LAW 501

“ASSIGNMENT 2”

PREPARED BY

KHAZATUL NAIMA BT ABD TALIB 2009749517

NUR ASMANIZA BT MOHAMAD 2009764707

PREPARED FOR

MR. MOHAMMAD RIZAL ABIDIN

GROUP MEMBERS

Nur Asmaniza binti Mohammad. Born to Mr Mohammad bin Mahmud and Mrs Suraya

bt Haroon, in Alor Setar, Kedah on 17 April 1990. She is the eldest in the family of four

siblings. They currently live in Mentaloon, Kedah Darul Aman. She started her early

education at Sekolah Kebangsaan Seri Negeri, Langkawi. She then pursued her studies at

MRSM Pendang in 2003 and MRSM Tun Ghafar Baba in 2006. In 2008, she decided to

pursue law at UiTM Kedah, as a pre-law student. In 2009, she managed to enroll into

UiTM Law Faculty doing LW213, Bachelor of Legal Studies (Hons). She does not hope

much from life as she wishes to have a normal and infamous yet peaceful life. Her motto

is “Those who work hard for something will eventually get what they desire”.

Khazatul Naima binti Abd Talib was born on 11 April 1990. She is the eldest children

of Mr Abd Talib b. Majid and Mrs. Norizan bt. Zainal who currently live in Jitra, Kedah.

She enjoyed her primary education at Sekolah Kebangsaan Anak-Anak Tentera. In 2003,

she began her secondary education at SMK Jitra and later she was admitted into MRSM

Beseri in 2006. In 2008, she pursued her tertiary education in law at UiTM Kedah. Later,

in 2009, her dreams come true, when she got admitted to UiTM Law Faculty as full time

students doing Bachelor of Legal Studied (Hons). She is a person who is always able to

capture hearts of others with her caring attitude and nice smile. Her motto is “I may not

be the best, but whatever I do, I do my very best”.

METHODS OF CONDUCTING RESEARCH

1. Internet based research. We found many articles on equity. We also found cases

from the web.

2. Library based research. We borrowed books from the library as reference in

answering the questions.

3. Interview based research. We ask for senior’s opinion as well as our fellow

friends to assist us in completing this assignment.

DISTRIBUTION OF WORKS

Since our group comprises of two members, each of us is required to answer two issues.

It was decided by drawing lots. Before answering the question, we discuss on some basic

things to be included in the question. We always contacted each other to let the others

know our current conditions and problems. We then read each other’s answer,

commented and made changes to it. Nur Asmaniza works on issue 1 and 4 while

Khazatul Naima works on issue 2 and 3.

APPRRECIATIONS

Alhamdulillah, thanks to Allah the Most Gracious and the Most Merciful.

Without his blessing and grace we are unable to finish this work properly. With His love,

we are finally able to complete the assignment given within the stipulated time. We are

very thankful that we were given enough energy and spirit by Him throughout the process

in completing this assignment.

A million thanks to Mr. Rizal for giving us the opportunity to have a better

understanding of the Law of Equity and Trusts. Thank you again for all your advices

which have helped us a lot throughout the process.

Not to forget, a billion thanks to our family especially our parents who keep

giving us love and support. It somehow gives us spirit especially when we are at a dead

end. Lastly, thank you very much to our seniors, friends and those who have contributed

their effort in helping us to finish this assignment.

Issue 1

Equity will not perfect an imperfect gift.

Law

For a gift to be complete, it is necessary that the donor must have demonstrated

intention to make a gift and it is also necessary that the donee be delivered the property

so as to make the donee the legal owner of the property1. In the event where the donor

disclose intention to make a gift, but later fail to deliver the property to donee or the

donor has a change of heart regarding his intention, then the donee has no action under

equity. This is because of the principles that equity will not perfect an imperfect gift and

equity will not assist a volunteer.

A volunteer at law means a person who has given no consideration for that gift.

