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Flashcards in Equity and Trusts- Formalities Deck (195)
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0
Q

What can make you do bad with formalities?

A

Can do bad if do not understand link btw formalities and conditions

1
Q

What about formalities?

A

Hard area- but if understand issues = can do very well

2
Q

What do formalities deal with?

A

Deals with how a trust is created in property, creating eq interest

3
Q

When we talk about form =

A

Requirement of writing

4
Q

Next challenge to establish trust after 3 cert

A

Formalities

5
Q

Formalities necc create ?

A

Testamentory trust (made by a will) & inter vivid

6
Q

What do formalities depend on

A

Diff formalities depending on type of prop

7
Q

Intro- a person who wishes to create trust must look at?

A

Must look at formality req imposed by statute

8
Q

There are diff requirements for what ?

A

Interviews trusts Testamentry trusts

9
Q

What are intervibos trusts

A

Trusts set up during a settlors life time - set out on face of will (trust)

10
Q

What are testamentry trusts

A

Set up by testator will which comes into effect on the testator death once probate = granted which is backdated to time of ts death

11
Q

Types of trust prop dealing with?

A

Trust of personalty Trust of land Disposition of an equitable interest

12
Q

What is need for formalities

A

2 create certainty of transactions and prevent fraud Need to be clear from outset who has benefit of an equitable interest Certainty created by formalizes has advantages for several parties

13
Q

In regards to several parties what about trustee

A

Trustee - need to be certain who benefited are Trustees have duties and powers in relation tot he trust property If these powers and duties are performed incorrectly trustee may be held personally liable for breach

14
Q

In regards to several parties- for beneficiary ?

A

Additionally Ben must be certain his / her actual interest in prop. This will prevent fraud by the trustee The clearer the allocation of prop rights, the easier for trustee, beneficiary and ultimately CT’s to allocate the correct interest to parties

15
Q

In regards to several parties- for the CT’s?

A

Certain circum CT’s may need to intervene with trust Eg in its variation or excercise of powers The ct will need to ensure it acts correctly in relation to competing interests

16
Q

Several parties - for revenue and customs?

A

Needs to be clear for the purpose of tax The trustee would hold the legal title and would appear to be the person who should pay tax any income the test produces. Rev and customs will seek to recover tax due which is why so many cases involve hm revenue and customs commission - emeeey irc ??

17
Q

What about trusts of personalty ?

A

Where in inter vivid one of personal prop sets out to .. a trust of such prop - not obliged to comply with any form of req - Come back to

18
Q

Info to types of trust - testamentry trusts?

A

Many trusts created by will. A few of all wills is that they must comply with req of wills act 1837 to be valid- s.9 states:

19
Q

What does s.9 state?

A

In writing Signed by the testor or someone acting At the testator direction in his or her presence : and In the presence of 2 witnesses who sign and attest the will in test sites presence

20
Q

Reason for these requirements is bc?

A

Req writing helps this and CT’s will not allow it to be used as an.. of fraud - rouchefaul boosted - 2 prevent fraud and corcion - all test docs must comply as must any amendments by codicil. These req will satisfy any need for the evidence of transfer of equit interests or the creation of trusts - The main purpose of s.53 1 b lap in evidential & wills aft 1837 req satisfy this

21
Q

Creation of intervivos trust in prop other than land?

A

The creation of this = no formalities - requires none - other than 3 certainties for the creation of trust

22
Q

Applies to which prop

A

Apply to prop eg shares. Money paintings - most important thing that must be established in cert of intention to create a trust- this is q of fact - must be esrav in case by case basis

23
Q

Certainty of intention can be determined by ?

A

Words , written statements or conduct - Paul v Constance - in established cert if I , ct look whole sit

24
Q

Hw if CT’s fail to look suff cert required for trust -

A

The y? Will not Josie a trust to achieve justice - Jones v locke This is clear e.g of maxims that equity will not perfect on imperfect gift & equity will not assist a volunteer

25
Q

What should you remember?

A

Creating a trust is cruel kindness - as it creates overseas obligations for trustee CT’s are happy to create a trust an informal statements but these must be clear that this is the intention of the settlor

26
Q

Back 2 trusts of personalty what can they be created

A

Can be created orally- Paul v Constance = money in bank account

27
Q

General rule trust is personalty

A

No need writing - no form req

28
Q

Req of writing dependant on?

A

Subject matter of trus t

29
Q

What in regards to trust of land?

A

Creation of intervibos interest trust of an interest in land

30
Q

Where subject matter land?

A

Must be evidenced in writing - signed by person declaring at time Been the case since - stat of frauds 1677

31
Q

Trust of land can be

A

Declared orally or in writing but until it is in writing = unenforceable

32
Q

What about land

A

Land always treated differently - perosjnofnorop intr no form just 3 certain items whereas need writing

33
Q

What is the rule now set out in

A

S.53 1 b lap

34
Q

Quote a.53 lpa

A

A decl of trust respecting land must be mandifest and proved by some writing signed by some person able to declare the trust

35
Q

2 formalities must be satisfied here

A

1 must be evidenced in writing 2 evidence must be signed by settlor

36
Q

What will be the interests affected?

A

Applies to freehold , leasehold and eq interest in land - look dealing with eq interest

37
Q

What should we note here:

A

S.53 1b only deals with creation of trust over an int in land not transfer of legal title and only deals with creation - land nothing else!

38
Q

What is meant by evidenced in writing?

A

So if have trust of land = enforceable cod ev in writing - able to sue and enforce in any shape / fashion but must satisfy 2 req

39
Q

While valid trust?

A

Come into exist once declared until 2 req satisif = not enforceable

40
Q

Valid momen de suff cert =

A

Important tax implications for settlor and Ben claimant

41
Q

What does this also mean?

A

Once trustee excercise his her proves under trusts he / she will not breach

42
Q

Although valid not enforceable ?

