The central issue is the "complete constitution of voluntary trusts".

Postage Stamp:

Helen’s estate is unadministered. The combined effect of Commissioner of Stamp Duties (Qld) v Livingston (dealing with the entitlement of a residuary legatee) and Official Receiver in Bankruptcy v Schulz (entitlement of a specific legatee) dictates that the beneficiary (Jeremy) of an unadministered deceased estate has no beneficial interest in any of the assets comprising that estate.

Jeremy has no more than an equitable chose in action against the personal representative to compel the latter to administer the estate. Jeremy’s equitable chose in action is an item of property that may be dealt with like any other item of equitable property. This constitutes pure personalty.

Jeremy’s words “I now hold” purport to be a declaration of trust over half his interest in respect of the postage stamp in favour of Olivia. This transaction is a purported declaration of trust over Jeremy’s equitable interest in pure personalty.

It seems the declaration of trust is a disposition under s3 PLA with reference to Schedule 6 PLA. Section 11(1)(c) PLA requires a disposition of an equitable interest to be evidenced in writing. It must be determined if this includes a declaration of trust over a subsisting equitable interest in pure personalty.

A literal interpretation of the PLA dictates that this transaction is not valid since it was not evidenced in writing. Three reasons why this may not be the best interpretation to follow have been advocated. First, it would be conceptually obscure for legal interests over pure personalty to be made orally while equitable interests in pure personalty are required to be evidenced in writing. This “dichotomy would be unintelligible in terms of legislative policy”.

Secondly, the agency argument. Section 11(1)(c) permits a disponer to authorise an agent to sign, on their behalf, a declaration of trust over an equitable interest in land. However s11(1)(b) makes no such provision. Thus if both 11(1)(b) and 11(1)(c) apply to the declaration of trust, 11(1)(b) will invalidate while 11(1)(c) would validate the declaration if an agent was given authorisation. Since 11(1)(c) applies to land as well as pure personalty, it does not apply to declarations of trust over equitable interests in land which would “compel the corollary” that it also does not apply to equitable interests in pure personalty”.

Thirdly, the literal rule should not be applied since it causes a mutual contradiction between the same subsections of the statute as in Secretary, Department of Social Security v James.

Thus it is at best uncertain which argument prevails for lack of Australian authority. There is no judicial pronouncement, even by way of obiter, on whether s11(1)(c) applies to a declaration of trust over an equitable interest in pure personalty.  It is uncertain if Olivia has any interest in respect of the stamp.

Interest Free Loan:

Jeremy has purported to transfer his entitlement in relation to the debt owed to him by Pamela to Natalie. Norman v Federal Commissioner of Taxation dictates that it is impossible to make a gift of future property since something that is presently non-existent cannot be made the subject matter of a trust.

Like the future right to royalties being classified as present property in Shepherd v Federal Commissioner of Taxation, it seems Jeremy’s entitlement to the remainder of the debt will be present property capable of being the subject matter of an immediate gift.

Jeremy is attempting to dispose of his entire common law chose in action, the right to the remaining portion of the debt, not the debt itself. The assignment will only be valid at law or in equity under s199 PLA if there is an absolute assignment of the entire chose in action made in writing signed by Jeremy and express written notice is given to Pamela.  

The requirements have not been met. Jeremy merely telephoned Natalie. This is similar to Olsson v Dyson.  Therefore the purported voluntary assignment is not valid at law for failing to comply with s199 PLA. Furthermore it is not valid in equity because Jeremy has not done all that was necessary for him to have done to enable Natalie to complete the assignment under s199 PLA. Therefore the telephone conversation has no effect in law or in equity and Jeremy will retain his right to the remaining debt.

Shares in Company C:

Jeremy has an equitable interest in 60 000 shares of company C. Colonial Bank v Whinney held that company shares are not assignable under s199 PLA.  This equitable interest may be created, dealt with and enforced in the same way as other personal property under s1070A(3)(b) of the Corporations Act (CA). However, legal title to the shares is normally transferable in accordance with company C’s constitution.

This intended result is not possible. Firstly, the courts will disallow an assignment since the doctrine of merger of estates prevents a beneficiary (Jeremy) under a trust from assigning his beneficial interest (¾ C shares) to the trustee (Ben as joint trustee). The interest would merge with Ben’s legal title as joint trustee, giving him and Geraldine “an entire and unqualified legal interest in that property”.

