Equity Notes

The History and the Nature of Equity

Equity derives from the broad jurisdiction exercised by the Lord
Chancellor as the keeper of the kings conscience. This later
developed into a system of law with rules, doctrines, and
precedents. The historical notion of a jurisdiction of conscience
(The Earl of Oxfords Case) still prevails today.
In NSW Equity was administered under a separate Act until 1970.
Now as a matter of practice, there is:
Equity and Commercial Division: commenced by summons; most
evidence by affadavit
-

Trusts
Wills and Estates
Companies
Partnerships
Receivers

Common Law Division: commenced by statement of claim

Basic Propositions

Equitable remedies are discretionary and not as of right

i.e. at common law you can always get at least nominal
damages for breach of contract

Equity acts in personam against a particular party. Usually

it will act by way of injunction, or specific performance.

The Jurisdictions in Equity

Exclusive Jurisdiction: Concerned with the enforcement of

equitable claims which are solely in the jurisdiction of Equity.
E.g. the rights and liabilities of a trustee, the duties of a
receiver.

Auxiliary Jurisdiction: Concerned with the intervention by

the court of Equity by way of injunction or otherwise to assist
in the enforcement of common law rights. E.g. to restrain the
breach of an implied negative stipulation in a contract.

Concurrent jurisdiction: The availability of a claim at both

law, and in equity e.g. specific performance of a contract for
the sale of land, or damages for breach of the contract.

The Statutory Regime

Supreme Court Act
Part 25: Deals with interim preservation and search orders
Part 28.5: The implied undertaking as to damages
s 57: The Court shall concurrently administer all rules of law,
including the rules of equity.
s 58, 59: preserve the availability of equitable claims and defences.
s 60: the Court will recognise all equitable estates and interests
s 61: abolishes the common injunction Court may now stay an
action on terms i.e. court pauses action while the Equity claim is
determined
s 66: Injunctions court orders a party to do or not to do something
s 67: Receivers the court will appoint a receiver to hold property
during a dispute
s 73: Relief against forfeiture; It is possible to apply to a court
for relief against forfeiture of a lease. This involves an application for
an injunction, supported by an affidavit, seeking an order that the
landlord allow the tenant to move back into the premises. It is
usually necessary to prove that the landlord failed to give
reasonable notice of the breach (except for arrears of rent), that
there was no breach, that the breach is trivial or that the breach will
be rectified promptly. Relief will not be given simply because the
tenant will suffer undue hardship by losing the premises.
Law Reform (Law and Equity) Act 1972
s 5 if there is any variance or conflict between the rules of law and
the rules of Equity, Equity will prevail
Conveyancing Act
s 13: Time is not of the essence in equity; it is not an essential term
until it is made essential

Zaccaradi v Caunt
To make time an essential term requires a 14 day notice to
complete
Walsh v Lonsdale; Chan v Cresdon
A promise that a) is sufficiently certain and b) is supported
by consideration gives rise to an equitable interest, and can
be specifically performable
Equity regards as done that which ought to be done
An equitable lease is the equivalent of a lease at law
Friend v Booker
If a lender pays out a secured debt, they are entitled to
stand in the shoes of the mortgagee / surety and enforce
the security (subrogation)
Day v Mead
Equity usually concerns itself with compensating for an
equitable wrong, not with granting exemplary damages to
punish for misconduct
Equitable compensation is not fettered by the requirements
of foresight and remoteness which control awards of
damages at law; the assessment will reflect that which the
justice of the case requires
Harris v Digital Pulse
Exemplary damages are not awarded in Equity for a breach
of fiduciary duty
Maxims of Equity
Milroy v Lord; Corin v Patton
Equity will not assist a volunteer by treating a failed gift at
law as a perfect declaration of trust (equity will not perfect
an imperfect gift)
However there will be a valid gift of property in equity if the
donor has done all that they can do to put it beyond their
recall (equity looks to intent rather than form) The legal

title will then be held under a constructive trust for the

donee.
Norman v FCT
Equity treats as done that which ought to be done.
Therefore agreement + consideration is enforceable in
equity, e.g. future property.
Re Lind
When you assign future property in Equity (contract +
consideration), not only does it fashion it into a right to
receive property when it comes into existence, there is a
quasi - property right given to the assignee, called a 'Re
Lind' right

Other Maxims of Equity

- Equity assists those who are alert, not asleep (laches,
waiver, acquiescence) so if you have an equitable complaint, you
should not delay.
Delay: Laches; remember Leaf v International Galleries (Delay
defeated a claim)
Waiver = This requires you to know strictly what your rights are.
Acquiescence = You know of some equitable wrong and you don't
do anything
- Equality is Equity, e.g. the pari passu rule with respect to
unsecured creditors in insolvency everyone gets the same amount.
Same for a trust. It means everyone who is in the same class is
treated in the same way.
- Equity applies limitation by analogy ***Note that the statute
of limitations is a procedural bar; it does not bar the
substantive relief*** (Commonwealth v Verwayen)
- Equity looks to substance, not to form. E.g. once a mortgage,
always a mortgage. A mortgage is security; as soon as you are late
with one payment you are in default, and in breach; in equity, it will
not take this harsh view.

Constructive Trust = Court construes a trust

Equitable compensation = Damages in Equity
Four Types of Security
Legal Mortgage: Legal title passes to mortgagee, but there is an
equity of redemption that equity will protect, right up until
foreclosure; this is because equity looks to substance and not to
form
Lien =
Equitable Charge = Obligation that burdens the land as security
for the payment of money. You have a right to sell the property
under s 66G of the Conveyancing Act. (Giumelli v Giumelli)
Pledge =
Mere Equities
- Right of a mortgagor, if the mortgagee exercises a power of sale,
to have the property sold by the mortgagee at arms length and in
good faith (Latec Investments)
- Right to go to court to enforce your Equity (Latec Investments)
- A floating charge is an EQUITABLE mortgage over all the
assets and undertakings of the company. IT INCLUDES
FUTURE PROPERTY (Assets include: Land, Inventory, Receivables/
Book debt
ANZ v Spectrum Plus
You can grant a mortgage over your own bank account.

Fiduciary Obligations
Questions to ask:

1) Is it a per se obligation? If so, strictly bound.

2) If not in this, you need to look at the facts. Has a fiduciary
relationship arisen between the parties? (Consent is not
necessary; e.g. a constructive trustee is a fiduciary, and may
not have given consent)
3) What is the extent of the fiduciary relationship? (Note the
approach here is proscriptive, not prescriptive)
4) Has there been fully informed consent to a breach of the
relationship?
5) Has the breach of duty relevantly caused any loss to the
principal / beneficiary?
6) What remedies are available?
7) Is the fiduciary in breach entitled in any event to a generous
equitable allowance for work done despite the breach? This
does not include profits!
REMEDIES FOR BREACH OF DUTY
Basic remedy of account; this includes a common law account
and an equitable account
Hospital Products per Mason J
Here HPI owed USSC fiduciary obligations as it was entrusted with
the responsibility of protecting USSCs product goodwill and the
market for their products
Traditional categories of fiduciary relationship: trustee
beneficiary, agent principal, solicitor client, employee
employer (employee cannot set up their own business in
competition), director company, partner partner,
accountant - trust.
The critical feature is that the fiduciary undertakes or
agree to act for or on behalf of or in the interests of another
person in the exercise of a power or discretion which will
affect the interests of that other person in a legal or
practical sense
If a fiduciary relationship is to be found arising from a
contractual agreement, it is a matter of construction as to
the terms of the contract; the fiduciary relationship must be
consistent with these terms. This includes both express and
implied terms
*** Implied fiduciary obligations will not be imposed on a
contract if it will go beyond what is necessary for business

efficacy. If the two parties are under a commercial

arrangement and dealing at arms length with each other on
an equal footing then this may indicate no fiduciary
obligations ***
If the relationship between the parties is such that one
party is vulnerable to the actions of the other, this may give
rise to a fiduciary obligation
Grimaldi v Chameleon Mining (No 2)
A fiduciary is under a burden to act with disinterest and
undivided loyalty; this responsibility will be to the exclusion
of their own or a third partys interests
An undisclosed profit which a director so derives from the
execution of his fiduciary duties belongs in equity to the
company; it is irrelevant that the profit could not have been
obtained by the company itself, or that no loss was caused.
The wrongdoing fiduciary can be personally liable to
account for profits derived in breach of duty.
The wrongdoing fiduciary can also be liable, at the
principals election, to pay equitable compensation to a
beneficiary who has suffered loss; the object is to restore
the beneficiary to the position in which he or she would
have been had there been no breach of fiduciary duty.
Chan v Zacharia per Deane J
Here a renewed lease was held on constructive trust for the benefit
of a dissolved partnership
A fiduciary is under an obligation to ensure there is no
conflict or significant possibility of conflict between
personal interest and fiduciary duties (conflict between
interest and duty)
The fiduciary must not use their position, opportunity or
knowledge for personal gain (misuse of position)
Equity will appropriate for the benefit of the person to
whom the fiduciary duty is owned any benefit gained or
received by the fiduciary in breach of these obligations
(liability to account)

It is immaterial that there was no absence of good faith or

damage to the person to whom the fiduciary obligation was
owed
There may be no breach of fiduciary duty unless and until
there is an actual failure by the fiduciary to account for the
relevant benefit or gain
*** The right to require an account from the fiduciary may
be lost by reason of the operation of other doctrines of
equity such as laches and equitable estoppel
Pilmer v Duke; Breen v Williams
A fiduciarys obligations are proscriptive, rather than
prescriptive; there is not a duty to act solely in the best
interests of the beneficiary, rather it is a duty NOT to do
certain things
It is not a quasi tortious duty and can thus be
distinguished from a duty of care owed under the tort of
negligence; thus contributory negligence is not a defence
able to diminish equitable compensation
United Dominions
A fiduciary relationship can arise between parties who have
not reached formal agreement; e.g. prospective partners
who have embarked upon the conduct of the partnership
business or venture before the precise terms have been
settled

