EQUITY AND TRUSTS SUMMARY - Student law notes and …€¦ · EQUITY AND TRUSTS 14.2 Remedies...
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EQUITY AND TRUSTS SUMMARY LAWSKOOL PTY LTD
Transcript of EQUITY AND TRUSTS SUMMARY - Student law notes and …€¦ · EQUITY AND TRUSTS 14.2 Remedies...
EQUITY AND TRUSTS
SUMMARY
LAWSKOOL PTY LTD
EQUITY AND TRUSTS
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Contents Cases ................................................................................................................................................ 6
Statutes .......................................................................................................................................... 12
01 GENERAL PRINCIPLES ........................................................................................................... 14
1.1 History and Nature of Equity .................................................................................... 14
1.2 Equitable Maxims .................................................................................................... 14
1.3 Summary Overview ................................................................................................. 15
02 EQUITABLE DEFENCES AND REMEDIES ............................................................................. 17
2.1 Equitable Defences ...................................................................................................... 17
2.1.1 Laches and Acquiescence ..................................................................................... 17
2.1.2 Acquiescence in Estoppel ...................................................................................... 17
2.1.3 Limitation of Actions ............................................................................................... 17
2.1.4 Set-off .................................................................................................................... 17
2.1.5. Release and Waiver .............................................................................................. 18
2.1.6 Unclean Hands ...................................................................................................... 18
2.2 Specific Performance ................................................................................................... 19
2.2.1 Definitions and Issues ............................................................................................ 19
2.2.2 Jurisdiction to Order Specific Performance ............................................................ 19
2.2.3 Discretionary Factors considered by a Court before ordering Specific Performance
........................................................................................................................................ 21
2.3 Injunctions .................................................................................................................... 23
2.3.1 Classification .......................................................................................................... 23
2.3.2 Establishing an Injunction (The elements) ............................................................. 25
2.3.3 Negative Stipulations ............................................................................................. 27
2.3.4 Will the Court enforce Negative Stipulations? ........................................................ 27
2.3.5 Interlocatory Injunctions ......................................................................................... 29
2.4 Equitable Damages ...................................................................................................... 31
2.4.1 Equitable Compensation (Restitution) ................................................................... 31
2.4.2 Lord Cairns Act Damages ...................................................................................... 32
2.4.3 The Legislation ....................................................................................................... 32
2.4.4 When will the Court have power to award Lord Cairns Act Damages? ................. 33
2.4.5 When will the Court decide to Award Damages? ................................................... 33
2.4.6 How are Damages assessed? ............................................................................... 34
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2.4.7 Lord Cairns Act Damages and Equitable Wrongs ................................................. 36
2.5 Declarations .................................................................................................................. 36
2.6 Mareva Orders .............................................................................................................. 37
2.7 Anton Pillar Orders ....................................................................................................... 37
2.8 Rescission .................................................................................................................... 37
2.9 Rectification .................................................................................................................. 38
2.10 Account of Profits ....................................................................................................... 38
2.11 Delivery Up and Cancellation of Documents .............................................................. 38
03 FIDUCIARY OBLIGATIONS ...................................................................................................... 39
3.1 What and Why .............................................................................................................. 39
3.2 Elements to be established .......................................................................................... 39
3.3 Element 1 – Is there a fiduciary relationship? ............................................................... 40
3.3.1 Status-based relationships ..................................................................................... 40
3.3.2 Fact-based relationships ........................................................................................ 43
3.4 Element 2 – What is the scope of the fiduciary relationship? ....................................... 45
3.5 Element 3 – Has the fiduciary relationship been breached? ........................................ 46
3.5.1 A conflict of duties .................................................................................................. 46
3.5.2 Conflict of duty and self interest ............................................................................. 46
3.5.3 Unauthorised profits ............................................................................................... 47
3.6 Defences ...................................................................................................................... 47
3.7 What remedies are appropriate? .................................................................................. 48
04 CONFIDENTIAL INFORMATION .............................................................................................. 48
4.1 What and why ............................................................................................................... 49
4.2 Elements to be established .......................................................................................... 49
4.2.1 Element 1 – Is the information confidential? .......................................................... 50
4.2.2 Element 2 – If the information is confidential, has there been unauthorised use? . 50
4.2.3 Element 3 – Are any defences available? .............................................................. 51
4.2.4 Element 4 – What remedies are available? ........................................................... 51
05 EQUITABLE RIGHTS, INTERESTS AND PRIORITIES ........................................................... 53
5.1 Equitable interest criteria .............................................................................................. 53
5.2 Equitable priorities ........................................................................................................ 53
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06 EQUITABLE ASSIGNMENT ..................................................................................................... 55
6.1 Issues and background ................................................................................................ 55
6.2 Unassignable rights ...................................................................................................... 55
6.3 Legal assignment ......................................................................................................... 56
6.3.1 Chose in possession .............................................................................................. 56
6.3.2 Torrens land ........................................................................................................... 57
6.3.3 Old system land ..................................................................................................... 57
6.3.4 Chose in action ...................................................................................................... 57
6.4 Equitable assignment ................................................................................................... 58
6.4.1 Legal property – For consideration ........................................................................ 58
6.4.2 Legal property – voluntary ..................................................................................... 59
6.4.3 Equitable property – unassignable at law .............................................................. 60
