Dispositions of Equitable Interests – s.53(1)(c) LPA 1925:
Introduction:
- This scenario concerns potential dispositions of equitable interests.
- With regards to each _______, it must be determined whether these are dispositions that
require signed writing and therefore whether they are binding.
- s.53(1)(c) LPA 1925 states that a disposition of an equitable interest or trusts subsisting at the
time of the disposition must be made in signed writing, by the person disposing of the interest
or an agent.
o The wording of the subsection is clear; non-compliance means that the transaction is
void.
Preliminary Paragraph:
- A preliminary point must be made in regard to whether this subsection applies exclusively to
rights over land.
- In s.205(1)(x) LPA 1925, the definition of “equitable interest” specifically mentions rights
“in or over land”.
o On this basis, it may be argued that only rights over land are covered by this
subsection.
- However, such point has never been raised before a court and all cases that concern the
application of this subsection do not involve rights over land.
o Moreover, in the preceding subsection s.53(1)(b) LPA 1925, the requirement of there
being rights over land is mentioned specifically.
o It can be justly argued that if subsection (c) was intended to be solely about rights
over land, it would have been just as clear.
o It is on this basis, therefore, that this answer will proceed.
Direction to Transfer Rights Absolutely:
- The case of Vandervell v IRC deals with such situations.
o In this case, V wanted to make a donation to RCS but, wishing to avoid paying stamp
duty, had his bank transfer title to shares to RCS with a dividend, which included an
option to purchase. V hoped that by transferring both legal and beneficial title, the
transfer would not fall within the scope of s.53(1)(c) and therefore would not require
signed writing.
o The court ultimately held that a direction to transfer rights absolutely is not a
disposition that requires writing under s.53(1)(c).
- BUT – the reasoning given by the court is not convincing.
o Lord Upjohn and Lord Donovan reasoned that the purpose behind s.53(1)(c) was to
prevent fraud.
Their Lordships were concerned about protecting the trustee, ensuring that
they knew who the beneficiary was.
However, since the trustee knows they are no longer trustee, they did not see
the risk of fraud on these facts and therefore did not fall within s.53(1)(c).
o This is not convincing.
There could still be fraud on these facts, even if not the fraud their Lordships
were referring to.
For example, the beneficiary could go back on their word, claim they never
made the direction and the trustee would not be able to prove that the
direction was given.
It is unclear why Lord Upjohn and Lord Donovan were concerned only with
this particular fraud.
o Lord Wilberforce gives a concurring judgement.
He argues that the beneficiary has done everything in their power to affect the
transfer, and, relying on Re Rose, if the beneficiary has gone through every
, step but something else has gone wrong, the court will perfect the imperfect
transfer.
In other words, the court would effect the rest of the transfer despite lack of
writing.
o Not only is this not convincing, it is also wrong.
The beneficiary clearly did not do everything in their power to effect the
transfer, otherwise they would have put it in writing.
- Despite the reasoning behind this case being doubtful and unconvincing, it is clear that the
court reached the correct decision.
o It was held in Westdeutsche that a transfer absolutely means there is no longer an
equitable right. When there is a transfer of rights absolutely, the equitable interest is
destroyed as there is no longer a trust.
o Even though Grey v IRC, applying the “usual, natural meaning” of the word
‘disposition’ would have held differently, it is clear that this should not be held to be
a disposition and therefore does not need to be in writing.
- The consequence of this is that ___________ was valid and binding.
Direction to Hold Rights on Trust for 3rd Party:
- Such a situation was dealt with by the court in Grey v IRC, in which a settlor made six
settlements in favour of his grandchildren.
o He later transferred substantial blocks of shares to the trustees, which they held on
trust for him. He subsequently orally instructed the trustees to hold the shares upon
the trusts of the six settlements.
o The court held, adopting the “usual, natural meaning” of the word, that it cannot be
denied that this is a disposition and therefore requires signed writing.
- The result of such decision is that _________ is not valid until it is put into signed writing.
- BUT – it is arguable that this decision was wrongly decided.
o The word “disposition” is actually very wide in scope; it encompasses any situation
where you have an equitable interest, and you lose it.
o This is shown clearly by the facts of Grey v IRC itself.
o This case did not concern one trust but six different trusts for his six grandchildren; at
the start, there was one equitable interest and at the end there was six. There was
therefore no transfer.
o The settlor instead had to destroy his one equitable interest in order to create six new
ones.
o The “usual, natural meaning” of ‘disposition’ for the court, therefore, includes even
destruction, which is arguably not the case.
When one thinks of ‘disposition’, it refers to a ‘transfer’, not destruction.
o Moreover, there are a large number of instances where equitable interests are
destroyed and yet there is no need for signed writing.
Two notable instances are the “equity’s darling” defence and the Saunders v
Vautier power.
- The above points show that the court clearly adopted too wide a definition and therefore is
wrongly decided.
o On this basis, the ________ is binding without the need for signed writing.
- ASIDE IF RELEVANT
o A question does arise, however, as to whether such an issue is present on these facts.
o The facts at hand do not involve the destruction of an equitable interest but merely the
transfer from one person to another.
o However, given that the court saw “destruction” as part of the “usual, natural
meaning”, this test should not be applied.
