Raising Capital

-just need one-quarter of the minimum capital to be 'paid up', s.586

Raising money:
- offer its shares for subscription
- an offer for sale: allot entire issue of shares to the issuing house (merchant bank). Issuing house will sell it to its client or general public
- a placing: placed with a group of merchant banks
- rights issue: new shares are offered to the existing shareholders in proportion to their existing shareholding. (pre-emption rights, s.561 2006)

FSA - Financial Services Authority, the UK Listing authority

Obligation when listing
-

Insider dealing
Crimianl
- s.397 FSMA - general catch-all provision
- Part V Criminal Justice Act 1993.
s.52(1)
s.52(2)(a) - induce others to deal in price-sensitive securities/disclose price sensitive info
Civil
s.118 FSMA
Market abuse -

Regulating takeovers
s.219

Statutory Minority protection

s.122(1)(g) 1986 - just and equitable to wind up
Ebrahimi v Westbourne Galleries - E was voted off the board using the power conferred by s.168 2006.
Held: just and equitable to wind up because E agreed to the formation of the company based on the essence that their business relationship will remain the same.
Factors:
- basis of the business was a personal relatiosnhip
- all certain shareholders will participate in management
- restriction on the transfer of members' interest

Grounds:
- Substratum has failed (Re German Date Coffee Co)
-  Fraud. The company was form in order to defraud the shareholders (Re Thomas Edward Brinsmead & Sons)
- Deadlock (Re Yenidje Tobacco Co)
- justifiable loss of confidence in company's management (Loch v John  Blackwood)
- exclusion from participation in a small private company where there was mutual confidence

If other remedies are available, a petition to wind up may be struck out (s.125(2))

s.994 - Unfair Prejudice
(a) company's affairs are conducted unfairly prejudicial to the interests of its member
(b)
Company affairs - Nicholas v Doundcraft Electronics: the failure of a parent company to pay debts due to its subsidiary
Re City Branch Group - director of holding company are also director of subsidiary (corporate veil?)
O'Neill v Phillips - conduct affecting the petitioner qua director will suffice
Re Ghyll Beck Driving Range - son has been unfairly excluded from the management of the golf range.
Held: ordered majority to purchase the petitioner's shares
Re a Company - company articles: a member, on ceasing to be director, would be required to transfer his shares to the company.
Director declined offer. He petitioned to restrain the compulsory acquisition
Interests

Lifting the veil

when to lift the veil:
1. IA 1986, s.213 - fraudulent trading provision. If in the course of winding up the company, anyone carried business intending to defraud the creditors could be called upon to contribute to the debts of the company. (Re Todd)
Re Patrick Lyon - definition: actual dishonesty.
Too difficult to satisfy the criminal burden.

s.214 is introduced to solve this problem: negligence rather than intend to defraud.

Point of no return - a reasonable director would stop trading at this time. Court might lift the veil - the director might be personally liable for the debt (Re Produce Marketing Consortium)

2.Judicial veil lifting -
Gilford Motor Company v Horne,
Jones v Lipman (the company was merely in front for the defendent)
DHN v Tower Hamlets - Denning.
Woolfson v Strathclyde disapproved Denning wholly owned subsidiaries - Z owns all the issued share capital of A,B,C. In realities there is just one business but organised through 4 separate legal personalities.
Adams v Cape Industries - Cape market abestos, also has a US marketing subsidiary.
Creasey v Breachwood Motors -

Tutorial Q1

After Kemp v Kemp, the court would not exercise discretion to distribute property unequally. Now, equity is equality.

McPhail v Doulton changed the test of certainty that applied to the objects of discretionary trusts.
Re Gestetner Settlement - a complete list is not needed in power of appointment. Thus was born the 'is or is not' test.
IRC v Broadway Cottages Trust - whether 'is or is not' test could be applied to discretionary trusts
argument for complete list test:
- if no complete list, t'ee cannot satisfy the duty - choosing the right b1b2 out of the whole set
- court unable to deal with failure
argument for is or is not test:
???
McPhail v Doulton - 3:2, held: 'is or is not' test was appropriate for discretionary trusts as well
Wilberforce: equal distribution is not possible, and is the last thing the settlor ever intended.

Trust tutorial Q1-4

"It seems to be as plain as can be that if all the objects are not ascertainable, then to distribute amongst the known objects is to take a narrower class than the settlor has directed and so to conflict with his intention' (Lord Guest (dissenting) in McPhail v Doulton (1970))


2. Explain the effect of the following separate transactions:

i. Alfred, the proprietor of a registered title to land, orally declares that he holds it on trust for Brian;

ii. Claudia, the proprietor of a registered title to land, completes a registered transfer form insructing the Chief Land Registrar to register David as proprietor. Before sending off the registration form, Claudia obtains David's agreement by telephone to hold the title on trust for Elizabeth. David is later registered as proprietor;

iii. Francis, the sold beneficiary of a bare trust of a title to a valuable painting, orally instructs his trustees to make a gift of the title to Graham, which they do by handing the painting to him;

iv. Harry, the sole beneficiary of a bare trust of shares, orally declares that he holds his rights on trust for James.


