Equity and Law Trust - Coursework Example

Equity and Trust I. Introduction According to Black’s law dictionary, the law on equity is a law originating from the Court of Chancery and involves the combination of doctrines and procedures which have evolved around the areas of statutory and common laws. The purpose of the law on equity is to provide remedies where the law is perceived to be weak and the implementation of the law would generally cause injuries and injustice. On the other hand, the laws on trusts adhere to a more formal procedure as opposed to the laws on equity. For a trusts agreement to be considered valid and enforceable, the parties to the trust must comply with certain formalities as mandated under section 9 of the Wills Act 1873 and section 53 of the Law of Property Act 1925. Under the Wills Act 1873, section 9 thereof so states that all testamentary trusts must be made in writing and signed by the testator in the presence of witnesses. The testator may also authorize another person to sign the Will in his or her behalf. In the absence of a written document to serve as evidence of the testamentary trust, the said trust may be considered as non-existent. In similar circumstances, under the law of Property Act 1925, section 53 (1) (b) states that “a declaration of trust respecting any land or nay interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will.” As with the case of testamentary trusts, the failure of the parties to put everything in writing will make the trusts agreement unenforceable. How do the laws of trusts and the laws of equity work together? According to decision of the Court in the case of Milroy v Lord1, an attempted transfer by the owner to the trustee might be considered valid even when the formalities required by law are not met. However, for the transfer to valid, the owner must do all the things necessary to divest himself or herself of his or her rights over the property in question. In the words of Turner LJ in this case, for a voluntary settlement to be valid and enforceable, the person who wished to convey the property as a gift must do everything which “according to the nature of the property” is necessary to “transfer the property and the render the settlement binding upon himself.” 2 However, in the subsequent case of Jones V Locke (1865)3 where the decision of the case of Milroy v Lord4 was taken into consideration, the fact that the father who placed a cheque in the hands of the baby died before he was able to deposit the cheque in the bank in the name of the baby was held to have not fulfilled the requirements set in the case of Milroy v Lord5. According to the decision of this case, the father has not totally divested himself of his rights over the cheque in question because he failed to deposit the cheque in the name of the many. Where there is still an act that needs to be done to perfect the transfer of the rights of certain properties, the transferred is deemed incomplete and unenforceable (Jones v Locke (1865)6. On the other hand, where the law is deemed to be too hard and the application thereof would prove to be inequitable to the parties involved, the Court would be more inclined to apply the rules of equity. According to the case of Westdeutsche v Islington BC (1996)7 the creation of a trust entails the separation of legal and equitable titles of the parties involved. Where the trust is created, the legal title is now vested in the trustee while the equitable tile now rests on the beneficiary. The separation of the legal and equitable rights of the parties now gives rise to the rules on beneficial interest. According to the case of Gissing v Gissing (1971)8, where a person can establish that he or she has some beneficial rights over the properties of another, such person will now be entitled to a share in the properties in question. II. The Case of John and Jean Our hypothetical case of John and jean involves two persons who co-habited without the benefit of marriage. In this case, Jean has a property where she and John lived. While living together, John who is an unemployed builder, spend his own money to renovate the house of Jean. Furthermore, John looked after Emily, the daughter of Jean from another relationship. When the couple parted ways, Jean said to John that she will give the house to him as a gift. All the relevant documents were drawn in relation to the transfer but Jean never signed the documents. Jean’s solicitor asked John to vacate the house as the house will be put up for sale. Based on the facts of the case, there are three issues that we must look into. First, we need to determine as to whether or not there is a perfected conveyance of the house as a gift, second, we need to determine as to whether or not John has beneficial interest in the property and third, we need to know if there was indeed as expressed or implied sharing of the property between John and Jean. To help us shed light on the issues involved, let us look into these issues one by one. a. Conveyance as a gift According to the facts of our case, Jean promised to give John the house as a gift. In fact, they have drawn all the necessary documents to affect the transfer of the interested on the house to John. However, although the documents have all been prepared, Jean has not signed the documents, which will seal their agreement. According to the case of Milroy v Lord, it is necessary that all acts within the powers of the owner should be done to divest the owner of his or her rights over the property to be given as a gift. Taken into the context of the case of Jones v Locke (1865), although there is the intent and the promise to give the gift, the failure of the giver to do some acts to complete the transfer shall make the transfer unenforceable. Furthermore, since the house is considered as a real property, there is a need for the conveyance to be in writing in order for it to be binding. In this case, although the documents have been drawn, Jean