CHAPTER 1
GENERAL INTRODUCTION
1.0.0: INTRODUCTION
The origin of the legal concept of trust in Nigeria cannot be fully discoursed without an enquiry into the antiquity and evolution of its history. Trust is a product of equity. Equity was a rule created to ameliorate the harshness and rigidity of the common law. In England equity developed separately from the common law and was administered in separate courts where the chancellors were judges. In view of this historical relationship, equity was held to be an appendage of the common law and was used to fill up the gaps-where the remedy available at common law was not sufficient to meet the justice of a particular situation. The chancellor who is the judge in the court of equity [also known as
chancery court] 1 decided each case on its merit and in accordance with conscience. His judgments were based not on precedent but on his individual sense of right and wrong. It was due to this peculiar nature of equity, that Johnseldan a notable jurist made his famed remark:
‘…equity is a roguish thing. For law (common law) we have a measure…equity is according to the conscience of him that is chancellor and as that is longer and
1 1 MuizBanire, The Nigerian law of trust, 2002, 1st edition, pg.2
narrower, so is equity. It is also one as if they should make the standard for the
measure, a chancellor’s foot.’2
1.1.0: BACKGROUND TO STUDY
The reception of the English law of trust in Nigeria was not a voluntary act. It was in a manner of speaking practically forced down our throat through the received English laws
which came into force on the 1st of January 1900. It is instructive to note at this stage that prior to when the British imposed their legal regime on us, the idea of trust was not unknown to us, it had been in existence under our native and customary system. The notion of individual ownership of land for example, was foreign to our native ideas. Land was viewed as a communal property, never to the individual. All members of the community have equal rights and access to the communal land but in every case, the chief or head of the community, village or family has charge over such land and he is sometimes loosely referred to as the owner. He is in essence in the position of a trustee and as such holds the land for the common benefit of all members of the community. The implication of the foregoing is that the community or family head can validly alienate land to any person or group on their behalf. He is merely an agent through whom such transaction is to take place and he must deal with it in such a way that not only is his interest affected but those of the others. In the celebrated case of AMADU TIJANI V.
2Kodilinye, An Introduction to equity in Nigeria, 1975, 35th Ed, pg. 2.
19
THESECRETARY OF SOUTHERN NIGERIA, 3Viscount Haldane was of the opinion that the family head does not own the family land but administers it on behalf of the family members.
1.2.0: OBJECTIVES OF STUDY
Since trust is foreign to Nigeria, most of the English ideas about it have not yielded much to us. To this end, this essay is aimed at shedding more light on the concept of trust in the Nigerian setting, duties and powers of trustees and the ways by which these responsibilities can be carried out without impeding the interests of the beneficiaries in the estate. As a result of the research work done in this project, it was discovered that some trustees exceed the limit s of their normal powers and sometimes fail to carry out the necessary duty of care that is expected of them which in effect leads to a breach of the trust. Solutions would be proffered to this problem in this work.
In addition, experience has shown that trustees in the course of carrying out their duties have been faced with a lot of challenges and limitations. This is inspite of the statutory provisions relating to the exercise of their powers. Some of these challenges have to do with religious beliefs, customs and disagreements between beneficiaries. This essay will also examine whether the statutory powers of trustees are sufficient to surmount these challenges.
3 (1921)3 N.L.R 21
The reasons for the examination of this topic are not far-fetched. This work will help make an illumination on the enormity of the oversight that settlors or property owners need to exercise on the trustees. Moreso, beneficiaries would be better educated that decisions of trustees are not absolute, they can exert influence on the trustees especially after the attainment of the age of majority. In similar manner, a trustee is expected to act in good faith and exercise independent judgment, taking into consideration the intention of the testator and the interests of the beneficiary, he is not a puppet that is pulled at the end of a wire.
1.4.0: SCOPE OF STUDY
As the heading connotes, an enquiry into the idea of trust will be made, its historical evolution, its application in Nigeria vis a vis its jurisprudential basis as well as the onerous responsibility of trustees in the administration of the trust estate.
