WEBSITE UPDATE FOR 6TH EDITION, TO JANUARY 2005

CHAPTER 2 MAXIMS OF EQUITY

P55
M. Halliwell, Equitable property rights, discretionary remedies and unclean
hands
[2004] Conv 439
CHAPTER 3 TRUSTS TODAY
P73
It should be noted that if the dispute relates to the property of a married
couple on divorce or, since the Civil Partnership Act 2004, the property of a
same-sex couple whose formally registered partnership has been formally
dissolved, the courts have a wide discretion when determining the property
settlement and the normal trust principles referred to above do not apply.
P82
Tax rate changes for 2005.
In his pre budget report the Chancellor announced the following changes for
tax year 2005-6.
Individuals allowance for income tax will be 4,895. The basic rate limit will be
32,400.
The annual CGT allowance for individuals will be 8,500 and the IHT
threshold will be 272,000.
CHAPTER 5 DISCRETIONARY TRUSTS
P122
The advice of the Privy Council in Schmidt v Rosewood Trust [2003] 3 All ER
76, a case referred from the Isle of Man, also appears to erode the distinction
between trusts and powers in certain contexts. Lord Wilberforces comments
in McPhail v Doulton, in which he pointed out the wide variety of different
forms of settlement, and with them the interests created, between the rights of
the beneficiary of a fixed trust on the one hand and those of the objects of a
power on the other, is cited with approval. The case concerned the right to
disclosure of trust documents. The trustees argued that this was a proprietary
right, and that therefore the object of a power, who has no proprietary right in
any part of the fund, could not claim disclosure. Lord Walker stated that a
claim for disclosure did not depend upon a proprietary right, but was matter of
the courts discretion in the supervision of any trust. None had a right to
disclosure, so in this respect the object and the beneficiary were in the same
position, though in the exercise of its discretion, in this as in any other aspect
of the courts intervention, the interest of the claimant would no doubt be
significant. The object who, though he had no right to a share, had normally
received payment under the trustees discretion in the case of a small class,

would be more likely to be able to obtain disclosure than one who was merely
a member of a large class of remotely possible objects.
CHAPTER 9 CHARITIES
P190
The Charities Bill, referred to in earlier updates, has now received its second
reading in the House of Lords. Cl 1 defines charity, following in a slightly
different form the definition in the 1993 Act, referred to at the opening of this
chapter. Cl 1 stresses, however, that the purposes must be exclusively
charitable, and also states that a charity may be incorporated or not.
Cl 2 represents a major change by providing a statutory definition of charitable
purposes to replace the case law based on the Charitable Uses Act 1601. To
replace the four categories given by Lord McMaghten in IRC v Pemsel, Cl
2(2) of the Bill provides eleven categories. These are:
(a) the prevention or relief of poverty;
(b) the advancement of education;
(c) the advancement of religion;
(d) the advancement of health or the saving of lives;
(e) the advancement of citizenship or community development;
(f) the advancement of the arts, culture, heritage or science;
(g) the advancement of amateur sport;
(h) the advancement of human rights, conflict resolution or
reconciliation
or the promotion of religious or racial harmony or equality and
diversity;
(i) the advancement of environmental protection or improvement;
(j) the relief of those in need by reason of youth, age, ill-health,
disability,
financial hardship or other disadvantage;
(k) the advancement of animal welfare;
Cl 2(3) expands on some of these categories, stating that (d) the
advancement of health includes the prevention or relief of sickness, disease
or human suffering, that (e) includes (i) rural or urban regeneration, and the
promotion of civic responsibility, volunteering, the voluntary sector or the
effectiveness or efficiency of charities, (g) sport means sport which involves
physical skill and exertion; and (j) includes relief given by the provision of
accommodation or care to the persons mentioned in that paragraph. The
explanatory notes provided by the home Office state that each category is a
description or "head" of charity rather than a fully-stated purpose in itself.
Within each of those descriptions lie a range of purposes all of which fit the
description but each of which is a different purpose in its own right. The list of
descriptions, taken as a whole with the purposes underlying the descriptions,
encompasses everything which is to be a charitable purpose.
Despite the apparently radical nature of this change, it will immediately be
noted that the first three categories are already included in Lord McNaghtens
list, and it is generally accepted that the list as a whole is intended to

