Case Summaries Flashcards

Question

**Formalities for transferring _legal title_ from A to B**

Answer 1

These depend on the type of property being transferred: * Transferring legal title to goods for no consideration requires intention to give and delivery or a deed; * Transferring legal freehold title to registered land requires a deed and registration, (LPA 1925, s 52, LRA 2002, s 27); * Transferring legal title to company shares: typically requires handing the transferee a filled-out share transfer form and registration, (but depends on the company’s articles, for more details see Stock Transfer Act 1963, s 1 and Sch 1; Companies Act 2006, ss 544, 770, 771). The general rule is that whatever the type of property, A must have completed the appropriate formalities in order for B to acquire legal title. And if B is to hold that legal title on trust, the trust won’t be constituted until B has received that title. **\*\*\*N.B. The formality requirements for the transfer of *legal title* to B _are not_ the same as the formalities required to give *C an equitable title* under the trust.\*\*\***

Answer 2

1. Evidentiary 2. Cautionary 3. Chanelling

Answer 3

(b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will;

Answer 4

**Key point:** Section 53(1)(b) provides that the trust needs to be ‘_manifested and proved_’ by some writing. (By contrast s.52(1)(a)/(c) require that signed writing is need to *create* or *dispose* of an interest in land). The writing does not need to purport to create the trust itself, i.e. to amount to a declaration. Evidence of the creation of the trust(i.e. with regards its subject matter) can be extrinsic to the trust deed. **Facts**: A intended to declare a trust over a house but signed a badly drafted settlement which did not include the house. She had signed two letters which showed she acknowledged that the house was held on trust, though they did not purport to create a trust. **Held**: That these letters satisfied s.53(1)(b).

Answer 5

**Background**: Although teh case predates s.53(1)(b) it concerned the equivalent provision in thE Statute of Frauds. S.7 held that ‘declarations of trust of land shall be manifested and proved by some writing signed by the party who is by law enabled to declare such trust, or by his last will in writing or else they shall be utterly void and of null effect.’ **Facts**: B agreed to purchase land on A’s behalf, and to hold it on trust for A. The arrangement was not put in writing. B purchased the land and argued he did not hold it on trust, as the trust was never evidenced in writing. A sued for breach of trust. **Issue**: Could A enforce thE trust against B despite the lack of writing. **Held**: B held on trust for A. We are by no means satisfied that the letters signed by the defendant do not contain enough to satisfy the Statute of Frauds. Whether this is so or not, the other evidence is admissible in order to prevent the statute from being used in order to commit a fraud; and such other evidence proves the plaintiff's case completely.” at 207 per Lindley LJ ***Lindley LJ’s reasoning*** * On the facts that may well have been enough written to satisfy the formality requirements, but even *if* there was not… * B was effectively estopped from pleading that the trust was void due to lack of formality. * B had **agreed** to hold the property on express trust for A, see Bill Swadling, ‘The Nature of the Trust in *Rochefoucauld v Boustead* in C Mitchell (ed), *Constructive and Resulting Trusts* (Hart 2009). * *Because of this agreement*, when A sued B for breach of trust, B was not allowed to go back on his word and argue that the trust was unenforceable because it was not in writing, as required by statute. * By implication, if C (a third party Creditor of B) had sued B—e.g. seeking to levy judgment against the land in satisfaction of a debt B owed C—C could have argued that the trust was unenforceable due to lack of writing. * Whereas B was estopped form making such an argument because of his _agreement_ to hold the property on trust. A TP who had made no such representation would not be estopped from contending that the trust was void due to failure to comply with the statutory formality requirements. ***Televantos Conclusion*** The court did treat the trust as an express trust. But all Linley LJ said was that it was enforceable against B. The reasoning did not go so far as to suggest it would be enforceable against a third party.

Answer 6

“This section [s.53] does not affect the creation or operation of resulting, implied or constructive trusts.”

