Disposition by a beneficiary of his interest

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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