Re Kay's Settlement [1939] 1 Ch 329

Facts

• The case arose from a dispute in the Chancery Division of the High Court regarding a settlement created by deed.
• The settlor covenanted to transfer certain property into a trust for the benefit of specified individuals.
• The beneficiaries in question were volunteers, meaning they had not provided consideration for the covenant.
• A key issue was whether the necessary formalities to create a valid trust had been completed.
• The beneficiaries sought to enforce the settlor’s promise under the deed.

Issues

1. Whether volunteer beneficiaries (who have not given consideration) can enforce a covenant made by the settlor to transfer property into a trust.
2. Whether the settlor's covenant created a valid and enforceable trust even in the absence of completed formalities.
3. How the principles of privity of contract and the maxim "equity will not assist a volunteer" apply to the enforcement of such covenants in trust law.

Decision

• The court held that volunteer beneficiaries could not enforce the settlor’s covenant.
• It was determined that equity will not assist a volunteer; those who have not provided consideration cannot enforce a covenant unless supported by a valid trust or equitable interest.
• The court found that the settlor’s covenant did not establish a trust because the necessary formalities and property transfer had not been completed.
• As a result, beneficiaries who were volunteers could not claim enforcement of the covenant.

Legal Principles

• Only parties to a contract may normally enforce its terms, per the doctrine of privity of contract.
• Equity will not assist a volunteer; a third-party beneficiary who has not provided consideration cannot enforce a covenant unless there is a valid trust or equitable interest.
• The intention to create a trust and compliance with necessary formalities are required to establish an enforceable trust.
• A covenant alone, without proper execution and demonstrated trust intention, does not confer equitable rights on volunteer beneficiaries.
• Comparative cases highlight that exceptions may turn on specific facts, but the general principle from this case remains that mere promises or incomplete formalities are insufficient for volunteers.

Conclusion

Re Kay's Settlement [1939] 1 Ch 329 confirms that volunteer beneficiaries cannot enforce a settlor’s covenant unless a trust is validly constituted with the required formalities, reaffirming that equity will not assist a volunteer and clarifying the interplay between contract and trust law in this context.