Equity & Trusts Reading List (Wk 1)_03082011

8/13/2019 Equity & Trusts Reading List (Wk 1)_03082011

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Consent Wrongs UnjustEnrichment

Other Events

Compensation

Restitution

Punishment

Other Goals

Birksian Taxonomy A way of classification

Birks Fusionist

Classification

o Causative Events

o Responses

Useful for

o Conflict of law characterization

o Limitation limitation act / lacheso Seeing inconsistencies in different areas of the law

SINGAPORE MANAGEMENT UNIVERSITY

SCHOOL OF LAW

LAW 303 - LAW OF EQUITY & TRUSTS

READING LIST

WEEK ONEINTRODUCTION

A. Historical development of equity and the relationship between common law and equity

PEARCE,STEVENS &BARR CH 2

What is equity?

A particular body of law decided by chancery courts with different rights and remedies

Parrallel court to the common law courts

A correction of law where it is defective owing to its universality

Mitigate rigidities

Historical development of equity

Kings court had specific writs to address specific crimes

Inflexible and stultified

Common law courts had a Tendency to apply strict rules

o Rules of evidence that would exclude the merits of the case


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to distinguish between equitable rights and common law rights. Certain things

like trusts and equitable estates must exist apart / in isolation from common law.

Alternatively, fusion of administration has produced a single coherent body of law which

operates harmoniously together even though some historically has roots in equity and

others in common law

o Tinsley v Milligan there is one single law of property made up of legal and

equitable interests. This suggests that there is some merging though not so

much as to eradicate all differences

o Lord Napier v Ettrick v Hunter our task is to see 2 strands of authority

moulded into a coherent whole but cannot see why such amalgamation should

lead to the rejection of the equitable proprietary right

o Examples

Land law Legal and Equitable interests (superseded by statute)

Specific performance an equitable remedy only available when there

is valuable consideration, and not available to contracts by deed

(common law based)

Thus promise to enter trust (w/o consideration ie, a volunteer)

not specifically enforceable even if entered into by deed. Burden of restrictive covenant passing with land

Rules in tracing property which has been misappropriated

Jurisdiction to award compound interest

LAU SIEW KIM V TEO GUAN CHYE TERENCE [2008]2SLR108,[24][33]

NOTE: Repeats points that are covered in textbook with regard to Historical developments of

equity as well as creativity of equity.

Lau Siew Kimpara 24 - Equity is the body of principles which has evolved progressively tomitigate the severity sometimes occasioned by the rigid application of the rules of thecommon law

Supplementary role

It is a body of principles

But is it true as of today?

Finally, the four primary perspectives which should guide the court in the development ofequitable principles have been succinctly encapsulated by Gary Watt in Trusts and Equity(Oxford University Press, 2nd Ed, 2006) at pp 4748 as:(a) precedent;(b) (b) principle;

(c) (c) policy; and(d) (d) pragmatism.

When a judge is presented with a legal problem, the judge is bound to look first to statutorylaw and judicialprecedent for a solution, but if it appears to the judge that there is no clearsolution in precedent, the judge should in theory seek to produce a solution consistent with

principles derived from precedent. Judges do not, however, reach their decisions in a logicalvacuum; they are very often acutely aware of the impact that their decisions might have uponthe wider community or society at large, and are therefore sensitive topolicy considerations.


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Last, but by no means least, above all considerations of principle and policy, and sometimeseven above precedent, judges are concerned to achieve a solution which works in practiceand one that will not bring the whole process into disrepute; the judicial process must be

pragmatic and sensitive to public interests. In fact, Lord Goff of Chieveley had candidlyobserved in Westdeutsche ([27] supra) at 685: It is a truism that, in deciding a question of law inany particular case, the courts are much influenced by considerations of practical justice, and

especially by the results which would flow from the recognition of a particular claim on the facts of thecase before the court.

B. Jurisdiction & Maxims

PEARCE,STEVENS &BARR PP 2834

Maxims of equity

Equity will not suffer a wrong to be without remedy

Equity follows the law Where equities are equal the law prevails

o Where there is a legal right and an equitable right, the legal right will prevail even

if equity pre-existed

Where equities are equal first in time prevails

He who seeks equity must do equity

o Governs a claimants future conduct

o Must act fairly as against the defendant

o For example if set aside purchase, must repay the purchase moneys (Peacock v

Evans)

He who comes to equity must come with clean hands

o Looks at the past conduct of the claimant

o To prevent any person from benefiting from illegal transactions

o Illegality or any tainting must be related to the equity sued for

Argyll v ArgyllAdultery which caused a divorce was NOT an illegality

sufficient to prevent the seeking of an injunction sought to prevent

disclosure of confidential material.

