Scribd
Upload
1K views

Trust Problem Essay

Uploaded by

api-234400353
Copyright
© Attribution Non-Commercial (BY-NC)
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
1K views

Trust Problem Essay

Uploaded by

api-234400353
Copyright
© Attribution Non-Commercial (BY-NC)
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
You are on page 1/ 2

Question: Adam made a written declaration of trust of 50 shares in a privately held company, with Calvin as sole trustee and

Eve as sole beneficiary. Adam sent the declaration to Calvin, along with a completed share transfer form and the share certificates. Calvin put the declaration, transfer form and certificates in a safety deposit box. Later, Eve orally agreed to sell her interest under the trust to Troy for 25,000. Troy then orally declared that he held any interest he received from Eve on trust for Helen. Helen orally assigned her interest under this trust to Sophie. Discuss. Answer: In this case, the apparent issues are whether the final beneficiaries, Sophie can specifically enforce her sub-sub trust? This issue would be clear cut where we trace back to who is the official legal title holder. In this case, Adam had done every procedure by completed a shares transfer form attached with shares certificates and sent to Calvin. However, Calvin did not register shares but he keeps it in safe deposit box. Apparently the legal title is still on Adam himself, but, Adam is holding on trust for Eve and Calvin. So, the final beneficiaries, Sophie is unable to enforce her sub-sub trust. The reasoning is come from the case of Milroy and Lord (1862). In Milroy and Lord, a man wishing to provide for his niece gave share certificates to a Mr. Lord to hold on trust for her. Now this transfer of physical possession did not pass legal title to the shares, so this act did not constitute the trust. But the uncle also gave Lord a power of attorney, which gave Lord the power to get the shares registered in his name. Unfortunately, the uncle died before Lord acted on the power of attorney to register the shares in his name, and the power of attorney was extinguished by the uncles death, so Lord was thereafter unable to get the shares registered in his name. Thus the trust was never constituted, and the shares fell into the uncles estate on death. This is the general rule where the court set out the rule of Equity will not perfect an imperfect gift. As Hackney said, You cannot sue for presents in equity. However, there is an exception applied in this case, which is Re Rose principle. In Re Rose, the court held that, in equity, such a gift is valid from the time that the donor does everything he is obliged to do to transfer the shares. The similar case to this scenario is Mascall v Mascall (1984) which applied Re Rose principle. In Mascall v Mascall (1984), the court held that the intending donor had made a complete gift in equity to his son by executing the registered land transfer document and handing it, with the land certificate, to him. As it turned out, the father later reaquired the land certificate, thus putting him in a position not to go ahead with the gift, and indeed he did not want to having since fallen out with his son. Nevertheless, the court held that as soon as he had executed the transfer form and had given it with the land certificate, the gift was complete in equity, and so he was ordered to hand over the land certificate to the son so the latter could complete the transfer of the legal title into his own name.
1

If Re Rose principle is successfully established in this scenario, it would be a constructive trust for Eve and Calvin, as the latter trust will be sub-trust and sub-sub trust for remaining beneficiaries. However, all this agreement is done by orally instead of written documents. Could the sub-trust and sub-sub trust specifically enforceable? Assuming that Re Rose is successfully established, in the case, since Eve is intended to drop out of the picture, the remaining issues would be Could the final beneficiaries, Sophie enforce her sub-sub trust? In s.53(1)(c) of the Law of Property Act 1925, which stated A disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing signed by the person disposing of the same or by his agent thereunto lawfully authorised in writing or by will. The wording of The disposition must be in writing signed by the person showed that the agreement must be in writing. By the case of Oughtred v IRC [1959], a case about a contract by a beneficiary assigns their rights. The majority judges concluded that this case should follow the s53(1)(c) of the LPA 1925. However, Lord Denning concluded that I do not think, he said, the oral agreement was effective to transfer Peters reversionary interest to his mother. I should have thought that the wording of s53(1)(c) of the LPA 1925 clearly made a writing necessary to effect a transfer; and s53(2) does not do away with that necessity. If followed the majority decision in Oughtred v IRC, Sophie will not successfully obtain her interest. However, in Grainge v Wilberforce which is applied in this scenario, this is a case about selfdeclaration of trust by the beneficiary. In this case, X holds on trust for Y, and Y contract to sell his equitable interest to Z, but no written assignment is ever executed. Does X now hold on trust for Y, and Y for Z, or does X now hold directly for Z? It is submitted that, since Y intended to drop out the picture entirely, and has no active duties to perform, equity would give effect to the intention, and X would therefor hold for Z. Since s53(2) removes the need for writing. Alternatively, one could follow Lord Cohen and say that, although there has been no disposition to Z, nonetheless the informal constructive trust in his favour precludes Y from asserting a claim to the equitable interest, so that Z is now the effective owner of Ys interest. In a nutshell, if the legal title is already transferred to Calvin, Sophie is able to specifically enforce her sub-sub trust. Whereas, if it has not been transferred, it need to see whether Sophies constructive sub-sub trust is being caught by s53(1)(c) of LPA 1925. However, as the case of Grainge v Wilberforce and s53(2) of LPA 1925, Sophie is able to specifically enforce her subsub trust due to reasons above.

You might also like