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Lecture

3. Requirements of Writing & Form

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Department
Law
Course
JSB171
Professor
All Professors
Semester
Spring

Description
A SSIGNMENT —R EQUIREMENTS OF W RITING Creation of express trusts: • The trustee must have the title to the trust property • Where the trustee acquires the property, the proper writing and form requirements must be adhered to, in order to perfect a valid transfer → The trustee will gain the property through assignment (transfer) of the property Assignment = the immediate transfer of an existing proprietary right, vested or contingent, from the assignor to the assignee: Norman v Federal Commissioner of Taxation (1963) 109 s 11(1)(a) s (11)(1)(b) s 11(1)(c) Matter Creation or Declaration of trust Disposition of disposition of an subsisting equitable interest in land interest or trust Object Land only Land only Land & Personalty Type of writing Actual writing Evidentiary writing Evidentiary writing By whom Settlor/lawfully Settlor Settlor/lawfully authorised agent authorised agent Effect of lack of Disposition void Disposition not Disposition not writing void, merely void, merely unenforceable unenforceable Section 11 PLA (1) Subject to this Act with respect to the creation of interests in land by parol— (a)no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person’s agent lawfully authorised in writing, or by will, or by operation of law; and (b)a declaration of trust respecting any land must be manifested and proved by some writing signed by some person who is able to declare such trust or by the person’s will; (c)a disposition of an equitable interest or trust subsisting at the time of the disposition, must be manifested and proved by some writing signed by the person disposing of the same, or by the person’s agent lawfully authorized in writing, or by will. (2) This section does not affect the creation or operation of resulting, implied, or constructive trusts. • Disposition includes conveyance, vesting instrument, declaration of trust, disclaimer, release and every other assurance of property: s3 & Sch 6 PLA 1. except by will: Sch 6 PLA Section 59 PLA No action may be brought upon any contract for the sale or other disposition of land or any interest in land unless the contract upon which such action is brought, or some memorandum or note of the contract, is in writing, and signed by the party to be charged, or by some person by the party lawfully authorised. 1 Andrew Trotter LWB241 Trusts • Rule in Millroy v Lord—If a trust taking effect as a transfer does not comply with requirements of writing & form, equity will not save it by treating it as one which takes effect as a declaration o Trust by transfer → requirements of writing & form o Trust by declaration → requirements of writing only  Or no requirements at all, depending on the circumstances Actual writing v evidential writing • Actual writing: an agreement/deed/document creating the trust 1. Contemporaneous (at time of transfer) • Evidenced in writing: Some documentation to support the trust ← eg a letter saying trust created = sufficient evidentiary proof 1. Need not be contemporaneous 2. No particular form is required: Forster v Hale 3. The writing must contain the terms of the trust – the parties, particularly the beneficiaries, the trust property and the nature of the trust: Forster v Hale 4. The original beneficial owner (settlor) must sign the document, not the trustee: Tierney v Wood 5. Evidentiary writing can be satisfied by multiple documents being read together: Secretary, Department of Social Security v James (1990) 95 ALR 615 Types of equitable assignment: 1. Declaration by full owner that holding as trustee for third party O  [←B] (trust created by declaration) 2. Direct assignment by full owner to trustee for third party O  T [←B] (trust created by transfer) 3. Direction to trustee by beneficiary to hold trust property for the third party T [←B1] [←B2] (trust continues) 4. Contract for valuable consideration for beneficiary to assign trust property to a third party T [←B1] ($) [←($)B2] (trust continues) 5. Direction to trustee to transfer the trust property to a third person [B→] T  O (trust ends) ← beneficiary must be of full age and capacity and absolutely entitled to the trust property: Saunders v Vautier 2 Andrew Trotter LWB241 Trusts 1. Declaration by full owner that holding as trustee for third party O  [←B] (trust created by declaration) Land → s11(1)(a) or (b) → actual or evidentiary writing HCA Approach—s11(1)(a) | Actual Writing: Adamson v Hayes (1973) HCA • All dispositions of interests in land require actual writing: s11(1)(a) PLA • → Disposition includes a declaration of a trust: s3 & Sch 6 Dictionary • → Therefore, declarations of trust require actual writing s11(1)(a) applies— 1. only to land | not to personalty 2. to the creation of an interest as well as a disposition 3. to all interests (legal and equitable), including leasehold interest: Adamson v Hayes (1973) 130 CLR 276 (Oral agreement for mining rights ← equitable interest  mining claim = land → lack of writing is a defence) Accepted Alternative Approach—s11(1)(b) | Evidentiary Writing: Department of Social Security v James (1990) 95 ALR 615 (lower court) (oral declaration of trust— unit for disabled daughter but no documentation  evidentiary writing through joinder did suffice || issue of ownership of property lowering pension) • Definitions and provisions in the PLA operate “unless a contrary intention appears” • The express provision in s11(1)(b) that declarations of trust require only evidentiary writing demonstrates such a contrary intention • To adopt the high court approach would be to neglect s11(1)(b) of any independent operation • → Therefore, declarations of trust require only evidentiary writing • Also suggested that s11(1)(a) has effect only to legal interests, which avoids the problem (NSW): Baloglow v Konstantidis [2001] NSWCA 451 → s11(1)(b) a declaration of trust respecting any land must be manifested and proved by some writing signed by some person who is able to declare such trust or by the person’s will; Requirements of Writing— Evidentiary writing—an agreement/deed/document creating the trust ← eg a letter saying trust created = sufficient evidentiary proof 6. Need not be contemporaneous 7. No particular form is required: Forster v Hale 8. The writing must contain the terms of the trust – the parties, particularly the beneficiaries, the trust property and the nature of the trust: Forster v Hale 9. The original beneficial owner (settlor) must sign the document, not the trustee: Tierney v Wood 10. Evidentiary writing can be satisfied by multiple documents being read together: Secretary, Department of Social Security v James (1990) 95 ALR 615 Required by—settlor Failure of writing → Disposition not void, merely unenforceable 3 Andrew Trotter LWB241 Trusts Personalty → no section applies → no requirements of writing • s11(1)(a) applies only to creations or dispositions of interests in land, not personalty • s11(1)(b) applies only to trusts created by declaration, not by transfer • s11(1)(c) applies only to dispositions of subsisting interest, not to the creation of new interests 2. Direct assignment by full owner to trustee for third party → s11(1)(a) O  T [←B] (trust created by transfer) Land → s11(1)(a) → actual writing • Because it is the creation by transfer of a legal or equitable interest in land, it is a disposition and must therefore be in actual writing: s11(1)(a)  Some contrary NSW authority that it would only apply to legal interests: Baloglow v Konstantidis [2001] NSWCA 451 s11(1)(a) applies—  only to land | not to personalty  to the creation of an interest as well as a disposition  to all interests (legal and equitable), including leasehold interest: Adamson v Hayes (1973) 130 CLR 276 (Oral agreement for mining rights ← equitable interest  mining claim = land → lack of writing is a defence) • Void unless actual writing: s11(1)(a) • Some academic authority that it would only apply to the transfer of equitable interests which is not a declaration of trust: see Ford and Lee, at [6060] → s11(1)(a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person’s agent lawfully authorised in writing, or by will, or by operation of law; Requirements of Writing— • Actual writing—an agreement/deed/document creating the trust • Contemporaneous (at time of transfer) Required by—settlor / lawfully authorised agent Failure of writing → Disposition is void Personalty → no section applies → no requirements of writing • s11(1)(a) applies only to creations or dispositions of interests in land, not personalty • s11(1)(b) applies only to trusts created by declaration, not by transfer • s11(1)(c) applies only to dispositions of subsisting interest, not to the creation of new interests 4 Andrew Trotter LWB241 Trusts 3. Direction to trustee by beneficiary to hold trust property for the third party T [←B1] [←B2] (trust continues) Land → s11(1)(a) or (b)→ evidentiary