Equity Personal Notes

faculty of law
EQUITY AND TRUSTS personal notes
COURSE DESCRIPTION
A. The Nature of Equity
The following Equity ideas come from Aristotle’s Ethics, and could be understood as
considering the difference between common law and equity:
“For equity, though superior to justice, is still just … justice and equity coincide,
and although both are good, equity is superior. What causes the difficulty is the
fact that equity is just, but not what is legally just: it is a rectification of legal
justice.”
So it is that equity may provide for a better form of justice than the common law
because it provides for a more specific judgment as to right and wrong in individual
cases which rectifies any errors of fairness which the common law would otherwise have
made:
“The explanation of this is that all law is universal, and there are some things about
which it is not possible to pronounce rightly in general terms; therefore in cases where it
is necessary to make a general pronouncement, but impossible to do so rightly, the law
takes account of the majority of cases, though not unaware that in this way errors are
made. … So when the law states a general rule, and a case arises under this that is
exceptional, then it is right, where the legislator owing to the generality of his language
has erred in not covering that case, to correct the omission by a ruling such as the
legislator himself would have given if he had been present there, and as he would have
enacted if he had been aware of the circumstances.”
Thus, equity exists to rectify what would otherwise be errors in the application of the
common law to factual situations in which the judges who developed common law
principles or the legislators who passed statutes could not have intended. Equity and
Trusts introduces students to foundational principles governing the law of trusts. The
module encompasses the historical development of equity, equitable principles and
equitable remedies, and considers the social and legal contexts in which trusts arise.
Students are encouraged to fully engage with the subject matter through an analysis of
key concepts, cases and contemporary judicial/academic debate.
OVERALL, this course seeks to enable the students to: provide a sound grounding in the
concepts, principles and rules relating to equity and trusts; build on students' existing
knowledge of the inter-action between common law and equity by looking more directly
at equitable remedies, the jurisprudence of equity and the contribution equity has made,
and continues to make, to the English legal system; introduce students to aspects of the
procedure and practice of equity; place the development of equity in a social and
economic context, and in particular track the evolution of the key jurisprudential themes
pg. 1 sebukalu@gmail.com 0779111777
faculty of law
in terms of their use in specific historical and contemporary developments; engage in a
critical discussion of the problems and advantages of using equitable ideas, and evaluate
their use in the context of other legal strategies (e.g. restitution); and consider the
implications of the development of equitable principles and actions in other jurisdictions
and the potential for their development in this jurisdiction. to extend these issues into an
engagement with the orthodoxies of trusts law through a critical evaluation of the use of
the trusts model and the techniques of thinking through trusts; and to engage in a
critical evaluation of the uses of the trust model in terms of contemporary policy issues,
by a consideration of the values and benefits the model carries, and an examination of
the extent to which orthodoxies presumed as necessary to the use of trusts may
constrain future developments, and the extent to which they remain necessary or can be
lost or stretched in order to make trusts more useful as a contemporary legal tool. The
course relates to the application of fairness to both substantive and procedural law. It
seeks to justify the evolution of equity, its governing principles, the nature of equitable
interests and the remedies available to aggrieved parties. The student is introduced to
the concept of a trust, how it is set up, the different types of trusts and the principles
governing each of them.
B. Learning Aims
The aims of the module are to ensure that students understand and are able to assess
critically:
a. The principles associated with equity and with trusts law;

b. the application of those principles to factual circumstances; the manner in which
these principles affect people in their everyday lives;
c. how those principles are to be reconciled with the principles governing the creation of
express trusts, the imposition of trusts by law;
d. how equity and trusts law adapt to changing social conditions; and how other legal
models challenge the traditional understanding of equity.
C. Learning Objectives
Knowledge
By the end of this module, a successful student will be able to explain;
a. what a trust is and how it operates generally, but with specific application to Uganda:
b. the informal acquisition of an interest in property through a resulting or constructive
trust;
c. the formal requirements for the establishment of a valid express trust, both inter
-vivos and on death;
d. the enforceability of trusts which have not been properly constituted;
e. the nature of the fiduciary relationship and the protection of the beneficial interest;
f. powers and duties of the trustees and remedies for any breach of duty;
g. the liability of third parties in respect of trust property; and and;

faculty of law
I. READINGS
These Lecture Materials provide you with a comprehensive list of your case law and
statutory reading for lectures and seminars, together with an illustrative list of key
articles and other materials for lectures and seminars. You are expected to read all
statutory material - this will be essential for an understanding of the subject. Cases
marked ** are essential reading, being leading or very important cases, and so must be
read in full in the law reports. All other cases can be read in a casebook or covered in a
textbook. You are also expected to read all cases marked with an asterisk * at the very
least in a casebook but you are advised to read them in full in the law reports.
II. TEXTBOOKS
Your recommended textbooks are:- Alastair Hudson: Equity and Trusts (7th ed.,
Routledge, 2012) & D.J Bakibinga, Equity and Trusts in Uganda, LawAfrica. There are
other textbooks available, including the following: -
a. Hanbury and Martin: Modern Equity (19th ed., by Dr J. Martin: Sweet & Maxwell,
2012): “ME”.
b. Pettit: Equity and the Law of Trusts (11th ed.: OUP, 2009): “PET”. Other textbooks
to which you might want to refer are:-
c. Virgo, The Principles of Equity and Trusts (OUP, 2012)
d. Pearce, Stevens and Barr: The Law of Trusts and Equitable Obligations (5th ed.,
OUP, 2010).
e. Penner, The Law of Trusts (8th ed.: Core Text, OUP, 2012).
f. Watt, Trusts and Equity (4th ed, Oxford, 2010).
III. CASES AND MATERIALS BOOKS
You are not required to have a cases and materials book, but some people find them
useful to extract some of the main principles. The best cases and materials books in this
area are:-
a. Maudsley and Burn: Trusts and Trustees: Cases and Materials (7th ed.: Butterworths
2008) – an excellent digest of the most significant cases.
b. Mitchell, Hayton and Marshall: Commentary and Cases on the Law of Trusts and
Equitable Remedies (13th ed.: Sweet & Maxwell 2010).
c. Moffat: Trusts Law: Text and Materials (5th ed.: CUP 2009) – a very interesting,
alternative view of the law.
IV. BACKGROUND READING
Hudson’s Equity & Trusts, has a long bibliography containing a large amount of journal
and treatise literature. Journal literature is referred to in these “Lecture Materials” and in
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the “further reading” sections in the Seminar Materials, although you are encouraged to
identify journal and treatise literature, and other reading online, for yourself. In the
footnotes to your set reading there are cross references to this bibliography. This is how
you will find further reading, as well as the articles to which you are referred in these
Lecture Materials. A number of further files and web-links can be found at
www.alastairhudson.com/trustslaw in.pdf format.
WEEK ONE
1. GENERAL PRINCIPLES OF EQUITY

