Shephard v Cartwright

When a parent purchases or subscribes for shares and registers them in a child’s name, equity presumes an advancement rather than a resulting trust. The transferor’s intention may be proved by acts and declarations made before, at, or as part of the transaction. Later acts and declarations are admissible against, but not in favour of, the person responsible for them.

A child’s subsequent conduct can amount to an admission only if undertaken with knowledge of the material facts. Separate transactions cannot establish the transferor’s intention merely by showing an alleged course of dealing. The party seeking to rebut the presumption bears the burden, including where that party represents the transferor’s estate.

A father subscribed for shares in six private companies and caused substantial holdings to be registered in the names of two of his children. The children did not know of the allotments and received no share certificates. Five years later, the companies were sold for a large consideration. The father obtained documents signed by the children without their understanding, received the proceeds attributable to their shares and used much of the money.

The children claimed an account against his estate. Harman J and the Court of Appeal rejected their principal claim. The central issues before the House were whether the presumption of advancement had been rebutted by evidence of later events or other transactions, whether ignorance prevented a completed gift, and whether the claims were barred by limitation.

1. Appeal allowed unanimously. Viscount Simonds delivered the leading speech. Lord Morton of Henryton, Lord Reid, Lord Tucker and Lord Somervell of Harrow agreed with the result and proposed order.

2. Per Viscount Simonds, when a man purchases or subscribes for shares and registers them in a stranger’s name, a resulting trust is presumed. Registration in the name of his child or a person to whom he stands in loco parentis instead raises a presumption of advancement. Ignorance of the transaction and the absence of share certificates were circumstances of negligible weight. The respondents, as executors, stood in no stronger position than the deceased and bore the burden of rebutting the presumption.

3. Per Viscount Simonds, acts and declarations made before or at the transfer, or so immediately afterwards as to form part of it, are admissible for or against the actor. Subsequent acts and declarations are admissible only against that person. Transactions concerning other property could not be treated artificially as part of the share allotments or admitted as evidence of a course of dealing. Events nearly five years later were independent transactions prompted by the companies’ unexpected success.

4. A child’s later conduct may possibly constitute an admission of the parent’s original intention, but only if undertaken with knowledge of the material facts. The appellants signed documents under their father’s guidance without knowledge or enquiry. Their conduct was therefore inadmissible for this purpose and, in any event, had no probative value. The father’s treatment of dividends and bank interest as the children’s income was admissible against his estate and was consistent with advancement.

5. Lord Morton held that each child necessarily held the shares either beneficially or as trustee. If the presumption were rebutted, the evidence could establish a bare trust or other defined trusts. It could not support an undefined intermediate or qualified interest on these facts.

6. Per Viscount Simonds, the requirement of acceptance applicable to a gift of a chattel did not determine this case. Legal title to the shares had been vested in the children in the prescribed manner; the question was whether the beneficial interest accompanied it under the doctrine of advancement.

7. The deceased received the later cash and shares as trustee for the appellants. He could not discharge that trust by secretly purporting to act in another capacity. The claims were not barred by laches, acquiescence or the Limitation Acts. The Court of Appeal’s order was set aside and Harman J’s order was varied to declare the appellants sole beneficial owners and direct the necessary accounts and inquiries.

1. House of Lords: Allowed the appeal unanimously, set aside the Court of Appeal’s order and varied Harman J’s order by declaring that the shares were advancements and that the appellants’ resulting claims were not barred.

2. Court of Appeal: By an order dated 1 July 1953, rejected the appellants’ principal case. That order was set aside by the House of Lords. A reported citation is not stated in the judgment.

3. High Court: Harman J made orders dated 12 January and 19 February 1953 concerning declarations, accounts and inquiries. The House of Lords varied those orders. A reported citation is not stated in the judgment.