Express Trusts- constitution and formalities


(Equity and Trusts) Flashcards on Express Trusts- constitution and formalities, created by scott.james.smit on 17/04/2013.
Flashcards by scott.james.smit, updated more than 1 year ago
Created by scott.james.smit about 11 years ago

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Blackwell v Blackwell Created requirements for a secret trust Testator holds his absolute gift to be employed as he and not as the donee desires he tells proposed donee of this intention and either by express promise or by tacit promise which is satisfied by acquiescence the proposed donee encourages him to bequeath money on the faith that his intentions will be carried out.
Ottaway v Norman FACTS: -Mr Ottaway left his bungalow to his partner, Miss Hodges on orally agreed terms that she would leave it by her own will to Mr Ottaway's son -After Mr Ottaway's death, Miss Hodges regned on the agreement and made a will leaving P to someone else. HELD: These circumstances gave rise to a fully secret trust binding on Miss Hodges executor Criteria for creating a secret trust; 1) intention of the testator to subject the primary donee (i.e. secret trustee) to an obligation in favour of second donee (i.e. intended beneficiary) 2) communication of that intention to the primary donee 3) acceptance of that obligation by the primary donee either expressly or by acquiescence
Intention in Secret Trusts Must be sufficiently clear evidence that testator intended to create a trust and the three certainties MUST also be present (Re Snowden)
Communication in Secret Trusts communication can be orally or in writing for FULLY SECRET trusts, communication must be made before death of testator. this is because if he/she is unwilling to carry out the trust they should have a right to reject it (Re Colin Cooper) for HALF SECRET trusts terms must be communicated at or before making of a will.
Oughtred v IRC -Phyllis O (mother) owned 72,000 shares in William Jackson & Sons Ltd absolutely -she also had a life interest in 200,000 shares in Co with remainder to her son, peter -18th June M&S agreed orally they would exchange their shares -26th June M,S&T entered into a deed of release stating that 200,000 shares were now held in trust for M absolutely -T then transferred legal title of 200,00 shares to M IR argued that transfer of shares to was assessable for SD, citing deed of release as document M argued that her son's EI was transferred to her ny the earlier oral agreement and therefore was not liable to SD HL HELD: Although the oral agreement of 18th made son a constructive T of his revisory interest in 200,000 shares for his mother (s53(2)) subsequent deed of release should be seen as part of the same transaction and therefore should be assessed for AVSD.
Acceptance in Secret Trusts Acceptance may include acquiescence or silence. Wallgrave v Tebbs
Mutual Wills Example: A&B have lived together for many years and have 3 children. A&B agree to make a mutual will which provides; 1) on the death of the first to die, all or part of the deceased's P will pass to the survivor; and 2) that on the death of the survivor, the relevant P should be divided amoung the 3 children becomes binding when the first party dies (Dafour v Pereira)
Neville v Wilson -concerned a dispute over distribution of assets of private co. -JEN was a private co. which operated a haulage business -in 1958 JEN acquired all the shares in UEC -1970 JEN was dissolved, with consequence that any assets then owned beneficially by JEN passed to the Crown -Court found that in 1969 shareholders and directors of JEN had all agreed to an informal liquidation -substance of these agreements was that JENs equitable interest in UEC should be available to be divided amoung the JEN shareholder in the proportions corresponding to their exisiting share -by 1985 the shareholders had fallen out and by 1989 UEC had ceased to trade and had sold all of their business assets, leaving only cash assets -question is whether the assets are liable for bona vacantia or whether they should be distributed -issue pinged on whether the 1969 agreements were void for lack of formality under s53(1)(c) CA HELD: effect of each individual agreement was to constitute the shareholder and implied of constructive T for the other shareholders therefore the requirement of s53(1)(c) dispensed by s53(2)
3) declaration of a trust over an EI -if subject matter of sub trust is land then s53(1)(b) applies -sub trust will be unenforceable unless it is manifested in writing and signed by the settlor -does this amount to the disposition of a subsisting EI for purposes of s53(1)(c)? -if a person with a BI creates sub trust over the exact same interest in favour of a 3rd party, then section will apply... -unless creator of sub trust retains a proportion of the EI.
