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Trust Assignment

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0% found this document useful (0 votes)
188 views18 pages

Trust Assignment

Business document

Uploaded by

Malik Usman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Task 1

The Evolving and Adaptable Character of Equity

A foundational principle of English law, equity arose to remedy the


shortcomings and inflexibility of common law. Its evolution is
characterised by watershed moments in history, the interaction of equity
and law, and the implementation of equitable principles and theories like
constructive trusts. With the use of pertinent case law from the United
Kingdom, this essay will examine how equity has developed through time,
how it relates to common law, why equitable maxims are important, and
what characteristics constructive trusts have.

Major Events in History That Contributed to the Growth of Equity


(AC1.1)

The origins of equity in England can be traced back to the Middle Ages,
when the common law system was both dominant and heavily criticised
for its rigidity. Because of its limited remedies and rigid procedural
procedures, the common law frequently failed to deliver justice, forcing
wronged parties to seek redress from the King. Because the King was
considered as the last arbiter of justice, he gave the authority to hear
these cases from the Lord Chancellor, who may then apply justice
according to principles of equity rather than rigid legal requirements.

Founded in the fourteenth century, the Court of Chancery was a


watershed moment in equity's historical progression. When common law
courts ceased to provide remedies like injunctions, particular
performance, and rectification, the Court of Chancery stepped in to fill the
void.

The Earl of Oxford's Case (1615) is a landmark case in equity history.


Here, the common law and the Chancery Court were at odds with one
another. Although the Earl of Oxford had been granted a common law
victory, the Court of Chancery, in the interest of equity and fairness,
granted an injunction to block the execution of the common law
judgement. When disputes arose between equity and common law, King
James I issued a proclamation declaring that equity should take
precedence. By upholding equity's preeminence, this ruling made sure
that justice could be served even when common law remedies failed.

Another watershed moment in equity's evolution occurred during the


Judicature Acts of 1873–1875. By combining common law and equity
courts into one system, these Acts gave judges the authority to use both
the letter of the law and equitable principles in their rulings. With this
consolidation, England's legal system became more unified, allowing for
the simultaneous administration of equitable and legal remedies.

AC1.2: The Link Between Equity and Law

Complementarity and integration define the relationship between equity


and law. In contrast to the common law's strict rule-based framework,
equity allows courts more leeway and discretion to determine what is fair
in each case.

Instead of existing in conflict with the law, equity works in tandem with it
to accomplish justice. The adage "equity follows the law" shows how these
two concepts are related; according to it, equity takes into account
preexisting legal standards but steps in when doing so would lead to an
unfair conclusion.

This connection is prominently shown in the case of Walsh v Lonsdale


(1882). Although a lease was executed in this instance, it failed to fulfil
the common law criteria for a valid lease. The arrangement was treated as
though it were a legitimate lease, according to the Court of Appeal, since
equity considers what ought to be done as done. If an agreement or duty
fails to be upheld due to the common law's stringent formalities, equity
can step in and enforce it.

Foss v. Harbottle (1843) is another case that illustrates how shareholder


rights were limited because the court ruled that only the corporation,
being a separate legal creature, could claim for damages inflicted against
it. In instances when the wrongdoers were in control of the firm,
shareholders could sue on its behalf through the idea of derivative
actions, which was introduced by equity and thus made exceptions to this
norm. This exemplifies how the law and equity function together to
guarantee that justice is done even in very convoluted business systems.

Equable Maxims and Their Significance (AC1.3)

The implementation of equity is guided by equitable maxims, which are


general concepts. These adages highlight the importance of conscience,
fairness, and justice, which are the moral and ethical factors that underpin
equitable decisions. They guarantee that equality is administered
consistently and fairly and lay the groundwork for its discretionary nature.
Important equitable maxims:

1. "Equity will not suffer a wrong to be without a remedy": This adage


highlights the importance of equity in addressing situations where the law
fails to do so. The court's decision in Ashby v White (1703) established
that, even in cases where a remedy is not provided by common law, there
must be one when a right exists. This case exemplifies the need of equity
in guaranteeing that there is a remedy for every legal injustice.