3. "It is high time the ghost of fraud was once and for all exercised from the doctrine of secret trusts".
Discuss

4. On the marriage of A to B in 2008, A's father, C, a widower, covenanted with D and E, that he (C) would transfer to them any rights valued at more than $10,000 he might receive to be held on the following trusts, namely, successive life interests to A and B, remainder in equal shares to the issue of the marriage, but, failing issue, to A's brother, F, absolutely.

In 2010, C acquired a painting under the will of a distant relative. The painting was valued at $250,000, but C failed to convey it to D and E. By his will drawn up in 2011, C left the painting to his cousin G absolutely.

Advise F as to his position regarding the painting. Would your answer differ if he could secure the co-operation of D and E in enforcing the covenant?

Company formation, promoters and pre-incorporation contracts

promoter- a person who takes necessary steps to form a company
Whaley Bridge Calico Printing Co v Green -
Promotion process involves:
- register the Co.
- enter into pre-incorporation conrtracts
- if public co, issue prospectus
- appoint directors, find shareholders

Definition of promoter (not found in 2006 Act):
Twycross v Grant - promoters are the persons who set it going
Whaley Bridge Calico Printing Co. v Green offers another definition
Promoters are fiduciaries. Fiduciary obligation are obligation owed to the principal to act with "loyalty and good faith in dealings which affect that person" (Penner)
Re Great Weal Pologooth - lawyers and accountant drafting constitution are not promoters
Court tend to leave the term "promoter" fluid so that it could catch as many fraudster as possible

For public companies, marketing of securities is strictly controlled by Financial Services and Markets Act 2000, and LR of FSA

In 2013, FSA is to be replaced by 2 bodies;
1) PRA - Prudential Regulation Authority
2) FCA - Financial Conduct Authority

*flotation (公司股票的〕發行﹐上市)

Promoter is not:
-agent: Kelner v Baxter. A person cannot be an agent of a nonexistent principal
- trustee: Re Leeds and Hanley Theatres of Varieties

Duties & liabilities
- no secret profits. promoters are required to make full disclosures of any such profits
Erlanger v New Sombrero Phosphate - a syndicate bought mine, sold to co, did not disclose. New board bring action to rescind the sale
Held: contract is voidable, except:
i) Co. affirms (Re Cape Breton) (but Co. can still promoter to account for the secret profit)
ii) Co. delays in exercising its right to rescind (Long v Lloyd)
Also there ust be restitutio in integrum - it is possible to restore

Salomon v Salomon - if the board was not independent, disclosure of benefit should be made to the original shareholders
Gluckstein v Barnes - even disclosure to original shareholders might not be sufficient, if the scheme as a whole is designed to defraud the investing public it is not okay

Remedies
Sinclaire Investments (UK) v Versailles Training Finance Ltd
Target Holdings v Redferns - personal

Pre-incorporation contracts
problem: an agent (promoter) cannot bind a non-existent principal (Co.) to contracts
CL: 
Kelner v Baxter: promoter of hotel buy wine, wine are consumed, hotel went liquidated.
The privity doctrine prevents rights and liabilities being conferred on the co. 1999 Act does not apply to pre-incorp contracts
Promoter: the hotel ratified the contract, I am not liable
Held: personal liable
Novation: co. to make a new contract with similar terms. ( Natal Land & Colonization v Pauline Colliery & Development Syndicate)
Re Patent Ivory Manufacturing, Howard v Patent Ivory Manufacturing: Novation might be inferred

Re Northemberland Avenue Hotel - novation is ineffective if the co. mistakenly believed that it is bound by it
Newborne v Sensolid -

Reform: s.51 2006: personal liable
Phonogram v Lane -Denning: in order for the promoter to avoid the personal liability, the contract must expressly provide for his exclusion

s.51 does not apply:
i) Oshkosh B'Gosh v Dan Marbel - misnamed existing co.
ii) Cotronic v Dezonie - the co. no longer exists
iii)
Braymist Ltd v Wise Finance -

the promoter could also enforce the contract

Freedom of establishment (EU cases)
Centros v Erhversus-or Selkabssyrelsen -

variation of trusts

sui juris beneficiary - full age and sound mind
Principle in Saunders v Vautier - a sui juris beneficiary can collapse the trust.
By the same token, they can vary the terms of a trust.

