Formalities of Trusts (Inter Vivos & Dispositions) Flashcards
Trusts of Land, Wills, and Disposition of Equitable Interests
What does s53 Law of Property Act 1925 say?
- 1(a): No interest in land can be created or disposed of except by signed writing by the person creating or conveying it, or his agent authorised to do so
- 1(b): A decleration of trust must be manifested and proved by some writing signed by some person able to declare such trust
- 1(c): A disposition of an equitable interest must be in writing signed by the person disposding of it, or his agent lawfully authorised by writing or will
(2) The section does not affect the creation or operation of resulting, implied or constructive trusts
What are the two ways in which we can understand s53(1)(b) as applying?
- Proving a declaration of trust (that is COULD/SHOULD exist)
- Proving the validity of an express trust (that it DOES exist)
Failure to comply with s53(1)(b) means a trust is not enforceable
What does the case of Rochefoucauld v Boustead tell us about s53(1)(b)?
- Equity will not allow a statute to be used as an instrument of fraud, i.e. where a person tries to use the statute and say a trust does not exist simply because there is no writing this is not valid
- The section is a rule of evidence
- In this case, an express trust was said to be formed based on what both parties had intended in the first place
What further cases confirm Rochefoucauld v Boustead?
- Bannister v Bannister: Could not rely on lack of signed writing to deny property was held on trust. A constructive trust was said to arise in this case
- Ong v Ping: Trust could not be declared by trust deed alone. However due to writing with solicitors, including a letter naming the specific house asking not to hold on trust, showed evidence that was sufficient
What case can be used to justify the validity stance?
Hodgson v Marks: Where there is no writing an express trust fails and a resulting one arises instead
How does s53(1)(b) operate when A makes a conveyance to B to hold land on trust for C?
Solomon v McCarthy
* Such trust cannot be valid without meeting the requirement in s53(1)(b)
* To allow the trust to be enforced would leave the section with no effective scope, it is not necessary to enforce it to defeat fraud by A
* A resulting trust will instead arise for A. Does this contradict Rochefoucauld?
What is the purpose of s53(1)(c)?
Vandervell v IRC
* To prevent hidden oral transactions in fraud and to stop making it difficult for the trustees to ascertain who are the beneficiaries
Distinction between disposition and dissipation of an equitable interest. Signed writing needed for the former, not the latter
What is meant by disposition?
Akers v Samba: whilst the word is linguistically capable of meaning the destruction or termination of an interest it does not extend this far here and instead is more like a transfer
What is the rule where the beneficiary instructs the trustee to hold the property on trust for another?
Grey v IRC
* Such is a disposition under s53(1)(c) that requires signed writing
* Where a person is seeking to transfer their equitable interest and the trust is already in existence, this requires some signed writing
What is the rule where the beneficiary directs the trustee to transfer trust rights / legal estate entirely to another?
Vandervell v IRC
* No ground for invoking the section where the beneficial owner wants to deal with the legal estate as well as the equitable estate
* If the intention in directing to transfer legal estate to X is that X should be the beneficial owner, writing should not be required
What is the rule if a trust is made after a resulting trust comes about?
Re Vandervell (No. 2)
* A resulting trust is born and dies without any writing, comes into existence when there is a gap in beneficial ownership
* As soon as the gap is filled by a valid trust, the resulting one comes to an end.
* Therefore, when a valid trust was created here (and not being a trust of land) it could be done without writing
Why are the decisions of Grey and Vandervell hard to reconcile?
Seem to contradict one another. Argue that Grey was wrongly decided:
* Too wide a meaning of disposition was given. Said to be ‘natural and ordinary meaning’ but no indication of what this actually entails
* No reason why application should be wider than the old Statute of Fraud, purpose of the section is to allow T to know who B is
* In Grey there was oral direction to the trustee, therefore they knew who B was and the original interest was destroyed and a new one arose
What is the rule on sub-trusts under s53(1)(c)?
Nelson v Greening & Sykes
Where a sub trust is created this would not be a disposition that requires signed writing. B does not drop out of the picture as has been previously suggested
How can an oral contract for the sale of equitable interests in shares of a private company be specifically enforced?
Oughtred v IRC gave first notice and cast some doubt, but view was adopted in Neville v Wilson:
* In the absence of written transfer of B1’s equitable interest, B2 may acquire the equitable proprietary rights by showing that as a result of oral contract, B1 holds beneficial interest on constructive trust for B2
* Therefore, requirement of writing is not needed due to the operation of s53(2)
What is the issue with the analysis in Oughtred and Neville v Wilson?
- Neville recognised that the minority view had been rejected by the majority in Oughtred but said this did not matter as they were obiter and so could depart
- Seem to say that the VPCT amounts to a disposition. However, if it arises over an existing interest under a trust is this not the same as a subtrust?
- Creation of a constructive trust, which is a sub-trust, does not carve out equitable interest or mean that the sub-trustee drops out
What do the most recent cases on disposition of equitable interests tell us?
Hudson v Hathway
* Correspondence by email in which the husband had wrote ‘its yours’ etc. were sufficient for disposition
* Email communication was sufficient writing and ending an email with the name amounted to a signature
LA Micro Group (UK) v LA Micro Group Inc
* Confirmed that S53(1)(c) applies to dispositions of all equitable interests and not just to land
* B intended to transfer beneficial interest to C. This fails due to lack of signed writing, but can be treated as a contract to transfer equitable interest to C. B therefore then holds the beneficial interest on a VPCT for A.
* Legal and beneficial interest merge when the trust arises, leaving A free to use the share, VPCT disappears immediately
What are the issues with the decision in LA Mirco v LA Micro?
- Wrong understanding of equitable interest, relies on the language of moving and splitting this which is not possible
- If we think that B is simply releasing A from the duties that they owe, there is no transfer away so why would writing be required and how can a constructive trust arise?
- Undermines the formality rule, saying it does apply to begin with but this can be circumvented is dangerous
How could LA Micro have been decided differently?
B releases A from the duties they owed to B that constituted the trust. A continues to hold the share but is free from the burden of a duty in relation to the share. Since the case only concerns these two, there is no risk that the trustee would not know who the beneficiaries are
