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Timestamp: 2019-06-26 01:49:40
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Matched Legal Cases: ['art 1', 'art 1', 'EWCA ', 'UKHL ', 'UKHL ', 'UKHL ', 'UKHL ', 'UKSC ']

Chapter 4: Formalities (Part 1): A. The character and purpose of formalities
Original Title: chapter 4formalities
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Chapter 4: Formalities (Part 1)
A.The character and purpose of formalities
As a cautionary measure o Property rights, including equitable interests under a trust, are very valuable rights. They should not be effectively dealt with in a casual or informal way, just in case the transferor did not seriously consider the consequences of his act. The formality of writing, in particular the requirement that the transferor signs his name, is suited to this purpose, because these days even the most benighted rube understands that when he sign his name to a document that is not a personal letter he is generally doing something of legal consequence. For evidential purpose I o Writing requirements provide documentary evidence that makes frauds more difficult on the presumption that it is easier to get away with lying to the court about what someone said than it is successfully to forge documents and lie to the court about their origin. For evidential purpose II o Documentary evidence also prevents the administrative problems that might arise when the memory of oral transactions are complicated, the writing down helps the parties to be clear about what they intend. Finally, in the case of trusts, the writings are useful simply as a paper record for the trustee, which ensures that he does not commit an inadvertent breach of trust by, say, paying income to a former beneficiary who has since assigned his equitable rights to the income to someone else.
B. Declarations of trusts in land: Law of Property Act 1925, s53(1)(b)
The admissibility rule o Statute provides that declarations of trust regarding land must be manifested and proved by some writing. The rule is an ancient one, s.7 of the Statute of Frauds 1677 providing that: all declarations or creations of trust or confidences of any lands, tenements or hereditaments shall be manifested and proved by some writing signed by the party who is by law enabled to declare such trust, or by his last will in writing, or else they shall be utterly void and of none effect. o That section was re-enacted as s.53(1)(b) of the Law of Property Act 1925 as follows: A declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will.
A statutory exception to the formality requirement o Section 7 of the Statute of Frauds was qualified by s.8, which read as follows: Provided always, that where any conveyance shall be made of any lands or tenements by which a trust or confidence shall or may arise or result by the implication or construction of law, or be transferred or extinguished by an act or operation of law, then and in every such case such trust or confidence shall be of the like force and effect as the same would have been if this statute had not been made; any thing herein before contained to the contrary notwithstanding. o Section 8 was re-enacted as the much shorter s.53(2) of the Law of Property Act 1925: This section does not affect the creation or operation of resulting, implied or constructive trusts.
C.Issues: The effect of non-compliance with section 7 of the statute of Frauds
The wording be manifested and proved by some writing suggests that the declaration need not be in writing, that the requirement is evidential only and that, consequently, an oral declaration is valid, although not enforceable, prior to the signing of a writing manifesting and proving it. On the other hand, section 7 retained the sanction for non-compliance provided in the original draft; this suggests that the requirements was not merely evidential and affected the validity of trust. The courts resolved the ambiguity by establishing, first, that the provision does not indeed only require the declaration to be evidenced by a signed writing, and, secondly, that in the absence of such writing, the trust is valid although unenforceable. The wording utterly void and of none effect does considerable violence. It reduces the protection given by the provision. First, it greatly reduces the cautionary function of the provision since the required signed writing might be made unwittingly after the settlor had changed his intention about the trust; it might even be supplied by a signed writing repudiating the trust. Secondly, it may reduce the protection given by the provision to third parties. Gardner v Rowe (1828) The only case discussing the point, an oral express trust was enforced against the trustee (so as to avoid claims by his creditors in bankruptcy); although the trust was evidenced by a post-transfer writing by the trustee, the case turned on the doctrine enunciated in Rochefoucauld v Boustead (1897), not on the writing point, so it does not decide the issue. However, in any case, the words of s53(1)(b) itself make it difficult to find any post-oral declaration signed by anyone would be an effective writing.
D.The doctrine of Rochefoucauld v Boustead (Exception to the rule)
Background:o The plaintiff, the Comtesse de la Rochefoucauld, had mortgaged her estates in Ceylon, and the mortgagee demanded payment of the mortgage debt. She had insufficient funds following her divorce, and her friend Boustead orally agreed to buy the estates from the mortgagee at a price sufficient to cover the mortgage debt and expenses, and hold the estates on trust for her, subject to her paying off the purchase price and further expenses. Since Boustead purchased the beneficial title from the mortgagee, which he impressed with the trust in the plaintiffs favour, so he should have signed the necessary writing. o The rationale for the CAs enforcement of the trust is what we now call the doctrine of Rochefoucauld v Boustead: Equity will not allow a statute enacted to prevent fraud to be used as an instrument of fraud, the court will allow parol (i.e. oral) evidence to prove the express trust, despite s53(1)(b) (or, in the case of Rochefoucauld, s7 of the Statute of Frauds 1677, the forerunner of s53(1)(b)).