or actual writing • Direction to trustees is a disposition: Grey v IRC [1960] AC 1 (H creates trusts for benefit of grandchildren (B)—oral direction to T to hold on trust (no stamp duty payable on oral direction)—no beneficiaries named: resulting trust to H, to B upon death—T executed declarations of trust  oral declarations ineffective, because disposition of trust & not in writing | trustee writing direction saved the trust, subject to stamp duty) s11(1)(a) applies—  only to land | not to personalty  to the creation of an interest as well as a disposition  to all interests (legal and equitable), including leasehold interest: Adamson v Hayes (1973) 130 CLR 276 (Oral agreement for mining rights ← equitable interest  mining claim = land → lack of writing is a defence) Minority alternative— • ‘Declaration of trust (s11(1)(b)’ includes direction—determines completely the equitable interest of the person making the direction, as with a declaration → s11(1)(b) applies → evidentiary writing will suffice: Grey v IRC [1960] AC 1 (minority) → s11(1)(a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person’s agent lawfully authorised in writing, or by will, or by operation of law; Requirements of Writing— • Actual writing—an agreement/deed/document creating the trust • Contemporaneous (at time of transfer) Required by—settlor / lawfully authorised agent Failure of writing → Disposition is void Personalty → Passive Subtrust → s11(1)(c) → evidentiary writing If the holder of the equitable interest purports to assign his or her interest, they are creating a sub-trust • Effect of this depends on whether the sub-trust is active or passive: Re Lashmar [1891] o Active subtrust—s11(1)(c) does not apply → no writing required • B1 (settlor of subtrust) passes only part of equitable interest to B2 5 Andrew Trotter LWB241 Trusts • B1 reserves some active duties for himself (= an interest: Onslow v Wallis) o Passive subtrust—s11(1)(c) applies → evidentiary writing required • B1 passes full interest to B2 • B1 totally substituted by B2—has no active role: Re Lashmar ← Designed to prevent a hidden oral transaction in equitable interests: Vandervell v Internal Revenue Commissioners [1967] 2 AC 291 per Lord Upjohn • s11(1)(c) applies to both land and personalty, but is rendered practically ineffective with regard to land by s11(1)(a): Adamson v Hayes (1973) 130 CLR 276 • Does not apply to a resulting trust—where new trusts declared and the beneficiaries directs the trustees to declare new trusts of the property received upon the exercise of the option: Re Vanvervell’s Trusts (No 2) [1974] Ch 269 → s11(1)(c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be manifested and proved by some writing signed by the person disposing of the same, or by the person’s agent lawfully authorized in writing, or by will. Requirements of Writing— Evidentiary writing—an agreement/deed/document creating the trust ← eg a letter saying trust created = sufficient evidentiary proof 1. Need not be contemporaneous 2. No particular form is required: Forster v Hale 3. The writing must contain the terms of the trust – the parties, particularly the beneficiaries, the trust property and the nature of the trust: Forster v Hale 4. The original beneficial owner (settlor) must sign the document, not the trustee: Tierney v Wood 5. Evidentiary writing can be satisfied by multiple documents being read together: Secretary, Department of Social Security v James (1990) 95 ALR 615 Required by—settlor / lawfully authorised agent Failure of writing → Disposition not void, merely unenforceable 6 Andrew Trotter LWB241 Trusts 4. Contract for valuable consideration for beneficiary to assign trust property to a third party T [←B1] ($) [←($)B2] (trust continues) Land → s11(1)(a) or s59 → actual or evidentiary writing HCA Approach—s11(1)(a) | Actual Writing: Adamson v Hayes (1973) HCA per Gibbs J • All dispositions of interests in land require actual writing: s11(1)(a) PLA • → Disposition has its ordinary, wide meaning (Chrichton v Chricton (1940)) which includes a disposition for consideration (a sale): s3 & Sch 6 Dictionary • → s59 & s11(1)(a) both apply, so higher standard is imposed • actual writing required s11(1)(a) applies— 1. only to land | not to personalty 2. to the creation of an interest as well as a disposition 3. to all interests (legal and equitable), including leasehold interest: Adamson v Hayes (1973) 130 CLR 276 (Oral agreement for mining rights ← equitable interest  mining claim = land → lack of writing is a defence) Accepted