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INTRODUCTION
Development/History of the Trust - Trust developed from the use: enabled a person to hold the legal title for land for the benefit or USE of another - Common law did not recognise the rights of the beneficiary; the legal title-holder had all rights to the land - When title-holder disregarded the interests of the beneficiary... - Popular in 16th century because: - 1. Land could not be passed by will; uses enabled this - 2. No death taxes were payable on uses - Banned by Statute of Uses in 1535 but lawyers then began creating a use upon a use e.g. to A for use of B for use of C - and Chancery courts began to accumulate a body of law for disputes involving these

Uses of Trusts Commercial: - Investment - Superannuation - Claimant priority trusts - assets of a trust are not divisible amongst the trustees general board of creditors in a winding-up - Tax minimisation (asset protection) - Trading trusts Socially useful: - Charitable purposes - Unincorporated associations Family purposes: - Protective (protect assets from those who would otherwise misdirect them) - Benefits for those unable to own property - Family trusts - Private provisions of benefits on death (cf. a will which is a public document; trusts allow assets to be allocated privately) - Allows for estate planning - Protection against bankruptcy

Attempts at Definitions of Trusts Dal Pont, Equity & Trusts: Commentary & Materials - the relationship that exists between a person who holds the legal title to property for the benefit of other persons (beneficiary or cestui que trust). The beneficiary holds the equitable title to the property.

Description of a trust Heydon & Leeming, Jacobs Law of Trusts in Australia: A trust exists when the holder of a legal or equitable interest in certain property is bound by an equitable obligation to hold his interest in that property not for his own exclusive benefit; but for the benefit, as to the whole or part of such interest, of another person or persons or for some object or purpose permitted by law. Ford and Lee, Principles of the Law of Trusts:

A trust is an obligation enforceable in equity which rests on a person (the trustee) as owner of some specific property (the trust property) to deal with that property for the benefit of another person (the beneficiary) or for the advancement of certain purposes. Split in title = the division between legal and beneficial ownership; the thing that distinguishes a trust from all other types of legal ownership (i.e. common law ownership)

Elements of trust: 1. Trustee 2. Trust property 3. Beneficiary 4. Personal equitable obligation that is attached to the trust property (i.e. obligation to hold the trust property for the benefit of the beneficiary).

Terminology - Trustee: can be an individual, or anything else recognised by the law as a person - e.g. corporation - Beneficiary: see Trustee. - Object: One or more persons or purposes that will/may benefit under a trust. Not all trusts have a beneficiary (purpose trusts) so the object could instead be a purpose. - Trust property: Also called subject. Can be real or personal property. - Trust deed: Also called trust instrument or settlement deed. Not essential to creation of trust; if no deed, trust follows equitable statutory requirements. - Settlor: Person or persons who create the trust. Used when the trust is created during the persons lifetime. - Testator/testatrix: Deceased person who has left a valid will. - Inter vivos trust: A trust created during the lifetime of a settlor. - Testamentary trust: A trust created by the will of a testator.

Classification of Trusts
Most commonly classified according to the way they arise: 1. Express = intention of the settlor 2. Resulting = implication of (already existing) law 3. Constructive = imposed by the court

1. EXPRESS TRUSTS - Arises pursuant to the intention (which may be express or inferred) of the settlor (i.e. creator of trust). - Can be created by declaration or transfer - May take 1 of 2 general forms: - Express PRIVATE trust: Trust is intended to benefit one or more individuals - Express PUBLIC trust: For purposes recognised by law as charitable, e.g. relief of poverty/illness/the aged, advancement of education. Used interchangeably with charitable trust. - May be fixed or discretionary (refers to the beneficial interest)

- FIXED: - Beneficiary or class of beneficiaries are ascertained and the beneficiaries have entitlements in equity in the trust property which are ascertained in accordance with the terms of the trust. - The beneficiaries may enforce the administration AND distribution of the property of the trust. Trustees have no element of choice in distribution of the trust property. - e.g. Settlor entrusts money to their children and specifies that it is to be divided a certain way (does not have to be equal). - Beneficiaries have an equitable proprietary interest in the trust property, right from the trusts creation. - DISCRETIONARY: - Trustees have an absolute discretion to apply the income and capital of the trust property to the beneficiaries (or class of beneficiaries) or the charitable purpose/s of the trust. - Here the beneficiaries have a mere expectancy and thus have no vested interest in the property until the trustees elect to exercise the discretion in their favour (i.e. until trustee decides to give them something). - May also be EXECUTORY or EXECUTED - Executed - all necessary formalities to complete the trust have been fulfilled and its terms are clear - Executory - intention of settlor to create trust has been manifested but some further step (or steps) is/are necessary to finally settle and define the details of the terms of the trust. - May be TESTAMENTARY or INTER VIVOS

2. RESULTING TRUSTS - These are implied by law. - Give effect to a persons lack of intention to confer beneficiary ownership on another - Not created pursuant to the actual intention of the parties but arises from a particular form of transaction - Arises where one person (the settlor) confers title to property to another person but the settlor retains beneficial ownership of the property, in whole or in part. - Incomplete disposition of a beneficial interest - Means that there may be a gap in beneficial ownership; to avoid this, the law creates a resulting trust (generally the beneficial ownership will revert back to the settlor) - 2 types of resulting trusts: - Automatic RT - Presumed RT

3. CONSTRUCTIVE TRUSTS - Called this because it is constructed/imposed by the court - Do not depend upon the intention of their creator - Are imposed by the court on a person where it would be a fraud (inequitable) for that person to assert beneficial ownership ELEMENTS OF A TRUST

1. The Trustee - There must be one or more trustees - May be individual or corporate - Must hold a legal or equitable interest in the trust property for the benefit of a beneficiary or charitable purpose - Can also be a beneficiary, but cannot be the ONLY beneficiary - Once completely constituted, a trust will not be allowed to fail for want of a trustee 2. The Trust Property - There should be property capable of being held on trust - Real or personal - Tangible or intangible - Generally all property is capable of being held on trust unless a law prevents it - There must be certainty of identification of the property 3. The beneficiary or charitable purpose - There must be at least one beneficiary - Can be trustee, see above - No requirement that the beneficiary be a person who is actually in existence at the time the trust is created, e.g. unborn child - In case of charitable trusts there will be no individuals as beneficiaries - beneficiary is charitable purpose - Usually beneficiaries will have a personal equitable interest in the trust property (except in discretionary trusts, see last lecture) 4. The personal obligation annexed to the trust property - Trustee must have an equitable obligation to deal with the trust property for the benefit of the beneficiaries - The obligation must be annexed to the trust property - This obligation is both a personal one binding on the trustee, and one which binds the property itself

TRUSTS DISTINGUISHED Trusts are not the same as: - Other fiduciary relations - Bailment - Agency - Debt - Contract - Condition - Equitable charge - Equitable obligation

Fiduciary relationships and trusts - Essence of fid rship is to serve exclusively the interest of others - Trusts are a SUBSET of fid rships Bailments and trusts

- Bailment is a delivery of personal chattels to a bailee to be held in possession on the condition that they be returned to the bailor (OR as the bailor directs) when the purpose of the bailment is carried out - e.g. taking car to be serviced: Owner = bailor, Auto mechanic = bailee - Similarities: - Both hold property for another; duty of care - Differences: - Bailee has weak possessory title, while trustee holds legal title - Bailment recognised at common law; trust = equity - Bailment only applies to personal property capable of delivery; trust applies to all real and personal property - Bailment is enforced by the bailor; trust cannot be enforced by the settlor - Rights of 3rd parties differ: - a 3rd party who purchases property with a bailment on it for value and without notice cannot obtain good title - legal owner can recover from purchaser - a 3rd party who purchases trust property for value without notice CAN obtain good title Agency and trusts - Agency arises where a person called the AGENT has express or implied authority to act on behalf of another, called the principal, and consents to do so - Similarities: - Both trustee and agent act in interests of, and for benefit for, another: - Agent-principal, trustee-beneficiary - Both act in a fiduciary role - no conflict of interests, no secret profits... - Tracing is available to assist in the remedy for both - Differences: - Agency not VESTED with the property of the principal; trustee holds actual legal title to trust property - Agent acts within express or ostensible authority of the principal; trust must follow directions in the trust instrument and thus is not as a general rule subject to the directions of a beneficiary - Agents incur no personal liability where they fully disclose that they act on behalf of a principal (provided transaction is within scope of their authority from the principal) - Agency will be ended by act of either principal or agent, or death of either party; trusts are not terminable at the will of the settlor or the trustee, or by the death of the trustee/beneficiaries. - Key element is intention to keep money separate from own.

Cohen v Cohen, 1929 - Mrs C sued her estranged husband for a number of sums of money - The sums had ended up in his possession in a number of ways: - From the sale of some of her furniture - 123 pounds - From an insurance payout for a piece of her jewellery - 80 pounds - From some sales in Germany, the proceeds of which the husband collected on her behalf to circumvent the difficulty of moving German currency into Britain, purchased goods with it, and then sold them and was intended to pass the proceeds onto the wife - 9000 marks

- Did the husband hold these sums on trust OR were they the subject of a debt relationship? (Husband argued debt, as Statute of Limitations would have rendered the claim impotent) - Court: intention to account for money specifically (and whether it would have been mixed with his own or not) was the key factor - Thus 123 and 80 were on trust, but 9000 marks was debt; however the SoL did not apply so all money was to be repaid Walker v Corboy (1990) - Fruit and vegetable growers sold their produce to an agent called LJ under a statutory scheme on an ongoing basis - LJ would sell their produce at the market and give them the proceeds later - Proceeds went into LJs general funds. This was in accordance with the standard practice in the industry - There was no requirement under the legislative scheme to keep the money separate - LJ went into liquidation, holding as part of its general funds the proceeds of sale of the growers produce - Growers claimed proceeds were held on trust, as this prevents them from being divided up amongst creditors, unlike debt money - Court: must look at whole of the circumstances attending the r/ship between the parties to decide whether the law would impute to the parties an intention to create a trust - Circumstances Meagher J considered: - 1. No requirement in statute to keep proceeds separate - 2. Industry practice - 3. If had been a requirement, would have been easy enough to enact this through an industry fund etc - 4. Reluctance to extend trust requirements across to ordinary commercial transactions - 5. Pre-liquidation, demand for payment by growers would not have been affected by how the money was kept

Debt and trusts - Instruments of trusts and debt can co-exist if there is a common intention for the funds to remain in a separate account and be treated accordingly - Quistclose Barclays Bank v Quistclose Investments - Rolls Razor (RR) needed certain funds to pay dividends to its shareholders - RR borrowed this money from Q under an arrangement whereby the loan from Q was paid into a separate account with the Bank to be used only for the purpose of paying the dividend (the Bank had refused to lend them any more money based on their financial situation) - If money was not used to pay dividends it would be returned to Q - Bank had notice of this arrangement (sufficient notice would make the trust binding on them if the trust did indeed exist) - Before any dividend was paid, RR went into liquidation - Bank sought to set off the money held by it in the separate account (treating Q as an ordinary unsecured creditor) - Q argued money was held on trust for them - Court upheld Qs claim.

Charges, conditions, obligations and trusts - Compare: - I leave all of my real property to Amanda in the fullest confidence that she will look after my young daughter Tracey - Moral obligation, cf. legal obligation - The precatory words used would indicate the moral obligation, but Amanda would receive the property free of any legal obligation - I leave all of my real property to Amanda subject to her paying $200,000 to my young daughter Tracey within two years of my death

Conditions - Property may be given to a person on the condition that they pay to a third party a sum of money or undertake some other obligation in relation to a third party - e.g. Property is devised to B on a condition precedent or subsequent in favour of C. This condition affects the vesting of the property in B. - 2 types of conditions: - One involving forfeiture of the gift iF the condition is not fulfilled - Re Gardiner - The other creating a personal obligation to fulfill the condition - Gill v Gill

Equitable charges - An equitable charge can be created where the transferor expressly charges property with payments to a third party, or gives property subject to such payments - Attaches to the property in question, not the person

Equitable personal obligation and trust - A disposition may amount to a statement of objects to which the person receiving the property is bound to apply the fund, either as a trustee or in some other character such as guardian - Countess of Bective v Fed Commissioner of Taxation, per Dixon J

2. EXPRESS TRUST REQUIREMENTS


EXPRESS TRUSTS Requirements: - Capacity - 3 Certainties must be fulfilled - Formality - No vitiating illegalities CAPACITY The person that the law allows to declare a trust of property is the beneficial owner of it. Therefore the general principal is that any person who is capable at law of holding property may be a trustee. Powers of a trustee may be exercised by: - Natural Persons

- Corporations - Public Trustee - Statutory Trustee Companies - Crown Those who cant hold property: - People of unsound mind - Minors - Bankrupts

THREE CERTAINTIES All of these must be present to create a valid express trust: (substantive requirements, cf formal requirements) - Certainty of intention to create the tryst - Certainty of subject matter (property) of the trust - Certainty of objects (beneficiaries) of the trust: Knight v Knight, 1840 If any of the three are missing, the trust will fail. N.B. Meaning of certainty 1. Certainty of intention - To hold that an express trust exists, a court must be satisfied that there was an intention to create a trust - A settlor must exhibit an express or implied intention to create a trust (cf. intention to create a similar relationship eg a bailment) - This will depend on the facts of the case - Jacobs: language or conduct (i.e. intention can be inferred from words or actions) --> the word trust doesnt have to be used - Relationship between parties - Nature of property in question - The burden of proving that a person intended to create a trust lies on the person alleging that the trust was created: Herdgren v Federal Commissioner of Taxation - There is no need for intention for resulting or constructive trusts - If there is not certainty of intention, a gift may result - Words used: - No formal or technical words are required: Re Armstrong, Paul v Constance - Use of trust or trustee will NOT conclusively indicate the existence of a trust: Commissioner of Stamp Duties v Joliffe - Words must bear an imperative meaning, not passive - Words are given their ordinary and natural meaning - Precatory words e.g. hope, desire, belief; cf. words of direction - dont usually have enough of an imperative meaning to create a trust, only a moral obligation - In rare circumstances, the trust instrument read as a whole may suggest that what was really intended was a gift, not a trust - If there is uncertainty of intention, a gift might result

Re Williams, 1897

- W left his property to his widow absolutely, in the fullest confidence she will carry out my wishes (to keep up payments on 2 life insurance policies and if 1 of them was to be paid out then to direct the payouts as he desired) - Court held that W couldnt put his wifes life insurance policy in trust; it belonged to her, not him - His language was not imperative enough, so no obligation could be imported

Re Alston, 1955 - Testatrix had had her will drawn up by a lawyer, so it used fairly professional language - One clause stated that it was her express wish that her investment properties be leased to a particular man for 2 pounds/week (even in 1955, very low rent) - Trustees went to court to find out if they were under a duty to carry out this express wish, or whether it was even proper to do so - Court found that trustees had a discretion; there was no duty/mandatory obligation, but they COULD take her wishes into account when making their decision - Bare power - Was found to be significant that will was drafted by lawyer; implication was that the language used was generally correct, so the use of express wish instead of trust coul d not be seen as an error

- Intention: - Equity looks to the intent rather than the form - Intention is determined on a test of construction - The relevant intention is to be inferred from the language employed by the parties in question and to that end the court may look also to the nature of the relevant transaction and the circumstances attending the relationship between them: Australian Elizabethan Theatre Trust, 1991 - You must take the will which you have to construe and see what it means, and if you come to the conclusion that no trust was intended, you say so, although previous judges have said the contrary on some wills more or less similar to the one you have to construe Re Hamilton, 1895

Re Armstrong, 1962 - Mr A took out 2 fixed-term, fixed rate accounts, telling his bank manager he wanted to create a fund to benefit his sons W and B - Intended that he be entitled to the interest from the accounts and W and B would receive the principal amounts once the investments had matured - Receipts noted only: - George Armstrong to Willing Armstrong - George Armstrong to Bernard Armstrong - Existence of trust was disputed upon Mr As death - Court held trust existed; inferred sufficient intention from his actions such that the lack of the word trust was irrelevant

Paul v Constance, 1977 - Mr C and Ms P lived to all appearances as man and wife - Mr C received a large work injury payout. Money put in his own account on advice of bank manager, but both had access to the account

- Mr C said to Ms P: the money is as much yours as mine - Both also used the account to deposit their bingo winnings - One major withdrawal that was divided between the two - Mr C died intestate and Ms P claimed the money remaining in the account was held on trust for himself and her - Mrs C however claimed that she was the legal heir to Mr Cs assets - In court: - Scarman LJ referred to Snells Principals of Equity: no particular form of expression is necessary... if on the whole it can be gathered that a trust was intended. - Circumstances that were looked at: - Mr C described as unsophisticated (infer lack of legal knowledge) - Nature of his relationship with Ms P - As much yours as mine - numerous times - Conversation with bank manager - Deposit of their bingo winnings - Single withdrawal for both of them - Trust was found to exist

Commissioner of State Taxation v Joliffe - Statute provided that: - No person could have more than one savings account in a state bank, AND - The state banks regulations limited interest payments to being paid only on the first 1000 in an account - Mr J opened a bank account in his name as the trustee for his wife to raise interest in two accounts - Account was titled Mrs Joliffe, Edwin as trustee - Mrs J died, and the CSD claimed that Mr J was subject to an estate duty - Mr J said that the money was never held on trust for his wife, and therefore was still HIS money (=no estate duty) - Claimed that there was no intention to benefit his wife with the account; only to earn interest on two accounts - Court upheld Mr Js argument; enforced that the use of the word trust did not in itself indicate the intention to create a trust - Suggested that this is limited to cases involving bank accounts

2. Certainty of subject (trust property) - The trust property must be defined and ascertainable or the trust will be void for uncertainty - Doubt over trust property can also cast doubt over intention to create trust - Issues that arise: - Nature of the property - Identification of the property - Entitlement/beneficial interest or quantum (amount of shares) of interests in the trust property - That which is uncertain is capable of being rendered certain A. Nature of the property - Can be real or personal, tangible or intangible, legal or equitable - Includes a limited interest in property such as a life interest

- But DOES NOT include (mere) expectancies (property that does not yet exist) - e.g. property expected to be distributed from a discretionary trust; property divested in a will of someone who is still alive In the Matter of Rules Settlement, 1915 - Parents of Mary Rule each had powers of appointment over certain property - pursuant to which they could, if they saw fit, appoint property to her - MR attempted to assign monies to which she MIGHT become entitled (through her parents exercising their powers of appointment) - This assignment was assessed for stamp duty on the trust deed based on the value of the property settled - Court found that MR could not assign any of the property that she was not yet entitled, therefore no stamp duty was payable on the non-transfer of those properties B. Identification of the trust property - Too uncertain: - The bulk of my estate or an appropriate amount of money - Palmer v Simmonds - The remaining part which he does not want - Sprange v Bernard - To reward any other of my old servants and tenants according to their desserts Knight v Knight, 1840 - Feeling confident that she will act justly to our children in dividing the same when no longer required by her - Mussoorie Bank v Raynor - Sufficiently certain: - Court will interpret some otherwise vague expressions, providing that an objective determinant is present - The residue of the estate - what is left after everything else has been assigned - Reasonable income - Re Golays Will Trusts