Answer 7

**Key point:** If A purports to create an express trust of land, which is not evidenced in writing, a resulting or constructive trust can nevertheless arise. **Facts**: A gratuitously gave legal title to land to B to hold on trust for A. It was not clear that the trust was evidenced in signed writing. Later, B sold the title to C. **Issue**: Did B hold on trust for A before the sale? Meaning that C took the property subject to A’s equitable interest. **Held**: B had held on resulting trust for A, despite the absence of signed writing. **Reasoning**: Because A had transferred the land to B for no consideration, the court would presume that A had intended B to hold the land on trust unless B could rebut this presumption by showing that A intended to make an absolute gift – however on the facts there was no such evidence. * Note that *Rochefoucauld* this Resulting Trust reasoning did not apply, on teh facts of that case B was buying property on A’s behalf and thus there could have been no interest to *result* back to A. In this instance C had not agreed to hold the property on trust for A, and was not estopped from denying the lack of writing. * Whenever you have a case where A gives property to B to be held on trust. Then in the absence of signed writing B will hold on resulting trust for A, proving A can evidence an intention to declare an express trust, and *not* to make an absolute gift.

Answer 8

**Facts**: A sold land to B, on the basis that A could remain in occupation of part of the property rent free for life. The promise was not proved by signed writing. Did B hold on trust for A? **Held**: B was a constructive trustee for A, who had an equitable life interest. “It is, we think, clearly a mistake to suppose that an equitable principle on which a *constructive trust* is raised against a person who insists on the absolute character of a conveyance to himself for the purpose of defeating a beneficial interest which, according to the true bargain, was to belong to another, is confined to cases in which the conveyance itself was fraudulently obtained. [*In short B’s counsel had argued that because the sale was not procured by any dishonesty, B was allowed to rely on the lack of signed witing in order to defeat A’s equitable interest. The court however rejected that argument*.] The fraud which brings the principle into play arises as soon as the absolute character of the conveyance is set up for the purpose of defeating the beneficial interest, [*In other words B would be disabled from claiming property free of any equitable interest in _any circumstances_ where he had agreed to hold teh property on trust. Lord Justice Scott went on to say that this principle, described above as a constructive trust, was the result of the decision in Rouchefoucauld v Boustead*] and that is the fraud to cover which the Statute of Frauds, or the corresponding provisions of the Law of Property Act, 1925, cannot be called in aid in cases in which no written evidence of the real bargain is available…The above propositions are, we think clearly borne out by….*Rouchefoucauld v Boustead*” (Scott LJ, at 135C to F, emphasis added) [*Lord Justice Scott and the CofA saw the decision in Rochefoucauld as a constructive trust arising to prevent unconscionable conduct. The unconscionability in questoin presumably arises from A’s detrimental reliance. B made a representation to A. A relied on this by selling B the property at a discounted price. This caused a constructive trust to arise, even if the lack of formality prevented an express trust from arising.*] The constructive trust rationalisation was adopted by Millett LJ in *Paragon Finance Plc v D B Thakerar & Co* [1999] 1 All ER 400 at 408-409

Answer 9

**Key point:** When a Beneficiary directs trustees to hold on trust for someone else this *does* invoke s.53(1)(c) **Facts**: B held legal title to shares on trust for A. A orally directed B to hold that title on trust for C instead of A. [**N.b.** The reason an oral direction was given to avoid payment of stamp-duty, which only applied when writing was used. However if writing wasn’t needed because s.53(1)(c) wasn’t engaged, then no stamp duty would have been payable.] **Issue**: Did this involve a *disposition* of A’s interest under the trust? **Held**: There was a disposition of A’s interest, writing was needed. **Reasoning**: Following A’s direction, C would have ended up with the same interest in the shares that A had before. Accordingly A had disposed of his interest to C

