Trust Law

[diddled]

Is anyone able to explain, in laymans terms, how constructive trusts and resulting trusts arise

[POCA]

A constructive trust is one that is implied into a situation, even if th eparties did not intend for it to be so. An example is when a husband and wife buy a house. They are assumed to hold it on trust for each other.

 

A resulting trust arises by law. For example, where someone tries to set up a trust (an express trust) but if fails, a resulting trust ensues in favour of that person.

 

To be honest constructive and resulting trusts are so close to each other that the distinction is often a fine one, usually applied purely by academic lawyers.

[diddled]

Thanks POCA, the issue I'm trying to find the answer to is-

An elderly person acting as a guarantor provides the bank with the deeds to an unregistered commercial property he owns as security. This elderly person subsequently loses mental capacity due to dementia. The bank makes formal demand on the borrower, the borrower fails to repay, then the bank makes formal demand on the mentally incapable guarantor. The guarantor does not have a legally appointed representative to preserve his affairs. Despite being aware that the guarantor was mentally incapable the bank failed to apply to the Court of Protection. They simply repossesed his property and sold it from under his feet. I assume the bank would be considered constuctive trustees in this case ?

[POCA]

I would say so. It sounds like you'd need to sue for the return of the property and have the possession order set aside.

[diddled]

There wasn't a possession order though. The bank just bypassed the court system and unlawfully used their alleged powers under Law of Property Act 1925

[POCA]

Oh dear. So are they relying on a signature given by an incompetent person?

[diddled]

Guarantor wasn't mentally incapable at time of signing guarantee.

Mental incapacity arose 5-6 years after signing.

I know that in cases of mental incapacity a contract is terminated by operation of the law. My argument is that when the bank demanded repayment they already knew the guarantor was mentally incapable, and in these sort of circumstamces the law requires any assets to be frozen, their affairs cannot be legally interfered with unless and until a receiver is appointed by the Court of Protection. As the bank held security in the form of the deeds to the property I think they must be considered as constructive trustees.

Immovable property under the control of trustees is covered by the Theft Act

Anymore thoughts ?

[Jimbo44]

Methinks a good solicitor, well versed in these matters is an absolute requirement now.

 

From my own experience you will need a solcitor who specialises in Trust matters as I think it unlikely a "general solicitor" will be experienced enough.

 

Just as an after-thought, and on a much lighter note, who is it in a PLC that is legally reponsible for that company's adherence to the law? Isn't it the Company Secretary? Just got a mental picture of a "big bank" Co Sec peering through the cell window at the local nick!!!

 

Do keep us posted, please!!

[POCA]

 

Just as an after-thought, and on a much lighter note, who is it in a PLC that is legally reponsible for that company's adherence to the law? Isn't it the Company Secretary? Just got a mental picture of a "big bank" Co Sec peering through the cell window at the local nick!!!

 

The directors are responsible since only they can make a company "do" something. However, any prosecution would be against the company itself and the only punishment realistically available is a fine (or winding up). To prosecute the directors you'd have to show a "directing mind" at work. Unless you can find a suitable offence which imports a liability to company officers.

[Pen]

Sorry to jump on this thread but it really is intresting reading. Just as a matter of intrest, how much would it cost to put a house in trust for chidren, do you need a Solicitor to set it up.

Pen

[JonCris]

Sorry to jump on this thread but it really is intresting reading. Just as a matter of intrest, how much would it cost to put a house in trust for chidren, do you need a Solicitor to set it up.

Pen

 

If your worrying about the future tax/liability commitments you would setup a trust in your WILL or if your looking to transfer your property now you can whilst retaining a life interest which means although you no longer own it you can continue to live there until you pass on.

However as most peoples circumstances can be very different I strongly suggest using a solicitor whos area of law is Wills Probate & Trusts.

 

You can find those in your area, plus a guide to their charges on the LAW Society website here

Law Society of England and Wales - Find a solicitor

 

Dependent on the amount of work involved you could be looking at a cost of from approx £250 to how long is a piece of string. If you speak to them they should quote you a price

[Pen]

Thanks joncris, i will look into it

Pen

[Resoli]

It is ABSOLUTELY VITAL that a Trust is correctly worded ... therefore GO TO A SOLICITOR. It will cost but the cost will outweigh getting it wrong.

 

One question - why do you want to put the house in trust? To save it for them? To prevent IHT? To just give it to them?Trusts now have a number of taxes applied to them (I'm a financial advsior). Putting it under trust may not be the best idea. A lot of people are doing trusts because they've suddenly become 'sexy' and fashionable. They need to be done properly and for the right reason. PM if you need advice.

 

On the issue of the constructive trust. The guarantor most likely signed an absolute guarantee. Any good commercial lawyer, e.g. a banks (although that said... lol...) will but the clauses in that make a guarantee is till effective even during mental incapacity. That said, the bank's actions must be challenged, even if speculatively. Given that their rights existed in effect in equity, equity can step in here. Go talk to a lawyer. A good provincial one should be able to help. Whatever town you are in, good talk to the best ones.

[zootscoot]

Please exercise caution before providing personal details via pm. Any advice can and should be given on the open forums so that others can learn from it and any wrong advice can be corrected.

[JonCris]

Trusts are a minefield. I know someone who spends much their day unravelling such trusts which are wrong.

 

Best advice see a solicitor because at least if they get it wrong you have a means of recourse & the prospect of compensation to make up for any loss that may occur later