Hunter v Moss, 1994 - S owned 950 shares in a co. which had issued a share capital of 1000 - S orally declared a trust over 50 shares - did not identify specific shares as trust property or separate shares from holding - Later he argued that the declaration of trust did not sufficiently identify the specific property to be held on trust - NOT found to be void due to uncertainty of subject matter - as there were only shares in the 1 company - Segregating the 50 from the rest of Ss holding was held to be unnecessary - Trust was valid - The authority in England - BUT: in Australia, White v Shortall, 2006 - If a portion of something is to be held on trust, it needs to be indistinguishable from the rest Re Golays Will Trusts, 1965 - T directed his executors to let Tossy... to enjoy one of my flats during her lifetime and to receive a reasonable income from my other properties - Too vague? No. - Courts CAN determine reasonable income - constantly updating this

C. Entitlement/beneficial interest or quantum (amount or shares) of interests in the trust property Boyce v Boyce, 1849 - T devised 4 houses to trustees on trust, to convey to M whichever she may think proper to choose, and the rest to C - M died before T without choosing - therefore trust could not specify which houses were to pass to C - In effect a trust of most of my houses - There was also no discretion to trustees to divide the houses between M and C as they saw fit - which would have solved the problem

3. Certainty of objects - Objects are the beneficiaries and potential beneficiaries under a trust instrument - The objects can be a person or a purpose (charitable trust) - A person cannot be a trustee for himself alone - General Rule: a trust must be in favour of definite beneficiaries, ascertained or capable of being ascertained, or of a recognised charitable purpose. (Known as the beneficiary principle) - Court wont recognise a trust that it cant control; & wont enforce a trust until a beneficiary attempts to have it enforced Morice v Bishop of Durham (extract re: court control of trusts) - Certainty of objects means that the beneficiaries or objects must be able to be identified with sufficient certainty - Level of certainty required by the beneficiary principle changes, subject to whether the trust is a fixed trust or a discretionary trust - Fixed: list certainty (a list of all the potential beneficiaries must be able to be made) - Discretionary: criterion certainty Fixed interest trusts - Identifies beneficiaries and beneficial interests - Trustee is obliged to carry out the trust as specified and is given no discretion to select among beneficiaries, nor how the trust property will be divided Discretionary trust/Trust Power - Trustee is under an obligation to perform the trust, AND is also given a discretion to choose amongst the beneficiaries - e.g. I give my trustee $100000 to hold on trust for whichever of my children they shall select, and if more than one, in whichever shares they choose - Trustee must give the WHOLE amount out, to at least one child - Re Badens Deed Trusts

Mere power (bare power) - Carries no form of obligation - Holder of the mere power has power to act in a particular way but is under no obligation to do so (ie the power is permissive) - e.g. power of appointment

- Can be given to a Trustee, or another person - A gift over in default of the discretion being exercised generally indicates a mere power - e.g. I give my husband power to appoint my $100000 to whichever of my children he shall select, and in default of appointment, it is to be held in equal shares

Types of powers - General power: can be exercised in favour of anyone - Special Powers: can be exercised in favour of a limited group or class of people - Hybrid Powers: can be exercised in favour of anyone except excluded people or classes of people (eg, my spouse, my children)

Certainty tests - Fixed interest trust = list certainty - For a fixed interest trust to be valid, it must be possible to list all the objects of the trust - Kinsela v Caldwell: it is sufficient if the provisions of the trust ensure that upon that date the beneficiaries can be ascertained with certainty - Mere power = criterion certainty - A court must be able to determine whether or not a person is within the class of objects described in the provision or not - Semantic uncertainty = linguistic uncertainty - Evidential uncertainty (disposition wont fail for this - there is no objection in the law to the court having to do a lot of work to find all the potential beneficiaries - Re Gulbenkians Settlements - residing in the company of = too vague - Discretionary trust = criterion certainty - At risk of semantic and evidential uncertainty, - AND administrative uncertainty/unworkability: McPhail v Doulton - In that case, it was found that the POTENTIAL beneficiaries of a discretionary trust have no right to demand any amount; however, they do have standing to enforce the trust itself. - (Purpose was for an employees benefit fund)

Consequences of applying the 3 certainties - If any one of the certainties is not present, the trust fails - Trust by declaration: settlor continues to hold the property (in law AND equity) - Trust by transfer: if property has been successfully transferred to the trustee, it will be held on resulting trust for the settlor - Testamentary trust: reverts back to the settlor

3. PURPOSE TRUSTS
PURPOSE TRUSTS - Can be charitable or non-charitable CHARITABLE TRUSTS Advantages of being defined as charitable:

- Validity issues (for trusts): - Certainty of objects rule: if it is clear that the intended purpose was charitabe, the trust will not fail from uncertainty (e.g. I leave my property on trust for some worthy charity would normally be too uncertain, but is exempt) - Beneficiary principal: normally beneficiaries must have standing to enforce the trust (sufficient interest to do so) but not for charitable trusts - the Attorney-General (or equivalent) of each jurisdiction has standing (and an obligation) to enforce the trust - Perpetual duration: general lifespan of trust is a lifetime +21 years, but charitable trusts have no limit - Cy-pres (as near as possible) doctrine: If the object of the trust no longer exists, courts are allowed to authorise use of the trust property for another purpose as near as possible to the original stated one. i.e. general charitable intent will override initial impossibility - Subsequent impossibility: when there is still property (e.g. money) left over after the initial purpose has been carried out; the remainder will be employed for a similar purpose - Tax exemptions/reductions (NOT limited to trusts; just charities) - No state payroll tax, lower council rates, no fringe benefits tax Definition of a charity - No clear definition: must be extracted from case law - 4 basic requirements taken from existing cases: - Must be charitable in nature - Must be beneficial (good for the community) - Must confer this benefit on the public - Must be exclusively charitable 1. Charitable Nature - Charitable Uses Act 1601 (Statute of Elizabeth) - Preamble: list of purposes regarded as charitable; but was never intended to be exhaustive, only illustrative (courts would reason by extended analogy with the listed purposes) - N.B. Although the act has been repealed, the preamble can still be used as a guide to charity - Commissioners for Special Purposes of Income Tax v Pemsel, 1891: House of Lords attempted to condense into 4 categories (heads): - The relief of poverty - The advancement of education - The advancement of religion - Other purposes beneficial to the community

A. Relief of poverty - Relative, not absolute poverty (i.e. no income cut-off point) - All beneficiaries must be poor (if there is the possibility that there could be some non poor beneficiaries, the trust may still be saved if the very nature of the purpose is such that non-poor people would not need it - e.g. a soup kitchen) - Purpose must relieve poverty and not do more (can only bring beneficiaries up to a modest level, not any higher)

B. Advancement of education - Schools and universities (constructing, scholarships, books...) - Research (but not propaganda - must look at both sides; results of research must be made publicly available) - Promotion of arts and culture (education in a broad sense) - Sports at schools and universities (but not sports/games per se)

C. Advancement of religion - All religions and denominations qualify - Church of the New Faith (formerly Scientology) v Commissioner of Payroll Tax, 1983 (Mason & Brennan - belief in supernatural being, practices of human conduct to give effect to that belief; Wilson and Deane - other factors) - Unless subversive of all morality - Advancement by: - Buildings - Missionary work (converting new members) - Religious texts (but not a religious NEWSPAPER) - Training/support of ministers/clergy

D. Other beneficial purposes - Assess by analogy to Preamble (can be very extended) - UK: Scottish Burial and Cremation Society v Glasgow Corporation, 1968 - WAS charitable in nature; analogous to the repair of churches in the Preamble - Repair of church --> upkeep of churchyard --> upkeep of graves in churchgrounds --> upkeep of cemeteries --> cremation - Aus: Royal National Agricultural and Industrial Association v Chester, 1974 - Applied traditional test - Common examples: - Care of sick/aged/disabled - Disaster relief - Animal welfare - Care of the environment - Public works - Specific examples in WA: - Provision of recreational facilities, in the interests of social welfare - Charitable Trusts Act 1962, s5 - Child care services - Extension of Charitable Purpose Act 2004, s4

2. Benefit - Assumed for heads 1-3 - Must be proved for head 4 - Assessment of benefit may depend on evidence and vary from time to time - National Anti-vivisection Society v IRC, 1948 (vivisection = experiments on live animals) - Was initially charitable on grounds of promoting humanity, animal welfare, etc - But later, courts decided that society benefited from the findings of these experiments, and thus stopping them was not beneficial - Disqualifying factors:

- Political purposes (unless lobbying for change can be characterised as merely incidental to the main purpose) - i.e. promoting a certain party, or a doctrine associated with a particular party - AND, intending to bring about a change in the law or a change in government practices is also political --> hence Amnesty International is not charitable as it campaigns to eradicate the death penalty - McGovern v Attorney-General, 1982 - Criticism of government policies by established charities can potentially harm their charitable status, as it is viewed as being political - Profit distribution - Re Reschs Will Trust - No objection if a charity charges fees for its services (e.g. low-cost housing for the poor, hospital fees) - The key factor is what is done with this money: use for commercial gain precludes charitable status - No distribution to shareholders - No fiscal benefits to directors etc - Profits must go back into the purpose of the trust

3. PUBLIC benefit - Beneficiaries must be the public at large or a section of the public - Oppenheim v Tobacco Securities Trust, 1951: 2 negatively defined requirements - Not numerically negligible, AND - Not defined by a personal nexus (connection) with one or more people or institutions - For my relatives - not charitable - For employees at UWA - not charitable - For the members of Nedlands hockey club - not charitable - Definition by geography, occupation, religion, etc, is acceptable. - Requirement does NOT apply to relief of poverty - Dingle v Turner, 1972 - Advancement of religion: - Benefit to public is assumed if the religion has contact with the public (assumption that they are benefiting society) - Closed orders (no contact with outside world) are thus not charitable - Gilmour v Coats, 1949: Argument that by praying for the world at large all day, the nuns are benefiting the public with their prayers - Courts: no proof of this Godly benefit - BUT, in Australia, this was effectively reversed by the Extension of Charitable Purpose Act 2004, s5(b), FOR COMMONWEALTH PURPOSES (e.g. taxation) - Trusts are administered by STATE law and courts

4. Exclusively charitable - Charitable OR benevolent purposes - FAILS. - Chichester Diocesan Fund v Simpson, 1944: House of Lords ruled that the trust failed as benevolence does not necessarily indicate charity. - Trustees had acted in breach of trust and thus became personally responsible for paying the next of kin of the deceased their missing money

- Statutory saving provision: Trustees Act 1962 (WA) s102 - allows court to excise the non-charitable part of the trust document and uphold the charitable purpose - N.B. If the purpose is non-specific, the Attorney-General will consult with the trustees (perhaps looking at the testators interests, life, etc) to form a scheme for how the trust property will be distributed, which will then be presented to a court for authorisation into the terms of the trust - after this, the trustees are obliged to distribute the property as per the scheme - HORRIBLE EXAMPLE: - To X on trust to use the funds to provide scholarships at the South Perth Academy of Music, - preferably for children of musicians who have played for the WA Symphony Orchestra, (PRIVATE!) - and otherwise for any Western Australian children showing outstanding musical talent (PUBLIC!) - ....so is the trust charitable or not? - No, as it is not EXCLUSIVELY charitable - BUT, s102 would probably operate such that a court could cut out the WASO limb and thus render the trust exclusively charitable.

NON-CHARITABLE PURPOSE TRUSTS - Morice v Bishop of Durham, 1805: [Apart from charitable trusts] every other trust must have a definite object. There must be somebody in whose favour the Church can decree performance - generally understood to be a requirement of certainty of object - Examples: - Erection or maintenance of graves/monuments: Re Hooper, 1932 - Care of particular animals (e.g.a pet): Re Dean, 1889 - Promotion of fox hunting: Re Thompson, 1934 - Must be: - Defined in certain terms - Limited in duration - a life in being (if any) +21 years - Re Astors Settlement, 1952 (1950s were not a good time to attempt to enforce a trust) - Trust property was to be used for improving cooperation between nations and preserving the independence and integrity of newspapers - Court found these both to be too uncertain to be valid - Created the beneficiary principle: for a non-charitable trust, there must be human beneficiaries with standing to enforce the trust - In this case, there was no party with sufficient interest to insist that the trustees carry out the trust - This principle is to be followed from hereonin.

NON-BENEFICIAL PURPOSES. Leahy v AG for NSW, 1959 - adopted the BP for Australia - A trust may be created for the benefit of persons... but not for a purpose... unless the purpose... be charitable. - Also Bacon v Pianta, 1966 - a gift to the Communist Party of Australia Re Denleys Trust Deed, 1969

- A trust of land to be used as a sports ground for the benefit of employees of the company (and others); if not so used, then to the local hospital. - Was argued that it was analogous to Astor - But court confined Astor and Leahy to abstract or impersonal purposes - Goff J: Trust will be valid if it is directly or indirectly for the benefit of persons - Employees had sufficient interest/standing to enforce the trust - THE KEY QUESTION. Beneficiaries were direct and identifiable (within their class) - Beneficiary principle did not cause this trust to fail. In Australia Re Van Campen-Beekman, 2007 - Denley was wrongly decided due to contradicting Leahy and Bacon - Way of advancing the law?

Sachs v Gridiger, 1991 - A trust of income to pay the school fees of the children of Dr Sachs, wi th the residue... for the RSPCA. - Though the object was a purpose, the children WERE beneficiaries who could enforce the trust --> obviously identifiable - N.B. Dr Sachs would not have standing to enforce the trust - even though he obtained an indirect benefit from the trust (not having to pay the fees himself!) - N.B.2. Remember the trust cannot break the rule against perpetuities (must not be made to last longer than a life in being +21 years)

GIFTS TO UNINCORPORATED ASSOCIATIONS - i.e. groups that come together for a shared purpose - clubs, leagues, etc - If the group is unincorporated, it does not have a separate legal existence - legal identity on top of its individual members - meaning it cannot own property - So if someone gives their property to an unincorporated association, what happens?

Leahy v AG for NSW, 1959 - A grazier left his property, Elmslea, upon trust for such Order of Nuns or the Christian Brothers as my trustees shall select - All of the religious bodies mentioned were unincorporated couldnt hold property - Court found that since the association had no legal existence, the property must go to the members AT THE TIME - Either as joint tenants/tenants in common - Each member received small portion as a gift; can do with it what they want - But surely the settlor didnt intend this - Or, to the members as trustees - For the present and future members of the association; - Fulfils the requirement of being a trust FOR PERSONS - however would fail due to the rule against perpetuities - Or for the purposes of the association - Court found that the Leahy trust had this effect: - Because language was for the Orders, not the members - There would hardly be any use in a grazing property for many nuns to hold a small portion of it, - There could possibly be thousands of members

- Would this succeed as a charitable purpose? - If the trustees selected an order of nuns that actually did carry out charitable work, it would succeed - But there was a possibility that they might select an order that did not do so - meaning the trust was not EXCLUSIVELY charitable - so the trust had to fail. - However the PC used a statutory saving provision similar to s102 to strike out the non-charitable purpose - Trustees could now only select orders that had exclusively charitable purposes

Another construction of the gift: - Where possible, construe the gift as one to the members of the association AT THE TIME, but not as tenants in common - rather, subject to their contracts/rules of association - Avoids the problems with the 2 approaches in Leahy: - If gift is held as JTs/TIC, the members can take their share and go home - here, they hold the share inseparably while they are still members - If the gift is held on trust for future members or purpose, the rules of trusts generally make it fail - This approach brings the gift under the rules of contract, not trusts. - Still fails if donors language is so explicit that non-charitable purpose is unavoidable. - Re Goodson, 1971 - Garden Clubs of Australia Inc v Eyres, 2002 - cf. Radmanovich v Nedeljkovic, 2001 - Cant use this construction if the members of the association do not have the capacity to terminate the association & distribute the assets as they see fit - e.g. if there is something in the rules of the association that prevents this (an antidissolution clause etc) - Will infringe rules against perpetuities - Inc will have to hold property forever - However, this only applies to trusts, not contract!!!

4. FORMALITIES
2 elements in creating a trust (each has their own set of formalities): - Declaring the terms of the trust - declaration - Vesting the property in the trustee - constitution

Declaration - Must be either before or contemporaneous with the constitution - cannot be after - Formalities found in PLA. - Depends on 2 factors: whether the property is land or otherwise; whether the declarant is the legal owner or only has an equitable interest PLA s34 1. (a) No interest in land is capable of being created or disposed of except by writing... (b) A declaration of trust respecting any land... shall be manifested... by writing... (c) A disposition of an equitable interest... subsisting at the time of the disposition shall be in writing 2. This section does not affect the creation or operation of resulting, implied or constructive trusts

N.B. Stamp duty is paid on the value of txns that occur under a document - therefore some txns will deliberately be made without a deed in order to minimise stamp duty. Approach to take: 1. Identify the position at the outset - what interest does the declarant have, and what is the interest in - land or otherwise? 2. What is the intended effect of the txn in question - what is the intended position at the end - who has legal interest and who has equitable/beneficial? 3. Which of the subsections of s34(1) PLA applies to that txn? 4. Have the requirements of that section been met? 5. If not, what are the consequences of non-compliance with the subsection? Example 1. - A declares a trust of her shares for B - 1. A holds the legal interest, and there is nothing that has given rise to an equitable interest - therefore there is ONLY the legal interest (Re DKLR Holdings) - 2. Declaring a trust creates the equitable interest (gives rise for equity to be involved) - 3. s34(1)(a) and (b) do not apply because they relate to land - does (c) apply? NO because the equitable interest was not subsisting at the outset (it has only just been created) - THEREFORE THERE ARE NO FORMALITY RULES (only the substantive rule that the intention must be made clear) Example 2. - A declares a trust of her land for B (held by T) - 1. A holds the legal interest and there is no separate equitable interest - 2. Declaring a trust creates the equitable interest intended that it resides in B. - 3. S34(1)(c) does not apply because the equitable interest was not subsisting at the time; either of (a) or (b) could apply - (a) because it is creating an equitable interest in land; - (b) because a trust is being declared in respect to land - However, they have disparate requirements: (a) requires the actual creation to be IN writing, so an oral creation would be invalid; (b) only requires the declaration to be MANIFESTED or proved/evidenced by writing, so the declaration can be oral and then can be manifested later: the trust will be on foot from the time of the declaration. - General view in Australia is that only (b) applies; because if it was held that (a) applies to declarations of trusts in land, then there would be no point in having (b) Department of Social Security v James, 1990 - THUS, (a) does not apply to the creation of interests by a declaration of a trust (b) applies to the exclusion of A. - Must be writing by person able to declare the trust the owner of the property at the time of writing - 4. Consequence of no written evidence? - Generally, the declaration is unenforceable - BUT, equity tells us that it does not allow a person to use a statute as an instrument to defraud others so if the denial of the trust would constitute fraud on the settlor, the declaration will be enforced Last v Rosenfeld, 1972 - Therefore, prima facie if there is no written evidence, the declaration will be unenforceable but if it would result in T fraudulently holding the equitable interest in the property, it will be enforced

- Unclear whether this occurs through an express or constructive trust (Express would be achieved by the court ignoring the statutory requirement; constructive would be imposed by the court on the grounds of unconscionability) - IF, in contrast, A had declared THEMSELVES the trustee and then changed their mind, they can rely on the lack of written evidence to defeat the declaration

Existing equitable interest transfer/disposition - What happens if T is already holding shares on trust for A and A directs them to henceforth hold the shares on trust for B? - s34(1)(a) and (b) cannot apply because the property is shares does (c) apply, meaning that writing is required? - Authority from PT Ltd v Maradona (No 2) 1992, that (c) applies to ALL forms of property real and personal - But what does disposition mean? - Grey v IRC, 1960 (HoL decision on equivalent statute to the PLA; case on shares) - Court held that where an equitable interest starts out in one party, and the intended effect of the txn is to pass/divert that interest to another person, that is a disposition of the subsisting equitable interest - Doesnt matter how the interest passes whether from A to T to B or directly from A to B, is covered by (c), therefore an oral disposition would have no effect must be in writing. - If T is holding LAND on trust for A in this situation s34(1)(a) might apply but the effect would be the same regardless.

