments were changed and certain substituted investments were lodged as security with the bank, and “at the date of the testator’s death the investments representing the original £5,000
were £500 Rhodesian Railway Company debentures (bonds), £3,500 Manilla Railway 5 per cent debentures (bonds) and £5,000 Manilla Railway preference shares which were in the name or custody of the said bank.” Mr. Grove-White exhibits a letter, dated November 7th, 1924, in the handwriting of the testator, “which the said J. Hugh Wilson informs me was handed to him by the testator.” This letter was in these terms: “To my Executors. The Manilla Railway securities (both bonds and shares) and £500 Rhodesian Railway 3 per cent bonds deposited by me with the Hibernian Bank as part of the securities in my loan account, are the property of my son John Hugh Wilson and do not form part of my assets. W.H. Wilson, 7th November, 1924.” The testator did not inform the bank then or subsequently that he had made over these securities to his son, but he addressed a letter to the bank on November 25th, 1925, in these terms: “Please accept release orders for shares held on my behalf when signed by my son, Mr. J. Hugh Wilson”; and all the dividends paid on the original and the substituted securities were credited by the late Mr. W.H. Wilson’s firm to the account of Mr. J.H. Wilson since December, 1919. Mr. Grove-White states further: “After the transaction referred to had been effected the testator informed me that as I was an executor of his will he thought I ought to know that he had made over the said bonds and preference shares to his son.”
The testator died in London on February 10th, 1931, without having done anything further to perfect or complete the gift of these securities to his son, and there can scarcely be any doubt that if there was nothing more in the case, the gift, being incomplete, was not one that could have been enforced in equity. There was no assignment by deed or delivery to the donee, nor was there any transfer of the shares into his name. The case is not unlike that of Lambert v. Overton 11 LT Rep 503, a case in which it appeared that shares had been deposited in a bank as security for a debt owing by the donor, and it was held that a gift of the shares by the donor to his son was incomplete and that the shares (when the debt to the bank had been satisfied) formed part of the estate of the deceased on the donor’s death. In the present case, the shares, to the day of the death of the testator, remained in the Hibernian Bank as security for the deceased’s liabilities, and under the circumstances the intended benefaction would have fallen to the ground had it not been for the fact that the testator nominated Mr. J.H. Wilson as one of the executors of his will, and thereby gave validity to what would have been otherwise an imperfect and invalid gift, as decided in the case of In re Stewart [1908] 2 Ch 251. I do not agree with Mr. Lavery’s critical attitude towards that case. It was referred to with approval – or at any rate, without disapproval – by Kennedy L.J. in the Court of Appeal four years later in Pink v. Pink [1912] 2 Ch 528, and has never been doubted in any case of which I am aware.
It was decided in Hyslop v. Hyslop [1894] 3 Ch 522 that the mere appointment of a debtor of a deceased person as the executor of the will of the deceased was not in itself sufficient to enable a debt owing by the executor to he discharged. North J. said in that case that in order that the principleestablished in Strong v. Bird (1874) LR 18 Eq 315 should be brought into operation there must be evidence of the creation of some equity in the debtor apart from his appointment as executor. Now, here there are, in the first place, the entries in the books of the firm of which the late Mr. Wilson was a partner. I must assume that these books were under his control, and although the entries are not in the handwriting of the alleged donor (as they were in the case of Pink v. Pink – a case which in all other respects resembles the present case) I am satisfied that they were made by Mr. Wilson’s direction and that they undoubtedly represented his wishes. I think also that Mr. J.H. Wilson is entitled to rely upon the letter of directions “to my executors.” A very similar document formed the subject-matter of a decision of North J. in In re Hyslop, Hyslop v. Chamberlain [1894] 3 Ch 522. He held that, the document in question – “general instructions” to an executor – having been found amongst the papers of the deceased and never having been communicated to the alleged donee, must be regarded as testamentary in its character and, not having been executed as a will, could not be looked at. The document in this case, however, would appear to have been handed by the late Mr. Wilson to his son, and that fact raises the very distinguishing feature that is referred to by North J. in his judgment. The other matters that are set out in Mr. Grove-White’s affidavit, in my opinion, place this question beyond controversy. I may say in conclusion that I have carefully considered the case of In re Innes [1910] 1 Ch 188, which has been so strongly relied upon by Mr. Lavery, and in my opinion it has no application to this case. The answer to question one, therefore, will be: “Yes, subject to the limitation that the excess, if any, in the value of the said securities when realised, over the sum of £5,000, belongs to the executors as assets of the deceased.”
The second matter is more difficult and calls for rather more consideration. Mr. W.H. Wilson retired from the partnership in 1924, and, with the marked consideration that he had always shown for his son, he introduced Hugh as a partner in his place. Then in 1926 came the next benefit which the son was to receive from the father. On August 3rd in that year, Marcella Wilson, the testator’s second wife, died, and he decided to make over the Carrickmines house and property to Hugh absolutely. This gift was properly and regularly effected by three deeds, executed on December 4th, 1926, and the property conveyed consisted of two parcels of land held by the testator in fee and registered in the Registry of Titles and another parcel of land held by the testator under two leases, made in 1861, and a third, made in 1862, for long terms, subject to three rents of £30, £10 and £24. These conveyances by the testator purported to be “for the natural love and affection for his son, the said John Hugh Wilson” and “for other good causes and considerations,” none of which are set out. In the assignment of the leasehold premises there is a covenant by the son to pay the rent reserved by, and to observe the covenants contained in, the original leases. Mr. Grove-White in his affidavit says that in 1926 the testator decided to give up Carrickmines House to his son, “he, the said John
Hugh Wilson, agreeing to keep up Carrickmines House and grounds and to receive the testator as a guest whenever the testator wished to come there, and keep the testator’s motor-car and chauffeur, the testator estimating the period during which he would probably desire to reside as four months in the year.” It is strange that there is no reference to this agreement in any of the three deeds, or in any letter, note, or memorandum, supplemental to them. One would have thought that a donor who was giving up his home absolutely and for ever to another, even though that other was his only surviving son, would, if he had intended to reserve to himself a right of residence therein as a legal and enforceable right, have seen to it that the agreement and its conditions and terms were dependent upon something more tangible than the recollection of the parties. But something more was left unexpressed. Mr. Grove-White adds that when the property was conveyed to Hugh in December, 1926, “the testator agreed to make up an allowance to the said John Hugh Wilson, with the said ground rents, of £600 per annum to help towards the maintenance and upkeep of the property.” It was not until almost a year later – namely, on August 22nd, 1927 – when the testator was on the point of marrying the second defendant, who was then Miss Edna Gladys White, that the document upon which Hugh Wilson relies was drawn up, and as to it I wish to say generally that it differs very materially from the verbal agreement of December, 1926, which was made at the time when the property was legally transferred.
The document of August, 1927, is a most peculiar one. Instead of covenanting to pay to his son a certain sum per annum, or of charging specific property with the payment of that sum, or of assigning to him such stocks and shares or other property as would produce that sum, the late Mr. Wilson “agrees” “to give directions” to certain persons to pay certain moneys to Hugh Wilson, “which several sums together with certain rents reserved by leases and issuing out of the property transferred to the said John Hugh Wilson and out of the lands of Rampere would produce £600 per annum or thereabouts,” a most unusual and most cautious way of securing an annuity. The persons who are to be given directions to pay these sums to the defendant are “the trustees of the will of C. H. Wilson, deceased,” the trustees of the donor’s own marriage settlement, and the Northern Nigeria (Bauchi) Tin Company (in which company the testator owned £1,000 preference shares). Down to this point the agreement was one to pay, or to secure the payment of, the sum of £600 annually to Hugh, or rather to secure the payment of £600 yearly less the amount of the rents payable out of the property which had already been conveyed to Hugh. The agreement then proceeds in these terms:-
“For the purpose of securing said sum of £600 per annum after the death of the said William Henry Wilson, the said William Henry Wilson hereby agrees to transfer the said sum of £1,000 Preference Shares in the Northern Nigeria (Bauchi) Tin Company into the joint names of himself and the said John Hugh WiIson, also to transfer three Policies of Insurance – 2 with the Scottish Amicable Co. and I with the Commercial Union Insurance Co. for £500 each on the life ofAlfred T. Collins – to the said John Hugh Wilson, also to transfer to the said John Hugh Wilson the following Policy of Insurance on the life of the said William Henry Wilson with the Scottish Provident Institution, viz., Policy No. 72748, which last mentioned Policy is subject to a mortgage of £3,500 to the said Scottish Provident Institution, and also to convey the fee farm rent issuing out of the lands of Rampere or the Land Bonds representing the same. And the said William Henry Wilson agrees to execute formal transfers of the said several policies and property whenever called on so to do by the said John Hugh Wilson, or else to bequeath same to him by will.”
Immediately after the making of this agreement – namely, on September 3rd, 1927 – the testator executed a marriage settlement on his marriage to Miss Edna White, by which a sum of £6,000 was to be provided, at the latest, six months after the death of Mr. Wilson, “to be a first charge on his estate after payment of his debts, funeral and testamentary expenses;” and the income of that sum is to be paid to Mrs. Wilson during her life. The marriage took place on September 16th, and the husband and wife went to the South of France where they lived for some time; and then a flat was taken in London. In the summer of 1928 they went to visit at Carrickmines where (as Mr. Wilson says in one of his letters) “Hugh was most courteous and kind”; but he adds that when they went back in the summer of 1929, “there was an air of hostility and a feeling that we weren’t wanted there;” and they remained only three weeks. It is only fair to Mr. Hugh Wilson to say that he denies that there was any ground for his father’s feeling in this matter. This unfortunate episode – it can scarcely be called a quarrel – left no bad effects, for we find the father making his will on September 16th, 1929, and making provision therein for the allowance that he had promised to his son. By this will the testator directed that the £6,000 that had been provided by the marriage settlement was to be “treated as a first charge on my estate, ranking equally with my debts, funeral and testamentary expenses.” The wife was to get £200, “to be paid to her out of the first available moneys in my executor’s hands,” and she was given also the income for her life from a sum of £4,000. The testator then proceeded to carry out the promise he had made in the memorandum of agreement with Hugh in these terms:- “Ileave to my son, John Hugh Wilson, certain policies on the life of A. T. Collins, also the balance of all moneys coming to me on foot of policy number 72748 on my own life with the Scottish Provident Institution. I also bequeath to him a holding in Land Bonds representing a fee farm rent formerly paid out of the lands of Rampere (Raheen)”; and he appointed Hugh as his residuary devisee and legatee to the extent of one-third of any residue. There is no mention in the will of the Northern Nigeria (Bauchi) Tin Company preference shares (which had never been transferred out of the testator’s own name), and that omission was not an accident. The testator had sold those shares on October 4th, 1929, retaining the proceeds of the sale for his own use. Further, the Policy of Insurance on his own life which is recited in the memorandum of agreement to have been mortgaged to secure a sum of£3,500, was utilised by the testator to raise a further sum of £500. There was no difficulty in carrying out that transaction, as there had been no assignment or delivery of the Policy to Hugh and no notice of any right in Hugh had been given to the Insurance Company.
On that state of facts can it be held that the defendant, Mr. Hugh Wilson, has any legal or equitable right that can be enforced in this Court by virtue of the memorandum of agreement of August, 1927, or any subsequent agreement inter vivos, whether supplemental or substituted? I think that a good deal could be said for the view, though it was not relied upon very strongly by Mr. Lavery, that an entirely new arrangement was arrived at between the father and son in 1929, by which the former agreed to pay to the latter a sum of £400 a year during the life of the father and that this arrangement was in substitution for the former one. The testator on October 21st, 1929, wrote to Mr. Grove-White: “! won’t allow him more than £400 a year, and if he doesn’t accept it I will stop the whole £600, and let him do what he likes.” On November 1st, he wrote:- “Don’t worry me with any more letters until you have fixed up the
£400 a year allowance.”
On November 18th Mr. Grove-White, writing on behalf of Hugh, says: “Hugh does not wish to go further into the question of the Bauchi shares, Moore’s wages, or any other matters. If you have decided to reduce his £600 to £400 a year, he accepts your decision.” On the 28th the testator wrote:- “I send you the list with the dividends I propose to take over.” And on December 20th, Mr. Grove-White writes to his uncle: “We went through your suggestions about making up the £400 a year,” and a list of securities and properties is set out in this letter, the annual income from which is stated to be £413 10s. 0d. I have analysed all this correspondence very closely and for myself I cannot see, in the face of the new terms that seem to have been arrived at, how the defendant can allege that any potency remained in the document of August, 1927, or how any part of the arrangement of that date remained in force.
However, I am willing to consider the case from the point of view that is most favourable to Mr. Hugh Wilson, and, on the assumption that the new arrangement was merely supplemental to the old, how does the matter stand? The document provides for the payment of an allowance of £600 a year, reduced subsequently to £400, to Hugh Wilson during the lifetime of his father, and I assume that this payment was made and that there are no arrears. If there is some small amount of this allowance outstanding, I shall hear counsel later as to what ought to be done.
The second half of the document provides that “for the purpose of securing said sum of £600 per annum after the death of the said William Henry Wilson” the latter “hereby agrees to transfer” the Bauchi shares into the joint names of himself and his son and to transfer to the donee three policies of life insurance
– one on his own life and two on the lives of another – and to convey to him a fee-farm rent issuing out of certain lands or land bonds (payable by the Land Commission) “representing the same.” The operative part of this clause is contained in the last sentence: “And the said William Henry Wilson agrees to execute formal transfers of the said several policies and property whenever called on so to do by the said John Hugh Wilson or else to bequeath same to him by his will.”
This document is alleged by the defendant to be an agreement for valuable consideration and enforceable as such. I do not think that it can possibly be so regarded. It is simply an agreement by a father, who, having made over certain property to his only surviving son “for natural love and affection,” desired to make that son an allowance “to help towards the maintenance and upkeep of said property.” The covenant entered into by Hugh, in one of the conveyances, to pay the rent and observe certain covenants cannot be regarded as valuable consideration for an agreement executed nearly nine months later for a collateral purpose that was not spoken of in the conveyance of the property; but even if the liability undertaken by Hugh in December, 1926, could by any process of implication be read into the memorandum executed in August, 1927, the rule established by the Court of Appeal in Lee v. Mathews (1880) 6 LR Ir 530 would prevent it having the potency that Hugh Wilson wishes to give it. The principle of that decision is to be found very clearly set out in the judgment of FitzGibbon L.J. He decided that when leasehold premises are assigned subject to onerous burdens, the question “whether the transaction was a bargain involving mutual considerations, or was a gift involving merely bounty from one party to the other,” was a question of fact to be decided upon the evidence and not a question of abstract law. The law on this question in England as laid down in Price v. Jenkins (1877) 5 Ch D 619 and some subsequent cases seems to be different; but I think that the decision of the Irish Court of Appeal, given three years later, is more in accordance with sound principle than that in the English case and I shall follow it. In Price v. Jenkins, Hall V.C., a very distinguished equity Judge, was reversed by the Court of Appeal; but that decision has not passed unscathed in England during the fifty years of its life. Applying, then, the test supplied by FitzGibbon L.J., it seems to me that, in view of the relationship of the parties and the circumstances under which the memorandum was drawn up, it would be impossible to do otherwise than find that it represented the conferring of bounty by a father upon a son and not the making of a bargain involving mutual considerations. Any other conclusion would be contrary both to common sense and sound judgment.
Then it is argued that there was an agreement between father and son in effect that the former should have a right of residence in Carrickmines House, and that this was part of the bargain. I can find no evidence of any such legal obligation. If such a right had been reserved by the deceased it would have been set out in the conveyance of the property to Hugh Wilson, but nothing of the kind is to be found in the deed; nor is there any reference to it in the subsequent memorandum. In the lengthy correspondence that took place in 1928 the deceased says: “There was an understanding that my wife and I were to be always welcome to Carrickmines House”; and later he said: “If he cannot keep Carrickmines House, let him sell it, or let it for four or five years.” The complaint that runs through the whole of this correspondence is a complaint of inhospitable conduct on the part of the son; there is no definite suggestion of any breach of contract.
The memorandum of August, 1927, then, was a voluntary agreement and not one for valuable consideration, and it was an imperfect or incomplete contract at that. Indeed, there is on the face of the document a statement which amounts to an admission by the parties that the contract was incomplete. It was a mere promise on the part of the alleged donor to make a certain provision for his son after the death of the donor. If Hugh Wilson had taken proceedings in his father’s lifetime to compel him to make the transfers referred to in the document, he would, I think, have failed, because he had no legal title to the property and equity would not have assisted him to enforce a voluntary settlement which was incomplete. The rest of the promise was of a testamentary character and had all the defects of such, as decided in cases of the type of Cross v. Cross (1877) 1 LR Ir 389 and Towers v. Hogan (1899) 23 LR Ir 53. Nor can the alleged donee gain any assistance from the principle established in Strong v. Bird (1874) LR 18 Eq 315 for the reason which is given by Neville
J. in In re Stewart [1908] 2 Ch 251. In the latter case the learned Judge decided that when a testator has expressed the intention of making a gift of personal estate to one who, upon his death, becomes his executor, the intention continuing unchanged, the executor is entitled to hold the property for his own benefit; but, adds Neville J., “the intention to give, however, must not be an intention of testamentary benefaction, although the intended donee is the executor; for, in that case, the rule cannot apply, the prescribed formalities for testamentary disposition not having been observed.” The plain meaning of the document is that if the promise is not translated into an effective disposition by a legal transfer in the lifetime of the testator, then the donee must be satisfied with whatever testamentary provision the testator may make for him. The testator did make provision for his son by his will, and he must be satisfied with that provision.”
Milroy v. Lord
(1862) 4 De G F & J 264
TllRNER L.J s
Under the circumstances of this case it would be difficult not to feel a strong disposition to give effect to this settlement to the fullest extent, and certainly I have spared no pains to find the means of doing so, consistently with what I apprehend to be the law of the Court; but, after full and anxious consideration, I find myself unable to do so. I take the law of this Court to be well settled, that in order to render a voluntary settlement valid and effectual, the settler must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him. He may of course do this by actually transferring the property to the persons for whom he intends to provide, and the provision will then be effectual, and it will be equally effectual if he transfers the property to a trustee for the purposes of the settlement, or declares that he himself holds it in trust for those purposes; and if the property be personal, the trust may, as I apprehend, be declared either in writing or by parol; but, in order to render the settlement binding, one or other of these modes must, as I understand the law of this Court, be resorted to, for there is no equity in this Court to perfect an imperfect gift. The cases I think go further to this extent, that if the settlement is intended to be effectuated by one of the modes to which I have referred, the Court will not give effect to it by applying another of those modes. If it is intended to take effect by transfer, the Court will not hold the intended transfer to operate as a declaration of trust, for then every imperfect instrument would be made effectual by being converted into a perfect trust. These are the principles by which, as I conceive, this case must be tried.
Applying, then, these principles to the case, there is not here any transfer either of the one class of shares or of the other to the objects of the settlement, and the question therefore must be, whether a valid and effectual trust in favour of those objects was created in the Defendant Samuel Lord or in the settlor himself as to all or any of these shares. Now it is plain that it was not the purpose of this settlement or the intention of the settlor, to constitute himself a trustee of the bank shares. The intention was that the trust should be vested in the Defendant Samuel Lord and I think therefore that we should not be justified in holding that by the settlement, or by any parol declaration made by the settlor, he himself became a trustee of these shares for the purposes of the settlement. By doing so we should be converting the settlement or the parol declaration to a purpose wholly different from that which was intended to be effected by it, and, as I have said, creating a perfect trust out of an imperfect transaction.
His Honour the Vice-Chancellor seems to have considered that the case,
Ex parte Pye (1811) 18 Ves 140 warranted the conclusion that the settlor himself, became a trustee by virtue of the power of attorney which he had given to the Defendant Samuel Lord; but in Ex parte Pye, the power of attorney was given by the settlor for the express purpose of enabling the annuity to be transferred to the object of the settlor’s bounty. The settlor had, it appears, already directed the annuity to be purchased for the benefit of that object, and had even paid over the money for the purpose of its being applied to the purchase of the annuity; and then when the annuity was, from the necessity of the case, purchased in the settlor’s name, all that possibly could be wanted was to shew that the original purpose was not changed, and, that the annuity, though purchased in the settlor’s name was still intended for the benefit of the same object of the settlor’s bounty, and the power of attorney proved beyond all doubt that this was the case. These facts appear to me wholly to distinguish this case from the case of Ex parte Pye. In my opinion, therefore, this decree cannot be supported upon the authority of Ex parte Pye; and there does not appear to me to be any sufficient ground to warrant us in holding that the settlor himself became a trustee of these bank shares for the purposes of this settlement.
The more difficult question is, whether the Defendant Samuel Lord did
not become a trustee of these shares? Upon this question I have felt considerable doubt; but in the result, I have come to the conclusion that no perfect trust was ever created in him. The shares, it is clear, were never legally vested in him; and the only ground on which he can be held to have become a trustee of them is, that he held a power of attorney under which he might have transferred them into his own name; but he held that power of attorney as the agent of the settlor; and if he had been sued by the Plaintiffs as trustee of the settlement for an account under the trust, and to compel him to transfer the shares into his own name as trustee, I think he might well have said – These shares are not vested in me; I have no power over them except as the agent of the settlor, and without his express directions I cannot be justified in making the proposed transfer, in converting an intended into an actual settlement. A Court of Equity could not, I think, decree the agent of the settlor to make the transfer, unless it could decree the settlor himself to do so, and it is plain that no such decree could have been made against the settlor. In my opinion, therefore, this decree cannot be maintained as to the fifty Louisisna Bank shares.
