Frequently Asked Questions on Common Law, Equity, Trustee, and Gift-Giving

How were conflicts between the rules of common law and equity resolved after the fusion?

1. After the fusion of the common law and equity, how were conflicts between the rules of common law and equity resolved?

a. Judicature Act 1873 s 25 equity should prevail

b. Walsh v Lonsdale common law should prevail

c. Common law hearing should decide first, then the Chancery

d. Chancery should decide first, then the common law court

This was resolved and laid down in the Act as a principle, to be applied as causes arose, such as in Walsh where the court followed the rule that equity should prevail.

2. Which of the following terms refers to the position of trustee?

a.Feoffee to uses

b.Cestui que use

c. Cestui que trust

d. Feoffor

These are the old-fashioned terms for trustee (feoffee), beneficiary (cestui) and settlor (feoffor).

3. Ahmed owns Bleak House and wishes to set up a trust over the property inter vivos in favour of his children. Ahmed wishes to appoint trustees to administer the trust rather than do so himself. What formalities would apply to this situation?

a. A deed (s 52 Law of Property Act 1925), registration (s 27(2) Land Registration Act 2002) and evidence in writing of the declaration of trust (s 53(1)(b) Law of Property Act 1925).

b.A will satisfying the Wills Act 1837 s 9.

c. A declaration of trust evidenced in writing (s 53(1)(b) Law of Property Act 1925).

d. A deed (s 52 Law of Property Act 1925).

The property needs to be transferred to the trustees according to the formalities for an inter vivos transfer (deed and registration) and there needs to be a declaration of trust which is evidenced in writing because it involves land (s 53(1)(b)).

4. What was the House of Lords’ decision in Vandervell v IRC?

a. That the transfer of the legal estate together with the equitable estate was not a disposition of the equitable interest under s 53(1)(c) Law of Property Act 1925 because it was not a hidden oral transaction: the transfer was at the direction to the trustees of an absolutely entitled beneficiary.

b. That the use of the children’s settlement funds to exercise the option to purchase extinguished the resulting trust and amounted to a new trust.

c. That the absence of a declaration of trust over the option to purchase the shares meant Vandervell retained an interest via a constructive trust.

d. That the transfer of the shares only transferred the legal estate, and Vandervell retained an interest because s 53(1)(c) Law of Property Act 1925 was not satisfied.

The option to purchase was found to create a resulting trust in the absence of a declaration of trust, and the subsequent Court of Appeal case Re Vandervell (No. 2) dealt with the exercise of the option by the children’s settlement. S 53(1)(c) was found not to apply where the equitable title was intended to transfer along with the legal title and the transaction was not hidden.

5. Equity will not assist a volunteer and will not perfect an imperfect gift. To which one of the following would these principles apply?

a. Where the formalities satisfy the requirements of a trust despite a gift being attempted.

b. The donatio mortis causa.

c. Where the donor does everything in their power to transfer the property.

d. Where the donor has done sufficient to make it unconscionable to recall the gift

These are mostly exceptions to the general rule, as equity will perfect the gift in a lot of these circumstances. However where a gift is attempted it is not open to the court to reinterpret it as a trust (Jones v Lock, Richards v Delbridge). In T Choithram International v Pagarani the court felt that the context meant that the apparent gift was actually a declaration of trust, given that the transferor was also to be a trustee. Therefore his words were seen to be a declaration of trust in the context. What the court cannot do is say this is an attempted gift but we will enforce it as a trust because those formalities have been satisfied.