Equity and theLaw of Trusts

Eighth edition

Philip H Pettit MA

ofthe Middle Temple, BarristerEmeritus Professor of Equity, Universities of Bristol and Buckingham

ButterworthsLondon, Edinburgh, Dublin1997

Contents

Preface vTable of Statutes xxviiListofcases xxxixAbbreviations xcix

Chapter 1

History of the Court of Chancery and introduction to equity 11 History of the Court of Chancery 12 Jurisdiction of the Court of Chancery 43 Fusion of the administration of law and equity 7

A THE EFFECT OF SS 2 4 AND 2 5 8B FUSION OF LAW AND EQUITY OR MERELY FUSION OF THEIR

ADMINISTRATION 94 Uses and trusts 11

A HISTORY OF THE TRUST 1 1B PURPOSE FOR WHICH A TRUST IS SET UP 1 4

(a) Unit trusts 14(b) Pension scheme trusts 15

C CONCLUSION 1 75 Equitable interests and equities 17

A DEFINITION AND DISTINCTION 1 7B EQUITABLE RULES AS TO PRIORITIES 1 9

6 Trusts and taxation 217 Trusts and the conflict of laws 22

Chapter 2

The trust concept 24

1 Definition ofa trust 242 Comparison with other legal concepts 25

A TRUST AND BAILMENT 2 5B TRUST AND CONTRACT 2 6

viii Contents

C TRUST AND AGENCY 2 6

D TRUSTS AND POWERS 2 7i Basic distinction 27ii Special power of appointment - mere power or trust power 29iii Trust in default of appointment or discretionary trust 32iv Mere powers and discretionary trusts 33v Unenforceable trusts or trusts of imperfect Obligation 34

E TRUSTS AND THE ADMINISTRATION OF ESTATES OF DECEASED PERSONS 3 4

F TRUST AND RESTITUTION 3 8

Chapter 3

The essentials of a trust 391 Capacity of settlor and beneficiaries 39

A CAPACITY OF SETTLOR 3 9B CAPACITY OF BENEFICIARY 4 1

2 The three certainties 41A CERTAINTY OF WORDS 4 1B CERTAINTY OF SUBJECT 4 4

i Certainty ofsubject matter 44ii Certainty ofbeneficial interests 45

C CERTAINTY OF OBJECTS 4 6i Need for ascertainable beneficiaries 46ii Test for a mere power 46iii Test for a fixed trust 48iv Test for a discretionary trust 49v Trusts for purposes 51vi Consequences offailure of trust for uncertainty 51

3 The beneficiary principle 51A SITUATIONS OUTSIDE THE SCOPE OF THE BENEFICIARY PRINCIPLE 5 2

i Re Denley's Trust Deed 52ii Contractual situations 53

B EXCEPTIONS TO THE BENEFICIARY PRINCIPLE 5 3

4 Trusts for the benefitof unincorporated associations 55

Chapter 4

Classification and juristic nature of trusts 591 Classification 59

A EXPRESS, RESULTING, IMPLIED AND CONSTRUCTIVE TRUSTS 5 9i Express trust 59ii Implied trust 59iii Resulting trust 60iv Constructive trust 60

B NEW MODEL CONSTRUCTIVE TRUSTS 6 1C TRUSTS OF LAND 6 4D STATUTORY TRUSTS 6 5E EXECUTORY AND EXECUTED TRUSTS 6 6F PRIVATE AND CHARITABLE TRUSTS 6 7G COMPLETELY AND INCOMPLETELY CONSTITUTED TRUSTS 6 7

Contents ix

H SIMPLE AND SPECIAL TRUSTS 6 7I FIXED AND DISCRETIONARY TRUSTS 6 8

J TRUSTS IN THE HIGHER SENSE AND TRUSTS IN THE LOWER SENSE 6 9Discretionary and protective trusts 69A LIMITATIONS UPON CONDITION AND DETERMINABLE INTERESTS 6 9B DISCRETIONARY TRUSTS 7 0C PROTECTIVE TRUSTS 7 3

Natureofa trust 75

Chapter 5

Formal requirements of express trusts 791 Inter vivos transactions 79

A CONTRACTS TO CREATE A TRUST OR DISPOSE OF A SUBSISTING EQUITABLEINTEREST 7 9i Land 79ii Pure personalty 80iii Equitable interests in pure personalty and, semble, land 80

B DECLARATIONS OF TRUST INTER VIVOS 8 0i Land 81ii Pure personalty 82iii Equitable interests in real or personal property 82

C DISPOSITIONS OF EQUITABLE INTERESTS INTER VIVOS 8 3i Direct assignment 84ii Direction to trustee 84iii Disposition to fiduciary 84iv Declaration of trust by equitable owner 85v Contract to assign an equitable interest 85vi Disclaimer 85vii Transfer by bare trustee ofthe legal estate 86viii Declaration ofnew trusts by trustee with assent ofbeneficiary 86ix Surrender up of equitable interest 87x Nominations under Staff pension fund 87xi Variation of Trusts Act 1958 87xii Statutory definition of'disposition' and 'equitable interest' 87

D EQUITY WILL NOT PERMIT A STATUTE TO BE USED AS AN INSTRUMENTOFFRAUD 8 8

2 The creation of trusts and the disposition of equitable interestsbywill 90

Chapter 6

Completely and incompletely constituted trusts 92

1 The perfect creation ofa trust 92A THE EFFECTIVE TRANSFER OF THE TRUST PROPERTY TO TRUSTEES 9 3

i Settlor the owner ofthe property bothat law and in equity 93ii Settlor possessing merely an equitable interest in the property 95

