Law of Trusts and Land Registration Act 2002 - Assignment Example

Assignment Ans A: John is the remainderman in this case, therefore what this means is that when a trust is terminated then its principal will pass on to the remainderman. George has constituted a marriage settlement trust for Henry and his family with John as the remainderman on the trust. Since Henry is dead this trust will be terminated and the proceeds of the trust will pass on to John as the remainderman and he will receive the 100,000 pounds that was to go to Henry and his family. Therefore, as far as this particular trust is concerned, no conflict should arise. As remainderman, John will have the rights to the extraordinary receipts such as sale proceeds. If this gift had been shares, he would have also received stock splits and dividends. John will also be responsible for any extraordinary expenses involved, such as amortization of principal or any other costs incurred. However, there is the question of the covenant that George has made with the trustees Dick and Harry in 1997 when the marriage settlement trusts were made to transfer 5000 shares in the Company and the sum of 200,000 ponds in cash and the question of whether it would affect John’s interest. A covenant is in the nature of a promise made to a volunteer and in order to be actionable, it must be Since George died only in 2004, one aspect that will be of significance in the courts is the fact that George did not go through on the constitution of the covenant, therefore this indicates that there was a lack of intention which is one of the requirements to establish the existence of a trust1. However, even if the trust has not been constituted, in the event that the beneficiary gave some consideration, the trust will be enforceable. Since Harry and Dick have provided the service of trustees and are going to execute the trusts set up by George, they could have enforced the promise. But in this case, there are three restrictions that exist. (a) A trustee may not pursue common law remedies that offer damages under common law even when the covenant has not been formally executed.2 (b) A rule established in the case of Keech v Sanford: “Trustees are not permitted to profit from their trusts/engage in self dealing.”3 (c) Since the trustee suffers minimal or no loss, it is likely that only nominal damages may accrue to him.4 It appears likely that the two trustees will not be able to press for damages and will have no way to enforce the promise in Court, especially since George did not formally execute the covenant through a written document when he was alive, even after the five year period stipulated. In the case of the trust comprising the residuary estate, there are competing interests here as well. Firstly, George had made a will in which he had allowed the sum of 200,000 pounds to his sisters, for them to provide a “reasonable amount” for their aunt. Hence in the case of administration of this trust, the two sisters will be considered the trustees of the aunt’s share in the amount and they will be responsible for how it is allotted and can transfer any amount since specified amounts are not stipulated5. But the problem in this case is the fact that George has made another will after that, in which he has transferred his residuary estate to his son. Thus this will has superseded the earlier one. The beneficiaries of the will are however dead, therefore John as the designated remainderman of the other trust, may put in a claim for the proceeds of the trust. However, the issue of unjust enrichment will arise in such a case. In the case of Rathwell6, three requirements were set out as follows: (a) an enrichment (b) a corresponding deprivation and (c) the absence of any juristic reason for such enrichment. In this case, it may be noted that the sisters have been deprived while there may be enrichment for John or the trustees, to whom the estate will revert back in a resulting trust if no definite beneficiary is identified. However, since the issue of John claiming the proceeds of the trust is at dispute here, and the issue of unjust enrichment arises, it is likely that the Court will set up a constructive trust in the interest of equity to all parties. Since John, the two sisters and the aunt remain as the legal next of kin standing in line instead of George to receive the proceeds of the estate, but the allocation is not certain as to whom it should be given, therefore the court is likely to impose a remedy whereby the proceeds of the estate are divided up between all the family members. The sisters may receive a proportionately larger share, since (a) John has already benefited from another trust and (b) they are also responsible for taking care of their aunt and ensuring that she receives her share according to what they deem suitable, as clearly set out by George. The Court will try and determine George’s intent in making the will. Since he has already indicated intention to provide for his sisters in a previous will, the Court may take