Equity & Trusts -> Secret Trusts

Secret Trusts

Where a settlor leaves property to X apparently beneficially, and communicates to X his intention that X is to hold the property on certain trusts or conditions, which X accepts which X accepts either expressly or impliedly by silence (McCormick v Grogan). This is because a will becomes a public document once executed and the settlor for whatever reason wishes to keep the identity of the true beneficiary a secret. Secret trusts are problematic because their exact nature is unclear nor meet the requirements of s9 Will Act 1837.

Req for Fully Secret Trust as per Ottaway v Norman:

1. Intention: Did the settlor intend the legatee to be bound by a legal/moral obligation? (McCormick). Re Snowden suggests it MUST be a trust obligation and not a moral or family obligation.
2. Communication: There must be communication of the intention and also the terms of the trust. Communication can take place anytime during the lifetime of the settlor (Wallgreve v Tebbs). However where the trustee knew in general terms that he was expected to act a trustee and communication of the terms of the trust might take place after the settlors death (Re Keen).
3. Acceptance: the secret trustee must agree to act as such expressly, but silence can amount to acceptance (Moss v Cooper).

Half-Secret

However ‘Half-Secret Trusts’ is where a gift by will is made but the legatees are identified as trustees on the face of the will. i.e. ‘to X for the purpose which I have made known to him’ (Blackwell v Blackwell = KEY CASE for everything half-secret).

Req for Half-Secret Trust

1. Intention: Did the settlor intend the legatee to be bound by a legal/moral obligation? (McCormick).
2. Communication: must take place before or at the time of the execution of the will (Re Keen).
3. Acceptance: The intended trustee must accept the office of trustee and accept to the terms of the trust be it expressly or by implied silence. (Blackwell v Blackwell)

Consequences of failure of ST: The property is dealt with in one of two ways:

• The named legatee takes absolutely.
• The name legatee would be required to hold the property on resulting trust for the settlors residuary estate (Re Boyce).

Equity & Trusts -> Creating a Trust

The Settlor holds absolute title in the property before the creation of a trust.

The Trustee once a trust has been created the legal title in the trust property must be vested in the trustee and held by the trustee on trust for the beneficiaries.

The Beneficiary the person(s) for whom the property title is to eventually end up in.

Bare Trust: where the trustee holds property for a single absolute beneficiary and therefore owns the entire equitable interest in the trust fund, the trustee has no discretion or any obligation other than stewardship.

Fixed Trust; when a trust is held by a trustee for a fixed list of beneficiaries.

Discretionary Trust and power of appointment: discretion of distributing property in a manner the trustee deems suitable.

Notice: A purchaser is taken to have notice of an equitable interest unless they had either actual notice of the equitable interest of the beneficiaries or constructive or imputed notice.

Capacity: the ability to own property (under 18s cant legally own property[land]). Therefore a trust is usually created to transfer property once he/she turns 18.

A valid trust can only exist if the settlor intends to create a trust and defines the relevant property an beneficiaries clearly. The criteria to decide this was established in Knight v Knight per Lord Langdale;

• Certainty of Intention, which is an intention on the part of the settlor to create a trust. This is usually done by examining the words used by the settlor. Did he intend to impose a trusteeship on the recipient of the property? 'The words must be imperative' Wright v Atkyn. However since equity looks at intent rather than form theres no technical way to create a trust. Re Hamilton is the authority for looking at the entire document to determine the existance of a trust. Mere expression of hope, wish and trust does not amount to a trust.
• Certainty of subject matter, which the settlor expresses the a clear description of the trust property and what type of interest each beneficiary has and the respective interests they will share. Re London Wine Co buyers of wine stored in warehouse-not segregated-unable to ID which bottles belonged to whom... therefore no trust. However in Hunter v Moss oral declaration of 5% of shares - held valid. If shares in the same company and of the same class, no need to segregate. The rule in Hancock v Watson states where a property has been left to a beneficiary as an absolute gift subject to a trust which has failed, then the bene takes the property absolutely.
• Certainty of Object, sufficient identification of the beneficiaries.

If a trust fails on any of the above requirements it will be held as void.

