#7344 - Formal Requirements For Trusts - Property, Equity and Trusts 1

• Persons with equitable interests in land can assign their interests in a number of ways (Comptroller of Stamps v Howard-Smith (HCA):

1. An expression or indication of intention on the part of the donor that he shall hold the equitable interest vested in him on trust for the persons intended to benefit.

   1. In this case he retains the equitable interest but constitutes a himself a trustee and imposes upon himself an obligation to hold it for the benefit of the donees

2. A sufficient expression of immediate intention to make over to persons intended to benefit the equitable interested vested in the donor

   1. Here neither notice nor communication is required; though notice can be important to bind the trustee it isn’t a condition precedent to the operation of the expression of intention to be an assignment

   2. What is necessary is an expression of intention to set over teh equitable interest and communication to someone who doesn’t receive the communication in confidence or in the capacity as an agent for the donor

3. The intending donor for whom property is held on trust can give to his trustee a direction requiring him to hold the property on trust for the intended donee

• Further, beneficiaries that are ‘sui juris’ and entitled to equitable interests corresponding to full legal interests in property vested in their trustee can require the transfer of legal estates or interests – and he may then transfer that legal interest upon trust for others.

  • But here he simply directs the existing trustee to hold on trust for new beneficiaries and cannot impose, without the trustee’s consent, new duties upon the trustee

• Difficulties have arose out of this statute, such as in Adamson v Hayes (HCA)

  • Facts: In Dec ’70 the appellant and respondents were registered holders of mineral claims relating to mineral deposits under the Mining Act. Some of them were registered in A and his relatives name and others in H’s names – but all were held by them as trustees for beneficiaries who varied in relation to each claim. In Dec ’80 a pooling agreement was reached between the two syndicates for a ‘partnership’ to divide the property in a 56/44 ratio between the appellants/respondents with an option that the respondents can acquire 50% on certain terms. They exercised the option but the appellants refused, relying on the fact that since the claims were ‘land’ they were void since the oral agreement wasn’t enforceable under the Statute of Frauds

  • Held: The Mineral claims were interests in land since s7 of the Property Law Act which included ‘any strata or seam of minerals...’ as Land overrode s273 of the Mining Act that interests in mines should be chattels. But s273 prevented appellants relying on the Statute of Frauds because s273 said that mining tenements weren’t to be regarded as lands for the purpose of the statute

  • Held (Menzies, Stephen and Gibbs JJ):

    • The agreements came under s34(1)(b) and the effect of the agreement was simply to substitute new trusts for the old ones

  • Held (Stephen and Walsh JJ): The agreement could be characterised as a disposition of equitable interests already in existence and thus came within s34(1)(a)

    • They rejected that s34(1)(a) only applied to the creation of legal interests

  • Held (Stephen J): Even if the pooling agreement did amount to a declaration of trust in relation to each claim, to a disposition of equitable interests within the ambit of s34(1)(c)

  • Held (Gibbs J): There was no disposition of a ‘subsisting legal interest’ since the equitable interests disposed of didn’t exist until the agreement created them and hence they weren’t ‘subsisting’

• In the above case Gibbs J in obiter rejected the suggestion that that s34(1)(c) only applied to equitable interests in land

  • But this is qualified – in Vandervell v Inland Revenue Commissioners the House of Lords held that even though the Statute of Frauds applied to dispositions of equitable interests in things other than land – it didn’t apply to transactions enabling a person to receive both legal and equitable interests (in that case – shares)

Some Questions left open

• Does s 53(1)(a) (writing and signature required) only apply to legal interests in land?

  • Menzies J says yes

    • If he is right, how does this provision interact with s 52 that requires conveyances/dispositions of legal interests to be made by deed

  • Gibbs, Stephen and Walsh JJ rejects this view

    • If this is right what is the purpose of s 53(1)(b) and (c)

• Whether or not s 53(1)(a) applies to contracts for the sale of an interest in land that create equitable interests in the purchaser is answered in the case below (Baloglow)

• s 53(1)(b) requires written evidence of a declaration of a trust rather than that the declarations be made in writing – this is in contrast with s 53(1)(a) which requires that creation/disposal of interests in land be in writing. s 53(1)(c) on the other hand requires the actual disposition of an equitable interest to be in writing

• What is the difference between a ‘declaration of trust’ in (1)(b) and a disposition of an equitable interest/trust subsisting at the time of disposition (1)(c)

  • Where a legal fee simple holder declares themselves trustee for another – this is within (1)(b)

  • Where the holder of an equitable interest declares themselves trustee of their equitable interest it also comes within (10(b)

• Even though the section says ‘interests in land’ it appears that s 53(1)(c) applies to dispositions of equitable interests in all forms of property (Adamson v Hayes). Cf the judgement of Menzies J.

• But a closed question is that legislation doesn’t exclude evidence of a trust where to do so would enable the defendant to use the legislation as an instrument of fraud (Davies v Otty)

Scenarios

• If T holds shares in trust for B₁ and B₁ orally directs T to hold them in B₂ it is ineffective since it amounts to a disposition of an equitable interest within s53(1)(c) [Grey v Inland Revenue Commission) and thus requires writing

• T holds shares in trust for B₁ who orally directs him to transfer them to B₂ with the intention (not expressed in writing) that B₂ should have both legal and beneficial title. T transfers the shares to B₂

  • In such a case the beneficial interest in the shares does pass to B₂ since s 53(1)(c) doesn’t apply

• H and W jointly hold interests in land, H agrees in writing, authorized by W to sell the land to P. But W hasn’t authorized H in writing to act on his behalf and H&W refuse to complete – P seeks specific performance while H&W resist the claim on the basis of s 34(1)(a) which requires that agents authorize others in writing.

  • The formal requirements for the sale for an interest in land have been satisfied since the agreement is in writing, even though W hasn’t authorized H to enter into agreements on her behalf

    • Is it enforceable? Opinion: Should be, they’re using the statute as an instrument of fraud

• Section 23C(1)(b) doesn’t apply to transactions purporting to create and declare a trust; in such a case s23C(1)(a) has to be met (Re JS and GP)

  • Monte v Buongiorno – s 34(1)(a) doesn’t apply to agreements to sell land, only documents like a transfer or conveyance; hence it is sufficient to satisfy the Statute of Frauds s4

    • Marist Bros v Shire of Harvey affirms Monte

• S 34(1)(b) is the governing subsection in relation to declarations of trusts relating to land – these have to be evidence but not made in writing