A

Ben can not enforce trust ie using his : her powers to vary trust = gap btw validity and enforceability

43
Q

Evidence when written-?

A

Must contain all relevant terms of trust = 3 cert

44
Q

Writing extras?

A

Does not need to be form of deed Written evidence signed by settlor = suffice Can be better / other informal doc Written and signed evi can be produced at later date - gardener v rowe

45
Q

Point to notes about s.53 1b

A

1- 3 cert2 - actual deck need to be in writing A doc acknowledging a prior oral decl will suffice - Oral - trust but no enforceable

46
Q

Cases for no. 2?

A

Foster v Gael - childes v childes- McBlain v cross Doesn’t say deed I writing just must be evidenced in writing

47
Q

Also with no. 2

A

Doc must show that trust was intended but need not contain all terms - re Tyler’s trust fund

48
Q

Doc must be signed by the person able to

A

Declare the trust (land owner) on agents signature will not suffice - re north cliffe ( must be actual owner not agents signature)

49
Q

What does this mean

A

Matter of construction -Hw if settlor declares himself trustee of an interest in land for a beneficiary, remember that the settlor will only have to declare trusts of land and complete required formalities of a.53 1b lpa- as settlor as trustee a tleast has legal title to the land- connected to consitituin

50
Q

Extra marks for exam?

A

Exam may create trust - by email/ text . This is to stimulate discussion on the need to have decl signed . No need to conclude in this but make reason any if it would satisfy req - perhaps compare with e conceyancing of land

51
Q

Requirement of writing was introduced to prevent fraud

A

Rouchedaul v vousread Form play important role in tracking the conduct of ownership of prop - CT’s extemelt rekebant to allow required form to be avoid

52
Q

What is this case?

A

This case is an exception If settlor transferred legal title to trustee - understanding to be held on trust but failed to evidence in writing - CT’s will consider enforceable So if writing fraud make unconditionally result - exception Comes back

53
Q

Beneficiaries disposing of equitable interests under trusts?- what is the next rule of formaility?

A

Next rule of formality we need to consider is differnet tule and it’s the idea of disposal of eq interests under trusts, or the disposition of eq interest under trust.

54
Q

now hear what do we have?

A

Now here we have a rule s.53 1 c of lpa which well look at in a moment but before we do that heres is recap

55
Q

What do we mean b y disposal of eq interest-

A

firs point remeber that an equitable property interest in the same way as lad is. It is intangible forming a chose in action, but neverthless capable of being treated in same manner as all prop. It can be mortgaged, sold, and transferred if you bear this in mind, can grasp topic easily

56
Q

The owner of an equitable interest in property may confer the benefit of the interest on another person by:?

A

The owner of an equitable interest in property may confer the benefit of the interest on another person by:(i) assigning the interest directly to a third party;(ii) directing the trustees to hold the property in trust for a third party;(iii) contracting for valuable consideration to assign the interest to another;(iv) by declaring himself to be a trustee for another.

57
Q

case for this?

A

Timpson’s Executors v Yerbury [1936] per Romer L.J-identified four ways to benefit another person with beneficial interest?

58
Q

S.53(1)(c) LPA?

A

S.53(1)(c) declares that a disposition of an 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.

59
Q

what does S.53(1)(c) LPA give us?

A

genral fairly strict rule of formality , certaintly in relation to eq interest under express trusts whether land or personalty doesn’t matter, tis about identifying express truts and how eq owners of property are, whatever htheir eq

60
Q

so what could it be?

A

is so it could be ming vase held on a by trust fpr b, or could be shares held by a on trust for x for life, or could be a house held on trust for a and bon trusts for x y z tenants in common equal shares

61
Q

what does the rule here concern?

A

The rule here cocnerns people who have eq interest under trusts certainly expressed trust-

62
Q

what must it be?

A

MUST BE IN WRITING UNDERLINE SIGNED BY PERSON DISPOSING OR BY AGENT,

63
Q

so if we have ming vase what?- example

A

SO IF WE HAVE A MING VASE, IF KRIS WANTS TO give away his remainder inters in iming vase e.g 1 mill quid to someeon her can do that. The rermainder interst doesn’t kick into into life interest does has died, so obvs person of remainder interest their interwst icks in .

64
Q

further on example?

A

if its on trustee ming vse v has lfie int on m ing vase, what it means she ahs interest which is VESTED IN POSSESION shes the man or woman of moment entitled to prop and ris line when she dies get sht evase, he has the remainder in the is the remainder man.

65
Q

example part 3?

A

,Now Kris and eq prop writing that vase, obvs doesn’t kick in until perso in possession has died and passed over, so person with remainder interest has concrete prop right in eq and is not vested in poss that only for MAN OF MOMENT its called vested in interest if have concrete prop right of sorts and they can dispose of ti assign it do what they want with it.

66
Q

example part 4?

A

Now if Kris wants to give away his remainder interest, concrete prop e.g say hes brother he can do that for free or sell b y contract.

67
Q

example part 5?

A

but if he just wants to give it away this is called disposition and needs to be in signed writing to comply with s.53 1c

68
Q

so any q vested in poss?

A

SO ANY EQ WHICH IS VESTED IN POSS/INTER and if u want to give it away has to be in signed writing in accordance to s.53 1 c –

69
Q

e.g of vested in poss?

A

so if me ad v house hold trust for ourselbes, sep shares and wanna give shar to someone else must bein writing to comply with s.53 1 c. so u need this signed writing. This is rule of formality to dispose of eq interest under trust. Pints to note, the dispos must acutall

70
Q

what is meant by directly assignment og equitable interest to 3rd party?

A

so if me ad v house hold trust for ourselbes, sep shares and wanna give shar to someone else must bein writing to comply with s.53 1 c. so u need this signed writing. This is rule of formality to dispose of eq interest under trust. Pints to note, the dispos must acutall

71
Q

What must the assignment be?

