Equity and Trust Issues - Essay Example

?Research Paper On Equity and Trust Order No: 781305 Law Problem The problem involves Amanda who lived with her boyfriend, Brian. The boyfriend won ?5000 deposited in his account at Bank of Southampton. He regarded that money as much as his and Amanda. Unfortunately he died intestate and Charles- Brian’s relative is claiming all the money. Issue Whether Amanda has any equitable claim for this money? Resolution of issue Yes. Amanda can claim the money but it’s solely the discretion of Court as to whether she takes the whole ?500 or part of it. The equitibility of the words “… I regard the money in the account as much yours as mine” by Brian shall be construed with reference to the conduct of parties. A trust is a binding agreement between a testator and the trustee for the benefit of the beneficiary. Accordingly, for there to exist a valid trust, three certainties must be present. The “certainty of words” which reveals the intention of the testator, certainty of “subject matter” (property bequeathed) which in this case is the money and the “certainty of objects” (the intended beneficiary) as upheld by“Lord Langdale MR” as he was then in “Knight V Knight (1840).” Besides, Lindley L J in “Re Hamilton [1895]”stated that the intention of the testator in every wording or disposition should as a rule of prudent practice is construed on the merits of each case. Whereas the current case presents quite a problematic and conflicting loyalty in the application of equity and trust, it can be regarded as a constructive trust. According to Lord Denning in “Hussey v Palmer (1972)” this is a trust imposed upon by the Court whenever justice, conscience or good objective judgment demands it to be vested in the beneficiary. From conduct of parties, Brian had the intention to create a valid constructive trust. It’s correct that he died intestate and in that vein he didn’t make any transfer of the money into the names of Amanda. However, Brian manifested an intention to hold the said money in his deposit account in trust for his girlfriend, Amanda by virtue of his conduct. Court of equity will determine the intention based on Brian’s conduct which suggests existence of a constructive trust. It’s also correct that Premafacie, the words themselves are not sufficient enough to create a valid trust but coupled with Brian’s conduct, there is a manifestation of that intention by his assurance to Amanda. For example, in the case of Paul v Constance (1977), money was placed into the account “sole name of Constance.” As it were assurances were made to Mr. Paul that the money in the account was jointly owned. Paul argued that based on that construction, it was sufficient that the wording created a joint ownership of the account. It was held that the conduct of the parties created an intention of joint ownership. Similarly in “Re Vandervell’s Trust (No 2) (1974)”, the money in the settlement was used in purchasing shares. This was done in exercise of a prevailing option for the intended beneficiary. The Court held that the conduct of these parties where upon they used the money to pay dividends into the intended settlement was sufficient evidence of the intention to create a valid trust although no specific words were used. Therefore, in the current case, although it’s difficult to state the words in the phrase “… I regard the money in the account as much yours as mine” as sufficient to create a valid trust, it’s also correct from the above case law that this wording coupled with the conduct of Brian created a valid constructive trust as sufficient certainty for that requisite intention . I advise Amanda to institute an equitable claim on the above basis because equity “looks at the intent rather than the form.” It’s the spirit behind the conduct of the parties which is important rather than the form of the statement. She will first seek an injunction to maintain the statusquo until the Court decides discretionary whether she will take the whole value or part of it. Problem 2 This problem involves David, the testator, leaving a will in which he declared that he left most of his balance in the Savings Account in trust for his daughter, Edith until she is 25 years and the balance for his son, Frank. Now Edith is 20 years old and Frank 19. David has just died. Issue Whether they are entitled to this money in the bank account? Resolution No. They are not entitled to that money until Edith is 25 except where it’s an intermediate income for their necessaries if they were still minors. This gift takes precedence as a contingent and also a future bequest according to the “Trustee Act (1925, S. 31(3)).” Unfortunately, Edith and Frank do not follow under this exception because they are above the majority age of 18 as further explained below. This type of bequest is a pecuniary legacy contingent and conditionally precedent upon Edith attaining the age of 25. It does not confer an intermediate income as per the Court in “Re Raine (1929)” except on two