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A Trust is a Legal Arrangement 

Info: 2977 words (12 pages) Essay
Published: 14th Aug 2019

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Jurisdiction / Tag(s): UK Law

A Trust is a legal arrangement which involves an individual (the Settlor) transferring legal title of properties to another person or body (the Trustees) to hold for the benefit of one or more persons (the Beneficiaries).

There are no clear definitions of a trust however it is commonly best described by leading authorities [1] …

The main type of trust that Johura had set up was an express private trust. An express trust is divided into public, private or charitable then further divided into discretionary or fixed. A power can also be formed within this. All these elements of the trust are included throughout Johura’s dispositions of her will that she created as a testatrix [2] . Johura also created a trust as the Settlor in an inter vivos transaction (between the living)

Three points are required for an express trust to be created. Lord Langdale MR [3] highlighted this as a requirement for a valid trust. They are certainty of intention, certainty of subject matter and certainty of objects. No particular form of expression is necessary for the creation of a trust and therefore the equitable maxim would apply. [4] Certainty of intention refers to a specific intention by an individual to create a trust arrangement whereby Trustees (which may include themselves) hold property, not for their own benefit but for the benefit of anothers). Certainty of intention is also known as certainty of words.

The courts have usually held that unless there is a certainty of subject-matter, no trust arrangement would exist. As in Simmonds [5] it was held that the phrase ‘the bulk of my residuary estate’ was not certain enough for a trust arrangement to exist, however, in Le Golay [6] it was held that ‘one of my flats and a reasonable income’ was enough certainty to constitute the trust.

The certainty of objects relates to knowing who the beneficiaries are. Unless the trustees know who the beneficiaries are they cannot distribute the trust of the property.

As Johura stated there may have been a risk to her safety one must look at the exception for gifts. This is known as a Donatio Mortis Causa [7] which is a lifetime gift which is also conditional and takes effect upon death but revocable by the donor if they recover.

The 3 certainties are not required when looking at DMC [8] . It is regarded as an exception to the rules and three elements must be satisfied [9] .

Lord Russell [10] laid these down in the case of Cain [11] and was subsequently used in cases including Sen [12]

Johura may have intended the gifts to go to her family members taking effect only in the event of her death, such gifts would normally be testamentary and valid only if made in accordance with the Will’s Act [13] , however the formalities were absent. Nevertheless, Johura’s family will be able to obtain the assets concerned if they can establish a valid DMC in respect of each item.

As Johura has orally expressed that her brother Faisel should have Rose Cottage, the LPA [14] states it must be in writing [15] . However S53(2) [16] contradicts this. Johura had stated that there was risks to her safety on the trip, she had gone further and instructed her solicitor to hand the deeds to her brother. The question to ask would be, had she done as much as what she could do. The cottage would still be registered in the owner’s name [17] , so if she was sole owner of the property she would be able to revoke the gift and she would satisfy all 3 elements of DMC. However the courts would probably intervene as some questions may arise as to how you can successfully pass dominion of registered land which is now computerised and is not evidenced by the ownership of a Land Certificate.

Handing over the keys to ones car advising them to ‘take car of it’ does not automatically prove that one is the new owner. In Re Craven’s Estate (1937) Farwell J stated a few obvious reasons…… [18] , however the case of Woodward [19] was successful as the courts looked at all the circumstances before reaching their conclusion. The questions that would need to be asked to confirm if Johura’s son would qualify for his mothers car would be, was both keys handed over. Does Johura’s husband have the second set of keys? Is Johura the keeper of the car [20] or is she merely the purchase owner.

Nazia maybe entitled to her mother’s jewellery if she can satisfy the three elements of DMC, however one of the elements for a successful DMC is for Johura to hand over the jewellery or something relating to the jewellery, i.e. the black jewellery box, or the keys to the jewellery box (if there is one) [21] . The law will not accept mere words. With regards to Faisel and Safter some form of delivery did take place however in this case it was mere words. Therefore this DMC will fail.

Johura also instructed her solicitor to give her shares in the family business to her brother. For this to be successful, a stock transfer form needs to be completed to comply with the Act [22] and delivered to the transferee [23] with the share certificate as it is a private company [24] . If it was a public company the shares would need to be transferred via the Stock Exchange [25] . If Johura has completed this or shown that she did everything that she could have done [26] , her brother would be successful in obtaining the shares. However if not he would be unsuccessful and it would therefore fall back to the residue of the estate.

If Johura’s father had set himself up as a trustee of the assets, this may have been effective if Johura had outlived her father. It is possible to create a trust by words alone.

