Developments in the Law of Trusts - Essay Example

? Equity and Trusts How Kevin and the Joint Trust could recover their Misappropriated Funds There have been tremendous developments in the law of trusts. This has been seen in legal decisions which have been made over time. These recent legal decisions have contributed a lot in refining the traditional stipulations surrounding. This been well illustrated in the amounts of emphasis currently attached to beneficiaries’’ loss as a result of a trustee’s actions. The law provides that a trustee should manage a trust property (in this case a fund) on behalf of beneficiaries. This is a discussion that surrounds misappropriation of trust funds by a trustee and focuses on the best legal advice to be given to the beneficiary. Introduction A trust is defined as an equitable duty that binds one person to handle property owned by him or her (but not his or her private property) on behalf of other persons in which any of these other persons my enforce the obligation; including the person himself or herself. This person is called a trustee while the others are beneficiaries and, as stated, the trustee could also be a beneficiary. The writer of the trust is called a settler. Hepburn insisted that obligation is equitable1. Some scholars have clarified that the popular obligation of conscience is not necessarily the same as ‘equitable obligation The prime obligation of a trustee is to run, handle and manage the trust on behalf of the beneficiaries. Over time however, it has been established that trustees could misappropriate the trust property; which led to the development of rules of equities to act as checks and balances. For instances, rules of equity stipulate that trustees cannot invest trust funds in their own private businesses but only beneficiary-authorized ventures. The beneficiaries are said to own the equitable interest in the trust fund or property and are required to demand for good management of the trust. Beneficiaries can sue trustees for mismanagement or breach of trust. The beneficiaries are entitled to proprietary interest emanating proceeding from the trust property or fund; and are entitled to pass it to others2. The beneficiaries have a legal duty to terminate the trustees’ legal titles to them. However, their age and absolute entitlement to the trust must be unquestionable. Jeremy Versus Kevin and Joint Trust In advising Kevin and the Joint Trust, there are a several features of a trust to be considered. It should be noted that the principle of equity is effected by the owner, trustee, in his or her own conscience. This is popularly known as implied or express trust. But if law comes in and forces the trustee to perform functions for which the property was conferred, that becomes a constructive. Using this power and the legal disposition discussed above, Kevin should go ahead and instruct his father to confer the legal title to him; otherwise seek court’s direction. The second advice to Kevin would probably rhyme with the second feature of trusts: conscience. For all intends and purposes, Jeremy, the trustee’s conscience is affected by at least some factors. This is illustrated by his decision to transfer the trust fund to his private account; which was of course not the original purpose of the trust. It means therefore that the trustee automatically rendered the trust from being implied or express. Establishment of a trust depends on a property that can be identified. In this case, Jeremy, by dishonestly transferring the trust fund, breached the trust and the ‘property is not identifiable’3; thus a trust cannot be established and if it was prior established, it should end. Alternatively, since the trustee is already under constructive trust terms, through a court process, then he should be made to refund the trust fund. After a trust is up and running, a proprietary interest on the part of the beneficiary starts to build up. Jeremy should be compelled by law to transfer legal title of the trust, refund the trust’s fund and pay Kevin his proprietary interest all the time he was never given anything. Kevin could also pursue the issue under personal right to the trust fund against the trustee. In fact, in taking effect over property, a trust must favor the beneficiary. It seems that a trust is an intersection of property law and personal obligations4. We shall now focus our attention on the specifics of breach of trust. Another ground on which Jeremy could be challenged is from the angle that trustees have a duty to transfer the title to the beneficiaries if it is necessary. A condition for this is of course a responsible age; which Kevin must have for the transfer of title from his father to him. If these conditions apply, then it is justifiable that Jeremy should have done that the moment he realized he had financial problems. Breach of Trust The law is very clear on this issue, which makes it not to be belabored. The law of trusts provides that if a trustee breaches a trust and if such a breach causes a loss on the part of beneficiaries, then such a trustee is liable. This kind of liability means that the trustee should pay back the trust fund. Although in this case Jeremy could argue that he also had personal rights in this liability, arguments based on making personal profits at the expense of the beneficiaries are more grounded. If as alluded earlier, the breach of trust does not cause loss to the trust, the trustee is not liable5. However, in this case, the trust incurred a loss of ?50,000. Kevin can also use the responsibilities of trustees argument to pursue reinstitution of his rightful trust fund. In advancing a better case against Jeremy on the nature of his breach, Kevin may consider establishing whether the trustee caused the breach in full knowledge of breach of trust or if he just assisted in the breach of the trust. It seems that the former perspective could give Kevin an upper hand in pursuit of his trust refund. Although neglect of responsibilities of a trustee and the trust terms is enough ground for argument, there is need to be more outspoken. In most cases, the beneficiary is specifically reinstituted6. There is additional information from Tagrget Holdings v Redferns whose success in reinstitution was pegged on ‘beneficiaries’ loss’ argument. In other words, Kevin must seek remedies due to losses caused to him courtesy of the breach. The breach of trust happened because Kevin’s basic right was violated: having the trust fund well managed and proceeding proprietary interests accordingly paid to him. He needs to invoke every provision of the specific trust instrument for this case. As provided in the law of trusts, Kevin should rightfully demand evidence of the accounts of that trust fund since the time last viewed them. It has to be submitted at this stage that a beneficiary should always keep the trustee on toes because he has the right to an excellent management of property or fund. It is reiterated that Kevin must desist from the traditional ways of approaching breach of trusts. The earlier quote case of Target Holdlings v Redfern of the House of Lords brought significant dimensions on the best grounds for reinstitution. It must be argued that the beneficiary suffered a loss which was as a result of the actions of the trustee. The arguments from both Kevin’s side and joint trust’s side should prove how irresponsible and selfish Jeremy was in ‘borrowing’ from the trust, without beneficiaries’ authorization, depositing the money in his private current account and engaging in ‘extravagant’ activities and illegal business (for sure fake art works do not form part of the legal businesses). The latter should actually be put as a grieve instance of carelessness; which should warrant a legal decision to transfer legal title to the son, following the father’s unfit inability to manage wisely. It must also be amplified that Jeremy’s ‘out-of-mindedness’ to give out beneficiaries’ funds to charity work and also going for holiday or retreat. This jobless and ‘full-of-debts’ fellow should not be entrusted with trusteeship of the two trusts. Above all, Jeremy was declared bankrupt. Any serious legal procedure would not surely reinstate money-related responsibilities to an individual with the above deviations from the mainstream characteristics of a trustee7. Conclusion A trustee is entrusted with the responsibility of managing a trust property of behalf of a beneficiary. In the case of Jeremy versus Kevin and Joint Trust, there seems to be obvious inabilities on the part of the trustee to manage the two trusts. This is because Jeremy has been declared bankrupt; having lost his directorship of a company and piling up numerous debts. The trust law provides for transfer of the title and this seems to be a good ground for that. The other legal advice to Kevin is to demand an account of the trust and consequently file for a reinstitution from his father. Bibliography Hepburn, S. J. & Hepburn, S, Principles of Equity and Trusts. 2nd ed. UK: Routledge, 2001. Hudson, A, Equity and Trusts. 6th ed. Oxford, UK: Taylor & Francis, 2009. Ramjohn, M, Text, Cases and Materials on Equity and Trusts. 4th ed. Oxford, UK:Taylor & Francis, 2008. Read More