Another situation (bare trust of an equitable interest) - What if A is holder of an equitable interest and declares themselves to be holding it on trust for B? - Authorities suggest that if A has no active duty to perform, A drops out of picture, T holds on trust for B - ISPT Nominees Pty Ltd v Chief Commissioner of State Revenue, 2003 - No authority on this, but Grey reasoning suggests that (c) applies being a disposition of a subsisting equitable interest - HOWEVER, if A has declared shares to be held on an active trust i.e. they still have duties to perform (exercising discretions to pay, etc) they do not drop out of the picture - There is no disposition of the subsisting equitable interest rather, a new equitable interest in personalty is created so no writing required (because (c) cannot apply) - No authority for this, but following the reasoning applied leads us to here. - If A has declared land to be held on an active trust, would still be a declaration of trust of an interest in land - need evidence in writing s34 (1)(b)

Table of formality requirements (bold = where there are no formalities) Property other than Land Land 34 (1)(b) where A declares self as trustee No formality to prevent fraud where there has been transfer to a new T

Declarant (A) is No formality legal owner

Declarant (A) has equitable interest

34 (1)(c) where A declares a bare trust No formality where A declares an active trust

34 (1)(c) where A declares a bare trust 34 (1)(b) - where A declares an active trust

5. COMPLETE CONSTITUTION
Overview - Complete constitution generally refers to the irrevocable transfer of the trust property and the creation of the beneficial interest - Basic principle: a trust will not be valid unless title to the property is bindingly vested in the trustee - By deed, by will, by declaration, or by direction - Settlor will be become bound if: - The trust is completely constituted, OR - Valuable consideration has passed to the settlor (when it becomes a contract like any other) - A trust is not completely constituted unless it is enforceable by the beneficiaries

Equitable maxims to recall - Equity regards that as done which ought (in good conscience) to be done - Equity will not perfect an imperfect gift (Milroy v Lord) - Means that if a gift lacks the required formalities to be legally binding, equity will not insert them - Equity will not assist a volunteer - important for VOLUNTARY trusts (those created with no transfer of consideration from beneficiary to settlor) - Does not apply to beneficiaries under a completely constituted trust - the trust will be enforced despite the beneficiaries voluntary status - Applies only to cases where the trust is NOT completely constituted - Ellison v Ellison - Once a trust is completely constituted, any beneficiary thereunder may enforce it, notwithstanding the fact that they may have given no consideration for it

Constitution of a VOLUNTARY trust 2 main methods: - 1. Declaration of a trust - 2. Transfer to a trustee N.B. Trust property only needs to be VESTED in a trustee when the trust is created by transfer.

Declaration of trust - Requires a statement, intended to be final and binding, that property owned by the settlor is thereafter held on trust for another - Requisite intention, etc - No need for transfer because settlor and trustee are same legal person - Provided that statutory formalities and the three certainties are met, the declaration itself is effective to create a trust

Trusts by transfer

- Will be executed when the title of the trust property has been completely and irrevocably transferred to the trustee - Two contexts: - in inter vivos trusts, and - post mortem trusts (through a will) per the Wills Act 1970 WA s8 - requirements re signatures etc - What must be done to vest title in the trustee will vary depending on the nature of the trust property - Chattels may sometimes be transferred by delivery - Shares: transfer must be registered - Land under Torrens must be registered (trustee as RP) with valid instrument etc - Title vests on registration - What if not all required documents are present and transfer cant be registered before settlor dies?

Milroy v Lord, 1862 - Settlor executed a voluntary deed purporting to assign 50 shares in Bank to L to be held on trust for M - Constitution of Bank said shares could only be assigned by a transfer registered in their books - not done - L held share certificates and a power of attorney from TM authorising him to execute a transfer of the shares (but power of attorney was held as agent of TM and he had never been directed to transfer the shares to himself) - TM lived for 3 years after executing deed dividends to shares received by L and remitted to M - Was settlor holding the shares on trust for the beneficiary...? NO - Turner LJ - 2 rules: - (a) in order to render a voluntary settlement valid and effectual, the settlor must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him; AND - (b) if a settlement is intended to be effected by a particular mode or form (ie direct assignment, declaration of trust, direction to trustee etc), the Court will not give effect to the intention by applying another form. An imperfect assignment will not, for example, be held to be a declaration of trust 1st element: everything necessary to be done - Meaning? - Property has in fact been transferred? - seems unlikely - Donor has done everything that they must and can do regarding the transfer? - Donor has done all the things that a donor of property must always do? (even if they have not done everything that they personally COULD have done) - e.g. armed the donee with the means to ensure that the property was transferred

Anning v Anning, 1907 - WA executed a deed of gift, purporting to convey all his property to his wife and 5 children before he died, including: - Land held under Crown lease - Promissory notes payable to order

- A debt secured by a mortgage over the land - Chattels, incl livestock - Nothing further as done to assure the property to the donees - Deed was totally insufficient to transfer ANY of the above - Failed as an assignment - Findings: - HCA took differing views of the meaning of everything necessary... - Isaacs: donor must ensure ALL necessary (ie statutory etc) acts are done, irrespective of who can do them - Higgins: donor must do those acts which it is possible for him to do - Griffith: donor must do only those acts which were obligatory for specifically him/her to do, and no-one else (most lenient) - Has survived the most: settlor must do all the things that ONLY the settlor can do

Corin v Patton, 1990 - Mr & Mrs P joint tenants of Torrens title land - Mrs P terminally ill - executed 3 documents attempting to sever the joint tenancy, in order that Mr P would not obtain her share of the land on her death through survivorship - 1. A transfer, in registrable form, of her interest in the land - 2. A deed in which C declared that he held the interest in the land as tenant in common with Mr P on trust for Mrs P - 3. A will leaving her estate to her children in equal shares - Transfer of land was not registered prior to Mrs Ps death - Mortgage over the property: CT had remained with the mortgagee and Mrs P had taken no steps to arrange for its production (e.g. authorising Bank to provide it to C) or to authorise C to apply for its production, to enable C to obtain registration - Had Mrs P done enough to alienate her interest in the land so as to sever the joint tenancy? - Findings: - Mrs P hadnt done enough - Mason & McHugh: - Accordingly, we conclude it is desirable to state that the principle is that, if an intending donor of property has done everything which it is necessary for him to have done to effect a transfer of legal title, then equity will recognise the gift. So long as the donee has been equipped to achieve the transfer of legal ownership, the gift is complete in equity. Necessary used in this sense means necessary to effect a transfer. From the viewpoint of the intending donor, the question is whether what he has done is sufficient to enable the legal transfer to be effected without further action on his part. - Equitable interest in land can be created/transferred before legal interest has done so - Deane: Twofold test - Whether the donor has done all that is necessary to place the vesting of the legal title within the control of the donee and beyond the recall or intervention of the donor. Once that stage is reached and the gift is complete and effective in equity, the equitable interest in the land vests in the donee and, that being so, the donor is bound in conscience to hold the property as trustee for the donee pending the vesting of the legal title.

- Clarify: equity wont ASSIST a volunteer (fix the imperfect gift etc), b ut it will not STOP a volunteer doing everything in their power to ensure the interest is transferred

2nd element: what must be done according to the nature of the property - Transferor must use the appropriate mode of transfer according to the nature of the property involved - LEASE: transfer is by assignment - Richards v Delbridge, 1874 - another no substituting a different form to fulfil the intention case - CHEQUE: transfer requires the cheque to be endorsed to its beneficiary - Jones v Lock, 1865 - father brings out cheque as present for newborn son; declared in front of 2 witnessed that the cheque was to be a gift; locked it in a safe - Father died and executor of will assumed cheque belonged to the father (as it was made out to him) - Lack of endorsement or actual declaration of trust meant that gift was incomplete - CHATTELS: transfer is effective where settlor delivers chattels to Tee or executes and delivers a deed of gift of the chattels: Anning v Anning, 1907 - SHARES: Transferor must deliver a duly executed instrument of transfer to the trustee - Re Rose, 1952 - unrevoked transfer of shares - LAND: - Unregistered land: transferor must deliver a duly executed deed of conveyance to the trustee - Torrens land: transferor must deliver a duly executed instrument of transfer to the trustee and the authority to use the CT for the purpose of registering the memorandum to transfer - Corin v Patton - BANK ACCOUNTS: person must: open bank account, hand the passbook to the beneficiary, consult the beneficiary

EXCEPTIONS TO RULE THAT EQUITY WILL NOT PERFECT AN IMPERFECT GIFT 1. The rule in Strong v Bird 2. Donationes Mortis Causa 3. Estoppel 4. Unconscionability

1. The rule in Strong v Bird, 1874 - If A expresses a present intention to make a gift of specific property to B, and that intention continues unchanged until As death, and B becomes executor of As will then B is entitled to hold the property for Bs benefit (ie their own benefit) Requirements for this rule: - 1. A must have intended to make an inter vivos gift of specific property to B - 2. As intention to make the gift must have continued until his death - 3. B becomes the executor of As will - Rule can also apply where there are 2 donees and only one is appointed as executor: Blackett v Darcy, 2005 - Onus is on B to establish these conditions. If satisfied, B is entitled to an equitable claim against the property (this can be defeated by a successful family provision claim)

- It was doubted whether the rule extends to interests in land: Cope v Keene, 1968 but also see Benjamin v Leicher, 1998

2. Donationes Mortis Causa - Donation made in contemplation of death: gift of property that vests immediately in the donee on the condition that the donor dies shortly afterwards - Fall outside the general rule of completely constituted trusts AND the rules of normal wills - Cain v Moon, 1896: - For an effectual donatio mortis causa, three things must combine: - first, the gift or donation must have been made in contemplation, though not necessarily in expectation, of death - secondly, there must have been delivery to the donee of the subject matter of the gift - thirdly, the gift must be made under such circumstances... Details of elements that must be satisfied: Sen v Headley, 1991, Nourse LJ - 1. Made in contemplation of impending death: - Sufficient that the donor is suffering at the time from an illness that may prove fatal: Dufficy v Mollica, 1968 - Dont need to die of the expected cause - 2. Gift must be made on condition that it is to be absolute and perfected only on the donors death, being revocable until then, - Even though title vests in the donee immediately, revocation is valid right up until death - N.B. Property wont appear in the will of the deceased, due to these arrangements - 3. There must be a delivery of the subject matter of the gift, amounting to a parting with dominion over, and not mere physical possession of the subject matter of the gift - Clear intention - Safekeeping does not suffice - Handing over car keys may be sufficient if unequivocal: Woodard v Woodard - Delivery may be done by someone acting as the donors agent - For intangible property, e.g. bank accounts, documents allowing access to the property will generally suffice - **4: personal property only??? - Traditional view in Aust: these do not include real property - Watts v Public Trustee, 1949; Bayliss v Public Trustee, 1988 - Consider influence of Torrens statutes & their stringent requirements - But English case of Sen v Headley: a valid donationes mortis causa of land achieved by constructive delivery of the title deeds to UNREGISTERED land Onus of proof - Recipient must establish the required elements of a donatio mortis causa on the balance of probabilities: Cosnahan v Grice, 1862 - Circumstances are usually such that the donor is open to persuasion/exploitation - may be very old, very ill, etc - Because of this, and because of the possibility of fabrication (donor is not alive to confirm or deny!), courts generally view donationes mortis causa with caution

Dufficy v Mollica, 1968

- While being taken to hospital, T handed neighbour a pouch containing keys to a safety deposit box and to his house - D visited T in hospital - T asked whether D had been given the keys by a neighbour; D confirmed yes - T instructed D that there was money in the house that was easily accessible and that she might as well have it - D found money in both house and safety deposit box - Valid donationes mortis causa of money in house and/or money in SD box? - Found: house - yes; SD box - no

3. Estoppel - An imperfect gift may be enforceable where the donee can establish the elements of an estoppel - Requirements: - 1. Proof of a representation by the purported testator/settlor - 2. Representation was intended to be relied upon - 3. The representation was in fact relied upon to the representees detriment. - If these elements are established equity may perfect the gift to satisfy the claim of the representee: Dillwyn v Llewelyn, 1862; Olsson v Dyson, 1969

4. Unconscionability Pennington v Waine, 2002 - AC held 1500 of the 2000 shares in a family company; wanted to give 400 shares to H - She consulted P and executed a stock transfer form in respect of those shares - A told H that she wanted to give him shares for him to become a director of the company. - P wrote to H enclosing a form of consent to act as a director and said A had instructed him to arrange to transfer shares. He said this required no further action by H - P prepared stock transfer form and A signed. P placed the form on file but took no further action. - Share certificates remained at the companys registered office. - Share transfer not registered by the time of As death - N.B. Upon her death, ACs will dealt only with the remaining 1100 shares - H relied upon Re Rose: because the transfer was not revoked - Findings: Cannot be literally true that the donor must have done EVERYTHING in their power to legally transfer the property in question, because then a transfer could be effective without the donee knowing about it - Would have been unconscionable for the donor to be able to change their mind - But contradicts Milroy, Corin THE EFFECT OF CONSIDERATION - When a trust has been declared but the settlor has not divested himself of the trust property, the trust is incompletely constituted and operates merely as an agreement to create a trust - If a settlor promises to create a trust, but hasnt yet, the enforceability of the promise will depend on the law of contract - If a party to the promise (either beneficiary or trustee) has given consideration for the promise, then THAT party may enforce the promise AS A CONTRACT - See Pullen v Koe, 1913

6. TESTAMENTARY TRUSTS
Overview - Arise post mortem: where the death of the creator is a condition precedent to the operation of the trust. - General Requirements: - Intention to make a will - Sufficient mental capacity - Minimum age - Statutory Requirements - Wills Act 1970 (WA) s8: gives basic requirements for valid will - Will must be in writing; and - Signed by the testator (or by some other person in the testators presence and by the testators direction); and - The signature must be made or acknowledged in the presence of 2 or more witnesses present together at the same time and who attest to the will in the presence of the testator. - N.B. Wills Act s32 (as amended by Wills Amendment Act 2007) Operation - Upon the testators death, legal title to the property passes either to trustee/s o r to executor/s; this makes the trust completely constituted - Trustee vs. Personal representative (Executor) if a will simply distributes property between parties, the personal rep/executor has no further responsibilities; however, leaving property on trust will often come with more, and ongoing, responsibilities than just distributing e.g. a life interest

7. ILLEGAL TRUSTS
Vitiating Factors that can deny a trust: - Illegality where it is created to serve some illegal or fraudulent purpose; - Where it imposes unlawful conditions upon alienation; - Where it promotes immorality or undermines the sanctity of marriage or the family; - Where it is declared void or voidable by statute; or - Where it offends the rule against perpetuities or the rule against indestructibility The Orthodox Rule - Illegal trusts: statutory illegality, or those against public policy. - Statute may prohibit the creation of a trust, or prohibit the execution of a trust created for a particular purpose. - Public policy eg interference with the institution of marriage - The clean hands doctrine (if you do not have clean hands, you cannot ask for the assistance of equity i.e. an equitable remedy, enforcement of an equitable obligation) is not the equitable counterpart of common law illegality. - Illegality (at common law) destroys the legal and equitable rights of the plaintiff so that there is never any call for discretion to be exercised. (Jacobs) (cf. In equity, courts always have a discretion) - Where a trust is created to serve some illegal or fraudulent purpose, the general rule is that the courts will not assist any party and the loss will lie where it falls: Payne v McDonald, 1908; Muckleston v Brown, 1801 Illegality of Purpose

- So illegality of purpose does not prevent an equitable proprietary interest in the trust property from arising or automatically generate a forfeiture of that interest. Muckleston v Brown, 1801; Tinsley v Milligan, 1993 per Lord Wilkinson-Browne. - Transferor cannot be allowed to repudiate the transfer if the illegal purpose has been carried out. Transferee can assert title because no one can assert better title. - The modern approach is that the orthodox rule of non-interference is departed from in certain cases, where it is considered in the interests of justice that the plaintiff should be assisted. Possible Approaches to Illegal Purposes - Parties to a trust for illegal purposes can recover property transferred under the trust, if: - 1. The illegal purpose has not yet been carried into effect (both England and Australia), OR - 2. They can make out their claim w/o leading evidence of that illegal purpose (English approach rejected in Australia by Nelson v Nelson); OR - 3. Where enforcing the trust would not defeat the underlying purpose of any legislation breached (modern Australian approach) 1. AKA the doctrine of locus poenitentiae where the settler can recover. - A person who has transferred property pursuant to an illegal trust may get it back, if they have repented prior to the illegal purpose being carried into effect and the property in question remains identifiable - Repentance here does not refer to any introspection or remorse on the part of the defendant. - It refers only to whether the defendant has aborted the course without commencing it. - Operation: the person asserting the illegal purpose has the onus of proving both that the alleged purpose existed and that it has been carried into effect. - Judgment: under this approach, the court asks: - Has the illegal purpose been carried out in whole or part? - Has the settlor refrained from using the fraudulent cover? - Has the settlor recanted before a necessity arose for using the fraudulent cover? Perpetual Executors and Trustees Association of Australia v Wright, 1917 - Husband purchased a house in his wifes name to defeat potential creditors. - Wife died and husband sought recovery of the house (by a purchase money resulting trust approach: N.B. doctrine of advancement?) - Administrator of the deceased wifes estate denied any resulting trust on the basis that the house was put into her name for an illegal purpose and that this purpose had been effected. - No creditors were defeated and the illegal purpose had never been carried into effect the trust succeeded. 2. (The English approach) - No cause of action may be founded on an illegal claim - Fundamental principle: no court will lend its aid to a man who founds his cause of action upon an immoral or illegal act. per Lord Mansfield in Holman v Johnson, 1175 - BUT a settlor can recant from a trust for illegal purposes and recover property transferred under the trust, where he or she can substantiate his or her claim without pleading evidence pertaining to that illegal purpose. - So, the court will help someone to recover their property only if they can make out all the elements of their cause of action without disclosing the illegality.