B A DECLARATION OF TRUST 9 62 The position ofa volunteer 97

A MEANING OF THE TERM VOLUNTEER 9 7

x Contents

B EQUITY WILL NOT ASSIST A VOLUNTEER 9 8i Beneficiary not a volunteer 98ii Beneficiary a volunteer 99iii Beneficiary a covenantee 101iv Performance of unenforceable covenant 101v ReRalli's Will Trusts 101

3 Trusts ofachose in action 102A THIRD PARTY CONTRACT - ACTION FOR DAMAGES BY CONTRACTING

PARTY 102B EQUITABLE REMEDIES FOR CONTRACTING PARTY 1 0 3C OTHER RELEVANT COMMON LAW PRINCIPLES 1 0 4D INTERVENTION BY EQUITY 1 0 5

4 Trusts ofthe benefit of a contract and volunteers 1075 Trusts offuture property 1096 Exceptions to the maxim that equity will not assist a volunteer 111

A THE RULE IN STRONG V BIRD 1 1 1B DONATIO MORTIS CAUSA 1 1 2C STATUTORY PROVISIONS 1 1 7D PROPRIETARY ESTOPPEL 1 1 8

Chapter 7

Secret trusts and mutual wills 119

1 Fully-secret and half-secret trusts 119A THE PRINCIPLE UPON WHICH SECRET TRUSTS ARE ENFORCED 1 1 9B EVIDENCE 1 2 2C FULLY-SECRET TRUSTS 1 2 2D HALF-SECRET TRUSTS 1 2 4

2 Mutual wills 126

Chapter 8

Constructive trusts 130

1 The rule in Keechv Sandford 1302 Obligation to account as a constructive trustee for profits received by

virtueof bis position as trustee 133A FEES PAID TO TRUSTEE DIRECTORS 1 3 4B OTHER CASES IN WHICH TRUSTEES ACCOUNTABLE FOR PAYMENTS

RECERTED 135

C COURT ACTING TO PREVENT TRUSTEE PROFITING 1 3 5D CASES INVOLVING OTHER FIDUCIARY RELATIONSHIPS 1 3 6E BRIBES 138

3 Strangers to the t rust 139A INTRODUCnON 1 3 9B TRUSTEE DE SON TORT 1 4 0C KNOWING RECEIPT OR DEALING 1 4 1D THE ACCESSORY LIABILITY PRINCIPLE - KNOWING ASSISTANCE 1 4 5E POSSESSION BY AN AGENT OF TRUSTEES 1 4 7

4 The vendorundera contract for the sale ofland 1485 Undertaking by purchaser 150

Contents xi

Chapter 9

Resulting trusts 152

1 Failure to dispose ofthe equitable interest 152A THE PRINCIPLE INVOLVED 1 5 2B THE PRELJMINARY QUESTION OF CONSTRUCTION 1 5 5

i Donor Isettlor parts with his money out and out without anyintention ofretaining any interest therein 155

ii Defunct voluntary associations 156iii Gift subject to carrying out a particular trust 157iv Trust for assistance ofcertain persons by stated means 157v The rule in Lassence v Tierney 158

C PENSION FUND SURPLUSES 1582 Transfer into and purchase in the name of another and related

cases 159A PURCHASE IN THE NAME OF ANOTHER OR IN THE JOINT NAMES OF THE

PURCHASER AND ANOTHER 1 5 9B VOLUNTARY CONVEYANCE OR TRANSFER INTO THE NAME OF ANOTHER OR

INTO THE JOINT NAMES OF THE GRANTOR AND ANOTHER 1 6 0C REBUTTING THE PRESUMPTION OF A RESULTING TRUST 1 6 2D THE PRESUMPTION OF ADVANCEMENT 1 6 3

i Father and child 164ii Husband and wife 165

Chapter 10

Common intention constructive trusts; proprietary estoppel;licences 173

1 Common intention constructive trust 173A THE CORRECT APPROACH TO DETERMINATION OF BENEFICIAL

INTERESTS 1 7 3B FAMILY HOME TAKEN IN JOINT NAMES 1 7 5C HOME TAKEN IN THE NAME OF ONE ONLY OF THE TWO PARTIES 1 7 5

D DETRIMENTAL RELIANCE 1 7 8E QUANTUM OF THE CLAIMANT'S BENEFICIAL INTEREST 1 7 9F TIME OF ASCERTAINMENT OF SHARES 1 8 0G DATE OF VALUATION OF SHARES 1 8 0H IMPROVEMENTS 1 8 1I SECTION 1 7 OF THE MARRIED WOMEN'S PROPERTY ACT 1 8 8 2 1 8 1

2 Proprietary estoppel 182A THE PRINCIPLES INVOLVED 1 8 2B HOW THE EQUITY MAY BE SATISFIED 1 8 6

C FLEXIBILITY 1 8 8D RELATIONSHIP WITH CONSTRUCTIVE TRUST 1 8 9

3 Licences 189A AT COMMON LAW 1 8 9B EQUITABLE INTERVENTION 1 9 0

i Hurst v Picture Theatres Ltd 190ii Proprietary estoppel 191iii Constructive trust 191

xii Contents

iv Reason andjustice 191THE LICENSEE'S RIGHTS AGAINST THIRD PARTIES 1 9 2i Contractual licences 192ii Estoppel licences 193iii Contractual licence giving rise to constructive trust 193

