Property law - Rouchefoucald v Boustead.doc
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Transcript of Property law - Rouchefoucald v Boustead.doc
In Rochefoucauld v Boustead (1897), Lindley LJ said ‘that the Statute of Frauds does not prevent the proof of a fraud; and that it is a fraud on the part of the person to whom the land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and claim the land himself’.
Section 53(1)(b) of the Law of Property Act 1925 provides that ‘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’. S53(1)(b) indicates that in cases where there is a
purported oral declaration of trust, it is not void without the element of writing,
but merely unenforceable against the trustee. This requirement of formality
can be traced to the forerunner of s53(1)(b); s7 of the Statute of Frauds 1677.
It is a ‘proof’, not a ‘validity’ formality; so the declaration renders the express
trust into existence and binds parties to it, however, since the beneficiary
cannot prove that the trust exists, there is no way for them to force the
trustee to carry it out (Penner, Law of Trusts).
However, in Rochefoucauld v Boustead, an oral express trust was
enforced against the trustee without fulfilling the writing requirement. The
Court of Appeal upheld that ‘equity will not allow a statute enacted to prevent
fraud to be used as an instrument of fraud’. Therefore, in order to prove the
express trust, parole evidence was included, despite the statutory requirement
of written evidence in s53(1)(b) (Penner, Law of Trusts). This is known as the
‘doctrine of Rochefoucauld v Boustead and it is reflected in this quote given by
Lindley LJ. He is essentially declaring that equity abhors the use of statute as
an instrument of fraud. The core function of the statutory formality rule is to
prevent fraud being practised upon a trustee by those who fabricate
allegations of trust. But, as Lindley LJ points out in this case, the insistence on
formality is not pursued to the degree that reliance upon the lack of writing is
allowed to facilitate fraud by the trustee himself. Therefore, by making an
express oral declaration that from the moment of acquisition Mr. Boustead will
hold the land on trust for Mrs. Rochefoucauld; it would be fraud in equity if he
were to rely on the absence of writing in order to deny the trust, which allowed
him to acquire title in the first place. Thus it was decided in this case, that Mrs.
Rochefoucauld was beneficially entitled to the surplus of the proceeds from
the sale of the land, after the deduction of the purchase price and expenses
incurred by the trustee (as per their agreed condition when the express trust
was declared) (Gray & Gray, Land Law).
S53(2) of the Law of Property Act provides that the documentary formality
requirement does not affect the creation or operation of resulting, implied or
constructive trusts. I will now discuss how the imposition of these trusts
uphold the doctrine of Rochefoucauld v Boustead (that statute will not be used
as an instrument of fraud) and prevent fraud without contravening statute by
enforcing a declaration of express trust.
In Hodgson v Marks, a resultin3g trust was imposed where the intentions
of the transferor were not upheld. The court held that although Mrs. Hodgson
could not have claimed an oral express trust due to s53(1)(b), the oral
agreement did prove that she did not intend to transfer the whole of her
equitable interest and therefore formed a resulting trust of the beneficial
interest to her, which would not be affected by s53(1). However, Hodgson
does not fit comfortably with the categories of the resulting trust. Swadling
argues that Russell LJ’s statement about resulting trusts is obiter and contends
that Hodgson is based on the doctrine of Rochefoucauld v Boustead, and since
Rochefoucauld upheld the oral express trust despite s 53(1)(b), Swadling
argues that Hodgson v Marks should have followed suit.
A more convincing argument is that Hodgson v Marks should be covered
by a constructive trust since the case fits more comfortably with a
constructive trust; there is no non-compliance of any statutory requirements
(s53(2) LPA 1925) (although many commentators agree with this point, it is
regarded as fallacious in Penner’s ‘Law of Trusts’ which claims that it is not
possible to give effect to an express declaration of trust for the reason that not
to do so would give rise to a fraud, and then say that the trust is constructive
arising by operation of law); and it would benefit from the underlying aim of
the constructive trust to do justice on a broad scale (Hudson, Equity & Trusts).
Equity enforces a constructive trust where someone has conducted
themselves in such a way that it would be inequitable to allow the to deny the
other party a beneficial interest in the land (Gissing v Gissing). The imposition
of a constructive trust requires: a bargain or common intention; a change of
position or detrimental reliance and equitable fraud or an unconscionable
denial of rights.
The rise of the constructive trust has obscured the principle of enforcing
the oral express trust despite the statutory formality provision (Penner, Law of
Trusts). This can be seen clearly in the case of Bannister v Bannister, which is
similar to Rochefoucauld as the fraud consisted of relying upon the lack of
writing. However, Scott LJ described the trust as a constructive trust rather
than the oral express trust, which he was clearly enforcing despite s53(1)(b).
Although he does not give a reason for doing so, academics believe that it is
because constructive trusts do not disregard statutory formalities. However,
this is deemed fallacious reasoning in Penner’s ‘Law of Trusts’ which claims
that it is not possible to give effect to an express declaration of trust for the
reason that not to do so would give rise to a fraud, and then say that the trust
is constructive arising by operation of law. The possibility of a constructive
trust arsing in Rochefoucauld v Boustead is commonly debated as this would
prevent the use of the statute as an instrument of fraud as well.
In Yaxley v Gotts, fraudulent behaviour relating to the reliance on s2 of
the Law of Property (Miscellaneous Provisions) Act 1989 to avoid an oral
agreement being effective led to the determination that the claimant was
entitled to relief under the doctrine of proprietary estoppel, which was not
necessarily invalidated by s2 of the 1989 Act. The appellants argued that the
doctrine could not validate an agreement rendered void by s3 of the 1989 Act.
The principle in Halsbury’s laws, which essentially states that the doctrine
could not validate an agreement rendered void by s2 of the 1989 Act, was
relied on. It was held, however, that the doctrine was not invalidated by the
Act, because it would be absurd if a constructive trust, which is very similar to
the doctrine of proprietary estoppel, could provide a proprietary remedy and
the doctrine could not. Additionally, it was held that since Parliament did not
view a constructive trust as undermining any policy that led to the creation of
the Act; the same should be true of the doctrine of proprietary estoppel where
the facts could equally support a constructive trust. Therefore, there is scope
for the application of the doctrine of proprietary estoppel in preventing statute
from being used as an instrument of fraud.
In three-party cases, where A transfers land to B upon trust for C; the
constructive trust approach may be used in ways which most justify the
circumstances. For example, in some cases the constructive trust could be a
bare trust for A which prevents B’s unjust enrichment; in others it could carry
out A’s intention by including the terms of the unenforceable express trust.
The former is preferable because as well as the bare trust complying with
statute, it does not enforce the express trust and B’s fraud is prevented. A
constructive trust in favour of C can be found when C has relied to his
detriment either because of a representation by A or because B has acted to
carry out the trust. This is particularly relevant where A makes a self-
declaration of trust for C, because A cannot defraud himself. This justifies
Rochefoucauld, which itself is a self-declaration case. By gratuitously
promising to buy the estates for Rochefoucauld, Boustead could be held a
settlor of the trust; and the cautionary purpose would allow him the finding of
a non-existent trust, because it would not be fraud upon Rochefoucauld if a
gratuitous promise had not been fulfilled. However, the courts finding that
Boustead had been giving effect to the express trust which Rochefoucauld had
relied upon in some way, shows that the decision made to enforce the
declaration of express trust and the doctrine resulting from it are correct.
(Penner,Law of Trusts).