The Doctrine of Parol Agreement Trusts
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View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Wolverhampton Intellectual Repository and E-theses THE DOCTRINE OF PAROL AGREEMENT TRUSTS AND FRAUD IN EQUITY: AN HISTORICAL-DOCTRINAL ANALYSIS OF EQUITY'S JURISDICTION UNDER THE HEAD OF FRAUD TO IMPOSE TRUSTS ARISING OUT OF PAROL AGREEMENTS. GREGORY WILLIAM ALLAN, LLB, LLM A thesis submitted in partial fulfilment of the requirements of the University of Wolverhampton for the degree of Doctor of Philosophy. October 2016 This work or any part thereof has not previously been presented in any form to the University or to any other body whether for the purposes of assessment, publication or for any other purpose (unless otherwise indicated). Save for any express acknowledgments, references and/or bibliographies cited in the work, I confirm that the intellectual content of the work is the result of my own efforts and of no other person. The right of Gregory William Allan to be identified as author of this work is asserted in accordance with ss.77 and 78 of the Copyright, Designs and Patents Act 1988. Signature....Gregory Allan............................... Date........13/02/17............................................. Acknowledgment I would like to extend my immense gratitude to my Director of Studies, Professor Peter Walton, for his unfailingly insightful advice in respect of this thesis and also in relation to my research career more generally. I am similarly indebted to Professor Roger Gregory, who was the primary source of inspiration for both the subject matter of my research and the means by which it was, and continues to be, conducted. I would also like to thank Wolverhampton Law School and Leicester Law School for providing me with encouragement and financial support during the course of this research degree. I also owe an immeasurable debt of gratitude to my parents for consistently supporting my education in every manner possible since the earliest days of my infancy. I would also like to acknowledge the contribution of my children, William and Leo, who provided frequent and (usually) welcome distractions from my work on this thesis. Last, and by no means least, I wish to pay tribute to the equally unquantifiable debt of thanks owed to my wife, Virna, for providing me with as much in the way of support, encouragement and intellectual insights as any researcher could possibly wish for. i Abstract This thesis examines, through the most comprehensive historical-doctrinal analysis to date, the nature and extent of equity’s jurisdiction to impose trusts arising out of parol agreements. The central argument of this thesis is that all such trusts are enforced pursuant to a single doctrine of equity which arises to prevent fraud. This doctrine, which is uncovered and elucidated in this thesis, is named ‘the doctrine of parol agreement trusts’. It is argued that the ‘fraud’ which brings the doctrine into play will occur if the recipient of property knowingly reneges on a parol agreement subject to which she took the property and upon which the other party thereto relied. Moreover, it is demonstrated that trusts arising for the prevention of fraud were, until the early twentieth century, not seen as express, resulting or constructive trusts, but that, according to modern nomenclature, they are best regarded as constructive trusts. This thesis also challenges several modern orthodoxies. It is proven that the leading case of Rochefocuauld v Boustead was reported imperfectly, and that all previously presented accounts of the facts are inaccurate. Furthermore, it is categorically demonstrated that secret trusts are enforced for the prevention of fraud, but that this is not inconsistent with the notion that secret trusts are dehors the will. The juxtaposition between parol agreement trusts and related equitable innovations such as mutual wills, proprietary estoppel and ‘common intention’ constructive trusts is also examined, as well as the doctrine’s relationship with contract law and the law of agency, with a view to providing a doctrinal solution to some modern controversies in these areas. The historical-doctrinal relationship between parol agreement trusts and other types of constructive trusts is also examined with surprising results which suggest doctrinal affinities with the liability which affects knowing recipients. Finally, it is suggested that the manner in which modern commentators and some judges have ii eschewed fraud as a justification for parol agreement trusts and other related trusts may represent an unwelcome development. iii Contents Chapter 1: Introduction .......................................................................................................... 1 1.1 The Research Question ............................................................................................... 1 1.1.1 What are Trusts Arising out of Parol Agreements (Parol Agreement Trusts)? ....... 1 1.2 How the Research Question will be Answered ............................................................ 2 1.2.1 Research methods ................................................................................................ 2 1.2.2 The various aspects of the research question ....................................................... 4 1.3 Why will the Intended Treatment of the Research Question as Lead to an Original Contribution to Knowledge? ............................................................................................. 10 Chapter Two: Category One and Two Parol Agreement Trusts ........................................... 12 2.1 General Introduction .................................................................................................. 12 2.2 Category One Parol Agreement Trusts ...................................................................... 13 2.2.1 The historical and contemporary relevance of fraud ............................................ 13 2.2.2 Observations on the nature of fraud in equity ...................................................... 15 2.2.3 The classification of category one parol agreement trusts ................................... 19 2.3 Category Two Parol Agreement Trusts ...................................................................... 22 2.3.1 Secret trusts- introduction and academic controversies ....................................... 23 2.3.2 Inter vivos category two parol agreement trusts: the academic controversies ..... 26 2.3.3 The Historical and Contemporary Relevance of Fraud to Secret Trusts .............. 27 2.3.4 Observations on the nature of equitable fraud in secret trusts cases ................... 28 2.3.5 Do the differing communication requirements for fully and half-secret Trusts undermine the fraud theory? ........................................................................................ 50 2.3.6 Summary of the observations on the nature of equitable fraud in secret trust cases .................................................................................................................................... 52 2.3.7 Observations on the nature of equitable fraud in cases of inter vivos category two parol agreement trusts ................................................................................................. 53 2.3.8 The classification of category two parol agreement trusts ................................... 56 2.4 Summary ................................................................................................................... 68 Chapter 3: Category Three Parol Agreement Trusts and ‘Hybrid’ Cases ............................. 71 3.1 Introduction ................................................................................................................ 71 3.2 Analysis of the Facts of Rochefoucauld v Boustead .................................................. 74 3.2.1 Why are the facts of Rochefoucauld unclear? ..................................................... 74 3.2.2 The factual background to Rochefoucauld ..................................................... 77 3.2.3 The Sale of the Estates .................................................................................. 83 3.2.4 The Aftermath of the Sale .............................................................................. 96 iv 3.2.5 Conclusions on the factual analysis of Rochefocuauld ................................. 101 3.3 The Extent to Which the Prevention of Fraud Underpins the Enforcement of Category Three Parol Agreement Trusts ...................................................................................... 102 3.3.1 Equitable fraud within the context of cases within the Rochefoucauld line ......... 102 3.3.2 Equitable fraud within the context of cases within the Pallant line ..................... 107 3.4 Fraud in Cases of ‘Hybrid’ Parol Agreement Trusts ................................................. 112 3.4.1 Young v Peachy ................................................................................................ 112 3.4.2 Neale v Willis .................................................................................................... 113 3.4.3 AM v SS: the most recent case of a parol agreement trust ................................ 114 3.5 The Classification of Category Three Parol Agreement Trusts ................................. 117 3.5.1 The classification of the trust in Rochefoucaud ................................................. 119 3.5.2 Summary regarding the proper classification of category three parol agreement trusts .........................................................................................................................