Secondly, there is a problem with circularity of obligation. Deane J in Corin v Patton would dictate that it is conceptually impossible for Margaret to hold her interest for the benefit of Geraldine and Ben, and for Geraldine and Ben to concurrently hold their purportedly derived beneficial interest for Margaret. Any attempt by Geraldine and Ben to enforce the trust against Margaret would have been defeated by Margaret’s enforcement of the sub-trust against Geraldine and Ben. This would effectively make the purported sub-trust nugatory.

In order to make this purported transaction valid; Jeremy must first get his equitable interest to Ben as joint trustee. The words “I am now giving you my interest in C shares” can be construed under In re Schar Decd  as a release using Crichton v Crichton. This would be a release of Jeremy’s ¾ sub-beneficial interest to Ben as joint trustee on terms, as in Grey v Inland Revenue Commissioners, that Geraldine and Ben:

1. Further release ¼ of the sub-beneficial interest to Margaret,
2. Further release ½ of the sub-beneficial interest to Ben on terms that Ben:

1. Receives ¼ of the sub-beneficial interest for himself
2. Further releases ¼ of the sub-beneficial interest on terms of a trust for Arnold.

Since Grey v Inland Revenue Commissioners allows a release on terms of a new trust, it seems there is no conceptual impediment with a release on terms of a new release. Therefore both problems will be eliminated.

Result:

                                        

Margaret

                M(¼, 20 000)                                G&B(¾, 60 000)

                                        A(¼, 20 000)                B(½, 40 000)

                                                        B(¼, 20 000)                A(¼, 20 000)

Jeremy has an equitable interest in the shares of C. The courts have held a release to be a disposition of an equitable interest under s3 PLA with reference to Schedule 6 PLA. Jeremy has manifested and proved the disposition of his equitable interest by writing and signing the letter to Ben in accordance with s11(1)(c) PLA. Therefore it seems the letter has effect in equity. Jeremy will loose his interest in the shares.

Diamond:

Jeremy is a one-half beneficial owner of the Diamond. The Diamond is a personal chattel. Jeremy’s interest in respect of the Diamond, under the trust, amounts to an equitable chose in action.  An equitable chose in action is capable of being assigned in equity only. It “may be” but is not required to be assigned in accordance with s199 PLA. All that is required for the equitable assignment is a manifestation by Jeremy of an intention to transfer.

Original Position: _                                        Result Intended:

Dorothy                                                Dorothy

Jeremy (½ )         Carol (½)                                         Carol

Carol (½)        Dorothy (½)

Jeremy cannot assign his equitable interest to Carol. The doctrine of merger of estates prevents Jeremy’s beneficial interest from merging with Carol’s. Carol cannot receive two halves as a separate interest.  

Further, a purported transfer to Carol would create a circularity of obligation. It is conceptually impossible for Dorothy to hold her interest for the benefit of Carol, and for Carol to concurrently hold her purportedly derived beneficial interest for Dorothy.

Thus In re Schar Decd may construe the words “I am now giving you my interest” as a release to Carol, using Crichton v Crichton, on terms, using Grey v Inland Revenue Commissioners, that Carol:

1. Receives ¼ of the beneficial interest for herself and
2. Further releases ¼ of Jeremy’s beneficial interest to Dorothy.

Result:

                Dorothy

Dorothy (¼)         Carol (¼ + ½ = ¾)

This release is a disposition of an equitable interest under s3 PLA. Jeremy has manifested and proved the disposition of his equitable interest by writing and signing the letter to Carol in accordance with s11(1)(c) PLA. Jeremy will loose his interest in the Diamond.

Painting:

Jeremy is the absolute owner of the painting. The paining is a personal chattel (a chose in possession). Cochrane v Moore dictates that title to the personal chattel may be transferred by either executing and delivering a deed of gift to the donee, or by delivering the chattel with the intention of transferring title to the donee.

Jeremy has written and signed a letter to Gregory. There is no evidence to suggest that the letter purports to be a deed. It is not described as a trust instrument under s44 PLA and has not been witnessed in accordance with the formalities of deeds executed under s45 PLA. Thus he has not complied with either method. Therefore Jeremy will retain his title to the paining over Gregory.