Re Aster Settlement Trust: a trust was created with the objective of advancing 'the preservation' of the independant and the integrety of newspapers in particular the Observer. It was held that there was no beneficiary of such a purpose and uncertain therefore the trust was held void.

Re Allen: a gift is valid if it is possible to identify one or more persons that qualify, even though it may be difficult to ID others.

In the event of uncertainty it is possible to grant the trustee a power to decide who will or will not faill within a class (Re Wright).

APPROACH TO PROBLEM QUESTIONS

Deal with each certainty in a logical order even where there are no problems.
Intention.

1. Intention
2. Subject matter.
3. Property.
4. Beneficial Interest.
5. Objects.
6. Effect of any uncertainty.

Land -> Mortgagee's and Remedies

Remedies available to a legal mortgagee (i.e. the bank):

1. Power of Sale.
2. Foreclosure.
3. Possession.
4. Appointing a receiver.
5. Personal Remedy of suing on Covenant to repay.

The first three are primarily concerned with recovering capital whereas the last two seek to recover interest.

Power of Sale

When does it Arise

The power for the mortgagee to sell the land is implied into every mortgage made by deed by Law of Property Act 1925 (LPA), s 101(1) and arises when the mortgage has become due on the contractual date of redemption.

When is the Power of Sale Exercisable?

However it’s not exercisable until one of the conditions are satisfied by LPA 1925,s 103:

1. You have given the mortgagor a notice requiring payment and the default has continued for 3 months after.
2. Some of the interest payable is at least two months in arrear.
3. There has been a breach of a covenant in the mortgage (other than non-payment) or some other provision of the LPA 1925.

Sale has the advantage over foreclosure that it’s not necessary to apply for a court order. However the mortgagee may be liable to the mortgagor for any loss caused through his negligence in conducting the sale.

Significance of its exercise on any other Mortgagees

Unless the mortgaged property is standing empty, the mortgagee will need to seek ‘an order for possession’ before sale. He is not obliged by law to do so, but he cannot evict the mortgagor by force, and the property will probably not be saleable unless the mortgagee can give vacant possession. The effect of sale is to vest the estate in land in the purchaser, free of the mortgage and any other mortgages of lower priority (LPA s. 104).

The two duties owed by the selling mortgagee

According to Salmon LJ in Cuckmere Brick v Mutual Finance a selling mortgagee owes certain duties, which were also re-emphasised in Silven v Royal Bank of Scotland:

1. Act in good faith: in order to obtain the best price possible. Otherwise the mortgagee will find himself liable to the mortgagor if he fails to do so. Which is why mortgagee's usually appoint a receiver to handle the sale as an agent, thereby limiting their liability (unless they're negligent in appointing the receiver).
2. Take reasonable care.

Mortgagee’s Responsibilities regarding proceeds of Sale

LPA s. 105 states all proceeds of sale must be paid in order of priority of the mortgages and any outstanding amounts can be claimed personally.

Foreclosure

When a borrower can not repay a load and the lender seeks to sell the property. The legal process by which the mortgagor’s equitable/statutory rights to redeem the property is terminated.

• Foreclosure can not be sought before contractual obligations to repay have been broken. (Williams v Morgan).
• A court order is required for foreclosure, its effect is to vest the mortgagors estate in the mortgagee in full settlement of debt (LPA 1925, 88(2) & 89(2)).
• If the property is worth more than the debt, the mortgagee is not liable to pay the difference to the mortgagor, which can be seen as being unfair to the mortgagor.
• On hearing the application for foreclosure the court will give the mortgagor a period to redeem the mortgage. However since the mortgagor is usually in financial difficulties and therefore unable to repay the load.
• Mortgagor has right to ask for an order for sale instead of foreclosure (LPA s.91(2)). ADVANTAGE: After sale the mortgagee can only keep the amount due while any remainder goes to the mortgagor or others entitled.
• DISADVANTAGE to Mortagor: Once an order for foreclosure has been given the case can be reopened and allow the mortgagor to redeem property (Campbell v Holyland) provided they meet the criteria: Speed of mortgagor’s application, reason for failure to redeem and nature of property. UNLESS the property has already been sold by the mortgagee.