Johura also set up some dispositions within her will. The dispositions must satisfy the Act [27] and it is not valid unless the following can be shown:

It is in writing

Signed by the testator or some other person in his presence and by his direction

The testator intended the signature to give effect to his will

The signature was acknowledged by the testator in the presence of two or more witnesses, present at the same time

Each witness signs the will or acknowledges the signature in the presence of the testator.

Each disposition will be discussed in turn

The settlor does not have to use the term ‘trust’ to create a valid trust.

In older authorities it was held that if a settlor or a testator used certain key words or phrases, called ‘precatory words’ [28] this would have been sufficient to create a trust. Johura’s first disposition would have been successful back then, using the phrase ‘in confidence’. It was decided around the middle of the19th Century [29] , that authorities using these phrases would be rejected as it was held that a trust would not be created simply by the use of ‘precatory words’. [30] The reason being, that those words did not seem to inflict specific responsibilities on the beneficiary of the property but just expressed how the settlor or testator would have liked to see the property been used.

Johura use of words within the first disposition ‘for absolute use of my husband in full confidence……..shows ‘precatory words’ however the question to determine is whether the language used showed the intention of Johura’s request. Similar language was used in the case of Re Adams [31] . It was held that no trust was created.

The Court of Appeal held that the precatory words alone were insufficient to create a trust. The position was summarised by Cotton LJ [32] . This case was contrasted with Comiskey [33] , as the words ‘in full confidence’ were also used. The language however was deemed to be entirely different. The main phrase pointed out ‘I hereby direct’ showed there was an intention to create a binding obligation.

Johura’s first disposition would fail to meet the needs to create a trust as her husband has a moral obligation to provide for his children. Johura’s request would be classed as a gift with a motive.

Johura’s second disposition involves her daughter. Nazia has conditions for the ring to be passed down to her children and through the generation of her children. This is known as a conditional gift. It is a gift of property which is revocable if Nazia does not fulfil the conditions attached to the gift, however a degree of uncertainty would not invalidate the gift. A less strict test applies in determining whether it is a conditional gift. This was laid down in the case of Re Allen [34] but was considered again by Browne-Wilkinson J [35] . It was stated that as long as there is a condition attached to a gift, even where it is uncertain or imprecise, it is still valid so long as at least one beneficiary comes within it. In the second disposition Johura’s request would be therefore successful as it could be traced to a specific class from Nazia [36]

The third disposition deals with Power of Appointment of which there are three types [37] . Testamentary powers of appointment are usually created by will. A power of appointment may be transferred only in writing, such as by deed, trust, or in this case by will. Johura’s trustees are the donor’s of the Power of Appointment and Lucy is the Donee. However the trustees (as the donors) must show that they intended to create the power, they can identify the person who would hold the power, the circumstances under which the power could be exercised are identified and the property to the power is specified.

The fourth disposition determines whether the rental income for Johura’s employees, their children and elderly parents is valid, one must consider certainty of objects. The first element (on trust to my employees) would be satisfied.

Prior to this case there was no clear distinction between the requirement of certainty for Fixed Trusts and Discretionary trusts [38] . Lord Wilberforce test could be questioned that any given individual was or was not a member of the class.

This is a discretionary trust and the test to determine this was decided by the House of Lords in McPhail [39] where Lord Wilberforce said [40] …meaning that it must be possible to identify who sits within that group.

The second and third element of this disposition would be more uncertain. For example a child of a female employee advises the trustees of so. This would not be difficult to disprove if it was or was not the case.

However a child from a male employee who is unaware that he has fathered a child would be as entitled to approach the trustees in order to claim as the children that he is aware of. The disposition is not clear on the children of the employees.

The third element re elderly dependant could be questionable as what constitutes a dependant [41] and an elderly. A dependant was narrowed down within the case so part of this element could be satisfied however as there is no fixed age to elderly this would be difficult to satisfy.

The trust however is in favour of Johura’s employees and extended family (class) however it is up to the trustees on how the income is to be distributed and which beneficiaries benefit.

Normally testamentary gifts will fail where certain phrases are used which have no real certainty as in the case of Boyce [42] . Where the subject matter of the trust does not yet exist, i.e. Meena is still awaiting the outcome of her property after Ayesha’s choice, there is no certainty of subject matter. This was demonstrated in the case of Williams [43] . This disposition would probably be successful providing Ayesha does not die before choosing the houses.

Lord Macnaghten categorised charitable in the case of Pemsel [44] by stating

“Charity in its legal sense comprises four principle divisions…..” [45]

Legal title will vest once the shareholder is registered. Shares in public companies must be transferred via the Stock Exchange.

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