Sarah is the sole trustee of the Green Family Trust, a trust created for the benefit of her three nieces: Emma, Lily, and Mia.The trust`s assets include a substantial portfolio of investments and a commercial property.Under the trust deed, Sarah has the duty to manage the trust assets prudently and in the best interests of the beneficiaries.
However, Sarah has recently fallen into financial difficulties due to her failing business.She decides to misappropriate £500,000 from the trust’s investment account to pay off her business debts. She transfers the funds to her personal account and then uses the money to settle her business creditors.
One of these creditors is Jason, who runs a consultancy firm. Jason is aware that Sarah is a trustee but does not inquire about the source of the funds she uses to pay him.However, he is aware that Sarah has been struggling financially, and he suspects that the money might not be hers.Despite his suspicions, Jason accepts a £100,000 payment without raising any questions.
Another individual involved is Mark, a real estate developer. Mark is approached by Sarah to purchase a property in her name for £400,000.He knows Sarah is a trustee and has a fiduciary duty, but he does not inquire about the source of the funds, believing it is none of his business. Later, it turns out that Mark also advises Sarah that purchasing the property might help her conceal her assets.
The next month, Sarah attends a meeting in her role as trustee of the Green Family Trust and finds out about an exciting new investment opportunity.She decides to put all of her company’s remaining money in the stock but also buys stock for the Green Family Trust.The investment is a huge success and within three months, Sarah is able to sell all of the stock for substantial profits for both the Trust and her company.
Six months later, Sarah unexpectedly passes away as a result of a freak billiards accident. At the time of her death, her estate includes various assets, including:
- The £400,000 house she purchased in her name using trust funds.
- Jewellery and artwork worth £200,000, which she intended to gift to her best friend, Anna, but did not do so formally before her death.
- A bank account with £100,000, which she verbally promised to her friend Tom with “half of it to use for a good cause” and the other half “to be shared among my most deserving employees at Echo Inc. who have been loyal to me” during a conversation at a family dinner.
- An antique collection worth £50,000, which she told her solicitor, Emma, to “hold on to and give to someone who truly loves antiques,” but she did not specify a beneficiary in writing.
- 100 shares in Titanic Homes which she told her cousin Mike in a letter to keep for himself, but did not mention in her will.Sarah did complete and sign a share transfer form but forgot to give this to Mike to submit, instead leaving it in the glove box of her car.
- A collection of rare dolls and two dollhouses worth £10,000 which she intended to give to her sisters, Helen and Polly.After her death, a note is found in Sarah’s dresser saying, “Polly to choose her favourite four dolls and one dollhouse, and Helen can have what is left.”
- A holiday villa in Spain, which had recently been renovated with the help of Sarah’s friend Robert.
Sarah left a will, which is formally executed and witnessed, dividing the remainder of her estate equally among her two children, Rachel and David. However, the will does not mention the specific assets above, as she had intended to deal with them separately.
After Sarah`s Death
Upon Sarah`s death, various issues arise:
- The House (£400,000): Sarah left the house to her niece Lily in a separate, handwritten letter that was found in her personal diary after her death. The letter is not witnessed but it is signed. There is no mention of the house in her formal will. Lily wants to claim the house, but Jason, who received £100,000 from Sarah to settle her debts, is also making a claim, alleging that he is owed the full amount due to another outstanding debt.
- Jewellery and Artwork (£200,000): Anna claims that Sarah intended to gift the jewellery and artwork to her, and there is evidence of Sarah`s intention in the form of text messages and a note left with the items. However, the items remain in Sarah’s safe deposit box and were never formally transferred to Anna.
- Bank Account (£100,000): Tom, a friend of Sarah`s, argues that Sarah`s intention was to create a charitable trust over half of this money, based on her statement that he should “use it for a good cause.” He is unsure whether he is required to distribute the other half to specific employees of his choosing or not.Rachel and David, Sarah’s children, claim that both statements were too vague to create binding trusts and that all the money should be part of the residuary estate.
- Antique Collection (£50,000): Sarah’s solicitor, Emma, was told to “hold on to and give to someone who truly loves antiques.” No further instructions were given. Emma is uncertain whether she should keep the items, find someone to gift them to, or if they should revert to Sarah’s estate.
- 100 Shares in Titanic Homes: Mike, Sarah`s cousin, claims that the shares are his, based on Sarah`s letter to him. However, the share transfer form was never formally submitted to the company. Rachel and David challenge this, arguing that the letter does not meet the formalities required for such a gift.
- Rare Dolls and Dollhouses: Polly has made her picks of which four dolls and which dollhouse she would like. Helen is happy to take the rest. However, Rachel and David feel that they should get the doll collection and both dollhouses in the residue of Sarah’s estate.
- Holiday villa in Spain: Sarah’s friend, Robert, claims that Sarah had promised him an interest in the villa if he helped her renovate it. Over the years, Robert invested a significant amount of his own money and labour into renovating the property. However, there is no mention of the arrangement in her will. Robert now seeks to claim an interest in the property; however, her children, Rachel and David are challenging this and feel that the property should be part of Sarah’s residual estate.
Questions
Using your knowledge and understanding of Trusts Law, and with reference to the relevant legal rules and authorities, explain, apply and advise the various parties of the following:
(a) Whether Sarah, Jason and Mark are liable for breach of trust including discussion around the types of liability that may be involved.
(b) What remedies would be available to the beneficiaries of the Green Family Trust if any breaches of trust have occurred?
(c) The validity of the various provisions set out in the scenario including the £400,000 House, the Jewellery and Artwork,the £100,000 in the Bank Account, the Antique Collection,the 100 Shares in Titanic Homes, the Rare Doll and Dollhouses and the Holiday Villa in Spain.Ensure that your advice includes who will receive each of the items, explaining your reasoning and providing authorities to support your answer.
Your answer should be in the form of a traditional academic essay/problem answer using OSCOLA referencing.Answers should be thorough and provide sufficient detail and reasoning expected at this level of study throughout. DO NOT use a file note to answer this question.
Submission details
Word limit: 4,000 words (This is a strict word limit so the university’s word limit policy will apply.)
Submission Type: Individual
Submission Format: Turnitin Only
Weighting for the Module: This assessment makes up 100% of your overall module mark
Hand-In Date: Friday 13th December 2024 at 5pm GMT (Late submission policy applies)
Learning outcomes assessed: A