The law of formalities is really a series of ad hoc responses to problems raised by revenue considerations. There is simply no real sense of a judicial development of equitable principles.

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Adeola Akitoye        

The law of formalities is really a series of ad hoc responses to problems raised by revenue considerations. There is simply no real sense of a judicial development of equitable principles.

I will start my essay off by explaining what formality is all about and then explain its requirements under S.53 (1) (c) LPA 1925 and I will also use case examples for explanation and to make my point. My essay will also cover situations issues regarding Inland revenue. I will give my conclusion at the end of the essay.

The main purpose of formality requirements is the prevention of fraud through hidden transactions of equitable interests, particularly oral transactions and when the legal interest remains with trustees and the equitable interest moves elsewhere, any lack of writing makes the trust difficult if not impossible to enforce at the suit of those who are, or at least reputed to be beneficially entitled.

The formality requirements arose out of the Statute of frauds 1677, which were also incorporated into related statutes such as the Wills Act 1752 repealed and replaced by the Wills Act 1837 (as amended) and some of the previsions of the Statute of Frauds are reproduced under section 53(1) (c) of the Law of Property Acts 1925.

My point here are principally concerned with the disposition of equitable interests and the four ways in which those interests may be dealt with was articulate by Romer LJ in Thomas Executors v Yerbury [1936] 1 KB 645 5 and I will also be discussing the four methods articulated by him.

Romer said “Now the equitable interest in property in the hands of a trustee can be disposed of by the person entitled to it in favour of a third party in any one of four ways. The person entitled to it (1) can assign it to the third party directly; (2) can direct the trustees to hold the property in trust for the third party (see per Sargant J in Re Chrimes); (3) can contract for valuable consideration to assign the equitable interest to him; or (4) can declare himself to be a trustee for him of such interest.”  Category (2), as Lord Evershed pointed out in Grey v IRC “appears to have been regarded as distinct from both an assignment, on the one hand, and a declaration of trust of the interest in the beneficial owner’s hands, on the other.”

It is to be noted that such a direction is a “disposition” within Law of Property Act 1925 s.53, according to the wide construction put upon that word by the ‘House of Lords, and required therefore to be in writing. If the beneficial owner authorises the trustees to transfer the legal estate to donees, then the beneficial interest passes to the donees without express mention.

Is should also be noted that category (4) creates what is usually called a sub-trust; a situation in which A holds property on trust for B, and B declares himself to be trustee of his interest for C. Unless B has specific duties to perform, he is a bare trustee and apparently drops out, the original trustee A holding on trust for C.

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Grey v IRC 1960 A.C 1 established that a direction to bare trustees that they transfer assets to other trustees of a separate settlement, to be held on trust of that settlement, involves disposition of a subsisting equitable interest within s.53 (1)(c), and that the word 'disposition' should be given its natural meaning, which is wider than s.9 of the Statute of Frauds 1677.8 The oral direction, the intent of which was to determine his equitable interest in the shares was, therefore, a purported 'disposition' within s.53(1)(c).9 The directions were rendered ineffective for non-compliance with s.53(1)(c).Green submits that 'where the ...

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