Chapter 11

Unlawful trusts 1941 Trusts which offend against the rule against perpetuities 1942 Trusts which offend against the rule against perpetual trusts 1953 Trusts for illegitimate children 195

A THE LAW RELATING TO DISPOSITIONS MADE BEFORE

1 JANUARY 1970 195B THE LAW RELATING TO DISPOSITIONS MADE AFTER

31 DECEMBER 1969 1964 The effect of declaring a trust void as offending against the policy of

thelaw 1975 Trusts tending to prevent the carrying out of parental duties 1986 Trusts designed or tending to induce a future Separation of husband

and wife, or to encourage an invasion ofthe sanctity ofthe marnagebond 199

7 Trusts in restraint of marriage 2008 Trusts which are not merely unlawful but also fraudulent 202

A WHERE THERE IS NO PRESUMPTION OF ADVANCEMENT 2 0 4B WHERE THERE IS A PRESUMPTION OF ADVANCEMENT 2 0 5C REIMBURSEMENT OF BENEFITS 2 0 5

Chapter 12

Voidable trusts 207

1 Transactions at an undervalue 207A GENERAL 2 0 7B MEANING OF UNDERVALUE 2 0 7C THE RELEVANT TIME 2 0 8D THE ORDER OF THE COURT 2 0 9

2 Transactions defrauding creditors 209A GENERAL 2 0 9B WHO MAY APPLY FOR AN ORDER 2 1 0C THE ORDER OF THE COURT 2 1 0

3 Voluntary disposition followed by conveyance for valuableconsideration 211A LAW OF PROPERTY ACT 1925 , S 173(1) 2 1 1B LAW OF PROPERTY ACT 1925 , S 173(2) 211

4 Section 37 of the Matrimonial Causes Act 1973 2125 Hlusory trusts 213

A TRUSTS FOR THE BENEFIT OF CREDITORS 2 1 3B WHERE THE TRUST BECOMES IRREVOCABLE 2 1 3C DEEDS OF ARRANGEMENT ACT 1 9 1 4 2 1 4

Contents xiii

Chapter 13

Charitable trusts 216

1 Difference between charitable and non-charitable trusts 216A CERTAINTY 2 1 6

i Basic position 216ii Charitable Trusts (Validation) Act 1954 217iii Primary trust for non-charitable purposes, residue to charity 218iv Non-charitable trusts ancillary to charitable trusts 218v Apportionment 220vi Liverpool City Council v A-G 222

B PERPETUITIES 2 2 2C THE RULE AGAINST PERPETUAL TRUSTS 2 2 3D EXEMPTIONS FROM RATES AND TAXES 2 2 3

2 Definition of charity 225A GENERAL 2 2 5B TRUSTS FOR THE RELIEF OF POVERTY 2 2 9C TRUSTS FOR THE ADVANCEMENT OF EDUCATION 2 3 1D TRUSTS FOR THE ADVANCEMENT OF RELIGION 2 3 4E TRUSTS FOR OTHER PURPOSES BENEFICIAL TO THE COMMUNITY 2 4 0F RECREATIONAL CHARITIES 2 4 9G THE REQUIREMENT OF PUBLIC BENEFIT 2 5 2

H EXCEPTIONS TO THE REQUIREMENT OF PUBLIC BENEFIT 2 5 8I 'CHARITY5 FOR THE PURPOSES OF THE CHARITIES ACT 1 9 9 3 2 6 0

Chapter 14

The administration of charities 262

1 Legal frameworkof charity 262A CHARITABLE TRUST 2 6 2B CHARITY FORMED UNDER THE COMPANIES ACTS 1 9 8 5 TO 1 9 8 9 2 6 3C UNINCORPORATED ASSOCIATIONS 2 6 3

2 Charity trustees and persons and bodies having powers and dutiesin connection with charities 264A TRUSTEES OF A CHARITABLE TRUST: CHARITY TRUSTEES: TRUSTEES FOR A

CHARITY 2 6 4i Kinds of trustees 264ii Qualifications for trusteeship 265iii Application ofstatutory powers relating to trustees generally 266iv Advice ofthe Charity Commissioners 266v Incorporation of charity trustees 267

B CHARITABLE COMPANIES 2 6 7i Alteration ofobjects clause 267ii Ultra vires transactions 268iii Certain acts by a charitable Company 268iv Name and Status ofa charitable Company 268v Winding up 268vi Offences committed by a body corporate 269

C THE CHARITY COMMISSIONERS 2 6 9i General function and object ofthe Commissioners 269ii Concurrentjurisdiction with the High Court 270

xiv Contents

iii General power to institute inquiries 270iv Power to act for protection of charities 271v Publicity for proceedings under ss 16 and 18 273vi Power to authorise dealings with charity property 273vii Power to give directions about dormant bank accounts 274

D THE OFFICIAL CUSTODIAN FOR CHARITIES 2 7 4E THE ATTORNEY GENERAL 2 7 5F LOCAL AUTHORITIES 2 7 5G THE COURT 2 7 7H VISITORS 2 7 9

i Position apart from Statute 279ii The Education Reform Act 1988 284

I THE DIRECTOR OF PUBLIC PROSECUTIONS 2 8 5Registration of charities 286A THE REGISTER OF CHARITIES 2 8 6B EXCEPTIONS FROM REQUIREMENT OF REGISTRATION 2 8 6C EFFECT OF REGISTRATION 2 8 7D CHANGEOFNAME 2 8 8E STATUS TO APPEAR ON OFFICIAL PUBLICATIONS ETC 2 8 9Charity accounts, audit, annual reports and annual returns 289A GENERAL PROVISIONS 2 8 9

i Duties in relation to accounts 289ii Annual audit or examination of accounts 289iii Annual reports 290