Tinsley v MilliganLesbian couple owned a house, registered under one

person to claim social security benefits. Couple broke up, one wants to

claim half share in house in equity because of monies contributed

towards it. Held that claim not founded on the illegality and thus allowed.

Bowmakers Ltd v Barnet Instruments Ltdthe rule is the same whether

it is founded on a legal or equitable title: he is entitled to recover if not

forced to plead or rely on the illegality, even if it emerges that the titlewhich he relied on was acquired in the course of carrying through an

illegal transaction

Tribe v TribeFather bought shares and put it in sons name to defraud

his creditors. Transfer of shares was presumed a gift at common law.

Father wanted to claim equitable ownership in the shares. But to do so

he had to rebut the presumption of a gift, and to rebut it had to rely on

illegal purpose of the transfer. In the end creditors didnt claim, and father


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was allowed to reclaim because the illegal purpose had not been carried

into effect in any way (ARTIFICIAL? ILLUSORY?)

Delay defeats Equity

o Smith v ClayEquity refuses its aid to stale demands, where party has slep on

his right, and acquiesced for a great length of time. Nothing can call forth this

court but conscience, good faith, and reasonable diligence.

o Nelson v RyeEquity denied because waited 6 years before commencing action.

Must today be considered with limitation action.

Equality is Equity

o Where there is no express provision, equal division should occir

o Equal share in property / Tenancy in common

Equity looks to intent rather than form

o Parkin v Thorold If by insisting on the form, the substance is defeated, it is

inequitable to insist on such form to defeat the substance

o Foskett v McKeown the availability of equitable remedies ought to depend on

the substance of the transaction in question

o Examples

Positively worded covenant may be restrictive if in substance it isnegative

No injunction to enforce negative covenant if It would amount to specific

performance of contract of employmernt

Look to substance and not wording to see if a clause is a penalty or

genuine pre estimate of damages

Equity regards as done that which ought to be done

o Regards promisor as having already done what he has promised to do because

he can be compelled to do it

o Walsh v Lonsdale Contract to grant lease treated as creating an equitable

lease on the same terms.

o Also, contract for purchase of land or property creates an immediate constructive

trust vesting equitable interest in purchaser by way of constructive trust at the

very moment the contract is entered.

Equity imputes an intention to fulfill an obligation

o Equity places the most favourable construction on a mans acts so that if he does

something which can be construed as fulfilling an obligation, equity will regard it

as having effect.

Equity acts in personam

o Generally, acts on the person and enforced by threat of contempt of court

proceedings.

o Possible extraterritoriality

Webb v Webb To enforce a right in property enforceable abroad

because it was acting in persona, Re Hayworth to rectify register, no equitable jurisdiction because the

claim had as its object, immovable property therefore, right in rem.

AELAS3(1)


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Application of common law and equity.

3.(1) The common law of England (including the principles and rules of equity), so far as it

was part of the law of Singapore immediately before 12th November 1993, shall continue to be

part of the law of Singapore.

CIVIL LAW ACT,CAP 43, SECTIONS 3AND 4

Law and equity to be administered concurrently

3.In every civil cause or matter commenced in the court, law and equity shall be administered

by the court in its original jurisdiction and by the Court of Appeal according to the rules

following:

Administration of insolvent estates, and winding up of companies. Bankruptcy rules to prevail

4.(1) In the administration by any court of the assets of any deceased person whose estate

proves to be insufficient for the payment in full of his debts and liabilities, and in the winding upof any company under the Companies Act (Cap. 50) whose assets prove to be insufficient for the

payment of its debts and liabilities and the costs of winding up, the same rules shall prevail and

be observed as to the respective rights of secured and unsecured creditors, and as to debts and

liabilities provable, and as to the valuation of annuities and future and contingent liabilities

respectively, as are in force for the time being under the law of bankruptcy with respect to the

estates of persons adjudged bankrupt.

Creditors may come in under decree, or winding up

(2) All persons who, in any such case, would be entitled to prove for and receive dividends out of

the estate of any such deceased person, or out of the assets of any such company, may come in

under the decree or order for the administration of such estate, or under the winding up of such

company, and make such claims against the same as they may respectively be entitled to by

virtue of this Act.

Voluntary waste

(3) A tenant for life or lives or a leasehold tenant shall not commit voluntary waste; but this

subsection shall not apply to any estate or tenancy without impeachment of waste, or affect any

licence or other right to commit waste.

[35/93]

(4) A tenant who infringes subsection (3) shall be liable in damages to his remainderman or

reversioner; and in subsection (3), leasehold tenant includes a tenant for a term, a tenant

under a periodical tenancy and a tenant at will.

