EQUITY: Introduction

What is Equity? Why do We Need it?

Equity is a body of legal principles, which exists to make the common law
operate more fairly and to assist parties to attain better justice through the law.
Trusts
The trust is

where equity and property law intersect.

the nature of various types of trust;
the rules relating to the creation of express trusts; and
the rules relating to the administration of express trusts.

What is Equity?
Commonly, equity = fairness and / or justice
The Legal Definition
Equity is the body of law developed by the Court of Chancery in England before
1873. Its justification was that it corrected, supplemented and amended the
common law. It softened and modified many of the injustices at common law,
and provided remedies where, at law, they were either inadequate or nonexistent.
(Meagher, Gummow and Lehanes
para 101)

Equity: Doctrines and Remedies p3,

Operation of Equity
Equity and the Common Law
Relationship between Equity and the Common Law
Before the Judicature System

Equity and common law were administered in two entirely separate court
systems:
Equity in the Court of Chancery
Common law in the common law courts (Kings Bench, Common
Pleas and Exchequer)
Common law courts would not recognise equitable rights, titles and
interests.
E.g. Coroneo v Australian Provincial Assurance Asn Ltd (1935) 35 SR (NSW) 391.
Castlereagh Motels v Davies-Roe [1966] 2 NSWLR 79.
Before the Judicature Act

Chancery had no power to award damages.

Conversely, the common law courts lacked power to:
give interlocutory relief.
award specific performance, or injunctions.
make declarations.
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No power existed to transfer cases from one jurisdiction to the

other.

The need for reform

By early in the 19th century, the urgent need for reform was clear
The Court of Chancery no longer enjoyed a good reputation
Technical procedures and too many lawyers.
Judicature System
Implemented by the English Judicature Acts of 1873 and 1875.
*Judicature system: set up one court (venue), one Judge but different
jurisdictions.
To overcome problems caused by the separate administration of Common
Law and Equity.
Abolished the court of Chancery and the Common Law Courts
Replaced them with one court the High Court of England of which Kings
Bench and Chancery were divisions.
This court was given jurisdiction to dispense both Equity and the Common
Law.
Main Features of the System

All branches of the court can administer equitable remedies.

Equitable defences may be pleaded in all branches of the court.
All branches of the court must recognise equitable rights, titles and
interests.
All branches of the court have a general power to determine legal rights
and titles.
The common injunction to the Chancery to stop what was happening in
the other court was abolished.
NB However, its effect was preserved, because the Act expressly provided
that in cases of conflict, the laws of equity prevail.

Equity in Australia
States other than NSW
Judicature legislation was introduced in most States in the 19 th or early 20th
centuries
QLD
SA 1878;
Vic 1883
1876,
WA 1880,
Tas 1932.
NSW- The Judicature system was not implemented until the mid-1970s
Judicature system wasnt popular with equity lawyers
A lot of different equitable principles in Australia compared to Britain etc.

Result

This created a unique environment in which for Equity to flourish.

NSW Equity judges were well represented on the High Court.
Australia has a robust and fertile Equity jurisdiction.

Western Australia
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Supreme Court Act 1935 (WA).

Part III - Jurisdiction and law
Section 16(1) General Jurisdiction
This gives the Supreme Court its jurisdiction.

s 16(1) Supreme Court Act 1935 (WA)

The Supreme Court

(a) is invested with and shall exercise the jurisdiction, powers,
and authority within Western Australia as the Courts of Queen's
Bench, Common Pleas, and Exchequer had and exercised in
England at the commencement of the Supreme Court Section 16(1)
Ordinance 1861;
In other words the Supreme Court of WA has a common law
jurisdiction
that is commensurate with the jurisdiction of the English common
law courts before the Judicature System.
AND
(d) shall be a court of equity, with power and authority within
Western Australia
(i) to administer justice, and to do all things necessary for the
due execution of such equitable jurisdiction as, at the
commencement
of
the
Supreme
Court
Ordinance 1861, the Lord Chancellor of England could or lawfully
might have done within the realm of England in the exercise of the
jurisdiction to him belonging;
In other words the Supreme Court of WA has an equitable
jurisdiction
that is commensurate with the jurisdiction of the English Court of
Chancery before the Judicature System.

Was implemented in WA by enacting in the Supreme Court Act 1880 (WA)

provisions equivalent to those of the Judicature Act 1873 (UK)).
The relevant provisions are now found in Supreme Court Act 1935 (WA):
s 24 headed Law and equity to be concurrently administered
and s 25.

The Judicature system in WA

The Judicature system in WA- s 24(1) Enforcing Equitable

Rights and Interests

The Court must recognise equitable rights, titles and interests

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If any plaintiff claims to be entitled to any equitable estate

right, or to relief upon any equitable ground the Court
shall give to such plaintiff such and the same relief as
ought to have been given by the Court in its equitable
jurisdiction in a suit for the same or the like purpose
instituted before the commencement of the said Act.

As well as legal rights titles and interests, see s 24(6).

Section 24(4) Recognition of Equitable Rights and Interests

The Court must recognise all equitable rights, proprietary interests,

duties and liabilities

The Court, and every Judge thereof, shall recognize and take notice of all
equitable estates, titles, and rights, and all equitable duties and liabilities
appearing incidentally in the course of any cause or matter, in the same
manner in which the Court in its equitable jurisdiction would have
recognized and taken notice of the same in any suit or proceeding duly
instituted therein before the commencement of the Supreme Court Act
1880.

Equitable defences may be pleaded in all branches of the court.

If any defendant alleges any ground of equitable defence to any

claim every judge thereof, shall give to every equitable defence
so alleged, such and the same effect, as the Court in its equitable
jurisdiction ought to have given if the same or the like matters had
been relied on by way of defence in any suit or proceeding instituted
by the Court for the same or the like purpose before the
commencement of the Supreme Court Act 1880.

Section 24(2) Equitable Defences

Jurisdiction with respect to Equitable and Legal Remedies

The court may award equitable and / or legal remedies in the same action.
See s 24(7).
With respect to equitable remedies, see s 25.
Especially, s 25(10) with respect to injunctions.

s 24(7) - avoiding multiplicity of legal proceedings

The Court is to administer equity and the common law simultaneously, so

as to avoid multiplicity.

2 separate jurisdictions, with one judge and one court to avoid running
around.

The Court, in the exercise of the jurisdiction vested in it by this Act,

shall have power to grant, either absolutely or on such
reasonable terms and conditions as shall seem just, all such
remedies whatsoever as any of the parties thereto may appear to
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be entitled to in respect of any and every legal or equitable

claim properly brought forward by them in such cause or matter;
so that, as far as possible, all matters so in controversy
between the parties may be completely and finally
determined, and all multiplicity of legal proceedings
avoided.

The common injunction was abolished.

No cause or proceeding at any time pending in the Supreme Court
shall be restrained by prohibition or injunction; but every matter of
equity on which an injunction against the prosecution of any such cause or
proceeding might have been obtained, may be relied on by way of
defence thereto;

s 25(12) Equity Rules

NB However, in cases of conflict, the laws of equity prevail.

Generally in all matters not hereinbefore particularly mentioned,
in which here was, before the passing of the Supreme Court Act
1880, 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.

s 24(5) abolition of the common injunction

Equity in the lower courts - District Court

District Court of Western Australia Act 1969 (WA): s 55. Court has powers
of Supreme Court

District Court has essentially the same equitable jurisdiction as the

Supreme Court, only limited to matters within the $750, 000 jurisdictional
limit.
The Magistrates Court also has jurisdiction to hear equitable claims.
However, this jurisdiction is limited by more than the jurisdictional limit.
For instance, only if the only relief claimed = a monetary payment
(damages liquidated / otherwise).
May not relate to title to land or a settlement made in a will.
We will focus on cases of the Supreme Court level.

Summary - Equitable Jurisdiction of Lower Courts

The Result

In WA today, the Common Law and Equity are complementary, but

distinct, bodies of legal principle.
Each is dispensed simultaneously by the Supreme Court.
And to a limited extent, by the District and Magistrates Courts.

Equity and the Common Law: Fusion?

In theory, the Judicature System merely amalgamated the administration

of Equity and the Common Law.
It did not merge the principles / fuse the jurisdictions themselves.
Argued common law and equity were separate and needed to be practiced
separately.
But in practice, this has become a matter of contention and controversy.

From time to time

It has been asserted that:
Law and Equity were themselves fused in 1875.
The waters of the confluent streams of law and equity are now
mingled.
More tolerance for fusion in the English courts as opposed to
Australian courts.
See United Scientific Holdings Limited v Burnley Borough Council [1978]
AC 904, 924 - 5, Lord Diplock.

Fusion Fallacies

The fusion fallacy = the mistaken view that the effect of the Judicature
Acts was to fuse / amalgamate the jurisdictions of common law and equity.
Coined by Meagher, Gummow and Lehane. Equity: Doctrines and
Remedies, p 52.
The term is often used with respect to judgments in which the courts
confuse the joint administration of common law and equity in the one
court with the idea that the two sets of principles were fused or
amalgamated in some way. i.e. the outcome couldnt have happened
before the Judicature system was implemented. The Judicature system
essentially didnt change the law, it changed the venue.

Fusion Fallacy

The Fusion Fallacy

But the contrary view has its proponents.

See Andrew Burrows, We Do This At Common Law But That In
Equity (2002) 22 Oxford Journal of Legal Studies 1.
Some say that they ought to merge.
Others assert that this has already occurred.
Some famous examples of the fusion fallacy in action:
The blended jurisdiction variety
Example: Deane J in Waltons Stores (Interstate) v Maher (1988) 164
CLR 387 and, Mason CJ and Deane J in Cwealth v Verwayen (1990) 170
CLR 394
In this case it mattered what estoppel was used. The common law
estoppel couldnt be used as a cause of action in these circumstances.
I.e. common law cause of actions would generally only bring a
common law remedy.
You can only get an equitable remedy where a common law remedy
doesnt suffice to do justice.
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An example of this is a defamation situation as at common law you

can get damages but if the damages are not sufficient to do damages
then you may be able to obtain an equitable remedy at the courts
discretion.
You cannot get a common law remedy for an equitable cause of action

The Mix and match approach to remedies. Examples:

Denning LJ in Seager v Copydex [No 1] [1967] 1 [WLR] 923; and [No 2]

[1969] 1 WLR 809. equitable cause of action. Here it was a fusion fallacy
as Lord Denning said common law damages could apply but it was an
equitable cause of action.
Sir George Jessell in Walsh v Lonsdale (1882) 21 Ch D 9: Property law
case relating to leases. It was an equitable lease and here the judge said
payment needed to be done yearly and in advance for rent. Principle of
Walsh v Lonsdale
Palmer J in Digital Pulse P/L v Harris (2002) NSWSC 33: Breach of
judiciary obligation and breach of confidence. It was a purely equitable
cause of action. Damages for the loss that had acutally occurred was too
little. The judge said here that the breach was so serious that stronger
damages needed to be awarded. It was a common law damage that was
awarded
The correct approach is to allow the equitable remedy to develop and
change not to lean over to another jurisdiction and pick a remedy, i.e. in
this case use a common law remedy.

How can there be two branches of case law?

Equity follows the Law
Equity cannot exist without the common law.
It is a gloss / overlay on the common law.
Map / overlay
Examples
What if they conflict?
In cases of conflict, equity prevails.

How does it work?

Categories of Equitable jurisdiction

Traditionally, there are three categories of equitable jurisdiction:

Exclusive Jurisdiction
Only equity recognises the cause of action and Common Law does
not provide any remedy at all.
For example,
breach of trust,
breach of fiduciary obligations, and
breach of confidence.
Concurrent Jurisdiction
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Where the facts give rise to a claim to remedies BOTH at common law and
Equity.
So that equitable principles supplement the common law
For example,
doctrines of undue influence, and
Unconscionable bargain.
Auxiliary Jurisdiction

Distinctive Features of Equity

Some of Equitys Distinctive Features

Equity is a settled body of legal principles

But it is different from the common law.

Equity acts in a supplementary/complementary role

Principles not rules

Flexibility v certainty

Facts all important, watch out when using cases as precedent

Discretionary, all equitable remedies are discretionary.

It comprises of doctrines and you must bring your case in one of these
causes of actions.

The common law is the basic map if you overlay equity on top of it, there
are more causes of actions and remedies that complement the common
law. Equity without common law makes no sense.

Principles not Rules

Equity consists of principles, rather than rules.

These principles guide the development of Equity. They ensure that Equity
develops along settled lines, so that it is no longer a series of ad hoc
decrees.

Yet, as these principles serve as guidelines, rather than rules, so that an

acceptable degree of flexibility is retained.

Equitable Maxims

Equitable Maxims are a collection of mottoes, which describe

(rather than prescribe) Equitys general attitude / approach on
particular matters. They are very general.

Examples of maxims

If you want Equity to assist you, you must first fulfil your own obligations.
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Equity may refuse to assist you, if you have acted improperly.

Equity may refuse to help you, if you delay too long. E.g. Allcard v Skinner
(1887) 31 Ch D 145.
Equity will not allow formalities to obscure the parties true intent.
Equity acts by compelling individuals to do particular things (or to refrain
from doing them) E.g. Chellaram v Chellarem [1985] Ch 409. In personam
Generally speaking, only those who have given valuable consideration in a
transaction can seek Equitys assistance in relation to it.
Related maxim = Equity will not perfect an imperfect gift.
E.g. Milroy v Lord [186-73] All ER 783 and Corin v Patton (1990)
169 CLR 540. NB Important exception for beneficiaries of a trust.
Equity will treat parties as if they have already done all the things that
they are obliged to do.
E.g. It will treat parties to a specifically enforceable contract as if
they have already executed that contract. See Lysaght v Edwards
(1876) 2 Ch D 499; Walsh v Lonsdale (1882) 21 Ch D 9.

Equitable Estoppel

Estoppel is more of a consideration. It is generally about precluding

someone.

Key Words = Preclude + Prevent

Estoppel

The doctrine designed to protect a party from the detriment which

would flow from that partys change of position if the assumption or
expectation that led to it were to be rendered groundless by
another. (Butterworths Australian Legal Dictionary 431).

The Purpose of Estoppel

To prevent injustice that would result from the repudiation of a belief or

assumption for which the estopped party is in some way responsible and
where such repudiation would cause harm to the person who holds that
belief or has acted on that assumption.

From Dal Pont and Chalmers, Equity and Trusts in Australia and New
Zealand at 191, citing McHugh JA in Coghlan v SH Lock (Australia)
Ltd (1985) 4 NSWR 158 at 176.

In a nutshell
The basic purpose of most doctrines of estoppel today (or at least estoppel
by conduct)
to prevent or reverse harm caused by detrimental reliance.

Operation
A person might seek estoppel to:

Prevent insistence on strict rights under a contract / other binding

transaction;
Preclude a party from pleading certain facts/claim in litigation;
Prevent the bringing of a claim or cause of action;
Restrain another from asserting proprietary rights.
Estoppel can be brought in these circumstances by the defendant. It acts
as a shield as a defence to preclude or stop someone from doing
something. (Evans, 273)

Three essential features

1. The claimant has made an assumption,

2. such that she/he will suffer detriment if the estopped is permitted to
assert the truth and defeat the assumption; and
3. The estopped has played a part in causing the claimant to make this
assumption, such that it would be unfair or unjust to allow her/ him to
deny the assumption and assert the truth in the circumstances.

See Grundt v Great Boulder Mines PL per Dixon J. [1933] 49

CLR 507 at547.

Comprises:
Estoppel by conduct
Proprietary Estoppel
Estoppel by acquiescence
Estoppel by encouragement
Promissory Estoppel and
NB Equitable Estoppel by Representation

CL v Equitable estoppel- key differences

Representation of fact:
CL estoppel ONLY governs representations of existing FACT.
Shield not a sword:
CL estoppel can only be used as a shield, i.e. defensively only to
stop someone from denying their representation. Not a cause of
action.
Remedy:
Cf Equitable estoppel grants relief proportional to the loss
suffered.

Equitable Estoppel

Equitable Estoppel - Proprietary Estoppel

Comprises:
Estoppel by encouragement
Dillwyn v Llewellyn (1862) 45 ER 1285.
Formal requirements of transferring property.
Estoppel by acquiescence
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Ramsden v Dyson (1866) LR 1 HL 129 .

Crabb v Arun District Council [1976] Ch 179.
i.e. transferred property with an invalid document because it wasnt
registered. There would be no legal interest in the property.
Equity began to grant estoppel in situations which may have been
different to the common law understanding.

Proprietary Estoppel

Where
the owner of property
by words or conduct
induces another to believe that he or she either has, or will be granted
(future), an interest in that property.

Such a belief might be induced:

by an encouragement to build on land (Dillwyn v Llewelyn),
or by acquiescence of the owner to acts that would otherwise be
detrimental to the claimant
e.g. mistaken building on the land (as in Ramsden v Dyson) or
acting detrimentally in relation to ones own land (as in Crabb v Arun District
Council).
Equity offers a defence and not a cause fo action. The person who as
made the mistake ought to be able to sue the other party. i.e. Crabb
believed he had an easement that he didnt have, this ended up being
detrimental to his land.

Estoppel by encouragement

If a person encourages another to believe that they have or will receive a

proprietary interest
and to act upon that belief,
and that the other does so act,
then that person will be estopped from denying that the facts are other
than in accordance with that belief and may even be compelled to make
good the expectation.
Where the defendant actively encouraged someone to believe they would
have an interest or eventually gain an interest. The encourager will be
estopped here.
Promises are only enforceable at common law where they are backed up
by consideration.
This goes further than common law estoppel
Difference to saying no then changing your mind and between actually
checking something and agreeing to it. (Owing money example).
Proprietary= enforcing the promise relating to property.
Dillwyn v Llewelyn (1862) Chancery
Father executed an (ineffective) instrument of conveyance in favour of son
and allowed son into possession of land.
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With fathers knowledge and approval, the son built a house on the land.
After fathers death, son sought a declaration that he was the equitable
owner of the property.
I.e. When acted on by the son, the fathers encouragement gave rise to an
equity in favour of the son which bound the father to make good the sons
expectation.
So, the fathers executors were required to transfer the property into the
sons name.

Where a person mistakenly improves land,

believing it to be his own,
and the true owner, knowing of the mistake,
stands by and deliberately fails to do anything to undeceive the other.
Eg Crabb v Arun District Council and Ramsden v Dyson.
Active encouragement. Relates to property.

Crabb v Arun District Council (1976) Chancery

Held:
The combination of:
the representations made to Crabb at the meeting, erecting the
gates and
standing by while Crabb sold off the first part of his land
Constituted encouragement to the plaintiff to act to his detriment.
Proprietary estoppel
The court indicated that the proper course for the court was the minimum
equity necessary to do justice.
It ordered that a right of access and right of way be granted along the
defendants road as originally contemplated.
I.e. It ordered the Council to make good the expectation.

Estoppel by Acquiescence

Proprietary Estoppel v Common Law Estoppel

Proprietary estoppel may be used to enforce promises where no

consideration is evident. In direct conflict with Jorden v Money (1854) 10
ER 856 .
Proprietary estoppel is a cause of action, the end result of which could to
transfer of property from the defendant to the plaintiff.
Proprietary estoppel was not confined to cases in which the parties were in
a pre-existing contractual relationship.
Radical departure from common law. Need to enforce promises and act
upon them. But it only related to promises in relation to property/ land etc.
BUT they were confined to cases in which force a promisee to fulfil its
promise, it would only do so where that appeared the only appropriate
way to prevent detriment to the promisor.
AND they were confined to cases in which the claimant had believed either
that he had or that he would receive an interest in property.

Promissory Estoppel: Central London Property Trust v High

Trees House Ltd (1947) KB 130
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Facts:
In 1945, the plaintiff offered to accept half of the proper rent for the
duration of the War and promised that it would not pursue the defendant
for the remainder.
The defendant paid the reduced rent from the date of the new
arrangement until after the war was ended and the flats were fully
tenanted.
They hadn't assumed the rent would be halved it had been promised. Lord
Denning enforced promissory estoppel here, but there were limitations.
Held:
This was not a variation to the original contract, because there was no
new supporting consideration.
Nor could it give rise to a common law estoppel by representation,
because the representation made by the plaintiff was that it would not
enforce the rent at the full rate but only at the reduced rate.
So it was a representation as to the future.
Following Jordan v Money, Lord Denning said such a representation could
not give rise to an estoppel at common law.
BUT Lord Denning went on to state that where a person makes a promise,
intending it to be binding, intending it to be acted on, and it is so acted
on, then the promisor will not be allowed to act inconsistently with that
promise. This principle did not create new causes of action.

In 1983 in the case of Legione v Hately (1983) 152 CLR 406 the equitable
doctrine of promissory estoppel was accepted into Australian law. BUT
only as a shield - not as a sword.
And, even then, only as between parties to a pre-existing contractual
relationship.
However, 5 years later, in Waltons Stores v Maher, both of these
limitations were removed

Promissory Estoppel in Australia

Proprietary estoppel v Promissory estoppel

Similarities:
Assumption/representation is created/generated.
Representation may be as to future conduct as well as present(cf CL
estoppel).
Reliance on the assumption/representation.
Detriment will be suffered if the representor departs from the
representation.
Differences
Promissory estoppel could be invoked as a defence but NOT as a
cause of action: Combe v Combe [1951] 2 KB 215.
Proprietary estoppel CAN be invoked as a cause of action: Dillwyn v
Llewelyn [1861-73] All ER 384 (June 4, July 12, 1862) CA in
Chancery.
See also Giumelli v Giumelli (1999) 196 CLR 10.

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Estoppel by conduct exists both at common law and in Equity.

The sub-categories of estoppel by conduct include:
B. In Equity
i. Promissory Estoppel
ii. Proprietary Estoppel

Summary of Estoppel by Conduct

The category of estoppel that is appropriate depends primarily upon the

manner in which the estopped induced the claimant to make the
assumption in question.
E.g. mutual assumption forming the basis of dealings (estoppel by
convention),
representation of existing fact (estoppel by representation),
representation of future fact / intention (promissory estoppel) and
representation (or silent acquiescence to a mistaken belief) that the
estoppee has a certain proprietary interest (proprietary estoppel).
Put another way, the category of estoppel depends on the nature of the
assumption made by the claimant.

Summary of Estoppel by Conduct

Waltons Stores v Maher (1988) 164 CLR 387

Waltons Stores had been negotiating with the Mahers to lease their land.
There was no legal lease here. It was to stop or preclude Walton for
denying the existence of the lease/ documents.
The Mahers wanted to enforce the lease but Waltons changed their mind,
Mahers wanted a cause of action to enforce the lease.
6 elements in Waltons
Powerful doctrine but limited in scope. Case of High trees estoppel only
applies in certain circumstances i.e. where the parties are already in a
contractual relationship.
The Mahers sued, claiming amongst other things, specific performance.
They won (although they got payment in lieu of specific performance).

The doctrine of equitable estoppel

Emergence - Walton's Stores v Maher

Elements - Walton's Stores v Maher

Detriment and remedy Verwayen and Clark

Traditional view of Waltons.

Split in Walton regarding the estoppel. Dean J pointless distinction.

Fusion Fallacy

Collapsed common law and equity.

3 Judges discussed when estoppel would apply and elements etc.

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Elements of Equitable Estoppel

Brennan J (at 428 429)

The object of the estoppel is the reversal of unconscionability. (In equity)
here it was unconscionable for them to assert the truth)
Elements of equitable estoppel =

1. The claimant assumed that a particular legal relationship existed

between the claimant and the estopped party or expected that a
particular legal relationship would exist between them (and in the
latter case that the defendant would not be free to withdraw from
the expected legal relationship); (Assumption)
2. The defendant has induced the plaintiff to adopt that assumption
/ expectation; (Inducement) it is a little stronger than estoppel buy
acquiescence
3. The plaintiff acts / abstains from acting in reliance
on
the
assumption / expectation; (reliance)
4. The defendant knew / intended him to do so; (Know about the
reliance but not necessarily the detriment)
5. The plaintiffs action / inaction will occasion detriment if the
assumption / expectation is not fulfilled; (detriment if not fulfilled)
and
6. The defendant has failed to act to avoid that detriment whether
by fulfilling that assumption / expectation / otherwise. I.e. what the
defendant could have done to prevent the detriment
Found in favour of the Mahers, payment in lieu

Mason and Wilson JJ (at 404)

Equity will come to the relief of a plaintiff who

has acted to his detriment

on the basis of a basic assumption
in relation to which the other party to the transaction has played
such a part in the adoption of the
assumption that it would be unfair or unjust if he were left free to
ignore it.
There essentially isn't much difference between Mason and Wilson and
Brennan
Brennan Js are used more frequently, but legally, there is no reason that
Brennans is more binding than Mason and Wilsons.
In a problem question, examine both approaches.
The question of unconscionability before we advise.

Unconscionability

Brennan J
The object of the Equity is not to compel the party bound to fulfil the
assumption or expectation; it is to avoid the detriment which, if the

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assumption or expectation goes unfulfilled, will be suffered by the party

who has been induced to act or abstain from acting thereon. (at 423)
Mason CJ and Wilson J
Equitable estoppel has its basis in unconscionable conduct. (at 405)

Walton's was adjudged to be not free to withdraw.

Equity was satisfied by treating Walton's as though it had done what it
induced M to think that it would do, i.e. by treating Walton's as if it had
executed and delivered the original deed.
So Maher was entitled to specific performance.
However, ultimately the court ordered Walton's to pay compensation in
place of specific performance.

Post Waltons Stores - Giumelli v Giumelli (1999) High Court

A son was promised land if he worked on the family farm. (farming family)
In reliance on this promise, he worked on the farm for several years.
Several promises involved
He sued his parents, seeking to enforce the promise. He won
Gleeson, McHugh, Gummow and Callinan JJ held that it was a
straightforward proprietary estoppel case. Could have been proprietary or
promissary they didnt use just equitable estoppel, they went back to its
old context.
NB On the facts, compensation was more appropriate than specific
performance.
This doctrine is still evolving
Since Bell in WA there is a ? As to how we can still treat equitable estoppel
as one doctrine following Walton's.
This case was very important following Waltons (Giumelli)

Significance

So the significance of this case is:

it established the doctrine of equitable estoppel and two judgments
outlined its elements.
established that equitable estoppel (not only proprietary estoppel) can be
used as a sword.
Deane J introduced his notion of a fused doctrine of estoppel (by conduct).

Outcome

A novel application W v G [1996] Fam LR 49

One party to a lesbian relationship encouraged the other to become

pregnant
On the understanding that she would act as co-parent and contribute to
the cost and burden of maintaining and supporting the child.
When the relationship broke down, she sought to resile.
She was held to her promise on the basis of equitable estoppel.
Brennan Js six elements were applied here.

The remedial response to equitable estoppel

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The remedial basis of equitable estoppel is the minimum equity to do

justice. - Lord Scarman in Crabb v Arun DC.
It is generally agreed that Justice here means reversing the detriment.
In other words, do no more than to reverse the detriment.
But which detriment?
The minimum equity needed to do justice that is not unconscionable. It is
not there to make good promises. Defendant is seeking to assert to truth
and enforce their legal rights.
You ought to not automatically get equity.
Equity= just enough to reverse the detriment and no more. But what
detriment?

Reliance detriment = the detriment suffered specifically as a result of acts

done in reliance on the assumption.
Expectation detriment = includes as part of the detriment the value of
the promise lost. The value of that which the claimant expected to
receive.
It needs to be just enough to revert the detriment
I.e. Crabb the minimum amount was to be given an equitable
easement
In Waltons it was a lease (monetary)
Giumelli has been said to put cold water on these detriments

Commonwealth v Verwayen (1990) 170 CLR 394

Straight promissory estoppel. At the time of the case military personnel

were not allowed to sue the state but that later changed and by this time
Verwayen wanted to sue but the case was out of date.
Reliance detriment= just the amount he is suing for he could have also
included costs for bringing about the action as well as mental and physical
damage.
Later the Cth made application to change its defence, so as to:
Contest liability; and
Raise the statute of limitations as a defence.
Verwayen argued, inter alia, that the Commonwealth was estopped from
raising these defences.
Issue: for the HC whether the Cth was allowed to resile from its promise,
or should be held to its representation that it wouldnt rely on the defence
and deny liability?
Mr Verwayen won

Expectation detriment v reliance detriment

Held Cth v Verwayen

4:3 split.
17

Majority (Deane, Dawson, Toohey and Gaudron JJ) Cth could not now
resile from its promise.
BUT only 2 of the majority judges used estoppel as the basis for their
decision Deane and Dawson JJ.
Toohey and Gaudron JJ (other majority judges) found on basis of waiver.
Mason CJ, Brennan and McHugh JJ dissented.

Mason J - the purpose of the estoppel is to reverse the detriment suffered

by the claimant. Not to make good the assumption.
Deane J - prima facie the appropriate remedy for estoppel by conduct was
to preclude departure from the assumed state of affairs.

Mason CJ

Supported idea of a single overarching doctrine of estoppel by conduct

(CL and equitable)
The remedy is only that which is required to prevent the detriment.
No prima facie obligation to make good the promise.
NB Gaudron J agreed with that view.

Deane J

Reiterated his view that there is a single doctrine of estoppel by conduct,

incorporating both CL and equitable estoppel.
I.e. the merged doctrine acts like common law estoppel by conduct.

Mason CJ v Deane J

Commonwealth of Australia v Clark (1994) 2 VR 333

Clark didnt issue proceedings until after Cth had promised that in his
particular case, it wouldnt rely on the defence of the limitation period.
Another case involving a man from the same accident as Verwayen
Result: All 3 Judges
There is an estoppel,
And the remedy is to hold the Cth to its promise.
See Marks and Ormiston JJ
Shows difficulty other courts have with applying Verwayen.

Marks J
Expressed difficulty with the concept of the minimum equity.
Talks instead about giving the necessary relief to prevent unconscionable
conduct, and do justice b/w the parties.
I.e. relief should be that which is necessary to prevent unconscionable
conduct and do justice between the parties.
On the facts: it was clear that over the years, C suffered psychological
problems when he thought he had no COA against Cth. I.e. here, Cs
reliance detriment was bound up with his psychological condition.

18

Ormiston J

Preferred the view of Deane J in Verwayen, that should always enforce the
assumption.
But accepted that thats not the majority view => therefore he accepts
that the remedy is to reverse the reliance detriment.
He applied the minimum necessary test,
BUT will take a generous view of the application of the test where
necessary to prevent unconscionability.
Here on the facts Clark proved that substantial detriment would occur,
and therefore Commonwealth must be held to its representation.
They agreed with what they were going to do i.e. minimum equity to do
justice, detriment, they want the same outcome but were in odds
regarding their outcome.

Giumelli v Giumelli 1999 High Court

Illustration: Remedial response is very difficult to predict.

All the Courts agreed that Mr and Mrs Giumelli ought to be estopped from
breaking their promises,
BUT each court took a different view as to the appropriate remedy.
Just do one doctrine of estoppel= Mason J agreed with this in Walton. But
this causes problems relating to the remedial response
The court makes good promise unless it is found they shouldnt
Difference in equity- minimum to reverse the reliance detriment, i.e.
minimum equity to do justice.
Collapse common law and equity into one
Responses and conclusions relating to the consequences were different
Sounds like a good thing to fuse common law and equity but it can be
difficult in determining the way in which it would act i.e. closer to equity or
common law or even somewhere in between.
I.e. minimum equity to do justice may be the promise itself.
In Giumelli the HC didnt embrace and run with the minimum equity
needed to do justice view
Sometimes making them do the promise is an appropriate action.
The courts these days look more to proportionality. English law on estoppel
is very different to Australia. This is because we had the important case of
Walton.
Matters were complicated by the fact that despite being faced with the
same evidence, each of these courts came to very different conclusions.
Nicholson J - Robert compensated only for the house and the land upon
which it stood.