Reading
1. D.J Bakibinga, Equity and Trusts Law Africa, chapter 1

2. Hudson Chapters 1 and 2, especially pp.1-8, 36–62;
3. Martin Chapters 1&2; Pettit Ch 1&3
4. Oxford Advanced Learner’s Dictionary, 6th edition
5. Hackney Jeffrey, (1987) Understanding Equity and Trusts; London: Fontana press
pp.1-34
6. Jill Martin, Hanbury & Martin: Modern Equity, 17th Edition, Sweet & Maxwell pp.1-14
Early Case Law on the Role of Equity
Equity arose and developed in the early days as a reaction to the rigors and
inadequacies of the common law
 The requirement to obtain writs bearing a royal seal in order to obtain

redress from the court
 Conservative common law judges opposed these new judicial developments,

especially they developed the practice of declaring new writs issued by the
Lord Chancellor to be invalid
 Judges were placing more emphasis on form rather than substance hence
merits of the case took secondary position to technicalities

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 Also, common law courts could only handle cases where there was
established remedies
 The law hence fell behind the needs and expectations of society
 Oxford 1258 approved judicial policies of then common law
 Power of chancery to issue new writs was subject to the consent and
approval of the king, hence hardship to litigants
 Statute of Westminster 1285 tried to rectify this unsatisfactory situation by

giving power to chancery to modify the existing writs and cater for new
cases, this was frustrated by the common law judges.
 By 13th Century, the law was failing to protect the basic rights of people and
litigants turned away from the common law courts and started sending
petitions directly to the king in council.
 The petitions were many in number and subsequently were turned to the
Lord chancery in his capacity as the chief executive of the Kings
administration
 This marked the beginning of Lord Chancellors judicial power.
The Quarrel:
 The rivalry between the common law courts and the chancery.
 Issue instigated by the chancery’s power to issue the common injunction to

restrain the enforcement of common law judgements
 The chancery had powers to issue and change writs and this enabled him influence
the development of the law
 The decisive stage of the conflict arose when Coke became chief justice of the
Kings Bench Division of the High Court and was totally opposed to the Chancery
jurisdiction
 He claimed that the Common law courts possessed the power to issue a writ of
prohibition against chancery jurisdiction.
 The conflict crystallised in the Earl of Oxford case
 In that case the Lord Chancellor Ellesmere contended that he had powers to set
aside common law judgments on grounds of equity and good conscience.

faculty of law
 Chief justice Coke argued that chancery had no right either by statute or any law
to set aside common law judgments and that he would issue a writ of prohibition
against chancery interference
 The controversy came before King James I who considering legal advice favoured
chancery jurisdiction
 Form then equity rules became supreme to common law rules in the English legal
system
A good student should also discuss the effects of King James’s decision and
what reforms followed later.
**Earl of Oxford’s Case (1615) 1 Ch Rep 1, per Lord Ellesmere:
“the office of the Chancellor is to correct men’s consciences for frauds, breach
of trusts, wrongs and oppressions … and to soften and mollify the extremity of
the law”
**Lord Dudley v Lady Dudley (1705) Prec Ch 241, 244, per Lord Cowper:
“Now equity is no part of the law, but a moral virtue, which qualifies,
moderates, and reforms the rigour, hardness, and edge of the law, and is an
universal truth; it does also assist the law where it is defective and weak in the
constitution (which is the life of the law) and defends the law from crafty
evasions, delusions, and new subtleties, invested and contrived to evade and
delude the common law, whereby such as have undoubted right are made
remediless: and this is the office of equity, to support and protect the common
law from shifts and crafty contrivances against the justice of the law. Equity
therefore does not destroy the law, nor create it, but assist it.”
The fusion of common law and equity
The conflicting approaches of various judges: e.g. Lord Nottingham and Lord Mansfield.
Judicature Act 1873, its effect on equity.
Judicature Act 1873 merged the two streams of courts, however the intellectual
distinction between common law and equity remains very important.
COMMON LAW EQUITY

Examples of Claims
 Breach of Contract  Breach of Trust
 Negligence  Tracing Property

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 Fraud  Claiming Property on
Insolvency
Examples of Remedies
 Damages  Compensation
 Common Law Tracing  Equitable Tracing
 Money had and Received  Specific Performance
 Injunction
 Rescission
 Rectification
 Subrogation…etc
INTRODUCTION: History of equity
1. Kerly, A Historical Sketch of the Equitable Jurisprudence (3rd Ed) P.25

