Oughtred v IRC [1960] AC 206

Facts

• Mrs. Oughtred and her son, Peter, were shareholders in a private company, with Mrs. Oughtred holding the majority and Peter the minority of shares.
• In 1956, Mrs. Oughtred and Peter entered into an oral agreement to exchange shares and other assets.
• The parties intended to formalize this agreement in writing, but no written instrument was ever executed.
• Mrs. Oughtred claimed the oral agreement transferred the equitable interest in Peter’s shares to her, with legal title to be transferred upon later documentation.
• The Inland Revenue Commissioners assessed stamp duty on the transaction, contending that the transfer required compliance with statutory formalities and the oral agreement was insufficient.
• The dispute centered on whether the oral agreement alone transferred an equitable interest and bypassed statutory requirements.

Issues

1. Whether an oral agreement to transfer shares could create an equitable interest without compliance with statutory formalities under the Companies Act 1948 and section 53(1)(c) Law of Property Act 1925.
2. Whether the oral agreement amounted to a disposition of the equitable interest or created only a personal obligation.
3. Whether the doctrine of constructive trust could apply to the arrangement, allowing avoidance of statutory formalities.
4. Whether stamp duty liability arose on the basis of the oral agreement or required a written transfer.

Decision

• The House of Lords held the oral agreement did not transfer the equitable interest in the shares.
• The statutory requirement for written documentation under section 53(1)(c) of the Law of Property Act 1925 could not be avoided by oral agreement.
• The oral agreement created only a personal obligation to transfer the shares, not a disposition of the equitable interest.
• The doctrine of constructive trust was found inapplicable in this context as the agreement did not create a trust relationship.
• Compliance with statutory formalities was held essential for valid transfer and for determining stamp duty liability.

Legal Principles

• Oral agreements cannot transfer equitable interests in shares where statutory provisions require a written instrument.
• Section 53(1)(c) of the Law of Property Act 1925 mandates that dispositions of equitable interests be in writing.
• Constructive trusts cannot be used to circumvent statutory formalities prescribed for property transfers.
• Statutory requirements uphold certainty and predictability in commercial and property transactions.
• Equitable remedies are limited and do not override clear legislative provisions.

Conclusion

The House of Lords reaffirmed that compliance with statutory formalities is mandatory for the transfer of equitable interests in shares, holding that oral agreements are ineffective absent written documentation. The case clarifies the boundaries of equitable remedies and maintains the distinction between legal and equitable ownership in English law.