formalise purposes which are already recognised under the existing headings,
rather than to create new purposes.
In addition there is a final category;
(l) any other purposes within subsection (4).
This is intended to recognise anything as charitable which has already been
recognised as charitable under existing law, for cl 2(4) states that the
purposes within this section are:
(a) any purposes not within paragraphs (a) to (k) of subsection (2) but
recognised as charitable purposes under existing charity law or
by virtue of section 1 of the Recreational Charities Act 1958 (c.
17);
(b) any purposes that may reasonably be regarded as analogous to,
or within the spirit of, any purposes falling within any of those
paragraphs or paragraph (a) above.
This latter provision will enable the meaning of "charitable purpose" to be
expanded in the future by allowing for the possibility of new charitable
purposes to be recognised, so arguing by analogy will continue to be a basic
tool in the development of the law in this area.
P195
Cl 2 of the new Charities Bill states that a charitable purpose must be for the
public benefit and Cl 3 (2), as expected, removes the presumption of public
benefit from the first three categories of charitable purpose (poverty,
education, religion). Abolishing the presumption will not by itself deprive
charities under these headings of their charitable status if were registered as
charities while the presumption existed.
Cl 4 provides that the Charity Commission must issue guidelines in pursuance
of its public benefit objective, which is to promote awareness and
understanding of the operation of the public benefit requirement. Such
guidelines will not be legally binding and will function as advice. None of this
actually defines public benefit, which will remain a matter of common law.
Much will therefore depend, as it already does, on the Charity Commissioners
interpretation of public benefit. The Report of the Joint Committee noted with
approval a recent statement of the Commissioners on this issue and
recommended that this be the approach that the Bill should adopt. In essence
the Commissioners deal with this on a case by case basis, and apply different
standards to different charitable purposes. They would continue to do this,
having regard to the social and economic context within which an organisation
operates, as well as to the relevant charitable purposes and activities of the
organisation.
A specific concern, both to the Strategy Unit, and to the organisations
themselves, was the position of charities which charge fees for their services;
the Strategy Unit suggested that these should be especially the subject of
scrutiny, and concern was expressed in the press as to the impact on public
schools in particular. Here the Commissioners indicated that they would

follow the guidelines indicated in Re Resch [1969] 1 AC 514, (which

concerned a fee charging hospital) that:
a) both direct and indirect benefits to the public or a sufficient section of the
public may be taken into account in deciding whether an organisation does,
or can, operate for the public benefit;
b) the fact that charitable facilities or services will be charged for and will be
provided mainly to people who can afford to pay the charges does not
necessarily mean that the organisation does not operate for the public benefit;
and
c) an organisation which wholly excluded poor people from any benefits,
direct or indirect, would not be established and operate for the public benefit
and therefore would not be a charity.
The Commission will apply these principles in judging whether or not a charity
is meeting the public benefit requirement. It will apply the general principles in
cases of all fee-charging charities, whatever their particular charitable
purposes and however long they have been established.
Until guidelines are issued by the Commissioners if and when the Bill
becomes law, this is the best indication available of their approach to the
issue.
P233
D G Cracknell, Legal developments (2004) 148 (48) Sol J 8
CHAPTER 10 RESULTING TRUSTS
P242
The strength of the presumption was dealt with in Kyriakides v Pippas and
others [2004] EWHC 646 where the court cited, with approval, the statement
of Lord Phillips MR in Lavelle v Lavelle [2004] EWCA Civ 223. The case-law
has developed in such a way that even "comparatively slight evidence" will
rebut the presumption and a: "less rigid approach should also be adopted to
the admissibility of evidence to rebut the presumption of advancement" And
the judge in Kyriakides v Pippas went on to state that he suspected the
position we have now reached is that the courts will always strive to work out
the real intention of the purchaser and will only give effect to the presumptions
of resulting trust and advancement where the intention cannot be fathomed
and a "long-stop" or "default" solution is needed. It is assumed that this will
also apply to cases of transfer into the name of another (as opposed to
purchase in the name of another).
P246
This presumption of advancement arises when certain relationships exist
between the transferor and the transferee. The relevant relationships involve
a moral obligation on the part of the transferor towards the transferee. The
presumption is based on the assumption that the transfer was intended to