[Cf. 52 Henry III (Statute of Malborough) c. 23. (1267)][35/93]

Estate for life when not to confer right of equitable waste

(5) An estate for life without impeachment of waste shall not confer, or be deemed to have

conferred, upon the tenant for life any legal right to commit waste of the description known as

equitable waste, unless an intention to confer such right expressly appears by the instrument

creating such estate.


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Merger when not to operate

(6) There shall not be any merger by operation of law only of any estate the beneficial interest in

which would not before 23rd July 1909 have been deemed to be merged or extinguished in

equity.

Suits for possession of immovable property by mortgagors

(7) A mortgagor entitled for the time being to the possession or receipt of the rents and profits

of any immovable property, as to which no notice of his intention to take possession, or to enter

into the receipt of the rents and profits thereof, has been given by the mortgagee, may sue for

such possession or for the recovery of such rents or profits or to prevent or recover damages in

respect of any trespass or other wrong relative thereto in his own name only, unless the cause

of action arises upon a lease or other contract made by him jointly with any other person.

Assignment of debts and choses in action effectual to pass right and remedy

(8) Any absolute assignment by writing under the hand of the assignor, not purporting to be by

way of charge only, of any debt or other legal chose in action of which express notice in writing

has been given to the debtor, trustee or other person from whom the assignor would have been

entitled to receive or claim such debt or chose in action, shall be and be deemed to have beeneffectual in law, subject to all equities which would have been entitled to priority over the right

of the assignee under the law as it existed before 23rd July 1909, to pass and transfer the legal

right to such debt or chose in action, from the date of such notice, and all legal and other

remedies for the same, and the power to give a good discharge for the same, without the

concurrence of the assignor.

Stipulations not of essence of contracts to be construed as in equity

(9) Stipulations in contracts, as to time or otherwise, which would not, before 23rd July 1909,

have been deemed to be or to have become of the essence of such contracts in a court of equity,

shall receive in all cases the same construction and effect as they would have received in equity

before that date.

Injunctions and receivers granted or appointed by interlocutory orders

(10) A Mandatory Order or an injunction may be granted or a receiver appointed by an

interlocutory order of the court, either unconditionally or upon such terms and conditions as the

court thinks just, in all cases in which it appears to the court to be just or convenient that such

order should be made.

Terms. To prevent waste, etc., when granted

(11) If an injunction is asked, either before, or at, or after the hearing of any cause or matter, to

prevent any threatened or apprehended waste or trespass, the injunction may be granted if the

court thinks fit whether the person against whom the injunction is sought is or is not in

possession under any claim of title or otherwise, or, if out of possession, does or does not claim,

a right to do the act sought to be restrained under any colour of title, and whether the estates

claimed by both, or by either of the parties, are legal or equitable.

Custody and education of minors

(12) In questions relating to the custody and education of minors, the rules of equity shall

prevail.


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Cases of conflict not enumerated, equity to prevail

(13) Generally in all matters not particularly mentioned in this section, in which there is any

conflict or variance between the rules of equity and the rules of the common law with reference

to the same matter, the rules of equity shall prevail.

SUPREME COURT OF JUDICATURE ACT (CAP.322),SECTION 18

Powers of High Court

18.(1) The High Court shall have such powers as are vested in it by any written law for the

time being in force in Singapore.

[16/93]

(2) Without prejudice to the generality of subsection (1), the High Court shall have the powers

set out in the First Schedule.

[16/93]

(3) The powers referred to in subsection (2) shall be exercised in accordance with any written

law or Rules of Court relating to them.

[16/93]

SUBORDINATE COURTS ACT (CAP.321),SECTIONS 31&52

Powers of District Court same as High Court

31.(1) A District Court, as regards any action within its jurisdiction, shall in any proceedings

before it

(a) grant such relief, redress or remedy or combination of remedies, either absolute or

conditional; and

(b) give such and the like effect to every ground of defence or counterclaim equitable or

legal,

as ought to be granted or given in the like action by the High Court and in as full andample a manner.

[15/93]

(2) Without prejudice to the generality of subsection (1), a District Court shall, as regards any

action within its jurisdiction, have power

(a) to grant an injunction whether or not any other relief is or could be claimed; and

(b) to make binding declarations of rights whether or not any consequential relief is or could be

claimed.

[15/93]

Civil jurisdiction of Magistrates Courts

52.(1) Subject to Rules of Court, a Magistrates Court shall have the jurisdiction and powers

conferred on a District Court by sections 20 (except 20 (1) (b)), 21, 29, 31 (1), 32 and 43 in any

proceedings where the amount claimed or the value of the subject-matter in dispute does not

exceed the Magistrates Court limit.

[6/76;3/86;15/93]

(2) In exercising its jurisdiction under subsection (1), a Magistrates Court shall be subject to the

same limitations and provisions as are applicable to a District Court under this Act.


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(3) The President may, after consulting the Chief Justice, by order vary the Magistrates Court

limit.