2 limitation:
1. Re Brockbank: they cannot ask the t'ee to make such and such decision. They can insist upon a variation
2. only sui juris beneficiary can (Variation of Trust Act 1958)

Chapman v Chapman - HL said that the court has no inherent jurisdiction to consent to a variation of the trust on behalf of sui juris beneficiary. The inherent jurisdiction of a trust is only limited to:
1. grand additional administrative power to t'ee in emergency situation
2. sanction maintenance payments to beneficiary

Trustee Act 192, s.57 extended the court's power over emergency situation.
Trustees of the British Museum v AG - the court extend the t'ee's power of investment, based on the factors including:
i) standing of t'ee, their admin plans
ii) size of the fund
iii) object of the fnd


Variation of beneficial interest: Variation of Trusts Act 1958
- the court might approve if the variation would be for their benefit

Goulding v James - the s'or's intention is only relevant if they help the court to determine the what is of benefit to the beneficiaries
Knocker v Youle - but this Act may give rise to substantial inconvenience

Succession: family provisions

Inheritance (Provision for Family and Dependants) Act 1975

Succession: construction

Chp 10

narrow approach - Re Skyes, Re Lewis, Re Rowland

broad approach - Perrin v Morgan. What appears the most probable meaning. to ascertain from the will the t'or's intention

HL abandons literalism:
Perrin v Morgan: earlier case law established that money meant money held in cash, but not residuary personalty. TIX's estate was worth more than 30,000 and consisted almost entirely of stocks and shares. If only count cash, she would die almost wholly intestate.

Reluctance of chancery lawyers to abandon literalism:
Re Rowland -

General rules of construction:
- expressed intentions: Jones v Midland Bank, Anthony v Donges. Very limited power to omit/subsititute: Re Whitrick.
- construe words in their ordinary state - money could be interpreted as including all of the t'or's property (Perrin v Morgan). Re Trundle, Re Barne's WT. secondary meaning may prevail if:
i) Ordinary meaning does not make sense (Re Smalley)
ii) T'or supplies his own dictionary: Re Lynch
Capicious is ok: Gilmour v MacPhillamy
- technical words must be given their technical meaning. This rule is subject to contrary intention (Re Bailey)
- a will must be construed as a whole: Re Macandrew's WT, Higgins v Dawson

Specific rules of construction
- a will speaks from death: s.24 1837 Act: reference to property shall be construed to speak and take effect as if it had been executed immediately before the death (unless contrary intention, Re Sikes, Re Evans)
s.24 does not apply to description to persons (Re Whorwood)
- words denoting relationship:
children:
illegitimate children - s.1 Family Law Reform Act 1987
legitimated children - s.5 Legitimacy Act 1976
adopted children -s.39 Adoption Act 1976
issue: remoter descendants are prima facie included
 next-of-kin: prima facie those who are in the nearest degree of blood relationship. (Spouse is not, Garrick v Lord Cauden)
survivors- Re James's WT: those who were alive when t'or died. Re allsop: include persons born after t'or died.
-Golden rule: Re Harrison: you ought to read the will so as to lead to testacy
- falsa demonstratio rule: wrong description does not prevent a gift passing. Re Price, NSPCC v Scottish NSPCC
- eiusdem generis
- inconsistent provisions: rule of last resort. Later provision prevail over the earlier (Re Hammond). But earlier gift prevails (Re Gare)

Class-closing rules = rule in Andrew v Partington
*class gift: a gift to a class, consisting of persons who are included under some general description, and bear a certain relation to t'or
the rules are controversial: re Charters, Re Henderson's Trusts

i) immediate gift without qualification: Viner v Francis
ii) postponed gift without qualification:
iii) immediate gift with qualification: Andrew v Partington
iv) postponed gift with qualification:
- these rules do not apply if contrary intention (Re Edmondson's WT, Re Chapman's Settlement)

Types of extrinsic evidence
i) direct evidence: expression by t'or
ii) circumstantial evidence: armchair principle.

Admissibility of extrinsic evidence
*extrinsic evidence: evidence outside the will itself. Court cannot rewrite a will (Re Willliams)
 - t'or died after 1982, s.21 AJA 1982:
s.21(1)
a. meaningless (Kell v Charmer)
b. ambiguous language
c.
patent ambiguity: ambiguity on the face of the will
latent ambiguity: ambiguity in the light of surrounding circumstances

Promises to create trust

Only 3 types of promises that the court will enforce
- promises in deeds
- promises given for consideration
- promises detrimentally relied upon

Promises in Deeds

Basic rule: promise contained in a deed is called a covenant. CL will enforce it whether there is consideration or not, but equity will not because equity looks at intent not form
whether a third party can enforce a covenant at CL is a question. If covenant is a contract, C(Rights of Third Parties) Act 1999 will help. But we are not sure if a covenant is a contract or not.

