Consent Compensation Restitution Punishment Other Goals

Wrongs

Unjust Enrichment

Other Events

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 / laches o Seeing inconsistencies in different areas of the law

SINGAPORE MANAGEMENT UNIVERSITY SCHOOL OF LAW LAW 303 - LAW OF EQUITY & TRUSTS READING LIST WEEK ONE INTRODUCTION
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

Rules that could not be relaxed as that would reduce certainty and condone carelessness Impossible to make any general law (tendency of legal positivism) Thus emerged equity courts

Workings of a court of equity Bill of complaint Subpoena

Character We are to argue conscience and not the law Decided cases on the basis of his own sense of justice (chancellors foot) Eventually developed precedent Created doctrines of equity No longer an arbitrary court of conscience, but a court of law with recognized principles. Equity acts in personam (an order against the person) o Common injunction Restrain action Restrain enforcement No conflict with the common law

Fusion between common law and equity Instances of Fusion of administration o Ashburner The two streams of jurisprudence, though they run in the same channel they run side by side and do not mingle o Salt v Cooper the main object of the act was to assimilate the transaction of equity business and common law business by different courts of judicature o Second reading of the judicature bill Law and equity would remain, but would be administered concurrently o S49(1) of the Supreme Courts Act rules of equity and rules of common law Instance of Fusion of substantive rules o Practical realism o Walsh v Lonsdale There is only one court and the equity rule prevails in it o Denning J law and equity have been fused for over 80 years ( Errington v Errington and Woods) and such fusion demanded that common law rules with regard to privity of estate should also apply to equitable leases o Boyer v Warby The distinction between agreements under hand and covenants under seal has been obliterated o United Scientific Holdings Ltd v Borough Council the confluent streams would surely have mingled now o New Zealand (Aquaculture Corpn v New Zealand Green Mussel Co Ltd) For its breach, a full range of remedies should be available as appropriate, no matter wheter they originated in common law, equity or statute o Canada (Le Mesurier v Andrus, Canson Enterprises Ltd v Broughton & Co) common law principle of remoteness of damage was held applicable to equitable claim for breach of fiduciary duty. Though also recognized that it is still necessary

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] 2 SLR 108, [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 Kim para 24 - Equity is the body of principles which has evolved progressively to
mitigate the severity sometimes occasioned by the rigid application of the rules of the common 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 of equitable 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 statutory law and judicial precedent for a solution, but if it appears to the judge that there is no clear solution 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 logical vacuum; they are very often acutely aware of the impact that their decisions might have upon the wider community or society at large, and are therefore sensitive to policy considerations.

Last, but by no means least, above all considerations of principle and policy, and sometimes even above precedent, judges are concerned to achieve a solution which works in practice and 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 candidly observed in Westdeutsche ([27] supra) at 685: It is a truism that, in deciding a question of law in
any 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 the case before the court.

B.

Jurisdiction & Maxims

PEARCE, STEVENS & BARR PP 28 34

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 Argyll Adultery 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 Milligan Lesbian 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 Ltd the 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 title which he relied on was acquired in the course of carrying through an illegal transaction Tribe v Tribe Father 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

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 Clay Equity 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 Rye Equity 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 is negative 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.

AELA S3(1)

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 3 AND 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 up of 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.

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 been effectual 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.

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 and ample 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.

(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] Note Repeats points mentioned in Pearce. Creativity of equity Creativity of equity o Re Hallets Estate Doctrines 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 Eves equity 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 through development 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 Cowcher the only justice that can be obtained is according to law; admitted facts and principles in the field of equity the chancellors 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

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] 1 WLR 923

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 Campbell If df proved to have used confidential information, directly or indirectly obtained from the plaintiff without consent express or implied of the plaintidd, he will be guilty of infringing plaintiffs rights o Terrapin v Builders Supply Co (Hayes) Ltd Not 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] AC 904.

