Assignments and Dispositions cont’d

1. Assignments and Dispositions cont’d Associate Professor Cameron Stewart Division of Law

2. Recap on last week • Things that can’t be assigned • Legal assignments • Real Property – old system and Torrens • Goods – Sale of Goods Act 1923 • Debts and other choses in action – Section 12 • Equitable assignments • Future property • Equitable assignment of legal property for consideration • Equitable assignment of legal property without consideration • Equitable assignment of assignment of legal property not assignable at law without consideration • Equitable assignment of equitable property

3. Equitable assignment of equitable property • The assignment of equitable property can only be achieved in equity. Because equitable property is not recognised at common law it cannot be the subject of a legal assignment. For a voluntary assignment of equitable property the assignment must be absolute. Apart from any statutory requirement of writing, all that is necessary for a valid equitable assignment is ‘a clear expression of an intention to make an immediate disposition’: Norman at CLR 30; ALR 149, per Windeyer

4. Section 23C of the Conveyancing Act 23C Instruments required to be in writing (1) Subject to the provisions of 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 thereunto lawfully authorised in writing, or by will, or by operation of law, (b) 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 the person’s will, (c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same or by the person’s will, or by the person’s agent thereunto lawfully authorised in writing. (2) This section does not affect the creation or operation of resulting, implied, or constructive trusts.

5. Section 23C of the Conveyancing Act The writing requirements within s 23C(1) can be satisfied by more than one document provided they are obviously interconnected: Australia and New Zealand Banking Group Ltd v Widin (1990) 102 ALR 289 at 297–300 per Hill J.

6. Section 23C of the Conveyancing Act Section 23C(1)(b) merely requires evidence in writing in relation to a declaration of trust of land. However, the disposition or creation of an interest pursuant to s 23C(1)(a) must itself be in writing. In all Australian jurisdictions except Queensland, the disposition of a subsisting interest pursuant to s 23C(1)(c) or its equivalents must also be in writing.

7. Section 23C of the Conveyancing Act Section 23C(1)(a) and s 23C(1)(b) apply to the creation or disposition of interests, whereas s 23C(1)(c) only applies to the disposition of subsisting interests.

8. Section 23C of the Conveyancing Act Section 23C(1)(a) applies to the disposition of legal and equitable interests in land Section 23C(1)(a) and s 23C(1)(b) apply only to land, whereas it has been held that, despite the references to land in the opening sentence of the section, s 23C(1)(c) applies to interests in land and personalty

9. Equitable assignment of equitable interest • 23C(1)(c) requires assignments of subsisting equitable interests to be in writing. • It does not apply if the assignor has both the legal and equitable interest in the property. This is a consequence of the decision in Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694

10. Equitable assignment of equitable interests • Nor does s 23C(1)(c) apply when where an absolute owner of property disposes of an equitable interest in that property, the equitable interest is created by the disposition. A similar line of reasoning applies to the equitable assignment of a legal interest in property. Here the assignee’s interest is a newly created one and not the assignment of a subsisting equitable interest.

11. Disposition by way of a direction by a beneficiary to a trustee • Direction to hold property on trust for a third party • What if a beneficiary instructed his or her trustee to hold the equitable interest in the trust on trust for someone else? • What would be required for this interest to pass?

12. Disposition by way of a direction by a beneficiary to a trustee • Grey v Inland Revenue Commissioners [1960] AC 1 • Hunter was the beneficiary under a bare trust of 18,000 shares. Grey was the trustee. • On 18 February 1955 Hunter orally and irrevocably directed Grey to hold those shares on various trusts for Hunter’s grandchildren. • One week later Hunter executed various declarations of trust confirming the effect of the oral direction given to Grey. • Was to oral directive effective to pass the interest? • If it was then stamp duty was only payable on a nominal basis on the confirming declarations • The House of Lords ruled against Grey and found that the oral directions were ineffective. This was the disposition of a subsisting equitable interest and needed to be in writing • Ad valorem stamp duty had to be paid on the written declarations of trust.

13. Disposition by way of a direction by a beneficiary to a trustee • Direction to transfer property to a third party • In Vandervell v Inland Revenue Commissioners [1967] 2 AC 291 a bank was a bare trustee of shares for Vandervell. Vandervell orally directed the bank to transfer the shares to the Royal College of Surgeons. His intention was that the college acquire both the legal and equitable interests in the shares. • Vandervell was assessed as liable for a surtax on the shares pursuant to relevant income tax legislation, on the basis that his oral direction to the bank did not result in a disposition of the shares to the college. • If the oral direction was an effective disposition of the shares to the college, Vandervell was not liable for the surtax.

