Equity and Trusts Disputes - Report Example

EQUITY AND TRUSTS al Affiliation EQUITY AND TRUSTS Introduction In the dispute provided, the trustees, David and Jones, require legal advice on Lucy’s failure of transferring the stated assets. Lucy had appointed David and Jones as the trustees of her deed of covenant. They were to act as intermediaries that would foresee the transfer of Lucys assets to her successors. Lucy had already filled the forms that foresaw the transfer of shares to her next of kin and her land parcels to Molly and Sebastian according to the stated terms. She had already signed the paperwork, and the only remaining activity was the reassigning of the property and shares to the trustees. Additionally, the covenant had also stated that the trustees were also to be the executors of Lucys will. According to the case, Molly and Sebastian had already been married six months ago; hence, deeming the contract valid as stipulated by Lucy in her will. She had given the right to Sebastian to get an equal share of the settlements if he succeeded Molly in the case of demise. Failure of the settlement to Molly and Sebastian should issue the remainder to Jack, who was the preferred next of kin. The arising issue from the case is the transfer of Lucy’s assets to the trustees that have been involved in the deed of covenant. They are required by law to assume power and instructions of the allocated settlement. David and Jones are also Lucy’s accountants; hence, providing knowledge on her assets and shares. Additionally, whether the Court will rule in favor of the trustee or Lucy’s repudiation is another issue arising from the scenario. Statement of the Law Trust and equity are sections of the law that deals with property ownership (Hudson, 2014). Trust is the transfer of assets to trustee with the aim of holding the assets for the benefit of others, which should be formal and should consist of a covenant of deed that should be signed by all parties (Campbell, 2010). A covenant of deed is a legal document that is used for the indemnity of the transfer of assets or monetary value to a second or third party through trustees. On the other hand, a covenant with penalty is used to settle debts or bond but have the same remedy legally. According to the Trustee Investments Act 1961 (c 62) section 1, a trust refers to an obligation that binds a trustee to the property for the benefit of beneficiaries and charitable needs. It is defined by the terms of the trust, and may be brought into existence in any manner including by the operation of law, an instrument in writing, oral declaration, and unilateral declaration (Brown and Myers, 2008). A trust may exist in forms of wills such as in Lucy’s case. A written document such as that presented and signed by Lucy as well as her trustees mitigate the likelihood of misunderstanding and validity matters of the trust. However, the law requires that if the trust is made orally, it should present enough evidence of the settler’s purpose of creating the trust, which reduces legal challenges while seeking authenticity of the document. (Ramjohn, 2013). A valid declaration of trust will not require any formality if it is established over personal property provided that the settler, Lucy, intended to create a trust over her property. She followed the right legal procedure for coming up with a trust and a deed of covenant that would provide authenticity to her work. However, if the trust is to be made subject to a trust upon death, there should be statutory formalities that have to be satisfied to create a successful trust. The trust, in this case, is related to property and other personal assets that an individual wants to present. In the presence of an inter-vivo (living) trust, there should be a written instrument due to authenticity issues. Intervivos are made to take effect while the settler is still alive, unlike the testamentary trusts that have to be created through a will (Brown and Myers, 2008). Lucys trust reflects a testamentary trust that requires a written agreement; hence, a deed of covenant, which only comes into effect after the settler dies through the help of the trustees. Application of Law in Light of the Case (solutions) The cases facts reveal that Lucy had already passed and signed her testamentary trust. The only step that was remaining was to transfer the assets to the trustees who could later proceed with the settlement through the respective orders. Remarkably, most trusts are established for asset protection, financial affairs, and succession planning. Based on the case of Knight vs. Knight (1840) 3 Beav 148 in the U.K and the conceptualization of Lord Langdale, there are three main certainties that have to be considered for a trust to be considered valid, which will further be utilized to give the appropriate advice to David and Jones. Certainty of Intention Certainty of intention is also known as the certainty of words, which implies that the settler has to come out clear on why he/she wants to create a trust according to the test in the case of Paul v Constance [1977] 1 WLR 527. The sufficiency of creating a trust should be presented in substance. Lucys case portrays certainty of intention because she had explained her intentions of creating a trust. Lucy also made sure that most of the settlements to her daughter’s husband were dated after the marriage. A case of Jones v Lock (1865) LR 1 Ch App 25 presents facts similar to those of Lucy’s intention to benefit her beneficiaries. Certainty of Subject Matter The trust’s subject matter should be clearly identified and ways that the settlement will be made in the form of ratios and conditions (Ramjohn, 2013). This is subject to the ‘certainty of subject matter’ presented in a case of Palmer v Simmonds (1854) 2 Drew 221. The certainty of subject matter must emphasize on the property being held upon in the trust and the beneficial interest of each beneficiary as it is revealed by the case of Hunter v Moss [1994] 1 WLR 452. Lucy’s case contains the certainty of subject matter where she states various settlements and their beneficiaries. For example, her present residence in Ealing and future land that may be purchased in the area should be settled to Molly for life. Her subject matter states the site of the asset, beneficiary, and the time of benefit. She further indicates that in the time of death, the assets should benefit either her son in-law or Jack who is the next of kin. In her shares, she states the number of shares each of the beneficiaries is entitled to, and explains who should benefit from the remaining shares. In reference to the case of Jordan v Brookmount (1991) Times 29 October, the clause also stipulates that the assets being transferred should be obtained legally and should not have any legal ties. Certainty of Object In reference the case of McPhail v Doulton (sub nom Re Baden) [1971] AC 424, the testamentary trust should clearly identify the object of beneficiary, which implies that persons entitled to the benefit should be at least