Both principles simply mean that equity will not force the donor to honor the promise if

he decides not to make it because equity will not assist a person to acquire rights if that

person has not given consideration to acquire rights under contract.2 However, there are

certain exceptions to these rules namely the rule in Strong v Bird (1874), Donatio Mortis

Causa and proprietary estoppel.

Rules in Strong v Bird states that if a person expresses a present intention to

make a gift of personal estate to another, and that intention remains so until the former

passed away and the latter becomes the executor of the will, then the vesting of the

property in the donee completes the gift. Donatio mortis causa is applied where the

property is delivered to the donee, in contemplation of the donor’s death, and the gift is

conditioned to take effect upon the donor’s death. Whereas proprietary estoppel is

applicable in circumstances where a person has been led to act upon the statement of

another, he can prevent that other person from acting inconsistently with his statement. If

the gift falls within any of these exceptions, then the donor has to deliver the property to

the donee.

Lisa’s problem falls under the rule in Strong v Bird. In Strong v Bird, Mr Bird

borrowed $1 100 from his stepmother who lived in his house, paying $212.10s a quarter

for board, and they both agreed that the loan was to be repaid by deduction of $100 from

1 Mohd Rizal Abidin (2005). Equity and Trust-Law 501 Manual, pg 372 Alistair Hudson, Equity and Trust, 2010, pg 96.

the quarterly payments. After two quarterly payments, she indicated that she did not want

the loan to be repaid and he continued making full payments. When she died, there was

an unpaid balance of $900. Mr Bird was appointed the executor and the stepmother’s

next-of-kin claimed the amount. The court held that the appointment of Mr. Bird as the

executor released the debt. Jessel MR explained;

“… it appears to me that there being a continuing intention to give, and there

being a legal act which transferred the ownership or released the obligation – for it is the

same thing – the transaction is perfected, and he does not want the aid of a court of

equity to carry it out, or to make it complete, because it is complete already, and there is

no equity against him to take the property away from him.”

However, rules in Strong v Bird is subjected to following conditions; the rules

apply only to inter vivos gift and does not extend to testamentary gift, the donor’s

intention to make a gift must be a continuous one, the donee must be appointed an

executor or one of the executors and the rule would probably be the same if he or she is

appointed as administrator and lastly, the subject matter of the gift must survive at the

donor’s death.3

Firstly, the gift must be an inter vivos gift. Inter vivos gift is Latin for "between

the living" or "from one living person to another." A gift inter vivos is one that is

perfected and takes effect during the lifetime of the donor and donee and that is

irrevocable when made. It is a voluntary transfer of property, at no cost to the donee,

during the normal course of the donor's life.4

Secondly, the donor’s intention to make a gift must be continuous. In Re Gonin

[1979] Ch 16, the mother promised her illegitimate daughter a house. However, the

mother wrongly thought that her illegitimate daughter could not be entitled to property

under her will, and thus left her a cheque for $33 000 which was discovered after the

mother’s death. The cheque could not be cashed upon death. The daughter was appointed

as administratrix of her mother’s estate. She then claimed the house. Walton J, in refusing

the claim said that;

3 Wan Azlan Ahmad & Paul Linus Andrews, Equity and Trusts in Malaysia, Sweet Maxwell, 2005, pg 48, 494 http://legal-dictionary.thefreedictionary.com/gift

“.. so far as the land is concerned no such continuing intention can be found … I

think that the intention changed by the latest in 1962 when the deceased drew her cheque

in favour of her daughter. I find it impossible to think that the plaintiff would inherit the

cheque on the deceased’s death – no immediate gift, and no gift of land.”

Thirdly, the donee must be appointed an executor or one of the executors and the

rule would probably be the same if he or she is appointed as administrator. Being the

executors or administrator, deceased’s estate will be tranfered to them to make it easy for

them to manage and divide the property to the next-of-kin. This transfer has made them

the legal owners, which then satisfy the second requirement of a gift which is the

property must be delivered to the donee so as to make the donee the legal owner of the

property.

