Problematic Questions of Testamentary Document - Case Study Example

OPINION In the present case, the testamentary document, that is the will, merely s that the testator leaves $100000 to Tom; insofar as the question of bequeathing the money goes, it has been bequeathed absolutely and unconditionally to Tom. Where a person obtains an absolute conveyance for a particular purpose and then uses it for another purpose, the courts will interfere on grounds of fraud;1 but this restriction is not to be interpreted as being a bar on the power of the beneficiary to use the gift/ transfer property for any other purpose than what the donor may have intended without a specific agreement between the donor and the beneficiary to that effect. In fact, even in cases where the donee has expressed his intention to use it in a particular way, without a contract (either express or implied) that he will so use it, does not prevent him form using it in any other way.2 Thus if a gross sum is given, and a special purpose is assigned for the gift, the courts regard the gift as absolute and the purposes as merely the motive of the gift; and the courts have held the gift to be valid even though it may have no longer been practicable or possible to give effect to the declared purpose of the gift.3 Tom has been bequeathed a sum of $100000, with perhaps a particular motive (although the same is not evidenced or is not disclosed in the will itself), there was absolutely no agreement or contract between Vito and Tom that Tom would use the gift for a particular purpose and only that particular purpose. Furthermore, even though Vito may have expressed his confidence in Tom using the money only for the purpose Vito had intended it to be used, Tom had not, at any point of time, accepted that or even agreed to it. It was, if anything, an error of judgement on Vito’s part to have left it to Tom or left it in that fashion in his Will. In any event, the Testamentary document itself, leaving the money to Tom does so absolutely with no hindrances whatsoever. Tom is therefore, under no legal obligation to use the money in the way Vito had desired it to be used; it is, at the very best merely an expression of Vito’s wishes to Tom, as his best friend, which Tom may choose to abide by or abandon without any detriment to his legal title and proprietary interest on the money left to him in Vito’s Will. Therefore, Tom is under no legal obligation to abide by Vito’s wishes and may utilise the money in any way as he so deems fit. 2. In the present case, a discretionary trust has been set up by Vito with regards to the shares in Transit limited with his entire family as the possible beneficiaries. A discretionary trust is a trust where the beneficiaries and/or their entitlements to the trust fund are not fixed, but are determined by the criteria set out in the trust instrument by the settlor.4 Where the discretionary trust is a testamentary trust, it is common for the settlor to leave a letter of wishes for the trustees to guide them as to the settlor’s wishes in the exercise of their discretion. Discretionary trusts can be said to be discretionary in two respects. Firstly, the trustees usually have a power to select which beneficiaries payments will be made to from within the class, and secondly, they can select the amount of trust property that the beneficiary receives.5 In the present case, both sets of discretions appear to have been created for Fredo and there appears to be no letter of intent as having been left by Vito as to the manner of disposal of the trust property. The ordinary correlation between beneficiaries’ rights and trustees’ duties which arises in fixed trusts is absent in discretionary trusts. In Re Lockers Settlement6 the trustees of a discretionary trust did not make any distributions for a number of years based upon the expressed wishes of the settlor. The trust then fell dormant, and after several more years, the trustees sought directions. The court held that their discretionary powers continued, and that they should exercise it in respect of the dormant years now as they should have done at the time. The court reaffirmed that if trustees refuse to distribute income, or refuse to exercise their discretion, although the court could not compel it be exercised in a particular manner, it could order that the trustees be replaced. The position with a duty to consider exercising the discretion in non-exhaustive discretionary trusts is more complicated, as to the duty to exercise the discretion can be satisfied by deciding to accumulate.7 Herein, there appears to be no directions left at all to Fredo and the nature of the trust seems to be a non-exhaustive discretionary trust. Fredo may therefore, firstly, choose to exercise his discretion in choosing the beneficiary of the trust property and hand it over now; as far as the proceeds of the shares go, he may or may not choose to distribute it, rather just opting to let the same accumulate and hand it over to a beneficiary of his choice in a proportion he wishes within the next ten years. 