Week 2- Formality rules Flashcards
What does the Law of property act s53 s(1)(a) and (b) dictate?
S53(1)(a)-No interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law.
Law of property act 1925 s53(1)(b):
“a declaration of trust respecting the 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”.
As per s53(2), this applies only to express trusts, and “do not affect the creation or operation of resulting, implied, or constructive trusts”- further to this they apply to lifetime and testamentary (will-created) trusts, but usually cases are concerned with lifetime (inter vivos) trusts and dispositions of property.
What are formality rules and how do they differ to requirements?
What purpose do they serve?
Formality rules play evidentiary and cautionary roles, guiding and outlining the process towards an end goal, whereas requirements are constitutive and determine a subsequent transaction/ end goal.
Formality rules, especially in the context of land conveyance, have a cautionary purpose, in that they advert the parties to the importance of the transaction which they wish to engage in, and ensure they give due consideration to what they’re doing. The evidential role increases the efficiency of the court to enforce or reject the existence of a trust.
What is the equity maxim which justifies the exception to the rule under s53(1)(b)?
What situation is the maxim trying to prevent?
“equity will not allow a statute to be used as a cloak for fraud”
Where an oral agreement is made, not supported by writing, for a trust to be set up, with the land recipient rejecting the existence of a trust and rather asserting himself as outright owner of the land, rather than trustee for the conveyor as beneficiary- on reliance of the oral agreement a party has suffered a detriment or refrained from receiving a benefit.
What were the facts of Rochefoucauld v Boustead?
Facts- claimant was a mortgagor of land (coffee plantations) sold on mortgage to the defendant, who had orally agreed to hold the land on trust (as a trustee) for the mortgagor, allowing the claimant to pay the price of her mortgage and prevent her recently divorced husband from buying up the mortgage himself. The defendant sold the land for a profit, after selling many mortgages to various different titles to the land to different people, without notifying the mortgagor. The mortgagee sought account of the mortgagor’s dealings, claiming, as the beneficiary, the balance due from him in order to repay the mortgage on the land. He had made much more than the value of the mortgage which he was owed by Roche- and therefore she wanted to recover the excess of this, as beneficiary.
This was treated as an express trust, ascertainable from the oral agreement between the two parties.
Why was the equity maxim invoked in favour of the appellant in Rochefoucauld?
(note that the relevant statute was the statute of frauds, which was the predecessor of the law of property act)?
Significance- the statute of frauds (predecessor to the Law of property act) was relied upon by the defendant to claim that there was no trust, as no written evidence could be admitted to the court. The statute of frauds was disapplied in order to prevent fraud on the part of the defendant, who made a profit by claiming that the trust was not enforceable, and that it was instead an outright sale of the land with which he could do as he pleased- “equity will not allow a statute to be used as a cloak for fraud”
- The statute of frauds still allowed the court to allow the claimant to prove of an oral agreement that it was conveyed on trust for themselves, and therefore keep the land themselves, the case was therefore decided in favour of the claimant; the oral evidence having been admitted could only amount to an express trust, and so there was no need to artificially create a constructive trust.
- Note the constitutional implications of such a decision and the need to recognise the trust as constructive in order to circumvent this
Why is it now argued that the decision in Rochefoucauld also proceeded on the basis that the trust was constructive rather than express, indicative of a more modern approach to formality rules in trusts of land?
Who makes these arguments and what do they say about the way in which the constructive trust is created?
McFarlane: In order to avoid the constitutional implications of disapplying an act of parliament in order to prevent fraud on the part of the property recipient, as in Rochefoucauld, a constructive trust analysis avoids the reaches of s53(1)(b) and is imposed artificially by the courts.
“On the constructive trust analysis, the trust does not arise simply because the former owner of the property so intended; rather, the trust arises to prevent C’s reneging on the understanding subject to which he received the property. The trust is therefore constructive, and can arise without being manifested and proved by writing. It is thus possible to accept the view in Rochefoucauld that the trust is an express one for limitation purposes, as it was one that B (and C) intended to create, without admitting that the trust is an express one in the sense that this intention is by itself sufficient to create the trust.”
The limitation period changes depending on the nature of the trust which is why it was accepted to be an express trust for the purposes of the limitation period in favour of the appellant, even if it can now be understood as constructive. The limitation period applied to breaches of duty under tort or contract, and would be longer for the purposes of this transaction if ti was accepted to be an express trust.
