BP015338

The question demands us to focus on the importance of s53 (1) (c) of the Law of
Property Act 19251 with regards to its application where an equitable interest is
destroyed when a beneficiary demands that the trustee transfers the legal interest to
a third party.
To discuss this we need to follow up on the rationale behind this formality. Lon Fuller
in one of his essays proposed the three basic functions of the formality requirements;
(i) the function of providing evidence of a transaction that the parties intended to enter
into;(ii) the function of putting someone on notice that they are entering into a
transaction, and encourage him to think about whether he wants to enter into that
transaction;(iii) the function of providing a well-defined means of entering into a
particular transaction.2
We should consider the possibility that s 53(1) (c)3 performs an evidential function.
This section exists to protect the beneficiaries from being defrauded by the trustees.
In other words, If A holds a property on trust for B, B might be vulnerable in the absence
of s 53(1) (c)4, to being defrauded of his interest by A, should A suddenly choses to
hold it on trust for C to B’s objection. Without the support of written evidence, B cannot
prove that he did not ask A to do so if C vehemently supports A’s statement.5 And this
also protects the Trustee against the same behaviour by the beneficiary.
This was identified in Grey v IRC.6 Where the settlor transferred shares to the trustees
to be held on trust for himself. He then orally instructed the trustees to hold the shares
on the trusts of the settlements for his grandchildren. Documents were subsequently
executed to confirm that the shares were held on trust for the grandchildren. The key
issue for the House of Lords was whether the trusts of the shares were created by the
settlor’s oral direction or by the execution of the documents, and this turned on whether
there had been a disposition of a subsisting equitable interest within section 53(1)(c)7.
This mattered because, if writing had been required, the disposition would have been
effected by the execution of the document, and so, as the law stood at the time, stamp
duty would have been due. It was held that the effect of the direction to the trustees to
hold the shares on trust for the grandchildren was to dispose of the settlor’s existing
equitable interest in the shares, and this could be effected only by writing and not
orally. Consequently, the dispositions were effected when the documents were
executed and so stamp duty was payable.8 This case perfectly describes the
application of s53 (1) (c).9
However, this was not the case in Vandervell v IRC10, which raises a question such
as the one demanded for this essay, ‘Should the law draw a distinction between the

1
Herein after referred as LPA 1925
2
‘Consideration and form’ (1941) 41 Columbia LR 799, Lon Fuller
3
LPA 1925
4
LPA 1925
5
Formalities August 16, 2013
https://mcbridesguides.com/category/equity/formalities/
6
[1960] AC 1
7
LPA 1925
8
Graham Virgo, Principles of Equity and Trust p 11.3
9
LPA 1925
10
[1967] 2 AC 191 herein after as Vandervell

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 BP015338
disposition and destruction of an equitable interest for the purposes of determining the
formalities rules applicable to the actions of beneficiaries?’
Vandervell11 deserves to be explained to remove the confusion created by the
decision and to justify the arguments of this essay. In this case, a trustee, in due
exercise of its powers, transferred the legal title to a trust property, hence,
overreaching the equitable interest in that property. In consequence, the recipient of
the property acquired this legal title free of any equitable interests. This explanation
puts Vandervell12 outside the scope of s53 (1) (c)13.
If Vandervell14 is correctly understood as a case of overreaching, than the law relating
to the concept can be used to determine what happens in various situations when a
trustee, acting on the instructions of the beneficiary, deals with the property he holds
for that beneficiary and the specific circumstances where the trustee transfers the legal
title to another and destroys the equitable title in consequence.15
According to the brief facts of the case, Vandervell wanted to endow a chair of
pharmacology for the Royal College of Surgeons, but to do so in a tax-efficient way.
He was the beneficial owner of shares in Vandervell Products Ltd, which were held on
trust for him by the National Provincial Bank. Vandervell requested the bank to transfer
these shares to the Royal College of Surgeons. A substantial dividend was then
declared, which was to be used by the Royal College to endow the chair; this would
be tax-free because the Royal College was a charity. An option to purchase the shares
for £5,000 was given to Vandervell Trustees Ltd. The Inland Revenue argued that
Vandervell was liable to pay surtax on the dividend that had been declared because
he retained an equitable interest in the shares. The House of Lords held that this was
correct, because Vandervell Trustees Ltd held the option on resulting trust for
Vandervell, so that he retained an equitable interest in the shares. The significance of
the case for present purposes, however, is that the Inland Revenue had also argued
that the National Provincial Bank had only conveyed the legal interest in the shares to
the Royal College of Surgeons, so that Vandervell had retained the equitable interest
because he had not disposed of his interest in writing within section 53(1) (c)16, as
required by Grey.17 This argument was rejected and Grey18 was distinguished
because, in that case, the legal title had remained with the trustee and the beneficiary
was only dealing with the equitable interest. In Vandervell, however, the beneficiary
had directed the trustee bank to dispose of both the legal and the equitable interest,
resulting in the destruction of the latter interest.19