1.5.0: METHODOLOGY
The method of approach that would be employed in this write-up will be based mainly on the use of secondary data. The secondary data will include textbooks written by renowned authors and scholars who by their wide knowledge and grasp of the subject and other ancillary legal precepts are experts in the field. Local statutes as well as judicial
decisions of Nigerian courts on the subject of trust will be examined so as to give it a Nigerian perspective notwithstanding its foreign origin.
1.6.0: LITERATURE REVIEW
J.O Fabunmi in his work Equity and trust in Nigeria, 1986, 1st Edition, O.A.U Press
Ltd. Ile Ife Nigeria, page 137 opined that many authors4 have attempted what a trust is with little success. Perhaps the most successful definition was that given by professor Keeton. He defined trust as follows: “a trust is a relationship which arises where a person called the trustee is compelled in equity to hold property, whether real or personal, and whether by legal or equitable title, for the benefit of some persons (of whom he may be one and who are termed cestuique trust) or for some objects permitted by law, in such a way that the real benefits of the property accrues not to the trustee but to the beneficiaries
or other objects of the trust.”5
There are certain important points arising from this definition. Firstly, it shows that there can be a trust of equitable interest. For example, a trust is created when A’s right in a trust fund is given to T1 and T2 on trust for B. Secondly, it is possible for both the legal and equitable titles to be vested in one person as when he, as a trustee holds a legal interest in trust for himself. Thirdly, some trusts may be valid eventhough they are for the
4Hanbury’s Modern equity; 1969 p.85: Underhill, Laws of Trusts and Trustees 12 Ed. P.3 5 Keeton, Law of Trusts, 1963, p.3
benefit of purposes.6 Finally, a trust is not necessarily created whenever legal and equitable interests are separated.
According to D.J Bakinbinga in his book Law of Trusts in Nigeria, 1989, 1st Edition,
Unilorin Press Ilorin, page 18, a trust is defined7 as a relationship which is recognized by equity. It arises where property is vested in a person or persons known as trustees and these trustees are under a duty to hold for the benefit of other persons known as cestuiquetrust (pronounced setikii trust) or beneficiaries.
The interest of the beneficiaries are normally described in the instrument creating the trust. However, this may be implied or imposed by law. It is also worthy of note to mention that the beneficiary’s interest is proprietary in the sense that it can be bought or sold, given away or disposed by will. It ceases to exist where the legal estate passes to a
bona fide purchaser for value of the legal estate without notice of the trust.8
It is important to note that the subject matter of the trust must be some form of property.
Normally, this takes the form of legal ownership of land or of invested funds.9 However, it may be any sort of property such as land, money, chattels, equitable interests or choses in action.
6For example, charitable trusts and private trusts of imperfect obligations.
In the view of Olayide Adigun in his work Cases and Texts on Equity Trust and
Administration of Estates, 1987, 1st Edition, Ayo Sodimu Publishers Ltd. Abeokuta, Ogun state Nigeria, page 246, he posited that in conventional English legal treatise, a trust is “an equitable obligation binding a person (who is called the trustee) to deal with property over which he has control (which is called trust property) for the benefit of persons (who are called beneficiaries or cetuique trust), of whom he may himself be
one…”10 the beneficiaries may be charity, human or a definite non charitable purpose. This apparent neutral definition of trust does not tell much about the device called “trust” which Maitland described as “the greatest and most distinctive achievement performed by English men in the field of jurisprudence…an institute of great elasticity and generally
as elastic, as general contract.”11
The trust system is a very flexible device. It permits multiplicity of trustees and functions. The trustees could be successive or concurrent. In a single trust instrument, there can be human beneficiaries and benefits for other purposes which are charitable. Also properties of all types – money, choses in action, shares and real property can be the subject matter of a trust.
