Grey v IRC [1960] AC 1

Mr Hunter established settlements for his grandchildren and transferred shares to trustees to hold initially for himself. He then gave an oral direction that the trustees should hold the shares under the grandchildren's settlements instead. A written document was subsequently executed to record and implement the arrangement. The tax dispute turned on whether beneficial ownership had already passed under the oral direction, making the later instrument merely evidential, or whether a signed writing was necessary to effect the disposition. The legal title remained with the trustees while the intended beneficial ownership changed.

Was an oral direction changing the beneficiaries of an existing share trust a disposition requiring signed writing under section 53(1)(c) of the Law of Property Act 1925?

The House of Lords held that the direction was a disposition of the subsisting equitable interest and required signed writing. Viscount Simonds gave disposition its ordinary meaning: the direction purported to move beneficial ownership from Hunter to others while leaving the legal title with the trustees. It was not merely the creation of a trust by an unencumbered legal owner. The oral instruction was therefore ineffective to accomplish the transfer. The later written instrument operated to dispose of the interest and attracted the stamp-duty consequence in issue. The decision is often misstated if the description of the oral direction as a disposition is confused with saying that the oral disposition was legally effective.

A beneficiary's direction that existing trustees hold property for different beneficiaries disposes of a subsisting equitable interest and falls within section 53(1)(c). Signed writing is required; classifying the instruction as a disposition does not make an oral instruction effective.

Grey is central to distinguishing an initial declaration of trust from a later disposition of equitable ownership. An owner can ordinarily declare a trust of personal property orally, but an existing beneficiary cannot avoid the statutory rule by telling the same trustees to substitute new beneficiaries. Vandervell concerns a different arrangement in which legal and beneficial ownership moved together. Carefully identifying which interest moves is more useful than treating all share-trust transactions alike.