6.4.4 Future property ...................................................................................................... 60
6.5 Assignment and Limitation periods ............................................................................... 62
07 UNCONSCIONABILITY ............................................................................................................. 64
7.1 Special Disadvantage ................................................................................................... 64
7.2 Was the Disability sufficiently evident? ......................................................................... 65
7.3 Did the defendant take advantage of the plaintiff? ....................................................... 65
7.4 Defences and Remedies .............................................................................................. 66
7.5 Statutory Modification ................................................................................................... 66
08 UNDUE INFLUENCE ................................................................................................................. 67
8.1 Presumed relationships of Undue Influence ................................................................. 67
8.1.1 Deemed relationships ............................................................................................ 67
8.1.2 Proof of relationship of Trust and Confidence ........................................................ 67
8.2 Actual relationships of Undue Influence ....................................................................... 68
8.3 Rebutting the Presumption – both categories .............................................................. 68
09 ESTOPPEL ................................................................................................................................ 69
10 INTRODUCTION TO TRUSTS LAW – EXPRESS TRUSTS ..................................................... 70
10.1 Description and Concept ............................................................................................ 70
10.1.1 Why create a trust? .............................................................................................. 70
10.1.2 Trust fundamentals .............................................................................................. 70
10.1.3 Classification of trusts .......................................................................................... 71
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10.1.4 Trusts and other relationships .............................................................................. 73
10.2 Certainties .................................................................................................................. 77
10.2.1 Certainty of intention ............................................................................................ 77
10.2.2 Certainty of subject matter ................................................................................... 80
10.2.3 Certainty of beneficiaries or objects ..................................................................... 81
10.2.4 Purpose Trusts and Charitable Purpose .............................................................. 87
10.2.5 Formalities and Legislative requirements ............................................................ 90
10.2.6 Illegality ................................................................................................................ 91
11 RESULTING TRUSTS ............................................................................................................... 94
11.1 Non-Disposal of Beneficial Interest ............................................................................ 94
11.2 Purchase price resulting trusts ................................................................................... 95
11.2.1 Is there a presumption of a resulting trust? .......................................................... 96
11.2.2 Is the presumption rebutted? ............................................................................... 97
11.2.3 Illegality and the presumptions ............................................................................ 98
12 CONSTRUCTIVE TRUSTS ..................................................................................................... 100
12.1 Introduction and the theoretical perspectives ........................................................... 100
12.1.1 Institutional vs Remedial Constructive Trusts .................................................... 100
12.2 The common intention Constructive Trust (Allen v Snyder) ..................................... 101
12.3 The unconscionability Constructive Trust (Muschinski; Baumgartner) ..................... 102
12.4 Timing of the Constructive Trust ............................................................................... 105
12.5 The Barnes v Addy Limbs ........................................................................................ 106
12.5.1 Limb 1 – Knowing Assistance Rule .................................................................... 107
12.5.2 Limb 2 – Knowing Receipt Rule ......................................................................... 107
12.5.3 Limb 3 – Trustee de son tort .............................................................................. 108
13 ADMINISTRATION OF TRUSTS ............................................................................................. 109
13.1 Types of Trustees, Appointment and Removal ........................................................ 109
13.2 Powers, Duties and Rights of Trustees .................................................................... 110
13.2.1 Powers ............................................................................................................... 111
13.2.2 Challenging and Exercise of Discretion ............................................................. 111
13.2.3 Trustees’ Duties ................................................................................................. 112
13.2.4 Trustees’ Rights ................................................................................................. 114
13.2.5 Beneficiaries Rights ........................................................................................... 114
13.3 Termination of Trusts ................................................................................................ 115
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14 REMEDIES FOR BREACH OF TRUST / FIDUCIARY DUTY ................................................. 116
14.1 Overview ................................................................................................................... 116
14.2 Remedies for Breach of Fiduciary Duty or Trust ...................................................... 116
14.2.1 Account of Profits ............................................................................................... 117
14.2.2 Constructive Trust .............................................................................................. 118
14.2.3 Equitable Compensation .................................................................................... 119
14.3 Remedies for Breach of Trust ................................................................................... 120
14.3.1 A loss to the trust estate .................................................................................... 120
14.3.2 A gain made in breach of trust ........................................................................... 121
14.3.3 In relation to a third party ................................................................................... 121
14.3.4 Equitable compensation for breach of trust ....................................................... 121
14.3.5 Account of profits for breach of trusts ................................................................ 122
14.4 Defences / Exclusion of Liability for Trusts ............................................................... 123
15 TRACING ................................................................................................................................. 124
15.1 Introduction ............................................................................................................... 124
15.1.1 Some helpful dichotomies .................................................................................. 124
15.2 Tracing Rules ........................................................................................................... 125
15.2.1 Is there a pre-existing fiduciary relationship? ..................................................... 125
15.2.2 Can the property be identified? .......................................................................... 126
15.2.3 Has the property been given to a third party? .................................................... 127
15.3 If tracing fails ............................................................................................................ 128
15.4 Tracing Options ........................................................................................................ 128
15.4.1 Sale of traced property (proprietary remedy) ..................................................... 128
15.4.2 Tracing where trustee mixed personal and trust property .................................. 128
15.4.3 Mixture of two or more trust funds in one account ............................................. 129
16 USEFUL FLOWCHARTS FOR EXAMS .................................................................................. 131
16.1 Fiduciary Obligations ................................................................................................ 131