2. Raja Binti Salim Bin Busaidi v. Hamed Bin Busaid [1962] E.A 248
Introduction of the doctrines of Equity into Uganda
Equity is a body of rules of fairness or natural justice or public morality. Equity is

applicable to Uganda with reference to the judicature Act which states that, in every
cause or matter before the high court, the rules of equity and rules of common law shall
be administered concurrently.
The contract Act2[2] also preserves the rights of parties to a contract both at law and in
equity.
Equity therefore is law, in the sense that its part of Uganda’s law with reference to the
magistrates court Act, which provides that, in every civil cause or matter before a
magistrates
court, law and equity shall be administered concurrently.
Sempa Mbabali v. Kidza [1985] HCB 46 – Bonafide purchaser for value

A bonafide purchaser of legal estate for value without notice has an absolute unqualified
and unanswerable defence against the claims of any prior equitable owner. The onus of
proof lies on the person setting it up. Here the defendants raised no evidence to prove it.
The defendants knew all along that part of the land they had purchased was for burial
grounds.
1. **Yesero Mugenyi v. Wandera [1987] HCB 79 – Temporary Injunction

2. Waswa v. Kakooza [1987] HCB 79 – Temporary Injunction
3. *UCB v. General Parts (U) Ltd [1992-1993] HCB 210 – Injunction
4. Serunjogi v. Katabira [1988-90] HCB 149 – Specific Performance
5. Sekayombya v. Uganda Steel Corp [1984] HCB 42 – Restituo in intergrum
6. Mugime v. Basabosa [1991] HCB 70 - Mareva Injunction
7. Sheikh Kagimu Mulumba & Ors [1980] HCB 110 – Temporary Injunction
8. **Kenyi v. Grindlays Bank (U) Ltd [1982] HCB 116 – Discovery of Documents
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Repugnancy Doctrine
1. Rex v. Amkeyo (1971) 7 F.A.L,R14

2. Mohammed v. R [1963] E.A.18
3. Karuru v. Njeri [1968] E.A. 361
The Relation between Equity and Common Law
Inevitable Conflict: Common Law Courts & Chancery Court Jurisdiction: Coke and
Ellesmere
**The Earl of Oxford Case
Nature of equitable rights I
Rights in Rem or Personam

Rights based on common law
Rights created by Equity
Distinction: Legal & Equitable interests
Types of Equitable interests

a. Estate Contracts
b. Restrictive Covenants
c. Mortgagors Equity of Redemption
d. Equitable Mortgage
The Doctrine of Notice
The concept of Notice refers to the knowledge of an existing fact; According to Prof.
Bakibinga. the rationale of the doctrine is to prevent a buyer of superior title from setting
it
up against earlier owners of inferior interests which affect the property. The effect of this
is
that the buyer of the legal estate with notice of the prior equitable interests affecting the
estate takes it subject to prior equitable interests in this regard; “Equity looks at the
substance rather than the form” Notice can be Actual, constructive or imputed. And
it is
based on the maxim "he who comes to equity must come with clean hands".
A purchaser has notice of an equitable interest and so is bound by it unless they had
either actual notice of the equitable interest of the beneficiaries, or constructive notice
or imputed notice.
a) Actual notice means actual knowledge
b) Constructive notice means that the purchaser should have been aware of the
equitable interest had reasonable enquiries been made
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c) Imputed notice means that if the agent or employee of the purchaser had notice
then the purchaser will also have notice.
Actual Notice
This is a situation where the buyer of an estate has actual or express notice of a prior
interest at the time when he or she made the purchase or at the time before the
purchase was completed. In regard to the relevance of the doctrine of notice. The
Registration of Titles Act (R.T.A) Section 64 encompasses the doctrine and it
provides that a buyer of land shall hold that land subject to such encumbrances as
notified to the registrar. In Sempa Mbabali v w k kidza Odoki J held that the
defendant’s plea of bona fide purchaser could not stand because they knew all along
that that part of land they had purchased was for burial grounds and also the seller had
sold them the land before his share of the land had been ascertained. This therefore
means that his hands were not clean.
1. Lloyd v. Banks (1868) 3Ch. App 488

2. Perham v. Kempster (1907) 1 Ch. 373, 379
3. Fredrick Zaabwe vs. Orient Bank & 5 Ors (Civil Appeal No.4 of 2006)
s. 64 R.T.A Cap 230
Constructive Notice
defined by Salden J in Williamson v Brown; where a purchaser has knowledge of any
fact sufficient to put him in inquiry as to the existence of some right or title in conflict
with that he is about to purchase he is presumed either to have made the inquiry and
ascertained the extent of such prior right or to have made the inquiry and ascertained
the extent of such right or to have been guilty of a degree of negligence equally fatal to
his claim. The prior interest in land should always be put into consideration.
In U.P.T.C V Lutaaya. Karokora J.S.C held thus "A proprietor takes land subject to the
interests of any tenant in the land in possession even if he or she had no actual notice of
the tenant".
1. Williamson v. Brown (1857) 15 N.Y. 354, 362 per Slden J.

2. Oliver v. Hinton (1899) 2 Ch. 264
c. Fredrick Zabwe v. Orient Bank
The case deals with the scope of powers of attorney and the effect of constructive
notice.
The Supreme Court held that a donee of a power of attorney acts as an agent of the
donor and for the donor’s benefit. The donee cannot use the power of attorney for
his own benefit. The execution of the mortgage to secure the borrowing of the
Company thus exceeded the authority given by the power of attorney.
The Court upheld the principle that where an agent, who has been given a power of
attorney to do certain things, uses the power to do something for a proper purpose,
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but the act done is for the agent’s own purpose to the exclusion and detriment of
the principal, the actions of the agent will be outside the scope of the power of
attorney and are not even capable of ratification by the principal.
The Supreme Court also found the Bank liable for the loss of the Appellant raising
the duty of care owed by a banker to a person whose property is mortgaged
through a power of attorney.
The Company and the Bank were found to be liable to the Appellant for the loss he
incurred
Imputed Notice
notice which is neither actual nor constructive may be imputed to the buyer through
actual notice to the agent. It's established in agency law that that notice to an agent is
notice to the principal. In this regard, a buyer who instructed his agent to buy property at
an auction sale was taken to be affected by notice of an equity which came to his notice
during the course of the transaction.
In Sejjaka Nalima v Rebecca Musoke[ix] Odoki j held that the appellant was not
bona fide purchaser without notice owing to the fact that Musoke and co advocates who
were acting as her agents had known of the alleged fraud concerning the disputed
property.
1. Sharpe v. Foy (1868) 4 Ch. App. 35

