TOPIC 2: FORMALITIES FOR THE CREATION OF A TRUST

The general rule is that an express trust may be created simply by the settlor
manifesting an intention to create one. This general rule has been modified by
statute in relation to:

(1) Trusts of Land

(2) Dispositions of Existing Equitable Interests
(3) Testamentary Trusts
Which all now require that it must be evidenced in writing and there must be an intention
on the part of the settlor to create a trust. A general intention (which is established form
the words or the settlor and they must be sufficient) to benefit someone will not suffice.

However for personality, no formalities required..

(1) TRUSTS OF LAND

Written evidence is required for trusts concerning land:

Section 60(2) of the Barbados Property Act:

- A declaration of trust respecting any land or any interest therein must be
manifested and proved by some writing signed by the person who is entitled to
declare such a trust or by his will.
- This is similar to section 53(1)(b) of the UK Law of Property Act 1925.

Walcott v Barclays Bank

- Illustrates the requirement of written evidence for declarations of trusts
concerning land.
- Facts: Testator purchased land in his own name. After the purchase he made
certain oral declarations of trust in relation to the land in favour of his wife.
- However, in his will the testator devised and bequeathed all his residuary estate to
his daughter – no direct reference was made in the will of the wife getting the
land.
- Issue: Whether the land passed with residuary estate to daughter or whether wife
had beneficial interest to it i.e. whether a trust in favour of the wife had been
validly declared?
- Whether the declaration in the will satisfied the statutory requirement of evidence
in writing.
- Held: The declaration in the will constituted written evidence of the oral inter
vivos declaration of trust. The wife was entitled to the land.
- Reasoning: Law is that the trust need not be created in writing, the writing merely
needs to be evidence of the fact of the trust.
- Oral Declarations plus clause 3 of the will manifested and proved the intention to
create a trust in favour of the wife.
 - Also, the wife made pecuniary contributions to the dwelling house which became
part of the land.

Differences between declaration of trust for land and disposition of equitable interest:
- (i) The actual disposition must be in writing, written evidence does not suffice.
- (ii) Whereas with declarations it must be signed by the settlor himself, in the
disposition it can be signed by the settlor’s agent.

(2) DISPOSITIONS OF EXISTING EQUITABLE INTERESTS

Section 60(3) of the Barbados Property Act:

- 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
his agent.’
- This is similar to section 53(1)(c) 1925 UK Law of Property Act

Timpson’s Executors v Yearbury

- In this case Romer LJ stated that there are four ways in which a person can
dispose of equitable interest in a property:
- [i] Direct assignment of an equitable interest by a third party
- [ii] Direction to trustees to hold on trust for another
- [iii] Contract for valuable consideration
- [iv] Declaration by equitable owner of himself as a trustee

[i] Direct assignment of an equitable interest by a third party

- This is where section 60(3) of the Barbados Act quoted above would apply.
- The disposition must actually be in writing and not merely evidenced in writing.
- Further, signature by an agent suffices for the disposition.

Re Danish Bacon Co Staff Pension Fund Trusts

- It has been held that a number of connected documents can provide the writing.

[ii] Direction to trustees to hold on trust for another

- Where a beneficiary directs his trustees to hold the equitable title upon trust for
another, THIS MUST BE IN WRITING.

Grey v IRC
- The settlor intended to transfer his shares to his grandchildren but he sought to
avoid stamp duty so he transferred the shares to his trustees to hold as nominees
for himself (this transfer was not dutiable because it was transfer of the bare legal
title).
- He then orally instructed the trustees to hold upon trusts for his grandchildren.
 - A month later, the trustees issued a written document confirming that they held
the shares upon trust for the grandchildren.
- Issue: What confirmed the trust – the oral declarations or the written documents
by the trustee?
- (If it was the written documents then stamp duty would have been payable).
- Held: Dispositions must be in writing so the oral instruction was void; the
subsequent written documents were what confirmed the trust – stamp duty
payable.
- The Case also illustrates two important points which were not directly referred to
in the judgment:
- (i) It seems that the principle applies equally to land as to personalty.
- (ii) The case shows that a ‘disposition’ may also amount to a ‘declaration’ of trust.

If the beneficial owner directs trustees to transfer entire legal and equitable estate –
writing is NOT required.

Vandervell v IRC
- Facts: Wealthy man wanted to establish a Pharmacy Professorship. He was the
owner of certain shares.
- He told trustees to transfer both legal and equitable title to the shares to the Royal
College.
- Inland Revenue argued that oral instruction didn’t give effect to the transfer so
Vandervell was still liable for income tax on shares.
- Held: Inland Revenue Wrong – Oral instruction valid because Vandervell was
transferring both legal and equitable interest. The written requirement as laid
down in statute was to prevent hidden oral transactions relating to equitable
interests, there was thus no need for it where both the legal and equitable interest
would have been transferred.