A

Must be if the whole interest and not just a part of the beneficial interest

72
Q

what does s.136 lpa allow?

A

allows for direct assignmnent of a chose in action, which could include an interest under a trust - re pain

73
Q

📖 example of this

A

If you have an absolute equitable untreated in property you cannot directly assign the life interest but retain the remainder interest

74
Q

📖 looking for extra marks - what about s. 136

A

S.136 lpa to an interest under a trust has been doubted - see snells principles of equity endn - in developing an arg on this issue - read what is said on matter

75
Q

📖What are the formalities for direct assignment are:

A

The assignment must be in writing

It should be signed by the assignor and

Express notice should be given to the trustee of the assignment

76
Q

📖 what if formalities not complied with ?

A

There may still be an assignment in equity which needs no partic formalities - Williams brandts sons & co v dunlop rubber co

77
Q

📖 an assignment in equity require?

A

A clear intention to assign, manifested by words or conduct

A clear transfer of the interest from the assignor to assignee and

In addition the interest transferred must be clearly indentifiable.

78
Q

📖 what is there no need to do?

A

No need to identify the trustee of the transfer. Hw if notice is given to trustee the assignee is protecred from 3rd part claims and fraudulent receipt by the assignor - kekewich v Manning

79
Q

📖 what about contract for valuable consideration to assign to another?

A

Where there has been valid contact to assign an equitable interest the contract may be capable of specific performance

80
Q

📖 for such transfer what must there be

A

A valid contract. Note that in equity marriage will be valid consideration - pullan v koe

81
Q

📖 then it may be possible?

A

That such a disposition need not be in writing. This argument is based upon application of a.53 2 lpa which states that implied trusts do not need to comply with req of s. 53 1 lpa

82
Q

📖 what about implied trusts?

A

One type of implied trust is a cosmturcive trust. This is a trust that is constructed around property when the CT’s believe that it would be unconcisoubale to deny an interest in prop to a person who does not have legal title.

83
Q

📖 in a contract which is enforceable note that?

A

All contracts are specifically enforceable that parties consciences are affect by the contact

“ equity lols upon as done hat which ought to be done’ and the CT’s may force perfection of title

84
Q

📖 extra marks for this?

A

In oughtred v irc- uphohn j at first instance and lord Radcliffe in the h o l considered that the benefits of contract - a chose in action- was held by the legal owner for the benefit of the person who provided val consideration

85
Q

📖 - extra marks Neville

A

Court of appeal in Neville v wilson endorsed this view. This is an area of academic debate as the House of Lords majority should be binding on the lower CT’s, and therefore a popular topic for exams

86
Q

📖 what about direct trustee to hold the beneficial interest for another?

A

The beneficial owner of property may direct the trustee to hold that beneficial interest for another person. The legal requirements to transfer a beneficial interest to another are set out in s.53 1 c

Declares :
S.53(1)(c) declares that a disposition of an 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.

87
Q

points to note s.53 1 c?

A

-The disposition must be actually effected in and by writing

88
Q

point 2 ?

A

-Document disposing of the equitable interest can be signed by owner of his agent-by person disposing of eq interst, the difference with s.53 1 b is that an agent auth in writing can sign off disposal disposition,

89
Q

point 3?

A

-The section applies to ALL equitable interests under ANY trust, albeit whether land or personalty.- primae face this section applies to all eq interest under any trusts, whether its land or personalty. Its about disposing eq interest its not related to subject matter. Its about ben ready to give awywa eq intferst.

90
Q

point 4?

A

-Point of section, is so that trustees, at all material times, can know who the beneficiaries are/have become and who therefore they owe their fiduciary duties to.

91
Q

point 5?

A

-The section only applies to subsisting i.e pre-existing equitable interest under trusts.

92
Q

the point in other words?

A

The point so that the trustees of all material times, have clearer in evidence who they have their fidicuary duties to , who the ben are for any moment in time.

93
Q

example of the point?

A

So if im a trustee ming vase, b has life interest , Kris has beneficial int remainder int, when u do I wanna know to give vase to. So if Kris is disposing to his brother, there is evidence his eq interest.. Changed to brother , now give vase to changeover.
That is point setion, clear written evidence exists

94
Q

problem falw with this section?

A

The problem flaw in this section, is.. Make sense clear written eveidence change of evidence and in sense protects trustees, the transaction in that sense is recorded, the flaw is theres no actual duty on person, disposing this eq interest to acutally give a copy and notify trustees, cause that would make more sense and round off section. U could say 1925 they didn’t have emails and things and maybe could reform the section e communications, but were not there atm. Writing means printed writing , suppose email and printed off = written evidence.

95
Q

what could we debate with this?

A

If it forms and evidentiary function then rule has ev purpose behind – but whata ctual says on 53 1 b the disposition must be effective in writing. Now whether that slight slevering joint tenants, whether that covers electronic writing or not, I think one could debate if arguably it does, notices serverance s.36 2 in land law, co ownership perhaps the same logic should apply to dispositions / equitable interests under trusts. But I suppose the simple way around that is to print off the communication because then you have a hard copy. But it would need to be signed aswell.

96
Q

but point of this section?

A

But the point of section is basically to ensure trustees any material times know clearly at what juncture whos duty is owed to who and whne there is a changeover in the equitable ownership.

97
Q

cases to consider with s.53 1 c ?

A

Cases to consider, which a bit complicated but illustarate the implications of 53 1 c dispose of equitable interest and reuirement of writing and case is often determine on, was theire a disposal on equitable int at what point was it effectuated in writing in purposes of 53 1 c and often cases involve shares, rather than ming vases and equitable int in them and where there has been disposal in eq int in shares but in olden days used to hve thing called stampact and if u gave away certain shars. Apart from 53 1 c effective in writing, where u did have writing alt disposition change ownershio that coiudl sometimes attract a tax liability stamp tac and so a lot of cases involved a revenue over whether a disposition was effected when they occur on stamp duty chargable erm after the old stamp duty laws which existed – so a lot of tax cases

98
Q

book- what am i not sure about?