14. Disposition by way of a direction by a beneficiary to a trustee • The House of Lords unanimously ruled in favour of Vandervell, holding that his direction to the trustee was not a disposition within the parameters of s23C(1)(c). • On the issue of Vandervell’s oral direction the House found that it was effective and did not have to be in writing. • Grey v IRC was distinguishable from the present case because in that case the transaction was one that dealt only with the subsisting equitable interest, whereas in the present case the transaction involved dealing with both the legal and equitable interests. It was not the disposition of a subsisting equitable interest • Neither were S 23C(1)(a) or (b) relevant because the interests were personalty

15. Disposition by way of a contract to assign an equitable interest • Do contracts for valuable consideration to assign an equitable interest in property have to be in writing? • There is divided opinion • On one view a contract for valuable consideration to assign an equitable interest in property would be a ‘disposition’ within the meaning of the legislation, and would therefore have to be in writing. • On another view s 23C(2) effectively dispenses with the requirement of writing in the context of the creation of, constructive trusts. • It is a well-settled principle of law that a contract for valuable consideration to assign property of any kind gives rise to a constructive trust whereby the vendor is a constructive trustee of the property for the purchaser eg the rule in Lysaght v Edwards

16. Disposition by way of a contract to assign an equitable interest • Oughtred v Inland Revenue Commissioners [1960] AC 206 • Mrs Oughtred held a beneficial life estate in certain shares. • Her son Peter held the equitable reversionary interest in those shares. • Mrs Oughtred also owned absolutely a number of other shares in the same company. • By an oral agreement of 18 June 1956 Mrs Oughtred and her son agreed that on 26 June 1956 she would transfer to him the shares in the company that she owned absolutely and in return Peter would surrender to her his equitable reversionary interest in the shares in which Mrs Oughtred had an equitable life estate, thereby making her the absolute beneficial owner of those shares

17. Disposition by way of a contract to assign an equitable interest • On 26 June 1956 three documents were executed to effectuate the oral agreement of 18 June 1956. • The first document was a deed of release which noted that the shares formerly held by trustees on trust for Mrs Oughtred for life with an equitable reversionary interest to Peter, were now held on trust for Mrs Oughtred absolutely and that it was intended to transfer legal title to her whereupon the trustees would be released from their trusteeship. • The second document transferred, for nominal consideration, the shares formerly owned absolutely by Mrs Oughtred to Peter. • The third document was a transfer, for nominal consideration, of the legal title from the trustees to Mrs Oughtred in relation to the shares referred to in the first document. • The third document was assessed by the taxing authorities as liable for the payment of ad valorem stamp duty on the basis that the earlier oral contract was ineffectual in transferring Peter’s equitable reversionary interest to Mrs Oughtred

18. Disposition by way of a contract to assign an equitable interest • A bare majority in the House of Lords found in favour of the taxing authorities. • Lord Jenkins (Lord Keith concurring) opined that, even if the earlier oral agreement created a constructive trust, the later transfer to Mrs Oughtred from the trustees would have conferred upon her rights superior to those gained on the creation of the constructive trust. In such circumstances the transfer would be dutiable at ad valorem rates under the stamp duty legislation • Lord Denning also was of the view that the oral agreement was ineffective to dispose of Peter’s equitable reversionary interest because of the requirement of writing in s23C(1)(c). In his Lordship’s view s 23C(2) did not do away with that requirement. • Lord Radcliffe for the minority, accepted the view that the oral agreement of 18 June 1956 gave rise to a constructive trust and that the disposition was effected by the oral agreement. In such a situation s 23C(2) dispensed with the need for writing. The transfer from the trustees to Mrs Oughtred of 26 June 1956 did not dispose of Peter’s reversionary interest and accordingly was only liable to nominal stamp duty

19. Disposition by way of a contract to assign an equitable interest • In Neville v Wilson [1997] Ch 144 the Court of Appeal in England, when confronted with this diversity of opinion in Oughtred v IRC, unanimously endorsed Lord Radcliffe’s view that a constructive trsust had effective transferred the interest orally.

20. Disposition of an equitable interest by way of declaration of trust • A disposition includes a declaration of trust for the purposes of s 23C(1)(c)

21. Question • Mrs Dole was the absolute beneficial owner of 10,000 shares in Macquarie Mines Ltd (MML). The registered holder as trustee of the shares was MML’s bank and it was obliged to transfer the legal title to the shares to Mrs Dole at any time if called upon to do so by Mrs Dole. One week ago Mrs Dole called the manager of the bank and said to him: ‘I want my son Bob to have my shares in MML. Please transfer them to him’. The manager replied: ‘Very well’. Two days later, and before any steps were taken by the bank manager to carry out Mrs Dole’s instructions, Mrs Dole died. In her will she left her entire estate to her husband Eric. • Eric seeks your advice as to who is entitled to the shares in MML.

22. Answer • The issue is whether Mrs Dole’s oral direction to the trustee disposes of the property to Bob or is the direction a disposition of a subsisting equitable interest caught by the writing requirement in s. 23C(1)(c) of the Conveyancing Act. • Because the property is personalty there is no question of s. 23 (1)(a) or s. 23C(1)(b) applying as they are confined to land. • Section 23C(1)(c) does apply to both interests in land and personalty. • Whether Mrs Dole's direction is within s. 23C(1)(c) depends upon a consideration of Vandervell v IRC which held that it doesn’t on these facts. • Even though Mrs Dole is getting rid of her equitable interest s 23C(1)(c) does not apply because Mrs Dole intends to and has the power to deal with both the legal and equitable interests in the shares. Thus, the oral direction is effective to pass the equitable interest to Bob. At her death Mrs Dole has no interest in the shares and Eric does not inherit any interest in them upon her death.