16.2 Creation of Express Trust ......................................................................................... 132
16.3 Recipient and Accessory Liability ............................................................................. 133
16.4 Assignment Line Diagram ........................................................................................ 134
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Cases
ABC v Lenah Game Meats ................................................................................................... 25
ABC v O’Neill ................................................................................................................... 29, 30
A-G (HK) v Reid .................................................................................................... 46, 118, 124
A-G of UK v Heinemann Publishers ................................................................................... 51
Allen v Snyder .................................................................................................................... 101
American Cyanamid Co v Ethicon Ltd ................................................................................... 29
Ampol Petroleum v Mutton ..................................................................................................... 27
Ansett Australia Ltd v Travel Software Solutions ................................................................... 60
Anton Pillar KG v Manufacturing Processes Ltd .............................................................. 37
Anvil Jewellery Ltd v Riva Ridge Holdings Ltd ....................................................................... 25
Aristoc Industries Pty Ltd v RA Wenham (Builders) Pty Ltd ................................................... 25
Armitage v Nurse ......................................................................................................... 112, 123
Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd .......................................................... 77
Australian Football League v Age Company Ltd .............................................................. 50
Bacon v Pianta ..................................................................................................................... 85
Bahr v Nicolay ........................................................................................................................ 26
Bailey v Namol Pty Ltd ........................................................................................................... 32
Barbagallo v J&F Catelan Pty Ltd .......................................................................................... 32
Barclays Bank v Quistclose Investments ........................................................................ passim
Barnes v Addy ................................................................................................................ 32, 106
Bartlett v Barclays Bank Trust Co ........................................................................................ 112
Baumgartner v Baumgartner ................................................................................ 72, 102, 105
Beecham Group Ltd v Bristol Laboratories Pty Ltd ................................................................ 29
Black v S Freedman ............................................................................................................. 125
Bloch v Bloch ......................................................................................................................... 72
Blomley v Ryan .......................................................................................................... 26, 64, 65
Boardman v Phipps ......................................................................................................... passim
Borg v Howlett (No 2) ............................................................................................................. 20
Bosaid v Andry ....................................................................................................................... 34
Boscawen v Bajwa ............................................................................................................... 124
Boyce v Paddington Borough Council .................................................................................... 24
Brady v Stapleton ................................................................................................................. 127
Breen v Williams .............................................................................................................. 44, 45
Brickenden v London Loan & Saving ................................................................................... 120
Bristol & West Building Society v Mothew ............................................................................ 122
Calverley v Green ...................................................................................................... 95, 96, 97
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Carson v Wood .................................................................................................................... 105
CBA v Smith ........................................................................................................................... 47
Chan v Zacharia .............................................................................................................. passim
Chase Manhattan Bank v Israel British Bank .................................................................. 125
Chequepoint Securities Ltd v Claremont Petroleum NL ......................................................... 42
Church of New Faith v Commissioner for Payroll Tax ........................................................... 89
Clayton’s Case ..................................................................................................... 126, 127, 129
Cochrane v Moore .................................................................................................................. 56
Coco v N Clark (Engineers) Ltd ............................................................................................. 49
Commercial Bank of Australia v Amadio ..................................................................... 64, 65
Commonwealth v John Fairfax & Sons .............................................................................. 51
Computroller of Stamps v Howard Smith .......................................................................... 55
Cook v Rodgers ..................................................................................................................... 25
Cooney v Ku-ring-gai Municipal Council ................................................................................ 24
Corin v Patton ........................................................................................................................ 59
Coulls v Bagot’s Executor & Trustee Co ................................................................................ 25
Cowan v Scargill ................................................................................................................ 113
Curro v Beyond Productions .............................................................................................. 28
Dart Industries Inc v Decor Corporation Pty Ltd ..................................................................... 38
Day v Mead ............................................................................................................................ 48
Dean v Cole ..................................................................................................................... 78, 79
Dean v McDowell ................................................................................................................... 42
Dearle v Hall ........................................................................................................................... 60
Dingle v Turner ....................................................................................................................... 89
Dougan v Ley ................................................................................................................... 20, 26
Downe v Sydney West Area Health Service (no 2) ................................................................ 26
Dowsett v Reid ....................................................................................................................... 22
Evans Marshall & Co Ltd v Bertola ........................................................................................ 25
Everett v CT ..................................................................................................................... 58, 59
Farah Constructions Pty Ltd v Say-Dee Pty Ltd ................................................................... 107
Farrington v Rowe McBride ................................................................................................ 40
FCT v Everett ......................................................................................................................... 57
Films Rover v Cannon Film .................................................................................................... 30
Foskett v McKeown ...................................................................................................... 126, 128
Fraser Edminston v AGT ........................................................................................................ 42
Gemstone Corporation of Australia Ltd v Grasso .................................................................. 31
Giles v Morris ......................................................................................................................... 20