The trust splits ownership of property between the trustee and the cestuique trust or beneficiary. The trustee holds the legal interest while the beneficiary holds the equitable interest. The nature of the trustee’s interest is a right in rem, that is, the rights of an owner
10SeeUnderhill’s Law of Trust and Trustees, 13th Ed. P1 11 Maitland, Equity, p. 43
of property. The trustee can validly confer title over trust property free of the trust to a third party. However, the third party must be a bona fide purchaser for value without
notice.12 On the other hand, the interest of the beneficiary is described as an interest in personam. The beneficiary of a trust has a right of personal action against the person of the trustee who has breached his trust. In the event of a transfer in breach of trust to a bona fide purchaser, the purchaser’s interest in the trust property supercedes that of the beneficiary. But any other transfer in breach of trust gives the beneficiary a right to trace trust property into the hands of the volunteers and creditors of the trustee in his personal
capacity.13
Muiz Banire in his book The Nigerian Law of Trusts, 2002, 1st Edition, Excel Publishers, page 25 brought to the fore a definition given byLewin whoin turn adopted a
definition given by Mayo J. in RESCOTT.14It was averred that “trusts refers to the duty or aggregate accumulation of obligations that rests upon a person described as the trustee. The responsibilities are in relation to property held by him, or under his control. He will be compelled by a court in its equitable jurisdiction to administer that property in the manner lawfully prescribed in the trust instrumentor where there is no specific provisions written or oral, or to the extent that such provision is invalid or lacking, in accordance with the equitable principles. As a consequence, the administration will be in such a manner that the consequential benefits and advantages accrue, not to the trustee but to the
person called cestuique trust, or beneficiaries, if there be any; if not for some purpose which the law will recognize and enforce. A trustee may be a beneficiary, in which case the advantages will accrue in his favor to the extent of his beneficial interest”
1.7.0: MEANING OF TRUST
Under the English law, trust is placed on a prominent pedestal, it is an institution considered unique and it has been held to be vital to human civilization. But as it is the case with many important legal concepts, attempts by various authors at arriving at a cogent and concise definition has recorded little success. Black Law’s Dictionary defines trust as a right of property, real or personal held by one party for the benefit of another. It also went further to add that trust can be defined as an arrangement whereby property is transferred with the intention that it shall be administered by the trustee for another’s benefit
Coke’s attempt at defining trust was summed up as the confidence reposed in some other not issuing out of the land but a thing collateral thereto, annexed in privities to the estate of the land and to persons touching on the land for which the cestuique trust has no remedy by subpoena in chancery.
Maitland on his own part described trust as the greatest and most distinctive development performed by English men in the field of jurisprudence. He also said it is an institution of
great elasticity and generally as elastic as general contract.15In the view of SirFredrick
15 Oakley, Modern law of trust, 1994, 6th edition, pg.
Underhill, it is an equitable obligation imposed upon a person who is called the trustee the duty of dealing with property over which he has control which is called the trust property for the benefit of persons called beneficiaries or cestuique trust of whom he may
himself be one and of anyone of whom may enforce the obligation.16
However, the most popular definition was the one given by professor keeton where he posited that trust is the relationship which arises whenever a person called the trustee is compelled in equity to hold property whether real or personal and whether by legal or equitable title for the benefit of some persons of whom he may be one and who are termed cestuique trust or for some object permitted by law in such a way that the real benefit of the property accrues not to the trustee but to the beneficiary or other objects of
the trust.17
The importance of trust cannot be overemphasized. The system of trust is a very flexible contrivance which permits the multiplicity of trustees and functions. In one single trust instrument, there may be human beneficiaries and benefits for other purposes which are humanitarian or charitable. In addition, all kinds of properties whether real or personal, movable or immovable can be subjects of trust. Cash, debts, shares in joint-stock companies, debentures or other choses in action can be subject-matters of trust. The trustees has the legal interest while the beneficiary has the equitable interest. The nature of the trustee’s interest is a right in rem (right of an owner of the property). In other
16 Oakley ibid
17Fabunmi ibid pg.13
words the trustee can validly transfer title over the trust property to a third party. But the third party must be a purchaser for value without notice. Conversely, the beneficiary’s interest is a right inpersonam. The beneficiary of a trust has a right to personally sue the trustee who has breached his trust.
1.8.0: PARTIES TO A TRUST
A trust arrangement involves three principal parties namely; the settlor, the trustee and the beneficiary.