[15/93]

C. Continuing importance of equity

(1) Creativity of equity

Lau Siew Kim v Teo Guan Chye Terence [2008] 2 SLR 108, [24][33]

NoteRepeats points mentioned in Pearce.

Creativity of equity

Creativity of equity

o Re Hallets EstateDoctrines are progressive, refined and improved.

Not past the age of childbearing

o Denning MR - The new model constructive trust whenever justice and good

conscience demands it

o Eves v Evesequity is not past the age of child bearing

Creativity of equity circumscribed

o Reluctance to countenance judicial law making

Western Fish Products v Penwith District Council The creation of new

rights and remedies is a matter for parliament and not the judges

Westdeutsche Landesbank Girozentrale v Islington London Borough

Council a great usurpation of the role of the legislature. A clear

example of judicial lawmaking.

Great Peace Shipping Ltd v Tsalviris Salvage (International) Ltd

Introduction of wider jurisdiction to set aside contracts for common

mistake should be by legislation and should not be achieved throughdevelopment of equitable jurisdiction

Counter arguments

Consider then what about incremental development

Black letter law

Time lag

Issues of interpretation = narrow? S9A interpretation act

Individual justice?

When is it for the legislature to make the ground breaking rules

o Danger of uncertainty

Cowcher v Cowcherthe only justice that can be obtained is according

to law; admitted facts and principles in the field of equity thechancellors foot has been measured or is capable of measurement.

Westdeutsche Landesbank Girozentrale v Islington London Borough

Council consequential commercial uncertainty that an unprincipled

alteration to the law is bound to produce

Evolution of new rights and remedies from existing principles

o Allen v Syder judge made law will alter to meet the changing conditions of

society but new rules should be related to the fundamental doctrine. If the

accepted doctrine is submerged under new principles, without regard to


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interaction between the two, there will be high uncertainty as to the state of the

law both old and new.

o Re Diplock An equitable claim must be shown to have an ancestry founded in

practice and precedents of the courts administering equity jurisdiction. Not

sufficient that the justice of the case requires it.

o Cowcher v Cowcher Its progeny must be legitimate, by precedent out of

principle

Examples of creativity of equity

o Creation

Mareva Injunction

Anton Pillar Order

o Extension

Resulting and constructive trusts

Properietary estoppel

o Rejection

New model constructive trust

(2) Fusion of equity and law?

SEAGER V COPYDEX [1967]1WLR923

Invented a carpet grip

Negotiated with another, confidential information passed. No contract.

Applied for injunction to restrain use of confidential information.

Issue of unconscious copying = breach of confidence?

Holding

o Saltman v CampbellIf df proved to have used confidential information,

directly or indirectly obtained from the plaintiff without consent express orimplied of the plaintidd, he will be guilty of infringing plaintiffs rights

o Terrapin v Builders Supply Co (Hayes) LtdNot allowed to be used as a

springboard, regardless if information is already in the public domain

o Equity No need for implied contract. Broad principle of equity that he

who has received information shall not take advantage of it. Wholly

private, part private part public.

Is this creating a new rule?

UNITED SCIENTIFIED HOLDINGS V BURNLEY BOROUGH COUNCIL [1978]AC904.

At p 924925 discredits the 2 streams. It is meaningless. Follow the statute.

At p936 937 rule at common law changed to follow equity so difference is

meaningless. Not nec fused.

At p944-945 fusion

At p 957-958 agrees

HARRIS V DIGITAL PULSE PTY LTD [2003]NSWCA10;197ALR626;SEE NOTE BY JEDELMAN,

AFUSION FALLACYFALLACY?(2003)119LQR375


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Eden and Harris misappropriated confidential information belonging to

Digital Pulse, lied to its controlling director and used its facilities and office

hours to set up Juice and divert projects from Digital Pulse.

The trial judge made orders including an award of $10,000 exemplary

damages against both Eden and Harris because something more than

compensation was necessary to ameliorate the plaintiff's sense of

outrage.

To the objection that this award was unknown to a court of equity, his

Honour held that the availability of exemplary damages should be co-

existent with its rationale and that it should make no difference whether

it was claimed at common law or in equity

On appeal, The majority rejected the two central arguments in favour of

exemplary damages for a breach of fiduciary duty:

o that equity recognised punitive awards in other areas so the

jurisdiction to make exemplary damages already existed;

o alternatively, if the jurisdiction did not exist then, by analogywith

tort law, it should be recognised. Spigelman C.J. and Heydon J.A. were both strongly critical

of fusion, considering it to be aflawed process of

reasoning thatthe joint administration of two distinctbodies of law means that the doctrines of one areapplicable to the other (at [18], [353]-[355], [391]).