B SPECIAL PROVISIONS RELATING TO PARTICULAR KINDS OF CHARITIES 2 9 0i Exempt charities 290ii Unregistered charities within s 3(5)(c) 290iii A charity which is a Company 291

C PUBLIC RIGHT TO A COPY OF CHARITY'S ACCOUNTS 2 9 1D ANNUAL RETURNS 2 9 1Schemes 291A GENERAL 2 9 1B STATUTORY EXTENSIONS OF THE JURISDIKTION 2 9 3C COMMON INVESTMENT SCHEMES AND COMMON DEPOSIT SCHEMES 2 9 4The cy-pres doctrine 295A GENERAL POSITION 2 9 5B IMPOSSIBILTTY OR IMPRACTICABILITY 2 9 6C GENERAL CHARITABLE INTENTION 2 9 9

i Initial impossibility or impracticability 299ii Anonymous donors eg contributors to a collecting box on a

flagday 300iii Supervening impossibility 302iv Cy-pres application on occasions introduced by s 13(1) 302

D GIFT TO A SPECIFIED CHARITABLE INSTITUTION WHICH ONCE EXISTED, BUTCEASED TO EXIST BEFORE THE DEATH OF THE TESTATOR 3 0 2i No lapse on the ground that although the specified Institution may

apparently have disappeared the charity has not ceased toexist 303

ii Gift construed as a gift for the purposes of the specifiedinstitution 304

iii The approaches in (i) and (ii) above in the light ofthe generalStatement made by Buckley J in Re Vernon's Trusts 304

iv Cy-pres application 306E SPECIFIED INSTITUTION CEASING TO EXIST BEFORE THE GIFT BECOMES

PAYABLE OR IS IN FACT PAID OVER 3 0 7

Contents xv

F GIFT TO WHAT APPEARS TO BE A SPECIFIED CHARITABLE INSTITUTION, BUTWHICH IT TURNS OUT HAS NEVER EXISTED 3 0 7

7 Small charities: power to transfer property or modify objects 3088 Very small charities: power to spend capital 3109 Discrimination 310

A RACE RELATIONS ACT 1 9 7 6 3 1 0B SEX DISCRIMINATION ACT 1 9 7 5 3 1 1

10 Dispositions of charity land 312A A LEASE FOR SEVEN YEARS OR LESS (OTHER THAN ONE GRANTED WHOLLY

OR PARTLY IN CONSIDERATION OF A FINE) 3 1 2B ANY OTHER DISPOSITION OF LAND 3 1 3

11 Control of fund raising for charitable institutions 31412 Public charitable collections 315

Chapter 15

Trustees. Appointment and determination of appointment 3171 Appointment of trustees 317

A APPOINTMENT BY THE SETTLOR 3 1 7B APPOINTMENT UNDER AN EXPRESS POWER 3 1 8C APPOINTMENT UNDER THE PROVISIONS OF S 3 6 OF THE TRUSTEE

ACT 1925 319i The circumstances in which the statutory power may be

exercised 320ii The persons who can exercise the statutory power 323iii Mode of appointment 324iv Appointment ofadditional trustees 325v Effect of appointment 326

D APPOINTMENT BY BENEFICIARIES UNDER THE TRUSTS OF LAND ANDAPPOINTMENT OF TRUSTEES ACT 1 9 9 6 3 2 6

E APPOINTMENT BY THE COURT 3 2 7i Under the statutory power contained in the Trustee Act 1925 327ii Under its inherent jurisdiction 329iii Under the Trustee Act 1925, s 54 329iv Under the Judicial Trustees Act 1896 and the Public Trustee

Act1906 329v Effect of appointment by the court 330

F THE PERSONS WHO MAY BE APPOINTED TRUSTEE 3 3 0G THE NUMBER OF TRUSTEES 3 3 2

i Maximum number of trustees 333ii Minimum number of trustees 333iii Appointment by the court 335

H SEPARATE SETS OF TRUSTEES FOR DISTINCT TRUSTS 3 3 6I LIABILTTY OF THE ORIGINAL TRUSTEES AND THE PURPORTED NEW TRUSTEES

UNDER AN INVALID APPOINTMENT 3 3 6

2 Vesting ofthe trust property 337A NEW TRUSTEES 3 3 7B VESTING ORDERS 3 3 9

3 Tennination of trusteeship 339A DISCLAIMER 3 3 9B DEATH 3 4 1C RETCREMENT AND REMOVAL 3 4 3

xvi Contents

i Under an express power in the trust instrument 343ii Under the provisions of s 36 ofthe Trustee Act 1925 343iii Under the provisions ofs 39 ofthe Trustee Act 1925 343iv Under the provisions ofs 41 ofthe Trustee Act 1925 344v By the court under its inherent Jurisdiktion 344vi At instance of beneficiaries under the Trusts ofLand and

Appointment of Trustees Act 1996 345vii By consent ofthe beneficiaries 346viii By payment into court 346