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Glynn v Commissioner of Stamp Duties ................................................................................ 98
Green v Sommerville ........................................................................................................... 23
Gregg v Blomley ..................................................................................................................... 56
Hartigan Nominees v Rydge ............................................................................................. 113
Hayes v National Heart Foundation .................................................................................... 79
Henry v Hammond ................................................................................................................. 74
Hercy v Birch .......................................................................................................................... 23
Hill v Rose ............................................................................................................................ 119
Hilton v Barker, Booth & Eastwood (A firm) ...................................................................... 46
Hodgkinson v Simms ................................................................................................... 43, 119
Holroyd v Marshall ............................................................................................................. 59, 61
Hospital Products Ltd v United States Surgical Corp ........................................... 40, 43, 44, 46
Hunter v Moss ...................................................................................................................... 81
Income Tax Special Purpose Commissioners v Pemsel (Pemsel’s case) ............................. 88
Inland Revenue Commissioners v McMullen ......................................................................... 89
International Advisor Systems Pty Limited v XYYX Pty Limited ............................................. 20
Jaggard v Sawyer ..................................................................................................... 34, 35, 36
Jennings v Credit Corp ........................................................................................................... 63
Johnson v Agnew ................................................................................................................... 34
Johnson v Buttress ................................................................................................................. 68
Johnson v Herrord ............................................................................................................... 65
Jones v Jones ........................................................................................................................ 42
Karger v Paul .............................................................................................................. 111, 112
Keech v Sandford ................................................................................................................... 40
Kelly v Cooper ...................................................................................................................... 43
LAC Minerals Ltd v International Corona Resources Ltd ..................................................... 118
Lamshed v Lamshed .............................................................................................................. 23
Leahy v A-G (NSW) .............................................................................................................. 85
Lipkin Gorman v Karpnale Ltd ................................................................................................ 31
Lloyd v Tedesco .................................................................................................................... 105
Loan Investment Corp of Australasia v Bonner ...................................................................... 20
Longtom v Oberon Shire Council ..................................................................................... 22, 35
Lonhro v Fayed (No 2) ......................................................................................................... 100
Lucasfilm v Ainsworth ......................................................................................................... 50
Lumley v Wagner ........................................................................................................... 25, 28
Mac-Jordan Construction v Brookmount Erostin .................................................................... 81
Madden v Kavereski ............................................................................................................. 35
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Maguire v Makaronis .................................................................................................... 116, 120
Manfred v Maddrell .............................................................................................................. 114
Mareva Compania Naviera SA v International Bulk Carriers ................................................. 36
McCraken, In the Will of; Webb v McCracken ........................................................................ 90
McKenzie v McDonald ..................................................................................................... 40, 43
McPhail v Doulton .................................................................................................... 82, 84, 111
Miller v Cameron .................................................................................................................. 110
Miller v Jackson ...................................................................................................................... 31
Milroy v Lord ........................................................................................................................... 59
Moody v Cox & Hatt ............................................................................................................. 46
Morice v Bishop of Durham .................................................................................... 81, 87, 90
Motor Terms Co Pty Ltd v Liberty Insurance Ltd .................................................................... 18
Mountain Road (NZ) ............................................................................................................... 62
Muschinski v Dodds ..................................................................................................... passim
Napier v Public Trustee (WA) ................................................................................................. 95
National Australia Bank v Bond Brewing Holdings Ltd ........................................................... 30
Nelson v Nelson ................................................................................................. 91, 92, 98, 99
Neville Estates Ltd v Madden ........................................................................................... 85, 86
Nocton v Lord Ashburton ............................................................................................... 31, 119
Norman v Federal Commissioner of Taxation ................................................................. passim
Northern Drivers Union v Kawau Island Ferries Ltd ............................................................... 29
Oppenheim v Tobacco Securities Trust ............................................................................ 88
Orr v Ford ............................................................................................................................... 17
Page One Records v Britton ............................................................................................... 28
Palmer v Simmonds ............................................................................................................... 80
Parsons v McBain .............................................................................................................. 106
Paul v Constance ........................................................................................................... 78, 79
Permanent Trustee v Presbyterian Church Property Trust .................................................... 89
Perpetual Executors and Trustees v Wright ...................................................................... 91
Pilmer v Duke Group (in liq) ....................................................................................... 44, 45, 48
Price v Strange ..................................................................................................................... 21
Puma Australia v Sportsman’s Australia .............................................................................. 125
Queensland Mines v Hudson .............................................................................................. 47
Ramsay v Aberfoyle ............................................................................................................... 24
Re Alston (Alston, Re; Equity Trustees, Executors and Agency Ltd) ................................. 79
Re Armstrong ......................................................................................................................... 78
Re Baden’s Deed Trusts; Re; McPhail v Doulton ........................................................ 83, 84
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Re Dawson .......................................................................................................... 119, 121, 122
Re Denley’s Trust Deed ......................................................................................................... 87
