Professional Documents
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Formalities and Constitution Case Laws
Formalities and Constitution Case Laws
Held: The House of Lords held that there was no transfer of the equitable interest when the oral declaration
was made (due to non-compliance with s53(1)(C)), but the disposition of Hunter’s interest in the shares was
effective when the later declaration was made in writing (so stamp duty was payable)
Held: It was held the purchaser could not rely on s.53(1)(b) to deny the widow’s interest in the house, as to
deny the widow’s interest would be fraudulent
Held: Her appointment as one of 5 executors, coupled with his continuing intention to give the bonds to her,
was held to be sufficient to perfect the gift
Held: The Court held there was no gift and the deed of gift did not have the effect of creating a trust → it was
a deed to give and not a deed to create a trust and the two are distinct
So this case affirm affirms that an ineffective gift does not constitute a declaration of trust i.e. it upholds
⇒ The IRC assessed whether stamp duty was payable on the oral contractual transfer of the son’s reversionary
shares to Oughtred. The IRC argued as they were attempting a disposition of the shares it should be void as
under s53(1)(C) this needed to be done in writing
Held: Lord Jenkins said stamp duty is payable on documents only and not transactions: As s53(1)(c) had not
been complied with, when the son told the trustees to transfer his reversionary interest to his mother it
had no effect; this meant the value was transferred in the document (NOT the oral contract) and therefore was
taxable under stamp duty
Held: The court upheld that there had been a creation of an express trust despite only being made orally
⇒ In this case, a donor (Ada Crampton) intended to transfer 400 shares in a private company to her nephew,
Harold, and to have Harold made director of that company. Ada completed a share transfer form which she
sent to her accountant, Pennington, but Pennington failed to forward this form either to the company or Harold.
Consequently, due to failure to deliver form, no transfer of shares was made to Harold
⇒ Ada subsequently signed a form consenting to Harold becoming a director of the company, but by her will
she transferred him insufficient shares for Harold to have a controlling shareholding in company → If Ada had
transferred the 400 shares to Harold before her death, then Harold would have had such a controlling interest in
the company
Held: It was held by Arden LJ that an equitable interest in those shares passed to Harold because it was
considered that it would have been unconscionable for Ada to have refused to transfer those shares to Harold
Whereas the every effort rule is an equitable rule that would apply automatically if the transferor made
every effort to transfer the property, this rule appears to give the court discretion and wide powers to
decide whether or not it would be the right thing to do to complete the gifts
Held: It was held that the gift was void because she was unable to understand the conflicting claims of her
other daughters i.e. she didn't have the mental capacity
⇒ Because these were shares in a private company, its directors had the right to refuse to register the transfer
and did not actually register it until the death of the testator
So the transfer form completed by Mr Rose constituted everything he needed to do to transfer the shares,
but the transfer was not complete because there were further formalities to be completed by the company
⇒ The issue was whether the transfer of shares to Hook had taken effect under the ineffective inter vivos
transfer form or under the terms of the will
As mentioned, the completion of the transfer form was the only formality which Mr Rose was required to
carry out as transferor, however, the company’s articles of association gave the board of directors power
to refuse to register the transfer of shares → Therefore transfer not complete until board approved it
⇒ Whether the legatee had taken the shares inter vivos or post mortem mattered a lot
This mattered because the bequest in Mr Rose’s will was conditional on the shares not having been
transferred to the legatee prior to the testator’s death; it was, therefore, possible to argue that the transfer
inter vivos was ineffective to pass any title but nevertheless sufficient to defeat the testamentary gift, thus
⇒ The registered owner of shares executed two share transfers, one in favour of his wife absolutely by way of
gift and the other in favour of 2 people (including his wife) on trust
⇒ Again, the transferor had completed all the formalities required of him; only ratification by the board of
directors remained before the transfer was complete
⇒ The date of the transfer was again important so that Rose’s estate could demonstrate that the voluntary
transfer had succeeded in passing an equitable interest in the shares to attract a lower rate of tax than would
otherwise have been payable if the transfer had not taken effect until the date of ratification by the board
⇒ The argument for IRC was that there was no transfer until ratification and that there could be no suggestion
of an express trust having been created because that would be to give effect to the intended bequest by means
not intended by the transferor
Held: The Court of Appeal approved the decision in Re Rose [1949] and held that the equitable interest in the
shared had been transferred as soon as the transferor had completed all of the formalities, which he was
required to complete i.e. as soon as transferor completed all the formalities he could there was a constructive
trust over the shares
Held: Equity will not allow a statute to be an instrument of fraud and it would be unconscionable here for the
defendant to keep the land (Lindley J)
Held: The Court of Appeal held that the elements necessary for a Donationes Mortis Causa had been present,
and that the gift of the house was valid.