As to the thirteen North American Fire Insurance shares, the case seems to
me to stand upon a different footing. Although the Plaintiffs’ case fails as to the capital of the bank shares, there can, I think, be no doubt that the settlor made a perfect gift to Mrs. Milroy, then Miss Dudgeon, of the dividends upon these shares, so far as they were handed over or treated by him as belonging to her, and these insurance shares were purchased with dividends which were so handed over or treated. It seems to me, upon the evidence, that these shares were purchased with the money of Mrs. Milroy, then Miss Dudgeon, and that the purchase having been made in Thos. Medley’s name, there would be a resulting trust for Miss Dudgeon. I think, therefore, that as to these shares the decree is right, the value of the shares being, as I presume, under £200, so that the case does not fall within the ordinary rule of the Court as to the wife’s equity for a settlement.
The case being thus disposed of as to the title to the shares, I see no ground for the claim to compensation raised by this bill. The certificates for the shares would follow the legal title, and as to the fifty bank shares would therefore belong to the Defendant J.A. Otto, and as to the thirteen insurance shares the Plaintiffs recovering those shares must recover the certificates also; but this not being provided for by the decree, a direction for the delivery of these certificates should, I think, be added.
Upon the hearing of this appeal it was contended for the Plaintiffs, that so far as they might fail in recovering any of the shares in question they were entitled to recover the value of them against the estate of Thos. Medley. I am not sure that this point can properly be considered to be open upon these pleadings, but whether it be so or not, I agree with my learned brother that the Plaintiffs’ claim in this respect cannot be maintained. There is no express covenant in the settlement, and whatever might be done as to implying a covenant to do no act in derogation of the settlement, it would, I think, be going too far to imply a covenant to perfect it. If there be a breach of any implied covenant by the delivery of the certificates to the Defendant, J.A. Otto, the Plaintiffs’ remedy sounds in damages, and they may pursue that remedy at law; for which purpose, if the Plaintiffs desire it, there may be inserted in the decree a direction that they be at liberty to use the name of the Defendant Lord, of course upon the usual terms of indemnifying him. I have not adverted to the point which was raised as to this case being governed by the Spanish law, for I think that if that law was more favourable to the Plaintiffs, the onus was upon them to allege and prove it. As to the costs of the suit, my learned brother being of opinion that they ought to be paid out of the settlor’s estate, I do not dissent. The decree must be altered accordingly as to the several points to which I have referred.”
McArdle v. O’Donohoe
High Court (O’Donovan J) 8 June 1999
O’DONOVAN J
“The issue that I have to decide in this case is whether the sum of £200,000.00 invested in the said Norwich Union Bond (Number U7000456T) constitutes part of the trust fund as defined in the Deed of Settlement of the 29th of August, 1997 or whether the said sum is the personal property of the Defendant.
In the light of my conclusions on the facts of this case, I am satisfied that, at the time that he executed the said Deed of Settlement of the 28th of August 1997, it was the intention of the Settlor, that the £200,000 which he had invested in the said Norwich Union Bond was to be included in the trust fund created by the said deed and, as I have already indicated, I am equally satisfied that, by virtue of the advice with regard to the tax implications of the creation of that trust which he had received from a Mr. Healy, the Settlor also appreciated that the trust thereby created was to take effect during his lifetime and that it was irrevocable. I might add that despite his protestations in that regard, I am also satisfied that after he had executed the said Deed of Settlement, the Settlor was provided with a copy thereof although I accept that it may well be that, as he maintains, he did not read it. I am also satisfied that the said bond was never transferred into the names of the trustees; either to the intent that it was to be included in the trust fund created by the said Deed of Settlement, or at all and that neither did the Trustees ever receive from the Settlor any monies or property (including the sum of £100 which is expressed in the said Deed of Settlement to have been paid by the Settlor to the Trustees) with a direction that such monies or property be invested in the said trust fund. Indeed, as I have also already indicated, I am satisfied that Trustees did not even open an account in any financial institution to which monies received by them on behalf of the trust fund might be invested. Moreover, although I accept that when, in November 1998, Mr. McArdle learned that the Settlor had withdrawn a sum of £35,000 from the said bond, he expressed reservations about that fact, those reservations were not based on any argument that those monies formed part of the trust fund created by the said Deed of Settlement and were not, therefore, available to the Settlor and, far from protesting that the Settlor was not entitled to withdraw those monies because they formed part of the trust fund created by the said Deed of Settlement of the 27th of August 1997 Mr. Jackson acquiesced in the withdrawal of those monies, in that, he actually signed the application therefor which was submitted to the Norwich Union Insurance Company. In this regard, while, as I have already indicated, I have no doubt but that, when he executed the Deed of Settlement of the 27th of August 1997, it was the Settlor’s intention that the said bond would be included in the trust fund thereby created although he understood that he would continue to be entitled to receive annual interest thereon, I am persuaded by the events which occurred during the months of October, November and December 1998 which are hereinbefore referred to that, in or about that time, the Settlor changed his mind and decided that he wanted to have access to the monies represented by that bond and I think it probable that, notwithstanding his execution of the said Deed of Settlement, he believed that, by reason of the fact that the said Bond had never been transferred into the names of the Trustees but remained in his name, he was entitled to draw on those monies. Whether or not that decision and that belief was influenced by a third party; in particular, by the Settlor’s natural son Patrick O’Donohoe which, apparently appears to be the suspicion, is, in my view, a moot point and is not relevant to the issue which I have to decide in this case although I accept that, at the time that he executed the said Deed of Settlement, the Settlor was adamant that his son, Patrick O’Donohoe, had already been well provided for and, accordingly, was not to be included as a beneficiary under the trust created by that deed; an assertion which he repeated in the Will which he made on the same date and in the subsequent Wills which he made on the 9th day of April 1998 and the 4th day of June 1998. I might add that it does not appear to me that there was any consideration for the creation of the trust given by the beneficiaries therein named and, in that regard, even though the Settlor, himself, is named as a beneficiary under the Trust and even had he paid the sum of£ 100 to the trustees which is stated in the Deed of Settlement as having being paid to them (which, as I have already indicated, I do not believe that he did) I am not persuaded that such payment would amount to valuable consideration. However, for the purpose of deciding the issue which I have to decide in this case, it is not, I think necessary to decide that question.
On behalf of the Plaintiffs, Ms Egan submitted:-
1. That, even allowing that the Settlor never paid to the Trustees the sum of
£100 which is expressed in the said Deed of Trust to have been paid to them by him by virtue of his execution of the said Deed of Trust, he surrendered rights and fettered his ability to deal with property which amounted to valuable consideration. Accordingly, she submitted that, as the Settlor, himself, is a beneficiary named in the Deed of Trust and even though the trust created by the deed may be incomplete, the Court should enforce it and in that event, the beneficiaries under the trust who are volunteers will be able to enforce their rights under the Deed. In support of that proposition, Ms Egan referred to volume 48 of the Fourth Edition of Halsbury’s Laws of England aLparagraph 561 and to paragraph 8.09 on page 97 of Equity and the Law of Trusts in the Republic of Ireland by Mr. Justice Ronan Keane.
2. In the circumstance that the said Deed of Settlement of the 27th day of August 1997 does not require particular words of limitation, all that is necessary to completely constitute the trust thereby created was that the settlor should hand over monies to the Trustees which he did when he gaveto Mr. Jackson the necessary authority to enable him to withdraw the sum of £200,000 from his bank account, for the purpose of investing it in the said Norwich Union Bond which, in turn, was to he vested in the trust fund created by the said deed. Accordingly, the maxim “omnia praesumunter rite ac solemnieter esse acta” applies, in that, the Settlor had done everything in his power to complete the trust created by the said Deed and it is clear that he, himself, recognised that fact when, in a letter dated the 3rd day of December 1998 addressed to Mr. McArdle he said:
‘I hereby instruct you to dissolve the Trust known as the ‘O’Donohoe Settlement’.’
Moreover, the Bond purchased by Mr. Jackson out of the monies provided by the Settlor was retained by Mr. Jackson in his capacity as one of the Trustees named in the Deed of Settlement. In support of that proposition, Ms Egan referred to paragraph 8.07 on page 95 of Equity and the Law of Trusts in the Republic of Ireland by Mr. Justice Keane.
On behalf of the Defendant, Mr. Brady submitted:
1. That the burden of proving that the sum of £200,000 invested by the said Settlor in the said Norwich Union Bond constitutes part of the trust fund created by the Deed of Settlement dated the 27th of August 1997 rested with the Trustees and that they must establish that fact on the balance of probability. To that end, the Trustees must prove that the Settlor had divested himself of the legal and equitable estate in the bond and had no longer any control or direct personal interest in the bond or the proceeds of any encashment thereof or any income generated thereby and that the mere proof of an intention to vest the bond in the Trustees of the settlement created by the said Deed of the 29th of August 1997 does not, ipso facto, establish the fact that the legal title had been so vested. In that regard Mr. Brady pointed to the fact that, apart from the sum of £100 which is expressed in the said Deed of Trust to have been paid by the Settlor to the Trustees, the Deed recites that the “Settlor may hereafter pay or transfer … into the names of or otherwise placed under the control of the Trustees … the sum of £200,000
… to the intent that the same may be held upon the trust thereof’ and further provides that the trust funds shall include “all monies investments, and property (including freehold or leasehold land) paid or transferred to the Trustees or otherwise vested in the Trustees and accepted by the Trustees as additions to the trust fund” whereas the fact of the matter is that the Settlor never exercised the option of paying or transferring the said sum of
£200,000 into the names or under the control of the Trustees and neither of the Trustees ever accepted the said sum of £200,000 as additions to the trust fund” in the sense that they never opened an account in the name of the trust to which those monies or the bond which was purchased therewith, could be lodged. On the contrary, although the Settlor provided the sum of
£200,000 with which the said bond was purchased, the bond issued in the name of the Settlor and remains in his name and the Trustees, by implication, recognise that the said bond was never vested in them, in that, in a Notice of Motion dated the 16th day of December 1998 issued in these proceedings on behalf of the Trustees an Order is sought requiring the Settlor to take all steps as are necessary to ensure that the said trust fund is vested in the Trustees. Moreover, neither the insurance broker, Mr. Shay Cribben, who was instrumental in purchasing the said bond, or the Norwich Union Insurance Company were ever told that the bond was to be held in trust nor did the Settlor ever execute a Declaration of Trust in respect thereof. Indeed, in November 1998, it was the Settlor, rather than the Trustees, who made the decision to withdraw the sum of £35,000 from the said Bond through encashment and although, subsequently, the Trustees expressed reservations with regard to that withdrawal it was not on the grounds that the Settlor was not entitled to withdraw it. In support of these propositions, Mr. Brady referred to the Law of Trusts and Equitable Obligations by Robert A Pierse and John Stevens at page 555, a judgment of the High Court given in the case of In the Matter of the Estate of William Henry Wilson Deceased; Ion Grove-White and Gerard Edward Grove-White v John Hugh Wilson and Others [1933] IR 729, a judgment of the Court of Appeal in Chancery given in a case of Milroy v. Lord [1861-73] All ER Rep 783 and the 1995 edition of Equity and the Law of Trusts in Ireland by Hilary Delany at page 100.
In my view, the trust created by the said Deed of Settlement of the 27th of August 1997 was not completely constituted, in that, the Settlor never effectively transferred any monies or any property which might be included in the “Trust Fund” as defined in the said Deed to the Trustees. While, as I have indicated, I am satisfied that, at the time that he executed the said Deed of Settlement, it was the intention of the Settlor that the sum of £100 therein expressed to have been paid by him to the Trustees would be paid to them for inclusion in the trust fund and that the Norwich Union Bond which had been purchased out of monies provided by him would equally, be included in the said Trust Fund, I am satisfied that, in fact, the said sum of £100 was never paid to the Trustees and neither did the Settlor ever effectively transfer his title to the said Bond to the said Trustees. In this regard, the mere fact that, following its purchase, one of the Trustees, Mr. Jackson retained possession of the bond does not, in my view, have the effect of transferring title in it to the Trustees. Accordingly, as I have indicated, I do not consider that the trust created by the said Deed of Settlement was completely constituted and, as I understand the legal principles in that regard, a Court of Equity may not compel the completion of an incompletely constituted trust in the absence of valuable consideration; c/f Volume 48 of the 4th Edition of Halsbury’s Laws of England at paragraph
561. In this regard, Ms Egan has submitted that, whether or not the Settlor paid to the Trustees the sum of £100 which is expressed to have been paid to them by the said Deed of Settlement of the 27th of August 1997, by his execution of that Deed, in which he, himself, is named as a beneficiary, he has surrendered rights and fettered his ability to deal with property which amounts to valuable consideration. I do not think that this is so. Consideration in the context of an incompletely constituted trust means the conferring of some benefit by the Settlor or the undergoing of some detriment by the beneficiary (c/f paragraph 8.09 of Equity and the Law of Trusts in the Republic of Ireland by Mr. Justice A. Ronan Keane) and it seems to me that the failure of the Settlor to transfer any monies or property to the names of the Trustees, as was his intention at the time that he executed the said Deed of Settlement and as was provided for therein, negatives the existence of a trust fund whereby the trust thereby created was incompletely constituted and there was no consideration therefore. In particular, in the absence of a trust fund, the Settlor surrendered no rights and had not fettered his ability to deal with his property. In this regard, while I accept the validity of Ms Egan’s proposition that, at the behest of a beneficiary, who is not a volunteer, the Court may enforce an incomplete trust so that the trust becomes completely constituted and that, in that event, a volunteer beneficiary will be able to enforce his or her rights under the incompletely constituted trust, the fact of the matter in this case is that none of the beneficiaries named in the said Deed of Settlement of the 27th of August 1997 have sought to enforce the trust thereby created and the only beneficiary by whom it is suggested that valuable consideration was given for the creation of the trust, namely, the Settlor, specifically does not seek to enforce it. That being so, and given, that, in any event, it is my opinion that there was, in fact, no consideration given for the creation of the trust, I am not satisfied to compel its completion.
Arising from the foregoing, while as I have indicated, I am satisfied, that,
when he executed the said Deed of Settlement of the 27th of August 1997 it was the Settlor’s intention to vest the said Bond in the Trustees, he never, in fact, gave effect to that intention, in that, he took no steps whatsoever to have the title to the bond which was in his name transferred into the names of the Trustees and, in that regard, I would adopt the statement of Mr. Justice Johnson given in the course of his judgment in the case of In the Matter of the Estate of William Henry Wilson deceased, hereinbefore referred to in which he said (c/ f page 739 of the Report of the Judgment):
“A gift is a gift and, of course if a donor, while expressing an intention to give something and taking certain steps in the direction of giving it, has not gone the whole way, the expectant donee has no equity to compel the completion of the gift. This is good sense and good law”.
Moreover, by virtue of the decision of the Court of Appeal in Chancery given in a case of Milroy v. Lloyd [1861-73] All ER Rep 783 it would appear that, if it is the intention to create a trust by transfer of property then, in the absence of a stated intention by the Settlor to constitute himself a trustee of the trust property and in the absence of an effective transfer of the trust property to the trustees, equity will not construe the ineffective transfer as a declaration of trust by the Settlor. In my view, there was never an effective transfer of the title to the Norwich Union Bond to the Trustees and neither did the Settlor t’VCr express an intention to constitute himself a Trustee of the settlement created by the Deed of the 27th of August 1997.
In conclusion, I reject the submission that the maxim “omnia praesumunter rite solemnieter esse acta” has any application in this case. While it may well be that, when he executed the Deed of Settlement of the 27th day of August 1997, the Settlor intended that the Norwich Union Bond would be included in the Trust Fund as defined in that Deed, in fact, the Deed did not require that the said Bond or, indeed, any particular monies or property be transferred to the Trustees for inclusion in the trust fund but rather gave the Settlor an option to pay or transfer sum of £200,000 together with further sums of money or securities or other property to the Trustees to the intent that the same be held upon the trusts thereby created whereas I am satisfied that the Settlor never, in fact, exercised that option.
Having regard to the foregoing, it is my opinion that the sum of £200,000 invested by the Settlor in Norwich Union Bond No. U7000456G does not constitute part of the Trust Fund as defined by the said Deed of Settlement but remains the personal property of the Defendant.”
In re Davitt’s Estate
, The Northern Bank, Limited v Davitt and Ahern
High Court.
29 November 1935
[1936] 70 I.L.T.R 53
Johnston J.
Nov. 29, 1935
Johnston, J.
This matter has arisen in an action brought by the Northern Bank, Ltd., as a creditor against Anne Davitt as the executrix of the will of one Daniel Davitt for the administration of his estate. When the case came before the examiner a question arose as to whether certain farms of which the deceased was the registered owner were assets or were held by the deceased as trustee for one Mary Ahern. For the purpose of having this question decided in the administration suit Mrs. Ahern was, with her consent, joined as a defendant, and the present issue was directed.
The late William Ahern was the registered owner of five farms in the townland of Ross, in County Meath. He was indebted in a considerable sum to the Northern Bank, whose customer he was, and in 1908 he mortgaged these farms to the bank as security for the debt. He was adjudicated a bankrupt on March 3, 1916, and the assignees in the bankruptcy caused themselves to be registered as the full owners of the land, subject, of course, to the bank’s debt. The lands were put up for sale, and as there were no bidders the sale was withdrawn. Mrs. Mary Ahern, the bankrupt’s wife, then went to Mr. Daniel Davitt, a prosperous auctioneer and shopkeeper in the town of Castlepollard, and asked him to buy in the property in trust for her. Mr. Davitt was a man of many activities, and he consented. Accordingly he wrote to the local manager of the bank a letter in which he said: “If you could see your way to give me money on the Ahern place you can get a mortgage.” He evidently was willing to make himself primarily liable to the bank, for he adds, “I can show you my account, as I am getting on very successfully.” A formal written application by him for an overdraft of £900 was put in evidence. On the back of this document the report of the manager to the bank is set out, and it makes it fairly clear that the bank understood pretty well what was afoot. The manager says: “He (Davitt) does not say what his offer for the premises would be, beyond stating that it would be sufficient to pay off Ahern’s liabilities to this branch.” He said further that Davitt would give “the same security as you hold for Ahern’s account, under which about £900 is now due.” He concludes, very significantly, thus: “He does not wish to have this transaction mixed up with his own business.… From your point of view the proposal would be a good change from William Ahern.”
It is important to observe that all this took place before Davitt had even formally proposed to purchase the property from the assignees. It is evident that he wished to help the Aherns and incidentally gain a new customer for himself as auctioneer and land jobber. Nothing, however, was done for ten weeks, and then he made a written proposal to the assignees to buy the property for an aggregate sum of £850. He proposed to buy also a policy of insurance on the life of the bankrupt. This proposal was made in his own name and not in that of the wife of the bankrupt.
I suppose they all had a little natural delicacy in disclosing to the Court of Bankruptcy the fact that Mrs. Ahern was about *54 to purchase her husband’s farm. The assignees, having failed to sell the lands by public auction, were, I have no doubt, glad enough to accept a substantial offer of this kind, especially as the secured creditors were agreeable, but I think that the purchase price of £850 was far below the real value of the lands on a free sale. The lands were transferred by the assignees to Davitt on February 18, 1918, the bank joining in the assurances for the purpose of discharging Davitt from all possible claims by them, and he was registered as full owner on May 9, 1919. On August 18, 1920, Davitt executed a deed of charge in favour of the bank to secure an amount “not exceeding in the whole upon the security hereby created the sum of £600 for principal.” Interest on the amount owing was to be paid at the bank rate or (at the option of the bank) at the rate of eight per cent. That charge was duly registered by the bank. Under these circumstances the bank now makes the case that, both in fact and on the law, Mr. Daniel Davitt was the owner in fee of these lands, that they are now part of his estate and must be accounted for as such in this administration suit, and that no trust in favour of Mrs. Ahern was ever created.
Now I may say at once that, so far as the evidence goes, every fact in the case, apart from the purchase of the lands by Davitt in his own name, is in favour of the view put before me by Mr. McGonigal. Mrs. Ahern herself tells me that the inception of the matter arose out of a conversation that she had with Mr. Davitt in his own office, when, after her husband had been adjudicated a bankrupt, she asked Mr. Davitt to purchase the lands for her and that he consented. I am quite certain that that evidence is true and I accept it in its entirety. When Davitt was looking about for a method of carrying out his promise he went not to his own bank—the Ulster Bank—but to the bank of which Ahern was a customer and he made it plain that his object was to help the Aherns and that he did not wish the transaction to be “mixed up with his own business” Davitt had an audit of his business assets carried out by Messrs Purtill and Company in 1919 and it was reported by that firm that Davitt was possessed of various farms and parcels of land, but Mrs. Ahern’s farms are not amongst them, and Mr. Michael Davitt, who now carries on his father’s business, tells me that his father before he died informed him that the lands of Ross had been purchased by him on behalf of Mrs. Ahern. After the purchase took place this lady and her family continued to reside on and work the lands. The larger portion of it was set by Davitt year by year for the season, and Mrs. Ahern continued to make such payments of annuity and rates as she could. There is no evidence that Davitt in his lifetime ever laid any claim to the land, and certainly since his death his family have made no such claim. So far as the facts, apart from the law are concerned, there never was a clearer case.
