Vandervell section Flashcards
Grey v IRC
HL
- HL gave “disposition its ordinary meaning”
- Argument: Section 9 of the Statute of Frauds, one of the Acts consolidated by the Act of 1925, refers to “all grants and assignments.” Section 53 (1) (c) of the Act of 1925 introduces the word “disposition” - “a disposition of an equitable interest.” “Disposition” must have the same meaning as “grants and assignments” in the earlier Act.
- Disposition includes a direction by the beneficial owner whereby the benefical interest vested in him becomes vested in others.
- Oral direction was void. It needed writing.
Vandervell (No2)
HL
Transfer of legal and equitable interests —) operation of law.
HL held:
- Option was held on restulting trust for V as there had been no declaration of trust. This is because he said there should be an option for VT, but did not specify the beneficiaries.
- s53(1)(c) was inapplicable
Justifications - Upjohn J
- If the intention of the beneficial owner is to transfer the legal and benefical interest, Upjohn saw no reason for any futhur document. The transfer of the legal estate also transfers the benefical interest.
Lord Donovan: dealt with the position HAD the bank been the sole owner of the property.
- If owning the legal and beneficial interest, one wishes to transfer the entire estate to another, it would not fall within s53(1)(c). When V instructed the bank to transfer the shares to the college, and making it clear he wanted his beneficial interest to be passed too, he achieved the same result as if there had been no seperation of interests.
Wider approach - Upjohn
- Approach is based on the perceived justification of s53(1)(c) which is to prevent hidden oral transactions in equitable interests and making it difficult for trustees to ascertain who are in truth his beneficiaries.
Problem with Upjohn’s narrow reasoning in Vandervell (No.2)
THIS CASE INVOLVED SHARES, NOT LAND. IF LAND, THERE WOULD NEED TO BE WRITING!!!
Upjohn L refers “I can see no further document or any further words in this document” because in this case the transfer of shares was in writing (because of STF - i think). When talking about land or shares, there will be a document transferring the legal title. But what if property in question is a chattel, whereby can transfer ownership simply by delivering it. Howe does this work because if Lord Upjohn saying sees no need for further document, that suggests you need A document. Whereas Lord Donovan just referred to a disposition passing the legal estate so is the effect of V that we require A document but not two documents? Or is it that as long as legal estate has passed by legal document or otherwise, the equitable interest will also pass.
Is Grey consistent with Vandervell?
Following Narrow approach
The equitable interest moves with the legal interest if they intent this effect. Although there was no agreement between the judges as to whether you need A document or any document.
- The narrow approach in V does not effect Grey because the legal interests in Grey had not moved - the trustees remained the same throughout.
Following the wide approach
Is to prevent hidden oral interests.
- If there is a bare trust, and the sole beneficiary communicates with the trustees, then s53(1)(c) does not apply. In which case, Grey should not have been decided differently because there was no hidden oral transaction.
What happens if the beneficiary directs the trustee to transfer legal title to other trustees to hold on different trusts?
Grey?
- Grey could be authority: where instruction to trustees to transfer to other trustees to hold on trust (As this is effectively what happened in Grey).
Can distinguish V because there, the legal and equitable interest transferred to the same person. So we could take the narrow approach in V and say it is limited where the equitable interest goes with the legal interest.
Vandervell?
- In Grey, the instruction only related to the equitable interest and so we can say that it is different where the legal and equitable interest are dealt with together.
The law is unclear here.
Vandervell (No.2)
CA
Beneficiary under a resulting trust persuades or instructs the trustees to hold on trust for someone else.
- There was not a disposition of a subsisting equitable interest, there was only a declaration of trust in favour of the children.
- The only situation where you need writing is where the trust is of land and as this was a trust of shares, the declaration could be oral.
Denning
- A resulting trust comes into existence whenever there is a gap in the beneficial interest. It ceases to exist when that gap is filled by someone becoming beneficially entitled.
- “As soon as the option was exercised and the shares registered, there was a valid trust in favour of the children’s settlement.
Lawton LJ
He believed there were two different assets: option and shares.
- The exercise of the option and transfer of the shares put an end to the RT.
- There could not be a resulting trust of a chose in action which was no more.
It was the change of property which was crucial. He believed V never acquires a beneficial interest in the shares. His view does not rely on a RT being created and dying without writing like Denning’s/
What makes Lawton’s views irrelevant?
If there is no change in property.
Grange + Wilberforce
Declaration of trust of an equitable interest
It was thought that where the sub-trust declared by B in favour of X is purely passive, and so does not require the exercise of powers from B, B “drops out of the picture”, so that X would then have a direct claim against T.
If the sub-trust declared is a bare trust, so that the sub-trustee has no active duties to perform because the sub-beneficiaries entitlement to the trust property is identical to his own, he will be regarded as having effected a disposition.
Significiantly, Upjohn J in Grey v IRC used the language of sub-trustee “Dropping out of the picture” when a sub-trust is created.
If this were the case, then applying Lord Upjohn’s analysis, writing would be required for the declaration of such a passive sub-trust
Nelson v Greening
Declaration of trust of an equitable interest
Recent authority suggests (not binding) that B will never drop out of the picture.
Lawrence Collins LJ - in the case of a trust and sub-trust of personal property the trustees may decide that as a matter of practicality it is more convenient to deal directly with the beneficiary of the sub-trust.
But B does not drop out the picture as T could deal with B. Moreover, T can refuse to deal with the beneficiary of sub trust as he could be liable for inter, meddling with a trust.
NO AUTHOIRTY IS BINDING. but present view favours B dropping out of the picture.
Held: even if the practical effect of the sub-trust is that B becomes merely a conduit to pass on the economic benefits of the trust property to X, that does not mean that its legal effect is to dispose of B’s beneficial interest.
Oughtred v IRC
Specifically enforcable contract
- A specifically enforcable contract to transfer creates a CT in favour of the purchaser by application of the maxim “equity looks upon as done that which ought to be done”.
- The seller holds property on constructive trust for the purchaser, subject to full payment of purchase price.
Held:
- Document subject to stamp duty irrespective of constructive trust.
Lord Radcliffe dissented:
- As there was a CT, s53(2) applied, so s53(1) did not prevent the trusteeship from arisign by operation of law.
Neville v Wilson
Lord Radcliffe’s dissent accepted by CA
- Nourse LJ refered to Oughtred and the opinions of Upjohn J at first instance and Radcliffe at HL.
- Nourse questioned why s53(2) should not apply and did not have a convincing reason.
The CA agreed that where there is a contract to assign a beneficial interest, there is a CT.
In Oughtred this was deliberately done, deliberate non-compliance.
Why is Neville of limited liability?
Because it requires a contract (s2 Law of property (Miscellaneous Provisions) Act for LAND which is specifially enforcabel
What did Green say about sub-trusts?
Sub trusts should require writing on the policy basis that any disposition of one’s beneficial interest under the trust should require writing on the grounds of:
- 1) Cautionary measure
- evidential purposes (making fruad difficult)
In an exam should I mention the bare/sub trust distintion?
YES! Mention the distinction between equitable/beneficial interest first.
Then state that 19th century cases (Grainge v Wilberforce) seem to suggest that the sub-trustee drops out of the picture. (Although Green disputes this).
Because the beneficiary drops out of the picture when he creates a bare (no active duties) trust, he has effectively assigned his interest.
Then mention that CA case of Nelson v Greening makes more sense.
How can there be a declaration of sub-trust?
Equitable proprietary itnerests are themselves capable of forming the subject matter of a trust, so the beneficiary is entitled to declare himself a trustee of his interest under the trust, creating a sub-trust.