did not sign these documents, thus, the there was no perfection of the act of conveyance. Can the act of Jean of leaving the house and allowing John to stay be construed as a form of delivery of the property to John? Unfortunately, English Law views a house as an immovable property just like land. In the case of real or immovable property, there is a need to put the transfer of the rights thereof in writing in order for it to be valid. According to the provisions of the Law of Property Act 1925, “Any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will.” In other words, since the house, which is subject to the dispute, needs to be conveyed in writing, until such time when Jean finally signs the deed of donation to John, Jean will remain as the owner of such property. As the counsel of John, I would strongly advise John not to rely on the argument on the delivery of the house as a gift. The court has always been reluctant to award an imperfectly given gift to the recipient thereof. The case of Jones v Locke (1865) has always prevailed in cases of imperfect gifts and the court have always taken a stand that “equity will not perfect an imperfect gift.”9 However, since there are still other forms of remedies available in this case, he can still pursue his claims based on other forms of arguments. b. Beneficial Interest in the property The case of Burns v Burns (1984)10 has similar facts to the case of John and Jean. In Burns v Burns, Valerie Burns and Patrick Burns co-habited without the blessings of marriage for 19 years and they both stayed in the house subject the dispute for 17 years. Just like in the case of John, Valerie Burns made no monetary contribution in the purchase or on the mortgage payments of the house but she bought fittings for the house and redecorated the interior thereof while she and Patrick co-habited. According to Court in this case, since the couple was never married, the provisions of the Matrimonial Causes Act 1973 will not apply. Note that Sec. 24 and 25 of the Matrimonial Causes Act 1973 specifically stated that couples should be married in order to avail of the protection afforded by this law. Since the couple was never married, their sharing in the property shall rely heavily on case law and the intent of the parties. Unfortunately, under our case laws, the “absence of financial contribution that can be related to the acquisition of the property”11 would mean that the party who did not make any contributions on the purchase of the property shall not have any beneficial interest in the property. According to Fox LJ’s judgment in the case of Burns v Burns, “payment could be said to be referable to the acquisition of the house if, for example, the payer either (a) pays part of the purchase price or (b) contributes regularly to the mortgage instalment or (c) pays off part of the mortgage or (d) make substantial financial contribution to the family expenses so as to enable the mortgage to be paid”.12 In our case of John and Jean, there is no clear showing that John did contribute in the purchase of the house. The facts of the case never mentioned that John helped in paying off the mortgage to the house. The facts only revealed that the mortgage of the house has been fully paid and since Jean is the one who is employed and is earning money, we can safely surmise that it was she who had made all the payments of the house. Did John contribute substantial money to cover for the family expenses and in effect enable the mortgage instalments to be paid? The facts of the case are silent on the contribution of John to the family expenses. However, since John was unemployed and is taking care of Jean’s child from another relationship, John may have made some contribution to the family but such contribution may not be substantial. Furthermore, the fourth category, which allows for substantial contribution to the family expenses to be considered as contribution to the mortgage payments of the house, has been challenged in the case of Lloyds Bank plc v Rosset (1993)13. According to the case of Lloyds Bank plc v Rosset (1993)14, “the interests of the parties on the house should be determined based on their inferred intentions during the time of the acquisition of the property and not be their subsequent conduct”15. Although John may have spent considerable amount of money for the renovation of the house, the ruling in the case of Burns and Burns would still preclude him from having beneficial interested over the house. Will it make any difference had John and Jean been married under this rule? Apparently, when it comes to the claim of beneficial interest in the property of the spouse, the Court did not really lay much difference between a couple who are co-habiting and a married couple. In the case of Gissing v Gissing (1971) 16, the court ruled that the spouse who did not contribute money for the acquisition of the house and later on did not contribute money for the payment of the mortgage of the house do not have any right to claim beneficial interest over the property17. Furthermore, in case of Gissing v Gissing (1971) Lord Diplock said that “ to constitute a valid declaration of trust by way of gift of a beneficial interest in land to a cestui que trust, the declaration is required by Section 53 (1) of the Law of Property Act 1925, to be in writing.” Given the rules established in the claim for beneficial interest, John would have little ground to pursue his claim against the property of Jean. If John cannot prove that Jean promised to give the house to him as a gift, he therefore cannot put a claim in the house. In the case of Lloyds Bank v Rosset(1993)18 the Court ruled that there are two requisites to prove the existence of an express trust, namely, the proper identification of the property subject to the trust and the irrevocable commitment to convey the property19. In this case, the house was clearly identified and Jean promised to give the property to John. Will