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

1. The Structure of Property Law: F3:2.2 Grey v IRC [1960] AC 1 (see pp 571-2)

2. Grey v IRC: Initial position A • A holds shares on Trust for B1 B1

3. 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

4. Grey v IRC: The question A - Can B1’s oral direction lead to A holding the shares on Trust for B2? B2 ??

5. Grey v IRC: The analysis of B1’s plan A A B1 B2 Stage 1 Stage 2

6. 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

7. 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)

8. The Structure of Property Law: F3:2.2 Vandervell v IRC [1967] 2 AC 291 (see pp 572-3)

9. Vandervell v IRC: Initial position A • A holds shares on Trust for B1 B1

10. 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

11. Vandervell v IRC: The question C = holds shares? - Can B1’s oral direction lead to C holding the shares free from any Trust?

12. Vandervell v IRC:The analysis of B1’s plan A C B1 Stage 1 Stage 2

13. 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

14. 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)

15. 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

16. Vandervell v IRC:The twist Option to buy the shares C holds shares A2 A2 holds the option on Resulting Trust for B1 B1

17. The Structure of Property Law: F3:2.2 Re Vandervell (No 2) [1974] 1 Ch 269 (see pp 573-5)

18. 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

19. 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

20. 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??

21. re Vandervell (No 2): The analysis of B1’s plan A2 = option A2 = shares B1 B2 Stage 1 Stage 2

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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

29. 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