Posted: January 19th, 2016

Will the trustees be directed to enforce the covenant?

Covenants to Settle

Where there is a covenant between the settlor, and the trustee the question is different. Here there is an obligation on the settlor to transfer the trust property. Not only have he declared an intention to do so, but he has contractually bound myself. That property may exist at the time the covenant is made, or it may be what is called “after-acquired property“, that is a covenant to settle property acquired in the future. There are three possible situations.

  • Where the trustee has given valuable consideration for the promise to transfer he may rely on the doctrine of specific performance and compel the settlor to transfer the property.

2) Similarly if there is marriage consideration anyone within the marriage consideration may compel the transfer of the actual property. The spouse and any children are considered to provide the marriage consideration and can therefore enforce the contract. Pullan v Koe [1913] 1 Ch 9 involved a marriage settlement. The wife covenanted with the husband that she would settle certain property in consideration of the marriage. The wife did not settle a sum of money she should have. The moment the wife received the money it was bound by the covenant and was consequently subject in equity to a trust enforceable in favour of all those within the marriage consideration.

In these two scenarios equity takes the view that the trustees, or those within the marriage consideration, have given value for the promise. They are not volunteers. Specific performance is not available to volunteers

  • The settlor has not received any consideration in return, or the claimants have not provided any consideration. Normally in this situation the covenant will be a deed under seal. Normal contractual rules provide that a seal is good consideration at law. The cases have concerned after acquired property, and that has complicated matters unnecessarily. The question is whether the obligation to transfer property acquired in the future can be contractually enforced by or for the benefit of a volunteer beneficiary when that property comes into being.

Two questions arise in this case

Two questions arise in this case
a) Will the trustees be directed to enforce the covenant?
b) Can they be forced not to attempt to enforce the covenant?

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