But the trump card of the bank is the Statute of Frauds (7 Wm. III, c. 12), and I am told that by reason of the provisions of Sect. 4 of that Act I must fly in the face of the whole of the evidence that I have briefly outlined and declare that, assuming that there is no note or memoranrum of the alleged trust in existence, no such trust can be established.
Notwithstanding the doubts and criticisms of that provision that have been expressed from time to time, by eminent judges, it was re-enacted afresh in the recent admirable codification of the law of property in England (S. 53 of the Law of Property Act, 1925). Now I am satisfied that the section has no applicability whatever in a case like the present. It is probable, as appears to have been decided in Davis v. Whitehead, (1894) 2 Ch. 133, that the bank as a creditor of Davitt would be entitled in a proper case to rely upon the statute, even though the executor of Davitt declined to do so. That indeed was the position of affairs in Davis’s case. It was an action for the administration of the estate of the late Duke of Marlborough, the plaintiffs being creditors of the Duke. A question arose in the course of the proceedings as to whether a certain leasehold house formed part of the Duke’s outstanding personal estate or belonged to the Duchess of Marlborough. The Duke had purchased the house some time before his death and the assignment had been taken in his own name, but the Duchess claimed that it had been purchased for her and, on the evidence, Stirling, J., held that that was so and gave a declaration to that effect. He held, further, that, so far as the Statute of Frauds was concerned, if the proceedings had taken place in the Duke’s lifetime, it would have been a fraud for him to have pleaded the statute as a defence and that a creditor who relied upon the statute was “in no better position” (p. 146).
The decision in that case would be a complete answer to the bank’s contention. But there is a further ground on which I could, if it were necessary, come to the same conclusion. The doctrine of part performance *55 is available to defeat the operation of the statute, and there was ample evidence of part performance in this case. Mrs. Ahern has resided in the house on these lands since the purchase took place. She has remained in the actual physical occupation and use of a part of them, and the late Daniel Davitt as her agent let the rest of it for her and applied the whole or a portion of the letting monies in keeping down the rates and the purchase annuity and in paying off, pro tanto, the purchase money. In fact Mrs. Ahern has occupied the premises as the owner in the most open and aboveboard way both before and since the death of her husband, and the late Mr. Davitt acted as her agent throughout a long course of years in letting for her the very lands of which, according to the Northern Bank, Davitt was the absolute owner.
Mr. McGonigal in relying upon the doctrine of part performance is right both in principle and in the light of the authorities. There is no reason in principle why that doctrine should be capable of being used to defeat the object of Section 1 of the Statute of Frauds and should not be applicable in regard to Section 4, and I am aware of two cases at least—Lincoln v. Wright, 4 De G. & J. 16, and Booth v. Turle, 16 Eq. 182—where continued possession of premises by a person who claimed them as against another was held to be sufficient part performance to defeat the fact that there was no note or memorandum in writing of an alleged trust.
There is even a further reason for holding that Mr. Lavery’s contention on behalf of the bank cannot be accepted—if I may be allowed to pile Ossa upon Pelion. In my opinion the two letters written by the late Mr. Davitt which were put in evidence and his written proposal to the assignees in bankruptcy contain all the essential elements which a note or memorandum in writing should supply. The first of these documents is the letter of March 30, 1917, in which he says to the local manager of the Northern Bank, “Dear Sir, If you could see your way to give me money on Mr. Ahern’s place you can get a mortgage. I can show you my account, as I am getting on very successfully.” This letter is connected with the proposal to the assignees, dated June 13, 1917, in which the lands are set out with the utmost particularity and Davitt proposes to purchase them for a sum of £850. The third document is Davitt’s letter to Mrs. Ahern dated June 23, 1926, with which he encloses and incorporates a letter from the bank to himself dated June 21, 1926. In that letter the bank manager says: “I shall be glad if you will let me know by return what progress Mrs. Ahern has made with reference to paying off your account at this branch. … She should not have much difficulty in getting the money elsewhere.” In his letter to “Mrs. Ahern, Ross, Mountnugent,” Davitt says: “I got this letter from the Northern Bank Manager to-day. I don’t know did you get any encouragement since. Your rent is coming due now. Did Paddy make any money since. Please try and do your best with this bill and take some of it when you can.” The word “of” in the last sentence here means, of course, “off,” and the word “bill” is a reference to the word “account” in the bank manager’s letter. There is in these four closely connected documents a note or memorandum in writing sufficient to “manifest” the trust upon which Mrs. Ahern relies. It has been decided that the fact that these documents did not come into existence until after the creation of the trust is immaterial: Forster v. Hale, 3 Ves., 696.
Mr. Davitt took the conveyance in his own name and caused himself to be registered as the full owner, I think, in order to have security for the amount advanced by him for the purchase, and Mrs. Ahern was fully aware of and acquiesced in the adoption of that course, and I am satisfied on the evidence also that she knew that the purchase money was to be raised by an advance by the Northern Bank, which, as a matter of fact, was her husband’s own bank. It is clear to my mind that these farms are not, in any sense, assets of Daniel Davitt, deceased, and that none of his creditors have any interest in them except the Northern Bank; and, of course, his own estate has an interest.
The terms of the issue which was directed to be tried by the order of July 27, 1931, are perhaps somewhat defective, but I shall regard them as amended for the purpose of enabling me to make the following declarations:—
(1) A declaration that Daniel Davitt, deceased, purchased the five farms in question from the assignees in bankruptcy of William Ahern, deceased, as trustee for Mary Ahern, the bankrupt’s wife, and that these farms are the property of Mary Ahern by virtue of that trust.
(2) A declaration that the amount for principal and interest owing by the estate of Daniel Davitt, deceased, to the Northern Bank under and by virtue of the deed of charge dated August 18, 1920, and regis *56 tered as a charge on August 27, 1920, is well charged upon the said lands.
(3) A declaration that such further sum (if any) as may be owing to the estate of Daniel Davitt, deceased for principal and interest at four per cent. per annum in respect of monies advanced by him personally for the purchase of the said lands is well charged upon the same.
(4) An inquiry (if necessary) as to the second and third declarations.
Rooney, deceased;
Scott v Murtagh
High Court.
16 January 1931
[1931] 65 I.L.T.R 82
Johnston J.
Alice Rooney, a woman of eighty years, executed a will in 1922, whereby she becqueathed certain pecuniary legacies to charities and other pecuniary legacies to relatives, one being for £50 to a niece, Mary Scott, the plaintiff. James Murtagh, a nephew of Alice Rooney was appointed executor. The old woman made certain codicils by one of which she bequeathed a further £50 to the plaintiff. Having fallen out with the plaintiff she revoked this second bequest by a subsequent codicil, but left the original bequest to her intact. Some time prior to her death Alice Rooney again became friendly with the plaintiff who visited her twice a day from that on. The old woman frequently told the plaintiff that she would give her some money for her children. On February 21, 1930, Alice Rooney wrote to her solicitor—“2 Victoria Street, Dublin,—Dear Mr Mooney, As I am about to become an inmate of St. Monica’s Home for Widows at Belvedere Place, Dublin, I hereby authorise you as my legal adviser to sell the furniture and effects belonging to me at above address and also my investments (certificates in box in bank) and out of the proceeds of the sales together with any monies in your hands belonging to me to pay to the said Home the sum of one hundred pounds towards my maintenance, and to apply the balance towards the payment of any debts now due or hereafter to become due and owing by me on any account whatsoever, yours truly, Alice Rooney.”
Some little time later when she was about to leave her residence and go to the Home the old woman wrote the following note and handed it to the plaintiff—“Please, Mr Mooney give Mrs. Scott when you sell my shares one hundred pounds. Alice Rooney.” When Mr Mooney arrived at her bedside some hours after the old woman had written the note, the plaintiff handed the note to him. He deciphered the old woman’s writing and asked her if it expressed her wishes and she replied in the affirmative. She died some three weeks later. Mr. Mooney, acting on behalf of James Murtagh, her executor, refused to make any payment to the plaintiff on foot of the note without an order of the Court. The plaintiff, accordingly, brought a summary summons asking for a declaration that a good and valid trust had been created in her favour. The executor was named as defendant.
Having heard arguments on behalf of the plaintiff and of the defendant Johnston, J. decided that the Attorney-General should be served so as to have an opportunity to argue on behalf of the charities, for a judgment in the plaintiff’s favour would greatly reduce the amount available for the legacies, Alice Rooney having in fact purported to bequeath about three times her assets.
John Coghlan (for the plaintiff). Viewing the surrounding circumstances there appears a series of acts constituting a trust. The legacies the old woman bequeathed being in money and not shares it is obvious that the sale of these shares was her policy and she took the natural steps to effect the results she desired. It is merely incidental that in fact Mr. Mooney has not sold the shares. Alice Rooney’s stockbroker would, if Mr. Mooney had explained the position, unhesitatingly have been willing to sell the shares, and if the latter had gone back and told the old woman that they were sold she would, judging by her attitude at the time of writing the two documents, undoubtedly have signed the transfer.
Johnston, J
I do not now think that there is much difficulty in the case. I am very glad I let it stand so that the Attorney-General might represent the charities. Mr Devlin has said everything possible from that point of view and I have found great assistance from all the arguments. As a result of to-day’s hearing I am confirmed in the view I took on the last day, that this is a good and valid trust (His Lordship read the short note). This document is a good declaration of trust for £100, especially as it was handed to Mrs. Scott. I accept the statement in Mr. Mooney’s affidavit that the document having been handed by Alice Rooney to Mrs Scott, was handed by her to him. Coupled with the previous letter it constitutes a good and valid trust. I may add that I am following in my decision Armstrong v. Timperon, and Tate v. Leithead (supra), which are to my mind indistinguishable from the present case. I answer the question in the summons accordingly, and allow all parties costs.
Chambers v Fahy
[1931] IR 17
Sullivan P: The will of Patrick Fahy, father of the plaintiff, Margaret Chambers, reads as follows:
“I leave and bequeath to my brother, Rev J Fahy, 8 George’s Quay, Cork, my two farms, the insurance on my life, and the insurance on the joint lives of myself and my wife, with all the property which I shall die possessed of or entitled to. He is to pay all my just debts and funeral expenses. After my debts are paid, I leave absolutely all my property to my brother, Rev J Fahy, with full power to dispose of it as he thinks fit for the use and benefit of my wife and children.”
The plaintiff claims that under that will Father Fahy took the property not beneficially, but as a trustee for the testator’s wife and children, as joint tenants or as tenants in common, and that he had not any power of appointment. For the defendants, Mr Ryan submitted that Father Fahy took the property beneficially; and Mr Hungerford and Mr Walker contended that he took as a trustee, with wide powers of appointment among the beneficiaries.
In the course of the argument our attention was directed to McCabe v Campbell [1918] 1 IR 429, and to earlier cases, in which wills in somewhat similar terms to the present will were considered and construed. There is, however, no contest here as to the general principles applicable in such cases.
I am of opinion, notwithstanding the argument of Mr Ryan, that the Rev J Fahy did not take for his own use. Mr Ryan relies upon the words: “I leave absolutely all my property to my brother Rev J Fahy.” I do not think we can stop at that point and disregard what follows, namely, the words: “with full power to dispose of it as he thinks for the use and benefit of my wife and children.” We must read the will as a whole; and, so doing, I am satisfied that the testator did not intend that his brother should hold the property beneficially. Accordingly, in my opinion, the Rev J Fahy held the property as a trustee.
The next question is whether the trustee had any power of appointment among the beneficiaries. I was influenced at first by Mr McCarthy’s argument that “dispose” means to “realise,” to “sell,” but during the course of the argument I altered my opinion. I think that construction of the words “dispose … as he thinks fit,” is unnecessarily narrow, and that the words confer a power to appoint among the wife and children in such shares as the trustee thinks proper. If that construction of the will be correct, there only remains for determination one question of fact. In the course of his administration of the trust Father Fahy did apportion the property in different shares among the children. Mrs Chambers thinks she did not get a fair share, but that was a matter to be determined by the trustee. It was, however, suggested on her behalf that the trustee did not distribute among the cestuis que trustent the entire trust property, and that he disposed of a part of it for which he did not account. It lay upon the plaintiff to adduce some evidence to support that suggestion and to show that part of the trust property remained unadministered by Father Fahy. She stated in the course of her evidence that part of her father’s farm was given by Father Fahy to Denis Duggan, the executor of her father’s will. That was denied by Denis Duggan, and there the matter rested. The Circuit Judge accepted Denis Duggan’s evidence, and was satisfied that Father Fahy had fully administered the trust created by the will. On the evidence, as it appears in the transcript before us, it would be difficult for us to differ from the Circuit Judge, but we have had the advantage of seeing the schedule of assets and the deed of assignment by Father Fahy to Denis Duggan of the land which it was alleged formed part of the testator’s assets. These documents were not in evidence in the Circuit Court, and it was suggested that if they were produced they would support the case made by the plaintiff. These documents do not assist the plaintiff; on the contrary, they go to show that the land assigned to Duggan formed no part of the testator’s estate.
The decision of the Circuit Judge was right, and this appeal must be dismissed. Mr Ryan’s client must bear his own costs. The other defendants will get their costs out of the estate.
O’Byrne J: I agree with the decision of the President, and with the reasons expressed by him. I desire, however, to say a few words in regard to the construction of this will.
It is argued by Mr Ryan that, on the true construction of the will, Rev Father Fahy took the entire residuary estate beneficially, unencumbered by any trust. The other parties in this suit contend that he took as a trustee. A considerable number of authorities have been cited before us, and I do not intend to go through them, or attempt to reconcile them. These authorities establish certain general principles which must be applied in this as in every other case, for the purpose of gathering, as best one can, the intention of the testator in the particular case.
It has been established that, in order that a trust may be created, the subject-matter must be certain, the objects of the trust must be certain, and the words relied upon as creating the trust must have been used in an imperative sense, so as to show that the testator intended to create an obligation. Now, as far as the first two matters are concerned, there is no difficulty. The subject-matter is certain: it consists of the entire estate after the testator’s debts and funeral expenses were paid. The objects of the trust are certain: they are stated in the will to be the testator’s wife and children. It only remains to be considered whether the words used by the testator were used in an imperative sense, so as to create an obligation upon Rev Father Fahy to apply the property for the purpose stated by the testator in the will. The words relied upon are: “I leave absolutely all my property to my brother, Rev J Fahy, with full power to dispose of it as he thinks fit for the use and benefit of my wife and children.” That clause, Mr Ryan contends, was merely intended to express the reason for the testator’s gift of the property to Father Fahy – to express, perhaps, a pious hope that he might possibly dispose of the property in favour of some of the children. If that were the object of the testator, I must say that the words used were singularly inapt and inappropriate for that purpose.
The will is a very short one. After the appointment of executor, it consists of three sentences. In construing the will, we are entitled to have regard to all the circumstances in which the will was made. This will was made five days before the testator’s death. He had at that time a wife and five young children, the youngest being aged eleven years. He had a brother who was a clergyman: a clergyman, as we gather from the evidence, who was well provided for; a gentleman who out of his own private means, was able to supply very considerable sums of money for the benefit of this family. I take it he was quite independent; and it strikes one as being very strange that a testator with a wife and five young children should pass them over, and dispose of his entire property in favour of a reverend gentleman, who was obviously in no need of it. But it was competent for him to do so, and such a bequest, if clearly expressed by the testator, must be upheld by this Court. Now, the first sentence relied upon is: “I leave and bequeath to my brother, Rev J Fahy, 8 George’s Quay, Cork my two farms, the insurance on my life, and the insurance on the joint lives of myself and my wife, with all the property that I shall die possessed of or entitled to.” This sentence is relied on by Mr Ryan as showing that Father Fahy was not a trustee. He says that, in the first instance, the testator made a clear, absolute bequest to Father Fahy. In these circumstances, Mr Ryan contends that the gift is not to be cut down or controlled by any trust unless such was clearly intended. I think Mr Ryan is right in that contention; but I think the subsequent words do clearly show that the testator intended that the gift was to be cut down and controlled by the following provisions. The next sentence is to the following effect: “He is to pay all my just debts and funeral expenses.” It is fairly clear that the testator did not know that the executors are bound to pay the testator’s debts and funeral expenses. That consideration is of no importance; the important consideration is what effect was intended by the testator to be given to these words. They seem to me in the clearest manner to have been intended to create a legal obligation upon Rev Father Fahy; an obligation binding upon this property. In other words, Father Fahy took this property upon trust, in the first instance, to apply it for the purposes named, namely, to pay the debts and funeral expenses. I now come to the next and final sentence: “After my debts are paid I leave absolutely all my property to my brother, Rev J Fahy, with full power to dispose of it as he thinks fit for the use and benefit of my wife and children.” The first sentence (with reference to the debts and funeral expenses) clearly controlled the disposal of the property: I am of opinion that the succeeding sentence has a similar object. I think I am entitled to approach the construction of this sentence in the same manner as Holmes LJ approached the construction of a similar clause in the case of Hickey v Hickey [1913] 1 IR 390. Approaching it in this way, I leave out the words “with full power to dispose of it as he thinks fit.” The clause now reads: “After my debts are paid I leave absolutely all my property to my brother, Rev J Fahy, for the use and benefit of my wife and children.” If the clause were in that form it seems to me unarguable that a trust was not intended. Can it be suggested that the insertion of the words, “with full power to dispose of it as he thinks fit,” so alters that construction as to give Father Fahy a beneficial interest? I consider that it would be impossible to give such a construction to these words. They were inserted for a definite purpose; they were not intended to give Father Fahy a beneficial interest, or to cut down the clear meaning of the trust. It seems to me that the object of the words was to give Father Fahy wide discretionary powers in connection with the execution of the trust, and not to give him a beneficial interest in the property.
As to the alleged power of appointment, I am of opinion that Father Fahy had full power to appoint among the children; and I agree with the President that to give the words the meaning contended for by Mr McCarthy would involve giving them an unnecessarily narrow construction.
It seems to me to be clear that the words, “with full power to dispose as he thinks fit for the use and benefit of my wife and children” were intended by the testator to confer upon Father Fahy rather wide discretionary powers. The words seem to me to confer a power to dispose of the property in favour of any of the persons named in the trust. I think he would be equally disposing of it for the benefit of the wife and children if he alienated it for their benefit, or distributed it amongst them. Accordingly, I am of opinion that Father Fahy was entitled to dispose of the property by appointing it amongst the objects of the trust.
I do not think it necessary to comment upon any of the questions of fact which have been dealt with by the President.
Re Humphrey’s Estate
[1916] 1 IR 21
Ross J: The earlier words in the will confer an absolute interest on the wife. The question is whether the later clauses cut down this interest to an estate for life. In the latter event the daughter who was born after the date of the will is altogether excluded from participation. To the ordinary man of intelligence, uninstructed in the doctrine of what are called precatory trusts, it would, no doubt, cause astonishment that there could be any doubt about the true meaning of this will.
The testator in clear words gives all his property to his wife, and appoints her executrix. He then expresses a wish that she should dispose of it for the benefit of his children in a certain way. I am sure the testator himself would have been amazed if the mere expression of his wish for the guidance of his wife should have the effect of creating a legal obligation of the strictest character, tying up all the property and preventing her from providing for any children that might be born after the making of the will. After a devise and bequest in clear and explicit terms, if a trust is intended to be created one would expect that this would be done in terms equally clear and explicit. When we come to consider the innumerable decisions in which the Courts of equity have displayed their benevolent astuteness in imposing an obligatory meaning upon words merely expressive of desire, the mind is reduced to a condition of perplexity and confusion. Trusts have been held to be created by the following expressions: “I desire him to give,” “I advise him to settle,” “It is my dying request,” “It is my will and desire,” “I recommend,” “Well knowing,” and such like. All these one would think impose at most a moral obligation. On the other hand, an expression of hope that the devisee would continue the estate in the family has been held to create no trust. I think it is quite impossible to reconcile the cases. However that may be, there is no doubt that the tide has turned and is running strong against precatory trusts.
In Lambe v Eames LR 6 Ch 597, at p 599 Lord Justice James said: “In hearing case after case cited, I could not help feeling that the officious kindness of the Court of Chancery, in interposing trusts where in many cases the father of the family never meant to create trusts, must have been a very cruel kindness indeed.” These words are approved of by Lopes LJ in Hill v Hill (1897) 1 QB 483, at p 488, who further says: “It is inconceivable to me that a testator who really meant his hope, recommendation, confidence, or request to be imperative should not express his intention in a mandatory form. I agree with Mr Farwell in his book on Powers, when he says at p 480, ‘It would not be a very strained inference to regard all such expressions as stating the motive that induced the absolute gift rather than as a fetter imposed upon it.’” He adds, “It is in every case a question of intention, and the whole document with the surrounding circumstances must be considered.”
Lord Lindley says in In re Hamilton [1895] 2 Ch 370, at p 373: “You must take the will which you have to construe and see what it means, and if you come to the conclusion that no trust was intended, you say so, although previous judges have said the contrary on some wills more or less similar to the one which you have to construe.”