19

The High Court ordered them to compensate their son for the loss of all of
the land, including that in the third promise, and would impose a charge
upon the land to secure that debt.
The Full Court went furthest of all. It would have compelled Mr Giumelli
actually to subdivide his farm, so as to create the block referred to in the
third promise, and then transfer it to Robert.

Summary
The core elements of estoppel

The making of an assumption

Detrimental reliance
Encouragement, inducement or acquiescence
Remedy
Note: Touchstone question would it be unconscionable for the def to
assert the truth?
There isn't a WA response for equitable remedies due to the failure of
making out estoppel in Bell 2012

The assumption
Present / future, fact / law

Detrimental reliance
Reliance; and
Detriment (possibly including stress, anxiety etc).

Encouragement, acquiescence, inducement

Including, in some circumstances, silence.
Remedy
Minimum necessary to satisfy equity;
the minimum equity to do justice. I.e. reversing the detriment (Lord
Scarman in Crabb v Arun DC).
Reverse the detriment / unconscionability;
In moulding its decree the court as a court of conscience goes no further
than is necessary to prevent unconscionable conduct. Brennan J Waltons
Stores at 419.
But what does that mean? Unpredictable.
See Verwayen
Mason J purpose of the estoppel is to reverse the detriment suffered.
Not to make good the assumption.
Deane J - prima facie the appropriate remedy is to preclude departure
from the assumed state of affairs.

20

Fiduciary obligations

This doctrine forms part of Equitys exclusive jurisdiction.

It complements the common law.
It fills a gap left by the common law.
What is that gap?

The nature of a Fiduciary Relationship

Is it a Fiduciary Relationship?
Statusbased fiduciary relationships
Fact-based fiduciary relationships
The Scope and Context of Fiduciary Obligations
Breach of fiduciary obligations
The Conflict Rule
The Profit Rule
Defences
Remedies
Third Party Liability
I.e. what is wrong when a property is sold for a fair price the person
is happy with but it is sold to the real estate agents relative? Law
aside, why would their interest be against you? Loyalty may not be
with you, now it is with their relative. What if the K says nothing
about having a conflict of interest? I.e. nothing in the K about them
being loyal to you. You have to do your job as a solicitor with loyalty.
The law of contract says that the person needs to do the things they
promised to do and cannot do anything they didnt promise to do.
The nature of the job means there needs to be a duty of loyalty. It
will always be unconscionable to go against the K even if there is
nothing in the K about conflict of interests etc.

Fiduciary Principles
[A] person will be a fiduciary in his relationship with another when
and insofar as that other is entitled to expect that he will act in that
others or in their joint interest to the exclusion of his own several
interest
21

(Finn, P D, The Fiduciary principle in Youdan, T G, Equity,

Fiduciaries and trusts, Carswell, Toronto, 1989, 1, 54).
Bona fide, faith, where you place your faith in someone. It is a
relationship of trust and confidence.
When you owe a duty of loyalty, then you are a fiduciary. You would
expect the person to be loyal as it is the nature of the job.
The distinguishing obligation
of a fiduciary is the obligation of loyalty.
(Bristol and West Building Society v Mothew [1998] Ch 1 at 18) per
Lord Millett).
Fiduciary Principle

These descriptions define a fiduciary relationship by reference to the

existence of fiduciary obligations.
And the primary obligation may be identified as loyalty.
But in order to ascertain the existence of fiduciary obligations, there must
first be a relationship of a fiduciary character.
So how do we ascertain a fiduciary relationship?
When deciding what it is, many refer to the consequences or
obligation and the primary one is loyalty. This puts you in the middle
of fiduciary obligation. How do you go about solving a PQ? Start by
determining if it is a fiduciary obligation.

The nature of a Fiduciary Relationship

What is a fiduciary relationship?

Commonly referred to as relationships of trust and confidence.

A relationship in which one party reposes confidence in another who is
expected to act in the first interests of the first party, rather than in his
own interests.

Heydon and Loughlan, Cases

and Materials on Equity and Trusts, 227.
A fiduciary is someone who undertakes to act for or on behalf of another
in some particular matter or matters P Finn, Fiduciary Obligations, 201.

Definition of agency- Not everyone who is fiduciary is principally in

an agency relationship.
Solicitors, go to court on your behalf, write letters, respond on your
behalf, they act on your behalf and it is not a principle agency.
You are reposing trust in them of your best interest. But not
necessarily, acting fully on your behalf.
The definition above is more of an indicator as opposed to a
definition. There is no legally binding definition of fiduciary duty in
Australia but there are good indicators
22

1. Looking for a relationship of trust and confidence- interplay between

common law and equity.
2. There is often a representative element involved.

In a nutshell

The indicia of a fiduciary relationship are :

A relationship of trust and confidence

and
Arises where someone undertakes to act for and on behalf of
another in some particular matter

Fiduciary Principles

Why is fiduciary law necessary?

It is a relationship protecting doctrine that we need in our society.

Loyalty is intrinsic.
This doctrine protects loyalty

Main Theories
Trust & confidence (traditional)
Vulnerability (Canadian, see Mason J in USSC v Hospital Products) - to
constrain the power to exercise discretions. i.e. vulnerable to the fact they
may betray the trust. Equitys manifestation to protect the vulnerable.
Dont get too caught up when judges reject the concept of vulnerability.
This doesnt seem to be the main rationale. It is not the motivating force,
it is about protecting the relationships.
I.e. child trusts the parent and may be vulnerable to abuse which
inherently makes it a fiduciary relationship. i.e. same with doctor/ patient.
This is the law in Canada but has been rejected in Australia.

Vulnerability

LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR 14

at 61 per Sopinka J,
said that one of the indicators of a fiduciary relationship is:
the exercise of a power or discretion which will affect the interests
of another person in a legal or practical sense so that that other
person is correspondingly vulnerable to abuse by the fiduciary of his
position.
This point was echoed by Mason J in USSC v Hospital Products.

But why did you expect the person to be loyal?

23

Reasonable expectation because of the relationship?

Unconscionability?
Both?
Why is it wrong and why does the duty exist?
The modern Australian law is that it starts with the relationship.
Gulliver, Boardman cases
Even when what the fiduciary has done on the face doesnt seem immoral,
they need to be held to a higher standard.
It is strongly policy based. It is about preventing breaches in the future.
Distinctive feature of these relationships that they can cheat you and you
may not even know it.
It can be a breach without being unconscionable.

Why do you think they are not able to do that i.e. it was
unconscionable.

Established categories

Is it a fiduciary duty?
Is it a relationship of trust and confidence? Is there vulnerability? You may
not even know if they are abusing the privilege.
Trustee / beneficiary (original)
Solicitor / client
Agent / principal
The main trust and confidence is that you send them out to act on your
behalf, under your colours. You are vulnerable to them abusing it
Director / company
Not shareholders, the company itself. The company cannot feel the
emotion of trust. Here we are not talking about the emotion of trust. It is
not that you feel trust it is the nature of the relationship.
Partner / fellow partner
It is mutually fiduciary. You are each liable for one anothers mistake. i.e.
partner of a law firm etc. each is a fiduciary and each is a principle.
Employee / employer
Where holding and managing money occurs, consulting with clients. This
can lead to an employee being a fiduciary. Essentially here, the employee
is the fiduciary because the employer is trusting the employee with
clients. E.g. a hairdresser, setting up their own business and telling
customers about it that they can move to them. This is a detriment to the
employer i.e. they will lose customers etc.
Investment advisor / client
Similar to solicitor and client
Promoter / company

24

Tracy case. It is not an advertiser etc. it is someone who gets the company
up and running. i.e. opening a chain of shops. Owe a duty to the company,
not to the directors themselves etc.
These are essentially about business, money and property. They are not
about the trust and confidence we saw earlier. i.e. in the Canadian cases
of sexual abuse in parent/ child, doctor/ patient etc.
The HC has said the business etc. is the limit in Australia.

Establishing a Fiduciary Relationship

These are i.e. relationships of trust and confidence

Not subjective / emotive trust.
The category of established fiduciary relationships is not closed.
It is possible to prove that a relationship was not fiduciary notwithstanding
that it fell within one of these established varieties e.g. a bare trustee.
Furthermore, a relationship may be fiduciary notwithstanding that it does
not fall within this list, if the indicia of a fiduciary relationship are present.

United Dominion Corp v Brian P/L

When does a fiduciary relationship arise?

Difference between contractual obligations and fiduciary obligations. If
someone is your solicitor and you have a K, you have a K obligation and a
fiduciary, at what point does it become fiduciary?
Joint venture to develop land into a shopping centre.
Are not always fiduciary but they can be. They are when parties come
together and work a bit like partners but usually in a once of venture.
Three participants: UDC, SPL and Brian.
UDC contributed the land.
SPL contributed finance.
Brian contributed expertise.

Sell it for a profit= nature of arrangement.

UDC owed $$$ to SPL from a previous transaction.

Before the joint venture agreement had been signed, SPL mortgaged the
land to UDC.
Unbeknown to Brian, the mortgage contained a collateralisation clause
which meant that when the land was sold, the entire debt to UDC must be
paid before any other.
At the conclusion of the venture not enough left to pay Brian its due
under the JV.
It diminished the amount of money owed to the parties.
Brian claimed this was a breach of fiduciary duty by UDC.
But was it a FD and at what point had it become a FD?
The mortgage came about before the JV
But this was a JV?
25

And anyway, the wrong was done, before the joint venture agreement
was signed.
HC didnt accept UDCs argument and Brian won.

The fiduciary obligations begin when the trust and confidence begins, this
may be before the onset of contractual obligations.
When parties first repose trust and confidence in one another, be aware of
this. They dont want to wait around for lawyers to draw up paperwork, i.e.
contracts. The court is saying if the JV is up and going etc. then you are
already reposing trust and confidence in one another and equity doesnt
wait for there to be a signing of a K etc.
Substance not form. What is actually happening, not what the paperwork
says.
The relationship of trust & confidence had commenced well before the K
was signed.

Chan v Zacharia (1984) 154 CLR 178

When do fiduciary obligations cease to be owed?

Doctors, no longer carrying on business together
Partnership agreement terminated
Held see Deane J
This was a breach of fiduciary duty
HC said it is fiduciary until the last vestige of trust and confidence is gone.
I.e. here they had a property interest together. In relation to the property
they were still fiduciary, even if it was the last strand of interest; they were
still jointly owners of the option to renew.
Still owed one another loyalty. It was a breach of Dr Chans loyalty.
Remedy was that Dr Chan held the new lease on constructive trust for
himself and Dr. Z meaning he owed an amount to Dr. Z of the lease i.e. a
% at the time of the K.
It was a proprietary remedy granted.

The existence of a fiduciary relationship

So we can see that, even if the relationship does fall within one of the
established categories, it might not be a simple matter to ascertain
When fiduciary obligations commence
And when they finish.
Courts dont readily imply terms into the K.
They begin when you repose trust and confidence in one another.
Equity is not what you agreed or what you expected to happen
when you agreed because of what you thought was in the K. it is
about what ought to have happened.
Knowing why the obligation is there is helpful to determine when it
starts and finishes

The scope of the fiduciary principle

Furthermore, fiduciary obligations can arise in relationships outside the
established categories.
26

BUT, in Australia the High Court seems to have limited fiduciary

obligations to relationships of trust and confidence in matters of business /
property.
CBA v Smith- banker an client, not usually a fiduciary relationship but
because of the nature of advice in this case it was said to be a fiduciary
relationship.
If a relationship can be argued by analogy then it may be a fiduciary duty.
i.e. liken it to a certain category.
On the other hand there are relationships which may not fall into a certain
category but still may be fiduciary.

Hospital Products Pty Ltd v US Surgical Corporation (1984)

156 CLR 1

Outside the established categories, it may be a matter of some difficulty to

predict whether or not a particular relationship is fiduciary. Especially
where parties are dealing with one another in the commercial arena.
HPI (later HPL) was the exclusive distributor of USSCs product in Australia.
Not an agent.
It manufactured and sold competing products.
Mr Blackman was an employee. The executives of the USSCs were on
good terms with him.
The K between Mr B and his company was just telephone conversations
and letters.
Thus it was hard to see the terms of the K. this was because they were all
friends.
Promised he wouldnt compete with them or sell competing lines, they
knew he might have sold other products but nothing that competed and
interfered with the ability to sell their products. The K was not at all clear

The promise
In negotiations for the exclusive distributorship contract, B had said that
after he had got the Autosuture business rolling, he might take on other
non-competing lines and build up a broad based surgical distributorship
but not so as to interfere with giving proper attention to the USSC
products.
Sued in breach of K and Fiduciary Obligations
He had made promises to them but it wasnt clear if they were in the K
But was this part of the contract?

Was there a fiduciary relationship? Hospital Products

5 of the 9 judges who looked at these facts thought that there was a
fiduciary relationship.
Unfortunately for USSC, the 4 who didnt were all on the High Court.
Result = no fiduciary relationship.

27

If you were USSC what remedy would you want? All the profits would be
ideal
An equitable doctrine was the path to follow. Is a constructive trust
appropriate here or not?
There would be no issue if Mr B started his own company and didnt use
USSC clients. But here he has spring boarded the company to his success
from taking clients etc. the remedy was to take into this account of his
benefit i.e. using the company and not having to do the hard work.

Ultimately, it was held that there was no fiduciary relationship in this case,
because:
Gibbs CJ- looks to C/L first, takes seriously the relationship between C/L
and equity.

The arrangement was a commercial one entered into at arms

length and on equal footing; and

It was integral to the arrangement that HPI was entitled to make a

profit on its own behalf. It had been contemplated that a conflict of
interest might arise and there was no obligation on HPI to resolve
any such conflict arrangement in USSCs favour.

Why the judges decided what they did.

Cf Mason J took a different view who considered that there could be a

fiduciary relationship here consistent with the contractual relationship.
His Honour considered that the critical feature of a fiduciary relationship to
be the principals vulnerability to abuse.
In so far as the relationship was exclusive, this rendered HPI the custodian
and made USSC vulnerable to abuse.
HPI was a fiduciary in so far as it was custodian of USSCs product
goodwill in Australia.
He was in minority and this wasnt an easy call to make. May be hard to
say it was fiduciary or not. Trust and confidence must be reposed. It will
sometimes be difficult to call if it is fiduciary.

The majority of the HCA followed the more binary approach of Gibbs
CJ.
This is the approach that has been followed by the courts ever since.
See for example: Paul Dainty Corporation Ltd v National Tennis Centre
Trust [1990] 22 FCR 495
One element of the argument was that they had been forced into a
fiduciary arrangement. Inherently contractual and not fiduciary

Paul Dainty Corporation Ltd v National Tennis Centre Trust

28

Paul Dainty argued that it was in a fiduciary relationship with Bass - the
Ticket vendor that the NTCT obliged it to use.
Bass sold tickets and held ticket moneys on behalf of Paul Dainty.
In rejecting this argument the Full Court of the FC observed:
the authorities make it clear that equity will not impose fiduciary
obligations on parties who have entered into ordinary and arm's
length commercial relationships, which fully prescribe the
respective powers and duties of the parties. This is particularly so
when the parties involved are substantial corporations, having equal
bargaining power.

Vulnerability

Has found little support in Australian case law.

Indeed, in C-Shirt Pty Ltd v Barnett Marketing and Management Pty Ltd
(1996) 37 IPR 315, Lehane J expressly rejected vulnerability as a
touchstone of fiduciary obligation.
So, although it may be present in many cases, vulnerability is probably not
an indicator of the existence of a fiduciary relationship in Australia.

Result: Contra-indicators of a fiduciary relationship

As a result of USSC v Hospital Products, there are now 2 contra

indicators of a fiduciary relationship:

1. The existence of a contract between parties in a commercial relationship

at arms length and on equal footing tends to indicate that there is no
fiduciary relationship and that the parties should look to their contract to
define their rights and obligations vis a vis one another.
2. If the parties countenance the possibility of conflict between their various
interests, then unless one party is to act solely in the interests of the
other, this will probably be fatal to any argument that a fiduciary interest
exists.

Trust and confidence and acting for and on behalf of.

Expanding the Role of the Doctrine

In Norberg v Wynrib (1992) 92 DLR (4th) 449, two judges of the SC of

Canada held that a doctor owed fiduciary obligations his patient.
Doctor sexually abused a drug adicted client in return for drugs.
Civil suit was statute barred outside the limitation period.
Sued in equity (Statute of Limitations n/a equity).
Doctor held liable to compensate for breach of fiduciary duty.
Cf Breen v Williams

Breen v Williams (1996) CLR 71

29

B wanted access to her medical records held and owned by W so she

could take part in a class action in the US against the manufacturer of the
implants.
Argued that Williams owed her a fiduciary obligation to provide access to
the records.
Held: Totally for the doctor.
Some members of the HCA reject outright the notion that a doctor owes
fiduciary obligations to a patient.
Others (e.g. Gummow J, Dawson and Toohey JJ) accept a doctor might be a
fiduciary in some contexts, e.g. diagnosis, advice and medical treatment.
Remember that the duty = loyalty.
So still would not require a doctor to hand over medical records.

Expanding the Role of the Doctrine

In M(K) v M(H) (1992) 96 DLR (4th) 289, it was held that the parent child
relationship was fiduciary.
In Bennett v Minister of Community Welfare (1992) 176 CLR 408, McHugh J
was prepared to accept that the Minister for Community welfare (as
guardian) owed fiduciary obligations to one of his wards (i.e. ward of the
State).
Paramasivam v Flynn (1998) 160 ALR 203. Sexual assault by guardian,
Civil assault statute barred. Sued for (inter alia) breach of fiduciary duty.
In Mabo v Queensland (No 2) (1992) 175 CLR 1 at 203, Toohey J
considered that the power of the Crown to extinguish native Title gave rise
to a fiduciary duty. So that any act done by the Crown which interfered
with that title or failed to take into account the title holders interests
would constitute a breach of duty.
Only Dawson J expressly disagreed.
Cases will not be turned over due to an error of law. This is in
relation to the fusion fallacy

Facts:

The obligation for FDs begin when the trust and confidence begins
and may not necessarily end when the K does.

The scope of the relationship

A relationship may be fiduciary in some of its aspects and not others.
Example = NZ Netherlands Society v Kuys [1973] 2 All ER 1222.
There will be contractual obligations alongside fiduciary obligations
We are looking at them in isolation but you will hardly see fiduciary
obligations in isolation

NZ Netherlands Society v Kuys

30

Mr Kuys = the secretary of the NZ Netherlands Soc.

It was agreed that K would run and own a newspaper The Windmill Post.
Privy Council Held:
K was a fiduciary to the extent of his role as secretary.
BUT the facts of the case particularly the fact that the success / failure of
the paper was at Ks financial risk meant that there was no fiduciary
relationship with the paper.
Injunction granted as it wasn't the Society's risk.

Scope
To determine whether or not fiduciary obligations exist ascertain:
Whether a fiduciary relationship exists;
And
Whether the matter in question falls within the scope of the
relationship.
I.e. if you are a solicitor and you happen to find a car belonging to
your client, this isn't a breach because they're not related I.e. to the
advice you are giving
Will the conduct be within the scope of the duty or not?
Equity emphasises substance not form.
Dixon in Birtchnell v Equity Trustees (1929) 42 CLR 384 said to
ascertain the scope of the fiduciary relationship:
Any docs or express arguments which established the
relationship; and
The actual course of dealing between the parties.
Focus is on substance not form.
Context

Fiduciary Obligations will frequently be only some of various obligations

owed.
For example the defendant may also be liable for:
Breach of contract;
Breach of duty of care (negligence);
Breach of statutory duty (esp. co-directors); and
Breach of industry standards (e.g. solicitors, real estate agents etc.).
Context and Remedial Response
It is not the case that if there is any fiduciary relation whatsoever, any of
the available types of interference is warranted.
The nature of the fiduciary relation must be such that it justifies the
interference.
Re Coomber [1911] 1 Ch 723, 728-9 (Lord Fletcher Moulton).
Cited with approval in McKenzie v McDonald, 144-145 (Dixon A.J.).

Fiduciary Obligations: Keech v Sandford (1726) 25 ER 223

31

Facts: Fiduciary here was a trustee. Legal title was a lease. Lease came
up for renewal. Trustee applied to renew lease to hold for beneficiary.
Landlord refused to grant lease to trustee.
So trustee applied for lease on own behalf and was granted the
lease.
Ben then claimed the trustee acted in breach of fiduciary duty.
This is an old doctrine. The principle here is as true today as it was
back in the 18th century.
Held: Trustee had acted in breach of duty.
Even though the beneficiary wasnt going to be able to take the lease,
trustee was still not entitled to take the lease.
This clearly describes the fiduciary principle
You can breach the fiduciary duty without actually being dishonest
It is of the nature if fiduciary obligations that the I.e. client, beneficiary etc.
may not know if they are always doing what they are supposed to do.
This is where there may be a conflict. There is a strong public policy issue
here.

Purpose: of these rules is to protect the vulnerable.

They operate as a deterrent / disincentive.
Remedy: court required trustee to:
Transfer title of lease to beneficiary.
Account for profits/income generated by the lease.

Chan v Zacharia

The fundamental rule in Keech v Sanford that a fiduciary must account for
any personal gain or profit made by virtue of a breach of fiduciary
obligations was explained by Deane J in Chan v Zacharia (at 198 199) as
embodying 2 themes:
The first is that the fiduciary must give to his or her principal any
benefit obtained where there was a conflict between the fiduciarys
personal interest and his or fiduciary duty or significant possibility of
such conflict
The second is that which requires the fiduciary to account for any
benefit or gain obtained by reason of or by use of his fiduciary
position or of opportunity or knowledge resulting from it
The principle in Keech is similar to Chan v Z
In so far as you are a co-owner or co- tenant you have to do the right thing
by your partner even if the connection is ever so minimal as in Chan v Z.
32

A fiduciary may not

1. Enter into a transaction in circumstances where a conflict (or a significant

possibility of conflict) exists between his or her fiduciary duty and his/her
own personal interest; or
2. Take any profit or gain obtained by use of or by reason of his/her position
(or by reason of opportunity or knowledge arising from that position)
Without making full disclosure to and receiving the informed
consent of his / her principal.

Two basic rules derived from Keech

The first one is the no conflict rule
The second is the no profit rule
Unless you make full disclosure and you retain the full consent of your
principle
Consider consent or disclosure= before you give advice you need to check
this

The Conflict Rule

Some applications or sub-rules:

The fiduciary may not carry on business in competition with the principal
(Hospital Products v USSC);
The fiduciary may not purchase from or sell to the principal (McKenzie v
McDonald [1927] VLR 124);
Mrs McDonald wanted to sell a farm and McKenzie was not a trust
worthy real estate agent. He undervalued the farm and inflated the
price of the property he wanted to sell to her, this created the rule
that there was to be no selling of goods
The fiduciary may not serve two masters at the same time(Farrington v
Rowe McBride [1985] 1 NZLR 83, Commonwealth Bank of Australia v
Smith (1991) 102 ALR 453);
The principle in Hospital Supplies was rejected here.

The fiduciary may not do for his own benefit that which he ought to have
done for his principal (Boardman v Phipps [1967] 2 AC 46; Green & Clara
P/Lv Bestobell Industries [1982] WAR 1; Bailey v Namol (1994) 53 FCR
102); and
Bestobell sued and claimed breach of obligation against Green and
Clara. They won. You cannot do something for your own benefit that
you should have done for the client.
The fiduciary may not accept bribes, gifts or commissions from third
parties in connection with his duties to the principal (Lister v Stubbs
(1890) 45 Ch D 1, Reading v R [1949] 2KB 232 (CA)).

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Most of these relate to breaches of good faith as opposed to trust

and dishonesty
Reading v R, where he wore a soldier uniform to sneak alcohol in, he had a
breach of duty while being in the uniform, I.e. he shouldn't have taken the
bribe in the first place. Lister v Stubbs is older but still relates to bribes.
What conflict?
The standard by which conflict is judged is that of a reasonable man.
It is not enough that by some stretch of the imagination a possible conflict
of interest could occur.
There must be what a reasonable person would say was a real, sensible
possibility of conflict Boardman v Phipps per Lord Upjohn at 124.
The rule is that you are not to make a conflict arise.
Trusts cases relating to family. I.e. you may not do anything wrong but
there may be a conflict arises. It is because of the existence of conflict.
e.g. if your solicitor is the trustee and they marry one of the beneficiaries
then this may be a conflict and you may want to remove them as a
trustee.

More like the no profit rule!

The fiduciary may not obtain any profit or gain by use of her / his fiduciary
position or of opportunity or knowledge arising from it.
In other words, a fiduciary may not use her / his fiduciary position for
personal advantage.
Be careful of serving the two masters at the same time. One case
said you need to disclose it to the client etc.
Consent may not be fully reliable in dealing with parties where there
is a conflict.

I.e. hairdressing example where one hairdresser is working for a

salon but then sets up their own salon and tells the clients whilst
she is still working there about her new business plans

The Profit Rule

Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134

Facts:
Regal Hastings owned cinema and wanted to acquire leases of 2 other
cinemas.
A defence is full disclosure to the P by the D and consent from the P to the
D.
Later, after securing the leases, it was decided to sell all shares in Regal
Hastings and A to a third party, at great profit.

House of Lords: Trust law should be applied strictly liability arises

not from harm to the beneficiary, but from profit being made only
by virtue of acting for the co.
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Directors in breach.
Conclusion: liability to account does not depend on fraud or
detriment to the beneficiary, but arises from the mere fact of a
profit having been made by reason of the opportunity and
knowledge flowing from the F position.

Boardman v Phipps [1967] 2 AC 46

Illustrates both obligation not to profit from ones fiduciary position

and (semble) the obligation not to permit the possibility of conflict
between interest and duty.
Shows how onerous these obligations are and how strictly they may
be enforced.
Illustrates that a fiduciary may be in breach of his / her obligations
notwithstanding that he / she acted in good faith. (See also the
speech by Lord Haldane in Nocton v Ashburton).
Shows that the liability to account is not affected or diminished by
the fact that the breach has caused the principal no loss.
You will be guilty of equitable fraud even if you were acting above
the law and tried to do the right thing.

Nocton v Lord Ashburton (1914) AC 932

Equitable fraud is broader than moral fraud.
Per Lord Haldane at 954
This case can be benefits for a remedial perspective.
Noctons security was further down the line and didn't directly affect
Noctons interest.
Nocton was sued for deceit. But there was no evidence of deceit here
however there was a breach of the fiduciary duty.
If you take a benefit in a fiduciary situation you run the risk of being
fraudulent.

Why are the no-profit and no-conflict rules so strictly

applied?
Because the fiduciary has superior information concerning his or her acts,
it would be difficult to detect and prove breach of these wide obligations;
and because the fiduciary has control based upon the notion of implicit
trust, there is substantial potential for gain through such wrongdoing.McLaughlin J in Canson Enterprises Ltd v Boughton & Co (1991) 85
DLR (4th) 129.
I.e. Its prophylactic.

Green v Bestobell Industries Pty Ltd (1982) WA

If a fiduciary takes for himself a profit sought by the principal, it doesnt
matter that this was not something that fell within the scope of the
fiduciarys duties.
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The principal does not have to prove that the information or opportunity
was in fact used to acquire the profit. This is often very difficult.
Nor is it necessary to show that but for the fiduciaries breach, the
principal would have made a profit.
In this case, the director was not responsible for bids. Nor was the
principals bid the next highest bid.
The defence of consent
The only way that a fiduciary may escape liability on the basis of a breach
of the conflict rule or the profit rule is by proving that the principal has
given its informed consent.
The fiduciary must disclose all info pertinent to the transaction and must
provide any necessary explanation of the disclosed information.
The fiduciarys duty to make full disclosure extends to all material
information known to the fiduciary.
This includes any information that the fiduciary has deliberately refrained
from acquiring.

Raise this even if there is no evidence of it in the question. It is the

only way they can escape liability, but it doesnt include
constructive notice

Queensland Mines Ltd v Hudson (1978) 18 ALR 1

Hudson = chairman of and managing director of Australian Oil Exploration.
On behalf of that company, H set up Queensland Mines. Hudson also =
managing director of Queensland Mines.
Then QM was moth-balled.
Sometime later, H resigned as director of QM and took up mining iron ore
in Tasmania via his own personal company.
Mr Hudson put before the mines the possibility of going into mining
for iron ore. QLD said no, he asked for consent to do it on his own
and they said that was fine, so he went ahead and was successful.
The mines raised a case but Mr Hudson had done everything he
needed to do.

The defence of consent

BUT the duty to make full disclosure does not extend to information of
which the fiduciary was not aware, even if prudent enquiry would have
revealed its existence.
BLB v Jacobsen (1974) 48 ALJR 372
Jacobson = the manager of BLBs business in Australia (supplying
yarn). He was also the director of one of BLBs customers Bel Knit.
If Jacobsen took more steps then he would have discovered what he
needed to know that- the company wasn't solvent. He had not failed
to disclose here.

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BLB v Jacobsen (1974) HC

In response to a claim by J for wrongful dismissal of J, BLB argued
that J had breached his fiduciary duties to BLB by supplying a large
quantity of yarn to Bel Knit, when that company was not solvent.
At the time of his actions, J had not seen the accounts of Bel Knit,
that indicated that it was had it had incurred a substantial trading
loss. All that he knew was that Bel Knit was not going too well that
year.
He had disclosed Bel Knits debts and the fact that it was struggling
to establish itself.
It was held by the High Court that Js disclosure was sufficient.

Consent
Summary: There must be proof (balance of probabilities) that:

Full disclosure by F to principal of all material facts

BEFORE the breach occurs

Unanimous consent by all the principals, if theres >1.

Where the principal is a co normally need shareholders

consent Regal Hastings

(cf Queensland Mines v Hudson where cons by other board

members was sufficient).

Context and Remedial Response

It is not the case that if there is any fiduciary relation whatsoever, any of
the available types of interference is warranted.
The nature of the fiduciary relation must be such that it justifies the
interference.
Re Coomber [1911] 1 Ch 723, 728-9 (Lord Fletcher Moulton).
Cited with approval in McKenzie v McDonald, 144-145 (Dixon A.J.).
Remedies
Injunction e.g. Hospital Products v USSC.
Equitable compensation e.g. McKenzie v McDonald, Bailey v Namol and
Nocton v Lord Ashburton.

NB Not punitive (disciplinary) damages Bailey v Namol. But see

Digital Pulse Pty Ltd v Harris [2002] NSWSC 33 and Harris v Digital
Pulse Pty Ltd [2003] NSWCA 10.

What remedies may you use? Ongoing loss may need an injunction
like Hospital Products to stop the person from selling goods based
on your company.
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Equitable compensation, in the cases above recession wasnt a

possibility, so for e.g. Mrs McDonald (McDonald Case) couldn't get
her property back, the courts look to what they lost monetarily as a
result of the breach. You can get punitive damages but only for
intellectual property rights as under the Act, but it doesn't apply to
equity.

The judge who wanted a remedial response to 'sting' I.e. to get the
message across, but on appeal it was overturned somewhat on the
basis there was fusion fallacy. Equitable damages are not to
'punish' but to simply compensate for the loss. But there are ways
of making the remedies harsher. You do not get exemplary
damages.

Account of Profits Regal (Hastings) Ltd v Gulliver [1942] 1 All ER 378,

Warman International v Dwyer.
Constructive Trust e.g. Keech v Sandford, Chan v Zacharia and Boardman
v Phipps.
NB Re bribes and secret commissions see Lister v Stubbs. But cf AG
(Hong Kong) v Reid [1994] 1 NZLR 1. 252525And Grimaldi v
Chameleon Mining NL [2012] NSWCA 30.

Powerfully: constructive trust. You may get it in fiduciary obligations

so far as the shares are concerned.
In Phipps they were in breach when they purchased the shares.
Whether the item is an item of property will be a good argument for
constructive trust.
Bribes and secret commissions is an area of somewhat confusion, it
was not clear after the Hong Kong case what would happen in
Australia because it was a NZ case. Constructive trusts havent
been explored in Australia as of yet and it is for the HC to decide.
Constructive Trust

Kearney J in Accounting for Fiduciaries gains in a Commercial Context in

P. Finn, Equity in Commercial Relationships.
The task is to
Identify and measure the extent of the fiduciaries gains; and
Determine whether or not, in the circumstances, a constructive
trust is the appropriate formula for relief.
When may you get a constructive trust?
If a constructive trust is established and there is a bankruptcy the trustee
cannot touch it essentially. If the profit is the form of property you should
try and get a constructive trust.

