Trust Law - a Property in Issue of Camelot - Case Study Example

Trust Law The problem at hand concerns the determination of the rights of several parties under the Trust Law and the extent of these rights, if any, over the property in issue called Camelot presently registered under the names of Arthur and Guinevere. There are presently several claimants to the property: Guinevere, Merlin, Mordred, Lancelot, and the Round Table Building Society. The purchase of the Camelot property created relationships of trust under the English Trust Law. There are two kinds of trusts: express and implied. As the term implies, Express Trusts require a clear, unequivocal intention of creating a trust; one that is reduced into writing. The facts of the case reveal that there was no such agreement put into writing respecting the purchase of Camelot. In its absence, the relationship of trust, if any, can only be Implied. And according to the book Introduction to Property Law by Dr. Mica Oldham, there are two kinds of Implied Trusts: Resulting Trust and Constructive Trust. Resulting Trusts arise when the parties who purchase a property are: business partners or the money used for the purchase was or was part of the business asset; or mortgagees and the mortgaged amount was used as the purchase money, or; contributors of unequal amount of money to the purchase price. The personalities involved i.e., Arthur, Merlin, Morgana, Lancelot and Guinevere, are not business partners nor was the money used a business asset. Neither are the parties mortgagees. On the other hand, the parties contributed monies for the purchase price: Merlin, £400,000; Arthur, £200,000; Lancelot, £200,000, and; Morgana, £200,000. Since Arthur had no extra cash to pay for attorney’s fees and registration fees, Guinevere, an old acquaintance, magnanimously loaned him £5,000. With respect to Merlin and the rest, viz., Arthur, Lancelot and Morgana, a Resulting Trust was created, applying the doctrine of law laid down in the case of Dyer v. Dyer, [1788] 2 Cox Eq Cas 92 at 93 which stated that: The clear result of all the cases, without a single exception, is that the trust of the legal estate... whether taken in the name of the purchasers and others jointly, or in the names of others, without the purchaser; whether in one name or several... results to the man who advances the purchase price (qtd. Oldham p 16). However with respect to Arthur, Lancelot and Morgana who gave the equal amount of £200,000 each, the doctrine laid down in Wilson v Wilson [1969] 3 All ER 945 at 949 which states to the effect that persons whose contributions to the purchase price are in equal amounts are presumed to have created a Joint Tenancy in equity. The Wilson case therefore, provides an exception to the general doctrine held in the Dyer case. To restate: Merlin and Arthur’s group (composing of Arthur, Lancelot and Morgana) created, by implication, a Resulting Implied Trust; and among Arthur, Lancelot and Morgana, a Joint Tenancy at equity was created. The book, Introduction to Law, states that there are two kinds of co-ownership: joint tenancy and; tenancy in common. The implication therefore, is that Resulting Trusts are tenancy in common since joint tenancy in equity forms an exception to the Resulting Trusts under the Dyer and Wilson cases. In addition, Arthur, under whose name the property Camelot was initially solely registered is the legal holder of the title to the property but holding the property in trust for Merlin, Lancelot, Morgana and himself. Under the notion of the presumption of Resulting Trust or Tenancy in Common, each of the beneficial owners hold an undivided share in the property albeit without physical demarcation as the property is not yet divided. In addition, the death of a party results in the passing of his undivided share to his or her heir by virtue of the laws of testacy or intestacy. Moreover, this relationship is characterised by unity of possession which means that all of the parties are entitled to the possession of property even if there is no demarcation yet. In concrete terms, two parties were involved in the Resulting Trust: Group A composed solely of Merlin, and; B composed of Arthur, Lancelot and Morgana. In accordance with the amount contributed A’s interest should be 2/5 of the property and B’s interest should be 3/5 of the property. In addition, the parts of the property taken by each of the parties, do not necessarily vest them with permanent interest over those parts as the property at that stage is still undivided. Arthur A 2/5 B 3/5 Merlin Arthur, Lancelot & Morgana The concept of Joint Tenancy at equity concept is characterized by the following: it is a group ownership and therefore, there is no individual demarcation; the death of one of the parties do not pass his to an heir either by testatcy (because there is no severance by will) or intestacy but his share will pass to the remaining co-owners, and; there must be unity not only of possession, but also of time, interest and title. Thus, diagrammatically the rights and interests of Arthur, Lancelot and Morgana over the property are: Arthur Arthur Lancelot Morgana 3/5 (B) of the Camelot property Anent the case of Guinevere who loaned Arthur £5,000, two things militate against her being a part of any of the trusts initially created at the time of the purchase of the property: first, her contribution, which was referred to as a loan meant to be paid but not paid as she eventually married Arthur was too minuscule compared to the rest, and; second, the fact that she did not join the group in moving in immediately after the purchase and was merely invited by Arthur as a visitor to Camelot imply that there was no common intention to include her as a co-owner. There was no presumption to that effect as required by law. On the other hand, the fact that Merlin, Lancelot and Morgana, together with Arthur, all