Mason P. clearly accepted this, but he considered that thefusion fallacy bogey is quite different in nature (at[139]-[140]). In an answer to the challenge issued byLehane J., Mason P. said thatfusion involves a process ofdevelopment of the principles of equity consistently, and byanalogy with, common law principles. He explained thatthis process is wholly independent of the concurrent

administration of law and equity and that it considerablypre-dated the Judicature Acts (at [132]-[155]).

What emerges from all the judgments is therefore a clear

rejection of what might be labelled automatic fusion

but a compelling argument by Mason P. for fusion by

analogy.

ABURROWS,WE DO THIS AT COMMON LAW BUT THAT IN EQUITY(2002)22OJLS1.

Anti fusion

o Fusion of administrationo Did not fuse substantive law

o Can develop incrementally and independently

o Can develop by analogy

o Cannot develop by adopting reasoning from one side to the other

Pro fusion

o Not expressly stated, but sets the framework

o Many areas where here is harmonious fusion


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o Where there is conflict, inconsistencies should be removed

There should be fusion. To remove inconsistencies between law andequity

3 categories:o (a) Law and equity co-exist coherently and historical labels are at

least useful, e.g. trusto (b) Law and equity co-exist coherently but the historical labels are

not useful, e.g. mistake in contract, duress & undue influenceo (c ) Law and equity do not co-exist coherently, e.g. law of set-off,

tracing (rules of identification), compound interest, limitation ofactions etc

K MASON, FUSION: FALLACY, FUTURE OR FINISHED

Varieties and stages of fusion

o fusion of administration,o procedure,

o remedies and

o doctrines.

Fusion to prevent abuse of process

KIRBY,EQUITYS AUSTRALIAN ISOLATIONISM20NOVEMBER 2008

Suggests that a special Australian hostility to the development of the equitable

doctrine has emerged. He calls for a change of this attitude and urges that it is recognized that

the categories of equity are never closed. Lawyers have responsibility foron-going renewal of equitys doctrines and themes.

Australians positiono Cites the Australian text of Meagher, Gummow and L ehane for

the authors views that the doctrines and remedies of equity aredistinct and separate from common law doctrines. (authors callfusionfallacy)

o Judges have rejected arguments that equity recognized punitiveawards in other fields. A divided Court delivered the majority

judgment in Harris v Digital Pulse Pty Ltd to overturn the

decision of a trial judge who had awarded an exemplary damagesfor proved breach of fiduciary duty

(3) Outline of equitable remedies

1. Specific performance

a. Enforcement of positive contractual obligation

b. No adequate remedy at law

c. Discretionary
http://www.lawlink.nsw.gov.au/lawlink/Supreme_Court/ll_sc.nsf/vwPrint1/SCO_mason161204http://www.lawlink.nsw.gov.au/lawlink/Supreme_Court/ll_sc.nsf/vwPrint1/SCO_mason161204http://localhost/var/www/apps/conversion/tmp/scratch_10/theaustralian.com.au/business/legal-affairs/equitys-australian-isolationism/story-e6frg97x-11http://localhost/var/www/apps/conversion/tmp/scratch_10/theaustralian.com.au/business/legal-affairs/equitys-australian-isolationism/story-e6frg97x-11http://localhost/var/www/apps/conversion/tmp/scratch_10/theaustralian.com.au/business/legal-affairs/equitys-australian-isolationism/story-e6frg97x-11http://localhost/var/www/apps/conversion/tmp/scratch_10/theaustralian.com.au/business/legal-affairs/equitys-australian-isolationism/story-e6frg97x-11http://localhost/var/www/apps/conversion/tmp/scratch_10/theaustralian.com.au/business/legal-affairs/equitys-australian-isolationism/story-e6frg97x-11http://localhost/var/www/apps/conversion/tmp/scratch_10/theaustralian.com.au/business/legal-affairs/equitys-australian-isolationism/story-e6frg97x-11http://www.lawlink.nsw.gov.au/lawlink/Supreme_Court/ll_sc.nsf/vwPrint1/SCO_mason161204


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d. Remedy in personam

e. Equity does not act in vain

i. If requires constant supervision by the court then it will not grant

2. Injunction

a. Court order to do or refrain from doing a particular act

b. Prohibitory / mandatory or quia timet

c. Non compliance = contempt

d. Interlocutory injunction

i. Enforce substantive rights during trial

3. Declaration

4. Anton Piller

a. Preservation of property or documents

b. Granted in exceptional cases

5. Mareva Injunction

a. Restrain defendant from dealing with his assets to prevent dissipation

6. Monetary compensation

a. Same as damages?

b. Does remoteness and causation apply?7. Recission

a. Setting aside of contract

8. Rectification

a. To correct instruments or deeds

9. Delivery up and cancellation

a. Equitable remedy leading to the destruction of relevant property

(4) The concept of trust

See below.

