Key Concepts in Equity and Trusts

Learning Outcomes

  • Understand the principles and context requiring formalities in trusts.

  • Attain knowledge on the operation of s53 of the Law of Property Act 1925 (LPA).

  • Analyze significant cases: Grey v IRC and Vandervell litigation.

  • Explore the maxim: ‘equity will not permit a statute to be used as an instrument of fraud’.

  • Familiarize with statutory exceptions for resulting, constructive, and implied trusts using s53(2) LPA 1925.

Overview of Formalities

  • General Rule: Equity prioritizes substance over form, meaning that formalities are usually unnecessary in establishing trusts.

  • Important Note: Wills must comply with section 9 of the Wills Act 1837, including testamentary trusts.

Trusts Without Formalities

  • Creation of inter vivos (lifetime) express trusts of personalty can occur without formalities.

    • Key Cases:

    • M’Fadden v Jenkyns

    • Re Kayford

    • Hunter v Moss

  • Mechanisms for establishment include:

    • Oral declarations

    • Conduct

  • Applicable only to personalty and inter vivos trusts.

Self-Declaration of New Trusts of Personal Property

  • Settlor retains legal and equitable title.

  • Example Declaration: “From this moment, I hold this necklace on trust for you.”

  • Key Case: M’Fadden v Jenkyns - oral declaration without need for formalities.

  • Practical Issue: Proving the existence of oral declarations in disputes.

Formalities in Real Property

  • Trusts involving land must adhere to s53(1)(b) LPA 1925:

    • Must be manifested in writing, signed by someone authorized to declare the trust.

  • Key Points:

    • Absence of writing results in a trust being unenforceable (e.g., Leroux v Brown).

    • Validity of trust is retained unless contested.

Effect of Writing on Trusts

  • Writing makes the trust retrospectively enforceable (e.g., Gardner v Rowe).

  • Writing must include all material terms (e.g., Tweddle v Henderson).

Joinder of Documents

  • Multiple documents can constitute sufficient writing to comply with formal requirements (e.g., Timmins v Moreland Street Property Company).

Case Studies

Grey v IRC

  • Facts: Hunter established settlements for grandchildren and subsequently directed trustees through oral instructions to hold shares for them. Legal title remains with trustees.

  • Ruling: Dispositions of equitable interests must be in writing, as outlined in s53(1)(c). Oral declarations do not suffice where interests are transferred.

Vandervell v IRC

  • Background: Vandervell set up a bare trust and instructed trustees to transfer shares to a third party without a clear relinquishment of interest.

  • Key Legal Point: The equitable interest was subsumed within the transfer of the legal title, thus not requiring compliance with s53(1)(c).

Section 53(2) LPA 1925

  • No formalities are required for trusts imposed by the courts through operation of law (e.g., constructive and resulting trusts).

Practical Issues and Considerations

  • Case scenarios will probe validity and enforceability against stipulated legal frameworks.

  • Understanding nuances of equitable interests and legal titles is critical for advising clients effectively.