Re Diplock’s Estate ...................................................................................................... 121, 126
Re Elizabethan Theatre Trust ........................................................................................ 76, 95
Re French Caledonia Travel ................................................................................................ 127
Re Gillingham Bus Disaster Fund .......................................................................................... 95
Re Golay ................................................................................................................................ 81
Re Gulbenkian ........................................................................................................... 82, 83, 84
Re Hallett’s Estate, Re; Knatchbull v Hallet .................................................................... passim
Re Leek ................................................................................................................................. 84
Re Londonderry’s Settlement ........................................................................................... 112
Re Lund .................................................................................................................................. 62
Re Nottage ............................................................................................................................. 89
Re Oatway ........................................................................................................................... 126
Re Recher’s Will Trusts .......................................................................................................... 87
Re Registered Securities Ltd ............................................................................................... 127
Re Sabri ....................................................................................................................... 102, 106
Re Shaw Deceased ............................................................................................................... 89
Re Speight ................................................................................................................... 112, 113
Re Whitehouse ..................................................................................................................... 112
Reader v Fried ..................................................................................................................... 123
Regal (Hastings) Ltd v Gulliver .......................................................................... 40, 41, 47, 118
Roscoe v Winder .................................................................................................................. 127
Ryan v Mutual Tontine Westminster Chambers ..................................................................... 26
Saltman Engineering Co Ltd v Campbell Engineering Co Ltd ......................................... 49, 50
Saunders v Vautier ....................................................................................................... 114, 115
Secretary, Dept. of Social Security v James .......................................................................... 90
Shelfer v City of London Electric Lighting Co ......................................................................... 33
Shephard v FCT ............................................................................................................... 60, 61
Shercliff v Engadine ............................................................................................................... 29
Silktone v Devreal Capital ...................................................................................................... 31
Slee v Warke .......................................................................................................................... 23
Smith v Cooke ........................................................................................................................ 94
Stephens Travel Service v Qantas ..................................................................................... 76
Stweart v Layton .................................................................................................................. 46
Tailby v Official Receiver ........................................................................................................ 62
Target Holdings v Redferns .............................................................................................. 121
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Taylor v Taylor ....................................................................................................................... 89
Thomas Borthwick & Son v South Otago Freezing ................................................................ 27
Thomas v NAB ....................................................................................................................... 63
Thompson v FCT ................................................................................................................... 88
Thompson v Leach ............................................................................................................... 109
Timber Engineering v Anderson ............................................................................... 118, 119
Tinsley v Milligan ................................................................................................................. 98
Titterton v Oates ................................................................................................................. 110
Trident General Insurance v McNiece .................................................................................... 74
Trustees of Church Property of the Diocese of Newcastle v Ebbeck ............................. 92
Turner v Bladin ....................................................................................................................... 20
United Dominions Corp v Brian ........................................................................................ 40, 44
Vandervell v IRC .................................................................................................................... 72
Verge v Sommerville ........................................................................................................ 86, 88
Waimor Holdings Ltd v Dean ................................................................................................. 20
Walton Stores (Interstate) Ltd v Maher ............................................................................ 25, 69
Warman International Ltd v Dwyer ....................................................................... 117, 121, 122
Warrington v Miller ................................................................................................................. 23
Wenham v Ella ....................................................................................................................... 23
Wentworth v Woollahra Municipal Council ....................................................................... 33, 36
West v Weston ...................................................................................................................... 82
Westdeutsche Landesbank Girozentrale v Islington London Borough Council ............. 96, 100
Young v Murphy ................................................................................................................... 116
Youyang v Minter Ellison .............................................................................................. 112, 122
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Statutes
Charitable Trusts Act 1993 (NSW) ......................................................................................... 90
Charitable Uses Act 1601 (UK) .............................................................................................. 88
Conveyancing Act 1919 (NSW) ........................................................................... 57, 58, 60, 90
Corporations Act 2001 (Cth) ............................................................................................ 58, 71
Income Tax Assessment Act 1936 (Cth) ................................................................................ 70
Land Title Act 1994 (Qld) ....................................................................................................... 57
Lord Cairns Act .......................................................................................................... 18, 31, 32
Property Law Act 1974 ..................................................................................................... 57, 60
Supreme Court Act 1970 (NSW) ............................................................................................ 32
Trustee Act 1925 (ACT) ....................................................................................... 109, 116, 123
Trusts Act 1973 (Qld) ........................................................................................................... 114
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01 GENERAL PRINCIPLES
1.1 History and Nature of Equity Equity developed from the Court of Chancery to address the harsh application, outcomes,
and deficiencies of the common law. Although the administration of equity law was formerly
limited to the Court of Chancery, the Judicature Acts of 1873 and 1875 (Imp) and similar
reforms in all Australian jurisdictions now means equity and the common law are
administered together. The fundamental features of the judicature system are:
• Courts have the power to administer equitable remedies.