Breach of Confidence

Confidential Information

Protection in equity the elements of the doctrine

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Confidential Information
Imparted in Circumstances of Confidence
Unauthorised Use
Detriment??
Remedies
Defences

Rationale

The rationale of this doctrine:

Is to prevent the unconscionable act / conduct of making unauthorised
use of information that has been imparted in confidence.
Also there is a public policy advantage to assuring the respect of
confidences.
BUT note that there is the important countervailing public policy ...
Freedom of speech
Protecting the ability to confide in one another. It is sensitive to public
policy. There is also the freedom of speech to be considered. We still need
the ability to speak freely. If we protect confidence too much then we
impede on the freedom of speech

Breach of confidence is not about protecting your privacy, it is to

prevent unconscionable behaviour (breach of fiduciary information)
such as disclosing the information. But the confusion can lead in
through the question of why it is unconscionable. Essentially it is
unconscionable when someone says it is confidential and you
betray this and let the information out. Society aspects- trust.

Jurisdictional Basis

Equity has an original, inherent and independent jurisdiction to prevent

the violation of a confidence and will grant relief.
Commonwealth v John Fairfax & Sons Ltd (1980) 147 CLR 39, 50-52
(Mason J)
So it doesnt matter if there is no contract, no tort, no copyright or patent.
Equity will enforce an obligation of confidentiality and will restrain breach.
This is not a case of Equity enforcing a legal obligation.
It falls within Equitys exclusive jurisdiction.
Equity has always had an inherent jurisdiction. This is a cause of
action which is equitable and a P is entitled here to ask for an
equitable remedy. AG (UK) v Heinemann Publishers

In an employment situation there will be contractual obligations of

confidence. A breach of confidence is essentially true information
and this is where there is a gap/ distinction in the law with
defamation. Equity may step in and grant a remedy at its discretion.

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Other sources of obligations

Contracts: express and implied terms;
Statutory provisions, e.g. Corporations Act 2001, s 183.
Torts
(a) Inducing a breach of contract (Ansell Rubber Co Pty Ltd v Allied
Rubber Industries Pty Ltd [1967] VR 37);
(b) Interference with a right to property (Lamb v Evans [1893] 1 Ch
218).

Confidentiality v Privacy

Take from Theakston case equitable doctrine of breach of confidence is

not necessarily suited to protecting expectations of privacy.
Ieaked private info may not be confidential.
Privacy protection of personal autonomy is different from protection of
confidences where confidence is expected.
Some argue we need an American-style privacy tort, to protect
personal autonomy as in Theakston.
Breach of confidence v Privacy. Misleading and deceptive conduct
has differed to how it was supposed to be.

Confidentiality v Privacy: Australia

In Aust no such legislation yet.
Arguments against view that this doctrine should protect privacy
are that privacy is different from confidentiality and the two should
be kept separate.
Arguably tort law is the better way to protect privacy.
This is the approach New Zealand has taken.

Breach of confidence v a right to privacy

International News Service v Associated Press 248 US 215 (1918) there
is no property in facts.
Victoria Park Racing Ground v Taylor (1937) 58 CLR 479 there is no
common law right to privacy.
BUT ABC v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 (Gleeson CJ at
[40])
the law should be more astute than in the past to identify and protect
interests of a kind which fall within the concept of privacy.
ABC Case- possum case. A reporter snuck in and filmed how the company
made their 'game meat'. There is no reason why we shouldn't protect
privacy was in this case.
Jane Doe v ABC in the County Court of Victoria per Hampel J (3 April 2007).

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Held (obiter, there was also a breach of statutory duty) that the ABC had,
in publishing the plaintiffs name breached the equitable obligation of
confidence AND was liable under a new tort invasion of privacy.
Accepted the invitation in ABC v Lenah Game Meats Pty Ltd 208 CLR 199.
Drew analogy with Campbell v MGM Ltd (2004) 2 AC 457 and Douglas v
Hello! Ltd (2001) QB 967.
Jane Doe case: Newspapers cannot without permission of the victim,
publish the name of a rape victim in the paper.
This is information in the public domain, but the ABC made it
publically available.
It was already known. This is a good example of why we need laws
to protect invasions of privacy. The Campbell case however is not
good law in Australia. There is a question mark over the doctrine of
breach of confidence and how it will develop. Drawn in two
directions of property rights and breach of privacy
Seager v Copydex [1967] 2 All ER 415
Mr Seager invented, manufactured and sold carpet grips. He was looking
for someone to market one of his products.
It did not infringe the Mr Seagers patent.
There was no contractual relationship between Mr Seager and Copydex.
Relates to the fusion fallacy.
Held: Lord Denning
Copydex had infringed Mr Seagers equitable rights and had to
compensate him.
It didn't infringe Mr Seager but clearly used information given from him.
Lord Denning quote. The appropriate remedy here was compensation as
they were in the exclusive jurisdiction.
Confidential Information
A person who receives:

information of a confidential nature

in circumstances of confidence
may not make unauthorised use of the information.
Equity will restrain abuse of the confidence and will render the confidant
accountable for profits obtained by improper use. 3 elements of
confidential information which gives rise to the duty.

3 Requirements
1. Information must have the necessary quality of confidence about it.
2. Must have been imparted in circumstances importing an obligation of
confidence.
3. Unauthorised use made of the information (to the detriment of the
confiding party).
Per Megarry JA in Coco v AN Clark (Engineers) Ltd [1969] RPC 41
41

Detriment may be a 4th element or part and parcel of element 3.

Detriment is not required by law.

1. Nature of Information
General Rule The information must be of a confidential nature, not be
public property and public knowledge per Lord Greene in Saltman
Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203.
No recognised standard by which confidentiality is assessed.
Therefore, there are no formal standards as to how to express something
to ensure confidentiality.
Three types of confidential information:
Commercial and technical;
Personal confidences; and
Government secrets.
The court looks to assess if it is private information, you need to
convince the court it was private. Writing confidential etc. on
something doesn't make it confidential it needs to be confidential at
nature. The 3 types of confidential information are not the only
types, something may not fit into these categories. These are the 3
main types. If information is publically available it is not
confidential. I.e. in the public domain.

Not in the public domain

Johns v ASC (1993) 116 ALR 567
Johns was the managing director of a company, Tricontinental. He gave
evidence to the ASC.
The ASC tendered transcripts of his evidence in a public hearing of a Royal
Commission into the affairs of Tricontinental.
Subsequently, the ASC made the transcripts available to certain members
of the media.
Was the information in the transcripts still confidential or had the
information entered the public domain?
Information that wasn't public becoming public is the issue.

Held (Gaudron J)
The term public domain in relation to the law of confidence is not an
expression with a constant meaning it has two distinct aspects: the first
is concerned with the question whether any duty of confidence arises; the
second is whether a duty of confidence has come to an end
Was it always public available information or was it always confidential
and if it was confidential has it remained confidential?
Public domain
In this context, the question whether the information is in the public
domain is largely one of fact.
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It may be that info has (passed into the public domain in that it has)
ceased to be confidential if, for example, the information is published by
or with the consent of the person to whom the obligation is owed in
which event the person is released from (the duty of confidence) In
this context whether the information is in the public domain is a question
of law.
There is an issue whether an obligation of confidence is extinguished
because of subsequent publication of the world at large by third parties or
even by the party who owed the duty in the first place. The info has
passed into the public domain. Again, the question is whether the info has
lost its confidential quality. And (for same reasons as in the first case) is
largely a question of fact. Look initially and at the time of the breach.

Common Knowledge
Info is confidential if it is available to one person (or a group of
people) and not generally available to others, provided that the
person (or group) who possess the information does not intend that
it should become available to others.
Douglas v Hello! Ltd (No.3) [2006] QB 125 at [55] The point was
here that they had control over the group who had access to their
wedding photos

Particular issues: Assembly

Assembly: May be protection in the way info is assembled, even if the info
contained in the doc is public knowledge.
E.g. an address book listing customer names and addresses
usually regarded as confidential, even though its a conglomeration
of public info.
Information has to be a discreet piece which is able to be identified.
Information can be photos etc.
The contact list i.e. is not about the 'addresses' it is about the composition
of the list.

Particular Issues: Reverse Engineering

If a defendant obtains info by reverse engineering Ps product that info
isnt confidential, because it can then be said to be the product of the
defs own endeavours.
E.g. one company invents new technology, and places a product on
the market.
Then a competitor can examine the technology and reproduce it,
solely through own endeavours. Competitor wont be in breach of
confidence: Saltman Engineering Co ltd v Campbell Engineering Co
Ltd (1948) 65 RPC 203
So if going to copy a suppliers product, reverse engineer it dont
try to steal their designs!! Reverse engineering is not private or
confidential.
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Loss of Confidentiality
Info which was confidential may lose its confidential character.
E.g. if govt secrets have been published, e.g. 71 copies of a book
sold, then no longer confidential: Commonwealth v Walsh (1980)
147 CLR 61
Government secrets case, court said once it's released, it's released
and there is no point in giving an injunction.

Publication
But the mere fact of some publication isnt enough to remove the quality
of confidentiality.

Trade Secrets
If information can be termed a trade secret, then it will necessarily
involve the necessary degree of confidence and will automatically obtain
protection.
When is something a trade secret? The answer will also tell us
something about the requirements used to establish confidentiality
generally.
See Ansell Rubber v Allied Rubber Industries (1967) VR 37 (Gowans J).
Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC
203. Cases where the money is.

Ansell Rubber v Allied Rubber Industries

Secrecy is necessary, novelty is not.
Factors in assessing secrecy of a trade secret:
Extent to which known outside his business;
Extent to which known to employees of the business;
Extent of measures taken to guard secrecy;
Value of the info (including to competitors);
Amount of money or effort expended in developing;
Ease with which it could be acquired or duplicated by others.
How to determine if information can be a 'trade secret'? It is a
difference between secrecy and novelty. Confidential information
and trade secrets. This is valuable information, developed over time
and care has been taken to protect it.

Confidentiality in the employment relationship

Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317.

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Samuels JA accepted the classification of information by Goulding J in

Faccenda Chicken v Fowler [1987] Ch 117.
Three categories of information:
First that which because of its triviality or public availability, cannot
reasonably be regarded as confidential at all.
Second, information that the employee must regard as confidential
(either because he is expressly told that it is confidential or because
of its character it is obviously so), but which he is free to use after
his employment is terminated.
Thirdly, specific trade secrets so confidential that even though they
may necessarily have been learned by heart and even though the
servant may have left the service, they cannot lawfully be used for
anyones benefit but the masters.
Kirby J gives some factors by which degree of confidentiality can be
assessed.
Needed to know all of the reliable suppliers. This information was
argued to be 'trade secret' confidentially. The employee argued it
was 'know- how'. The court here came up with the 3 categories of
information. Here it was the 3rd aspect.
1= know how, you can take it with you and if they don't want you to
take it they need to put it in the K
2= K obligation not to disclose it, but may be used once they have
left
3= Trade secret, cannot be disclosed whatsoever.

Personal Information
Whether personal information is protected depends upon the nature of the
relationship between the parties and the nature of the relationship.
Argyll v Argyll [1967] 1 Ch 302
Duchess of Argyll sought an injunction restraining the Duke from
publishing information about her personal life and private conduct, which
had been disclosed to him in confidence during their marriage.
Held per Ungoed-Thomas J granting the injunction that the protection of
confidential communications between husband and wife is designed to
encourage, protect and preserve the trusting and confidential relationship
between spouses.
Personal confidences are protected. We are able to see the public
policy aspect here of the institution of marriage. Is there still a
public policy aspect of preserving confidence of spouses as opposed
to friendships etc.? Possibly that certain relationships i.e. spousal
are worth protecting.

But
On the other hand, not all sensitive personal information is confidential;

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The relationship b/w a prostitute in a brothel and the customer was found
to be not confidential in nature. Theakston v MGN Ltd [2002] EWHC 137
Rather characterised as a fleeting transaction for money when there is no
reason to suppose that at the time the other party would have considered
the relationship or the activity confidential for one moment.

Information must be specifically identifiable

The information must be specific and identifiable.
The court must be able to specifically identify what the defendant is
restrained from using.
The injunction issued must specify.
Defendant ought to have a clear case to answer.
A general idea is not enough to be protected.
Needs to be very clear and specific what they cannot disclose.

But Talbot v General Television Corporation Pty Ltd [1980]

VR 224
Later he saw commercial on Channel 9 advertising A Current Affairs series
on millionaires.
Sought injunction restraining broadcast.
Argued breach of confidence
GTC said - nothing confidential or secret about it - no original ideas, and
this kind of thing had been done before.
Held:
Injunction granted.
Talbots concept was sufficiently developed to be capable of protection as
confidential info.
The confidential info was the core idea was sufficiently novel to
remove the info from the public domain.
Plus Talbot also proved he hadnt given his ideas to anyone else.
The core idea of his program had been developed contrasted with
OBrien v Komesaroff
OBrien v Komesaroff (1982) 150 CLR 310
Komesaroff = a solicitor, argued he had provided confidential info to
OBrien in the course of advising him as a client.
Held:
K failed to identify what was confidential about the doc he drafted.
The contents of the trust deed were info that was already common
knowledge in the industry.
Couldnt point to any particular part of his doc that was confidential
info.
The description of the information in question was too general to allow the
info to be identified as confidential.

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2. Imparted in Circumstances Importing a Duty of Confidence

The circumstances under which the information is imparted must be
confidential.
Role of confidential circumstances:
May create the element of confidentiality;
May dictate the permissible use of that information.
So
The info must be given or obtained in circs of confidence.

And
The defendant must know that restrictions have been placed on use
of the information. It doesn't matter if you didnt say it was
confidential, they either knew or ought to have known it was
confidential.

Objective standard
If the circumstances are such that any reasonable man standing in the
shoes of the recipient of the information was being given to him in
confidence
then this will impose an equitable obligation of confidentiality.
Coco v AN Clark (Engineers) Ltd [1969] RPC 41
Would have realised the information given to them on a confidential
basis, equity imposes the obligation.
There are sorts of information you may not realise is confidential or
other parts which are obviously confidential, therefore you do not
necessarily need to say this is confidential.
This is where elements 1 & 2 are linked.

Nature of the information

Overlap with element one.
Sometimes, the very nature of the information, together with the identity
of the parties and the circumstances under which it was confided combine
to make it obvious that the information was confided in confidence.
Example. Selling unauthorised photos of celebrity wedding, when
magazine knew the couple had attempted to prevent unauthorised
photography Douglas v Hello! Ltd (No 3) [2003] 3 All ER 996.

Ordinarily
In the ordinary case, without more, a person given access to material is
entitled to presume he/she is not restricted in the use of that material.
Trevorrow v State of SA (No.4) (2006) 94 SASR 64.
State archive allowed Trevorrow to copy docs referring to legislative advice
regarding scope of Aborigine Protection Boards power to remove
Aboriginal children. Court nothing in the circumstances to suggest to a
47

reasonable person that Crown wanted to maintain confidential of the

advice. Therefore no remedy for Crown in passing the info on to others.

Unilateral obligation of confidence

Supplier cant unilaterally impose restrictions on use of information, if:
to do so is unreasonable at the time; or
Becomes unreasonable to enforce.
Contractual obligations of confidentiality. Needs to be confidential in the
first place and imparted in a way that it applies unconscionability.
Receipt of info for limited purpose illustration
Castrol Australia P/L v Emtech Associates
Held Rath J
The information had been supplied for a limited purpose and this purpose
did not extend to investigation of the feasibility of a prosecution of Castrol.
The Commission had received the information with the knowledge and
acceptance of those limitations.
Therefore, the injunction was granted.

Cf Re Smith Kline and French Laboratories Ltd

Smith Kline = a pharmaceutical company.
Other companies sought licences to market the same drug as SK, the
authority proposed to use Smith Klines information for the purpose of
assessing those applications.
Smith Kline sought to restrain it from doing so on the basis that this was
not within the limited purpose for which the information was supplied.
Used the information for another purpose different to the purpose it was
given to them for.
Held Lord Templeman
The principal duty of the licensing authority is to protect the public.
It also has a secondary obligation to treat all applicants fairly and equally.
I.e. public policy over-rides the right to confidentiality.

See also Smith Kline & French v Secretary, Dept Community Services and
Health (1990) 95 ALR 87 in which Gummow J considered an equivalent
application in Australia.
He too rejected it.
Reason = confidence is not to be determined solely by the purpose of the
confider, but depends on all the circumstances.
Court: Refused the injunction. Appeal also dismissed. Reason:
Smith Kline didnt make known the restricted purposes for which the
info was supplied.
Dept. staff were aware that info couldnt be disclosed to third
parties. But there was nothing to make them aware they couldnt
use it internally for another purpose.
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Smith Kline might have intended the info to be used only to

evaluate its own applications; but hadnt made this known.
Court need to take into act all the circumstances, not just what the
confider (i.e. Smith Kline) wanted.
So if acting for client giving info to government agency make
sure you draft a strong confidentiality rider.

Information obtained by wrongful means

What about where information is not disclosed, but stolen? Equity will
restrain the publication or use of confidential info improperly or
surreptitiously used (Dal P & Ch p198).
Franklin v Giddins [1978] Qd R 72
Pl had bred a unique type of nectarine. D stole plaintiffs budwood and
grafted it onto their trees. Held Dunn J
The defendants were prevented from selling any of the produce and were
compelled to deliver up the stolen budwood for destruction.
Doesn't matter if the information was given, stolen or stumbled upon, the
result will still be the same
You may 'accidently' come across something but the nature of the
information or circumstances will suggest it is confidential information.
This is different to asserting it is confidential but will arise an opinion that
it is to be confidential

Another Example: Selling unauthorised photos of celebrity wedding,

when magazine knew the couple had attempted to prevent
unauthorised photography Douglas v Hello! Ltd (No 3) [2003]
So situation:
Equity makes an exception for info obtained by reprehensible
means on basis of unconscionability. Some have also said, fact
that you steal it means that you know that it was confidential.

Result
= is if info obtained by dishonest, unlawful or surreptitious means,
we relax the requirement that the info be imparted in circs of
confidence. Only need to show the info is confidential, and used to
detriment of plaintiff.

3. Breach Unauthorised use

Coco v AN Clark (Engineers) Ltd (1969) RPC 41 Megarry J
3rd element = there must be an unauthorised use of that
information to the detriment of the party communicating it.
Cf In Smith Kline v Secretary, Dept Community Services and Health (1991)
99 ALR 679 the Court held that there can be no breach of the equitable
obligation unless the court concludes that a confidence reposed has been
abused, that unconscientious use has been made of the information.
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If information is not going to harm you in anyway but you are still
hurt by the betrayal and didn't want the information disclosed,
equity may or may not step in, depending on the circumstances.

F Gurry (P D Finn, Essays in Equity (1985) 110):

Use or disclosure (Saltman; Lamb v Evans);
Directly or indirectly obtained from the plaintiff;
Inconsistent use or disclosure;
Comment on the third test: Smith Kline.
It is not clear yet if equity will step in if the P sues in principle i.e.
betrayal as opposed to pain, misery, suffering caused by disclosing
the information i.e. where the release of info doesn't harm you in
anyway, equity doesn't have the place to essentially step in where
the common law is adequate, it is not there to address every
problem that doesn't have a common law remedy also.

Unauthorised Use
The use of the information by the confidante must not be authorised under
an arrangement with the confider or otherwise.
Detriment?
Unclear whether detriment is a necessary element of this cause of action.
Dominant view at the moment = detriment not necessary.
Examples:
Talbot v GTC.
Castrol case.
Examples:
Talbot v GTC case case of millionaires programme on TV.
Castrol case ran add past TPC for one reason, and then got sued for
another.
Breach and third parties
A third party who comes by information innocently may be restrained
from making use of it once he or she learns that it was obtained in
circumstances involving a breach of confidence. However, the question
whether there is or should be a duty on third parties must depend, at least
in part, on the extent to which the information is generally known.
Should a third party who is unaware of the breach of confidence be
prevented from using it?

Extends: Obligation of confidence extends to any third party to

whom info is conveyed and who knows or becomes aware of its
confidentiality
Regardless of whether the 3rd party acted innocently in acquiring
the info will usually be a 3rd party i.e. Zeta Jones' wedding, the
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photographer who took the photos was in breach but the magazine
company would be the 3rd party.

4. Defences: The Public Interest Defence

The private interests of the plaintiff and the public interest in the
maintenance of confidences may be outweighed by a public interest in
disclosure.
The defendant bears the onus of proving that an overriding public interest
favours disclosure.
Public interest: Def may be justified disclosing info where its in the public
interest to do so, e.g. disclosure of info about criminal activity.
In Aust, courts more reluctant to make it out.
Note comments in Croft doubting whether any general public interest
defence exists.
TPC in Castrol tried to argue this defence. But court found it wasnt made
out, as court found a reason for breaking confidence must be more
weighty and precise than a public interest in the truth being told.
Examples where defence made out in Aust breaches of Part IV and V of
TPA Allied Milles Industries Pty Ltd v TPC;
HC held in A v Hayden (1984) 156 CLR 532 that express contractual
stipulation for confidentiality would not be enforced where to do so would
obstruct the administration of justice.
Is this a defence at all? Or merely:
Defence to breach of contract?
a matter going to discretion clean hands?
Not talking about interest here in the sense of mere curiosity. Public
policy basis

Two important examples:

Public interest in disclosure of crimes frauds and misdeeds e.g. A v
Hayden; and
Where disclosure is in the interests of public health and welfare e.g.
W v Edgell.
A v Hayden
There is no confidence as to the disclosure of iniquity. Gartside v Outram
(1856) 26 LJ Ch 113 at 114.
What is iniquity?
A v Hayden example of what is not an iniquity. There would be no
defence available to ASIO for disclosing identities.
This is based on public policy and interest to disclose crimes which
outweighs the duty of confidence

Gibbs CJ
Considered the concept of iniquity. The concept of iniquity has been
expanded to include misconduct generally..

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He backed this up using the example of the case before him saying that,
if the only possible criminal offence had been that the pl and the hotel
manager had jostled one another, then this would not be enough to
outweigh the prejudice to public security and the potential for serious
harm to the plaintiff and others.
Matters relevant to public health and welfare
The court must balance the public interest in confidentiality against the:
likelihood and
severity
Of danger to the public if the information is not disclosed (Dal P &
Ch p203).
Illustration: W v Edgell [1990] 1 All ER 385

W v Edgell
W withdrew the application.
Dr Edgell sent a copy of the report on W to the review panel anyway and
W's lawyers sued in breach of confidentiality
CA per Bingham LJ
the crucial question (is) how the balance should be struck between
maintaining professional confidences and the public interest in protecting
the public against possible violence.
There was a risk to public safety, it was reasonable to disclose the
information to the responsible authority.

X v Y [1988] 2 All ER 648

In X v Y the employees of a health authority supplied the 1st

defendant, a reporter with a national newspaper owned and
published by the 2nd defendant with names of 2 doctors who were
carrying on general practice despite having AIDS.
Rose J said that while there was some public interest in knowing
what the D wanted to print, it was outweighed by pub interest in
loyalty and confidentiality generally and particularly with respect to
the hospital records of patients with AIDS.
So can see the sensitivity of this doctrine to public policy
considerations.

Government Info and public interest

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Governments often seek to restrain breaches of their confidence on the

basis of national security.
See Brennan J considered this in AG (UK) v Heinemann Publishers
(Spycatcher case).
It is a job for parliament, not the court, to balance the interests of foreign
government with the interests of our own. The duty is to refrain from
enforcing an obligation of confidence owed to a foreign govenment unless
Australian security and foreign relations is threatened.
Injunction denied.
Comparison: Breach of confidence v fiduciary duties
The two types of obligation are conceptually distinct, however, historically
linked.
Several similarities remain. These all developed alongside breach of trust.
Similarities
See S Barkehall, Equity, pp 211-3.
No requirement of mens rea; breach can be unintentional.
No requirement that property be held.
The obligations forbid the oblige making an unauthorised profit.
The obligations can, to some extent, survive termination of the underlying
relationship.
Third parties who have knowledge of the obligations can be fixed with
liability for participation in their breach.
You can accidentally breach confidence

Differences
See S Barkehall, Equity, pp 211-3.
The duties can protect different interests.
In Australia, fiduciary obligations only protect economic interests.
Confidentiality can protect economic interests, and also some
personal or privacy interests: Duchess of Argyll v Duke of Argyll
[1967] Ch 302.
Breaches of fiduciary obligations are invariably transactional, damage in
breach of confidence cases is not.
Remedies may differ.
The same genesis and share a lot in common. The core rationale is
the betrayal of trust. Breach of confidence is broader and softer

TRUSTS- Creating a Valid Express Trust

Essential elements of a trust

Three elements common to all trusts:

The trustee(s);

The beneficiary(ies); and

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The trust property.

Plus, in the case of express trusts, the creator of the trust is called
the settlor.

The trustee(s)
There must be at least one trustee.
The trustee is the person in whom legal ownership of the trust property is
vested.
The trustee may be a natural person or a corporation
The trustee is obliged to deal with the trust property in accordance with
the terms of the trust.
A trust will not be allowed to fail for want of a trustee. Ie the owner of the
trust property will be deemed to be a trustee unless she / he is a bona fide
purchaser for value without notice.
If the trustee dies suddenly, the executor of your will can then stand
in as owner of your land including the trust property will be included
but subject to the trust, they will act as owner until the matter is
settled.
The beneficiary(ies)
The beneficiary is the person for whose benefit the trustee is holding the
trust property.
OR
The person who holds the equitable interest in the property pursuant to
the trust. This emphasises the property and who owns what, it is used
more often these days.
It is of the essence of any trust that there is a duality of interests in the
property. Therefore, a trust without a beneficiary is void.

Case of DKLR Holdings of when equitable interests come into play.

Circumstances that trigger a trust have come into existence
whereby the legal and equitable interests of the property have been
split. DKLR Holdings, a person cannot have legal and equitable
interests in the property. If you have both legal and equitable the
trust will cease to exist because the trust is a split in the legal and
equitable interests in the property.
The trustee may be one of the beneficiaries.
Or there may be one beneficiary who is one of several trustees.
A sole trustee cannot be the sole beneficiary. The duality would lost and
no trust could exist.
The beneficiary may be:
a natural person or a corporation; or
a class of persons, the exact identities of whom are unascertained
at the time of the trust.

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In the case of charitable trusts, the charity itself is regarded as the

beneficiary.
Trust Property
There must be property to form the subject matter of a trust.
Any form of property can be held on trust, unless the law says otherwise.
So trust property may be:

Real or personal;

chose in action or chose in possession;

Legal or equitable (it is possible to hold an equitable

interest on trust).

If the trust was a painting and it was burnt and destroyed then the
trust would cease to exist as there is no property as trust property.
Money in a bank account is chose in action and can be considered
as property for trust.

Characteristics of a trust
i. Dual ownership of trust property.
the essence of a trust lies in the fact that the equitable ownership of the
trust property lies in someone other than the legal owner.
ii. A fiduciary relationship between trustee and beneficiary.

- As we saw last time a trust gives rise to a (traditional

category of) fiduciary relationship.

- A trustee does owe fiduciary obligations to the

beneficiary.
Equitable interest lies in someone other than the legal owner unless
the interest is equitable to begin with.

Classification of Trusts
Trusts are primarily divided into two categories:
1. Those created by the express declaration of a settlor

i.e. Express Trusts;

and
2.
Those created by application of law:
Resulting trusts; and
Constructive trusts.

Classification of trusts Express trusts

Express trusts may be classified in several ways:
Private v public / charitable;
Inter vivos v testamentary;

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Fixed trusts v discretionary trusts; and

Executed v executory trusts.

Public trusts do not have a beneficiary it has a purpose.

Public policy waives the need to have a human beneficiary here so
long as the purpose is charitable and if not it will be invalid.
Fixed trust: stipulates the beneficiaries and their specific shares.
Discretionary trust: i.e. get a years profit and give an amount to the
children at their own discretion i.e. split it between the children or to
give it to one etc. It is discretion of the trustee; the beneficiaries
therefore cannot say they are entitled to a certain %. They own
nothing in equity they only have an equitable right. You may go to
the court if the trustee is doing an improper purpose and seek to
appoint a new trustee. You cannot state what money you should be
getting, i.e. one third etc.

Private v public / charitable

Private trusts are trusts created for the purpose of benefiting private
individuals.
Public or charitable trusts have the primary purpose of promoting the
public good in some way (or some other such purpose). They may
incidentally have the effect of benefiting private individuals.
Inter vivos v testamentary trusts
A trust declared during the lifetime of the settlor is an inter vivos trust;
A testamentary trust is a trust declared in the settlors will, coming into
effect after death.
Fixed trusts v discretionary trusts
Fixed trusts are trusts in which the beneficiary or beneficiaries are
nominated / stipulated.
The trustee is given no discretion as to whom the distribution of trust
property should be made.
Discretionary trusts are trusts in which the rights / share of the
beneficiaries cannot be known at the outset.
The settlor nominates a number or class of beneficiaries, but leaves a
power of appointment to someone else (often the trustees).
The power of appointment is the power to choose to whom distributions of
the benefits of the trust shall be made.
Under a discretionary trust, no one beneficiary has the right to compel the
trustee to make a distribution.
It is generally considered that the beneficiary of a fixed trust has an
equitable proprietary interest in the trust property.
Cf the beneficiary under a discretionary trust does not merely a
hope or expectancy.
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Executed v executory trusts

A trust which fully stipulates all the details of the trust, so that it is
completely constituted, is an executed trust.
If the settlor leaves something to be done by the trustee to order to
perfect the trust.

NB the terms of an executed trust are construed more strictly than

are those of an executor trust.
A bare trust
A trust pursuant to which the trustee has nothing more than the legal title
to the trust property and has no active duties to perform.
In a bare trust the trustee simply holds the legal title, until the
beneficiary/ies request that it is transferred to them.

Creating a trust
There are 2 main ways to create a trust:
1.
by transfer
i.e. A (settlor) B (trustee) on trust for C (beneficiary)
Here both legal and equitable title passes.
2.
by declaration
i.e. A declares that henceforth, she holds property on trust
for C
Here A = both settlor and trustee and C = beneficiary.
Here only equitable title passes. Legal title remains with A.
NB Butterworths -Third possibility = direction i.e. the beneficiary
directs the trustee to hold the property on trust for another.

Essential ingredients of a valid express trust

The essential ingredients for a valid express trust are:
1. The three certainties;
2. Formal requirements
a) Any statutory requirement that the trust be in writing or evidenced
in writing must be satisfied; and b.
b) The trust must be completely constituted or supported by valuable
consideration;
3. There must be no vitiating factor (such as incapacity of the settlor,
illegality etc.).
From Heydon and Loughlan at 24.1.

Executive Summary
Validity of Express Trusts
The three certainties
Certainty of Intention
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Certainty of Subject Matter (Trust Property)

Certainty of Object (Beneficiary)
Formal requirements
Any statutory requirement that the trust be in writing or evidenced
in writing must be satisfied.
If it is a trust by transfer, it must be completely constituted or
supported by valuable consideration.
Any vitiating factors?
Good problem question structure.
Three certainties are the 'ingredients' for a trust, then has it been
done properly and is it valid? Then you will have a valid trust.

The Three Certainties

1. Certainty of Intention No special words

The usual words are to X on trust for Y.
There are no special words necessary to create a trust.
Equity looks to substance, not form.
Whatever words are used must indicate an intention to create a trust.
Intended to be an obligation and it needs to be clear before the
property is transferred. It is a legally binding obligation. Usual equity
maxim applies.
The burden of proving the intention falls to the person asserting the
existence of a trust (Herdegen v FCT (1988) 84 ALR 271).
There must be a clear and certain expression of intention to this effect.
A trust deed will help things along and it needs to be proved to a civil
standard.
Where the trust is created in writing - words will be given their ordinary
meaning, but they will also be considered in the context of the document
as a whole.