2. Jared v. Clements (1903) 1 Ch. 428
Tutorial 2 hours
1. Trace the origin of equity and explain how the notions of conscience were
introduced into Uganda.
2. Explain the repugnancy doctrine and the conflicts between law and equity.
WEEK TWO
A. General Principles of Equity II
2. MAXIMS OF EQUITY
Reading
D.J Bakibinga, Equity and Trusts LawAfrica, chapter 2, Pgs 16-25, Hudson,
section 1.4; Martin 3-48; Pettit 21-29. The twelve maxims set out below are
culled, as a list, primarily from Snell’s Equity, (31st ed., 2004) by McGhee, 27.

faculty of law
The maxims of equity may fairly be described as a set of general principles which are
said to govern the way in which equity operates. They tend to illustrate the qualities of
equity, in contrast to the common law, as more flexible, responsive to the needs of the
individual and more inclined to take account of the parties’ conduct and worthiness.
These maxims not only help to explain the essence of equity but indicate situations in
which equitable rules would or wouldn’t be applied as well as the relationship between
law and equity.
1. Equity will not suffer a wrong to be without a Remedy.
This principle is at the very heart of equity: where the common law or statute do not
provide for the remedying of a wrong, it is equity which intercedes to ensure that a fair
result is reached. Equity will intervene in circumstances in which there is no apparent
remedy but where the court is of the view that justice demands that there be some
remedy made available to the complainant. Under a trust, as we shall see below, a
beneficiary has no right at common law to have the terms of the trust enforced, but the
court will nevertheless require the trustee to carry out those terms to prevent her
committing what would be in effect a wrong against that beneficiary.
2. Equity follow the Law
This maxim indicates that, where possible, equity will ensure that its own rules are in line
with the common law ones. Examples of equity overcoming the effect of the common
law are frequent enough, but it should be noted that in most cases the principle is that
equity supplements but does not contradict the common law. Thus, in the case of the
trust, the interests of the beneficiary are recognised, but so too, of course, is the status
of the trustee as
legal owner. The trust exists, as it were, behind the legal ownership.
a. Rules of Law
b. Rules of Evidence
3. Where there is Equal Equity Law Prevails
In a situation in which there is no clear distinction to be drawn between parties as to

which of them has the better claim in equity, the common law principle which best fits
the case is applied. So, in circumstances where two people have both purported to
purchase goods from a fraudulent vendor of those goods for the same price, neither of
them would have a better claim to the goods in equity. Therefore, the ordinary common
law rules of commercial law would be applied in that context.
4. Where Equities are Equal, First in Time Prevails

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Time is important to equity, reflecting, perhaps, its commercial element. Where two
claimants have equally strong cases; if there is a conflict between a number of equitable
interests, they will have priority in order of their creation equity will favour the person
who acquired their rights first. Thus, if two equitable mortgagees each seek to enforce
their security rights under the mortgage ahead of the other mortgagee, the court will
give priority to the person who had created their mortgage first.
*Cave v. Cave (1980) 15 Ch. D. 6;30

a sole trustee purchased land out of trust moneys in breach of trust, the conveyance
being taken in the name of his brother. The brother created first a legal mortgage and
then an equitable mortgage. It was held that the legal mortgagee had priority by virtue
of his legal estate, but that, the equities being equal, the primary rule applied to give the
beneficiaries under the trust priority over the equitable mortgagee. Hence Where there
are two competing equitable interests, the primary rule again applies that they rank in
order of their creation, again subject to the proviso that the equities are equal
*Rice v. Rice (1854) 2 Drew 73

Here The equities were not equal. a vendor indorsed a receipt on, and handed the title
deeds over to, a purchaser without having received the purchase money. Although the
vendor still retained an equitable interest, his vendor’s lien for the purchase price, it was
held that a subsequent equitable mortgagee of the property without notice of the lien
had priority although later in point of time, because the vendor’s conduct had led him to
assume that there was no competing equitable interest.
Dearle v. Hall (1828) 3 Russ. 1