Lord St Leonards, in his work on the Law of Property, published in 1849, wrote as follows (p 375):
“The law as to the operation of words of recommendation, confidence, request, or the like, attached to an absolute gift, has in late times varied from the earlier authorities. In nearly every recent case the gift has been held to be uncontrolled by the request or recommendation made or confidence expressed. This undoubtedly simplifies the law, and it is not an unwholesome rule that, if a testator really mean his recommendation to be imperative, he should express his intention in a mandatory form; but this conclusion was not arrived at without a considerable struggle.”
Lord Lindley approves of these words in In re Williams [1897] 2 Ch 12, and calls it a sensible rule. In the same case he puts the matter thus (at p 18):
“There can be no doubt that equitable obligations, whether trusts or conditions, can be imposed by any language which is clear enough to show an intention to impose an obligation, and is definite enough to enable the Court to ascertain what the precise obligation is, and in whose favour it is to be performed. There is also abundant authority for saying that, if property is left to a person in confidence that he will dispose of it in a particular way as to which there is no ambiguity, such words are amply sufficient to impose an obligation … Unless it appears from the whole will that an obligation was intended to be imposed, no obligation will be held to exist; yet, moreover, in some of the older cases obligations were inferred from language which in modern times would be thought insufficient to justify such an inference.”
In In re Hamilton [1895] 2 Ch 370, at p 373 a testatrix left legacies to her two nieces, and added: “I wish them to bequeath the same equally between the families of O and P.” The English Court of Appeal held that these words merely amounted to an expression of the wish of the testatrix, and created no trust in favour of the families indicated.
In In re Diggles 39 Ch D 253 the Court held that in considering whether on the whole will the testator’s intention was to create a trust, regard may be had to any embarrassment and difficulty which would arise from a trust. Applying this to the case before me, surely the possibility that children might be born to the testator after making his will, for whom his wife could not provide, is such an embarrassment and difficulty.
In Wright v Atkyns, Turn & R 143 which was much relied on in the contention in favour of a trust, it was laid down (at p 157) that three things are required to create such a trust: (1) the words must be imperative; (2) the subject must be certain; (3) the object must be certain. Assuming certainty in the subject and object indicated in this will, am I obliged to hold the words used imperative? I think not.
The outcome of the cases is simply this, that the words are to be interpreted in their ordinary sense, unless there is something in the terms of the will operating upon the property disposed of, from which a Court ought to infer that a trust is intended or a condition imposed. In this will there is not a trust, in language, from the beginning to the end of it, or anything in the will from which a trust can be legitimately inferred.
I therefore hold that Elinor Mary Augusta Longfield took the property absolutely uncontrolled by any legal obligation, and I make a declaration accordingly in respect of the £900 now in Court.
Re McIntosh
[1933] IR 69
Kennedy CJ: The father of the Minors, Peter Joseph McIntosh, died on the first of March 1919, having made his last will on the same day. It is a short will which I should quote in full:
“I leave devise and bequeath all my property of every nature kind and description including my business house and premises moneys cattle horses hay and the farms comprising about eleven Irish acres which I own in and about Garristown to my wife Mary Anne McIntosh until my son Richard Christopher reaches the age of twenty-five years when he is to become the absolute owner. In the meantime she may utilise it in any way she deems best for the improvement education and general welfare of my three daughters Alacoque, Esther, Marie Gertrude. Should my wife Mary Anne McIntosh re-marry instead of the above bequest she is to receive the sum of One Hundred Pounds sterling. I hereby appoint my wife sole Executrix of this my will.”
The testator carried on a grocery business at Garristown, in County Wicklow, and he also worked the small farm referred to in the will. He left surviving his wife and four young children who are the Minors with whom this matter is concerned. The ages of the four children were respectively as follows: Alacoque was ten years, Esther was eight years and Marie Gertrude was five years, and the boy who was the youngest was then aged two years. They were all living in the dwelling-house connected with the premises where the grocery business was carried on.
Probate of the will was granted on the 7th of May 1919, to the testator’s wife, Mary Anne McIntosh. She subsequently died in the year 1927 as the result of a tragic accident, when Letters of Administration de bonis non with the will annexed were granted to Mrs Mary Ellen Killian, guardian of the children, for their use and benefit. The situation created by the death of Mrs McIntosh, during the minority of all the children, was not expressly provided for by the testator when making his will. It is not surprising that in the peculiar circumstances, the business of grocer was not carried on successfully after the death of the minors’ parents and had to be sold as also was the case with the small farm. The children were all taken into wardship of the Court after the mother’s death, namely in the year 1927, and their education, maintenance and upbringing has been a matter of serious concern, particularly having regard to the terms of the will and to the fact that the youngest of them, the son, was to become absolute residuary legatee and devisee of the testator on attaining the age of twenty-five years.
A question has arisen as to whether, during the interval until the son reaches his age of twenty-five years, there is any power under the will to apply any part of the capital or income of the testator’s property for the benefit of any of his three daughters, who, if there is no such power, are wholly unprovided for. One of them has now attained her full age and been discharged from wardship of the Court, but, though she has been trained for business, she is not yet earning sufficient income for her maintenance.
I have been requested by all the parties so as to avoid expense to entertain a summons in the Minor Matter for the construction of the will and the determination as between the Minors (including the late Minor) of this question which has been very fully argued before me by Mr McCann for the three girls and Mr Bacon for the boy Richard Christopher.
In all these construction cases, the tendency to read extensively from the now formidable mass of reported decisions upon the construction of an immense variety of wills affording an almost infinite choice from which to find support for any proposed interpretation of any given set of words, calls for frequent repetition of the reminder that we are seeking the intention of a particular testator in making a particular will and that we shall not find a ready-made solution in the construction put upon an apparently similar set of words in the will of another testator. The effort to fit the will of an Irish farmer into the mould of the will of some English landholding testator is, an extreme no doubt yet common, instance of a futile proceeding. Of the reported interpretation cases the only cases which help are those which lay down some canon of construction applicable to the particular problem to be solved or which explain or clarify such a canon. One group of cases cited in the present argument was concerned with a rule applicable to the determination of the nature of the interest given to the son Richard Christopher, viz, whether contingent on attaining the age of twenty-five years or immediately vested subject to the interest given to the testator’s wife. I refer to Boraston’s Case 3 Co 19(a), 21(a)(b): Mansfield v Dugard 1 Eq Cas Abr 195, and the statement in Hawkins on Wills of the rule illustrated by these cases. See also Lane v Goudge 9 Ves 225. Of more direct bearing on the question immediately for decision are Smith v Havens Cro Eliz 252; 1 Eq Cas Abr 194(G), Proposition N. 3: Anon Pre Ch 598; Lomax v Holmeden 3 P Wms 17; Howorth v Dewell 29 Beav 18; Lambe v Eames LR 10 Eq 267; Murtagh v Murtagh 36 ILTR 129; Pickley v Leahy 34 ILTR 178, 180, though the cases of this last group are rather examples of the way in which analogous dispositions have been construed than declarations as to any rule or principle governing them.
Now in order to construe the will of Peter Joseph McIntosh I must first look at his position, his property, and the state of his family, and then read his will as a whole. He was a grocer and very small farmer in a small country town. He was paying his way and able to support his family in the residence attached to the shop. His family consisted of his wife and four children, viz three girls and one boy. The boy was very young and was some three years younger than the youngest girl. He contemplated the carrying on of his business so that it would ultimately come to the boy when he would reach the age of twenty-three years later. In the meantime the three girls would have to be reared and educated and the testator’s wife would have to be supported and maintained. When the boy would reach the age of twenty-five years, the youngest girl would be some twenty-eight years of age, and it might be assumed that all the girls would be then settled in life or able to support themselves, if given a suitable education and training which he would have expected would be provided out of the income of the grocery business and farm carried on and managed by his wife.
Now, in my opinion, the short will made by the testator follows precisely along the line of thought I have just sketched. He put his wife in his own shoes for the twenty-three years until the boy should attain his age of twenty-five years when he was to become absolute owner of everything. In the meantime the wife would carry on the business as the testator would have done if living and would bring up and educate the family, subject only to this that if she re-married her beneficial interest was cut down to the sum of £100, an event which did not occur and the consequences whereof, therefore, we need not consider.
In my opinion the true construction of the will is that the testator gave to his wife his business as a going concern and all his property until his son Richard Christopher should reach the age of twenty-five years and that he gave Richard Christopher a vested interest in all his property subject to the estate and interest carved out of it and given to the wife. I am further of opinion that the interest given to the testator’s wife was an absolute beneficial interest during the term of period of enjoyment (subject to being defeated by her marriage), and I am of opinion that it was not subject to any precatory or other trust. I do not think that it was affected in any way by the statement that she could utilise the property for the benefit of the daughters, a clause which I understand to indicate that he was not injuring them, in his view, by the disposition he was making in favour of his wife. I do not think that this clause gave power to apply capital for the benefit of the daughters.
In my opinion the interest which the testator gave to his wife devolved on her death, without having re-married, to her legal personal representatives and her four children as her next-of-kin then became equally entitled to the income of the property until the son shall reach the age of twenty-five years when he will become absolutely entitled to the whole. I do not consider, because it has not arisen, what would happen if the son should die before attaining his age of twenty-five years.
I will make a declaration according to the opinion I have stated.
Knight v Knight
(1840) 3 Beav 148
LORD LANGDALE MR: …The principal question is, whether a trust in favour of the male descendants of Richard Knight is created by the will of the testator Richard Payne Knight. That the testator wished that his estates, or at least, that some estates should be preserved in the male line of his grandfather, and had a reliance, or in the popular sense, a trust that the person to whom he gave his property, and those who should succeed to it, would act upon and realise that wish, admits of no doubt. He has expressed his wish and his reliance in terms which are, to that extent, sufficiently clear. But it is not every wish or expectation which a testator may express, nor every act which he may wish his succes sors to do, that can or ought to be executed or enforced as a trust in this Court; and in the infinite var iety of expressions which are employed, and of cases which thereupon arise, there is often the greatest difficulty in determining, whether the act desired or recommended is an act which the testa tor intended to be executed as a trust, or which this Court ought to deem fit to be, or capable of being enforced as such. In the construction and execution of wills, it is undoubtedly the duty of this Court to give effect to the intention of the testator whenever it can be ascertained: but in cases of this nature, and in the examination of the authorities which are to be consulted in relation to them, it is, unfortu nately, necessary to make some distinction between the intention of the testator and that which the Court has deemed it to be its duty to perform; for of late years it has frequently been admitted by Judges of great eminence that, by interfering in such cases, the Court has sometimes rather made a will for the testator, than executed the testator’s will according to his intention; and the observation shows the necessity of being extremely cautious in admitting any, the least, extension of the principle to be extracted from a long series of authorities, in respect of which such admissions have been made. As a general rule, it has been laid down, that when property is given absolutely to any person, and the same person is, by the giver who has power to command, recommended, or entreated, or wished, to dispose of that property in favour of another, the recommendation, entreaty, or wish shall be held to create a trust.
First, if the words are so used, that upon the whole, they ought to be construed as imperative. Secondly, if the subject of the recommendation or wish be certain; and,
Thirdly, if the objects or persons intended to have the benefit of the recommendation or wish be also certain.
In simple cases there is no difficulty in the application of the rule thus stated….
Re Kayford Ltd (In liq.)
[1975] 1 All ER 604, Chancery Division
MEGARRY J: Now there are clearly some loose ends in the case …Nevertheless, despite the loose ends, when I take as a whole the [evidence] I feel no doubt that the intention was that there should be a trust. There are no formal difficulties. The property concerned is pure personalty, and so writing, though desirable, is not an essential. There is no doubt about the so-called ‘threecertainties’ of a trust. The subject-matter to be held on trust is clear, and so are the beneficial interests therein, as well as the beneficiaries. As for the requisite certainty of words, it is well settled that a trust can be created with out using the words ‘trust’ or ‘confidence’ or the like: the question is whether in substance a sufficient intention to create a trust has been manifested …
No doubt the general rule is that if you send money to a company for goods which are not deliv ered, you are merely a creditor of the company unless a trust has been created. The sender may create a trust by using appropriate words when he sends the money (though I wonder how many do this, even if they are equity lawyers). or the company may do it by taking suitable steps on or before receiving the money. If either is done, the obligations in respect of the money are transformed from contract to property, from debt to trust. Payment into a separate bank account is a useful (though by no means conclusive) indication of an intention to create a trust, but of course there is nothing to pre vent the company from binding itself by a trust even if there are no effective banking arrangements .
. . . I should, however, add one thing. Different considerations may perhaps arise in relation to trade creditors; but here I am concerned only with members of the public, some of whom can ill afford to exchange their money for a claim to a dividend in the liquidation, and all of whom are likely to be anxious to avoid this. In cases concerning the public, it seems to me that where money in advance is being paid to a company in return for the future supply of goods or services, it is an entirely proper and honourable thing for a company to do what this company did, on skilled advice, namely, to start to pay the money into a trust account as soon as there begin to be doubts as to the company’s ability to fulfil its obligations to deliver the goods or provide the services. I wish that, sitting in this court, I had heard of this occurring more frequently; and I can only hope that I shall hear more of it in the future.
Re Chelsea Cloisters Ltd (In liq.)
(1980) 41 P & CR 98, Court of Appeal
BRIDGE LJ: We are fortunate in that we do not have to speculate about Mr lredale’s intentions [who was in effective control of Chelsea Cloisters] because he has clearly disclosed them in an affidavit. It is com mon ground that his statements in evidence of what his intentions were at the time when the separate bank account was opened are admissible against the liquidator if they tend to support the landlords’ contention that an intention to create a trust was in fact manifested. I divide up the two critical para graphs in Mr lredale’s affidavit … into three distinct statements. It may be that each considered in iso lation is insufficient to manifest the intention to create a trust; but the three considered in conjunction in my judgment, are clearly sufficient. However, it is worth examining them first in isolation to see exactly what he said. The first was: ‘This’-that is to say, the opening of a separate bank account- ‘was a practical step, designed to ensure that the deposits would not be spent as part of the company’s gen eral cash flow.’ That is entirely consistent with an intention to keep these funds from the general funds of the company in order that they should not be swallowed up by the general funds of the company. The second critical statement was this: ‘I was also concerned that I and my firm could be open to criti cism if deposits were spent in this way’-that is to say, if they were absorbed in the general funds of the company and spent as if they were available to be treated as part of the general funds of the company. Why was Mr Iredale apprehensive of criticism of himself and his firm? It surely can only have been that he at that time regarded the company, whose affairs he was managing, as being either under a moral or perhaps a legal duty to treat the tenants’ deposits as impressed with some sort of beneficial interest in favour of the tenants and to ensure that sufficient funds were available to meet the tenants’ claims to recover the deposits as and when those claims were made.
. . . Finally, there is the statement … : ‘I regarded the tenants’ deposit account as available only for repaying the deposit of any tenant who had paid a deposit on or after 18 June 1974.’ That comes near est of any of the separate statements in Mr lredale’s affidavit to amounting to a positive declaration of his intention to create a trust at the material time. When considered in conjunction with the other statements, and when considered against the background of the extremely parlous situation finan cially in which the company found itself, I find it possible only to construe those expressions as indicat ing an intention to create a trust.
Re London Wine Co. (Shippers) Ltd
(1986) PCC 121, Chancery Division
OLIVER J: …As it seems to me, to create a trust it must be possible to ascertain with certainty not only what the interest of the beneficiary is to be but to what property it is to attach. I cannot see how, for instance, a farmer who declares himself to be a trustee of two sheep (without identifying them) can be said to have created a perfect and complete trust whatever rights he may confer by such declaration as a matter of contract. And it would seem to me to be immaterial at the time he has a flock of sheep out of which he could satisfy the interest. Of course, he could by appropriate words, declare himself to be a trustee of a specified proportion of his whole flock and thus create an equitable tenancy in common
between himself and the named beneficiary, so that a proprietary interest would arise in the benefi ciary in an undivided share of all the flock and its produce. But the mere declaration that a given num ber of animals would be held upon trust could not, I should have thought, without very clear words pointing to such an intention, result in the creation of an interest in common in the proportion which that number bears to the number of the whole at the time of the declaration. And where the mass from
which the numerical interest is to take effect is not itself ascertainable at the date of the declaration such a conclusion becomes impossible .
Hunter v Moss
[1994] 1 WLR 452, [1993] 3 All ER 215, Court of Appeal
DILLON LJ Ipass then to the second point of uncertainty.It is well established that for the creation of a trust there must be the three certainties referred to by Lord Langdale in Knight v Knight (1840) 3 Beav 148. One of those is, of course, that there must be certainty of subject matter. All these shares were identical in one class:5 per cent was 50 shares and the defendant held personally more than 50 shares. It is well known that a trust of personalty can be created orally. We were referred to the well known pas sage in the judgment of Turner LJ in Milroy v Lord (1862) 4 De GF & J 264, 274-275 .
In the present case there was no question of an imperfect transfer.What is relied on is an oral declar ation of trust. Again, it would not be good enough for a settlor to say, ‘I declare that I hold 50 of my shareson trust for B,’ without indicating the company he had inmind of the various companies in which he held shares.There would be no sufficient certainty as to the subject matter of the trust. But here the discussion is solely about the shares of one class in the one company.
It is plain that a bequest by the defendant to the plaintiff of 50 of his ordinary shares in MEL would be a valid bequest on the defendant’s death which his executors or administrators would be bound to carry into effect. Mr Hartman sought to dispute that and to say that if, for instance, a shareholder had 200 ordinary shares inICI and wanted to give them to A, B, C and D equally he could do it by giving 200 shares to A, B, C and Das tenants incommon,but he could not validly do it by giving 50 shares to A, 50 shares to B, 50 shares to C and 50 shares to D, because he has not indicated which of the identical shares A is to have and which Bis to have. I do not accept that. That such a testamentary bequest is valid, appears sufficiently from In re Clifford [1912] 1 Ch 29 and In re Cheadle [1900] 2 Ch 620. It seems to me, again, that if a person holds, say, 200 ordinary shares in ICI and he executes a transfer of 50 ordin ary shares in ICI either to an individual done or to trustees, and hands over the certificate for his 200 shares and the transfer to the transferees or to brokers to give effect to the transfer, there is a valid gift to the individual or trustees/transferees of 50 of the shares without any further identification of their numbers. It would be a completed gift without waiting for registration of the transfer: see In re Rose [1952] Ch 499. In the ordinary way a new certificate would be issued for the 50 shares to the transferee and the transferor would receive a balance certificate in respect of the rest of his holding. I see no uncertainty at all in those circumstances.
Mr Hartman, however, relied on two authorities in particular. One is a decision of Oliver J in In re London Wine Co. /Shippers) Ltd [1986] PCC 121 which was decided in 1975. That was a case in which the business of the company was that of dealers in wine and over a period it had acquired stocks of wine which were deposited in various warehouses in England. Quantities were then sold to customers by the company, but in many instances the wine remained at the warehouse. There was no appropriation-on the ground, as it were-from bulk, of any wine, to answer particular contracts. But the customer received from the company a certificate of title for wine for which he had paid which described him as the sole and beneficial owner of such-and-such wine of such-and-such a vin tage.The customer was charged for storage and insurance, but specific cases were not segregated or identified.
Subsequently, at a stage when large stocks of wine were held in various warehouses to the order of the company and its customers, a receiver was appointed by a debenture holder. The question that arose was whether the customers who had received these certificates of title had a good title to the quantity of wine referred to in the certificate as against the receiver appointed under a floating charge. The judge held that it could not be said that the legal title to the wine had passed to individual cus tomers and the description of the wine did not adequately link it with any given consignment or ware house. And, furthermore, it appeared that there was a lack of comparison at the time the certificates were issued in that, in some cases, the certificates were issued before the wine which had been ordered by the company had actually been received by the company. It seems to me that that case is a long way from the present. It is concerned with the appropriation of chattels and when the property in chattels passes. We are concerned with a declaration of trust, accepting that the legal title remained in the defendant and was not intended, at the time the trust was declared, to pass immediately to the plaintiff. The defendant was to retain the shares as trustee for the plaintiff.
Mr Hartman also referred to MacJordan Construction Ltd v Brookmount Erostin Ltd (1991) 56 BLR 1, a decision of this court. The position there was that MacJordan were sub-contractors for Brookmount as main contractors. There was retention money kept back by Brookmount which, on the documents, was to be held on a trust for the sub-contractors,but it had not been set aside as a separate fund when a receiver was appointed by the main contractor, Brookmount’s, bank. It was, consequently, held that MacJordan were not entitled to payment in full of the retention moneys in priority to the receiver and the secured creditor. It was common ground in that case that, prior to the appointment of the receivers, there were no identifiable assets of Brookmount impressed with the trust applicable to the retention fund. At best, there was merely a general bank account.
In reliance on that case Mr Hartman submitted that no fiduciary relationship can attach to an unappropriated portion of a mixed fund. The only remedy is that of a floating charge. He referred to a passage in the judgment of Lord Greene MR in In re Diplock [1948] Ch 465, 519-520 where he said:
The narrowness of the limits within which the common law operated may be linked with the lim ited nature of the remedies available to it …In particular, the device of a declaration of charge was unknown to the common law and it was the availability of that device which enabled equity to give effect to its wider conception of equitable rights.
So Mr Hartman submitted that the most that the plaintiff could claim is to have an equitable charge on a blended fund …As I see it, however, we are not concerned in this case with a mere equitable charge over a mixed fund.Just as a person can give, by will, a specified number of his shares of a certain class in a certain company, so equally, in my judgment, he can declare himself trustee of 50 of his ordinary shares in MEL or whatever the company may be and that is effective to give a beneficial proprietary interest to the beneficiary under the trust. No question of a blended fund thereafter arises and we are not in the field of equitable charge.