Warman International v Dwyer

The liability of a fiduciary to account for a profit or gain
made in breach of fiduciary duty does not depend upon the
person to whom that obligation is owed suffering a loss or
injury; and it is ordinarily immaterial to the fiduciary's
liability to account that the person to whom the fiduciary
obligation is owed could not have earned the profit or gain.
In determining the proper basis for an account of profits, it
is of first importance to ascertain precisely what it was that
was acquired in consequence of the fiduciary's breach of

duty. In some cases, it may also be relevant to ascertain

what was lost by the plaintiff.
In cases outside the realm of specific assets, the liability of
the fiduciary should not be transferred into a vehicle for
unjust enrichment of the plaintiff.
Breen v Williams
Australian law recognises no fiduciary duty cast upon a
doctor to provide a patient with access to that patient's
medical records
Maguire v Makaronis
Fiduciary duties arise in the solicitor client relationship. An
element of these duties is full and informed consent of the
principal through disclosure of any interest the fiduciary has
in a transaction involving the principal. Failure to obtain this
informed consent may be a breach of fiduciary duties.
Youyang v Minter Ellison
If you improperly dispose of trust property, you will be liable
to restore the trust property; this is a strict liability, and
there can be no excuse of mistake, etc. If specific restitution
is not possible equitable damages will be awarded.
*** Boardman v Phipps ***
It is important to first define the scope of a fiduciarys
obligations and duties, and then see if there is a breach of
these through some conflict of duty and interest
Fully informed consent generally requires that a fiduciary
disclose to the beneficiary all relevant information in his or
her possession in relation to the proposed transaction, and
at least the material facts. With multiple beneficiaries, the
consent of ALL must be obtained.
If the fiduciary has already been given a generous equitable
allowance, this is another reason they will be prevented
from pursuing their own opportunities
It is irrelevant that the principal would not or could not have
sought the benefit that the fiduciary has obtained

However a partner may make a profit from information

obtained in the course of the partnership business as long
as it is done through another firm which is outside the scope
of the partnership business.
John Alexanders Clubs
At the beneficiarys election, and as long as it is
appropriate, the fiduciary can hold on constructive trust
any property or benefit derived in breach of fiduciary duty,
or even keep the profit
*** Maguire v Makaronis ***
Even if a fiduciary duty has arisen, a potential fiduciary can
escape liability for misuse of information or otherwise if
there is fully informed consent of the beneficiary
There is no precise formula which will determine in all cases
if fully informed consent has been given; it is a question of
fact in all the circumstances of each case
Farah Constructions
Informed consent can be made at different times and in
different ways; it will depend on the sophistication and
intelligence of the persons to whom disclosure must be
made
Spellson v George
Consent is only a prima facie defence, not an absolute
defence to a breach of trust or fiduciary duty. It may be that
it is fair and equitable for the beneficiary to still claim a
breach of duty
Brickenden v London
In a breach of fiduciary duty, it is irrelevant to speculate
that the material facts that should have been disclosed
would have not affected the decision of the beneficiary
Once you show a breach of fiduciary duty, you will be liable,
unless you can show there is no causal connection between
the breach and the loss
Prince Jefri

A fiduciary cannot act at the same time both for and against
the same client. Similarly a man cannot without the consent
of both clients act for one client while is partner acts for
another who has an opposite interest.
The fiduciary relationship between solicitor and client
comes to an end with the termination of the retainer;
however a duty of confidentiality endures

Confidential Information
A duty of confidence will arise in Equity where it is clear that the
information has a confidential quality, e.g. information exchanged
privately with a doctor.
REMEDIES
The usual remedy is injunction. (Earl v Nationwide News)
EMPLOYMENT
Often it is expressly provided in an employment contract that
certain information is confidential during and after employment.
Such a clause is valid provided it does not amount to a restraint of
trade; it is only valid to the extent that it is reasonable to
protect the employers genuine interests. Under the
Restraints of Trade Act 1976 (NSW) a court can read down such
a restraint.
Coco v A N Clark per Megarry J; Optus Networks
The TEST for a duty of confidentiality (independent of
contract):
1) The information is identified with specificity
2) It is confidential information
3) It was originally communicated in circumstances
importing an obligation of confidence, i.e. cannot be
blurted out in public (objective reasonable person
test)

4) There has been, or is threatened, an unauthorised use

of the information to the detriment of the party
communicating it
Query: Does detriment need to be demonstrated?
Information is of a confidential nature if:
- It is not public property and public knowledge
- Although it is constructed solely from materials in the
public domain to which the skill and ingenuity of the human
brain has been applied.
- It is of sufficient gravity and is not trivial tittle-tattle
Information will be imparted in circumstances of confidence
if
- Objectively a reasonable person would think so
- In particular if it is information of commercial or industrial
value given with a business objective in mind, such as a
joint venture or something special to be produced
If the contract covers the confidential information, this will be
conclusive.
Note: If there is threatened use of confidential information one could
obtain a 'quia timet' injunction (you're afraid of something
happening)
Optus Networks
An account of profits can be ordered from one who is in
breach of a duty of confidentiality
Streetscape
An injunction may lie not only against the party who owes
the duty of confidentiality and breaches or threatens to
breach it, but also against a third party who either
knowingly obtained the confidential information, or comes
to learn it was originally given in confidence.
AG v Guardian Newspapers
Confidentiality is lost when the information is so generally
accessible that, in all the circumstances, it cannot be
regarded as confidential.
ABC v Lenah Game Meats

A duty of confidentiality can arise on the facts; even if there

is no entrusting of confidential information, information can
be deemed confidential if it is inherently private, or is
illegally or surreptitiously obtained, or is received
unsolicited.
Equity will intervene if it would be unconscientious for the
recipient of the information to decline to respect the
confidentiality of the information. In deciding such a case,
this will depend on all that the recipient has come to know
by the time the court is considering whether or not to grant
the remedy.
Breen v Williams
A medical practioner is under an obligation in equity not to
disclose confidential information concerning a patient
without express or implied consent
Moorgate Tobacco
Equity can grant relief against an actual or threatened
abuse of confidential information, and does not require a
tort, breach of contract, or wider fiduciary duty
OBrien v Komesaroff
Information may be categorized as public knowledge though
only notorious in a particular industry or profession; the
substance of confidentiality involves the person seeking to
protect the information largely keeping it to himself.
Johns v ASC
When the proceedings of a court, tribunal or commission is
open to the public, or its findings are published generally,
information in these proceedings is in the public domain

John Fairfax
The court will determine the governments claim to
confidentiality by reference to the public interest. Unless
disclosure is likely to injure the public interest, it will not be
protected. Examples likely to injure the public interest
include national security, or relations with foreign countries.

Once information has been published and / or dispersed

overseas, it is unlikely an injunction will be effective or
granted.

Bolkiah v KPMG
A practioner can act against a former client so long as he or
she does not disclose or misuse any confidential information
(successive representation) whereas simultaneous
representation is not possible
The onus is on the plaintiff seeking to restrain a former
practitioner that (i) they are in possession of confidential
information, the disclosure of which they have not
consented, and (ii) the information is or may be relevant to
the new matter in which the interest of the new client is or
may be adverse to his own and there is a risk of misuse or
disclosure
This risk of misuse or disclosure needs to be a real one, and
not merely fanciful or theoretical. But it need not be
substantial
Once this is done the evidential burden shifts to the
defendant firm to show that even so there is no risk that the
information will come into the possession of those now
acting for the other party. This is a heavy burden.
It is assumed that information moves within a firm; for an
information barrier such as a Chinese wall to be successful,
it needs to involve personnel from different departments,
needs to be an established part of the organizational
structure of the firm, not created ad hoc and backed up by
evidence from those involved.
*** Kallinicos v Hunt
The appearance of loyalty to clients is important element of
the judicial process; this means a former solicitor can be
restrained from acting for a new client in conflict with the
old one, even without it being shown that he or she
possesses any confidential information of the former client.
Prince Jefri

A fiduciary duty of confidence does not survive the

information ceasing to be confidential
If confidential information is accidentally revealed in discovery?
see: Armstrong Strategic Management v Expense Reduction
Analysts
Provided you don't know that an error has been made, you
can continue to use it. NOTE This case is under special leave
to the HCA.
Giller v Procopets
If a breach of confidence is proven, equity may award
monetary damages for predictable resulting mental distress
that falls short of a recognised psychiatric injury.

Estoppel
- Promissory estoppel arises when a representor makes a
representation of law or fact which the representee relies upon to
his or her detriment in relation to the enforcement of a legal right
e.g High Trees (a promise not to do something in this case,
traditional estoppel).
- For promissory estoppel equity will restrain the enforcement of
existing legal rights that would be inconsistent with the promise that
was given. Note that the minimum equity is often difficult to work
out and usually you make good the full representation
- Since there is no consideration for the representation, the
representor can resile from the statement/ representation upon the
giving of appropriate notice, and from there assert the old position.

- There is now an increasing merger between promissory

estoppel and proprietary estoppel/ estoppel by
encouragement.
- Note that a promissory estoppel does not provide relief that
effectively enforces the promise as if it were a contract: Selah v
Romanous
- Equitable estoppel involves matters resting on future
assumptions; common law estoppel involves assumptions as to
an existing state of affairs.
Categories of Estoppel
Estoppel by Deed Applies to unambiguous statements of fact in
the recitals or operative provisions of a deed. A deed is a solemn
document that replaces the need for consideration. These
statements bind the parties and cannot be contradicted in legal
proceedings based on the deed (Discount & Finance)
Estoppel by Representation Applies where a representor makes
an unambiguous representation of an existing fact intending that it
be relied on by a person, who acts reasonably in reliance on it
(Foran v Wight)
Estoppel by Convention (common law estoppel cannot be
founded on future language or conduct) This arises when
parties join in making some fact or fact and law the basis of their
transaction or relationship. Once this assumption is communicated
and adopted by each of them, it will bind them and prevent a return
to the earlier relationship. This could be at odds with an earlier
contract! This is where practice and custom change the relationship
over time. The only detriment that needs to be shown here is entry
into the relationship or transaction: Bell Group v Westpac
Proprietary Estoppel (equitable estoppel) either by
encouragement, where a person encourages another to believe
that he will receive a proprietary interest in property, or standing
by, where an owner, who is aware of his rights and know they are
being infringed, stands by in silence while a person acts to his
detriment by building on or improving the land (Ramsden v
Dyson)
Issue Estoppel (Anshun estoppel) A form of procedural
estoppel, this will prevent a party from relitigating an issue that has
already been determined in early proceedings.

