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Oral trust for third party – not binding

A recent CC decision is an important reminder to property practitioners to advise clients to ensure that any declaration of trust is in writing. Section 53(1)(b) LPA 1925 states that:

Instruments required to be in writing

(1) Subject to the provision hereinafter contained with respect to the creation of interests in land by parol –

(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 his will.

The CC heard a case involving two properties and a couple who had been in a long-term relationship which produced children. The relationship had broken down and, on the face of it, the case might have looked like a Stack v Dowden co-ownership situation. The judge however made a salient point: ‘At the outset of this claim, I observe that, although these questions come before the court following the breakup of a domestic relationship of some duration, this court is a civil court, and not a family court or a criminal court… It is concerned only with the issues that arise between the parties in relation to the beneficial ownership of the two properties’.

The CC was prepared to find that a trust had been created in relation to one of the properties but the issue to be determined was how far it could be established who were the beneficiaries of the trust. It is clear law that, where A conveys to B on trust for A, this can be proved without the need for signed writing complying with s53. The problem is whether, where A conveys to B on trust for C, the trust for C can be established without compliance with the statute. The CC held that the trust failed for lack of compliance with s53 – an oral trust for C cannot be enforced and the property was held on a resulting trust for the transferor, ie A.

The CC said that Stack v Dowden was ‘far removed’ from this case in that:

  • the property was not going to be used as the parties’ home;
  • it was to be held on trust for others;
  • it was an investment property.

This is a first instance decision – but the relevance to property practitioners when advising on more complex or fluid family arrangements should be noted. See Solomon v McCarthy [2020] EW Misc 1 (CC) and reported on www.bailii.org.

 

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