Cases Discretionary Trusts
Re Gestetner’s Settlement
[1953] Ch 672,
HARMAN J: … If, therefore, there be no duty to distribute, but only a duty to consider, it does not seem to me that there is any.authority binding on me to say that this whole trust is bad. In fact, there is no dif ficulty, as has been admitted, in ascertaining whether any given postulant is a member of the specified class. Of course, if that•could not be ascertained the matter would be quite different,but of John Doe or Richard Doe it can be pos.tulated easily enough whether he is or is not eligible to receive the settlor’s bounty. There being no uncertainty in that sense, I am reluctant to introduce a notion of uncertainty in the other sense, by saying that the trustees must worry their heads to survey the world from China to Peru, when there are perfectly good objects of the class in England. Consequently, I am not minded to upset the scheme put forward by the settlor on the ground indicated, namely, that of uncertainty. There is no uncertainty in so far as it is quite certain whether particular individuals are objects of the power. What is not certain is how many objects there are; and it does not seem to me that such an uncertainty will invalidate a trust worded in this way. I accordingly declare the trust valid.
Re Gulbenkian’s Settlements
, Whishaw v Stephens
[1970] AC 508, House of Lords
LORD UPJOHN (with whom Lords Hodson and Guest agreed): My lords, …Iagree … with the Court of Appeal. Many difficult and borderline cases may occur in any one of these situations.But mere difficulty is nothing to the point. If the trustees feel difficulty or even doubt on the point the Court of Chancery is available to solve it for them.It solves many such problems every year.I cannot for myself see any insu perable difficulty arising in the solution of any given state of affairs which would make it necessary to hold that the relevant clause as I have construed it fails to comply with the test. On course I have not overlooked Sifton v Sifton [1938] AC 656, but that was the entirely different case of a divesting clause. In my opinion, this clause is not void for uncertainty, and the Court of Appeal [1968] Ch 126 were quite right to overrule the decision of Harman J in Re Gresham’s Settlements [1956] 2 All ER 193, where he held a similar clause was void on that ground.
My lords, that is sufficient to dispose of the appeal, but, as I have mentioned earlier, the reasons of two members of the Court of Appeal went further and have been supported by counsel for the respondents with much force and so must be examined.
Lord Denning MR [1968) Ch at pp. 133, 134, propounded a test in the case of powers collateral, namely, that if you can say of one particular person meaning thereby, apparently, any one person only that he is clearly within the category the whole power is good though it may be difficult to say in other cases whether a person is or is not within the category, and he supported that view by reference to authority. Winn LJ said [1968] Ch at p. 138 that where there was not a complete failure by reason of ambiguity and uncertainty the court would give effect to the power as valid rather than hold it defeated since it will not have wholly failed, which put-though more broadly-the view expressed by Lord Denning MR. Counsel for the respondents in his second line of argument relied on these observations as a matter of principle but he candidly admitted that he could not rely on any authority.Moreover,Lord Denning MR expressed the view [1968) Ch at p. 133 that the different doctrine with regard to trust powers should be brought into line with the rule with regard to conditions precedent and powers collateral. So I propose to make some general observations on this matter.
If a donor (be he a settlor or testator) directs trustees to make some specified provision for ‘John Smith’, then to give legal effect to that provision it must be possible to identify ‘John Smith’. If the donor knows three John Smiths then by the most elementary principles of law neither the trustees nor the court in their place can give effect to that provision; neither the trustees northe court can guess at it. It must fail for uncertainty unless of course admissible evidence is available to point to a particular John Smith as the object of the donor’s bounty.
Then, taking it one stage further, suppose the donor directs that a fund, or the income of a fund, should be equally divided between members of a class. That class must be as defined as the individual; the court cannot guess at it. Suppose the donor directs that a fund be divided equally between ‘my old friends’, then unless there is some admissible evidence that the donor has given some special ‘dictionary’ mean ing to that phrase which enables the trustees to identify the class with sufficient certainty, it is plainly bad as being too uncertain. Suppose that there appeared before the trustees (or the court) two or three indi viduals who plainly satisfied the test of being among ‘my old friends’ the trustees could not consistently with the donor’s intentions accept them as claiming the whole or any defined part of the fund. They can not claim the whole fund for they can show no title to it unless they prove they are the only members of the class, which of course they cannot do, and so, too, by parity of reasoning they cannot claim any defined part of the fund and there is no authority in the trustees or the court to make any distribution among a smaller class than that pointed out by the donor. The principle is, in my opinion, that the donor must make his intention sufficiently plain as to the objects of his trust and the court cannot give effect to it by misinterpretinghis intentions by dividing the fund merely among those present. Secondly, and per haps it is the most hallowed principle, the Court of Chancery, which acts in default of trustees, must know with sufficient certainty the objects of the beneficence of the donor so as to execute the trust. Then, sup pose the donor does not direct an equal division of his property among the class but gives a power of selection to his trustees among the class; exactly the same principles must apply. The trustees have a duty to select the donees of the donor’s bounty from among the class designated by the donor; he has not entrusted them with any power to select the donees merely from among known claimants who are within the class, for that is constituting a narrower class and the donor has given them no power to do this.
So if the class is insufficiently defined the donor’s intentions must in such cases fail for uncertainty. Perhaps I should mention here that it is clear that the question of certainty must be determined as of the date of the document declaring the donor’s intention (in the case of a will, his death). Normally the question of certainty will arise because of the ambiguity of definition of the class by reason of the lan guage employed by the donor, but occasionally owing to some of the curious settlements executed in recent years it may be quite impossible to construct even with all the available evidence anything like a class capable of definition (ReSayer Trust [1957] Ch 423), though difficulty in doing so will not defeat the donor’s intentions (Re Hain’s Settlement [1961] 1 All ER 848). But I should add this: if the class is suffi ciently defined by the donor the fact that it may be difficult to ascertain the whereabouts or continued existence of some of its members at the relevant time matters not. The trustees can apply to the court for directions to pay a share into court.
But when mere or bare powers are conferred on donees of the power (whether trustees or others) the matter is quite different. As I have already pointed out, the trustees have no duty to exercise it in the sense that they cannot be controlled in any way. If they fail to exercise it then those entitled in default of its exercise are entitled to the fund. Perhaps the contrast may be put forcibly in this way: in the first case it is a mere power to distribute with a gift over in default; in the second case it is a trust to distribute among the class defined by the donor with merely a power of selection within that class.The result is in the first case even if the class of appointeesamong whom the donees of the power may appoint is clear and ascertained and they are all of full age and sui juris, nevertheless they cannot compel the donees of the power to exercise it in their collective favour. If, however, it is a trust power, then those entitled are entitled (if they are of full age and sui juris) to compel the trustees to pay the fund over to them, unless the fund is income and the trustees have power to accumulate for the future.
Again the basic difference between a mere power and a trust power is that in the first case trustees owe no duty to exercise it and the relevant fund or income falls to be dealt with in accordance with the trusts in default of its exercise, whereas in the second case the trustees must exercise the power and in default the court will … It is a matter of constructionwhether the power is a mere power or a trust power and the use of inappropriate language is not decisive (Wilson v Turner (1833) 22 ChD 521 at p. 525).
So, with all respect to the contrary view, I cannot myself see how,consistently with principle, it is pos sible to apply to the execution of a trust power the principles applicable to the permissible exercise by the donees, even if the trustees of mere powers; that would defeat the intention of donors completely. But with respect to mere powers, while the court cannot compel the trustees to exercise their powers, yet those entitled to the fund in default must clearly be entitled to restrain the trustees from exercising it save among those within the power. So the trustees, or the court, must be able to say with certainty who is within and who is without the power. It is for this reason that I find myself unable to accept the broader proposition advanced by Lord Denning MR and Winn LJ mentioned earlier, and agree with the proposition as enunciated in Re Gestetner [1953] Ch 672 and the later cases. My lords, I would dismiss these appeals.
Re Baden’s Deed Trusts (No. 1 ), McPhail v Doulton
[1971] AC 424, House of Lords
LORD WILBERFORCE: …I therefore agree with Russell U and would to that extent allow the appeal, declare that the provisions of clause 9(a) constitute a trust and remit the case to the Chancery Division for determination whether on this basis clause 9 is … valid or void for uncertainty.
Thismakes it necessary to consider whether, inso doing, the court should proceed on the basis that the relevant test is that laid down in /RC v Broadway Cottages Trust [1955] Ch 20 or some other test.
That decision gave the authority of the Court of Appeal to the distinction between cases where trustees are given a power of selection and those where they are bound by a trust for selection.In the former case the position, as decided by this House, is that the power is valid if it can be said with cer tainty whether any givenindividual is or is not a member of the class and does not fail simply because it is impossible to ascertain every member of the class (ReGulbenkian’s Settlements [1970] AC 508). But in the latter case it is said to be necessary, for the trust to be valid, that the wide range of objects (I use the language of the Court of Appeal) should be ascertained or capable of ascertainment.
The respondents invited your lordships to assimilate the validity test for trusts to that which applies to powers. Alternatively they contended that in any event the test laid down in the Broadway Cottages case [1955] Ch 20 was too rigid, and that a trust should be upheld if there is sufficient practicalcertainty in its definition for it to be carried out, if necessary with the administrative assistance of the court, according to the expressed intention of the settlor. I would agree with this, but this does not dispense from examination of the wider argument. The basis for the Broadway Cottages principle is stated to be that a trust cannot be valid unless, if need be, it can be executed by the court, and (though it is not quite clear from the judgment where argument ends and decisionbegins) that the court can only execute it by ordering an equal distribution in which every beneficiary shares. So it is necessary to examine the authority and reason for this supposed rule as to the execution of trusts by the court.
Assuming, as I am prepared to do for present purposes, that the test of validity is whether the trust can be executed by the court, it does not follow that execution is impossible unless there can be equal division.
As a matter of reason, to hold that a principle of equal division applies to trusts such as the present is certainly paradoxical. Equal division is surely the last thing the settlor ever intended: equal division among all may, probably would, produce a result beneficial to none.Why suppose that the court would lend itself to a whimsical execution?And as regards authority, I do not find that the nature of the trust, and of the court’s powers over trusts, calls for any such rigid rule. Equal division may be sensible and has been decreed, incases of family trusts, for a limited class; here there is life in the maxim ‘equality is equity’, but the cases provide numerous examples where this has not been so, and a different type of execution has been ordered, appropriate to the circumstances .
So I think that we are free to review the Broadway Cottages case [1955] Ch 20.The conclusion which I would reach, implicit in the previous discussion, is that the wide distinction between the validity test for powers and that for trust powers is unfortunate and wrong, that the rule recently fastened upon the courts by /RCv Broadway Cottages Trust ought to be discarded, and that the test for the validity of trust powers ought to be similar to that accepted by this House in Re Gulbenkian’s Settlements [1970] AC 508 for powers, namely, that the trust is valid if it can be said with certainty that any given individual is or is not a member of the class …
Assimilation of the validity test does not involve the complete assimilation of trust powers with powers.
As to powers, I agree with my noble and learned friend Lord Upjohn in Re Gulbenkian’s Settlements that although the trustees may, and normally will, be under a fiduciary duty to consider whether or in what way they should exercise their power, the court will not normally compel its exercise. It will intervene if the trustees exceed their powers, and possibly if they are proved to have exercised it capriciously.But in the case of a trust power, if the trustees do not exercise it, the court will:I respectfully adopt as to this the statement in Lord Upjohn’s opinion (p.525).I would venture to amplify this by saying that the court, if called upon to execute the trust power, will do so in the manner best calculated to give effect to the settlor’sor testator’sintentions. It may do so by appointing new trustees, or by authorising or directing representative persons of the classes of beneficiaries to prepare a scheme for distribution, or even, should the proper basis for distribution appear, by itself directing the trustees so to distribute … Then, as to the trustees’ duty of inquiry or ascertainment, in each case the trustees ought to make such a survey of the range of objects or possible beneficiaries as will enable them to carry out their fiduciary duty (cf.Liley v Hey (1842) 1 Hare 580). A wider and more comprehensive range of inquiry is called for in the case of trust powers than in the case of powers.
Two final points: first, as to the question of certainty. I desire to emphasise the distinction clearly made and explained by Lord Upjohn ([1970] AC 508, 524) between linguistic or semantic uncertainty which, if unresolved by the court, renders the gift void, and the difficulty of ascertaining the existence or whereabouts of members of the class, a matter with which the court can appropriately deal on an application for directions. There may be a third case where the meaning of the words used is clear but the definition of beneficiaries isso hopelessly wide as not to form ‘anything like a class’ so that the trust is administratively unworkable or in Lord Eldon’s words one that cannot be executed (Morice v Bishop of Durham (1805) 10 Ves 522, 527). I hesitate to give examples for they may prejudice future cases, but perhaps ‘all the residents of Greater London’ will serve.I do not think that a discretionary trust for ‘relatives’ even of a living person falls within this category.
Re Baden’s Trusts (No. 2)
[1973] Ch 9, Court of Appeal
SACHS LJ:It is first to be noted that the deed must be looked at through the eyes of a businessman seek ing to advance the welfare of the employees of his firm and those so connected with the employees that a benevolent employer would wish to help them.He would not necessarily be looking at the words he uses with the same eyes as those of a man making a will. Accordingly, whether a court is considering the concept implicit in relevant words, or whether it is exercising the function of a court of construction, it should adopt that same practical and common-sense approach which was enjoined by Upjohn JinRe Sayer [1957] Ch 423, 436, and by Lord Wilberforce in the Baden case (1971] AC 424, 452, and which would be used by an employer setting up such a fund.
The next point as regards approach that requires consideration is the contention, strongly pressed by Mr Vinelott, that the court must always be able to say whether any given postulant is not within the relevant class as well as being able to say whether he is within it. In construing the words already cited from the speech of Lord Wilberforce in the Baden case (as well as those of Lord Reid and Lord Upjohn in [Re Gulbenkian’s Settlements (1970] AC 508]), it is essential to bear in mind the difference between conceptual uncertainty and evidential difficulties. That distinction is explicitly referred to by Lord Wilberforce in Re Baden’s Deed Trusts (1971) AC 424, 457 when he said:
… as to the question of certainty. I desire to emphasise the distinction clearly made and explained by Lord Upjohn (1970) AC 508,524 between linguistic or semantic uncertainty which, if unresolved by the court, renders the gift void, and the difficulty of ascertaining the existence or whereabouts of members of the class, a matter with which the court can appropriately deal on an application for directions.
As Mr Vinelott himself rightly observed, ‘the court is never defeated by evidential uncertainty’, and it is in my judgment clear that it is conceptual uncertainty to which reference was made when the ‘is or is not a member of the class’ test was enunciated. (Conceptual uncertainty was in the course of argument conveniently exemplified, rightly or wrongly matters not, by the phrase ‘someone under a moral obli gation’ and contrasted with the certainty of the words ‘first cousins’.) Once the class of persons to be benefited is conceptually certain it then becomes a question of fact to be determined on evidence whether any postulant has on inquiry been proved to be within it: if he is not so proved, then he is not in it. That position remains the same whether the class to be benefited happens to be small (such as ‘first cousins’) or large (such as ‘members of the X Trade Union’ or ‘those who have served in the Royal Navy’). The suggestion that such trusts could be invalid because it might be impossible to prove of a given individual that he was not in the relevant class is wholly fallacious-and only Mr Vinelott’s per suasiveness has prevented me from saying that the contention is almost unarguable.
MEGAW LJ: The main argument of Mr Vinelott was founded upon a strict and literal interpretationof the words in which the decision of the House of Lords in Re Gulbenkian’s Settlements (1970] AC 508 was expressed. That decision laid down the test for the validity of powers of selection.It is relevant for the present case, because in the previous excursion of this case to the House of Lords [1971] AC 424 it was held that there is no relevant difference in the test of validity, whether the trustees are given a power of selection or, as was held by their lordships to be the case in this trust deed, a trust for selection. The test in either case is what may be called the Gulbenkian test. The Gulbenkian test, as expressed by Lord Wilberforce at p. 450, and again in almost identical words at p. 454 is this:
…the power is valid if it can be said with certainty whether any given individual is or is not a member of the class and does not fail simply because it is impossible to ascertain every mem ber of the class.
The executors’ argument concentrates on the words ‘or is not’ in the first of the two limbs of the sen tence quoted above: ‘if it can be said with certainty whether any given individual is or is not a member of the class’. It is said that those words have been used deliberately, and have only one possible mean ing; and that however startling or drastic or unsatisfactory the result may be-and Mr VineIott does not shrink from saying that the consequence is drastic-this court is bound to give effect to the words used in the House of Lords’ definition of the test. It would be quite impracticable for the trustees to ascertain in many cases whether a particular person was not a relative of an employee. The most that could be said is: ‘There is no proof that he is a relative’. But there would still be no ‘certainty’ that such a person was not a relative.Hence, so it is said, the test laid down by the House of Lords is not satisfied, and the trust is void. For it cannot be said with certainty, in relation to any individual, that he is not a relative.
I do not think it was contemplated that the words ‘or is not’ would produce that result. It would, as I see it,involve an inconsistency with the latter part of the same sentence: ‘does not fail simply because it is impossible to ascertain every member of the class’. The executors’ contention, in substance and reality, is that it does fail ‘simply because it is impossible to ascertain every member of the class’.
The same verbal difficulty,as I see it, emerges also when one considers the words of the suggested test which the House of Lords expressly rejected. That isset out by Lord Wilberforce in a passage immediately following the sentence which I have already quoted. The rejected test was inthese terms [1971] AC 424,450:
… itis said to be necessary …that the whole range of objects …should be ascertained or capable of ascertainment.
Since that test was rejected, the resulting affirmative proposition, which by implication must have been accepted by their lordships, is this: a trust for selection will not fail simply because the whole range of objects cannot be ascertained. In the present case, the trustees could ascertain, by investigation and evidence,many of the objects: as to many other theoretically possible claimants,they could not be cer tain.Is it to be said that the trust failsbecause it cannot be said withcertainty that such persons are not members of the class? If so, is that not the application of the rejected test: the trust failing because ‘the whole range’ of objects cannot be ascertained’?
In my judgment, much too great emphasis is placed in the executors’ argument on the words ‘or is not’.To my mind,the test is satisfied if,as regards at least a substantial number of objects, it can be said with certainty that they fall within the trust; even though, as regards a substantial number of other per sons, if they ever for some fanciful reason fell to be considered, the answer would have to be, not ‘they are outside the trust’, but ‘it is not proven whether they are in or out’. What is a ‘substantial number’ may well be a question of common sense and of degree in relation to the particular trust: particularly where, as here, it would be fantasy, to use a mild word, to suggest that any practical difficulty would arise in the fair,proper and sensible administration of this trust in respect of relatives and dependants. I do not think that this involves, as Mr Vinelott suggested, a return by this court to its former view which was rejected by the House of Lords in the Gulbenkian case. If I did so think, I should, however reluctantly, accept Mr Vinelott’s argument and its consequences. But as I read it, the criticism in the House of Lords of the decision of this court in that case related to this court’s acceptance of the view that it would be sufficient if it could be shown that one single person fell within the scope of the power or trust. The essence of thedecision of theHouse of Lordsin the Gulbenkian case, as I seeit, is not that it must be possible to show with certainty that any given person is or is not within the trust; but that it is not, or may not be, sufficient to be able to show that one individual person is within it. If it does not mean that, I do not know where the line is supposed to be drawn, having regard to the clarity and emphasis with which the House of Lords has laid down that the trust does not fail because the whole range of objects cannot be ascertained.I would dismiss the appeal.
STAMP LJ … Counsel for the defendant executors, fastening on those words, ‘if it can be said with cer tainty that any given individual is or is not a member of the class’, submitted in this court that a trust for distribution among officers and employees or ex-officers or ex-employees or any of their relatives or dependants does not satisfy the test. You may say with certainty that any given individual is or is not an officer, employee, ex-officer or ex-employee. You may say with certainty that a very large number of given individuals are relatives of one of them; but, so the argument runs, you will never be able to say with certainty of many given individuals that they are not. I am bound to say that I had thought at one stage of counsel’s able argument that this was no more than an exercise in semantics and that the phrase on which he relies indicated no more than that the trust was valid if there was such certainty in the definition of membership of the class that you could say with certainty that some individuals were members of it; that it was sufficient that you should be satisfied that a given individual presenting him self has or has not passed the test and that it matters not that having failed to establish his member ship-here his relationship-you may, perhaps wrongly, reject him. There are, however, in my judgment serious difficulties in the way of a rejection of counsel’s submission.
