Equity and Trusts †Problem Question

Equity and Trusts occupation Question pack has died recently, and has left a properly executed testament in respect of his commonwealth. in that respect are a number of comestible in this depart, including a substantial financial legacy to his sister, a organized religion everywhere mob leasehold country for which the legal guardian has since died, a assert of 100,000 for the manipulation of serviceting crowd friends dependants completing studies, a clothe of his charm of coins and mints, and a gift of Jack Daniels whiskey and some m sensationy to his niece. Each of these readinesss of the leave alone put in certain worrys. The cookerys will be addressed severally in fiat to assess their status, and determine who will actually go far what under pile will.The first provision, then, is a gift of 100,000 to his beloved sister Emily, with an obligation on Emily to use a credible amount to wager after mob step-daughter, Mary. This would step forward to crea te a in verify over a portion, hardly non all, of the 100,000 in question. As identified in the seminal bailiwick of Milroy v gentle (1862), a institutionalise tummy be created either where a person declares himself or herself a regent over retention the legal form of address of which he or she holds, for the benefit of (that is, beneficial ownership lies with) a nonher or where a person transfers his position to surenessees on effrontery. It is established, however, that a trust obligation skunk barely last in relation to proper(postnominal) trust post. James clear aspiration here to create a trust will non, on its own, be adapted to benefit his step-daughter if it green goddess non be ascertained exactly what the trust property was mean to be.This brings us to a fundamental requisite of valid trusts the so-called three certainties, identified by Lord Langdale in Knight v Knight (1840), when he was Master of the Roll. The three certainties that essentialin ess be pillowcase are inference of words (or intention), certainty of bow bailiwick and certainty of objects. In relation to certainty of intention, one mustiness consider James wording. He does not preciseally mention a trust. This whitethorn not be fatal to the successful establishment of one, however, as his authoritative confidence that his sister will use some of the money for the stipulate purpose would probably qualify as precatory words which would be sufficient. In Re Adams and Kensington Vestry (1884), the words used in a similar provision were in full confidence that the testates wife would do what was right as to the disposal of the trust property between his children. like J, in the Court of Appeal, suggested precatory words alone were insufficient, but a valid trust whitethorn be created in the wider context of the will. Again, James words would appear to qualify as he has created other trusts.thither may also be a problem with this provision in relation t o the specific subject national of the trust. Trust property must be clearly defined, otherwise the trust will fail for insufficiency of certainty. Here, James has asked that a reasonable amount be used for the gentility of his step-daughter. The chat up may be prepared to define a reasonable amount, however, following such fibres as Re Golays exit Trusts (1965). Here, the wording provided for a reasonable income for the legatee, and Ungoed-Thomas J considered the term to be sufficiently objective to be capable of quantification. It seems this provision will be valid if two conditions are met namely James use of precatory words are considered sufficient in the context to create a trust, which seems likely, and the court is prepared to define reasonable amount as the subject matter of the trust which, again, seems likely.The second provision in James will concerns to his leasehold estate in Blackacre, which he wishes to pass to his nephew earth-closet, whom he desires to use the rent for the estate for either James children who John thinks are close deserving, or for Johns own children. thither are a number of spare-time activitying, and emfly problematic, aspects of this provision. The first is that it relates to a trust over land. Under the Law of dimension Act 1925, there are further formalities that must be observed when creating a trust over land. The trust will and be validly constituted if legal rubric to the trust property is effectively transferred to the trustee, John. Section 52 of the LPA 1925 states that any conveyance of land must be effected by deed. Mere writing (such as in James will) or an oral transfer, or even physical pigheadedness of the land will be insufficient. An assignment of title to a testators leasehold estate to an intended beneficiarys mother was held disable because it was not make by deed in Richards v Delbridge (1874). It seems that this trust would have failed for this reason.The trustee, John, however, died without distributing any of the rent from the leasehold property. The trust has therefore failed for two reasons (the trustees death and the absence of a proper assignment of legal title to the trustee). What, then, happens to the leasehold estate? It will become a resulting trust. The beneficial interest results back to the settlor or his successors, and the trustee holds on bare trust for that party. This is know as an Automatic Resulting Trust (ART). In probate monetary value, the interest will revert to James estate and will be distributed in ossification either with other provisions of his will, or with the intestacy rules.The third provision in James will relates to 100,000 which he has given to Mark in order that Mark can invest it and use the income to help any of James friends dependants over(p) law degrees. This will meet the unavoidablenesss of an express trust in terms of its certainty of subject matter. The 100,000 is a specific sum of money that is to be make the subject of the trust. In this instance, however, we