Lastly, subject matters of the gift must survive at the donor’s death.

Disappearance of subject matter will defeat the gift by donor since the gift does not exist

anymore.

The effect of the rules in Strong v Bird is the donee can enforce the incomplete

gift, ie the donee will get the gift.

Application

Applying the above discussion to Lisa’s case, an incomplete gift has been made to

her by Homer since Homer only declare his intention but does not transfer the gift to her.

Clearly, this is a situation which could attract the application of the rules in Strong v Bird.

However, to invoke this rule, Lisa must first make sure that she passed all the

elements. Firstly, the gift must be an inter-vivos gift not testamentary gift. In Lisa’s case,

the gift was intended to be an inter-vivos gift since Homer’s intention to give a yacht to

Lisa was made on his deathbed not via a will. Secondly, there was also a continuous

intention on the part of Homer, since there was no indication of changes of intention by

Homer. Third element is also fulfilled as Lisa was appointed as one of the executors of

the will. Lastly, the property must survive upon the donor’s death which is also fulfilled

since the yacht still exists after Homer’s death.

Therefore, having fulfilled all the requirements under the rule in Strong v Bird

[1874], Lisa can have the yacht as a gift.

Conclusion

Lisa can take the luxury yacht and Homer’s next-of-kin have no rights to prevent

Lisa from taking the yacht in question because the yacht was an absolute gift to Lisa

under the rule of Strong v Bird [1874].

Issue 2

Doctrine of Satisfaction- Satisfaction of portion debts by legacy.

Law

There are four types of equitable doctrine namely doctrine of, conversion,

election, satisfaction and performance. The relevant doctrine in this problem is the

doctrine of satisfaction. Doctrine of satisfaction is based of the equitable maxim, “Equity

imputes an intention to fulfill an obligation”. Where a person is legally obliged to do one

thing, but in fact does a different thing, the doing of this may be held to satisfy the legal

obligation. This doctrine can be divided into two categories, (i) Satisfaction of debts by

legacies and (ii) Satisfaction of portion debts.

Satisfactions of debts by legacies involve a situation of ordinary debts. Which

refer to the relationship between debtor and creditor. This situation involve a will, where

the debtor had make a will, in his will he had give a certain amount of money to the

creditor, there is a presumption that the legacy extinguishes the debt. However, the

amount given must be either equal to or exceed the amount of debt; Talbott v Duke of

Shrewbury (1714). If not, the creditor can take the money given and then claim for the

amount of debt. There are 3 situation in which this presumption will not apply ; (1) where

the debt was incurred after making a will, (2) where the debt is not a specific sum but a

running account i.e overdraft account and (3) where the will contain a direction to pay

debts.

While satisfaction of portion debt can be divided into 3 situations (1) satisfaction

of portion debt by legacy, (2) satisfaction of portion debt by subsequent portion and (3)

ademption of legacy by portion. The first two situations usually involve a promise made

by a father to his children but fail to fulfill it, and then it became a portion debt. Portion

mean a gift made or an obligation under taken by a parent or person standing in loco

parentis to set the children up in life. It is for the benefit of the child. The satisfaction of

portion debt by legacy and ademption involve a will, while the satisfaction of portion

debt by subsequent portion did not involve will.

Satisfaction of portion debt by legacy is a situation where a father promise to give

his son or daughter gift (money) but he fails to fulfill it during his life time. The

presumption arise when he later give the child a legacy of the same amount or of the

greater amount of what he had promised. Then it is presume that the legacy was intended

to satisfy the portion debt. If the legacy is less than the debt, satisfaction pro tanto will

take place. In this situation, the child has a choice to make. He or she can either elect to

enforce the portion debt or to take under the will.