*** Walton Stores (a promise to do something)

Equitable estoppel (such as promissory estoppel) requires a
plaintiff to prove that (per Brennan J):
1) The plaintiff assumed that a particular legal
relationship then existed between the plaintiff and the
defendant or expected that a particular legal
relationship would exist between them and, in the
latter case, that the defendant would not be free to
withdraw from the expected legal relationship
2) The defendant has induced the plaintiff to adopt the
assumption or expectation by a promise which is
intended by the promisor and understood by the
promisee to affect their legal relationship, and from
which the defendant cannot withdraw
3) The plaintiff acts or abstains from acting in reliance on
the assumption or expectation
4) The defendant knew or intended him to do so
5) The plaintiffs action or inaction will occasion
detriment if the assumption or expectation is not
fulfilled
6) The defendant has failed to act to avoid that detriment
whether by fulfilling the assumption or expectation or
otherwise
Remedies include specific performance, injunction, or
equitable lien on property for the expenditure which a party
has made on itthe court goes no further than is necessary
to prevent unconscionable conduct
The object of the equity is not to compel the party bound to
fulfill the assumption or expectation; it is to avoid the
detriment which, if the assumption or expectation goes
unfulfilled, will be suffered by the party who has been
induced to act or abstain from acting
*** The key is whether the essential terms have been agreed
with a formality outstanding, e.g. no formal documents. If
so courts will enforce this. In Walton Stores there was no
dispute as to the terms of the proposed lease agreement,
just no exchange of the contracts.

Bell Group v Westpac

Estoppel by Convention (common law estoppel) requires:

This arises when there is an agreed statement of facts (of
mixture of facts and law), the truth of which has been
assumed, by the convention of the parties, as the basis of a
transaction between them they are about to enter. When the
parties have entered into their transaction upon this
assumption, then each are estopped from resuming their
previous legal relationship, as departure from the
assumption will cause detriment to the plaintiff, and it
would be unconscionable to permit the defendant to resile
from this statement of facts.
Silovi v Barbaro
Priestley JA set out a series of enumerated points in order to
clarify the law on estoppel.
1. Common law and equitable estoppel are separate
categories, although they have many ideas in common.
2. Common law estoppel operates upon a representation of
existing fact, and when certain conditions are fulfilled,
establishes a state of affairs by reference to which the legal
relation between the parties is to be decided. This estoppel
does not itself create a right against the party estopped.
The right flows from the courts decision on the state of
affairs established by the estoppel.
3. Equitable estoppel operates upon representations or
promises as to future conduct, including promises about
legal relations. When certain conditions are fulfilled, this
kind of estoppel is itself an equity, a source of legal
obligation.
*** Commonwealth of Australia v Verwayen (1990) (MAIN
AUSTRALIAN CASE)
Here they were estopped from relying on the statute of limitations
What is the appropriate remedy? Here estoppel differs from
contract
the appropriate remedy for estoppel is not to make good the
representation, (this is contract), but to remedy the
detriment, because someone misled you

Rule: 'Detriment' does not have to be financial, but it must

be demonstrated, e.g. stress and anxiety
There will always be an element of value judgment (per
Deane J) in deciding whether the defendants actions
amount to unconscionable conduct; an estoppel will not be
granted if it is disproportionate to the detriment to be
suffered by the plaintiff and if instead either adequate
compensation or reasonable notice would suffice

Delaforce v Simpson-Cook
Proprietary Estoppel (by encouragement) comes into
existence when an owner of property has encouraged
another to alter his or her position in the expectation of
obtaining a proprietary interest and that other, in reliance
on the expectationhas changed his or her position to their
detriment. If these matters are established equity may
compel the owner to give effect to that expectation in whole
or in part

Crabb v Arun District Council

Proprietary estoppel does not require consideration
Austotel v Franklins
If parties are large commercial entities that have
deliberately kept their pre-contractual negotiations vague,
this may prevent an equity arising in favour of a party
claiming estoppel
Per Priestly JA: For equitable estoppel to operate in precontractual negotiations, there must be the creation or
encouragement by the defendant in the plaintiff of an
assumption that a contract will come into existence or a
promise be performed or an interest granted to the plaintiff
in circumstances where departure from the assumption by
the defendant would be unconscionable
Thus the more uncertain the representation, the more terms
that have not been agreed, the more difficult it will be to
establish an estoppel. Here there was no estoppel when a
property developer exchanged letters of intent with a

supermarket proprietor, but subsequently declined to enter

a lease despite the supermarket increasing the size of the
store and acquiring fittings and equipment
Giumelli v Giumelli (Proprietary estoppel)
Relief in the form of fulfilling the expectation may be
refused if to do so would exceed what could be justified by
the requirements of conscientious conduct, or would be
unjust to the estopped party, or would cause excessive
hardship to third parties. Furthermore, relief may be
structured to recognise practical considerations such as the
need for a clean break. Here the High Court granted the son
monetary relief to the value of the property that should
have been transferred to him by the parents.
Remember a party seeking equity must do equity
Estoppel can arise from an oral representation or statement

*** DHJPM v Blackthorn (NOW THE LEADING NSW CA CASE)

The circumstances and relationship is important when
determining whether the parties expect a binding contract
to come into existence; family cases, with their lack of legal
experience, will be held to a lower standard; experienced
commercial parties dealing at arms length held to a higher
standard, and have a higher burden of proof
Hope or confidential expectation of a binding agreement
is not enough; there must be something more, a
legitimately induced assumption that the other party is
committed irrevocably to their course of action
Here no equitable compensation was ordered as there was
no detriment and there was some injustice to the estopped
party
Injunctions
Injunctions require: (American Cynamid per Lord Diplock)
1) A serious question to be tried as to the plaintiffs
entitlement to relief from actual or threatened
violation of his legal rights; this is a reasonably

arguable case on both the facts and the law (ABC v

Lenah Game Meats)
2a) The plaintiff is likely to suffer injury for which
damages will not be an
adequate remedy if the injunction is not granted
2b) IF not, would the defendant be adequately
compensated by damages
recoverable under the plaintiffs undertaking as to
damages
3) Whether the balance of convenience favours
granting the injunction,
including an assessment of
the risk of injustice arising from the granting or the
withholding of the injunction
- Note where factors are evenly balanced, the appropriate
course is to preserve the status quo
- Complete disclosure of all relevant matters which the court
should consider in determining whether to grant ex parte
relief, including why not to grant an injunction (Edison v
Bullock)
- For the applicant to give an undertaking as to damages
a promise to compensate the party against whom the
injunction has been awarded for any loss flowing directly
from the granting of the injunction, and which could be
foreseen when the injunction was granted (European Bank v
Robb Evans)
- Note an interlocutory injunction, or its refusal, may
determine the matter
TEST for damages from an injunction:

What is the loss now alleged?

Did that loss from directly form the order of the injunction?

Could the loss sustained have been foreseen at the time of

that order?

Notes:
Best to act quickly; Equity rewards those who are vigilant and
do not delay.

You can obtain short service which will get the parties to
court really quickly

Varley v Varley
In considering the balance of convenience, the adequacy of
the remedy of damages will be relevant but is only relevant
to Equitys auxiliary jurisdiction, such as a breach of
contract, as if an injunction is refused the applicant will still
have a right to damages. However in Equitys exclusive
jurisdiction, e.g. trusts, the applicant has no right to
damages.
Castlemaine Tooheys
In order to secure an interlocutory injunction, a plaintiff
must in the majority of cases establish that there is a
serious question to be tried but in some cases where the
public interest would be adversely affected by the grant of
an injunction, the plaintiff may need to show a probability,
even a distinct probability, of success.

Specific Performance
NOTE: Contract - normally damages are an adequate remedy damages are the difference that they will have to pay. If the market
has dropped, then you can't get any damages. This is a market
based test.
Dougan v Ley
Specific performance will be granted where the market is
limited, or an item is unique or of rare quality, and as such
damages would be an inadequate remedy
Falcke v Gray; Dowsett v Reid

However specific performance is a discretionary remedy,

and a court may refuse to award specific performance if the
transaction is unfair, unjust or a hard bargain
Coulls v Bagots
The basis of the equitable jurisdiction to grant specific
performance is that damages cannot satisfy the demands of
justice (per Windeyer J).
Where there is an agreement, for consideration between A
and B, for B to pay C, then A may obtain specific
performance of Bs promise
This is so not because A is enforcing a right of C, but
because he is enforcing his own right against B. Only if the
situation is construed as A becoming a trustee for C, then C
may have enforceable rights.
Contracts to pay money or transfer property to a third
person are often contracts for breach of which damages
would be an inadequate remedy.
Beswick v Beswick
If there is an ongoing agreement that is repudiated, for
example a promise to pay a surviving spouse an annuity,
this is an example of an agreement for which damages will
not be adequate (due to need for repeated actions for
nominal damages) and specific performance will instead be
granted
Argyll Stores
Specific performance can be granted when requiring a
result, such as a building contract, but are usually not
granted when it would require a defendant to carry on an
activity, such as requiring persons to carry on a business
However specific performance may not be granted if terms
of the order cannot be drawn with precision
Giles v Morris
Specific performance is not usually granted when personal
service obligations are involved, as these are difficult to
enforce. However the mere presence in a contract of one
provision which, by itself, would not be specifically

enforceable (i.e. personal service) does not prevent the

contract as a whole from being specifically enforced
Pakenham Upper Fruit Co
There is a distinction to be drawn between specific
performance in the true sense the need to place the
parties in the relative legal positions contemplated by the
contract and an order made requiring performance of a
term of an executed contract
McMahon v Ambrose
Thus specific performance of obligations is not available if
the contract has come to an end
The first question to ask is:
Is this the sort of contract for which the court would declare specific
performance? Land is the classic example. You can compel
performance for contracts of land. Rarely given for chattels.
However is it sufficiently unique because of sentimental value?
In relation to chattels, there isn't normally special performance:
Trespass (Direct interference) Note there is often implied consent.
The remedy is injunction.
Detinue (can sue for return of the goods - s 93 of Supreme Court
Act)
Conversion - Can sue for value of the goods

Anton Piller Order

Anton Piller Order This is a civil search warrant. Usually made ex
parte.
Anton Piller KG

Elements to prove:
1) there must be an extremely strong prima facie case.
2) The damage, potential or actual, must be very serious for
the applicant.
3) There must be clear evidence that the defendants
a) have in their possession incriminating documents or
things, and
b) that there is a real possibility that they may destroy such
material before any application inter partes can be made
Microsoft Corp v Goodview Electronics
An Anton Piller order is not an investigatory order; more is
needed these days than a mere suspicion that the defendant
will shred the evidence.