This is one of the cases where the maxim does not apply where there are successive
assignments of the equitable interests. This case sets the rule to determine priority
between competing equitable claims to the same asset. The rule broadly provides that
where the equitable owner of an asset purports to dispose of his equitable interest on
two or more occasions, and the equities are equal between claimants, the claimant who
first notifies the trustee or legal owner of the asset shall have a first priority claim. Hence
it’s the first to give notice.
This present maxim deals with priorities where there is a conflict between two
competing
equitable interests in property because priority of time gives better equity. This
maxim has been applied in certain Uganda cases for example in
Ndegejjewa vs Kizito and Kubulwamwana4, the Court concluded that
Kubulwamwana’s equitable interests had priority because it was created earlier
than Ndigejjerawa’s interest. Court further stated that the first in time rule only
applies where equities are equal.
5. He who Seeks Equity Must Do Equity
the person who seeks an equitable remedy must be prepared to act equitably, and
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the court may oblige him to do so. in the case of Bank of Uganda Vs Hassan
Bassajabalaba where court held that Bassajabalaba failed to act fairly when he forged a
court order so as to get back his land titles hence an equitable remedy couldn’t be
granted to him. A claimant will not be granted an equitable remedy unless he is prepared
to fulfil his legal and equitable obligations relating to the matter in dispute, and to act
fairly towards the defendant.
Th e discretionary nature of equitable remedies is to be contrasted with the common
law position where, if a party has made out his case, the court is bound to give him
a remedy no matter how unworthy his claim might be
This maxim can be illustrated through the following arrangements that is, doctrine of
election, notice to redeem mortgage, consolidation of mortgage and illegal loans.
1. **Lodge v. National Union Investment Company [1907] 1 Ch. 300
Doctrine of Election
a person cannot claim benefit and reject burden under the same instrument. Hence a
person cannot accept a benefit under a deed or will without the same time conforming to
all its provisions.
Notice to Redeem Mortgage
If a mortgager wants to exercise the equitable right of redemption, he or she must give
reasonable notice to the mortgagee of his or her intention to do so
Illegal Loans
Lodge v. National Union Investment Co. Ltd.,
the facts were as follows. One B borrowed money from M by mortgaging certain
securities to him. M was an unregistered money-lender. Under the Money-lenders’ Act,
1900, the contract was illegal and therefore void. B sued M for return of the securities.
The court refused to make an order except upon the terms that B should repay the
money which had been advanced to him.
Consolidation of mortgages:
Where a person has become entitled to two mortgages from the same mortgagor, he
may consolidate these mortgages and refuse to permit the mortgagee to exercise his
equitable right to redeem one mortgage unless the other is redeemed.
6. He who Comes to Equity Must Come with Clean Hands
A claimant will not obtain relief in equity where his conduct has been improper in relation
to the transaction that he seeks to enforce. The plaintiff must approach the court free
from any blame on his part because court wont grant equitable relief to the plaintiff if
there is any evidence of fraud, mistakes, misrepresentation or illegality, thus in
Katarikawe Vs Katwiremu where court held that if a tenant is in breach of several terms
of his agreement with the land owner then court wont grant relief. Equity demands
fairness not only from the defendant but also from the plaintiff. It is therefore said that
“he that hath committed an inequity, shall not have equity.” While applying this maxim
the court believed that the behavior of the plaintiff was not against conscience before he
came to the court.
1. Gill v. Lewis (1956) QB 1, 13, 14, 17

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2. Coatsworth v. Johnson (1886) 54 L.T. 520
3. Loughran v. Loughran 292 US 216 (1934)
4.
7. Delay Defeats Equities (Doctrine of Laches)
1. Smith v. Clay (1767) 3 Broc. C. 639

2. Lindsay Petroleum Co. v. Hurd (1874) L.R. 5P.C 221
NB: Effect of Limitation Statutes
Limitation Act
Otherwise known as the equitable defence of larches, a person who seeks equitable
relief must
do so within a reasonable time. This doctrine can be used as a defence against an action
and not as a basis for establishment of a cause of action thus where the land owner
knows that his rights are being trampled on and chooses not to act, he / she is taken to
have delayed in the violation and will be estopped from denying otherwise.
This can be seen in the case of Climatong Vs Olinga, the applicant for a period of thirty
years occupied and cultivated the respondent’s land, and although the latter was aware
of the intrusion he made no attempt to stop it. The High court held that the applicant
had taken too long to enforce his right. However, courts will not apply the doctrine in
situations which are governed by statutes of limitation for example under The
Limitation Act it provides that no person shall make an action to recover land after the
expiration of twelve years from the date the cause of action accrued to him. Thus if a
person does not assert his right to bring an action within a reasonable time, then his
conduct is seen as being acquiescence of the wrong complained of. However, there are
exceptions to the doctrine of larches where by courts will not permit delay so as to bar a
claim and they include disability or infancy of the plaintiff, fraud on the defendant
ignorance of the facts on which the claim is based.
8. Equality is Equity
s. 28 Succession Act Cap 162

In Re Bower’s Settlement Trusts Ch. 197
9. Equity Looks at Substance Rather than Form
1. Article 126 (2) (e) Uganda 1995 Constitution

2. **URA v. Stephen Mabrosi C.A 1995 (Supreme Court)
URA v. Stephen Mabosi
- Equity looks to the intent or substance rather than the form

- Article 126 (2) (e) subjective justice shall be administered without undue regard
to technicalities.

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Supreme Court held that a memorandum of appeal which was filed out of time
could not be rejected because the appellant could not file it before obtaining the
official record of proceedings from the High Court which were released after the
60-day period required in filing the appeal had lapsed.
10. Equity Looks on That as Done which Ought to be Done#
1. **Walsh v. Lonsdale (1882) 21 Ch. D. 9