The first difficulty, as I see it, is that the rejection of counsel’s submission involves holding that the trust is good if there are individuals-{)r even one-of whom you can say with certainty that he is a member of the class. That was the test adopted by and the decision of the Court of Appeal in the Gulbenkian case where what was under consideration was a power of distribution among a class con ferred on trustees as distinct from a trust for distribution: but when the Gulbenkian case came before the House of Lords that test was decisively rejected and the more stringent test on which counsel for the defendant executors insists was adopted. Clearly Lord Wilberforce in expressing the view that the test of validity of a discretionary trust ought to be similar to that accepted by the House of Lords in the Gulbenkian case did not take the view that it was sufficient that you could find individuals who were clearly members of the class; for he himself remarked, towards the end of his speech as to the trustees’ duty of enquiring or ascertaining, that in each case the trustees ought to make such a survey of the range of objects or possible beneficiaries as will enable them to carry out their fiduciary duty. It is not enough that trustees should do nothing but distribute the fund among those objects of the trust who happen to be at hand or present themselves. Lord Wilberforce, after citing that passage which I have already quoted from the speech of Lord Upjohn in the Gulbenkian case, put it more succinctly by remarking that what this did say (and he agreed) was that the trustees must select from the class, but that passage did not mean (as had been contended) that they must be able to get a complete list of all possible objects. I have already called attention to Lord Wilberforce’s opinion that the trustees ought to make such a survey of the range of objects or possible beneficiaries as will enable them to carry out their fiduciary duty, and I ought perhaps to add that he indicated that a wider and more comprehensive range of enquiry is called for in the case of what I have called discretionary trusts than in the case of fidu ciary powers. But, as I understand it, having made the appropriate survey, it matters not that it is not complete or fails to yield a result enabling you to lay out a list or particulars of every single beneficiary. Having done the best they can, the trustees may proceed on the basis similar to that adopted by the court where all the beneficiaries cannot be ascertained and distribute on the footing that they have been: see, for example, Re Benjamin [1902] 1 Ch 723. What was referred to as ‘the complete ascer tainment test’ laid down by this court in the Broadway Cottages case is rejected.So also is the test laid down by this court in the Gulbenkian case. Validity or invalidity is to depend on whether you can say of any individual-and the accent must be on that word ‘any’, for it is not simply the individual whose claim you are considering who is spoken of-that he ‘is or is not a member of the class’, for only thus can you make a survey of the range of objects or possible beneficiaries.
If the matter rested there, it would in my judgment follow that, treating the word ‘relatives’ as meaning descendants from a common ancestor,a trust for distributionsuch as ishere in question would not be valid. Any ‘survey of the range of the objects or possible beneficiaries’ would certainly be incom plete, and I am able to discern no principle on which such a survey could be conducted or where it should start or finish. The most you could do, so far as regards relatives, would be to find individuals who are clearly members of the class-the test which was accepted in the Court of Appeal, but rejected in the House of Lords, in the Gulbenkian case.
The matter does not, however, rest there, and I must return to examine more closely Lord Wilberforce’s reasons for rejecting the Broadway Cottages test … He cited cases where prior to the time of Sir Richard Arden MR a discretionary trust had been executed otherwise than by equal division. Harding v Glyn (1739) 1 Atk 469, he said, was an early case where the court executed a discretionary trust for ‘relations’-and it is a discretionary trust for relations that I am considering-by distributing to the next-of-kin in equal shares ..
Harding v Glyn accordingly cannot be regarded simply as a case where in default of appointment a gift to the next-of-kin is to be implied as a matter of construction, but as authority endorsed by the deci sion of the House of Lords that a discretionary trust for ‘relations’ was a valid trust to be executed by the court by distribution to the next-of-kin. The class of beneficiaries thus becomes a clearly defined class and there is no difficulty in determining whether a given individual is within it or without it.
Does it then make any difference that here the discretionary trust for relations was a reference not to the relations of a deceased person but of one who was living? I think not. The next-of-kin of a living person are as readily ascertainable at any given time as the next-of-kin of one who is dead. A trust for the next-of kin of a person, without more, was not a trust for the next-of-kin according to the statutes which would regulate the distribution of the personal property of a deceased person had he died intestate, but a trust for his nearest blood relations: see Re Gray’s Settlement. To execute a discretionary trust for the relations or relatives of a living person by distribution among his nearest blood relations appears to me a satisfac tory method of so doing; and, if it were necessary to give a construction to the word ‘relatives’ in relating to a living person in an inter vivas settlement, to construe it as a reference to his nearest blood relations would be far more likely to give effect to the intention than a construction which embraced all who were descended from one of his ancestors.Putting aside the doctrine ut res magis valeat quam pereat, which would if necessary have persuaded me that the word ‘relatives’ in this settlement should be construed to mean nearest blood relations, nothing could be more improbable than that Mr Baden should have intended the trustees to be at liberty to make grants to a relative of an employee of whose very existence that employee might be ignorant. ‘Nearest blood relations or dependants’ makes more sense …
In coming to these conclusions I remain haunted by a remark towards the end of Lord Wilberforce’s speech when, in considering the possible unworkability of a trust, he speaks of ‘relations’ as if it were a very wide class; for I confess that I find a difficulty in treating a discretionary trust as one which may be executed by the trustees among a wider class than would be contemplated if the court were required to execute it …
The only other challenge to the validity of the trust is directed against the use of the word ‘depend ants’ which it is said introduces a linguistic or semantic uncertainty. That in the context the word con notes financial dependence I do not doubt, and although in a given case there may be a doubt whether there be a sufficient degree of dependence to satisfy the qualification of being a ‘dependant’, that is a question which can be determined by the court and does not introduce linguistic uncertainty.
Re Barlow’s WT
[1979] 1 WLR 278, (1979] 1 All ER 296, Chancery Division
BROWNE-WILKINSON J: Counsel for the fourth defendant, who argued in favour of the validity of the gift, contended that the tests laid down in the Gulbenkian case (1970] AC 508 and McPhail v Dou/ton [1971] AC 424 were not applicable to this case. The test, he says, is that laid down by the Court of Appeal in Re Allen [1953] Ch 81Oas appropriate in cases where the validity of a condition precedent or description is in issue, namely that the gift is valid if it is possible to say of one or more persons that he or they undoubtedly qualify even though it may be difficult to say of others whether or not they qualify.
The distinction between theGulbenkian test and the Re Allen test is, in my judgment, well exemplified by the word ‘friends’. The word has a great range of meanings; indeed, its exact meaning probably varies slightly from person to person. Some would include only those with whom they had been on intimate terms over a long period; others would include acquaintances whom they liked. Some would include people with whom their relationship was primarily one of business; others would not. Indeed, many people, if asked to draw up a complete list of their friends, would probably have some difficulty in deciding whether certain of the people they knew were really ‘friends’ as opposed to ‘acquaintances’. Therefore, if the nature of the gift was such that it was legally necessary to draw up a complete list of ‘friends’ of the testatrix, or to be able to say of any person that ‘he is not a friend’, the whole gift would probably fail even as to those who, by any conceivable test, were friends. But in the case of a gift of a kind which does not require one to establish all the members of the class (e.g., ‘a gift of £1Oto each of my friends’). it may be possible to say of some people that, on any test, they qualify. Thus in Re Allen Evershed MR took the example of a gift to X ‘if he is a tall man’; a man 6 feet 6 inches tall could be said on any reasonable basis to satisfy the test, although it might be impossible to say whether a man, say, 5 feet 1O inches high satisfied the requirement.
So in this case, in my judgment, there are acquaintances of a kind so close that, on any reasonable basis, anyone would treat them as being ‘friends’. Therefore, by allowing the disposition to take effect in their favour, one would, certainly be giving effect to part of the testatrix’s intention even though as to others it is impossible to say whether or not they satisfy the test.
In my judgment, it is clear that Lord Upjohn in Re Gulbenkian was considering only cases where it was necessary to establish all the members of the class. He made it clear that the reason for the rule is that in a gift which requires one to establish all the members of the class (e.g., ‘a gift to my friends in equal shares’) you cannot hold the gift good in part, since the quantum of each friend’s share depends on how many friends there are. So all persons intended to benefit by the donor must be ascertained if any effect is to be given to the gift. In my judgment, the adoption of Lord Upjohn’s test by the House of Lords in McPhai/ v Dou/ton is based on the same reasoning, even though in that case the House of Lords held that it was only necessary to be able to survey the class of objects of a power of appointment and not to establish who all the members were. But such reasoning has no application to a case where there is a condition or description attached to one or more individual gifts; in such cases, uncertainty as to some other persons who may have been intended to take does not in any way affect the quantum of the gift to persons who undoubtedly possess the qualification. Hence, in my judgment, the different test laid down in Re Allen. The recent decision of the Court of Appeal in Re Tuck’s ST [1978] Ch 49 establishes that the test in Re Allen is still the appropriate test in considering such gifts, notwithstanding the Gulbenkian and McPhai/ v Dou/ton decisions: see per Lord Russell of Killowen.
Accordingly, in my judgment, the proper result in this case depends on whether the disposition in cl. S(a) is properly to be regarded as a series of individual gifts to persons answering the description ‘friend’ (in which case it will be valid), or a gift which requires the whole class of friends to be established (in which case it will probably fail).
R v District Auditor, ex parte West Yorkshire Metropolitan County Council
[1986] RVR 24,
LLOYD LJ … For the creation of an express private trust three things are required. First, there must be a clear intention to create the trust. Secondly there must be certainty as to the subject matter of the trust; and thirdly there must be certainty as to the persons intended to benefit. Two of the three cer tainties, as they are familiarly called, were present here. Was the third? Mr Henderson argued that the beneficiaries of the trust were all or some of the inhabitants of the county of West Yorkshire. The class might be on the large side, containing as it does some 2½ million potential beneficiaries. But the defin ition, it was said, is straightforward and clear cut. There is no uncertainty as to the concept. If anyone were to come forward and claim to be a beneficiary, it could be said of him at once whether he was within the class or not.
I cannot accept Mr Henderson’s argument. I am prepared to assume in favour of the council, without
deciding, that the class is defined with sufficient clarity. I do not decide the point because it might, as it seems to me, be open to argument what is meant by ‘an inhabitant’ of the county of West Yorkshire. But I put that difficulty on one side. For there is to my mind a more fundamental difficulty. A trust with as many as 2½ million potential beneficiaries is, in my judgment, quite simply unworkable. The class is far too large. In Re Gulbenkian’s Settlements [1970) AC 508, [1968] 3 All ER 785 Lord Reid said at page 518: ‘It may be that there is a class of case where, although the description of a class of beneficiaries is clear enough, any attempt to apply it to the facts would lead to such administrative difficulties that it would for that reason be held to be invalid.’
In the following year in Re Baden’s Deed Trusts [1971] AC 424, Lord Wilberforce said … …. It seems to me that the present trust comes within the … case to which Lord Wilberforce refers. I hope I am not guilty of being prejudiced by the example which he gave. But it could hardly be more apt, or fit the facts of the present case more precisely.
I mention the subsequent decisions in Re Baden /No.2) (1972] Ch 607, and on appeal [1973] Ch 9 and
Re Manisty’sSettlement [1974] Ch 17, with misgiving, since they were not cited in argument. The latter was a case of an intermediate power, that is to say, a power exercisable by trustees in favour of all the world, other than members of an excepted class. After referring to Gulbenkian and the two Baden cases, Templeman J (as he then was) said: ‘I conclude … that a power cannot be uncertain merely because it is wide in ambit’. A power to benefit, for example, the residents of Greater London might,he thought, be bad, not on the ground of its width but on the ground of capriciousness, since the settlor could have no sensible intention to benefit ‘an accidental conglomeration of persons’ who had ‘no dis cernible link with the settlor’.But that objection could not apply here. The council had every reason for wishing to benefit the inhabitants of West Yorkshire. Lord Wilberforce’s dictum has also been the sub ject of a good deal of academic comment and criticism,noticeably by L.McKay (1974) 38 Conv 269 and
C.T. Emery (1982) 98 LQR 551. I should have welcomed further argument on these matters,but through no fault of Mr Henderson this was not possible. So I have to do the best I can.
My conclusion is that the dictum of Lord Wilberforce remains of high persuasive authority, despite Re Manisty.Manisty’s case was concerned with a power, where the function of the court ismore restricted. In the case of a trust, the court may have to execute the trust. Not so in the case of a power. That there may still be a distinction between trusts and powers in this connection was recognised by Templeman J himself in the sentence immediately following his quotation of Lord Wilberforce’s dictum, when he said:
In these guarded terms Lord Wilberforce appears to refer to trusts which may have to be exe cuted and administered by the court and not to powers where the court has a very much more limited function.
There can be no doubt that the declaration of trust in the present case created a trust and not a power. Following Lord Wilberforce’s dictum, I would hold that the definition of the beneficiaries of the trust is ‘so hopelessly wide’ as to be incapable of forming ‘anything like a class’. I would therefore reject Mr Henderson’s argument that the declaration of trust can take effect as an expressprivate trust.
Richards v Delbridge
(1874) LR Eq 11, –
SIR GEORGE JESSEL MR: The principle is a very simple one. A man may transfer his property, without valuable consideration, in one of two ways: he may either do such acts as amount in law to a con veyance or assignment of the property, and thus completely divest himself of the legal ownership, in which case the person who by those acts acquires the property takes it beneficially, or on trust, as the case may be; or the legal owner of the property may, by one or other of the modes recognised as amounting to a valid declaration of trust, constitute himself a trustee, and, without an actual transfer of the legal title, may so deal with the property as to deprive himself of its beneficial ownership, and declare that he will hold it from that time forward on trust for the other person. It is true that he need not use the words, ‘I declare myself a trustee,’ but he must do something which is equivalent to it, and use expressions which have that meaning; for, however anxious the Court may be to carry out a man’s intention, it is not at liberty to construe words otherwise than according to their proper meaning.
The true distinction appears to me to be plain, and beyond dispute: for a man to make himself trustee there must be an expression of intention to become a trustee, whereas words of present gift shew an intention to give over property to another, and not retain it in the donor’s own hands for any purpose, fiduciary or otherwise.
Paul v Constance
[1977] 1 All ER 195
SCARMAN LJ: There is no suggestion of a gift by transfer in this case. The facts of [Jones v Lock and Richards v Delbridge] do not, therefore, very much help the submission of counsel for the defendant, but he was able to extract from them this principle: that there must be a clear declaration of trust, and that means there must be clear evidence from what is said or done of an intention to create a trust or, as counsel for the defendant put it, ‘an intention to dispose of a property or a fund so that somebody else to the exclusion of the disponent acquires the beneficial interest in it’. He submitted that there was no such evidence.
When one looks to the detailed evidence to see whether it goes as far as that-and I think that the evidence does have to go as far as that-one finds that from the time that Mr Constance received his damages right up to his death he was saying, on occasions, that the money was as much the plaintiff’s as his. When they discussed the damages, how to invest them or what to do with them, when they dis cussed the bank account, he would say to her: ‘The money is as much yours as mine.’ The judge, rightly treating the basic problem in the case as a question of fact, reached this conclusion. He said:
I have read through my notes, and I am quite satisfied that it was the intention of [the claimant] and Mr Constance to create a trust in which both of them were interested.
In this court the issue becomes: was there sufficient evidence to justify the judge reaching that conclu sion of fact? In submitting that there was, counsel for the plaintiff draws attention first and foremost to the words used. When one bears in mind the unsophisticated character of Mr Constance and his rela tionship with the plaintiff during the last few years of his life, counsel for the plaintiff submits that the words that he did use on more than one occasion namely ‘This money is as much yours as mine’, convey clearly a present declaration that the existing fund was as much the plaintiff’s as his own. The judge accepted that conclusion. I think he was well justified in doing so and, indeed, I think he was right to do so. There are, as counsel for the plaintiff reminded us, other features in the history of the relationship between the plaintiff and Mr Constance which support the interpretation of those words as an express declaration of trust. I have already described the interview with the bank manager when the account was opened. I have mentioned also the putting of the ‘bingo’ winnings into the account, and the one withdrawal for the benefit of both of them.
It might, however, be thought that this was a borderline case, since it is not easy to pin-point a spe
cific moment of declaration, and one must exclude from one’s mind any case built on the existence of an implied or constructive trust; for this case was put forward at the trial and is now argued by the plain tiff as one of express declaration of trust. It was so pleaded, and it is only as such that it may be consid ered in this court. The question, therefore, is whether in all the circumstances the use of those words on numerous occasions as between Mr Constance and the plaintiff constituted an express declaration of trust. The judge found that they did. For myself, I think he was right so to find. I therefore would dismiss the appeal.
Milroy v Lord
(1862) 4 De GF & J 264, 45 ER 1185, C
TURNER LJ: …Itake the law of this court to be well settled, that, in order to render a voluntary settle ment valid and effectual, the settlor must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him. He may, of course, do this by actually transferring the prop erty to the persons for whom he intends to provide, and the provision will then be effectual and it will be equally effectual if he transfers the property to a trustee for the purposes of the settlement, or declares that he himself holds it on trust for those purposes; and, if the property be personal, the trust may, as I apprehend, be declared either in writing or by parol; but, in order to render the settlement binding, one or other of these modes must … be resorted to, for there is no equity in this Court to per fect an imperfect gift. The cases I think go further to this extent, that if the settlement is intended to be effectuated by one of the modes to which I have referred, the Court will not give effect to it by applying another of those modes. If it is intended to take effect by transfer, the Court will not hold the intended transfer to operate as a declaration of trust, for then every imperfect instrument would be made effec tual by being converted into a perfect trust …
The … question is, whether the defendant Samuel Lord did not become a trustee of those shares? Upon this question I have felt considerable doubt; but in the result, I have come to the conclusion that no perfect trust was ever created in him. The shares, it is clear, were never legally vested in him; and the only ground on which he can be held to have become a trustee of them is, that he held a power of attor ney under which he might have transferred them into his own name; but he held that power of attorney as the agent of the settlor; and if he had been sued by the plaintiffs as trustee of the settlement for an account under the trust, and to compel him to transfer the shares into his own name as trustee, I think he might well have said-These shares are not vested in me; I have no power over them except as the agent of the settlor, and without his express directions I cannot be justified in making the proposed transfer, in converting an intended into an actual settlement. A court of equity could not, I think, decree the agent of the settlor to make the transfer, unless it could decree the settlor himself to do so, and it is plain that no such decree could have been made against the settlor. In my opinion, therefore, this decree cannot be maintained as to the 50 Louisiana Bank shares.
Re Fry, Chase National Executors and Trustees Corp. v Fry
[1946] Ch 312, Chancery Division
ROMER J: … Now Ishould have thought it was difficult to say that the testator had done everything that was required to be done by him at the time of his death, for it was necessary for him to obtain permis sion from the Treasury for the assignment and he had not obtained it. Moreover, the Treasury might in any case have required further information of the kind referred to in the questionnaire which was sub mitted to him, or answers supplemental to those which he had given in reply to it; and, if so approached, he might have refused to concern himself with the matter further, in which case I do not know how anyone else could have compelled him to do so.
Re Rose, Rose v IRC
[1952] Ch 499, Court of Appeal
EVERSHED MR: For the reasons I have stated, I do not think that Milroy v Lord covers the case If, as
I have said, the phrase ‘transfer the shares’ is taken to be and to mean a transfer of all rights and inter ests in them, then I can see nothing contrary to the law in a man saying that so long as, pending regis tration, the legal estate remains in the donor, he was,by the necessary effect of his own deed, a trustee , of that legal estate. Nor do I think that that is an unjustifiable addition to or gloss on the words used in the transfer. Indeed, for my part, I find it a less difficult matter in the way of interpretation than to say that this was, upon its terms, merely a conditional gift, merely a transfer as a gift to Mrs Rose of a par ticular right, namely the right to get herself registered and thenceforward, but not before, to enjoy the benefits which the donor previously had in these shares. That is nothing like what the deed sets out to do. I have said that I reject the proposition that the distinction between a case such as this and a case such as Milroy v Lord is, as [counsel for the Crown] urged,indefensible.I think it is sensible and real; and for these reasons I would dismiss the appeals.
JENKINS LJ: If that was the effect of the transfers, what was the position between the delivery of the
transfers and the actual registration of the transferees as the holders of the shares? ….. has referred us to the well-known case of Milroy v Lord, which has been his sheet-anchor. He says that on this authority we must be forced to the conclusion that, pending registration, the transfers had no effect at all, and he arrives at that conclusion in this way: He says that these transfers, while pur porting to be transfers of the property in the shares and not declarations of trust, did not transfer the property in the shares, because registration was necessary in order to get in the legal title. He says, fur ther, that being transfers purporting to be transfers of the property in the shares and failing of their effect as such for want of registration, they could, pending registration, have no operation at all because in the case of Milroy v Lord it was held that a defective voluntary disposition purporting to operate as a transfer or assignment of the property in question would not be given effect to in equity as a declaration of trust. I agree with my Lord that Milroy v Lord by no means covers the question with which we have to deal in the present case. If the deceased had in truth transferred the whole of his interest in these shares so far as he could transfer the same, including such right as he could pass to his transferee to be placed on the register in respect of the shares, the question arises, what beneficial interest had he then left? The answer can only be, in my view, that he had no beneficial interest left whatever: his only remaining interest consisted in the fact that his name still stood on the register as holder of the shares; but, having parted in fact with the whole of his beneficial interest, he could not, in my view, assert any beneficial title by virtue of his position as registered holder. In other words, in my view the effect of these transactions, having regard to the form and the operation of the transfers, the nature of the property transferred, and the necessity for registration in order to perfect the legal title, coupled with the discretionary power on the part of the directors to withhold registration, must be that, pending registration, the deceased was in the position of a trustee of the legal title in the shares for the transferees. Thus in the hypothetical case put by the Crown of a dividend being declared and paid (as it would have been paid in accordance with the company’s articles) to the deceased as regis tered holder, he would have been accountable for that dividend to the transferees, on the ground that by virtue of the transfers as between himself and the transferees the owners of the shares were the transferees, to the exclusion of himself.