ascertainable. In the given dispute, Lucy specifies that her grandsons should get the reminder shares after Jack has been presented with a thousand shares, which shows that the beneficiaries may include people who have not been born yet. Notably, the type of trust being created determines the test of objectivity. The facts presented in the case of R v District Auditor ex p West Yorkshire Metropolitan County Council (1986) 26 RVR 24Act reveals what should happen in the absence of specified beneficiaries during settlement. Such trusts are known as discretionary in which a settler does not issue the trustees with the power to manage the benefits. However, for such trust to be considered valid, they should describe a clear class of beneficiaries. Facts presented from the case proceedings of McPhail v Doulton (sub nom Re Baden) [1971] AC 424, reveals that the task is whether the beneficiaries of objects are capable of being legally defined and it is unnecessary to draw up a list of all the objects. Remarks: According to the provisions of a valid trust, Lucy’s trust cannot be impeached because it contains all requirements for authenticity of the will. However, the problem arises where Lucy lacks asset transfer before her death. Trust property The most important factor in the trust and equity is that the trustee acquires full ownership of the property from the settler (Ramjohn, 2013). The ownership can be in the form of written-documents setting out wishes in relation to the property to the trustee , which is evident from the facts of a case of Fletcher v Fletcher (1844) 4 Hare 67, Don King Prod. v Frank Warren [1998] 2 All ER 608. An interest in the declared property subject to the trust must be I existence. Additionally, Property must be made subject to the trust. Remarkably, beneficiaries hold equitable title to the property subjected to the trust while the trustee holds legal title to the trust property. Given the detailed analysis of the dispute in relation to legal proceedings, Lucys property qualifies to be part of the trust property because she got into an agreement with the trustee as stipulated by The Law of Property Act 1996 c. 47, s. 24(2). David and Jones are legally trustees after signing the will because the agreement meets all the requirements for a valid trust. Lucy has already presented her property to the trustees. She has also stated the subject matter and the beneficiaries as well as their order of property’s presentation. Rendering to the validity of the document, the judge should present David and Jones with the power to hold the property as stipulated in the deed. The settlement of the property to the trustees should take place immediately after the property has been reissued to the trustees because the agreement was a testamentary trust that requires the trustees to issue the property to the beneficiaries upon death of the settler. Trust Instrument or Trust Deed Trust deed is a formal written document that binds the trustee to handle the profits for the benefits of the beneficiaries, which is drafted and signed by the settler as well as his/her trustees. Additionally, a trust deed should name the settler, the trustee, trust property, beneficiaries, time, and the conditions of property issuance as revealed by the case of Morice v Bishop of Durham (1804) 10 Ves. 522. Lucy’s trust deed has all the stated conditions; hence, can be considered as valid. Classification of Trusts Express Trusts Express trusts are formulated when the settler consciously and deliberately creates a trust that may come into existence during the lifetime or after death (Virgo, 2012). Subsequently, the beneficiaries are clearly identifiable by the settler while the trustee is issued with the management of the property that is to be settled. Drafting and signing of the trusts takes place in the presence of a legal practitioner who will vet the authenticity of the will. Other trusts include implied and constructive trusts, which have no implication on the case presented. Lucys trust can be identified in court as an express trust because she makes a rational decision based on her financial affairs and beneficiaries. Property Act The appointment of trustee land falls under the Law of Property Act 1925 15 Geo 5 c.20, part 1 and regulates the sale and purchase of trustee land. Amendments on the act included in law of property act 1996 c. 47, s. 24(2) stipulate that a settler be bound to appoint the trustees as the same persons. The trustees can only sell Lucy’s property only if she has stated in the will for the benefit of the beneficiaries as stipulated in Chapter 19, Section (24) subsection (1) of the Trustee Act 1925. Duties of a Trustee in reference to Lucys case (settler), David, and Jones (trustees) According to Trustee Act 1925 Part 1, Sections 21, a trustee is under a fiduciary duty to take reasonable care in undertaking investments on behalf of the settlor. The case of Wright v Morgan [1926] AC 788 discloses that when a trustee purchases a trust property, the beneficiary can facilitate the sale with his/her contrary to which the trustee will be found liable for the breach of trust. In the case of Speight v. Gaunt (1883) 22 ChD 727, the House of Lords considered a trustee not liable to the beneficiary due to the broker’s dishonesty. A trustee should read and comprehend the terms of a trust deed as well as ensuring that sufficient information is provided to the settlor as stipulated in the law of property act 1996 c. 47, s. 24(2). The trustee should also act fairly between beneficiaries and ensure that there are no discrepancies. Additionally, a trustee is also required to comply with terms of the trust and act unanimously unless issued with power through the express trust. Conclusion In the case, Lucys actions of signing the trust deed and agreeing to all terms that include the transfer of settlement property to the trustees will satisfy the transfer. The ruling will have its facts obtained on the law of trust and equity that will probably conclude that Lucys trust deed is valid and followed all legal procedures. However, her death will lead to the direct issuance of the property and shares to the beneficiaries accordingly because it was an express trust based on the contract she signed. Subsequently, David and Jones have will be advised to pursue the case because they will eventually obtain a ruling in their favor to transfer the property to the trust despite Lucys death. Reference List Brown, G. and Myers, S. (2008). Administration of Wills, Trusts, and Estate. 4th ed. Boston: Cengage Learning. Campbell, D. (2010). Comparative Law Yearbook of International Business 2010. Alphen an den Rijn: Kluwer Law International. Hudson, A. (2014). Equity and Trusts. Hoboken: Taylor and Francis. Moffat, G., Bean, G. and Probert, R. (2009). Trusts law. Cambridge, UK: Cambridge University Press. Ramjohn, M., 2013. Unlocking Trusts 4th Edition. Hoboken: Taylor and Francis. Virgo, G. (2012). The principles of equity & trusts. Oxford, U.K.: Oxford University Press. Read More