Equity and Trusts at Hipley Textiles Ltd - Essay Example

?Hipley Textiles Ltd. Introduction In the case at bar, there is a presumably a trust fund set up for the employees of Hipley Textiles Ltd. This trustfund was set up for a very specific purpose – to provide medical care and rest and recuperation for the employees of the company and the family of the employees. For the reasons set out below, the trustees would not be allowed to use this money for any other purpose, other than the purpose set out originally. Discussion The fund held by the Hipley Textiles workers appears to meet all the elements of a valid trust. The elements are that there is an intention that there be property given to a trustee for use of a beneficiary or beneficiaries.1 Moreover, there must be a certainty that a trust is what was truly was intended, and not a bailment, gift or agency relationship.2 Additionally, there must be certainty about the terms of the trust – what is the property, and who is to benefit from the property.3 The trust must also be for the benefit of people, and not for a purpose, which means that the beneficiaries may be able to decide how to use the property.4 This is known as the three certainties – there must be a certainty of intention, subject matter and object.5 There must also be, for an express trust, a transfer of property to the trustee.6 There is some question, however, about this particular trust. While it appears to be for the benefit of beneficiaries, in that the people of the company are who would benefit from the trust, the trust might also be construed as a purpose trust, which means that the trust is set up for the fulfillment of a purpose, not the for the benefit of a person.7 The court might construe the trust as being a purpose trust, because it was set up for the purpose of providing medical care and rest and recuperation care to the employees. The beneficiaries, therefore, would not necessarily be known with certainty, assuming that the company has a constant turnover of employees, which is often the case with a large company. The facts indicate that the fund was began in 1980, and there is a presumption that not every employee that was working at the Hipley Textiles in 1980 were still working there today, or even that even one of the employees is still working at the factory today. Another possibility is that this money would be treated as a resulting trust.8 This would occur if the court assumes that the settlor of the trust are the people who contributed the money into the trust, and the trust itself fails, because of the lack of certainty of the objects of the trust.9 A resulting trust can also result when the objectives of the trust no longer become possible or relevant by the time of the transfer to the trustee.10 Alternatively, the trust could treated as a quistclose trust, which occurs when a creditor lends money to a debtor for a particular purpose.11 If the trust fails, because the purpose that the debtor was to use the property fails or cannot be fulfilled, then the money reverts back to the creditor.12 Either way, the money would be considered to be a resulting trust, which would mean that the settlors would retain the value of the money.13 This would mean, of course, that the trustees would not be able to use the money for other purposes – as with a quistclose trust, the money in the trust fund was to be used for a very specific purpose, which is to be pay for medical care and rest and recuperation care for any employee or the family of an employee who suffers injury or a medical condition arising from their work. This is what the fund was specifically set up for, and, since this purpose is no longer valid, the settlors would retain the money. This would mean that the people who contributed the money into the fund would retain the rights to the money, and the trustees would not be able to divert the funds for other things. Even if the court does not treat the trust as a resulting trust, it is still doubtful that the trustees would be able to use the funds for something else. Assuming that the trust is considered to be valid, which his doubtful, as the beneficiaries are not certain, but, if the court does consider the trust to be valid, the trust is governed by the terms under which it was created.14This would mean that the terms of the trust at the time that the trust was created would hold, and, since the terms of the trust are that the money was to be used for very specific purposes, including medical care and the like, there is no indication that the trustees would be able to violate this and use the trust money for something else entirely. This would mean, again, that a resulting trust would be formed, as the original terms of the original trust are no longer valid, therefore the money would revert back to the settlors, which would be the factory workers themselves. Conclusion The trustees probably would not be able to use the funds that are in the medical trust for any reasons other than what was initially stated when the trust was formed. If the trust is considered to be valid, which is doubtful, considering that beneficiaries (objects of the trust) are not certain, because the employees no doubt turnover at the factory, therefore there would be different beneficiaries of the trust all the time, and, at any rate, the beneficiaries who were at the beginning of the trust are not the same as the beneficiaries now – there are now 900 employees, when, at the start of the trust, there was only 30 – then the terms of the trust at the time of formation would rule. And this would mean that the trust is not to be used for anything other than what the trust was used for at the time of creation. If the fund fails as a trust, which is the likely outcome, then the money reverts to the settlors, which are the employees who are contributing to the fund. This would mean that the employees who contribute should be entitled to get their contributions back. This is what happens when there is a resulting trust. Because of this, the trustees must give the money back to the employees who contributed the money. References Used Knight v. Knight (1840) 49 EWR 58. Jones v. Lock (1865) 1 Ch App 25. Paul v. Constance [1976] EWCA Civ 2 Hunter v. Moss [1994] 1 WLR 452 Re Barlow's Will Trusts [1979] 1 WLR 278 Milroy v. Lord (1862) 4 De GF&J 264 Morice v. Bishop of Durham [1805] EWHC Ch J80 Re Sick and Funeral Society of St. John's Sunday School, Golcar [1972] 2 All ER 439. In Re Vandervell's Trusts (No. 2) [1974] 3 All ER 205. Re Gillingham Bus Disaster Fund [1958] Ch 300. Barclays Bank Ltd. v. Quistclose Investments Ltd. [1968] UKHL 4. Twinsectra Ltd. v. Yardley [2002] UKHL 12. Westdeutsche Landesbank v. Council of London Borough of Islington [1996] AC 669. Hudson, A. (2003) Equity and Trusts (3rd Ed.) Oxford: Cavendish Publishing. Read More