T. Choithram International SA v Pagarani
[2001] 1 WLR1,
LORD BROWNE-WILKINSON:…Although equity will not aid a volunteer, it will not strive officiously to defeat a gift.This case falls between the two common-form situations [declaring oneself to be a trustee and transferring to another to act as trustee]. Although the words used by TCP [the donor] are those normally appropriate to an outright gift-‘I give to X’-in the present context there is no breach of the principle in Milroy v Lord if the words of TCP’s gift (i.e. to the foundation) are given their only possible meaning in this context. The foundation has no legal existence apart from the trust declared by the foundation trust deed. Therefore the words ‘I give to the foundation’ can only mean ‘I give to the trustees of the foundation trust deed to be held by them on the trusts of the foundation trust deed’. Although the words are apparently words of outright gift they are essentially words of gift on trust.
But, it is said, TCP vested the properties not in all the trustees of the foundation but only in one, i.e. TCP. Since equity will not aid a volunteer, how can a court order be obtained vesting the gifted property in the whole body of trustees on the trusts of the foundation? … In their Lordships’ view there should be no question. TCP has, in the most solemn circumstances, declared that he is giving (and later that he has given) property to a trust which he himself has established and of which he has appointed himself to be a trustee. All this occurs at one composite transaction taking place on 17 February. There can in principle be no distinction between the case where the donor declares himself to be sole trustee for a donee or a purpose and the case where he declares himself to be one of the trustees for that donee or purpose. In both cases his conscience is affected and it would be unconscionable and contrary to the principles of equity to allow such a donor to resile from his gift.
Pennington v Waine
[2002] 1 WLR 2075, Court of Appeal
LADY JUSTICE ARDEN: …This appeal raises the question of what is necessary for the purposes of a valid equitable assignment of shares by way of gift. If the transaction had been for value, a contract to assign the share would have been sufficient: neither the execution nor the delivery of an instrument of transfer would have been required. However, where the transaction was purely voluntary, the principle that equity will not assist a volunteer must be applied and respected. This principle is to be found in Milroy v Lord and other cases on which Mr Weatherill relies, such asJones v Lock, Warrinerv Rogers and Richards v Delbridge: see in particular the citation from the judgment of Turner LJ set out above. Accordingly the gift must be perfected, or ‘completely constituted’ .
[T]he principle that equity will not assist a volunteer at first sight looks like a hard-edged rule of law not permitting much argument or exception. Historically the emergence of the principle may have been due to the need for equity to follow the law rather than an intuitive development of equity. The principle against imperfectly constituted gifts led to harsh and seemingly paradoxical results. Before long, equity had tempered the wind to the shorn lamb (i.e. the donee). It did so on more than one occa sion and in more than one way.
Firstly it was held that an incompletely constituted gift could be upheld if the gift had been com pleted to such an extent that the donee could enforce his right to the shares as against third parties without forcing the donor to take any further step. Accordingly, if a share transfer has been executed by the donor and duly presented to the company for registration, the donee would be entitled, if neces sary, to apply to the court for an order for rectification of the share register under section 359 of the Companies Act 1985. Such an order would not, of course, be granted if for example the directors had a discretion to refuse to register the transfer and had timeously passed a valid resolution to decline to register the transfer (see Buckley on the Companies Acts 15 ed. (2000) paragraph [359.277]).
That exception was extended in Re Rose, Rose v /RC and other cases by holding that for this excep tion to apply it was not necessary that the donor should have done all that it was necessary to be done to complete the gift, short of registration of the transfer. On the contrary it was sufficient if the donor had done all that it was necessary for him or her to do.
There is a logical difficulty with this particular exception because it assumes that there is a clear answer to the question, when does an equitable assignment of a share take place? In fact the question is circular. For if by handing the form of transfer to Mr Pennington in this case, Ada completed the trans action of gift and the equitable assignment of the 400 shares, Harold can bring an action against Mr Pennington to recover the shares as his property, and the principle that equity will not assist a volunteer is not infringed. If on the other hand, by handing the share transfer to Mr Pennington, Ada did not com plete the transaction of gift or the equitable assignment of the shares, Harold cannot recover the shares because to do so would mean compelling the donor or the donor’s agent to take some further step. The equitable assignment clearly occurs at some stage before the shares are registered. But does it occur when the share transfer is executed, or when the share transfer is delivered to the transferee, or when the transfer is lodged for registration, or when the pre-emption procedure inarticle 8 is satisfied or the directors resolve that the transfer should be registered? I return to this point below.
According to Counsel’s researches, the situation in the present case has not arisen in any reported cases before. I note that inher recent work, Personal Property Law Text and Materials (Hart Publishing, 2000) Professor Worthington takes it as at axiomatic that:
notwithstanding any demonstrable intention to make a gift, there will be no effective gift in equity if the donor simply places matters (such as completed transfer forms accompanied by the relevant share certificates) in the hand of the donor’s agents. In those circumstances the donor remains at liberty to recall the gift simply by revoking the instructions previously given to the agent. The donor has not done all that is necessary, and the donee is not in a position to con trol completion of the transfer. It follows that the intended gift will not be regarded as complete either at law or in equity. (page 241)
Secondly equity has tempered the wind (of the principle that equity will not assist a volunteer) to the shorn lamb (the donee) by utilising the constructive trust. This does not constitute a declaration of trust and thus does not fall foul of the principle (see Milroyv Lard andJanes v Lack, above) that an imperfectly constituted gift is not saved by being treated as a declaration of trust. Thus, for example, in the Choithram case, the Privy Council held that the assets which the donor gave to the foundation of which
he was one of the trustees were held upon trust to vest the same in all the trustees of the foundation on the terms of the trusts of the foundation. This particular trust obligation was not a term of the express trust constituting the foundation but a constructive trust adjunct to it. So, too, in Re Rose, Rose v /RC the Court of Appeal held that the beneficial interest in the shares passed when the share transfers were delivered to the transferee, and that consequently the transferor was a trustee of the legal estate in the shares from that date …
Thirdly equity has tempered the wind to the shorn lamb by applying a benevolent construction to words of gift. As explained above an imperfect gift is not saved by being treated as a declaration of trust. But where a court of equity is satisfied that the donor had an intention to make an immediate gift, the court will construe the words which the donor used as words effecting a gift or declaring a trust if they can fairly bear that meaning and otherwise the gift will fail. This point can also be illustrated by ref erence to the Choithram case …
Accordingly the principle that, where a gift is imperfectly constituted, the court will not hold it to operate as a declaration of trust, does not prevent the court from construing it to be a trust if that inter pretation is permissible as a matter of construction, which may be a benevolent construction. The same must apply to words of gift. An equity to perfect a gift would not be invoked by giving a benevo lent construction to words of gift or, it follows, words which the donor used to communicate or give effect to his gift.
The cases to which Counsel have referred us do not reveal any, or any consistent single policy con sideration behind the rule that the court will not perfect an imperfect gift. The objectives of the rule obviously include ensuring that donors do not by acting voluntarily act unwisely in a way that they may subsequently regret. This objective is furthered by permitting donors to change their minds at any time before it becomes completely constituted. This is a paternalistic objective, which can outweigh the respect to be given to the donor’s original intention as gifts are often held by the courts to be incom pletely constituted despite the clearest intention of the donor to make the gift. Another valid objective would be to safeguard the position of the donor: suppose, for instance, that (contrary to the fact) it had been discovered after Ada’s death that her estate was insolvent, the court would be concerned to ensure that the gift did not defeat the rights of creditors. But, while this may well be a relevant consideration, for my own part I do not consider that this need concern the court to the exclusion of other considerationsas in the event of insolvency there are other potent remedies available to creditors where insolvents have made gifts to defeat their claims: see for example sections 339 and 423 of the Insolvency Act 1986. There must also be, in the interests of legal certainty, a clearly ascertainable point in time at which it can be said that the gift was completed, and this point in time must be arrived at on a principled basis.
There are countervailing policy considerations which would militate in favour of holding a gift to be completely constituted. These would include effectuating, rather than frustrating, the clear and continuing intention of the donor, and preventing the donor from acting in a manner which is unconscionable …
If one proceeds on the basis that a principle which animates the answer to the question whether an apparently incomplete gift is to be treated as completely constituted is that a donor will not be permit ted to change his or her mind if it would be unconscionable, in the eyes of equity, vis-a-vis the donee to do so, what is the position here? There can be no comprehensive list of factors which makes it uncon scionable for the donor to change his or her mind: it must depend on the court’s evaluation of all the relevant considerations. What then are the relevant facts here? Ada made the gift of her own free will: there is no finding that she was not competent to do this. She not only told Harold about the gift and signed a form of transfer which she delivered to Mr Pennington for him to secure registration: her agent also told Harold that he need take no action. In addition Harold agreed to become a director of the
Company without limit of time, which he could not do without shares being transferred to him. If Ada had changed her mind on (say) 1o November 1998, in my judgment the court could properly have con cluded that it was too late for her to do this as by that date Harold signed the form 288A, the last of the events identified above, to occur.
There is next the pure question of law: was it necessary for Ada to deliver the form of transfer to Harold? …the ratio of Re Rose, Rose v /RC was as I read it that the gifts of shares in that case were com pletely constituted when the donor executed share transfers and delivered them to the transferees even though they were not registered in the register of members of the company until a later date.
However, that conclusion as to the ratio in Re Rose, Rose v /RC does not mean that this appeal must be decided in the appellants’ favour. Even if I am correct in my view that the Court of Appeal took the view inRe Rose, Rose v /RC that delivery of the share transfers was there required, it does not follow that delivery cannot in some circumstances be dispensed with. Here, there was a clear finding that Ada intended to make an immediate gift. Harold was informed of it. Moreover, I have already expressed the view that a stage was reached when it would have been unconscionable for Ada to recall the gift. It fol lows that it would also have been unconscionable for her personal representatives to refuse to hand over the share transfer to Harold after her death. In those circumstances, in my judgment, delivery of the share transfer before her death was unnecessary so far as perfection of the gift was concerned.
It is not necessary to decide the case simply on that basis. After the share transfers were executed Mr Pennington wrote to Harold on Ada’s instructions informing him of the gift and stating that there was no action that he needed to take. I would also decide this appeal in favour of the respondent on this further basis. If I am wrong in the view that delivery of the share transfers to the company or the donee is required and is not dispensed with by reason of the fact that it would be unconscionable for Ada’s personal representatives to refuse to hand the transfers over to Harold, the words used by Mr Pennington should be construed as meaning that Ada and, through her, Mr Pennington became agents for Harold for the purpose of submitting the share transfer to the Company. This is an application of the principle of benevolent construction to give effect to Ada’s clear wishes. Only in that way could the result ‘This requires no action on your part’ and an effective gift be achieved. Harold did not question this assurance and must be taken to have proceeded to act on the basis that it would be honoured.
Accordingly in my judgment the judge was right in the conclusion that he reached.
LORD JUSTICE CLARKE: …although I know that hard cases make bad law, I would have expected Harold to be entitled both to the 400 shares apparently transferred by stock transfer form and the shares bequeathed to him, with the consequence that, on Ada’s death, he became entitled to 51 per cent of the issued shares in the company. I should add that, if unconscionability is the test, I agree with Arden U that it would have been unconscionable of Ada, as at the time of her death (if not earlier). to assert that the beneficial interest in the 400 shares had not passed to Harold. It would certainly be unconscionable of the estate to seek to resile from the transfer after Ada’s death because, as at her death, she plainly intended Harold to own the shares.
The difficulty is to identify the correct approach in law and equity to the facts of this case.In addition to the facts just set out, a feature of the case which has particularly struck me stems from the role and wording of the stock transfer form. Section 1 of the Stock Transfer Act 1963 (‘the 1963 Act’) provides, so far as relevant, as follows:
(1) Registered securities to which this section applies may be transferred by means of an instru ment under hand in the form set out in Schedule 1 to this Act (in this Act referred to as a stock transfer). executed by the transferor only and specifying (in addition to the particulars of the consideration, of the description and number or amount of the securities, and of the person by whom the transfer is made) the full name and address of the transferee.
(2) The execution of a stock transfer need not be attested; …
(3) Nothing in this section shall be construed as affecting the validity of any instrument which would be effective to transfer securities apart from this section; .
Section 1(4) sets out the securities to which the section applies. They include shares in a company … There is nothing in the provisions of the 1963 Act which suggests that delivery is necessary to effect the transfer. On the contrary, section 1(1) provides that that registered securities ‘may be transferred by means of an instrument under hand’. It does not provide that they may, let alone may only, be trans
ferred by delivery of such an instrument, whether to the transferee or to the company.
Moreover, there is, so far as I am aware,no case which is authority for the proposition that an equitable assignment of shares, or perhaps strictly of the shareholder’s rights to and under the shares, cannot be effective without delivery of the share certificates or the instrument of transfer. It is not, to my mind, sur prising that there is no authority for such a proposition because there is no need for such a principle…
Itseems to me that the signature of a donor on a stock transfer form in the statutory form used here is or should be capable, without more, of amounting to an equitable assignment. However, it does not follow that it will necessarily operate as an effective equitable assignment. Thus, the cases show that there are circumstances in which the court will not give effect to such an ‘assignment’.For example, the evidence may show that, although the document was signed, the donor did not intend the assignment to take immediate (or perhaps any) effect. The classic example of such a situation is the case contem plated by Viscount Haldane in the passage from Macedo vStroud [[1922] 2 AC 330, 337] quoted above, where the deed or instrument is delivered, or indeed executed, on the basis that it is not to have effect until some event happens or some event is performed. There is no reason why, in those circumstances, the court should not give effect to that intention.
Unless there is authority binding on this court to the contrary, I would hold that absent such an inten tion or some other compelling reason why equity should not give effect to the transfer, the execution of the transfer, either by itself or coupled (as here) with delivery by the transferor, as Viscount Haldane put it in the case of a deed, intending to make the transfer his own, the transfer had effect as an equitable assignment to transfer the shares in equity to the transferee …
…evidence in a particular case might lead to the conclusion that the transferor did not intend the assignment to have effect until a later date, as in the case of an escrow or other indication of an inten tion that the transfer should not have effect until later. However, there was no such indication either in Re Rose, Rose v /RC or the Midland Bank Re Rose, Midland Bank v Rose case or in the present case. The fact that the deed was delivered to the transferee in Re Rose, Rose v /RC and indeed in the Re Rose, Midland Bank v Rose case was an indication of the fact that the donor did indeed intend to transfer the shares to the transferee by the transfer document. So too were Ada’s actions in this case, as set out by Arden U.
Reading the judgment of Sir Raymond Evershed, I have no doubt that he would have held that Ada’s beneficial interest in the 400 shares was transferred to Harold by the stock transfer form and that her intention was amply proved by what happened thereafter. It is true that he placed some emphasis upon the fact that a deed had been used, and executed by both parties in Re Rose, Rose v /RC but I do not read his judgment as depending upon that point.
Jenkins U agreed with the Master of the Rolls, although it is fair to say that he placed more emphasis on the delivery of the transfer form to the donee. Nevertheless, he too emphasised the form of the transfers. Thus he said (at p. S16) that the directors, when they registered the transfers, registered them because ‘by virtue of the transfers’ the transferees had become owners of the shares and as such had become entitled to ‘get in the legal estate’ by becoming registered as owners. However he also said this by way of conclusion:
In my view, a transfer under seal in the form appropriate under the company’s regulations, coupled with delivery of the transfer and certificate to the transferee, does suffice, as between the transferor and the transferee, to constitute the transferee the beneficial owner of the share, and the circumstance that the transferee must do a further act in the form of applying for and obtain ing registration in order to get in and perfect his legal title, having been equipped by the transferor with all that is necessary to enable him to do so, does not prevent the transfer from operating, in accordance with its terms as between the transferor and the transferee, and making the trans feree the beneficial owner. After all, where duty is concerned, the only relevant type of ownership is beneficial ownership, and the situation of the legal estate does not affect the question.
In considering the decision in Re Rose, Rose v /RC it is important to note that the form had in fact been delivered to the transferee. As I see it, the ratio of Re Rose, Rose v /RC was that the gifts of the shares were completely constituted by the crucial date, which was 10th April 1943, by which time the deeds had been executed and delivered to the donee. It does not, however, follow that the decision would have been different if no such delivery had taken place. The court did not have to decide that question. I do not think that the decision would have been different because, as already stated, it seems to me that that the transferor had done everything that was necessary in order to transfer his equitable inter est in the shares to the transferee. There was nothing further that the transferee had to do. The effect of that transfer was to create a form of trust under which the donor could have been compelled to procure the registration of the shares in the donee’s name …
Moreover, I do not think that the conclusion which I have reached falls foul of the principle that the court will not convert an imperfect gift into a declaration of trust. As I see it, there was here a perfect gilt of Ada’s beneficial interest in the 400 shares, which, as Sir Raymond Evershed MR explained in the passage on page 510 of his judgment quoted above, took effect as a trust of the legal estate in the shares. It follows that, in my judgment, the decision in Re Rose, Rose v /RC does not require the appeal in the instant case to be allowed.
Pullan v Koe
[1913] 1 Ch 9, Chancery Division
SWINFEN EADY J: It was contended that the bonds never in fact became trust property …In my opin ion as soon as the £285 was paid to the wife it became in equity bound by and subject to the trusts of the settlement. The trustees could have claimed that particular sum … and,if it had been invested and the investment could be traced, could have followed the money, and claimed the investment.
Thispoint was dealt with by Jessel MR inSmith v Lucas (1881) ChD 531,543, where he said: ‘What is the effect of such a covenant in equity? It has been said that the effect in equity of the covenant of the wife, as far as she is concerned, is that it does not affect her personally, but that it binds the property: that is to say, it binds the property under the doctrine of equity that that is to be considered as done which ought to be done.That is in the nature of specific performance of the contract no doubt. If, there fore, this is a covenant to settle the future-acquired property of the wife, and nothing more is done by her, the covenant will bind the property.’
Re Cook’s ST
[1965] Ch 902, Chancery Division
BUCKLEY J (on the issue of marriage consideration): It is an elementary general rule of law that a con tract affects only the parties to it and their successors in title and that no one but a party or the succes sor in title to a party can sue or be sued upon it. There are, however, exceptions to this rule, some legal, some equitable and some statutory. If there is any such exception as Mr Brightman contends, it must be equitable.
It has long since been recognised that if marriage articles or a marriage settlement contain an execu tory agreement to settle property, equity will assist an intended beneficiary who is issue of the mar riage to enforce the agreement. Such a beneficiary is described as being within the marriage consideration … This fiction by which a child of the marriage is treated as if he were a party to and as having given consideration for his parents’ marriage settlement is no doubt associated with his intim ate connection with the marriage which was in fact the consideration for it, and it is, as I understand the law, because he is treated as a party who has given consideration that equity will assist him to enforce any contract to settle property which that settlement may contain …On the other hand, an intended beneficiary who is not issue of the marriage is not within the marriage consideration, is not treated as though any consideration moved from him, and will not be assisted to enforce a contract to make a settlement. Thus the next-of-kin of the covenantor who are intended to take the property which is to be brought into settlement in the event of a failure of issue cannot enforce a covenant to settle (Re d’Angibau [(1880) 15 ChD 228]), nor can the children by a previous marriage of one of the parties, unless maybe, their interests are interwoven with those of the children of the marriage (see Attorney General v Jacobs-Smith [1895] 2 QB 341). nor can the children of the marriage, if the settlement is a post-nuptial one, for in such a case, though there may be consideration as between the husband and the wife, that consideration would not be their marriage but consideration of some other kind to which their children would be strangers: Green v Paterson (1886) 32 ChD 95.
These authorities show that there is an equitable exception to the general rule of law which I have mentioned where the contract is made in consideration of marriage and the intended beneficiary who seeks to have the contract enforced is within the marriageconsideration.They do not support the exist ence of any wider exception save perhaps in the case of a beneficiary who is not within the marriage consideration but whose interests under the intended trusts are closely interwoven with interests of others who are within that consideration. They do not support the view that any such exception exists in favour of a person who was not a party to the contract and is not to be treated as though he had been and who has given no consideration and is not to be treated as if he had given consideration.Where the obligation to settle property has been assumed voluntarily it is clear that no object of the intended trusts can enforce the obligation. Thus in Re Kay’s Settlement [1939] Ch 329, a spinster made a volun tary settlement in favour of herself and her issue which contained a covenant to settle after-acquired property. She later married and had children who, as volunteers, were held to have no right to enforce the covenant ..