Enforcement by the intended beneficiary
In general no, except:
i) C is a party made by statute
ii) C is within marriage consideration
iii) trust of the right to sue on the covenant - Re Cook's ST - problem: no declaration of such trust (some said such intention should be inferred from the mere fact that the promise to create a trust was contained in a deed). problem 2:
after-acquired property

*quid pro quo -a favour or advantage granted in return for something.
"the pardon was a quid pro quo for their help in releasing hostages"

Enforcement by the intended t'ee
- Re Pryce, re Cook's ST, Re Kay - please note these are decisions at first instance
- even if these cases are wrongly decided, what damages can t'ee claim? substantial or nominal?
- all B entitled is nominal damages because he is no worse off > Promises for consideration. 
But in the eyes of law, they are the owner of the property and therefore they have suffer lost.

Promises for detrimental reliance



Penner Chp.8-
The enforcement of covenants to settle by equity
-Covenants are promises formally expressed by being written in a deed
- covenants must be distinguished from contracts
-modern law of contract developed out of law of covenants. there is no formality requirement before (Now LP(MP) Act 1989 s.2. require contracts in land be made in writing though)
- a covenant is a formal means by which CL will enforce it, regardless of consideration
- equity will not enforce a gratuitous promise only because it is in a deed. Because equity will not assist a volunteer
- covenant to settle is a covenant to create a trust
- marriage settlement - a trust created by a man or woman in contemplation of marriage (because in 19th century a married woman's property become her husband's)
- these covenants are not made for any consideration
- AG v Jacobs-Smith - Equity regarded marriage as "the most valuable consideration imaginable"
- if they are already married, and they set up a trust for themselves, their children do not create a marriage settlement
- Pullan v Koe - wife transferred some after-acquired property to husband's bond. Husband dies. T'ee sue husband's executor to transfer the bond to them so that the t'ee can hold them on marriage settlement trusts. Held: yes, it is duty of t'ee to enforce the covenant
- Re Plumptre's marriage settlement - next of kin sue to enforce a covenant. Held: they cannot because they are volunteer, they are not within the marriage consideration. If it is a fully constituted trust, the volunteer beneficiary has the same right as beneficiaries who have given consideration

- Davenport v Bishop - once the c'or has transferred the properties to the t'ee, it is constituted for both non-volunteer and volunteer beneficiaries

The enforcement of covenants to settle at CL
- Re Pryce- said t'ee cannot sue c'or to transfer the property in favour of next of kin. Because if so, volunteer beneficiaries would be able to enforce the promise, which they could not through equity
- criticism of re Pryce - equity will not assist a volunteer, it does not mean that equity will stand in the way of a volunteer. Although the t'ee is asking if they have to sue or not, and the t'ee is not asking for help from equity, if they are to sue, they will sue at CL.

- 2 cases go in another way - Fletcher v Fletcher, Re Cavendish Browne's ST.
- 2 cases follow Re Pryce - Re Kay's ST, Re Cook's ST.
So now the authority is t'ee cannot sue for damages at CL
- Cannon v Hartley - father failed to settle the property. Daughter sues for damages. Held: yes
- if t'ee brings an acition at CL for breach of covenants. He may recover on 2 basis: certain sum, or c'ee's loss. Sometimes it is argued that c'ee lost nothing because it is the beneficiary who lost. So if the damages are paid on the basis of the latter criteria, the sum pay would be nominal. CL does not allow him to recover the damages for a third part (volunteer here): Woodar Investment Developemtn v Wimpey Construction UK
-

The trust of the benefit of a promise to settle
Until c'ee has the property constituted in him he holds his CL rights to enforce the covenant for himself absolutely

XXX

Fortuitous vesting of the trust property

-Re Brook's ST

Resulting trust

Penner Chp 5:
feofees - 公共不動產管理人
feoffments - transfer of land or property to the other given the other the total right to sell it as well as the right to pass it on to his heir feoffments to use were so common, equity assume that this was the normal basis upon which land is conveyed.
This is called the presume resulting trust.  This presumption is not abolished today yet, probably the court usually could find sufficient evidence to know what the actual intention of the parties, on balance of probability
RT: 2 kinds: Presumed RT and Automatic RT
PRT: 2 kinds: voluntary transfer PRT and purchase contribution PRT
Purchase contribution PRT: IF, A pays C to transfer property to B Presumes, B holds property on trust for A
Difference between these 2 types of RT:
Megarry J in Re Vandervell (No.2) - ART does not depend on any intentions or presumptions, but is the automatic consequence of A's failure to dispose of what is vested in him

