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Introduction - Equity and Law problem question Assignment
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The presented submission outlines the various requirements for a valid trust under the United Kingdom trust law. It has been provided under the law that for a valid trust it is required that the intention of the party for creating be clear and also there should be a clear mention of the subject of the trust. The submission identified three issues where the first issue is regarding the holding of real estate property in the trust. The second issue deals with holding shares in the trust and the third issue discusses the requirements of a valid charitable trust.
The first issue as per the facts is that whether the disposition of property by Stella Gibson in the hand of Paul, the trustee in favour of her husband and two children is valid under the United Kingdom trust law.
As per the identified issue, the law concerning, in this case, is the trust laws enacted under the United Kingdom. The trust law in the United Kingdom is defined as law that is concerning the protection of assets especially when the property is being held by one person as trustee for another person as beneficiary. In this case, the matter is regarding the creation of an express trust where the settlor named Stella Gibson has disposed of her property in trust to Paul for the benefit of her husband and two children.
Reference of the English case Paul v. Constance where it was held by the court that to prove that a person has created trust, it shall be sufficient to prove one of the essentials out of the three essentials. It shall also be sufficient to prove that the settlor had the intention to create trust either by words or by action and it shall also be sufficient to prove that the trust has been created for the benefit of another person.
Discussing the meaning of trust, the law relating to trust applies when one person holds the property for another person for his benefit. The primary circumstance when a trust is created is when the settlor of the property gives the property in trust to another person called the trustee for the benefit of another person. And shows an express intention of creating trust. In other words, the settlor shall give the property to another person (the trustee) for using it for another person for his benefit (the beneficiary). The basic requirement under the United Kingdom trust law is that there was a clear intention of creating the trust by the settlor and that the trust is different from agency, bailment or a gift. It has also been provided that the settlor must have clearly stated that the concerned property is for trust for the benefit of another person. Further, it has also been stated that trust has been created for people and not for purpose. It has also been explained that the trust for the benefit of the person is not for charity and that charitable trusts are a different type of trust that is regulated by the Charities Act 2006.
On applying the above-mentioned trust law that is enacted in the United Kingdom on the facts of the instant case, it has been clear that the settlor, in this case, is Stella Gibson who has given her property in trust to Paul who is the trustee for the benefit of her husband and the two children named Matt and Archie who are the beneficiaries. Further, it has also been noted that the settlor Stella has clearly expressed her intention of creating the trust as she has expressly mentioned that Paul the trustee shall hold the property in trust for her husband after her husband, for their children Matt and Archie. The settlor Stella has also given a clear expression of the property for which she is creating the trust by mentioning the name of the property that is Brompton Heights and Belfast House. Hence, the requirement for a valid trust under the United Kingdom Trust law that is the express intention of creating the trust has been fulfilled in this case as Stella Gibson has given a clear description of the property as well the intention of creating the trust.
Reference of the case Saunders v. Vautier can be taken where it was held by the court that for a valid trust it shall be important that the settlor creates the trust for the person and not for purpose and if the trust has been created for a purpose, it shall be a different type of trust. Hence, it shall be required for a valid trust that it be created for people. In this case, Stella the settlor has created a trust for the benefit of her husband and her two children Matt and Archie after her husband.
Thus, to summarise it can be stated that the legal requirement for a valid trust under the United Kingdom trust law has been met in this circumstance and the disposition of property by Stella in trust stands valid.
The second issue identified as per the facts of the case is that whether the holding of shares by Paul as trustee in the company Private Detectives Ltd for Stella’s niece Cary and two nephews is valid under the United Kingdom trust law.
As already mentioned above, trust is a fiduciary relationship where the settlor appoints a trustee for holding his assets for the benefit of a person called the beneficiary. Although it has been provided that people are the holders of shares in any company but there are instances when a trust can also be a shareholder. Hence, the answer to the common question of what property can be held in trust is that shares can also be held in trust. But there is a specific requirement for holding shares in the trust and that is the holding of shares should not be for the benefit of the trustee solely but the benefit of some other beneficiaries. This is because trustees and trusts are not separate legal entities but it is a fiduciary relationship.
Further, the holding of shares in trust is a kind of express trust where the settlor of property expressly makes clear the description of the property that is to be held in trust. As mentioned above, it is one of the requirements to express the intention of creating trust and in the same way, another requirement of a valid trust is a clear description of the subject that is to be held. In this case, the subject is the 50 shares out of 950 shares in the company Private Detectives Ltd.
Reference of the case Herdegen v. Federal Commissioner of Taxation can be taken where it was held by the court that the property that is to be held in trust should be ascertainable at the time when the trust was created.
Further explaining the holding of shares in the trust, there are certain duties of the trustees while holding the shares in trust which the trustee is required to abide by. These duties are first, the trustee shall not be the sole beneficiary of the trust property that is shared. Secondly, it shall be the duty of the trustee to preserve the trust property whether it is shares or any other kind of property. Thirdly, the trustee shall act in good faith and shall give the benefit to the beneficiary from the shares. In addition to this, the trustee shall also be under a duty of keeping proper and accurate records of the shares and the benefits that he has received.