Tinsley v Milligan, 1994 - Tinsley and Milligan co-owned property and jointly contributed to its purchase. - House registered only in Tinsleys name, so Milligan could fraudulently claim welfare payments (payments could not be claimed by owners of property) - Welfare payments then used for joint expenses. - Milligan confessed her fraud; relationship later broke down. - Tinsley commenced proceedings to assert complete ownership, Milligan counterclaimed and sought declaration of resulting trust. (Simple purchase-money resulting trust) - Did illegal purpose affect this? - Held by Lord Browne Wilkinson: Where the presumption of resulting trust applies, the plaintiff does not have to rely on the illegality. In case where the presumption of advancement does not apply, a plaintiff can establish his equitable interest in the property without relying in any way on the underlying illegal transaction. - i.e. Only have to prove that you contributed to the purchase price. - N.B. BUT, where the presumption of advancement applies, the plaintiff cannot rebut the presumption without referring to and relying on the illegality. 2. contd - The English approach can lead to harsh and arbitrary results and has been rejected in Australia. - In Australia, a settlor can recant from a trust for illegal purposes, and recover property transferred under the trust where enforcing the trust would not defeat the underlying purpose of the law breached even if this necessitates adducing and relying upon evidence of his own illegality Nelson v Nelson, 1995 - Mrs Nelson used her own money and money from her late husbands estate to purchase a house. - The property was put in the name of her adult son and daughter, Peter and Elizabeth, in order to obtain, under the Defence Services Homes Act 1918, a subsidy (in the form of a reduced interest rate). - She was entitled to this subsidy in relation to only one house (she already had another one). - She applied for the subsidy, making a false declaration (that she had no financial interest in any home other than the one in re the subsidised loan was being sought), and purchased a second house. - The first house was sold, but Elizabeth was unco-operative and would not account for the sale proceeds. - Mrs N sued Elizabeth for declaration that she was beneficiary under a resulting trust. - Elizabeth claimed that mother bought the property for her, i.e. presumption of advancement should apply - Was Mrs N entitled to the $200K even though she was guilty of an illegal purpose? - Could she force Elizabeth to account? - Would she be able to rebut this presumption by reference to her illegal purpose? HELD: - Majority Deane, Gummow, McHugh, and Dawson - Mrs N was entitled to a resulting trust. - Deane and Gummow rejected old approach of letting loss lie where it falls. - Rather, said that you look at the policy underlying the relevant statute trust will only fail if policy is completely defeated by allowing trust to remain.

- An equitable interest should not be defeated on the basis that it arose out of or was associated with an illegal purpose unless the statute evinced such an intention, or the sanction was necessary or not unreasonable in the circumstances. - Mc Hugh J at p193: - Courts should not refuse to enforce legal or equitable rights simply because they arose out of or were associated with an unlawful purpose unless: - (a) the statute discloses an intention that those rights should be unenforceable in all circumstances; or - (b) (i) the sanction of refusing to enforce those rights is not disproportionate to the seriousness of the unlawful conduct; (ii) the imposition of the sanction is necessary having regard to the terms of the statute, to protect its objects or policies; and (iii) the statute does not disclose an intention that the sanctions and remedies contained in the statute are to be the only legal consequences of a breach of the statute or the frustration of its policies. - Toohey J also rejected the inflexible application: - Held that this public policy was only one aspect to be considered and that it is also important to prevent one party being unjustly enriched at the expense of another. - In this case, if the mother was precluded from making her claim, the daughter would gain an unjust windfall. - Should she be required to repay the subsidy a condition of relief? Court split - Maj Deane, Gummow & McHugh thought that she should be required to refund the subsidy to the Defence Homes Dept. - Dawson and Toohey thought that it was not appropriate for the court in this matter to impose such conditions. Thought that it should be left to the dept to sue her. - So she was required to repay the difference between the interest rate that she paid and that which she would have paid without the subsidy. - This approach (focusing on the purpose of the statute in question) was followed in: - Fitzgerald v FJ Leonhardt, 1997; - Damberg v Damberg, 2001 Trusts disturbing the sanctity of marriage or the family - Although, in Ellaway v Lawson, 2006, denial of a bequest until the applicant divorced her husband was upheld - Partial restraints, i.e. to my brother unless he marries a servant: Jenner v Turner, 1880 - Religious affiliation (e.g. to my children as long as they never marry Catholics); but see Trustees of Church Property of the Diocese of Newcastle v Ebbeck, 1960 the children were already married, and to obtain the money they would have had to divorce the court did not uphold this trust - Trusts designed to separate parents and children will be void: Re Boulter, 1922 Statutory illegality - Avoiding creditors there is legislation allowing the court to wind back trusts that have been set up in a specified period of time within declaring bankruptcy in order to avoid paying creditors - Evading taxation MINIMISING is allowed, but EVADING is not - Some family trusts Family Court has power to set aside family trusts which have the effect of defeating an order of the Court.

8. TRUSTEE DUTIES

On assuming the office of trustee, two duties arise: 1.To become familiar with the terms of the trust Turner v Turner [1984] Nestle v National Westminster Bank Plc [1994] Must be informed personally. Trustees are not vicariously liable but liability is joint and several. 2.To get in the trust property In their control and vested in the trustees (as joint tenants) Registration of shares; certificates of title To call in any debts (corresponds with power to enter compromises or compound debts) It is perhaps the most important duty of a trustee to adhere rigidly to the terms of the trust. Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) Trust instrument can modify other duties (eg remuneration) Reflects intention of the trustee Failure to comply leaves trustee personally liable to compensate for loss Exceptions: Direction by beneficiaries; Obedience will result in illegality: Re Beard [1908], or compliance is impossible (should ask court for directions) Statute or court order justifies departure Inherent jurisdiction: emergency; change nature of infants property; allow maintenance out of income; approval of compromise on behalf of infants; direction that an unauthorised transaction be carried out. Departure authorised pursuant to s 89 Trustees Act 1962 (WA): departure when expedient or in the best interests of the majority of beneficiaries.

Duty to keep accounts and supply information Positive duty to keep full and proper accounts: Kemp v Burn (1893) May employ agents (and in certain circumstances, should) (audit s51(1)) Accounts must be rendered when required by beneficiaries; trustees will be liable for costs of proceedings to obtain them: Re Whitehouse [1982]. Should make full rather than reluctant response. Duty extends to full details of trust investments or property Notification to beneficiaries of their interests Adverse inference can be drawn from failing to keep accounts or destroying records: Gray v Haig (1854) Duty does not include: Volunteering information to beneficiaries, or consulting them regarding their wishes; Hartigan Nominees v Rydge (1992) (memorandum of wishes not trust document) Duty is limited to trust documents, and there is no duty to disclose reasons for exercising a discretion. Re Londonderrys Settlement [1965]. No distinction between oral evidence and documentary evidence.

However, there is a distinction between written material relating to the management of the trust (which should be disclosed) and those relating to exercise of discretions. Claims by beneficiaries are sometimes based on a proprietary right to the documents: The beneficiary is entitled to see all trust documents because they are trust docum ents and he is the beneficiary. They are in this sense his own: ORourke v Darbishire Position at common law See Speight v Gaunt (1883) Duties to be discharged with the same standard of care as an ordinary prudent man of business conducting their own affairs Investments trustee is subject to additional restrictions; same care as an ordinary prudent man would take if investing for the benefit of people for whom he felt morally obliged to provide: Learoyd v Whiteley (1887)

Overarching Duty of Care The test is essentially objective: (Wheeler) not what that particular trustee would have done if the business was his or her own (otherwise the person may be careless in their own business) Onerous duty, but not overly so, so as not to discourage people from office. Some related issues: Honesty and sincerity/prudence and reasonableness Incurring Risk Taking Action enquiries, calling meeting of directors etc: Bartlett If trustee unsure directions of court Examples of potential Breaches Overly risky investment Failing to monitor investments Leasing trust property at a below market rent Mortgaging trust property to secure debt unlikely to be payable At common law: same care as an ordinary prudent man would take if investing for the benefit of people for whom he felt morally obliged to provide. Learoyd v Whiteley (1887) Statute: does not set out a standard of care generally, but does set out a standard when investing. s18(1) sets out the standard of care required in the context of exercising the power of investment:

Administrative Duties (cf fiduciary duties) Investment To provide information and accounts To distribute to those entitled To act unanimously To act impartially etc Underpinned by the duty of care

Fiduciary Duties Trustee subject to strict fiduciary proscriptions:

No conflict rule duty to avoid a situation of conflict between duty as trustee and personal interests : No profit rule: duty not to make an unauthorised profit (eg Keech v Sandford; Boardman v Phipps) The no profit rule Trustees can only make an income from being a trustee if: 1.There is authorisation in the trust instrument. Express remuneration clauses (charging clause) are extremely common, but owing to the equitable rule, they were always construed very strictly. Re Chahinder and Herrington [1907]: solicitor/trustee authorised to charge for professional services was not allowed to claim for work that could have been done by someone other than a solicitor. 2.Remuneration agreed under contract with beneficiaries. Of age and absolutely entitled to trust property, beneficiaries can contract to pay trustees. However subject to allegations of undue influence owing to the presumptive relationship. 3.Courts Inherent jurisdiction Court has inherent jurisdiction to authorise remuneration for trustees or fiduciaries. Duke of Norfolks Settlement Trust [1981] (variation of previous agreement) 4. Where orders have been made under s89 TA (expedient) court may allow remuneration N.B. The solicitor-trustee May only charge for professional costs if authorised by the trust instrument In the absence of express authorisation, can claim for out of pocket expenses Exception is the rule in Craddock v Piper (1850): Covers remuneration for litigious work undertaken by solicitor/trustee. May charge for costs if they have acted for a co-trustee as well as themselves.

The rule against self-dealing What conduct should the trustee avoid? Borrowing trust money, even if the trust instrument gives wide powers of investment: Wickstead v Browne (1992) Buying trust property in the absence of authorisation, even for full price. Leasing trust property Consequences: transaction voidable. Cf Holder v Holder [1968] rare exception. The fair-dealing rule isthat if a trustee purchases the beneficial interest of any of his beneficiaries, the transaction is not voidable as of right, but can be set aside by the beneficiary unless the trustee can show that he has taken no advantage of his position and has made full disclosure to the beneficiary, and that the transaction is fair and honest. The rule I take it is this; not that a trustee cannot buy from his cestui que trust, but, that he shall not buy from himself. If a trustee will so deal with his cestui que trust, that the amount of the transaction shakes off the obligation, that attaches to him as a trustee, then he may buy. Per Lord Eldon LC, Ex parte Lacey (1802) Therefore, these presumptions must be rebutted: No material facts have been concealed: full disclosure The price was fair: full value given The beneficiary obtained independent advice The transaction was at arms length.

The above will cleanse the trustee of undue influence.

Duty to act impartially Must act impartially between beneficiaries and between classes of beneficiaries. Income beneficiaries (i.e. life tenants) v capital beneficiaries - Re Mulligan Ties in with duty of investment Law presumes the settlor intends to benefit both equally.

Duty of Loyalty Trustee must act loyally to the trust and always put the interests of the beneficiary first. Trustee should not act in a way thats contrary to the (financial) interests of the trust. Tee should exercise good faith in administering the trust. Should place the interests of the beneficiaries ahead of other concerns, especially personal concerns or views: Cowan v Scargill [1985] In the investment context, this means that, unless trust deed provides otherwise, trustees must be motivated primarily to gain the best financial return for beneficiaries, bearing in mind the risks and potential income of an investment. Trustees may have even to act dishonourably (though not illegally) if the interests of their beneficiaries require it. Thus where trustees for sale had struck a bargain for the sale of trust property but had not bound themselves by a legally enforceable contract, they were held to be under a duty to consider and explore a better offer that they received, and not to carry through the bargain to which they felt honour boundIn other words, the duty of trustees to their beneficiaries may include a duty to gazump.

Duty to act personally Three aspects: 1.Trustees must act unanimously 2.Duty not to delegate 3.Duty not to fetter discretions Must not act under the dictation of another Must not defer to the wishes of a co-trustee Must not commit in advance to future exercise of their discretions

Duty not to delegate: Arises from the duty to act personally delegatus non potest delegare Basic equitable rule states that a person is entrusted with a fiduciary duty does not fulfil it if he delegates it to someone else; thus he remains liable for the other persons default. The trustee has a responsibility to administer the trust personally. Exceptions: Where delegation is expressly authorised by the trust instrument; Situations where agents need to be employed (solicitors, stockbrokers) (situations not covered by statute) Where Trustee Act expressly authorises them to delegate (s53 Trustees Act) Investment

Generally: - Trustees are under a duty to invest (s24). Power to invest comes from: - Trust deed - may proscribe certain investment (i.e. in listed companies, or may disallow certain investments) - Statutory power to invest: s17 Trustees Act - Gives a very broad power to invest: unless expressly prohibited by the trust instrument, a trustee may (a) invest in ANY form of investment; and (b) at ANY TIME vary or realise an investment and reinvest money. (i.e. a general power of investment) - s18: standards of care - (1)(b) nonprofessional and (1)(a) professional - Authorisation by the court: inherent power to authorise investment: s89(1) if it is expedient in the management or administration of the property - s5 TA specifies the Act applies except where otherwise expressly provided - Though there are wide powers of investment, restrictions are imposed regarding matters to be taken into account - STATUTORILY: s19. Investment power of trustees, rules of law and equity apply (1) Any rules and principles of law or equity that impose a duty on a trustee exercising a power of investment including, without limiting the generality of those duties, rules and principles that impose (a) a duty to exercise the power of a trust in the best interests of all present and future beneficiaries of the trust; (b) a duty to invest trust funds in investments that are not speculative or hazardous; (c) a duty to act impartially towards beneficiaries and between different classes of beneficiaries; or (d) a duty to take advice, continue to apply except to the extent that they are inconsistent with this or any other Act or the instrument creating the trust. (2) Any rules and principles of law or equity that relate to a provision in an instrument creating a trust that purports to exempt, limit the liability of, or indemnify a trustee in respect of a breach of trust, continue to apply. (3) If a trustee is under a duty to take advice, the reasonable costs of obtaining the advice are payable out of trust funds.

s20(1) - matters the trustee MAY consider in exercising their power of investment.

- IN EQUITY: - Duty to act prudently - even though trust may authorise a particular investment, trustee may still be liable if did not act prudently or in good faith - Beneficiaries financial interests are paramount over their opinions: Cowan v Scargill, 1985 - Not speculative or hazardous investments (but diversification - return & maintenance of trust property)

- Duty to preserve the trust property: trustee must ensure that the capital value of the trust is maintained, and protected against inflation where possible - Trustee should also take care not to put the trust capital at risk in the process of trying to secure high returns - Sometimes capital value cant be maintained, e.g. inflation is extremely high - Duty to seek advice - Factors relevant to ascertaining whether there has been a breach of these duties -s26B: Breach of trust as to investments, factors to be considered by court -Portfolio as a WHOLE needs to be prudent - not necessarily each investment: Nestle v National Westminster Bank, 1993 - Modern trustees acting within their investment powers are entitled to be judged by the standards of current portfolio theory, which emphasises the risk level of the entire portfolio rather than the risk attaching to each investment taken in isolation. - Heiress to fund argued her inheritance could have been four times as much as it was had it been invested differently. (270,000 should have been over 1m) - Court conceded there had been errors of judgement, mistakes as to width of investment power and a failure to review often enough, however failure to maintain value was not of itself a breach of trust. -Breach of associated duties - e.g. terms of the trust -Trustees decisions not to be judged with the benefit of hindsight facts and circumstances existing at the time the decision was made: Nestle -Review of investments: s18(3) annually (individually and as a whole) -Failure to review regularly amounts to a breach of duty of care

Nestle v National Westminster Bank, 1993 - Beneficiary arguing she had been deprived of a significant amount of money due to poor investments by the trustee - her inheritance could have been 4 times as much as it was - See excerpt above - Breach is not judged on the basis of whether they were the BEST investments possible with the benefits of hindsight; only whether they were prudent in context of the time they were made

Authorised? - What if a trustee is unsure of whether a particular investment or investment strategy is authorised? - 1. May obtain independent advice - s20(1) specifically allows a tee to obtain and consider independent and impartial advice reasonably required for the investment of trust funds or management of the investment, from a person whom the trustee believes to be competent to give the advice. - May pay for advice: Tee may pay for the reasonable costs of obtaining advice out of T funds - s20(2).

- Is trustee required to act on advice? Under the general law, position used to be that tee had a duty to seek advice on matters which they didnt understand, e.g. making certain investments. - Tee wasnt entitled to reject that advice merely because they sincerely disagreed with it but nor were they bound to accept and act on it: Cowan v Scargill, 1985 - Only entitled to reject advice if in addition to being sincere, the trustee is acting as an ordinary prudent man would act: Cowan. - 2. May ask court for directions: - Court may authorise an investment of trust funds - under s92 - Part of courts inherent supervisory jurisdiction

9. ADMINISTRATION OF TRUSTS
Appointment of Trustees - Who can be a trustee? - Any person capable of holding property - Children prohibited by legislation in NSW and ACT: but there are processes for substituting adults etc - No prohibition regarding bankrupts, but may be removed in certain circumstances - Beneficiary can - but cannot be sole trustee & sole beneficiary, or one trustee of several & still sole beneficiary: DKLR Holding Co - If property is conveyed upon trust to someone who cannot hold it on trust or if the trust deed imposes specific duties upon a trustee who has not the capacity to perform those duties, then the trust will not fail - Sonley v Clockmakers Co, 1780 - How can trustees be appointed? - Pursuant to trust instrument (powers of appointment) - Appointment pursuant to a power of appointment - Takes precedence over statute - Likely to be construed as a fiduciary power (therefore has to be exercised for the benefit of beneficiaries; except where the appointer is in fact a beneficiary; Price v Powers, 2005 - Pursuant to statutory powers - s7 Trustees Act: who can appoint? - Persons nominated in trust instrument - Surviving or continuing trustees - If no such people, the personal representatives of the last surviving or continuing trustees: s7(1) - In what circumstances? - (a) onwards - N.B. unfit does not = incapable. - By the court - A trust will not fail for want of a trustee - If trust satisfies certainties and is completely constituted, equity will uphold it and appoint trustees - s77: Allows this. - Dominant consideration by court (when determining whether to exercise this power to appoint/remove trustee) is the welfare of the beneficiaries

- This involves considering: settlors intention for who should be trustee; whether trustee will represent interests of ALL beneficiaries (not just one or a small group, e.g. reluctant to appointment someone whos a close relative of one ben); whether trustee is likely to properly execute the trust (e.g. financial stability, conflicts of interest, other experience as trustee, friction between trustees). - Situations in which a new trustee may be appointed in that way include: - Where a trustee wants to quit, - Where they have been convicted of a felony, or - Where they have become a lunatic or a bankrupt (s77(2)). - i.e. where it is expedient - Expedient here means conducive to the interests of the beneficiaries, the security of the trust property and efficient and satisfactory execution of the trusts and faithful exercise of the tr/ees powers. Miller v Cameron, 1936 - For instance, where there is animosity between the trustees: Letterstedt v Broers, 1884.