STRONG V BIRD (1855) LR 18 EQ. 315
Facts: Bird borrowed £1,100 from his stepmother with whom he shared the house. She paid him quarterly rent
to stay in the house, so it was agreed that he (Bird) would repay the £1,100 loan by reducing her rent by £100
per instalment. She paid the reduced rent for 2 quarters, but, when payment was due on the 3rd quarter, the
stepmother insisted upon paying the full rent without deduction. She continued to make full payments of rent
until her death 4 years later, whereupon Bird was appointed to be sole executor of his stepmother’s estate. The
stepmother’s next of kin, Strong, alleged that Bird ought to repay the £900 balance of the loan that remained
Held: The court held that the stepmother satisfied the requirements of the rule in Strong v Bird. Namely, it was
held the stepmother intended to make a gift of the money owing, and that intention remained at her death
⇒ Pagarini was given the deed, but did not execute it until 1992. The solicitors bought the deeds to him in
1992 (as he was very ill) and it was properly executed (signed and witnessed); so the trust was then created.
However, this did not transfer wealth into the trust: it just establishd a framework ready to receive his property
(so property still belonged to him at this point)
⇒ He then orally directed his accountant to transfer all of his wealth to the trust i.e. words of gift → as seen,
words of gift are not effective to make a gift unless there is delivery
Note: It was not a donatianes mortis causa even though he was on his deathbed because it wasn’t a
conditional gift i.e. it wasn't a gift that would be made when he died, it was to be made there and then
⇒ The accountant noted that TCP did not have long to live and urgently prepared all the transfer forms for
TCP to sign to transfer legal title. But, once the transfer forms were given to TCP he refused to sign them →
he seemed to have lost interest and saying he had already disposed of his property. He died a month later → so
this looks like a prima facie incomplete gift
⇒ The issue was whether, by his oral declaration, P had successfully transferred the property to the trust.
As already said, an oral declaration gift must be coupled with delivery to be effective → without both
Accordingly the property was not transferred to the charitable trust (as he had not completed the formality
requirements of a gift) but went to his estate → so, the property went to his beneficiaries under the rules of
intestacy
⇒ Privy Council allowed an appeal → they held it was an effective transfer of equitable title
⇒ This was an unusual case in that TCP was trustee of the foundation; in his own right he was the legal owner
of the property; the intention was the property would vest in the trustees of whom TCP was already one (i.e.
TCP was a trustee of the trust) → so if somebody holds property as a trustee they don't need to transfer legal
title because they already have it
“Although equity will not aid a volunteer, it will not strive officiously to defeat a gift.” - P.501 (Lord
Browne-Wilkinson).
Case Facts: The IRC assessed Vandervell (V) as liable for surtazx on the shares as he retained a beneficial
interest in them (as stated under the Income Tax 1952 s414). The IRC argued when V instructed (in writing)
the bank to transfer legal title in the shares to RCS, he failed to specify he was also transferring his own
beneficial title in the shares, so the transfer failed by virtue of s53(1)(c). This would have meant that V was
still the beneficial owner and subject to tax.
V had actually directed the trustees to transfer the absolute interest, and does not need not be a separate
disposition under s53(1)(c), and neither can the beneficiary be said to retain any of the beneficial interest
“The transfer thus made pursuant to his intentions and instructions was a disposition not of the equitable
interest alone, but of the entire estate in the shares…. I see no room for the operation of s53(1)(c)” (Lord
Donovan).
HOWEVER, the House of Lords still found for the IRC on the grounds that V retained a beneficial
interest in the option to repurchase the shares under a resulting trust (as it was unclear who could exercise
this equitable interest, so it resulted back to him) → so he still had a beneficial interest and therefore
Held: The Court of Appeal held the resulting trust came to an end when the option was exercised in 1961;
Denning held a new trust – of the shares – was created and, as a trust of personalty, did not require writing
under s.53(1)(b), as it was not a trust of land, or 53(1)(c), as the resulting trust no longer existed: there was no
subsisting beneficial interest.
It was also held that, as the money used to exercise the purchase came from the 1949 trust fund: as a
general principle, any property bought with money under a trust becomes part of the trust property.
The resulting trust, which came into existence as a result of Vandervell’s failure to declare on what basis
the option was held, was exempt from the provisions of s.53(1)(c) by virtue of s.53(2) of the LPA 1925.
⇒ The case is controversial: it has been held that the grounds on which the CA held that the shares were held
for the benefit of the children are unconvincing and difficult to reconcile with other cases.
⇒ A particular issue is Lord Denning’s separation of the option and the shares as separate properties.
However, it has been argued that this is artificial, in that the option can be ‘traced’ into the shares purchased;
and that the use of the money from the 1949 settlement would give them an equitable lien over the shares but
not a proprietary interest.