What is the distinction between fraud in a narrow sense and fraud in the wider sense?
‘Fraud’ in the narrow sense of dishonestly inducing another to transfer/devise property (sometimes called actual fraud) and ‘fraud’ in the broad sense of ‘refusing to comply with an undertaking’. It seems clear that, in the present context, fraud is understood in the broad sense – see, eg, Bannister v Bannister, Re Gardner, Re Snowden.
How does Bannister v Bannister show the more modern approach to formality rules and the type of trusts which are said to arise?
Facts- A sold two houses to B for below market value, and there was an oral agreement that B would hold one of the houses on trust for A. B promised that A could remain in the cottage for life, even though B would hold title of the land. A would owe no rent. Despite their oral agreement, B attempted to evict A, his sister in law. There was no fraud in obtaining the conveyance; the intention of B was to enable A to hold beneficial interest in the property, unlike in Roche, where the defendant fraudulently profited off of the mortgage and failed to account to the plaintiff, having accrued enough profit to pay off Roche’s mortgage. This was fraud in the wider sense because it was a failure to comply with an agreed undertaking, although no deceit or dishonesty was made out regarding the procurement of any agreement.
Significance- the oral agreement was sufficient as evidence for the creation of a constructive contract, and the plaintiff had entered into the trust on the reliance that she would be awarded undisturbed possession of her cottage. It was this wider notion of fraud, a failure to comply with an undertaking, which sufficed for the imposition of a constructive trust in favour of the plaintiff. The lack of writing was immaterial for the purposes of s53 of the law of property act, with s53(2) being triggered, the written evidence rule under s53(1)(b) not being applicable here.
Scott LJ held that for a constructive trust:
1) The conveyance need not be obtained by fraud;
2) The transfer need not use technical language of a trust;
3) No weight needed to be given to the fact that the conveyance was at an undervalue. The fraud consists in the denial of the trust. The proprietary right was given to Mrs Bannister under constructive trust.
The plaintiff did not have a remedy under common law; rather Scott LJ allowed her claim on the basis that ‘equity will not allow a statute to be used as a cloak for fraud’- it would be fraudulent for the defendant to evict the plaintiff and deny the oral agreement of acting as a trustee to the plaintiff for life, thereby allowing undisturbed possession. In construing the trust as a constructive trust, they are circumventing s53(1)(b) because under s53(2), the written rule does not apply to constructive trusts (nor implied or resulting trusts). No written evidence could be adduced, and yet the oral agreement made the trust enforceable, in order to prevent the fraudulent act of eviction after the plaintiff had relied on an oral promise totally against this.
What does Ong v Ping 2017 show about the evidential role of formality rules, specifically those contained within the LOPA 1925??
Facts- a mother had bought a house on trust for 3 respondents. She failed to sufficiently quantify the worth of the property which she wanted to hold on trust for the beneficiaries, although she did sign the trust deed for her solicitor; it seemed as though she had set up a trust for virtually nothing. The judge found that it was the mother’s expressed wish that she would hold the house on the basis of a trust; that on 14 December 1985 there was clarity as to the intended beneficiaries; that the terms of the trust became defined on 14 April 1986; and that although Sch.1 defined no trust property, the mother had executed the deed intending the trust property to be the house.
Significance- The mother had manifested an intention to create a trust, as per Paul and Constance. With regards to the Law of property act 1925 s53(1)(b), the express trust had to have a signature of evidence if the trust was going to be enforced in court. Whilst the trust deed may not satisfy this evidence, her cover letter was adduced as the sufficient evidence of intention, as it linked the trust to the house in a way which her, when taken with her trust deed, validated and showed a sufficient intention to manifest a trust. The combination of evidence sufficed for compliance with the Law of property act, which in turn allowed the trust to be enforced for her children.
As Sir Colin Rimer put it, “What can she have thereby intended to acknowledge other than that the house was an asset of the trust?” For the evidence to be valid, the property which was to be held on express trust had to be identified.
What does s9 of the Wills act 1837 require/ provide?
S9- Signing and attestation of wills
(1) No will shall be valid unless—
(a) it is in writing, and signed by the testator, or by some other person in his presence and by his direction; and
(b) it appears that the testator intended by his signature to give effect to the will; and
(c) the signature is made or acknowledged by the testator in the presence of two or more witnesses present at the same time; and
(d) each witness either— (i)attests and signs the will; or (ii)acknowledges his signature, in the presence of the testator (but not necessarily in the presence of any other witness), but no form of attestation shall be necessary
What do s15 and s20 of the Wills act dictate?