2. "He who comes to equity must come with clean hands": According to
this adage, in order to get equitable relief, a claimant must be honest and
forthright. Due to Mrs. Rees's unconscionable behaviour in pressuring a
creditor into accepting a reduced payment, the court rejected her request
for equitable relief in the case of D & C Builders Ltd v Rees (1966). The
fact that equity will not help individuals who act unethically is shown in
this situation.

3. "Equity looks to the intent rather than the form": The focus of equity is
on the content, not the form, of an agreement. The court's decision in
Berry v Berry (1929) established that parties' genuine intentions might be
used to enforce an agreement in equity even if it did not fulfil the formal
conditions of a contract. This adage gives judges the authority to uphold
agreements that would be null and void if not for this maxim.

"Delay defeats equity" (4): A proverb that goes something like, "equity
aids the vigilant, not the indolent," stresses the significance of moving
swiftly when pursuing equitable remedy. The plaintiff's unreasonable delay
in filing an action to withdraw a contract for a painting was denied
equitable remedy in Leaf v International Galleries (1950). It is clear from
this case that achieving justice in equity requires prompt action.

The implementation of equitable principles is guaranteed to be fair and


consistent across diverse circumstances by providing a moral and ethical
foundation provided by these maxims.

The Characteristics of Trusts That Are Constructive (AC2.1)

A constructive trust is an implicit trust that does not need the parties'
explicit intent to exist but rather is created by the operation of law. To
correct circumstances where it would be unfair for someone to hold
property for their personal gain and to prevent unjust enrichment, courts
impose them.
Fairness, rather than a formal agreement, is the foundation of constructive
trusts, which is a distinguishing trait. When one party has gained property
through dishonest means (such as fraud, breach of fiduciary duty, or other
unethical behaviour), it becomes unfair for that person to keep it. This is
when constructive trusts come into play.

Regarding constructive trusts, the seminal decision is Gissing v Gissing


(1971). Even when the property is in the name of the other party, the
House of Lords ruled that a constructive trust can still exist when one
partner in a partnership helps pay for the property or the mortgage. The
court prevented unfair enrichment by imposing a constructive trust that
reflects the financial contributions of the non-legal owner.

The House of Lords also established that a constructive trust may exist in
the event of an accidental transfer of funds in the landmark decision of
Westdeutsche Landesbank Girozentrale v Islington LBC (1996). Although
they were aware of the error, the recipient was determined by the court to
have held the funds in constructive trust for the one who made the
mistake. This case shows how a constructive trust can be used to stop
someone from getting rich unfairly when they get money or property in an
unfair way.

When one spouse has helped acquire or maintain property without being
formally named as the owner, as might happen in cohabitation disputes, a
constructive trust can be a useful tool in family law. To acknowledge the
non-legal owner's stake in the property, a constructive trust might be
established in such instances.

Conclusion

Because it fills gaps left by the common law with justice, fairness, and
flexibility, equity has been crucial in developing England's legal system.
The evolution of the legal system, influenced by seminal cases and
historical events, demonstrates the continuous requirement for a system
that can adjust to evolving societal norms and conditions. A vital part of
contemporary legal theory, equity is ever-changing and may be seen in
the interplay between law and equity, in the use of equitable maxims, and
in the concept of constructive trusts.
Task 2

Introduction

After James learnt he had a terminal illness in January 2019, he made the
decision to share some of his riches before he passed away. The
disposition of his assets upon his death is complicated by the legal
concerns raised by his acts, though. In this assignment, we will discuss the
following topics: who has a right to certain assets like the shares in
Neptune Limited, the jewellery, and the cottage in Scotland; how the three
certainties apply to the medals; how a bequest to an unincorporated
association is to be handled; under what circumstances could Melanie
receive money before she turns eighteen? Lastly, we will look at Harry’s
role as trustee and his obligations and duties in this role. In order to back
up the analysis, applicable statutory rules and case law will be used.

