Law of Equity and Trusts - Essay Example

Law of Equity and Trusts The first issue concerns the trust of the family barge in which Jonathan has resided with Pauline for 14 years. She is a cohabitee (not a spouse, and thus exempt from the operation of s 37 of the Matrimonial Proceedings and Property Act 1970, amended by the Civil Partnership Act 2004) and has contributed to the maintenance of the barge, along with bearing three of their sons and undertaking their care on account of which she forgoes her job as a radiologist. There are two ways in which she may form an interest in the family barge, either by resulting trust or constructive trust. The first determination of the presence of a trust is with regards to a written declaration of it. There is no written declaration for the purposes of s. 53(1)(b) of the Law of Property Act (LPA) 1925 with regards to the home. The only written declaration of the trust is Uncle David’s Will. Thus, if Lorraine has to establish an interest, it must be under the rules ofPettitt v Pettitt(1970) later affirmed by Lloyds Bank v Rosset(1991), by way of resulting or constructive trust. This would result in an equitable interest for Lorraine. Resulting trusts are formed when there is a contribution made to the purchase price, which, in this scenario is not the case.The facts do not say whether she actually contributed to the purchase price by way of outright sum or through mortgage payments, both of which are accepted ways of establishing an interest in the house, and thus, it is presumed that Jonathan was the sole proprietor of the house. Lorraine joined him as a young girlfriend, and for that reason, her interest has to be established by way of constructive trust, which is formed in the presence of an oral assurance on which reliance has been made by the claimant to her detriment (see Lloyds Bank). The promise made by Jonathan can be easily evidenced as it was in the presence of witnesses. In 2009, he declared, “all of my property including our lovely barge home is as much yours Lorraine as it is mine”. This takes the form of an oral promise, and judging from the fact that it was made on several occasions, Lorraine can establish that it amounts to an interest of some kind in the property (Ungarian v Lesnoff (1990) and Eves v Eves (1975)). Thus, the second step for Lorraine in order to establish her equitable interest in the property would be to prove that she relied upon the promise to her detriment. Lorraine spent a considerable amount on structural repairs and decoration, to the tune of 65000 pounds and contributed half of her salary to maintenance while she was working. This satisfies the additional requirement that the detriment faced must be in relation to the property in question (Gissing and Christian v Christian (1981)). However, the detriment must be in reliance on the promise, and it seems that she spent the money BEFORE the actual promise was made, as the promises came after the birth of the triplets in 2009 and the money was spent much earlier. However, Lorraine also quit her job and was unable to return to it after the birth of the children. This could easily be a detriment that flowed from the promise. Lord Bridge in Lloyds Bank carefully acknowledged the operation of a constructive rust to be used to ‘do justice’ and its presence cannot be willfully denied in this case just because the job was not directly related to the property (a requirement set by Gissing). Thus, for the purposes of a constructive trust, Lorraine would be able claim her equitable interest in the barge. Thus, by virtue of s. 53 (1)(b) of the LPA 1925 and application of Lloyds Bank, Jonathan held the legal title to the barge on trust for himself, Lorraine and his three sons beneficially. In order to quantify her interest, the courts may resort to the ENTIRE course of her dealings with Jonathan and the property (see Oxley v Hiscock(2004) where Stokes v Anderson (1991) was applied), leading up to his death. It follows that Lorraine and the kids have an equitable interest in the property, but her equitable share in the property may be overreached if the property had beenregistered and is subsequently sold to a bonafide purchaser by Pauline, who is Jonathan’s successor and now holds legal title to the property. If the title to the barge was registered, the LRA 2002.Sched. 3, para 2(a) declares that Lorraine’s equitable interest does not constitute an overriding interest. However, the facts are silent as to whether the barge property was registered and even if it was, Lorraine may rely on Stack v Dowden in order to bolster her current equitable share in the property, deeming it an overriding interest. In Stack, the courts made an assessment of the interest based on the context of the relationship, and as such, established an absolute equitable interest in favor of the defendant, an interest which constitutesan overriding interest under Sched 3, para 2(a) of the LRA 2002. Applying that case to the present scenario, the absolute equitable interest concorded to Lorraine and the kids would entitle her to a share of the purchase price in the event that Pauline sells the barge. Uncle David’s Will In order for a trust to be created, certain formalities need to be fulfilled. According to the test laid down by Turner LJ in Milroy v Lord [1862], for an express trust to be valid, it must either be a self-declaration of trust OR comprise of a named trustee to whom the settler transfers