must consider the nature of purposes in the context of trusts. The law of trusts allows individuals to devote their property to the carrying out of specific purposes. There are, however, a number of restrictions on how this can be done. Purposes often expect both trusts and contractual obligations to carry out some action. The frequent startle point in this discussion is that unless it is a charitable purpose, the law in England does not generally allow the simple transfer of property on trust to carry out a incident purpose. Using Penners example, 10,000 on trust to oppose UK entry into the common European currency would be likely to fail.1In order to assess whether James provision to Mark of 100,000 for the designated purpose is valid, the beneficiary principle must be considered. This states that for a trust to be valid, it must be for the benefit of ascertainable individuals. This provision is not a pure purpose trust, whi ch would fail under incline law, but rather it is for the benefit of certain individuals. In Morice v Bishop of shorthorn (1805), Sir William Grant, then Master of the Rolls, said there can be no trust, over the practise of which this Court will not assume a control for an uncontrollable power of disposition would be ownership, and not trust There must be somebody, in whose favour the court can decree performance. In this case, as mentioned, there are a particular group of authorization beneficiaries of the trust it is not simply for the general advance of legal studies, for example. Although the beneficiary principle would appear to be met, then, it is a corollary of the requirement of certainty of objects, to which we now turn.For a trust to be valid, the objects of the trust (that is, the beneficiaries), must be certain. In other words the trust must be expressed in such a way as to modify the trustees, or in their default, the court, to identify who exactly the beneficiari es are. The trust of 100,000 to Mark is symptomatic of a perceptivenessary, rather than a fixed, trust, meaning that the precise benefit to specific individuals is not defined by James. Rather, Mark will exercise dainty as to who, from the group of assertable beneficiaries, will benefit. In McPhail v Doulton (1971), the shack of Lords stated that the test for certainty of objects in trusts such as this one should be similar to the test for objects of powers. It should, in other words, be possible to say of any given individual that he or she is, or is not, part of the specified class of beneficiaries. Subsequently, in Re Badens operation Trusts (No 2) (1972), the Court of Appeal stated that when this test is applied, a discretionary trust will be valid so long as the beneficiaries can be identified with conceptual certainty.How does this apply to the present case? The discretionary trust relates to any of my friends dependants. This is of course, subjective. Who is, or is not, James friend? And who qualifies as a dependant of those friends? An early test for this problem was the so-called have it off list test, which was applied in IRC v Broadway Cottages Trust (1955). Jenkins LJ stated that a trust for such members of a given class of objects as the trustees shall make is void for uncertainty, unless the whole range of objects eligible for selection is ascertained or capable of ascertainment.2 Clearly, in the present case, it is unlikely that an exhaustive list of the potential beneficiaries will be able to be compiled. The test was, however, criticised in consequent cases as failing to deal adequately with developing discretionary trusts that cover larger groups of potential beneficiaries. In McPhail v Doulton (mentioned above, in which the purported discretionary trust was very similar to the present one), the complete list test was chuck out in favour of the is or is not test.Unfortunately for the present trust, however, it would well-nigh likel y still be invalid on the basis of administrative unworkability. Again, this concept arose in McPhail v Doulton, when Lord Wilberforce stated that there may be classes where the meaning of the words used is clear but the explanation of the beneficiaries is so wide as to not form anything like a class so that the trust is administratively unworkable3 Given the potential size of the class of beneficiaries here (depending of course on James popularity), this trust would probably fail.The fourth provision relates to James collection of coins and mints which he gives on trust in order that any of his colleagues who wish to do so to purchase them at half(a) price. The rest are to go to James sister, Lora. The first issue here is the identity of James trustees. He has not specified who will be the trustee(s) in this case. This is not, however, a significant problem as it is well established that trusts will not fail for privation of a trustee. This applies either where no trustee is spe cified (as is apparently the case here), or where the specified trustee is un uncoerced to accept this responsibility. If no willing trustee can be found, Public legal guardian will be appointed as a last resort. Provision for this office was do in the Public Trustee Act 1906 (section 2(3)). Alternatively the court may appoint a trust corporation to administer the trust pursuant(predicate) to section 42 of the Trustee Act 1925. This first issue with the present trust, then, presents no real problem.The trust property is James valuable collection of coins and mints. This is unproblematic, assuming that the collection can be physically located. It should be comparatively clear what forms part of the collection and what does not. The requirement for certainty of subject matter will therefore be met. The class of beneficiaries is expressed as existence James colleagues. This is not a discretionary trust in the said(prenominal) way as the one discussed earlier, as the trustees have n o discretion as to who will benefit from the trust. Rather it