2. Grosvenor v Rogan Kamper
Equity sees that as done which ought to be done at law. The decision in Walsh V
Lonsdale
provides a perfect illustration of the operation of this maxim. The decision to uphold the
long
lease in that case was based on the ground that equity regarded that as done which
ought to be done, and in doing so, the court regarded the long lease as having been
granted even though at common law it failed for formality. This maxim is applicable in
Uganda’s situation through the Registration of Title’s Act, whereby in breach of or non-
observance of any of the covenant expressed in a lease or implied by law, the leaser
may exercise the right of re-entering the leased property and this is because equity
treats an agreement as done since the parties had agreed and one had fulfilled the
obligation. This principle is laid down in the case of Serunjogi Vs Katabira, were a
memorandum of agreement had been signed by both parties. The defendants sold to the
plaintiff a piece of land and a house situated thereon, the plaintiff paid the full price but
the defendant neglected to transfer title and deliver up possession to the plaintiff. The P
sued and Court held basing on the maxim that equity treats an equitable interest as if it
were already conveyed hence the defendant was ordered to deliver up vacant
possession of the promises.
11. Equity Imputes an Intention to Fulfil an Obligation
Based on Doctrines of Performance and Satisfaction
12. Equity Acts in Personam
One of the more important maxims of equity is that ‘equity acts in personam’ and it’s
applicable in Uganda. This maxim has its origins in the manner in which the Lord
Chancellor would seek to redress a legal wrong complained to by a claimant. The
chancellor would not interfere with the common law rule or judgment awarded by the
common law courts. Instead he would ask the defendant to appear before him
personally. Here, were one acquires an equitable interest then it is enforceable
against the vendor thus in the case of Katarikawe Vs William Katwiremu and Anor12,
court held that where the purchaser acquires an equitable interest in the nature of
right in personam, its enforceable against the vender only. It is further illustrated in a
situation where a defendant fails to comply with a decree of specific performance; the
court may appoint another person to execute the transfer in respect of the dispute
faculty of law
property. However, courts will not apply this maxim in situation where a bonafide
purchaser for value of the legal estate without notice of an earlier equitable claim
over the subject property.
equity will not assist a volunteer
1. Students must appreciate exceptions to the rule that equity will not assist a
volunteer
 The necessary ingredients of a donatio mortis causa as summarised by Nourse LJ
in Sen v Headley as follows (at 431):
(a) First, the gift must be made in contemplation, although not necessarily
in expectation, of impending death;Wilkes v. Allington [1931] 2 Ch. 104
(b) Secondly, the gift must be made upon the condition that it is to be
absolute and perfected only on the donor’s death, being revocable until that
event occurs and ineffective if it does not;
(c) Thirdly, there must be a delivery of the subject matter of the gift, or the
essential indicia of title thereto, which amounts to a parting with dominion and
not mere physical possession over the subject matter of the gift.
Further, where a donor’s chattel is already in possession of another, although
not for the purpose of an intended gift, an effectual oral gift of it to that other
person may be made without any further delivery to him: Woodard v
Woodard [1995] 3 All ER 980, CA.
A valid donatio mortis causa does not vest in the deceased’s personal
representatives, and so does not require any act by them to constitute a title in
the donee. Where the subject of the gift has not yet been completely vested in
a donee, he is entitled to call upon the personal representatives to lend him
their name or to give him their endorsement in order that he may complete the
title: Re Richards, Jones v Rebbeck [1921] Ch 513.
Priorities
Assignment of choses in action
Conversion and reconversion
Election
Satisfaction
Tutorial 2 hours
1. **Earl of Oxford’s Case (1615) 1 Ch Rep 1,

faculty of law
2. **Lord Dudley v Lady Dudley (1705) Prec Ch 241, 244
3. *Lodge v National Union Investment
Reading
Alastair Hudson: Equity and Trusts (6th ed.: Routledge-Cavendish, 2009 pp. 24-45
WEEKs THREE & FOUR
3. EQUITABLE REMEDIES
RESCISSION
Nature and Effect
1. Clough v. London & Northwestern Rly Co (1871) L.R. & Exch. 26

2. Abraham Steamship Co. v. Westville Shipping Co. [1923] A.C. 773
Grounds
a. Mistake
i. Common Mistake
1. Bell v. Lever Bros [1932] A. C. 161 H.L
2. Solle v. Butcher [1950] 1 KB. 671. C.A
ii. Unilateral Mistake

1. Cundy v. Lindsay (1878) 3 App. Cas 459
2. Phillips v. Brooks Ltd. [1919]2 KB 243
3. Lewis v. Averay [1971] 3 ALL E.R. 907
4. Ingram v. Little [1960] 3 ALL. E.R. 332
5. Requirement that Mistake Must Be Operative

Cundy v. Lindsay (1878) 3 App. Cas 459
Smith v. Hughes (1871) L.R.6Q.B.597
faculty of law
Raffles v. Wichelhaus (1864) 2H & C906
6. Mistake in Equity (Mitigating Role)

Smith v. Hughes (1871) L.R.6Q.B.597
Bell v. Lever Bros
Cundy v. Lindsay (1878) 3 App. Cas 459
Types
i. Mistake of Fact
Non Fundamental Mistake
1. Colyer v. Clay (1843) 7 Beav 188
ii. Mistake as to Value

1. Campbell v. Edwards [1976] 1 WLR 403
2. Re Garnett (1885) 21 Ch.D.1.
iii. Mistake of Law

1. Solle v. Butcher [1950] 1 KB. 671. C.A
2. Cooper v. Phibbs (1867) L.R. 2H.L. 149
3. Alcard v. Walker [1896]2 Ch. 369
b. Misrepresentation
i. Innocent
1. Derry v. Peek [1896]14 App Cas 337
2. Ajayi v. Eberu (1974) 10 ALR Comm 155
ii. Fraudulent
1. Derry v. Peek
2. Peek v. Gurner
c. Constructive Fraud
1. Johnson v. Maja (1951) 13 W.A.C.A. 290.
2. Wingrove v. Wingrove (1855) 11 P.O.91
3. William v. Franklin [1961] 1 ALL. ALR. 128
d. Non- Disclosure of Material Facts

1. Century Insurance Co. Ltd. V. Atumiya 1966 (2) ALR Comm. 314.

faculty of law
LOSS OF RIGHT TO RESCIND
a. Affirmation
1. Ajayi v. Eberu (1974) 10 ALR Comm 155
2. Taiwo v. Princewell [1961] 1 ALL NLR 240
b. Restituo in Integrum Impossible