At p 924 925 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] NSWCA 10; 197 ALR 626; SEE NOTE BY J E DELMAN, A FUSION FALLACY FALLACY? (2003) 119 LQR 375

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 analogy with tort law, it should be recognised. Spigelman C.J. and Heydon J.A. were both strongly critical of fusion, considering it to be a flawed process of reasoning that the joint administration of two distinct bodies of law means that the doctrines of one are applicable to the other (at [18], [353]-[355], [391]). Mason P. clearly accepted this, but he considered that the fusion fallacy bogey is quite different in nature (at [139]-[140]). In an answer to the challenge issued by Lehane J., Mason P. said that fusion involves a process of development of the principles of equity consistently, and by analogy with, common law principles. He explained that this process is wholly independent of the concurrent administration of law and equity and that it considerably pre-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.

A BURROWS, WE DO THIS AT COMMON LAW BUT THAT IN EQUITY (2002) 22 OJLS 1.

Anti fusion o Fusion of administration o 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

Where there is conflict, inconsistencies should be removed

There should be fusion. To remove inconsistencies between law and equity 3 categories: o (a) Law and equity co-exist coherently and historical labels are at least useful, e.g. trust o (b) Law and equity co-exist coherently but the historical labels are not useful, e.g. mistake in contract, duress & undue influence o (c ) Law and equity do not co-exist coherently, e.g. law of set-off, tracing (rules of identification), compound interest, limitation of actions etc

K MASON, FUSION: FALLACY, FUTURE OR FINISHED <http://www.lawlink.nsw.gov.au/lawlink/Supreme_Court/ll_sc.nsf/vwPrint1/SCO_mason161204 >

Varieties and stages of fusion o fusion of administration, o procedure, o remedies and o doctrines. Fusion to prevent abuse of process

KIRBY, EQUITY S AUSTRALIAN ISOLATIONISM 20 NOVEMBER 2008

<http://www.theaustralian.com.au/business/legal-affairs/equitys-australianisolationism/storye6frg97x-1111118084379>

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 for on-going renewal of equitys doctrines and themes. Australians position o Cites the Australian text of Meagher, Gummow and Lehane for the authors views that the doctrines and remedies of equity are distinct and separate from common law doctrines. (authors call fusion fallacy) o Judges have rejected arguments that equity recognized punitive awards 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 damages for 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

2.

3. 4.

5. 6.

7. 8. 9.

d. Remedy in personam e. Equity does not act in vain i. If requires constant supervision by the court then it will not grant 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 Declaration Anton Piller a. Preservation of property or documents b. Granted in exceptional cases Mareva Injunction a. Restrain defendant from dealing with his assets to prevent dissipation Monetary compensation a. Same as damages? b. Does remoteness and causation apply? Recission a. Setting aside of contract Rectification a. To correct instruments or deeds 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 consequences o Consider when there is liwuidation o Limitation o Remedies o Formality requirements o Duties that are owed

PEARCE, STEVENS & BARR, PP 71 82

General Hybrid nature o Obligation / property o Sui generis proprietary obligation Essential characteristics o Seperation of legal and equitable interest

o Only exist in relation to specific property o Must be held by a trustee, subject to mandatory obligations o 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 their Recogniton 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 the benefit or for a specified purpose o 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 there must be identifiable trust property o Cannot be created over future property (property not yet in existence but expected as a possibility in the future) Examples Property to be received under the will of a relative who has not died Re 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 not a 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 that the metals were held in trust because impossible to identify which specific metals were the trust property oh which specific investor o Trust will cease to exist if all trust property is dissipated / destroyed Re Diplock ; Bishopgate Investment Management v Homan Concept of a trust fund o 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 Stratford A 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 actions will replace the claim as an asset of the trust. None of these represent a variation of the trust. Merely a change in composition. If it was compromised at a low level, then there may 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 property o Accretions as well as substitutions

o o

Examples Dividends from shares Property acquired by sale and reinvestment of trust property Any unauthorized profit earned from exploiting trust property is also trust property Example Shares are trust property. Trustee uses voting rights that comes from shares to make a private profit or any kind of renumeration. Profits are trust property.

