Equity and Trust

A sample Question

Donald was a wealthy businessman who, upon his retirement, gave the following letter to his only daughter, Badia.

Dear Badia,

Now that I am retiring a wealthy man from the profits of my businesses, I want to make sure that my loyal employees are looked after in their retirement too. I have settled $10 million in a trust, called the D Beneficent Fund, to provide pensions for former employees and their dependants. I have appointed my solicitor, Josh, as trustee. I would like to appoint you to chair the committee that will select deserving recipients of pensions from the fund. I want to be sure that only employees who have served my companies faithfully for many years will be entitled to any payments for themselves or their dependants.

Last year, I invested $500,000 in a property development venture with your uncle Mike. Mike used my funds to purchase the block of land and he was to borrow a further $500,000 himself to complete the project. We intended to share the proceeds from the eventual sale of the property upon completion. The land is registered in the name of Mike's private company, Mike Constructions Pty Ltd. I haven't heard anything from Mike in a long time, so I would like you to chase him up to find out what is happening with the project.

Finally, I am the sole beneficiary in the will of my deceased aunt, Tez. She has left me her house in Mosman, and various other property. The executor of the estate is Jacob, of Jacob Law Partners. He has been taking a very long time to wind up the estate. I would also like you to chase up what is happening with the estate.

In appreciation for all the work you are doing for me, I want to make you a gift. I recently purchased a new apartment in Pyrmont off-the-plan from Realty Constructions Ltd and it is due to be completed by the end of year. I hereby assign to you all my rights under that sale contract. I have already paid a 50% deposit, and there is $600,000 left to pay. I will give you that amount from my personal bank account with Westpac when the time comes for settlement.

[The letter was signed, 'Donald'].

Shortly after Badia received the letter, Donald collapsed of a heart attack and died. Donald's will left all his property to his widow AMY, and named Badia as the executor of his estate.

Badia is now seeking your advice on the following:

Badia does not wish to bear the burden of selecting beneficiaries of the Donald Beneficent Fund, because she knows that Donald's many companies have thousandsof employees and she does not want to spend the rest of her life assessing applications from them. She also believes that this money should have been left to her mother, Amy.

On investigating the property development with her uncle Mike, Badia discovered that the project has stalled, because Mike was not able to raise any funds for completion. The land is now valued at $800,000, and Mike is refusing to agree to its sale. He has asserted that the land belongs only to Mike Constructions Pty Ltd, now that Donald has died.

On investigating the management of Tez's estate, Badia has discovered that Jacob purchased the Mosman house from the estate himself at a serious undervalue, and has made a gift of it to his wife, Mrs Jacob, who is now the registered owner of the house.

Realty Constructions Ltd has now completed the apartment in Pyrmont and is ready to settle. Donald's personal Commbank bank account presently has a balance of $700,000.

Give advice to Badia dealing (in order) with:

1. The Donald Beneficent Fund. Advise Badia of any proceedings she may bring to claim the $10 million in this trust for Donald's estate and her prospects of success.
2. The parcel of land now owned by Mike ConstructionsPtyLtd. Advise Badia on any claim she may make to an interest in this property, and her prospects of success.
3. The Mosman property in Tez's estate. Advise Badia on any action Badia may bring against Mr and Mrs Jacob in respect of the Mosman house.
4. The Pyrmont apartment. Can Badia now withdraw $600,000 fromthe Commbank bank account and use it to complete the purchase of the Pyrmont apartment in her own name, or does the right to complete the purchase belong to Donald's estate?