Part 1: Property Rights

1. Shares of Neptune Limited

James told Martin that he was going to give him the shares of Neptune
Limited that he had in order to help Martin fund the launch of his own
company. On the strength of this assurance, Martin left his employment to
seek the business opportunity. Nevertheless, following James’ demise, his
possessions included the share certificate and a duly signed transfer form
favouring Martin.

Clear intent and proper constitution are necessary for a gift of shares to
be effective in equity. Proper composition usually means that the transfer
must be lawfully executed. Milroy v Lord (1862) established the notion
that a gift cannot be effective unless the appropriate legal procedures
have been followed to transfer the property. Here, the transfer was
incomplete because the document, which James had signed, was never
delivered or registered with the corporation. Since Martin’s resignation
was based on his reliance on James’ promise, he may have a claim under
the law of proprietary estoppel. Although the shares will most certainly be
part of James’s inheritance, Martin may be able to claim an equitable
stake due to his reliance.

No 2: Jewellery

In a letter he sent to his niece Helen, James announced his intention to


leave her the jewels that had belonged to his late wife. Regardless, James
kept the jewellery until his death, and Helen never took it. A gift must
meet the three legal criteria of intent, delivery, and acceptance in order to
be considered lawful. The importance of delivery in making a gift
complete was highlighted by the court in the case of Re Cole (1964).
Helen never got the jewels, therefore it was never really a perfect present.
As a result, James’s new partner, Alisha, will inherit the jewels since it is
part of James’s estate.

No. 3: The Scottish Cottage

For the sake of his daughter Melanie, who would not be legally considered
an adult until she turned 21, James’s sister Gail was named in a trust deed
that transferred the family cottage to Scotland. For this situation to work,
a trust must be established that satisfies the three conditions laid out in
the case of Knight v. Knight (1840): certainty of purpose, certainty of
subject matter, and certainty of objects. The completed trust deed makes
it quite evident that James intended to establish the trust, that the cottage
is the subject matter, and that Melanie is the named beneficiary.
Regardless of what is said in the subsequent will, the trust is legitimate,
and Gail is obligated to maintain the cottage in trust for Melanie until she
becomes 21.

Section B: The Medals and the Three Uncertainties, as Well as the


Distinction Between a Trust and a Gift
1. The Three Unchangeable Factors

An essential premise in establishing a trust is the doctrine of the three


certainties, which states that one must be absolutely sure of their
purpose, their subject matter, and the objects to which they are entrusting
their assets. Unlike a mere moral responsibility, certainty of intention
requires the settlor to explicitly state their desire to create a trust. For a
trust to be valid, the subject matter must be easily discernible. Finally, the
beneficiaries must be easily recognisable in order to ensure certainty of
objects. The faith collapses in the absence of even one of these
guarantees.

2. Trust vs. Charity

There is a difference between a gift and a trust in the law. The legal title to
the property is held by the trustee, who is also responsible for managing it
for the benefit of the beneficiaries. This creates a distinction between
legal and equitable ownership in a trust. On the other hand, a gift is a
direct transfer of ownership from one person to another, when the
receiver takes full possession without any continuing responsibilities for
the giver. Regarding the medals, James gave them to his nephew Peter,
but then he pulled them back as he was leaving, suggesting that the
present was incomplete. The medals are still considered part of James’s
inheritance, and no trust was established, because delivery is an essential
component of a gift, as established in Re Cole (1964).

Section C, Legacy’s Impact on the Bentown Bird Watching Club

An unincorporated, non-charitable association called the Bentown Bird


Watching Club was bequeathed £25,000 in James’s will. Because they do
not have legal identity, the status of such entities makes it more difficult
to treat donations to them. According to Re Recher’s Will Trusts (1972),
there are three possible ways in which these donations could be
interpreted: either as an addition to the association’s money, held on trust
for the members, or subject to contractual responsibilities. Since the
group isn’t in the charity sector, the donation could be better understood
as a boost to the club’s overall coffers, to be spent how the bylaws specify.
Thus, the legacy is legitimate, but its meaning should be determined by
the club’s objectives.