Trustees Subject to the Obligations of the trust Trust as a species of obligation o It is the right to own property subject to mandatory obligations according to the terms of the trust owed to the beneficiary o Trustee has the right to deal with the property because he owns it Dealings in contravention of the trust agreement does not make the dealing in property ultra vires / void Hammersmith and Fulham London Borough Council v Monk The fact that a trustee acts in breach of trust does not mean that he has no capacity to do the act he wrongly did Instead, liability to beneficiary for breach of trust. The source of trust obligations o Generally Where owner subjects himself to trust obligations Presumed to have subjected it to trust obligations Trust imposed by law o Express intention to impose trust obligations Deliberate declaration that property is held on trust o Implied intention to impose trust obligations Equity presumes that the property was meant to be held in trust. Westdeutsche Landesbank Girozentrale v Islington London Borough Council - resulting trust arises in two main circumstances A makes a payment to B voluntarily or pays wholly or partly for the purchase of property which is vested either in B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B; the money or property is held on trust for A (if A is sole provider of the enemy) or by A and B in shares proportionate to their contributions (if it is a joint purchase) Where A transfers property to B on express trusts, but the trusts declared do not exhaust the whole beneficial interest o Imposed trust obligationss Where the law demands that he be required to hold the property for the benefit of others due to his unconscionable conduct The law imposes a Constructive Trust Content of trustees obligations under the trust o Generally Determined by terms of the trust In the absence of contradictory express terms, some powers and duties granted and imposed by statute Trustees Act o Obligation to allocate trust property Obligation to apply trust property for the benefit of all beneficiaries in accordance with the terms of the trust

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 thus benefits from property) is allocated among beneficiaries discretionary 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 property to their own benefit maintenance Where trustees have power to let beneficiary have trust property ahead of time advancement 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 trust o Trustees must perform the trust o If not, court will order them to act as required o Alternatively, replace the trustees o Equity will not allow a trust to fail for want of a trustee Trustees liability for breach of trust o Act in a manner inconsistent with the terms of the trust o Fail to do what the trust requires them to do o Fail to act with the requisite objective standard of care expected of them the ordinary prudent man of business Ability of beneficiaries to override terms of the trust o Beneficiaries may authorize a breach after it has happened (ratification) o Will remain liable to beneficiaries who do not give authorization o 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 obligations o General fiduciary duty imposed by equity o Strict duty of exclusive loyalty, obliging them to act solely in the interests of their beneficiaries o Assumes any personal profit derived from their position as trustee was only obtained by allowing their own interests to prevail over beneficiaries

o o o

Obliged to make restitution for any unauthorized profits received by virtue of their position OR in circumstances where there was a mere possibility of conflict of interest between their duty and their personal interest Trustees only entitled to retain such profits if they acted with informed consent or authorization of beneficiaries Fiduciary duty is owed to ALL beneficiaries of a trust

Beneficiaries entitled to benefit of the trust General o Must be held for legal persons Only legal persons have the locus standi to enforce a trust o Only limited instances where trust exists for a purpose Beneficiaries have right to enforce trust obligations o 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 trust o Rule in Saunders v Vautier o 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 fund o Beneficial interest as a mere interest in personam Maitland, Equity equity has never regarded the beneficiary as owner of the trust property, but only as entitled to enforce the personal obligation of the trustee to carry out the terms of the trust Webb v Webb Possibly unreliable because it deals with extra territoriality 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 its establishment the beneficiary has, in equity, a proprietary interest in the trust property, which proprietary interest will be enforceable in equity against any subsequent holder of the property (whether the original property or substituted property into which it can be traced) other than the purchaser for value of the legal interest without notice.

Powers of Appointment o General o A power of appointment in relation to a specific property or a fund of property o The holder of the power is called the donee o 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

Classification of power by reference to donees duties o Bare / mere = absolute discretion to allocate Courts only intervene if a wrongful allocation is made o Fiduciary power = fiduciary duties Substantially discretionary. But time to time have to consider whether to exercise in favor of the beneficiaries and to make appointments in their favor Classification of power by reference to range of objects o General power can allocate to anybody o Special power only can exercise on an identifiable class of persons o Hybrid power Anyone BUT a class of persons o NOTE, until appointment Rule in Saunders v Vautier no application, objects cannot demand that property be transferred to them No proprietary entitlement held by beneficiaries

Re A Solicitor [1952] Ch 328 per Roxburgh J: As the principles of equity permeate the complications of modern life, the nature and variety of trusts 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 by conveyance 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 was held in trust. The policy as not part of that property.