An applicant for a search order is under a duty to the Court to

make full and frank disclosure of all material facts to the
Court.

The applicant will be required to give the usual undertakings

as to damages.

Federal Court Practice Note CM 11 Search Orders (Anton

Piller Orders)

Is by judicial discretion
Usually made without notice
Compels the respondent to permit the search party to enter
premises and search for, inspect, copy and remove things
described in the order.
The search party must include an independent lawyer
who will supervise the search and a lawyer or lawyers
representing the applicant. This independent lawyer must
not be a member or employee of the applicants firm of
lawyers.
Supported by affidavits, including why there is a real
possibility that the things to be searched for will be
destroyed or otherwise made unavailable for use in
evidence before the court unless the order is made
Affidavits also to include whether the premises to be searched
include a female or a child under 18, or any other vulnerable
person. If so the court will consider if the search party should

include a woman or person capable of addressing the relevant

vulnerability.
Court must be informed if an independent computer
specialist is required, who will have to give undertakings to
the court.
Ordinarily the applicant is not permitted to inspect things
removed from the premises without leave of the court.
Ordinarily the order should be served between 9am and 2am
on a business day.
A search order must not be executed at the same time as
the execution of a search warrant by the police.
On the return date the court will consider all issues, including
commercial confidentiality, privilege, as well as leave for the
applicants lawyer to disclose information found during the
search.

Anton Pillar Order:

Q: What do you do if you are attacked with an Aton Pillar
Order?
A: Seek legal advice. Don't let them in. Only way they can come in
is if you let them. You will be in contempt, but you can still get
legal advice. However the order is directed at you not disposing of
evidence, etc. No one should use that time to dispose of documents.
Disposal would be a gross breach of the order.
Could get an injunction based possibly on legal privilege. Could get s
5 ADJR Act Legal Privilege - you must act immediately to claim
privilege.
Q: What about a section E 3 search warrant?
A: Can't resist. They have to come in - a search warrant gives a
special agent (the federal police) to enter, with a large number of
other people.

Injunctions and Property

Cowell v Rosehill Racecourse

Prima facie a contractual right to enter land is a licence, an

in personam right that is not a proprietary interest and can
be revoked at will by the licensor.
However if it is a licence couple with a proprietary interest,
prima facie this is irrevocable
Alonso v Leichardt Municipal Council
Even if a plaintiff does not have a proprietary interest, an
injunction may be granted if the licensor is threatening to
revoke the licence and untold hardship would be caused,
and damages would not be an adequate remedy.
Injunctions and Contracts
Curro v Beyond Productions; Lumley v Wagner; Warner Bros
v Nelson
Equity will intervene to enforce an express negative
stipulation in a contract it cannot make you fulfill a
personal service contract, but it will induce you to do so by
declaring an injunction against taking up other work for
another employer in breach of contract
Bingham v 7 Eleven
Equity may grant an injunction to enforce a negative
stipulation in a contract, e.g. that there will be no
termination other than as provided by the agreement.
Redland Bricks v Morris
Regarding withdrawal of lateral support, a mandatory
injunction will not be granted if it imposes an unlimited and
unqualified obligation, e.g. to restore support to land
Patrick Stevedores
Constant supervision by the court is by itself no longer an
effective or useful criterion for refusing an equitable order
of injunction or specific performance

Mareva Order (asset preservation order)

Prevents assets from being moved; prevents an abuse

of process of the court; See Rule 25.11 of Uniform Civil
Procedure Rules 2005 (NSW)

With or without notice to the other party

To obtain a Mareva Order, the plaintiff must:

1) Have obtained judgment in their favour, OR
2) Have a good arguable case on an accrued or
prospective cause of
action
AND
3) The court is sastisfied that there is a danger that a
judgment or
prospective judgment will be wholly or partly
unsatisfied because either the judgment debtor
absconds, or their assets are removed, disposed of or
diminished in value.
NOTE: The court can also make an order against a 3 rd
party if they are holding the assets
NOTE: The court can make a freezing order at any time
if the court considers it is in the interests of justice to
do so.
Finn v Carelli
A freezing order is not security; it is designed to prevent an
abuse of court process.
Impending insolvency, or any other impecuniosity, is no
reason to grant a freezing order. There must be a deliberate
attempt to move or diminish assets.
Frigo v Culhaci

There must be a real danger that the applicant will not be

able to have their judgment satisfied. A mere assertion will
be insufficient.
Cardile v LED Builders
In exercising its discretion whether or not to grant a Mareva
order the court weighs up the strength of the plaintiffs
cause of action and the risk that the defendant will dissipate
his or her assets against various discretionary factors, such
as delay, whether there has been a full and frank disclosure
by the plaintiff, and if the assets are held by a third party,
whether proceedings are available and have been
undertaken against the third party.

Garnishee Orders

Requires a third party who owes money to the

judgment debtor to pay you, the judgment creditor - it
is a way of intercepting funds

Equitable Compensation
Equitable Compensation has three principal features:

First, the primary purpose of the remedy is compensation for

what has been lost.
Secondly, the assessment of equitable compensation is not
fettered by common law principles, such as remoteness of
damage or foreseeability.
Thirdly, equitable compensation is not punitive in nature.

Nocton v Lord Ashburton

Statute of limitations will not apply to a claim for equitable
compensation
Youyang v Minter Ellison
A claim for equitable compensation requires a causal link
between the
breach and the loss Equity will not compensate for loss
which would have

been suffered in any event

Warman International v Dwyer
The object of equitable compensation is to restore persons
who have suffered
loss to the position in which they would have been if there
had been no
breach of the equitable obligation. Unlike damages at
common law, however,
the loss as a consequence of the breach is to be assessed
with the full benefit
of hindsight, i.e. a court will ask if there had been no
breach, what would
have happened? and compensate accordingly.
Where equitable compensation is sought for breaches of
fiduciary duty, it is necessary to identify criteria which
supply an adequate or sufficient connection between the
equitable compensation claimed and the breaches of duty,
i.e. a court will take into account objective facts in deciding
what the hypothetical situation would have been
Re Dawson
In the case of a trustee dealing with trust property in breach
of trust, a sufficient connection will be established
irrespective of the identification or a separate and
concurrent cause when the loss would not have occurred if
there had been no breach of duty. The obligation of a
defaulting trustee is one of effecting a restitution to the
estate, assessed at the date of restoration (so including any
interest that has developed in the meantime)

Target Holdings
Compensation is to be measured by a but for test; but for
the breach of fiduciary duties / trust, what position would
the plaintiff be in?
Wentworth v Woollahra Council
Equitable damages may be available even when a claim is
defeated by a discretionary defence, e.g. laches,
acquiescence or hardship

Canson Enterprises
Compensation is an equitable monetary remedy which is
available when the equitable remedies of restitution and
account are not appropriate. By analogy with restitution, it
attempts to restore to the plaintiff what has been lost as a
result of the breach, i.e. the plaintiffs loss of opportunity.
The plaintiffs actual loss as a consequence of the breach is
to be assessed with the full benefit of hindsight.
Foreseeability is not a concern in assessing compensation,
but it is essential that the losses made good are only those
which, on a common sense view of causation, w ere caused
by the breach
Damages under Lord Cairns Act
Supreme Court Act s 68 = Where the court has the power to
(a) to grant an injunction against the breach of any
covenant, contract or agreement, or against the commission
or continuance of any wrongful act; or (b) to order the
specific performance of any covenant, contract agreement,
the court may award damages either in addition to or in
substitution for the injunction or specific performance
It suffices if the court has such jurisdiction either at the time
when proceedings were instituted or at the hearing
Wroth v Tyler
There are times where specific performance is not
appropriate, e.g. proceedings between husband and wife. In
that case the damages awarded will constitute a true
substitute for specific performance, assessed at the time
the damages are awarded.
Grant v Dawkins
These damages are not limited by common law rules and do
not have to be assessed at the date of breach; instead they
can take into account appreciation in value of the property
Johnson v Agnew
Damages under Lord Cairns Act can even be awarded to one
who is not party to a breach of contract, e.g. in a breach of a
restrictive covenant

Giller v Procopets
In Victoria, Lord Cairns Act damages are extended to areas
of exclusive jurisdiction in Equity, such as breach of
confidentiality

UP TO HERE NOV 6 AFTERNOON

TRUSTS

- Settlor settles property (deed of trust - signed, sealed and

delivered, no consideration necessary) onto a trustee (holds legal
title) who holds property for beneficiaries
- Trustee can sell away legal title to a bona fide purchaser for value
without notice
- Beneficiaries have an equitable proprietary interest
- Often under a will someone will move from being an executor to a
trustee.
- Often a trustee can be a volunteer; this means that they are not
held to an incredibly high standard
Youyang v Minter Ellison
If you improperly dispose of trust property, you will be liable
to restore the trust property; this is a strict liability, and
there can be no excuse of mistake, etc.
Here again there was a difference of opinion between the
lower courts and the HCA.
(A)

Nature and Classification of Trusts

Express Trusts
a) Creation of express trusts (i.e. created by the parties, not by
operation of law)
This is where one person holds property for the benefit
of other people, the beneficiaries. There may be one
beneficiary or many. The beneficiaries have rights against the
trustee.
The trustee can be one of the beneficiaries, but cannot be the
only beneficiary.
3 Certainties Must Exist for express trusts
1) Certainty of intention (Paul v Constance, Re Adams and
the Kensington Vestry)
o This means a trust only arises if the person creating it
intends to create a trust. This person is called the
settlor.
o This intention is ascertained objectively (by an
outsider) (Brynes v Kendle).
o You dont have to use the word trust (Paul v
Constance)

o The language used to create it must be sufficiently

imperative (Re Adams)
2) Certainty of subject matter
3) Certainty of objects
1) Certainty of Intention
Paul v
Constance

Byrnes v Kendle

Milroy v Lord;
Jones v Lock

For a SELF DECLARATION of trust, as long

as you are one of the trustees, and as
long as it is not land (which would need
s23C(1)(b)) no formalities are required;
the word trust is not necessary to create
a trust; only certainty of intention to
create a trust
The intention required to create a trust is
ascertained objectively (by an outsider)
You have to be careful with selfdeclarations. If an outright assignment
to a recipient was intended, then the law
will not allow you the 'second chance' of
construing it as a self-declaration of trust

1A) The language used to create the trust must be

sufficiently imperative

The settlor doesnt have to realize that they are creating a

trust. However you must be sure that the settlors intention
was imperative. You must be sure that the recipient
(trustee) is being required to hold the property for
someone else.