SETTLOR; A trust can be created generally by any person who has the capacity to dispose of an equitable interest or legal interest in an estate. The person with the capacity to dispose is called the settlor. However, not every person has the requisite capacity or qualification to be called a settlor. This restriction includes infants and minors i.e persons that have not attained the age of 18 years cannot create a trust on land or realty as provided for by section 1(1) FAMILY LAW REFORM ACT, 1969. But in the case of personal property, [other properties not related to land] a settlement made by him after he attains the age of majority [18 years] is binding unless repudiated within reasonable time of that date.18
Also the class of persons covered under the MEDICAL ACT, 1959 cannot make a valid disposition. Section 103(1)of the Act grants the court the jurisdiction to direct settlement
18 Oakley, ibid pg.33
of the property of a mentally unsound person of full age.19 Hitherto, married women were restricted by the rules of common law. Under the law a married woman’s chattel belongs to her husband. But with the enactment of the MARRIED WOMEN’S PROPERTY ACT, 1882 as amended by theMARRIED WOMENTORTFEASOR ACT, 1935, any married woman can now create a trust as if she was femesole.
TRUSTEE; a very vital party to the trust arrangement is the trustee. This is because it is the trustee that defines how the estate would be dealt with. It is the trustee that is required by law to administer the estate for the beneficiary’s benefit. As earlier held in the introduction to this essay, the legal title to the res i.e. subject-matter of the trust is vested in the trustee, but he is to deal with it in accordance with the intention of the testator as directed by the trust instrument. A person with the requisite capacity can be appointed trustee. One condition for such appointment is that such person must be of full age. Under the law the age of capacity otherwise known as age of majority is 21 years. Where the appointment is made by the court, then a beneficiary under the trust who has attained full age can be so appointed. However a beneficiary’s solicitor or spouse or a person resident outside the court’s jurisdiction cannot be appointed.20
By virtue of section 18 of the PROPERTY AND CONVEYANCING LAW, 1959 an infant is not eligible to be appointed trustee in relation to any settlement. The section further provides that such appointment will be void but without prejudice to the power to appoint new trustees to fill the vacancy. However, the same statute makes provision to the effect that an infant can hold property other than a legal estate in land resulting from
an implied or constructive trust21. By section 17(3) of the above law, the conveyance of legal estate to an infant or two or more persons jointly both or all of whom are infants on any trust operates as a declaration of trust and does not pass any estate. A married woman can be appointed trustee to any property. This was made possible courtesy MARRIED WOMEN’S PROPERTY ACT,1882 which removed the restriction placed on married women, as amended by the MARRIED WOMEN’S PROPERTY ACT, 1893. Beneficiaries can be appointed trustees but such appointment is not desirable as there is the possibility of conflict between the former’s interest and the latter’s duty. Corporations can also be appointed. Such corporations must however be corporate bodies empowered by the CAC or the court to carry on the business of trusteeship such as the trustee department of a bank or the public trustees as empowered by the PUBLIC
TRUSTEES ACT, 1958 section 9.22
BENEFICIARIES; the persons in whose favor the testator or donee of the power applies the property are known as the beneficiaries23. They include those enjoying
21Ibid.
22Kodilinye, ibid
23Akinyelure, Executoip, trusteeship, bankruptcy law and accounts. 1994, 1st Edition, pg.92
the benefits of the property created in their favor. It is worthy of note to state that any person capable of holding interest in the trust property can be a beneficiary.
By way of analogy, an infant who has an equitable interest in land can be a beneficiary of a trust involving real or personal property. Incorporated companies under the COMPANY’S ACT, 1948 can be beneficiaries. Foreigners may also be beneficiaries under a trust with the exception of one involving a British ship according to the ALIEN’S ACT, 1914 and the BRITISH NATIONALITY ACT,
1948. Married women are also qualified to be beneficiaries.24
1.9.0: APPOINTMENT OF TRUSTEES
A person cannot just by his whim assume the role of a trustee. For him to qualify as one, he must first be appointed. The issue of appointment is very crucial in a trust settlement. However, the following are the ways a trustee can be appointed;
by settlor
by statutes, and by the court
Appointment by Settlor; originally, trustees are normally appointed by the settlor or testator. However if all trustees appointed in the settlement disclaim or if all the trustees die, the testator if still alive will hold the property as trustee. But where
24 S.M Abdulrazaq, Notes on trust, 1998. Pg.12
the testator is no more and either all the trustees disclaim or die, the personal representative of the last surviving trustee will hold the property in trust. This is the whole essence of the maxim ‘equity never wants for a trustee’. Where trust is created by a will, the same persons appointed executors may as well be appointed trustees. But where this is not the case, the executor may still be the one nominated by the trust instrument [will] to appoint trustees. In this instance, the executor will be empowered to appoint not as testator but as the person nominated.