Declaration of trust with consent of beneficial owner

Vandervell’s Trusts (No.2)

- In 1961 Vandervell Trustees Ltd. (upon order from V) exercised the option to
repurchase the shares using 5,000 pounds from the Vandervell children settlement.
- However, it was not until 1965 that V executed a formal deed assigning to
Vandervell Trustees Ltd. any right or interest he might still have in the option of
the shares.
- Revenue Dept claimed that V was liable for income tax on the dividends paid
from 1961 – 1965 on the ground that there was a resulting trust of the option in
favour of V and that V had not disposed of that beneficial interest in writing until
1965.
- Before the Revenue claim came to court, V’s executors intervened and brought a
claim from Vandervell Trustees Ltd. of the dividends paid during 1961 – 1965.
- Court of Appeal held that Vandervell Trustees held the dividends on the trusts of
the children’s settlement.
 - In the view of the Court of Appeal neither the extinction of the trust of the option
nor the creation of the new trust of the shares, nor the two viewed as a whole,
amounted to a disposition by V of an interest within s. 53(1)(c).

[iii] Contract for valuable consideration

Oral Contract to Assign Equitable Interest

It is uncertain whether there is a disposition where the equitable owner makes a contract
with a third party for valuable consideration to assign his equitable interest to him. In the
following case it was held that such a transfer was effected by oral agreement. Although
the court still held that stamp duty was payable on the written documents.

Oughtred v IRC
- June 18 Mrs. Oughtred and her son made an oral agreement to exchange their
shares.
- June 26 trustees executed a formal transfer of the shares to Mrs. Oughtred.
- She claimed that she had become equitable owner on June 18 by virtue of her
right to specific performance of the June 18 agreement whereby Peter became a
constructive trustee of the shares for her; in which case the document would only
be a formal transfer of the bare legal estate and thus not liable to tax.
- The House of Lords accepted her argument that after the June 18 agreement she
had a proprietary interest of a sort which arises in anticipation of the execution of
the transfer.
- The beneficial interest in the shares was transferable by oral instruction because
the agreement was specifically enforceable.
- However the court stated that notwithstanding her equitable right the stamp duties
were payable because there was a contract stage separate from a conveyance stage
thus stamp duty was still payable.

[iv] Declaration by equitable owner of himself as a trustee

Generally speaking, it can be argued that this is a declaration of trust, which creates a
sub-trust and not a disposition. Thus, unless the property is land, no writing in required.

Grainge v Wilberforce
- Where Amy is trustee for Bobby, and Bobby becomes trustee for Cindy and
Bobby drops out of the picture leaving Amy directly holding on Cindy and then
there is a disposition – the disposition must be in writing.

It is suggested that B will only drop out of the picture where he has no active duties to
perform under the sub-trust. (B will have active duties to perform where the beneficiary
under the sub-trust is a minor).
(3) TESTAMENTARY TRUST

General rule:
- a trust which is to take effect on the settlor’s death must be declared in the manner
required by the Wills legislation
- In Barbados it is section 61 of the Succession Act 1981:

No will shall be valid unless –

(a) It is in writing
(b) It is signed by the testator
(c) Two or more witnesses present to attest the signature

Nominations under Staff pension schemes

Norris v Norris (Barbados High Court)

- Concerned a nomination under a group insurance policy, under which an
employee could, by written notice, designate a beneficiary(s) to receive the
money on his death. He retained the right to change his beneficiary at any time
- The deceased employee had executed a designation in the presence of only one
witness.
- Held: (Barbados High Court) because the nomination was (1) freely revocable
and (2) because the deceased’s interest in the policy remained vested in him
during his life time, and the beneficiary only became entitled to an interest when
he dies the act was testamentary in character and thus would be in Breach of
Succession Act 1981, Cap 249 as only one witness was present.

CONTRAST

Baird v Baird
(Privy Council) appeal from T&T Appeal Court.
- In this case, the pension scheme funds were vested in Trustees, and the scheme
was administered by a management committee.
- It was held in this case that the nomination was not a testamentary disposition
since the member’s interest in the fund was non-assignable and the member had
no control over the funds to which his nomination related.’
- The nomination was therefore valid, although it had not been executed in the
presence of two witnesses.
- Lord Oliver: emphasised whether the Wills Legislation applied to a nomination
under a pension scheme depended in each case on the provisions of the scheme.
In a case such as this where the interests are non-assignable and where the power
of nomination and revocation require prior approval by trustees or management
committee the approach of Megarry J in Re Danish Bacon Co Ltd Staff Pension
fund Trust
- In Re Danish Bacon Co the court reasoned that although the nomination carried
certain testamentary characteristics, it took effect as a contractual arrangement
and not as a disposition by the deceased. The interests did not come to the
 deceased then pass on from him by force of his will or nomination: The interests
went directly from the fund to the nominee, and formed no part of the estate of the
deceased.
- The nomination takes effect under the trust deed and rules, the nominee in no way
claims through the deceased.