For example, giving property to someone else, and you say I

HOPE or WISH that you hold this for someone else if
these words are insufficiently imperative, and the person is
not required to do what you hope or wish, this is not a trust.
This is a gift. It doesnt make them a trustee. They can ignore
you or do whatever they like.

Re Adams

There must be sufficiently imperative

language to create the trust; not
precatory words
Here the testator gave property in
confidence; this was not enough, a
person must be required to hold property
on trust for others. Instead this was an
absolute assignment

Associated
Alloys

In order to infer the relevant intention,

the court may look to the nature of the
transaction and the whole of the
circumstances attending the relationship
between the parties

McEvoy v
McEvoy

It is not necessary that the creator of the

trust should know that the particular
relationship intended to be created is in
law a trust; what matters is intention

2. Sufficient Certainty of Subject Matter

***It must be clear what property is subject to the

trust, and what the beneficiary's interests are.

This is because the trustee will ordinarily have other property.

If the trustee becomes bankrupt, the trustee's own property is
realised for the creditors, but the trust property is not.

Palmer v
Simmonds

There must be certainty of subject matter.

If you don't identify with sufficient clarity
what you are declaring the trust over,
there is no trust without specific
property the trust cannot exist.

Hunter v Moss

There is a difference between tangible

and intangible subject matter; if it is
tangible, it needs to be separated if it
doesnt, the trust fails. However if it is
intangible, e.g. shares, or the residue of
an estate, it doesnt have to be separated
to be a valid trust

3. Sufficient Certainty of Objects (Beneficiaries)

It must be clear for WHOM the trustee is holding the trust

property. If they are individuals A, B and C, this is easy.

Discretionary Trusts (Fay v Moramba Services)

This is a species of express trust

This is a trust coupled with a special power of appointment; the

beneficiaries are not determined at the moment of creation of
the trust, either as to identity or quantum of interest and the
choice of beneficiary, or determination of the extent of
his or her interest, or both, is left to the trustee to
decide.

Thus while the trustee has discretion over his actions, he is

obliged to use that discretion.

Thus a discretionary trust does not have beneficiaries in the

traditional sense; instead there is a class of persons, who are
the objects of a power to appoint either income or corpus or
both.

The members of the class do not have a proprietary legal or

equitable interest in the trust fund. At best they are potential
beneficiaries, not beneficiaries.

They do have a right in equity to due administration of the

trust, and the trustees have a corresponding fiduciary
obligation at least to consider whether, and in what way,
to exercise their discretionary powers of appointment.

The trustees must give real and genuine consideration as to

the exercise of their discretion; they must survey the field,
and determine whether to make an appointment (Re Hays
Settlement Trusts)

The exercise of a trustees discretion can be attacked on the

grounds that they acted in bad faith, arbitrarily, capriciously,
irresponsibly, or irreverently to any sensible expectation of the
settlor. However it cannot be impugned on the basis that
their decision was unfair or unreasonable.

The test is whether it is possible to say whether a proposed

beneficiary is/is not within the class (Baden)

There must also be criterion certainty e.g, a friend is not

usually sufficiently certain. This relates to certainty of objects.

Mere Power

If there is a mere power, not only does trustee have discretion

over his actions, the trustee is not bound to exercise it at all,
beyond considering from time to time whether or not to
exercise the power.

The trustee of a mere power must make a survey of the

range of objects or possible beneficiaries with a view to the
appropriateness of individual appointments.

In the absence of a corrupt motive, the refusal to exercise a

purely discretionary power is no reason to remove the trustees.

Distinguishing between different types of testamentary gift:

(The Countess of Bective)
Equitable Personal Obligation

This arose in Gill v Gill, and results in a personal liability alone,

for which equitable compensation can be ordered.

Equitable Charge

Equitable charge is a security interest over property. The chargee

can exercise power of sale under s 66G

Gift subject to a condition

By accepting the gift, the donee incurs the equitable duty to

perform a condition.

When a trust is declared for a class of people

Rule: ***Provided the criterion for membership of the

class is clear, the trust will be upheld, even if it is not
clear on the facts whether a particular person falls
within that criterion***

Trust Property must Reach Trustee

You cant have a trust where the trustee doesnt have the trust
property. The trust is only constituted when the trust property
is received by the trustee (Oughtred v Inland Revenue
Comissioners)(assuming the other three certainties are in place).

If you own property and you declare yourself the trustee,

that's no problem. However if you declare someone else
trustee, there is no trust until that person gets the
property. So if you declare a trust over your house, and tell
someone they are the trustee, there is no trust until they
get the house.

If you promise that you will transfer your house to someone

else to hold on trust for the class, if you haven't transferred
the house, you have only made an ORAL PROMISE, and this
is not binding. Until there is an enforceable right against the
settlor there can be no trust.

Binding Contract to Create a Trust

However if you had entered into a binding contract with the

trustee, then the trustee has an equitable interest in the
house from the time the contract is binding. Equity
considers done that which needs to be done, and considers
the house to have passed in equity already. They now have a
chose in action the right under the contract to force
the settlor to transfer the house - and that is property,
and this is enough to constitute the trust. The intended
trustee has RECEIVED property, and it was clear the
purpose of this was to hold it for others, not for their own
benefit.

If you intended a transfer to trustees on trust then the trust

property has to reach them - again, you won't get the second
chance of saying that it took effect as a self-declaration.

*Oughtred

If there is valuable consideration for a

promise to transfer, then this can transfer
title in equity, even though legal title has not
yet passed

Beneficiary's Rights Under a Trust

Ultimately the beneficiary's interests under a trust is a chose

in action

Under the original Roman sense, the beneficiary's rights sit in

the middle; they have rights against the trustee (in
personam) and against third parties if the trust
property is given to the wrong people (in rem)

However the beneficiary's rights are not FULLY in rem; their

interest cannot be enforced against a bona fide
purchaser for value of the estate without notice of the
breach of trust.

Rules
1) The trust beneficiary's rights are DEFINITELY proprietary
in that they can be assigned.
2) The trust beneficiary also often has rights in respect of the
specific trust property.
3) In a TRUST, the beneficiary's right is assignable, but also
the trust beneficiary can say that the trust assets belong
to the trust beneficiary. Similar to a partnership
interest.
4) If the trustee misapplies trust assets - gives them to a
non-beneficiary - then the beneficiaries can require them
to return the property to the trustee. So in this sense
the beneficiary can enforce this right against 3rd
parties. (Unless 3rd party is a bona fide purchaser for
value without notice of the breach of trust)
5) The beneficiaries may be able to assert - even when the
assets are still in the trust - that those assets belong to
them in equity. This depends on the terms of the trust.
Baker v
Archer
Shee

In equity, property under a trust, such as income

derived from trust assets, can be viewed as
property in the hands of the beneficiary
(excluding discretionary trusts, etc)
It depends on statute whether this property can
be taxed or not
It depends on what the terms of the trust says
E.g. If it is a discretionary trust you only have a
personal right to compel due administration, but
you have no property right until the trustee
choses

Beneficiarys Rights against a Bona Fide Purchaser For Value

Without Notice

1) The trustee holds the legal title to the property.

2) The beneficiarys interest is an equitable interest.
3) If the trustee gives the property to someone who is not a
beneficiary, then the trustee is passing legal title,
because that is what the trustee has. So the recipient takes
legal title to this property.
4) So, if the trustee were to sell a car to someone, and that
person didn't know anything about the trust, that
person has acted bona fide, have purchased legal title to
the car for value, and has no notice that it has been
transferred in breach of trust. Here they are free from
the equitable interest; beneficiaries cannot enforce
their rights against that person and the property is free
of the trust.
5) Because the purchaser has paid money for value
that money now becomes part of the trust fund.
6) The beneficiary sues the trustee for breach of trust and
seeks compensation.
Byrnes v Kendle

The equitable interest under a trust is

property that can be assigned
(proprietary right). This is then
enforceable against the trustee (personal
right).
Thus under a trust you have both
personal and proprietary rights.
Intention to create a trust is ascertained
objectively

Secret Trusts
NOTE: Still need to discuss settlors intention and whether the
language sufficiently certain. (Byrnes v Kendell) As they
ordinarily arise in wills, trust property will not reach the trustee until
the testator dies. If the beneficiary dies, the beneficiary still had
an interest in the will which can be passed to their heirs
(Gardner No 2)
Intro
Operate through wills
Davids will leaves $100,000 to Gary and Phil, remainder to
Victoria.
Actually David wants to give some money to Rebecca, but doesnt
want Victoria to know.
David tells Gary and Phil to give their money to Rebecca instead.

 A secret trust for Rebecca is created, and Victoria is none the

wiser.