11
[1967] 2 AC 191
12
[1967] 2 AC 191
13
LPA 1925
14
[1967] 2 AC 191
15
Trusts Law: Text and Materials, Graham Moffat, Gerry Bean, Rebecca Probert p 125 onwards.
16
LPA 1925
17
[1960] AC 1
18
[1960] AC 1
19
All Answers ltd, 'Trust properties' (Lawteacher.net, August 2018) <https://www.lawteacher.net/free-law-essays/property-
trusts/trust-properties.php?vref=1> accessed 27 August 2018

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Since the property being disposed here was not of equitable interest but of the legal
title. Since A hols the property for B and B instructs A to transfer both, equitable and
legal titles to C, it follows that the equitable interest must be extinguished by this
disposition. And since this transaction destroys rather than dispose the equitable
interest, writing in not required and hence, s53 (1) (c)20 does not apply.21
The courts in some cases might be interpreting s 53(1) (c)22 as performing a
channelling function – in other words, they interpret s 53(1) (c)23 as saying that the
only way to dispose of a beneficial interest in property to another is to do it in writing,
where the written document conveying the beneficial interest can be subjected to
stamp duty.24
The question demands whether there should be a distinction between disposition and
destruction of an equitable interest with regards to s53 (1) (c) and whether this is
necessary.
Overreaching, as the doctrine is now understood, the process whereby a purchaser of
property takes it free from any interests or powers, which attach instead to the
proceeds of sale.25 Overreaching is a result of executing a trust by which an earlier
interest may be subordinated to a later interest as per Peter L. J. 26 Generally, while
overreaching, the power to dispose of a trust, by definition, is not a breach of trust,
and gives rise to no claim against the trustee or any consequential claims against the
property. The recipient, therefore, gets the property free of the beneficiary’s rights.
However, it is strictly vital that the trustee only exercises this power to free the property
from prior interest only is a purchaser is concerned.27
Now to connect this concept to the case of Vandervell.28 The National Bank held the
legal title to the shares as a trustee for Vandervell before any relevant transactions
were made. The Bank could pass the legal ownership of the shares to a purchaser
with or without Vandervell’s consent simply by the virtue of the legal title. However, it
did not have any inherent power to dispose of this legal title free of Vandervell’s
equitable interest in them. By contrast, the Bank could sell the legal title of the shares
free of that interest if it had been given power to do so 29. Any such sale would be a
case of overreaching. This ability to transfer the shares at law would simply be as an
incident of owning them at law and it is within the s cope of power of a trustee.30 Due
to this, there was no disposition of trust and Vandervell had to claim against the trustee
nor the purchaser; “In no sense do trustees, when they exercise a power of sale or