PRT: s.60(3)1925 Act, a RT is not to be implied merely because there is no express statement saying that this is a gift, not a trust
Lohia v Lohia - it did abolished the presumption
Ali v Khan - agrees wiht L v L
(N.B. the section does not abolish the presumption in purchase contribution PRT cases)
Fowkes v Pascoe - the presumption is rebutted since there is no other conceivable reason for her to transfer the stocks to him (Mrs Baker treated Mr Pascoe as a grandson, there is evidence that she intended to give the stocks to Mr Pascoe as a gift)
Re Vinogradoff - woman buy loan stock into joint names of herself and her 4-year-old granddaughter.
Held - presumption not rebutted - infant hold the stock on resulting trust (L: W + baby, e: W)
contribution in purchase contribution PRT should be read as "purchase contribution in money or money's worth"
Springette v Defoe - sitting tenant (現任租戶)
Assume A and B buy a house which costs GBP50,000.
A pays GBP10,000. Mortgage provides GBP40,000, under which both A and B are liable.
A's equitable share: (10 + 40/2)/50 x 100% = 60%
B's equitable share: (40/2)50 x 100% = 40%
If the house doubles in value; GBP100,000.

Assuming after paying the mortgage loan, the profit is GBP40,000. A gets 24k, B gets 16k.
The presumption of RT: In order for A to get the benefit of presumption, he only has to provide evidence of the transfer itself. A does not have to prove that B provides no consideration. B will then give evidence. E.g. shows that he pays for the car, written contract of sale.
B is said to rebut the presumption of RT.

What is the content of presumption of RT? 4 theories:
i) the law presumes that the transferor declares an express trust over the property now in B's hands (Swadling)
ii) A intended B to hold the property for A on trust (Mee)
iii) A did not intend for B to take the title to the property beneficially (Penner)
iv) no legal basis to which B can point to show that A intended B to receive the property for his own benefit (Chamber & Birks)

Different theories will give different result. e.g. payment by mistake. If you use theory (i), A does not intend to declare an express so no RT. If you use theory (iii), A did not intend for B to take beneficially, so there is a RT.

 i) criticism: it cannot explain many cases. Re Vinogradoff - if using this model, this case is wrongly decided. Penner pointed out that this model is still wrong because in family home cases, it does not seem that the husband has expressly declares an express trust.(my question, is it still RT? L: H, e: H+W)

Midland Bank v Cooke. Swadling would say, these are actually constructive trust, rather than presumed resulting trust. Because the wife's contribution is simply a factor in finding a constructive trust. (my question: if wife contributes
purchase contribution)

ii)
iii) 5.20 -24 skip - please read later Presumption of advancement: only father to child, or husband to wife.

Court will infer that a man is making a gift

Sekhon v Alisa -No presumption of advancement from mother to child, unless the mother is a widow If man wants to show that the transfer is not a gift, he has to provide evidence. 2 ways to understand the relationship between the 2 presumptions >> it is a second step to presumption of RT: where father leads evidence to overcome the presumption of advancement, the presumption of RT falls back into place >>there is no presumption of RT in cases where presumption of advancement applies.

Laskar v Lasker - suggests that the presumption of advancement might apply between mother and daughter as well
Antoni v Antoni - pres. of advancement operates between parent and child
Pecore v Pecore (Canadian case) - pres of advancement operates between parent and minor child
McGrath v Wallis - the pres of advancement is rebutted because:
1) putting the property under the son's name would assist an application of a mortgage
2) declaration of trust is drawn up by a solicitor (although never executed)
3) father is 63 years old, good health, no obvious reason that he is making a gift to his son.
The court did not say there is a purchase contribution RT in this case, rather the court declare a trust and determine the equitable shares based on their intention objectively
ART: what the s'or fails to give away, he keeps. Swalding and Chambers does not agree, because in the beginning s'or has a title, but at the end of story he has an equitable title, so we cannot say that he "keeps". It really just fails, leaving him exactly as he was before. So, Swalding thinks there is no ART at all.

The nature of corporate personality

Saloman v Saloman - at that time the Company Act required that there be seven members of the company. Saloman and family hold shares, paid:
-GBP10,000 worth of debentures giving a charge over company's asset,
-GBP20,000 of GBP1 shares
-GBP9,000 cash Mr Saloman then paid off all creditors in full
So he holds 20001 shares, his family hold 6 shares Insolvent >>
CA: shareholders has to be bona fide but here the family hold the shares just to comply with the Company Act
HL> irrelevant, there is a separate legal personality in this case. (But Mr Saloman is a sole trader operating through a corporation)  

Macaura v Northern Assurance - Mr Macaura sold timber to a company, he then insured the timber. Fire destroyed timber, HL: Timber belongs to company, not Mr Macaura company's asset (timber) belong to the company, not its shareholder
Lee v Lee's Air Farming - Mr Lee owned all shares, he is also the pilot. Plan crashed, widow claimed $ and said Mr Lee is a worker. NZ: no. Privy Council: yes because the company and Mr Lee were disctint legal entities

Note: s.3(4) CA 2006 still allows unlimited company to be formed.
Debenture - company can raise money by issuing debentures, it is like an acknowledge of debt, it evidence the fact that the company is liable to pay back a specific amount with interest. The money raised does not become part of the share capital.
Liquidator - a court appointed official