Types of trustees - Public trustee: established under Public Trustee Act 1941 (WA) -Can act as executor/trustee whether appointed or in cases of intestacy; where its not clear who is to be trustee, or the need for an objective trustee. - Advisory trustee: Trustee Act 1962 s14 - Appointment to advise other trustees, therefore not a true trustee - (s14(3)): property not vested in the advisory trustee and does not have management responsibilities, and absolved from liability. Public trustee sometimes takes this role. - Appointed by settlor/testator in trust instrument, by court, or person with a power to appoint new trustees - Custodian trustee: Trustees Act s15 - Purpose is to HOLD the trust property and manage it under the direction of the managing trustee - Will not be liable for any default of the managing trustees. - In some jurisdiction the custodian trustee must be the Public trustee. - In WA any corporation can be appointed custodian trustee. - Bare trustee: - Has legal title to the property but no obligations/duties other than to preserve the property and transfer it to the beneficiary when required to do so (though not an absolute rule)

Disclaimer, Retirement and Removal of Trustees - Disclaimer: - There is no obligation to act as trustee merely because one is appointed: Robinson v Pett, 1734 - A person appointed as trustee may refuse the trust before the trust property is conveyed to him - Even if the trust property has already been conveyed to him, he may disclaim the trust: Hardoon v Belilios, 1901

- An attempt to vest property in a person who cannot legally hold it will not prevent operation of the trust - Sinnott v Hockin, 1882. - To disclaim the trustee, the intended trustee may expressly refuse to act as a trustee or his refusal may be implied from inaction on his part - Re Birchall, 1899 -However, the onus of proving disclaimer is on the party relying on it - Lady Naas v Westminster Bank Ltd, 1940. - The disclaimer must occur before the intended trustee has accepted the trust (unless otherwise stated, execution of the trust deed is an acceptance of the trust - Bennett v Bennett, 1875; or done anything as trustee Noble v Meymott, 1851. (cf Holder v Holder: otherwise have to go through retirement procedures) - What happens to the trust property if the single trustee disclaims? - Property will be held on a resulting trust by the settlor until a new trustee can be appointed (and presumably not disclaim) - Retirement: - A trustee may retire in 4 ways: - 1. In accordance with the retirement provisions in the trust deed - 2. Pursuant to the power contained in s9 Trustees Act: - In writing; provided there are 2 trustees or a trust corporation left or co-trustees and appointor consent to retirement and to existing trustee/s being vested with the trust property - 3. If all of the beneficiaries (of full age and legal capacity) agree to it: although it may bring an end to the trust entirely - Re Brockbank - 4. By consent of the court: - May apply to a court for release from their duties - Court has an inherent jurisdiction to do so - May impose terms, including insisting that the trustee pay the costs of appointing a new trustee. - Acceptable reasons to be excused include sickness, infancy, the fact that he is suffering financial loss as a result of the role. - Wanting to purchase the trust property is generally insufficient: Gould v Carroll, 1964 - Any knowledge of breaches will not be absolved by retirement: Head v Gould, 1898 - Removal: - A trustee may be removed: i. under an express power in the trust deed. (construed strictly) ii. pursuant to ss7 or 77 Trustees Act, which permit a new trustee to be appointed in substitution for an existing one; or iii. by the court exercising its inherent jurisdiction to supervise trusts - Removal by the Court - This jurisdiction is used to protect beneficiaries. - The trustee will be removed if his continuing in office is inconsistent with the welfare of the beneficiaries - Miller v Cameron, 1936 - Only used in exceptional circumstances - Porteous v Rinehart, 1998 - Breach of trust is not in itself a reason unless the welfare of the beneficiaries is compromised: Princess Ann of Hesse v Field, 1963 - So simple breaches of trust will not be grounds for dismissal. - On the other hand, a trustee may be removed even if she has committed no breach of trust.

- For instance, if the relationship between the trustee and the beneficiaries is so poor that it impedes the administration of the trust, then the trustee may be removed - Hunter v Hunter, 1838. - However, mutual dislike will not suffice - Letterstedt v Broers, 1884. - Incapacity of Trustee: - The court may remove a trustee and replace him if he is unfit to hold office e.g. misconduct in administering the trust, conviction of a felony, lunacy, bankruptcy (wont necessarily incapacitate) or in the case of corporate trustees, liquidation/ dissolution - s77(2) Trustees Act. - If the beneficiaries wish to remove a trustee without having a replacement appointed, or if the trustee contests his removal, then must apply to the court to exercise its inherent jurisdiction. - They must show that the trust property is in danger or that the trustee has behaved dishonestly, with a lack of reasonable fidelity or some other quality essential in a trustee - Letterstedt v Broers.

Death of a trustee - S45 (1) if trust vested in 2 or more jointly, trust can be managed by survivor - If property vested as tenants in common, then trust property passes to trustees personal representatives (creates admin difficulties if trust instrument doesnt provide that property will vest in those people in absence they hold it under bare trust)

Powers of Trustees - Sources of powers: trustee powers come from 3 possible sources - Trust instrument: usually confers certain powers on trustees - Often have considerable detail about powers - e.g. power to borrow/lend money, deal with property, carry on business etc - Powers in a particular trust will vary, depending on the type and purpose of the trust. E.g. trustee of an estate that involves a business needs different powers from a trustee involving a trust fund that is invested. - As a protective measure, trust deed could make a power exercisable only with the consent of a certain specified person. Eg make the power of sale subject to consent of a particular beneficiary. - Trustee legislation: Part IV of Trustees Act - Only apply so far as a contrary intention is not expressed in the trust instrument - ss5(2),(3) TA - Power to sell, lease property s27-8 Power to raise capital by sale, mortgage etc of trust property s43 Power to carry on business, trade of a deceased s55 Power to sell business to a company s67 Power to insure trust property s46 - Inherent jurisdiction of the court - Power of sale: - Trust instrument may grant a general express power of sale, or limit it in some way (e.g. by auction) - Implied power may be construed if it is necessary to carry out the settlors intentions:

- clause giving power to trustees to act for the benefit and welfare of the beneficiaries held to confer power of sale: Seelander v Rechner, 1884. - direction that trust fund be divided equally between 4 bens was found to imply a power of sale: Re Jones, 1917; Pagels v MacDonald, 1936. - Statutory power to sell: Trustees Act WA s27 - every trustee may sell the property, dispose of the property by way of exchange for other property in the State of a like nature and a like or better tenure, postpone the sale of any property that he has a duty to sell, let or sublet the property at a reasonable rent. - Court-conferred authority of sale - when sale is expedient in the management or administration of a trust, but is forbidden by the trust instrument. - Powers of management: - Conferred by trust instrument - Conferred by statute: s55 Trustees Act: Subject to the provisions of any other Act, if at the time of his death any person is engaged (whether alone or in partnership) in carrying on a business, trade or occupation, it shall be lawful for his trustee to continue to carry on that business, trade or occupation, in the same manner, for any one or more of the following periods, namely2 years from death of that person, such period as may be necessary or desirable for winding up the business or such further period/s as the Court may approve. - elaborates further on what trustee may actually do, eg purchase stock, machinery, implements; employer such managers, agents, servants, clerks as he thinks fit; enter into share-farming agreements. - Conferred by the Court - s55(3) TA; as they see fit. - Maintenance and Advancement: - Refers to situations where powers of trustee are constrained in some way: e.g. where beneficiarys interests are vested but not presently payable, or they are entitled to capital but it is contingent on an event occurring (e.g. reaching 21 years) - Beneficiary may request day-to-day money (maintenance: paid out of income of the trust), OR a capital sum (advancement - out of the trust capital) - Commonly included in the trusts deed - ss58-60 Trustees Act (but subject to the instrument)

10. RIGHTS OF TRUSTEES AND BENEFICIARIES


TRUSTEES RIGHTS - Reimbursement & indemnity: (expenditure and legal costs) - Ron Kingham Real Estate v Edgar, 1999: [The right to indemnity and recoupment is] an incident of trusteeship that enables a trustee to act in the best interests of the trust in an impartial and disinterested manner with some assurance that his personal financial position will not be prejudiced. - Reflected in s71 Trustee Act - Right is only to expenses properly incurred. - Trust instrument is not a source of the right, but may modify it: (costs recoverable for unauthorised transaction if acted in good faith) Fitzwood v Unique Goal, 2001 - Could the instrument remove the right to indemnity? - Act does make indemnity subject to the trust instrument - but indemnity is seen as a fundamental right so perhaps not

- Nature of the right: - Right is actually a proprietary right = an equitable lien over the trust assets - Priority to beneficiaries claims Octavo Investments Pty Ltd v Knight, 1979; Commissioner of Stamp Duties v Buckle, 1998 - Trustees right of indemnity will survive the winding up of the trust and transfer of trust assets to a ben: Rothmore Farms v Belgrave, 1999 - Tees right of indemnity survives even after loss of office, ie if tee ceases to act as trustee (retires), lien survives in respect of liabilities arising from time of administering the trust: Rothmore. - Tee can bring proceedings in equity to enforce the right, or can sell trust property to satisfy the right pursuant to court order. - Creditors right of subrogation: - Creditors are entitled to be subrogated to trustees rights of indemnity - So if trustee is insolvent, creditors of the trust (seeking payment of debts/liabilities) can stand in the shoes of the trustee and access the trust assets in priority to the bens: Re Raybould, 1900 - Note though creditors can only claim out of T property to the extent of the trustees indemnity, and cant actually sue the beneficiaries personally. - Right to reimbursement from beneficiaries personally - General rule: trustee has a right of indemnity that is enforceable against a beneficiary of full capacity - Hardoon v Belilios, 1901 - Reasoning: beneficiarys obligation to indemnify trustee is an incident of equitable ownership, based on the benefit/burden principle ie if beneficiary receives the benefit of the trust, he/she should also bear a proportionate part of the associated burden. - i.e. if trust fund is deficient, tee may sue ben personally for indemnity against expenses properly incurred if the ben is sui juris and absolutely entitled to the property - In other words, tees right of indemnity includes right in rem against T prop, and right in personam against bens. - If multiple beneficiaries, indemnity is proportional to their entitlement

- Right to contribution and indemnity in relation to breach of trust: - A trustee who is personally liable for a breach may in turn seek reimbursement from other trustees who are also in breach, and also from beneficiaries who requested the wrongful action - Co-trustees: Bahin v Hughes, 1886 - Active trustee made unauthorised investment. Passive trustee sought indemnity. Held; inactive trustee as much responsible because of inaction. - Co-trustee/beneficiary: Chillingworth v Chambers, 1896 - If one trustee is also a beneficiary, and that ben/trustee concurs in a breach of trust, that ben/trustee must indemnify co-trustees to the extent of his/her beneficial interest - Beneficiary: s76 TA - EXCEPTIONS include: - One trustee acted fraudulently, but other didnt the one who acted fraudulently will be liable for full amount Bahin v Hughes; Miorada v Miorada, 2005

- If loss was caused by actions of a solicitor-trustee, and the co-trustee (not a solic) reasonably relied on the solicitors experience, then solicitor-trustee may bear sole liability: Chillingworth v Chambers, 1896. [Note solics have professional indemnity insurance] - No entitlement to contribution if the tee received a benefit from the breach, or committed an intentional breach: Powlet v Herbert, 1791 - Right to impound: - s76 TA: where tee commits breach of trust on request or with written consent of a beneficiary, Court may make order impounding all or any part of the beneficiaries interest in the trust by way of indemnity to the trustee. - Effect: beneficiary who instigates, is involved in or consents to breach of trust by trustee (eg asks trustee to act in a way thats outside powers conferred on tee) cant succeed in an action against the tee for breach, and maybe be personally liable for loss caused (to other beneficiaries) - Right to impound only applies: in relation to an investment, where the investment requested or authorised by the beneficiary is outside whats authorised by the trust. - i.e. if the investment is within power to invest, trustee cant rely on s76 as then tee is expected to act with reasonable care in exercising the power: Re Somerset, 1894 - Right to seek advice: - Statutory right: s92 Trustees Act gives trustee the right to seek opinion, advice or direction of court on any matter concerning management or administration of the trust. - Reflects general law position: that stems from Courts inherent power to supervise trusts: Re Permanent Trustee Australia Ltd, 1994 - Effect of advice: is that, providing trustee put all relevent facts before the Court, if trustee acts on advice, trustee is protected from a claim of breach of duty in acting on the advice given: Re Grose, 1949 - Practice: In practice, this power is used for advice on matters such as the rights/interests of bens or creditors, whether further inquiries need to be made, difficulties in ascertaining a class of bens; providing accounts; approval of dealings with trust property; initiation of litigation on behalf of the trust. - Costs of the application: can be paid out of the trust fund s97 Trustees Act . - NB: Shouldnt apply to the court on a question such as how to exercise the discretion (not law, merely opinion) BENEFICIARIES RIGHTS - Tend to reflect trustees duties; are in addition to rights arising on breach of trust - To extinguish the trust: Saunders v Vautier - Right to compel performance of the trust - Right to possession of trust property - Right to approach the court on questions of construction and review of trustees acts: ss93 &94 Trustee Act - Right to Information (link to trustees duty to keep accounts and provide information)

11. PROPRIETARY REMEDIES


1. General Position Trustees liability for breach - Trustees are liable for acts or omissions that are shown to be in breach of their duties as trustees (e.g. obey terms, insure trust property, etc) Beneficiarys options re: breach (full range of equitable remedies) - Where the breach is imminent: - May be able to take preventative action: obtain court order to have trustee removed under Trustees Act or have a new trustee appointed (e.g. by an appointor) - Where the breach has occurred: - Proprietary remedy in respect of trust property in the possession of a trustee or a third party - Personal remedy against the trustee - Personal remedy against a third party Benefits of proprietary remedies - If a beneficiary is able to obtain a proprietary remedy against a bankrupt trustee (e.g. if the trustees bank account is declared to be held on constructive trust for the beneficiary/ies) then the trust property in question cannot be divided up amongst the trustees other creditors - Remedies are enforceable against third parties (for specific assets) - Assets may increase in value - so beneficiary will be able to claim AT LEAST the value of the trust property, and if it has made a profit, then claim the profit too 2. Proprietary Remedies Constructive trusts - Imposed by the court as a remedy to: - Significantly strengthen the beneficiarys rights, - Significantly reduce the wrongdoers rights - Imposed when there has been a breach of a trust duty and the trust property/asset is still in the hands of the breaching trustee, and there is no other adequate remedy to compensate the victim/s Keech v Sandford, 1726 - Trustee held a lease on trust for an infant B - Lease came up for renewal and landlord refused to renew it as the infant was the ultimate lessee - Trustee agreed to lease the property for HIMSELF, which landlord agreed to - Court held that trustee could not hold the lease for his own benefit, unless all the beneficiaries fully consented to this - (Infant beneficiary could not give informed consent as was not of age) Chan v Zacharia, 1984 - Business lease held by the two parties in their partnership; very valuable - Lease came up for renewal and Z asked C to renew the lease for both of them - C secretly renewed lease in his name only

- Court found that C held the lease on CT for the partnership Boardman v Phipps, 1967 - Part of trust property was a 25% share in a private company - Trusts solicitor and one trustee went to board meeting of the company and represented the trust - Decided company could be run more profitably, so purchased the remaining 75% and did indeed improve the companys profits - However the court found that the profits on their 75% were unauthorised by the trust, so they were accountable to the beneficiaries of the trust (no secret profits rule; no conflict of interests) Equitable charge - Used to secure a personal claim - The value of the misappropriated trust property becomes a debt attached to some asset owned by the breaching trustee - Only for the specific value, not for the asset itself like a CT. - More desirable for the beneficiary when the asset has FALLEN in value and there are thus no profits to give to the beneficiary. 3. Tracing: Nature/Principals/Purpose What is tracing? - Following the value of the trust property through to its current form - More than FOLLOWING in the legal sense - When the form of the trust propertys value that the breaching trustee holds has been converted into something else (cash, shares, real estate...) and the beneficiary then has a claim over that new asset - When TP is sold to a BFPFVWON, cannot be claimed from the purchaser, so beneficiary can then claim the VALUE from the trustee. - Substituted asset --> vindication of the beneficiarys interest in the asset - Necessary to be able to claim a proprietary remedy (as it attaches to whatever has been substituted for the TP) Nature of tracing - NOT A REMEDY, a process (Miller LJ in Foskett) - Beneficiary demonstrates what has happened to their property - Identifying the proceeds of the TP sale/substitution, and the persons that have handled it along the way (potential other defendants!) - The final substitute asset belongs to the beneficiary - Process itself doesnt establish the claim: it depends on the initial interest in the original asset (e.g. equitable security interest vs. equitable OWNERSHIP) - Remedy is the result of tracing Principles of tracing - Common law rules: - Foskett v McKeown, 2001 -Miller LJ: No sense in maintaining different rules for tracing in common law and equity; removed much of the distinction between the two. - Equitable rules: - Re Diplock, 1948

Applying the principles of tracing - 1. Identify some pre-existing property right; - 2. Identify the asset that exists at the end. - Difficulties arise when the asset arises WITH the breach - e.g. with bribes, when a trustee takes a bribe and then purchases an asset with it - this is a breach of trust duties, but the beneficiary didnt have an original interest in the bribe - Mostly resolved with AG (Hong Kong) v Reid - as soon as a trustee accepts a bribe, it is held on CT for the beneficiary.