20
LPA 1925
21
Graham Virgo, Principles of Equity and Trust p 11.3.3
22
LPA 1925
23
LPA 1925
24
Formalities August 16, 2013
https://mcbridesguides.com/category/equity/formalities/
25
Harpum, ‘Overreaching Trustees’ Powers and the Reform of the 1925 Legislation’ [1990] C.L.J. 277 p. 282.
26
State Bank of India v Sood [1997] COA, Ibid 25
27
R. C. Nolan. “Vandervell v. I.R.C.: A Case of Overreaching.” The Cambridge Law Journal, vol. 61, no. 1, 2002, pp. 169–
188. JSTOR
28
[1967] 2 AC 191
29
R. C. Nolan. “Vandervell v. I.R.C.: A Case of Overreaching.” The Cambridge Law Journal, vol. 61, no. 1, 2002, pp. 169–
188. JSTOR. This could be done in the trust deed under which the shares were held.
30
Harpum, Overreaching, pp. 277-278

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repurchase, dispose of the equitable interest.”31 In conclusion, the interest is
destroyed.
Vandervell’s instruction to the Bank to execute a transfer of shares imposed a duty on
the Bank to do, he held the correlative right to compel the Bank to do this. Moreover,
this instruction also conferred an immunity on the Bank from any claim by Vandervell
as it acted on his direction. This idea was proposed by Hohfeld.32
Whether Vandervell’s instruction falls within the meaning of disposition of his equitable
interest or not is a question of common sense. S53 (1) (c) and common sense are only
bowing acquaintances. The word disposition, in law, has a very wide meaning.
According to s205 (1) (ii),33 the only way his instruction wold fall into the meaning of
disposition if it were to be a ‘disclaimer’, ‘release or ‘some other assurance of property
or an interest therein by any instrument’.34 S53 (1) (c) ‘disposition’ falls in neither.35
As per McGarvie J, the effective disclaimer of an interest means that the interest vests
as if the person disclaiming it did not exist (J.W. Broomhead (vic.) Pty. Ltd).36 Hence,
if every intended done of a gift were to disclaim it, it would reinstate in the donor or his
successor- Mallot v Wilson.37Logically, a disclaimer is a simple renunciation or
repudiation.38 Vandervell’s equitable interest was out of his own former legal title to
them39 and he could not disclaim his interest in the shares as it was derived from deeds
of 1952 and 1958.40 Furthermore, as per Lord Wright; ‘…. a deed once accepted
cannot be disclaimed (Sheppard’s Touchstone p.70), and I see no ground to think the
rule has been changed… If either party desires ... to get rid of the deed … must be
achieved by some procedure … other than disclaimer.’- Lady Naas v Westminister
Bank Ltd. 41
This rationale behind the decision of Vandervell42 is one argument. The second
argument was very interestingly proposed by Brian Green in his article. He argues that
in Grey, there were six pre-existing settlements before the settlor created a seventh
settlement. The trustees should have been considered to be as seven different
capacities, even though they were the same human beings and hence, there should
have been a transfer of both, legal and equitable interests out of the settlor’s seventh
settlement into the six pre-existing ones. In this opinion, it could’ve been decided as
Vandervell.43 As to the latter, since the Bank was in possession of the shares

31
Vandervell v IRC [1967] 2 AC 191, at p 303, per Goulding Q.C.
32
W. N. Hohfeld, Fundamental Legal Conceptions as Applied in Judicial Reasoning( Yale University Press) 1964
33
LPA 1925
34
R. C. Nolan. “Vandervell v. I.R.C.: A Case of Overreaching.”( herein after referred as Nolan ‘overreaching’) The Cambridge
Law Journal, vol. 61, no. 1, 2002, pp. 169–188. JSTOR. s205 (1) (ii) of Law of Property Act 1925. The definitions of s205 only
apply to the provisions of the Law of Property Act 1925, unless the context otherwise requires.
35
Ibid. Although the broad meaning of disposition in s205 (1) (ii) has not always been used in context with s53 (1) (c), it is
discussed here for the purposes of this essay as it is useful to test the arguments advanced against the widest definition of
disposition
36
[1985] V.R. 891 p. 930-936 per McGarvie J.
37
[1903] 2 Ch. 494 p 501 per Byrne J.
38
Nolan ‘Overreaching’. Gray v Stanion (1836) 5 L.J. Ex. (N.S.) 253,256, on the disclaimer of a lease.
39
Vandervell v IRC [1967] 2 AC 191 pp.295-296.
40
Ibid
41
[1940] A.C. 366. 401 per Lord Wright.
42
[1967] 2 AC 191
43
[1967] 2 AC 191

