Law of Trusts and Advise to Teresa - Case Study Example

Order No 132764 PART ESSAY. QUESTION ADVISE TO TERESA (a) According to the law of trusts, Teresa is the trustee of a fund whose beneficiaries are her aunt's two children Austin 22 and Morris 15 they are not entitled to equal shares before the age of 25. Here Teresa is a trustee, meaning she holds the fund for the benefit of two children. This means that all the money accruing from this trustee whether directly or indirectly should go towards helping these children by providing for their needs like accommodation, food, clothing, education and other necessities they will require. In this case, Teresa should ensure that all the income accruing from various investments is well saved for the benefit of the children. The children being the minors are not entitled to be solidly or liquidly be given any cash it should only be kept for them or invested for their behalf. Therefore Teresa is not entitled to pay them any income except invest or save it for their benefit after meeting their necessary requirements. Teresa is entitled to invest the money for the beneficiaries for as much as she can but not give them hard cash because of their age. In the law of Equity and Trust, any trustee is entitled to make decision on investment of the beneficiaries. Therefore Teresa should not give them cash as it will spoil them. Further dislike of the children by Teresa does not entitle her not to give or provide for them what should be provided. Her personal hatred towards the children should not be driven towards the fund. However if Teresa finds that her dislike to the children is affecting the trust, then she can apply to the court for requiting her post as a trustee and the court shall appoint a trustee to run the fund. Therefore, the two boys claim is justified as long as they do not solicit for the income realized from these investments to be paid to them directly. Teresa as a trustee should not also invest the money for the boys where she has interest. b) Austin's dropping out of school where he was studying Tourism studies at the University of Scunthorpe does not entitle him to be given the money to start his own business by being 200,000 as down payment of 10% on the purchase of the hotel. This is against the law of equity since all the investments done must be for the benefit of the two children. Therefore, Teresa should not give out the money to Austin simply because, he (Austin) is a minor and in any case the money is held in trust for their benefits and not his own benefit. Any investment done or any purchase of the two children him (Austin) and Morris. In reality the age of maturity i.e. 25 years. Then he can be given the said money to start his business as he requires but before that, Teresa should not be swayed or pressed to give any money to Austin as this is against the rule of equality, where all the investment on property or otherwise must be for the benefit of both children and not Austin himself. Therefore Austin must not be given the said money as he is a minor and the Trust is not for his own benefit, it is held on the behalf of the two children and strictly for the provision of necessaries like food, accommodation, education and thereafter any amount extra can be invested in other investments for the benefit of them (Austin and mum's). Austin mighty argues that since he has dropped out of University, his part of fees can form part of 200,000 for the purchase of the Hotel, this should not be entertained since no one had forced him out of school. He dropped out of University in his own will. He is free to go back and continue with his studies and his fees will be paid. However, if Austin has entered into agreement with the management of the Hotel to purchase the hotel, Teresa as a trustee can write a letter to the hotel and explain to them why she cannot give Austin the money to pay as part of payment in the purchase of the Hotel. This is because all the money is held in trust and he is not the only one who is entitled to benefit from it. Further, Austin is not legible to enter into any contract as per the law of Trust due to his age factor. On attaining the age of majority however he will be allowed to make any transaction whether or not his property will on trust. (C) Regarding investment in marks and Spencer investment on ordinary shares, there is no problem in this as much as the interest accruing from this investment in shares goes direct to the benefit of the children on whose beneficiary the trust is held. All the profits accruing from these shares in marks and Spencer should be invested for the benefit of the children. Since the shares are really doing well, Teresa must ensure that she invests for the benefit of the children and that the shares in marked and Spencer are held for their (children) benefit. All profits accruing should be for the benefit of the children. Further the terms and conditions of shares in Mark& Spencer should be clear so