Sham trusts, revisited
Background Trusts can fail for a variety of reasons, many of which will be familiar to law students on equity and trusts modules. A trust may be invalid for want of formality, such as a failure record in writing an agreement to declare a trust of an interest in land, which is required by section 53 of the Law of Property Act 1925. Alternatively, a trust may be invalid for lack of one of the “three certainties”: (a) intention of the settlor to create the trust, (b) clearly identifiable property or assets over which the trust is declared, and (c) the beneficiaries which the trust is intended to benefit. A further reason for the invalidity of a trust is fraud or illegality. One aspect to this is the so-called ‘sham trust’, defined in Snook v London and West Riding Investments Ltd [1967] 2 QB 786 by Diplock LJ (at p 802) as follows: “acts done or documents executed by the parties to the ‘sham’ which are intended by them to give to third parties or to the court the appearance of creati...