Disposition by a beneficiary of his interest

http://books.google.com/books?id=ga9gAQAAQBAJ&pg=PA149&lpg=PA149&dq=sub-trust+2+legal+title&source=bl&ots=4rjCZcE-tP&sig=t_zQsCk5qST3vV0hpwnJbnRU12c&hl=en&sa=X&ei=y73GUtbkBKquiQfRsoDYDA&ved=0CFwQ6AEwCQ#v=onepage&q=vandervell&f=false

s.53(1)(c) -

T - B1 (equitable interest)- B2 (beneficial interest)
Grainage v Wilberforce - if B1 creates a bare trust for B2, he simply drops out of picture(because you have nothing to do and so become superfluous. So in effect B1 is disposing his beneficial interest, so this "transaction" is caught by s.53 (1)(c)

Nelson v Greening & Sykes -
Lawrence Collins LJ - the creation of a bare trust might in practice make it more convenient for the t'ee to deal directly with the beneficiary, this was not the same thing as a matter of law.

Current position:  Declaration of sub-trust are not dispositions of the beneficiary's equitable interest

Vandervell - Vandervell directed the bank to transfer the shares to RCS, dividends were declared, shares were then bought back by VT.
IRC: V retained an interest in those shares so was liable for tax
2 arguments:
1. V's direction to the bank to make an outright transfer to RCS was an attempted disposition of V's equitable interest. Since it has not been made in writing it was ineffective and V retained his e interest.
2. the option to buy back the shares from the RCS, which had been granted to VT, was received by VT not beneficially but on trust, since VT's sole purpose was to be a trustee company. However, V had never declared the trusts on which VT was to hold the option, so in the absence of any effectively declared trust VT held the option on RT for V as settlor.

HL: rejects 1st argument but accepts the 2nd. So liable for tax on the dividends.
HL unanimously held that the direction to the bank, which was t'ee of the shares, to transfer them outright to the RCS was not a disposition of V's equitable interest so does not fall within 53(1)(c).
Lord Upjohn: the situation was analogous to an outright transfer by a shareholder with legal beneficial title to the shares, since transfer of legal title to the shares by the bank to the RCS itself required documentation, there was no reason to require an additional document to transfer the beneficial interest.
Lord Wilberforce: Re Rose principle


criticism to Lord Upjohn and Wilberforce:
1.
2. the rule in Re Rose applies once we know what steps the transferor needed to take to make the transfer effective. But the rule does not tell us what the necessary steps are, and this was the question which faced the court in Vandevell.



wiki:

The House of Lords, by three to two, found that Vandervell was indeed liable to pay tax on the £145,000 of dividends given to the Royal College of Surgeons. The House of Lords held that LPA 1925 s 53(1)(c) was not applicable to situations where a beneficiary directs his trustees, by way of his Saunders v Vautier right to do so, to transfer full legal and equitable^[5] ownership to someone else. As such, Vandervell had not successfully divested himself of ownership (legal and equitable) in the shares, since the Trust Company had an option to purchase the shares back from the RCS. The case is a proposition that an oral declaration to a bare trustee to transfer the trust property to a third party absolutely for his own benefit is a valid disposition. If the settlor does not divest himself adequately as in Vanderwell v IRC an ART would operate.The option to purchase a substantial fraction of the company for only £5000 was extremely valuable. As such, Vandervell was liable to pay surtax on the option.

Lord Wilberforce said that there was,

“

no need, or room to invoke a presumption. The conclusion, on the facts found, is simply that the option was vested in the trustee company as a trustee on trusts, not defined at the time, possibly to be defined later. But the equitable, or beneficial interest, cannot remain in the air: the consequence in law must be that it remains in the settlor.

Vandervell No.2:
Shares bought back by VT with money from the children's trusts.
VT wrote to IRC and said the shares were now held on trust for the children
IRC: you still have an interest in the shares
4 years later, V executed a deed by which he transferred all rights he might still have had in the option or shares to VT to hold on the children's trusts.
question before the court: whether V retain interest in the shares in the period between VT's purchase of the shares and V's execution of the final deed?