1. Uganda Steel Corp. [1984] HLB 42
2. Blackburn v. Smith (1848) 2 EX 783
3. Erlanger v. New Sombrero Phosphate Co.
c. Complete Contract
1. Bada v. The Premier Thrift Society (1938) 14 NLR 20
1. Wilde v. Gibson (1848) 1 HLC 605: 9ER
Rescission summary
A good answer shall define what rescission is. (Un-making a
contract)
Give brief facts of the case Long v Lloyd [1958] 1 WLR 753,
The claimant was told by the seller that a lorry was in excellent condition,
but shortly after the sale it broke down twice. The court refused to grant
rescission because it said the claimant should have rejected the lorry when it
first broke down; he only did so after the second breakdown, which was too
late. By persevering with the lorry, he had indicated his willingness to
continue with the contract. The court’s reasoning was similar to the thinking
behind the loss of the right to reject in relation to sale of goods contracts;
just as a party to a contract can lose the right to reject if it delays too long,
so a party can lose the right to rescission if it fails to bring an action for
misrepresentation within a reasonable time of the contract being entered
into.
It is an equitable remedy and hence discretionary.
 A rescinded contract is terminated from the beging , as though the
contract never existed and all parties are brought back to the position
they were before entering into the contract.
 Resitutio in integrum is a fundamental feature of the remedy of
rescission. Where this is not possible the right can’t be validly exercised.
 The full effect of Rescission is to treat the contract as though it never
existed.
A STUDENT MUST BE ABLE TO APPRECIATE THESE CIRCUMSTANCES:

- Under what circumstances is the equitable remedy available?
How does the right to rescind a contract arise.
Grounds for Rescission

faculty of law
- Mistake ( Solle v. Butcher (1950) 1 KB 671, 693)
- Misrepresentation ( Fraudulent, Innocent and constructive)
Derry v. Peek (1889) 14 App. Cas. 337
Peek v. Gurney
- Misdescription
What are the bars to rescission? / Loss of the right to Rescind

The right to rescind is not indefeasible and therefore it can be lost
in certain circumstances.
- Affirmation of the contract and Acquiescence
- Impossibility of Restitutio in Integrum( Erlanger v New sombrero Phosphate)
- Completion of Contract (Seddon v. North Eastern Salt Co. (1905) 1 Ch)
- Acquisition of rights by 3rd parties (Clough v. London & North Western Railway
Co (1871) 7 Ex Ch 26, 35
RECTIFICATION
1. Lavell Christmas Ltd v. Wall (1911) 104 L.T. 85

2. White v. White (1872) L.R. 15 Eq. 247 – Conveyance Documents
3. Murray v. Parker (1854) 19 Beav. 305 – Leasehold Agreements
4. Welman v Welman (1880) 15 Ch. D.570 – Marriage Settlements
5. Roberts & Co.v. LCC [1961] Ch. 555 – Building Contracts
6. In the Matter of Kasiita Estates Ltd [1982]HCB 107 – Company Register
7. Collins v Elstone (1893) P.1 and p.4 – Unrectifiable Documents (Will)
8. Scott v. Scott (1940) Ch. 794, 801 – Unrectifiable Docs (Memorandum and
Articles of Association)
Rectification Limited to Harmonisation of Written Document with Intention of

Parties
1. Mackenzie v. Coulson (1869) L.R. 8 Eq. 368

2. Rose Ltd, v. W,H. Pim Ltd [1953 2 ALL ER. 739
3. Tucker v. Bennet (1888) Ch. 1, 16
Grounds for Rectification
i. Existence of Finally Concluded Contract

1. Mackenzie v. Coulson (1869) L.R. 8 Eq. 368
2. **Rose Ltd, v. W,H. Pim Ltd [1953 2 ALL ER. 739
3. Cradock v Hunt [1923] Ch. 13P

faculty of law
iii. Common Mistake
1. Murray v. Parker (1854) 19 Beav. 305
2. **Rose v. Pim
iv. Continuing Intention of Parties

1. Tucker v. Bennet (1888) Ch. 1, 16
2. Murray v. Parker
3. Whiteside v. Whiteside [1950] Ch. 65, 76
v. Burden of Proof
1. **Murray v. Parker
vi. Mistake of Law

2. *Napier v. Williams [1911]1 Ch. 361
vii. Unilateral Mistake

1. Pagett v. Marshall (1885) 28 Ch. D. 255
Refusal of Remedy of Rectification
i. Contract Incapable of Performance

1. **Smith v. Jones [1954]2 ALL ER. 823
2. Borrowman v. Russel (1864) 16 CBNS 58
ii. Convenient Way of Reconciling Agreement with Written Instrument

2. Wilson v Wilson (1854) H.L. Cas 40
iii. Contract Fully Performed

1. Caird v. Moss (1886) 33 Ch. D. 22
iv. Laches & Acquiescence

1. Fredensen v. Rothschild [1941] 1 ALL E.R. 430 (30yrs)
2. Beale v Kyte [1907] 1 Ch. 564. 566
2. DELIVERY UP AND CANCELLATION OF DOCUMENTS

1. Hoore v. Bremridge (1872) 8 Ch. App. 22 - Rationale
2. Gray v. Mathias (1800) 5 Ves 28 – Rationale
3. Underhill v. Horwood (1804) 10 Ves. 209 – Rationale
4. Wynne v. Callander (1826) 1 Russ 293 – Documents to be Delivered up
5. Peake v. Highfield 1 Russ 559 – Documents to be Delivered Up
6. Bromley v Holland (1802) 7 Ves.3 – Documents to be Delivered Up
faculty of law
7. Booking v. Maudslay, son & Field – Requirements for Delivery Up
8. **Lodge v. National Union Investment Co. Ltd [1907] 1 Ch. 300; [1904 – 7] ALL E.R
Rep 333
9. *Kasunmu v Baba-Egbe [1956] A.C 539. 549
a. RECTIFICATION Summary
Rectification is an equitable remedy intended to correct a verbal error in a written
instrument so as to make it conform to the previously agreed intentions of the
parties.
Sometimes there is a variance between the agreed intention of the parties to a
transaction and the document or instrument that is intended to give expression to
the agreed intention
In such cases the equitable remedy of rectification is granted with a sole purpose
of making the written instrument conform to the intentions of the parties
Lavell Christmas Ltd v. Wall (1911) 104 L.T 85
Welman v. Welman (1880) 15 Ch D 570, 578-579
Grounds for Rectification

