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Trusts & Equity - Formalities (Statutory requirements which relate to…
Trusts & Equity - Formalities
Statutory requirements which relate to dealings with equitable title
Creating new equitable interests
Dealing with existing interests in terms of transfer
Creation of new trusts
In creating trust on death, must comply with Wills Act 1837 s9
In writing and signed by testator
Appears testator intended signature to give effect to the will
Made or acknowledged in presence of two witnesses, there at the same time
Each witness must attest and sign, and acknowledge their signature in the testator's presence
Inter vivos (living) trusts - generally no formalities
Exception is Law of Property Act 1925 s53(1)(b) - "a declaration of trust respecting any land or interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust"
Non-compliance renders declaration of trust unenforceable (basically can only take possession if no disagreement) - not void - valid through the three certainties
Applies to both transfers on trust and self-declarations
s53(2) - does not affect the creation of resulting, implied or constructive trusts
Hodgson v Marks - court used this to hold that Mrs Hodgson had beneficial interest in house under a resulting trust - did not need to be evidenced in writing - idea of equity being used to prevent unconscionable conduct
Per Russell LJ: "If an attempted express trust fails, that seems to be just the occasion for implication of a resulting trust" - based on idea that sometimes strict enforcement of formality rules may actually promote the fraud they are intended to prevent
Possible to provide evidence in writing later
Would take effect from date of original oral declaration
Law of Property Act s53(1)(c) - formalities for the disposition of a subsisting (existing) equitable interest
"Must be in writing, signed by the person disposing of the same or by his agent lawfully authorised in writing or by will"
Not restricted to land
In writing, not just evidenced by
Otherwise void - can't evidence in writing later
Disposition - any act by which a person ceases to own the property in question
Timpson's Executors v Yerbury - Romer LJ suggested four ways that constitute disposition of existing equitable interest
1) Direct assignment to a third party
Applies to s53(1)(c)
2) Contract for valuable consideration to assign the equitable interest - aka selling
3) Direction to the trustees to hold the property for a new beneficiary aka give away
4) Declaration of trust over the interest - aka sub-trust
Key issue is whether declaring sub-trust amounts to a "disposition" - courts appear to view beneficiary declares himself as a declaration of a new trust - therefore s53(1)(c) doesn't apply
Nelson v Greening and Sykes
Sheffield v Sheffield
2) Contract for valuable consideration to assign the equitable interest
Not clear if applies to s53(1)(c) - however if enforceable by specific performance (order of court compelling defendant to transfer property as contracted) then a constructive trust will arise in favour of intended transferee
Constructive trusts are immune from s53(1)(b) - follows that would be the same for s53(1)(c)
Neville v Wilson - shares subject to constructive trust and came within ambit of s53(2) - therefore requirements of 53(1)(c) weren't necessary - no signed writing required for validity
3) Direction to trustees to hold property for new beneficiary
s53(1)(c) does apply
Grey v IRC - orally directed trustees to hold shares on trust for grandchildren instead of self, then later assigned directly in writing - oral direction found to be void - equitable interest found to pass under later deed, but did not backdate
Per Viscount Simonds: "there is no justification for giving the word 'disposition' a narrower meaning than it ordinarily bears'
House of Lords saw no real difference between direct assignment to new beneficiary and direction to trustees to hold trust property for somebody else
Decision ratio for proposition that writing evidencing an earlier void oral disposition of an equitable interest will make the disposition valid
Could argue not sufficient as reading s53(1)(c) strictly means no writing makes it void
Only upheld because of specific arrangement between parties
Can be contrasted with cases where both equitable and legal title are transferred to new owner - doesn't apply
Vandervell v IRC - orally instructed bank to transfer shares to Royal College of Surgeons - House of Lords held that it didn't need to be in writing because he had transferred legal title also - essentially collapsed the trust - beneficial title merged into legal - ceased to exist and therefore couldn't be transferred
Per Wilberforce L: "No 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"
Upjohn looked at reason for section - created to prevent fraud and therefore doesn't apply here - trustees don't need to be sure who beneficiaries are because there is no trust
When beneficiary doesn't want equitable interest and it reverts back to estate, does not count as disposition
Paradise Motor: "a disclaimer operated by way of avoidance and not by way of disposition"