D. The concept of trust

Why is definition important

Different legal consequenceso Consider when there is liwuidationo Limitationo Remedieso Formality requirementso Duties that are owed

PEARCE,STEVENS &BARR,PP 7182

General

Hybrid natureo Obligation / propertyo Sui generis proprietary obligation

Essential characteristicso Seperation of legal and equitable interest


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o Only exist in relation to specific propertyo Must be held by a trustee, subject to mandatory obligationso Must owe these mandatory obligations to a legal person entitled to enforce them

Article 2 of the Hague Convention on the Law Applicable to Trusts and on theirRecogniton

o trust refers to the legal relationship inter vivos or on death by a person the

settler, when assets have been placed under the control of a trustee for thebenefit or for a specified purposeo Has the following characteristics

A separate fund and not part of the trustees estate Title to the trust in the name of a trustee or another person on behalf of

the trustee Trustee has the power and duty to manage employ or dispose of assets

in accordance with terms of the trust and special duties imposed by law

Property subject to trust

A trust can only exist in relation to specific property, whether land or personal property -Westdeutsche Landesbank Girozentrale v Islington London Borough Council theremust be identifiable trust property

o Cannot be created over future property (property not yet in existence butexpected as a possibility in the future)

Examples

Property to be received under the will of a relative who has notdiedRe Ellenborough

Money that a person might win from the lottery Possible to contract to promise to create a trust. But this is different from

creating an immediate trust (this creates a contractual obligation but nota trust obligation)

o Cannot create trust over uncertain property Re Goldcorp Exchange Company received money from incestors.

Company invested money in various precious metals. Unable to find thatthe metals were held in trust because impossible to identify which

specific metals were the trust property oh which specific investoro Trust will cease to exist if all trust property is dissipated / destroyedRe Diplock ;

Bishopgate Investment Management v Homan

Concept of a trust fundo Where the trust property includes various assets, and trustees may sell assets in

exchange for new ones, all assets are collectively referred to as the trust fund Assets will be fluid. Part of sale and reinvestment Capital held by trustees, income to be paid to beneficiaries, trustee may

invest capital and reinvest in different investments. Trustees usually have powers of disposition over investments Fluidity of trust assets recognized

Re Earl of StratfordA disputed claim formed part of the trust

assets. Trustees may enforce the claim, sell it, compromise it,compoundd it, or abandon it if its worthless. Any of these actionswill replace the claim as an asset of the trust. None of theserepresent a variation of the trust. Merely a change incomposition. If it was compromised at a low level, then theremay be liability for breach of trust. So claim is replaced by fruits of compromise + claim against culpable trustees

Property that is a product of trust property will also be trust propertyo Accretions as well as substitutions


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Where there is more than one beneficiary, trustee may allocate

Where allocation is provided for then its a fixed trust

Where settler allows trustee to decide how property (and thusbenefits from property) is allocated among beneficiariesdiscretionary trust

Where must distribute ALL property in trust among beneficiaries

exhaustive Where trustee can retain and invest all or some of it non

exhaustive

Where trustees have power to apply income from trust propertyto their own benefit maintenance

Where trustees have power to let beneficiary have trust propertyahead of time advancement

o Obligation to manage the trust property Manage and maintain the integrity of the fund Examples

How trust fund be invested

Whether assets should be realized

Whether proceeds of sale reinvested

Statute provides for investment powers Also provides for delegation to an agent to act on behalf of trustee Also for appointment of replacement trustees

Mandatory character of the trustees obligation under the trusto Trustees must perform the trusto If not, court will order them to act as requiredo Alternatively, replace the trusteeso Equity will not allow a trust to fail for want of a trustee

Trustees liability for breach of trusto Act in a manner inconsistent with the terms of the trusto Fail to do what the trust requires them to doo

Fail to act with the requisite objective standard of care expected of them theordinary prudent man of business

Ability of beneficiaries to override terms of the trusto Beneficiaries may authorize a breach after it has happened (ratification)o Will remain liable to beneficiaries who do not give authorizationo Authorization can only be given by people with capacity (of age and legally

competent)o Saunders v Vautier

Property held on trust for a beneficiary aged 21 Terms of trust was to accumulate inc ome till 25 But because reached age of majority, beneficiary can insist that trustee

transfer the trust property to him negating the age restriction Can also countenance variations in its terms Even can be done by people on behalf of beneficiaries as long as its in

their benefit

Fiduciary obligationso General fiduciary duty imposed by equityo Strict duty of exclusive loyalty, obliging them to act solely in the interests of their

beneficiarieso Assumes any personal profit derived from their position as trustee was only

obtained by allowing their own interests to prevail over beneficiaries


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o Obliged to make restitution for any unauthorized profits received by virtue of theirposition OR in circumstances where there was a mere possibility of conflict ofinterest between their duty and their personal interest

o Trustees only entitled to retain such profits if they acted with informed consent orauthorization of beneficiaries

o Fiduciary duty is owed to ALL beneficiaries of a trust

Beneficiaries entitled to benefit of the trust

Generalo Must be held for legal persons

Only legal persons have the locus standito enforce a trusto Only limited instances where trust exists for a purpose

