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In order to advised Ophelia, it is first necessary to establish whether Theo

have created a trust. Firstly, it was held that an imperfect gift is not to be rebranded
as a valid declaration of trust or vice versa. This is because, with an immediate gift,
donor means to dispose of all entitlement to the property, whereas with a trust the
trustee intends to retain rights subject to the obligations of trust. If a gift is intended,
but fails then there is nothing the court can do because of the traditional maxims
equity cannot perfect an imperfect gift. For instance, Richard v Delbridge, a tenant
sought to transfer his business to his grandson. Unfortunately, he did not execute a
conveyance necessary to complete of legal title to land. The gift, therefore, failed.
The grandson argued that the court should instead discern an intention to create a
trust. But it was held that, if it is intended to be a gift, the court cannot regard the
failed transfer as amounting to a declaration of trust. In this situation, as a birthday
gift for Ophelia, if Theo did not transfer the stock or giving the share certificate follow
by registration of title in the share register to Ophelia, it will become a fail gift and
Ophelia will not have a claim to any of her fathers shareholding in Meo Industries.
However, in later case of Shah v Shah, Court of Appeal held that both
intentions might coexist. In Shah, Dinesh delivered a signed a letter to his brother,
which attempted to make a gift of 4,000 shares in a company in the latters favour.
Dinesh later sought to withdraw from the arrangement, claiming that the gift had
never been completely constituted. In normal circumstances, this argument would
have prevailed and the gift would have been ineffective. Dinesh had, however,
declared in his letter that, I am from today holding 4,000 shares in the above
company for you. This manifested the clearest intention that the transfer should take
effect immediately. Arden L.J. concluded that, One of the ways of making an
immediate gift is for the donor to declare a trust.. Similar to Shah, Theo who said
that I hereby hold 10% of my shares in Meo Industries Ltd for your absolute benefit,
can be conclude that Theo have declare a trust for the benefit of Ophelia.
In order for a trust to be valid, it is necessary that the settlor makes clear that
a trust was intended, what property is subject to the trust and who the beneficiaries
are in order that the trust can be enforced. In Knight v Knight the test that three
certainties are required for the creation of a valid trust. These are certainty of
intention, certainty of subject matter and certainty of objects. Thus, the trust
created by Theo must satisfy the three certainties in order for it to be valid. Absence
of any of these certainties would in turn render the trust void.
With regard to the certainty of intention in an express trust, settlor are require
to use the imperative words as mentioned in Wright v Atkyns in order to impose a
binding mandatory obligation on the trustees to hold property for the benefit of
someone else. The intention to create a trust is can also be found where a person
purports to hold his or her own property for the benefit of another, the so-called self-
declaration of trust. This can be seen in Paul v. Constance that, the use of words
this money is a much yours as mine" was held to be sufficient to find that there was
an intention to create a trust. The wording I hereby hold 10% of my shares in Meo
Industries Ltd for your absolute benefit is sufficient to show an intention by Theo to
create a trust, so there appears to be Certainty of intention.
Next, for a trust to be valid, the certainty of subject matter must also be
certain. Although any existing property may be the subject matter of the trust, it is
necessary that the settlor identify what is to be subject of trust and provide the
means by which the interest of the beneficiaries can be ascertained. Without this,
the trust must fail for lack of certainty and cannot be enforced. Once again, the
words must have a clear meaning. There is a distinction to be drawn between trust of
tangibles and intangibles. The major difference is that with tangibles the physical
segregation of trust is required. Contrastingly, with an intangibles trust, the
segregation is not necessary. With an eye on Hunter v Moss, Mr Hunter who was
entitled, under his contract of employment with Mr Moss, to claim 50 shares
(intangibles) out of 950 shares in a company held by his employer. Although it was
not possible to identify precisely which 50 shares were intended to be the subject
matter of the trust, the trust was upheld. Since the shares were essentially identical
and indistinguishable, any 50 shares in the company can form the subject matter of
the trust. This approach was recently followed in Lehman Brothers International
(Europe). In Ophelias case, Theo said that 10% of my sharesin Meo Industries
Ltd. This is very clear that Theo will hold 10 per cent of his own shares in Meo
Industries Ltd for the benefit of Ophelia. Thus, the certainty of subject matter is
clearly satisfied.
