IMPORTANT Flashcards
Nolan (2002) in Vandervell v IRC: A case of overreaching
- The doctrine of overreaching can be used to explain and justofy the decision in Vandervell.
- The shares were transferred to the Royal College, and re-registered in its name, so acquired good legal title to them.
- The gift of the shares also overreached Vandervell’s equitable interest in them.
- As the Royal College acquired the shares free of that interest, no aspect of the transaction amount to a disposition of subsiting equitable interest.
The substantial body of law relating to overreaching can be used to establish the limits within which Vandervell should properly be applied.
“A trustee, in due exercise of its powers, transferred legal title to a trust asset, thereby overreaching the equitable interest in the asset. Consequently, the recipient of the asset acquired legal title to it free of the equitable interest, even though the trustee received nothing in exchange for the asset. This explanation puts the facts of Vandervell outside the scope of s53(1)(c).
In Vandervell, National Provincial Bank did not have power under a trust instrument to sell the shares, let alone some power to give the shares away free of the trusts affecting them. Vandervell did, however, direct the Bank to transfer legal ownership of the shares, in order that the recipient should become their beneficial owner, free of his equitable interest. The Bank complied with that instruction. Consequently, Vandervell could not bring a claim against the Bank for breach of trust in respect of the transfer. For the same reason, Vandervell could not bring a claim against the Royal College in respect of the shares, even though the Royal College knew that the Bank had held the shares as trustee for Vandervell. In other words, the transfer of legal title to the shares overreached Vandervel’s equitable interest in them, leaving the Royal College as their legal and beneficial owner
So was Vandervel’s instruction to the Bank a disposition of his equitable interest within section 53(l)(c)?
the word “disposition” has a very wide meaning for the purposes of section 53(l)(c), given section 205(l)(ii) of the Law of Property Act 1925.
Is there anything in this very broad definition that encompasses Vandervel’s instruction to the Bank? The only way the instruction might possibly fall within the definition of “disposition” is if it amounted to a “disclaimer”, or a “release”, or some other “other assurance of property or an interest therein by any instrument”.
Vandervell’s instruction was not a disclaimer. There are various reasons for this conclusion.
What Vandervell therefore did was to give his personal instruction to the Bank, requiring it to deal with the shares.
Summary of Nolan
- First, when Vandervell instructed the Bank to execute a transfer of the shares, that instruction was outside the scope of section 53(l)(c).
- Secondly, when legal ownership of the shares passed from the Bank to the Royal College, that transfer overreached Vandervell’s equitable interest in the shares, and was likewise outside the scope of section 53(l)(c). This explanation of Vandervell rests crucially, therefore, on the overreaching transfer oflegal title to the shares.52 Until that transfer, Vandervell remained equitable owner of the shares. That transfer deprived him of his equitable ownership of the shares.
Vandervell’s original instruction was revocable: that instruction did not amount to a disposition of Vandervell’s equitable interest, it was not contractually binding. If V then took back what he said, and the Bank had nevertheless gone on, and transferred legal ownership of the shares to the Royal College, the transfer would have amounted to a breach of trust by the Bank. In those circumstances, Vandervell’s equitable interest would not have been overreached.
Where does Re Rose fit into Vandervell?
IMPORTANT
Nolan
Again, if Vandervell had died after giving his instruction, but before the Bank had acted on it, the Bank should have held the shares on trust for Vandervel’s estate. Vandervell’s instruction, being personal and revocable, should have been revoked by his death.62 For reasons given in the previous example, whether the Bank would commit a breach of trust were it to act on Vandervell’s instruction after his death—and, therefore, whether overreaching would occur—should depend on whether the Bank had notice that Vandervell’s instruction had been revoked, by his death.
Lord Wilberforce, admittedly, took the contrary view.63 He thought that the Royal College’s entitlement to the shares would not have been affected if Vandervell had died before the Royal College had become their legal owner, but after he had done everything necessary to achieve that result. Lord Wilberforce based his opinion on Re Rose.64 With respect, application of Re Rose to the facts of Vandervell must be open to question. According to Re Rose, equity may anticipate the effect of a transfer where the transferor has done everything within his power to make the transfer effectual, albeit that action by some other person may be needed to complete it. Yet the application of Re Rose to Vandervell begs the very question at issue—whether Vandervell had done all he need to divest himself of his interest, given section 53(l)(c) of the Law of Property Act 1925.65 More importantly, this article takes the bolder view that the principle in Re Rose is simply irrelevant to the facts of Vandervell, because the Royal College obtained its rights from an overreaching transfer by the Bank. .
Still, according to the view put forward here, Lord Wilberforce was nevertheless correct to say that “The case should then be regarded as one in which the appellant himself has, with the intention to make a gift, put the college in a position to become the legal owner of the shares, which the college in fact became”,66 and that “[n]o separate transfer, therefore, of the equitable interest ever came to or needed to be made and there is no room for the operation of the subsection [i.e., section 53(l)(c) of the Law of Property Act 1925]”; but it is suggested that the better justification for both assertions lies in the application of overreaching to the case, not the principle in Re Rose.
What would have happened if:
if Vandervell had not merely directed the Bank to transfer the shares, but had sought also to procure that their new legal owner held them on trust for some third party,
Nolan - he would have done more than merely instruct the Bank to overreach his equitable interest in the shares, and impose a new trust on them: he would have been seeking to replace himself as beneficiary of the shares. Again, in accordance with Grey v. I.R.C.,75 that would amount to a disposition of Vandervell’s equitable interest in the shares, within section 53(l)(c), and duly signed writing would therefore be required for such a transaction to be effective.
What did Nolan say about the artifialness of Neville v Wilson?
Neville v Wilson shows the technicality and artificality of the case law.
If a person directs his trustees that the assets they hold for him are now to be held for someone else, then this amounts to a disposition (Grey v IRC).
But according to Neville v Wilson, if a person does not unilaterally tell his trustees what to do, but instead contracts for value to dispose of his beneficial interest that is not a disposition because technically what is involved is the creation of a new equitable interest in the purchaser, coupled with destruction of the ‘old’ equitable interest in the banks of the vendor; and thus is so, even though that ‘new’ interest is logically identical to the ‘old’.
What is the consequence of the requirement that a trust of land is unenforcable unless evidenced in writing?
This has led judicial development of “common intention” constructive trusts, as a means of giving effect to informal agreements between the parties.
How does one distinguish Oughtred v IRC from Neville v Wilson?
Said Nolan?
oughtred v IRC can be distinguished perhaps from Neville v Wilson because Oughtred was a tax case. Nolan states that although background should not make a difference, he thought that context is highly significant in cases concerning the effect of s53(1)(c).