Answer 10

**Key point:** When a Beneficiary directs trustees to transfer legal title to a third party this is *not* disposition of equitable interest. s.53(1)(c) does *not* apply. **Facts**: B held legal title to shares on trust for A. A orally directed B to convey that legal title to C, who was to hold it free of the trust. **Issue**: Did this involve a *disposition* of A’s interest under the trust? [If it did, writing would have been needed and tax would have been payable] **Held**: It did not. Accordingly, signed writing by A was not needed. However, the judges all gave different reasons for this result: **Lord Upjohn** at 311-312 (with the agreement of Lord Pearce) * Section 53(1)(c) is designed to prevent beneficiaries from being defrauded. * However in cases, like *Vandervell*, where the _beneficiary_ gave the direction to the trustee, there was no risk of this, so writing was not needed. **Lord Donovan** at 317-18 * That the section did not apply because C ended up with *legal title*, and A only ever had *equitable title*. * There was thus no disposition of A’s equitable interest—C did not end up with what A had originally. **Lord Wilberforce** at 329 * A was “owner in equity” of the shares, and so “absolute master of the shares”. * A intended that C become legal owner of the shares, and had done everything he could to give C legal title to the shares (i.e. ask the trustees to hold on trust for C). * By analogy to the rule in *Re Rose*, A had done everything he could to give C legal title to the shares, and so equity regarded the transfer as complete—even without writing. * Lord Wilberforce argues that A had done everything he could do to give C legal title to the shares. But surely the very question the court weas dealing with was what steps A needed to take in order to give C legal and beneficial title to the shares. The court was asking: Do the necessary steps required by A involved signed writing by A. * LW seems to presuppose the answer to this question. **Lord Reid**: Agreed as to the result (at 307), but gave no reasons, and didn’t say he agreed with anyone else’s reasons Best explanation: A’s interest was *destroyed* because B had transferred legal title to C with A’s consent, see Richard Nolan: “*Vandervell* v *IRC*: A Case of Overreaching” [2002] CLJ 169.

Answer 11

**Key point:** Sub-trusts are *not* dispositions of equitable interests. **Facts**: A held a beneficial interest under a trust and signed a declaration of trust prepared by solicitors over his beneficial interest in favour of C. A owed no duties under the trust. **Issue**: Did this amount to an assignment (i.e. transfer) of A’s interest? **Held**: There was no assignment, A held his beneficial interest on trust for C under a ‘sub-trust’. There is no transfer from A to C. C acquires a *new* equitable interest, and A becomes a trustee of A’s pre-existing equitable interest. This is called a sub-trust.

Answer 12

**Facts**: W held a life interest under a trust of private shares, with remainders to her children in equal shares. W wanted to resettle the trust, so that her life interest only applied to half the trust assets—giving the children interests in those assets immediately, (subject to additional restraints on when the capital would vest, and trustee powers to accumulate income). W applied to the court to revoke the existing trusts and establish new trusts. **Issues**: 1. Did the Variation of Trusts Act only allow the court to *approve* a variation (or revocation)? 2. Did the transfer of part of W’s interest to the children require signed writing under s.53(1)(c)? Or did the court order itself effect the transfer, so no signed writing was needed? **Held** (Megarry J): No signed writing needed 1. That the Variation of Trusts Act 1958, s 1(1) gave the court jurisdiction to vary the trust by a court order. Because the *court order* effected the transfer from W, no signed writing by W was needed. 2. The variation was an agreement reached between the beneficiaries for valuable consideration, in respect of shares in a private company (ie which could not be bought on an open market). The agreement was therefore specifically enforceable, and so a constructive sub-trust arose over W and the children’s beneficial interest, and no signed writing was needed—because constructive trusts have no requirement for signed writing and a sub-trust involves teh creation of a new right, not the transfer of a pre-existing right. (s.53(2)). Therefore when the court exercises their jurisdiction under the Variation of Trusts Act 1958, s1(1), then even when that bring about a transfer between the interests of beneficiaries, you don’t need any signed writing.

Case Summaries Flashcards

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