The final requirement is certainty of objects. There must be beneficiaries who
are certain or capable being rendered certain. The rationale is there has to be
someone who can enforce the trust. Again, this can be found in Morice v Bishop of
Durham which held that a trust must be for ascertainable beneficiaries, the objects
of a trust need to be certain so that it can be enforced in their favour by the courts if
necessary. According to this, the trust created by Theo have satisfied the prerequisite
of certainty of object when he stated that he will hold the trust for Ophelias absolute
benefit. Obviously, Ophelia is the beneficiary and also the only beneficiary in this
trust. Therefore, by satisfying all three certainties, Theo have successfully created a
valid trust and so Ophelia has a claim to any of her fathers shareholding in Meo
Industries. Since the subject matter of the trust is the shares in a company, it is
sufficiently identical, Ophelia is able to claim her 10 percent shares from the
remaining 15 percent shares of Theo.
In Harry and Ralphs case, first issue to be concerned is trustees power to
invest. Usually a duty to invest the trustee is not given an unbridled ability to invest
as he wishes, the choice of investment is governed by administrative power to
invest. Owing to the absent of express investment clause in the trust instrument,
Fatima and Sunita will possess a general power of investment which is set out in
s3(1) of Trustee Act 2000 which authorize the trustee to make any kind of
investment that he could make if he were absolute entitled to the assets of the trust.
Nevertheless, Trustee Act 2000 subjects trustees to a statutory duty of care, which
applied when a trustee is exercising the general power of investment or any other
power of investment. Under s 1(1), the duty of care requires a trustee to exercise
such care and skill as is in the circumstances, having regard in particular to any
special knowledge or experience that he has or holds himself out as having and, if
he acts as a trustee in the course of a business or profession, to any special
knowledge or experience that is reasonable to expect of such a person.
Furthermore, the standard of care prescribed in 2000 Act confirms that a
professional trustee is expected to show a higher degree of care than a lay(unpaid)
trustee. This is demonstrated in Bartlett v Barclays Bank Trust co Ltd where a
trust company with the specialist trust will be judge on a different level to an unpaid,
family trustee. This is also follow by a later case, Pitt v Holt.
It would appear from the question that Fatima is a lay trustee; he therefore will
be judge by the standard of care established in the case law, namely that prudent
man of business investing for the benefit of person whom he feels morally bound to
provide. In investing, Fatima may not take more than a prudent man degree of risk.
Yet, Sunita is a professional person, she is an investment expert, so that it would
seem that she will be required to exercise a higher degree of skill in relation to the
legal work which she perform for the trust.
In exercising any power of investment, whether under Trustee Act 2000 or
otherwise, a trustee must have regard to the standard investment criteria, and must
from time to time review the investments of trust and consider whether, having
regard to such criteria, they should be varied. Section 4(3)(a) requires the trustees
when making any investment or reviewing existing investment to have regard to the
suitability of particular investment. Besides, this provision emphasises the need for
diversification and this is designed to ensure that there will be a range of investments
and a minimisation of investment risk. In this, there is 9 years for both Harry and
Ralph to attain 25 years old. Although it is not consider long but 250,000 will
purchase less in 9 years time than today due to inflation so the fund needs to grow at
least at the average rate of inflation). This suggests that investment in shares and
similar investments will be appropriate since such investments produce capital
growth. Sunita and Fatima also fulfil the requirement of diversification of investment
by invest in two companies. The trustees are not, guarantors of the success of their
investment policy, and so are not liable merely because the investments do not, in
the course of time, turn out to have been the most profitable that could have been
made. This can be seen in Nestle v National Westminster Bank Plc, which held
that the failure of trust fund to grow in line with what a prudent trustee would have
achieved, the trustee will be breached of duty of care. Therefore, Sunita and Fatima
will not liable for breach of trust unless their performance is below the standard
where a prudent man can achieve.
In Robinson v Pett, it was held that until 2000 Act, the general rule was that
the trustee is not entitled to claim remuneration for carrying out his office. An
important exception to the general rule was introduced in 2000Act on which if the
requirements of the act are met, Sunita who acts in a professional capacity may be
entitled to received reasonable remuneration out of the trust fund for any services
that she provided to the trust. The requirements are that the trustee is not a sole
trustee, that each other trustees has agreed in writing that he may be remunerated
(Trustee Act 2000, s29(2)), and that no provision for remuneration is made by the
trust instrument(s29(5)(a)). Under s29(4) 2000 Act, a trustee acts in a professional
capacity if he acts in the course of services in connection with the management or
administration of trust generally or a particular kind of trust. A trustee is entitled to
remuneration under the statutory provision even if the services in question could be
provided by a lay trustee. In the problem, the first requirement is satisfied as there
are two trustee in the trust, Sunita is not the sole trustee. Next, Sunita, as an
investment expert, she acts in a professional capacity in the trust created by Theo. If
Sunita is entitled to the remuneration, she will need the agreement in writing of
another trustee, Fatima. If such agreement is obtained, Sunita will be able to claim
for the 10,000 from the trust as professional fees.