Melanie’s Access to Funds Prior to Turning 18 (Part D)

The will names Harry as the trustee to hold Melanie’s inheritance in trust
until she becomes eighteen. Sec. 32 of the Trustee Act 1925 grants
trustees the authority to advance assets, while Sec. 31 grants them the
authority to maintain such assets. The trustee can use these powers to
take care of the beneficiary’s requirements, like schooling and
maintenance, even before they reach a certain age. Harry, in his capacity
as trustee, might advance Melanie a portion of her inheritance if she had a
need for the money before she turned eighteen. While this would mean
that there will be less money in the trust when she turns 18, it will take
care of her immediate needs and demonstrate that the trustee is looking
out for her best interests.

Section E: Harry’s Trustee Responsibilities and Duties

The First Duty of a Trustee

Both administrative and fiduciary responsibilities fall on Harry’s shoulders


as a trustee. He has administrative duties to manage the trust property
wisely, fiduciary duties to act honestly, non-profitability to avoid conflicts
of interest, and investment terms to invest in line with the trust. Accurate
record-keeping and disclosure of assets are among the administrative
duties. While administering the trust, Harry has a responsibility to look out
for Melanie’s and his own best interests as beneficiaries (with respect to
the remaining estate).

2. Justifications for Negligence

According to Section 61 of the Trustee Act 1925, Harry could face liability
if he fails to fulfil his obligations unless he can prove that he acted
honestly, reasonably, and deserved properly to be forgiven. Based on the
precedent set in Re Evans (1999), the courts can choose to absolve a
trustee of responsibility in certain cases where these requirements are
satisfied. Trustee obligations, when carried out with diligence and good
faith, are protected to a certain extent by this law.

For Merit Grade

The Re Rose (1952) principle, which permits a transfer to be effective in


equity even if not accomplished legally, so long as the donor has done all
that they could to transfer the property, can be compared against the
stringent requirements of the constitution to have a better understanding.
Donors who, for whatever reason, are unable to fulfil the necessary legal
procedures may be at a disadvantage; this method is more
accommodating and avoids the severe consequences that could result
from rigid compliance.

For Distinction Grades

Considerable inconsistencies in the way equity steps in to perfect gifts


have been exposed by court reasoning in decisions like Milroy v Lord and
Pennington v Waine (2002). Social, legal, and political factors, such as the
necessity to safeguard beneficiaries while striking a balance between
trustees’ and beneficiaries’ interests, all factor into the policy decision to
follow the beneficiary principle. Lastly, when trustees agree to limitation
of responsibility clauses in trust deeds, it begs the question of how much
protection trustees should have from the outcomes of their decisions,
which may compete with beneficiary interests.

Conclusion

Finally, there are a number of legal questions that arise from deciding how
to divide up James’s assets, most notably around the efficacy of gifts and
the establishment of trusts. By looking at these matters through the lens
of UK law, it becomes apparent that although some gifts were not finalised
and ended up in the estate, others were effectively created trusts that
safeguarded the beneficiaries’ interests. Importantly, trustees must
navigate complicated legal frameworks while balancing the necessity for
careful management of trust assets with the obligation to act in the
beneficiaries’ best interests.

Task 3

The following is a piece of advice for the beneficiaries of the


Lantry Charitable Trust:

In his capacity as a trustee of the Lantry Charitable Trust, Kasper has


violated his duty of loyalty by taking ten thousand pounds out of the trust
and placing it in his own personal account. Because of this breach, the
beneficiaries have the right to know where the funds that were stolen
from them are. Tracing is a sort of equitable remedy that enables
beneficiaries to track trust property into its new form, provided that the
property can be identified and has not been lost beyond the point of
recovery.
Identifying the Funds That Have Been Misappropriated:

In the beginning, Kasper deducted ten thousand pounds from the trust,
and he subsequently placed the money into his own personal bank
account. Kasper’s personal funds totalling ten thousand pounds were
already present in this account. In the process of tracing trust funds,
equity makes the assumption that the trustee’s own funds are spent first
for any expenditures, which helps to ensure that the trust funds are
preserved. It was established in the case of Re Hallett’s Estate (1880) 13
Ch D 696 that in mixed accounts, the trustee’s own monies are presumed
to be utilised before the trust funds. This idea is confirmed by this case.

