The Creation of an Express Trust – Formalities

The formalities of creating a valid trust and a valid will should not be underestimated.  Often the statute of frauds or wills legislation applies where the formalities are not met.

Courts of Equity generally look to a person’s intentions rather than the form in which they expressed their intention and have not required that a trust be created in any specific form.  However, there are obvious merits to formalizing a trust in written form, and in some cases, the lack of formalities and written forms will render the trust void.

Formalities of a Written Trust

Formalities for trusts go back centuries.  Since the decree of the English Statue of Frauds 1677 (section 4), enforcement on land contracts have been required to be proven by some note in writing and signed by the person to be charged or their agent.  This requirement extends to contracts that require performance over a prolonged period.  Furthermore, the English Statue of Frauds 1677 (section 7) notes the creation and declaration of trusts concerning land must be proved by some writing and signed by the person enabled to declare the trust.  The result is that all trusts concerning land have to be proven by writing and signed by the settlor or risk being void.

The English Statue of Frauds 1677 (section 9) notes all grants and assignments of equitable interests in trusts must be in writing and signed by the party (but not their agent) making the grant or assignment.  This includes land and personal property.  If the grant is not in writing, the grant or assignment is void.

Formalities for a Trust Created in a Will 

The Wills Act in England (1837) and legislation in Canadian provinces note if the formalities required to create a valid will are not met, any testamentary trusts are also invalid.

The Alberta Wills and Succession Act (2010) requires a will to have the following to be valid:

• It must be in writing;
• It must contain a signature of the testator that makes it apparent that it was intended, by signing, to give effect to the writing in the document as the testators will;
• The testator must acknowledge his signature in the presence of two witnesses who are both present at the same time; and
• The witness must also sign the will in the presence of the testator.

A testamentary trust must comply with wills legislation to be valid.  However, a court may interpret a trust to be a constructive trust if it does not fall within the testamentary trust legislation.

Formalities of a Secret Trust

There are instances where a testator may not want the names of the persons to whom the gifts have been made to be known.  A secret trust arises where a will may not indicate the trust – however, trust formalities may be detailed in a letter separate from the will.  This is done as the contents of will become known.

• The donor or testator must have intended to impose a trust obligation;
• The donor or testator must have communicated that the property should be held in trust for others and communicated the intended beneficiaries of the trust to the trustee;
• The trustee acquiesced or accepted to hold the property in trust for the specified beneficiaries; and
• The communication of the trust obligation by the donor or testator to the trustee must be timely. For a secret trust, this should be before the donor’s death.  For a semi-secret trust, this should be before or at the time of the trust obligation (execution of the will).

 

In assessing if a will has been validly created, one should ask:

• Has the will received probate?
• Are the three certainties met?
• Have requirements of a secret or semi-secret trust been met?
• If land is involved, is this in writing and signed by the person who is required?

What if Formalities Have Not Been Met?

Factors in a particular scenario that suggest the formalities of execution have or have not been met are usually pursuant to statute of fraud legislation or wills legislation.  This could be a costly mistake; however the doctrine of part performance is alternative to proving a contract.  The case of Rouchefoucauld v. Boustead may also be considered along with the doctrine of fraud which underlined the statute of fraud cannot be used to commit fraud, resulting in the opportunity to use other evidence to prove the trust.

The case of Rochefoucauld v. Boustead is an important legal precedent in English law, particularly concerning the law of trusts and the application of the Statute of Frauds. This case decided in 1897, provides key insights into how courts can handle situations where strict adherence to statutory requirements might otherwise facilitate fraudulent practices.

Case Background

The case involved the Countess of Rochefoucauld and Mr. Boustead. The Countess claimed that Mr. Boustead, who had been a friend and legal adviser, had agreed to purchase land on her behalf, holding it in trust for her. Mr. Boustead acquired the land but subsequently refused to acknowledge the trust, instead claiming the land as his own.

Legal Issue

The main legal issue revolved around the application of the Statute of Frauds, which requires that certain types of contracts, including those for the sale of land or the creation of trusts over land, must be evidenced in writing to be enforceable. Mr. Boustead argued that since there was no written evidence of the trust, the arrangement could not be legally enforced.

Judgment and Rationale

The court, led by Lord Lindley, held in favor of the Countess. The judgment established an important exception to the Statute of Frauds. Lord Lindley stated that the statute, which was intended to prevent fraud, could not itself be used as an instrument of fraud. If a defendant’s own fraud is the reason why a contract or trust is not in writing, the court will not allow the statute to be used as a defense.

In Rochefoucauld v. Boustead, the court decided that oral evidence could be admitted establishing the existence of the trust, since enforcing the statute strictly in this instance would effectively reward fraudulent behavior by Boustead.

Implications

This case has significant implications in trust law and the doctrine of equity. It underscores the principle that equity will not permit a statute to be used as a cloak for fraud. This doctrine allows courts to enforce unwritten trusts where there is sufficient evidence to prove that a trust was indeed intended. The case also emphasizes the role of equitable principles in interpreting and applying statutory requirements, ensuring that justice prevails over technical compliance when the two are at odds.

Conclusion

The decision in Rochefoucauld v. Boustead illustrates how the courts can use the doctrine of equity to prevent the misuse of statutory provisions like the Statute of Frauds to perpetrate fraud. It remains a cornerstone case in both trust law and the broader context of equitable remedies, demonstrating the flexibility of the law in achieving just outcomes. However, why let it get to that…. Adhere to the formalities of a trust if that is truly your intent.

 

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