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Law Sample Paper on The paradox in the UK Law of Trusts

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Law Sample Paper on The paradox in the UK Law of Trusts


Just as the law on equity was developing from the growing number of unsatisfied claimants of property law under common law, so did the law of trust. This would be formalized through a court of equity referred to as the Court of Chancery in which the Lord Chancellor would exercise jurisdiction as the custodian of the King’s conscience. The English law would define Trust as “A trust is an equitable obligation, binding a person (who is called a trustee) to deal with property over which he has control (which is called the trust property) for the benefit of persons (who are called beneficiaries) of whom he himself may be one and any of whom may enforce the obligation.”[1]

Basically, the concept of trust is dividing ownership of property in which the legal title to manage and control rests with the trustee while all benefits are exclusively owed to the beneficiary. Trusts can either be implied or express, in which case they are created by the owner of the property who makes a declaration of legal title to beneficiaries or simply declares himself as a trustee of the property. When the trust is created during a person’s lifetime, it is referred to as an intervivos in which case the creator is referred to as the settlor whereas he/she is referred to as a testator where a trust is created by a will.

The law exists to protect the settlor and enforce the trust like a normal contract to regulate the trust relationship; establishing obligations for the trustee, privileges for the beneficiaries and the consequences of any breach by the trustee. In the UK, there have been legislated a number of statutes to achieve this among them the Trustee Act 1925, Trustee Act 2000, Trustee Investments Act 1961, Recognition of Trusts Act 1987, the Charities Act 2011, Pensions Act 1995, Pensions Act 2004 andFinancial Services and Markets Act 2000[2].

The court has the authority to enforce a validly created trust on behalf of the beneficiaries but that can only be done once all doubts has been cleared with regards to its validity. Ultimately the situation would require a set criterion to be fulfilled to qualify a trust and thus the holding in Knight v Knight[3]. This infamous case decided on 7th August, 1840 established what have come to be called the three certainties which a private trust must demonstrate for the court to recognize it as binding in equity. The first is the Certainty of intention where it must be demonstrated that the settlor clearly intended, not hoped or expected, for the property to be put under trust.Such certainty exists where the words used by the settlor or testator reveal the imposition of a trust obligation on the intended trustee as distinct from an intention to transfer the property to that person absolutely. It is what distinguishes a transfer by way of trust from a transfer by way of absolute gift as was observed inRe Conolly (1909). The second is the certainty of subject matter whereby the court can easily identify the exact property that is to be the subject of the trust.It requires that both the property which is to be the subject matter of the trust as evidenced by the case of Palmer v Simmonds[4] and the extent of the intended equitable owners’ beneficial interests as held in Boyce v Boyce[5]and Margulies v Margulies[6] are certain, or at least capable of being rendered certain. Phrases such as “the bulk of my estate” and “anything that is left” have been held not to be sufficiently certain. This ensures that the trustee is aware of the precise scope of his or her duties under the trust.  Last but not least is the certainty of object which fronts the proposition that a court should be able to identify the exact person or persons who will form the beneficiary or beneficiaries of the trust.The trustee should know in whose favour he or she must perform the trust, so identifying who may apply to the court should the trustee fail in this duty. The precise requirements of certainty of objects vary for different kinds of trusts and powers but, in all cases, a settlor’s or testator’s failure to define their objects with sufficient certainty will mean that the property is held on resulting trust for the settlor or residuary legatees as was the case in McPhail v Doulton[7]. This essay will provide incites as to how these certainties have been perforated by parliament through contradictory legislations.




The general rule with formalities to trust is that as long as the three certainities are present and the legal title is vested in the trustee then the settlor is no longer held to any demands. The UK parliament however, decreed that certain provisions and types of disposition require additional formalities before they can become effective. To this effect, testamentary dispositions are governed by section 9 of the Wills Act 1837 while inter vivos trusts are governed by section 53 of the Law of Property Act 1925. The additional formalities are said to be performing three major functions namely;

  1. The evidentiary function: the clearest jurisdiction for legal formality is to provide documentary evidence of the existence and terms of the transaction. This offers protection from fraud, provides a provable record transactions and documentation also helps to establish the obligations of the trustee/executor so that the risk of an inadvertent breach of trust is minimized.
  2. The cautionary function: this operates to focus the mind of the settlor/testator and to offer a cooling off period until the formalities at been attended to. As property rights are often valuable rights, they are not expected to be created disposed of casually, secretly or informally.
  • The channeling function: the presence of authenticated writing relieves the court and the need to enquire whether a legal transaction was intended and, if so, to explain the nature.


Inter vivos trusts of land are subject to the additional formalities prescribed in section 53 (one) (b) of the Law of property act 1925. This section provides that, “a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such a trust or by his will”. These extra requirements are imposed because of both the value of land and the highly technical rules that attend each transfer. This applies to a declaration of a trust of land regardless of whether the title is Freehold or leasehold and whether the land is registered or unregistered. The section will catch the trust of land even it outside the jurisdiction of the domestic courts. It is to be appreciated, however, that s 53(1)(b) LPA 1925 does not require that the trust it created in writing. Instead, it demands that such trusts are merely evidenced in writing and signed by the settlor and no one else. This requires a documentary memorandum on the existence of the trust, the trust property and the beneficiaries of the trust as was the case in Smith v Matthews[8].The court in Close invoice Finance Ltd v Abaowa[9]also provided that there is no requirement for a deed or for the signature to be witnessed.The consequence of a failure to adhere to section 53 (one) (B) is that although the trust of land remains valid, it is rendered unenforceable by the beneficiary.