Chapter 16

Special kinds of trustees 3471 Judicial trustees 3472 The Public Trustee 349

A GENERAL POWERS AND DUTIES 3 4 9B MODE OF APPOINTMENT 3 5 0C POSITION OF PUBLIC TRUSTEE AFTER APPOINTMENT 3 5 1D VESTING OF THE ESTATE OF AN INTESTATE IN THE PUBLIC TRUSTEE 3 5 1

E PUBLIC TRUSTEE AND ADMINISTRATION OF FUNDS ACT 1 9 8 6 3 5 23 Custodian trustees 3524 Trust corporations 354

Chapter 17

Powers and duties of trustees 3561 Duties on the acceptance ofthe trust 3572 Dutyof trustees to act unanimously 3603 Duties in relation to information, accounts and audit 361

A DUTY TO ACCOUNT 361B AUDIT 364

4 Duty of trustees to hand over the trust funds to the rightpersons 365A THE EXTENT OF THE DUTY 3 6 5

B SECTION 2 7 OF THE TRUSTEE ACT 1 9 2 5 3 6 7C RIGHT TO A DISCHARGE ON TERMINATION OF TRUSTS 3 6 7

5 Duties where beneficiary is solely and beneficially entitled 368A ENTD1E EQUITABLE INTEREST PRESENTLY VESTED IN A BENEFICIARY OF

FÜLL AGE AND CAPACITY 3 6 8B ENTIRE EQUITABLE INTEREST VESTED IN TWO OR MORE BENEFICIARIES,

EACH OF FÜLL AGE AND CAPACITY 3 7 0C WHERE ONE OF SEVERAL BENEFICIARIES, BEING SUIIURIS, IS ABSOLUTELY

ENTITLED IN POSSESSION TO A SHARE IN THE TRUST PROPERTY 3 7 1

6 Right of beneficiaries to occupy trust land 3727 Applications to the court 374

A PROCEEDINGS FOR ADMINISTRATION, OR DETERMINATION OFQUESTION 3 7 4

B SURRENDER OF DISCRETION 3 7 6C APPEAL BY THE TRUSTEES 3 7 6D PAYMENT INTO COURT 3 7 6

Contents xvii

E APPLICATIONS UNDER THE TRUSTS OF LAND AND APPOINTMENT OFTRUSTEES ACT 1996 377

8 Controloftrustee's powers 378A CONTROL BY BENEFICIARIES 3 7 8B CONTROL BY THE COURT 3 8 0

C PROVISIONS OF THE TRUST INSTRUMENT 3 8 1

Chapter 18

The investment of trust funds 3831 Introduction 383

A HISTORICAL BACKGROUND 3 8 3B NON-FINANCIAL CONSIDERATIONS 3 8 4C TYPES OF INVESTMENT 3 8 7

2 Express power of investment 3883 The statutory power under the Trustee Investments Act 1961 390

A BACKGROUND 3 9 0B SCHEME OF THE ACT 3 9 2C TRUSTEE INVESTMENTS 3 9 3

i PartI— narrower-range Investments not requiring advice 393ii Part II — narrower-range Investments requiring advice 393iii Part III — wider-range investments 394iv Part IV 394

D RELATIONSHIP BETWEEN THE STATUTORY POWER AND OTHER POWERS OFINVESTMENT 3 9 4

E GENERAL PRINCIPLES TO BE APPLIED 3 9 5F OBTAINING ADVICE 3 9 7

4 Investments on amortgage ofland 398A DIFFERENT KINDS OF MORTGAGE 3 9 8B AMOUNT TO BE LENT 3 9 9C TRUSTEES OUTSIDE PROTECTION OF S 8 4 0 1

5 Trustees holding a Controlling interest in a Company 4016 Settled land and land held upona trust ofland 4027 Retaining investments 4038 Miscellaneous statutory provisions incidental to powers

of investment 4039 Alteration of power of investment 40410 Claims by beneficiaries in relation to the investment of

trust funds 404B11 Occupational pension schemes established under a trust 404B

Chapter 19

Evenhandedness as between the beneficiaries 405

1 The duty to convert 4052 The duty to apportion 408

i Authorised investments 409ii Unauthorised pure personalty 409iii Unauthorised pure personalty — the effect ofa power to postpone

conversion 411

xviii Contents

iv Reversionary interests - the rule in Re Earl ofChesterfield's Trusts 412

v Reversionary interests — the effect ofa power to postponeconversion 413

vi Rate of interest 413vii Unauthorised investment by trustees 413

3 Where stock or shares are sold or purchased by trusteescum dividend 414

4 The 'windfall' principle 4145 Allocation of expenditure 417

Chapter 20

The fiduciary and personal nature of trusteeship 419

1 Duty not to profit from his trust 419A DUTY TO ACT WITHOUT REMUNERATION 4 2 0

i The provisions ofthe trust Instrument 421ii Contract with the cestuis que trust 421iii Order ofthe court 422iv The rule in Cradock v Piper 423v Statutory provisions 423vi Custom 424vii Foreign remuneration 424

B DISABILITIES OF TRUSTEE RELATING TO PURCHASE OF TRUST PROPERTY OREQUITABLE INTEREST 4 2 4i Purchase by a trustee ofthe trust property — 'the self-dealing

rule' 425ii Purchase by the trustee from the beneficiary ofhis equitable interest