BUCKLEY J: .. As an alternative argument, Mr Brightman formulated this proposition, which he admitted not to be directly supported by any authority, but he claimed to conflict with none: that where a covenantor has for considerationmoving from a third party covenanted with trustees to make a settle ment of property, the court will assist an intended beneficiary who is a volunteer to enforce the covenant if he is specially an object of the intended trust or (which Mr Brightman says is the same thing) is within the consideration of the deed. In formulating this proposition Mr Brightman bases himself on language used by Cotton U in Re d’Angibau (1880) 15 ChD 228, 242, CA and by Romer J in Cannon v Hartley [1949] Ch 213, 223. As an example of a case to which the proposition would apply, Mr Brightman supposes a father having two sons who enters into an agreement with his elder son and with trustees whereby the father agrees to convey an estate to his elder son absolutely in consider ation of the son covenanting with his father and the trustees, or with the trustees alone, to settle an expectation on trusts for the benefit of the younger son. The younger son is a stranger to the transac tion, but he is also the primary (and special) beneficiary of the intended settlement. A court of equity should, and would, Mr Brightman contends, assist the younger son to enforce his brother’s covenant and should not permit the elder son to frustrate the purposes of the agreement by refusing to imple ment his covenant although he has secured the valuable consideration given for it. This submission is not without attraction, for it is not to be denied that, generally speaking, the conduct of a man who, hav ing pledged his word for valuable consideration, takes the benefits he has so obtained and then fails to do his part, commands no admiration. I have, therefore, given careful consideration to this part of the argument to see whether the state of the law is such as might justify me (subject to the construction point) in dealing with the case on some such grounds.
There was no consideration for Sir Francis’s covenant moving from the trustees; nor, of course, was there any consideration moving from Sir Francis’s children [beneficiaries) … ….. Mr Brightman distinguishes [Kay] from the present on the grounds that in Re Kay’s Settlement (1939] Ch 329 the settlement and covenant were entirely voluntary, whereas Sir Francis received consideration from Sir Herbet; but Sir Francis received no consideration from his own children. Why, it may be asked, should they be accorded had Sir Herbert given no consideration? As regards them the covenant must, in my judgment, be regarded as having been given voluntarily. A plaintiff is not entitled to claim equit able relief against another merely because that latter’s conduct is unmeritorious. Conduct by A which is unconscientious in relation to B so as to entitle B to equitable relief may not be unconscientious in relation to C so that C will have no standing to claim relief notwithstanding that the conduct in question may affect C. The father in Mr Brightman’s fictitious illustration could after performing his part of the contract release his elder son from the latter’s covenant with him to make a settlement on the younger son, and the younger son could, I think, not complain. Only the covenant with the trustees would then remain, but this covenant would be a voluntary with the trustees having given no consideration.I can see no reason why in these circumstances the court should assist the younger son to enforce the covenant with the trustees. But the right of the younger son to require the trustees to enforce their covenant could not, I think, depend on whether the father had or had not released his covenant. Therefore, as it seems to me, on principle the younger son would not in any event have an equitable right to require the tcustees to enforce their covenant. In other words, the arrangement between the father and his elder son would not have conferred any equitable right or interest upon his younger son. I reach the conclusion that Mr Brightman’s proposition is not well-founded. There is no authority to support it and Green v Paterson (1886) 32 ChD 95 is, I think, authority the other way. Accordingly, the second and third defendants are not,in my judgment, entitled to require the trustees to take proceed ings to enforce the covenant even if it is capable of being constructed in a manner favourable to them.
Re Plumptre’s MS, Underhill v Plumptre
(1910) 1 Ch 609,
EVE J: … are not in my opinion cestuis que trust under the settlement, for nothing therein amounts to a declaration of trust, or to anything more than an executory contract on the part of the husband and wife; it is, so far as the next of kin are concerned, … a voluntary contract to create a trust as distinguished from a complete voluntary trust such as existed in the case of Fletcher v Fletcher [below]. on which [the next of kin) so strongly relied. The collaterals are no parties to the contract; they are not within the marriage consideration and cannot be considered otherwise than as volunteers, and in these respects it makes no difference that the covenant sought to be enforced is the husband’s and that the property sought to be brought within it comes from the wife. For each of the foregoing propositions authority is to be found in the judgment of the Court of Appeal in Re D’Angibau (1880) 15 ChD 228; and in the same judgment is to be found this further statement-that where, as in this case, the husband has acquired a legal title as administrator of his wife to property which was sub ject to the contract to settle, volunteers are not entitled to enforce against that legal title the contract to create a trust contained in the settlement.
Re Pryce, Neville v Pryce
[1917] 1 Ch 234,
EVE J: The position of the wife’s fund is …that her next of kin would be entitled to it on her death; but they are volunteers, and although the Court would probably compel fulfilment of the contract to set tle at the instance of any persons within the marriage consideration (see per Cotton U in In re D’Angibau (1880) 15 ChD 228,242,246), and in theirfavourwill treat the outstanding property as sub jected to an enforceable trust (Pullan v Koe [1913) 1 Ch 9), ‘volunteers have no right whatever to obtain specific performance of a mere covenant which has remained as a covenant and has never been performed’: see per James U in In re D’Angibau. Nor could damages be awarded either in this Court, or, I apprehend, at law, where, since the Judicature Act, the same defences would be available to the defendant as would be raised in an action brought in this Court for specific performance or damages.
In these circumstances, seeing that the next of kin could neither maintain an action to enforce the
covenant nor for damages for breach of it, and that the settlement is not a declaration of trust consti tuting the relationship of trustee and cestui que trust between the defendant and the next of kin, in which case effect could be given to the trusts even in favour of volunteers, but is a mere voluntary con tract to create a trust, ought the Court now for the sole benefit of these volunteers to direct the trustees to take proceedings to enforce the defendant’s covenant? I think it ought not; to do so would be to give the next of kin by indirect means relief they cannot obtain by any direct procedure, and would in effect be enforcing the settlement as against the defendant’s legal right to payment and transfer from the trustees of the parents’ marriagesettlement. The circumstances are not unlike those which existed in the case of In re D’Angibau, and I think the position here is covered by the judgments of the Lords Justices in that case.
Accordingly, I declare that the trustees ought not to take any steps to compel the transfer or pay ment to them of the premises assured to the wife by the deed of 12 December 1904 .
Vandervell V IRC
[1967] 2 AC 291,
LORD WILBERFORCE: The conclusion, on the facts found, is simply that the option was vested in the trustee company as a trustee on trusts, not defined at the time, possibly to be defined later. But the equitable, or beneficial interest, cannot remain in the air: the consequence in law must be that it remains in the settlor. There is no need to consider some of the more refined intellectualities of the doc trine of resulting trust,nor to speculate whether,in possible circumstances, the shares might be applic able for Mr Vandervell’s benefit: he had, as the direct result of the option and of the failure to place the beneficial interest in it securely away from him, not divested himself absolutely of the shares which it controlled.
There remainsthe alternative point taken by the Crown that in any event,by virtue of s. 53(1)(c) of the Law of Property Act 1925, the appellant never effectively disposed of the beneficial interest in the shares to the Royal College of Surgeons. This argument I cannot accept. Section 53(1)(cl, a successor to the dormants. 9 of the Statute of Frauds, has recently received a new lease of life as an instrument in the hands of the Revenue. The subsection, which has twice recently brought litigants to this House (Grey v /RC [1960] AC 1[above]; Oughtred v /RC [1960] AC 206 [below]), is certainly not easy to apply to the varied transactions in equitable interests which now occur. However,in this case no problem arises. The shares in question, the 100,000 A shares in Vandervell Products Ltd, were, prior to 14 November 1958,registeredin the name of the National Provincial Bank Ltd upon trust for the appellant absolutely. On 14 November 1958, the appellant’s solicitor received from the bank a blank transfer of the shares, executed by the bank, and the share certificate.So at this stage the appellant was the absolute master of the shares and only needed to insert his name as transferee in the transfer and to register it to become the full legal owner. He was also the owner in equity. On 19 November 1958, the solicitor (or Mr Robins-the case is ambiguous) on behalf of Mr Vandervell, who intended to make a gift, handed the transfer to the college which,in due course, sealed it and obtained registration of the shares in the college’s name. The case should then be regarded as one in which the appellant himself has, with theintention to makea gift,put the college in a position to become the legal owner of the shares, which the college in fact became. If the appellant had died before the college had obtained registration, it is clear that on the principle of Re Rose [1949] Ch 78 that the gift would have been complete, on the basis that he had done everything in his power to transfer the legal interest, with an intention to give, to the college. No separate transfer, therefore, of the equitable interest ever came to or needed to be made and there is no room for the operation of the subsection. What the position would have been had there simply been an oral direction to the legal owner (viz. the bank) to transfer the shares to the college,followed by such a transfer, but without any document in writing signed by Mr Vandervell as equitable owner, is not a matter which calls for consideration here. The Crown’s argument on this point fails but, for the reasons earlier given, I would dismiss the appeal.
Re Vandervell’s Trusts (No. 2)
[1974] Ch 269
Lord Denning MR
In October 1961 the trustee company exercised the option. They did it by using the money of the chil dren’s settlement. They paid £5,000 of the children’s money to the Royal College of Surgeons. In return the Royal College of Surgeons, on 27 October 1961, transferred the 100,000 A shares to the trustee company. The intention of Mr Vandervell and of the trustee company was that the trustee company should hold the shares (which had replaced the option) on trust for the children as an addition to the children’s settlement. They made this clear to the Revenue authorities in an important letter written by their solicitors on 2 November 1961, which I will read:
GA Vandervell, Esq.-Surtax
Further to our letter of 7 September last, we write to inform you that in accordance with the advice tendered by counsel to Vandervell Trustees Ltd, the latter have exercised the option granted to them by the Royal College of Surgeons of 1 December 1958, and procured a transfer to them of the shares referred to in the option, with funds held by them upon the trusts of the settlement created by Mr G. A. Vandervell and dated 30 December 1949, and consequently such shares will henceforth be held by them upon the trusts of the settlement.
Mr Vandervell believed that thenceforward the trustee company held the 100,000 A shares on trust for the children. He acted on that footing. He got his products company to declare dividends on them for the years 1962 to 1964 amounting to the large sum of £1,256,458 gross (before tax) and £769,580 1Os 9d (after tax). These dividends were received by the trustee company and added to the funds of the children’s settlement. They were invested by the trustee company for the benefit of the children exclusively.
But even now Mr Vandervell had not shaken off the demands of the Revenue authorities. They claimed that, even after the exercise of the option, Mr Vandervell had not divested himself of his inter est in the 100,000 A shares and that he was liable for surtax on the dividends paid to the children’s settlement. Faced with this demand, Mr Vandervell, on the advice of counsel, took the final step. He executed a deed transferring everything to the trustee company on trust for the children. This ended the second period, and started the third.
On 19 January 1965, Mr Vandervell executed a deed by which he transferred to the trustee company all right, title or interest which he had on the option or the shares or in the dividends-expressly declaring that the trust company were to hold them on the trusts of the children’s settlement. At last the Revenue authorities accepted the position. They recognised that from 19 January 1965, Mr Vandervell had no interest whatever in the shares or the dividends. They made no demands for surtax thenceforward.
On 27 January 1967, Mr Vandervell made his will. It was in contemplation of a new marriage. In it he made no provision for his children. He said expressly that this was because he had already provided for them by the children’s settlement. Six weeks later, on 1O March 1967, he died.
Held: The Court of Appeal was concerned only with the law for the second period. Liability to surtax now depended on the whereabouts of the equitable interest in the shares during that period. It was argued that, as before, it remained with Vandervell. The option: The option was destroyed when it was exercised by the trustee company in 1961, so Vandervell’s equitable interest in it (resulting from the earlier litigation, above) was extinguished. This was not a disposition withins. 53.
The shares: The children had the equitable interest. The shares had been placed by the trustee company on the trusts of the children’s settlements, and Vandervell had now succeeded in divesting himself of the entire interest in these shares, there being no longer a resulting trust in his favour. The later trusts were precisely defined, in favour of the children’s settlements, so that it was no longer necessary for the equitable interest to remain in the settler.
In October and November 1961, the trustee company exercised the option. They paid £5,000 out of the children’s settlement. The Royal College of Surgeons transferred the legal estate in the 100,000 A shares to the trustee company. Thereupon the trustee company became the legal owner of the shares. This was a different kind of property altogether. Whereas previously the trustee company had only a chose in action of one kind-an option-it now had a chose in action of a different kind-the actual shares. This trust property was not held by the trustee company beneficially. It was held by them on trust. On this occasion a valid trust was created at the time of the transfer. It was man ifested in clear and unmistakable fashion. It was precisely defined. The shares were to be held on the trusts of the children’s settlement. The evidence of intention is indisputable: (i) The trustee company used the children’s money-£5,000-with which to acquire the shares. This would be a breach of trust unless they intended the shares to be an addition to the children’s settlement. (ii) The trustee company wrote to the Revenue authorities the letter of 2 November 1961, declaring expressly that the shares ‘will henceforth be held by them on the trusts of the children’s settlement’. (iii) Thenceforward all the dividends received by the trustees were paid by them to the children’s settlement and treated as part of the funds of the settlement. This was all done with the full assent of Mr Vandervell. Such being the intention, clear and manifest, at the time when the shares were conveyed to the trustee company, it is sufficient to create a trust.
Mr Balcombe for the executors admitted that the intention of Mr Vandervell and the trustee com pany was that the shares should be held on trust for the children’s settlement. But he said that this intention was of no avail. He said that during the first period, Mr Vandervell had on equitable interest in the property, namely, a resulting trust; that he never disposed of this equitable interest (because he never knew he had it): and that in any case it was the disposition of an equitable interest which, under
s. 53 of the Law of Property Act 1925, had to be in writing, signed by him or his agent, lawfully autho rised by him in writing (and there was no such writing produced).He citedGrey v /RC [1960] AC 1 [above] and Oughtred v /RC [1960] AC 206 [below].
There is a complete fallacy in that argument. A resulting trust for the settlor is born and dies without any writing at all. It comes into existence whenever there is a gap in the beneficial ownership. It ceases to exist whenever that gap is filled by someone becoming beneficially entitled. As soon as the gap is filled by the creation or declaration of a valid trust, the resulting trust comes to an end. In this case, before the option was exercised, there was a gap in the beneficial ownership. So there was a resulting trust for Mr Vandervell. But as soon as the option was exercised and the shares registered in the trustees’ name, there was created a valid trust of the shares in favour of the children’s settlement. Not being a trust of land, it could be created without any writing. A trust of personalty can be created with out writing. Both Mr Vandervell and the trustee company had done everything which needed to be done to make the settlement of these shares binding on them. So there was a valid trust: see Milroy v Lord (1862) 4 De GF & J 264, 274, per Turner LJ
Oughtred v IRC
[1960] AC 206, House of Lords
LORD JENKINS: The provisions of the Stamp Act 1891 directly relevant to the claim are these:
Section 1 (which contains the charge of stamp duties) provides that stamp duties ‘upon the several instruments specified in Schedule 1 to this Act shall be the several duties in the said Schedule specified’. Section 54 provides as follows: ‘For the purposes of this Act the expression’ conveyance on sale ‘includes every instrument … whereby any property, or any estate or interest in any property, upon the sale thereof is transferred to or vested in a purchaser, or any person on his behalf or by his
direction’.
Schedule 1 imposes under the head of charge ‘conveyance or transfer on sale, of any property’ (except as therein mentioned) ad valarem duty upon ‘the amount or value of the consideration for the sale’; and under the head of charge ‘conveyance or transfer of any kind not hereinbefore described’ a fixed duty of 1Os [50p] …
I am unable to accept the conclusion that the disputed transfer was prevented from being a transfer
of the shares to the appellant on sale because the entire beneficial interest in the settled shares was already vested in the appellant under the constructive trust, and there was accordingly nothing left for the disputed transfer to pass to the appellant except the bare legal estate. The constructive trust in favour of a purchaser which arises on the conclusion of a contract for sale is founded upon the pur chaser’s right to enforce the contract in proceedings for specific performance. In other words, he is treated in equity as entitled by virtue of the contract to the property which the vendor is bound under the contract to convey to him. This interest under the contract is no doubt a proprietary interest of a sort, which arises, so to speak, in anticipation of the execution of the transfer for which the purchaser is entitled to call. But its existence has never (so far as I know) been held to prevent a subsequent trans fer, in performance of the contract, of the property contracted to be sold from constituting for stamp duty purposes a transfer on sale of the property in question. Take the simple case of a contract for the sale of land. In such a case a constructive trust in favour of the purchaser arises on the conclusion of the contract for sale, but (so far as I know) it has never been held on this account that a conveyance subse quently executed in performance of the contract is not stampable ad va/orem as a transfer on sale. Similarly, in a case like the present one, but uncomplicated by the existence of successive interests, a transfer to a purchaser of the investments comprised in a trust fund could not, in my judgment, be pre vented from constituting a transfer on sale for the purposes of stamp duty by reason of the fact that the actual transfer had been preceded by an oral agreement for sale.
In truth, the title secured by a purchaser by means of an actual transfer is different in kind from, and may well be far superior to, the special form of proprietary interest which equity confers on a purchaser in anticipation of such transfer.
The difference is of particular importance in the case of property such as shares in a limited company. Under the contract the purchaser is no doubt entitled in equity as between himself and the vendor to the beneficial interest in the shares, and [subject to due payment of the purchase consideration) to call for a transfer of them from the vendor as trustee for him.But it is only on the execution of the actual transfer that he becomes entitled to be registered as a member, to attend and vote at meetings, to effect trans fers on the register, or to receive dividends otherwise than through the vendor as his trustee.
VISCOUNT RADCLIFFE (dissented): … The reasoning of the whole matter, as I see it, is as follows.On 18 June 1956, the son owned an equitable reversionary interest in the settled shares; by his oral agree ment of that date he created in his mother an equitable interest in his reversion, since the subject-mat ter of the agreement was property of which specific performance would normally be decreed by the court. He thus became a trustee for her of that interest sub modo; having regard to subsection (2) of s. 53 of the Law of Property Act 1925, subsection (1) of that section did not operate to prevent that trusteeship arising by operation of law. On 26 June the appellant transferred to her son the shares which were the consideration for her acquisition of his equitable interest; on this transfer he became in a full sense and without more the trustee of his interest for her. She was the effective owner of all out standing equitable interests. It was thus correct to recite in the deed of release to the trustees of the settlement, which was to wind up their trust, that the trust fund was by then held on trust for her absolutely. There was, in fact, no equity to the shares that could be asserted against her, and it was open to her, if she so wished, to let the matter rest without calling for a written assignment from her son. Given that the trustees were apprised of the making of the oral agreement and of the appellant’s satisfaction of the consideration to be given by her, the trustees had no more to do than to transfer their legal title to her or as she might direct. This and no more is what they did.
It follows that, in my view, this transfer cannot be treated as a conveyance of the son’s equitable reversion at all. The trustees had not got it; he never transferred or released it to them; how, then, could they convey it? With all respect to those who think otherwise, it is incorrect to say that the trustees’ transfer was made either with his authority or at his direction. If the recital as to the appellant’s rights was correct, as I think that it was, he had no remaining authority to give or direction to issue. A release is, after all, the normal instrument for winding-up a trust when all the equitable rights are vested and the legal estate is called for from the trustees who hold it. What the release gave the trustees from him was acquittance for the trust administration and accounts to date, and the fact that he gave it in con sideration of the legal interest in the shares being vested in his mother adds nothing on this point. Nor does it, with respect, advance the matter to say, correctly, that, at the end of the day, the appellant was the absolute owner of the shares, legal and equitable. I think that she was; but that is description, not analysis. The question that is relevant for the purpose of this appeal is how she came to occupy that position; a position which, under English law, could be reached by more than one road.
Neville v Wilson
[1997] Ch 144,
NOURSE LJ: …The substantial questions now in issue are whether there was an agreement for the informal liquidation of the company and, if so, whether it had the effect of disposing of the company’s equitable interest in the shares of another company. The latter question involves a consideration of s. 53(1)(c) and (2) of the Law of Property Act 1925 and a point left open by the House of Lords in
Oughtred v Inland Revenue Commissioners [1960] AC 206 …
The effect of the agreement, more closely analysed, was that each shareholder agreed to assign his
interest in the other shares of N Ltd’s equitable interest in exchange for the assignment by the other shareholders of their interests in his own aliquot share. Each individual agreement having been a disposition of a subsisting equitable interest not made in writing, there then arises the question whether it was rendered ineffectual bys.53 of the Law of Property Act 1925 ..
So far as it is material to the present case, what subsection (2) says is that subsection (1)(c) does not
affect the creation or operation of implied or constructive trusts. Just as in Oughtred v Inland Revenue Commissioners [1969] AC 206 the son’s oral agreement created a constructive trust in favour of the mother, so here each shareholder’s oral or implied agreement created an implied or constructive trust in favour of the other shareholders. Why then should subsection (2) not apply? No convincing reason was suggested in argument and none has occurred to us since. Moreover, to deny its application in this case would be to restrict the effect of general words when no restriction is called for, and to lay the ground for fine distinctions in the future.With all the respect which is due to those who have thought to the contrary, we hold that subsection (2) applies to an agreement such as we have in this case. For these reasons we have come to the conclusion that the agreement entered into by the shareholders of [N Ltd] in about April 1969 was not rendered ineffectual bys. 53 of the Act of 1925. The plaintiffs’ alter native claim succeeds and they are entitled to relief accordingly. That means that ,, equitable interest in the 120 shares did not vest in the Crown as bona vacantia in 1970. Taking into account the dispositions of the testator’s will, we calculate the result to be that the cash now representing the 120 shares will be divided in the global proportions 77.33 to the plaintiffs and 42.66 to the defendants. In that connection we should record that the defendants resisted the appeal because, as we under stand it, they preferred their chances of persuading the Crown to disclaim its interest in their favour to the certainty of obtaining a smaller but nevertheless substantial interest if the appeal succeeded. As to the wisdom of that course, we express no view. On grounds not argued before Merritt J, the appeal is allowed.