3. A gift to a non charitable unincorporated association may be intended to take effect in three ways.8 First it may be a gift to the members of the association as joint tenants at the relevant date, so that any member can sever his shares and claim it whether he continues to be a member of the association or not. Such a gift is valid.9 Secondly, it may be a gift to the existing members of the group or association, not as joint tenants but subject to their mutual rights and obligations as members of that association. If this is the effect of the gift, it will not be open to objection on the ground of perpetuity or uncertainty unless there is something in the rules of that association which precludes the members at any given time from dividing the subject matter of the gift between themselves on the footing that they are solely entitled to it in equity.10 Thirdly, the terms of the gift and the rules of the association may show that the property in question is not to be at the disposal of the members for the time being, but is to be held on a trust or applied for the purposes of the association as a quasi-corporate entity. In such cases the gift must fail on the grounds of perpetuity and uncertainty.11 Special problems arise in connection with the holding of property by unincorporated associations of persons. Whereas a company has separate legal personality and can hold property, with certain statutory exceptions, unincorporated associations of persons cannot. Accordingly, where an unincorporated association is formed for a non-charitable person (which is most often the case), a gift to an unincorporated association can fail as an invalid purpose trust.12 However, there appear to be some changes to the position of law in this regard. In the case of Re Re Lipinskis Will Trusts13 their lordships further clarified that the question of whether a gift was treated as a purpose trust or an absolute gift to an unincorporated non-charitable body with a superadded direction, the gift was valid if the beneficiaries were ascertainable and it was not affected by the rule of perpetuities. In the present case, the members are ascertainable persons and the gift has been made for a particular purpose; buying buses. It is not one in perpetuity as is evident from the fact that it authorizes the spending of the entire capital sum on acquiring buses for the transport of fans. Further, the beneficiaries are identifiable and constant and capable of enforcing the gift purposes. Therefore, there is no reason for this not to be a valid gift and be treated like an absolute gift with a superadded direction, which the members of the body, in their collectivity, are free to either accept and follow or reject and alter. In either of these two events, the gift would be valid. 4. Ownership of land and property like the penthouse can be transferred to another in various ways, inter alia, by creating a trust. The trust too can be created in two ways: either vesting the property in a third party to hold in trust for another or declaration of self as trustee.14 There is no difficulty if a settlor wishes to declare himself as a trustee of all or a part of his property. All that is required for the same is an intention to create a trust and a manifestation of the same. It needs to be shown that the settlor had intended for the property to be held in trust for another and shall merely declare himself as trustee of the same; a deed for this kind of trust is not required. After such a declaration, the named beneficiary has an equitable interest on the said property.15 In Paul v. Contance16 the conduct of the parties was sufficient to infer the declaration of a trust. Here, Mr Constance, who lived with the claimant, Mrs Paul, had deposited a sum of money in a bank account in his name but repeatedly declared the amount to be “our” money even though it was in his name only. The courts held that there was sufficient evidence to show that Mr. Constance had wanted to and did in fact declare himself trustee of the money for both parties in equal share, even though it was not possible to pinpoint the exact moment he did so. Accordingly, Mrs Paul was declared to have an equitable right interest in one half of the share of that money and the same was decreed accordingly. In the present case, Vito has clearly and unambiguously shown that he intended his son to have the property and also expressly declare himself trustee. Therefore, there is virtually no ambiguity that Vito intended the penthouse to be held in trust for Michael and declared himself as the trustee for the same. There is of course, a small factor that in cases of land transfers such intention to create a trust must also be put to writing, assuming that the same has been followed, a valid trust was created in favour of Michael over the penthouse in London. Michael, now having come of age, has the rights over the same and title for the same will now flow to him. As far as the shares in Lucrative Plc goes, the same were never transferred to Connie; no share transfer agreement, which is the only valid way of transferring shares in the said company, was executed and neither had Vito declared himself only as trustee of the said shares, to be held for Connie, as he had done with the penthouse for Michael. Claims based on any kind of proprietary estoppel not having been accepted in law,17 the absence of executing any valid transfer of shares to Connie will affect the validity of Connie’s claims to ownership over the same. Further, since Vito did not even dispose of the same to Connie in his Will which he could easily have done, it merely remains as an unfulfilled promise to Connie by Vito. Connie, therefore, has no proper standing in law to challenge and claim the proprietary interest in those said shares. Further, since there was no testamentary disposition with regards to the shares, and Vito had a residuary clause in his will, bequeathing his residuary estate to Kay, it appears that the shares, which would pass into his residuary estate, would stand transferred to Kay. Read More