E.g. Re Altson my express wish v I direct.

However, the intention may be inferred from the nature and circumstances
of the transaction.
A trustee needs to know there is an obligation and they are taking
the property based on the obligation. 'I direct' suggests there is a
direct obligation.

What intention?
No necessity that the settlor even knows what a trust is.
This intention is a dual intention i.e. to confer a benefit on the beneficiary
AND to impose a duty upon the trustee.
NB This doesnt apply to resulting (presumed) or constructive (irrelevant).

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It needs to be clear you are giving the property to one person and
there is a benefit to a third party.
The discretion may be how much that the trustee wants to give to
the children i.e. money wise. They have to distribute it but have
discretion as to how much they see fit to give to each child

Nature of the transaction and all the circumstances

The court may look at the nature of the transaction and all the
circumstances in order to draw an inference as to the intention.
Example = Dean v Cole (1921) 30 CLR 1.
In this case, the testator had given all his property to his wife trusting to
her that she would divide fairly between the children.
But was not a trust, because earlier the will referred to some of the
property as being at her absolute disposal. A trust would have been
inconsistent with this.
A trust can arise out of a document but also through conduct. Dean
v Cole case, essentially it was a 'gift but the children argued it was
a trust as it was what the settlor expected her to do.
Trusting someone here does not give rise to an obligation. He had
said it was out the wife's 'absolute disposal' which does not give rise
to an obligation.

Actual intention
On the other hand, the mere fact that the supposed settlor uses the word
trust or even says that they intended a trust is not conclusive.
It is the actual intention that matters.

Extrinsic evidence
Parole evidence rule usually applies
But extrinsic evidence will be admitted when:

1.
The written instrument could not reasonably be considered to
be a complete statement of the makers intention (Star v Star
[1935]SASR 263).

2.
Writing is not required for a valid disposition e.g.
for
personal property.
3.
Terms of the instrument are ambiguous e.g. Lutheran
Church v Farmers Co-op Executors and Trustees (1970) 121 CLR 628. Dal
Pont and Chalmers 438.

Look to the trust document but not usually beyond it.

Writing is required for inter vivos trust for land or for an equitable
interest.
Where terms are ambiguous then the court can have access to
intrinsic evidence.
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Go to the document itself and see if the parole evidence rule will
apply, look to the 4 corners of the document etc.

The Commissioner of Stamp Duties (Qld) v Jolliffe (1920) 28

CLR 178
Mr Joliffe opened an account in his wifes name with himself as trustee and
deposited 900.
His purpose was to get extra interest that he would not get if he had put
the money in his own account.
When his wife died he converted all the money in the account to his own
use.
He went on to say that it was not the intention for him to be the trustee,
and claimed it was only an idea. He wanted to put the money in his
account. You cannot say it is or is not a trust when it suits you.
Held: the Court split.
Majority = Knox J and Gavan Duffy J said that his real intention not to
create a trust. No use of any form of words could create a trust contrary
to a proven actual intention.
Therefore it was not part of her estate it was his money.
Minority = Isaacs J strongly dissented. Said Mr Joliffe should be held to his
expressed intention.
The court does not like helping people to go back on their word.

However...
Where the language is unambiguous and there is nothing in the objective
circumstances to preclude an intention to create a trust... then a court will
hold that a trust exists.

Hilton v Kauter (1953) 90 CLR 86

Recent changes
Byrnes v Kendle [2009] SASC (FC)
K purchased a house in his own name and signed "acknowledgement of
trust" to the effect that he held an undivided half interest in the property
as tenant in common upon trust for B.
K later denied that he intended to hold part of his interest in the property
on trust for B.
Byrnes died and Kendle went back on his word to say he did not intend the
trust.
HELD:
Regard should be had to:
The terms of the written document, which are a significant matter
for consideration, the context in which it came into being and the
relationship between the parties.
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The High Court agreed that Mr Kendle must be held to the unambiguous
acknowledgment of trust made in writing.
He could not be heard to deny that this was his actual intention.
Gummow and Hayne JJ: A settlor must possess the necessary intention
to create a trust, but his personal intentions are irrelevant [i]f he enters
into arrangements that have the effect of creating a trust .
Appeal to the HC. They held he needed to be held to the trust he made in
writing. Here they said it doesn't matter the intention it is what you said.
They have not contradicted the Joliffe case there just needs to be a very
good reason to look to the other intention.
Primarily
What matters is the meaning of your words.
NOT what you meant to say.
Your actual intention will be gained from the actual words you have used.
In a problem Q if it clearly is a trust and the person is denying it then it will
be assumed that the actual intention was the words you said.
Precatory words
Words evincing an intention to create a trust must be mandatory /
imperative - not merely precatory.
Precatory words = words of request. Permissive rather than mandatory.

E.g. trusting that , beseeching that , requesting that , in

the hope that etc.
Will be in the exam so need to know how they work.
These words are not mandatory and do not indicate an obligation
and on their own they are neutral. It does not mean that there is not
a trust. Some words may be used as a courtesy so the intention and
obligation is there with no choice involved but they are given in a
polite and non-rigid way.

Re Altson [1955] VLR 281

The testatrix declared that her express wish was to grant a lease to the
plaintiff and that she desired the plaintiff to have the opportunity to
purchase the property when the lease ran out.
Trustees of her estate wanted to know whether they were obliged to grant
the lease or whether this was a matter for their discretion (i.e. power not
duty).
Held
No duty to grant a lease, merely a discretionary power.
So even if mandatory words are used in a will, precatory words (relating
to or expressing a wish or request) will not create a trust.

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What does 'express wish' mean? Here it was seen to be a discretionary

power.
Dean v Cole (1921) 30 CLR 1
Facts
Testamentary disposition left almost all property to the widow trusting to
her that she will divide in fair just and equal shares between my
children all such portion of my estate as she may be in the use or
enjoyment of.
Was she a trustee?
Held per Knox CJ, Gavan Duffy and Rich JJ
The words trusting to her were an expression of his confidence that she
would divide the property that he left her in accordance with his wishes
i.e. equally and fairly. But they did not impose any legal obligation to do
so.
Therefore they were not an attempt to impose a trust. These words were
not sufficient to contain a legal obligation.
Therefore:
Precatory words are, in themselves, neutral.
If the words are merely precatory, then even though the property and
objects may be expressed with certainty, no trust will result.
BUT if it appears from the document as a whole that a trust was intended,
precatory words will not preclude this result. Jacobs at [506].
Bottom line: If the document is professionally drafted and the words are
merely precatory, then there will probably be no trust.
If a client drafts it themselves and comes to you to check it, look out
for precatory words, do they mean it to be optional or an obligation,
need to change the words to you shall from you may. This too may
be in the exam. Precatory words are not fatal they are insufficient.
Beneficiaries knowledge
As it is the intention of the settlor which is relevant, it does not matter that
the beneficiary doesnt even know of the trust.
Rose v Rose (1986) 7 NSWLR 679.
Burden of proof
The burden of proving the intention falls to the person asserting the
existence of a trust (Herdegen v FCT (1988) 84 ALR 271).
What if she / he fails?
The disposition may amount to an outright gift;
Or, if it clear that no beneficial interest was intended for the donee,
there will be a resulting trust:
In the case of an inter vivos trust, the property might result back to
the person who set up the transaction (i.e. the settlor); or

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In the case of a testamentary trust, it might result back tho that

persons residuary beneficiaries.

2. Certainty of subject matter

There is no trust without trust property and the trust property must be
specified.
Example: Re Goldcorp Exchange Ltd [1995] 1 AC 74.
Goldcorp purchased gold in bulk. Argument that it was held on trust for
particular investors failed, because no specific item (gold bar) was
identified as trust property.
It can be an obligation but there needs to be a property and if there
is no property and it is not clear what is the trust property then the
trust will fail. There was no specific allocated item of property here
therefore the trust failed.
Boyce v Boyce (1849) 16 Sim 476; 60 ER 959.
Trust property for Charlotte = houses not selected by Maria.
Maria made no selection before she died.
Therefore, no trust property had been identified.

There are 3 main ways in which a trust can fail for want of certainty
of subject matter:
1. uncertainty as to the property described;
2. uncertainty as to the existence of the property;
3. uncertainty as to the beneficiarys interest in the property

Guideline = if it was called upon to enforce the trust, would a court

know what to do?
E.g. Directions to reward the beneficiary (Knight v Knight ) and to make
ample provision for a particular beneficiary (Winch v Brutton (1844) 60 ER
404) each failed for want of certainty of subject matter.

A situation not where the 'street name' is not specified it is where

the property is not specified. The court will try to understand what
was in the trust and the intention.

Uncertainty as to property described

Ever helpful - Equity says: that which is not certain is capable of being
rendered certain. This means that a trust will not fail for want of certainty
of subject matter so long as there is enough information there from which
a court can ascertain the identity and quantum of the trust property.
E.g. In Re Golays Will Trusts [1965] 1 WLR 969, the words a reasonable
income were (in the context) considered to be sufficient to indicate the
property bequeathed.

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That what is not certain can be rendered certain sometimes. Reasonable

is something the court can understand therefore they can help to direct
the trustee to be fair.
An undifferentiated portion
Ordinarily, an attempt to convey an undifferentiated portion of a mass of
goods constitutes no conveyance at all.
See Re London Wine Co (Shippers) Ltd [1866] PCC 121 regarding
wine;
Re Goldcorp (above) re gold bars.
Re Applebys Estate (1930) 25 Tas LR 126 re portion of a bank
deposit. Cf Associated Alloys Pty Ltd v CAN 001 452 106 Pty Ltd
(2002) 202 CLR 588.
It is better if the property is referred to as clearly as you possibly can.
London Wine Co, the deed did not specify which bottles were to be held on
trust as they are all separate chattels. Harder to distinguish with company
shares.
An undifferentiated portion: Shares
A trust relating to shares should specify to which company the shares
pertain. A trust over X% of my share portfolio or even of 100 shares not
specifying a company would be void for uncertainty. Herdegen v Fed
Commissioner of Taxation (1988) 84 ALR 271.
However, it has been held that a gift of X% of 1000 shares in Y Pty Ltd is
quite valid Hunter v Moss [1994] 1 WLR 452.
See also Re Harvard Securities Ltd [1997] 2 BCLC 369.
This decision has been highly criticised.

Uncertainty as to the existence of the property

Any property can be held on trust legal, equitable, chose in action, chose
in possession. But the property must be in existence at the time that the
trust is made. For this reason, future property cannot be held on trust,
neither can a mere expectancy.
Eligibility to benefit under a general power of appointment is a mere
expectancy.
It is essentially separate trusts in one document as each piece of
property creates a separate trust.

Re Rules Settlement
It was probable they would exercise it in her power but Mary did not have
any right to property.
Held: Mary had a mere expectancy, until her parents exercised their
power and made an appointment in her favour.
So, there was no property in existence at the time that the trust was made
And therefore no trust and therefore no tax payable.
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Future property
Trust property must be in existence at the time that the trust is created.
BUT if there is a specifically enforceable contract to create a trust, then a
trust will arise when the trust property comes into existence. Norman v
Fed Commissioner of Taxation (1962) 109 CLR 9, 25.
NB this does not apply to volunteers. See Re Ellenborough [1902] 1 Ch
697.
A situation where you promise that when you get money i.e. you will
hold it on trust for someone. It is not expressed. You need to
distinguish between actual property and mere expectancy.

In fixed trusts, the beneficiaries share of the trust property must be

ascertainable.
Mussoorie Bank v Raynor (1882) 7 App Cas 321.
The testator left his widow all of his estate feeling confident that she will
act justly to our children in dividing the same when no longer required by
her. This is where it is not certain what the shares of the beneficiary will
be. 'Acting justly.
Raynor case, issues was the amount of trust property all together; the
shares were to be 'just' so it was unclear how much each child would get.
Certainty of subject matter (trust property) this is that the trust property
needs to be property. Fixed trust i.e.to children in equal shares or shares
are fixed.
They must be ascertainable. Needs to be clear what the size of the share
will be.
Mussoorie Bank v Raynor (1882) 7 App Cas 321.
Held: The trust failed for want of subject matter.
act justly too vague for the courts to administer (i.e. while the courts may
be prepared to assess a reasonable share they cannot assess what is a
just share).
Result the widow kept the property free from obligation.

Uncertainty as to the beneficiarys interest in the property

2 possible objects
Trust for persons;

Trusts for charitable

objects

The beneficiary principle

Every non-charitable trust must have an identifiable human beneficiary in
whose favour the court can decree performance.
Corollary = that a non-charitable purpose trust is void, even if the purpose
is very clearly specified.
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Human beneficiary includes corporations, i.e. there must be a person who

can be in charge, beneficiary etc.

Morice v Bishop of Durham (1804) 32 ER 656

Held the case when it went on appeal. You are entitled as a
beneficiary under the Trustees Act to ask the court for guidance in
determining shares etc.

3. Test for certainty of object

Two tests exist:
The yes/no, in / out or certainty or criterion test i.e. can it be said (yes or
no) of a particular person whether or not they fall within the class of
objects? (Discretionary)
The list certainty test can the beneficiaries of the trust be listed? (Fixed)
In deciding private trusts i.e. for a person or class of persons. There
are 2 tests and it will depend on the trust you are looking at. I.e.
fixed trust or discretionary trust.

Fixed Trusts
All beneficiaries must be ascertained or ascertainable.
The trust must satisfy the list certainty rule i.e. one should be able to
exhaustively list the beneficiaries.
The list should be able to be compiled at the date the beneficiaries are
entitled to their estate.
But see: West v Weston (1998) 44 NSWLR 657.
The class must be described with sufficient clarity. Fixed trust needs
certainty.
West v Weston (1998) 44 NSWLR 657
In the context of a fixed trust which contemplated distribution of the entire
capital of the fund, the rule will be satisfied if,
within a reasonable time after the gift comes into effect,
the court can be satisfied on the balance of probabilities that the
substantial majority of the beneficiaries have been ascertained and
That no reasonable inquiries could be made which would improve the
situation.
Facts
Testamentary trust over residuary estate, to lineal descendants. Problem
was how you could ever be certain that you had tracked them all down.
Residuary estate: property that is not allocated i.e. anything left over.
Drawing up a list of lineal descendants may be very difficult.
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Held
Young J: applied McPhail v Doulton the trust would be valid if,
within a reasonable time (as opposed to on that exact day) after the
gift comes into effect, the court can be satisfied on the balance of
probabilities that the substantial majority of the beneficiaries could
be listed and no reasonable inquiries could be made which would
improve the situation.

Discretionary trusts
Criterion certainty test.
In a discretionary trust, the trust/ee has either a mere power v trust power.
Mere power = trust/ee has a discretion as to whether to make a
distribution at all.
Trust power = trust/ee must make a distribution, but has a discretion in
relation to whom to distribute.
Trust power i.e. can be on a yearly basis, at an amount you see fit.
They need to distribute it at some point and cannot keep it for
themselves

McPhail v Doulton [1971] AC 424

Bertram Baden established a fund for the benefit of the staff (including
former staff) of Matthew Hall & Co and their relatives and dependants .
Trust power- you are obligated to make a distribution
Here in this case it is difficult to tell if it is trust or mere power and this
was also the case in workshop 7.
Funds were left to the staff of the company, their relatives and
dependents. Criteria certainty would be easily satisfied.
Held per Lord Wilberforce (with whom Lords Reid and Dilhorne
agreed).
This was a trust power i.e. there was an obligation to make a
distribution. .
The distinction between mere and trust powers in a discretionary trust was
narrow, artificial, unfortunate and wrong and the test for certainty of
object should be the same in either case.
And the better test was the criterion is a yes/no certainty test.
The appropriate test here in all discretionary trusts is the certainty
test
Private trust? Is it fixed or discretionary? Different tests for each one,
Discretionary trust will be criteria and certainty test.
The criteria may be certain even if there are no records and you may
be able to draw people in or out of the list (List certainty test).
However, it seems that there may be some differences in the way that
test is applied, depending upon whether a trust or mere power is
conferred.

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Lord Wilberforce said that a trust would fail if the statement of the
beneficiaries was so hopelessly wide as not to form anything like a class,
so that the trust was administratively unworkable.
This can applies only to trust powers and not to mere powers. Only a trust
power will fail for the too loose class rule.
Administrative workability is a matter which a court can assess. If the
trust cannot be practicably administered in its native form then it
might be a matter for opinion, advice or directions under the
Trustees Act 1962-78 (WA) s92.
Semantic and evidential uncertainty
Semantic uncertainty (aka conceptual or linguistic uncertainty)
Relates to whether the settlor has prescribed a criterion capable of certain
application: a disposition that suffers semantic uncertainty fails the
criterion certainty test, and is void.
Semantic uncertainty will cause a trust power to fail, because you
cant enforce someone to exercise a power that cannot be
ascertained.
Semantic uncertainty will also cause a mere power to fail, because
a court cannot tell whether or not it is being exercised impulsively
or unreasonably.
Are the words the testator has used semantically clear?
Re Gulbenkians Settlement [1970] AC 508
Facts
Calouste G set up a trust, obliging that the trustee at his absolute
discretion during the life of Cs son Nubar, to pay all / any of the income
of the fund to (or apply it for the benefit of) all or any persons of a
particular class. Anyone who has ever given the son a job or has let him
stay at their house. Discretionary, so it was the criteria test, however was
it semantically clear? It needs to be clear i.e. they either employed him or
didn't etc.
It could be difficult to prove, but semantically it is a clear class of people.
Held (HL)
This = a mere power. The test for certainty was whether or not it could be
with certainty whether any given person did or did not fall within the class
described. Here it could and so the class was sufficiently certain.

Evidential uncertainty
Evidential uncertainty = extent to which the evidence available in a
particular case enables specific persons to be identified as members of the
class and so as beneficiaries or potential beneficiaries.
A disposition will not fail for evidential uncertainty.

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Re Gulbenkians Settlement Trusts [1970] AC 508 if the class is

sufficiently defined by the donor the fact that it may be difficult to
ascertain the whereabouts or continued existence of some of its members
at the relevant time matters not. The trustees can apply to the court for
directions
Easier to prove

The beneficiary principle

Every non-charitable trust must have an identifiable human beneficiary in
whose favour the court can decree performance.
Corollary = that a non-charitable purpose trust is void, even if the purpose
is very clearly specified.
Unincorporated Associations
Legal problems arise in the case of gifts (almost always testamentary
gifts) to unincorporated associations.
Donors often make gifts, many by way of trust, to unincorporated
associations.
An unincorporated association, e.g. a tennis club or an order of nuns, does
not constitute a legal person, as a corporation does.
Example, to A on trust for the Leeming Bowling Club.
So the gift will fail, unless the associations purposes are charitable.
People do not distinguish between corporated and unincorporated
associations.
Unincorporated associations are not legal persons, but a corporation is.
Therefore it could be charitable. But you may have left it to a person under
the unincorporated body; they can take it as trust for all members of the
club for example.
Unless you construe the trust in a particular way, it will fail. If you do not
leave it to a person, it will be left to the 'unincorporated' body and will
therefore fail.
However, courts have generally given effect to such gifts wherever
possible.
A gift to an unincorporated association can take effect in one of three
ways, depending on the purpose for which the gift is made.
Cross J in Neville Estates Ltd v Madden [1962] Ch 832 at 849.

Rebuttable Presumption
So, in order to salvage the trust, there is a presumption that:
where a gift is made to an unincorporated association by name and for it
general purpose
it is presumed to be made to the present members.
But this presumption is rebuttable.

It may succeed if you leave it to someone on trust for all members of

the club at the time you die. If not it will fail.

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Rebuttable presumption i.e. at the time the trust comes into effect, is
it likely due to the nature of the group, property etc. that it can be
rebutted to not be current members.

Charitable Trusts
A charitable trust is a trust for a purpose, not for a person.
Attorney General (NSW) Perpetual Trustee Co Ltd (1940) 63 CLR 209 at
222 per Dixon and Evatt JJ.

Commissioners for Special Purposes for Income Tax v Pemsel

[1891] AC 531
Held per Ld Macnaghten
This was a charitable trust. At 583
Charity in its legal sense comprises four principal divisions:
trusts for the relief of poverty; trusts for the advancement of
education; trusts for the advancement of religion; and trusts for
other purpose beneficial to the community, not falling under the
preceding heads.
If you are not certain if it is charitable or not then you can decide
through these elements

Morice v Bishop of Durham

The legal concept of charity consists of the purposes listed in the
preamble together with any other purposes that fall within the spirit and
intendment of the act.
Per Sir William Grant MR and affirmed on appeal by Lord Eldon.
Not looking at what was intended in the statute but look to the spirit of the
intention of the statute.
Public Benefit
In addition to this, a charitable trust must provide a benefit to the general
public.
This means that it must be:
Beneficial to the public; and
For a public as opposed to a private purpose.
Needs to be for a public purpose i.e. publically accessible.
Trusts for the relief of poverty
Derived from the preamble to Statute of Elizabeth relief of aged,
impotent (i.e. sick / disabled) and poor people.
Must be read disjunctively.
I.e. old and / or sick and / or poor.
For instance, trusts made for the benefit of the aged will be charitable,
even if those benefited are neither disabled nor poor.
See Re Glyns Will Trusts [1950] 2 All ER 1150 (working class
women over sixty).
Relief of a particular illness i.e. this will suffice. I.e. for old people of WA
will also need to prove it is public, not private. Therefore it needs to be for
a public purpose.
The trust does not have to stipulate that it is for the alleviation of poverty,
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So long as it is clearly intended to have that purpose

See Downing v FCT (1971) 125 CLR 185 (amelioration of the
condition of the dependants of members or ex-members of the
armed services).
OR that is likely to have this effect.
See Re Niyazis Will Trusts [1978] 3 All ER 785 for the construction of
a hostel for working class men).
Trusts for the relief of poverty do not require proof of public benefit.
Trusts for particular poor people or groups have been held to be
charitable.
See Dingle v Turner [1972] AC 601.
However, this does not apply to trusts for the benefit of the old and / or
the sick.
Trusts for the advancement of education
This includes all trusts, which promote learning.
For example:
Trusts for the purpose of maintaining a school (e.g. AG v Lady
Downing (1766) 27 ER 353);
or university college (e.g. Wilkinson v Malin (1832) 2 Cr & J 636);
or a university chair (Yates v University College London (1875) LR 7
HL 438);
or a scholarship (Re Leitch [1965] VR 204) or academic prize
(Chesterman v FCT [1926] AC 128).

But is not restricted to educational institutions.

So that trusts for the promotion of:
The Boy Scout movement (Re Webber [1954] 1 WLR 1500);
The playing of chess (Re Duprees Deed Trusts [1945] Ch 16);
Cultural advancements such as:
choral singing (IRC v Royal Choral Society [1943] 2 All ER
101),
organ playing (Re Levien [1955] 1 WLR 964), and
the Archibald prize for portrait painting (Perpetual Trustee v
Groth (1985) 2 NSWLR 278).
Means education in a broader context. Leads into public policy as the
exception of charity. Could also be a sporting club etc.
Education means the dissemination of knowledge, not merely the
amassing of information.
So research alone will not suffice, unless it adds to the sum of publicly
available information.
Such as:
Scientific research (Taylor v Taylor (1911)110 CLR 218);
Educational research (Re Schulz [1961] SASR 377);
Research into matters of cultural importance (Re Hopkins Will Trusts
[1965] Ch 669).
Even if they serve the public good by promoting learning, these trusts
must promote education of the public or sectors of the public in order to
be considered to be charitable.
Thus, trusts for the education of private individuals e.g. the testators
children or of particular families are considered to be private trusts.
See Re Compton [1945] Ch 123; and
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Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297.

Trusts for the advancement of religion

This was recognised after the Statute of Elizabeth and is not found in the
preamble.
The law has no preference for one religion or sect over any other.
It includes all religions, not merely those that rest on a belief in God.
Leads to the question of 'what is a religion'? scientology was not included
here
Nor is validity is not an issue, unless the proposed religion could be
described as a hoax or a sham.
See Church of the New Faith v Commissioner for Payroll Tax for Victoria
(1983) 154 CLR 120 re the Church of Scientology. Does the group in
question:
hold some belief in a supernatural being, thing or principle,
Are its beliefs and practices related to mans place in the universe and
his relation to things supernatural?
Accept cannons of conduct to demonstrate this belief.
Publically beneficial, cannot be purely private

The advancement of religion means the promotion and advancement of

the given faith.
Including:
Evangelical work United Grand Lodge of Free and Accepted Masons v
Holborn Borough Council [1957] 1 WLR 1080.
Providing or maintaining (public) places of worship;
The support of clergy;
Public services, even for the benefit of particular individuals;
BUT NOT private prayer. This is not considered to be sufficiently
beneficial to the public. Re Joy [1886-90] All ER 1110.
Trusts for the advancement of religion must benefit the public.
However, it is generally presumed that the public benefited at large
benefits from the spiritual and moral advancement of its members who in
turn go into the wider community and improve it.
See Neville Estates Ltd v Madden [1962] Ch 832, per Cross J.
For this reason, trusts in favour of purely contemplative and / cloistered
orders have not been held to be charitable.
See Leahy v Attorney General (NSW) (1959) 101 CLR 611; Cocks v
Manners (1871) LR 12 Eq 574; Gilmour v Coats [1949] AC 426.
Furthermore, charitable trusts must not be private.
Therefore, gifts made simply to clergymen or made expressly for parish
purposes or even explicitly at [their] discretion have been upheld. Re
Flinn [1948] Ch 241.
However, a trust for the clergymans personal purposes would not be
charitable.

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Trusts for purposes beneficial to the community

In order to fall under this category, the trust must:
Be beneficial to the community
and
Fall within the spirit and intendment of the preamble to the Statute
of Elizabeth. This is generally determined by analogy.
'Other' so not for education, religion or poverty.
Examples:
For the benefit of inhabitants of particular places eg for my country
England / the Australian community.
Trusts for the benefit of aborigines / members of the armed services.
Trusts for stray animals / the prevention of cruelty to animals.
Relief of human suffering, but not in a political context.
Sport has not been considered to be beneficial per se, but only in an
educational context.
Public facilities e.g. parks.
Relief in cases of natural disaster.
I.e. for animals, it is not for the benefit for the animals as such, it is a
benefit to the community as the community will be a 'better place' if
animal cruelty is prevented.
Law reporting is important to administration of justice and therefore
beneficial to the community.
Incorporated Council of Law Reporting of the State of Queensland v
FCT (1971) 125 CLR 659.
Now possibly also agitation and debate with respect to political and /
legislative change.
Aid / Watch Inc v Commissioner of Taxation (2010) 241 CLR 530
Aid Watch: purpose was to keep the topic of international aid apparent in
society. Courts were reluctant to find a charitable trust to push a particular
political view, i.e. if it was political, it was not charitable.
Political trusts
Formerly, trusts for political purposes would not be upheld as charitable,
even if they might otherwise have been considered to be beneficial.
Eg trusts for the benefit of Amnesty International have failed as being for
political purposes. McGovern v Attorney General [1981] 3 All ER 493.
We can see the reason for this, courts do not want to be seen to be
promoting political causes or sitting in judgment as to their benefit to the
public.
See Bowman v Secular Society Ltd [1917] AC 406 at 442.
Following, Aid / Watch Inc v Commissioner of Taxation (2010) 241 CLR 530,
there is no longer a blanket disqualification of political purpose trusts.
Aid / Watchs purpose was to influence government policy with respect to
the delivery of foreign aid.
Court took a more modern approach with Aid Watch and said political
aspects could be charitable. It was found that Aid Watch was a charitable
body.

Aid / Watch v Commissioner of Taxation

Aid / watch was a charitable body.
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BUT, arguably, if the purpose was not to stimulate debate, but merely to
assert views (lobby?) then it might still fail (see Heydon and Keiffal JJ).

Mixed charitable and non-charitable purposes

The general rule is that where the objects of the trust are sub-categorised,
then unless each and all of the sub-classes of beneficiary satisfies the rule
in Morice v Bishop of Durham, the entire trust will fail.
So:
if a trust is made for several objects,
some of which are charitable and others consist of non-charitable
purposes,
Then the whole trust will fail.
But ...
See statutory intervention: s 102 Trustees Act 1962 (WA).
This section permits a trust for both charitable and non-charitable
purpose to be preserved by severing the non- charitable purpose /
expression.
Where a body has both charitable and non-charitable aims (e.g. a political
purpose) the trust can be allowed to stand so long as the charitable
purpose is the primary object and the non-charitable purpose is only
ancillary.
Victoria Women Lawyers Association v Commissioner of Taxation [2008]
FCA 983.
Primary purpose = to assist women to enter and advance in the
legal profession;
Ancillary aim = achieve law reform.
Cy-prs
close-by i.e. close by to who it was intended for.
If the charitable purpose does fail, this doctrine allows the funds to be
used for a charitable purpose which approximates the purpose specified
by the creator of the trust.
So the trust is saved. Originally equitable, now also statutory.
Testementory trust, doctrine of cy-prs, Where the trust has not specified
a purpose or it is unclear then funds will be put towards a similar purpose
of charity. In Taylor v PMH the hospital's name was misspelt slightly, Judge
found it was perfectly clear who the trust was intended to be for.

A. Formal requirements: Express Trust

Testamentary trusts:
Except for certain other trusts post-mortem (secret trusts and
half-secret trusts) trusts that come into effect after the settlors death must
be contained in a validly executed will.
Inter vivos trusts:
Any statutory requirement that the trust be in writing or
evidenced in writing must be satisfied.

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 Legal interest in personal property no

formalities.
Legal interests in land (trusts by transfer) in
writing and signed s34 (1)(a) PLA
Legal interests in land (trusts by declaration)
evidenced by writing s34 (1)(b) PLA
Equitable interest in legal / personal property in writing and signed s34 (1)(c) PLA

If the trust is a trust by transfer, it must be completely constituted

or supported by valuable consideration.

There must be no vitiating factor.

1. Statutory requirements that the trust be in writing or evidenced in writing:

Trusts Post Mortem
Testamentary trusts
the Wills Act;
Secret and Half-secret trusts.
Inter vivos Trusts
s 34 Property Law Act .
Voluntary transfers
2. Complete constitution:
When is it required? and
What does it mean?

Wills Act 1970 (WA)

Part II Dispositions and appointments by will
Section 6.
Provision that may be made by will
A person may, by a will executed or made in a manner required or
permitted by this Act
(a) dispose of property (whether acquired before or after the making
of the will) to which at the time of the persons death the person is
entitled either at law or in equity;
(b) dispose of property that in exercise of a power of appointment
the person is entitled or able to dispose of by will; and
(c) appoint a guardian of any infant child of the person.
Needs to be a valid will.

Part III Execution of wills

Section 8 Execution generally
Subject to sections 17 and 20 and Parts X and XI, a will is not valid
unless
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(a) it is in writing;
(b) it is signed by the testator or signed in the testators name by some
other person in the testators presence and by the testators direction, in
such place on the will so that it is apparent on the face of the will that the
testator intended to give effect by the signature to the writing signed as
the testators will;
(c) the testator makes or acknowledges the signature in the presence of at
least 2 witnesses present at the same time; and
(d) The witnesses attest and subscribe the will in the presence of the
testator but no publication or form of attestation is necessary.

Valid executed will. Usually you sign at the end with an execution
clause. Also make sure they sign in the same pen. Make sure you
use a person as a witness who will be willing to be called upon at a
later time to acknowledge they actually signed it.