While , satisfaction of portion debt by subsequent portion involve a situation

where a father promise to give a sum of money to his son but he do not fulfill it yet (P1),

later the father without any reason give son a sum of money which same like what he

had promise (P2) and then the father died. If this happen the son cannot claim the

amount of portion debt (P1) from his father’s estate as equity presume that the latter

portion(P2) satisfy the first portion(P1) and the portion debt is treated as discharged. This

is known as presumption against double portion. However if the amount given is less

than what had been promise, satisfaction pro tanto will take place.

While ademption of legacies by portion involve a situation where the father make

a will giving his child legacy and later gives a portion to the same child it is presumed

that the portion was not intended to be in addition to the legacy, which will therefore be

adeemed. If the portion amount is less than the amount in the will, the child can only

claim for the balance.

Application

This problem involves a satisfaction of portion debt by legacy. The testator,

Homer in his life time had promise to give his daughter RM 9000 for her to pursue her

tertiary education. Homer died before he can fulfill his promise. Then, the promise

became a portion debt. However, in his will he gives Maggie a legacy of RM 10000

which is a greater amount than what has been promised. Thus applying the equitable

maxim of “Equity imputes an intention to fulfill an obligation” and the doctrine of

satisfaction of portion debt by legacy it is presume that the RM 10000 given to Maggie is

intended to satisfy the portion debt.

Conclusion: Therefore, Maggie cannot claim addition amount of RM9000 from her

father estate as the legacy, RM 10000 is presume as to satisfy the portion debts.

Issue 3

Express Private Trust – Certainty of Subject Matter

Law

Trust is an equitable obligation, binding on trustee to deal with property over

which he has controlled (trust property) for the benefit of beneficiaries (cestui que trust)

of whom he himself may be one and any one of whom may enforce the obligation. The

type of trusts involved in this problem is Express Private Trust.

Express Private Trust (EPT) comes into account when there is an express

declaration of trust by the settler/testator5. It is a combination of express trust and private

trust. It can be either in writing or verbal. There are three main stages for the creation of

EPT. (i) Satisfying the three certainties, (ii) fulfilling any formal requirement laid down

by statute and (iii) transferring of trust property to trustee by formal method.

In order for EPT to be created, three elements of certainties must be established.

Firstly is certainty of intention. This type of certainties is bound on the part of

settler/testator whose create the trust. The settler/testator must show that he/she is

intended to create a trust. In most cases, the court will look at the wording of the trust

deed or will whether it constituted trust or not. There is no particular form of words is

required to create a trust since the equity looks at the intent rather than form. However,

the language used must be sufficiently expressive to show that it is an intention to create

a trust. Lord Eldon in the case of Wright v Atkyns (1823) held that in order to constitute

a trust, the words used must be imperative which mean it must be clear.

Secondly is certainty of subject matter. This type of certainties is referring to the

trust property. It may comprise of cash, choses in action, livestock, chattels, land and

building subject to the lex loci situs6. Settler/testator must be clear and certain on the

property that he/she want to dispose of. The trust property must be identifiable and

ascertainable. There are two aspects to this requirement. First, there must be certainty as

to what is to be held upon trust. In the case of Palmer v Simmonds(1854) the court held

that the phrase “ bulk of my estate” amount to uncertainty as the subject matter is unclear

since it may mean different thing to different people. Second is there must be certainty as

5 Wan Azlan Ahmad & Paul Linus Andrews, Equity and Trusts in Malaysia, Sweet Maxwell, 2005,pg 21.6 Mary George, Malaysian Trust Law, 1999, pg87.

to what is the extent of beneficial interest of each beneficiaries. The beneficial interest of

each beneficiary must be certain so that the trustees know what and how much each

beneficiaries will entitle to. In the case of Boyce v Boyce (1849) it was held that the

Charlotte’s share was uncertain since it depend on Maria’s choice. In this case Maria died

before she made her choice. Thus, the court held that the trust was failed.

