Contentious Issue of Interpretation of Trust - Case Study Example

Trust law Introduction: This paper seeks to consider the contentious issue of interpretation of Trust, Tort and criminal regulations laying emphasis on decided case laws, in order to help comprehend why, in certain cases, the illegality doctrine are enforced, whereas not carried out in other case settings. It is first necessary to consider the Tinsley v. Milligan case. Tinsley v.Milligan case [1994] 1 AC 340 House of Lords. [1994] 1 AC 340, [1993] 3 All ER 65, [1993] 3 WLR 126, [1994] 2 FCR 65, [1993] 2 FLR 963 The facts of this case was that two women, Stella Tinsley and Kathleen Milligan were lovers. Both of them jointly purchased a house, but its legal title vested upon Stella Tinsley alone (in order to perpetrate Department of Health and Social Security fraud). The relationship ended, but Kathleen claimed a share of the joint property. The defendant claimed that since the transaction was itself illegal, action woud not succeed. However, the House of Lords (HOL) held that since the applicant relied on trust, and not on the illegality of the agreement, the applicant’s stand was reasonable under law. The “illegality doctrine “ is contained in the dictum “ex turpi non oritur actio”, or in other words, no suit can arise out of an inherent illegal or unlawful action. (Smith). Ex turpi non oritur actio: The concept of ex turpi causa may sometimes be raised as a defense during the course of many claims in tort. Since, people must be themselves responsible for their own criminal actions, the law recognizes that Courts, during normal cases, must not to recompense people who have suffered loss in the course of their own wrongful actions, even where the primary fault could lie with someone else. This is also known as public conscience test. In this case, HOL cast off the aspect of this test, or how the case would appear to public. The main aspect that the Courts considered was reliability. Although it could be only be selectively applied in property cases, as in Tinsley v. Milligan, it has been used very sparingly and selectively during trial proceedings of tort cases. (Stone & Rolls v Moore Stephens). This could be reaffirmed in the case of Stone & Rolls v Moore Stephens (2008). In this case, a one man business owned and run by Mr. Stojevic, committed letter of credit frauds, by issuing fake documents, thus cheating banks of substantial sum of money. One of such aggrieved banks brought action against Stojevic and his company, and later the company was liquidated. But neither the company, nor its owner was in a position to pay off creditors. Under such circumstances, the liquidator brought action against the statutory auditor, Moore Stephens, and held him responsible, stating that his negligence in not properly auditing the financial statements had led to such irregularities and the ultimate fiasco of the company’s business. As was laid out in the case of Tinsley v Milligan [1994] 1 AC 340, if the applicant had taken recourse to illegality of the contract, then, the claim became invalid. “In the instant case, R’s claim relied upon, was based substantially on, arose out of and was inextricably linked with the fraud that was perpetrated on the banks. That fraud was actually perpetrated by S, who was R’s sole directing mind and will.” (Moore Stephens (A Firm) V Stone & Rolls Ltd (In Liquidation)). Thus, in this case, Tinsley v Milligan does not apply, and therefore the Courts were constrained to revoke the principle that states that no cause of action could arise against an inherently illegal transaction. Bowmaker v. Barnett Instruments Ltd. (1945) KB 165 Again, in the case of Bowmaker v. Barnett Instruments Ltd. (1945) KB 165, it was held that “unjust enrichment” cannot be entertained in the Court of law. In this case, what actually transpired was that the plaintiffs hired machine tools to the defendants under a contract of hire, albeit illegal. The defendants did not pay hire charges and sold part of the machine tools, and refused to part with the remainder tools to the rightful owners, the plaintiffs. “The Court of Appeal allowed the plaintiffs to recover damages for conversion, notwithstanding the illegality.” (Birks, 73). Thus, it flows that this case could be seen as an extension of principle of ex turpi non oritur actio, wherein it is quite possible that an illegal contract may be used for deriving benefits by any party or contractee. The Court of law, in such cases would not allow the basis of illegality to be used, in case it is, the suit would be voided, and the applicant woud not stand to gain anything under this contract. Again, it coud be seen that where aspects other then illegality are considered, it is possible that the Courts may favor the applicant as is observed in the Tinsley v Milligan case. Criteria for testing illegality or otherwise: Thus, it could be reasonable be deduced that the courts need to consider the following aspects while deciding with such cases - 1. The circumstances and background of the case 2. The positions of the relevant parties- applicant, defendants and others 3. The ultimate carriage of justice that would need to be just, equitable and in commensuration with the level of tort, or punitive damages, and other forms of recompensation that could be meted out to the aggrieved parties. 4. Whether precedents would be set in the verdict of a case that could underpin future judicial decision making, and the extent to which impacts of such decisions needs to be considered in the current setting and in dealing with the present case. Gray v Thames Trains Ltd and another [2008] EWCA Civ 713; [2008] WLR (D) 210 However, if the case of Gray v Thames Trains (2008) is considered, it is seen that the claimant was one of the victims of the Ladbroke train disaster, and was rendered suffering from Post Traumatic Stress syndrome (PTSS). Within two years of having this condition he stabbed a person to death, and pleaded manslaughter, citing his illness. He also brought a suit against the railway company for loss of earnings both before, and after his criminal act of manslaughter. The defendants argued that they would be liable for loss of his earnings prior to his manslaughter action, but not subsequent to it, and this was upheld. However the Court of Appeal maintained that “whether the relevant loss is inextricably linked with the claimant’s illegal act or…so closely connected or inextricably bound up with his criminal or illegal conduct that the court could not permit him to recover without appearing to condone that conduct.” (The WLR Daily) In other words, what Court of Appeal ruled was that it is likely that if COA upheld his plea for maintenance (due to loss of earnings) subsequent to his misdeeds, it would be as good as excusing or overseeing it, which the magnitude of his offense (manslaughter, a milder form of murder) cannot compromise on. Thus it is seen that in this case, the question of illegality cannot be used as a tool or weapon for material benefits, especially in the case of torts, or wrongs. While Tinsley v Milligan ignored the illegality aspect in the property transaction, this could not be applied in cases like of Gray v Thames Trains, or in other tort or criminal cases cases. Tribe v. Tribe case (1996): It is now necessary to consider the case of Tribe v Tribe (1996) which witnessed a father illegally transferring shares in favor of his son, in order to avoid creditors, but the son subsequently refuses to retransmit the transferred shares back to the original transferor. The facts of the case was that the plaintiff held majority shares and also two leases of the premises in which he was operating his company, along with his son. The landlords of the leased premises wished major repairs to be conducted in the leased premises, and the legal attorneys of the plaintiff advised him that this could entail need for future sale, or disposal of his premises or assets, or disposal of stocks. Fearing that he would lose his assets, the plaintiff transferred a bulk of his shareholdings to his son, who was the managing director of the Company. However, the anticipated advancement never took place, and the landlords were suitably recompensated. The plaintiff‘s motive was that the transferred shares be held in trust until the issue was resolved, and not any other mala fide purpose. However, when the plaintiff wanted his shares to be retransferred back to him, the defendant refused citing that there was no agreement, and also took solace in the principle of ex turpi non oritur actio, “or that an illegal purpose could not be set up to rebut the presumption of advancement.” (Case law database: Free law cases: tribe v tribe). The case came up for hearing and the Courts were convinced of the fact that an illegal intention was guised within a legal framework. Although his intention was to deceive potential creditors into believing that he held no assets or shares, the modus operandi and the share transfer, per se, satisfied the tenets of law. However, the illegal transaction was not performed in any way, and also all evidences pointed to the fact that “therefore the exception to the general principle applied with the result that the plaintiff was entitled to lead evidence in rebuttal of the presumption of advancement.” (Case law database: Free law cases). The Court accepted this argument and verdict that the shares be delivered back to the transferor (plaintiff). The defendant appealed against this judgment. The Appeals court held that a transferor who transferred assets for an unlawful purpose giving scope to the pre-supposition that it was for benefit, could withdraw his connection in such unlawful purpose, before it occurred, or give proof of the illegal aspects of this transaction in order to deny the benefit, and could thus get back the property for his own. This is considered to be the general exception to the law that no court would abet anyone who underpins his action of an unlawful act. In this case, Millet CJ observed, “it was sufficient for the transferor to withdraw voluntarily from the transaction when it had ceased to be necessary without any need to repent his illegal purpose.” (Case law database: Free law cases). Distinction between Tinsley v Milligan and Tribe v. tribe revisited: The main difference between Tinsley v Milligan and Tribe v. Tribe needs to be discussed. In the former case it is seen that an illegal intention, (motivated to defraud DHSS by showing that they were dependent on Social security and had no income) was completed and the benefits were derived in the form of legal title falling in the hands of one party, to the exclusion of other. However, the plaintiff relied on trust and not on illegality of the transaction to establish her point. This is the reason why the applicant was successful. Had she relied on the illegality doctrine contained in the dictum ex turpi non oritur actio, the Courts would have held that no suit can arise out of an illegal action and her appeal woud have been dismissed. Thus in the case of Tinsley v Milligan, the applicant was able to refute the presupposition of advancement which eventually clinched the case in her favor. Coming to the case of Tribe v. Tribe, it is seen that the illegal action which supported the case was circumvented and thus no cause of action arouse, in as far as the transferor’s dealings were concerned. Accordingly, considering the facts of the case it was apparent that “the plaintiff was able to rebut the presumption of advancement by clear evidence of his intentions and since he had not defrauded his creditors in any way the judge had not erred in ordering the delivery up of the share certificates.” (Tribe v Tribe). The main differences lied in the motive of the parties in the cases. While one was to defraud the government, and was completed, (Tinsley v Milligan), the other stopped short of deceiving creditors and suppliers, since the cause of action did not materialize (Tribe v. Tribe). Conclusions: It is now necessary to consider the valedictory part of this essay. The history of illegality is not a one fit- for- all cases. As mentioned earlier, a number of contributory factors need to be identified, assessed and argued before a final verdict is passed. The history of illegality was not considered relevant by the court in Tinsley v Milligan because of the following reasons: 1. The applicant did not seek recourse to this doctrine of illegality in the deposition 2. The issue related to property and not tort laws 3. Although the transaction was unlawful, the grounds on which the applicant sought relief were trust and not illegality of the subject matter. 4. The dictum ex turpi non oritur actio is not applicable in this case. Again,coming to the Tribe to Tribe case, the provider of the consideration, the plaintiff has established an exception to his earlier illegality in the following ways : 1. The basic idea behind the transfer was to show that no assets existed 2. The presumption of advancement never took place, and this has been reasonably proved by the plaintiff father. 3. He had transferred the assets on trust and not for consideration. No consideration flowed from the transferee (son) to the transferor (father).. Under these circumstances, the Courts accepted the contention of the father and allowed the retransfer to take place. The son’s appeal was rejected on similar grounds. Hence it may be concluded that what the courts do take into consideration in trust cases is basically the intention and actions of the parties, before, during and after the deal is completed. Also, the courts need to take into consideration the material legitimacy of actions, whether the unconstitutional aspects of the case has materialized or has become enforceable. It not been done in the case of Tribe v. Tribe and hence, the question of accepting history of illegality had been considered in this case. Works Cited Birks, Peter. Differentiation. An Introduction to the law of Restitution. 1985. 26 Jan. 2009. . Case Law Database: Free Law Cases: Tribe V Tribe. Law Teacher: UK Law Essay & Dissertation Writing Services. 2008. 26 Jan. 2009. . Smith, Travers. Stone & Rolls: Case Note. 2008. 26 Jan. 2009. . Moore Stephenes (a firm) v stone & Roles Ltd (in Liqugation): Held (appeal allowed). Telegraph.co.uk. 2008. 26 Jan. 2009. . The WLR Daily: Gray v Thames Trains Ltd and another [2008] EWCA Civ 713; [2008] WLR (D) 210. ICLR: The Incorporated Council of Law Reporting. 2008. 26 Jan. 2009. . Read More