Secret Trusts Trusts which are intended to take effect after a person's death, but which are not disclosed on the face of their will
Reasons for creating a secret trust? once a person dies, their will becomes a public doc. secret trusts therefore provide a mechanism whereby testators can maintain some confidentiality
two categories of secret trust 1) fully secret trust 2) half secret trust
fully secret trust no indication of the T at all on the face of the will. (A makes a will leaving P absolutely to B, but A communicates informally to B that B is to hold P on trust for benefit of C)
half secret trust Existence of trust is clear from the face of the will but the terms of the trust are not disclosed. (A makes a will leaving P to B to hold on T, but A communicates the terms of the T and the identity of the beneficiary informally to B)
Two reasons that the court recognise secret trusts? 1) Fraud prevention 2) Dehors Principle
Secret Trusts, fraud prevention McCormick v Grogan aim of ST is therefore to rectify situations in which a literal application of WA would permit a person receiving P under a will to behave unconscionably by retaining the benefit of P for themselves in circumstances where they were not intended to do so.
Secret Trusts, Dehors Principle These trusts operate outside the will and therefore outside confines of the WA. Re Young Led to view that ST are a specific form of Express Trust which are created and declared inter vivos with P vesting on testator's death (declaration and transfer principle)
Requirements for a Secret Trust Blackwell v Blackwell 1) intention 2) communication 3) acquiescence Ottaway v Norman 1) intention 2) communication 3) acceptance
3) contract for valuable consideration to assign EI to a 3rd party where contract for sale is specifically enforceable. courts apply equitable maxim "equity looks as done that which ought to have been done" Buyer consequently treated as acquiring an EI in the relevant P from date of contract S is treated as holding P on constructive trust (s53(2)) for the buyer until the contract is completed see Oughtred v IRC
Grey v IRC -S owned 18,000 shares in a private co. -He wished to transfer shares into trusts for his grandchildren -He also wished to avoid ad valorem stamp duty on value of share transfers STEP1) S transferred shares to T of grandchildren's trusts to hold on trust for himself (at this stage, S is B but there has been no transfer of EI) STEP2) S directed T ORALLY to hold shares according to the terms of the pre existing grandchildren's trusts STEP3) T then executed a document declaring they held shares on the grandchildren's trust IR argues doc executed by T (step 3) was liabel to ad valorem stamp duty because it transferred BI in shares T argued it was oral direction (step 2) that effected the transfer and was therefore not liable HELD: disposition in s53(1)(c) should be interpreted broadly. S oral declaration constituted a disposition and was therefore void for lack of formality. in contrast, the written declaration was regarded as a valid disposition and was therefore liable to stamp duty
exceptional situation to direction of 3rd party... (2 cont.) -where S holds absolute title to P, transfers LEGAL title to T with a direction to hold it on trust for 1 or more B -no disposition of EI, at time of transfer S absolutely entitled to P -no separation of legal and EI at this stage -s53(1)(c) does not apply. see Vandervell v IRC
Vandervell v IRC -S was beneficial owner of shares in a private co. -legal title was registered in the name of NPB as nominees -S wanted to give £150,000 to Royal College of Surgeons - he arranged with the bank orally to transfer both LEGAL AND EQUITABLE interests in these shares to the RCS, giving a T co (VTL) an option to repurchase them for £5,000 -This enabled the RCS to receive dividends of around £145,000. Because of the option to repurchase, V did not irrevocably relinquish control of Vand. Products. -at this stage the legal and EI had been transferred to the RCS. this raises a formality point... if VTL had the legal interest, where was the EI? HELD: The option was held on resulting trust for V, along with liability to pay sur tax on the dividends. V had failed to state where the EI was to go. Meaning that it resulted back to him.
Paul v Constance possible to create an inter vivos trust of personal property without any formalities.
three areas where formalities are important... 1) Declaration of Express Trusts of Land 2) Transfer of EI under an existing trust 3) Creation of a testamentary trust
s53 LPA 1925 governs what needs to be in writing re creation of trusts
two reasons for underpinning stat requirements for formality 1) To minimise the risk of fraud (equity will not allow a statute to be used to create a fraud) 2) To provide evidence of the terms of a T and the identities of the individuals who are entitled to the benefit of P
Express Trusts of land s53(1)(b) LPA 1925 must be manifested in writing oral declaration is unenforceable
Disposition of an EI or trust s53(1)(c) LPA 1925 EI can be treated like other forms of P, may be transferred or gifted etc
Timpson's Executors v Yerburg EI in P in hands of T can be disposed of by person entitled to it in favour of a 3rd party in any one of the following ways: 1) assign it directly to a 3rd party 2) direct T to hold P on trust for 3rd party 3) contract for valuable consideration to assign the EI to him 4) can declare himself to be a T of such interest
1) Direct assignment of EI to a 3rd party s53(1)(c) applies. Assignment will only be effective if in writing signed by B
2) Direction to T to hold P on trust for a 3rd party s53(1)(c) applies. see Grey v IRC see Vandervell v IRC
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Equity and Trusts, Express Trusts
Equitable Maxims
Certainty of Objects
Equitable Remedies
Express Trusts