Formalities of Trusts 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
- In this case, an express trust was said to be formed based on what both parties had intended in the first place. D sought to rely on a limitation period which he could not do under an express trust
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: says it is a rule of evidence and a trust need not be declared by a trust deed alone
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)
* It is not necessary to enforce such trust in order to defeat the fraud by A, and to allow the trust to be enforced would leave the section with no effective scope
What formality requirements must be satisfied for a trust in a will to be effective?
S9 Wills Act 1837, as amended by S17 Administration of Justice Act 1982
No will shall be valid unless
* It is in writing and signed by the testator, or by someone in his presence and direction
* It appears they intended by signature to give effect to the will
* Signature is made by the testator in the presence of two witnesses present at the same time
* Each witness either attests and signs the will; or acknowledges the signature in the presence of the testator
What is the difference between a fully secret and half secret trust?
- Fully Secret: Will purports to leave property to X absolutely, but the testator actually intends for X to hold the property on trust for another, and this is known to them
- Half Secret: Testator states in the will that property will be held on trust by X for the benefit of people that will be told to them separately
How does the Wills Act 1837 affect the operation of secret trusts?
Re Young
Formality requirements of the act are not applicable to secret trusts. In this case, it did not matter that the intended beneficiary was also a witness to signing of the will (s15 usually prevents this)
What are the requirements for a secret trust to be valid?
Ottoway v Norman:
1. Testator intended X to be subject to an obligation to hold the property (this must be intention to impose a trust obligation and not a mere moral one per McCormick v Grogan)
2. This intention is communicated to X
3. X accepts such obligation either expressly or by acquiescene
Blackwell v Blackwell: same principles apply to a half secret trust, however communication and acceptance must occur before the will is made
How can communication of a secret trust occur?
Acceptance occurs either through express promise or silent implication (not declining) and can be either written or oral. It must take place prior to death
Re Keen
* In a fully secret trust, a sealed envelope that was to be opened after death was sufficient communication as it was understood to contain names of beneficiaries
* However, half-secret trust void as the clause could only refer to a trust that is created after the execution of the will
What is the position if beneficiary predeceases the testator?
Re Gardner No 2
B’s interest arose as soon as the trust was communicated and accepted, source of the right was not the will but X’s acceptance of obligation, and thus interest did not lapse but instead property formed part of B’s estate
However, decision should be treated with caution:
* Secret trusts cannot be constituted until death of testator, so it seems strange to argue the interest has already arisen
* Goes against the idea of a will being revocable
What is the standard of proof in establishing a secret trust?
Burden of proof is on the person seeking to establish the secret trust
McCormick v Grogan
Standard of proof requres the clearest and most indisputable evidence
Re Snowden
* Fraud is not an essential ingredient for the application of a secret trust
* Where there is no issue of fraud, the standard of proof is the ordinary civil standard of proof required for an ordinary trust
Re Keen
The parol evidence rule will prioritise written evidence over oral evidence
What are the two ways in which we might explain secret trusts?
Secret trusts are constructive trusts that arise to prevent fraud:
* MacCormick v Grogan: Where a person knows property is not to be used for their own benefit and promises to apply it for others he cannot go back on this
* Equitable doctrine of not allowing a statute to be used as an instrument of fraud
* Does this truly apply to half secret trusts? How would fraud occur here
Secret trusts are express trusts taking effect outside of the will:
* Re Young: Wills Act has no application to secret trusts because the people take by virture of the secret trust imposed on the beneficiaries
* Re Snowden: Basis of secret trusts is that they operate outside the wull, changing nothing inside of it and allowing it to operate according to its tenor
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
- Have been distinguished on the grounds that Grey was an express to express trust and Vandervell was resulting to express
- However, unclear why this should matter, whilst s53(2) says it does not effect the creation of resulting trusts it says nothing about their death
- When the resulting trust arose in Vandervell, he had a real equitable interest and therefore to dispose of it, writing should have been required
- Ultimately may think decision in Vandervell No. 2 was of sympathy, e.g. Stephenson LJ recognised the issues but did not dissent as the result was seen as just
What is the rule on sub-trusts under s53(1)(c)?
Nelson v Greening & Sykes
* Where a sub trust is created, in that B may ‘drop out’ of the picture so that A is holding on trust for C, the equitable interest of B is not lost
* Thus, this would not be a disposition that requires signed writing because a new interest is created
How can an oral contract to dispose of equitable interests 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 s52(3)
What is the rule on a disclaimer of beneficial interest?
I.e. beneificary refuses their right or benefit under the trust
Re Paradise Motor Co
Writing requirement does not need to be satisfied because any substiting equitable interest dissipates or disappears, therefore there is no disposition
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
* In cases of the beneficiary releasing their interest in shares, a vendor purchaser constructive trust can arise so that an oral agreement is effective and signed writing is not required