Part X Informal wills

Section 32. Court may dispense with formal requirements
(1) In this section and section 33
document means any record of information including
(a) anything on which there is writing;
(b) anything on which there are marks, figures, symbols or perforations
having a meaning for persons qualified to interpret them;
(c) anything from which sounds, images or writings can be reproduced
with or without the aid of anything else; or
(d) a map, plan, drawing or photograph,
And includes any part of a document within the meaning given by
this subsection.
(2) A document purporting to embody the testamentary intentions of a
deceased person, even though it has not been executed in the manner
required by this Act, constitutes
(a) a will of the person;
if the Supreme Court is satisfied that the person intended the document to
constitute the persons will ...

If you want something to be effective without needing to go to the

SC for approval you need to comply with s.8
If it doesn't comply with section 8, no 2 witnesses etc. This does not
mean it cannot come into effect.
(3) In forming its view, the Supreme Court may have regard (in addition to
the document) to
any evidence relating to the manner of execution or testamentary
intentions of the person,
Including evidence (whether admissible before the commencement of this
section or otherwise) of statements made by the person.
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Does not matter what the property is i.e. land or chattel or an

equitable interest, s.8 is still the platform

Secret trusts
A secret trust may be created where:
On the face of the will, the legatee (donee) takes absolutely;
But extrinsic evidence reveals that the testator has arranged with
the legatee (either before or after the making of the will) that the
gift is actually to be held on trust for another (e.g. a mistress or
illegitimate children); and
The legatee agrees or acquiesces to the trust.
Extrinsic evidence will be admitted to prove the existence and terms of the
trust.
The trust will be valid and the legatee may not use the formal
requirements of the Wills Act to evade his obligation. Otherwise, this
would permit the Wills Act to be used to perpetrate a fraud.
The will must be proven where there is a lot of property at stake.
Extrinsic evidence is an exception to the general rule.
Half secret trusts
The will reveals that there is a trust, but the terms of the trust are not
specified.
Question must the terms of the trust be communicated to the trustee at
or before the making of the will?
Canadian court had insisted that they must.
Young J of the Supreme Crt of NSW had held that such a trust may be
enforceable, even if the terms werent communicated to the legatee until
after the execution of the will.
Ledgerwood v Perpetual Trustee Co Ltd (1997) 41 NSWLR 532.
That there is a trust is apparent but the terms are not apparent and
the beneficiaries are not clear.
It has been held that requirements for a half trust are stricter than a
secret trust.
Half secret trusts need to be incorporated into the will. Cannot
incorporate a conversation that has never occurred.

Brown v Pourau [1995] 1 NZLR 352

Sophy Douglas left her property to her eldest daughter Emma.
Intention is important- legally binding obligation as opposed to a
moral obligation.
Emma was to hold it for a particular purpose but on the face of the
will it was a gift. If it was a trust, then Emma could not pass it
beneficially to her son. But if it was a wish, hope etc. then Emma
could have given it to her son.
Held
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Need to demonstrate the critical step from ought to is.

Here the defendants did not discharge the onus of proving an intention to
create a secret trust. Evidence suggested a very vague intent i.e. that the
land was somehow to be held for the family. Imposing a mere moral
obligation.
Nor was there sufficient evidence that E accepted any such trust i.e.
willingly undertook a legal obligation and exposed herself to sanction by
the court for any breach of trust.
Result = no trust.
Onus of proving the trust exists is up to the people proving there was a
trust (Emma's family)

Trusts made inter vivos

No Formal requirement imposed by Equity itself
Equity looks to the intent rather than the form so no requirement of
writing at general law to create a valid trust.
But certain types of trusts must fulfil certain statutory formalities.
It is better to have a will drawn up and signed by the trustee/executor etc.
Make sure a copy is kept by a proposed beneficiary. No formal
requirements of trusts- substance not form.
Personalty
There are no formal requirements (i.e. of writing) in relation to an inter
vivos trust in relation to personal property.
Kilpin v Kilpin (1834) My & K 520
Facts: Gifts of 8000 and 4500 worth of shares.
The only evidence of an intention that the share be held on trust was an
unsigned memorandum and oral agreement.
Held: valid trust.
This proposition was affirmed in Grey v IRC [1960] AC 2 at 16
Where personal property is concerned then there is no formal requirement
for conveyance of legal interest in the property, i.e. painting, musical
instruments.

s 34 (1)(b)
Smith v Matthews (1861) 3 De GF & J 139 at 151.
Relates to trusts created by declaration, rather than by transfer.
The evidence may be made after the trust is declared. (Gardiner v Rowe
(1828) 38 ER 923).

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Conflict with para (a), which was held in Adamson v Hayes (1973) 130 CLR
276 to apply to the creation and disposition of both legal and equitable
dispositions in land.
Conflict between paras a & b. Something may be covered by a or b,
if it is in writing or evidenced in writing.
However the best thing to do would be to put the whole thing in
writing. No clear HC authority or legislation.
Trust by declaration, land, a declaration will suffice and the whole
thing will not need to be in writing as such. Para c purpose is to
prevent hidden transactions, so the best thing is to get it all done in
writing.
Equitable Interests
s 34 (1) (c) a disposition of an equitable interest or trust subsisting at the
time of the disposition shall be in writing signed by the person disposing
of the interest, or by his agent thereunto lawfully authorised in writing or
by will.
Purpose = to prevent hidden transactions in equitable interests and to
enable trustee to identify the person to whom they are accountable.
Does not apply where the legal owner disposes of his or her legal and
beneficial interest in the property.
DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW)
[1980] 1 NSWLR 510.
Complete constitution of the transfer of trust property
As we saw earlier, express trusts can be created in one of 2 ways:
Declaration of trust by the settlor; OR
Transfer from the settlor to the trustee.
Legal interest in land- put it in writing and have it signed. Trust by transfer,
legal interest in land needs to be in writing and signed.
s.33(1) PLA general law land you will need a deed. If it is a trust by
transfer, you need to consider if the trust property is owned by the trustee
or not, if it is or it is unclear then it will not be completely constituted.

Trusts by Declaration
The settlor is already the owner of the trust property.
So, the trust is automatically completely constituted.
So long as the 3 certainties are present and any formalities complied with,
the trust will be enforceable.
Trusts by transfer
One additional requirement applies: the trust must be completely
constituted.
While the trust property remains owned by the settlor, the trust will not be
completely constituted.

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The trust will be completely constituted when the title (ownership) of the
trust property is vested in the trustee.

Vesting the trust property in the trustee

Torrens System Land : registration of transfer.
General law land : deed of conveyance (s33(1) PLA).
Chattels capable of passing by delivery:
delivery of the chattels to the intended trustee
or delivery of a deed of gift of the chattels.
Anning v Anning (1904) 4 CLR 1049
Choses in Action: see s 20 Property Law Act 1968 (WA).
Assignment must be absolute - Norman v Federal Commissioner of
Taxation (1963) 109 CLR 9.
Must be made in writing and signed by the assignor.
Express notice must be given in writing to the debtor.

Where there is consideration...

BUT note that, even if the trust property is not completely transferred to
the trustee at law, it may yet be effectively be enforceable if consideration
was provided.
Equity deems to be done that which ought to be done.
If the contract is specifically enforceable, parties will be treated as is the
contract to create the trust / transfer the property has been performed.
Where any conveyance is concerned then in the eyes of equity the trust
may be completely constituted

In the absence of consideration...

BUT, unless the trust is completely constituted by:
effectual legal transfer; or
specifically enforceable contract
It will not be effectual
Because equity does not perfect an imperfect gift.

Complete constitution of the transfer of trust property

So to completely constitute the trust, the settlor must:
1. Do everything necessary;
2. according to the nature of the property
To transfer the trust property from the settlor to the trustee.
Equity will consider it to be completely constituted where the testator has
done everything they could do that is necessary to be done to make the
transfer.

Everything necessary
What does this mean? That there is absolutely nothing left to be done?
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Means that the transferor must do those acts which it was necessary for
him to do i.e. for him and him alone.
See Milroy v Lord and Corin v Patton.

Limitations on the settlors power of disposition

An express trust which satisfies the three certainties is completely
constituted and
where all parties have capacity will generally be valid,
Unless there is some vitiating factor.

Discussed 3 certainties and formal requirements, but is there some

other reason that the trust will fail? I.e. vitiating factors

B. Vitiating factors
Vitiating factors include:
Illegality where it is created to serve some illegal or fraudulent
purpose;
Void as against public policy
where it imposes unlawful conditions upon alienation;
where it promotes immorality or undermines the sanctity of
marriage or the family;
Where it offends the rule against perpetuities or the rule against
indestructibility; or
Where it is overridden by statute.
Purpose of the trust must be such that the law allows.

Trusts for illegal purposes

Orthodox Rule
It is a fundamental condition that the purposes of a trust must be such as
the law allows otherwise the trust will be void.
Departure from the Orthodox Rule
The modern approach is that the
orthodox rule of non-interference is departed from in certain cases
Where it is considered in the interests of justice that the plaintiff should be
assisted.
Summary of the modern approach
The party to a trust for illegal purposes can recover property transferred
under the trust, if:
the illegal purpose has not yet been carried into effect (both England
and Australia)
OR
they can make out their claim w/o leading evidence of that illegal
purpose (English approach);
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OR
Where enforcing the trust would not defeat the underlying purpose of
any legislation breached (modern Australian approach).
Australian courts take a different view of illegal conduct. So long as
enforcing the trust does not defeat the purpose of the legislation, it can go
ahead.
Where the illegal purpose has not yet been carried into effect
The doctrine of locus poenitentiae.
A person who has transferred property pursuant to an illegal trust may get
it back, if they have repented prior to the illegal purpose being carried into
effect and the property in question remains identifiable.
Repentance introspection or remorse on the part of the defendant.
Question = has the defendant aborted the course without commencing it?
The person asserting the illegal purpose has the onus of proving both that
the purpose alleged exist and that it has been carried into effect.
Under this approach, the court asks:
Has the illegal purpose been carried out in whole or part?
Has the settlor refrained from using the fraudulent cover?
Has the settlor recanted before any necessity arose for using the
fraudulent cover?
It is nothing to do with repentance, it is have you planned or have
you done something illegal.
Perpetual Executors and Trustees Association of Australia v
Wright (1917) 23 CLR 185
Husband purchased a house in his wifes name in case he failed in
business.
So purpose = to cheat creditors.
Normally there would be a resulting trust. It was just a purpose and he had
not done anything illegal.
Held per Isaacs, Gavan Duffy and Rich JJ
The onus of proving that the illegal purpose has been effected lies with the
person seeking to deny the trust.
It is not sufficient to show that a trust was set up for the purpose of
attaining some illegal object, if that purpose has not been or cannot be
achieved.
The question = whether the illegal purpose still rests in intention only
(at 196).
Here, the administrators failed to discharge their onus.
So he was entitled to his interest. Administrators could not deny the
resulting trust.

The Australian approach

The English approach can lead to harsh and arbitrary results and has been
rejected in Australia.

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In Australia, a settlor can recant from a trust for illegal purposes, and
recover property transferred under the trust
Where enforcing the trust would not defeat the underlying purpose of the
law breached.
Even if this necessitates adducing and relying upon evidence of his own
illegality.

Nelson v Nelson (1995) 132 ALR 133

Indicates that, at least in the case of statutory illegality,
The court should look at the policy behind the law breached
And inquire whether it will be served by denying the interest.
Special interest rate, she put it on paper that she only had 1 house in
her name in order to get the discount.
But on paper it was a 'gift' to the child she had fraudulently intended
a cheaper interest rate and the mum had to rebut the presumption
of the gift and the only way to do this was to state her intention of
the trust, which was the illegality.
This case demonstrates how illegality will be treated in an Australian
court. You can plead the existence of a resulting trust, even if you have to
confess to some illegal act
The mother was declared to have a beneficial interest in the proceeds of
sale. Three of the five judges held that this declaration should be subject
to a requirement that she restore the subsidy to the Commonwealth.

Purpose of the statute

This approach, focusing on the purpose of the statute in question was
followed in:
Fitzgerald v FJ Leonhardt (1997) 189 CLR 215 and
Damberg v Damberg (2001) 52 NSWLR 492.

Mixed purposes
If a trust is created partly for a lawful and partly for an unlawful purpose,
the whole trust will fail, unless the property to be held for the lawful
purpose can be separately ascertained, because:
the lawful property was identified by the settlor (Chapman v
Brown (1801) 31 ER 1115); or
the court can ascertain the sum that would have sufficed to achieve
the illegal object (Mitford v Reynolds (1842) 41 ER 602).
Jacobs Law of Trusts at 115. Reasons why a trust may fail other than
fraud.
Where only one of the terms of the trust is for an illegal purpose
The trust can only be saved if that term can be severed without defeating
the purpose of the trust as a whole. Jacobs Law of Trusts at 115.
It is there to prevent people from directing and controlling the property,
i.e. it was against public policy as dynasties were built up.
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Public policy: Trusts in restraint of alienation of property

The idea is that if a gift is made of an absolute interest e.g. fee simple or
ownership, then he cannot purport to restrict alienation.
To do this is repugnant or inconsistent with the interest given.
Therefore, a settlor may not transfer property absolutely, subject to
conditions restraining the transferee from transferring, mortgaging, selling
or otherwise dealing with the property.

Grayson v Grayson [1922] QSR 155

McCawley J held that :
the court must look at all the factors, such as:

The number of the persons to whom it could be

alienated;

the length of the restriction;

The effect on the value of the property given etc.

The question = whether, even if the whole of the power to alienate

is not withheld, is a valuable portion taken?
Exceptions
Be aware that there are some exceptions
e.g. to wife until remarriage is OK. Lloyd v Lloyd (1852) 61 ER 338. Either
passes or fails on day 1 depending on how it is written

Trusts which disturb the sanctity of marriage or family

Trusts which have the effect of interfering with the sanctity of marriage are
void.
On this basis:
a trust gift that vests upon the separation of a H and W is generally
void.
Trusts that destabilise the institution of the family are generally also
void.
So trust for the benefit of future illegitimate children were usually
void.
And gifts designed to separate children and parents are likewise
void.
Yet
Trusts which provide that the beneficiarys interest is to be forfeited if they
marry:
A particular person (Jenner v Turner); or
A person of a particular
Nationality (Perin v Lyon (1807) 103 ER 538),
religion (Dugan v Kelly (1847) 10 Ir Eq R 295); or
Class (Jenner v Turner); or
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Without consent (so long as a gift over is also provided in

circumstances where they do marry without consent) (Leong v Lim
Beng Chye [1955] 2 All ER 903)
Have been held to be valid.
In an exam you do not need to decide if it passes or fails based on
the rule. It is when the trust 'ends' or is vested in someone, it is
about the clause whereby it is determined when it is vested and
when it ends.
Need to distinguish this from an indestructible trust. When looking
at indestructible trusts, you will need to determine if it is a
charitable trust or not.

However
Competing public policies and changing social values have caused
difficulty in the formulation of consistent principles.
So that, trusts to take effect if and when a married couple separate are
still void (Re Moore (1988) 39 Ch D 116)
But trusts in favour of children born outside legal marriage would no
longer be invalid. (Jacobs, p. 117).
And trusts which are forfeit if a person marries a person of a specified
nationality would now probably offend s9 of the Racial Discrimination Act
1975 (Cth). Jacobs p118 fn 61.

Jenner v Turner
The testator left her residuary estate to her brother, but stipulated that his
interest under the trust would be forfeited if he ever married a domestic
servant.
The trust was upheld (by Bacon VC) on the basis that
there is no reason nor any authority for saying that the testator
may not make it a condition that the object of his bounty shall
not marry any particular person by name, or any person of a
particular nation, or belonging to a specified class.

Trustees of Church Property of the Diocese of Newcastle v

Ebbeck
Testator left a life interest in his residuary estate to his wife and the
remainder to his sons.
However, the son forfeited his interest as remainderman if he and his wife
were not protestant.
All the sons married Roman Catholics.
Held per High Court
That the trust was void as tending to encourage the dissolution of
marriage.

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The father was putting the son in a position where, unless he could induce
his wife to desert faith, the son had a serious financial inducement to end
the marriage.
Therefore, the condition was void.
And furthermore
Trusts determinable on the remarriage of the settlors surviving partner or
on the marriage of the beneficiary have been upheld. Morley v Rennoldson
(1843) 67 ER 235 at 239; Lloyd v Lloyd 61 ER 338 at 341.
The modern perpetuities rule
(Also known as the rule against remoteness of vesting) is a common law
rule.
It imposes a time limit on the amount of time which may elapse between
the creation of a future interest and the ultimate vesting of that interest.
Recognise the common law side in the exam but do not need to discuss in
detail just say i.e. it may be a problem rule against remoteness of vesting.

The rule against perpetuities

The rule against perpetuities aims to stop the indefinite (perpetual)
postponement of the vesting of an interest in property:
i.e., it seeks to ensure that the interest concerned will vest in someone
w/in a certain time after the commencement of the instrument creating
the interest.
Promotes the free alienability of property.
Effect of the rule
Any future interest that is not bound to vest within this period is invalid.
If a trust infringes the rule against perpetuities, the express trust fails and
the trust property reverts to and vests in the settlor of the trust (on
resulting trust) or to the settlors personal representatives.
The rule does not purport to affect the duration of the interest once
vested.
Statutory modification
The general law position is modified by statute. In WA the statutory
modification is contained in ss99-115 of the Property Law Act 1969 (WA).

Indestructible trusts

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Public policy of preventing property from being tied up indefinitely is also

reflected in the rule against indestructibility of trusts.
With the exception of charitable trusts a trust is void if it is indestructible.
An unlimited and perpetual gift of income is presumed, in the absence of
contrary evidence, to be a gift of the body of the fund itself:
Congregational Union of NSW v Thistlethwayte (1952) 87 CLR 375. If the
trust does not lend itself to such a construction it will be void.

Congregational Union of NSW v Thistlethwayte

The testator left his estate on trust for life and after that a gift of 5% of the
proceeds of the income of the estate to the Congregational Union in
perpetuity.
Yet, the court held that the gift was to a charity it was not void, even
though it was intended to endure in perpetuity (indestructible).
Statutory limitations on a settlors power of disposition
The trust may be unenforceable, by virtue of statute
Main forms of statutory unenforceability =
trusts to avoid creditors,
trusts to evade taxation and
the Family Courts power to set aside family trusts which have the
effect of defeating an order of the Court.
Trusts to avoid creditors
The Bankruptcy Act 1966 (Cth) may render a trust void as against the
trustee in bankruptcy in circumstances where it has the effect of, or is
created with the intention of defeating the settlors creditors.

Trusts to evade taxation

Trusts established to evade taxation are void as against the Commissioner
of Taxation.
Important to appreciate the distinction between those arrangements to
reduce the incidence of taxation which are legitimate and those which are
designed to evade it.
See Part IV A of the Income Tax Assessment Act 1936 (Cth).
Family Court powers to set aside family trusts
The Family Court has jurisdiction to set aside family trusts under ss 106B
of the Family Law Act 1975 (Cth)
where the trust or disposition of property is made to defeat an
existing or anticipated order
or which, irrespective of intention, is likely to defeat any such order.
Section s106B operates irrespective of the intention of the settlor it is
not the purpose of the trust which is examined by the Family Court, but its
effect on the other party.
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Relates to tutorial 7. The spouse doesn't have to prove the intention, they
just need to prove it will affect the Family Law Act.
Family Court powers
Also, under s79 Family Law Act 1975 (Cth), the Family Court is conferred a
wide discretion to alter property interests between parties to a marriage
in proceedings with respect to their property.
The court may be required to decide whether property within a family trust
is property for the purposes of s79.
If discretionary trust is the mere puppet or alter ego of a party to the
marriage, the Court may find that the trust was the property of that
party even if the party is not a beneficiary of the trust or is merely a
discretionary beneficiary. Ashton v Ashton (1986) FLC 91-777

Inheritance (Family and Dependants Provision) Act 1972

(WA)
A testators word is not always final.
If the trust is created by a will, and the testator has not made adequate
provision for proper maintenance and support of his close relatives, a
court can vary the trust under the testator family maintenance provisions
of this Act.
It is about protecting the dependents who you should have provided
for in the will.
These are all the vitiating factors.

Express Trusts How do they work?

If a formal requirement is not met and the trust fails, no property

has been transferred and it is 'nothing'. So look to if the trust will
succeed or fail etc.
This section of lectures will be in the form of short answers.

Capacity to act as trustee

Natural Persons as trustees
So long as a person has the legal capacity to take and hold title to
property, they are capable of being a trustee.
One person who cannot be a trustee is a sole beneficiary

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DKLR Holding Co v Commissioner Stamp Duties [1980] 1 NSWLR

510 (per Hope JA at 519).
Anybody who has the capacity to own property can be trustee. This
means that an infant may be 'trustee'.
The trustee cannot be the sole beneficiary, but if you are not the
only beneficiary then you may be a trustee.
Trustee Act 1962 (WA), s 7(1)(g)
Where a trustee is an infant
The person named in the trust as having the power to appoint new
trustees may appoint another person as trustee.
Citizens of foreign countries can be trustees,
so long as they are resident within Australia
(And fall within the jurisdiction of Australian courts).
You do need to be within the called court of jurisdiction i.e. need to be
accessible to Australian Courts, if they are not accessible then this may be
grounds for removing the trustee.

If property is conveyed upon trust to someone who cannot hold it on

trust or if the trust deed imposes specific duties upon the trustee
and the trustee has not the capacity to perform those duties, then
the trust will not fail.
Sonley v Clockmakers Co (1780) 28 ER 998.
A trust will not fail for want of a trustee Sinnott v Hockin (1882) 8 VLR 205.
The property will be deemed to be held on and the court will appoint a
new trustee.
Corporate Trustees
A corporation is a legal person. Therefore, prima facie, it may be a
trustee.
However, the company may only do that which is permitted within its
Memorandum of association.
If its memorandum of association, does not permit it to act as a trustee or
does not permit it to own property, then the company may not act as
trustee.
Corporations can be a trustee as they are a 'person' but if the company
does not allow them to 'own' property then they cannot be trustees.

Appointment of trustees

The trust instrument

The original trustees will be specified in the trust instrument.

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The instrument usually stipulates the manner in which original and any
new trustees are to be appointed.
Look at the trustee, look to the legislation then go to court. 3 steps of what
to do if you are unsure of the trust
In relation to new trustees - commonly an individual will be nominated as
appointer
The appointer will have the role of selecting new trustees.
The Trustees Act
If no appointer is named, then this role is usually fulfilled jointly by the
other trustees (or the personal representatives of the last surviving
trustee) s 7(1) Trustees Act.
The court will have inherent jurisdiction, i.e. Supreme Court over the
administration of trusts.
Appointment by the Court
The court has an inherent jurisdiction to appoint new trustees.
The maxim = a trust will not fail for want of a trustee.
Pursuant to s 77(2), the situations in which a new trustee may be
appointed in this way include:
Where the trustee wants to quit;
has been convicted of an indictable offence;
is a person of unsound mind; or
is bankrupt.
Under s.77(2) can have the trustee replaced with someone else.
Appointment by the court
This is added to by s 77 Trustees Act 1962 (WA), which provides that the
Court may appoint new trustees in addition to / substitution for old,
whenever:
it is expedient to appoint a new trustee and
it is inexpedient / impractical / difficult to do so without the Courts
assistance.
Expedient here means conducive to the interests of the beneficiaries, the
security of the trust property and efficient and satisfactory execution of
the trusts and faithful exercise of the trustees powers.
Miller v Cameron (1936) 54 CLR 572.

For instance, where there is animosity between the trustees.

Letterstedt v Broers (1884) 9 App Cas 371.
In appointing new trustees, the courts primary consideration is the
welfare of the beneficiaries.

Letterstedt v Broers and Miller v Cameron.

In making its choice, it looks at:
the wishes of the settlor;
the need for a trustee who will fairly represent the interests
of all beneficiaries.
And
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the need to advance the execution of the trust.

Letterstedt case where they were forcing the trustee to choose Lloyd's
bank. Balance between what the beneficiaries want and what the trustee
thinks is right.
Essentially the beneficiaries are simply volunteers. When it comes to
appointing the new trustee, replacing another one or not, best interest of
the beneficiaries.
One argument may be that there will be a breach, i.e. not in the interests
of the trust and the representation will not be fair or there will be a strong
conflict of interest, this may be a good argument.
Such trustees have all the same powers as if they had been appointed by
the trust instrument - s 77 (5).
Disclaimer by trustee
There is no obligation to act as trustee, merely because one is appointed
as a trustee Robinson v Pett (1734) 24 ER 1049.
A person appointed as trustee may refuse the trust before the trust
property is conveyed to him.
If someone has nominated as a trustee, you may refuse it, however, make
sure you do it quickly. Otherwise you may be held liable for inaction and
you will need to ask if you can retire which is difficult. Make sure the
refusal of the trust is very clear and in writing.
Even if trust property has been conveyed to him, he may disclaim the
trust.

Hardoon v Belilios [1901] AC 118.

The intended trustee may expressly refuse to act as trustee (disclaim) or
refusal may be implied from inaction on his part.

Re Birchall (1899) 40 Ch D 436.

However, the onus of proving that someone refused the trust lies on
him.

Lady Naas v Westminster Bank Ltd [1940] AC 366.

The disclaimer must occur before the intended trustee has

accepted the trust
(unless otherwise stated, execution of the trust deed is an
acceptance of the trust - Bennett v Bennett (1875) 1 VLR 280).
Or done anything as trustee.

Noble v Meymott (1851) 51 ER 367.

Just saying you will think about it and ask for the documentation,
this may be misconstrued.

Retirement of trustees
A trustee may retire in 4 ways:
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1. In accordance with retirement provisions in the trust deed.

2. Pursuant to the power contained in s 9 Trustees Act 1962 (WA).
3. The trustee may be permitted to retire, if all of the beneficiaries (of full
age and legal capacity) agree to this. Although this may bring an end to
the trust entirely, Re Brockbank.
4. By consent of the court.
Look at the trust deed; go to the statute then go to the court, again
these are the 3 steps which need to be done. 1 look to the trustee,
documents etc. 2. Look to s.9 and 3. Consent of the court.

Retirement by consent of the court

The trustee may apply to the court for a release from his duties.
The court has an inherent jurisdiction to do so.
It may impose terms,
Including insisting that the trustee pay the costs of appointing a
new trust.
Acceptable reasons to be excused include:
sickness,
infancy,
the fact that he is suffering financial loss as a result of the role.
The fact that the trustee wishes to enter into dealings with the trust that
would otherwise be a breach of fiduciary duty (eg he wants to buy the
trust property) is also a legitimate reason.

Gould v Carroll [1964] NSWR 803.

Removal of trustees
A trustee may be removed if:
Under an express power in the trust deed.
pursuant to ss 7 or 77 Trustees Act, which permit a new trustee to be
appointed in substitution for an existing one; or
By the court exercising its inherent jurisdiction to supervise trusts.
When can you actually 'sac' the trustee? ss.7 & 77 allows the court to
replace the trustee but can also be used to remove the trustee.
Removal by the court
This jurisdiction is used to protect beneficiaries.
The trustee will be removed if his continuing in office is inconsistent with
the welfare of the beneficiaries - Miller v Cameron (1936) 54 CLR 572.
It will only be used in exceptional circumstances - Porteous v Rinehart
(1998) 19 WAR 495 at 516-7.
Reasons for removal of trustees
Breach of trust
Breach of trust is not in itself a reason unless the welfare of the
beneficiaries is compromised.
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Princess Ann of Hesse v Field [1963] NSWR 998.

So simple breaches of trust will not be grounds for dismissal.
Serious breach, i.e. fiduciary obligations, this will be sufficient grounds. You
are not allowed to be in a situation where there is a breach and it will not
usually be litigated unless detriment is caused for a party.
Being in the situation of e.g. conflict of interest can be a breach but
depends when it occurs.
On the other hand, a trustee may be removed even if she has
committed no breach of trust.
For instance, if the relationship between the trustee and the
beneficiaries is so poor that it impedes the administration of the
trust, then the trustee may be removed.
Hunter v Hunter [1938] NZLR 520.
However, mutual dislike will not suffice - Letterstedt v Broers (1884) 9 Ap
Cas 371.

Potential conflict

Potential conflict of interest may, but need not necessarily,

constitute grounds for the removal of a trustee.
A trustee is likely to be removed, if they refuse to acknowledge the
potential conflict and to take steps to avoid it - Hunter v Hunter
[1938] NZLR 520.

Incapacity of trustee
The court may remove a trustee and replace him if he is unfit to hold office
For example,
misconduct in administering the trust,
conviction of an indictable offence,
is of unsound mind,
bankruptcy (wont necessarily incapacitate) or
in the case of corporate trustees ceasing to carry on business / in
liquidation / dissolution.
s 77(2) Trustees Act 1962 (WA).
If the beneficiaries wish to remove a trustee without having a replacement
appointed, or if the trustee contests his removal,
then must apply to the court to exercise its inherent jurisdiction.
They must show that the trust property is in danger or that the trustee has
behaved dishonestly, reasonable fidelity or some other quality essential in
a trustee.
Letterstedt v Broers.
If the trustee contests then you need to go to court for them to exercise
their inherent jurisdiction.

Vesting the trust property in a new trustee

Jurisdiction to vest
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Pursuant to s 78 Trustees Act 1962 (WA), the court has jurisdiction to make
orders vesting trust property in new trustees.
However, generally, an order compelling the trustee to divest himself of
the property and revest in the new trustee.
See Chellaram v Chellarem [1985] 1 Ch 409.
The statutory jurisdiction will be used as a matter of last resort, where the
ordinary conveyance methods have failed or are not available.
Re Nairns Application [1961] VR 41.
Effect of vesting order
Sections 85 and 87 Trustees Act 1962 (WA).
The effect of a vesting order is that:
In cases where the order is made on appointing a new trustee or
upon the retirement of a trustee, it is as if the outgoing trustee has
made the conveyance or as though someone of full capacity has
done so (s 85 (1)).
In all other cases, the effect of the order is as if a person of full
capacity had been ascertained and had made the conveyance (s 85
(2)).

NB If the trust property = Torrens System land, then the vesting does not
take place until the register is altered s 85(3).
In any other case where the transfer of ownership of the trust must be
registered, it is as though the new trustee is vested with the right to call
for a transfer s 85(4).
Alternatively the court may simply appoint a person to affect the
conveyance
and any such conveyance will have the same effect as if a vesting order
had been made (s 87).
Trustees Duties
Initial Duties:
A trustees duties begin from the moment that she is appointed.
the first duty = to get in the trust property
i.e. ensure that the trust property is vested in him/her Field v Field
[1894] 1 Ch 425.
The moment you execute the trust deed or verbally say you will do
it means that your duties begin.
The first thing to do is to get everything 'in your hands' i.e. make
sure it is safe.
Now need to check if there is a mortgage? Does the bank have the
CT or is there a duplicate etc.?
As part of this duty, the trustee must get in any title deeds / documents
and store them in a safe place - Field v Field [1894] 1 Ch 425 at 429.

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Section 48 of the Trustees Act permits the trustee to deposit documents

with a bank or a company in the business of providing safe-storage of
documents.
Need to charge the cost of doing so to the trust.
Duties
The trustees second duty is to familiarise himself with the trust
instrument and acquaint himself with the terms of the trust
Harvey v Olliver (1887) 57 LT 239 at 241;
Hallows v Lloyd (1888) 39 Ch D 686 at 689.
Primary obligations is fulfilling the settlor's instructions
Duty to obey the trust instrument
The primary and overriding source of the trustees duties is the trust
instrument.
The trustees main duty is to fulfill the settlors wishes as expressed in the
trust instrument. Get the trust property and the document.
Section 5(2) Trustees Act
Exceptions s 89 and s 90.
What the deed says comes first, but if there is nothing contrary in the
deed then the provisions in the Trustees Act will apply.
The trustee may only disregard the terms of the trust, if:
he is authorised to do so by the beneficiaries (by unanimous
decision of all trustees being of full age and capacity) Saunders v
Vautier (1841) 49 ER 292;
to do so would be illegal e.g. the terms of the trust are illegal or
following them would mean committing an illegal Act; and
If she is compelled or sanctioned to depart from the trust document
by court order or statute.
Do what you are told unless as it is illegal. If you do not want to do
it, go to the beneficiaries ensuring they are all of age i.e. not
children. If there are children you will need to go to court.
Section 89
Section 89 allows the Court to sanction actions by a trustee that are:
beyond his expressly conferred powers,
but would nevertheless be in the best interests of the beneficiaries.
This jurisdiction is expressed to be exercisable notwithstanding anything
to the contrary expressed in the trust deed.

