LAW340 Equity And Trusts Essay.

A guarantee is considered as a promise by the party to make a certain amount of payment or meet the obligations, which is owed by other. It will continue to remain in place until the payment is made the guarantor or the obligations has been met. The considerations regarding the guarantee is either isolatable or whole. It generally contains the provision for revoking the guarantee for any kind of future transactions. This represents that guarantor shall be liable for the debts or obligations till the data of cancelations but the guarantor is not liable for any kind of considerations after the date.

Under the current case study, it is found that Faraway provides a guarantee in consideration of the loan to the principle debtor who in this case is Gostwyck. As evident from the case study Trisha who defaulted on her lease payment to Gostwyck, who then seeks to enforce the guarantee against the faraway is legally enforceable in the court of law. As evident had already agreed to provide guarantee, which stated that all the obligations and undertaking of the lease is witnessed in pursuant to the terms of document. Hence, a guarantee given by Faraway represents promise by the guarantor, which states that the debt, which is owed by to the credit provider, will be paid by Faraway if the debtor is not able to pay the money.

Agreeing to become the guarantor for Trisha, Faraway will have to may repayment and this ultimately means that the guarantee is enforceable. As noted in the code of banking practice it requires the credit providers who have subscribed to the code to provide the proposed guarantor with the notice of legal and monetary advice before making an entry into the guarantee. Therefore, guarantees forms the binding agreement between the party which involves three parties

1. The credit provider
2. The debtor or the borrower
3. The guarantor   

As noted in the case of “McDonald v. Dennys Lascelles” ltd the failure or refusal on the part of purchaser to complete the executory contract for the purchase of land cannot be entitled to be sued for the purchase money in the form of debt. He is only entitled to be sued for the specific performance of the contract for the damages sustained for the loss of his bargain. It is only applicable when the contract has been duly executed and an acceptance for the conveyance has been made for the unpaid amount of money, which in turn becomes debt and can be recovered according to the terms.

As stated under the Reynolds v. Fury the court of Victoria upon assessment of the authorities decided that the instalment of the money for the contract of sale of land was payable at the fixed times before the conveyance turns out to be debt or settled demands. Under the current case, there was an express statement, which proclaimed that Faraway is a guarantor and he shall be liable to pay for the instalment. Thus, even though the party to the contract had breached the promise to pay, however Gostwyck will be able to recover the money as long they have not been unconditionally accrued by the other party. A contract of guarantee presupposes the principle debt or an obligation, which the principle debtor is under the obligation to discharge in favour of the creditor. The surety under this case does not receives any kind of benefit and considerations and is therefore entitled to insists upon the rigid adherence concerning the terms of their obligations by the creditor.  Faraway liability for being a surety of Trisha under the guarantee consist of rights against Trisha to whom the guarantee was given. As noted the rights of surety against the principle debtor, where the guarantee was made with the debtor consent however after the default, Faraway shall be compelled to by the surety to vindicate him from any kind of liability by making the payment of any kind of guaranteed debt.

Under the current scenario it was found that Trisha entered into the contract with Max for a sum of $25,000 which was payable at will and did not had any kind of fixed period with Trisha having the right to pay off the loan during any time. The contract was executed between Trisha and Max however, after a short period of time Max receives advise from his accountant to divest few amount of assets during the financial year of 2015-16 to his wife for taxation purpose. Both Max and Maude executed a deed where the assignor transferred all of his rights to his wife in order to recover the amount of interest on the amount of debt owed from Trisha to the assignee.

The deed executed between Max and Maude was expressed in the form of gift transfer. The gift contained the provision of gifts of interest paid but not on the gift of the interest to be paid. As stated in the case of Norman v. Federal Commissioner of Taxation it was argued that whether the taxpayer or his wife deriving the two items of income consisted of 450 pounds interest paid from a partnership deed. On the other hand, 40 pounds paid in the form of dividend where the taxpayer was the shareholder at the time when the dividend was declared and paid to him. The tax payer asserted by claiming that neither amount of his income should be considered as his income. The taxpayer contented that he had voluntarily but effectively assigned them to his wife. The assignment was depended upon the deed that was executed by both the taxpayer and his wife where the taxpayer purported to assign to her four descriptions of income for the terms having different point of starting.