Moreso, in a trustintervivos [trust created by a will] the testator may appoint himself in
the first instance.25 In the case of ADEMOLA V. SODIPO,26 it was held that a trustee is generally appointed by the settlor or the person who erects the trust.
Appointment Made Under Statute; this is governed by theENGLISH TRUSTEESACT, 1893 which is a Statute of General Application operational in all the states of the federation except the defunct old Western States of Ogun, Oyo, Ondo and Bendel which apply the TRUSTEES LAW. Section 21 of the TRUSTEES LAW provides that new trustees may be appointed in writing by deed:
i} by person or persons nominated in the trust instrument, ii} by continuing trustees but if they are dead,
25Kodiliye, (supra) pg.2
26 (1989)5 NWLR pt 121, pg.329 C.A.S
iii} by the personal representative of the last surviving trustee or
iv} by the court.
The appointment of a new trustee or trustees may be made whenever a trustee is dead, remains outside of the country for a period exceeding twelve months or desires to be discharged, refused to act; is unfit to act or is incapable of acting or has been removed under the power conferred in the trust instrument. In all of these cases, in the old Western States where the TRUSTEE’S LAW is applicable, a person making the appointment may appoint himself. Whereas under the TRUSTEES ACT of 1893, the person exercising the power cannot appoint himself. Although, section 10 of the Act of 1893 and section 24 of the Trustee’s Law, 1959 requires that the appointment of trustees be made by deed because in this case the trust property is automatically vested in the new trustee and this
makes a separate vesting instrument unnecessay.27
Appointment by the Court; the court may make an appointment by virtue of its jurisdiction. This power of appointment is conferred by section 25 of the TRUSTEES ACT, 1893and section 38 TRUSTEES LAW (laws of Western Nigeria, 1959). Such powers may be exercised by the court whenever it deems it expedient to do so. Such powers may be for the appointment to or in addition to existing trustees.28
27Fabunmi (supra), pg. 182
28Fabunmi (supra), pg. 183
In any such situation, there is a discretion exercisable by the court except where exceptional circumstances justify this, the court will not be bound to consider the wishes of the testator or the beneficiary. Particularly and without prejudice to the generality of the provision, the court may make an order for the appointment of a new trustee where one of the trustees has been convicted of a felony or is declared insolvent. It appears that on the proper construction or interpretation of the above provision, the powers conferred bysection 10(1) TRUSTEES ACT, 1893 and section 24 TRUSTEESLAW must first be exhausted before applying to the court for it to appoint new trustees. However, an application to the court can be made for the appointment of new trustees where for example, the last surviving trustee dies intestate without leaving any estate so that no grant of administration is made in respect of his property and no one else is given power to appoint new trustees. In situations like this, the court is to exercise its discretion judiciously within the ambit of established rules and general principles as laid down by
TURNER L. J. in RE-TEMPEST29, which is summarized as follows:
‘1) The court will respect a settlor’s wish where these have been made known expressly or by implication.
2) It is unlikely that an appointment will be made if the person so appointed would have conflicting interest with those of the beneficiaries.
29 (1886) ICH, APP, 485.
3) The court will take into consideration whether the proposed appointment will result in the promotion of the execution of the trust or whether it may impede it.’
1.0.1: CONCLUSION
Since there is no provision in the statute to guide the court in the exercise of its powers of appointment, the above rules as enunciated by Turner L.J. are sufficiently broad to be applicable to the Nigerian situation. It is therefore submitted that Nigerian judges when faced with similar problems of appointing trustees, may well adopt the above principles.
Accounting/ Audit/ Finance Jobs
Administration/ Office/ Operations Jobs
Advertising/ Social Media Jobs
Copyright © 2024 All Right Reserved CVClue
A Subsidiary of EMINENT INFO TECH VENTURES