A month later, Kasper transferred seven thousand pounds from his mixed
account to purchase shares. The recipients are able to trace this sum back
to the shares that were purchased under the equity system. Due to the
fact that the value of these shares has increased to £8,000, the
beneficiaries are entitled to a proportionate share of the increased value.
The case of Foskett v. McKeown [2001] 1 AC 102 reaffirms the right to
trace into mixed funds and seek a proportionate share of the value of the
property obtained with those funds. This right was established by the
case.

In the succeeding step, Kasper took out seven thousand pounds from the
same account in order to buy an automobile. As a result of the car being
written off in an accident, this money has been lost, and it is no longer
feasible to reclaim the cash directly. Due to the fact that the automobile is
a lost asset and does not exist anymore, the trust is unable to retrieve the
funds that were spent to purchase it.

In addition, Kasper took a sum of five thousand pounds out of his account
and gave it to his son, Ben, as a gift in order to cover the deposit on a flat.
It is necessary for the recipients to track down the origin of the donation in
order to retrieve this sum. Due to the fact that the sum of five thousand
pounds being a component of the funds that were stolen, it is possible
that Ben could have recovered it if he had not altered his position upon
receiving the money. The beneficiaries may be required to pursue
restitution by filing a court claim against Ben in order to get restitution.
However, considering that the money has already been spent, direct
recovery is difficult to achieve.

Advice for the Son and Daughter Regarding the Gifts

Advice to Ben:

Kasper gave Ben a sum of five thousand pounds. Ben may choose to make
use of the change of position defence in order to address the prospect of a
claim being brought against him. If Ben is able to demonstrate that he
altered his stance in good faith based on the receipt of the money and
that this change has led him to suffer a loss, then he is eligible to employ
this argument. It is possible that Ben would argue that returning the
money would be unfair if he had utilised the money or made decisions
that could not be reversed solely on the basis of receiving the five
thousand pounds. In the case of Lipkin Gorman v. Karpnale Ltd. [1991] 1
AC 548, the concepts of the change of position defence are explained.
This case maintains that a recipient who has changed their stance in good
faith may defend themselves against a restitution claim.

Advice to Julia,

Julia was given shares from Kasper that were worth 8,000 pounds. In the
event that Julia received the shares in good faith and was unaware of the
breach of trust, it is possible that she will not be obliged to return them.
The Kasper fiduciary responsibility, which was established in Bristol and
West Building Society v. Mothew [1998] Ch 1, places an emphasis on the
fact that trustees are obligated to act in the best interests of beneficiaries
and to handle trust property in a responsible manner. Given that Julia’s
acquisition of the shares was most likely done so in good faith, she is
permitted to keep them unless it can be demonstrated that she was either
participating in the breach or had knowledge of it.

In the context of equitable tracing, the merit grade analysis


focusses on the fiduciary relationship.
Because it assures that trustees comply to their responsibilities with
integrity and accountability, the fiduciary relationship is the essential
component of equitable tracing. One who is entrusted with the
responsibility of managing property or assets for the benefit of others is
known as a fiduciary. This relationship serves as the foundation for the
equitable rules that govern the recovery of money that have been
misused.

The administration of trust property is guided by the principle of


maintaining trust and justice, which is the motivation behind this fiduciary
duty. In reference to Oatway, [1903] 2 Ch 356 provides an illustration of
the application of equitable tracing principles. This demonstrates that
fiduciaries are obligated to protect trust property and behave in a manner
that is in the beneficiaries’ best interests. This particular instance
illustrates how the equitable remedy of tracing might be utilised to assist
in the enforcement of the fiduciary duties to account for and return
property that has been unjustly taken.

It is important to note that the beneficiaries of the Lantry Charitable Trust


have the legal right to track down and recoup the value of any shares that
were acquired with funds that were improperly used. It is not possible to
retrieve the seven thousand pounds that was used to purchase the
automobile because it has been spent. However, Ben may be able to
pursue the five thousand pounds that was provided to him if he is able to
use the change of position defence. Legal principles and Ben and Julia’s
behaviour will determine whether or not they are obligated to fulfil their
commitments with regard to the gifts that they have received.