In relation to Theresa, Jeremy’s words “I am now holding” is evidence of a declaration of trust over his legal interest. Paul v Constance dictates that Jeremy’s declaration of trust over his legal interests in pure personalty does not have to be evidenced in writing and may be made orally.

Jeremy, as absolute owner of the Painting, cannot hold legal title to the Painting subject to his own equitable title. Jeremy is declaring himself to be the sole trustee of the Painting for the joint benefit of himself and Theresa. Jeremy retains legal title to the painting but holds the beneficial interest as trustee for himself and Theresa in equal shares.

Therefore Jeremy has created a new equitable interest in favour of Theresa. This is a chose in action allowing Theresa to enforce her equitable interest in her portion of the Painting. Thus Jeremy’s letter to Gregory has no effect in law or equity however his telephone call to Theresa has effect in equity.

Credit Balance:

The credit balance is a legal chose in action against Bank B. It represents the right to sue the Bank for the amount of the credit balance. Jeremy’s interest in respect of the Diamond, under the sub-trust, amounts to an equitable chose in action. His words “I am now giving you my interest” may be construed as a purported release of his sub-beneficial interest using In re Schar.

Original Position: _                                                Result Intended:

Elizabeth                                         Elizabeth

Lawrence                         Elizabeth (¼)        Lawrence (½)        Martin(¼)

Jeremy (¾, $300000)        Martin(¼, $100 000)                        Martin(¼)

It seems there is no trust relationship existing between Jeremy and Elizabeth. Therefore Jeremy will not be able to release his beneficial interest to Elizabeth as this would be “contrary to principle”. Thus it seems the purported release is impossible.

However, Jeremy should have released his ¾ sub-beneficial interest to Lawrence on terms that Lawrence:

1. Receives ¼ of Jeremy’s sub-beneficial interest for himself,
2. Further releases ¼ Jeremy’s beneficial interest to Elizabeth and
3. Further releases ¼ of Jeremy’s beneficial interest on terms of a trust for Martin.

Valid Result:

Elizabeth

        Elizabeth (¼, $100 000)                Lawrence(¾, $300 000)

                        Lawrence (¼, $100 000)        Martin (¼ + ¼ = ½, $200 000)

The release would have been a disposition of an equitable interest under s3 PLA with reference to Schedule 6 PLA. Jeremy wrote and signed a letter in compliance with the writing requirements of s11(1)(c). Thus if Jeremy had released his interest to Lawrence, on terms, he would have lost his interest in the credit balance.

Antique Vase:

This is a personal chattel. Jeremy’s interest in respect of the Antique Vase, under the trust, amounts to an equitable chose in action.  Jeremy’s words “I now hold my interest” purports to declare a sub-trust for Veronica and Yvonne.

Original Position: _                                        Result Intended:

Veronica                                        Veronica        

Jeremy (½ )         Veronica (½)                         Jeremy(½)        Veronica(½)        

Veronica(¼)        Yvonne(¼)                                

        

Firstly, Jeremy is purporting to declare s sub-trust of ¼ of his beneficial interest for Yvonne. This is a disposition under s3 PLA with reference to Schedule 6 PLA. It is a declaration of a sub-trust over a subsisting equitable interest in pure personalty.. There is no judicial pronouncement, even by way of obiter, on whether s11(1)(c) applies to a declaration of a sub-trust over an equitable interest in pure personalty.  Thus it is uncertain if Jeremy will loose this portion of his interest in the Vase.

Secondly, Jeremy is purportedly declaring to hold ¼ of his beneficial interest in the Vase for Veronica. This intended result is not possible. There is a problem with circularity of obligation using the judgement of Deane J in Corin v Patton. Any attempt by Jeremy to enforce the trust against Veronica would have been defeated by Veronica’s enforcement of the sub-trust against Jeremy. This would effectively make the purported sub-trust nugatory.

To be Valid: _                                                        

                

Veronica

Veronica(¼ + ½ = ¾)                Jeremy(¼)

                                Yvonne(¼)

To be valid; the purported declaration of a sub-trust can be construed as a release simpliciter of ¼ of Jeremy’s beneficial interest in the Vase to Veronica. However, as this release is a disposition of an equitable interest under s3 PLA, it will consequently fail as it is not evidenced in writing under s11(1)(c) PLA. Thus Jeremy will retain this portion of his interest.

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