note of that. It is also possible that the Court may find the trustees deserving of an equitable interest which may take the form of some of the shares that were promised by George, since the question of his intent can be established. Ans 2: The case of the holiday villa Flametrees involves realty while the shares constitute personalty. As far as the disposition of land is concerned, there are defionite formality requirements, which have arisen out of the Statute of Frauds of 1677, of which Section 9 was incorporated into Section 53 (1)(c)of the Land Property Act of 19257. According to Sectin 53 (1) (c) of the LPA, all dispositions of property are to be made in writing if they are to be valid. Formality requirements are generally enforced by the Courts, unless there is a compelling interest or if injustice would be done by not allowing an equitable interest. In the case of Ayo’s oral arrangement with Semi, this is the issue that would arise. Although she has entered into an oral agreement with Semi, this contract is not valid since the LPA requires such dispositions to be in writing. Therefore, there is no transaction and no disposition of the property has taken place. Possibly, Semi may have some recourse in equity to recover the money he paid Ayo, however unless Ayo signs over her interest in the property to Semi, he will have no legal or beneficial interest in it. This is not however the same case as far as Ayo’s interest in the shares are concerned which will be construed as trusts of personalty where an oral transfer will be enforced by the Courts, provided that some strong evidence of such oral transfer can also be provided8. Semi will have recourse in the courts to enforce Ayo’s promise to transfer the shares. In the case of Ayo’s oral direction to transfer title to Ben, it may be noted that such transfer of title cannot be effected until Ayo signs a written document, transferring the legal title she has on the property to Ben. Section 53 (1)(c)states as follows: "A disposition of an equitable interest or trust subsisting at the time of disposition, must be in writing, signed by the person disposing of the same, or by his agent thereunto lawfully authorized in writing or by will." In the case of Timson’s Executors v Yerbury9, Romer LJ laid out four methods that would constitute a disposition, by a person entitled to equitable interest in a trust, to a third party. The person can: (a) assign it to the third party directly; (b) direct the trustees to hold the property in trust for the third party; (c) contract for valuable consideration to assign the equitable interest to him; and (d)declare himself to be a trustee for him of such interest. Thus, applying the above principles in the case of Semi, it nay be noted that an equitable interest may be transferred, however a disposition of land would necessarily involve formalities, unless there is some extenuating circumstance by which refusing to enforce transfer of title on the basis of the absence of a written document would constitute gross inequity. In the case of Ben also, the same principles will apply. Ayo can not only make herself a trustee of her beneficial interests through an oral declaration, she can also transfer those beneficial interests orally, however dispositions of her title in Flametrees will have to be conveyanced only through writing. This was earlier laid out by Lord Simonds in Grey v IRC10, who defined disposition by a beneficiary of a trust as follows: "If the word disposition is given its natural meaning it cannot, I think, be denied that a direction given by the beneficiary whereby the beneficial interest in the shares thetofore vested in another or others is a disposition” On the basis of the above, Ayo can declare herself the trustee of her interest in Flametrees and this could include her legal and beneficial interest, however as far as the actual disposition of the legal title on the property is concerned, this would have to be done by writing, in order to avoid fraud. The requirements on Dispositions are influenced significantly by the revenue aspects rather than equity, through the incorporation of third parties and intermediary beneficiaries that have developed purely on the basis of economic implications. There is a conflict that arises in terms of the disposition of the legal owner of the trust vis a vis the equitable owner/s or beneficiaries of the trust - however existing provisions of formality are conditioned mostly on the basis of revenues accruing from the estate, therefore such dispositions cannot be made flippantly on an oral declaration. Bibliography * Knight v Knight [1840] 3 Beav 148 * Re Kay’s Covenant (1939) Ch 329 * Keech v Sanford 1726) Sel Cas. Ch.61; 25 ER 223 * Re Cavendish Browne’s Settlement Trusts [1916] WN 341 * Wolstenhome and Cherry’s Annotated Land Registration Act 2002. London: Sweet and Maxwell, 2003 * Petty v Petty [1853] 22 LJ Ch 1065 * Rathwell v Rathwell [1978] 2 SCR 436 * Timson’s Executors v Yerbury (1936) 1 KB 645 CA * Grey v IRC (1960) AC 1 Read More