Revisiting Sham Trusts: Common Intention, Estoppel and Illegality
The Conveyancer and Property Lawyer pp. 31-44, 2018
Posted: 4 Mar 2018 Last revised: 20 Mar 2018
Date Written: March 1, 2018
Abstract
This article examines the prevailing view that, to find a sham trust, the settlor’s shamming intention must be shared by the trustee. This common intention requirement, it is argued, overprotects the trustee and the beneficiary, and suffers from inconsistent application to conceptually identical cases. Moreover, where the sham is concocted for the perpetuation of an illegal purpose, the requirement may contradict the operation of the illegality doctrine. This article proposes that the two doctrines ought to align and that any prejudice to an innocent trustee or beneficiary can be addressed with more specific solutions such as a change of position defence or an analogous estoppel defence.
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