Drainge v wilberforce
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Drainage v Wilberforce (1889) 5 TLR 436
Defendant is tenant for life of a large estate in Sussex, and contracted to sell to the Plaintiff a house occupied by the latter as yearly tenant.
A holds property on trust for B, and B declares himself a trustee in favour of C. A holds directly on trust for C, and B drops out. It is submitted that B will drop out of the picture, unless he has active duties to perform as a trustee. In the latter case, the transaction is a declaration of trust, and must be evidenced in writing if it relates to land. In the former case, the original trustees hold for C directly, the transaction in truth is an assignment and must be in writing.
Sub-Trust (derivative trust) – Sub-trust is not a disposition of the equitable interest if some rights are retained. A trust created out of a trust such that A holds property on trust for B and B then declares himself to be trustee of his beneficial interest for C. If, in making such a declaration of trust, B has no duties to perform as trustee (because A continues to perform all such duties), then B will simply drop out of the picture leaving the original trustee, A, holding in trust for C. This is not a genuine example of a sub-trust. If B, however, by declaring the trust in favour of C, has some duty to perform in his capacity as trustee, then a genuine sub-trust will have been created and B will not drop out of the picture.
In the case of a bare sub trust the beneficiary is now a mere conduit between the trustee and the sub beneficiary and therefore drops out of the picture and this is in truth a disposition and must follow S53(1)(c) as explained by Battersby and strenghtned by the operation of the rule in Grainge v Wilberforce.
In creating a sub-trust where the original beneficial owner retains some control over that property this is not a disposition of an equitable interest. However, if they have not control it is effectively a disposition and should comply with s53(1)(c).