Equity Notes

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 information3) 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 relationship2) 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 withdraw3) The plaintiff acts or abstains from acting in reliance on the assumption or expectation4) 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 fulfilled6) 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 pre-contractual 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 3rd 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 sufferedloss 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) This means a trust only arises if the person creating it intends to create a trust. This person is called the settlor. This intention is ascertained objectively (by an outsider) (Brynes v Kendle). You dont have to use the word trust (Paul v Constance) The language used to create it must be sufficiently imperative (Re Adams)2) Certainty of subject matter3) Certainty of objects

1) Certainty of Intention

Paul v ConstanceFor 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

Byrnes v KendleThe intention required to create a trust is ascertained objectively (by an outsider)

Milroy v Lord; Jones v LockYou have to be careful with self-declarations. 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 AdamsThere 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 AlloysIn 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 McEvoyIt 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 SimmondsThere 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 MossThere 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.

*OughtredIf 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 SheeIn 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 KendleThe 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

Above example is a half-secret trust

1) Fully secret beneficiary witnesses the will2) Full secret trustee witnesses the will3) Fully secret trustee disclaims the inheritance4) Fully secret beneficiary pre-deceases the testator5) 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 NormanFacts: 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 BaillieFacts: 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 identifiableHalf-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. Relief of poverty2. Advancement of education3. Advancement of religion4. Other purposes for the public benefit

ChesterTo 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

Example: welfare of animals, emergency service, agriculture preservation, relief of unemployment, promotion of ethical standards

Sport clubs do not have legal personality Sporting clubs may be charitable under fourth head, but not likely 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 foreverA 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 charitableb. 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 JumpingAn organisation must have charitable purposes. A gift to an association with non charitable purposes is only valid if it is capable of immediate enjoyment

(B) Public Benefit

Oppenheim; Thompson v FCTA 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 KoettgenThis was a general public charitable trust; even though it had a preference for employees of the company, it was still valid

Thompson v FCTIf the trust is only for members of a particular association, it will not be charitable as it is not for the public

IRC v BaddeleyJust 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 TrusteeThere 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

Anti-vivisection caseCannot 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/Watch (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 PiantaA 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.

(D) Poverty

Dingle v TurnerPoverty is an exception to the Oppenheim 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 FCTAn intention to provide for the relief of persons from poverty need not be stated in express terms; it is a question of construction

Le CrasPublic benefit can also mean indirect benefit; here for example was a valid trust for St Vincents private hospital

(E) Education

Re ShawAlthough 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 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 I.e. if you leave money to the Archbishop of Sydney, it is on trust for the charitable purpose of his office

LeahyA 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

LawlorTo 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 CoatesTraditionally 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 FaithThis 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 BaddeleyIf 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 FCTTrusts for the welfare of ex-service personnel come under the fourth class

(H) Schemes

Re LysaghtIf the charitable purpose fails, the court may be able to apply the funds to a nearby charitable purpose

Phillips v RobertsIn 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 AGIf 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 beneficiaries1. Trusts of imperfect obligation concessions to human frailtya. 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 gravesd. E.g. 4 Fox hunting2. 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 DurhamIf a trust fails for non-charitable purposes or uncertain / indefinite language, the residue will be distributed among the next of kin

Re Astors Settlement TrustsFor 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 DeedEven if a trust is expressed for a non-charitable 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 NSWUnincorporated 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 non-charitable 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 PiantaA 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 Estates1. 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 43Basically overtakes Bacon v Pianta; gifts to unincorporated associations will be validWhat 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 CharityWhen 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 ChapmanTrustees have a duty to obey the terms of the trust, with limited exceptions:

1.To make allocations to infant beneficiaries2.To deal with unforeseen difficulties 3.To provide maintenance for needy beneficiaries.4.To compromise or settle disputes between beneficiary claimants

Trustee v GodsallA variation will generally be considered expedient where it can be proven to be in the best interests of the beneficiaries

Re Londonderrys SettlementTraditionally trustees do not have to give reasons for the exercise of their powers

Schmidt v RosewoodThe 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 SpeightThe 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 ScargillUnder a trust for the provision of financial benefits, the paramount duty of trustees is to act in the financial best interests of present and future beneficiaries

Harries v Church CommissionersMoral 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, 90AFILL?

Pilkington v IRCTrustees cannot delegate unless they have authority to do so

Rights and Liabilities

BuckleIn 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 RaybouldIn 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 OrderBefore 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 BeliliosWhen 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 BroomheadIn 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 PhilpIt 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 85If 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

(B) The Rights of Beneficiaries

Saunders v VautierModern 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

Manfred v MaddrellIf 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

CPT Custodian 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 on the trust property, such that the beneficiaries do not have an absolute interest in the trust property.

Trustee Act 1925 (NSW) s 85If 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 settlorWhen 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 Vandervells 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 FundHere 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.

Re West Sussex Constabublarys Trust FundsHere 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:

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)

Re British Red Cross Balkan FundIf a trust has exhausted its purpose, the balance can be returned to contributors on a pro rata basis

Vandervell v IRCThe 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.

(B) The Quistclose Trust

Barclays Bank v QuistcloseThis is a form of resulting trust: where 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

Carreras RothmansThis 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.

Re Australian Elizabethan Theatre TrustThe 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.

Twinsectra v YardleyIn 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.

Raulfs v Fishy BiteWhen 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 GreenYour 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

Russell v ScottHere 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.

Brown v BrownIn more recent cases the presumption has been recognised as arising between a mother and her children

(D) Resulting Trusts and Illegality

Nelson v NelsonEven 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 PhippsAs 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.

Stephenson NomineesIn 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.

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