Equity and Trusts - Constitution of Trusts - Essay Example

Name Course Tutor Institution Introduction Equity is a set of principle which supplements strict rules of law where they would operate harshly. Equity was defined by Maine as a body of rules, founded by district courts in virtue of superior sanctity. There are different principles governing equity, examples will include; he who comes in equity must come with clean hands, equity looks at the intent rather than form etc. But my main focus will be on the principle which states that ‘equity will not try to perfect an impact gift or assist a volunteer’. Equity is said to mitigate common law, allowing different courts to use their own discretion and apply justice while handling certain matters in courts. On the other hand, trust refers to the process of separating legal and beneficiary of a property. In the law of trust, settlor enter into a legally binding contract with a trustee to manage certain assets for the benefit of the beneficiary. If a volunteer has made an imperfect gift, thus lacking the legal formalities needed at common law, equity will not assist the projected donee. Equity stipulates that an imperfect gift will not be termed as ideal simply through interpreting the donor as the legal trustee of the property which its subject matter is a gift. Turner LJ principles states that for any settlement to be successful “the settlor should have done the whole thing which, according to the nature of the property involves in the settlement, was required to be done so as to transfer the property and provide the settlement legal binding upon him”.A rift of equity will not assist a volunteer (Duddington Pp 43-96). However, in Pennington v Waine, equity tends to assist a volunteer. The following are increment to the discussion of Milroy v Lord and the Re Rose rule in equity and trusts relating to the following cases: (1) T Choithram Internation SA v Pagarani (2001) and (2) Pennington v Waine (2002). The court of Appeal in Pennington v Waine has followed the rule (in Choithram) in order to perfect a gift in circumstances where the donor has not effected a declaration of trust over the property nor has the donor done everything in which was required for the effect of such transfer of shares. This verdict extends the rule beyond its boundaries where it can be demonstrated that the donor had done all in his/her power to finalize the transfer. In these cases, Clarke LJ acknowledged that the rule operated in general notion and that equity recognized by the court of Appeal in Re Rose was able to deal with such matters. Different surveyors have come up with conclusions stating that Re Rose rule can be understood as part of the general principle that equity will not be officious in conquering a gift. Therefore we can understand this to mean that the legal intension in Pennington was to dully effect a gift and because the courts should not strike down different gifts too keenly, then the Re Rose principle may be extended so as to protect such gifts (Association volume 33). Re rose Rule This principle is best understood in a constructive modern context, even though Lord Evershed explained it as an equitable acceptance of unconscionability of the benefactor purporting to retain shares and dividend paid under share transfer from. Equity tends to accept that fact that the equitable ownership of property can pass to the anticipated beneficiary when the benefactor has done everything in his/her power to effect such transfers. As a result, the legal title still remains under the donor while the equitable title becomes an asset of the donee. This occurs through operation of law. In consequences, it is clearly suggested that trust arising through operation of law is the best enlightenment of this phenomenon. In my opinion, Pennington v Waine is evidently wrong. The courts should not be too industrious in striking down gifts; nevertheless there is limited equity to merit the transfer in this property. We can see in Re Rose case that Lord Evershed was actually moved by the norm of inequity by denying the transfer once all the formalities have been satisfied to effect this transfer. In Re Fry, projected character could have been prevented. Unfortunately, Re Rose could only achieve protection from the tax through the artificial exclamation of a gift in equity (Macnair Pp 105-167). In Pennington there are no such concentrations of circumstances as compared to that of Re Rose, there was no completion of any legal formalities or documents for the donor to have performed. No legal formalities necessary had taken place on those prepositions based on facts. As such the existence of the ordinary law of gift calls that for a person to be able to change her mind or refuse to transfer the property. it is ideally wrong to suggest that equity should induce the transfer of properties for two major reasons; (1) it is very important to poses this questions as we try to argue how equity will not act to perfect an imperfect gift nor assist a volunteer, what point should equity consider unconscionable for disponor to repudiate her intension to make a gift? Could it be immediately after she has explicitly told the other individual