Another exception to the general rule that the role of trustee is to be perform
without remuneration is by the order of court. The court might award payment to a
trustee. This occur only when the service of the trustee are regarded as being of
exceptional benefit to the trust. As Fox LJ acknowledge in Re Duke of Norfolks
Settlement Trust, in exercising jurisdiction the court has to balance two influences
which are to some extent in conflict. The first is that the office of trustee is, as such,
gratuitous, the court will accordingly be careful to protect the interest of the
beneficiaries against claims by trustees. The second is that it is of great importance
to the beneficiaries that the trust should be well administered. Markedly, Sunita will
not entitled to the remuneration through the order of court as Sunitas service is
neither provide any benefit to the trust nor for the beneficiaries.
Regarding to the issue where Sunitas taking of money from the trust bank
account, the topic to be focus is tracing. The tracing process can be can be taken
place at common law and equity. The process of tracing at common law established
that claimants property has passed into the hands of recipient in breach of trust. The
principle that the common-law rules allow tracing into substitute assets have been
said to derived from Taylor v Plumer, where Thomas Plumer gave money to a
stockbroker to buy exchange bills. Contrary to instruction, stockbroker instead used
the money to buy American securities for his own purposes. Thomas was able to
trace his property into the securities by the stockbroker so to defeat a claim made to
them by the stockbroker assignees in bankruptcy. According to this, Harry and Ralph
will be able to trace part of their money into the painting from Sunita. However,
common law rule is characterised by a restrictive approach. Once the trust property
has become mixed with other property, beneficiary is no longer permitted to traced it.
Harry and Ralph will not be able to trace the money which is already mixed with
Sunitas money at Common law.
Tracing is, however, possible at equity. Clearly, tracing at equity for the 4000
into painting will not be a problem too. Nevertheless, where the asset in which the
claimant has an equitable interest has been destroyed or the fund has been
dissipated and no specific asset can be identified that derives from it, tracing will fail.
This can be seen in Bishopsgate Investment Ltd v Homan, where a tracing
remedy is defeated when the account into which the money is paid is overdrawn. As
Privy Council in Federal Republic of Brazil v Durant International Corporation
has recognised, if a property interest has ceased to exist, it cannot metamorphose
into a later property interest. Consequently, it is generally not possible to trace
through an overdrawn account. In this situation, Harry and Ralph will not be able to
trace their money as Sunita have transferred the money to another bank account to
clear an overdraft. It can be said that even Sunita have paid back the money into the
bank account, they will not be able to trace it.
As such, a breach of trust has undoubtedly occurred as Sunita have done an
act she is not supposed to do. Generally, trustee will be liable for breach of trust
where they do what they should not do, their action could be described as ultra vires.
It is made clear in Armitage v Nurse a breach of trust may be deliberate or
inadvertent and may consist of an actual misappropriation or misapplication of the
trust property or merely an investment that is outside the trustees powers". It was
also made clear in the case that a breach of trust can in fact occur regardless of
whether the breach was beneficial or injurious to the beneficiaries. Thus, Sunita have
breach of trust as she had misappropriate the money can cause the lost of trust fund.
And since the liability of trustee to compensate the trust for loss suffered arising from
a breach of trust is personal and not vicarious, Fatima will not be liable for the act of
her co-trustee, Sunita. As an alternative to a proprietary claim Harry and Ralph can
bring a personal claim against Sunita for the value of the trust property
misappropriated.
As a conclusion, with a valid trust created by Theo, Ophelia will have a claim
to any of her fathers shareholding in Meo Industries. In concern with Harry and
Ralphs case, as the investment made by Sunita and Fatima perform poorly, they will
only liable for breach of trust if their performance under the standard of the prudent
man. Furthermore, Ralph and Harry able to trace part of money into painting which
bought by Sunita by using the trust money. However, the other money will not be
able to trace at both common law and equity as have been dissipated by Sunita to
pay her overdraft. But Sunita will be liable for breach of trust by doing what she is not
supposed to do.

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