But this power is not to be relied upon.

Re Westons Settlements [1969] 1 Ch 223.

Lord Denning refused the appointment of a new trustee here. Be
careful when using this section, you cannot really rely on it

Section 90
95

Section 90 empowers the crt to:

revoke or vary trusts
and / or to enlarge trustees powers contained in testamentary
trusts
at the request of anyone who is or will in the future have an interest in
them (including a discretionary interest),
So long as the proposed variation would not be to the detriment of
the applicant or another beneficiary.
I.e. you may want to have 3 trustees rather than 2 for example. Boardman
and Phipps case this is an example where you may use the s.90 to vary
the trust
In considering detriment, the court may have regard to the welfare and
honour of the family to which he (the beneficiary) belongs (s90(2)).
An example of an application to the court for permission to depart from
the trust is Re Westons Settlements [1969] 1 Ch 223.
Duty to preserve trust property
As we saw, the trustee (whether an original trustee or newly appointed)
should;
Get in all trust property, so that it is within his control.
Keep safely the title deeds to the trust property store them in a safe
place; and
Bring any outgoing trustee to account for any breach of trust.
I.e. if the trust property is a 'jewel' and you need to keep it in a safe
place, locked up etc. then your dressing table is not a good idea. If
you see an ex-trustee wearing it for example, it is your duty to get it
back etc.
Any trustee who destroys the trust property or any part of it is in breach of
trust. Re Fairbairn [1967] VR 633, 637.
It may also part of this duty to insure the trust property.
Power to insure the trust property (s30(1)(g) Trustees Act 1962(WA))
Traditional view = trustee not liable for loss caused by failure to
insure Re McEacharn (1911) 103 LT 900.
Modern approach = unless the income from the trust property
would be inadequate to pay the premiums, insuring at least for
replacement value may be an implied duty.
See Davjoyda Estates P/L v National insurance Co of NZ Ltd [1965]
NSWR 1257; Pateman v Heyen (1993) 33 NSWLR 188; and SA
Perpetual Forests Ltd 1964 Trust Deed (1994) 64 SASR 434.
s.30(1) (g) says the trustee may insure it, there is no duty to ensure
it.
Need to insure the property at least where it is income generating.
So no duty to insure if there is no money given for that purpose.

96

To Account and Provide Information

As soon as funds fall into the trustees hands, he has a duty to keep proper
accounts of all $$ received and paid out.
So that such accounts may be furnished to the beneficiary, should he ever
wish to see them.
Wroe v Seed (1863) 66 ER 773.
This is used to ascertain whether the trustee has performed his other
duties i.e. to obey the trust instrument, preserve the trust property and to
invest.
Have to keep records- it is a critical duty. Rhinehart case on at the
moment.
The accounts
(which are generally expected to be kept and resented in written
form)
must be faithful and accurate and
must be provided in a timely manner (Strauss v Wykes [1916] VLR
200).
Furthermore, trustees must (if requested to do so by a trustee):
fully disclose to a beneficiary the amount of the trust funds and
provide complete details as to the manner in which it has been
invested. (Walker v Symonds (1818) 36 ER 751). At any given time
if asked to do so.
Duty to administer the trust personally
Firstly, the trustee cannot act under dictation, or bind him or herself
contractually to administer the trust in a particular manner.
His/her discretionary powers must remain unfettered. Re Brockbank
[1948] Ch 206.
It may be a breach to 'take the easy way out' i.e. if it is discretionary, ask
the beneficiaries what they want etc.
A trustee must use their own judgment as to what is in the beneficiaries
best interests.
It used to be thought that options to purchase / to renew a lease could not
be granted by a trustee as they offended this principle.
But such ordinary contracts are now statutorily permitted.
Trustees Act s 27(3)(b) (options to purchase) and s27(3)(a) (options to
renew leases).
The trustee can delegate their duties, but they must retain the decision
making power and actually make the decision.
Secondly, the trustee generally cannot delegate his/her powers,
authorities or discretions.
Each trustee has an obligation to ensure that the trust instrument is
obeyed and that the trust is carried out.
Unless they have a good reason for doing so, they may not defer to the
wishes of a third party or even to a fellow trustee.
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Delegation is permitted in two circumstances:

if allowed by the trust instrument or
in certain circumstances, in which the Trustees Act permits
delegation.

It is common for the trust deed to expressly provide that the trustees have
the power to
employ agents, workmen, contractors, employees, consultants etc
to assist them in the execution of their duties.
Where so permitted, even a delegation by the trustees delegation will not
be a breach (Doyle v Blake (1804) 2 Sch & Lef 231).
e.g. power to employ an accountant to do the accounts is perfectly
acceptable to do the duties of keeping the books

The Trustees Act also permits delegation in particular circumstances:

Section 54 permits a trustee who is outside the State or who is or may be
suffering under a physical infirmity to delegate his/her responsibilities
under the trust.
You can delegate tasks but you cannot delegate decisions. Temporary 'lack
of capacity' you can delegate all of your powers under the trust
temporarily
In order to do this, a deed needs to be executed granting the delegate a
power of attorney (s54(1)).
Any co-trustee and any person entitled to appoint trustees also agrees by
deed (it can be the same deed) s54(2).
However, a trustee cannot delegate to a co-trustee where there is only
one other trustee unless that trustee is a trustee company. You are
dissolved of your duties for this time.
So long as the trustee makes the appointment in good faith and not
negligently, they will not be liable for any default by their delegate
(s54(4)).
The delegation will be revoked by the trustees return to the jurisdiction or
recovery of capacity (s54 (6)).
Delegation should be distinguished from the appointment of agents.
At common law, a trustee can also employ an agent.
An agent is different from a delegate in that they are not actually
exercising the trust power,
But they are helping to ensure that the power is exercised properly.
Adviser advises but trustee decides
As Robert Walker J said in Scott v National for Places of Historic Interest or
Natural Beauty [1998] 2 All ER 705 at 717 (quoted in DP and C at 626):
advisers advise and trustees decide.

98

Typically, this will be an expert in a particular field, such as a solicitor or a

property-valuer.
At common law, a trustee may appoint an agent if it would be in the
normal course of business for a person to appoint someone else to do the
work.
A trustee cannot appoint an agent merely to get out of doing work (Re
Speight (1883) 22 Ch D 727).
An agent can also be appointed under statute.
In the Trustee Act, s50 expressly permits the use of a valuer and s53
expressly permits a trustee to appoint an agent to do any transaction with
respect to the trust.
The agent who is appointed must be competent in the appropriate area
and care must also be taken in the supervising of the agent,
Otherwise the Trustee can become personally liable (Re Luckings Will
Trusts [1968] 1 WLR 866).
Duty of Co-trustees to act collectively
It follows from the fact that trustees are obliged to act personally, that,
where there is more than one trustee, they must all act unanimously.
A majority cannot bind the minority. (Luke v South Kensington Hotel
Company (1879) 11 Ch D 121, 125-6)
By appointing more than one trustee, the settlor minimizes the chance
that the trust will be administered in an idiosyncratic manner.
Any decision is to be unanimous. All trustees need to agree, but it may be
expressed in the deed to be a majority i.e. if there is more than 2 trustees.
But where there are 2 trustees and a conclusion cannot be reached then
you need to go to the court for directions.
This rule may be expressly excluded (Re Butlins Settlement Trusts [1976]
Ch 251).
Another alternative, in cases where the trustees cannot agree, is to apply
to the court for the appointment of a receiver to take charge of the
property.
However a court would only be prepared to entertain such an application if
the trust property was at risk (Swale v Swale (1856) 52 ER 1233).
Furthermore, this rule does not apply to charitable trusts (Perry v Shipway
(1859) 65 ER 799).
Duty to Act Impartially
In the exercise of his powers and duties, the trustee is obliged to act
impartially and not to favour one beneficiary or beneficiaries over another
Re Lepine [1892] 1 Ch 210 and Re Charteris [1910] 2 Ch 379.
This is important for family trusts i.e. broken families. This differs to a
conflict of interest. It is where the beneficiaries contest the appointment of
the trustee as they feel they will not do their job fairly.
99

Fiduciary Duties
Two fiduciary duties:
not to permit a conflict of interest
not to make a personal profit by reason of information or
opportunity gained in performance of his duties
unless she / he has made full disclosure to the beneficiary and obtained
her / his informed consent.

Standard of Care
Loss caused by virtue of the manner in which a trustee has performed his
duties is not automatically recoverable.
The trustee will only be liable for loss caused in the performance of his
powers and duties, if he has failed to exercise the requisite care and
diligence.
You know what you need to do, but how much care do you need to
take.
Do not necessarily need to compensate the beneficiary where there
has been a loss of the trust property where you have exercised their
discretions to the standard of care required.
The standard of care and diligence that a trustee has to maintain in
carrying out both powers and duties is that of the care and diligence that
an ordinary, reasonably prudent (Wise in handling practical matters;
exercising good judgment or common sense) business person would take
with his or her own property and business affairs
Elders Trustee and Executors Company v Higgins (1963) 113 CLR 426.
This is an objective standard. It does not matter whether the trustee is in
fact a business person (Fouche v State Superannuation Board (1952) 88
CLR 69 at 641.

Indeed it makes no reference to the trustees actual degree of skill and

prudence.
Needs to be a business decision.
As Sir George Jessel MR said in Re Speight (1883) 22 Ch D 727 at 740:
A trustee is not bound to conduct business in other than the
ordinary and usual way in which similar business is conducted by
mankind in transactions of their own. If it were otherwise no-one
would be a trustee at all.
(Approved in relation to investments by Lord Halsbury LC in Learoyd v
Whitely (1887) 12 App Cas 727 at 731-2).
Where investment is concerned it is different.
In exercising this care, the trustee is expected to remember to reserve
some capital for the benefit of future beneficiaries.

100

There is authority which suggests that the standard of care for

professional trustees and trustee companies may be higher
Bartlett v Barclays Trust Co (No 1) [1980] 1 Ch 515 and
Australian Securities Commission v AS Nominees Ltd (1995) 133
ALR 1 and
Wilkinson v Feldworth Financial Services Pty Ltd (1998) 2 ACSR
642).
The Act
Section 5(2) Trustees Act provides that:
the powers conferred under the Act are in addition to those in the
trust instrument;
that they are subject to the terms of the instrument and apply only
in so far as no contrary intention is expressed in the instrument.
Result
The trustee has the powers conferred upon him in the trust instrument.
In addition to these, trustees have a variety of statutory powers, the most
important of these is the power to invest.

Duty to invest
In every trust, there is an obligation on trustees to invest the trust
property
Even if the trust instrument does not expressly state this (Adamson v Reid
(1880) 6 VLR 164).
However, it is normal for a trust instrument to expressly state the kind of
investments that a trustee can make i.e. authorised investments.
Trust duties, every trust instrument imposes a duty on the trustee.
The investment made by a trustee must be made in a manner that is
authorized by:
the trust deed;
statute;
the court.
The instrument:
Trust deeds often oblige the trustee to invest the trust property.
The relevant provision may proscribe to a greater or lesser extent
the types of authorised investment.
Or it may merely oblige the trustee to make such investments as
seem to them fit.
However, it has been held to include the purchase of property in
circumstances where no monetary return is envisaged (Re Wragg [1919] 2
Ch 58).

Over-arching duty of care

101

Trustees owe a duty of care to beneficiaries with respect to the

manner in which they execute any of their non-fiduciary duties.
This duty is to exercise the same care and diligence that an
ordinary, reasonably prudent business person would take with his or
her own property and business affairs. Elders Trustee and
Executors Company v Higgins (1963) 113 CLR 426. See also in
Speight v Gaunt (1883) 9 App Cas1, 19 in which a similar general
statement was made.

Duty of care with respect to the duty to invest

In the context of investment, the duty has been expressed
differently.
This has been re-enforced in the Trustees Act 1962 (WA) - However,
this power must be exercised with the care, diligence and skill that
a prudent person would exercise in managing the affairs of other
persons (s18).
NB With respect to professional trustees, the standard of care is
higher. s18 (1)(a) Trustee Act provides that (subject to the trust
instrument) if the trustees profession, business or employment
includes acting as a trustee or investing money on behalf of other
persons, then the trustee shall exercise the care, diligence and skill
that a prudent person engaged in that profession, business or
employment would exercise in managing the affairs of other
persons.
NB In this case the statement was put by the High Court with
respect to the duty to preserve the trust property. In this case, with
respect to the duty to invest.

Duty of care investment

The trustee must take the same care as would be taken by a reasonably
cautious man, when investing other peoples money. Having regard, not
only to the interests of those presently entitled, but of those who stand to
take a future interest. See Whitely v Learoyd (1886) 33 ChD 347.
Also need to take into account those who are entitled but also future
beneficiaries.

Statute
The statute provides that, unless it is expressly forbidden in the trust
instrument, the trustee may invest money in any form of investment (s
17).
The limitation is that this power must be exercised with the care, diligence
and skill required by the statute (s 18).
Statutory standard of care
In exercising this power, the trustee must do so with the requisite care,
diligence and skill:
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if the trustees business or employment includes acting as a trustee

or investing money on behalf of other persons, then the standard =
the care, diligence and skill that a prudent person engaged in that
profession, business or employment would exercise in managing the
affairs of other persons - (s 18(1)(a)).
Otherwise, the standard of care = the care, diligence and skill that a
prudent person would exercise in managing the affairs of other persons
(s 18(1)(b)).
In any event, trustee must, review the performance (individually and as a
whole) of trust investments at least once each year (s 18(3)).

Statute
In exercising the power, regard must be had to the matters in s 20(1).
I.e. if you have a long term trust for the advancement and education of
the settlors children and grandchildren. Need to take into the property,
length of trust ad type of trust then balance it as well as looking to profits/
investments etc.

The Court
The court in its inherent jurisdiction can also authorise an investment that
is not within the realms of the powers provided in the trust instrument or
the statute
So long as this would be expedient in the management or administration
of property vested in the trustee or would be in the best interests of the
beneficiaries.
s 89 (1) Trustees Act.
The court will exercise this power very carefully.
A court may excuse a breach and absolve the trustee from liability, so long
as he has acted honestly, reasonably and ought fairly to be excused.
However, it will not do so if the trustee has invested the property against
the advice of one whom he ought to have consulted - Shaw v Gates [1909]
1 Ch 389.

Other

Trustees Statutory Powers

powers conferred upon a trustee by the statute include:
The power to sell property (s27(1)(a), (b), (c));
The power to lease property (s27(1)(d), (e)) including the power to
renew leases under s36;
The power to expend money to repair, maintain or renovate
property (s30(1)(a)).
If money is expended to improve or develop the property then the
amount is limited to $20 000
(or $50 000 if the trustee is acting on the advice of someone who
the trustee reasonably believes to be competent to advise on
improvement and development).
103

unless the Court consents (s30(1)(c));

The power to make decisions with respect to any debts. (s42);
The power to insure the trust property (s46)
and the power to use any insurance payout to replace, repair,
rebuild etc damaged trust property (s47(4)).
The power to raise money by selling or mortgaging trust property
(s43).
If money is required then there is a power to sell even if the
contrary is expressed in the trust instrument.
ss 37-40 give the trustee particular powers where the trustee has
invested the trust property by way of mortgage
i.e. where the trustee = mortgagee
These include the power to foreclose the mortgage, to
exercise the power of sale etc.
If part of the trust property is a business, the trustee has the power
to carry on the business (s55)
The power to make decisions with respect to any interest in trust
property that is not vested in the trustee (s49).
Power of advancement
The power to use the income from a trust for the maintenance of an
underage beneficiary (s58).
The trustee can also apply capital of up to $2000 or half of the trust fund
(whichever is greater) for that purpose (s59).
The trustee can make the advancement of this money conditional (for
example, on repayment by the beneficiary) (s60).
ss.58,59,60 where money is left for the specific advancement of children, it
is the use of income from the trust

Pilkington v Inland Revenue Commissioners [1964] AC 612

The trustees wanted to use the power of advancement to create a fund for
one of the beneficiaries in order to avoid death tax.
If what you are doing is for a legitimate purpose, there may be another
benefit so long as it is not for yourself.
Held - this was an appropriate use of the power of advancement.
Although the purpose behind the move was to avoid tax.
It was clearly for the childs advancement or benefit, in that it was to
improve the material situation of the beneficiary.
It did not matter that there were others who were not beneficiaries under
the will who might benefit.
It didn't matter that others who were not beneficiaries would benefit.

104


Tempest v Lord Camoys [1866] LR 1 Ch App 485.
The trust instrument gave a trustee the power to purchase property in his
absolute discretion, and there was also a power to raise funds by
mortgaging the property.
But the other trustee didnt agree.
Held
That the Court will not intervene to force a trustee to exercise a power
that is at his complete discretion.
However, the Court will be able to ensure that a power that is sought to be
exercised is exercised properly and reasonably.
On these facts the Court was not willing to force the trustee to acquiesce
to the purchase of the property.

Klug v Klug [1918] 2 Ch 67

However the discretion whether or not to use a power must be exercised
honestly.
One of the trustees (the Public Trustee) felt that he should exercise his
discretion to make advancement to her.
The other trustee, her mother, did not wish to exercise her discretion to do
this.

Held that this was not a valid exercise of the discretion, and so the
Court ordered that the advancement be made to pay off the mortgage and to
make the further payments that were required.
Effectively, they found that the mother had not honestly exercised her
discretion and in those circumstances the Court could interfere.

Karger v Paul [1984] VR 161

The plaintiff was a remainder-person under a will, with the life interest
being held by the testatrixs husband.
However, there was a discretion exercisable on the part of the executors of
the will to transfer all or part of the interest to her husband for his own use
absolutely.
Held:
that the discretion was worded broadly, so that if it were exercised in good
faith, with real and genuine consideration and in accordance with the
purposes for which the discretion was granted, the Court would not
interfere.
In deciding this, the Court can look at the reasons (if any are given) for the
exercise of the discretion and in the absence of this, the Court can look at
the evidence to decide whether the discretion has been exercised in good
faith.
In this case, the executors had made inquiries with the plaintiff as to her
financial position, and had therefore taken into account the effect on the
remainder-person.
105

Mayo v Mayo [1943] Ch 302

With respect to the manner and circumstances in which the Court will
interfere, there is no difference between a statutory discretion and a
discretion that is provided by the trust instrument.
Statutory discretions and other discretions. If you have a discretion
and you exercise it in good faith and use it appropriately is okay,
but if you do not use it fairly etc. then the court needs to step in.
If you use it in good faith etc. and there is a benefit to someone else
then that is okay.
Rights of Trustees: Remuneration
As usual, look to the trust instrument.
The trust instrument usually permits the trustee to be paid.
s98(1) Trustees Act states that the Court may allow a trustee to take out of
trust property such commission or percentage for that persons service as
is just and reasonable.
However, this amount cannot exceed 5% of the value of the trust property
(s98(2)).
The Court can decide that any amount that is divided between trustees be
divided unevenly between them (s98(4)).
If the trustee is engaged in a profession or business and is not being paid
by the trust instrument, then s98(5) permits the person to take out of
trust property all usual professional or business charges for business
transacted, time expended, and acts done by him or his firm in connection
with the trust
Providing the trust instrument does not state otherwise (s98(5)).
The trustee does not need to apply to the Court to make an order under
this subsection;
the right exists provided it is not excluded by the trust instrument.
This is different from re-imbursement and indemnity. This is a salary.
Reimbursement and Indemnity
s 71 Trustees Act
Gives a trustee the right to reimburse himself for all expenses reasonably
incurred in the execution of the trust duties and powers.
The trustee can make any payment directly out of trust property without
having to go through the process of paying the amount themselves and
then reimbursing themselves from trust property.
You do not need to go to court and have it sanctioned
s 97: permits the Court to make an order directing that any costs and
expenses relating to applications for orders under this Act and any
conveyance or assignment arising from such be paid as the Court directs
e.g. out of the trust.
Relates to the trustee spending money for court needs you are able to
take this money out of the trust fund.
106

s 108: Permits a trustee to take any costs, expenses and charges

associated with locating a beneficiary be taken out of the benefit that is to
go to that beneficiary
Providing a contrary intention is not stated in the trust instrument.
Right to Discharge
Providing no contrary intention is expressed in the trust instrument (s9(4)),
s 9 permits a trustee to retire
by declaring in writing that he wants to be discharged,
Providing at least two individuals or a trustee corporation remain as
trustees (s9(1)).
Indemnity is where there is a liability occurred. This is when you can
retire, it is not easy to do so, thus you need to decide carefully if you want
to pull out.
If the consent of the co-trustees and any person entitled to appoint
trustees is obtained,
then the retirement can take place without there being a new trustee
appointed (s9(2)).
However, the retiring trustee cannot be discharged until any conveyance
required to vest the trust property solely in the remaining trustees is done
(s9(3)).
If you want to retire and there is only one other trustee then you cannot
write a letter and simply walk away. A new trustee will need to be
appointed.
Right to Pay Trust Fund into Court
A trustee who has possession or control of money or securities can pay
them into Court for the Court to deal with (s99(1)).
This can be done by a majority of the trustees by way of a court order,
without the consent of the other trustees (s99(3)).
When the amount is paid into Court, the trustees will be given a
certificate, and that will discharge them of their duties in re the sum paid
(s99(2)).

Right to Assistance and Protection of Court

Important!
Any trustee may apply to Court for directions concerning - s92(1)
the management or administration of trust property
or with respect to the exercise of any power or discretion
vested in the trustee, whether granted by the instrument or
by statute.
If you are concerned that another trustee is breaching their
obligations or you are a concerned beneficiaries you may appoint a
receiver if you are concerned about the welfare of the funds.
When in doubt bear in mind s.92.
107

On top of this is the inherent jurisdiction of the court to administer

trusts.

Rights of Beneficiaries

The right to possession of the trust property

Where the trustee has no active duties to perform in managing the trust
property, the beneficiary may insist on being given possession of the trust
property (and the title deeds) Turner v Noyes (1903) 20 WN (NSW) 266.
As only the possession (and not ownership) of the trust property is passed,
the trust remains on foot.
Even if the trustee has active duties to perform in managing the property,
the beneficiary may still apply to the court for an order allowing them to
take possession of the trust property Jenkins v Milford (1820) 37 ER 508.
Trustees not to breach their duties, not to exceed their power but they
need to fulfil their duties.
The right to compel performance of the trust
Any beneficiary may sue to compel a trustee to do his duty and / or to
protect the trust property Bartlett v Bartlett (1845) 67 ER 800.
The beneficiary may sue either in his own name or using that of the
trustee (or a receiver appointed to act in his stead).
If the suit is in the equitable jurisdiction and there are exceptional
circumstances, then the beneficiary may sue in his own name - Ramage v
Waclaw (1988) 12 NSWLR 84.
May sue through another trustee, i.e. if beneficiary is an infant and their
guardian is suing through their name. Can sue for breach of contract,
negligence etc.

Rights of Beneficiaries
If the suit is a common law action or the circumstances are not
exceptional, then the appropriate course of action is to bring a suit against
the trustee to compel performance of his duty; and
Apply:
for the appointment of a receiver; and
to bring the proposed action in the trustees name or that of the receiver.

To restrain a breach of trust

If the trustee is about to breach of trust, then the beneficiary may apply
for an interlocutory injunction.
Normally an applicant must prove that irremediable harm will be suffered
if the injunction is not granted.
However, as the application is in equitys exclusive jurisdiction, this
requirement does not apply.
You may appoint a receiver during the interlocutory period.
108

The right to approach the court for determination of

questions of construction and administration
Beneficiary has standing to apply for a declaration in relation to
interpretation of the trust instrument.
However, this will not be granted in relation to matters in dispute between
the beneficiaries or the beneficiaries and the trustees.
s 94(1) Trustees Act 1962 provides that any person with an interest
(vested or contingent) in trust property or is, upon reasonable grounds,
aggrieved by the actions of a trustee may apply to the court for a review
of the trustees act, omission, decision etc. but there needs to be
reasonable grounds

The right to approach the court for determination of

questions of construction and administration, either with or
without a decree for general administration
A beneficiary is entitled to apply to the court of Equity to have the trust
administered by the court (Re Blake (1885) 29 Ch D 913).
This is called an order for general administration.
The question is, is such an order actually necessary to the determination
of the issues between the parties.
After such an order, the trustees powers are suspended and he requires
the courts supervision in order to act.
The right to inspect trust documents
Beneficiaries are entitled to have all the records of the trust (and other
information that the trustee has in relation to the trust property) furnished
by the trustee promptly and readily.
ORourke v Darbyshire [1920] AC 581;
Manning v FCT (1928) 40 CLR 506.
These records are not part of the trust property.
Nevertheless the beneficiaries are considered to have a proprietary right
to them and are entitled to take possession of them.
Entitled to take possession of the documents for the purpose of examining
them.

This right is held even by beneficiaries in a discretionary trust.

However, beneficiaries in a large discretionary trust (i.e. with many
beneficiaries) will not have the same rights to disclosure as are held by the
beneficiaries of a fixed trust or those under a discretionary trust with few
beneficiaries - see Hartigan Nominees v Rydge (1922) 29 NSWLR 405).

To follow or trace trust property (in certain circumstances);

and to terminate the trust and call for the corpus.
Unless a contrary intention is clearly and explicitly expressed, a
beneficiary who is:

109

absolutely entitled (i.e. fixed trust, vested interest ie no

contingencies or re-conditions outstanding) to an aliquot share of the
trust property; and

of age and legally competent

may insist that the trustee conveys the legal ownership of the trust
property into his name.
This will terminate the trust.
This is the rule in Saunders v Vautier (1841) 41 ER 482.
Beneficiaries rights are the other side of trustees obigations.
With a fixed trust, in the eyes of equity, as the sole beneficiary you own
that trust property.
With shared trusts, as a beneficiary you own your share in the eyes of
equity.
Saunders v Vautier (1841) 49 ER 292
Under the terms of the trust, the trust fund was to be paid to Vautier upon
his attaining the age of 25. At age 21, Vautier directed the trustee to pay
over the fund to him.
The court held that notwithstanding that the testator had preferred him to
wait until 25, as Vautier was the only beneficiary of a fixed trust and
therefore the absolute beneficial owner of the trust property, he was
entitled to insist upon payment as soon as he was legally competent to
validly discharge the trustee i.e. full age and legal capacity.
Terminates a fixed trust.
This principle also applies to fixed trusts, where there is more than one
beneficiary who are sui juris and absolutely entitled.
In such a case, the bens may unanimously agree to call for the trust
property and terminate the trust.
It may even be exercised individually by one beneficiary of several, so
long as he or she has been allocated an aliquot share - Quinton v Procter
[1998] 4 VR 469.
It may even apply to a discretionary trust - Sir Moses Montefiore Jewish
Home v Howell and Co [1984] 2 NSWLR 406
At least where the class of objects is closed and all of the income of the
fund must be paid each year to one or more of them.
However, both Meagher and Gummow (2316) and DP and C say (at 772)
that the requirement that all beneficiaries be of full age and capacity
together with the difficulty of attaining a unanimous decision, means that
this rarely occurs in discretionary trusts.
However, the beneficiaries must be absolutely and indefeasibly entitled to
the trust property - Comptroller of Stamp Duty (Vic) v Howard-Smith
(1936) 54 CLR 614.
There is no doubt that this rule can lead to the intentions of the settlor
being frustrated.

110

For instance, if all of the beneficiaries agree, then even a protective trust
may be terminated in this manner Re Smith [1950] Ch 915; Re Coppel
[1950] VLR 328.
According to DP &C (772), the basis for the rule in S v V is threefold:

equity treated a voluntary trust as equivalent to a

common law gift;

equity regarded the trustees as holding the balance

between the differing interests of the beneficiaries, so that if the
bens desired to terminate the trust, the rationale for the trustees
existence disappeared; and

Beneficiaries who are absolutely entitled are entitled to

enjoy the property in any way desired.
However, as a matter of practicality, the settlor can prevent the
beneficiaries from terminating the trust by naming a general charitable
purpose as a discretionary object of the trust.

Termination of the Trust

How do you finish a trust other than under Saunders? Under these
forms
1. Termination by Revocation
Occasionally there will be a power of revocation given to the settlor, the
trustees or a third party in the trust instrument.
Unless this right is provided for in the instrument, the creation of the trust
is irrevocable (Mallott v Wilson).
2. Termination by Beneficiaries
3. Termination by the Court
The Court has an inherent jurisdiction to terminate a trust in whole or in
part.
The Family Court is also given jurisdiction to set aside family trusts by the
Family Law Act 1975 (Cth).
s85 and s85A of the Family Law Act 1975 (Cth).
4. Termination by Distribution of Trust Property
*This is the most common ending to a trust. Need to settle
outstanding claims and pay bills etc.
The trust will be at an end when the trustees distribute all of the trust
property to the beneficiaries.
This can occur either on the happening of a particular event (under a fixed
trust) or due to the exercise of discretion by the trustees (under a
discretionary trust).
Before making final distribution, the trustees are required to settle all
outstanding claims against the trust.
To ensure that this requirement is met, s 63 Trustees Act requires the
trustees to publish a notice specifying a period in which claims against the
trust are to be made.

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Breach of Trust
A breach of trust occurs when a trustee acts in contravention of duties
that are imposed on him by the trust (including the duty not to exceed his
powers).

So a breach of trust consists of nothing more nor less than an act

by the trustee:
In contravention of the duties imposed by the trust; or
exceeding powers granted.
Re Spedding (decd) [1966] NZLR 447 at 463-464.
If you have a power to do something and you exceed that power
and do something you are not in power to do. These are the
essence of the breaches.
These breaches can either be:
passive (where the trustee fails to act) or
active (where the trustee acts intentionally, negligently or
dishonestly).
A trustee who acts is breach of trust is generally personally liable for the
breach.
A trustee who acts in breach of trust can be sued by:
a beneficiary,
a co-trustees or
a replacement trustee (that is, a trustee who replaces the trustee
who is alleged to have been in breach).
Co-trustees duty to sue you if there is a breach by you.
Remedies for Breach of Trust
Injunction
A beneficiary who anticipates a breach of trust may seek an injunction to
prevent the breach from occurring or being repeated.
This injunction may be:
mandatory (to force the trustee to properly perform his duties) or
prohibitory (to prevent a trustee from acting in breach of her duties
or beyond his powers).
Need to prove you have a case where the balance of convenience
favours you.
Equitable Compensation
In determining the amount that is to be given to a beneficiary, the overriding principle is that of compensation.
There is no power to punish the trustee.
Example - Re Dawson:
There was a breach of trust. However, there was a fluctuation in the
exchange rates between the time of the breach and the time that the
112

action was decided, leading to an increase in the amount of required to

compensate the trust fund.
The Court held that the date at which the damage is assessed is the date
of judgment.
The trustee must place the trust in exactly the same position as if the
breach had not occurred.
Interest is generally also awarded on any amount that is to be paid.
If loss has already been sustained and you cannot get an injunction,
the remedy is equitable compensation but there is not a punitive
right.
Account of Profits
This will normally be requested when the profit that the trustee has made
through the breach in trust is more than the loss that the trust has
suffered.
This is an alternate remedy to equitable compensation.
Tracing
Breach of fiduciary obligation may be applied here. Tracing- where
trusts are concerned, it can include non-express trust such as
resulting trusts
Tracing
Tracing is a doctrine whereby the owner of property is treated as being
the owner of anything into which that property has been converted.
Meagher and Gummow, Jacobs Law of Trusts in Australia, 6th Edn, 736.
Tracing is where you effectively follow the money.
Following is where you follow the item itself, generally to a bona fide
purchaser without notice.
Difference between tracing and following.
Tracing enables trust property to be persued through different owners and
changes in the form of the trust property (for example, if property is sold,
the money can be traced).
It is normally used as a remedy when the trustees pockets are not deep
enough or if the compensation that can be obtained is insufficient.
In order to be able to trace an asset, it must be identifiable at all stages
over which it is sought to be traced.
So long as the trust funds / property remains identifiable, the trustee may
follow it into the hands of third parties (not being bona fide purchasers for
value without notice) and into property purchased with it.
Can follow the item but trace the funds
Account of profits is limited.
Declaration of constructive trust.