4. Rules of Tracing 1. Purchase of an asset using trust funds only - Beneficiary may elect to either: - Claim the asset (CT) or, - Hold a charge over the property as security for the amount of trust monies laid out in its purchase - Whichever is the most beneficial to the plaintiff. - Authority: Foskett v McKeown. 2. Situations involving mixing trust funds with trustees, or others, funds - Purchase of an asset using mixed funds: - Beneficiary may elect to: - Claim a proportionate interest in the property (e.g. 50% of the asset if 50% of the purchase price was paid with trust funds); or - Claim an equitable charge for repayment of the trust money, or a proportion of the profits - Authority: Scott v Scott, 1962 - But undecided: whether beneficiary should be entitled to the WHOLE of the profits, or should the breaching trustee be allowed to keep some? (e.g. an allowance for their time and effort, as described in Boardman) - Definitely will be awarded a pro-rata share of the profits (i.e. equivalent to the share that the trust funds purchased) - Mixing of trust funds with trustees money: - Claytons Case, 1816: The money that was deposited first is the money that was withdrawn - but has drawbacks if trustee made deposits of their OWN money after the trust money (Stenning?) - Re Halletts Estate, 1880: Modified the above rule; it is irrelevant in what order the money was deposited. The trustee took their OWN money out, and any remaining is property of the trust. - Beneficiary has a choice: - Take the property that has been purchased with the money (if there is still an identifiable asset) - Or seek to claim a charge over the property for the amount of trust money misappropriated - Where part of a mixed fund is used to purchase an asset and the balance is dissipated (spent on things that have no remaining value to the beneficiary) - Re Oatway, 1903: Trustee cannot maintain that the investment was purchased with their money and the squandered money was the trust property. The opposite will be held. - Tracing into a mixed fund that is or has been less than the amount misappropriated

- e.g. if after the balance drops below the misappropriated amount, the trustee deposits some of their own money - Makes 2 separate stages of mixing - Rule: subsequent deposits are not regarded as restoration of the trust funds. Beneficiary can only claim the lowest intermediate balance. - James Roscoe (Bolton) v Winder, 1915 - British, but imported into Australia by Re Laughton, 1962 - Lofts v MacDonald, 1975 - Whos entitled to profits from purchases with mixed funds? - Scott v Scott: recall that beneficiary only claimed a PORTION of the profits from the asset purchased with mixed funds, not the entire amount - If this occurs, wrongdoer is entitled to keep a share of the profits (the unclaimed portion) - What if the trustee funds the rest of the purchase not with their own money, but with a loan? - Paul A Davies Pty Ltd v Davies (no 2), 1983: - Court considered here that in some circumstances it would be more appropriate to give beneficiaries ALL the profit - as the mortgage being granted here was entirely dependent on using the trust funds as a deposit (flow-on benefit) - Trustee is not entitled to any profits as NONE of their funds were used. Lender is entitled to their loaned funds returned, but profits to go to beneficiaries. - Where trust funds are used to reduce trustees debts - General rule: Funds are treated as being dissipated (i.e. lost) --> undesirable outcome for beneficiary, but there is no asset left to hold a charge over. Can still have a personal remedy against trustee for what it might be worth. - Where trustee uses trust money from two or more trust funds to purchase an asset - Proportionate approach: Foskett? - Applies where trust money is used to purchase ASSETS, not simply mixing in bank accounts (i.e. illiquid) - Where trustee mixes money from two or more funds and trustees own money in a bank account (cf. previous situation) - Presumably not enough money left in account to fulfil all beneficiaries claims - Initially, similar rule to Claytons Case applied (Re Stenning, 1895) - Has been rejected recently, and not applied in Australia - Keefe v Law Society, 1988: Firstly, assume any money taken out and dissipated was trustees. Then take proportionate approach to determine how the remainder will be distributed between the beneficiaries. - Re Global Finance, 2002: Difficulties with the proportionate approach here (McLure J) re: identifying the spending of the different beneficiaries trust moneys & where different grounds for/claims from various proprietary interests are involved; thus it may not always be appropriate to apply.

Foskett v McKeown, 2000, at 1327: - As against the wrongdoer and his successors, the beneficiary is entitled to locate his contribution in any part of the mixture and to subordinate their claims to share in the mixture until his own contribution has been satisfied. This has the effect of giving the beneficiary a lien for his contribution if the mixture is deficient.

- Innocent contributors, however, must be treated equally inter se. Where the beneficiary's claim is in competition with the claims of other innocent contributors, there is no basis upon which any of the claims can be subordinated to any of the others. - Where the fund is deficient, the beneficiary is not entitled to enforce a lien for his contributions; all must share rateably in the fund. The primary rule in regard to a mixed fund, therefore, is that gains and losses are borne by the contributors rateably."

Tracing against third parties - CAN trace against third parties, but tracing rights will be defeated where trust property (or substitute) has been sold to a BFPFVWON - Knowledge or suspicion of receiving trust property makes them not bona fide, and your rights continue

12. PERSONAL REMEDIES


Personal action against the trustees: 1. Personal liability - Trustees are only liable for those breaches that occur through their OWN default, unless the loss caused by the acts of another occurs through the trustees own default - s70 Trustees Act - Re City Equitable Fire Insurance Co, 1925 - Trustee is in wilful default only if they know that they are committing or intend to commit a breach of duty, or are recklessly careless. (Must have knowledge) - Re Harrison, 1891 - Co-trustees: if one (or more) is in wilful default and the other one (or more) has sat back and left the administration of the trust to the breaching one, even though they have done nothing unconscionable themselves, both/all of them are liable

Remedies available: - Account of profits, equitable compensation (see later) - Must elect to pursue either one or the other of these against each trustee (may even choose both for the same trustee if there are multiple separate breaches) but cannot pursue both simultaneously for the same breach - N.B. Simply because a trustee has committed a breach of trust does not mean they will be liable for some remedy (there are some defences available) - These may also be raised against third parties (see later).

Defences available: 1. Consent of beneficiaries - Trustee may be able to prove that the beneficiary has consented or acquiesced to the breach, or has subsequently released the trustee from liability. Consent is discussed in: - Spellson v George, 1992 (Handley JA)

- Can take a number of forms: express consent, active encouragement/inducement, participation in the breach, silence/lack of activity despite knowledge of what is going on (SOMETIMES infers consent) - Regardless of the form it takes, it must be fully informed - issues: - Beneficiary must have full mental capacity - Full knowledge of all the facts and legal consequences of the breach - Consent must be given of the Bs own free will (evidence of pressure by the trustee will negate this defence) - Onus is on the trustee to prove the above three requirements once the defence is raised - Consent cf acquiescence: - Consent is given BEFORE the fact; - Acquiescence is where the beneficiary finds out of the breach after it has occurred, and adopts it - if all the requirements are fulfilled, the transaction has been fixed and the trustee is not liable - Acquiescence carries the same requirements as consent. - Release: - Also occurs after the breach - Typically in the form of a deed of release - beneficiary & defaulting trustee reach an agreement on the breach (perhaps a settlement, etc etc). Beneficiary cannot then later sue on the same breach.

2. s75 Trustees Act - Allows court to excuse the trustee in whole or part if the trustee acted honestly & reasonably & ought therefore to be excused - Shifts deciding power from beneficiary to court - E.g. court may decide not to impose interest on payments the trustee is liable for, etc... - Re Stuart, 1897 - National Trustees of Australia v General Finance of Australia, 1905 - Partridge v Equity Trustees Executors & Agency, 1947 - No fixed rule comes from these cases - each case must be considered on its own circumstances due to the broad scope of the courts discretion - Generally, the pivotal requirement is reasonableness - might be determined by asking whether the trustee has acted as if the trust funds were there own money (i.e. were they as careful as they would have been with their own money?) - Obviously runs into problems when the trustee is reckless with their own money anyway - Professional trustees - does this make a difference? - National Trustees suggests a higher standard of reasonableness applies for professional trustees - Professional trustee paid trust funds to wrong beneficiary based on legal advice they had received - Court held that it was appropriate to apply a higher standard of conduct for paid trustees (here, that meant that relying on this legal advice was not sufficient care)

3. The trust instrument

- Trust instrument often contains a provision purporting to limit the liability of the trustee for breaches of the trust - Typically, such provisions are construed very narrowly/constrictively by the courts (cannot merely go on the words in the instrument); likely to adopt an interpretation that excludes the least liability - However, see Armitage v Nurse, 1998: - Clause in the trust instrument exempted a trustee from all liability except in cases of fraud (meaning even if they were hopelessly reckless/negligent) - Court held this was valid - N.B. Has been criticised, AND is British (so not binding in Australia); yet to be seen whether Australian courts will adopt it - Generally, case law shows that if you attempt to excuse liability for EVERYTHING, the clause will be void - Obvious rationale that allowing this is bad public policy - puts beneficiaries at the absolute mercy of the trustees - Still appropriate to excuse liability for INNOCENT breaches however.

4. Procedural defences - Limitation period: - Limitation of Actions Act, 2005 s25, 26, 27, 47 (6-year time limit for most civil suits) - Clay v Clay, 2001

2. Remedy 1: Account of profits - In accordance with the general principle that a trustee must not be allowed to profit from their position, this remedy requires the trustee to disgorge any gain made from the position - These profits are assumed to otherwise belong to the trust - cf. Compensation, which attempts to place the beneficiary in the exact position they would have been in without the breach - account of profits could make the beneficiary end up better off than this, or worse - depends on the profitability of the breach! - The degree of the trustees unconscionability is irrelevant: whether the breach was innocent or fraudulent, the trustee must hand over ALL the profits - Only exception to this is that the court may put aside an allowance for the time and skill invested by the trustee - Boardman v Phipps, aforementioned - Regal Hastings v Gulliver, 1967

3. Remedy 2: Equitable compensation - Fully restores the trust fund to where it would be if the breach had not occurred. - Does not necessarily mean putting the misappropriated money back in: must take into account other changes that may have occurred to the fund (e.g. interest earnt, appreciation of share values, etc) - Measuring the amount of equitable compensation: - Re Dawson, 1966, pp214-216 - Quite different to compensation for breach of contract - Key difference is that the limiting factors, such as remoteness and foreseeability, that apply in contract, do NOT apply to equitable compensation

- Therefore equitable compensation is likely to be greater than compensation for breach of contract - When looking at the quantum of damages for equitable compensation, generally adopt a commonsense approach to causation & factor in the but-for test - Timing is also a factor: courts will look at the date the funds are due to be returned, NOT the dare the breach occurred (to calculate what the trust fund should be restored to). - This means that interest must be calculated - Intentional dishonesty is not required for the trustee to be liable for equitable compensation - e.g. if breach means that the money innocently goes to a third party who is then negligent with the money and causes the loss, the trustee is still liable. (Links to the causation test) - Youyang v Minter Ellison, 2003 - Can the trustee offset losses and gains against each other? - Only if they result from the same transaction - If not, the beneficiary can select equitable compensation for the losses and account of profit for the profits - leaving the trustee in the worst position ever - However, courts have sometimes been lenient with this, and allowed similar breaches to be condensed into one with the result that offsetting can then occur

4. Key differences between the remedies - Account of profits = restitutional. Focus is on the gain made by the wrongdoer - so no loss to the trust/beneficiaries needs to be proven. Profits can be associated with a constructive trust and therefore beneficiaries can get the benefits of a proprietary remedy. Easier to prove, as it is stripping an actual gain - Equitable compensation = repairs the reliance loss. Focuses on the actual fall in the value of the trust fund, therefore requires proof of an actual loss, so can be harder to prove. Useful when the defaulting trustee has made dodgy investments and thus no profit.

Personal remedies against third parties: 1. Wrongful distributions from deceased estates & trusts - Equity requires that the accidental recipient repays an equivalent amount. - However difficulties can arise when the recipient truly believed that they were entitled to the money and has spent it - Re Diplock; Ministry of Health v Simpson, 1951 - Traditionally, the beneficiary could only bring a claim against the recipient third party: - 1. if the distribution was inappropriately made by the trustee; and - 2. if all available remedies against the defaulting trustee have been exhausted - But this was altered by the Trustees Act - s65 reverses this, and requires the beneficiary to first claim from the recipient, and then if this fails, against the defaulting trustee - No defence that the recipient has spent the money - a key difference between personal and proprietary remedies - Only requires that the defendant pay the specified amount. Does not matter where it comes from (i.e. that the actual trust money has been spent account mixing is not a factor here)

- However in cases where the defendant would suffer a detriment - e.g. if a hospital uses it to upgrade a wing, and they obviously cannot undo this - a court may be willing to forego this step)

2. Third party liability in other cases - The 2 limbs in Barnes v Addy, 1874: - Knowing receipt, - Knowing assistance - Knowing assistance (accessory liability): - A Person who dishonestly assist a trustee to breach a trust duty will be liable in equity for any resultant losses, and accountable for resultant gains, to the trust fund - PERSONAL ACTION - Typically the assistant will not have made any personal gains from this - Elements: - Trustee must have committed a DISHONEST OR FRAUDULENT breach; - i.e. innocent breaches will not suffice - Farah Constructions, 2007 - Third party must have assisted in the breach; - Some element of fault must be present - Third party must have KNOWLEDGE of the breach - Farah at [174] - the degrees of notice/knowledge (1. actual knowledge, 2. wilful blindness, 3. wilful/reckless failure to make inquiries that an honest & reasonable person would make, 4. constructive knowledge - knowledge of circumstances that would indicate the facts to an honest & reasonable person, 5. knowledge of circumstances that would put an honest & reasonable person on notice - constructive notice) - Only the first 4 establish sufficient knowledge. #5 does not. - Knowing receipt (recipient liability): - A person who receives trust property will hold the property on a constructive trust for the true owner if they received it with notice of the trust - Elements: - Receipt of the property; - Actual receipt for their own benefit - i.e. the bank is not liable for the trust funds being deposited into an account in one of their branches. Only the holder of the account is. - Knowledge that it is trust property; - Must be actual property - not merely information, agreements etc (this counts as breach of confidence!) - Degrees of knowledge from Farah apply here - Knowledge that it is being received in breach - Degrees of knowledge also apply here

13. RESULTING TRUSTS


Definition/classification - No concrete definition or distinction between resulting and constructive

- 3 types of RTs not defined as such, but arise from different sets of circumstances - Traditional classification: Re Vandervells Trusts (No 2), 1974 - A resulting trust is a trust imposed by operation of law in circumstances where equity presumes a trust was intended - oversimplification, does not apply to theft principle

Types of Resulting Trusts - Automatic RT: When there is no disposal of the beneficial interest - Presumed RT: When a purchase is made in anothers name (e.g. joint purchases, etc) there is a presumption that the property is NOT a gift and that the party providing the money also intended to hold at least a part of the beneficial interest - Theft principle: (Established HCA 1910) When someone steals property, they hold the rights to that property on trust for the victim (previous owner) --> obviously no intent for the trust from either party

Automatic Resulting Trusts - Arises where a settlor transfers property to a trustee but does not fully dispose of the beneficial interest in the property - What is not fully disposed of results back to the settlor/their estate - or is seen as never having left their possession - Results in the trustee holding the property on trust for the settlor - not the (intended?) beneficiary - Intended to make sure that there is no gap in the beneficial ownership - that someone always holds the beneficial ownership and it does not merely attach to legal ownership - e.g. Settlor transfers property on trust, but does not name any beneficiary - property immediately reverts back to settlor - OR, settlor transfers property on trust for A for life, but does not name any beneficiary after A dies - after As death, is held on trust for settlor/their estate - OR, a testator provides in their will that leaves their real propertyto A but says nothing about their personal property - their personal property will be distributed according to intestacy legislation upon their death - OR, a testator leaves their property to a charity which, upon their death, no longer exists the executor holds the property on RT for As estate (intestacy legislation again applies) - OR, an express trust cannot legally be enforced - whether it is void for uncertainty, incompletely constituted, etc - OR, if the property is conveyed on trust for a specific purpose, which fails - Barclays Bank v Quistclose Investments - OR, if the purpose for which a trust was established has been achieved and there are surplus funds - Re Gillingham Bus Disaster Fund

Re Gillingham Bus Disaster Fund, 1958 - Trust was established to raise money from public for funerals, medical care for those who survived the bus disaster, etc - Amount of money raised was 3 times the amount needed - Court held that purpose wasnt charitable (because it aimed to benefit only a small, specific number of people) so an RT arose and the surplus money reverted back to those who had donated it (though in practice many of them were anonymous so it was impossible) - Reasoning was that donors had not given away the whole of their interest so the unused portion must be returned to them

- Issue had arisen before, in Re British Red Cross Balkan Fund, 1914 - That case found that the surplus belonged to each donor in proportion to the size of their donation

Presumed Resulting Trust - Not concerned with a gap in the beneficial interest - rather, concerns circumstances where legal title is with one person but another person has provided some or all of the purchase price and is claiming an interest in the property (concerned with equity) - Frequently arises in family disputes - N.B. Overlap with CTs in area of spousal disputes: courts now have discretion to alter these property rights under Family Law Act (marriages) and Family Court Act (de factos) so parties do not have to revert to trust claims - Presumption of a resulting trust: - Where a purchaser (A) legally transfers all or part of an interest in property to B, or where the parties both put in money to purchase the property in only Bs name, equity will presume that B holds the property on trust for both of them, unless there is evidence to the contrary - i.e. that A intended the property to be a gift. - Presumption of advancement: - In certain circumstances, the parties are considered to be in a relationship giving rise to a natural obligation for A to provide for B. The law then presumes that A did intend to make a gift to B. (e.g. father and son) - This presumption of advancement displaces the presumption of a resulting trust. - Applies where A is: husband/fiance of B (DOES NOT operate the same for wife/fiancee); father/mother of B; someone who stands in the place of father/mother. - SEE TEXTBOOK FOR FURTHER INFO - Rebutting both of the presumptions: (requires evidence of a contrary intention) - Onus of proof shifts to the party wanting to rebut the presumption - In situations where only A contributes money, the only relevant intention is that of the contributor - NOT the recipient. - Where both parties contribute, but uneven amounts, the common intention matters - court will try to deduce this. - Calverley v Green - Courts will look to acts/words of the parties and the nature of their relationship (proportions of contributions are relevant) - Will NOT impute an intention that a person did not have - the rebuttal needs evidence to succeed - Timing is important: only the actual intention BEFORE or AT THE TIME of the transaction is relevant - or, if it is so immediately afterwards that it constitutes part of the txn (Calverley) - Subsequent acts (such as improving the party) are not relevant to determining the original intention - Buffrey v Buffrey, 2006 - What is a contribution to the purchase price? - Difficulties when two or more parties purchase in ones name - esp. with loans - In Australia, payments AFTER the purchase are not generally regarded as contributions to the purchase price - e.g. mortgage repayments; money spent on improvements - So if A and B take out a joint loan to purchase a property, and A makes all of the repayments, they will still have made equal contributions to the PP - BUT, repayments MAY be taken into account re: CTs.