Alternative Approach—s59 | Evidentiary Writing: Abjornson v Urban Newspapers [1989] WAR 191; Theodore • s59 covers the field for contracts for sale of land with valuable consideration • Definitions and provisions in the PLA operate “unless a contrary intention appears” • s 59 provides that contrary intention • → actual or evidentiary writing sufficient Even if High Court reasoning is accepted— • The passing of consideration binds the receiver’s conscience and creates a constructive trust until the goods are passed • s11(2) states that s11(1)(a) doesn’t apply to constructive trusts • → s59 applies and actual or evidentiary writing sufficient: Oughtred v Inland Revenue Commissioners [1960] AC 206 (Trustee holding shares X for B1 (life interest) & B2 (remainder)—oral agreement that B1 transfer shares Y to B2 in return for B2’s remainder interest in shares X  contract of sale of remainder interest is specifically enforceable—upon signing: B2 becomes constructive sub-trustee of remainder interest in shares X for B1—when shares transferred, full constructive trust established → s11(1)(a) doesn’t apply → evidentiary writing will suffice → agreement enforceable) → s59 No action may be brought upon any contract for the sale or other disposition of land or any interest in land unless the contract upon which such action is brought, or some memorandum or note of the contract, is in writing, and signed by the party to be charged, or by some person by the party lawfully authorised. 7 Andrew Trotter LWB241 Trusts Requirements of Writing— Evidentiary writing—an agreement/deed/document creating the trust ← eg a letter saying trust created = sufficient evidentiary proof 6. Need not be contemporaneous 7. No particular form is required: Forster v Hale 8. The writing must contain the terms of the trust – the parties, particularly the beneficiaries, the trust property and the nature of the trust: Forster v Hale 9. The original beneficial owner (settlor) must sign the document, not the trustee: Tierney v Wood 10. Evidentiary writing can be satisfied by multiple documents being read together: Secretary, Department of Social Security v James (1990) 95 ALR 615 Required by—signed by the party to be charged Failure of writing → Disposition not void, merely unenforceable Personalty → Passive Subtrust → s11(1)(c) → evidentiary writing If the holder of the equitable interest purports to assign his or her interest, they are creating a sub-trust • Effect of this depends on whether the sub-trust is active or passive: Re Lashmar [1891] o Active subtrust—s11(1)(c) does not apply → no writing required • B1 (settlor of subtrust) passes only part of equitable interest to B2 • B1 reserves some active duties for himself (= an interest: Onslow v Wallis) o Passive subtrust—s11(1)(c) applies → evidentiary writing required • B1 passes full interest to B2 • B1 totally substituted by B2—has no active role: Re Lashmar ← Designed to prevent a hidden oral transaction in equitable interests: Vandervell v Internal Revenue Commissioners [1967] 2 AC 291 per Lord Upjohn • s11(1)(c) applies to both land and personalty, but is rendered practically ineffective with regard to land by s11(1)(a): Adamson v Hayes (1973) 130 CLR 276 • Does not apply to a resulting trust—where new trusts declared and the beneficiaries directs the trustees to declare new trusts of the property received upon the exercise of the option: Re Vanvervell’s Trusts (No 2) [1974] Ch 269 → s11(1)(c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be manifested and proved by some writing signed by the person disposing of the same, or by the person’s agent lawfully authorized in writing, or by will. Requirements of Writing— Evidentiary writing—an agreement/deed/document creating the trust ← eg a letter saying trust created = sufficient evidentiary proof 11. Need not be contemporaneous 12. No particular form is required: Forster v Hale 13. The writing must contain the terms of the trust – the parties, particularly the beneficiaries, the trust property and the nature of the trust: Forster v Hale 14. The original beneficial owner (settlor) must sign the document, not the trustee: Tierney v Wood 8 Andrew Trotter LWB241 Trusts 15. Evidentiary writing can be satisfied by multiple documents being read together: Secretary, Department of Social Security v James (1990) 95 ALR 615 Required by—settlor / lawfully authorised agent Failure of writing → Disposition not void, merely unenforceable 5. Direction to trustee to
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