- 'the fair-dealing rule' 4272 Duty not to delegate the t ru s t 428

A THE EQUITABLE RULES, APART FROM STATUTE 4 2 8B SECTION 2 3 OF THE TRUSTEE ACT 1 9 2 5 4 3 0C LJABILITY OF A TRUSTEE FOR THE DEFAULTS OF AN AGENT 4 3 1D LIABILITY OF TRUSTEE FOR HIS OWN BREACH OF TRUST 4 3 4E DELEGATION BY POWER OF ATTORNEY UNDER S 2 5 OF THE TRUSTEE ACT

1 9 2 5 AS AMENDED BY S 9 OF THE POWERS OF ATTORNEY ACT 1 9 7 1 4 3 5F ENDURING POWERS OF ATTORNEY ACT 1 9 8 5 4 3 6G DELEGATION UNDER THE TRUSTS OF LAND AND APPOINTMENT OF

TRUSTEES ACT 1 9 9 6 4 3 8H MISCELLANEOUS PROVISIONS 4 3 8I BENEFIT OF CONTRACT WITH AGENT A TRUST ASSET? 4 3 9

Chapter 21

Powers of trustees 440

1 Trustees ofland 4402 Power ofsale 441

A EXISTENCE OF A POWER OF SÄLE 4 4 1(i) Land 441(ii) Property other than land 441

B STATUTORY PROVISIONS RELATING TO SALES 4 4 1

Contents xix

3 Power to give receipts 4434 Power to insure 4435 Power to compound liabilities 4446 Powers in relation to reversionary interests 4467 Power of maintenance of infants or minors 446

A EXPRESS POWERS 4 4 6B STATUTORY POWER 4 4 7

i History 447ii The present law 448iii Destination ofany balance ofthe income not applied under

sub-s(l) 450iv Interests arising under Instruments made before

1 January 1970 451C POWER OF THE COURT 452

8 Power of advancement 453A EXPRESS POWERS 4 5 3B THE STATUTORY POWER CONTAINED IN S 3 2 OF THE TRUSTEE

ACT 1925 454C POWER OF THE COURT 4 5 7

9 Right to reimbursement for costs and expenses 457A REIMBURSEMENT OUT OF THE TRUST ESTATE 4 5 7B PERSONAL LIABILITY OF CESTUI QUE TRUST TO INDEMNIFY TRUSTEES 4 6 0C COSTS OF LEGAL PROCEEDINGS 4 6 1D COSTS OF BENEFICIARIES 4 6 2

Chapter 22

Variation of trusts 4641 Duty not to deviate from the terms of the trust 4642 Statutory exceptions to duty not to deviate from the terms of

the trust 467A SECTION 5 3 OF THE TRUSTEE ACT 1 9 2 5 4 6 7B SECTION 5 7 ( 1 ) OF THE TRUSTEE ACT 1 9 2 5 4 6 8C SECTION 6 4 OF THE SETTLED LAND ACT 1 9 2 5 4 7 0D SETTLED LAND AND TRUSTEE ACTS (COURT'S GENERAL POWERS)

ACT 1943 4713 The Variation of Trusts Act 1958 472

A PERSONS ON WHOSE BEHALF THE COURT MAY ACT 4 7 3B MEANING OF BENEFIT IN THE PROVISO 4 7 5C PRINCIPLES TO BE APPLIED 4 7 7D RELATIONSHIP TO OTHER STATUTORY PROVISIONS 4 7 9

Chapter 23

Breach of trust 4801 Personal liability of trustees to beneficiaries 480

A GENERAL POSITION 4 8 0B MEASURE OF DAMAGE 4 8 1

i Equitable compensation for breach of trust 481

xx Contents

ii Equitable compensation for breach ofthe duty ofskilland care 485

c TAX 4 8 5D INTEREST 486E JOINT AND SEVERAL LIABILITY TO BENEFICIARIES 4 8 7F TRUSTEE-BENEFICIARY 4 8 8G INJUNCTION 4 8 8H PROCEDURE 4 8 8

2 Liability of trustees inter se 489A TOWNLEY V SHERBORNE 4 8 9B CONTRIBUTION BETWEEN TRUSTEES 4 9 0

3 Defences of a trustee to proceedings for breach of trust 491A EXEMPTION CLAUSES 4 9 1B CONSENT OR CONCURRENCE OF THE CESTUI QUE TRUST 4 9 1C IMPOUNDING THE BENEFICIAL INTEREST OF THE BENEFICIARY 4 9 4D LIMITATION AND LACHES 4 9 6

i Section 21 496ii Section 22 498iii General points relating to the Limitation Act 1980 500iv Lackes 500

E SECTION 6 1 OF THE TRUSTEE ACT 1925 5 0 1F DISCHARGE IN BANKRUPTCY 5 0 3

4 Criminal liability of trustees 503

Chapter 24

Tracing: proprietary remedies of the beneficiary 505

1 Tracing at common law 5062 Tracing in equity 509

A GENERAL POSITION 5 0 9B MDONG OF TRUST PROPERTY WITH THE TRUSTEE'S OWN PROPERTY 5 1 2C MIXING OF TWO TRUST FUNDS, OR OF TRUST MONEYS WITH MONEYS OF AN

INNOCENT VOLUNTEER 5 1 5D IDENTIFICATION 5 1 7E CLAIM INEQUITABLE 5 1 8F INTEREST 5 1 8

3 The claims in personam 518

Chapter 25

Injunctions I - nature, damages in lieu, enforcement 521

1 Meaning and nature of an injunction 521A MEANING AND JURISDICTION 5 2 1B REMEDY IN PERSONAM 5 2 6C WHERE A PARTICULAR REMEDY IS PROVIDED BY STATUTE 5 2 6D INJUNCTIONS AGAINST PERSONS UNDER DISABILITY 5 2 7