A

declarition of s.53 only refetrs to direct trustee to hold the beneficial int - then says declariotn adfter dec says - this applies to any type of proeprty held beneficially , not just interests in land

99
Q

book- looking for extra marks?

A

definition of equit int within lpa s.205 1 x defines these as in relation to exisitng in or over land - but this is not result of its application in grey v irc

100
Q

book- what does wording of section refer to?

A

refers to subsisting equit interests at the time of the dispostion. this means that it applies not to the creation of trust but where ones is in existence susbiting and a person wants tp transfer that benefit another

101
Q

book- the transfer must?

A

must be in wrtiing which means that is not valid dispostiion unless it is in writing

102
Q

book- the transfer may be signed by?

A

the person making the transfer or by a person who is lawfully awuth to do so- this may be the agent of the equit owner?

103
Q

e.g 1 to get extra marks??

A

john declares he will hold shares in DDD Ltd on trust for his nephew hendrick

There is no need to comply with a.53 1 c as this is original declaration of trust

SELF DECLARED of TRUST

John is absolute owner - trustee johan (legal title held by johan)

Beneficiary Hendricks - (equitable title held by hendrick)

104
Q

📖Example 2 extra marks

A

Hendrick who no owns beneficial int in shares asks trust johan to hold his beneficial interest in ddd for the benefit of wide precious. He later writes a memorandum to confirm transfer

105
Q

📖- example what must hendrick do?

A

Must comply with s.53 1 c lpa - as he only holds the beneficial interest - which is substing at time he intends to give the interest away - a dispotion to precious. The legal title remains with trustee

106
Q

📖 what about the transfer?

A

The transfer is void until actually in writing . A claim that the writing is evidence of a previous disposition is invalid .

As the transfer is void an initio, you cannot have written evidence of a non existent transfer. The transfer said to be void for want if writing - grey v irc

DISPOSING OF AN EXISTING EQ INT -

Trustee johan original position- hendrick
Trustee johan - position after disposition - precious

107
Q

what is the case?

A

Grey v IRC [1960]

Settlor was beneficiary of shares under a bare trust. Legal title to the shares was held by trustees.

Settlor at all times intended to transfer shares on trusts for his 6 grandchildren.

TRANSDE SHARES HE WAS EQ OWNER OF – 6 BLOCKS TO 6 GC

108
Q

what happeend in grey v irc?

A

He did not want to create trust in their favour by straight transfer of legal title to the trustees on trust for the children, (6 batches of shares, 6 trusts), because to do so would attract Stamp Duty (tax).
He thus set up the arrangement where he retained the beneficial title to the shares.

109
Q

grey v irc part 3?

A

The from his position as beneficiary of the shares he verbally ordered the trustees to hold the shares on the 6 trusts for his grandchildren in equal shares.
This was later confirmed in writing.

110
Q

grey v irc part 4?

A

Now that oral instruction to do that would command trustees to now hold the shares in 6 sep blocks, for each of his six gc, that was later confirmed in writing a written instruction to them, there was a command to trustees don’t hold on trust anymore hold In shares 6 blocks 1 6 gc- hold on fresh trusts

111
Q

grey v irc part 5?

A

Trustees then told the Revenue.
Revenue argued successfully in HL that the effect of the ‘oral direction’ was a ‘disposition of his equitable interest in the shares’ and was invalid for want of writing in violation of
S.53(1) (c ).

112
Q

grey v irc part 6?

A

The later written confirmation was held to be the ‘disposition’ and compliant with S.53(1)(c) and therefore attracted Stamp Duty.

113
Q

grey v irc in other words 1?

A

Read as written – there was a purported disposition of his int in shars. His block being chopped into 6 little blocks held on trustees to hold on new trust- but said as his own declaration it didn’t actually dispose of eq int that point cos of s.53 1 c

114
Q

grey v irc in other words 2?

A

so effect of that dispos was a purpoted dispos- but wa actually invalid because of lack of writing –

115
Q

grey v irc in other words 3?

A

–s.53 1 c- the later written confirmation of the oral isnturction which he then signed off to hold shares 6 blocks hold on trust- that written time there was our written disposition- and that complied to s.53 1 c and it was that later writte statement that attracted stamp duty.

116
Q

grey v irc in other words 4?

A

Because effect telling trustees was please get rid interest, rearrange and give 6 gc in 6 blcoks –ge was disposing of his eq interest in hshares –

117
Q

grey v irc in other words 5?

A

the oral direction as attempt of that, the latter confirmation of that direction was the actual disposition was complied s.53 1 c- but it just illustrates nicely ways get rid of eq int- writing did come later and it was that where get signed writing affect dispo of eq int

118
Q

what about vandervell cases?

A

Vandervell cases are very complicated factually and they have a relvance in terms of 53 1 c

119
Q

📖 vandervell exception to section 53 1 c lpa - what do requirements of this sec ensure?

A

That the ownership of beneficial interest can be clearly identified by the trustee, beneficiary, the CT’s , and the inland revenue - grey c irc

120
Q

📖 before going on to see how vandervell no. 1 operates?

A

It is important to remember the folllowign principle - a beneficiary who is absolutely entitled and competent can ask that the legal title tot he trust prop is transferred to him or her so that beneficiary becomes absolute owner = rule in Saunders v courier

121
Q

📖example of how the sequence of events may occur?

A

Trustee- legal title
Mr vandervell = equitable title ( stage 1

Me vandervell = absolute ownr- stage 2

So long as the legal title is transferred validly the equity interest I transferred with it- no need to comply with a. 53 w c lpa - stage 3

122
Q

📖 so of example?