that when the beneficiaries become entitled to equal shares at 25 years old, they are able to ascertain the percentage they hold, and the dividends which has accrued till then. However, Teresa is also free to increase the percentage of shares in Mark & Spencer being a good investment opportunity. (d) This case, the trust investing in Aylesbury systems where their main business is the supply of computers for nuclear sub-marines is neither ethical nor risky as Austin and Morris claim. The main business of the trust is the supply of computers only and is not associated with the result or operation of the Aylesbury systems. The trust's business is only to supply the computers; supply of computers does not make the trust ethical or risky because it does not support the operations of the company. Theirs is only an investment by the way of supplying computers. Further to this, as long as the investment was done in good faith, and for the benefit of the children, then a problem does not arise to the beneficiaries' assumption that investing with Aylesbury Systems plc. Is risky does not apply because all business undertaken comes with risk. Therefore Teresa investing in Aylesbury Systems plc. Is not risking as it does not contravene any rule of investing. She is only trying to identify viable opportunities of investment for the good of the beneficiaries. Teresa as a Trustee should not be swayed by the remarks of the children since theirs is only to benefit from the Trust. They do not have any role to play in management of the trust by dictating where and how to invest. According to the law of Trust beneficiaries are mainly entitled to get the benefits accruing from the trust held on their behalf and not taking or making decisions on how the trust should be run. According to Ashburner, "Every act which a trustee purposely performs in the administration of his trust is done because the trustee is under a duty to do it. However, the general rule and the insurrect creating a trust in certain cases leave the trustee no discretion whether he will or will not do an act. They impose upon him an absolute obligation to do it independently of his own volition, and in this event, he is said to be under a duty to do it. In English, the trustee is the 'legal' owner while the cesti que trust is the equitable owner. Therefore, Teresa being the legal owner of the Trust holding it for the benefit of the children has a responsibility of making decisions as long as they are within the benefit of the cesti que trust. (e) From the circumstances and facts of the case Teresa who is a trustee does not deserve any remuneration as her sister. The sister is a professional who is executing professional duties as a lawyer and is not a Trustee in any way. The sister represents the clients who in return pay her for services offered. However, there are some trusts where the trustee is paid remuneration for work done. As per Teresa, she is running a private trust for the benefit of children and created by will. In this case, she will not be entitled for any remuneration. The trust Teresa is learning is purely private and it does not give rise to obligation of getting remuneration. Further Teresa cannot compare herself with her sister, a lawyer by profession. She has not attended any training as a lawyer. Therefore there's Lawyer-client relationship with the sister while hers is fiduciary relation which does not give rise to entitlement of any remuneration. In addition to this, Teresa's profession is a Primary School teacher, where she is paid for the service she offers. Her claim of remuneration is totally unjustified and against the law of Trust. Further there is no justification of Teresa comparing herself with the sister's pay of 110,000 pounds a year. However, if Teresa needs to be paid she has to hold on the trust until the beneficiaries attain the maturity age of contracting as per the law of Trust. After that they can negotiate and if she agrees to continue as a trustee then she can be paid as per the agreement then and that will be subject to termination of her profession as a primary school teacher. A trustee who is on remuneration is not allowed to hold a profit or public office. This is against or in contravention of the law of trust. "Maitland says," When a person has rights he is bound to exercise them on behalf of another". This relationship is called fiduciary relationship. The person who acts in fiduciary position is prohibited from exploiting his position at the expense of the person who has confidence in him. Any profit taken by such person acting in Fiduciary capacity is deemed to be held by him for confiding person. In Bray V Ford, Lord Herschell defined the equitable principle as: "It is an inflexible rule of court of equity that a person in a fiduciary position --- is not unless otherwise expressly provided, entitled to make a profit, he is not allowed to put himself in a position where his interest and duty conflict. In Robinson