IRC:

Proving declaration of trust

In general, oral testimony is admissable in civil cases. Same rule applies to prove the right-holder has made a declaration of trust. Except: 1) Land: the admissibility rule s.7, 1677 Act> s53(b) 1925 Act: declaration of trust of land must be manifested and proved by some writing s.7 1677 Act is qualified by s.8 1677 Act. s.8 1677 Act> s53(2)1925 Act Purpose is to prevent perjury (偽證罪) long time ago Writing does not have to be pre-dated. It could be post-dated. Gisseng v Gisseng - wrong - the declaration itself does not need to be "in" writing ***s.53(b) is only a rule of evidence. It is not concerned with enforceability, but with proof, a logical prior question Sometimes court allow the evidence to come in. Rochefoucauld v Boustead. CA: the statute designed to prevent fraud could not be used to effect a fraud R v B criteria: i) must be express trust 2) Testamentary trust controverted fact - 反駁 misnomer - 人名誤載 Burden of proof: General rule is he who asserts must prove (e.g.the husband, because he wants to say that wife holds it for him, and it's not a gift). 2 exceptions: i)Not husband or father (e.g. third person, wants to show that husband did not say it's a trust and therefore the transfer is a gift) ii)

constitutions

Constitution - transfer of the rights from settlor to t'ee e.g. transfer of e benefit, s.53(1)(c) 1925 Act The effect of perfect constitution - B can enforce the trust against the t'ee. It does not matter even if B gives nothing in return Milroy v Lord - equity will not assist a volunteer to perfect an imperfect trust. imperfect constition cannot be interpreted as a declaration by the settlor of himself as trustee Richards v Delbridge - same argument for gifts EXCEPT 6 situations: 1) detrimental reliance - Pascoe v Turner, Dillwyn v Llewelyn 2) Re Rose - while the settlor has done everything in his power to perfect the gift/trust (3rd party's assistance is needed), court will perfect the gift criticism: no detrimental reliance, no base, and maxim "equity looks upon that as done which ought to be done" does not actually apply here. 3) Strong v Bird testatrix (留有遺囑的死者)intend to release the debt, i.e., promise not to sue. Re Stewart extend the rule from releaseing debt only to all kind of rights. 4) The rule in Ralli details: pls see covenants to settle 5) Donatio mortis causa If I die, this watch is yours. Normally such gift would be subject to Wills Act 1837, which prohibit oral wills. But court render valid. Conditions for the operation: Cain v Moon. 6) unconscionability. Pennington v Waine - same facts, but result hard to reconcile with M v L.

Breach of trust

Court order: specific performance, or appoint a new t'ee. personal liability proprietary liability A third part may be personally liable as well by assisting the breach of trust trust account: records of the rights coming into and going out of the trust fund taking of/calling for an account: B sues t'ee for breach of trust falsify an account: when the t'ee has entered into a transaction which is not authorised, or he has paid to a person who is not a beneficiary of the trust, B can failsy the account in respect of that particular transaction Remedy - t'ee restore the breach (e.g. buy back the property, any difference comes out from his own pocket). If he cannot restore it, he has to pay from his own pocket Surchaging - the trust fund has less value than it should have had, due to negligence of t'ee strict liability, can escape when: 1) B consent to the breach 2) exemption clause 3) s.61, 1925, court relieve

Constructive trust

Real trust:
1) enforceable contract
2) imperfect gift

Fake trust: 2 types: institutional (arise by rules) and remedial (court's discretion)

Reasons of why remedial trust arise: Professor Birks: events which give rise to right:
1)manifestation of consent 2)wrong 3)unjust enrichment 4)others
Wrong-doing: CL: damages e: liability to account as a constructive trustee, or, equitable compensation
Lister v Stubbs Dubai Aluminium, Lord Millett suggested to jettison the language of constructive trust
AG for HK v Reid, Lord Templeton: there is a C trust because "equity considers as done that which ought to have been done"
Unjust enrichment
Chase Mangattan v Isarel-British Bank, mistaken payment: equitable property in the transferor, the legal property in transferee, so there is a trust arisen by operation of law.
Criticism: this is wrong, because there is no pre-existing interest.
This case is disapproved in Westdeutsche Landesbank v Islington LBC

secret trust

s.9 Formality of wills:
a) in writing
b) intend the signature to be effective
c)  K+A
d) i) witness signs, or
ii) witness acknowledge

These are not merely evidential requirements.
s.15 1837 Act - to ensure the impartiality of the witnesses, gift to witness or spouse would be avoided
s.20 - any alteration must be in the same form as the will

3 types of secret trust:
1. Fully secret trust: Has will
but it does not mention there's a trust
- Will says: to Fred
- I said: Fred I left money to you, please hold it on trust for Fifi
- Fred accepted
- a constructive trust is imposed on Fred to prevent him from unconscionably denying Fifi's right
ReBoyes - the names of other persons are not communicated to the executor, therefore no certainty of object, trust fails. It would be enough if I pass to Fred a sealed envelope and told him there are names inside the envelope

2. Full secret trust: No will
- rule of intestacy: my rights will go to my bro
- I said: Brother, when you get $, please hold a certain amount on trust for Fifi


3. Halfly secret trust: has will
- Will says: to Fred on trust for the purpose I have communicated to him
- a half secret trust needs to be created before the will, and can be regarded as incorporated into the will. (Blackwell v Blackwell)
- Blackwell v Blackwell -