This provision has raised a number of legal dilemmas with courts making contradicting interpretations to try and harmonize the provision with the general rule of formalities. The first is the interpretation of the form of writing. This definition has been taken to be wide enough to embrace the modern manifestations of writing (any mode of representing or reproducing words in a visible form) + writing found in telex, fax and email.

Secondly, the court in Gardener V Rose found that the documentary evidence can either be created before or after the trust has been declared. This makes the trust to be retrospectively enforceable.

Another parameter adapted in Sandhar v Sandhar& Kang Ltd[10] was that since there is no prescribed writing to adopt, it can be pieced together from more than one document. The court was of the opinion that the general rule offormalities can be as a result of multiple actions evidenced by a number of documents which can be construed to enforce a trust. The court in Tweedle v Henderson extended the ruling by providing that the signed writing must however, contain sufficient. Following suit was the Re Northcliffe which in addition to the set precedents added that the writing must moreover be signed ‘BY THE SETTLOR ONLY’.

Section 53 1) (b) allows some flexibility on the writing by providing that there must be some physical manifestation on the document that is intended to identify the declarant. This is to say that the manifestation can be a cross, full signature or initials and may be hand written, typed, rubber stamped and electronic signaturewhere the law permits. The signature must be of the individual able to declare the trust is necessary. In the case of Hilmi& Associates Ltd v 20 Pembridge Villas Freehold Ltd[11], the court held that in relation to a company; the documents must be signed by the company rather than on its behalf. This is to allow the court to deduce the company’s certainty of intention rather than pursue an individual’s own interest.              

S 53(1)(c) LPA 1925 operates where the existing beneficiary wishes to dispose of his beneficial interest to a new beneficiary. Existing beneficiaries can either: sign a document called a “Deed of assignment of beneficial interest” and the new beneficiaries are in place once the form is lodged with the trustees (so they can pay dividends to the correct recipients) OR orally request trustees to hold the beneficial interest in favour of the new beneficiary(ies).

The section applies to any property (personalty or land) and concerns “a disposition (disposal) of an equitable interest or trust subsisting at the time of the disposition, which must also be in writing, signed by the person disposing of the same (the original beneficiary) or his agent thereunto lawfully authorized in writing or by will”. The general rule envisaged in the case of Zeital v Kaye[12] is that the agent must be authorized in writing to sign the document.       

A legal dilemma was posed in the case of Grey V IRC[13]which poses the notion that A direction to the trustees will have no effect at all – it will be void because the existing beneficiary is effectively disposing of his beneficial interest- unless it is done in writing to comply with s 53(1)(c). Consequently the confusion appears because the trust is in existence at the beginning and the trust is in existence at the end. All that has changed is the beneficiary; meaning, the beneficial interest moves from the old beneficiary to the new beneficiary, the legal title remains in the same place – with the trustees.      

Grey v IRC says that a request or direction by the existing beneficiary to a trustee of the existing trust to hold all or part of the trust property on trust for a new beneficiary invokes the operation of s 53(1)(c) because the existing beneficiary is effectively disposing of his beneficial interest.  

Another principle was introduced in the case of Saunders v Vautier[14] which states; if the old beneficiary is the sole beneficiary of the trust (a bare trust) then he has sole control over the legal title. The beneficiary can bring trust to an end, have the legal title transferred to him and then give the new beneficiary the shares OR the beneficiary can decide to direct the trustees to TRANSFER the shares for him, without ending the trust. The trustees of a bare trust are essentially nominees (they have a mere caretaker role) and under Saunders v Vautier the beneficiary can tell the trustees exactly what he wants them to do – if he orders a transfer of the legal and equitable titles to a new owner the S 53(1)(c) LPA 1925 does NOT apply.

To transfer equitable interest,Vandervell v IRC[15] stated that s53(1)(c) does not apply in cases of share transfers because the greater (i.e. legal title) includes the lesser (i.e. equitable title) so as soon as the trustees sign a share transfer forms the legal title drags the beneficial interest with it. Under Vandervell the new beneficiary (the new absolute owner) does not need to sign anything – only the trustees sign the share transfer form.


This has been at the center of many court proceedings most of which end up being appealed depending on the diverging precedents formed. The two subsections as enumerated need to be revisited in order to provide a clear cut direction with regards to additional formalities and procedures thereto. Arguably, the solution has to come from the legislature which created the problem to begin with.



Nigel Stockwell and Richard Edwards. (2009) Trusts and Equity (Foundation Studies in Law Series) 9th Edition>accessed 10 January 2017…/samplechapter/panesar_C02.pdf

Gary Watt,(2008) Trust and Equity, 3rd Edition

Hayton and Mitchell’s (Sweet & Maxwell 2010)Commentary and Cases on the Law of Trusts and Equitable Remedies, 13th edition

Underhill and Hayton’s(Butterworths, 2006)Law Relating to Trusts and Trustees, 17th edition

Graham Moffat, (2005) Trust Law: Text and Materials, Fourth Edition

[1]Underhill, Arthur, Sir, 1850-1939; The law relating to trusts and trustees (Originally published in 1912)

[2] Incorporated Council of Law Reporting;  All England Laws (Originally published in 1977)

[3](1840) 49 ER 58

[4] (1909) 2 Drewry 61 ER 704

[5] (1849) 60 ER 959

[6] (2000) All ER (D) 344

[7] (1970) UKHL 1,, AC 424

[8] (1861) 3 D.F & J 139

[9] (2010) EWHC 1920 (QB)

[10] (2008) All ER (D) 219

[11] (2010) All ER (D) 279

[12] (2010) EWCA Civ 159

[13] (1958) Ch 690

[14] (1841) EWHC J82

[15] (1966) 2 AC 291

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