www.newlawjournal.co.uk | 5 October 2018 11LEGAL UPDATETrusT law

your ownership of the property. I look forward to receiving your further instructions with regard to where this document should be held and your confirmation that the Trust Deed has been executed.’

His letter was headed with the address of the house.

On 14 April 1986, Madam Lim replied saying: ‘Thank you for your letter dated 2nd April 1986. With regard to the Land Certificate of the above-mentioned property, please be informed that I would appreciate your kind arrangement of temporary keeping the document in your office and I will collect it when I am in London.

In respect of the Trust Deed, I enclose herewith the photocopy which was executed for your retention.’

The photocopy enclosed by Madam Lim bore her signature, and the signature of her son, Ping. However, Sched 1 was blank. The draft trust deed, with the blank, is referred to hereafter as ‘the deed’. On its face the deed therefore did not create any trust, because it is essential that there be ‘trust property’. Ping’s strong contention was that it was wholly unclear from the above exchanges, whether the trust property was the house, or a sum of money (and if so, what sum?)

Court of appeal decisionMorgan J decided that the deed should be read as if the blank referred to the house. The Court of Appeal agreed.

Sir Colin Rimer delivered the only reasoned judgment. At [58] he referred to Madam Lim, and said: ‘No doubt she made no express oral declaration of trust in such terms, nor was there any evidence that she uttered words to like effect. But the utterance of such words is not an essential prerequisite to the creation of a trust by way of a declaration. In Paul v Constance [1977] 1 WLR 527, at 531, Scarman LJ said that for there to be a clear declaration of trust means that there must be clear evidence from what is said or done of an intention to create a trust’ (the emphasis is the judge’s). Bridge and Cairns LJJ both agreed with his judgment, although Bridge LJ identified the requirements of a valid declaration of trust without reference to the declarer’s conduct.

The judge concluded at [59] that: ‘The reasonable person would be satisfied that Madam Lim’s execution of the settlement in April 1986, read in light of the correspondence that had passed between her and Mr Hyde, evinced an intention by her to subject the house to the trusts of the settlement; and that she thereupon made a valid declaration of trust in respect of the house.’ Lord Justice Underhill and Sir Brian Leveson agreed with Sir Colin Rimer’s judgment, without adding further comment.

Contrary to expectation, the Court of Appeal recently stated that it is possible to create a trust by express declaration, without there being

a declaration. The case in question is Ong v Ping [2017] EWCA Civ 2069, [2017] All ER (D) 68 (Dec). The parties were various family members. On one side was a mother (Jane) and her three children. On the other side was Jane’s brother in law (Ping). In 1988 Jane began litigation, alleging that a large house in Highgate (the house) was held upon trusts in her favour. Nearly 30 years later, after extensive litigation in England and Singapore, an English judge (Morgan J) decided that the house was held upon trusts, but these did not benefit Jane, rather other family members. The Court of Appeal upheld the judge’s decision.

It is in the course of the lead judgment in the Court of Appeal, delivered by Sir Colin Rimer, that consideration was given to the necessary pre-conditions to establishing an express trust. This article offers a critique of the Court of Appeal’s reasoning. It does so by outlining the facts, stating the court’s reasoning and then explaining why that reasoning is inconsistent with earlier authority.

The factsOn 6 January 1986, Robert Gore & Co (RG), solicitors acting for Lim Lie Hoa (Madam Lim), completed the purchase, in her sole name, of the house.

At the time of the purchase of the house, Madam Lim expressed an intention to RG to establish a trust of the house for the benefit

of five identified beneficiaries, on terms to be decided. On 25 February 1986, Mr Hyde of RG wrote to Madam Lim, enclosing a draft discretionary trust. Clause three of the draft trust contained a declaration of trust of ‘the Trust Fund’. The ‘Trust Fund’ was initially to comprise ‘the property specified in Schedule 1 hereto’. Schedule 1 read as follows:

‘THE INITIAL SETTLED PROPERTY The sum of...............pounds.’

In his letter of 25 February 1986, Mr Hyde said to Madam Lim: ‘On page 25 of the Deed, in Schedule 1, the amount of your gift must be stated. I will leave you to specify what this should be.’

On 3 March 1986, Madam Lim replied, saying: ‘Thank you for your letter dated 25 February 1986. First of all the amount of gift excluding the settlor shall be divided equally to all the beneficiaries, ie 20% each, and I would like to know whether I am supposed to fill in the amount myself over here, or do you fill it in for me.’

On 13 March 1986, Mr Hyde responded, beginning: ‘Thank you for your letter of the 3rd March. I will deal with the points that you raise in the same order in which you have raised them.’

At the end of his letter he said: ‘There is one last item which requires completion and that is Schedule 1 on page 25. You will recall that here you must enter the amount of your original gift.’

On 2 April 1986, Mr Hyde wrote to Madam Lim saying: ‘I am pleased to advise that I have now received the Land Certificate which is the official document which registers

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Words & intentions Can there be an express declaration of trust, without any declaration? Mark warwick QC investigates

IN BRIEF f Reviews the Court of Appeal decision in

Ong v Ping on whether a trust can be created without declaration.