- Courts look solely to direct financial contribution to the INITIAL purchase money - Illegality - What is the situation if A transfers property to B in order to obtain an improper advantage, eg to achieve some unlawful purpose? - Creighton, The Recovery of Property Transferred for Illegal Purposes, 1997 Kais v Turkey, 1994 - A woman purchased a property entirely in her name - about half was with her own money, the other half with a mortgage she had taken out - Later, her fiance paid off the whole mortgage (so ended up paying about 50% of the value of the property) - Court held he DID NOT have a claim under RT. - However (obiter), if both had had their names on the mortgage (and the property was purchased in joint names), and the mortgage had been for the whole value, and the fiance had still repaid the whole mortgage, the woman would have a claim under RT: because her name was on the mortgage, she had therefore been liable to its consequences should default occur

Theft Principle - Stolen property is held on trust by the thief for the victim (victim = beneficiary) - Often arises before the victim is aware of the theft - Multiple property rights are created - i.e. more than one party can have legal title: as the money ITSELF was not held on trust, but the property right to that money was

Black v S (Simon) Freedman & Co, 1910 - Thief was accountant employed by a firm - Ran a scheme where he skimmed off small amounts every day - ran 2 different sets of books - Placed most of the stolen money in a bank account in his wifes name - Firm took action against Mrs Black for the money in her bank account - sought a declaration that the money was LEGALLY theirs - HCA declared the money was EQUITABLY theirs - Griffith J made some reference to employee-employer relationship (being fiduciary, therefore a trust for breach of FD nothing new) - OConnor J made no such reference or attempt to tie into any pre-existing relationship merely stated theft = trust - Since 1991, has been applied the way OConnor approached it - When Black first stole the money, he had possession of money; Freedman & Co had the right to possession - Blacks possessory right to the money was therefore not his, but was held on trust for the company - When the money was deposited into Mrs Blacks account, she then had the possessory right on trust for the company

Creak v James More & Sons, 1912 - HCA directly applied Black v Freedman

- Here, thief stole personal property, sold it, and the money eventually made its way back to the victim - Problem: victim had recovered their money from the sale, but had not lost their proprietary right to the goods, so tried to reclaim the goods from the most recent innocent purchaser - HCA held they must elect only one of the two (the money or the goods)

14. CONSTRUCTIVE TRUSTS


Definition/overview: - A means adopted by a court of equity to make a person accountable where to do so is consistent with equitable principle. - N.B. Focus not on a definition, but on the factual circumstances that tend to give rise to a constructive trust. - Terminology: person being liable as a constructive trustee - suggesting that the person might be liable for compensation, an account of profits, etc, AS IF the proceeds or property they were in possession of had become trust property. NOT always the same as discussing an actual constructive trust. - A form of proprietary remedy where the D holds some property (or proceeds etc) on trust for the P. There is no express intention by either of the parties to create the trust. - Often based on notions of good conscience - court will impose a CT where it would be unconscionable for the D to assert their strict legal ownership over the property. - Can only exist due to our 2 levels of property rights. Nature of a CT - Difficult to explain under one theory: but for an attempt to do so, see Gummows judgment in Stephenson Nominees v Official Receiver - Ownership is established over an asset not because of some pre-existing property right that can be traced/followed into those assets, but because it would be unconscionable for the defendant to be able to assert beneficial, as well as legal ownership over the property - A question of conduct: chiefly that of the defendant - 2 sub-types of CT: - Institutional, - Remedial - Difference is how they work in practice Institutional CT - Arises by operation of the law on the occurrence of specified criteria - Time that the trust came into existence is crucial (for questions of tracing, insolvency, etc) - Widely accepted that if a court finds a CT exists, the trust came into existence when the circumstances occurred (i.e. when all the requirements lined up) - NOT when the court makes its decision. - This differentiates it from a remedial CT which arises only when the court makes its decision. (CREATED by the court, rather than just DECLARED) - Situations where an ICT may arise: - Unauthorised profit by fiduciary using trust property or acting in breach of fiduciary duty: Keech v Sandford, 1726; Boardman v Phipps, 1967; Chan v Zacharia, 1984 - Bribes/secret commissions: AG (Hong Kong) v Reid, 1994

- Third party liability accessory liability: Barnes v Addy, 1874 - Third party liability recipient liability: Barnes v Addy - Where a gift is complete in equity but not in law: Corin v Patton, 1990 - Mutual wills - Secret trusts: Wallgrave v Tebbs, 1855 - Where it would be inequitable to rely on non-compliance with formality requirements for express trusts: Bannister v Bannister, 1948; PLA s34. - Where the purchaser has paid the purchase price under a specifically enforceable contract of sale Common Intention CT - Doubts exist about the continued use of these, as the same ground is now covered by remedial CTs. - A type of trust that can be imposed by the court to give effect to the express common intention of the parties (although they havent actually expressed this in tention in terms of trust) - Not limited to spousal relationships - There must be a consistent and common intention that can be identified by a court - Generally this intention is along the lines that one of the parties would have a beneficial interest in the property in question, even though they never intended to have legal title. - Typically the parties havent done what is required to create an actual express trust, or havent expressed their intention for shared beneficial ownership in any technical terms may not have even heard of a trust - Intention must be inferred as a matter of fact, NOT simply imputed (they never had this intention, but they might have had it if they had known about the possibility) - Factors that may indicate a CICT: contributions to a property, services for the benefit of a household, express words such as this house is now yours, etc. - Detrimental reliance is required, similar to a question of estoppel - e.g. if a son/daughter is told by their parents that the family home is now theirs, and they then spend $100,000 improving the property, a CICT will be declared - Timing is important: suggested that both reliance on the expressed intention/statement, and then action to the Ps detriment, is required before the trust can be declared: see DSS v Agnew, 2000 - Gors v Henderson, 1998 - re detriment (there was not very much)

Remedial CTs - The High Court has indicated that it is prepared to impose constructive trusts as a remedy to avoid unconscionable behaviour by the legal owner in circumstances not covered by the existing categories of constructive trusts. The availability and limits of these constructive trusts is not yet settled. - CREATED by the court, as opposed to being merely declared (like an institutional CT). Only starts to exist at the date the court gives their judgment. - No specific requirements, e.g. for a breach - simply the notion of unconscionability - What decides whether a CT is created or not? - Availability of other remedies - e.g. if the D is able to compensate for the amount/property required, a CT might not be created - Court is also concerned with making sure that the trusts creation does not cause inequity to 3rd parties - Very frequently used as a method of reallocating property from relationship breakdowns & similar disputes - especially in de facto relationships, where

- Not based on categories of conduct, e.g. bribes etc, as is an institutional CT - is centered purely on the unconscionable assertion of legal AND beneficial title by one party to the detriment of another Muschinski v Dodds - M contributed 91% of the purchase price when the parties purchased a property together, but they were named as tenants in common, thus possessed only 50% each legally - Plan was that D would pay for improvements to the house - But relationship broke down and D refused to concede any more than 50% of the propertys value to M - Court found that the parties were entitled to an equitable share in the property that reflected their proportional contributions to the purchase price Baumgartner v Baumgartner - Parties lived as de facto partners for 4 years on and off - Mr B owned a unit, which he sold, and used the proceeds of this, together with a mortgage, to purchase a new house. - The house was entirely in his name, but he and Mrs B pooled their income to meet the mortgage repayments - Joint endeavour - Question about a resulting trust...? (~94 minutes in) - Mr B attempted to assert his sole legal ownership of the house as also constituting sole beneficial ownership - but court found this was unconscionable. - Note there is no question of duties or breaches here, no bribes or conversion; nothing at all illegal - only a question of conscience - Courts findings: - Generally in a joint endeavour case, the court will start from a position of equality (50-50) and then look at more facts to determine whether this is fair or not - Can look at non-monetary contributions - Court here adjusted away from 50-50 to 55-45 in favour of Mr B - but that was 45% more than Mrs B was going to have in the first place.

RELEVANT LEGISLATION
TRUSTEES ACT 1962
7. (1) New trustees , appointment of Where a trustee, whether original or substituted, and whether appointed by the Court or otherwise, (a) (b) (c) (d) (e) (f) is dead; or remains out of the State for more than one year without having properly delegated the execution of the trust; or seeks to be discharged from all or any of the trusts or powers reposed in or conferred on him; or refuses to act therein; or is unfit to act therein; or is incapable of acting therein; or

(g) (h)

is an infant; or being a corporation, has ceased to carry on business, is in liquidation or is dissolved,

then the person nominated for the purpose of appointing new trustees by the instrument (if any) creating the trust, or if there is no such person or no such person able and willing to act, then the surviving or continuing trustee or trustees for the time being, or the personal representatives of the last surviving or continuing trustee, may by writing appoint a person or persons, whether or not being the person or persons exercising the power, to be a trustee or trustees in the place of the trustee first in this subsection mentioned. (2) On the appointment of a trustee or trustees for the whole or any part of the trust property (a) where the number of trustees originally appointed was less than 4, 2 or more trustees may be appointed in place of a trustee being replaced under this section, but so that after any appointment the number of trustees shall not exceed 4; (b) a separate set of trustees may be appointed for any part of the trust property held on trusts distinct from those relating to any other part, and whether or not new trustees are or are to be appointed for any other part of the trust property; and any existing trustee may be appointed or remain one of the separate set of trustees; or if only one trustee were originally appointed, then one separate trustee may be so appointed for the part of the trust first in this paragraph mentioned; (c) it shall not be obligatory to appoint more than one new trustee where only one trustee was originally appointed, or to fill up the original number of trustees where more than 2 trustees were originally appointed; but, except where only one trustee was originally appointed, a trustee shall not be discharged under this section unless there will remain either a trustee corporation or at least 2 individuals to act as trustees to perform the trust; and (d) (3) any assurance or thing requisite for vesting the trust property, or any part thereof, jointly in the persons who are the trustees shall be executed or done. Where a trustee has been removed under a power contained in the instrument creating the trust, a new trustee or new trustees may be appointed in the place of the trustee who is removed, as if he were dead, or, in the case of a corporation, as if the corporation had been dissolved, and the provisions of this section shall apply accordingly. (4) The power of appointment given by subsection (1) or any similar previous enactment to the personal representative of the last surviving or continuing trustee is and shall be deemed always to have been exercisable by the executor for the time being, whether original or by representation, of that surviving or continuing trustee who has proved the will of his testator or by the administrator for the time being of that trustee without the concurrence of any executor who has renounced or has not proved; but a sole or last

surviving executor intending to renounce has, or all the executors where they all intend to renounce have, and shall be deemed always to have had power, at any time before renouncing probate, to exercise the power of appointment given by this section or by any similar previous enactment if willing to act for that purpose and without thereby accepting the office of executor. (5) Where, in the case of any trust, there are not more than 3 trustees (none of them being a trustee corporation), then (a) (b) the person or persons nominated for the purpose of appointing new trustees by the instrument (if any) creating the trust; or where there is no person nominated for the purpose of appointing new trustees by the instrument creating the trust, or no such person able and willing to act, then the trustee or trustees for the time being, may, by writing, appoint a person or persons (whether or not being the person or persons exercising the power) to be an additional trustee or additional trustees, but it shall not be obligatory to appoint any additional trustee unless the instrument (if any) creating the trust, or any statutory enactment, provides to the contrary; but on any appointment of additional trustees under this subsection the number of trustees shall not be increased beyond 4, where 4 or fewer trustees were originally appointed, or beyond the original number of trustees, where more than 4 were originally appointed. (6) Every new trustee appointed under this section has the same powers, authorities, and discretions and may in every respect act, as if he had originally been appointed a trustee by the instrument (if any) creating the trust, both before and after all the trust property becomes by law or by assurance or otherwise vested in him. (7) The provisions of this section that are brought into effect by the circumstance that a person nominated trustee (whether sole or otherwise) in a will is dead are brought into effect whether the death of that person occurred before or after the death of the testator; and the provisions relative to a continuing trustee relate also to a refusing or retiring trustee, if willing to act in the execution of the provisions of this section. (8) The provisions of this section relating to a person nominated for the purpose of appointing new trustees apply whether the appointment is made in a case specified in this section or in a case specified in the instrument (if any) creating the trust, but where a new trustee is appointed under this section in a case specified in that instrument, the appointment shall be subject to the terms applicable to an appointment in that case under the provisions of that instrument. (9) 16. In this section, the term trustee does not include a personal representative as such. Application of Part This Part applies to trusts created before or after the coming into operation of the Trustees Amendment Act 1997. 17. Trust funds , investment of A trustee may, unless expressly prohibited by the instrument creating the trust (a) invest trust funds in any form of investment; and

(b)

at any time, vary an investment or realize an investment of trust funds and reinvest money resulting from the realization in any form of investment.

18. (1)

Investment power of trustees, exercise of Subject to the instrument creating the trust, a trustee shall, in exercising a power of investment (a) if the trustees profession, business or employment is or includes acting as a trustee or investing money on behalf of other persons, exercise the care, diligence and skill that a prudent person engaged in that profession, business or employment would exercise in managing the affairs of other persons; or (b) if the trustee is not engaged in such a profession, business or employment, exercise the care, diligence and skill that a prudent person would exercise in managing the affairs of other persons. (2) A trustee shall exercise a power of investment in accordance with any provision of the instrument creating the trust that is binding on the trustee and requires the obtaining of any consent or approval or compliance with any direction with respect to trust investments. (3) Subject to the instrument creating the trust, a trustee must, at least once in each year, review the performance (individually and as a whole) of trust investments.

19. (1)

Investment power of trustees, rules of law and equity apply Any rules and principles of law or equity that impose a duty on a trustee exercising a power of investment including, without limiting the generality of those duties, rules and principles that impose (a) (b) (c) (d) a duty to exercise the power of a trust in the best interests of all present and future beneficiaries of the trust; a duty to invest trust funds in investments that are not speculative or hazardous; a duty to act impartially towards beneficiaries and between different classes of beneficiaries; or a duty to take advice, continue to apply except to the extent that they are inconsistent with this or any other Act or the instrument creating the trust. (2) Any rules and principles of law or equity that relate to a provision in an instrument creating a trust that purports to exempt, limit the liability of, or indemnify a trustee in respect of a breach of trust, continue to apply. (3) If a trustee is under a duty to take advice, the reasonable costs of obtaining the advice are payable out of trust funds.

20.

Investment by trustee, matters to be considered

(1)

Without limiting the matters that a trustee may take into account when exercising a power of investment, a trustee shall, so far as they are appropriate to the circumstances of the trust, have regard to (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) (o) the purposes of the trust and the needs and circumstances of the beneficiaries; the desirability of diversifying trust investments; the nature of and risk associated with existing trust investments and other trust property; the need to maintain the real value of the capital or income of the trust; the risk of capital or income loss or depreciation; the potential for capital appreciation; the likely income return and the timing of income return; the length of the term of the proposed investment; the probable duration of the trust; the liquidity and marketability of the proposed investment during, and on the determination of, the term of the proposed investment; the aggregate value of the trust estate; the effect of the proposed investment in relation to the tax liability of the trust; the likelihood of inflation affecting the value of the proposed investment or other trust property; the costs (including commissions, fees, charges and duties payable) of making the proposed investment; and the results of a review of existing trust investments. obtain and consider independent and impartial advice reasonably required for the investment of trust funds or the management of the investment from a person whom the trustee reasonably believes to be competent to give the advice; and (b) pay out of trust funds the reasonable costs of obtaining the advice.

(2)

A trustee may (a)

24. (1)

Residence for beneficiary, power to invest in etc. Subject to the instrument creating the trust, a trustee may (a) (b) (2) invest any trust funds in the purchase of a dwelling house for a beneficiary to use as a residence; or enter into any other agreement or arrangement to secure for a beneficiary a right to use a dwelling house as a residence. Despite the terms of the instrument creating the trust, a trustee may, if to do so would not unfairly prejudice the interests of the other beneficiaries, retain as part of the trust property a dwelling house for a beneficiary to use as a residence. (3) A dwelling house purchased, retained or otherwise secured for use by the beneficiary as a residence may be made available to the beneficiary for that purpose on such terms and conditions consistent with the trust and the extent of the interest of the beneficiary as the trustee thinks fit.

(4)

The trustee may retain a dwelling house or any interest or rights in respect of a dwelling house acquired under this section after the use of the dwelling house by the beneficiary has ceased.

(5)

In this section dwelling house includes (a) (b) any building or part of a building designed, or converted or capable of being converted, for use as a residence; and any amenities or facilities for use in connection with the use of a dwelling house.

25.

Retained authorised investments, no liability for A trustee is not liable for breach of trust by reason only of retaining an investment that has ceased to be (a) (b) (c) (d) an investment authorised by the instrument creating the trust; an investment properly made by the trustee exercising a power of investment; an investment made under this Act or a corresponding previous enactment; or an investment authorised by any other Act or the general law.

26. (1)

Loans secured against property, trustees liability for If a trustee lends money on the security of a property, the trustee is not liable for breach of trust by reason only of the proportion borne by the amount of the loan to the value of the property at the time when the loan was made if it appears to the Court (a) that, in making the loan, the trustee was acting on a report as to the value of the property made by a person whom the trustee reasonably believed to be competent to give such a report and whom the trustee instructed and employed independently of any owner of the property; (b) (c) (2) that the amount of the loan did not exceed two thirds of the value of the property as stated in the report; and that the loan was made in reliance on the report. This section applies to transfers of existing securities as well as to new securities and to investments made before or after the coming into operation of the Trustees Amendment Act 1997

26A. (1)

Improper loans, trustees limited liability for If a trustee improperly advances trust money on a security that would at the time of the investment have been a proper investment if the sum advanced had been smaller than the actual sum advanced, the security shall be taken to be a proper investment in respect of the smaller sum, and the trustee is only liable to make good the difference between the sum advanced and the smaller sum, with interest.

(2)

This section applies to investments made before or after the coming into operation of the Trustees Amendment Act 1997.

26B.