moved in to Camelot each taking over a portion of the house as his or her own territory bolstered the presumption of a resulting trust in equity. However, after her subsequent marriage to Arthur, Guinevere made renovations to the property spending, as a result, around £100,000 and Arthur eventually added her name to the title but without the knowledge of the other co-owners. It is already established that Guinevere was not a part of the common tenancy at equity arising at the time of purchase between Merlin and the group of Arthur, nor was she a part of the joint tenancy at equity established among Arthur, Lancelot and Morgana. Any beneficial interest accruing to her respecting the Camelot property, if any, arose only after the acquisition of the property. Guinevere has the option to resort to the court for the application of the doctrine of constructive trust at common law to her case. Under this doctrine, two requirements must be met: express common intention and detrimental reliance. It would seem however, that the requirement of express common intention is not met in the case of Guinevere. Only Arthur gave express intention to grant beneficial interest to Guinevere by adding her name to the registry without the knowledge of the other co-owners. As discussed earlier Arthur co-owned 3/5 of the Camelot property with Lancelot and Morgana. This was a group ownership which means that any disposition, especially one that diminishes the co-ownership, needed the consensus of the entire group. As a trustee, Arthur had the obligation to exercise the duty of care in exercising his powers under the Trustee Act 2000. Under the same law, Arthur was obliged to consult with the beneficiaries in possession thereto in any disposition respecting the property. The lack of express common intention is fatal to a claim of constructive trust as held in the case of Lloyds Bank plc v. Rosset [1991] 1 AC 107, regardless of the amount contributed. The requirement of detrimental reliance, however, can easily be asserted by Guinevere because of Merlin’s intention to contest her claim. The act of Morgana, who fled the Camelot property after her heated encounter with Guinevere, in resorting to the court for the compulsory of sale of Camelot was an action leading to the severance of the joint tenancy among Arthur, Lancelot and herself, with respect to her share. The summons served by the court on each of the co-owners operated as a severance notice in accordance with s 36 (2) of the Law of Property Act 1925. This was the doctrine laid down in the case of Re Draper’s Conveyance [1969] 1 Ch 486 where the court held that the application of a joint tenant upon the court for the sale of the property subject to a joint tenancy and the division of proceeds of the sale under the law of Property Act 1925 and the subsequent service of summons to the other joint tenant constituted a legitimate notice of severance. The implication, applying the same doctrine to the case at hand, is that from the time the joint owners Arthur, Lancelot and Morgana received the court summons in re Morgana’s application to the court, the joint tenancy was severed as to the share of Morgana. Diagrammatically the partition would look like this at that stage: Arthur Morgana Arthur Lancelot 1/5 2/5 3/5 of Camelot Since there was, in effect, a valid and effective severance, the right of survivorship with respect to the share of Morgana had been rendered null and her subsequent death before the initial hearing of the case she filed did not operate to pass her share of the Camelot property to both Arthur and Lancelot, whose co-ownership of the remaining 2/5 of the property was still held by them in joint co-ownership. Therefore, Morgana’s property validly passed to her only heir Mordred. Arthur’s subsequent death in the hands of Lancelot, both of which held the property in joint tenancy at equity at the time of the death, would have passed to Lancelot the entirety of the 2/5 Camelot property by operation of the doctrine of right of survivorship in Joint Tenancy Trusts. However, the public policy rule of forfeiture came into play in the case of Lancelot because he killed Arthur (p 36). The public policy rule holds that a joint owner who caused the death of another joint owner will not benefit under the right of survivorship. Therefore, instead of Lancelot benefiting under the right of survivorship and taking the entire 2/5 of the Camelot property for his own, Arthur’s share will pass to whoever was named in his will, in this case Merlin. At this stage, two of the shares of the Camelot property had been severed: that of Morgana (to Mordred) and Arthur (to Merlin) and only the shares of Merlin and Lancelot remain. The Round Table Society however had stake a claim on Lancelot’s share, who applied for a loan to the Society against his share. Since the joint tenancy in equity of Arthur, Lancelot and Morgana implied group ownership of the 2/5 part of Camelot, - this means that there are no shares yet to speak of at the time Lancelot affected a mortgage in 2007. However, whether the mortgage was valid or not, the same operated as a severance of the joint tenancy as to Lancelot’s share. This was the same doctrine held in the case of First National Security v. Hegerty [1985] AB 850. Since the part of the property held by Group B composed by Arthur, Lancelot and Morgana had all been severed impliedly by mutual consent, Arthur cannot anymore hold off a severance of the common tenancy at equity between him and Group B, if and when Guinevere and the Round Table Society, who both had also the right, at equity, resort to court action. This is notwithstanding Mordred’s alliance with Merlin because Mordred was not part of the original co-ownership formed by the tenancy in common between Merlin and the group of Arthur but succeeded only upon Morgana’s property by virtue of a severed share. Read More