Westdeutsche Landesbank v Islington [1996] AC 669 P689D

(2)

Fundamentals of the concept i. ii. iii. iv. Form of property ownership Separation of legal and equitable title Settlors, trustees and beneficiaries Nature of beneficial ownership Saunders v Vautier (1841) 4 Beav 115

(3)

Distinguishing trust from other legal relationships

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] 2 KB 515, 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 third parties 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] AC 567

Took out a loan, promised to use it to pay dividends In the end went into voluntary liquidation

Claim that the money was held in trust with the shareholders as beneficiaries Counter argued that it was a loan to Razor that created a debt that the bank should claim in an action for debt and not trust o Held that this is crap o The specific intention was to pay one person (or do one thing) o No intention to let razor use it as its own assets and pay whoever they like o To do so would be ignoring parties intentions o There is an action for debt, coexisting with an action for trust 2 questions o Whether the loan was as to impress a trust on him Loan was specifically granted to pay the dividend Sum advanced would no become assets but be used to pay dividends Dividends to be paid exclusively to a specific class of creditors Quistclose = Settlor Bank = Trustee A mere power to pay the creditors Creditors = Beneficiaries A situation of payments of a persons creditors by a third person gives rise to a fiduciary relationship = trust Primary trust to the creditors If primary trust fails, of the third person (because if money is not passed to creditors then it goes back to the settlor) Where money is advanced for a specific purpose, so clothed in a trust, will not be property of the intermediary Troovey v Milne Where there is an intention that it be included in a companys assets (mixed) then it is a debt and not a trust o Whether he had notice of the trust Yes. Cover letter. Though just opening a separate account is not enough

TWINSECTRA V YARDLEY [2002] UKHL 12; [2002] 2 AC 164

Clt needed a loan to finance an acquisition Lender needed solicitors undertaking st 1 Solicitor not willing. 2nd solicitor took up undertaking o Loan money will be retained until acquire the property o Utilized solely for the acquisition o Money to be returned with interest st Lender lent money to Clt, passed to 1 solicitor st 1 solicitor held money on account. Money was paid out for various purposes not restricted to the acquisition. nd 2 solicitor bankrupt, loan not repaid Claim for breach of trust

Held o

Clearly there was a trust. There was also a breach of trust st The 1 2 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 st 1 solicitor was accessory to the breach of trust Requires a dishonest state of mind Conscious departure Dishonesty Royal Brunei Air

iii.

Trust and agency

Relationship Similarity Differences a. The agent represents the principal the agent can enter into a contract: Agency both common law and equity f(n) of agent to represent the principal in dealing with third parties agents with your authority enters into contract with third parties. The primary purpose of the agent is to enter into a contract ON BEHALF of the principle and to affect the principle directly. The trustee cannot do that to the beneficiary. Sometimes, the agent is also a trustee because say I want to sell something, and appoint A to sell them as your agent and to receive payment on my behalf. IN so far as A enters into a contract to sell the items as your agent, if theres a problem, the buyer will sue the principle, but not A. b. However, we could have stipulated that the money is to be held in trust (i.e. a separate 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 cannot mix those notes with her money. Must give the exact same notes that she collected. ii. However, if it was not so set up that theres going to be a trust if she is simply going to take payment, then she can keep that notes collected, bank it into her own account, and when it comes to the time to pay the principle, she can pay from any of her money.

c. Agents are also fiduciaries as are trustees. Both must act in their personal capacity and cannot delegate duty. Neither the agent nor the trustees can take profit from that office. i. Agent does not necessarily hold properties for the principal ii. Trust relationship always involves trustee holding property iii. A trustee does not bring the beneficiary in a relationship with the third party whom he deals with. The beneficiary only has recourse to the trustee. d. Once the trust is set up, the settlor drops out of the picture. Although it is possible for the settlor to also be the trustee. Whether it is a bilateral relationship or are there three parties involved. e. You could appoint someone as an agent to sell your property. But the title to the property remains with you. Although the agent has the power to transfer the authority, you still do not have a title. The trustee on the other hand can effect a transfer of the title of the property because he is the holder of the legal 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 from what the trust deed says. The powers of the trustee would be to the limits as set 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 you can tell the trustee to give the asset to us [i.e. to end the trust], but that is still limited. Practically speaking, theres very little application today for Saunders v 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 property can the bailee sell and transfer 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 transfer good title. But if the transfer was in breach of the beneficiarys trust deed, the third 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