• Equitable defences are available in all courts (as applicable).
• All courts recognise equitable rights and interests.
• Common injunction has been abolished.
• Where conflict arises between equity and the common law, equity prevails.
At its crux, Equity seeks to:
• correct exploitations of weakness or vulnerability;
• remedy outcomes achieved through the abuse of power or confidence;
• enforce rights in harsh or oppressive circumstances;
• prevent the denial of obligations; and
• prevent or remedy the unjust retention of property.
Equitable decision-making by courts is therefore characterised by two things:
1) the exercise of the court’s flexibility in discretion; and
2) the fact the court of equity is a court of conscience.
Ù ‘Conscience’ does not mean judges decide according to his or her personal
convictions. Rather, equity is based on certain principles or “maxims”.
1.2 Equitable Maxims Equitable maxims are not rules. They are generalisations that provide an understanding of
the development of equity and how the principles have been applied. Whilst some are
historical, some still operate today. The maxims are:
• Equity is equality: Equity addresses the quantum of loss pursuant to liability.
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• Whoever seeks equity must do equity: Plaintiffs cannot seek equity if they
have not fulfilled their obligations in law and equity.
• Must come to equity with clean hands: Improper conduct will negate a claim of
equitable relief.
• Equity follows the law: The matter must be first considered at common law,
then in equity.
• Equity acts in personam: Whilst equitable remedies were once only operated in
personam, all Australian jurisdictions now recognise equitable proprietary
interests. The most significant is the need for real property transfers to be
evidenced in writing.
• Equity looks to substance, rather than form: Equity will address the substance
of the matter as opposed to strict reliance on the procedural issues associated.
• Equity will not suffer a wrong without a remedy: Reflects early decisions
where a common law remedy was not available.
• When equities are equal, the first in time prevails: Subject to exceptions, this
rule governs the law of equitable priorities.
• Equity assists the diligent, not the tardy: A plaintiff who acts with undue delay
or acquiescence may prejudice a claim.
• Equity regards as done, that which must be done: Where a person is under
an obligation to complete a task, equity will regard the obligation as having been
completed.
• Equity imputes an obligation to fulfil an obligation: Forms the basis of the
doctrines of satisfaction, ademption and performance.
• Equity will not assist a volunteer: Equity is not available to a party who has not
provided consideration.
1.3 Summary Overview It is important to develop a sound understanding of the law of equity before moving to the law
of trusts. Accordingly, the progression of this summary is as follows:
• Equitable defences and remedies
• Fiduciary duties
• Confidential information
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• Equitable rights, interests and priorities
• Equitable assignments
• Unconscionability
• Undue influence
• Estoppel
• Introduction to Trusts law – Express Trusts
• Charitable Trusts
• Resulting Trusts
• Constructive Trusts
• Administration of Trusts
• Remedies for breach of Trusts
• Tracing
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02 EQUITABLE DEFENCES AND REMEDIES
2.1 Equitable Defences Ù There are a number of defences available in equity. They are:
• Laches and Acquiescence
• Acquiescence in Estoppel
• Limitation of Actions
• Set-Off
• Release and Waiver
• Unclean Hands
2.1.1 Laches and Acquiescence This defence is founded in the maxim ‘equity assists the diligent and not the tardy’. Mere
delay is not a defence in itself. However, when coupled with actions that occurred during the
delay period, laches may be established. To rely on this defence, the defendant must
establish that the plaintiff’s actions constitute acquiescence (not exercising or enforcing an
entitled right) in the defendant’s conduct. Alternatively, in response the plaintiff’s failure to
act, the defendant changed their position to such a degree that it would be unjust to grant the
relief sought.
Note - laches and acquiescence are only available for equitable claims, not legal claims (Orr
v Ford).
2.1.2 Acquiescence in Estoppel In this case, acquiescence occurs when someone stands-by as an act is done, or is about to
be done that infringes their rights. In such a case, an applicant may be denied a remedy to
which they would otherwise have been entitled.
2.1.3 Limitation of Actions Generally, lapse of time does not prevent an action commencing. However, this presumption
has been the subject of statutory modification. Now, all jurisdictions have enacted limitation
of action legislation. The effect is that when claims are made in equity, the court, in the
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absence of fraud or other special circumstances, will correlate and adopt the same limitations
prescribed by statute (Motor Terms Co Pty Ltd v Liberty Insurance Ltd).