Above example is a fully secret trust

John wants to leave some money to Edwina, but he doesnt want

Norma to find out.
John agrees with Ken that Ken will hold money on trust for Edwina.
Johns will reads $100,000 to Ken upon the trusts that we have
agreed

1)
2)
3)
4)
5)

Above example is a half-secret trust

Fully secret beneficiary witnesses the will

Full secret trustee witnesses the will
Fully secret trustee disclaims the inheritance
Fully secret beneficiary pre-deceases the testator
Fully secret trustee predeceases the testator

Answer to all the above: probably defeat the secret trust, but
not clear
Secret trusts for land:
Ottoway v Norman
Facts: fully secret trust of land, without writing, was upheld
implied that it must have been a constructive trust, but the point
was not raised
Some authority that fully secret trusts involving land are
constructive
Re Baillie
Facts: Half-secret trust of land held ineffective because it was not in
writing
Beneficiary of half-secret trust could not enforce it because the
beneficiary needed to be identifiable
Half-secret trusts involving land are express
Re Keane (UK)
For half secret trusts, for the intended trustee you need
to tell them the terms of the trust before the will is drawn
up
Ledgerwood

Took a different approach from Re Keane - if the intended

trustee has agreed to be a trustee, then their conscience is
bound even if they dont know the full terms of the trust
UP TO HERE LATE pm 6 NOV
Charitable Trusts
What counts as charitable? It must be for the PUBLIC
BENEFIT, as well as come under one of the four heads of
charity:
Pemsel
1.
2.
3.
4.

Relief of poverty
Advancement of education
Advancement of religion
Other purposes for the public benefit

Chester

To qualify under the fourth head, an applicant

must demonstrate that the purported charity
is analogous to or within the spirit and
intendment of the 1601 Act. This is a strict
test and courts are likely to be interventionist
for fourth head trusts
o Example: welfare of animals, emergency service,
agriculture preservation, relief of unemployment,
promotion of ethical standards

Sport clubs do not have legal personality

o Sporting clubs may be charitable under fourth head, but
not likely
o Exam: if sports club advice is to incorporate

What is public benefit? Very elastic term. Even one poor

relation can benefit from the relief of poverty'; alternatively
advancement of education may require a very wide public
benefit

Charitable Purpose Act 2004

Now includes childcare, self help bodies and closed or

contemplative religious orders.
Charities are not liable to income tax, and not liable to the rule
against perpetuities, i.e. may potentially last forever

A trust which is set up for a non-charitable purpose will be struck

down on the ground of perpetuity

For exam:
1. First question: is it a purpose trust?
2. If so, could it be charitable?
a. Is it under one of the four heads?
i. If no not charitable
b. If yes is it also for the public benefit?
i. Do the purposes being considered confer a
tangible benefit directly or indirectly upon the
public?
ii. OR is the class of persons eligible to derive a
benefit from these purposes defined so as to
constitute the public as a whole or a section
thereof?

(A) Charitable Purposes

Purpose Trusts
Show
Jumping

(B)

An organisation must have charitable

purposes. A gift to an association with non
charitable purposes is only valid if it is
capable of immediate enjoyment

Public Benefit

Oppenheim;
Thompson v
FCT

A charitable trust must be for the benefit

of a section of the public. E.g. to be valid
as to education, it must be education per
se; it cant be the education of our
employees /family members. Note that
this does not stop it being construed as a
private trust

Re Koettgen

This was a general public charitable

trust; even though it had a preference for
employees of the company, it was still
valid

Thompson v
FCT

If the trust is only for members of a

particular association, it will not be
charitable as it is not for the public

IRC v
Baddeley

Just because only a limited number of

people are likely to avail themselves of the
benefits of a trust does not affect its
validity

National
Anti
Vivisection

If a purpose falls within one of the familiar

categories of charity, the court will assume
it to be for the benefit of the community
unless the contrary is shown

Davies v
Perpetual
Trustee

There cannot be qualifications put on the

beneficiaries that would render them a
fluctuating body of private individuals.
This would not amount to public benefit.

(C)Political Trusts

Political trusts by definition are seeking to change public

policy. As a matter of preserving the separation of powers, it is
not appropriate for judges to be determining that it is for the
public benefit to change government policy

Antivivisection
case

Cannot have a trust whose sole purpose

is to change the law
However a political purpose which is
merely subsidiary or ancillary to a main or
leading purpose that is charitable does
not deny the validity of the trust

Aid/Watc
h
(RECENT)

However a charity may advance public debate

on an issue
There is no general doctrine in Australia
which excludes from charitable purposes
political objects

Bacon v
Pianta

(D)

A trust for the benefit of both present and

future members of an association will not now
fail as infringing the rule against perpetuities.
However it will fail if it is, in reality, a trust for
some purpose that is not charitable.
Poverty

Dingle v

Poverty is an exception to the Oppenheim

Turner

rule (cant have beneficiaries linked to settlor

via a personal relationship). A trust for
employees affected by poverty is acceptable,
however it still must be a public trust, not a
closed gift to individuals

Downing
v FCT

An intention to provide for the relief of

persons from poverty need not be stated in
express terms; it is a question of construction

Le Cras

Public benefit can also mean indirect

benefit; here for example was a valid trust for
St Vincents private hospital

(E)Education
Re Shaw

Although education is a head of charity,

there must still be public utility. Here money
left on trust for an alternative alphabet was
not valid

(F)Religion

Note: repair of churches / upkeep of churchyard are charitable

o But NOT a trust for a particular monument or grave
A gift to an office-holder in the name of the office will be
presumed to be on trust for that offices charitable activities
o I.e. if you leave money to the Archbishop of Sydney, it is
on trust for the charitable purpose of his office

Leahy

A gift can be made to persons (including a

corporation) beneficially, as long as it is for
immediate use and enjoyment for an
ascertainable class of people. However it
cannot be made to a purpose or to an object
unless the purpose or object is charitable

Lawlor

To qualify as a religious charity the purpose

must be religious, involving the spread or
strengthening of spiritual teaching or
observance it must be edifying. There may
be many purposes peculiar to religious
denominations which do not qualify, such as
running a newspaper or the observation of
the Sabbath.

Gilmour v
Coates

Traditionally a closed order would not be a

valid trust for religious purposes if the church
/ religion is not open to the public

Church of
the New
Faith

This offered a TEST for what defines a

religion: (i) belief in a supernatural being,
thing or principle; (ii) acceptance of canons of
(legal) conduct in order to give effect to that
belief (Mason ACJ and Brennan J)

(G)

Fourth Class

IRC v
Baddeley

If the terms of the purported trust are so

wide that they would permit uses which are
not charitable, then the trust must fail

Downing v
FCT

Trusts for the welfare of ex-service

personnel come under the fourth class

(H)

Schemes

Re
Lysaght

If the charitable purpose fails, the court may

be able to apply the funds to a nearby
charitable purpose

Phillips v
Roberts

In deciding what an alternative scheme could

be, evidence can be accepted from associates
as to what the settlor would have wanted

(i)

Mixed Purposes

Leahy v
AG

If a trust has mixed purposes, where some

are valid and some are not, the invalid
purpose may be severed (see also the new
charities act LOOK UP s 23?

(I) Non-Charitable Purpose Trusts

Other exceptions to rule that purpose trusts are void, or

the rule that there must be legal identity of beneficiaries
1. Trusts of imperfect obligation concessions to human frailty

a. E.g. 1 Pets are a purpose, because in reality it is for

the purpose of looking after the dog (Re Dean)
i. All that a trust of imperfect obligation is, is a
reason for the trustee not to give the money to
the residuary estate before the dog dies (for
example)
b. E.g. 2 saying of private masses
c. E.g. 3 Monuments and graves
d. E.g. 4 Fox hunting
2. Trusts for unincorporated non-charitable organisations
(Problem is that, being unincorporated, they do not exist
legally)
a. Sometimes, in leaving money for informal groups e.g.
book club it can be construed to mean the people in
the book club but more often it is problematic, and
this does not work
Morice v Bishop
of Durham

If a trust fails for non-charitable

purposes or uncertain / indefinite
language, the residue will be
distributed among the next of kin

Re Astors
Settlement
Trusts

For a trust to be valid it must be either

for individuals or charitable purposes;
there must be a beneficiary, someone
in whose favour the court can decree
performance (excepting animals and
graves)
The purposes must be stated in phrases
which embody definite concepts and
the means by which a trustee is to
attain them must also be prescribed
with a sufficient degree of certainty.
The trust must be of such a nature that
it can be administered or executed by
the court.

Re Denleys
Trust Deed

Even if a trust is expressed for a noncharitable purpose, as long as it is

directly or indirectly for the benefit of
individuals, it will still be valid. Here it
was a sports ground.

Leahy v AG for
NSW

Unincorporated associations: as the

association has no separate legal
personality (so cant itself be the
beneficiary), when a gift is given to it,

it is possible to read the gift as a trust

for the benefit of members of the
association, and thereby validate the
gift rather than a trust for the noncharitable purpose that the association
represents. Whether it is for the
members individually or as a whole
depends on wording, size of association
and nature of trust property.
Bacon v Pianta

A gift to an unincorporated association

is valid if it operates as one for the
immediate benefit of members.
A gift in trust for the benefit of present
and future members will fail as not
vesting within the perpetuity period
A gift for a purpose will fail unless
charitable, even if the association has a
charitable flavour

Neville Estates

1. An absolute gift to existing members

each entitled to a share.
2. A gift to existing members, subject to
the constitutional rules of the
organisation, which operate as a
contract between the members
3. A gift to the association as trustee for
purposes, which must be charitable.

Succession Act
2006 s 43

Basically overtakes Bacon v Pianta; gifts

to unincorporated associations will be valid
What this doesnt say is who owns the
property; hence the importance of Neville
Estates

Trustees Powers and Duties and the Rights of Beneficiaries

regarding
Administration

(A)
The Duti es, Powers, Rights and Liabilities of
Trustees
Powers and Duties
Re Beloved
Wilkes
Charity

When trustees have powers of discretion,

as long as a decision is made bona fide and
for a proper purpose, a court will not
interfere

Chapman v
Chapman

Trustees have a duty to obey the terms of

the trust, with limited exceptions:
1. To make allocations to infant
beneficiaries
2. To deal with unforeseen difficulties
3. To provide maintenance for needy
beneficiaries.
4. To compromise or settle disputes
between beneficiary claimants

Trustee v
Godsall

A variation will generally be considered

expedient where it can be proven to be in
the best interests of the beneficiaries

Re
Londonderr
ys
Settlement

Traditionally trustees do not have to give

reasons for the exercise of their powers

Schmidt v
Rosewood

The better view is that a beneficiary does

not have a proprietary interest in trust
documents, with the result that a
beneficiary will not have an automatic right
of production and inspection of such
documents. Rather, a beneficiary may only
obtain such documents by requesting the
Court to exercise its inherent jurisdiction to
intervene in the administration of the trust.