2 Classification of injunctions 527A PROHIBITORY AND MANDATORY 5 2 7B PERPETUAL AND INTERLOCUTORY 5 2 8C QUIA TIMET INJUNCTION 5 3 1

Contents xxi

Damages in Heu of aninjunction 534A JURISDIKTION 5 3 4

B PRINCIPLES TO BE APPLIED 5 3 6C MEASURE OF DAMAGE 5 4 0

Enforcement of an injunction 541A POWERS OF THE COURT 5 4 1B SERVICE OF THE INJUNCTION 5 4 4C COMMITTAL TO PRISON 5 4 4D FAMILY LAW ACT 1 9 9 6 5 4 5

Chapter 26

Injunctions II - principles governing grant of injunctions 5471 Interlocutory injunctions 547

A INTRODUCTORY CONSIDERATIONS 5 4 7B UNDERTAKINGS 5 4 9C THE APPROACH OF THE COURTS 5 5 2D THE PRINCIPLES LAID DOWN IN THE AMERICAN CYANAMID CASE 5 5 3E DECISIONS ON SPECIAL FACTORS 5 5 7F INTERLOCUTORY MANDATORY INJUNCTIONS 5 6 1G DELAY AND ACQUIESCENCE 5 6 2H CLEAN HANDS 5 6 3I MOTION AS TRIAL OF ACTION 5 6 3J TRADE DISPUTES 5 6 4

2 Perpetual injunctions 564A GENERAL PRINCIPLES 5 6 4

i Injunctions to restrain legal wrongs 564ii Injunctions in aid ofan equitable right or title 565

B SMALL DAMAGE 5 6 5C DELAY AND ACQUIESCENCE 5 6 6D CLEAN HANDS 5 6 7E THIRD PARTIES 5 6 8F DECLARATIONS AND SUSPENSION OF INJUNCTION 5 6 9

Chapter 27

Injunctions III - injunctions in particular types of cases 571

1 Torestrain a breach of contract 571A PURELY NEGATIVE TERMS 5 7 2B CONTRACT CONTAINING BOTH AFFIRMATIVE AND

NEGATIVE STIPULATIONS 5 7 4C NO EXPRESS NEGATIVE STIPULATION 5 7 7D DE MATTOS V GIBSON 5 7 8E DEFENCES 5 7 9

2 To restrain legal proceedings 5793 To protect membership of clubs, trade unions and other

unincorporated bodies 5804 To restrain the commission or repetition of a tort 5805 To protect Copyright, patent rights and trade marks 581

xxii Contents

6 To restrain a breach of confidence 5817 To protect public rights 5848 To restrain a breach of trust 5879 In matrimonial and other family matters 58810 In Company matters 58911 Mareva injunctions and Anton Piller Orders 589

A THE 'MAREVA' INJUNCTION 5 9 0i Origins 590ii Extent of'the Jurisdiktion 591iii Guidelines 593iv Thirdparties 596v Whereabouts ofdefendant 596vi Whereabouts ofassets 597vii Disclosure ofassets 599viii Privilege against self-incrimination 600ix Other Orders in support of Mareva relief 600

B THE ANTON PILLER ORDER 6 0 1i Origins 601ii Pre-conditions to making order 602iii Safeguards to defendant 603iv Privilege against self-incrimination 604v Exceptional or routine? 605vi Guidelines 606

C EXTENSION OF MAREVA AND ANTON PILLER ORDERS 6 0 7

Chapter 28

Specific Performance 610

1 Nature ofremedy 610A MEANTNG 6 1 0B REMEDY IN PERSONAM 6 1 2C DISCRETIONARY CHARACTER 6 1 3D DAMAGES IN ADDITION TO OR IN SUBSTITUTION FOR SPECIFIC

PERFORMANCE 6 1 3E SPECIFIC PERFORMANCE WITH COMPENSATION 6 1 4F SPECIFIC PERFORMANCE AND MAREVA INJUNCTION 6 1 4

2 Grounds on which specific Performance may be refused 614A CONTRACT RELATING TO PURE PERSONALTY 6 1 5B VOLUNTARY CONTRACTS 6 1 6C CONTRACTS TO CARRY ON A BUSINESS OR ANY COMPARABLE SERIES

OFAcnvrriES 616D CONTRACTS FOR PERSONAL WORK OR SERVICE 6 1 9E CONTRACTS WANTING IN MUTUALITY 6 2 2F CONTRACTS CAPABLE OF PARTIAL PERFORMANCE ONLY 6 2 5G WHERE A DECREE OF SPECIFIC PERFORMANCE WOULD BE USELESS 6 2 6H CONTRACTS TO LEND OR ADVANCE MONEY 6 2 7I A CONTRACT TO REFER TO ARBITRATION 6 2 8J PARTNERSHIP AGREEMENTS 6 2 8K CONTRACTS TO LEAVE PROPERTY AT WILL 6 2 8L MISREPRESENTATION AND MISTAKE 6 2 9M HARDSHIP AND WANT OF FAIRNESS 6 3 0

Contents xxiii

N RIGHTS OF THIRD PARTIES 6 3 3O CONDUCT OF THE PLAINTIFF 6 3 4P LACHES 6 3 6Q ABSENCE OF WRITING 6 3 7

Chapter 29

Other equitable remedies 6381 The appointment of a receiver, or receiver and manager 638

