EQUITY & TRUST
PROBLEM QUESTION ANSWERING EXERCISE
EQUITY AND TRUST PROBLEM QUESTION
Stefano, who died recently, was a wealthy UK domiciled Italian racing car designer who had lived in England for a number of years. He made the following dispositions in his will, appointing his wife, Paola as his executrix:
(i) £100,000 to my wife, Paola, in the certain knowledge that she will use it to benefit such good causes as I would have wished.
(ii) My favourite sports car from my collection of cars to my son Martino; Alberto, my other son, should choose another car from the collection.
(iii) My remaining cars are to be sold, with the profits therefrom to be held on trust by my wife Paola for my sons Martino and Alberto for life, with remainder to their children absolutely and in equal shares, but so that Paola may pay any income arising for the benefit of the friends and relatives of any of those who worked with me at the Maserati factory in Modena, Italy.
Advise Paola as to the validity and effect of these 3 dispositions.
This is an advice Paola as to the validity and effect of the dispositions. It will discuss the following:
£100,000 to my wife, Paola
Sports car for Martino and Alberto
the friends and relatives trust
#Issue (i) £100,000 to my wife, Paola
FACT: £100,000 is left on trust to Paola, “in the certain knowledge that she will use it to benefit such good causes as I would have wished”.
GENERAL PRINCIPLE: The use of precatory words does not create a trust. When someone leaves something in a will and says ‘I hope and pray it will be used for a stated purpose’, this cannot be said to be a trust.
LAW: In Mugsoorie Bank v Raynor (1882) 7 App Cas 321 the court held to create a trust, it should clearly create a mandatory requirement, the words must be imperative, and a hope or prayer will not suffice. There has been a gradual hardening of attitude by the courts as to how precatory words are to be construed. Lamb v Eames (1871) LR 6 Ch App 597: the court held the question for the court was whether those words created any trust affecting the property. By looking at the words the court must evaluate the intention of the testator.
APPLY: using the above cases the £100,000 to Paola, in the certain knowledge that she will use it to benefit such good causes as I would have wished will not create a trust. Difficulties with certainty of intention arise where a settlor or testator uses so-called “precatory” words. These are words which express a request, a hope, a desire, or a suggestion that the donee of the property will use in a particular way. The intention of the settlor must be certain otherwise the trust is not valid. The person in control of the property will be entitled to retain it beneficially.
#Issue (ii) Sports car for Martino and Alberto
FACTS: Stefano leave his favourite sports car from his collection of cars to my son Martino.
GENERAL PRINCIPLE: In order for a trust to be valid it is essential that the settlor has properly described it in order to identify it. The question is: What property is the property subject to the trust? The trust property has to be specified at the outset along with the beneficial interest to be taken in the trust property. If the trust property is not defined with sufficient precision, the trust will be invalid.
LAW: Palmer v Simmonds  2 Drew 221 A testatrix left on trust “the bulk” of her residuary estate to her heir. She had confidence in him that, if she should have died without lawful issue, he would have left ‘the bulk’ to four named persons equally. Since it was not possible to carve out from the residue that portion which was to be held on trust, the trust failed and the lasting beneficiary took the whole property absolutely.
APPLY: There is uncertainty on what “his favourite sports car” is. If there is no doubt on this the trust is straightforward because the trust is certain. If no one knows which car was Stefano favourite the trust fails for uncertainty?
#Issue (ii) Alberto
FACTS: Alberto, my other son, should choose another car from the collection.
GENERAL PRINCIPLE: Because Martino has not chosen his car the selection of a car by Alberto may not be possible. This is because there the trust property is certain, but the interest to be acquired by the beneficiaries is uncertain, the trust fails.
LAW: In Boyce v Boyce (1849) 16 Sim 476 A testator left four houses in trust ‘one for Maria, whatever she shall choose and the other three to Charlotte’. Maria predeceased the testator. The effect of this was to cause the gift to her to lapse (as it is a rule of succession law that the beneficiary must, subject to one or two exceptions, survive the testator). One of the houses thus fell into residue. It was held that Charlotte’s gift failed for uncertainty as to her beneficial interest as it was impossible to decide which of the three houses she was entitled to. The result was that the four properties were held on resulting trust for the testator’s estate. Bear in mind that if Maria had survived the testator, even though only for a split second, then the trust would have been valid as Maria’s estate could have made the choice and Charlotte would have been certain as to her beneficial entitlement. This case demonstrates that judges in 1849 were maybe excessively concern with certainty in a very doctrinal way.
APPLY: Using this authority is argued the trust leaving the Sports car for Martino and Alberto fails because it is not clear what the subject matte of the trust is.
#Issue (iii) The friends and relatives trust
FACTS: My remaining cars are to be sold, with the profits therefrom to be held on trust by my wife Paola for my sons Martino and Alberto for life, with remainder to their children absolutely and in equal shares.
GENERAL PRINCIPLE: This trust is likely to fail because trust cannot be created for more than 21 years plus the testator’s life.
LAW: An optional statutory period of up to 80 years, under the Perpetuities and Accumulations Act 1964. The common law period, which is the lifetime of the last to die of certain individuals alive when the interest is created (known as "lives in being" or "measuring lives") plus 21 years.
APPLY: It appears the capital lump sum will have to be disposed within 80 years under the ACT i.e. divided amongst the children absolutely and in equal shares.
FACTS: but so that Paola may pay any income arising for the benefit of the friends and relatives of any of those who worked with me at the Maserati factory in Modena, Italy.
GENERAL PRINCIPLE: the general principle is the term friends and relatives is
LAW: In Re Barlow’s WT A testamentary direction giving an option to purchase paintings and parts of the estate to "members of my family and friends of mine" is not invalid for uncertainty. At the time of her death the unmarried testatrix's closest family were various nephews and nieces and great and great-great nephews and nieces. After specific bequests of various paintings, she directed that the remaining paintings be sold subject to "any members of my family and friends of mine " wishing to purchase the same at a price well below their true value. Her executor sought directions from the court
APPLY: This has been left for you to work it out.