satisfy, at least in part, that moral obligation. Examples of transfers giving rise
to the presumption include father to legitimate child and husband to wife.
P247
In Beckford v Beckford (1774) Lofft 490 it was held that the presumption of
advancement did not arise between a father and his illegitimate or step child
(although, of course it may be that the father assumes a loco parentis
relationship (see below) and then the presumption of advancement would
arise.)
P256
The strength of the presumption was dealt with in Kyriakides v Pippas and
others [2004] EWHC 646 where the court cited, with approval, the statement
of Lord Phillips MR in Lavelle v Lavelle [2004] EWCA Civ 223. The case-law
has developed in such a way that even "comparatively slight evidence" will
rebut the presumption and a: "less rigid approach should also be adopted to
the admissibility of evidence to rebut the presumption of advancement" And
the judge in Kyriakides v Pippas went on to state that he suspected the
position we have now reached is that the courts will always strive to work out
the real intention of the purchaser and will only give effect to the presumptions
of resulting trust and advancement where the intention cannot be fathomed
and a "long-stop" or "default" solution is needed.
P257
Curley v Parkes [2004] All ER (D) 344, states that any resulting trust arising
with respect to property bought in the name of another will arise (if at all) at
the time of the purchase.
The claimant and defendant had been cohabiting in a house bought by the
defendant and registered in her sole name. The claimant's employer
subsequently required him to relocate.
His employer offered financial help with the moving costs and with the
purchase of a new property. As a result, the employer bought the property
from the defendant. Then, in April 2001, another property was bought in the
defendant's name alone. It was paid for by the proceeds of the old property, a
mortgage in the defendant's sole name, and cash paid by the defendant. The
defendant paid no part of the purchase price, despite receiving money under
the relocation scheme. He also received a payment each month from his
employer with respect to the higher mortgage payments.
Between May and November 2001, the claimant paid the defendant about
9,000 in six instalments. This was to compensate the defendant for the
deposit on the new property and for legal and removal expenses.
On the subsequent break up of the relationship, the claimant argued that the
property was held on a resulting trust by the defendant for the defendant and
claimant. The claimant argued that that he had contributed to the purchase
price of the property by the payments he had made in 2001.
The court held that where property is bought in the name of another, a
resulting trust would arise once and for all at the date the property was
acquired. In this case, the court decided, there were no findings of fact to
support the claimant's view that his payments of 9,000 (paid to compensate
the defendant for the deposit, and in respect of legal expenses and removal

costs had contributed to the purchase price of the property. Therefore, the
claimant had no beneficial interest in the property under a resulting trust.
P 257
The strength of the presumption was dealt with in Kyriakides v Pippas and
others [2004] EWHC 646 where the court cited, with approval, the statement
of Lord Phillips MR in Lavelle v Lavelle [2004] EWCA Civ 223. The case-law
has developed in such a way that even "comparatively slight evidence" will
rebut the presumption and a: "less rigid approach should also be adopted to
the admissibility of evidence to rebut the presumption of advancement" And
the judge in Kyriakides v Pippas went on to state that he suspected the
position we have now reached is that the courts will always strive to work out
the real intention of the purchaser and will only give effect to the presumptions
of resulting trust and advancement where the intention cannot be fathomed
and a "long-stop" or "default" solution is needed.

