Formalities

Creating an Express Trust Inter Vivios S53(1)(b) :Trusts over Land:S53(1)(b) LPA 1925: A declaration of a trust representing any land or any interest must be manifested and proved by some writing signed by some person who is able to declare such a trust by his willie. must be proved in writing signed by trustee them self.Trusts over Personality:  Trusts over personal property (non-land) does not require writing, it can be made orally  Fraud: Rochefoucauld v Boustead: Defendant orally agreed to hold the land on trust for claimant. When Rochefoucauld went bust the trustees refused to recognise his interest in the land as it was not written down as a formality. Held, the need for formalities were disapplied as Rouchefoucauld would otherwise be defrauded.  Court will not allow a lack of formality (or statute) to cause a fraud by technicality. Equity does not allow a statute to be used as an instrument of fraud. Constructive and Resulting trusts S53(2) : S53(2) LPA 1925: Formalities are not required for resulting or constructive trusts. Bannister v Bannister: Ms Bannister inherited two cottages when her husband died, including the one where she lived. She transferred them to her brother and they orally agreed she would remain rent free for life, he later tried to kick her out. Held, if an express trust is being formed there must be formalities. Therefore if there are no formalities the trust must be a constructive trust. Hodgson v Marks:  Hodgson bought land, after being widowed she transferred her freehold to her lodger. He registered himself, and sold it to Marks.  Hodgson found out and claimed a declaration that Marks should transfer his freehold to her. There was held to be a resulting trust, statute should not be used as an instrument of fraud.

Transfer of a Subsisting Equitable Interest S53(1)(c) :S53(1)(c) LPA 1925: disposition of an equitable interest or trust subsisting at the same time of the disposition must be in writing signed by the person disposing of the same or by his agent.ie. transfer of a subsisting equitable interest must be in writing signed by transferor or their agent. Grey v IRC: Grey wanted to benefit his grandchildren with shares, he created a trust under which he was a beneficiary. Later, Grey orally directed that his trustees hold his beneficial interest on trust for his grandchildren. The oral direction was held to be a disposition within s53(1)(c) LPA 1925. Disposition= beneficial interest in himself becoming invested in others.Re Danish Bacon Company: settlor changed the beneficiary under a pension scheme by letter. However, he did not sign the letter himself. Although there could not be a beneficiary under a pension scheme fund, it was held that, the original writing and the amended writing can be read together. Under s53(1)(c) formalities can be satisfied by connecting a number of documents.Vandervell v IRC: Vandervell transferred his equitable and legal title of shares in a company through a bare trust in the bank to the Royal College for Surgeons meaning he would not get taxed. However, because he retained the option to repurchase the shares, he was held to still have an equitable interest in the shares. s53 does not impose formality requirements upon the transfer of legal title but there must be some form of writing for a gift to be enforced if equitable title is to be transferred, which was not done. Vandervell Trusts (no2): Vandervell transferred his shares over to a trust company and instructed the tax company to repurchase shares in his company. The court ruled that his equitable interest in the shares had disappeared because he had failed to identify to the company whom would become the new beneficiary leaving an "equitable void". Held, resulting trusts arise in two situations:  Automatic resulting trusts: do not depend on the intention of parties but arise as an automatic consequence of the transferor’s failure to dispose of the entirety of the beneficial interest. Presumed resulting trusts: based on the presumed intention of the transfer of property. Arises because there is a rebuttable presumption of trust based on inferred intention. An automatic resulting trust arose here meaning Vandervell still held the legal interest in the shares and so could be taxed.

Formalities are used to avoid potential fraud. 

Creating Constructive and Resulting Trusts:s52(3) LPA 1925: This section does not affect the creation or operation of resulting, implied or constructive trusts.Oughtred v IRC: Shares in a trust fund were held on trust for Mrs O for life and the remainder interest is held by her son. Mrs O agreed to transfer some other shares to her son and he agreed to release his remaining interest of the trust fund to her. Three documents were executed: a transfer of the second shares to the son; a deed of release to the trustees who held the first shares; and a deed of transfer by the trustees of the first shares to Mrs O. There was no document transferring the son’s interest to Mrs O and it was argued that no stamp duty was payable. However, the equitable interest had already been transferred through the previous oral agreement, and so the son's interest was protected under a constructive trust. Under s53(2) there are no formality requirements for a constructive trust to be formed. Neville v Wilson: Neville held an equitable interest in a company which had fallen into liquidation, the shares in a sub-company were divided between all shareholders. Held, where the owner of a beneficial interest wishes to transfer their beneficial interest to a 3rd party by way of a contract this transfer should be subject to s53(1)(c). Because each shareholder was a constructive trustee for the other shareholders this means that s53(2) LPA 1925 displaced the formality requirements in s53(1)(c).

Creating a Sub-trust: Grainge v Wilberforce: Where a beneficiary declares he is holding the property on behalf of another, this would be the creation of a sub-trust and not subject to specific formalities. However, a sub-trust will only be valid if the trustee-beneficiary has active duties and obligations to perform.Re Lashmer: if A holds a trust for B and B declares a bare sub-trust for C, if B has no active duties he ‘drops out’ of the picture and the  original trustee (A) would hold the property on trust directly for C. This would be equivalent to an express assignment of the beneficial interest and so will amount to a ‘dispostion’ under s53(1)(c) ie. a subsisting equitable interest. 

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