The Basis of Trust and Equity - Essay Example

Equity and trusts Equity and trusts Equity is the means by which a law system is able to balance the certainty need in making rules aimed at achieving fair results individually. It mitigates the rigor found in a common law so that the letter used is not strict to an extent of causing injustice in individual cases. 1 Trust forms the most equitable doctrine of all time. Equity operates on the conscience of the owner of legal interest. Thus, in the event of a trust, it is important for the legal owner to determine the reason why the property was vested in him or what the law has on him in the event of his unconsciousable conduct.2 Basis of trust and equity is concerned with regulation of the conscience where the individual’s common law might allow the individual to act unconscionably though in accordance with the letter of the law. 3 Trust enables more than one individual to gain rights to the same property in a simultaneous manner. It ensures that the property’s ownership is divided between the trustee and the beneficiary. The trustee is liable to act in the interest of the beneficiary to ensure that the property held on trust is well managed. In creation of an express trust, there is a relationship created between the settler, trustee, and the beneficiary. The settler is only involved in creation of a valid trust and seizes to have any further role. Though in some times the settlers allocate themselves roles as beneficiaries or trustees, any role as a settlor seizes when the trust is created successfully.4 The trustee guards the ownership of the trust while the beneficiary is the one entrusted with the property that is allocated or left behind by the settlor. Thus, trust has various characteristics. One of them is that equity operates on the conscience of the owner of the required legal interest. In case of an express trust, it is unconscionable for the legal owner to carry out the intended purposes of the property vested by the settlor. Secondly, the holder of legal interest should be aware that they are holding the property for other people’s benefit. Moreover, the trustee acquires a proprietary interest in the trust property from the time the trust is established. Thus, proprietary interest or its identifiable substitute is enforceable in equity against individuals receiving the property or its substitutes without notice of the equitable proprietary interest. The principle in Saunders v Vautier states that if under a trust every possible beneficiary was under no disability and occurred during their re-arrangement or termination of their trusts, then under the doctrine in Saunders v Vautier those beneficiaries could dispose of the property as they though fit. Thus, an adult beneficiary who may possess an absolute and indefeasible interest in the capital and income of property may at some point in time require that the transfer of property is made to them and they may terminate accumulation. A simple example of the operation of the doctrine in Saunders v Vautier would be a bare trust under which that beneficiary could direct the trustees either to transfer legal title to the beneficiary to ensure that they become the absolute owner of the property. It also directs the trustees on how to deal with the trust properly if the beneficiary was of sound mind and was aged above 18 years. It extends to circumstances where there exist more than two beneficiaries. All of these beneficiaries would be required to act together to be suris juris. This would enable all the beneficiaries under an even and complex trust to call for delivery of an absolute title in the trust funds from the trustees. As a result, these beneficiaries are able to override the expressed wishes of the settlor as to the treatment of the trust property. This principle establishes that the beneficiary has a right in the trust fund itself and not merely personal claims against the trustees or against the settlor. Once the trust is declared and once the trust property has been vested in the trustees, it is the beneficiaries who have the whip hand in relation to the treatment of the trust fund. In the imposition of express trusts, as with trusts implied by law, there are mixed issues of achieving justice and demonstrating an entitlement to specific property. The common root of all of these institutions in the conscience of the common law owner frequently leads to the courts deciding either to find an express trust or comparatively flimsy evidence.5 It also seeks to prevent the common law owner from acting unconscionably by means of a constructive trust even though there is ostensibly a common intention as to title in the property found on the facts. Therefore, to return to the core purpose of equity to mitigate unfairness, which may be wrought by statute such as, trusts implied by law will lead to the imposition of a form of trust without the need for formalities. In addition, for a trust to be properly constituted, it is required that the three certainties are present when the settlor purports to declare the trust and also for legal title in the trust property to be vested in the trustees. Failure to meet these requirements results into no valid trust created. On the other hand, the office of trustee under a fully secret trust can only be accepted in two ways according to the words of Wood VC in Wallgrave v Tebbs6. One of the way is where a person knowing that a testator in making a disposition in his favor intends it to be applied for purposes other than his own benefit either expressly promises, or by silence implies, that he will carry on the testator’s intentions into effect and property left to him upon faith of that promise or understanding. It is in effect a case of trust, and in such a case, the court will not allow the devises to set up the wills act. The main intention of the court is in making the decision whether or not the actions of the trustees on being asked to act by the testator were sufficient to be said to have caused the testator to carry through his intentions. Importantly, the trustee is required to have expressly promised although that will suffice to constitute acceptance, rather it is enough that the trustee by silence implies that he will act as trustee. Suppose therefore, that a testator is lying sick in bed knowing that he will soon die, he calls his confidant on the bedside and explains his plans in great secrecy, and then asks him, I know you will be my trustee. The confidant may not reply but the secret trust will bind him to be the trustee of the property and not to take the property beneficially. The terms of the terms may not be disclosed, it is held that the trustee must hold the property on resulting trust for the testator to prevent his own unjustified benefit. Consequently, the trustee would hold the property for the next kin under intestacy rules. This might be the case for the trustee but does not apply for the beneficiaries. For the beneficiaries, there is no secret trust by word of mouth. The settlor has to put it in writing though he may not disclose all the contents of the written will. The settlor wrote in his will and promised his daughter his farm on the isle Wight together with all its contents. He left to his cousin, Amal, 30000 shares in Harcombe plc. Writing to Darshan and promising him the farm on isle Wight does not give Darshan the right to that land. Sanjeev could have changed his will if he wanted to leave the land to him. Moreover, Jameel claiming that Sanjeev had promised him the 30000 shares during his Ebola illness period is not enough for him to be the legal owner of the shares. The best the two can be is trustees of the land and the shares consecutively. The rightful beneficiaries are those indicated in the will7. As indicated earlier, the trustee is only entitled to ensuring the maintenance of the property entrusted to them for the benefit of the beneficiaries. Thus, they do not have a valid claim. Read More