11. Constituting a trust

Completely constituted trusts

Once the settlor has declared himself trustee, or transferred the property to trustees, the trust is completely constituted. The beneficiaries can enforce it even if they are volunteers, meaning they gave no value. The settlor cannot change his mind. Paul v Paul is an example: a completed marriage settlement could not be undone by the spouses.

Incompletely constituted trusts

If the transfer fails, the trust is incompletely constituted. Who can enforce it depends on whether the beneficiaries gave value.

Beneficiaries who gave value: equity will help them, because it treats as done what ought to be done. Value here means money or money's worth, or marriage consideration. In a marriage settlement the spouses and their children are within the marriage consideration. Pullan v Koe is an example.

Volunteers: equity will not assist a volunteer, and will not perfect an imperfect gift. In Re Plumptre's Marriage Settlement, next of kin who were outside the marriage consideration could not enforce a covenant to settle after-acquired property.

When a transfer is treated as complete

Milroy v Lord said that if a settlor means to make a gift by transfer, the court will not save a failed transfer by treating it as a declaration of trust. But equity treats the gift as complete once the donor has done everything he must do.

In Re Rose the donor had signed share transfers and sent them to the company. Registration, which was in the directors' hands, came later. The gift was complete in equity from the date he had done all he could. Pennington v Waine went further. A donor signed a share transfer form, which was never delivered. The Court of Appeal held that it would be unconscionable to let her deny the gift, because the donee had been told and had agreed to become a director in reliance. Pennington has been criticised for its uncertainty.

The rule in Strong v Bird

If a donor makes an imperfect gift during life and then appoints the donee his executor, the gift is perfected when the donee takes the legal title as executor. In Strong v Bird a stepson borrowed money from his stepmother, who lived in his house and paid for her board. They agreed he would repay by deductions from what she paid. After a few payments she told him she would not take the deductions, and paid in full until she died. He became her executor, and the rest of the debt was treated as released.

The conditions are:

An intended immediate gift: the donor meant to give during life, not on death.

A continuing intention: it lasted until death. In Re Gonin the mother's intention to give her daughter the house did not continue, because she later wrote her a cheque instead. The cheque also failed, because an uncashed cheque is only an order to the bank that ends on death.

The donee is executor or administrator: the rule applies whether he is sole executor or one of several.

Property that survives death: the subject matter must still exist.

Donatio mortis causa

A donatio mortis causa is a gift made in contemplation of death, conditional on the donor dying. It is a true exception to the rule that equity will not help a volunteer. If the donor dies without completing the transfer, equity makes his personal representatives complete it.

Lord Russell CJ in Cain v Moon set out the conditions.

Contemplation of death: the donor must contemplate death in the near future for a specific reason, such as illness or a dangerous operation, not just that all people die.

Delivery of the subject matter or the means of control: handing over the thing, or something that gives dominion, such as a key. In Sen v Headley the Court of Appeal held that land could pass this way, where the dying man gave his partner the key to a box containing the title deeds.

Conditional on death: the gift must be meant to take effect only if the donor dies. It is revoked if he recovers, or if he takes the property back.

Property capable of passing: a cheque drawn by the donor cannot be the subject matter, because the bank's mandate ends on death. Some kinds of property, such as shares, were once thought unsuitable. Sen v Headley suggests the rules are now more flexible.