the arguments using the reliance rule be enough to give John a right over the property? There is really no assurance that the arguments anchored on reliance will be enough for John to win the case over Jean. However, since there Court has always been open to the possibility of granting equitable rights, the reliance argument may be a good point to argue in Court. Note that in the case of Lloyds Bank v Rosset (1993)20, the Court ruled that such reliance if well founded will help in getting around the provisions of S. 53 (1) (1) Law of Property Act 1925. However, the Court did not make it clear as to what will be the effects of constructive trust if it is standing on its own in Court. At most, the Court simply opens a door for arguments in this matter that it is hard to determine at the moment as to whether John will succeed or not in his claim based on constructive trust.21 Suffice is to say that in the case of Springette v. Defoe (1992)22, the court ruled that where the arguments are based on the grounds of trusts and estoppel, “silence will not do” and there must be some kind of representation that must be fulfilled before the case can be considered in favour of the claimant of the property. For John to be able to claim beneficial interest in the property, he must prove in Court that he and Jean had an agreement and that Jean had made an irrevocable commitment to give the house to him as a gift. The evidence that John could present to prove his claim that Jean indeed made an irrevocable commitment to give him the house would be as follows: (1) Jean made him a verbal promise that she will give him the house (2) Jean moved out of the house and allowed John to stay (3) documents were drawn for the purpose of transferring the rights over the property to the name of John, and (4) Jean did not make any move to stop the preparation of the documents which will purportedly transfer the rights of the property to John. c. Implied sharing of the property The rule on implied sharing in the property stems from the assumption that the people involved are partners. According to Lord Bridge in the case of Lloyds Bank v Rosset (1993)23, there is need for us to ascertain whether or not the parties have established a kind of agreement regarding their affairs. We must look into the conduct of the parties when it comes to “sharing the house as their home and managing their joint affairs”24. According to Lord Bridge, there is a need to observe the conduct of the parties prior to the acquisition of the property or in some exceptional cases, after their conduct after the acquisition of the property, in order to establish as to whether or not they have come to an agreement, arrangement or understanding on how the properties shall be shared beneficially. Where the parties came up with an agreement on how they will share the ownership of the property later on, the agreements of the parties shall govern. Had the parties in this case agreed on how to share the property? No, there was really no agreement because when John asked Jean how they should share the property, Jean promised John that she would give the house to him as a gift. Will the promise of Jean in this case be construed as a form of sharing arrangement between the two of them? Although it is tempting to go with the argument that Jean indeed proposed a sharing scheme which was accepted by John, this type of situation seem to be not what is intended in the case of Lloyds Bank v Rosset (1993)25. Note that the Rosset case was more focused on the idea of partnership right from the moment when they bought the property. Given this situation, the idea of partnership may not be applicable to the case of Jean and John. Note that the case of John and Jean lacks the characteristics of the case of Springette and Defoe [1992]26, which is the stability and equal financial footing of the parties. In the Springette case, the parties involved were middle-aged couple who are already established in life. Considering the financial status of the parties, the Court ruled that the house they purchased was to be interpreted as a “joint venture or commercial partnership between the parties.” If I were to advise John on this matter, I would recommend to him not to pursue an argument in court based on the implied sharing of the property. Although John may have spend some money for the renovation of the house, based on the arguments presented in the case of Burns v Burns he still can’t claim interest in the house. In the event where John will not be able to succeed in getting a share in the house, he can at least recover the money that he has spent on the renovation of the house once the house is sold. Note that under the principles of equity and unjust enrichment, Jean cannot just ignore the contribution of John in the renovation of the house. Jean can be compelled to reimburse the amount of money and the cost of personal labour, which John has invested in renovating the house. References: 1. Black’s Law Dictionary 2. Burns v Burns (1984) Ch 317, [1984] 1 All ER 244 3. Ferguson, P (1993) Constructive Trusts - A Note of Caution 109 Law Quarterly Review 114 4. Gissing v Gissing (1971) AC 886 5. Hayton, D (1990) Equitable Rights of Cohabitees [1990] Conveyancer 370. 6. Huntingford v. Hobbs [1993] 1 F.C.R. 45 7. Jones V Locke (1865) 1 Ch App 25 8. Law of Property Act 1925 9. Lloyds Bank plc v Rosset (1993), 109 L.Q.R. 114 10. Matrimonial Causes Act 1973 11. Milroy v Lord (1862) 4 De GF & J 264 12. National Provincial Bank v Ainsworth (1965) 2 All ER 472, [1965] 3 WLR 1, 194 EG 1085, [1965] EGD 173 13. Springette v. Defoe (1992) 24 HLR 552, [1992] 2 FCR 561, [1992] Family Law 459, note [1992] Conv 347 14. Stokes v Anderson [1991] 1 FLR 391, [1991] Fam Law 310, [1991] FCR 539 15. Watt G. (2006) Trust and Equity (2nd Ed) Oxford University Press 16. Westdeutsche v Islington BC (1996) 2 All ER 961 17. Wills Act 1873 18. Winkworth v Edward Baron Development Co. Ltd. [1988] 1 WLR 1521 Read More