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throughout the transaction, it meant that it was the trustee throughout and therefore,
the only settlement that moved from Vandervell to the Royal College, was the
equitable interest and this case could be decided in the meaning of s53 (1) (c). 44
In light of the arguments put forward, it can be concluded that the decisions by the
courts in Vandervell45 and Grey46 were correct in their own place. However, it is still
necessary to distinguish between the meaning of disposition and destruction of an
equitable interest.
In Vandervell47, those parts of the case which address to s53 (1) (c) and its
requirements for disposition of an equitable interest are difficult to justify as a matter
of legal principal. In spite of this, the approach of the case decision has very important
consequences in everyday ecommerce and is very convenient. Shares and securities
are normally held by trustees and it is very common for the beneficiaries to instruct the
trustees through oral instructions through telephones and the internet. Trustees would
want to be able to act on those instructions without committing any breach of trust and
the purchaser would want to obtain the property free from any trusts binding the
vendor. 48 To sum it all up, the doctrine of overreaching justifies the decision in
Vandervell49 and therefore elaborates what a destruction of equitable could mean and
how it lies outside the scope of s53 (1) (c).
In a more academic opinion and in reference to the rationale behind s53 (1) (c), it is
agreed that the law should draw a distinction between the disposition and the
destruction of an equitable interest for the purposes of clearly stating the formalities
rules applicable to the actions of the beneficiaries for the protection of not only the
trustees but also the purchasers.50
‘I BP015338 declare that this piece of work contains 2110 words. I have read and
fully understood the University Policy relating to Academic Misconduct as cited
on the VLE.’

Digital Receipt
Turnitin submission id: 91946903

Digital Receipt
Turnitin submission id: 91946903

44
Principles of Equity and Trusts, Alastair Hudson p. 140
45
[1967] 2 AC 191
46
[1960] AC 1
47
[1967] 2 AC 191
48
Nolan ‘Overreaching’ p 169.
49
[1967] 2 AC 191
50
Unlocking Equity and Trusts, Mohamed Ramjohn, Disposition under s53 (1) (c) pp.126-139

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Bibliography
Acts
 Law of Property Act 1925

Cases
 Grey v IRC
 Vandervell v IRC
 State Bank of India v Sood
 Mallot v Wilson
 J.W. Broomhead (Vic.) Pty. Ltd. (in liq.) v. J.W. Broomhead Pty. Ltd. & Ors.
 Lady Naas v Westminister Bank Ltd.

Books
 Principles of Equity and Trusts, Alastair Hudson
 Graham Virgo, Principles of Equity and Trust
 Trusts Law: Text and Materials, Graham Moffat, Gerry Bean, Rebecca
Probert
 The Law of Trusts, James Penner
 The All England Law Reports, Volume 1

Articles & Journals

 W. N. Hohfeld, Fundamental Legal Conceptions as Applied in Judicial
Reasoning( Yale University Press) 1964
 R. C. Nolan. “Vandervell v. I.R.C.: A Case of Overreaching.” The Cambridge
Law Journal, vol. 61, no. 1, 2002
 Harpum, ‘Overreaching Trustees’ Powers and the Reform of the 1925
Legislation’ [1990] C.L.J. 277
 ‘Consideration and form’ (1941) 41 Columbia LR 799, Lon Fuller
 Formalities August 16, 2013

Websites
 Google Scholar
 Law Teacher
 Lexis Nexis

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 Lexis Library
 WestLaw
 mcbridesguides
 LawTel
 The Law Society Gazette

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