is the potential beneficiaries who may exercise their discretion to purchase items from the collection. The equitable maxim that equity treats as done that which ought to be done would apply a constructive trust here, if there was a specifically enforceable contract to sell the property to the beneficiaries. There is not, however, as the potential beneficiaries have not yet decided to accept.In the present context, a further requirement of a valid trust is worth considering namely that where a settlor wishes to create a trust over which a third party is trustee, the legal or beneficial title to the subject matter of the trust must be effectively transferred to the trustee. James words here refer to his trustees. In Choithram (T) International SA v Pagarani (2001), it was held that where it is intended that there be a body of trustees, it will be sufficient to transfer title to one member of that body. The rules of effecti ve transfer of title vary according to the type of property in question, and are most lenient in relation to chattels (which cover the collection here). Title may be transferred either by deed or gift, or talking to of possession. It is likely that the will, if correctly executed, will be sufficient for this transfer.There is, in trust law, a rule against perpetuities. This states that gifts of property must vest at heart a certain period of time. James sister is due to get the deviation of the collection at some point in the future, but this is not defined. The perpetuity period is a life in be plus twenty-one years.4 This limits the period of time in which the remainder of the collection must vest in Lora.The final provision in James will relates to 20 bottles of Jack Daniels whiskey that is stored in his cellar, and calciferol from his City Bank plc savings compute, which he gifts to his niece, Emily. This is, on the face of it, unproblematic. It would appear to meet the r equisite standards of certainty in relation to words (or intention), subject matter, and objects. The wording clearly creates a testamentary gift. Assuming James has only one niece called Emily, the intended beneficiary will be clearly classifiable. Ostensibly, also, the subject matter of the trust should be sufficiently certain. The problem, however, relates to the fact that in James cellar there are 40 bottles of Jack Daniels and in the germane(predicate) savings account, there is 1000. The testamentary gift therefore relates only to half of these items.It is clear that a trust cannot exist in abstract. It must relate to specific assets or else it will fail. By way of example, in Hemmens v Wilson Browne (a firm) (1995), an agreement allowing a person to call for a earnings of a specified sum at any time did not create a valid trust because no specific property had been identified as the subject matter of the obligation. There was no identifiable fund to which any trust could at tach.5 In the present case, there is no conceptual uncertainty as to the intended trust property, however, as it explicitly relates to bottles of whiskey and money. The problem arises, however, because the property is unascertained. In Re London wine Co (Shippers) Limited (1975), a customer order for a dispatch of wine was unable to create a trust over specific bottles in the sellers warehouse because the specific property could not be ascertained. The customers specific order had not been appropriated from the general stock.This would suggest that the gift to Emily would fail for similar reasons. The Privy Council confirmed the improvement in Re Goldcorp permute Limited (In Receivership) (1995) in relation to property bullion. Again, specific orders had not been appropriated from the general stock so the trust failed. This is not conclusive, however, as an alternative approach occasionally adopted by the courts should be considered. In Hunter v Moss (1994), an oral declaration of trust was made over 5% of the issued share capital of a private connection in which the settlor owned 950 shares. The court held that this was not void because the specific shares had not been segregated from the remainder of the shares. This decision, although it might help on the successful death penalty of Emilys trust, has been criticised as being inconsistent with the earlier Privy Council decision. bingle justification for following the decision in Hunter was offered in Re Harvard Securities Limited (In Liquidation) (1997) as being that Hunter related to shares and not chattels. In the present context then, it seems that the trust over the money in the account might be valid, but that over the whiskey may not be.BIBLIOGRAPHYStatutesLaw of Property Act 1925Public Trustee Act 1906Trustee Act 1925CasesChoithram (T) International SA v Pagarani 2001 2 All ER 492Hemmens v Wilson Browne 1995 Ch 223Hunter v Moss 1994 1 WLR 452IRC v Broadway Cottages Trust 1955 Ch 20, CAKnight v Knight (1840) 3 Beav 148McPhail v Doulton 1971 AC 424Milroy v Lord (1862) 4 De GF J 264Morice v Bishop of Durham (1805) 10 Ves 522Re Adams and Kensington Vestry LR (1884) 27 Ch D 394Re Badens Deed Trusts (No 2) 1972 Ch 607Re Golays Will Trusts 1965 2 All ER 660Re Goldcorp Exchange Limited (In Receivership) 1995 1 AC 74Re Harvard Securities Limited 1997 2 BCLC 369Re London Wine Co (Shippers) Limited (1975) 126 NLJ 977Richards v Delbridge (1874) LR 18 Eq 11Secondary sourcesMartin, J.E. (2001) Hanbury and Martin Modern Equity, 16th interpretation (London mellifluous Maxwell)Pearce, R. and Stevens, J. (2006) The Law of Trusts and Equitable Obligations, 4th Edition (Oxford OUP)Penner, J.E. (2004) The Law of Trusts, 4th Edition (London LexisNexis)Footnotes1 Penner, J.E. (2004) The Law of Trusts, 4th Edition (London LexisNexis), p2542 1955 Ch 20, CA, per Jenkins LJ at 313 1971 AC 424, per Lord Wilberforce at 4574 Pearce, R. and Stevens, J. (2006) The Law of Trusts and Equitable Oblig ations, 4th Edition (Oxford OUP), p4045 1995 Ch 223, per Mosely J at 232