In the case of Rochefoucauld v Boustead (1897), Lindley LJ stated that the Statute of Frauds does not prohibit the evidence of fraud. Furthermore, Lindley LJ declared that if a trustee is aware that a land was conveyed to them as a trustee, it would be considered fraudulent for them to reject the existence of the trust and assert ownership of the land.
According to Section 53(1)(b) of the Law of Property Act 1925, a written declaration of trust is required for any land or interest in land. This declaration can be made by someone who is authorized to declare the trust or through their will. S53(1)(b) states that an oral declaration of trust is not void if there is no written proof, but it cannot be enforced against the trustee. This requirement for written proof can be traced back to s7 of the Statute of Frauds 1677. The written declaration establishes the existence of an express trust and binds parties to it. However, without proof, the beneficiary is unable to compel the trustee to fulfill the trust (Penner, Law of Trusts).
In the case of Rochefoucauld v Boustead, an oral express trust was enforced against the trustee, even though it did not fulfill the writing requirement stated in s53(1)(b) (Penner, Law of Trusts). The Court of Appeal justified this enforcement by stating that equity will not allow a statute meant to prevent fraud to be used as an instrument of fraud. This principle, known as the ‘doctrine of Rochefoucauld v Boustead’, is reflected in a quote by Lindley LJ, who declares that equity abhors the use of statute as a means of fraud. The purpose of the statutory formality rule is to prevent fraud against trustees by individuals who fabricate trust allegations. However, as Lindley LJ points out in this case, insistence on formality should not be taken to an extent that allows a trustee to use the absence of writing to facilitate fraud. Therefore, when Mr. Boustead made an explicit oral declaration that he would hold the land on trust for Mrs. Rochefoucauld from the time of acquisition, it would be considered fraud in equity if he were to deny the trust based on the lack of writing, which initially permitted him to acquire title.The case determined that Mrs. Rochefoucauld is rightfully entitled to the surplus from the land sale, after deducting the purchase price and trustee expenses, in accordance with the agreed condition of the express trust declaration (Gray & Gray, Land Law). According to S53(2) of the Law of Property Act, the requirement for documentary formality does not affect resulting, implied, or constructive trusts. This discussion will now address how these trusts reinforce the doctrine of Rochefoucauld v Boustead (which prohibits using statutes for fraud) and prevent fraud while still enforcing an express trust declaration. In Hodgson v Marks, a resulting trust was established when the transferor’s intentions were not honored.
The court ruled that while Mrs. Hodgson couldn’t have claimed an oral express trust under s53(1)(b), the oral agreement did establish that she didn’t intend to transfer her entire equitable interest. As a result, a resulting trust was formed for her beneficial interest, which wouldn’t be affected by s53(1). However, Hodgson doesn’t fit neatly into the resulting trust categories. Swadling argues that Russell LJ’s remark on resulting trusts is peripheral and asserts that Hodgson is based on the Rochefoucauld v Boustead doctrine. Since Rochefoucauld upheld the oral express trust despite s53(1)(b), Swadling argues that Hodgson v Marks should have done the same.
The argument for Hodgson v Marks being covered by a constructive trust is considered more convincing. This is because the case aligns better with a constructive trust, as there is no violation of statutory requirements (s53(2) LPA 1925). It is important to note that some commentators challenge this viewpoint, as Penner’s ‘Law of Trusts’ argues that it is not possible to enforce an express declaration of trust while simultaneously claiming that the trust is constructive and arises through the operation of law, as not doing so would constitute fraud. However, the argument for a constructive trust in Hodgson v Marks is strengthened by its alignment with the underlying aim of the constructive trust, which is to administer justice on a broad scale (Hudson, Equity & Trusts). Equity enforces a constructive trust when a party has behaved in a manner that would be unfair to deny the other party a beneficial interest in the property (Gissing v Gissing). The imposition of a constructive trust necessitates the presence of a bargain or common intention, a change in position or detrimental reliance, and either equitable fraud or an unconscionable denial of rights. The prevalence of constructive trusts has overshadowed the principle of enforcing an oral express trust despite the formal requirement stipulated by law (Penner, Law of Trusts). This can be seen clearly in the case of Bannister v Bannister, where the fraud involved relying on the absence of written documentation.
In the case, Scott LJ considered the trust to be a constructive trust rather than an oral express trust. He enforced this trust even though it goes against the provisions of s53(1)(b). The reason for his decision is not provided, but academics argue that constructive trusts do not disregard statutory formalities. However, Penner’s ‘Law of Trusts’ argues that this reasoning is flawed, as it would be fraudulent to not give effect to an express declaration of trust and then claim that the trust is constructive due to the operation of law. The possibility of a constructive trust arising in Rochefoucauld v Boustead is a topic of debate, as it would prevent the statute from being used as a tool for fraud.
In the case of Yaxley v Gotts, fraudulent behavior occurred regarding the reliance on s2 of the Law of Property (Miscellaneous Provisions) Act 1989 in order to avoid the effectiveness of an oral agreement. This led to the determination that the claimant could obtain relief under the doctrine of proprietary estoppel, which was not necessarily made invalid by s2 of the 1989 Act. The appellants argued that the doctrine could not validate an agreement that had been rendered void by s3 of the 1989 Act. They relied on the principle stated in Halsbury’s laws, which essentially claimed that the doctrine could not validate an agreement that had been rendered void by s2 of the 1989 Act. However, it was held that the doctrine was not invalidated by the Act because it would be illogical for a constructive trust, which is very similar to the doctrine of proprietary estoppel, to provide a proprietary remedy while the doctrine itself could not. Furthermore, it was determined that since Parliament did not consider a constructive trust as undermining any policy that led to the creation of the Act, the same should apply to the doctrine of proprietary estoppel if the facts give equal support to a constructive trust.
Therefore, the application of the doctrine of proprietary estoppel can be used to prevent statute from being used fraudulently. In cases involving three parties, where A transfers land to B with the instruction to hold it in trust for C, the constructive trust approach can be used in a manner that best suits the circumstances. For instance, in some instances, the constructive trust may function as a bare trust for A, thus preventing unjust enrichment on B’s part and avoiding enforcement of the unenforceable express trust. This is the preferred option as it not only fulfills the requirements of statute but also thwarts B’s fraudulent behavior. A constructive trust that benefits C may be established when C has suffered detriment due to a representation made by A or when B has taken action to carry out the trust. This is especially pertinent when A declares a trust for C, as A cannot deceive himself.
This passage justifies Rochefoucauld as a case of self-declaration. Boustead’s promise to buy the estates for Rochefoucauld could be seen as a creation of a trust, with Boustead as the settlor. The purpose of caution would allow the finding of a non-existent trust if the gratuitous promise was not fulfilled, as it would not constitute fraud against Rochefoucauld. However, the courts determined that Boustead was giving effect to the express trust relied upon by Rochefoucauld, indicating that the decision to enforce the declaration of express trust and the resulting doctrine are correct.