The final element is certainty of objects. It refers to who is the beneficiary of the

trust created. The settler/testator must identify the persons who are to benefit under the

trust. In order to identify the beneficiary we need to look whether the trust if fixed trust or

discretionary trust. A fixed trust is one where the trustees are under obligation to

distribute the trust property to the named persons or to all members of specified group.

This is known as ‘list principle’. While, in discretionary trust, the trustee is given the

absolute discretionary power to appoint who is the beneficiaries. This refers to the ‘any

given postulant’ test.

Application

Applying the above discussion to Marge’s problem, Homer clearly used the words

‘trust’ in his will making it certain that the trust is intended by him. Therefore, applying

Wright v Atkyns, the first element is established.

For the second element, the trust property is certain as it is possible to ascertain

and identify the paintings which are “The Red Dragon and the Woman Clothed with the

Sun” and “The Venus of Urbino”. However, for the second requirement which is to what

extent the beneficial interest of each beneficiaries is uncertain as the painting which

Marge will receive depend on Krusty choice. In this situation, Krusty died before making

his choice. Therefore, this element is not established.

For the last certainty, the trust exist is a fixed trust as the trustees were not given

any discretionary power to decide on the beneficiaries since Homer has named Krusty

and Marge as the beneficiaries. Therefore, applying the ‘list pinciple’ test, it is possible

for the trustees to draw the list of all the beneficiaries as the beneficiary has been named

in the trust itself. Therefore, the last certainty is established.

Conclusion

The trust created in Marge’s favour is an invalid trust as it lack of the certainty of the

subject matter. Hence, the trust failed.

Issue 4

Express private trust – certainty of subject matter

Law

Trust is an equitable obligation, binding on trustee to deal with property over

which he has controlled (trust property) for the benefit of beneficiaries (cestui que trust)

of whom he himself may be one and any one of whom may enforce the obligation. The

type of trusts involved in this problem is Express Private Trust.

Express Private Trust (EPT) comes into account when there is an express

declaration of trust by the settler/testator7. It is a combination of express trust and private

trust. It can either be in writing or verbal. There are three main stages for the creation of

EPT. (i) satisfying the three certainties, (ii) fulfilling any formal requirement laid down

by statute and (iii) transferring of trust property to trustee by formal method.

In order for EPT to be created, three elements of certainties must be established.

Firstly is certainty of intention. This type of certainties is bound on the part of

settler/testator who creates the trust. The settler/testator must show that he/she intends to

create a trust. In most cases, the court will look at the wording of the trust deed or will

whether it constituted trust or not. There is no particular form of words required to create

a trust, it is unnecessary to use the words ‘trust’ since equity looks at intent rather than

form. However, the language used must be sufficiently expressive to show that it is an

intention to create a trust. In the case of Wright v Atkyns (1823), Lord Eldon held that in

order to constitute a trust the words used must be imperative in which it is clear.

Secondly is certainty of subject matter. This type of certainties is referring to the

trust property. It may comprise of cash, choses in action, livestock, chattels, land and

building subject to the lex loci situs8. This is a requirement that the property which is

intended to constitute the trust fund is segregated from all other property so that its

identity is sufficiently certain.9 Therefore, settler/testator must be clear and certain on the

property that he/she want to dispose of. The trust property must be identifiable and

ascertainable. There are two aspects to this requirement. First, there must be certainty as

to what is to be held upon trust. In Re Kolb’s Will Trust [1962] Ch 531, the court held

7 Wan Azlan Ahmad & Paul Linus Andrews, Equity and Trusts in Malaysia, Sweet Maxwell, 2005, pg 21.8 Mary George, Malaysian Trust Law, 1999, pg87.9 Alistair Hudson, Equity and Trust, 2010, pg 96.

that the words ‘blue chip securities’ used in an investment clause was uncertain. This is

because, back then, it was difficult to determine which shares are ‘blue chip shares’ and

which are not. However, with the development of economy sectors over the years, it is

now possible to determine blue chip shares by checking at the bursa. Therefore,

considering this, the words ‘blue chip shares’ is now ascertainable and identifiable.