Breach of trust as to investments, factors to be considered by Court

In proceedings against a trustee for breach of trust in respect of a duty under this Part relating to the trustees power of investment, the Court may, when considering the question of the trustees liability, take into account (a) (b) (c) (d) the nature and purpose of the trust; whether the trustee had regard to the matters set out in section 20 so far as is appropriate to the circumstances of the trust; whether the trust investments have been made pursuant to an investment strategy formulated in accordance with the duty of a trustee under this Part; and the extent the trustee acted on the independent and impartial advice of a person competent (or apparently competent) to give the advice. 26C. (1) Breach of trust as to investments, Court may set off losses against gains The Court may, when considering an action for breach of trust arising out of or in respect of an investment by a trustee where a loss has been, or is expected to be, sustained by the trust, set off all or part of the loss resulting from that investment against all or part of the gain resulting from any other investment whether in breach of trust or not. (2) The power of set off conferred by subsection (1) is in addition to any other power or entitlement to set off all or part of any loss against any property. 26E. Authorised trustee investments, meaning of Any provision in an instrument (whether or not creating a trust) that empowers or requires a person to invest money in investments authorised for the investment of trust funds or moneys is to be read as if it empowered or required that person to invest that money according to the provisions of this Part relating to the investment of trust funds. 45. (1) Trustees dying, devolution of powers or trusts Where a power or trust is given to, or imposed on, 2 or more trustees jointly, then, unless the contrary is expressed in the instrument (if any) creating the power or trust, the power or trust may be exercised or performed for the time being by the survivors or survivor of them. (2) Until the appointment of a new trustee, the personal representative for the time being of a sole trustee or (where there were 2 or more trustees) of the last surviving or continuing trustee shall be capable of exercising or performing any power or trust that was given to, or capable of being exercised by, the sole or last surviving or continuing trustee, or other trustees for the time being of the trust; but for the purposes of this subsection the term trustee does not include a personal representative as such. (3) This section does not authorise the exercise or performance of any power or trust by an executor who has renounced or has not proved. 46. (1) Insuring trust property A trustee may insure against loss or damage, whether by fire or otherwise, any insurable property to any amount, including the amount of any insurance already on foot, not exceeding the full replacement value of the property; and may also insure against any

risk or liability against which it would be prudent for a person to insure, if he were acting for himself; and may pay the premiums for the insurance out of the income of the property concerned or out of the income of any other property subject to the same trusts, without obtaining the consent of any person who may be entitled wholly or partly to that income. (2) A trustee may recover the amounts of any premiums paid in respect of any insurance properly effected from the life tenant or other person entitled to or in receipt of the rents and profits of the property concerned. (3) Nothing in this section imposes any obligation on a trustee to insure or to insure for any particular value or sum. 51. (1) Trusts accounts, audit of A trustee may, in his absolute discretion, from time to time, cause the accounts of the trust property to be examined or audited by a person who publicly carries on the business of an accountant, and shall for that purpose produce such vouchers and give such information to that person as he may require. (2) The costs of the examination or audit, including the fee of the person making the examination or audit, shall be charged against the capital or income of the trust property, or partly in one way and partly in the other, as the trustee may in his absolute discretion think fit, but, in default of any direction by the trustee to the contrary in any special case, costs attributable to capital shall be borne by capital and those attributable to income by income. 53. (1) Agents, attorneys, etc., power to employ A trustee may, instead of acting personally, employ and pay an agent, whether a solicitor, accountant, bank, trustee corporation, stockbroker or other person, to transact any business or do any act required to be transacted or done in the execution of the trust or the administration of the trust property, including the receipt and payment of money, and the keeping and audit of trust accounts, and shall be entitled to be allowed and paid all charges and expenses so incurred, and shall not be responsible for the default of any such agent employed in good faith and without negligence. 70. Trustees liable for own defaults etc. only A trustee shall be chargeable only for money and securities actually received by him, notwithstanding his signing any receipt for the sake of conformity; and shall be answerable and accountable only for his own acts, receipts, neglects or defaults, and not for those of any other trustee, nor those of any bank, broker or other person with whom any trust money or securities may be deposited, nor for the insufficiency or deficiency of any securities, nor for any other loss, unless the insufficiency, deficiency or loss occurs through his own wilful default. 71. Trustees expenses, reimbursement out of trust property

A trustee may reimburse himself for or pay or discharge out of the trust property all expenses reasonably incurred in or about the execution of the trusts or powers 89. (1) Additional powers, Court may confer on trustee etc. Where in the opinion of the Court any sale, lease, mortgage, surrender, release or other disposition, or any purchase, investment, acquisition, retention, expenditure or other transaction is expedient in the management or administration of any property vested in a trustee, or would be in the best interests of the persons, or the majority of the persons, beneficially interested under the trust, but it is inexpedient or difficult or impracticable to effect the disposition or transaction without the assistance of the Court, or it or they cannot be effected by reason of the absence of any power for that purpose vested in the trustee by the trust instrument (if any) or by law, the Court may by order confer upon the trustee, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions (if any) as the Court may think fit, and may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne, and as to the incidence thereof between capital and income. (2) The Court may from time to time rescind or vary any order made under this section, or may make any new or further order; but such a rescission or variation of any order shall not affect any act or thing done in reliance on the order before the person doing the act or thing became aware of the application to the Court to rescind or vary the order. (3) (4) An order may be made under this section, notwithstanding anything to the contrary contained or expressed in the instrument creating the trust. An application to the Court under this section may be made by the trustees, or by any of them, or by any person beneficially interested under the trust.

90. (1)

Varying or revoking certain trusts, Courts powers as to Without limiting any other powers of the Court, it is hereby declared that, where any property is held on trusts arising under any will, settlement or other disposition, or on the intestacy or partial intestacy of any person, or under any order of the Court, the Court may, if it thinks fit, by order approve on behalf of (a) any person having, directly or indirectly, an interest, whether vested or contingent, under the trusts who, by reason of infancy or other incapacity, is incapable of assenting; or (b) any person (whether ascertained or not) who may become entitled, directly or indirectly, to an interest under the trusts as being, at a future date or on the happening of a future event, a person of any specified description or a member of any specified class of persons; but this paragraph does not include any person who would be of that description or a member of that

class, if that date had fallen or that event had happened at the date of the application to the Court; or (c) (d) any unborn or unknown person; or any person, in respect of any discretionary interest of his under protective trusts where the interest of the principal beneficiary has not failed or determined, any arrangement (by whomever proposed, and whether or not there is any other person beneficially interested who is capable of assenting thereto) varying or revoking all or any of the trusts, or enlarging the powers of the trustees of managing or administering any of the property subject to the trusts. (2) Except where the Court approves an arrangement on behalf of a person referred to in subsection (1)(d), the Court shall not approve an arrangement on behalf of any person if the arrangement is to his detriment; and, in determining whether any such arrangement is to the detriment of a person, the Court may have regard to all the benefits that may accrue to him directly or indirectly in consequence of the arrangement, including the welfare and honour of the family to which he belongs. 92. (1) Directions, trustee may ask Court for Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee. (2) Every application made under this section shall be served upon, and the hearing thereof may be attended by, all persons interested in the application or such of them as the Court thinks expedient. 98. (1) Trustees remuneration The Court may, out of the property subject to any trust, allow to any person who is, or has been, a trustee thereof or to that persons personal representative such commission or percentage for that persons services as is just and reasonable. (2) (3) (4) The aggregate commission or percentage allowed under subsection (1) shall not exceed 5% of the gross value of the trust property. The Court may, from time to time, allow such portion of the aggregate commission or percentage allowable under this section as it thinks fit. Where the Court allows a commission or percentage under this section, in any case in which 2 or more persons are or have been trustees, whether acting at the same time or at different times, the Court may, in its discretion, apportion the total amount allowed among the trustees in such manner as it thinks fit, and, in particular, may divide the amount in unequal shares or may make the allowance to one or more of the trustees to the exclusion of the other or others. (5) In the absence of a direction to the contrary in the trust instrument, a trustee being a person engaged in any profession or business for whom no benefit or remuneration is provided in the trust instrument is entitled to charge and be paid out of the trust property all usual professional or business charges for business transacted, time expended, and acts done by him or his firm in connection with the trust, including acts

Kind of property

Declaration of trust

that a trustee not being in any profession or business could have done personally; and, on any application to the Court for commission or percentage under subsection (1), the Court may take into account any charges that have been paid out of the trust property under this subsection.

WILLS ACT 1970


8. Execution generally Subject to sections 17 and 20 and Parts X and XI, a will is not valid unless (a) (b) it is in writing; it is signed by the testator or signed in the testators name by some other person in the testators presence and by the testators direction, in such place on the will so that it is apparent on the face of the will that the testator intended to give effect by the signature to the writing signed as the testators will; (c) (d) the testator makes or acknowledges the signature in the presence of at least 2 witnesses present at the same time; and the witnesses attest and subscribe the will in the presence of the testator but no publication or form of attestation is necessary.

Land registered in your name

S 34(1)(a) May apply, but there is potential overlap with s 34(1)(b). On authority of DSS v James only (b) applies here. S 34(1)(b) YES declaration of trust concerning land. S 34(1)(c) NO no subsisting equitable interest

Shares registered in your name

No part of s 34(1) applicable as no land or subsisting equitable interest involved.

Car registered in your name

No part of s 34(1) applicable as no land or subsisting equitable interest involved.

Your interest in a partnership over land

S 34(1)(a) NO partnership interest is treated as an equitable chose in action S 34(1)(b) NO partnership interest is treated as an equitable chose in action. S 34(1)(c) Arguably only applies if declaration of trust amounts to a disposition.

Your interest in a partnership over personalty

S 34(1)(a) NO no land involved S 34(1)(b) NO no land involved S 34(1)(c) Probably not. Only applies if declaration of trust amounts to a disposition.

Your equitable interest in a trust over land

S 34(1)(a) see notes for s 34(1)(b). 34 (1)(b) YES applies where declaration of active trust and bare trust as is a declaration of trust concerning interest in land (NOTE: S 34(1)(a) May apply, but there is potential overlap with s 34(1)(b). On authority of DSS v James only (b) applies here.) 34 (1)(c) applies where declaration of a bare trust as this is a disposition of a subsisting equitable interest NOTE: s 34(1) (b) applies where there is a bare trust it is just that (c) is a more onerous requirement, which also applies, so the declarant would need to satisfy it for the declaration to have any effect. S 34(1)(a) NO no land involved S 34(1)(b) NO no land involved S 34(1)(c) Applies where declaration of a bare trust as this is a disposition of a subsisting equitable interest. NOTE: No formality where declaration of an active trust (as S 34(1)(c) only applies to subsisting equitable interests and this is creation of a NEW interest)

Your equitable interest in a trust over personalty

Third Party Liability through a breach of trustee duties.

According to Barnes v Addy, In order to successfully recover there must be:

1st Limb:
1. An established primary breach of a fiduciary duty. 2. A 3rd party who is: A BENEFICIAL RECIPIENT of the misappropriated property; and 3. Has knowledge that they are receiving that property as a result of a breach of a fiduciary duty.

Where: Property is legally recognized property.


Receipt means to take into possession (physical control): Gold v Primary Development and must be in a beneficial capacity: Africa v Jackson(1990)

2nd Limb:
1. A dishonest and fraudulent breach of a fiduciary duty (by the primary Dft) What is the meaning/threshold of fraud in equity? See below. 2. 3rd party who is: A KNOWING ASSISTANT in the breach; and The assistance must be in the breach. If the breach is too narrow, may be difficult to prove actual assistance in the exact breach rather than assistance in a broad dishonest scheme. 3. Has knowledge that they have assisted in a fraudulent and dishonest breach [Consul Developments].

Knowledge requirement: According to Farah Constructions: Knowledge requirement may be satisfied by 4 of the 5 types of knowledge on the Baden scale: (i) (ii) (iii) actual knowledge willfully shutting eyes to obvious willfully and recklessly failing to make enquiries that an honest and reasonable person would make (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable person; (v) BUT NOT knowledge of circumstances which would put an honest and reasonable person on enquiry

If 3rd party has (i)-(iv) this will satisfy the knowledge requirement.

Dishonest and fraudulent breach In equity, fraud has a different meaning from CL. CL means a deliberate, knowingly done fraud. In Equity the threshold is lower i.e. in undue influence. Normally, a breach of a fiduciary duty would fulfil the definition of equitable fraud. What is then a dishonest or fraudulent breach? From Farah Constructions it is known that there may be different degrees of a fiduciary breach i.e. it may be honest or dishonest. Honesty may be characterized by the actions of the fiduciary. For instance, have they attempted to receive consent i.e. Boardman v Phipps? (example of an honest breach)

Problem solving framework: Trustees duties, rights and liabilities and beneficiaries rights and liabilities
General guide for considering whether a duty has been breached:

1. Identify the conduct potentially in breach (on the facts)

2. Identify the source of the power to engage in that conduct eg. a. Trust instrument b. Trustees Act c. Court order 3. Identify the relevant duties (there are quite a few to choose from REMEMBER it could be more than one) a. Initial Duties o Duty to become familiar with the terms of the trust o Duty to get in trust property b. Duty to obey the terms of the trust c. Duty to keep accounts and supply information o Duty to keep accounts o Duty to render accounts and information d. Overarching duty of care e. Fiduciary Duties o No conflict and no profit rules o The duty to act gratuitously (Remuneration) o Prohibition on purchase of trust property (self-dealing rule) f. Duty of loyalty g. Duty to act impartially h. Duty to act personally i. Duty to properly invest 4. Work through the duties one at a time a. What was the conduct required? b. Has the trustee acted in breach? Why/why not? 5. IF A BREACH IS ESTABLISHED is the trustee liable for loss caused? a. Consider the trustees right to indemnity from: i. Trust assets; and ii. Against the beneficiaries b. Does the right of indemnity apply in these circumstances? Or has it been lost?

2009 EXAM Q1. Overall: 3 components of a question: Deciding whether the trust will succeed, If the trust would succeed, then looking for an action for a breach; Then if there is a breach, looking at which personal and proprietary remedies can be sought. - Nature of the trust: Validly executed will, so no need to examine formalities trustees have absolute discretion to distribute between the beneficiaries (trust power) Charging question: s98 TA; can charge no more than 5% of gross value of fund Accounting firm? No profit rule if Tom receives any profit from the probate, he would hold it on constructive trust or account of profit, Williams v Barton - Investment decisions General duties (managing trust): act with reasonable prudence, ordinary man of business - Speight v Gaunt Higher standard when performing investment functions ordinary prudent man of business who is morally bound to provide for another Re Whiteley Higher standard for professionals Re Bartlett; prudent to get advice? Paintings General sale not an issue trustees have general power of sale, given by TA and not restricted by the will Problem is manner in which they exercised power of sale Havent maintained the real value of the trust Re Mulligan (but not the real issue) Action would depend on them falling below the standard of the ordinary prudent man of business etc and there being a quantifiable loss flowing from that Nestle Not to be judged with hindsight Applied to facts is it likely that the ordinary businessman, with no experience in art, would get a valuation? YES Prima facie this would be a breach and they would need to compensate Purchase of painting by trustee self-dealing rule: prima facie this is voidable as of right the beneficiaries CAN consent to it after the fact however BUT the painting has been sold to a bona fide purchaser and the txn cannot be unwound (N.B. 3rd parties very difficult to trace the rest of the paintings, as the purchasers are extremely likely to be BFPWON no way to prove knowing receipt as very unlikely to know they were trust property and a breach had occurred) What about the recipient of the painting in question? He is a solicitor, spouse of the trustee, AND he knows about the trust all your hard work on that trust so it is likely that he would have at least constructive knowledge Farah Thus a personal action against him, AND a proprietary remedy in that the painting can be traced through him Held the $600,000 on CT but has done various things with it $200,000 and a loan of $100,000 purchased a racehorse $300,000; horse now worth $400,000 (33% increase)

Foskett v McKeown proportionately divide this amount Combined account - $200,000 already of his, $400,000 of trust, $200,000 of another clients Withdrew $300,000 for shares which are currently worth $270,000 $500,000 remaining in the account to be returned to both clients proportionately (2/3 to Vincents trust, 1/3 to the other) - Re Stenning Would shares not simply be held on trust for the clients? (or $100,000 of their value?) $150,000 dissipated cannot be traced Repayment of debt also cannot be traced Thompson v Clydesdale Bank Donation to hospital cannot be traced as even though it was improperly given, the hospital would suffer detriment innocent victim - Re Diplock Sale of shares based on opposition to nuclear energy DO have authority to sell shares, but is the manner of the sale inappropriate? Financial wellbeing of the trust is the main object therefore the opinions of the trustees OR the beneficiaries shouldnt be a factor Cowan v Scargill Sale for reasons other than the financial wellbeing is therefore improper probably wouldnt lead to a remedy in itself due to the following sequence of events, but may provide the beneficiaries with more ammunition to remove the trustees Investment in IPL: 2 issues Duty to take advice Re Whitely confirms that trustees are expected to obtain expert advice but they do not HAVE to act on it their actions have to be consistent with their overarching duty of care the advice must be INDEPENDENT/impartial also in s20 TA Firstly this stockbroker has a vested interest so the advice is not independent May be found to be a breach Purchase of the shares: What duties are at risk here? Maintaining capital value of fund, diversifying, not investing PURELY in hazardous investments diversifying etc (s20, s26B (lack of investment strategy) TA) Yes these are breached. Remedy is a personal action for the trustees to restore the value of the trust to what it would have been if they had not invested in a failed venture. Access to documents Vincent wants to know why the tees have allocated the winery to another beneficiary Are beneficiaries entitled to documents at all? Yes Hartigan Nominees entitled to trust instruments, but not docs revealing exercise of discretion Thus refusal to give access to minutes of tee meetings etc is valid. What are trust docs? Re Londonderry Settlements NOT obliged to reveal what was in the Letter of Wishes

Q2. Possible sources of Victor having an interest in the winery:

Purchase of 1/3 of the property initially Presumed resulting trust? His contribution to the purchase price exceeded his proportionate entitlement at law Mortgage repayments? Not enough info about these assume that until 99, Michael paid them; after this we know that payments came out of the joint fund, which we assume came from the two equally So equity would hold his interest to be at least 1/3 and potentially more depending on what the intention was construed to be and the view the court took of the initial contributions: excluding the mortgage, they contributed each therefore equity may find the property to be held by the two as joint tenants Delahunt v Carmody Any presumption of advancement? No, relationship is not one that raises the presumption Is the presumption rebutted i.e. is there any proof that Vincent intended his 1/3 contribution to be a gift? Not enough facts ambiguous. Contributions the mortgage repayments DO NOT count; Calverley. But since this is law, could Vincent argue a beneficial interest instead of 1/3? If 1/3, this amount would be held on a resulting trust for Vincent; if , then they would have held the property as joint tenants and Michaels interest would automatically have passed to Vincent upon his death. Date would go back to when the property was first purchased CICT Evidence of the common intention? House is all yours when Im gone fairly strong evidence Courts can only enforce ACTUAL intention not imputed Allen v Snyder Evidenced by circumstances? N.B. they DID enter into this agreement once Vincent had already made his 1/3 contribution Express agreement? DSS v Agnew analogy Detriment? Giving up cheapo accommodation to live in nicer premises not prima facie detriment Gors; but caring for Michael, viticulture course, etc all constitute detriment But what about the $50,000/year payment? Not convincing Reliance? no evidence of a doting relationship so also unclear linked to detriment If CICT was found (due to there being detriment), then remedy would give effect to intention, which was that V receive the property therefore he would hold 100% of the beneficial interest. Date: would take effect from the date the common intention arose 1997. Remedial constructive trust Unconscionable for the trustees to deny beneficial interest in the circumstances? Muschinski, Baumgartner Joint endeavour argument