EQUITY AND TRUST 2.1 GENERAL INTRODUCTION
LAW OF TRUSTS.
As implied from Keeton’s definition: Where a person (trustee) holds (whether by legal or equitable title) property (real or personal) for the benefit of another (called beneficiary) or some object permitted by law.
A trust involves the notion of holding any property on behalf of someone else. Even in Yearworth and Others V North Bristol NHS Trust, the court held that sperm samples can be held in trust. Most members of the public have little knowledge of what a trust is and unknown to them, they may be beneficiaries or even trustees as well-Richard and Ademola complete equity and trust text, cases and materials.
TRUST DISTINGUISHED FROM OTHER LEGAL CONCEPTIONS.
Trust and Bailment: bailment occurs where the owner of a chattel keeps it in the temporary possession of another.
- Both control property which is not beneficially their own.
- A bailee just like a beneficiary can trace the bailed property or its proceeds.
- Both are required to take good care of the property.
- Bailment is a common law concept while trust is equitable.
- Only chattels can be bailed while any property can be held on trust.
- A trustee is generally the legal owner and can pass a valid title to a bona fide purchaser for value without notice while a bailee has mere special property, possession and cannot pass a valid title.
- The obligations under a trust are more onerous that that under bailment.
Trust and Agency: An agent is a person that acts on behalf of another person called his principal.
- The principle of non-delegation (delegatus non potest delegare) generally applies to both except circumstances or the trust instrument dictate otherwise.
- Both owe fiduciary duties and are accountable.
- Agency is a common law concept while trust is an equitable concept.
- Agency relationships can be created without vesting of any property in the agent while trust property must be vested in the trustee to be completely constituted.
- At common law, agency relationship can terminate upon death however, death of a testator or trustee does not determine the trust.
- Unlike an agent who can make his principal liable to debtors, the trustee cannot involve the beneficiary in liability.
- A beneficiary can trace mixed funds while a principal’s remedy in the event of mixed funds would be to personally sue the agent-Lister V
- Trust may not come into existence from an agreement between the parties. Agency generally does except ostensible, apparent and ratified agency.
Trust and Contract.
Although both create binding obligations:
- A contract is a common law obligation while a trust is an equitable obligation.
- A contract arises from agreement between the parties while a trust may arise without agreement between the parties. E.g. where the testator declares himself as the trustee of his property or constructive trust?
- Valuable consideration has a wider meaning in trust than in contract and includes not only money but also other considerations like marriage.
- The doctrine of privity operates in contract and only parties to the contract can generally sue on it. Under trust, a beneficiary who is not a party to the creation of the settlement can sue on it.
Trust and Administration of Estate.
Generally, the provisions of the Trustees Act 1893 and Trustee Law applies to both. However:
- The major function of the personal representative is to distribute estate while that of the trustees is to hold it.
- Trustee must always act jointly while one of the PR may validly dispose of pure personalty.
- Section 11 of the trustee Act relating to appointment and retirement of trustees cannot apply to a PR- Adeniji V Probate Registrar Western Nigeria.
- The limitation period for suing a trustee is 6 years while that of a PR is 12 in respect of claims relating to the personal estate of the deceased person Section 31 Limitation Decree. Where there is fraud however, there is no limitation.
- Unlike trustees, PRs hold both legal and equitable interest in the deceased’s estate so that they can easily sell and administer it.
Note however that a person can be both PR and Trustee where a will establishes a trust and appoints the same persons to be both executors and trustees.
Trust and Powers.
As Megarry VC noted in Re Hay’s Settlement, trust power is mandatory and the court would see to its execution while mere power is discretionary.
Power of Appointment: occurs where the donor empowers the donee to appoint property to any person he chooses including himself (general power) or any person he chooses within a specified class only (special power). Appointment must be in accordance with the trust. In Turner V Turner, the trustee was given a power to appoint two members of the Turner family but he made three appointments. The court held that the appointments were void as they were contrary to the intention of the trust. There is always a gift in default of appointment where the donee is meant to give the property to x if he fails to make an appointment.
Trust power distinguished from power: if there is a gift over in default of appointment, then it would be construed to be a trust power-Burrough V Philcox.
Discretionary trust and power: discretionary trust occurs where a trustee holds property on trust for a group of beneficiaries and is to pay to such of the beneficiaries as he deems fit. No beneficiary entitled as of right they only have a spes (hope) that the exercise of the discretion is in their favour. However they can sue where such appointment is not done in good faith… but cannot claim entitlement to be appointed. Megarry VC in Re Hay’s Settlement Trust noted that unlike mere power, the trustees here are under a positive duty to consider the exercise of their discretion while a done of power may decide not to do so. In Re Smith, all the beneficiaries combined together to claim the trust property and end the trust.
Trust of imperfect obligation and power resemble in that they cannot be compelled to act since there are no human beneficiaries.
Trust for sale distinguished from power of sale and power to postpone sale.
Trust for sale binds trustees to sell and hold the proceeds in trust for the beneficiaries. Conversion operates under trust for sale as equity regards the land as converted to money even though not actually sold. Under power of sale, the trustees cannot be compelled to exercise power of sale- Re Hilton.
Thank you a lot but please what are the difference between trust and pledge