Equity and Trusts Property - Essay Example

?Equity and Trusts Essay 2 Davina The gifts of 200,000 pounds and the cottage to Davina will constitute trust property if the disposition of the gifts to Tilda for Davina and her children satisfies the three certainties: intention, object and subject.1 Certainty of intention refers to the settlor’s intention to create a trust. Certainty of subject refers to the trust property and certainty of object refers to the beneficiaries of the trust.2 Certainty of intention is established by reference to the words used in the disposition of the property. Although words such as “trust” and “confidence” will likely provide evidence of the settlor’s intention, any words that can be interpreted to establish “a sufficient intention to create a trust” will be regarded as establishing the settlor’s intention to create a trust.3 On the facts of the case for discussion, Sir Clarence specifically instructed his friend Tilda to hold both 200,000 pounds and his seaside cottage upon “trust” for his daughter Davina and her children in equal shares. Thus there can be no doubt that Sir Clarence intended to create a trust out of the transfer of the property/gifts to Tilda. In order to give effect to Sir Clarence’s intention to create a trust, certainty of subject and object must be satisfactorily established.4 In this regard, certainty of subject matter is sufficiently established if the property transferred or to be transferred to the trust can be identified and administratively workable.5 The sum of money transferred to Tilda to administer is specific and certainly capable of division and is thus identifiable and readily administrable. Since the seaside property was transferred to Tilda, the seaside cottage is likewise identifiable and administrable. Certainty of objects is established if the words used to describe the beneficiaries are sufficient for the courts or the trustees to identify and administer the trust among specific beneficiaries or a class of beneficiaries.6 In a discretionary trusts, the trustees need only be able to identify by virtue of an in or out test, who the beneficiaries are. However with a fixed trust, as this particular trust appears to be, the trustees must be in a position to draw up a complete list of all of the beneficiaries.7 Even so the in or out test will be effective for determining who Davina’s children are. It is also possible to draw up a complete list of the beneficiaries. Therefore whether or not the trust is discretionary or a fixed trust, certainty of objects can be established. Tilda, who is Sir Clarence’s friend should certainly be able to identify Davina and her children. Likewise the courts can easily identify who Davina’s children are as births are a matter of public record. Thus far it has been established that the three certainties have been satisfied in the gifts to Davina and her children. However, the disposition of the freehold in the cottage to Tilda upon trust for Davina and her children cannot be enforced unless it meets the formal requirements for the disposition of an equitable interests in land pursuant to Section 53(1)(c) of the Law of Property Act, 1925. Section 53(1)(c) of the Law of Property Act 1925 provides that the disposition of an equitable interests in land must be evidenced in writing.8 It therefore follows that while the gift of 200,000 pounds forms the subject of a valid trust, the seaside cottage does not since it does not meet the requirements of Section 53(1)(c) of the Law of Property Act, 1925. Therefore the principle of resulting trusts is relevant. A resulting trust will arise to essentially transfer the property back to Sir Clarence. This is possible because the resulting trust functions to give effect to that which is conscionable.9 In particular a resulting trust will arise when both the trustee and the settlor agreed and know that the settlor never intended to transfer the property to the trustee absolutely or the trustee treats the property in a way that does not correspond with the settlor’s intention.10 Since Sir Clarence is dead, the seaside property will fall to his estate and will be transferred to Penelope (the executrix of his will) to distribute pursuant to his instructions. Sam The gift of the shares to Sam falls under the equitable principle “equity will not assist a volunteer” or equity will not perfect and “imperfect gift” in instances for the donee has not given any consideration for the gift to be received.11 Turner LJ said in Milroy v Lord, that a settlement can only be binding if the property is transferred to the trustee and “as I understand the law of this court…there is no equity in this court to perfect an imperfect gift”.12 It was held in Milroy v Lord however, that the incomplete transfer of shares to a beneficiary will be perfected if there is a clear and substantiated intention to create a trust for the shares in an incomplete way.13 On the facts of the case for discussion, Sir Clarence had intended to perfect the transfer of the shares to Tilda to hold upon trust for Sam. Evidence of Sir Clarence’s intention was revealed in his handing the share certificate and the executed share transfer form to Tilda and his admission that he had no idea how to perfect the transfer. Tilda reassured her friend that she would have it taken care of. However, in her attempts to have the forms executed by Meteor Holdings Ltd. the share certificate and transfer form were returned for errors. Tilda failed to follow up and thus the transfer of the shares to the trust remained incomplete. In Milroy v Lord, the settlor had attempted to establish a similar trust in shares and had failed to execute the share transfer. It was held that in order for transfer to be effective, the settlor must have completed all that was necessary to be completed for transferring the property in order to make it a binding settlement. The transfer must be such that it is consistent with the property to which it applies. In Milroy, the transfer of the shares could only be effected by virtue of re-registration. Since re-registration had not occurred the gift failed. 