of her need to make a gift? (2) The disponor had not actually carried out all the necessary formalities to perform an absolute transfer of the properties: for that reason equity is alleging to transfer an equitable interest where there is no transfer of title that is specifically enforceable. The rule that equity will not perfect an imperfect is an application of the principle which states that equity will not assist a mere volunteer. A volunteer refers to that person who is willing to do anything without any consideration in terms of money. These goods are transferred from the real owner to another person who provides totally nothing in return. The exception to the rule that equity will not act to perfect an imperfect gift nor assist a volunteer occurs where the beneficiary is the volunteer, this usually comes under three exceptions; Donatio Mortis Causa, proprietary Estoppel, The Rule in strong v Bird (Wilson Pp 92-423). The Rule in strong v Bird The rule in strong v Bird, states that if an imperfect gift is made throughout the donors lifetime and the same donor has appointed a donee as the executor, the donee will be appointed as administrators, the power vested by the donor to the donee as an executor can be treated as the consideration of the gift. In short, equity should pave way for common law to prevail in situations where the deceased (the donor) has appointed his debtor as the final executor. When an incomplete gift is offered during the benefactor lifetime and the benefactoree is the executor under the manager in intestacy, vesting the possessions such that the donee can be treated as a completion will override the beneficiaries of the state. In the same way, while at common law, the rendezvous of a debtor as architect unrestricted the debt, in impartiality the debtor still has to account for the estate unless provable intension to discharge part of the donor during his lifetime until death. Therefore, in Strong v Bird the sole executor borrowed some funds from his step mother opting to be repaid through an adjustment of the rent payable. At the time of the donor’s death, some $900 was still outstanding and the beneficiary claimed the balance of the debt. On the other hand, since the receiver had been appointed as the executor, lord chancery held that the debt had been waived away at that point. There must be firmness in equity. The benefactor must intend to make immediate lifetime gift. For that reason, it was held in Re Stewart that testamentary gift will not suffice. In the same way, there must be sureness as to topic: the intent must relate to precise possessions and cannot consist of a general wish to make prerequisite for the donee (Watt Pp 104-345). Similarly, Choithram there is an unfortunate conditions or situation where the deceased – who could not amend the nature of the existing affairs-failed to constitute the trust. To me, the whole scenario seems to be the end of all matters. In such a state, it is obvious that the courts will opts to give cause to a dead person intention to a certain extent rather than a trust particularly on valuable property into residue in order to benefit the beneficiaries who were intended to take left over from the management of the dead person estate. As a result, this is what most of the courts are dong if not all, to me there is interpolates reasonable desire to pass property in Re Rose principle in contradiction of common law gift. On the other hand, on an exact understanding of the rule in Milroy v Lord, it is not feasible to maintain a moderately constituted trust or to free a gift by another through an artificial means. In this case, the dead man has not constituted the trust through transferring the title in the property to the benofactories and therefore no trust had been appropriately created. Donatio mortis causa The doctrine of Donatio mortis causa was established in order to create an exception to the principle that states “equity will not perfect and imperfect gift or assist a mere volunteer. The gifts are dully made during the benefactor lifetime, made in the expectation of an immediate death, of which is intended to take place during the donors death. It is therefore very vital for the donor to give up his dominion at the time of making Donatio mortis causa (Ramjohn, Cases and Materials on Equity and Trusts 4/e Pp 77-247). For instance, Donatio mortis causa may cover situation where a soldiers dies on battlefield, while his head is being supported by his/her fellow comrades as his life fades away, who then speaks out that ‘ I want to surrender my land to my step son’. That mere statement made by the father is however not sufficient to make legal transfer of the property to the step son since the formalities needed to re-register them under the companies Act has not been adhered to. On the other hand, the doctrine of Donatio mortis causa provides that this gifts shall be enforceable reason being it was made in the expectation of death in situation which it would have been ideal to expect the projected donor to adhere with the legal formalities for making the gift (Wilkie and Malcolm 32-67). In Sen vs. Headley, the Court of Appeal reflected on the facts which dealt with couples