The scope of the doctrine:1.A declares himself a trustee of Blackacre for B. The doctrine does not apply in this situation since it is restricted to situations where a person acquires property subject to a trust. 2.A conveys Blackacre to B to hold on trust for C. This is the clearest case where the Rochefoucauld doctrine does apply. Re Duke of Marlborough: The Duchess assigned a lease to Duke. It was expressed to be in consideration of love and affection and made no mention of any trust. After the Dukes death, the Duchess claimed that the assignment had only been made to enable the Duke to raise money by a mortgage of the lease (which he had done) and that it was part of the arrangement that he would re-assign the property to her. It was held that the Dukes obligations to re-assign could be enforced by the Duchess despite non-compliance with s7 of the Statute of Frauds. In the case like this, the Dukes estate would have been unjustly enriched by the acquisition of the lease if the obligation to re-assign had gone unenforced because of non-compliance of the statute. On the other hand, if the Duchesss allegation to re-assign was mistaken or false, the Duke (and his estate) would simply have failed to retain the gift. 3.A sells and conveys Blackacre to B on the terms that A is to retain a life interest in the property. Bannister v Bannister (1948) In this case, where a women sold 2 cottages to her brother-in-law on his oral undertaking that he would allow her to live in one of them rent free for the rest
of her life. Subsequently, he repudiated this undertaking and sought to obtain possession of the cottage. The Court of Appeal held that the Rouchefoucauld doctrine applied, with the result that the man held the property on a constructive trust to give effect to his sister-in-laws interest in the property. The trial judge had found that the woman would not have sold the property without the mans undertaking and that the property was sold at substantially less than the market value of the property with vacant possession. This case made it clear that Rochefoucauld doctrine does not depend on the trustee having a fraudulent intention at the time of the conveyance, but it seems that the doctrine does depend on his having knowledge of the trust when he acquires the property. 4.B purchases Blackacre from D for 100,000. There is clearly some arrangement about this A and B. A says that B agreed to buy Blackacre on his behalf and that he promised to hold it on trust for him subject to a charge in Bs favour to secure repayment of the purchase price and expenses. B says that he never bound himself to do anything with Blackacre for A, although he did agree to consider re-selling it to A if A could find the money. B says, in the alternative, that he promised to re-sell the property to A for the original purchase price and expenses. It is now 2 years later and Blackacre is worth about 200,000. The most difficulty to apply Rouchefoucauld doctrine to this most problematic situation because they are extremely unlikely to have an idea of the distinction between the trust and contract agreement. There will often be great difficulty both in ascertaining the facts (and, of course, one or both parties may also be lying) and in appropriately conceptualizing the facts found. In situation (3), and (4), it might appear that injustice is no more likely to be caused by insistence on the requirements of s7 of the Statute of Fraud than by application of the Rochefoucauld doctrine. Moreover, s7 are particularly important in the context of situation (4) since a signed writing would out the court in a far better position to determine whether any binding arrangement was made, whether it was a trust or some other arrangement, and what it were its terms. Youdan said I do not, however, advocate the abandonment of the Rochefoucauld doctrine in these situations.
The type of trust enforced in Rochefoucauld:o What type of trust is enforced in a case such as Rochefoucauld v Boustead? Logically, it must be an express trust, for the event which triggers the finding that a trust exists is the now proved by evidence of declaration of trust. Indeed, this is exactly what the Court of Appeal (as part of the ratio of the case) there held. Other cases, however, have called it constructive (Bannister v Bannister [1948] 2 All ER 133; Paragon Finance v Thakarer [1998] EWCA Civ 1249; [1999] 1 All ER 400). This is wrong.
A constructive trust, arises for a reason other than a declaration of trust on the part of a right-holder. The Rochefoucauld trust, by contrast, arose because of proof by evidence of a declaration of trust. Nor is it possible to say of such a case that the express trust failed and a resulting trust arose as a consequence. Though that might be correct were s.53(1)(b) a rule concerning enforceability (on the argument that though the oral evidence is inadmissible to enforce the trust, which therefore failed, it is admissible to prove the fact of such failure, thus giving rise to an automatic resulting trust), the subsection is, as we have seen, unlike the now repealed s.40 LPA 1925, only an evidential provision.
E. The matrimonial homes cases
There are a group of cases, the most of prominent of which are Pettitt v Pettitt [1970] UKHL 3, Gissing v Gissing [1969] UKHL 5, Lloyds Bank plc v Rosset [1990] UKHL 4, Stack v Dowden, [2007] UKHL 17, and now Jones v Kernott [2011] UKSC 53, which concern attempts to say there is a trust of the matrimonial home. Such cases usually run into problems with, among other things, s.53(1)(b) of the Law of Property Act 1925. Such trusts are therein called constructive trusts, more particularly, common intention constructive trusts. But given that a constructive trust is one which arises for a reason other than of a declaration of trust by a right-holder, it may seem that the idea of a constructive trust based on an intention to create a trust is something of a misnomer. However, as Professor Birks famously said in An introduction to the law of restitution (Oxford: Clarendon Press, 1985) p.65: There is a fine but important distinction between intent conceived as creative of rights, as in an express trust or a contract, and intent conceived as a fact which, along with others, calls for the creation of rights by operation of law. The matrimonial home cases can be understood as cases in which the intention to share the property is not sufficient on its own to create an express trust, but is a fact that calls for the imposition of a constructive trust when there have been sufficient acts of detrimental reliance on that intention. This is similar to proprietary estoppel (discussed briefly in the previous chapter) and was clearly the approach taken in Lloyds Bank plc v Rosset, where Lord Bridge said: Once a finding [of an agreement or arrangement to share] is made it will only be necessary for the partner asserting a claim to a beneficial interest against the partner entitled to the legal estate to show that he or she has acted to his or her detriment or significantly altered his or her position in reliance on the agreement in order to give rise to a constructive trust or a proprietary estoppel. However, more recently in Jones v Kernott, the Supreme Court made no mention of detrimental reliance nor did it provide any explanation why an unexpressed intention to share a home can give rise to a trust without having to comply with s.53(1)(b) of the Law of Property Act 1925.
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