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Grey v IRC [1960] AC 1 (see pp 571-2) PowerPoint PPT Presentation


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The Structure of Property Law: F3:2.2. Grey v IRC [1960] AC 1 (see pp 571-2). Grey v IRC : Initial position. A. A holds shares on Trust for B1. B1. Grey v IRC : The attempted transaction. A. A holds shares on Trust for B1

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Grey v IRC [1960] AC 1 (see pp 571-2)

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The Structure of Property Law: F3:2.2

Grey v IRC

[1960] AC 1

(see pp 571-2)


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Grey v IRC: Initial position

A

  • A holds shares on Trust for B1

B1


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Grey v IRC: The attempted transaction

A

  • A holds shares on Trust for B1

  • B1 orally directs A to hold the shares on trust for B2 (i.e. B1’s grandchildren)

B1


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Grey v IRC: The question

A

- Can B1’s oral direction lead to A holding the shares on Trust for B2?

B2 ??


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Grey v IRC: The analysis of B1’s plan

A

A

B1

B2

Stage 1

Stage 2


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Grey v IRC: House of Lords: Stage 2 cannot be reached without signed writing

A

A

Need writing: s 53(1)(c)

B1

B2

Stage 1

Stage 2


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Justifying the decision in Grey v IRC?

  • B1’s attempted transaction did not necessarily involve A: it is possible to go from Stage 1 to Stage 2 without the involvement of A

  • so A needs a means to discover the transaction: hence the transaction must be made in signed writing

  • butin Grey itself, B1 orally informed A of the transaction so A did in fact know about it

  • so should there be an exception to the writing requirement where B1 and B2 can show that A happened to know about the transaction? (see pp571-2)


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The Structure of Property Law: F3:2.2

Vandervell v IRC

[1967] 2 AC 291

(see pp 572-3)


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Vandervell v IRC: Initial position

A

  • A holds shares on Trust for B1

B1


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Vandervell v IRC: The attempted transaction

A

  • A holds shares on Trust for B1

  • - B1 orally directs A to transfer the shares to C

  • - so the plan is that C will hold the shares outright: ie C will not hold the shares on Trust

B1


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Vandervell v IRC: The question

C = holds shares?

- Can B1’s oral direction lead to C holding the shares free from any Trust?


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Vandervell v IRC:The analysis of B1’s plan

A

C

B1

Stage 1

Stage 2


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Vandervell v IRC:House of Lords: Stage 2 can be reached without signed writing

A

C

No need for writing: not a “disposition” of B1 right under the Trust

B1

Stage 1

Stage 2


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Justifying the decision in Vandervell v IRC?

  • In contrast to Grey v IRC,B1’s attempted transaction did necessarilyinvolve A: as A held the shares, only A could transfer the shares to C

  • soA does not need a means to discover the transaction: hence there is no need for the transaction to be made in signed writing

  • soalthough B1 disposed of (ie lost) his initial right under the Trust of the shares, the transaction does not count as a “disposition” for the purposes of section 53(1)(c)


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Vandervell v IRC: The twist

  • The Inland Revenue could not show that C held the shares on Trust for B1: despite the absence of writing, B1 had successfully lost his initial right under the Trust of the shares

  • but C, when acquiring the shares, was required by B1 to make a contractual promise to A2 (the Vandervell Trustee Company) to allow A2 to buy the shares at a set price in the future: A2 thus had an “option”

  • and the House of Lords found that A2 held that option on a Resulting Trust in favour of B1. That Resulting Trust can be seen as arising in response to A2’s unjust enrichment at B1’s expense (see D4:4.3): as A2 was a trustee company, it could not have been intended by B1 to be free to use the option for its own benefit


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Vandervell v IRC:The twist

Option to buy the shares

C

holds shares

A2

A2 holds the option on Resulting Trust for B1

B1


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The Structure of Property Law: F3:2.2

Re Vandervell (No 2)

[1974] 1 Ch 269

(see pp 573-5)


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re Vandervell (No 2):Initial position (following on from Vandervell v IRC

Option to buy the shares

C

holds shares

A2

A2 holds the option on Resulting Trust for B1

B1


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re Vandervell (No 2):The attempted transaction

  • A2 holds its option to buy the shares on Trust for B1

A2 = option

  • B1 orally directs A2: i) to use money A2 holds on Trust for B2 (B1’s children) to exercise the option and thus acquire the shares; and then ii) to hold the shares on Trust for B2

B1


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re Vandervell (No 2):The question

A2 = shares

- Can B1’s oral direction, coupled with A2’s use of money held on Trust for B2 to exercise the option, lead to A2 holding the shares on Trust for B2?

B2??


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re Vandervell (No 2): The analysis of B1’s plan

A2 = option

A2 = shares

B1

B2

Stage 1

Stage 2


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Analysing re Vandervell (No 2)

  • From one point of view, the attempted transaction seems very close to that in Grey v IRC (see next slide) and in that case, the House of Lords held that signed writing was necessary

  • if signed writing is required, then, A2 holds the shares on Trust for B1 as:

    • i) A2 held the initial option on Trust for B1; and

    • ii) The shares are the product of that option


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Grey v IRC: House of Lords: Stage 2 cannot be reached without signed writing

A = shares

A = shares

Need writing: s 53(1)(c)

B1

B2

Stage 1

Stage 2


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Analysing re Vandervell (No 2)

  • From a different point of view, the attempted transaction seems analogous to that in Vandervell v IRC (see next slide) as A2’s involvement is necessary for the transaction to take place (A2 must exercise the option to buy the shares)

  • if signed writing is not required, then A2 holds the shares on Trust for B2 as:

    • i) A2 held the initial option on Trust for B1; but

    • ii) B1 has successfully directed that the shares should be held on Trust for B2


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Vandervell v IRC:House of Lords: Stage 2 can be reached without signed writing

A

C

No need for writing: not a “disposition” of B1 right under the Trust

B1

Stage 1

Stage 2


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Analysing re Vandervell (No 2)

  • An important question is whether the attempted transaction in re Vandervell (No 2) is closer to that in Grey (where writing was required) or that in Vandervell v IRC (where no writing was required)

  • one crucial distinction with Grey may be that at Stage 1 in re Vandervell (No 2), A2 holds the option on Trust for B1; whereas at Stage 2, A2 holds the shares on Trust for B2

  • so in re Vandervell (No 2), as in Vandervell v IRC, no writing is required as the trustee is necessarily involved in the transaction


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Analysing re Vandervell (No 2)

  • A further important factor in re Vandervell (No 2) is that, in contrast to Grey v IRC, B2’s acquisition of a right under the Trust need not depend solely on B1’s consent

  • In re Vandervell (No 2), B2 can argue that he has acquired a right under a Resulting Trust of the shares held by A2: those shares are the product of the money used by A2 to exercise the option; and that money was held by A2 on Trust for B2

  • so in re Vandervell (No 2) no writing is required as B2’s right arises under a Resulting Trust


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re Vandervell (No 2):the Court of Appeal: Stage 2 can be reached without signed writing

A2 = option

A2 = shares

No need for writing: not a “disposition” of B1 right under the Trust

B1

B2

Stage 1

Stage 2


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Justifying the decision in re Vandervell (No 2) ?

  • The judges in the Court of Appeal gave a number of unconvincing reasons as to why no writing was required; but their decision may nonetheless be justified

  • i) as in Vandervell v IRC, A2 was necessarily involved in the transaction – so there was no need for signed writing enabling A2 to discover the identity of B2

ii) in contrast to Grey v IRC, B2 did not claim to have acquired a right solely as a result of B1’s consent: instead, B2 could rely on a Resulting Trust


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