A trust is when one person assumes legal ownership of a property but for the benefit of another. A trust may be implemented for instance when an owner of property gives up the legal title of his/her property to a person and gives the equitable title to another.
A trust has some important features; it sets an obligation on a person, as the proprietor of some property, to deal with that property for the beneficial interest of another.
A common issue that arises in the constitution of a trust is the validity of any assignment.
The general law test for the validity of voluntary assignments of legal property was set out by Turner LJ in Milroy v Lord (1862) 45 ER 1185 (‘Milroy’) at 1189:
‘[I]n order to render a voluntary settlement 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 on him’.
The first legal of Milroy was clarified by Griffith CJ in Corin v Patton (1990) 169 CLR 540 (‘Corin’) at 559:
‘if an intending donor of property has done everything which it is necessary for him to have done to effect a transfer of the legal title, then equity will recognize the gift. ‘Necessary’ used in this sense means necessary to effect a transfer…the question is whether what he has done is sufficient to enable the legal transfer without further action on his part’.
The second leg of Milroy is that if an assignment is intended to be effected by some form, the Court will not give effect to it by treating it as another form.
Section 23C of the Conveyancing Act 1919 (NSW) (‘CA’) may be considered a further hurdle in the ordeal. It provides that:
(1) Subject to the provisions of this Act with respect to the creation of interest in land by parol:
(a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same…,
(b) 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 trust or by the person's will,
(c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same or by the person's will, or by the person's agent thereunto lawfully authorised in writing.
(2) This section does not affect the creation or operation of resulting, implied, or constructive trusts.
(3) For the purposes of this section, a requirement for writing may be satisfied in electronic form and a requirement for writing to be signed may be satisfied by electronic signature.
Looking at Milroy and Corin together, it might be easier to relay the test of assignment of equitable interests as follows: ‘if an intending donor of equitable property has done everything which it is necessary for him or her to do to effect a transfer of equitable title, then equity will recognize the gift’. The person giving away the property must have done something sufficient to facilitate an equitable transfer without any further action on his part. This might happen as a declaration of trust.
If you would like to discuss equitable assignments, please do not hesitate to contact me by:
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