Upon the assessment it was found that the deed was inconsistent with this contention as it provided that on account of distribution of the assets of the estates were referred to the first schedule of the deed. The financial value and the assets received by the assignor for the time being represented the same to be deemed as assets in the specific schedule. As found in the case of Lunn v. Thornton 1845 that interest arising under the contract represented the character of future instead of an existing right. The deed needed considerations and was ineffective to entitle the assignee to the amount of interest, which was in question for payment.  Under the given case study for the debt accruing or arising of the contract though not, payable on the date of the assignment would be considered as assignable by law. On the other hand, from the observation it can understood that the applicability of the case may be made to the present case. In pursuant to section 25.6 of the Judicature Act corresponding legislation can also be assigned in the equity voluntarily and not every right can be assigned in consideration of the law.

The section is applicable to the future debts and not just debts, which is not presently payable. As evident from the Judicative Act, the effectiveness of the voluntary assignment remains limited to the existing rights and interest. It has long been settled that the future possibilities and expectancies are assignable in equity for value. In order to make the purpose of the assignment for value regarding present and immediate an equity has always been regarded as a contract, which has binding on the conscience of the assignor.

The equity also has the binding on the subject matter of the contract when it came into the existence having the capability of being ascertained and identified. It is noteworthy to denote that the deed executed between the Max, Maude constituted a complete transfer of right to his wife, and the principles stated under the case of Comptroller of Stamps v. Howard-Smith would be applicable. A transfer of deed would therefore been considered as the transfer of future property and may require the consideration to be effective. The real effect of such assignment where the property is not in existence represented that it carried an effect not because it passes the property but it has contractual obligations, which was binding upon the assignor.  

It is not very uncommon for the verbal assignment to be made rashly or without considering all the details properly sorted. However, verbal assignment can be considered as legally binding with the identical force in relation to the agreement in written form. However, it should be noted that not all verbal agreements will be considered as a contract. Under the given case study, it is noticed that Ezy Finance sells to ABC Factors and the debt owing to Trisha was discounted from 25000 to 22000. However, it is observed from the case study that the deal was struck verbally over launch and was sealed with the handshake. As noted in the case of Milroy v Lord which stated that trust should not be put into use in order to save the gifts from being defeated. Therefore, it purported to follow the principles of equity where the equity will not assist the volunteer.

The case study stated that Thomas had held shares in the company and brought forward its intention of transferring them. The bank required the shares to be transferred in accordance with the regulations. The deeds of the shares were signed by Medley and upon his death, he wanted to his niece. After the death of Thomas medley Milroy made the claim by stating that the shares belonged to him. However, Stuart VC held that the trust was created in the name of the Elenor and the decision was appealed. However, according to the verdict of the court the transfer had failed.

The court stated that ineffective outright transfer could not be regarded as the effective declaration of trust. In the current case, it can be asserted that Trisha assignment cannot be regarded as valid transfer since Ezy Finance did not do any kind of witness document concerning the existence of such kind of transfer. In addition to this, the sole director of Ezy finance was unfortunately killed in the car accident. It can be considered that the transfer of cheque had affected the legal title. It was in the power of Ezy finance to make the transfer of deed so that it can confer the legal proprietorship on another person but failing to make the documentation represents an ineffective declaration of trust. As set out in the current case study that the deed will only be considered as an effective transfer where the donor had done everything which he is obliged to do in order to make the deed valid.

The onus is on ABC factor to prove the existence of deed and from the current case study; it is evident that there is nothing in writing about the conversation held between ABC factor and Ezy finance. Thus, this represents an extremely difficult situation to prove what was said and what was promised. Ezy finance had the power of conferring the legal ownership of the deed on ABC factor but no documentation was to bind it in the form of legal proof. In order to render the settlement of the binding of sum owed by Trisha transfer of title to the trustee should have been documented. This will be regarded as one of the failed transfer. Therefore, as stated above an ineffective transfer cannot be regarded as effective declaration of trust.

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