Flashcards
Formalities
Cards in this deck (19)
- 1PersonaltyNo formalities unless testamentary trust (s.9 Wills Act 1837)
Paul v Constance: A tells B that money in account is 'as much yours as mine'
Hackney - Can informally transfer economic advantages by a few significantly chosen words. Once done, the act cannot be revoked - 2Trusts of lands.53(1)(b) LPA 1925: Must be proved in writing - purpose is to prevent fraud
Exception under s.53(2): does not affect creation/operation of resulting, implied or constructive trusts. - 3Evidentiary purpose of s.53(1)(b) LPA 1925Forster v Hale: Does not require all trusts to be created in writing but that they shall be proved in writing. Plainly meaning that there should be written evidence proving a trust.
- 4Cautionary Purpose of s.53(1)(b) LPA 1925Preamble to Statute of Frauds:
for prevention of many fraudulent practices which commonly endeavoured to be upheld by perjury and subordination of perjury. - 5Rochefoucauld v BousteadLand Transferred to D on understanding it would be held on trust for C. Never put in writing, done orally. D mortgaged property and argued no trust as it wasnt in writing. Hiding behind s.53(1)(b).
Court - equity not allow a statute enacted to prevent fraud to be used as an instrument for fraud - 6Timpsons Executors v Yerbury 4 ways to dispose of equitable interest to 3rd party1. B assigns equitable interests to TP directly
2. B can direct T's to hold property on trust for TP
3. B can contract for valuable consideration to assign equitable interest to TP.
4. B can declare himself trustee for TP (subtrust) - 7s.53(1)(c) LPA 1925A disposition of 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 thereunto lawfully authorised in writing or by will.
- 8Purpose of s.53(1)(c) LPA 1925 Lord Upjohn in Vandervell v IRCProtect B's - makes it harder to defraud B's
Protect T's - Makes it easier for T's to know who B's are - 9Re Danish Bacon2 documents can be proof of writing as long as interconnected
- 10Re TylerEquitable owner writing to T's referring to prior oral instruction to hold on trust was sufficient.
- 11Where B directs T to hold on trust for another Grey v IRC1: S made settlements in favour of grandchildren
2: Transferred shares to T's to hold on bare trust for himself
3: Orally directed T to hold shares on trust for grandchildren.
4: Asked T to write down everything done.
IRC stated S had to pay stamp duty. He argued not everything transferred in writing (he transferred in stage 3 - oral). IRC argued failed to dispose of equitable interests as didnt comply with s.53(1)(c) and everything was transferred in stage 4.
Court agreed with IRC - held stage 3 tried to dispose of equitable interest and failed as not in writing - therefore stamp duty payable. - 12Vandervell v IRCBank held Mr V's shares in company on trust for V as sole owner. V wanted to give £250k to Royal College of Surgeons in tax-efficient way. Instructed B to transfer shares to C. Instructed C to grant option to repurchase shares for £5k to Vandervell T's Ltd. Shares transferred to C and dividends declared. IRC argued transfer to C ineffective as didnt comply with s.53(1)(c).
HL rejected this - where sole owner disposes of beneficial interest by directing T's to transfer legal estate, he disposes of beneficial interest too but s.53(1)(c) doesnt apply. BUT, IRC won. Option to repurchase fatal as he retained sufficient equitable interest on shares for purposes of tax (RT). HL: Trustees to hold option on RT for V. - 13Re Vandervell's Trusts (No.2)VT exercised option to buy using £5k from childrens settlements (CS). Dividends between 1961-65 added to CS. Informed IRC this was case. V executed deed to transfer all interest to VT to hold for CS. Died in 1967. Whether V retained any beneficial interest in shares between 1961-65?
VT held dividends on trust for CS because VT used funds of CS to exercise option, dividends paid into settlement, letter informing IRC, RT attached to the option not the shares and RT came to an end when exercised option.
Principle: s.53(1)(c) didn't apply where trustee with consent of B, declared new trust of property. - 14Criticism of reasoning in Re Vandervell's Trust No 2Difficult to understand when and how declaration of new trust arose.
Lord Denning brought in estoppel which further confused. "[Equity] has been prayed in aid to do injustice on a large scale - to defeat the intentions of a dead man - to deprive his children of the benefits he provided for them - and to expose his estate to the payment of tax of over £600,000. I am glad to find that we can overcome this most unjust result.” - 15Contract for sale of beneficial interests and that contract is SPECIFICALLY ENFORCEABLEWhen this is the case, beneficial interests pass by virtue of contract and no need to comply with s.53(1)(C).
- 16Where contract not specifically enforceable...No CT arises, beneficial interests only pass where s.53(1)(c) complied with
- 17Contracts to assign beneficial interest Oughtred v IRCT's hold 200k shares on trust for B1 for her life, remained to B2. B1 absolute owner of 72,700 shares - B's orally agree B1 transfer B2 her 72k shares in exchange for B2 give B1 reversionary interest in 200k shares. Week later, deed executed to carry this out. IRC claim stamp duty as constitutes transfer by way of sale from B2 to B1 of reversionary interest. Entered into oral agreement - specifically enforceable contract because shares unique. Gave rise to CT (didnt have to comply with s.53(1)(c).
HL - majority - stamp duty payable, formalities point not decisive:
LORD DENNING: didnt think oral agreement was effective to transfer reversionary interest, s.53(2) doesnt do away with necessity of s.53(1)(c)
LORD RADCLIFFE: (dissent) B2 became trustee of that interest and s.53(2) does not operate to prevent trusteeship arising - 18Majority view is that Lord Radcliffe's argument is the better oneNourse LJ: Effect of each individual agreement was to constitute the shareholder an implied or constructive trustee for other shareholders so requirement for writing in s.53(1)(c) was removed by s.53(2).
- 19Neville v Wilson (agreeing with Lord Radcliffe)Each shareholder's oral/implied agreement created implied or CT in favour of other shareholders. No convincing reason why s.53(2) shouldnt apply. To deny its application would restrict effect of general words which is not called for.
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- Equity Flashcards on Formalities, created by Chloe Garton on 10/04/2018.
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- Chloe Garton
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