Specifically Enforceable Contracts:
Introduction:
- This scenario concerns potential dispositions of equitable interests.
- With regards to each _______, it must be determined whether these are dispositions that
require signed writing and therefore whether they are binding.
- s.53(1)(c) LPA 1925 states that a disposition of an equitable interest or trusts subsisting at the
time of the disposition must be made in signed writing, by the person disposing of the interest
or an agent.
o The wording of the subsection is clear; non-compliance means that the transaction is
void.
Preliminary Paragraph:
- A preliminary point must be made in regard to whether this subsection applies exclusively to
rights over land.
- In s.205(1)(x) LPA 1925, the definition of “equitable interest” specifically mentions rights
“in or over land”.
o On this basis, it may be argued that only rights over land are covered by this
subsection.
- However, such point has never been raised before a court and all cases that concern the
application of this subsection do not involve rights over land.
o Moreover, in the preceding subsection s.53(1)(b) LPA 1925, the requirement of there
being rights over land is mentioned specifically.
o It can be justly argued that if subsection (c) was intended to be solely about rights
over land, it would have been just as clear.
o It is on this basis, therefore, that this answer will proceed.
Direction to Transfer Rights Absolutely:
- The case of Vandervell v IRC deals with such situations.
o In this case, V wanted to make a donation to RCS but, wishing to avoid paying stamp
duty, had his bank transfer title to shares to RCS with a dividend, which included an
option to purchase. V hoped that by transferring both legal and beneficial title, the
transfer would not fall within the scope of s.53(1)(c) and therefore would not require
signed writing.
o The court ultimately held that a direction to transfer rights absolutely is not a
disposition that requires writing under s.53(1)(c).
- BUT – the reasoning given by the court is not convincing.
o Lord Upjohn and Lord Donovan reasoned that the purpose behind s.53(1)(c) was to
prevent fraud.
Their Lordships were concerned about protecting the trustee, ensuring that
they knew who the beneficiary was.
However, since the trustee knows they are no longer trustee, they did not see
the risk of fraud on these facts and therefore did not fall within s.53(1)(c).
o This is not convincing.
There could still be fraud on these facts, even if not the fraud their Lordships
were referring to.
For example, the beneficiary could go back on their word, claim they never
made the direction and the trustee would not be able to prove that the
direction was given.
It is unclear why Lord Upjohn and Lord Donovan were concerned only with
this particular fraud.
o Lord Wilberforce gives a concurring judgement.
He argues that the beneficiary has done everything in their power to affect the
transfer, and, relying on Re Rose, if the beneficiary has gone through every
, step but something else has gone wrong, the court will perfect the imperfect
transfer.
In other words, the court would effect the rest of the transfer despite lack of
writing.
o Not only is this not convincing, it is also wrong.
The beneficiary clearly did not do everything in their power to effect the
transfer, otherwise they would have put it in writing.
- Despite the reasoning behind this case being doubtful and unconvincing, it is clear that the
court reached the correct decision.
o It was held in Westdeutsche that a transfer absolutely means there is no longer an
equitable right. When there is a transfer of rights absolutely, the equitable interest is
destroyed as there is no longer a trust.
o Even though Grey v IRC, applying the “usual, natural meaning” of the word
‘disposition’ would have held differently, it is clear that this should not be held to be
a disposition and therefore does not need to be in writing.
- The consequence of this is that ___________ was valid and binding.
Direction to Hold Rights on Trust for 3rd Party:
- Such a situation was dealt with by the court in Grey v IRC, in which a settlor made six
settlements in favour of his grandchildren.
o He later transferred substantial blocks of shares to the trustees, which they held on
trust for him. He subsequently orally instructed the trustees to hold the shares upon
the trusts of the six settlements.
o The court held, adopting the “usual, natural meaning” of the word, that it cannot be
denied that this is a disposition and therefore requires signed writing.
- The result of such decision is that _________ is not valid until it is put into signed writing.
- BUT – it is arguable that this decision was wrongly decided.
o The word “disposition” is actually very wide in scope; it encompasses any situation
where you have an equitable interest, and you lose it.
o This is shown clearly by the facts of Grey v IRC itself.
o This case did not concern one trust but six different trusts for his six grandchildren; at
the start, there was one equitable interest and at the end there was six. There was
therefore no transfer.
o The settlor instead had to destroy his one equitable interest in order to create six new
ones.
o The “usual, natural meaning” of ‘disposition’ for the court, therefore, includes even
destruction, which is arguably not the case.
When one thinks of ‘disposition’, it refers to a ‘transfer’, not destruction.
o Moreover, there are a large number of instances where equitable interests are
destroyed and yet there is no need for signed writing.
Two notable instances are the “equity’s darling” defence and the Saunders v
Vautier power.
- The above points show that the court clearly adopted too wide a definition and therefore is
wrongly decided.
o On this basis, the ________ is binding without the need for signed writing.
- ASIDE IF RELEVANT
o A question does arise, however, as to whether such an issue is present on these facts.
o The facts at hand do not involve the destruction of an equitable interest but merely the
transfer from one person to another.
o However, given that the court saw “destruction” as part of the “usual, natural
meaning”, this test should not be applied.
Specifically Enforceable Contracts:
