Equity and Trust - Assignment Example

Research Paper On Equity and Trust Order No: 781305 Law Problem The problem involves Amanda who lived with her boyfriend Brian. The boyfriend won £5000 deposited in his account at Bank of Southampton. He regarded that money as much as his and Amanda. Unfortunately he died intestate and Charles- Brian’s relative is claiming it. Issue The issue is whether Amanda has any equitable claim for this money? Resolution of issue Yes. Amanda can claim the money but it’s within the discretion of the Court to grant her the whole or part of it as explained below. This problem requires determining whether the construction of the words “… I regard the money in the account as much yours as mine” by Brian amounted to a valid trust. A trust is a binding agreement between a testator and the trustee for the beneficiary. Accordingly, for there to exist a valid trust, three certainties must be present. These are “certainty of words” which reveals the intention of the testator, certainty of “subject matter” (property bequeathed) which in this case is the money and the “certainty of objects” which is the intended beneficiary as upheld by “Lord Langdale MR” as he was then in “Knight V Knight (1840).” Besides from the decision of “Lindley L J” in “Re Hamilton [1895]” the intention of the testator in every wording or disposition should as a rule of prudent practice be construed based on its constructive merits and it differs from case to case. For the above reasons, whereas the current case presents quite a problematic and conflicting loyalty in the application of equity and trust and in relation to the “constitution of a valid trust”, it can be regarded as a constructive trust. According to Lord Denning in “Hussey v Palmer (1972)” this is a trust imposed upon by the Court whenever justice, conscience or good objective judgment demands so to be done to the beneficiary. The issue in this problem thus resolves on whether Brian had the intention to create a valid constructive trust and it is answered in the affirmative herein. It’s correct that he died intestate and in that vein he did not make any transfer of the money into the name of Amanda. However, it’s arguable that in the circumstances of this case, Brian manifested an intention to hold the said money in his deposit account in trust for Amanda by virtue of his conduct. Court will determine the intention based on Brian’s conduct which suggests existence of a constructive trust. It is also correct that Premafacie, the words themselves are not sufficient enough to create a valid trust but coupled with Brian’s conduct, there is a manifestation of that intention. For example, in the case of “Paul v Constance (1977)”, money was placed into the account “sole name of Constance.” As it were assurances were made to Mr. Paul that the money in that very account was jointly owned hence this case. Paul argued that based on that construction, it was sufficient that the wording created an intention of joint ownership. It was held that the conduct of the parties sufficiently created that intention. Similarly in “Re Vandervell’s Trust (No 2) (1974)”, the money in the settlement was used in purchasing shares. This was done in exercise of a prevailing option for the intended beneficiary. The Court having been faced with a similar situation as to whether there was a valid trust held that the conduct the parties where upon they used the money to pay dividends into the intended settlement was sufficient evidence of the intention to create a valid trust although no specific words were used. Therefore, in the current case, although it is difficult to state that the words in the phrase “… I regard the money in the account as much yours as mine” are sufficient to create a valid trust, it is also correct from the above case law that this wording coupled with the conduct of Brian and Amanda created a valid constructive trust as sufficient certainty for that requisite intention . I advise Amanda to institute an equitable claim on the basis of a constructive trust because equity “looks at the intent rather than the form.” It is the spirit behind the conduct of the parties which is important rather than the form of the statement. She will first seek an injunction to maintain the status quo until the Court of equity decides whether she will take the whole value or part of it. This is purely discretion of the Court. Problem 2 This problem involves David, the testator, leaving a will in which he declared that he left most of his balance in the Savings Account in trust for his daughter, Edith until she is 25 years and the balance for his son, Frank. Now Edith is 20 years old and Frank 19. David has just died. Edith and Frank are now seeking legal advice. Issue Whether they are entitled to this money in the bank account at the moment? Resolution No. They are not entitled to that money in account until Edith is 25 except where it’s treated as an intermediate income for their necessaries provided they were still minors. This gift takes precedence as a contingent and also a future bequest according to the “Trustee Act (1925, S. 31(3)).” Unfortunately, Edith and Frank do not follow under these exceptions because they are above the majority age of 18. This type of bequest is a pecuniary legacy contingent and conditionally precedent upon Edith attaining the age of 25 and does not confer an intermediate income as per the Court in “Re Raine (1929).” The exceptions are; firstly, where there is no any other fund to be used for their maintenance according to “Re George (1877).” Secondly, is where the intended beneficiary has not attained the majority age as known in United Kingdom to be 18 as upheld in “Re Abrahams (1911).” Both of these exceptions are not applicable to the current legal problem because there is no evidence that Edith and Frank have no any other source of income and they are aged 20 and 19 above the majority age of 18. Furthermore, under the “Property Act (1925, S. 175)”, this type of bequest confers an intermediate income upon the death of a testator but in so far as it was stated in the will by the testator. It’s true that the testator is dead but the beneficiaries do not follow under the above exceptions for such entitlement according to “Trustee Act (1925, S. 69).” For instance, in the case of “Re McGeorge (1963)” involving a testator bequeathing land to the daughter but it had to take effect upon the death of his surviving wife, the daughter attempted to enforce her right prior to the widow’s death. Cross J as he was then held that the action couldn’t succeed because the widow was still living by then. This is the same situation we are faced with in the current problem. The intention of the testator is for the bequest to take place upon Edith attaining the age of 25 except in exceptional circumstances which are not applicable herein. Therefore, Edith and Frank are not protected at all by the above exceptions and will not succeed in this claim at the moment. Their income will keep accumulating for their own benefit until Edith is 25 years old. If any of them dies prior to Edith attaining the age of 25, then it will be treated as a resulting trust. Problem 3 This problem is about a testator, Grace who bequeathed 100,000 ordinary shares in shell Oil Company to her trustees in trust for her loyal friends for 20 years. Thereafter, the shares should revert to her Nephew, Harry. She is now dead. Issue Whether the trustees can comply with Grace’s instructions? Resolution Yes. This is a discretionary Trust and the trustees can comply with Grace’s instructions as long as they follow the rules governing discretionary trust. As a general rule, a valid discretionary trust should indicate the certainty of objects or beneficiaries as laid down by the Court of Appeal in “Re Endacott (1960).” The question faced by the trustees is to determine the certainty of objects in a discretionary trust. This test was decided by House of Lords in “Mcphail v Doulton (1971)” that the concerned trustees should ascertain the individual group stated in the will or those who belong to the class or group of people intended to be the beneficiaries by the testator. It also means that identification of one individual in this circumstance would be helpful. This gives the trustees power to bequeath the property in light of this decision. In the current case, the term “loyal friends” shall be subjected to certainty test to determine who are these individuals? If the testator knew them and has ever disclosed their identities, then that will be the starting point. For example, in the case of “Re Baden’s Deed Trusts (No 2) (1973)”, the Court of Appeal was faced with a discretionary trust and concluded that the “term relatives, dependants, or spouse” was certain and thus the will was valid. If the term “loyal friends” is uncertain, then it will make the trust invalid. However, in the circumstances, “loyal friends” can be ascertained as only those people who were loyal to the testator though it’s discretionary. Furthermore, once the trustees have ascertained the beneficiary using the above test, they have the duty and powers to determine the “administrative workability” of the trust through conceptual certainty. This means defining the class of “loyal friends” through evidential proof of that loyalty per “Megaw LJ in Re Baden’s Deed Trust (No2) (1973).” This case can however, be distinguished with the case of “R v District Auditor, ex parte West Yorkshire County Council (1986)” in a sense that to ascertain a proper “administrative workability”, the individual beneficiaries should not be too many. In this case the testator referred to “the inhabitants of the County of West Yorkshire.” This group was held to be too wide and therefore, administratively undefined and unworkable. Therefore, in the current problem, “loyal friends” should be a small group. In case the group is undefined, then her Nephew will become the ultimate beneficiary. Bibliography H Hussey v Palmer [1972] 1 WLR 126 Knight v Knight (1840) 3 Beav 148 Mcphail v Doulton [1971] AC 424 Paul v Constance [1977]1 WLR 527 Re Abrahams [1911] Ch. 108 Re Baden’s Deed Trusts (No 2) [1973] Ch. 9 Re Endacott [1960] Ch. 232 Re George (1877)5 Ch. D 837 Re Hamilton [1895] 2 Ch. 370 Re McGeorge [1963] Ch. 544 Re Raine [1929] 1 Ch. 716 Re Vandervell’s Trust (No 2) [1974] Ch. 269 R v District Auditor, ex parte West Yorkshire County Council (1986) 26 RVR 24 The Property Act, 1925 [cap 20] London: HMSO [Online] Available at: http://www.legislation.gov.uk/ukpga/1925/20/pdfs/ukpga_19250020_en.pdf Accessed on: 10th/1/2013] The Trustee Act, No 14 of 1925, London: HMSO [Online] Available at: http://www.austlii.edu.au/au/legis/nsw/consol_act/ta1925122/s31.html Accessed on: 10th/1/2013] Read More