the property and settles it for the beneficiaries. Thus, for a trust to be perfect, the property MUST be transferred to the trustee, which in this case is the Reisberg Trustee Co Ltd. Jonathan inherited Greenacre. But he did not convey the property to Reisberg Trustee Co. This constitutes an imperfect trust under Milroy v Lord. The question that needs to be answered here is whether Jonathan did all he could to transfer the legal title to Reisberg before his death; if the Courts find that he did, a constructive trust will operate which will transfer the equitable title in Greenacre to Reisberg who would hold it on trust for Lorraine for life and the remainder to the children in equal shares, as was the case in Re Rose [1952]. The measure for this is the degree of steps he took. Moreover, in Pennington v Waine (2002), the Courts purported to allow the equitable interest to exist if they could determine whether on the facts it would be unconscionable for the transferor to deny the transfer. The fact that Jonathan covenanted in writing regarding Greenacre with Reisberg is evidence enough for the Courts to order the transfer of Greenacre to Lorraine’s name as it may be deemed unconscionable for Jonathan’s estate to deny Lorraine her interest (Pennington). An equitable interest in land is allowed to subsist as per s. 52(1)(a) of the LPA. The shares in Heavenly City Plc are subject to the same conditions of trust. Their transfer to Reisberg Trustee Co Ltd was incomplete, but according to the Covenant, Jonathan’s intentions were clear and the drafting of the covenant itself was a step towards the creation of a trust. But was it all Jonathan could have done (as per the rules of Re Rose). When it comes to shares, there are more steps required of Jonathan in order for courts to give effect to a constructive trust in favor of Lorraine and the children. The transfer of shares involves not only compliance with the Companies Act 2006, but execution of share transfer form, certificates, etc as well. Even in Pennington, the Courts only effected the transfer because the transfer forms were already handed to the mediator who was then supposed to effect registration. The settler had done all that he could. Jonathan did not do that and hence, the Courts are likely to bar the creation of a constructive trust in Lorraine’s favor with respect to the shares. Pauline’s share, 25000 pounds and the Manchester property However, Pauline, Jonathan’s daughter, also has a share in Jonathan’s estate since he died intestateand her interest is superior to that of Lorraine. As already stated, Lorraine’s interest is equitable as opposed to Pauline’s interest which is both legal and equitable, and arises by virtue of the operation of s. 53 (1)(b) of the LPA 1925. As a result, the share of Lorraine’s property would be credited after considering Pauline’s share. Pauline will be entitled to the Manchester property and to a share of the barge. The 25000 pounds were to be invested in a trust fund in favor of the children. This was evidenced in writing on the cheque payable to Jonathan in an event which was video-taped, therefore, his intentions to create the trust cannot be refuted. However, there is no transfer of funds to trustees, which in this case would be the bank. Moreover, a cheque is automatically revoked on death (Re Beaumont). Thus, the children may only be able to claim the amount of funds if they claim a right under a chose in action on account of the endorsement created by Jonathan on the cheque (Fletcher v Fletcher). Since they are minors and entitled to interest under a savings fund once it matures, the chose in action can be transferred to them instead. Hence, they would be entitled to the long term saving funds once they reach majority. Conclusion Thus, in conclusion, Lorraine was promised by Jonathan of an interest in the barge (“all that is mine is yours”) by virtue of a constructive trust, she may only claim an interest to the barge and Uncle David’s Will. It is unlikely that her status as a cohabitee (as different from a spouse) would permit her to extend her claim to the Manchester property (unless she relies on Stack v Dowden on principles of ‘fairness’). It is up to the discretion of the Court to award her an interest in the Manchester property based on Stack, but it is submitted that it’s very unlikely since she did not purport to rely on it to her detriment, mainly because it does not seem apparent whether she knew of its existence at all. Hence, her interest is restricted to the barge and Uncle David’s Will. Pauline, who is the only legal heir to Jonathan, sustains legal title to the Manchester property which was conveyed in her name. She is also entitled to the income under the trust fund set aside for her, the legal title to which is held by the Reisberg Trustee Co. Ltd. Since she contributed to her living expenses by ‘letting’ some rooms to her friends and therefore fulfilled her father’s condition precedent (“I expect you to stand on your two feet”), she can claim the entirety of the trust fund upon reaching 25 years of age. Moreover, Pauline enjoys legal and equitable share in all of Jonathan’s estate except for Uncle David’s Will. The three children (triplets) are entitled to equal equitable shares in the 25000 pounds, the barge, and Uncle David’s Will. Pauline, being the heir, would hold the legal title to the 25000 pounds on trust for the children till they reach the age of maturity. Read More