Re Speight

The standard of care of trustees is to

exercise the due care and skill of a
reasonable person; they do not owe a duty
of strict liability. They will thus not be liable
for accidental loss of or depreciation in
value of trust property

Cowan v

Under a trust for the provision of financial

Scargill

benefits, the paramount duty of trustees is

to act in the financial best interests of
present and future beneficiaries

Harries v
Church
Commission
ers

Moral or personal questions are irrelevant;

what matters is the best financial interest
of the beneficiaries

Trustee Act
1925 (NSW)
Division 2

Codifies the common law with regards to

the above principles; 14A: In exercising a
power of investment, a trustee must
exercise care, diligence and skill of a
reasonable person, with a higher standard if
they are a professional trustee

90, 90A

FILL?

Pilkington v
IRC

Trustees cannot delegate unless they have

authority to do so

Rights and Liabilities

Buckle

In the making of a contract with a third party,

ordinarily the trustee is personally liable for
this debt, but is entitled to indemnity out of
the trust estate. This has been described as a
beneficial interest superior to those of the
beneficiaries.

Re
Raybould

In the event of litigation e.g. arising out of

negligence, a trustee can claim an indemnity
from the trust assets, so long as the trustee
has been acting diligently and reasonably
and in accordance with the terms of the trust

Beddoes
Order

Before embarking on litigation a trustee

should seek the protection of a
Beddoes order to prevent the risk of
losing their right of indemnity against the
trust estate

Hardoon v
Belilios

When a sole beneficiary, B, is sui juris, the

trustees right of indemnity extends beyond
the trust property to a personal right
against B. In practice, the right of
indemnity against beneficiaries is exercised

only after the trustee has exhausted his or

her rights against the trust property
JW
Broomhead

In the case of multiple beneficiaries, each

must personally indemnify the trustee. Each
beneficiarys liability is limited to his
proportionate interest in income.

McLean v
Burns Philp

It is possible to draft a trust instrument so

as to limit the liability of the beneficiaries;
these immunity clauses are not contrary
to public policy

Trustee Act
1925 (NSW) s
85

(B)

If there has been a breach of trust,

provided a trustee has acted honestly and
reasonably the Court may relieve the
trustee either wholly or partly from
personal liability for the breach

The Rights of Beneficiaries

Saunders v
Vautier

Manfred v
Maddrell

CPT
Custodian

Modern formulation of the rule: An adult

beneficiary (or beneficiaries) who
has/have an absolute, vested and
indefeasible interest in the capital and
income of property may at any time
requires the transfer of the property to
him/them and may terminate the office of
the trustee. Note that this will only apply
if the beneficiaries are entitled to wind up
the trust and require the trustee to
assign to them the subject matter of the
trust (Don King Productions). However
this usually requires all the beneficiaries
to agree
If there is more than one beneficiary, and
only some want to break it up, a
proportionate share of property may be
distributed, so long as the value of the
remaining property is not prejudiced. This
is possible even if to do so is inconsistent
with the intentions of the settlor
The rule in Saunders v Vautier does not
apply to a situation where the trustees
right of indemnity (reimbursement or
exoneration) has yet to be satisfied. In
such an instance, the trustee has a lien

Trustee Act
1925 (NSW) s
85

on the trust property, such that the

beneficiaries do not have an absolute
interest in the trust property.
If there has been a breach of trust,
provided a trustee has acted honestly and
reasonably the Court may relieve the
trustee either wholly or partly from
personal liability for the breach

7. Resulting Trusts

A resulting trust arises where although legal title is

vested in a trustee, equitable title becomes vested in the
settlor.

An arrangement whereby one person holds property for the benefit

of another,
which is implied by a court in certain cases where a person
transfers property to
another and gives him or her legal title to it but does not
intend him or her to
have an equitable or beneficial interest in the property.
Could arise when:

An express trust fails, e.g. the beneficiary dies, trustee holds the
property on resulting trust for settlor
When an express trust does not use or exhaust all the trust
property, trustee holds the property on resulting trust for settlor.
A charitable trust fails if the doctrine of cy pres cannot be
applied, the trustee or charity will hold the trust property on
resulting trust for the settlor.
A purchase money resulting trust arises when one person
purchases and pays for property, and the name of another
person is on the title.
Re
Vandervell
s Trusts (No
2)

Megarry J distinguished between automatic

and presumed resulting trusts: Presumed
resulting trusts arise where the transfer to
B is not made on any trust ... there is a
rebuttable presumption that B holds on
resulting trust for A. B is presumed not only
to hold the entire interest on trust, but also
to hold the beneficial interest for A
absolutely.
Automatic resulting trusts arise where
the transfer to B is made on trusts that

leave some or all of the beneficial interest

undisposed of. Here B automatically holds
on resulting trust for A to the extent that
the beneficial interest has not been carried
to him or others.

(A)

Non Disposal of Beneficial Interest

Re
Gillingham
Bus Disaster
Fund
Re West
Sussex
Constabubla
rys Trust
Funds

Here was a charitable trust that failed due

to uncertainty of objects; the cy pres
doctrine could not be applied; it was
decided that the unspent funds should be
returned to the donors under a resulting
trust. First in first out was applied.
Here a charitable trust was wound up; it
had various contributions, only some of
which were held on resulting trust, others
were deemed to be bona vacantia
(ownerless property, goes to the crown) as
the trust was intended for third parties:

Re British
Red Cross
Balkan Fund
Vandervell v
IRC

(B)

Raffle money (contract for

entertainment, bona vacantia)
Collection boxes (out and out gift, bona
vacantia)
Donations, including legacies (resulting
trust)
Members contributions (contract =
claim based on frustration, otherwise
bona vacantia)
If a trust has exhausted its purpose, the
balance can be returned to contributors on
a pro rata basis
The mere intention to not have a resulting
trust does not make it so; if the settlor
refuses to specify a beneficiary (for
example, to avoid taxes) a resulting trust
may still arise, as an equitable interest
cannot remain in the air.

The Quistclose Trust

Barclays

This is a form of resulting trust: where

Bank v
Quistclose

Carreras
Rothmans

Re
Australian
Elizabethan
Theatre
Trust

Twinsectra
v Yardley

Raulfs v
Fishy Bite

money is advanced upon a condition that it

will be used for a special purpose only, and
that purpose becomes impossible to fulfill,
the money loaned will be held on a
resulting trust for the lender and will not be
treated as part of the general assets of the
borrower
This solved the problem of a non-charitable
purpose trust in Quistclose. We say that
instead of there being a trust for a purpose,
there is a private trust instead. The money
paid (by Quistclose or Rothmans) is to be
held on trust for a class of beneficiaries
who are sufficiently certain. The trust will
disappear once the purpose is fulfilled;
otherwise it will be protected in insolvency.
The prevailing opinion in Australia is that
the Quistclose trust is a kind of express
trust. According to Gummow J, the
Quistclose trust is an express trust with two
limbs. First limb: pay the dividend to the
shareholders. Second limb: if first limb fails,
repay the money to the lender / creditor
(who retains a beneficial interest). It must
therefore have the three certainties of an
express trust.
In the UK it has held to be a form of
resulting trust, whereby the beneficial
interest remains in the lender throughout,
subject only to the borrowers power or
duty to apply the money in accordance with
the lenders instructions, similar to a
retention of title clause in contract.
When money is advanced, the lender
acquires an equitable right to see that it is
applied for the primary designated purpose;
once satisfied, the lender has a remedy in
debt; if not satisfied, it is a question of
whether it was intended that a secondary
trust would be created for the benefit of the
lenders.

(C)Presumed resulting trusts

The Presumption of Resulting Trust v the Presumption of

Advancement

The presumption of resulting trust refers to an assumption

that a person who pays for property intends to own that
property beneficially, even if they authorise another
person to take legal title to the property

The presumption of advancement refers to an assumption

that fathers and husbands intend to make outright gifts to
their children and wives when they provide the money for the
purchase of property

Both presumptions can be rebutted by evidence

The presumption of advancement overrides (and can

rebut) the presumption of resulting trust
Calverley
v Green

Russell v
Scott

Brown v
Brown

(D)

Your interest in a mortgage arises at the

time you sign the mortgage the payment of
installments only generates an equitable
charge over these installments
In the purchase of a home as joint owners,
the presumption of advancement (outright
gift) applies to a married couple. This does
not apply to a de facto couple, and a
presumed resulting trust will arise over the
deposit for the party who paid it. The
remainder is split evenly, regardless of who
has been repaying the loan
Here an aunt maintained a joint bank
account for her nephew, who contributed
nothing; when she died her estate claimed a
presumed resulting trust. This was
successfully rebutted by the nephew, thus
the presumption of resulting trust can be
rebutted by clear evidence.
In more recent cases the presumption has
been recognised as arising between a
mother and her children

Resulting Trusts and Illegality

Nelson v
Nelson

Even if the resulting trust was for an

illegal purpose, you can still plead it

If a trust fails for illegality, equity looks at

the specific circumstances of the case
and the particular policy behind the law
that had been breached, before
determining whether a resulting trust
should be applied

8. Constructive Trusts

Note the benefit of a constructive trust is that it is a

proprietary right that will be protected in insolvency.