who lived together for approximately 10 years but had been separated for more than 25 years. One of the couples kicked the bucket of a lethal disease, but right before she died, she told his partner that the house was actually hers. It was argued out that plaintiff always had the keys o the house. The plaintiff was lucky in establishing the claim over the house title deed. Proprietary estoppel and the enforcement of promises Proprietary estoppel refers to a remedial doctrine that seeks to compensate a plaintiff for detriment suffered due to the statement made by the defendant, thus making the plaintiff act either direct or indirect from that statement. One of the principle of equity is that equity will not assist a volunteer or perfect an imperfect gift, Albeit has provided relevant circumstance under which equity will perfect an imperfect gift, this occurs where the plaintiff has suffered some detriment as a result of the promise made by the defendant that he/she will receive a property (Hudson Pp 200-236). Through a circuitous route, this framework is therefore seen as perfecting an imperfect gift. The claim may appear in the following manner. If Alpha had promised Beta that he would transfer to her an expensive unique fireplace, acknowledging that fact the Beta had already spent a fortune in trying to eliminate the older fireplace in the projection that she could dully replace it with Alpha’s fireplace. However, if Alpha fails to complete the promise or gift, Beta could sue Alpha for a specific performance due to the detriment that she has already incurred as a results of Alphas representation (Hanbur and Maudsley Pp 234-498). In Pascoe vs. Turner states that a man left a woman, whom they had a relationship with, but tld her that the house is all hers. Thought as a gift, this was therefore an incomplete gift of the house but a complete gift of contents of the house. The woman later on claimed the house under Proprietary estoppel since she had already incurred some detriment in the process of renovating the house. The lords of chancellor held that the encouragement to improve or renovate the house was led by the man’s statement. It was further established that in order to protect the right of that woman, it was necessary to perfect an imperfect gift through granting Turner the appropriate fees in the property. In Re Basham where there was an oral evidence of a gift of the house to a step-daughter by the step-father during his illness. The daughter filled a claim to the court of Appeal that she had been induced by the dying father thus help her in return. Unfortunately the step-father died intestate and the intestacy principle would have passed the properties of the deceased man to his nieces, who were his real blood relatives. The courts held that, since the step daughter had acted to her detriment as a result of the step-fathers promise of the house, the doctrine of Proprietary estoppel passed the property to the step daughter rather than his blood relatives i.e. nieces (Ramjohn, Cases & materials on trusts Pp 88-145). In this case, Proprietary estoppel operated in order to perfect an imperfect gift or assist a volunteer (step daughter) to obtain the gift of the house, even though the courts main aim as to return the step daughter in her financial position that she was in before the detriment occurred. This doctrine goes hand in hand with the underlying principle which states that equity will not assist a volunteer. However in relation to the exception of Proprietary estoppel, the plaintiff is not the volunteer as a result of the detriment suffered. Conclusion Lord Browne-Wilkinson’s axiom is itself a contradiction. A better axiom will perhaps be: equity will not strive officiously to defeat a gift and in order to do so, equity will aid a volunteer; however the general principle remains that in normal situation, court will not assist a volunteer.” This modified axiom clearly seems to reveal the resolution of cases in this area of law more accurately. Equity will not grant rights to someone who has merely received a gift. A volunteer has not done anything in return for the gift, like pay for it nor do anything for the donor (there is no consideration for value). References Association, Canadian Bar. he Canadian bar review: Revue du Barreau canadien, Volume 33. Canada: Canadian Bar Association, 1955. Duddington, John. Equity and Trusts. New York: Pearson Education, Limited, 2009. Hanbur, Harold Greville and Ronald Harling Maudsley. Modern equity. New York: Stevens, 1976. Hudson, Alastair. Equity and Trusts. New York: Taylor & Francis, 2009. Macnair, Michael Richard Trench. The law of proof in early modern equity. Australia: Duncker & Humblot, 1999. Ramjohn, Mohamed. Cases & materials on trusts. Australia: Routledge, 2004. Ramjohn, Mohamed Cases and Materials on Equity and Trusts 4/e. New York: Taylor & Francis, 2008. Watt, Gary. Todd and Watt's cases and materials on equity and trusts. New York: Oxford University Press, 2007. Wilkie, Margaret and Rosalind Malcolm. Q & A: Equity and Trusts 2008 and 2009. New York: Oxford University Press, 2008. Wilson, Sarah. Todd & Wilson's Textbook on Trusts. 2007: Oxford University Press, New York. Read More