CHAPTER 11 CONSTRUCTIVE TRUSTS

P270
The personal liability of directors to account for improper profits arose to the
Court of Appeals decision in Gwembe Valley Development Corporation v
Koshy (No3) [2004] 1 BCLC 131. K was the managing director of GVDC and
also a major investor, through another company, Lasco, of which he was the
majority shareholder. K arranged for Lasco to lend a quantity of Zambian
currency to GVDC. For which GVDC acknowledged a debt of $5.8 million, as
the price of the Zambian money. In fact Lasco had acquired the currency for
only $1 million, so K was able to make a very large profit on the deal. As in
Guinness, the issue arose of the extent to which the no profit rule could be
avoided by the GVDCs articles of association. Here the articles permitted its
directors to enter into contracts with the company on their own behalf, but this
did not override the other requirement, which was to disclose all interests in
such contracts at a meeting of directors. K had not done this, and the fact
that some other directors were aware informally that K had an interest in the
loan contract did not comply with this requirement of disclosure. The trial
judge was entitled to conclude that K was guilty of dishonest concealment.
The case was not therefore time barred (see further under Chapter 16, time
limits). Accordingly K was bound to account to GVDC for the profit he had
made.
CHAPTER 12 THE FAMILY HOME
P331
On 18th November 2004 the Civil Partnership Act received the Royal assent.
Under the provisions of the Act, in general terms those same-sex couples who
register their partnership will acquire a raft of rights and responsibilities. In the
context of Equity and trusts, the property situation on the dissolution of a
registered partnership is of particular interest. On the formal dissolution of the

partnership the parties will be treated in the same way as a married couple
when it comes to the court allocating the ownership of their shared home. In
other words there can be property adjustment orders and the application of
the rules in Lloyds Bank v Rosset will not be relevant
However, in other cases, not involving the formal ending of the relationship,
the rules in Lloyds Bank v Rosset will still be relevant. For example on the
death of one of the partners the ownership of a shared home may be an issue
in the context of the administration of the will of the deceased partner.
The Act is limited to those same-sex couples who register their partnership
and the problems discussed above both in terms of establishing and
quantifying beneficial interests in shared property (most importantly in the
context of shared homes) will continue to be relevant to same-sex couples
who choose either not to register their partnership or choose to not to formally
dissolve their registered partnership.
The provisions also leave many home sharers exposed to the problems
outlined above. For example, opposite-sex co-habiting couples and those who
simply decide to share a home will still be exposed to the vagaries of the
existing law.
The Government does not believe that the solution for those opposite-sex
couples who choose not to marry, is to offer them another way of entering into
an equally formal kind of legal commitment to each other. This is, the
Government decided, an entirely separate issue from the legal recognition of
same-sex partnerships and no legislation is planned which will benefit
unmarried opposite-sex couples. Also there are no plans to introduce
legislation that will address the problems of other home-sharers (siblings,
flatmates etc.).
P331
R Adkinson, Cohabitee rights (2004) N.L.J. (2004) Vol.154 No.7134 952
D Burles, Promises, promises - Burns v Burns 20 years on Fam L J (2003)
No.33 November, 834
M Pawlowski, Common intention: assessing beneficial entitlement (2004)
Trusts and Trustees Vol 10 No 6, 13
C Rotherham, The property rights of unmarried cohabitees: the case for
reform, Conv. [2004] 268
J Sandbach, Evaluation of Civil Partnership Bill 2004, Fam L J (2004) No 40,
2
M.P Thompson, The obscurity of common intention Conv [2003], 411
CHAPTER 15 TRUSTEE'S DUTIES
P396
The trustees are also under a duty to allow beneficiaries to inspect trust
documents and to provide general information regarding their administration
of the trust. In ORourke v Darbishire [1920] All ER 1, Lord Wren stated that a
beneficiary had the right to see trusts documents because They are in a
sense his own. He argued that this right arose simply from the fact of being a
beneficiary under the trust. Income beneficiaries are entitled to see all the
accounts but capital beneficiaries are only entitled to see the accounts which

relate to capital transactions as only such transactions affect their interests.