Beneficiaries have right to enforce trust obligationso Entitled to full performance of the terms of the trust

Subject to rights of termination as set out in the trust Or termination by complete performance Or trusts in perpetuity

Beneficiaries have right to override terms of the trusto Rule in Saunders v Vautiero They may not dictate as to all or any of the trustees power under the terms of the

trust .o Cannot require a trustee to retire or a new trustee of their choice to be appointed,

unless they did this by way if terminating the trust and creating a new one.

Beneficiaries also enjoy a proprietary entitlement to the trust fundo Beneficial interest as a mere interest in personam

Maitland, Equity equity has never regarded the beneficiary as ownerof the trust property, but only as entitled to enforce the personalobligation of the trustee to carry out the terms of the trust

Webb v Webb Possibly unreliable because it deals with extraterritoriality

o Beneficial interest as an interest in rem

Can be dealt with like property Transferred by equitable assignment

Sale

Gift

Disposed of by will

Intestate succession Westdeutsche Landesbank Girozentrale v Islington London Borough

Council - Once a trust is established, as from the date of itsestablishment the beneficiary has, in equity, a proprietary interest in thetrust property, which proprietary interest will be enforceable in equityagainst any subsequent holder of the property (whether the originalproperty or substituted property into which it can be traced) other thanthe purchaser for value of the legal interest without notice.

Powers of Appointment

o Generalo A power of appointment in relation to a specific property or a fund of propertyo The holder of the power is called the doneeo The donee may allocate the property and making appointments.o UNLIKE a trust, donee is under no obligation to exercise this power

(discretionary rather than mandatory)o Trustee may also be a done


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o Classification of power by reference to donees dutieso Bare / mere = absolute discretion to allocate

Courts only intervene if a wrongful allocation is madeo Fiduciary power = fiduciary duties

Substantially discretionary. But time to time have to consider whether toexercise in favor of the beneficiaries and to make appointments in theirfavor

o Classification of power by reference to range of objectso General power can allocate to anybodyo Special power only can exercise on an identifiable class of personso Hybrid power Anyone BUT a class of personso NOTE, until appointment

Rule in Saunders v Vautier no application, objects cannot demand thatproperty be transferred to them

No proprietary entitlement held by beneficiaries

Re A Solicitor [1952] Ch 328per Roxburgh J:

As the principles of equity permeate the complications of modern life, the nature and variety oftrusts ever grow.

(1) Definition?

Raynor v Preston (1881) 18 Ch D 1

A bought a messuage and workshop from B

A had insured this from fire. This was not known to B. Not in the contract.

Building caught fire. A received money due to insurance.

B wants that money.

Held that after it was completed, the money cannot be refunded.

Trustee relationship between time of making a contract to time of perfection byconveyance

o No. qualified trust only. Only the property. And not the collateral contract.o It is not a case that the money is received by reason of legal interest in

the property. It was received due to a collateral contract.o Only when the policy is part of the contract can it be considered to be

trust property

Contended that the policy was held in trust. But held that only the property washeld in trust. The policy as not part of that property.

Westdeutsche Landesbank v Islington [1996] AC 669

P689D

(2) Fundamentals of the concept

i. Form of property ownership

ii. Separation of legal and equitable title

iii. Settlors, trustees and beneficiaries

iv. Nature of beneficial ownership

Saunders v Vautier (1841) 4 Beav 115

(3) Distinguishing trust from other legal relationships


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i. Contract

Insolvency setting

Remedies

o Damages

o Equitable Restorative Remedy (different from a compensatory type of

remedy)

o Equitable Compensation

HENRY V HAMMOND [1912]2KB515,521

A instructed B to sell cargo to pay for expenses and claims

After cargo sold, B had 96pounds left

A brought an action to recover it.

But barred by statute of limitations.

Where the duty is to receive property, and to hold it for another, and to keep it

until it is called for, they cannot discharge themselves from that trust by

appealing to the lapse of time (Burdick v Garrick)

If he is not bound to keep it separate, but entitled to m it with his own money and

deal with it as he pleases, and when called upon to hand over an equivalent sum

of money then he is not a trustee but a debtor

The only use of looking at the facts is to see whether in the particular case he

has kept the money as a separate fund is to see whether he has recognized his

obligation

Whether its a contract or a trust has to do with what is to be done with the

money. Separate, or mixed.

