Examples of Property Law and Trust Cases

Part a)

One should assume that the trust instrument requires the house to be kept as capital and only the income to be applied for the benefit of the beneficiaries. In such circumstances, the issue in relation to the trust of the Brighton house is whether it infringes the rule against remoteness of vesting, as it is unclear whether or when Lily may get married or have children. The rule provides that trust property must be vested (not necessarily in possession, but at least in interest) in the beneficiaries within 21 years of the death of a causally relevant life which was in being when the trust was created, which may be expressly or impliedly specified in the trust instrument.

In the present scenario, Lily has an interest vested in possession (a present right to present enjoyment), and her husband and eldest child would have interests vested in interest (a present right to future enjoyment) if they existed. We are however told that Lily is 22 and has no husband or children.

Three possible scenarios fall to be considered. First, Lily dies without marrying or having children. In such case, Lily has an interest vested in possession for life, and, as there is no beneficiary specified in relation to the interest in remainder arising after the termination of Lily’s life interest, the interest in remainder would revert to Matt or his estate under a resulting trust.

Secondly, Lily marries Fred, but has no children. Lily again has an interest vested in possession for life, Fred would have an interest vested in interest which would become vested in possession for life upon Lily’s death, and upon Fred’s death the interest in remainder would again revert to Matt or his estate by way of a resulting trust.

Finally, Lily marries Fred, and they have one or more children. In this case, the interests considered above still apply to Lily and Fred, but the interest in remainder would go to their eldest child absolutely.

My advice is therefore that the gift of the Brighton house is, subject to all relevant formalities being complied with, valid as it does not infringe the rule against perpetuities irrespective of the existence of Lily’s husband or children.

Part b)

The trustees require Ken’s consent before they can sell the country cottage in which Linda has a life interest and Ken has an interest in remainder, and although Linda wants the cottage to be sold, Ken refuses to give his consent.

The trustees commit a breach of trust if they sell the cottage without obtaining the consent required by the trust instrument. Supposing he is of full capacity, as Ken is of full age and is the only person whose consent is required, section 10 of the Trusts of Land and Appointment of Trustees Act 1996 will not help the trustees or Linda.

In Re Beale’s Settlement Trusts^[1] Maugham J held that section 30 of the Law of Property Act 1925 (now repealed) and section 57 of the Trustee Act 1925 gave him jurisdiction to grant an order for the sale of a house where the beneficiary who held the life interest in the property and who had been declared bankrupt refused to consent.

In my opinion, the present situation is factually rather different, and it is likely the court would refuse to order a sale of the house unless it was clear that Ken’s refusal to consent was not only capricious but also detrimental to all the beneficiaries including himself. Failing this, the court is likely to seek to carry out Matt’s intentions and therefore enforce Ken’s power to veto the sale, and Linda would therefore not be able to sell the country cottage.

Part c)

The gift of the London apartment to “my first grandchild to reach the age of 25” gives rise to issues of certainty of beneficiaries and perpetuity.

There is a condition precedent that a grandchild must reach the age of 25 and be the first one to do so to qualify for the gift. This is a sufficiently certain condition, particularly considering the benevolent approach to constructions taken by the courts in relation to conditions precedent^[2].

We are not given Amy and Don’s ages. They both, together with any other grandchild who may be born before one of them reaches 25, have a contingent interest in the flat. Such interest must become vested before the end of the perpetuity period, as otherwise the rule against remoteness of vesting will render the entire trust void. This means that the interest must become vested within 21 years after the death of a causally relevant life which was in being when the trust was created.

It appears that in this case the causally relevant life may be Matt, Lily or Ken. Although highly unlikely, it is not inconceivable that, for example, Lily could have a son, John, and subsequently die in a plane crash a few months later together with Matt, Ken, Amy and Don. In this scenario John’s interest only becomes vested when he reaches 25, which would be at a date falling outside the perpetuity period terminating 21 years after Matt, Lily and Ken’s death. The gift is thus prima facie void, but may be saved by the “wait and see” approach contained in the Accumulation and Perpetuities Act 1964.

Section 3(1) of the Act provides that a disposition such as the present is to be treated as not subject to the rule against perpetuities until such time as it appears that the vesting of the interest must occur outside the relevant perpetuity period. It is far more likely that Amy or Don, depending on their age, would reach the age of 25 within 21 years of Matt’s death, who is only 66. Therefore, the trust is presumed to be valid until this occurs, and would only be invalidated by the rule against remoteness of vesting at a time when it becomes clear that the interest will not in fact vest in a beneficiary within the perpetuity period.

Finally, there is no express provision as to what the trustees are to do with the income generated by the trust. If the trustees are directed to accumulate the income until a beneficiary becomes entitled to the trust property, the accumulation period must be limited to one of the six periods listed in sections 164 and 165 of the Law of Property Act 1925 as extended by section 13 of the Perpetuities and Accumulations Act 1964.

Part d)

The general position is that trusts cannot be set up for a particular purpose unless they are charitable or fall within the limited exceptions recognised in Re Endacott^[3], as there must generally be one or more beneficiaries with sufficient locus standi to enforce the trust against the trustees^[4].

The trust of the Sussex farm is expressed to be “to all my grandchildren, whenever born, to graduate from University”. It therefore appears that the trust is, if somewhat indirectly, for the benefit of Matt’s grandchildren and, following Wicks v Firth^[5], such trust would be valid as Matt’s grandchildren have sufficient locus standi to ensure that the trustees do not apply the trust fund for any purpose other than their University education and to enforce the trust against the trustees if any of them attends University^[6].

A trust of this kind cannot continue indefinitely, and would therefore be valid if it was limited to an express period of 80 years or less^[7]. On the face of it, however, the trust appears to infringe the rule against remoteness of vesting, as it fails to specify a defined perpetuity period. As discussed in relation to part c) above, under the Perpetuities and Accumulations Act 1964 the trust would not be invalidated in its entirety at the outset, but would be kept valid by operation of the “wait and see” approach contained in the Act.

BIBLIOGRAPHY

Hayton, Underhill & Hayton: Law of Trusts and Trustees, 16^th ed., London, LexisNexis, 2003

Hayton & Mitchell, Hayton & Marshall: Commentary and Cases on the Law of Trusts and Equitable Remedies, 12^th ed., London, Sweet & Maxwell, 2005

Mowbray, Tucker, Le Poidevin & Simpson, Lewin on Trusts, 17^th ed., London, Sweet & Maxwell, 2000

Re Allen [1953] Ch 810

Re Beale’s Settlement Trusts [1932] 2 Ch 15

Re Denley’s Trust Deed [1969] 1 Ch 373

Re Endacott [1960] Ch 232

Re Grant’s Will Trusts [1979] 3 All ER 359

Morice v Bishop of Durham (1804) 9 Ves 399

Wicks v Firth [1983] 2 AC 214

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Footnotes

^[1] [1932] 2 Ch 15.

^[2] See Re Allen [1953] Ch 810.

^[3] [1960] Ch 232.

^[4] This is referred to as the “beneficiary principle” and can be traced back to Morice v Bishop of Durham (1804) 9 Ves 399.

^[5] [1983] 2 AC 214.

^[6] See also Re Denley’s Trust Deed [1969] 1 Ch 373 and Re Grant’s Will Trusts [1979] 3 All ER 359.

^[7] In Wicks v Firth, note 5 above, the trust was expressly limited to 79 years.