Trustees often keep some form of diary in which decisions and actions are
recorded so that the information can readily be provided to the beneficiaries.
However the view of Lord Wren (that beneficiaries have the right to inspect
trust documents) was rejected by the Privy Council in the recent case of
Schmidt v Rosewood Trust Ltd [2003] 3 All ER 76.
A beneficiary under a discretionary trust applied for disclosure of trust
accounts and information about trust assets. The trustees argued that the
right to disclosure is a proprietary right and that discretionary beneficiaries do
not have this right.
The Privy Council stated that the court has the jurisdiction to supervise the
administration of trusts, including discretionary trusts and that where
appropriate the court could intervene in the administration. Additionally, it was
said that the right to seek the assistance of the court does not depend on any
entitlement to an interest under the trust and that a discretionary beneficiary
was able to seek the intervention of the court. The Privy Council went on to
state that no beneficiary has the right to the disclosure of trust documents.
The court would assess and balance commercial and personal interests and
confidentiality before making trust documents available.

CHAPTER 16 REMEDIES FOR BREACH OF TRUST

P425
The claim in Gwembe Valley Development Corporation v Koshy (No3) [2004]
1 BCLC 131 (see p270, above) was a personal one, to account for profits, but
as the judge had found K to be dishonest, the case fell within S21(1)(a) as
analogous to a fraudulent breach of trust.
P437
The rule in Claytons Case was further undermined in Commerrzbank
Aktiengesellschaft v IMB Morgan plc (2004) EWCH 2771. Lawrence Collins
J., applying Barlow Clowes v Vaughan, considered that the rule need only be
applied when it was convenient and could do broad justice. As the amount of
the claims far exceeded the sums in the accounts the claimant beneficiaries
would be paid pari passu, according to the amount of their contributions. The
claimant-beneficiaries were the victims of a common misfortune and to apply
the fiction of first in, first out would be to apportion loss through a test that
bore no relation to the justice of the case.
CHAPTER 18 EQUITABLE REMEDIES
P472
Delay in seeking a remedy was certainly one reason why it would have been
oppressive to the defendant to impose an injunction in the case of Jaggard v
Sawyer [1995] 2 All ER 189 (see below, damages in lieu), but according to
the Court of Appeal in Mortimer v Bailey (2004) EWCA Civ 1514; (2004) NPC

162, it is doubtful whether a person who did not seek an interlocutory

injunction as soon as he knew that a building was being erected on
neighbouring land, but who had made it clear that he objected to that
construction as a breach of covenant, and who subsequently commenced
proceedings,
was
barred
from
obtaining
a
final
injunction.
P484
Though the claimant has a duty to the bank or other third party to identify
clearly the assets which are subject to the order, conversely, once the bank
has notice of the order, it owes a duty of care to the claimant to preserve
a defendant's assets and not allow them to be dissipated. Even in the
absence of any express or deliberate assumption of responsibility on the part
of the bank the law ought to decide that such responsibility should be
imposed: Customs and Excise Commissioners v Barclays Bank (2004) EWCA
Civ 1555, Independent December 2nd 2004.

P498
Rectification of non-contractual mistakes: the courts power to interfere
with the trustees discretion
Under the rule in Re Hastings-Bass [1974] 2 All ER 193, it appears that the
court may interfere with mistakes in the exercise of trustees' discretions,
though the precise limits of this power are as yet unclear. The rule is that
where the trustees exercise a power in a way which is within the terms of that
power, it may nevertheless be ineffective is the trustees (a) failed to take into
account something which they ought to have or have taken into account
something which they should not, and (b) would not have exercised the power
in the way that they did had they taken account of the thing they have ignored
or ignored the thing they should not have taken into account.
The issue arose in Abacus Trust Co (Isle of Man) v Barr [2003] 1 All ER 763,
where the trustees had a power to appoint from among a class, including the
children of the settlor/life tenant. The settlor wished the trustees to appoint
40% of the fund to the children absolutely. Unfortunately, he informed the
trustees of this through an intermediary who misunderstood the instructions,
with the result that the trustees believed that the settlor wanted 60% of the
fund appointed and made the appointment accordingly.
Lightman J held that the courts power to interfere depended on a breach of
the trustees duty, rather than on the fact of a mistake having been made. In
this case the trustee was in breach of his duty to ascertain the life tenants
wishes (by relying on the intermediary). Despite the fact that the settlor had
then delayed 9myears in seeking a remedy, his lordship held that the trustees
appointment was voidable. The question remains as to how serious the
mistake must be before the courts will interfere.