A RECEIVERS 6 3 8B MANAGERS 6 3 9C WHO MAY BE APPOINTED AS RECEIVER, OR RECEIVER AND MANAGER 6 4 0D SALARYANDALLOWANCE 6 4 1E POSITION OF RECEIVER 6 4 2F CASES IN WHICH A RECEIVER MAY BE APPOINTED BY THE COURT 6 4 3

i Pending the grant of probate or letters ofadministration 643ii As against executors and trustees 643iii In partnership cases 644iv Companies 644v Mortgages 645vi Creditors 645vii Between vendor and purchaser 646viii Other instances 646ix A receiver for a mental patient 646x Equitable execution 646

G APPOINTMENT OUT OF COURT 6482 Account 651

A ACTIONS OF ACCOUNT 6 5 1B WILFUL DEFAULT 6 5 2C SETTLED ACCOUNTS 6 5 3

3 Rescission 654A MEANING OF 'RESCISSION' 6 5 4B RESCISSION IN ITS STRICT SENSE 6 5 5C GROUNDS UPON WHICH RESCISSION MAY BE GRANTED 6 5 7

i Fraudulent misrepresentation 657ii Innocent misrepresentation 657iii Mere silence 658iv Executed contracts entered into as a result of

misrepresentation 658v Mistake 658vi Constructive fraud 659

D LOSS OF THE RIGHT TO RESCISSION 6 5 9i Affirmation ofthe contract 659ii Restitutio in integrum 660iii Rights ofthird parties 661iv Misrepresentation Act 1967 661

4 Rectification of documents 661A GENERAL 6 6 1B COMMON MISTAKE 6 6 3C UNILATERAL MISTAKE 6 6 6D VOLUNTARY SETTLEMENTS 6 6 8E EVIDENCE 6 6 9

xxiv Contents

5 Delivery up and cancellation of documents 6706 Perpetuationoftestimony 6727 Ne exeat regno 673

Chapter 30

Conversion and reconversion 675

1 The doctrine of conversion 6752 Circumstances in which the doctrine of conversion continues to

apply 676A UNDER AN ORDER OF THE COURT 6 7 6B UNDER A CONTRACT FOR THE SÄLE OF LAND 6 7 6C UNDER AN OPTION TO PURCHASE 6 7 8D PARTNERSHIP PROPERTY 6 7 9

Chapter 31

Satisfaction, ademption and Performance 681

1 Satisfaction of ordinary debts by legacies 682A THE GENERAL RULE 6 8 2B DIFFERENCE BETWEEN THE LEGACY AND THE DEBT 6 8 3C DEBTS TO WHICH THE PRESUMPTION APPLIES 6 8 5D DIRECTION TO PÄY DEBTS, OR TO PAY DEBTS AND LEGACIES 6 8 6E DEBT DUE TO A CHILD OF THE TESTATOR 6 8 6F ADMISSIBILTTY OF EXTRINSIC EVIDENCE 6 8 7

2 Satisfaction of a debt by an inter vivos payment 687A DEBT DUE TO A CHILD FROM ITS PARENT 6 8 7B OTHER CASES 6 8 7

3 Satisfaction of a portions debt by a legacy or by a subsequentportion: ademption of a legacy by a portion 688A DOUBLE PORTIONS 6 8 8B MEANING OF A PORTION 6 8 9C DONOR MUST BE FATHER OR IN LOCO PARENTIS 6 9 3D SATISFACTION AND ADEMPTION PRO TANTO 6 9 5E BOTH PORTIONS MUST BE PROVIDED BY, AND FOR, THE

SAME PERSONS 6 9 5F APPLICATION OF THE DOCTRINES TO BENEFIT STRANGERS 6 9 6G THE OPERATION OF THE PRESUMPTIONS 6 9 7H REBUTTING THE PRESUMPTIONS 6 9 8

i Differences in the limitations 699ii Gifts must be eiusdem generis 700iii Differences between the times of payment 701iv Direction for the payment of debts prior to ascertainment ofresidue

contained in the will 701I ADEMPTION - SUBSEQUENT ADVANCEMENT FOLLOWED BY A CODICIL 7 0 2J THE ADMISSION OF EXTRINSIC EVIDENCE 7 0 2

4 Ademption of legacies given for a particular purpose 7035 Performance 704

A GENERALLY 7 0 4

Contents xxv

B COVENANT TO PURCHASE AND SETTLE LAND 7 0 4C COVENANT TO LEAVE MONEY 7 0 5

Chapter 32 707

The equitable doctrine of election 707

1 Election under a will 707A APPLICATION OF THE DOCTRINE TO WILLS 7 0 7B LEGAL BASIS OF THE DOCTRINE 7 0 8C COMPENSATION NOT FORFEITURE 7 0 9D ELECTION UNDER A POWER OF APPOINTMENT 7 1 0E THE ESSENTIALS OF ELECTION 7 1 1F GIFTS OF THE TESTATOR'S OWN PROPERTY 7 1 3G ALIENABILITY OF THE PROPERTY WRONGFULLY PURPORTED TO BE

DISPOSED OF 7 1 3H THE RULE AGAINST PERPETUITIES 7 1 4

I CLAIM DEHORS THE WILL 7 1 5J ELECTION BY THE HEIR 7 1 6K DERIVATIVE INTERESTS 7 1 7L MODE AND TIME OF ELECTION 7 1 8

2 Election under a deed 719

Index 721