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In Equity, tracing permits a beneficiary to follow trust funds that have

been mixed with other funds e.g. into a bank account in which the trust
funds have been mixed with the trustees own funds.
If the trustee mixes the trust property with his own money, the rule in
Claytons case does not apply and the trustee will be presumed to have
withdrawn h is own money first Re Halletts Estate (1880) 13 Ch D 696.
Unless that money has been invested and the money that remains has
been dissipated Re Oatway [1903] 2 Ch 356; followed in Scott v Scott
(1963) 109 CLR 649 AT 664.

Tracing also existed at law as well as equity, as soon as the property was
taken and sold and the cash was put in their bank account, at law this was
as far as you could go.
Equitable tracing has been more favourable as it goes beyond this where
money that has been mixed with other funds can be followed. Clayton's
case rule is 'first in, first out' in relation to depositing and withdrawing
funds. If Clayton's case said it is your money that has been taken then
Hallett's case assumes that the trustee takes out their own money first
and the money remaining is the beneficiaries. Re Oatway- Trustee took
money out and invested it.
This case assumes the beneficiaries money is invested. Can only take the
amount of money that was taken at the time. So you can only trace to the
amount that you lost in the first place.
James Roscoe (Bolton) v Winder
The beneficiary may trace into a mixed fund to the extent of the
lowest balance maintained since the date of the mixing.

Re Tilleys Will Trust

The beneficiary may not trace funds that have been paid to a bank
to repay an overdraft.
These have passed to bona fide purchaser for value.
On husbands death, she paid the expenses of the estate, about 500 out
of her own funds, and was eventually left with a bit over 2000.
This amount was, over the years, confused with her own money.
If the money is put into an account with overdraft, they owe the
bank the overdraft and by putting money in the account they are
just paying off the debt.
The Court held that the trust money had only been used to reduce the
overdraft, and therefore were not used to purchase the property.
Therefore, the property could not be traced, and the beneficiarys estate
was only entitled to half of the bit over 2000.

Options

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Re Halletts said that where property is purchased solely with trust funds,
then the beneficiary has a choice take the property or assert a charge
over the property for the full amount of the funds.
This charge = a fixed amount. It is not a percentage of the value of the
asset.
If the property has increased in value, the former is the better option.
The latter is more attractive, if the property has decreased in value. The
beneficiary can take all the sale proceeds, but does not have to be
satisfied with that. He can still sue for the rest.
In Halletts, the court said that if the property was purchased with a mixed
fund, then a charge was the only option.
Tracing
BUT in Scott v Scott the court said that:
So long as the property is specifically severable, shares / livestock, then
the beneficiary may elect to assert absolute ownership of that proportion
of the property as corresponds to the proportion of the purchase price
represented by the trust funds.
Even if the property is not severable, the beneficiary may claim a
proportionate interest in the property purchased.
So there is choice. If the property has decreased in value, then the charge
would be the better option.
Modern approach is that you should be able to obtain a portion or amount.

Scott v Scott:
Where property is purchased with mixed fund, the trust funds may be the
traced into property purchased with those funds and will give the
beneficiary an interest in the property (a lien) proportionate to the
percentage of trust funds used in the purchase. This interest will increase
in value as the value of the property increases

Where funds are mixed with those of other beneficiaries

Where a trustee has mixed the funds of different beneficiaries.

Claytons case applies.
Trustee will be resumed to wdraw her own funds first.
However, after that she will be presumed to have wdrawn funds in the
order that she deposited them. First in first out!
Re Stenning [1895] 2 Ch 433.
So money you take is assumed to be yours, the money you take out
and spend is the beneficiaries

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i.e.$150, 000 where $100, 000 is Beneficiary 1 and $50,000 is

Beneficiary 2 and it becomes 300,000 Beneficiary 1 will get $200,
000 and Beneficiary 2 will get $100, 000.

Other Remedies
Removal;
Apply to inspect the trust documents or an account;
Call in his or her share Manfred v Maddrell (1950) 51 SR (NSW) 95.
Seek a declaration as to whether particular conduct is a breach of trust;
Setting aside the transaction;
Appointment of a receiver;
Forfeiture of remuneration;
Loss of Indemnity.

Third Party Liability

If a third party has received trust property and is a volunteer, then it may
be possible to recover the property from that person. In Re Diplock
executors mistakenly distributed money to 139 charities.
The residuary beneficiaries were able to recover the money from the
charities when the trustees did not have deep enough pockets.
In Western Australia, s65 of the Trustees Act says that this applies to trusts
as well as to estates.
However, s65(7) states that the volunteer must be pursued before any
action is commenced against the trustee, otherwise the right is lost.
s65(8) provides a statutory defence for the volunteer if he has changed his
position.
Defences for Breach of Trust
Informed consent of beneficiaries
If all of the beneficiaries, being of full age and capacity authorise a trustee
to act in breach of trust, they will not be able to later pursue the trustee
for breach of trust.
s76 of the Trustees Act allows the Court to make any orders it thinks are
just for impounding part of a beneficiarys interest to indemnify a trustee
who has acted with the written consent of that beneficiary
Acquiescence
A beneficiary can acquiesce to a past breach of trust providing they have
been given full details of the breach.
Delay
An inordinate delay in bringing the action for breach of trust may result in
a Court exercising its discretion not to give a remedy.
Secondly, the statute of limitations might prevent an action being taken.
In WA, the time limit is 6 years for an innocent breach of trust but is
unlimited in the case of fraudulent breaches of trust (s47 Limitation Act).
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A longer time period (12 years) is allowed to recover land in WA (s4

Limitation Act).

Trust Instrument
Both complete defences and limits on liability can be provided by
the trust instrument, but they are interpreted strictly by the courts.
There is also case authority to suggest that it will not save a trustee
who is in positive breach of a duty (Seton v Dawson).

Statutory Power of Court to Excuse Breach

The Court has a power to exclude a trustee from liability or limit a
trustees liability under s75 if the trustee has acted honestly and
reasonably and ought fairly be excused from both the breach of
trust and of failing to seek directions from the Court.

Resulting Trusts

sometime called implied trusts

arise when one person confers title to property to another person, but
equity considers that they retain some or all of the beneficial interest in it
themselves.
the beneficial interest results back to the first person.
A resulting trust can arise from the presumed intention of the parties or by
operation of law.
presumption = an inference drawn from a given set of facts - shifts the
burden of proof.

Non express trust, resulting and constructive trusts.

Difference between and resulting and constructive trust is now
easier to distinguish.
Resulting trust= intended to arise, or because there is a rule of law
implied to intend a trust in certain situations.

Basis
Sometimes the basis of the trust is said to be intention of the settlor.
It is this meaning that corresponds with the term implied trust.
In other cases, it seem that the settlors intention is beside the point.
In these cases, the resulting trust = a remedial device used to decide who
should be entitled to the property.
Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v
Islington London Borough Council [1996] 2 All ER 961 at 990-991
considered that all resulting trusts were based on a presumed common
intention of the parties.

117

1.

2.

a)

b)

Both types of resulting trusts are traditionally regarded as

examples of trusts giving effect to the common intention of the
parties. A resulting trust is not imposed by law against the
intentions of the trustee (as is a constructive trust) but gives effect
to his presumed intention.
Based on what your intention would have been i.e. if the trust
failed.

In what circumstances does a resulting trust arise?

Presumed resulting trusts arise where a purchaser of property directs that
it be conveyed into the name of a 3rd person, but there is no evidence that
that person was to take beneficially. If there is no express intention for
that person to take beneficially, there is a presumed intention that the
property should revert to the settlor.
Automatic resulting trusts arise where a settlor transfers property to
trustees without wholly disposing of the beneficial interest in the property:
what is undisposed of results back to the settlor, though in one sense it
never left the settlor (automatic).
See the judgment of Megarry J in Re Vandervells Trusts (No 2)
[1974] Ch 269 at 289.

Megarry J. Presumed and automatic resulting trusts.

Equity takes the view if it was paid and purchased as property, that
it was intened to be a trust held for someone, thus a resulting trust.
This intention may be rebutted but until then it will be assumed to
be a resulting trust. It can result back to the original settlor.

Westdeutsche Landesbank Girozentrale v Islington London

Borough Council
Lord Browne-Wilkinson at 990-991 put the same thing a different way
without using the term automatic.
He identified the following as the 2 main circumstances in which a
resulting trust will arise:
Where A makes a voluntary payment to B or pays (wholly or in part) 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 he is the sole
provider of the money) or in the case of a joint purchase by A and B in
shares proportionate to their contributions.
Where A transfers property to B on express trusts, but the trusts declared
do not exhaust the whole beneficial interest
When does it arise (i.e. timing)?
It arises at the time of that transaction.
Implications
there must be certainty of interest at the time of its creation;
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evidence of actual intention of the parties after the date of the transaction
is not relevant and cannot be used to rebut the presumption of trust;
beneficiarys proprietary interest arises and its priority is determined.
If you purchase property and put it in someone elses name then the trust
will result on the day of purchase.
Arising from contributions to property
Where the legal ownership of property does not accurately reflect the
direct contributions to the purchase of that property ...
it is presumed that a resulting trust arises in favour of the purchaser or
purchasers in the proportions to which they contributed to the purchase
money: Calverley v Green (1984) 155 CLR 242 at 246-7 per Gibbs CJ.
Constructive trusts will be contemporary in the sense of elders and their
property.

i.e. elderly couple sell property and buy land and build properties for their
son and his wife who only add a $100,000 to the 1million dollar block and
1million property.

Result of trust would be that the property is legally the son and wife's but
at equity they look to the money put in by each party. Differences between
contribution to purchase price or voluntarily giving it (transfer).

So - it is presumed that the property should result back to the transferor

when:
A purchases property in the name of B or in the name of A and B jointly
(purchase money situation); and
There has been a transfer of property by one person to another and that
person has provided no consideration (voluntary transfer situation).
Resulting trust i.e. tenancy in common where there are 10/90%
shares, for example.

Purchase money situation

Where a person purchases land in the name of someone else or in the
name of himself and someone else, it is presumed that that he / she were
not intended to take beneficially.
Calverley v Green (1984) 155 CLR 242.
Remember Nelson v Nelson.
This presumption applies to both real and personal property.
In these situations, the law presumes those who transfer property to
others for no consideration, or purchase property for others, do not intend
to donate this property.
Muschinski v Dodds (1986) 160 CLR 583 at 589-590 per Gibbs CJ;
Westdeutsche Landesbank Girozentrale v Islington London Borough
Council [1996] 2 All ER 961 at 990-991.

i.
ii.

119

The presumption may be rebutted by evidence that no trust was intended,

eg by showing that a gift or loan was intended or by raising a presumption
of advancement.

Purchase in anothers name

Where the legal ownership of property does not accurately reflect the
direct contributions to the purchase of that property, it is presumed that a
resulting trust arises in favour of the purchaser or purchasers in the
proportions to which they contributed to the purchase money: Calverley v
Green (1984) 155 CLR 242 at 246-7 per Gibbs CJ.
Evidence can either reinforce or rebut this presumption.
The property in question may be either real [Napier v Public Trustee (WA)
(1980) 32 ALR 153] or personal [Russell v Scott (1936) 55 CLR 440 (money
in a joint bank account)]
Bloch v Bloch
The property was conveyed into the name of the son, although his father
contributed part of the purchase price.
The circumstances rebutted the presumption of advancement. So - the
contribution was not a gift and it was not a loan.
Therefore, the inference was that the father intended the son to hold the
property in trust for him in a proportion corresponding to the amount of
the purchase price that he contributed.
Similar to Nelson v Nelson of illegal trusts

Calverley v Green
Man (Calverley) and woman (Green) had been in a de facto relationship
since 1968.
In 1973, they purchased a house and put it in their joint names.
Uneven contributions
Held: Mason and Brennan JJ (at p258):
When two or more purchasers contribute to the purchase of property and
the property is conveyed to them as joint tenants the equitable
presumption is that they hold the legal estate in trust for themselves as
tenants in common in shares proportionate to their contributions
Therefore, the couple held as tenants in common with shares
proportionate to their contributions to the purchase price.
Here this was held to be 1/3 to Green (based on her share in the loan)
and 2/3 to Calverley.
NB No credit given for her contribution to household expenses.
If he had paid 100% it will be held on trust for him and he would get the
full amount. The mortgage amount was the same for each party and they
would both be liable if they did not pay. In this case, the rule is that only the
purchase price contribution matters, not the contribution thereafter.

Propositions
120

The direct financial contribution to the purchase price is the sole measure
of the proportionate shares.
SO: household expenses will not be taken into account, nor will
money spent on improvements in the absence of contrary intention,
Robinson v Robinson [1961] WAR 56; Pettitt v Pettitt [1970] AC 777.
Conflicting authority as to whether incidental costs of acquisition
are included within direct contributions to purchase price. Currie v
Hamilton [1984] 1 NSWLR 687 held that incidental costs did
constitute direct contributions to the purchase price;

Cf Little v Little (1988) 15 NSWLR 43 held that it was the

purchase price that was the relevant amount and not the incidental
costs.

Mortgage payments do not constitute a contribution to the purchase price

because the beneficial interests of the parties are to be determined at the
time of purchase. Calverley v Green (1984) 155 CLR 242
NB Cf In UK repayments of principal and interest under a mortgage
are characterised as payments of purchase price. Falconer v
Falconer [1970] 3 All ER 444; Gissing v Gissing [1971] AC 886 at
903; Re Densham [1975] 3 All ER 726.
NB Constructive trust relief
The absence of a resulting trust will not constrain a court from
preventing an unconscionable assertion of a beneficial interest by
the imposition of a constructive trust (or where its elements are
established, by means of equitable estoppel).
Situation on the day the house was purchased.

Marriage and de facto relationships

s 79 Family Law Act 1975 (Cth)

Alteration of property interests

s 79 and de facto relationships legislation (in some jurisdictions but not yet
in WA) have diminished the importance of the equitable presumptions of
resulting trust and advancement in the context of property of matrimonial
or de facto relationships.
BUT
In WA (so far) the presumptions remain relevant to the allocation of
equitable interests in property within de facto or any relationship other
than marriage.
Voluntary Transfer
If the purchaser of property directs that it be put into anothers name,
then equity presumes a resulting trust (Napier v Public Trustee (WA)
(1980) 32 ALR 158).
So, if X purchases from Y, but directs that the property be placed in Zs
name,
then, in the absence of:
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evidence of intention to the contrary (eg gift / loan); or

Presumption of advancement
Equity presumes that Z holds the property on trust for X.
The legal owner will hold it on resulting trust.

Where the supposed trust/ee has provided no consideration.

We need to consider personal property and realty separately.
Realty
There is some doubt as to whether the presumption arises in the case of
voluntary transfers of general law land. This is because of the possible
application of the Statute of Uses.
Furthermore, in WA ss38 PLA provides that:
No use to result from absence of consideration
No use shall be held to result merely from the absence of
consideration in a conveyance of land as to which no uses or trusts
are therein declared.
It seems s 38 PLA says no trust will arise as there is no
consideration. The cases and legislation are not consistent.
Seems to say trust by voluntary transfer does not relate to land but
this is unclear.

An explanation of the Victorian equivalent of this statutory provision was

given by Cussen J in House v Caffyn [1922] VLR 67 at 75-81 .
The effect of s38 is not to exclude resulting trusts altogether, it just
changes the burden of proof throwing it back onto the transferor.
This means that a resulting trust will not be presumed on a voluntary
transfer of realty without consideration, unless the transferor actually
indicates an intention that the transferee is not to take beneficially.
Even so, does this apply to Torrens System land?
Some authorities suggest that it does,
Newcastle City Council v Kern Land Pty Ltd (1997) 42 NSWLR 273,
Bhana v Bhana (2002) 10 BPR 19,545.
Others suggest that it does not.
House v Caffyn; Wirth v Wirth (1956) 98 CLR 228.
PLA applies to torrens and non-torrens.
Relates back to example of the parents and their son previously.

Wirth v Wirth
Facts: A man and fiance = JTs of Torrens land, later the man
voluntarily transferred his interest in it to his fiance for a stated
consideration of 100 (which was probably not paid).
Was there a presumption of resulting trust in favour of the man?
Held: Dixon CJ
That a resulting trust could arise here.
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BUT he was displaced by the presumption of advancement.

NB He was wrong on this Allen v Snyder says the presumption of
advancement does not arise in relation to fiances.

Personal Property
A resulting trust in some circumstances:
Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 363-364;
Napier v Public Trustee (WA) (1980) 32 ALR 153 at 158 per Aickin J.
Presumption of resulting trusts arises:
where the property transferred is capable of producing income and
property in relation to which title doesnt pass on delivery (eg shares or a
debt[$ in bank]).

Fowkes v Pascoe (1875) LR 10 Ch App 343 at 348; Russell v

Scott (1936) 56 CLR 440.
If it was non income generating property in your name, there is an
assumption it was not assumed to be on trust and retain beneficial
interests.
If it is income generating, then it is assumed to be on trust for
retaining beneficial interests.

BUT
Not in other cases e.g. money and chattels which pass by delivery.

Heydon v Perpetual Executors, Trustees and Agency Co

(1930) 45 CLR 111 at 112 3.
The onus is on the transferor to prove that the transfer was made on trust
as opposed to gift:

e.g. a person who pays money to a stranger is not presumed

to have withheld the beneficial interest is prima facie a gift.

Rebutting the presumption

Only the actual intention of the parties before or at the time of the
transaction, or so immediately after it as to constitute part of the
transaction is relevant to rebut the presumption of resulting trust.
Calverley v Green (1984) 155 CLR 242 (at 251; 262); Muschinski v Dodds
(1986) 160 CLR 583 (at 589-590).
The property rights cannot be altered by subsequent events unless such
involve an enforceable agreement or conveyance. Martin v Martin (1959)
110 CLR 297 at 304; Pettitt v Pettitt [1970] AC 777 (at 803;813)
If 2 purchasers who contribute in unequal proportions have taken the
property in joint names, the intentions of both are material. Calverley v
Green (1984) 155 CLR 242 (at 251; 258 and 261).
Need to show at the time or at some time before the person giving it said
it was a gift. It is not about paying it, but it is about what was intended at
the time.
123

Intention is ascertained from the acts and declarations, and words and
conduct of the parties, and the relationship between the parties.
Calverley v Green (1984) 155 CLR 242 (p261;269-270).
Evidence of intention to gift or loan the property in question will rebut the
presumption.
Express agreement to the contrary or evidence of an intention to create an
express trust will rebut the presumption: Gough v Fraser [1977] 1 NZLR
279 at 283.
If consideration is proved, the presumption may also be rebutted. Re
Bulankoff [1986] 1 Qd R 366.

The presumption of advancement

In some relationships - where the transferor is under a natural obligation
to provide for the transferee, the law presumes that the transferor
intends to make a gift. This presumption is called the presumption of
advancement.
The presumption of a resulting trust may be displaced where a
presumption of advancement applies. Calverley v Green (1984) 155 CLR
242; Muschinski v Dodds (1986) 160 CLR 583 (at 589-590).
Issue if it needs to be abolished or if it needs to be expanded to other
relationships.
Presumption of advancement does not apply to=
Siblings: Noack v Noack, son in law: Knight v Biss or nephew/ niece:
Russell v Scott and grandchildren: Soars v Foster
Unless the donor is loco parentis to that person (in the place of a parent)
Anderson v McPherson: Resulting trusts are about what was probably
intended and constructive looks to circumstances
contribution to purchase price and voluntary transfer fall under resulting
trusts
Presumption of advancement- Nelson v Nelson.

Transfer from Husband to Wife: is presumed to be made by way of

advancement: Russell v Scott (1936) 55 CLR 440
Traditionally no corresponding presumption in the case of a transfer from
wife to husband.
A transfer after separation will not attract the presumption: Cossey v Bach
[1992] 3 NZLR 612 at 630; Wilson v Wilson [1963] All ER 447 at 454 per
Russell LJ.
Transfer by a man to his fiance will attract the presumption: Wirth v Wirth
(1956) 98 CLR 228 (at 237-238), but if the marriage does not take place a
resulting trust arises [Davies v Messner (1975) 12 SASR 333] Cf Allen v
Snyder.
The tendency has been to focus on relationships that it applies to. It was
based on an obligation to provide and wives were not usually the providers
for their husbands. However this is still unclear
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De facto spouses: no presumption of advancement arises Calverley v

Green (1984) 155 CLR 242 at 260 (per Mason and Brennan JJ).
Transfer from parent to child:
Transfer from father to child is presumed to have been made by way
of advancement. Charles Marshall Pty Ltd v Grimsley (1956) 95
CLR 353 at 364
In Australia: transfers from mother to child: Nelson v Nelson (1995)
132 ALR 133 (at 141;162-163;169-171;183-184); Brown v Brown
(1993) 31 NSWLR 582 (at 598-599 per Kirby J).
Extends to any person who in equity is treated as being in loco
parentis (in the place of a parent). Calverley v Green (1984) 155
CLR 242 (at 247 per Gibbs CJ).
in favour of an illegitimate [National Trustees Executors and Agency
Co of Australasia Ltd v Fenn [1924] SASR 470.
Strictly limited to married relationships.
Rebuttal of the presumption of advancement
Presumption of advancement may be rebutted either partially or
completely, by evidence that at the time of the transfer no gift was
intended. Shepherd v Cartwright [1955] Can look to acts and declarations
before of at time of purchase or so immediately after as to form part of the
transaction.
Burden of rebutting the presumption of advancement lies upon the person
asserting the existence of a trust: Martin v Martin (1959) 110 CLR 297;
Calverley v Green (1984) E.g. Evidence that the transfer was motivated for
reasons inconsistent with an intention to confer beneficial ownership will
dislocate the presumption. (e.g. illegal purpose cases)
Nelson v Nelson- tried to prove it was a gift and the mother revealed her
illegal motive.

Failure of disposition
Resulting trusts arise where, for any reason, a settlor fails to dispose of
some or all of the beneficial interest in the trust property.
The trustee holds on a resulting trust for the settlor to the extent that the
beneficial interest has not been carried to him or others.
Is it about an obligation to provide, love and affection or the intentions?
Anderson v McPherson= issues with parents putting property in the name
of their son and daughter in law. Presumption of advancement for your son
but not for the daughter in law, better to put it into the full name of your
son.
Trust with no beneficiary will be a resulting trust, i.e. if certainty of object
fails it will result back to the settlor.

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Typical situations where a resulting trust will arise

Failure of express trust trustee will hold for settlor or settlors
personal representatives. Express trust may fail because:
It is void for uncertainty, perpetuity or illegality [see Nelson v Nelson
(1995) 132 ALR 133];
It is unenforceable because of failure to comply with formal requirements
for complete constitution [Vandervell v IRC [1967] 2 AC 291];
The intended beneficiary predeceases the testator.
Failure to set out the trust or dispose of the whole
beneficial interest usually is a result of incorrect drafting.
E.g. a settlor transfers land to A on trust but doesnt refer to beneficial
interest; or part only of an estate is disposed to named beneficiaries
residue will be held by trustee for benefit of settlor or settlors personal
representatives. I.e. If you say to hold on trust for 3 people but only list
two, you have not fully stipulated the beneficiaries. The trust will fail and
become resulting.
Property conveyed for a specific purpose which fails
Classic case: Clarke v Terry (1859) 1 Legge 753.

Modern example is the Quistclose Trust : where money lent for a

specific purpose which fails may be characterised as trust property,
and thereby stand outside the pool of assets available to the
borrowers creditors upon the latters insolvency: Barclays Bank Ltd
v Quistclose Investments Ltd [1970] AC 567.
Property conveyed on trust for certain purposes exceeds
that required

Barclay Bank v Quistclose Investments Ltd [1970] AC 567

Held (per HL) Lord Wilberforce (Lords Reid, Morris of Borth-y-gest,
Guest and Pearce agreed).
The arrangement gave rise to a trust, primarily in favour of the creditors
(shareholders) and then, secondarily, to the lender (here Q).
To the extent that any of the $$ is not used for the designated purpose, it
is held on resulting trust for the lender.
B Bank was bound, because it had notice of the trust at the time that it
advanced the funds.

Twinsectra v Yardley [2002] 2 AC 164

House of Lords approves Quistclose.
Yardley borrowed $$$ from Twinsectra.
But did not deal with them directly.
Dealt through solicitors.
The solicitors (acting for Yardley) received $$$ from T in return for an
undertaking that:
The loan moneys were to be retained by the solicitors until used by
Y to purchase a particular property;
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The loan $$$ was to be used solely for purchasing the property and
for no other purpose.
However, despite this undertaking, they released the $$$ to Yardley.
Yardley spent much of the $$$ for a different purposes and did not repay
the loan.
This was all advanced just so the property could be purchased. It was not
to be used for any other purpose.
Held
The $$ was held on trust and was not available to Mr Yardley for any
purpose other than that specified.
Rather the $$ was held on trust for Twinsectra up and until it was applied
for the specified purpose.
The borrower must either use it for that purpose or return it.
That purpose failed.
There is then a resulting trust in favour of Twinsectra.
Importance: they had more than a debt, but a traceable proprietary
interest in the $$$.

Constructive Trusts

A constructive trust arises by operation of law, not as a result of the

intention of the parties.
The basic principle is that if a person holds property in circumstances
where equity and good conscience demand that the property be held or
enjoyed by another person, then the holder of the property will be
compelled to hold it on trust for the other person.
Carson v Wood (1994) 34 NSWLR 9 at 26:
Equity will impose a constructive trust as a remedy to preclude the
retention or assertion of beneficial ownership on the property to the
extent that such retention or assertion would be contrary to
equitable principle.

Institution or remedy?
Is the constructive trust a trust or simply a remedial device?
There is a continuing debate as to whether the constructive trust is, like an
express trust, a property institution
or is rather a remedial device.
It appears that the constructive trust is a concept flexible enough to
function as an institution in some circumstances and as a remedy in
others: Muschinski v Dodds (1985) 160 CLR 583 at 612-615 per Deane J.

Institutional constructive trust

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Arises by operation of law as from the date of the circumstances which

give rise to it: the function of the court is merely to declare that such trust
has arisen in the past: Westdeutsche Landesbank Girozentrale v Islington
London Borough Council [1996] 2 All ER 961 at 997.
Those circumstances are recognised by law as defined categories, which
give rise to an interest to which the court gives effect from the date when
the defining events occurred.

Remedial constructive trust

The remedial constructive trust does not exist at all until the Court
imposes it.
There must be an asset in the defendants hands in respect of which the
court considers it appropriate to impress a trust, and some principled basis
for declaring that assets held by Fortex Group Ltd (in receivership and
liquidation) v MacIntosh [1998] 3 NZLR 171 at 175.
The court has a discretion as to whether or not to impose a constructive
trust on the property in question, and will not do so if there is an
appropriate equitable remedy which falls short of the imposition of a
trust.: Giumelli v Giumelli (1999) 161 ALR 473 at 476. Followed in Chan v
Zacharia
Compared with other types of trust
Differences
Main distinction is that constructive trusts are imposed by the court
irrespective of the actual, inferred or presumed intention of the parties in
issue.
Constructive trust is not intended to create an endure.
The trustees powers and duties are less precisely defined.
The principles governing the retirement, appointment and removal of
trustees, do not apply to constructive trustees.
New lease was held by Chan on trust for Dr Z
Similarities
Where the constructive trust is used to provide proprietary relief, this
clothes the property with the characteristics of trust property.
Therefore, the remedy of tracing is available.
The property is separate from the assets of the constructive trustee on her
or his insolvency and any profits arising from that property belong to the
beneficiaries and not to the constructive trustee.
Constructive trust must, like express and resulting trusts, exhibit both
certainty of object and, with some exceptions, certainty of subject matter.
For obvious reasons, certainty of intention is not required.

Remedial constructive trust

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Theoretically, as the court creates the trust, the trust so created cannot
be back-dated to a time before the court order which created it: Fortex
Group Ltd v MacIntosh [1998]
But courts have exercised a discretion to back-date the proprietary impact
of the order, taking into account any prejudice to 3 rd parties:
Westdeutsche Landesbank Girozentrale v Islington London Borough
Council [1996] 2 All ER 961 (there is a continuing debate).

Where the improper profit or gain is money it is interesting to see if

it will be a constructive trust.

It will only be imposed as a constructive trust where it is necessary

to achieve a just remedy.

Hospital Products- was a business opportunity as opposed to

property.

AG v Hong Kong said bribes were held on constructive trust for the
Crown and the property was used through the crown money and through
tracing it was theirs.

However looking back to recent times, the UK is trending back to a

Lister v Stubbs view.

Situations in which a constructive trust arises

Institutional constructive trusts:
Mutual wills
Breach of fiduciary duty;
Trustees de son tort.
Third parties who receive trust property as a result of breach of the
trust or participate in the breach of trust.
Where trust property has been transferred to someone - other than
a bona fide purchaser for value without notice.
Where property is held by someone who attained it by virtue of a
transaction likely to be set aside in Equity (e.g. undue influence).
Purchaser under a specifically enforceable contract of sale (?).
Remedial constructive trusts:
Mutual wills- different to breach of fiduciary obligations.
Barnes: 2 limbs whereby a person participates in a breach of trust
or fiduciary or knowingly receives property as the result of a breach.
Constructive trustee

Mutual wills
The courts have recognised institutional constructive trusts arising to give
effect to an agreement between the parties for mutual wills.
Mutual wills arise where a non-revocable agreement is made between 2
persons, as to the manner of disposition of their property after their
deaths. Because the first party to die is unable to enforce the agreement,

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equity imposes on the survivor the obligations of a constructive trustee to

carry out the terms of the agreement.

Birmingham v Renfrew (1937) 57 CLR 666

Where husband and wife made wills and the W died first. H tried to change
the will to benefit his family instead of his wifes
Held: There was a valid contract, pursuant to which the H was
precluded from revoking his will. So that his personal
representative held the property on constructive trust for the
beneficiaries and in the terms of the first will.
NB He was not obliged to preserve the trust property during his lifetime
only to fulfil the agreement as to devising whatever remained at the time
of his death.
Improper gains by a trustee or other fiduciary
A fiduciary who gains by reason of her / his position may be liable to
account for that gain through the imposition of constructive trusteeship
upon the fiduciary regarding the moneys or property the subject of the
gain.

Keech v Sandford
A trustee, under a testamentary trust, held a lease on trust for a minor.
It was held that the lease should be held on trust for the minor, that
the trustee should account for profits made since the renewal and
that the trustee should be indemnified from any covenants
contained in the lease.
There was no fraud in this case but the court said the trustee should
rather have let the lease run out than to have had it to himself.

Chan v Zacharia
the principle in equity is that a person who is under a fiduciary obligation
must account to the person to whom the obligation is owed for any benefit
or gain
(i) which has been obtained or received in circumstances where a
conflict[of interest] existed or
(ii) which was obtained or received by use or by reason of his
fiduciary position or of opportunity or knowledge resulting from [his
fiduciary position].
Any such benefit or gain is held by the fiduciary as constructive trustee
That constructive trust arises from the fact that a personal benefit or gain
has been so obtained or received and it is immaterial that there was no

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absence of good faith or damage to the person to whom the fiduciary

obligation was owed.