(A)
Constructive Trusts Following Breach of Fiduciary
Duty
Boardman v
Phipps

Stephenson
Nominees

AG v Reid
(NZ Privy
Council
this started
the
discussion
as to
whether
Lister v
Stubbs was
correctly
decided)

As liability to account in breach of a

fiduciary duty is strict, usually a
constructive trust will be declared for the
principal, subject to a possible generous
equitable allowance. Here there was a
distinction between profits in the form of
traceable assets over which a
constructive trust was declared and
profits in the form of mere monetary
value for which the defendants are made
to account as equitable debtors only.
In Australia, unjust enrichment has not yet
been accepted as a ground for the
imposition of a constructive trust. While
there is no unifying principle for when one
will be imposed, the governing principle is
that equity will impose a constructive trust
to prevent the unconscionable retention of
benefit.
Bribes? Bribe money accepted by a person
in a position of trust, can be traced into
any property bought, including the
investment gains, and is held on
constructive trust for the principal. The
principal acquires a proprietary right here.
This was a proprietary constructive trust

Sinclair
Investments
(UK Court of
Appeal)

Grimaldi

Bribes? However the UK has since declined

to follow Reid; here the point was made
that a bribe paid to a fiduciary could not
possibly be said to be an asset which the
fiduciary was under a duty to take for the
beneficiary. The principal will only have a
personal claim against the agent. The
important thing to note is that when it
comes to bribes, THE POSITION IS NOT
ENTIRELY CLEAR
Here there was dicta Finn J it was made
clear that Lister v Stubbs does not apply in
Australia Australia is much more in
favour of the Reid line

(B)
Constructive Trusts and Third Parties PERSONAL
CLAIMS deal with this after proprietary claims if
they are innocent, try the personal Diplock claim (ONLY
APPLIES IF THE MISAPPLICATION IS OUT OF A
DECEASED ESTATE)
Barnes v
Addy

In Barnes v Addy, Lord Selborne referred

to two limbs
upon which third parties to a breach of
trust can become
constructive trustees. (Note BFPFVWN still
applies here if they are one of these,
they havent received trust property!)
The first limb occurs in circumstances
where the
third party knowingly receives some part
of the trust
property, and is referred to as knowing
receipt.
The second limb occurs in circumstances
where the defendant knowingly assists in
a dishonest and fraudulent design of the
trustee, and is referred to as knowing
assistance.
There are three elements that must be
satisfied in
order to establish liability under the
second limb:
A dishonest and fraudulent breach of
duty by the trustee or fiduciary;
Knowledge on the part of the

Consul
Developmen
t

Robb Evans

Farah
Construction
s

Grimaldi v
Chameleon
Mining

defendant;
Assistance by the defendant towards
the trustees or fiduciarys dishonest
and fraudulent breach.
Accessory liability will attach even though
no trust property reaches the secondary
partys hands; nor is it necessary that the
defaulting fiduciary be a trustee.
For knowing assistance, actual or
constructive
knowledge will suffice; however even if the
circumstances would have put a
reasonable person on
inquiry, this will not attract secondary
liability as an assister
Placing money held in a trust account on
deposit to earn interest does not
constitute either inconsistent dealing with,
or knowing receipt of, trust monies by a
bank
Here knowing receipt liability was said to
extend to the first four Baden categories,
encompassing actual knowledge and
constructive knowledge. Whether it
extended to the fifth category was
answered in:
To establish liability for knowing receipt,
knowledge of circumstances putting an
honest reasonable person on enquiry in
enough
The principal is entitled to a constructive
trust over a bribe received by the
fiduciary, unless the fiduciary is bankrupt
in which case the principals interest will
be confined to an equitable lien over the
bribe, its product, or the defendants land
Funds of a company, although the company
is the beneficial owner of them, are
treated as trust property for the purposes
of the rule in Barnes v Addy

NOTE BOOK HERE

(C)Constructive Trusts and Unconscionable Conduct

Muschinski v
Dodds

Baumgartne
rv
Baumgartne
r

Green v
Green (UK
APPROACH)
(Thai girl to
Aus she
hadnt paid
anything,
when he
died claimed
a common
intention
trust
Shepard v
Doolan

Allan v
Snyder

If a commercial partnership or joint

venture (such as a relationship) collapses
with no fault on either party, then parties
should be able to get back the
contributions they made to the failed
partnership. Thus in circumstances where
a joint venture fails, and it would be
unconscionable to allow one party to
retain their benefit, a constructive trust
will be imposed instead.
Equity favours equality and, in
circumstances where the parties have
lived together for years and have pooled
their resources and their efforts to create
a joint home, they should share the
beneficial ownership equally as tenants in
common, taking into account any disparity
between the worth of their individual
contributions either financially or in kind.
In these circumstances, the mans
assertion that he owned it all was enough
to be unconscionable, so equity intervened
to impose a constructive trust.
There are two elements for a common
intention constructive trust:
1) There must be a common intention by
the parties that the claimant is to
have a beneficial interest in the
property, manifested by words or
conduct
2) There must be conduct by the
claimant to his or her detriment on
the faith of that intention
These two types lead to different results;
joint endeavour approach is a native
Australian doctrine; the common intention
approach comes out of recent UK case law.
They are both trying to resolve the same
problem, but they produce different
results
You must show that there really is a
common intention for this type to succeed

(D)

Remedial Constructive Trusts

Giumelli v
Giumelli

Here an equitable charge over the property

was given; if
the interests of the claimant are
adequately protected
by some other, non-proprietary remedy
which does not
attach to particular assets, the court should
impose it
rather than a constructive trust. Equitable
Charge
Obligation that burdens the land as security
for the
payment of money. You have a right to sell
the property
under s 66G of the Conveyancing Act.

9. Tracing, the In Personam Claim and Accountability

Following trust property thats been paid away in breach of

trust; this traces the PROPERIETARY RIGHTS OF THE
BENEFICIARIES SO YOU NEED TO MENTION PROPRIETARY
RIGHTS
ALSO OCCURS WHEN PROPERTY IS STOLEN
Available at common law and in equity
o Common law tracing differs from equitable tracing in
that equity recognises that a beneficiary retains his or
her property rights over trust property in cases where
the trust property is mixed with other property or
converted into a new type of property
Tracing is neither a claim nor a remedy. It is merely a process
by which a claimant demonstrates what has happened to his
property (Lord Millett in Foskett [2001])
Successful tracing confers no rights, but may be a
precondition for the exercise of rights
Tracing is also distinct from claiming. It identifies the traceable
proceeds of the claimants property. It enables the claimant to
substitute the traceable proceeds for the original asset as the
subject matter of his claim. But it does not affect or establish
his claim.

Re Halletts
Estate

In identifying the trust property, the

courts presume that where trust funds
are mixed in the trustees own bank

Brady v
Stapleton

Re Oatway

Scott v Scott

Foskett v
McKeown

account, and a trustee withdraws money,

the trustee is acting honestly, such that
the trustee expends their own money
first, leaving the beneficiary to claim any
balance remaining.
Defence to Tracing: If the trust property
has passed on from a volunteer or a
person who took with notice, to a bona
fide purchaser for value without notice,
the property will not be recoverable
The beneficiaries may be able to recover
greater than the minimum intermediate
balance if they can trace the withdrawn
funds. This is because the Re Hallett
presumption does not apply where a more
satisfactory remedy is available for the
beneficiaries, such as where the trustee
has invested the money withdrawn in a
profitable asset prior to dissipating the
balance of the trust account. (BASICALLY
THEY CAN CHERRY PICK!)
Hallets estate applies where trust money
has been dissipated; until then the
beneficiaries have a charge over the bank
account of the trustee, which can apply to
any profit
Increases in the Value of the Property
Traced
A trustee must account to the
beneficiaries for any profit they made
from the trust fund. Where trust funds
are invested profitably in breach of trust,
the beneficiaries are entitled to the entire
profit. Similarly, where the trustee has
used both trust money and his or her own
money to realise an unauthorised gain,
the beneficiaries are entitled to at least a
proportionate amount of the profits this
will be secured by a lien/ charge (they are
the same thing)
Following is the process of following the
same asset
as it moves from hand to hand. Tracing is
the
process of identifying the new asset as
the
substitute for the oldWhere one asset is
exchanged for another, a claimant can

elect whether
to follow the original asset into the hands
of the new
owner or to trace its value into the new
asset in the
hands of the same owner. In practice his
choice is
often dictated by the circumstances.
Whenever a
third party comes into the picture,
although you can
identify the asset, you cant do the next
stage and
claim it because they are a bona fide
purchaser
without notice of the breach of trust

Devaynes v
Noble
(Claytons
Case)
Keefe v Law
Society of
NSW

Re French
Caledonia
Travel

So a beneficiary can choose to either

claim a
proportionate share of the asset or to
enforce a lien
upon it to secure the personal claim
against the
trustee
In a mixed or running account, Claytons
Case suggests a first in/first out method
applies, in that the funds provided for a
trust earliest are the funds that are
withdrawn first. This is not the approach
today.
Proportionate pari passu approach
The general rule is that the beneficiaries
of several trusts have an interest in the
mixed fund in proportion to their
contribution to it. This approach applies
to trust funds.
Claytons Case is not applied in Australia a pro rata distribution is the way to go
when you have a large fund.
Whenever trust money is mixed with
other money, a notional charge arises
over the whole account normal
equitable priority rules will apply, so
presume things against the wrongdoer
etc if they are all innocent, they share
on a pro rata basis
The reason they share equally is if the
equity is equal. If someone is entirely

Re Diplock

Re Diplock
sub. Nom.
Ministry of
Health v
Simpson

innocent, as opposed to someone who

makes a mistake, their equities might be
different. (side point)
Equitys ability to give relief by a
declaration of equitable charge, and its
extensive use of specific relief as distinct
from damages, enables it to deal with
mixed funds in a way the common law
cant (Taylor v Plumer chattel needs to
be specifically identifiable). Note in an
equitable suit, you can join everybody (CL
cant)
If you have an equitable property right,
you dont need to worry about a fiduciary
relationship however if you dont have
an equitable property right, you DO need
a fiduciary relationship
In the event that a proprietary claim to
trace the
trust property fails (e.g. if the property
has
dissipated) then beneficiary can still
make an in
personam claims against the volunteer
who has
received trust property, via the form of a
charge. THIS ONLY APPLIES TO DECEASED
ESTATES READ THIS CASE AGAIN
PLEASE!
Rights exist in the intended beneficiaries
of the will
However if a volunteer has changed its
position, e.g. build an extension or
something, then
money cannot be paid back

AG (Hong
Kong) v Reid
Heperu v
Belle
Moses v
Macferlan

Re Tilleys

Defence to tracing: A third party who is a

volunteer may raise the defence of
change of position, where he can prove
that he has innocently changed his
position as a result of receiving the trust
property
NOTE: Re Oatway cherry picking will only

Will Trusts
Wambo

apply if there is a debit of the trust

account
If money is given by mistake and the
recipient knows of the mistake, then they
hold on
constructive trust for the mistake maker.

Questions:
What is the lives in being thing and will it be important?
What about loss of trust property through bad investments? They
dont owe a duty of strict liability (Re Speight) but what about
fiduciary duties?