This lecture discusses formalities required for transferring beneficial interests in property under UK law. It examines three cases: 1) Oughtred v IRC established that an oral contract to transfer a beneficial interest in shares was invalid, as section 53(1)(c) of the Law of Property Act 1925 requires such transfers to be in writing. 2) Vandervell v IRC concerned an attempted tax avoidance scheme where shares were orally transferred to a college but an option to repurchase was created, resulting in a taxable resulting trust. 3) Re Vandervell Trustees (No.2) found that assigning the beneficial interest of a resulting trust to children did not require writing under section 53(1)(c) as

1. Lecture 7
Lecture 7 – Formalities II
Lecture outline
This lecture follows on from the previous lecture on formalities. It covers
contracts for the assignment of beneficial interest, the transfer of legal (not
equitable) title to a third party and disclaimer of an equitable interest.
Suggested reading
 Gary Watt, Trusts and Equity (Eighth Edition, 2018, OUP) Chapter 4.
 Green, ‘Grey, Oughtred and Vandervell: A Contextual Re-appraisal’ (1984)
47 MLR 385
Cases Mentioned
 Oughtred v IRC [1959] AC 206
 Neville v Wilson [1997] Ch 144
 Vandervell v IRC [1967] 2 AC 291*
 Re Vandervell Trustees (No.2) [1974] EWCA Civ 7
Contracts for assigning an equitable interest
In Oughtred v IRC [1959] AC 206 Mrs. Oughtred sought to avoid inheritance tax
on the 72,000 shares she legally and equitably owned in a private company.
She also had the beneficial interest in 200,000 shares which on her death would
pass to her son, Peter. Mother and son entered into an oral contract. This
provided that she would transfer her 72,000 shares to the trust and in return
Peter would forfeit his interest in the 200,000 shares. In execution of this
transfer, a deed transferring the legal title was executed but this was of nominal
value and would not by itself attract stamp duty. Instead, Mrs. Oughtred and
Peter argued that because the oral contract was specifically enforceable, the
shares held by Peter passed into a constructive trust, the beneficiary of which
was Mrs. Oughtred. Remember that formalities do not have to be complied with
if a constructive or resulting trust is being created (section 53(2) Law of Property
Act 1925). Constructive trusts are thus not created by deed and stamp duty is
only payable on trusts created by deed. Thus no tax would be payable.

2. Inland Revenue disagreed and argued tax was payable. The House of
Lords agreed. It was held that the oral contract was void because it failed to
comply with the formality requirements:
‘I do not think that the oral agreement was effective to transfer Peter’s
reversionary interest to his mother. I should have thought that the wording of
section 53(1)(c) clearly made a writing necessary…and section 53(2) does not
do away with that necessity.’ Per Lord Denning
The purchaser of shares would only receive the beneficial interest when the
deed was transferred. Thus no constructive trust arose.
The position in Oughtred can be contrasted with that of Neville v
Wilson [1997] Ch 144. Here shares in one company U Ltd were held on trust for
another company J Ltd. J Ltd was the beneficiary and was then liquidated. What
would happen to the beneficial interest in U Ltd? It could not simply vanish into
thin air. Prior to the liquidation of J Ltd there was an oral agreement to distribute
the shares in U Ltd. A question then arose as to whether section 53(1)(c) of the
Law of Property Act 1925 had been complied with. If it had not then the
beneficial interest would pass to the Crown under bona vacantia rules. Under
these rules ownerless property passes to the Crown. The Court however held
that despite the declaration to distribute the shares being oral, a constructive
trust had been created to hold the shares until they could be distributed to the
beneficiaries. This appears to contrast with Oughtred as both concern the
purported creation of a constructive trust. However, there are clear differences
between the two cases. Oughtred was about tax avoidance while Neville v
Wilson was about keeping property, if at all possible, from the Crown
under bona vacantia rules.
Direction by a third party to transfer legal title to a third party
Instances exist where the legal and equitable interests in property are
transferred to a third party in a single transaction. As there is no splitting of the
legal and equitable interest section 53(1)(c) does not operate. As a result such
transfers might be exempt from taxation. This issue arose in Vandervell v
IRC [1967] 2 AC 291. Mr. Vandervell wished to make a donation of £150,000 to
the Royal College of Surgeons (RCS) to establish a professorship of
pharmacology. The shares in his company were held by his bank and the
money to be paid to the RCS was to be paid for out of the dividends payable on
his shares. This would be a payment of £145,000 and Mr. Vandervell would
avoid tax on this amount. He made an oral declaration transferring the legal and
equitable title to the shares to the RCS. As a result no formality was required
and thus no tax was payable. The RCS were to become the absolute owners of
the shares and as such they would be under no obligation to hand them back to
Mr. Vandervell who in fact did not want to relinquish complete control of the

3. shares. Thus, he entered into a separate agreement with the RCS that they
would then sell his shares back to him for £5,000 meaning that the total
donation would amount to £150,000 as originally intended.
Despite this, the Inland Revenue argued that Mr. Vandervell had not
complied with s.53(1)(c) requiring transfers of beneficial interest to be
concluded in writing (and thus taxable). Had the transfer just been to give the
shares to the RCS the transfer would indeed not have to have been written.
However, the option to repurchase the shares was more problematic. The Court
held that this option to repurchase created a resulting trust (see next lectures) in
favour of Mr. Vandervell. Thus he was liable to pay the tax on the £145,000
dividend.
Vandervell was followed by Re Vandervell Trustees (No.2) [1974]
EWCA Civ 7. This also concerned the transfer of the shares to the RCS and tax
liability. The repurchase of the shares was to be conducted through a trust
established for the benefit of Mr. Vandervell’s children. Thus the shares could
be passed to them through the RCS with minimal taxation. Mr. Vandervell died
in 1967 and the matter of the shares arose, this time for taxation of the legal title
to the shares. The question arose to whether the transfer of the shares from the
RCS to his children’s trust fund amounted to a disposition for the purposes of
section 53(1)(c). If it did then Vandervell’s estate remained liable for tax. The
Court of Appeal in this instance found in favour of Vandervell. This was because
in the first case, Vandervell v IRC, a resulting trust had been created and Mr.
Vandervell had accordingly been taxed. By assigning the beneficial interest of
that resulting trust to his children, Mr Vandervell had extinguished the resulting
trust rather than making a disposition. Thus there was no need to comply with
section 53(1)(c).
Disclaimer of an equitable interest
An individual who might be entitled to receive a beneficial interest can choose to
refuse to receive it. This is known as disclaiming. This occurred in Re Paradise
Motor Co. [1968]2 All ER 625.