grounds; firstly, where there is no any other fund to be used for the maintenance of the beneficiary as a minor per “Re George (1877).” Secondly, is where the intended beneficiary has not attained the majority age as known in United Kingdom to be 18 “(Re Abrahams, 1911).” Both of these exceptions are not applicable to the current legal problem. There is no evidence that Edith and Frank have no any other source of income and they are aged 20 and 19 respectively above the majority age of 18. Furthermore, under the “Property Act (1925, S. 175)”, this type of bequest confers an intermediate income upon the death of testator in relation to the testator’s intention. It’s true that the testator is dead but the beneficiaries are above the majority age of 18 and can only claim for this money upon Edith attaining 25 years of age as stipulated in the will “(Trustee Act, 1925, S. 69).” For instance, in the case of “Re McGeorge (1963)” involving a testator bequeathing land to the daughter but it had to take effect upon the death of his surviving wife, the daughter attempted to enforce her right prior to the widow’s death. Cross J as he was then held that the action couldn’t succeed because the widow was still living by then. This is similar to the current situation. The intention of the testator is for the bequest to take place upon Edith attaining the age of 25 except in exceptional circumstances which are not applicable herein. Therefore, Edith and Frank are not protected at all by the above exceptional circumstances and will not succeed in this claim. Their income will keep accumulating for their own benefit until Edith is 25 years old. If any of them dies prior to Edith attaining the age of 25, then it will be treated as a resulting trust. Problem 3 This problem is about a testator, Grace, who bequeathed 100,000 ordinary shares in shell Oil Company to her trustees in trust for her loyal friends for 20 years. Thereafter, the shares should revert to her Nephew, Harry. She is now dead. Issue Whether the trustees can comply with Grace’s instructions? Resolution Yes they can. This is a discretionary Trust and the trustees can comply with Grace’s instructions as long as they follow the rules governing discretionary trust. As a general rule, a valid discretionary trust should indicate the certainty of objects or beneficiaries as laid down by the “Court of Appeal” in “Re Endacott (1960).” The question faced by the trustees is to determine the certainty of objects in a discretionary trust. This test was decided by “House of Lords” in “Mcphail v Doulton (1971)” that the concerned trustees should ascertain the class of beneficiaries as intended by the testator. It also means that identification of one individual in this circumstance would suffice as the beneficiary to that class of people. This gives the trustees power to bequeath the property in light of this decision. In the current case, the term “loyal friends” shall be subjected to certainty test. If the testator knew them and has ever disclosed their identities, then that will be the starting point. For example, in the case of “Re Baden’s Deed Trusts (No 2) (1973)”, the Court of Appeal was faced with a discretionary trust and concluded that the “term relatives, dependants, or spouse” was certain and thus the will was valid. If the term “loyal friends” is uncertain, then it will make the trust invalid. However, in the circumstances, “loyal friends” can be ascertained as only those people who were loyal to the testator though it’s discretionary. Furthermore, once the trustees have ascertained the beneficiary using the above test, they have the duty and powers to determine the “administrative workability” of the trust through conceptual certainty. This means defining the class of loyal friends through evidential proof of that loyalty per “Megaw LJ in Re Baden’s Deed Trust (No2) (1973).” This case can however, be distinguished with the case of “R v District Auditor, ex parte West Yorkshire County Council (1986)” in a sense that to ascertain a proper “administrative workability”, the individual beneficiaries should not be too many. In this case the testator referred to “the inhabitants of the County of West Yorkshire.” This group was held to be too wide hence, administratively undefined and unascertainable. Therefore, in the current problem, “loyal friends” should be a small group. In case the group is undefined, then her Nephew will become the ultimate beneficiary. Bibliography H Hussey v Palmer [1972] 1 WLR 126 Knight v Knight (1840) 3 Beav 148 Mcphail v Doulton [1971] AC 424 Paul v Constance [1977]1 WLR 527 Re Abrahams [1911] Ch. 108 Re Baden’s Deed Trusts (No 2) [1973] Ch. 9 Re Endacott [1960] Ch. 232 Re George (1877)5 Ch. D 837 Re Hamilton [1895] 2 Ch. 370 Re McGeorge [1963] Ch. 544 Re Raine [1929] 1 Ch. 716 Re Vandervell’s Trust (No 2) [1974] Ch. 269 R v District Auditor, ex parte West Yorkshire County Council (1986) 26 RVR 24 The Trustee Act, No 14 of 1925, London: HMSO The Property Act, 1925 [cap 20]London: HMSO Read More