S15 Gifts to an attesting witness to be void.
If any person shall attest the execution of any will to whom or to whose wife or husband any beneficial devise, legacy, estate, interest, gift, or appointment, of or affecting any real or personal estate (other than and except charges and directions for the payment of any debt or debts), shall be thereby given or made, such devise, legacy, estate, interest, gift, or appointment shall, so far only as concerns such person attesting the execution of such will, or the wife or husband of such person, or any person claiming under such person or wife or husband, be utterly null and void, and such person so attesting shall be admitted as a witness to prove the execution of such will, or to prove the validity or invalidity thereof, notwithstanding such devise, legacy, estate, interest, gift, or appointment mentioned in such will.
S20 No will to be revoked but by another will or codicil, or by a writing executed like a will, or by destruction.
No will or codicil, or any part thereof, shall be revoked otherwise than as aforesaid, or by another will or codicil executed in manner herein-before required, or by some writing declaring an intention to revoke the same, and executed in the manner in which a will is herein-before required to be executed, or by the burning, tearing, or otherwise destroying the same by the testator, or by some person in his presence and by his direction, with the intention of revoking the same.
What does s25 of the wills act provide?
S25 Residuary devise (property left by the term of a will) shall include estates comprised in lapsed and void devises (those which have sought to be left but have been rendered void under a prior/ different will fall within the residue of the estate).
Unless a contrary intention shall appear by the will, such real estate or interest therein as shall be comprised or intended to be comprised in any devise in such will contained, which shall fail or be void by reason of the death of the devisee in the lifetime of the testator, or by reason of such devise being contrary to law or otherwise incapable of taking effect shall be included in the residuary devise (if any) contained in such will.
What is the difference between secret and half-secret trusts?
Secret trust- contrary to the provisions of the wills act, secret trusts make seemingly outright dispositions of property in a will, accompanied by non-attested letters or written instructions to the recipient to deal with the trust property in a particular way- they are still enforceable notwithstanding a failure of compliance with the formalities with the wills act. The terms may be communicated to the trustee after the execution of the will, so long as this is prior to the testator’s death eg by providing a letter to be opened upon the death of the testator by the legatee (so long as the legatee knows that the contents of the letter and the nature of the obligation being imposed upon him).
Conversely, half-secret trusts will note the existence of a trust in favour of a trustee, for example a solicitor, accompanied by instructions unattested to outside of the will documents. The terms of the half-secret trust must be communicated to the trustee before the execution of the will for the court to hold it as valid/ enforceable.
What advantages do secret wills give to the testator?
- A secret trust as often undertaken in the modern concept avoids the formalities of the Wills act, whilst still being enforceable by the courts. The testator retains future powers to make gifts which do not have to comply with the wills act, so long as the obligation on the intended trustee to distribute to beneficiaries is communicated to the legatee and accepted by the legatee prior to the death of the testator, even if these instructions are given after the will is concluded- more flexibility/ autonomy to decide how to deal with the trust property afterwards- historically they were even more beneficial in upholding the reputation of disgraced men.
- Not only may a secret trust arise where A makes B his legatee, but where B is made the executor, where B is made the executor by default, or where B inherits the legacy where A dies intestate (without a will), as supported in Re Gardner and Re Young- the acquisition of property in another way will still make B hold on trust for someone else.
What is the significance of McCormick v Grogan with regards to secret trusts?
Facts- testator purported to leave all his property to Mr Grogan, as well as providing a letter containing a list of several people along with the amounts of money that they should receive, including £10 to Mr McCormack. The letter also provided instructions which said that Mr Grogan “was not to act strictly with the foregoing instructions” and so the disposition of the property was left to the judgement of Grogan. McCormack sought to recover his £10 despite this clause. McCormick was also told that “as it is not my wish that you should say anything about this document, there cannot be any fault found with you by any of the parties, should you not act in strict accordance with it”- further evidencing that Grogan was not legally bound by the trust and therefore it was not enforceable.
Significance- it was held that no secret trust had been set up for McCormack, and that the letter did no more than provide instructions and guidance as to how Grogan might like to dispose of the property.
Even if it was considered a legal obligation, no evidence that Grogan had accepted it, as per requirement 3. Shows importance of 3 requirements for secret trusts
-Also endorsed fraud theory