14 However, there is an important exception to the general rule that equity will not assist a volunteer. The exception is that once the donor has done everything that is in his or her power to perfect a gift, the gift should be validated since it is conscionable to do so.15 In Re Rose, the settlor had executed the shares necessary for transfer to the done. However, the company had not completed the transfer of the shares. Thus it was held that since the donor had done all that was in his power to transfer the shares, the shares should be treated as transferred according to the donor’s stated intentions.16 On the facts of the case for discussion, Sir Clarence had done everything that was in his power to divest himself of the shares in Meteor Holdings. He had executed the share transfer forms and handed them to Tilda who gave an undertaking to ensure that they were transferred. It appears that Tilda sent the share certificate and transfer forms to Meteor Holdings for their approval or signature. However, since the forms were returned for minor errors, it would appear that there was something else that Sir Clarence could have done to ensure that the transfer of the shares was perfected. However, since Sir Clarence delegated authority for completed the transfer to Tilda and he had already signed the share certificate and transfer forms, he had effectively done all that was necessary for him to do. Tilda need only correct the minor errors and the transfer will be complete. Thus the gift of the shares to Tilda upon trust for Sam will be regarded as complete pursuant to the ruling in Re Rose. Penelope The issue is whether or not Sir Clarence created a trust in the antique silver collection for Penelope. If indeed, Sir Clarence was holding the antique silver collection upon trust for Penelope as of June 2011, he was not authorized to dispose of any part of that antique silver collection in his will or otherwise. However, if the settlor reserves the right to revoke the trust, the property can be returned to the settlor. Under the law of equity and trust, it is generally assumed that once an express trust is made, the settlor may not revoke it or take the property back in the absence of a reservation of the authority to revoke the trust.17 On the facts of the case for discussion, there is no evidence that Sir Clarence reserved the right to revoke the gift or any part of the gift to Penelope. Therefore, in order to ascertain whether or not Sir Clarence intended to reserve the power to revoke the gift or any part of it, it is necessary to determine whether or not Sir Clarence intended to part with the property altogether and absolutely.18 On the facts of the case for discussion, Sir Clarence told Penelope that he wanted her to have the antique silver collection and indicated that he would only keep it for her until she installed security at her home. Specifically, Sir Clarence appears to have given the antique silver collection to Penelope and held it only for safe keeping. Thus it is reasonable to assume that Sir Clarence intended to divest himself of the antique silver collection absolutely and completely and he since he volunteered to keep it for safety and security reasons he was holding the silver upon trust for her. Pursuant to the ruling in Milroy, in order for the gift to be absolute, the property must be transferred in a manner that is consistent with the property itself. As a chattel, the transfer of the antique silver collection could have been perfected by virtue of delivery. However, since Sir Clarence was holding the property upon trust for Penelope, delivery to Penelope was only necessary to make the gift absolute. Certainly, Sir Clarence had intended to transfer the antique silver collection to Penelope absolutely, but did not feel that it was safe to deliver the collection to her until such time as she secured her property. The question is therefore whether or not Sir Clarence intended to create a trust rather than an absolute gift. Although, Sir Clarence did not specifically state that he intended to create a trust, his words and conduct indicate that he did indeed intend to create a trust for a specified time. It was held in Richards v Delbridge, that although the settlor is not required to specifically use the word “trust”: He must do something which is equivalent to it and use expressions which have meaning; for however anxious the court may be to carry out a man’s intention, it is not at liberty to construe words other than according to their proper meaning.19 In other words, the courts will be willing to hold that the settlor intended to establish a trust, but are reluctant to do so if the settlor’s actual intent was to make an outright gift. There is no doubt that Sir Clarence intended to both create a trust and to divest himself of the antique silver collection absolutely. However, he did not intend to make an absolute gift of the silver to Penelope until a later date. In the meantime he specifically informed Penelope that he would hold onto the property for safe keeping. It can therefore be argued that by informing Penelope that he was holding the collection for safe keeping, he was not expressing an intention to create a trust. Sir Clarence was instead merely holding the property for Penelope for safety and security reasons. Even so, regardless of the reasons Sir Clarence was holding the antique silver collection, he was holding them as trustee for Penelope. Since Sir Clarence had not delivered the antique silver collection to Penelope he effectively declared a trust in favour of Penelope. Moreover, since he intended to make the gift an absolute gift, the absolute gift would not take effect until delivery. Therefore Sir Clarence created a trust and since he intended to give the property to Penelope absolutely, he cannot dispose of the property in part or in whole in his will. There was nothing in the nature of the gift do indicate that Sir Clarence intended to reserve unto himself the power to revoke the gift or the trust. Thus the entire collection is Penelope’s. Janet is therefore not entitled to the teapot. Bibliography Carreras Rothmans Ltd. v. Freeman Matthews Treasure Ltd. [1985] Ch. 207. Hudson, A. 2010. Equity and Trusts, Oxon, UK: Cavendish. IRC v Broadway Cottages Trust [1955] Ch 20. Knight v Knight [1840] 3 Beav 148. Law of Property Act 1925. Milroy v Lord [1862] 4 De GF & J 264. Mussoorie Bank Ltd. v Raynor [1882] 7 App. Cas. 321. Paul v Paul [1882] 20 Ch D 742. Re Baden’s Deed Trusts (no.1) [1971] AC 424. Re Kayford Ltd. [1975]1 WLR 279. Re Rose [1952] Ch. 499. Richards v Delbridge [1874] LR 18 Eq. 11. Webb, C. and Akkouh, T. 2011. Trust Law. London, UK: Palgrave MacMillan. Read More