ESSENTIALLY IT IS ABOUT INTENTION (source of trust obligations)

CONTRACTS (RIGHTS OF THIRD PARTIES)ACT 1999(CAP.53B)

Minimizes the differences between trusts and contract because thirdparties can enforce the contract

Conditions

o Identified person

o Identifiable class of persons

OPTIONAL: C.H. THAM (2005), "TRUST, NOT CONTRACT: RESTORING TRUST IN THE

CONTRACTS (RIGHTS OF THIRD PARTIES)ACT",JOURNAL OF CONTRACT LAW,VOL.21,

107130

ii. Debt

Difference in insolvency

o Personal vs property interest

BARCLAYS BANK V QUISTCLOSE INVESTMENTS [1970]AC567

Took out a loan, promised to use it to pay dividends

In the end went into voluntary liquidation


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Held

o Clearly there was a trust. There was also a breach of trust

The 1st2 para of undertaking made it clear

for acquisition of property made it clear that the trust

was for a clear purpose

It is sufficiently certain if the courts can say what

is and what is not the purpose Re Badens

deeds trust

Certainty

Borrower is authorized / directed to apply the

money for a purpose

Its a mere power and not a purpose trust

Quistclose trust

Does not come into being after the purpose is

unfulfilled

Prevents anything from being in suspense

o 1stsolicitor was accessory to the breach of trust

Requires a dishonest state of mind Conscious departure

DishonestyRoyal Brunei Air

iii. Trust and agency

RelationshipSimilarityDifferences

a. The agent represents the principalthe agent can enter into a contract:Agencyboth common law and equityf(n) of agentto represent theprincipal in dealing with third partiesagents with your authority enters intocontract with third parties. The primary purpose of the agent is to enter into acontract ON BEHALF of the principle and to affect the principle directly. Thetrustee cannot do that to the beneficiary. Sometimes, the agent is also atrustee because say I want to sell something, andappoint A to sell them asyour agent and to receive payment on my behalf. IN so far as A enters into acontract to sell the items as your agent, if theres a problem, the buyer willsue the principle, but not A.

b. However, we could have stipulated that the money is to be held in trust (i.e. aseparate trust account for the cash)she is both agent and trustee.

i. Agent in so far as A is selling and receiving payment, but trustee in

the sense that she holds the money in trust subsequently. She cannotmix those notes with her money. Must give the exact same notes thatshe collected.

ii. However, if it was not so set up that theres going to be a trust if sheis simply going to take payment, then she can keep that notescollected, bank it into her own account, and when it comes to the timeto pay the principle, she can pay from any of her money.


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c. Agents are also fiduciaries as are trustees. Both must act in their personalcapacity and cannot delegate duty. Neither the agent nor the trustees cantake profit from that office.

i. Agent does not necessarily hold properties for the principalii. Trust relationship always involves trustee holding propertyiii. A trustee does not bring the beneficiary in a relationship with the third

party whom he deals with. The beneficiary only has recourse to thetrustee.

d. Once the trust is set up, the settlor drops out of the picture. Although it ispossible for the settlor to also be the trustee. Whether it is a bilateralrelationship or are there three parties involved.

e. You could appoint someone as an agent to sell your property. But the title tothe property remains with you. Although the agent has the power to transferthe authority, you still do not have a title. The trustee on the other hand caneffect a transfer of the title of the property because he is the holder of thelegal title.

f. Depending on the precise relationship the principle could still, in principle,give irrevocable power to the agent. The converse seem to be true for the

trust. The beneficiary cannot demand that the trustee do anything apart fromwhat the trust deed says. The powers of the trustee would be to the limits asset up by the trust deed. That is not within the beneficiarys right to do so.EXCEPT when all the beneficiaries are sui juris, and they all agree and youcan tell the trustee to give the asset to us [i.e. to end the trust], but that is stilllimited. Practically speaking, theres very little application today for Saundersv Vautier because the class of beneficiaries is usually very large.

iv. Trust and bailment

a. Bailment delivery of chattels to someone, with the request for delivery later.Borrowing of library books.

b. Some courts try to distinguish between different types of bailment. The

difference between general and special propertycan the bailee sell andtransfer good title? No, unless one of the exceptions apply [some bailees fall

c. within the the SOGA]. A trustee on the other hand, simply has full legal title.At common law, he is the owner.

d. So far as the common law courts are concerned, the trustee can transfergood title. But if the transfer was in breach of the beneficiarys trust deed, thethird party takes subject to the beneficiarys beneficial interest.

i. A bailment only applies to chattels [personal property, but not

intangible property].

(4) Classification of trusts

Equity & Trusts Reading List (Wk 1)_03082011

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Transcript of Equity & Trusts Reading List (Wk 1)_03082011