5 October 2018 | www.newlawjournal.co.uk12 LEGAL UPDATE TrusT law

The decision critiqued Probably the key case, re the creation of express trusts, is Milroy v Lord (1862) 4 De GF & J 264; 45 ER 1185. In Milroy, the court was concerned with whether a document executed by Mr Medley constituted him a trustee of certain shares. According to the very recent judgment of the Privy Council in Deslauriers v Guardian Asset Management Limited [2017] UKPC 34 (Lords Mance, Kerr, Hughes, Lloyd-Jones and Briggs), at para [37]: ‘The classic statement of the law relating to the voluntary settlement of property is to be found in the judgment of Turner LJ in Milroy v Lord. “I take the law of this Court to be well settled, that, in order to render a voluntary settlement valid and effectual, the settler 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 upon him. He may of course do this by actually transferring the property to the persons for whom he intends to provide, and the provision will then be effectual and it will be equally effectual if he transfers the property to a trustee for the purposes of the settlement, or declares that he himself holds it in trust for those purposes; and if the property be personal, the trust may, as I apprehend, be declared either in writing or by parol; but, in order to render the settlement binding, one or other of these modes must, as I understand the law of this court, be resorted to, for there is no equity in this court to perfect an imperfect gift...”’ (The emphasis is mine.)

There have been many subsequent cases regarding the creation of express trusts, including the famous decisions of Jones v Lock (1865) and Richards v Delbridge (1874). These cases require a statement, oral or written, in order for there to be a declaration of trust.

The Court of Appeal in Ong v Ping did not refer directly to these cases, but to Paul v Constance, and hence it is necessary to review that case.

In 1969, a bank account was opened in the name of Mr Constance. At the time he was living with Mrs Paul. Mr Constance continued to live with her until his death in 1974. At different times Mr Constance said to Mrs Paul, when referring to the account, ‘The money is as much yours as mine’. After Mr Constance had died his estranged wife claimed all the money in the account. However, the trial judge held that Mr Constance’s repeated words ‘The money is as much yours as mine’ amounted to an express declaration of trust, for the benefit of both of them, and awarded Mrs Paul a half share of the trust fund.

The Court of Appeal decided that the trial judge’s finding was one that he was entitled to make. Scarman LJ referred to Jones v Lock and Richards v Delbridge, and at page 532E said: ‘The question, therefore, is whether, in all the circumstances, the use of those words on numerous occasions as between the deceased and the plaintiff constituted an express declaration of trust. The judge found that they did. For myself, I think that he was right so to find’ (my emphasis).

Bridge LJ referred to the part of the passage of Sir George Jessel MR in Richards v Delbridge, that mentioned the use of ‘expressions which have that meaning’ and he then said, at page 532H: ‘In the last analysis, accordingly, the whole question in this case, as it seems to me, is whether the judge was right, in construing those words according to their proper meaning and in the context in which the words were spoken as disclosed by the evidence, to conclude that, by using those words, the deceased had done something which was equivalent to declaring himself a trustee of the moneys in the account for himself and the plaintiff in equal shares.’

Bridge LJ’s repeated emphasis was upon ‘words’. Cairns LJ gave the third judgment and simply added ‘I agree’.

It can be seen that Paul v Constance was not a ‘conduct’ case. It was a conventional declaration case, turning upon the construction of the words used.

sir Colin’s judgmentAt [58] of his judgment, Sir Colin Rimer referred to the use of words, and added, ‘But the utterance of such words is not an essential prerequisite to the creation of a trust by way of a declaration. In Paul v Constance (1977) 1 WLR 527, at 531, Scarman LJ said that for there to be a clear declaration of trust ‘means there must be clear evidence from what is said or done of an intention to create a trust’ (Sir Colin’s emphasis). Bridge and Cairns LJJ both agreed with his judgment, although Bridge LJ ‘identified the requirements of a valid declaration of trust without reference to the declarer’s conduct’.

However, at page 531 of his judgment in Paul v Constance, Scarman LJ is referring to a submission of counsel. On a reading of the judgment of Scarman LJ in full (eg 532C and 532E) that judge is focusing upon the words used. In any event, if Scarman LJ is referring to ‘conduct’, then his comments are both obiter dicta and at odds with Bridge LJ’s citation of Sir George Jessel’s summary of the law, which summary refers to ‘expressions which have that meaning’. Effectively Bridge LJ is saying that conduct alone will not suffice for a declaration of trust. Cairns LJ expresses no view, as between Scarman LJ and Bridge LJ, by simply using the phrase ‘I agree’.

Conclusion It is the writer’s contention that, in deciding that a declaration of trust can be found from evidence of what was done, the Court of Appeal has expanded the circumstances in which an express declaration of trust can be created. The Supreme Court was invited to grant permission to appeal, but (on 15 May 2018) it decided not to do so. Thus Ong v Ping stands as authority that one need not look for a declaration of trust. The door is open to seeking to establish an express trust on less exacting material. NLJ

Mark Warwick QC, Selborne Chambers (www.selbornechambers.co.uk).

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