Possession

Although the mortgagee has the right to possession, the mortgagee will not normally exercise that right where the borrower has not defaulted (exp Bignold). Although theoretically a mortgagee does not require a court order (Wade [1995]), very few will proceed without one as seen in Barclays Bank v Bird.

Land -> Mortgages

A mortgage of land is the conveyance/transfer of land made to secure future repayments of a loan. Thus the land is transferred to the lender subject to redemption… aka once you’ve paid up the loan the land is transferred back.

Mortgagor- Borrower in a mortgage (i.e. Some-guy).

Mortgagee- Lender in a mortgage (i.e. Bank).

Equitable Right of Redemption: a fundamental principle where the mortgagor is able to redeem the property early, however this is not an absolute rule a mortgagee can not always be allowed to redeem early (Knightsbridge v Byrne). The courts have struck down any attempt to ‘fetter the equity of redemption’ (Biggs v Hoddinott).

No clog on the equity of redemption: on redemption all mortgage obligations must be discharged. In Kreglinger v NewPatagonia Meat where a collateral advantage for the mortgagee maybe upheld where it does not prevent the mortgagor getting his land back. However any collateral provision that allows mortgagee an option to purchase the property as a clog and therefore void (Samuel v Jarrah Timber).

Interest rates on Mortgages: subject to the principle that equity will set aside a bargain which is oppressive/unconscionable (Cityland and Property v Dabrah).

Contract -> Offer and Acceptance

ANSWER STRUCTURE:

1. Has an offer been made? Was it specific and definite proposition of offerors intentions? Not an ITT, as adverts are usually ITT with few exceptions (Carlill v Carbolic Smoke Ball). Theres little difference between advertising goods in a shop window (Fisher v Bell) and other mediums of advertisement. As advertisements wording is usually too vague (Grainger & Son v Gough) they're considered ITT.

2. If it’s an offer, does the offeree accept unequivocally?
a) Does acceptance contain any new terms, if so it may be a counter-offer which would require the other party to accept (Hyde v Wrench). Although it is possible to accept an offer unequivocal while also making a colateral contract (Society of Lloyds v Twinn).
b) Silence rarely constitutes acceptance, unless offeree has argeed to that method of acceptance (Re Selectmove Ltd).
c) Has acceptance been authorised and communicated by offeree or agent (Powell v Lee).

3. Acceptance communicated effectively? Is acceptance effective on receipt or must it be read? Traditionally acceptance on receipt (Entores Ltd) as without hearing the message it has not been communicated effectively, but recently The Brimnes suggest receipt and intention of parties required: as an answer machine suggests delaying the actual time when communicated therefore a court could imploy the indeterminate time between the reeipt of a letter and it being read.
a) Has offeree used correct mode of communication? If alternative mode used acceptance may not be valid (Tinn v Hoffman).
b) Postal rule: postal acceptance is effective on posting, subject to reasonableness and express reservation contained in offer (Adam v Linsdale) even if lost delayed or destroyed.

4. When acceptance is deemed effective, is the offer still open?
a) Has the offer expired? Baring in mind this can also happen with the death of the offeror (Bradbury v Morgan).
b) Has offer been revoked? Effective anytime before acceptance, provided its communicated (Dickinson v Dodds).

N.B: Remember in the end conclusion the answer need not necessarily be definite. As these questions tend to focus on your analytical argument for both sides.

Contract -> An Offer

A contract may be defined as an agreement between two or more parties that is intended to be legally binding.

The first requisite of any contract is an agreement (consisting of an offer and acceptance). At least two parties are required; one of them, the offeror, makes an offer which the offeree, accepts.

The first stage in any contractual dispute is to establish if a contract actually exists. Which will depend on its formation, based on three key ingredients:

• Agreement: based on mutuality over terms, agreement exists when a valid acceptance follows a valid offer. An offer is simply a statement of willingness to be bound by the terms of an offer.
• Consideration: given by both sides, the quid pro quo, the proof that the bargain exists or “the price of the promise” (Dunlop v Selfridge) by doing some act.
• Intention to create legal relations: since contract is legally enforceable.

An offer is an expression of willingness to contract made with the intention that it shall become binding on the offeror as soon as it is accepted by the offeree.

A genuine offer is different from what is known as an "invitation to treat", ie where a party is merely inviting offers, which he is then free to accept or reject.