Secondly, there must be certainty as to what extent of the benefits is to be enjoyed

by each beneficiary. In Re Golay Morris v Bridgewater and Ors [1965] 1 WLR 969, it

was held that a provision that ‘a reasonable income’ be provided out of a fund could be

held to be valid if one could make an objective measurement of what would constitute a

reasonable income in any particular case. In this case, the court held that it was possible

to ascertain the ‘reasonable income’ by looking at the beneficiary’s previous standard of

living. Court further held that the trustees were under obligation to pay the beneficiaries

reasonable income and if necessary beneficiary could go to court for a declaration that the

income she was receiving was not reasonable and seek to have it reviewed.

The final element is certainty of objects. This refers to the beneficiary of the trust

created. The rule is that there must be a sufficient certainty as to the ‘objects’ or

‘beneficiaries’ of a trust, or else the trust will be void.10 To decide whether or not it is

possible to identify the beneficiaries of a trust with sufficient certainty it is first necessary

to identify the nature of power which is being exercised. It is important therefore to

identify between fixed trust and discretionary trust. A fixed trust is one where the trustees

are under obligation to distribute the trust property to the named persons or to all

members of specified group as stated by the settlor/testator. This is known as ‘list

principle’. While, in discretionary trust, the trustee is given the absolute discretionary

power to decide on who will be the beneficiaries. This refers to the ‘any given postulant’

test.

Application

10 Alistair Hudson, Equity and Trust, 2010, pg 115

Applying the above discussion to Uncle Bob’s problem, Homer clearly used the

words ‘trust’ in his will making it certain that the trust is intended by him. Therefore,

applying Wright v Atkyns, the first element is established.

For the second element, the trust property is certain as it is possible to ascertain

and identify ‘blue chip shares’ by checking at the bursa as the bursa has prepared a list of

blue chip shares available for people to view. Applying Re Golay, the extent of

beneficiaries that Uncle Bob will enjoy is also certain and identifiable since the trustees

can decide on the ‘reasonable income’ by examining and looking at the previous living

standard of Uncle Bob. If Uncle Bob is not satisfied with the benefits he received, he may

go to court to ask court to review the income for him. Therefore, the second requirement

is established.

For the last certainty, the trust exist is a fixed trust as the trustees were not given

any discretionary power to decide on the beneficiaries since Homer has named uncle Bob

as the beneficiary. Therefore, applying the ‘list pinciple’ test, it is possible for the trustees

to draw the list of all the beneficiaries as the beneficiary has been named in the trust

itself. Therefore, the last certainty is established.

Conclusion

The trust created in favour of Uncle Bob is a valid trust as all the certainty of the Express

Private Trust has been satisfied.

REFERENCES

Equitable Doctrine of Election, Retrieved from http://www.oup.com/uk/orc/bin/

9780199561025/resources/chapters/ pettit_ch32.pdf

Equitable Doctrine of Satisfaction, Ademption and Performance Retrieved from

www.oup.com/uk/orc/bin/9780199561025/pettit_ch31.pdf

George, M (1999). Malaysian Trust Law. Selangor, KJ: Pelanduk Publications.

Hanbury, H. G., Martin, J. E. (1981). Modern Equity (11th ed.).       London: Stevens&Sons.

Hudson, A. (2010). Equity And Trusts (6th ed.). London, Oxon:       Routledge-Cavendish.

Megha Karnwall (2008). Law of Equity. Retrieved from http://jurisonline.in/

2008/11/law-of-equity/

Mohd Rizal Abidin (2005). Equity and Trust-Law 501 Manual.

Wan Azlan Ahmad., Adrews, P. L. (2005). Equity and Trusts in       Malaysia. Malaysia: Sweet&Maxwell Asia.