2.1.4 Set-off Set-off can be claimed as a defence when the defendant has a claim that can be raised
against the plaintiff to ‘set-off’ all or part of the originating claim. This is distinguished from a
counter-claim as the defence only reduces or negates a verdict in favour of the plaintiff. A
counter-claim would constitute separate proceedings.
2.1.5. Release and Waiver Equity recognises as a defence, the proven assertion that the plaintiff released the defendant
from their obligations or otherwise waived their rights against the defendant.
2.1.6 Unclean Hands Founded on the maxim ‘a person who comes to equity must come with clean hands’. Here,
the conduct of the plaintiff will be considered. Three categories have been established where
the defence may be available. They are:
Case 1: Plaintiff is guilty of misrepresentation.
Case 2: Plaintiff’s conduct amounts to equitable fraud.
Case 3: Plaintiff has misled the court.
The defence will not be available in the following circumstances:
1. Where a declaration is sought (derived from statutory power, not equity).
2. Where delivery-up or cancellation of documents is sought (continued use is usually
fraudulent and thus, inherently prevents unclean hands).
3. Where statutory relief is sought (as per circumstance 1 above).
4. Where public policy outweighs the consideration of clean hands.
Ù If a defence is not established, equitable remedies are available at the discretion of
the court. They are flexible and the matter at hand may produce circumstances
where more than one remedy is imposed. The key equitable remedies are:
• Specific performance
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• Injunctions
• Equitable damages: Restitution and Lord Cairns Act Damages
• Declarations
• Mareva orders
• Anton Pillar orders
• Rescission
• Rectification
• Account of profits
• Delivery-up and Cancellation of Documents
• Constructive trusts (discussed in the corresponding section of this summary)
2.2 Specific Performance
2.2.1 Definitions and Issues Traditionally, the primary remedy for breach of contract is damages at common law.
Equity can sometimes supplement the common law where there has been some
circumstance warranting its application (e.g. unconscionable non-performance of contract).
In these cases, the equitable remedy of specific performance may be ordered. Specific
performance orders direct a party to a contract (may also be ordered where no contract
exists but estoppel has been awarded) to perform their obligations pursuant to its terms.
Generally, specific performance will only be awarded where monetary damages would be an
inadequate form of compensation such as for valuable or unique personalty. The court will
generally not order specific performance for contracts involving personal services. Specific
performance is therefore a discretionary remedy and not a right. Certain factors are
considered when granting discretionary remedies.
2.2.2 Jurisdiction to Order Specific Performance Is there a legally enforceable agreement between the parties?
Usually there is a valid and enforceable contract supported by consideration between the
parties. However, the doctrine of part performance may be available in the absence of a
contract. Fundamentally, the applicant must be a party to the contract (doctrine of privity).
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Are damages at common law an inadequate remedy?
The plaintiff bears the onus of proof to establish damages would be inadequate. This will
hinge on the type of contract and the circumstances of the case. The relevant inquiry is
whether merely granting damages would leave the plaintiff in as favourable position in all
respects as would exist if the defendant’s obligation were specifically performed
(International Advisor Systems Pty Limited v XYYX Pty Limited [2008]).
Note - the court’s determination will place considerable emphasis on the following types of
contract:
Sale of land: Here, damages are generally regarded as inadequate, even if purchased for
investment (Turner v Bladin). This is because, traditionally, all land is considered unique and
therefore on other parcel of land is a just substitute (Loan Investment Corp of Australasia v
Bonner). Nowadays, there is also a costly and lengthy process to find alternate land (Waimor
Holdings Ltd v Dean). Further, vendors may also seek specific performance to gain funds
and the divestment of the land. Despite this, even though specific performance may be
available, a court will not make an order unless the applicant can show that damages would
be an inadequate remedy in the circumstances.
Sale of goods: Here, damages are generally adequate unless the goods are rare, unique, or
not readily available on the market (Dougan v Ley). In Dougan, it was determined taxi
licences were difficult to obtain due to their limited number and thus specific performance
was ordered. In Borg v Howlett (No 2), specific performance was ordered to enforce a
contract for the purchase of a racehorse. This was on the basis that damages would be too
difficult to estimate given the inability to predict the horse’s possible winnings.
To pay or lend money – finance agreements: Here, damages are generally adequate
(Loan Investments Corp). This is because loss is easily assessable in monetary terms.
Personal services: Here, the courts are generally reluctant to order specific performance
(Giles v Morris). This is due to the difficulty associated with compelling co-operation. This
may amount to personal servitude, which is contrary to public policy. Further issues also
arise in determining adequacy of performance. An exception may exist for building service
contracts where performance standards are governed by tangible industry standards.
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2.2.3 Discretionary Factors considered by a Court before ordering Specific Performance Detailed Supervision
Courts are unwilling to order specific performance if detailed supervision by the court would
be required. The rationale behind this is to avoid the potential of ongoing disputes. Note, this
can be distinguish between: (i) orders to carry on a business or activity (detailed or ongoing
supervision may be necessary) and (ii) an order to achieve a result (unlikely to require
ongoing supervision).