-  please mention s.9 of the Wills Act - no will shall be valid unless
a) it is in writing
b) it is signed
c) it is witnessed
s.9 renacts Fraud Act 1677, it is an anti-fraud statute

Fifi wants money, Fred denies, Fifi goes to court, burden of proof on her.
Fred said you cannot bring evidence to court because of s.9: admissibility of evidence that is not in a form of signed writing  evidential provision
- substantive provision
- difference
All cases treat s.9 as evidential provision

Solutions

Solution 1: Fraud theory
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Gary Watt - Trusts and Equity textbook
- secret trusts are not subject to the Wills Act Testamentary transactions:
mutual will & secret trust testamentary disposition needs to be within the formalities laid down by Wills Act 1837

Mutual wills - when a husband and wife enters into a binding contract, that ensures when one of them dies earlier, the property would be left to the surviving person - the surviving spouse is bound in equity under a constructive trust to dispose the property in accordance with the agreement to create mutual wills
Re Dale- H and W agreed that they would draw up wills leaving the property to their son and daughter equally. H died, left the property to S and D. W later drew up a new will leaving all property to S.
Held: S must hold W's estate on trust for himself and his sis equally  PE giving rise to Constructive trust? fault lines
1) Gillet v Holt: PE usually is concerned with the benefits of the primary parties, while mutual wills & secret trusts are about the benefits of a third party
2) a mutual will depends upon a contractual agreement whereas PE does not
3) PE is not a remedy itself, but only a cause of action. Secret trust  Floating or suspensory theory  

Criticism of Fraud Theory:
- circular argument
- in half secret trust, if court does not let evidence in, there will be a automatic RT back to the s'or's estate. The trustee gain nothing - there is no fraud to prevent

Response to the criticism:
Blackwell v Blackwell - redefine what Fraud means. Lord Buckmaster & Lord Hailsham said defeating the expectation of the secret beneficiaries is also a fraud

Response:
But this response does not solve the problem that the argument is circular

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Solution 2: Cullen v AG for Ireland
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Solution 3: outside (dehors) the will theory

1. secret trust are inter-vivos declaration of trust by the t'or (questionable. Re Gardner No.2 said it is inter-vivos trust, but actually dehors the will theory's basis is that the trust arise when the subject matter is constituted into the trustee, there is no inter-vivos trust <
2. Mattew's theory:

criticism: narrow interpretation of "will". "Will" mentioned in the 1677 statute is the "totality of the t'or's wishes" (s.1)
it could not work because I cannot declare a trust on future property, I might lose the property before my death. Moreover, if it is cash, I have to identify the very coins and note, otherwise the trust will fail because of uncertainty of objects.


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Solution 4: incorporation by reference

criticism: it only applies to documents, whereas in secret trust cases the court is admitting oral testimony
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*legatee - a person who receive a legacy

Some specific issues:
- non-conforming evidence

Timing of acceptance:
Fully ST - before t'or's death(re Boyes): he has to know that t'or intended him to be a t'ee
Half ST - before execution of the will (obiter in re Keen). because otherwise t'or can change the will without a codicil
problem:
1) change of mind =/= change of will because it is outside the will
2) post-execution communication is accepted in fully ST, but not halfly ST cases. This is not fair.

2 or more t'ee - is the t'ee who are not told bound by it?
- Re Stead - TIC: only those who know are bound. JT: before or after execution of will? If before, all bound. If after, only those who are told are bound by the trust (re Stead does not explain why there is such rules, they just said here are the rules let's apply them)
- Halfly ST: no case law yet

Predecease of the secret beneficiary
- doctrine of lapse -gift will fall into residue
- re Gardner (No2) - there is inter vivos trust which, when benificiary has died, it passed to the estate <
Predecease of the secret t'ee
- equity will not allow a trust to fail for want of a t'ee: a substitute t'ee will be appointed.
- but if FST, it will lapse

Witnessing by secret beneficiary

Witnessing by secret t'ee

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what type of trust is secret trust?

- express - t'or intention
- constructive - t'or's detrimental reliance
Smith v Wheeler -
Siggers v Evans
Sen v Hedley -
*donatio mortis causa

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Penner: Chp 6
(Swadling's warning: Penner said dehors the will theory base on the assumption that it is inter-vivos trust, and it is wrong)
Non-testamentary gifts: my personal representative will hold it for you from my death. This is a inter vivos trust immediately vest in you a future interest
Testamentary gift: the gift must be revocable and ambulatory (流動的, 可修改的)
*ambulatory: a will just walks along without immediate effect, only operating when t'or dies
A specific gift adeems: if t'or sells his car, his specific gift of the car fails
A gift abates when t'or's property is reduced.
Secret trusts are testamentary trusts

-McCormick v Grogan - what counts as fraud? Re Gardner (No 2): the fraud is that the legatee fails to comply