Task 4

In order to provide Mobapps Limited with guidance regarding the


equitable remedies that are potentially available, with a particular
emphasis on specific performance and injunctions, it is necessary to
conduct an analysis of the scenario within the framework of UK law, with
the assistance of relevant case law.

1. “Specific Performance”
One type of equitable remedy is known as specific performance, and it is
used to compel a party to fulfil their duties as outlined in a contract. This
remedy is typically accessible in situations where the damages awarded
are not sufficient to compensate the party that was hurt. On the other
hand, specific performance is not a right that is automatically granted;
rather, it is discretionary and is dependent on a number of different
conditions.

The application to Aziz’s situation is as follows:

If Aziz were to continue working on the software for Mobapps Limited, he


would be required to do so in order to meet certain performance
requirements. When it comes to employment contracts, however, courts
are often hesitant to compel particular performance due to the nature of
the personal services that are involved and the possibility of a difficult
working relationship. It was decided by the court in the case of De
Francesco v. Barnum (1890) that specific performance would not be
allowed in a contract of personal service since it would be equivalent to
compelling a person to work against their will, which is the same thing as
slavery.

An argument could be made by Mobapps Limited that the completion of


the app is exceptional and that specific performance should be allowed.
This is due to the fact that the contract stipulates that Aziz must refrain
from working for any other companies both during and after the contract.
However, due to the fact that personal service contracts are sometimes
difficult to execute, it is possible that this remedy will not be successful.

2. injunction.

A court order known as an injunction can either forbid a party from


engaging in a certain activity (known as a prohibitory injunction) or
compel them to engage in a particular activity (known as a mandatory
injunction). For the purpose of preventing breaches of contract or to
maintain the status quo until the subject is addressed, injunctions are
frequently submitted for consideration.

The application to Aziz’s situation is as follows:

It is possible for Mobapps Limited to file a petition for an injunction in


order to prevent Aziz from using or disclosing any confidential information
or complete the application for another business. If it is demonstrated that
Aziz’s acts have the potential to inflict Mobapps Limited irreparable injury
that cannot be satisfactorily compensated by damages, then the courts
may decide to grant an injunction because of this.

“Interim Injunction:” [Translation] This could be pursued promptly in order


to deny Aziz the opportunity to make use of the stolen material until the
investigation is concluded. The standards for issuing temporary
injunctions were set in the case of American Cyanamid Co. V. Ethicon Ltd.
(1975). The case emphasised that there must be a significant matter that
needs to be tried, and the balance of convenience must favour granting
the injunction.

“Final Injunction:” [Conclusion] It is possible that the court will grant a final
injunction if Mobapps Limited is able to demonstrate that Aziz’s breach of
contract would result in serious property damage. In the case of Fitch v.
Dewes (1921), an injunction was issued to enforce a restrictive covenant
that prohibited a solicitor from engaging in practice within a particular
area after leaving the business.

An Example of Restriction of Trade

Additionally, Aziz’s contract has a restrictive covenant that prohibits him


from working for a rival company for a period of six months following the
conclusion of the contract. This restraint of trade will be evaluated by the
courts to determine whether or not it is reasonable within the parameters
of duration, geographical extent, and the interests of the parties involved.
In the case of Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co.
Ltd. (1894), the House of Lords ruled that a limitation of commerce is
enforceable provided it is reasonable in the interests of both the parties
involved and the general public.

Conclusion

Mobapps Limited has a stronger case for requesting an injunction rather


than specific performance given the facts that have been presented about
the situation. They should file a petition for an interim injunction to
prevent Aziz from utilising the materials, and they might also consider
filing a petition for a final injunction to get the restricted covenant
enforced. As a result of the personal character of the contract, it is highly
improbable that specific performance will be requested.

It is imperative that Mobapps Limited takes prompt action in order to


safeguard its interests. The court’s discretion will eventually find the
proper equitable remedy, taking into consideration the facts and previous
cases in the United Kingdom’s legal system.

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th

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