Oughtred v IRC
An oral contract to transfer an equitable interest in shares creates a constructive trust, but the later written transfer is still liable to stamp duty.
Facts
Mrs Oughtred held a life interest in shares under a settlement, and her son had the remainder. They orally agreed to exchange interests, so that she would transfer to him her own shares in exchange for his reversionary interest in the settled shares. The trustees then transferred the settled shares to her by deed. The Inland Revenue claimed stamp duty on the deed, but Mrs Oughtred argued that the beneficial interest had already passed to her under a constructive trust arising from the oral contract, so the deed transferred only the bare legal title.
Legal principle
The House of Lords held, by a majority, that stamp duty was payable on the deed. Lord Jenkins said that, although the oral contract might give rise to a constructive trust in her favour, under the principle that a specifically enforceable contract to transfer property creates a constructive trust, that trust did not give her the full beneficial interest, so the deed was the instrument by which the transaction was completed. Lord Radcliffe, dissenting, said that the constructive trust gave her the entire beneficial interest, so section 53(1)(c) did not apply because of section 53(2).
Related cases on formalities and constitution of trusts
- Re Brooks' Settlement Trusts [1939] Ch 993
- Cannon v Hartley [1949] Ch 213
- Choithram (T) International SA v Pagarani [2001] 1 WLR 1
- Fletcher v Fletcher (1844) 4 Hare 67
- Grey v IRC [1960] AC 1
- Hodgson v Marks [1971] Ch 892
- King v Dubrey [2015] EWCA Civ 581, [2016] Ch 221
- Mascall v Mascall (1984) 50 P & CR 119
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