Consider: can the terms of the order be precisely drawn – i.e. are the defendant’s
expectations clear?
Lack of Mutuality
There must be mutuality before an applicant can be granted specific performance. That is,
although an applicant is seeking the order, consideration must also be given to the position
of the defendant – would the defendant be likely to have received specific performance if
they had tried to enforce the plaintiff’s obligations? Equity will not compel specific
performance by a defendant unless performance or compensation for any outstanding
obligations of the applicant can be assured. For example: (i) the applicant must have already
performed their obligations or, (ii) the defendant would be entitled to specific performance if
they had asked for it.
Where the applicant has already performed, there is no issue of mutuality. Mutuality is
judged at the date of the order for specific performance (Price v Strange). For example:
contract where one party is underage (can be unenforceable against the minor). Even if
minor is enforcing the contract against the other party, no SP will be obtained because of
lack of mutuality.
Price v Strange
Facts: Defendant had leased out a flat to the plaintiff. Term of lease was that the plaintiff
would do certain repairs. Plaintiff carried out internal repairs and was ready/willing to do
external repairs. However, the defendant did not want the plaintiff in the flat so repudiated
contract and did external repairs herself.
Issue: Plaintiff sought specific performance but the defendant argued lack of mutuality (if the
defendant were to enforce contract against the plaintiff, it could not be obtained – too much
supervision).
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Held: The defendant’s argument was unsuccessful because by the date of the order the
required repairs had already been done (plaintiff has already performed) and therefore the
plaintiff was entitled to specific performance. Mutuality is judged at the date of the order.
Hardship
An order for specific performance would not be given if the order would lead to undue
hardship suffered by the defendant. This is considered at the time the order would be given
(Longtom v Oberon Shire Council). The court will place weight on the position of the
defendant and if they had to pay common law damages as opposed to performing the
contract. There must also be a balancing of the potential hardship to the defendant if specific
performance is granted against the hardship to the plaintiff if specific performance is refused.
If both will suffer similar hardships or the plaintiff will have greater hardship, specific
performance will be granted (Dowsett v Reid).
Hardship is difficult to establish: there must be some unconscionable bargaining or
compassionate grounds. Generally, financial hardship alone is not sufficient.
Unconscionability as applied from Amadio – one function of the doctrine is to refuse specific
performance where it would unconscionable to enforce performance.
Longtom v Oberon Shire Council
Facts: Council purchased rural land from the plaintiff and intended to use it for a gravel pit.
Clear term that the council would restore the land to its previous condition once gravel was
extracted – a significant term. Later, the council refused to restore land, arguing that the cost
was prohibitive (would become insolvent). However, not a problem for plaintiff, who could not
see the gravel pit anyway. Here, the issue was whether it was hardship where the only harm
to the plaintiff was a failure to fulfil the intentions of the parties, with no further harm.
Held (Young J): Unusual to refuse specific performance for hardship on purely financial
grounds (but council’s evidence about hardship was treated sceptically). Specific
performance was granted.
Critique: Here, the plaintiff did not really suffer any harm that would warrant specific
performance because the land had already been sold, plaintiff was entitled to common law
damages for breach of contract (nominal), and non-performance did not really affect the
plaintiff because they could not see gravel pit anyway. On the other hand, the grant of
specific performance placed the plaintiff in a more advantageous position because it gave
the plaintiff advantage to negotiate with the council on other matters. Giving an additional
benefit to the plaintiff is contrary to what Hoffman LJ stated in Argyll.
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‘Ready and Willing’
The party seeking specific performance must be ready and willing to perform their
obligations. The plaintiff cannot seek specific performance if they are themselves in breach
(he who seeks equity must do equity). This relates to the substantive obligations under the
contract.
Green v Sommerville
Facts: Contract for the sale of land, but parties were in dispute about an interest payment.
The plaintiff sought specific performance for the sale but the defendant argued that the
vendor (plaintiff) was not ready and willing.
Held: Rejected the defendant’s argument. Consideration given to the substance of the
contract. The plaintiff was disputing the terms in good faith; it was not the case that they were
not ready and willing.
Other Factors
Other discretionary factors include:
Illegality: the court will not order a defendant to do something illegal (Warrington v Miller).
Futility: specific performance will not be ordered where it would be futile (Hercy v Birch).
Impossibility: similar to futility, specific performance will not be ordered if the defendant
cannot perform their obligations (Wenham v Ella).
Mistake: there may be grounds for ordering payment of damages instead (Slee v Warke).
Laches: lengthy delay by P may defeat their claim to SP (Lamshed v Lamshed).
2.3 Injunctions An injunction is an order restraining a person from performing a specific act, or (in
exceptional circumstances) requiring a person to perform a specific act. It is important to
remember injunctions are remedies. They are not rights in themselves; therefore, the plaintiff
must show an existing right to which injunctions can attach.
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