v Pett it has been held that the basic principle is that a trustee acts voluntarily and is not paid for his services. It does not matter whether his services are of a professional nature. If follows that a trustee can only claim remuneration if he can show a specific entitlement for it. However, all the facts stated above will only apply if only the original will of Teresa's Aunt is in place, certified and verified. Absence of the said will, which has not been provided, will render all the facts stated ineffective. To constitute a trust fund the Aunt must have left the will and that will must be produced. Without the Will, the cest que trust or beneficiaries are not entitled to make any claim whatsoever. Therefore the law of Trust is universal and its laws are clear Teresa should be governed by these principles of the law of the law of trust. To conclude, Teresa should hold this responsibility of trusteeship with utmost dedication and transparency without any intention to make any profit out of it. She is the "legal owner" holding it on trust for the benefit of cesti que trust. Therefore she should ignore all odds and pressure and instead make decisions according to the powers vested on her as long as those decisions are purely for the benefit of the beneficiaries. She only has a "fiduciary relations" with the beneficiaries. PART 2. (I)LETTER OF ADVICE TO MICHAEL. BRADLEY WHITE & CO. ADVOCATES 17 THE Square Leighton Buzzard LU7 6RJ Tel: 0152638892 Fax: 0152669143 30Th August, 2006 Our Ref: RMP/51R Mr. Michael 117 Bornsley Lane, London N23 1DJ Dear Sir/Madam, RE: ADVICE TO YOUR LETTER DATED 14TH AUGUST 2006 Reference to your letter dated 14 August 2006 regarding making of a Will. I wish to advise or address you as under- (1) In English Law, for a Will to be valid it must be valid it must be contain as beneficial interest. In this, regard your Will leaves this important requirement. You must be able to state the Percentage of Interest that is to be entitled to each beneficiary. Therefore, I need to advise you that the objects of a Will must be indicated with sufficient Precision in order to be valid. A Will should be one which the Court can control and execute. (2) In English Law, we have two types of arrangement therefore you need to choose either a purely precatory arrangement which is a Will declared and created not by express words, but by precatory words as 'I hope' 'I desire'. I recommend etc.Therefore this precarious arrangement means that something which depends on the Will pleasure of another. In this case, of Precatory arrangement, the Court moves to interpret the decision of the testator. (3) Life-Interest trust: This is a trust created by the testator for the benefit of the cesti que trust held in their behalf by the trustee. All the benefits or profits accruing are vested to that benefit of beneficiaries. The trust runs according to the conditions given. It can be a lifetime depending on the agreement. I therefore prefer you to opt for Life-Interest trust which will leave your position in a correct and safe hands. You can decide the type of arrangement you should prefer and I shall assist you to facilitate the process. In your service always. Yours Truly ID: 4793 B. WHITE ( 2) LEGAL PRINCIPLES ON WHICH ADVICE IS BASED BRADLEY WHITE & CO. ADVOCATES 17 THE Square Leighton Buzzard LU7 6RJ Tel: 0152638892 Fax: 0152669143 30Th August, 2006 Our Ref: RMP/52R Mr. J. Jones, Smart-West End Firm Simpleton Haxton H 14 5QT Dear Sir/Madam, RE: LETTER TO MICHAEL ON HIS WILL This is in reference to your Legal advice given to Michael. In the foregoing circumstances, I would like to address you as under- i) That in complying with the requirements of English Law, i.e. certainty of facts like:- (a) Property or rights capable of being subjected to the trust. (b) A declaration or disposition on, trust by a person competent to create a trust or an obligation for valuable consideration to make the disposition. (c) Certainty of property ad objects. On compliance as the Legal Principles above Michael is legally bound to entrust his Will to the beneficiaries according to "life-Interest trust arrangement. In reference to the facts above Turner L.J, in Miloy .v Lord observed that "the settlor must have done everything which, according to the nature of property compromised in the settlement binding upon him. Sworn at LondonDated.. 31st August 2006. DRAWN BY BRADLEY WHITE & co. advocates 17TH SQUARE LEIGHTON BUZZARD LU7 6RJ. SOURCES 1. Watt {2004) Law of Trusts, Oxford Textbook 2.Petit {2001) Equity and the Law of trusts 8th ed. Butterworths 3. Hanbury and Martin Modern Equity 16th ed. Sweet and Maxwell 4. Riddall the Law of Trusts 6th ed. Butterworths 5. Maudsey and Burn (2003) Trusts and Trustees-Cases and Materials 8th ed. Butterworths 6. Equity trust and fiduciary Relations, A. Ahmad, Text book, Thirteenth edition, Central Law Agency, New Delhi, India. 7. Trusts and Equity, G. Watt, second Edition, Oxford press. Read More