The Structure of Property Law: F3:2.2
Grey v IRC
[1960] AC 1
(see pp 571-2)
Grey v IRC: Initial position
A
B1
- A holds
shares on Trust for B1
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
Grey v IRC: The question
A
B2 ??
- Can B1’s oral direction lead to
A holding the shares on Trust
for B2?
Grey v IRC: The analysis of B1’s plan
A
A
B1
B2
Stage 1
Stage 2
Grey v IRC: House of Lords: Stage 2 cannot be
reached without signed writing
A
A
Need writing:
s 53(1)(c)
B1
Stage 1
B2
Stage 2
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
- but in 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)
The Structure of Property Law: F3:2.2
Vandervell v IRC
[1967] 2 AC 291
(see pp 572-3)
Vandervell v IRC: Initial position
A
B1
- A holds
shares on Trust for B1
Vandervell v IRC: The attempted transaction
A
B1
- 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
Vandervell v IRC : The question
C = holds
shares?
- Can B1’s oral direction lead to
C holding the shares free from
any Trust?
Vandervell v IRC: The analysis of B1’s plan
A
C
B1
Stage 1
Stage 2
Vandervell v IRC: House of Lords: Stage 2 can be
reached without signed writing
A
B1
Stage 1
C
No need for writing: not a
“disposition” of B1 right under
the Trust
Stage 2
Justifying the decision in Vandervell v IRC?
- In contrast to Grey v IRC, B1’s attempted
transaction did necessarily involve A: as A held the
shares, only A could transfer the shares to C
- so A does not need a means to discover the
transaction: hence there is no need for the transaction
to be made in signed writing
- so although 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)
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
Vandervell v IRC: The twist
Option to buy the shares
C
A2
holds shares
A2 holds the
option on
Resulting Trust
for B1
B1
The Structure of Property Law: F3:2.2
Re Vandervell (No 2)
[1974] 1 Ch 269
(see pp 573-5)
re Vandervell (No 2): Initial position (following on
from Vandervell v IRC
Option to buy the shares
C
A2
holds shares
A2 holds the
option on
Resulting Trust
for B1
B1
re Vandervell (No 2): The attempted transaction
- A2 holds its option to buy the
A2 = option
shares on Trust for B1
- B1 orally directs A2:
B1
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
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??
re Vandervell (No 2): The analysis of B1’s plan
A2 = option
A2 = shares
B1
B2
Stage 1
Stage 2
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
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
Stage 1
B2
Stage 2
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
Vandervell v IRC: House of Lords: Stage 2 can be
reached without signed writing
A
B1
Stage 1
C
No need for writing: not a
“disposition” of B1 right under
the Trust
Stage 2
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
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
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
B1 the Trust
B2
Stage 1
Stage 2
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