Sir HM- Essay- Formalities

Question 1: ‘Section 53(1)(c) of the Law of Property Act 1925 requires that ‘a
disposition of an equitable interest or trust subsisting at the time of the disposition, must
be in writing signed the person disposing of the same or by his agent thereunto lawfully
authorized in writing or by will’. Unfortunately, it is not clear what amounts to a
disposition for the purpose of this Section’. Discuss.
Answer structure:
1. Introduction
The courts of equity are firmly based upon the equitable maxim ‘equity looks into intent,
rather than form’. This maxim indicates that the Chancery Equity Courts are not very fond of
the formalities. Be that as it may, the Parliament through statutory intervention has
introduced certain formalities for creation and disposition of equitable interests. Section 53(1)
(c) of LPA 1925, creates a writing requirement for the disposition of equitable interests,
however the case law underneath Section 53(1) (c) of LPA 1925, shows that the courts have
not adopted a consistent approach in understanding the concept of disposition. In the essay
below, we shall discuss the various concepts and cases to show the inconsistency in the courts
approach towards the concept of disposition.

2. Main body
a. What is meant by disposition
- Requirements of Section 53(1) (c) - must be in writing because frauds needs
to be avoided. If there is no writing, then the beneficiary can commit fraud
upon the trustee, as if it is done verbally then the beneficiary can go back on
his words. If someone wants to dispose of the trust then it must be in write so
that they do not go back on their words. Avoid fraud and certainty.
- Writing is a necessary (which can be physically or by email)

- Disposition- initially narrow meaning- coming from the Statute of Frauds

1677, where it was defined as grants and assignments. Courts have broadened
the definition of disposition in the case of (GREY V IRC), where they held
the meaning as any transaction where the beneficiary deals with his equitable
interest is considered as disposition.

b. Transaction which are considered as disposition

- Assignment| Statute of Frauds
- Direction to trustee to hold the property on trust for another and its variants
(coming from the case of GRAY V IRC)
- Surrender| Re Paradise Motors
- Analysis for these transaction: These transactions are dispositions and
rightly labeled so hence no uncertainty or lack of clarity. Courts adopting a
consistent approach.

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 c. Transactions which are NOT considered as dispositions
- Creation of sub-trust
- Creation of bare sub-trust
- Disclaimer
- Analysis- the approach of the courts is consistent

d. Transaction which are NOT considered as dispositions but SHOULD be

- Transfer of absolute title- VANDERWELL V IRC

- Analysis: VANDERWELL V IRC- is a criticized case. It should be regarded

as disposition but the courts incorrectly considered it not as disposition. The
transfer of absolute title led to the extinguishment or surrender of equitable
interest of the existing beneficiary and therefore, it should have been invalid
without writing. The courts created this exception in VANDERWELL V IRC
for policy reasons which were that the gifts were made to be perfect due to the
fact that the donee was a charitable institution. The courts kept a soft corner.

- Richard Nolan argues that this case can be regarded as an example of over-
reaching. The gift of shares by the trustee with the consent of the beneficiary
led to beneficiaries’ equitable interest being over-reached.

- Declaration of new trust with the consent of existing beneficiary (RE

VANDERWELL NO 2)

- Analysis: Lord Denning stated that an equitable interest created without

writing can be disposed off without writing as well. This is a flawed concept.
Express Trusts for moveable properties, there is no requirement of any
formalities. If this logic of Lord Denning is to be followed/accepted, then there
would be no writing required for such dispositions.

e. Transactions which are considered as disposition but does not require

writing
- Vendor purchaser constructive trust (OUGHTRED V IRC) (NEVILLE V
WILSON).

- Analysis: a disposition of equitable interest by virtue of VPCT is not covered

under Section 53(1) (c) due to the operation of Section 53(2).

- Criticized part of judgment: that even though the verbal disposition was
valid, the courts nonetheless imposed stamp duty on the documents for policy
reasons. Inconsistent approach.

3. Conclusion
Although, unlike Section 53(1) (b) there are no specific exceptions to Section 53(1) (c), but
the courts by adopting an inconsistent approach have created expectations by themselves

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without any cogent reasons. One can therefore argue that the aim of Section 53 has failed and
few tears would be shed if Section 53 is repealed.

Question 2: ‘Section 53(1) (b) and (c) of the Law of Property Act 1925 each create a
strong rule because written evidence is the only reliable indication of whether a trust or
equitable interest has been created in whom, at any given moment, that trust or interest
resides’.
Critically discuss with reference to case law.
Answer structure:
1. Introduction
Although the courts of equity generally despise formalities, the Parliament has nonetheless
bound the courts with certain formalities created under Section 53(1) (b) and 53 (1) (c) of
LPA 1925. Both these Sections create writing requirements for creation of trusts and
disposition of equitable interests respectively. The statement in the question states that these
statutory provisions provide a strong rule rejecting oral or parole evidence. However, in the
essay below I shall be discussing various cases, where the courts have departed from this rule
indicating that the rule is not a strong one and that the courts have time and again admitted
verbal evidence as reliable indication of equitable interest.

2. Main body
a. Section 53 (1) (b)
- Why were formalities created by the parliament

- Requirements of Section 53 (1) (b)

- Exceptions- ROUCEUFAULD and BARRISTER V BARRISTER

- Analysis- justified exception however, this is a slippery slope. If verbal

evidence is allowed, then it itself is an unreliable evidence. The chances of
fraud may increase. In some situations it may close the window of fraud but
sometimes it may open the window. To avoid this fraud, the statute was
created. It is easy toile in courts but hard to prove a fake document in the
courts.

b. Section 53 (1) (c)

- Requirements- must be in writing (GREY V IRC) (RE PARADISE
MOTORS) (OUGHTRED V IRC)

- Exceptions- VANDERWELL V IRC and RE VANDERWELL NO.2

- Analysis- not justified exceptions [as discussed in question 1]

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 3. Conclusion
The courts have time and again admitted verbal evidence as reliable indication of equitable
interest showing that the statute is not a strong rule. Amongst the two, Section 53(1) (c) is a
strong rule compared with Section 53(1) (b), because Section 53 (1) (b) only creates
evidential requirements and not a validity requirements. Whereas Section 53(1) (c) creates
validity requirements.

Question 3: ‘judges have been far too willing to allow the circumvention of statutory
provisions requiring that transactions are effected or evidenced by signed writing.
Those provisions are included for good reasons’
Critically discuss
Answer structure:
- Same as above but opposite in the statement
- Does not limit to section 53
- Mention secret trust- section 9 of the wills trust- must be in writing, signed
and witnessed by 2 people. Why string requirement? Justified because to avoid
fraud. According to penner absolutely unjustified, the judges have a liberal
approach the courts should not have accepted that