A

Once the title is held absolutely, at stage 2, the owner only has to comply with the legal requirements to transfer the legal titles . Understanding this will make the principle in vandervell no. 1 easier to understand

Where a beneficial owner who is absolutely entitled and competent (sui iris) makes an oral declaration to trustee that trustee transfer legal part to 3rd party intending that at the time the beneficial title shall transfer to the same third party, there is no need to comply s. 53 lpa

123
Q

📖a what can you see when u look at next example?

A

It simply removes the Saunders c vautier step and be justified on that basis

TUSSREE - legal title

MR VAND- equit title

= stage 1

So long as the legal title is transferred validly the equit interest is transferred with . No need to comply - s.53 1 c lpa

= stage 2

124
Q

📖 revision tip for this

A

Examiners often use words that Are ambiguous such as five , transfer, convey . This is because hey want students to consider whether vandervell applies

125
Q

whats next case?

A

Vandervell v IRC [1960] HL (‘block of shares’)

126
Q

what happened in vandervell?

A

S wished to sponsor a professorship at Royal College of Surgeons (RCS).
S was equitable owner of a substantial number of SHARES, held by bank as nominal trustee.
So as to endow the Chair, S agreed orally (so as to avoid Stamp Duty) to transfer BOTH the legal and equitable interests in these shares to the RCS.

127
Q

vandervell 1?

A

He simultaneously gave a trustee company (Vandervell Trustees Ltd, which he controlled) an OPTION to re-purchase the shares for £5,000 (well below market value).

This arrangement enable the RCS to receive the dividends but because of the option to re-purchase Mr Vandervell did not irrevocably relinquish ‘control’ of his shares.

128
Q

vandervell part 2?

A

As to the shares - the legal and equitable interest together had been transferred to RCS simultaneously, therefore this was not a disposition just of the equitable interest under S.53(1)(c).
No stamp duty was therefore payable here.

129
Q

book- what about formalities?

A

formalites are required to protect the trustee from any claim for breach of duty. this exception can be justified as the trustee, in trasnferring the legal title to another person, has no further obligations to beneficairy

131
Q

📖What is the next case?

A

Vandervell v irc no. 2

132
Q

📖 what happens in Vandervell v irc no. 2

A

Case is complex and has been subject to academic criticism . There has been protracted litigation over the attempt by mr vandervell to benefit the royal college of surgeons and his children’s trust settlement . Much of it concerned with stamp duty and tax.

It may appear that in attempt to end this litigation lord denningn used judicial creativity to Aboid the requirements of a. 53 lpa

133
Q

📖 what did Court of appeal do?

A

Made a distinction btw option as one form of prop which, when excercised has ceased to exist. So when the benefit created by excercise the option was declared to be be held on trust for children this was a completely new trust. It was not a dispotion ofba subsisting equit interest . It was in fact a decl if trust ins hares and required not formalities

134
Q

Re Vandervell (No 2) per Megarry J. (the ‘Option’)?

A

The Option to Purchase the shares was held by the Vandervell Trustees Ltd.
This company had to apply the shares so purchased to somebody else. As no beneficiaries of these shares so purchased were declared, the equitable ownership of these shares went on resulting trust to Vandervell under an Automatic Resulting Trust.

135
Q

vandervell in other words?1

A

Vandervell no.2 – case considered what would happen to this option – remember option state contract, otpiton for our puyrposes is form property- the otpiton to purchase the shares was held by this company set up- vandervell trusttes limited which he was effectivdely controlling.

136
Q

vandervell in other words?2?

A

The company had to apply the shares so purchase to someone else, so if excecisze option to buy back the shares, they were to hold them on trust for soeone else. Erm mr vandervell be person to declare who beneficaires were, but he never did, so as no beneficiares of these shares, so purchase were declared the eq ownership of the shares then purchase, went on a resuktung trust to vandervell. Under whats called an automatic resulting trust .

137
Q

vandervell in other words?3?

A

The option itself was held by this trustee company, for mr vandervell and when they exercise the option to buy back the shares fro rouyal college, it was said the company were to hold shars purchased under the optional trust, but it didn’t say who for, and so here , mcgagry judge said equity hates a vaccum so a resulting trust kicks in the equitable ownership of shares purchased under the option would result back to the settlor.

138
Q

vandervell in other words?4?

A

So the equitable ownership of shares purchased when option was excercised by the trustee company, went to back to mr vandervell and he was liable then to pay tax of yearly pay outs with income the diviedens, because that’s where th elocation eq ownership of shars was. And automaticresulting trust will plug gap in beneficial equitable ownership.

139
Q

vandervell in other words?5?

A

If you haven’t said who to hold prop on trust for eq steps in and says well as you haven’t said who fair, equity fills gap, and results back to person from once it came

140
Q

vandervell in other words?6?

A

e.G automatic result tust- if I have transfer hosue tov and in a tr1 form – freehold title to house hold absolutely and tell her to hold house on trust, she knows that, her conscious is effected, but I haven’t said who for , meant to say Kris lines but forgot- gap in land reg = gap in equitable ownership therefore resulting trust kick in so v will hold on r.t fororiginal owner- if drop dead be my estae- equity plugs that gap – results back to the settlor or testator. Resiudary legatees. So the automatic result trust will kick in and vandervell no.2= example of that.

141
Q

carry on vand no.2?

A
Vandervell was liable to pay tax on these share dividends.
#As therefore the eq ownweship under the automatic ownership nder automatic resulting trust plugged gap and stayed with mr vandrvell as regards to shares purchased under the option. The company was the trustee, he was the equitable owner of shares so purchase , then he had to pay tax on income those shares generate, the dividends, the pay outs.
142
Q

next case?

A

Oughtred v IRC [1960]

143
Q

what happened in Oughtred v IRC [1960]?

A

Mrs O owned 72,700 shares in a company. She was also life tenant behind a trust of 100,000 preference shares and 100,000 ordinary shares. Her son Peter had the Remainder interest to these shares.

144
Q

outrgihed 1 in other words?

A

held these under trust, life int = so she had income dividends, income shares generate the payout if its money u get interest in the account u get the income gors to life tenant u must pay into them- concrete right to that- obs whne they die the remainder perso picks entirety of shres – in this case was her son

145
Q

Oughtred v IRC [1960]? 2?

A

To minimise her estate duty on her death, she made an oral agreement with Peter in 1956, under which Peter would surrender his remainder interest in the shares in consideration for Mrs O transferring to him the 72,700 shares.

146
Q

Oughtred v IRC [1960]? 2? part 3?

A

So he would give uo his remainder int to her so the life interest remaining interest murk, she becomes like absolute owner so the life interest remaining interes merch, she becomes absolute owner of those 200,000 and his oay off price his paid for that 72, 000 block of shares as his present for doin that, so we have a contract

147
Q

Oughtred v IRC [1960]? 4?

A

A deed was executed by Mrs O and Peter which recited that the shares were then held in trust for Mrs O absolutely. The trustee then transferred the shares to Mrs O and she transferred the 72,700 shares to Peter.

Q: Was Stamp Duty payable on the transfers, the transfer of shares from the trustee to
Mrs O?

148
Q

Q: Was Stamp Duty payable on the transfers, the transfer of shares from the trustee to
Mrs O?

A

This question depended on whether Mrs O was owner of the shares in equity before the legal transfer.
The HL said no and declared that stamp duty was payable. However Lord Radcliffe’s dissenting judgment stated that as the agreement was a specifically enforceable sale contract, the seller (Peter) became Constructive trustee for Mrs O in equity as purchaser).

149
Q

Oughtred v IRC [1960]? 4? in other words?

A
  • Intnetion to show legal relations was a valid legally binding contract in reation to unique shares not avail to public, shares to private company instead, the contract was specifically enforceable. Cant buyt these shares on the market, they are unique shares and therefore contract was 1 that was enforceable, now because of that uniqueness , in greafted on this contract was a cosnturctive trust, as soon as that specifically enforcebale contract to sell unique proterty was struck, a constructive trust protecte it.
150
Q

Oughtred v IRC [1960]? 4? in other words? part 2?

A

That meant mrs o then held shres she promised her son on a consturive trust for him on equity. Constructive trust like tissue paer layer upon layer on top of contract , equity protect such a contract- like a landsale between lender and purchaser- and when that happened meant mrs o constructive trustee and son wa s beneficiary under that constructive trust – don’t need writing s.53 2 lpa and it meant at that point, peter gets the equitable int in shares which shes promised him

151
Q

Oughtred v IRC [1960]? 4? in other words? part 3?

A

. So the equitable interest shifts the moment that specifically enforceable unique contract is struck the equitable int in shares shift through the medium of a constructive trust, which is engrafted onto that transaction. Now this was the descenting judgmenet, but it has actually become the law.

152
Q

Oughtred v IRC [1960]? 5?

A

As the seller at the point of the agreement holds the property on Constructive trust for the buyer (who has the equitable interest) no further written disposition under S.53(1)(c) was necessary.

153
Q

Oughtred v IRC [1960]? 6?

A

The disposition of the eq interest took place serpately under this constructive trust, which was engrafted onto the vendor purchaser agreement her ebtw mother and son and it only kicks in because the subject matter of the sale was unique because they wrre private shares in private company not readily evaible on market, like selling a rare ming vase.

154
Q

Oughtred v IRC [1960]? 7?

A

Is this really ct? – well it’s a vendor purchase constructivde trust which arises on sell of unqiue prop, c . T tend to arise where theyre necessary to protect justice and to show good conciousble transaction occurs e.g frankfurd or rosset house sharing arrnagment stop people gong back on common agreement shars. So it’s a weird species of c.t.

155
Q

Oughtred v IRC [1960]?8?

A

Lord Radcliffe’s reasoning was subsequently adopted by Megarry J in Re Holt’s Settlement [1969], DHN Food Distributors Ltd v LBC Tower Hamlets [1976] and Neville v Wilson [1997] Ch.144.

156
Q

ehat about constructive trusts?

A

For the constructive trust to be imposed so as to pass to the purchaser the equitable interest sale agreement must be specifically enforceable i.e the subject matter of the sale must be unique or rare. Shares in the private company were held in Neville to be so unique. (Shares in a public company are not unique).

Constructive trusts are exempt form any formality of writing , S.53(2) LPA.

157
Q

what was said in Jerome v Kelly Insp. Of Taxes [2004] ?

A

Most recently by lord walker- adopt c.t reasoning in jermone v Kelly – read as written

Jerome v Kelly Insp. Of Taxes [2004] 1 WLR 1409. Ld Walker at 32:
‘…It would be wrong to treat uncompleted contract for sale of land as equivalent to immediate, irrevocable declaration of trust…Neither Seller nor Buyer has unqualified beneficial ownership. Beneficial ownership is in a sense split between the seller and buyer on provisional assumptions that specific performance is available… and the contract …will be completed…

158
Q

📖 declare that the interest is held by the beneficial owner on trust for another ?

A

As with all prop an equity interest can be held on trust. It can be argued that this is not a disposition but merely a declaration of trust- creating a subtrust

158
Q

📖 declare that the interest is held by the beneficial owner on trust for another ?

A

As will with

158
Q

📖 declare that the interest is held by the beneficial owner on trust for another ?

A

As will with

159
Q

📖 example 3

A

Anne is the beneficial owner of a bank account at bigs bank. Plc . Herbert is the trustee of the account - Anne wants her son Luke to benefit from the account and she states to herber that she now holds the interest on trust for Luke

DECLARING SUB TEUSR

HERBET - legal holder of bank account

ANNE - beneficial owner who joe hold interest for Luke

LUKE- has been fit of equit interest int

159
Q

📖 example 3

A

Anne is the beneficial owner of a bank account at bigs bank. Plc . Herbert is the trustee of the account - Anne wants her son Luke to benefit from the account and she states to herber that she now holds the interest on trust for Luke

DECLARING SUB TEUSR

HERBET - legal holder of bank account

ANNE - beneficial owner who joe hold interest for Luke

LUKE- has been fit of equit interest int

160
Q

📖 eg 3 what is it a question of?