Technically, trusts cannot hold shares in the company as the trusts are not a separate legal entity and trust is a fiduciary relationship. But under the United Kingdom trust laws, trusts can hold shares in the company for the benefit of the beneficiaries.it is also been provided that the trustee cannot be a sole beneficiary of the shares in the company.
On applying the above law on the facts of the case, it is clear that the 50 shares out of the 950 shares in the Private Detectives Ltd are the subject of the trust and the property that is to be held. As per the United Kingdom trust law, shares cannot be held in trust as trust is not a separate legal entity and it is a fiduciary relation but if the shares are to be held for the benefit of beneficiaries, then shares can also be held in trust. Hence, Stella Gibson has created an express trust by appointing Paul as her trustee for holding 50 shares out of 950 shares that she has in the company Private Detectives Ltd for her niece until she attains the age of 21. Moreover, Stella has also created an express trust by stating that the remaining trust shall be equally distributed between her nephews when they shall attain the age of 18.
Further, Stella has also made clear that the income of the shares until that time shall be given to the residents of Brompton and shall be distributed as Paul the trustee deems fit. Hence, Stella has given the power of distributing the income of the shares to Paul and has given him the discretion of distributing the income as he deems fit.
Thus, it can be concluded that the trust created by Stella by appointing Paul as her trustee for holding the shares for her niece and nephews is valid until the trust has been created for the benefit of beneficiaries.
The third issue identified in this case is that whether the trust created by Stella by appointing Danielle her friend as a trustee for the rest of her property is valid or not.
In this circumstance, it has been seen that Stella has created a trust by appointing her friend Danielle as her trustee for the rest of her property and has stated that the income of the property shall be utilised for the maintenance of her horse and hound until they shall live. But it is also noted that Stella has also stated that after that the property shall be utilised for some worthy cause which makes clear that she has impliedly created a charitable trust for animals and also by stating the word worthy cause.
Charitable trusts are the trusts that are created for some charitable purpose whether it be education, poverty, religion or any other purpose. But for a charitable trust to be valid, Danielle the trustee in this case shall be required to establish a charitable purpose and a public for the benefit. Further, Danielle shall also be required to run the charitable trust for non-profit purposes and shall also refrain from supporting political agendas, legal changes or any political issues. A charitable trust that is created for animals falls under the fourth category of charitable trust where the benefit is for animals and to protect them from molestation, attacks and also regarding maintenance. Reference of the case Re Grove Grady can be taken where it was held by the court that creating a trust for benefit of animals falls within the category of charitable trust where the aim is to protect the animals from attacks and molestation and also includes the creation of sanctuaries for them and provide them comfort. Hence, it is clear that the intention of Stella by appointing her friend Danielle as the trustee for the rest of her property is for charitable purpose where he shall maintain her horse and hound until they shall live and after that utilize the amount for some worthy cause as he deems fit.
For creating charitable trusts, two main requirements are to be fulfilled and that is the purpose of creating the trust is for charity and the benefit should be for the benefit of the public. The trust created for the welfare of animals also falls within the category of a charitable trust. Though there is no specific definition of the word charity under any statute the Charities Act 2006 under Section 1(1) states that-
"For law in England in Wales, the meaning of charity shall be an institution that is created for-
The purpose of charity
And falls within the control of the high court while exercising jurisdiction in respect of charities.
Hence, the creation of trust by Stella for the maintenance of her horse and hounds falls within the category of charitable trust as she has created the trust for the benefit of her animals and their maintenance. Further, she has also made clear that the income from her property shall be utilised for the maintenance of her animals until they are alive and after that the trustee Danielle her friend shall utilise the income of the property for some worthy cause. Thus, it is clear that she has further empowered Danielle to use the income for some charitable cause and hence, the trust is a charitable trust in this circumstance.
But it is important to note that Stella has also expressly stated that if Danielle fails to utilise the money for some worthy cause within 10 years, the money shall go to Horse Hotel Rescue Centre which is again a charitable organisation for the maintenance of animals. Hence, the charitable trust is for a limited time with Danielle as a trustee this is for 10 years and after that, the money shall vest with another organisation as Stella has expressly provided.
Thus, it is clear that in this case, the trust is a charitable trust that has been created for the benefit of her animals and after that for some noble and worthy cause. Further, it has also been provided that if Danielle is unable to vest money for some charitable purpose the money shall vest with Horse Hotel Rescue Centre which is also a charitable organisation.
Thus, to conclude it can be stated that in all the three issues mentioned above, the creation of trust by Stella Gibson is valid as all the legal requirements of valid trusts under the United Kingdom trust law are met. In the first case, Stella has appointed Paul as her trustee for two of her property with her husband as the beneficiary. Moreover, the two properties are properly described by Stella with names and also who shall hold each property after her husband. In the second case also, the trustee is Paul who shall hold 50 out of 950 shares in the company Private Detectives Ltd for Stella’s niece and nephews until they attain the age of majority. Moreover, she has also been given the discretion of distributing the income from the shares as per the discretion of the trustee Paul. In the third case, the trustee is Stell's friend Danielle and the trust is a charitable trust which is created for the benefits of Stella's horse and hound until they are alive and after that for some worthy cause.
Thus, to conclude it can be stated that under the United Kingdom law of trust and equity, there are certain requirements to be fulfilled for a valid trust and hence, in the above case scenario all the requirements of a valid trust has been met by the settlor and the trustees.
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