Oral direction to trustees to hold for another: s.53(1)(c) LPA 1925
Kemal Arslan and Ruth Okafor hold 20,000 shares in a listed company on bare trust for Dalia Haddad absolutely. Dalia telephones the trustees and tells them that from now on they are to hold her interest in the shares on trust for her adult son, Idris. The trustees agree. Nothing is put in writing and the legal title to the shares stays with Kemal and Ruth. Dalia later dies. Her valid will leaves her whole estate to a cancer research charity.
Who is beneficially entitled to the shares?
Choose one answer to see the reasoning.
Worked answer
Correct answer B: Dalia's estate, and so the charity, because her oral direction was a disposition of a subsisting equitable interest, void for want of signed writing.
THE RULE TO REMEMBER
A disposition of a subsisting equitable interest in any property must be in writing signed by the person disposing of it or their authorised agent, or by will (LPA 1925 s.53(1)(c)).
Oral direction to trustees to hold for another: s.53(1)(c) LPA 1925
Section 53(1)(c) of the Law of Property Act 1925 requires that a disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing signed by the person disposing of it, or by a lawfully authorised agent, or by will. Dalia had a subsisting equitable interest in the shares. Directing the trustees to hold that interest for Idris in future is a disposition of it: the beneficial interest was to move from Dalia to Idris while the legal title stayed where it was. Because the direction was oral and nothing was signed, it was ineffective and Dalia kept her equitable interest. The subsection is not limited to land; it applies to equitable interests in any property, including shares. This is not a case where the trustees transferred the legal title to a third party on her instructions, so no argument that the legal transfer carried the beneficial interest with it arises. Dalia's interest passes under her will to the charity.
Why A is wrong: Section 53(1)(c) applies to equitable interests in any kind of property, not only land.
Why C is wrong: An absolutely entitled beneficiary can call for the property, but a disposition of her equitable interest itself still needs signed writing.
Why D is wrong: The trustees' agreement cannot dispense with a statutory formality, and Idris gave nothing and relied on nothing.
Why E is wrong: Directing a gift to Idris is the opposite of abandonment; Dalia's interest remained hers because the disposition failed.
A little more practice done.
Related questions
Oral declaration of trust of land: LPA 1925 s.53(1)(b)
Can Beatrix enforce the trust against Owen?
Certainty of intention and precatory words
Which of the following best describes Joan's entitlement to the £60,000?
Certainty of subject matter: unallocated generic goods (Re Goldcorp)
Which of the following best describes the customers' position in respect of the remaining coins?
A GOOD HABIT, DELIVERED
Tomorrow's question.
In your inbox.
One free question a day, with the answer and reasoning.
No course pitches. Just your daily practice.