A

Whether th ebeenfickal owner who declares sub trust is dispossessing him or herself of an equit interest. One argument is that the beneficial owner is not doing so as he or she is merely holding the interest on trust

160
Q

📖 eg 3 what is it a question of?

A

Whether th ebeenfickal owner who declares sub trust is dispossessing him or herself of an equit interest. One argument is that the beneficial owner is not doing so as he or she is merely holding the interest on trust

161
Q

📖 example 4a? - rishi is beneficial owner under a bare trust of a house called gills farm

A

Basic trust

T - trustee holds the legal title for benefit of r

R - r holds the beneficial interest

This is the starting position with the trustee holding for rishi he wants to give this interest to his son John. He writes to John telling him of his intention

161
Q

📖 example 4a? - rishi is beneficial owner under a bare trust of a house called gills farm

A

Basic trust

T - trustee holds the legal title for benefit of r

R - r holds the beneficial interest

This is the starting position with the trustee holding for rishi he wants to give this interest to his son John. He writes to John telling him of his intention

162
Q

📖 transfer of existing equit interest

A

T - trustee holds the legal title for benefit of j

J - j now holds the beneficial interest

This would be the classic sit where rishi gives away disposing himself of his equit interest and as such he must comply with s53 1 c - this is normal trust position with which students are familie but there are also sit where bendifarh does not intend that the ben interest should be given to another by intends to hold this interest for the benefit of another person

162
Q

📖 transfer of existing equit interest

A

T - trustee holds the legal title for benefit of j

J - j now holds the beneficial interest

This would be the classic sit where rishi gives away disposing himself of his equit interest and as such he must comply with s53 1 c - this is normal trust position with which students are familie but there are also sit where bendifarh does not intend that the ben interest should be given to another by intends to hold this interest for the benefit of another person

163
Q

Example of 4 b

A

Rishi is ben owner under a bare teusr of a house called gills farm. He wants to hold this interest on trust for son- in this sit it appear rishi had not dispossessed himself if his interest he had merely decided to hold his prop on trust for nother persons. In this sit there is a sub teusr createared.

On a literal reading of stat as there is no disposition then there should be no require for rishi to comply with s. 53 1c . Hw this seems contest tit he intention of stat which is to prevent fraud and allow the these to know whom he or she owe and obligation

In fact it appears that inc rearing The sub trust rishi effectlivly disposes of hisbinteresr as he can no longer exert any real control over the trus prop other than hold it for John in exactly the same way as the trustee held it for him

In fact Hohn who has the power to decide how the prop should be treated

163
Q

Example of 4 b

A

Rishi is ben owner under a bare teusr of a house called gills farm. He wants to hold this interest on trust for son- in this sit it appear rishi had not dispossessed himself if his interest he had merely decided to hold his prop on trust for nother persons. In this sit there is a sub teusr createared.

On a literal reading of stat as there is no disposition then there should be no require for rishi to comply with s. 53 1c . Hw this seems contest tit he intention of stat which is to prevent fraud and allow the these to know whom he or she owe and obligation

In fact it appears that inc rearing The sub trust rishi effectlivly disposes of hisbinteresr as he can no longer exert any real control over the trus prop other than hold it for John in exactly the same way as the trustee held it for him

In fact Hohn who has the power to decide how the prop should be treated

164
Q

📖 example 4 b diagram ?

A

Declaring a sub trust

Head teusr- t trustee holds he legal title for benefit of r & r - r holds ben interest

Sub trust.- r r wants his whol interes to be held for the benefit of j

J receives exact interest that r had

164
Q

📖 example 4 b diagram ?

A

Declaring a sub trust

Head teusr- t trustee holds he legal title for benefit of r & r - r holds ben interest

Sub trust.- r r wants his whol interes to be held for the benefit of j

J receives exact interest that r had

165
Q

📖 implications of e. G 4 b

A

If prop produces an income then trustee would have paid this money tot he benefit of rishi. Now the trustee would be required to pay moeny to benefit John . He may do this by paying it to rishi who then pays it to John but this is merely a procedural step x it is John who is there real benefecitlsry of trust.

165
Q

📖 implications of e. G 4 b

A

If prop produces an income then trustee would have paid this money tot he benefit of rishi. Now the trustee would be required to pay moeny to benefit John . He may do this by paying it to rishi who then pays it to John but this is merely a procedural step x it is John who is there real benefecitlsry of trust.

166
Q

📖Eg of possibly impl

A

Trustee- legal title - rishi original equit owner

John- the person with the actual benefit of int

166
Q

📖Eg of possibly impl

A

Trustee- legal title - rishi original equit owner

John- the person with the actual benefit of int

167
Q

📖 what does this sit illustrate tha

A

The reason formalities are rehired - if trustee pays he money to rishi when reality it benefits John then the trustee may breach risking the poss that the trustee may be personally liable for any losses. Remember one of the purpose of formalities is to enable the trustee to be sure to whom he or she owes a duty

167
Q

📖 what does this sit illustrate tha

A

The reason formalities are rehired - if trustee pays he money to rishi when reality it benefits John then the trustee may breach risking the poss that the trustee may be personally liable for any losses. Remember one of the purpose of formalities is to enable the trustee to be sure to whom he or she owes a duty

168
Q

📖However to this ?

