Equity and Trust: Trends in Trust Law - Essay Example

Equity and Trust Dominic died a year ago having appointed Tick and Tock as his trustees. His will contained the following provisions My trustees are to hold 175,000 on trust to distribute as they see fit to the past and present members of Oakley Riding Club who have proved themselves fit to be in the saddle. 2. 16,000 on trust for my niece Abigail so that she can learn to ride 3. 5,000 on trust for my daughter Beatrice so that she can ensure that my old mare Clopalong will be looked after in the manner to which the horse has become accustomed Abigail was aged 15 at the time Dominic died. Soon after Dominic's death Abigail discovered that she was allergic to horse hair and asked for 9,000 from the 16,000 to pay for sailing lessons instead. Tick agreed to this and gave her the 9,000 which Abigail immediately spent on a new wardrobe for herself. Beatrice looked after Clopalong for a year but has just been reported to the police for wilful neglect of an animal. Tick and Tock are of the view that the money should be used to maintain the horse at a rescue centre. Tick and Tock invested the 175,000 held in trust for the ridding club members in Meltdown plc, a recently formed company that was very soon under investigation by the fraud squad. Tock had asked his friend George, a registered financial adviser, about Meltdown before they invested the money when they met at race meeting. George told Tock that all new companies came under investigation by the Fraud Squad and that Tock should not worry. The share value of the company dropped dramatically last month but Tock has told Tick that they are better off leaving the money invested in Meltdown Plc as the company is bound to make a profit sometime. Last week Tick and Tock were approached by Clarissa, a member of Oakley Riding Club, who has asked them for some money out of the trust fund to finance her proposed trip to the Olympic Show jumping finals. The trustees have told her that this is not possible due to the current low value of the trust fund. Advice to Tick and Tock The will appointed them as trustees of Mr. Dominic fund which they are entrusted to distribute to the parties provided in the will following the probate words. For the case of Abigail, this is a fixed trust where they were to give her 16,000 'so that she can learn how to ride'. However, after they discovered that she is allergic to horse hair and subsequently giving her part of the trust fund for sailing lesson where she spent on new wardrobe instead, they had no authority beyond the probate to follow and ensure that she did as the Dominic wished. Secondly, the words 'so that she learns how to ride' is uncertain it doesn't even give us direction what kind of riding is, sailing is also riding and it is wishful that the money would be used by Abigail to learn how to ride. Therefore they acted within their trusted duties. They should also remember that she is entitled to the whole amount since the probate states clearly that she be given 16,000. In case of Beatrice, the same kind of problem occurs, the is very clear why Beatrice is given the fund, that is, to look after Clopalong, the mare horse in the manner it's accustomed to. However after she is given money she fails to look after the animal and Tick and Tock have no power to withdraw the fund and look for another person to accomplish this. This is because the will is not explicit as to what should happen if Beatrice fails to look after the animal as it's accustomed. Here Beatrice has legal right to retain the horse and look after it as she deemed fit. Another uncertainty is that what if the ill health of the Clopalong is due to other reasons or old age Why Dominic appointed her and not somebody else These are some of the uncertainties we see in this will and Tick and Tock have no choice other than to give her the whole amount. For Oakley fund, Tick and Tock had been entrusted to hold this fund in trust for members of this club. They were to discretionary disburse this fund particularly to those members 'who prove fit for the saddles'. By investing the fund to this company the trustees were acting within the will since Dominic gave them power to decide how, when and to whom the fund will go to in the club. However the company in which they invested the fund was not doing fine and the knowledge of the fraud investigation before investments prove a bit technical. The fact that it's an investment adviser who misleads them to invest in this company the outcome of the low value of trust fund is beyond their blame. If they give Clarissa, a member of Oakley Riding Club, the funds at this level they will have to go back to their pocket since the initial fund value would be less than as stated in the will. Therefore they acted within the will by denying Clarissa the fund to participate in the jump finals against the testator's wish. As in case of Re Gisbourne, where the Judge decided that 'the trustees have unfettered discretion whether to pay the income to A or not, provided that the trustee had exercised his dispositive power honestly and bonifide...' (Trust cases). This is also the case with McPhaile v Doulton case decision. Advice to Abigail The testator who doubles as her uncle entrusted the fund to her in the hope that she would learn how to ride. However she is allergic to horse hair which the testator did not know about it and she decided to learn sailing instead. Interestingly, after she receives the fund she buys a new wardrobe. This is another case of uncertainty of intention versus an absolute gift. She acted within the will since the clause of 'so that she can learn how to ride' is problematic. It doesn't specify exactly how this fund will make her learn how to ride. Again it doesn't advice the parties as to what should happen if she doesn't enrol for riding classes. So as in the case of Re Lipinski's WT (1976) the judge can rule for her to receive the rest of the money despite her using it to do other things as along as she is the one using the fund and nobody else (Trust cases). Advice to Beatrice Beatrice is testator's daughter, and she is entrusted with the fund in the hope that she would take care of the mare horse as it is used to. However she fails to take care of the horse as her father wished. Here again the Tick and Tock have no right of taking the horse to the care centre using the fund. First because the testator father just 'hoped' and this fails the certainty of intention test. Failure of Beatrice to give the horse the care it deserves doesn't rule her out of the fund, she just failed. The clause doesn't attach the benefit of fund to the horse in absolute terms and failure to give the horse the care it deserves will not disqualify her from benefiting from the fund. Moreover, the testator knew of the existence of the centre but he decided to entrust the horse he loved so much to his daughter. Furthermore, this is an absolute gift and Beatrice doubles as a beneficiary and a daughter of the testator, thus the fund cannot be taken away from her. Advice to Clarissa, Oakley Club member He should understand that Tick and Tock were appointed as executors of the testator's will to the club on discretionary terms. That they will decide what and who to benefit from the fund. So by denying him the fund when he really needed it due to the fund low value is within the will of Dominic. Tick and Tock have the full authority to decide when and how to distribute this fund to the members. However, Clarissa can still sue Tick and Tock for wrong decision in investment and claim they knew the company they invested the fund was under investigation and was not doing well as in case of Stannard V Fison's Pension. In this case the judge overruled the trustee's decision as wrong and void. References Gillen & Woodman (eds.) (2000), The Law of Trusts: A Contextual Approach, Toronto: Edmond Montgomery. Oakley, A, J.(eds) (1996), Trends in Contemporary Trust Law, Oxford University Press Inc., New York. The Law Site, (2006), Trust Law/Cases, Available at http://groups.msn.com/thelawsite/trustcases.msnw, Accessed on 14th August, 2006: 10.00 GMT. McPhaile v Doulton (1971) A.C. 424, Available at http://groups.msn.com/thelawsite/trustcases.msnw, Accessed on 15th August, 2006: 15.10 GMT. Re Lipinski's WT (1976), Available at http://groups.msn.com/thelawsite/trustcases.msnw, Accessed on 15th August, 2006: 15 GMT Re Adams & Kensington Vestry (1884), Available at http://groups.msn.com/thelawsite/trustcases.msnw, Accessed on 15th August, 2006: 16.00 GMT Stannard v Fison's Pension Trust [1991] PLR 225, Gisbourne v , Gisbourne, (1877), 2 App. Cas. 300 (H.L.) Read More