Improper gains by a trustee or other fiduciary

The principle applies to fiduciaries other than trustees. For instance, in
Phipps v Boardman [1967] 2 AC 46. This case shows how harsh the rule
can be.
BUT gains derived in breach of fiduciary duty are not invariably held on
constructive trust by the errant fiduciarythe constructive trust will only
be imposed where it is necessary to do so to achieve a just remedy.
NOTE: Exception = It was thought that a constructive trust could not
arise, if the fiduciarys improper profit was a bribe or secret commission Lister v Stubbs .(1890) 45 Ch D 1. However, it seems most unlikely that
this remains good law - AG (Hong Kong) v Reid [1993] 3 WLR 1143.
Barnes v Addy (1874) LR 9 App 244
Lord Selbourne at 251 outlined the circumstances in which third parties
may be held liable for breaches of trust and may be fixed with a
constructive trust.
Trustees de son tort
A trustee of his own wrong i.e. a trustee de son tort. Mara v Browne
[1896]
The trustee de son tort being deemed to be a constructive trustee.
A common example of trusteeship de son tort arises in respect of agents
of a trustee who deal with the trust property in a manner inconsistent with
the known terms of the trust.
Trustees by virtual of their own wrong.
Agents of the trustees who go beyond the scope of their authority and still
act as though they are trustees but still breach the trust by exceeding
powers. It is insisted you provide a remedy accordingly.
Re Barney [1892] 2 Ch 265
The imposition of constructive trusteeship will only be justified where the
stranger is so in control of the trust property as to, like an express trustee,
have been capable of disposing of it in any possible way.
The court must determine whether the stranger was so far in control of
the trust property as to warrant imposing upon her or him the liabilities
equivalent to those of express trustees.

Intermeddlers: (Liability of Third Parties)

Where a stranger to the trust becomes involved with the trust property or
with a trustee committing a breach of trust, they may become liable in 2
main situations:

1. Knowing receipt i.e. receive trust property

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2. Knowing participation in a fraudulent design i.e. fraud with

the trustee

BLB v Jacobsen (1974) 48 ALJR 372

Jacobson = the manager of BLBs business in Australia (supplying yarn).
He was also the director of one of BLBs customers Bel Knit.
In response to a claim by J for wrongful dismissal of J, BLB argued that J
had breached his fiduciary duties to BLB by supplying a large quantity of
yarn to Bel Knit, when that company was not solvent.
He had disclosed Bel Knits debts and the fact that it was struggling to
establish itself.
It was held by the High Court that Js disclosure was sufficient.
Arguing fiduciary obligations. He was deemed to know they were
insolvent.
How much notice?
Consul Developments v DPC Estates (1975) 132 CLR 373 , which was a
knowing participation case, said that notice for the purposes of Barnes v
Addy included categories (i), (ii) and (iii). Further, Consul also indicates
that category (iv) suffices.
However, in Consul:
Stephen J held that knowledge of circumstances which would put an
honest and reasonable man on inquiry, later identified as the fifth
category in Baden, would not suffice.

Barwick CJ agreed.
Gibbs J left open the possibility that category 5 constructive notice
would suffice.
Notice
The result is that Consul supports the proposition that circumstances
falling within any of the first four categories of Baden are sufficient to
answer the requirement of knowledge in the first limb of Barnes v Addy,
but does not travel fully into the field of constructive notice by accepting
the fifth category.
Farah v Say-Dee: HCA said that these conclusions in Consul as to what is
involved in "knowledge" for the second limb represent the law in Australia.
They should be followed by Australian courts, unless and until departed
from by decision of this Court.
Anything except pure constructive notice
Known participation case- Farah. This turned away from Australia
following the English law.
Knowing receipt
( aka recipient liability)

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Where a person receives in her or his own capacity, not as agent for the
trustee, property already subject to a trust with the requisite knowledge
that it is trust property and that the transfer is in breach of fiduciary duty,
he or she will be made a constructive trustee of that property for the
benefit of the beneficiaries or principal.

Knowledge required
Knowledge required for constructive trust liability in knowing
receipt cases includes:
Actual knowledge: United States Surgical Corporation v Hospital Products
International Pty Ltd [1983] 2 NSWLR 157;
Wilful shutting of the eyes to the obvious: Consul Development Pty Ltd v
DPC Estates Pty Ltd (1975) 132 CLR 373 at 398 per Gibbs J.
Wilful and reckless failure to make inquiries that an honest and reasonable
person would make: Belmont
Finance Corporation Ltd v Williams
Furniture Ltd [1979] Ch 250 at 267.
Knowledge of circumstances that would indicate the facts to an honest and
reasonable person: Consul Development Pty Ltd v DPC Estates Pty Ltd
(1975) 132 CLR 373 at 398 per Gibbs J.
And notice of facts that could have been discovered by conducting the
inquiries that a reasonably prudent person would conduct as a matter of
course.
Gibson J in Baden Delvaux v Societe Generale [1992]
Proof of dishonesty by the recipient is not necessary for the
recipient to be liable as constructive trustee.
Knowing participation
Aka accessory liability
According to Selbourne LJ in Barnes v Addy (1874 9 Ch App 244), need 3
things:
Participation (direct or indirect)
A dishonest or fraudulent design (must be morally reprehensible
more than mere negligence or mere technical breach)
Knowledge (as above)
Essential difference =
Cases of receipt liability are concerned with rights of priority in
relation to property taken by a legal owner for his own benefit.
Participation cases concern accessory liability for furtherance of
fraud.
Issue = is constructive notice sufficient here and, if so, which types?
Mere carelessness is not enough.
However, in Carl Zeiss, Sachs LJ said that the focus is on honesty
not notice.
BUT after Farah v Say Dee categories 1-4 knowledge will suffice
and category 5 will not.
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What is required here (for the second limb) is dishonesty and

conscious impropriety not failure to inquire.

Knowing participation
BUT this = a knowing receipt rather than a knowing participation case and
the remarks were obiter.
And see Belmont Finance v Williams Furniture (No 2) (1980) (indicating
that constructive notice not enough).

Dishonest participation?
For a time it was considered that Australia might follow the Privy Councils
remarks that, in second limb cases, it is dishonesty, not knowledge that is
critical.
This emphasis on honesty, rather than notice, was expressed by the Privy
Council in Royal Brunei Airlines Sdn Bhd v Tan (1995) 2 AC 378.
So, on this view, notice isnt the issue. The question is whether the 3P
observed the standards to which an honest person would adhere.
The Privy Councils view was rejected by the High Court in Farah
Constructions P/L v Say-Dee (2007) 81 ALJR 1107.
Remedial constructive trusts
Remedial constructive trusts have been used mainly in the context of
allocating property interests on the breakdown of relationships between
persons where the legal proprietary interests of the parties do not reflect
that which equity considers consistent with equitable principle.
Unlike the institutional constructive trust, the remedial constructive trust is
not based on a pre-existing fiduciary or contractual duty owed by one
party to the other.
In Australia, the justification for the remedial constructive trust is an
unconscionable assertion to a beneficial interest in property Baumgartner
v Baumgartner (1987) 164 CLR 137.
Constructive trusts- remedial and institution
They arise in classes, i.e. mutual wills, breach of fiduciary etc.
Muschinski v Dodds (1985) 160 CLR 583.
Ms M and Mr D lived together in a de facto marriage for about 8 years.
The house was conveyed to them as joint tenants.
In the end, he contributed very little. About 9% of the $ spent on
purchase and improvements.
When they split, Mrs M sought a declaration that Mr D held his interest in
the property on trust for her.

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NSW Crt of Appeal - That There was no equitable fraud here upon which to
base a constructive trust.
In fact Ms M had made a gift of the share of the property.

Held
So in this case, they each held their shares on constructive trust term =
to repay the other their contribution (i.e. her pay $10 000 him pay $90
000) with the capital appreciation to be split equally i.e. the same result as
if he had lent him the $ to make an equal contribution.
Baumgartner v Baumgartner
Muschinski v Dodds was applied in Baumgartner v Baumgartner (1987)
164 CLR 137, where the High Court held a constructive trust may be
imposed where, upon the breakdown of the relationship, it would be
unconscionable for one party to assert her or his entire legal interest.

Remedies

Equity- you can compile a suite of remedies to best assist your

client.

4 observations about equitable remedies

The number
10 well recognised equitable remedies.
Specific and flexible
They give the plaintiff exactly what she/he wants. And they can be
drafted in whatever way the court deems fit.
Discretionary
Equitable remedies are always discretionary.
Personal
Usually = decrees / commands directed at the person.

Equitable remedies are very important to understand equitys role and the
relationship with the common law. It is popular because it has very
effective remedies in comparison with the common law. Also the
characteristics of the remedies are somewhat better, they are wholly
different from common law.
Constructive trust is used as a remedy in Australia, other than this we
have 10 well recognised remedies.
You have be wronged, this is the money equivalent of putting you in the
position where you would have been if the task was performed or not
breached. It is in a monetary form.
Equity acknowledges that money doesnt always suffice for a remedy. P in
a position they would like to be in rather than just get money.
Equitable remedies are specific and flexible. Common law is limited to a
pecuniary replacement of what you have lost.
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You would want an injunction in relation to having your confidence

breached as opposed to money as a solution. This is only available in
equity= equitable injunction.
Damages are a good remedy but sometimes they are not, i.e. if something
is irreplaceable like a particular piece of technology. Damages would not
suffice here as your whole business would suffer.
Only equity will give you specific performance of the K. it is limited to
certain circumstances. Law of tort= conversion in common law, damages.
It will not allow you to get your goods back, it would be money. Sometimes
what is required for justice is to get your goods back. Unlike the common
law equity has specific remedies.
They are also flexible and not binary. Limit the extent of the injunction by
the courts, to days months etc. to shape the remedy to best do justice for
the P without being unfair to the D. Nelson case= trusts (illegal). Equitable
remedies are discretionary but also conditional. i.e. you can have it but
only if you do this
Leads onto the fact equitable remedies are also discretionary. The
unquestioned legal view that remedies are always discretionary. The court
can decline a remedy.
This is why in an exam the Q will arise as to what remedies you would like
and if you think you would be successful.
Discretionary is critical- you may not be able to answer the remedies as
clear as in common law.
When answering remedies in the exam, state I think we will ask for. i.e.
declaration of constructive trust because I want to make sure if the
fiduciary goes bankrupt that the money/ property goes to the client & it is
not distributed amongst other creditors. I do or do not think I will be able
to achieve this because (state reasons). Similarly with interlocutory
injunction, there is much room for discussion.
Equitable remedies are personal, they are decrees against the person.
Constructive trust is the exception, but they are essentially orders, i.e. you
will perform the K, you will cease publishing confidential information or
you will pay x amount of compensation.

The Menu
Interlocutory
Injunction
Appointment of a Receiver
Final Relief
Declaration
Compensatory Remedies
Equitable Compensation
Damages in Equity
Account of Profits
Rescission
Delivery up and Cancellation of Documents
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Rectification
Specific Relief
Specific Performance
Specific Restitution of Chattels
Injunction
Declaration
Is a final and authoritative statement by the court (usually) as to the rights
and obligations of the parties to the litigation.
Power originated in Chancery.
Now found in s 25(6) Supreme Court Act and O18 R16 SCR.
It is not about the judgement, it is a declaration that the D holds x
property in trust for the P. Argue it is encapsulated in the statute, but even
without it this would still exist.
Section 25 (6) Supreme Court Act 1935 (WA)
There is no doubt over this anymore, you can go to court and seek
nothing but a declaration.
Quick and inexpensive.
Useful in:
Ascertaining proprietary rights and interests;
Construction of documents legislation etc.
May be used in a pre-emptive way.

Benefits of a declaration
Proprietary rights, i.e. a priorities claim in property law over land. i.e.
whether the original K was binding or not. Statute of Frauds. No order of
specific performance, just a declaration.
Construction of a particular clause of a contract.
Construction of a trust deed, i.e. where a term in the deed is unclear and
the trustee doesnt understand it. It may also be used in a preemptive
way. Declarations can be used to avoid a problem. i.e. a trustee doesnt
understand something in the deed so they go to the court because they do
not want to breach it and ask for a declaration of the definition of that
section. If the court says no= problem averted
Declarations can also be useful with legislation i.e. local government
wants to pass a bi law and they want to make sure it falls in the scope of
the governing law so they will not be acting ultra vires.
Contempt of court- you would need to sue again. i.e. breach of
interlocutory injunction. You may well find the fact you would have
consciously breached a declaration of the court has an effect on the relief
the court gives.

Now statutory, but still discretionary.

E.g. may be refused if purely hypothetical or if plaintiff has not sufficient
interest.
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Even statutory remedies are still discretionary. Hypothetical situations are

a breach of the courts services. Declarations can prevent you from getting
sued but you are not getting sued.
You need to have (sufficient) standing to get a declaration. It is not there
for people to use if they have insufficient interests.

Ainsworth v Criminal Justice Commission (1992) 106 ALR 11, 22 (Mason CJ,
Dawson, Toohey and Gaudron JJ).
There must be a real legal controversy not merely an abstract /
hypothetical query.
The applicant must have a real interest.
A declaration may be granted with respect to future conduct.
BUT not:
WRT conduct that has not and might not ever happen; or
Where the declaration will have no foreseeable consequences for
the applicant.
You need to have a real controversy and the applicant needs to
have a sufficient interest. It can be granted for future conduct.

Monetary compensation
There are 2 remedies by which the court orders the defendant to
provide monetary compensation:
1. Equitable compensation; and
2. Damages in Equity.

These are distinct.

2 circumstances where you may want monetaries/ compensation.
1st is where there is a common law cause of action, this is common
law so there is no need to go to equity for remedies and you will
receive damages
2nd equitable cause of action, you dont want an injunction/
declaration and you want compensation, C/L damages cannot be
used here because you do not have a C/L cause of action. At equity
this remedy can perform a role for damages i.e. monetary role.
These are not damages as such. Maintain the terminology of
equitable compensation, equitable damages, avoid other
terminology. Sometimes case law here is fuzzy as it is not clear
which one judges are using.

Equitable Compensation
Inherent jurisdiction to award compensation for financial loss suffered as a
result of a purely equitable duty.
Theoretically restitutionary (i.e. restorative) in nature.
Aim = to place the pl in a position as nearly as possible to that in which
they would be if there had been no breach.
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Not an equitable equivalent to common law damages.

Discretionary and may be decreed conditionally.

There has to be a remedy where the P has suffered a loss and the D hasnt
made any particular profit and the P simply wants to be compensated.
This is equitable compensation. But is this like damages i.e. mitigating,
issues of remoteness etc.? Strictly speaking the answer is no as it is not
like common law damages.
These rules here do not apply for equitable compensation. None of the
common law cases are essentially binding law in equity.
Court can look to common law by analogy. Compensatory remedy. It does
the same thing as common law damages in that it compensates for loss,
but is not equivalent as the same rules do not apply.
One key difference is theoretically equitable compensation is restitutionary
in nature. Here it means it is restorative i.e. giving you back what you
have lost. McDonald case. Here, you could have the money back i.e. the
value in money of the thing you lost. It is notionally restorative in nature,
i.e. put the plaintiff in the position or close to the position they would have
been in had there been no breach.
Equity= no right to equitable compensation, it is discretionary. You can ask
for it but its up to the court to decide.

Has been used in cases of:

Breach of trust;
breach of fiduciary obligation;
breach of confidence;
estoppel;
undue influence; and
unconscionable bargain.
Complementary doctrines, i.e. doctrines that have been used to fill a gap
left by the C/L. purely equitable doctrines.
The court has jurisdiction to grant such compensation/ remedies. If you
cannot get back the thing you lost but they give you money instead as a
replacement, is that equitable?
The courts are not too overly worried if they strain beyond the equitable
jurisdiction or not. Regardless if the PQ i.e. is for estoppel or UI or on the
other hand breach, if the remedy you are asking for is compensatory then
you can ask for equitable compensation.
If there is a breach and your client wants or is likely to get compensation
then ask for equitable compensation.
Differs from CL damages:
Discretionary not available as of right;
Quantum assessed at the time of the judgement with full benefit of
hindsight;

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The CL requirement of causation does not apply. However. (semble)

there is usually a causal link requirement similar to CL causation
i.e. but for + March v Stramare common sense;
The foreseeability, remoteness, and the requirement to mitigate do
not apply;
Defences of contributory negligence and voluntary assumption of
risk do not apply;
No equivalent to exemplary damages equity and punishment are
strangers.
Some sort of remoteness will be relevant just not the law of
remoteness.
Defences are important and it is not equivalent
Deterring others in future/ punishing the defendant= exemplary
damages

Result = sometimes the quantum of CL damages will differ from that

available by way of equitable compensation.
Example CL damages AND e.g. compensation available, in circs where
the damages, but not the e.g. compensation is liable to be diminished by
virtue of contributory negligence.
Where this occurs the P is entitled to elect.

It should be no shock to see the same cause of action may be both

negligent and a breach of fiduciary obligation, you may ask for
damages and/ or equitable compensation, most likely or the
quantum here will be different. The P is entitled to elect whatever is
in their own best interests.

Examples
Nocton v Lord Ashburton (where solicitor had to compensate client for
damage caused pursuant to the fiduciarys conflict of interest). Leasing
land for a mortgage, deceit.
McKenzie v McDonald (where real estate agent purchased his clients
farm in breach of fiduciary duty, but the conveyance could not be
rescinded). Had there been no breach, the farm wouldnt have been sold.
Had to pay the amount to put the P back in her original position.
Commonwealth Bank v Smith (where the bank manager was held to
have acted as the customers investment adviser).

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Damages in Equity
No inherent jurisdiction to award damages.
However, sometimes damages at common law are unavailable and
specific relief (specif perf or inj) is either inappropriate or less desirable.
Result Lord Cairns Act 1858.
Contained in s 25(10) Supreme Court Act.
Available in the exclusive jurisdiction? Unclear.
As opposed to compensation
E.g. King case, compensation was not awarded here, sale of a farm, gone
through and awaiting settlement. The purchaser had started to move
stock to the farm. Then the vendor said no, not going ahead with the K.
The P here was able to get damages here at C/L but didnt want damages
the P wanted the farm. i.e. specific performance.
Damages here was not a sufficient remedy. The purchaser here was
possibly able to get SP, but it was to be inadequate here in that it was not
quite enough. The delay had been that the purchasers stock had died
whilst waiting for settlement i.e. sheep so if he got the farm this would still
not be adequate for the loss of stock as well. Damages in equity was
created to assist in these circumstances. For other reasons too, the P
didnt win here.

Section 25 (10) Supreme Court Act 1935 (WA)

These damages in addition to specific performance. They are
statutory but happens to apply in an equitable context.
In obtaining it there are 2 major differences between this and
equitable compensation, 1 is that its statutory i.e. need to make out
the terms of the statute, so to get damages in equity you need to 1 st
prove the court has jurisdiction to award SP or an injunction and in
the circumstances there is good reason for the court to award it. If
the court can give you an injunction etc., they can elect to also give
you damages as well. Cases relate to courts having jurisdiction.

Section 2 Lord Cairns Act

Where the court has jurisdiction to award specific performance or
injunction, it can (if it thinks fit) award damages, either in addition
to or in substitution for specific performance or injunction.
This is statutory, not inherently equitable, it just happens to apply in
an equitable context.

Damages in Equity
Statutory remedy linked to the availability of specific performance or
injunction.
Narrow view King v Poggioli.
Wider view Wentworth v Woollahra
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Examples and utility (in the context of breach of trust): the Talbot case
(The millionaire case).
Older/ narrow view= cant get damages in equity unless the court is
prepared to give it.

Modern/ Wider view= They agreed the court doesnt have to be

prepared to grant a remedy and exercise their discretion in your
favour, of SP or injunction they just need to have jurisdiction to do
so. This is enough to fulfil Lord Cairns Act (predominant view at the
moment).

It may go to discretion if you can prove you are ready, willing and
able to perform. We award this because damages in C/L will be
inadequate. Judges find they go to discretion not jurisdiction. You
can still ask for damages in equity instead of or as well as the
specific relief.

1.
2.
3.
4.

Shelfer v City of London Electric Lighting Co

Guidelines for damages in equity
Smith LJ laid out a good working rule for awarding damages in
equity.
Where the damages to the plaintiffs rights was small.
The injury is capable of being estimated in money.
The injury is capable of being compensated by a small monetary payout.
In the circumstances, it would be cruel to grant an injunction against the
def.

Set out guidelines for damages in equity. i.e. rule of thumb.

Different form the King example. Granting remedies in place of SP
So you can ask for s.25(10) or Lord Cairns Act remedies in lieu
First big difference between equitable compensation and damages
in equity is that one had inherent jurisdiction and one is statutory
and specific
Second in assessing damages in equity the rules apply i.e.
mitigation.

Assessment of damages
In assessing damages equity follows the law.
Common law rules re assessment usually apply.

E.g. duty to mitigate loss, remoteness of damage etc.

Account of Profits
Profit by the defendant is quantified and paid over to plaintiff.
The distinction between an account of profits and damages is that, by the
former, the infringer is required to give up his ill-gotten gains to the party
whose rights he has infringed. By the later, he is required to compensate
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the party wronged for the loss he has suffered. The two computations
obviously yield different results, for a plaintiffs loss is not to be measured
by a defs gain, nor a defs gain by the plaintiffs loss. Either may be
greater or less than the other. Colbeam Palmer v Stock Affiliates by
Windeyer J.

Breach of trust:
If they just want compensation- ask for compensation
But if they want SP or an injunction plus damages then the damages has
to be damages in equity.
Where profit and loss coincide, the plaintiff must elect whether to take
damages for loss or an account of profits.
Procedure set out in O45 Supreme Court Rules.
File a summons supported by an affidavit setting out the basis for
application;
At hearing ask that an account be taken ie auditors are appointed to
work out how much profit the def has made and to certify that fact
AND a court order that the certified amount be paid within a
specified time;
Account is taken, once the extent of the profit has been quantified
and certified, the def is obliged to pay within the time specified in
the order.
Nobody lost anything, there was just an improper profit by the fiduciary,
i.e. they made more profits than they were supposed to.
Exclusive jurisdiction doctrines.
Elect what they want. It could be a loss of an account for profits, i.e.
improper profits.
May elect equitable compensation, but in the circumstances of Hospital
Supplies case, then you can elect to take the profit etc. but you cannot
have both at the same time.
Procedure is set out in O45 SCR. Gives a better idea of what an account of
profits it. This is where equity has taken over something common law
established and also improved it. Equity developed the remedy of paying
the profit. Decree/ order of you will pay and if not you are in contempt of
court. Certified amount to be paid in a certain amount of time.

Order 45 Rule 1 RSC

Summary order for accounts
(1) Where the statement of claim claims an account or involves the
taking of an account the plaintiff may, at any time after the
defendant has entered an appearance, or after the time limited for
appearing, apply for an order under this Rule.

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(2) An application under this Rule must be made by summons and

must, unless the Court otherwise directs, be supported by affidavit
or other evidence.

(3) On the hearing of the application, the Court may, unless

satisfied by the defendant by affidavit or otherwise that there is
some preliminary question to be tried, order that an account be
taken and may also order that any amount certified on taking the
account to be due to either party be paid to him within a time
specified in the order.

Account of Profits
The defendants profit may exceed what the plaintiff would have made.
But remember only the amount actually made as a result of the defs
breach of equitable duty is recoverable.
But onus is on def to prove that any profit does not flow from the breach.
What is profit?

Gross receipts minus the costs and expenses incurred in

generating the income.
But which expenses should be deducted? The HC has held that this is a
question of fact in each case and onus is on the def. Dart Industries Inc v
Dcor Corporation Pty Ltd.

Breach of fiduciary obligations/ trust/ confidence

i.e. which remedies to ask for, and you consider account of profits,
one thing you ought to consider is only the profits that flow from the
breach will be accounted for. This is a question if fact in each case,
i.e. Dart.

Take out overheads etc. if you try to say something needs to be

deducted the D needs to prove it.

Rescission

Distinguish from the contractual and common law right to rescind.

The remedy of rescission (available both at common law and in equity).
Rescission available in equity for mistake, innocent or fraudulent
misrepresentation, equitable fraud e.g. undue influence, unconscionable
bargain etc.
Easier to get in equity, because the pre-requisite of restitution in integrum
is more liberally construed (i.e. only have to substantially restore the
status quo).

Delivery Up and Cancellation

Where a document is void or voidable, the court may order that it be
delivered up and cancelled.
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Prevents innocent third parties being duped.

Often sought in combination with recession.
Not ordered if the invalidity is apparent on the face of the document.

Rectification of Documents
If it can be proven that a written instrument does not reflect the true
intentions of the parties, then the court may rectify that document.
NB It is only the written instrument that is rectified. Not the contract itself.
Exception to the parole evidence rule.
Need very clear evidence that the document is wrong.
Usually only available in cases of mutual mistake.
Not available if the true meaning is obvious or can be achieved as a
matter of construction.
Applies retrospectively.
Rectification may be made by ordering the parties to execute a fresh
document. But more commonly, is done by court order that a copy of the
decree of rectification be endorsed on the document itself.

Specific Relief

Specific Performance
An order of the court
compelling a contracting party
to perform her / his obligations under the contract
(Waltons Stores (Interstate) v Maher.
Pre-requisites:
Valid contract;
Plaintiff ready, willing and able to perform; and
Damages for breach would be inadequate to compensate the
plaintiff e.g. sale of land, sale of unique or rare chattels e.g. Falcke
v Gray (1859) Drew 651 or chattels which are (extremely) difficult to
obtain chattels e.g. Dougan v Ley (1946)
No lack of mutuality.

Contracts usually not specifically enforceable

Contracts for the payment of money;
Contracts requiring constant supervision;
Series of breaches or the breach of a continuing obligation; and
Contracts for personal services e.g. employment contracts.

Specific Restitution of Chattels

Decree by the court that particular chattels that have been wrongfully
obtained be returned to the person rightly entitled to them.
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Normally, remedy in tort is damages.

Specific restitution is available where damages would not be an adequate
remedy.
E.g. unique or rare chattels.
E.g. Practically irreplaceable Doulton Potteries v Bronotte.

Doulton Potteries v Bronotte

Doulton sent a die to Bronotte for repairs. Disputed Bronottes bill ($9000).
Bronotte refused to return the die until the full price was paid.
Doulton sought specific restitution of the die on the basis that it needed it
for its business, it would take months to make another (and the only one
who could do it was Bronotte).
Hope J granted specific restitution on the basis that the die was for
all practical purposes irreplaceable and was necessary for the
plaintiffs business.

Injunction
A decree restraining the defendant from doing an act or compelling them
to do something.
Section 25(9) Supreme Court Act
Empowers the court to grant an injunction in all cases in which it appears
to the court to be just or convenient to do so.
And such injunction may be granted upon such terms and conditions as
the court thinks just.
Injunction terminology
Prohibitory injunction forbids.
Mandatory injunction compels / commands.
Final injunction = an injunction granted at the end of the trial, by way of
final relief.
Interlocutory injunction = granted before completion of trial.

NB Where granted up until a particular date, called an interim

injunction.
Inter partes injunction = granted after hearing from both sides.
Ex parte injunction = only applicant heard (urgent and temporary).
Quia timet injunction = granted to prevent a threatened or apprehended
wrong.
Mareva Injunction = prohibiting a party from removing assets from the
jurisdiction or from disposing of / dealing with them within the jurisdiction
so as to frustrate the execution of the proceedings.
Anton Piller Order = prohibiting the removal or destruction of evidence
that is necessary to the proceedings.
Injunction to protect a legal right or title
Plaintiff must prove:
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Infringement of a legal right;

Of a proprietary nature;
NB Extremely liberally construed.
Infringement is likely to occur or be continued / repeated; and
Damages would not adequately compensate the plaintiff for the
infringement of that right.

Interlocutory Injunction
Granted before the completion of trial.
Purpose = to preserve the status quo until the end of trial, so as to
prevent irreparable or irreversible damage to the plaintiffs rights.
O52 R1(1) SCR provides that the court may make interlocutory injunctions
and sets out procedure.
Must prove a serious question to be tried American Cyanamid v Ethicon /
a triable issue Murphy v Lush.
Court must consider that the balance of convenience favours the
granting of an injunction.
Takes into account:
Adequacy of other remedies (eg that damages would be an adequate
damages).
The conduct of both parties.
Hardship to both sides and to third parties.
Public interest (if relevant).
Overall justice of the case.
Applicant must undertake to the court to compensate the other party for
any damage caused by the injunction, if it turns out that it ought not to
have been granted.
Appointment of a Receiver
A receiver is appointed to take possession of the property of another.
Receiver:
Gets in the property;
Pays the outgoings; and
Holds the balance for the person entitled to it.
Distinguish from receivers appointed pursuant to a contract e.g. mortgage
or pursuant to statute e.g. Companies Code.
Equitable remedy of receiver usually appointed as an interim measure to
preserve property (or income from it) which is the centre of dispute i.e. to
preserve the status quo pending resolution.
Power contained in Order 51 Supreme Court Rules.
Where need a business kept alive as a going concern, need a receiver and
manager.
Defences
Laches;
Acquiescence;
Consent;
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Unclean hands;

Illegality; and

148

Hardship.

Laches
Aka laches and acquiescence.
Acquiescence = part of the defence of laches.
Traditionally, the Statute of Limitation Act did not apply to equitable
causes of action.
BUT
Maxim = Equity assists the diligent and not the tardy.
Mere delay is not a bar.
Defendant must show that:
Plaintiffs actions constitute acquiescence to the defendants conduct;
The defendant has changed her position such that it would now be unfair
to grant the relief sought by the pl.

Limitation Act 2005 (WA), s 27

Equitable actions (not analogous to other actions)
(1) An equitable action cannot be commenced after the only or later of
such of the following events as are applicable
a) the elapse of 6 years since the cause of action accrued; or
b) the elapse of 3 years since time started running, on equitable principles,
for the commencement of the action.
(2) In this section equitable action means an action
(a) in which the relief sought is in equity;

Laches
Not arbitrary or technical.
Arises where it would be practically unjust to afford a remedy, either
because:
The pls conduct may fairly be regarded as equivalent to a waiver of
his cause of action; or
Pls conduct and neglect have otherwise put the def in an
unreasonable situation if the remedy sought is now granted.
Two circumstances are always important:
Length of delay; and
The nature of the acts done in the interval.
See Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221, 239-240.
Consent
Specific to breach of fiduciary duty = Full disclosure and informed consent.

Unclean hands
Maxim = he who comes to equity must come with clean hands.
Involves a consideration of the pls conduct in the past.
Cf He who seeks equity must do equity, which relates to the transaction /
dealing under dispute.

Does not require that a pl must have been a saint.

Examples of unclean hands:
Where pl has been guilty of misrepresentation to the def or another eg in
relation to a contract in re which he seeks specific performance;
Where the pl has misled the court in some material way or committed an
abuse of process;
Where the pl has been guilty of legal depravity. e.g. gross sexual
depravity Gill v Lewis [1956]
Illegality
Nelson v Nelson (1995) 132 ALR 133 at least in the case of statutory
illegality, the court looks to the policy behind the law breached and inquire
whether it will be served by denying the interest.
Mc Hugh J at p193:
courts should not refuse to enforce legal or equitable rights simply
because they arose out of or were associated with an unlawful purpose
unless:
(a) the statute discloses an intention that those rights should be
unenforceable in all circumstances; or
(b)
(i) the sanction of refusing to enforce those rights is not
disproportionate to the seriousness of the unlawful conduct;
(ii) the imposition of the sanction is necessary having regard
to the terms of the statute, to protect its objects or policies;
and
(iii) the statute does not disclose an intention that the
sanctions and remedies contained in the statute are to be the
only legal consequences of a breach of the statute or the
frustration of its policies.
Hardship
Relates to specific performance.
specific performance will not be granted, if:
To do so would impose great hardship on either party (Dowsett v
Reid (1912) 15 CLR 695, 705); or
Performance would be impossible or futile (Mundy v Joliffe (1839) 9
LJ Ch 95).
Difficult to prove.
Not just that the terms of the contract are hard.
Example, where specific performance would have involved the def
undertaking risky litigation to recover land in order to convey it Wroth v
Tyler [1974] Ch 30, 50.