The following link will show a more detailed diagram.

Offer: a statement of willingness to be bound by the terms of the offer.

Consideration: given by both sides, the quid pro quo, the proof that the bargain exists and “the price of the promise” (Dunlop v Selfridge) by doing some act.

Acceptance: an unequivocal expression of intention to agree to the exact terms of the offer which is then communicated.

Invitation to treat: indication by the maker of willingness to receive offers (negotiations). ITT lacks the required intent and specificity to be an offer.

Public -> Judicial Review

“Principles of JR give effect to the rule of law. They ensure administrative decisions will be taken rationally in accordance with a fair procedure and within the powers conferred by Parliament” – Lord Hoffman.

JR not an appeal process; in finding a public body has exceeded its lawful authority; the court will not enquire into the subjective correctness of the decision but only into the process by which the decision was reached. JR procedure applies only to ‘public functions’ and when an issue of public law is in question, JR being an appropriate procedure (O’Reilly v Mackman (1982)).

Requirements:

(a) Leave: Apps for JR are made to Administrative Court (s31 Supreme Court Act (1981)) to filter out unmeritorious claims and made no later than 3 months after.

(b) Sufficient Interest: App must have ‘locus standi’ per s 31 in order to bring an action.

Grounds:

The GCHQ case identifies 3 heads for grounds on review:

(a) Illegality – narrow ultra vires – if a body acts outside their authority/jurisdiction (AG v Fulham Corporation).

An error in law: a mistake in legal interpretation leads to an error on the face of the record (Perilly v Tower Hamlets).

An error in fact: a mistake that leads to a critical error in decision making process a finding of fact that is totally unreasonable and lacking any evidential basis will be reviewable (R v Secretary of State for Home Department exp Khawaja).

Wide Ultra Vires: when a decision maker its within his powers but does so in a manner that abuses its discretion:

a) Acting for an improper purpose (World Development Movement case)

b) Taking irrelevant factors into account or leaving out relevant material (Bromley LBC v GLC).

c) Unauthorised delegation (R v Talbot)

Fettering Discretion: the decision maker has discretion, thus they should consider each case on its merits (BOC v Board of Trade).

(b) Irrationality/unreasonableness (Wednesbury unreasonableness)

When a decision maker comes to a decision that is so unreasonable no other body would have come to that decision. Or the decision is lawful but imposes conditions that are unreasonable (R v Hillington).

(c) Procedural Impropriety: failure to follow the correct procedure can invalidate a decision (Bradbury v Enfield LBC).

Natural Justice:

(a) a right to a hearing: Ridge v Baldwin HL concluded that an individual severely affected by a decision must be afforded an opportunity to hear and refute the case against them.

(b) Duty to give reasons: although there’s no strict duty to give a reason the courts however have held failure to give reasons may invalidate a decision if in order to have a fair hearing the applicant requires an explanation (R v Doody).

(c) Bias: A decision maker must act free from bias (impartially) i.e. financial interest no matter how small (Dime v Grand) or a member of an organisation party to the case (R v Bow Magistrates Court).

TEST FOR BIAS: Whether a ‘fair minded and informed observer would consider there is a real possibility or danger of bias’ (Porter v Magill).

(d) Legitimate Expectation: where a prior course of dealing with the decision maker leads to a reasonable legit expl on the part of the app regarding future decisions.

(e) Legal Representation: a right to be legally represented before the decision maker, criteria set out by R v Home Sec, Exp Tarrant:

1. Seriousness of charge & penalty.
2. A point of law likely to arise.
3. The capacity of the defendant to present their own case.
4. Complexity of procedure.
5. A need for reasonable speed in decision making.
6. Need for fairness between students and teachers.

(f) Cross-examination; oral hearings automatically carry a right to cross examine those who give evidence (Bullshell v Sec of State for Environment).

Remedies

Quashing Orders (certiorari) - such an order renders the original order invalid once grounds for finding it unlawful/irrational or procedurally improper have been found.

Mandatory orders (mandamus) – An order that compels a body to take action i.e. ordering a tribunal to hear a case that it has refused to deal with.

Prohibiting Orders (prohibition) – Prevents a body from making a decision that would be susceptible to a quashing order.