“The sham doctrine holds that where persons have entered into a transaction or arrangement with the common intention of concealing from the court or third parties their actual legal rights and obligations towards each other, then the transaction or arrangement is a sham. This is not the same, though, as a court construing an arrangement’s terms and deciding that, despite whatever label the parties have used, those terms indicate that it is actually something else. Instead, sham requires a court finding that the transaction or arrangement was always meant to be a ‘disguise’ or ‘façade’. Thus, for a transaction or arrangement to be a sham, the parties must have objectively intended for it to exist while simultaneously harbouring a subjective (sometimes phrased, ‘secret’) intention to the contrary …”
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Derwent Coshott, ‘The sham doctrine and intention: addressing the bilateral nature of sham trusts’ (2022) 138 Law Quarterly Review (Jan) 114-130.
First posted 2021-11-27 09:00:01
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