Express Trusts: Creation and Formalities

For a valid express trust to be created, three certainties must be present (Lord Langdale in Knight v Knight (1840) 3 Beav 148):

(1) Certainty of intention: The settlor must intend to create a trust, not merely a moral obligation or a gift. No particular words are required — the court looks at the substance, not the form. In Paul v Constance [1977] 1 WLR 527, repeated statements of "the money is as much yours as mine" were held sufficient to create a trust. However, precatory words (expressions of hope or desire) are generally insufficient (Lambe v Eames (1871) LR 6 Ch App 597).

(2) Certainty of subject matter: The trust property must be identifiable. In Palmer v Simmonds (1854) 2 Drew 221, a trust of "the bulk of my estate" failed for uncertainty. For tangible property, the specific items must be ascertained or ascertainable. For intangible property (e.g., shares in a company), the trust may be valid even if the specific shares are not segregated, provided they are of the same type (Hunter v Moss [1994] 1 WLR 452).

(3) Certainty of objects: The beneficiaries must be identifiable. For fixed trusts, the "complete list" test applies — it must be possible to draw up a complete list of all beneficiaries (IRC v Broadway Cottages Trust [1955] Ch 20). For discretionary trusts, the "given postulant" test applies — it must be possible to say of any given individual whether or not they fall within the class (McPhail v Doulton [1971] AC 424).

A trust is completely constituted when the legal title to the trust property has been vested in the trustee. The method of transfer depends on the type of property: land requires a deed and registration, shares require a stock transfer form and registration, and chattels require delivery or deed of gift.

The general rule is that equity will not assist a volunteer — if the settlor has not completed the transfer, the intended beneficiary (who has given no consideration) cannot enforce the trust (Milroy v Lord (1862) 4 De GF & J 264). However, there are exceptions:

The Re Rose principle: Where the settlor has done everything in their power to transfer the property, equity treats the trust as constituted even before legal formalities are complete (Re Rose [1952] Ch 499).

The Pennington v Waine exception: In Pennington v Waine [2002] 1 WLR 2075, the Court of Appeal held that where it would be unconscionable for the donor to resile from the gift, equity may perfect an imperfect gift. The scope of this exception remains controversial.

Strong v Bird rule: Where a donor appoints the intended donee as executor, and the donor's intention to give persists until death, the gift is perfected when the donee obtains legal title as executor (Strong v Bird (1874) LR 18 Eq 315).

Section 53(1)(b) of the Law of Property Act 1925 requires that a declaration of trust respecting land must be manifested and proved by some writing signed by the person declaring the trust. Failure to comply renders the trust unenforceable (not void).

Section 53(1)(c) requires that a disposition of an existing equitable interest must be in writing signed by the person disposing of the interest. This provision has generated significant case law:

In Grey v IRC [1960] AC 1, an oral direction by a beneficiary to trustees to hold on trust for someone else was held to be a disposition requiring writing. However, in Vandervell v IRC [1967] 2 AC 291, a direction by a beneficiary to trustees to transfer the legal title to a third party was held not to be a disposition within s.53(1)(c) because the equitable interest passed with the legal title.

Section 53(2) provides that s.53(1) does not affect the creation or operation of resulting, implied, or constructive trusts. This is an important exception that allows these trusts to arise informally.