EQUITY WILL NOT ALLOW A STATUTE TO BE USED

AS AN INSTRUMENT OF FRAUD

The Statute of Frauds 1667 states that written evidence is required in relation to
declarations of trust and contract relating to land. The object of the Statute was to prevent
fraud from being perpetrated by merely oral evidence. However, persons later used this
provision to try to bar persons who may have legitimately contributed to the acquisition
of the land from getting an interest simply because there was no written evidence.

The main instances of equitable intervention are:

1. doctrine of part performance
2. The rule of Rochefoucauld v Boustead
3. doctrine under secret trusts

Part Performance
A contract for the sale or disposition of land which is unenforceable at common law due
to lack of written evidence as required by statute will be enforced in equity if there is
sufficient part performance.

Jackman v Jones
- By oral agreement P agreed to sell his house to the defendant for $18,200, on the
same date the D paid the sum to the Plaintiff
- P went into possession
- Issue could the agreement be rendered unenforceable due to the lack of written
evidence as required by s 47 Property Act 1979, Cap 236 or could it be enforced
by virtue of a sufficient act of part performance.
- Held the payment of the sum alone was not sufficient, however coupled with
possession there would be sufficient part performance Maddison v Alderson was
cited in support of this view

Maddison v Alderson
- Lord Selborne stated that the payment of money is not an equivocal act, not (in
itself) without parol evidence indicative of a contract concern and that the taking
 of possession was strong evidence in support of the existence of a contract
concerning land.

Rule In Rochefoucauld v Boustead

- This Rule states that equity considers it a fraud on the part of the person to whom
land is conveyed as a trustee and who knows it was so conveyed to deny the trust
and claim the land for himself.

Rochefoucauld v Boustead
- P was a mortgagor of the Delmar Estates in Ceylon.
- They were sold by the mortgagee to the defendant, who orally agreed to hold the
estates on trust for the plaintiff subject to the repayment of the purchase price and
expenses.
- Defendant sold the land at a profit but did not account to the Plaintiff
- Case established that it is fraud on the part of a person to whom land is conveyed
as a trustee, and who knows that it was so conveyed, to deny the trust and claim
the land for himself.
- The trust must be enforced not withstanding the lack of written evidence.

Kunja v Bruce
- P wished to purchase a plot of land offered for sale at $4,500 but only had $3,000
- She orally agreed with the defendant to pay the D the 3000 and the D would lend
the P the 1500
- The defendant would purchase the property on behalf of the Plaintiff
- Held: defendant was a trustee of the property for the plaintiff.
- Defendant could not rely on the lack of written evidence since equity would not
allow the Statute to be used as an instrument of fraud.
- Persuad J explained that the application of the Statute of Frauds was subject to the
important equitable rule that a Statute cannot be used as an instrument of fraud.
- He stated that fraud was not confined to cases in which the conveyance was
fraudulently obtained but arises wherever the absolute character of the
conveyance is to deceit the beneficial interest of the party.

Bisram v Samaroo
- Makes the same point as above

Bannister v Bannister
- Defendant sold her two cottages to the plaintiff under the oral agreement that the
Plaintiff would allow her to live in one of the cottages as long as she wished
- Conveyance deed did not mention the agreement
- Later the Plaintiff attempted to get her out of the cottage claiming she was a
tenant at will whom he had given notice to quit
- Defendant asserted that the Plaintiff held the cottage upon trust for her for her
lifetime
 - Held there was a constructive trust in her favour since it would be unfair and
unconscionable to allow the plaintiff to perpetuate fraud by refusing to honour the
oral agreement

Trusts of Direct Direction Contract for Declaration Testamentary

Land assignment to Trustees Valuable of Self as Trust
of to hold on consideration Trustee
equitable trust for
interest another
Formalities Evidenced in Must be in Must be in Can be Oral
Writing and writing and writing;
Signed by signed by
Settlor settlor or But need
his agent not be in
writing if
both legal
and
equitable
title being
transferred
Authority Section 60(2) Section Grey v Oughtred v
Barbados 60(3) IRC: IRC:
Property Act: Barbados Failed
Declaration of Property attempt at
Trust Act: A avoiding
respecting any disposition stamp duty
land must be of an
manifested equitable Vandervell
and proved by interest or v IRC:
some writing trust Need not
signed by the subsisting be in
person at the time writing if
of the the whole
Walcott v disposition legal and
Barclays must be in equitable
Bank: Valid writing title is
trust for land signed by being
created by the person given.
widow as disposing
evidence in of the
writing same, or by
sufficed by his agent
declaration in
the will
(supplemented
by oral gift)
even though
no direct gift
was made in
will.