A

Alternative arg is that there is no need to comply with s 53 a c when beneficial owner retains some control of the beneficial interest. Such as declaring discretionary of beneficial interest . The reasoning by chatty in hrainge v wilberforce and comments by upjohn in grey 1958 would suggest tgat there is no need to comply with s.53 1 c we this is no dispose of equit interestS

The rising btw the two sit was rejected in court of appeal in Nelson v greening and skyes - where the diffeeenf btw the refract in practice and effect in law was made. So it would seem that declarations of sub trust are not dispositions of a beneficial interest within the meaning of s. 53 1 - c lpa

168
Q

📖However to this ?

A

Alternative arg is that there is no need to comply with s 53 a c when beneficial owner retains some control of the beneficial interest. Such as declaring discretionary of beneficial interest . The reasoning by chatty in hrainge v wilberforce and comments by upjohn in grey 1958 would suggest tgat there is no need to comply with s.53 1 c we this is no dispose of equit interestS

The rising btw the two sit was rejected in court of appeal in Nelson v greening and skyes - where the diffeeenf btw the refract in practice and effect in law was made. So it would seem that declarations of sub trust are not dispositions of a beneficial interest within the meaning of s. 53 1 - c lpa

169
Q

📖 extra marks for this ?

A

When dealing with a sub trust it is important to identify what property is being held on trust bc if equit interest in land and then as it is creation of new sub trust in land or an interest in land . It must also comply with requirement of s.53 1 b

169
Q

📖 extra marks for this ?

A

When dealing with a sub trust it is important to identify what property is being held on trust bc if equit interest in land and then as it is creation of new sub trust in land or an interest in land . It must also comply with requirement of s.53 1 b

170
Q

Beneficiary’s Declaration of Trust ?

A

Where a beneficiary (B) of an interest under a trust declares himself to be a trustee of his interest for another X, does this amount to a disposition of his equitable interest under the trust, and thus caught by the requirement of writing in S.53(1)(c ) or is a separate genuine sub-trust created ?

Next thing to look at in terms of formalites is the issue of beemficaries decl of trust?

171
Q

what about the answer?

A

The answer is debatable:

If B retains some ‘active role’ to fulfil as trustee, then a genuine sub-trust results.
Re Lashmar [1891].
N:B If the property is land, the declaration of sub-trust must be evidenced in writing, S.53(1)(b) LPA.

172
Q

what happened in re lashmar?

A

Re lashmar – if the sub trust relates to the land, it has to comply with 53 1 b evidenced in writing

173
Q

if b retains noa ctive role?

A

If B retains ‘no active role’, then in effect there is no genuine sub-trust and the result is that the purported sub-trust is actually a disposition of his equitable interest, which must, to be effective, be in writing, S.53(1)(c),Grainge v Wilberforce [1889].

174
Q

contrast with?

A

Contrast however recent case: Nelson v Greening & Sykes (Builders) Ltd EWCA Civ 1358, CA where despite ‘inactivity’ of sub-trustee, sub-trust upheld.

175
Q

noa ctive role in other words?

A

If beneficiary retains no active role in any sens,e then some argue no genuine sub trsut here, and although used lang of sub tust, what has actually happened, is that that he has actually disposed entirely of his equitable itn, in favour of the sub fid x – and this is actually a disposal of his eq interest under headrass and is caught by need for signed writing under s.53 1 c grainger v Wilberforce- is this analysis rugth – it all turn sn whether there is an active role for b under a sub trust or not.

176
Q

contrast in other words?

A

In recent times howevr, this approach to dealing with this issue has been questioned and a more genral rule seems to come to form that any decl of subtrust whether active or not will be genuine of sub trust – dispite inactivity – genuine sub trust could be created . In which case 53 1 c doesn’t apply , not treated as a dispotion all cases gtreated as a genuine sub trust and only rule of formality have to worry about 53 1 B IF SUBJECT MATTER IN LAND NEED TO BE

177
Q

actie role carry on in other words?

A

Active role = 100,000 trust for b , b prepars subtrust v for life remainder to james = active role, have to give income and when u die right check to trustee or paid to me. Acitve non active role analysis sub trust /disposition has gone out window about following recent nelson geening casewhich suggests if you delcalre a sub trust the activity or non activity = irrelevant.

178
Q

better marks in other words?

A

Academic lit if rel will get good mark, also get conclusion in, throw research wide in it. On the sub trusts question assuming its all approved, ther is- he is editor of trust law interntional , weve just had accepted publ article an article on this by Chinese guy from Singapore, on sub trust, so figuring doing that q u might want to look at trust law international on west law and there are other articles aswell – refwred to all about sub trust debate , are tey used why use them, why use them, why have them, funds unite trust, is effective way of managing cetain prop= good article to lok at on westlaw – other articles also dig ojut- barry green article – but that trust law inter aricle has whole source of lit this year last edition or on before

179
Q

Disclaimer of Beneficial Interest?

A

A disclaimer of a beneficial interest is not a disposition within S.53(1)(c), for a disclaimer operates by way of avoidance rather than disposition, Re Paradise Motor Co [1968] ; Allied Dunbar v Fowler [1994].

so if u can show the transaction is a disclaimer, it doesn’t matter disposition and will not need to have writing aspect

180
Q

Nomination of Death Benefits?

A

Where a member of an occupational pension scheme or the holder of a life insurance policy nominates a person who will receive benefits in the vent of his death, this does not operate as a disposition under S.53(1)(c ), Re Danish Bacon Co [1971] ; Gold v Hill [1998].

Pension funds often held on trust – contract law trust law both between trustees and fud people that contr – read as written – come back if rreally neeeed to .

181
Q

conclusion of this?

A

chapter considered formalites which are required to create a trust in prop, any property- including an ewuit interest. additionally there are formalities for the transfer of beenficial interests

purpose of form = evidential.

the requirement sof a trust in land or an int in land are partic strignent. which refledcts the improantce the law places on land transactions

182
Q

conclusion 2?

A

this chapter shoudl be read with the preceding chap of consittion. also in relation to a trust of personalty , remeber close link with the requirements of cert of int. chapter 3 4 and 5 must be read and understood in relation to each other.