A fundamental requirement for the grant of the remedy is the Existence of a
finally concluded contract.
Mackenzie v. Coulson
Rose v. Pim
 Common Mistake ( A common mistake that will sustain an action for rectification
must be of facts and not law)
 Continuing Intention of the Parties
The burden of proof is a high standard one and is on the party seeking rectification
The general rule is that rectification will not be granted for a unilateral mistake.
(Exception is only where one of the parties is mistaken and the other is fraudulent.
Equity will not allow a person to profit from his fraud.)
In certain cases of unilateral mistake a defendant resisting rectification may be put
on his election, either submit to rectification or to have the agreement annulled.
A will is not subject to rectification unless there is fraud
Court has no justification to rectify articles of association
Scott v. Scott (1940) Ch. 794
When the Remedy will be refused

 Where the contract is no longer capable of performance
 Where the contract has been fully and wholly performed
RESTITUTION

faculty of law
TRACING
Tutorial 2 hours
Examine the relevance of both cases to equitable remedies. Saloman v A Saloman & Co
Ltd [1897] AC 22 and Westdeutsche Landesbank v Islington [1996] 2 All E.R. 961, 999).
WEEK FIVE
3. Doctrines of EQUITY
1. Doctrine of Election
1. **Re Edwards [1958] Ch. 168
a. Requirements for Election

Property of another is disposed
1. *Cooper v. Cooper (1874) l.R. 7 H.K.53 – Intention to Dispose of Property

2. Re Harris [1909] 2 Ch. 206 – Intention to Dispose of Property
3. Re Lord Cheshem (1886) 31 Ch. D. 466
4. Re Dicey [1957] Ch. 145 – Property Capable of Alienation
5. Brown v. Gregson [1920] A.C. 860 – Property Capable of Alienation
6. Re Nash [1910] 1 Ch. 1 – Void Disposition
7. Re Oliver’s Settlement [1905] 1 Ch. 191, 197 – Void Disposition
8. Re Nash – Appointment to Object with Proviso in favour of Non-Object
b. Effects of Election
1. Pickersgill v. Rodger (1875) 5 Ch. D. 163
2. Re Booth [1906] 2 Ch. 321
3. Re Hancock [1905] 1 Ch. 16
1. Doctrine of Satisfaction
3.0. DOCTRINE OF SATISFACTION.
Also, in consideration is the doctrine of Satisfaction defined as “the donation of
a thing with the intention that it is to be taken wholly or in part in
extinguishment of some prior claim of the donee.” per Lord Romilly in
Chichester-v-Coventry[xiii]thus where W is under an obligation to give X
something and W gives X something else, there may be a presumption that W’s
gift was made with the intention of satisfying his obligation to X.
This doctrine is based on the maxim “equity imputes an intention to fulfill an
obligation” Satisfaction takes several forms first in consideration is
faculty of law
satisfaction of debts by legacies[xiv],
the general rule is that equity imputes to the donor an intention to give the
legacy in
satisfaction of the debt. Thus in the case of Talbot v Duke of Shrewsbury [xv]
Lord Trevor stated that "if one being indebted to another a sum of money does
by his will give him a sum of money as great as or greater than the debt without
taking any notice at all of the debt, this shall never the less be in satisfaction of
the debt, so that he shall not take both the debt and legacy.
In this case the legatee has a choice to either to take the legacy and forego the
debt or to forego the legacy and insist on his contracted debt. However, it
should be noted that there are circumstances in which intention to fulfill an
obligation (satisfaction) may not be presumed, hence limiting the application of
the doctrine in Uganda. Fore example where the debt was contracted after the
will, where the legacy is less than the debt where the legacy and the debt are of
different nature and where the legacy is not as beneficial to the creditor as the
debt.
Also, sec 164 of the succession Act has limited the application of this doctrine
as far as this aspect of satisfaction is concerned in Uganda.
"where a debtor bequeaths a legacy to his creditors and it does not appear
from the will
that the legacy was is meant as satisfaction of the debt, the creditor shall be
entitled to both the as well as to the amount of the debt"
Secondly Satisfaction of portion debts by legacies[xvi] the general rule is that

equity leans against double portions; hence equity will provide for the
satisfaction of portion debts by legacies to ensure equal division of the parents
property among the children[xvii] hence where the legacy is equal to the
promised portion or exceeds it satisfaction of the portion debt is presumed.
In Uganda however this is limited under Sec 165 of the succession
Act "where a father…does not intimate by the will that the legacy is meant as a
satisfaction of the portion, the child shall be entitled to receive the legacy as
well as the portion ".
Under satisfaction of a portion debt by a portion Lord Selborne[xviii] stated
"where a father…gives a legacy and later makes a gift in the child's favour,
there is presumption that the gift was either wholly or in part in a substitute for
or an ademption of the legacy. "
lastly is the satisfaction of legacies by legacies.
However, the doctrine will only apply if the legacy is in a sum as great as or
greater than the debt or if there is a direction to pay debts[xix] (Satisfaction of
debts by legacies)
The doctrine of satisfaction has been incorporated in Uganda’s legal scene and
can be traced in Sections 164 to 166 of the Succession Act. Section 164
faculty of law
provides that where a debtor bequeaths a legacy to his or her creditor, and it
does not appear from the will that the legacy is meant as satisfaction of the
debt the creditor shall be entitled to the legacy as well as well as to the amount
of the debt. This means that a testator must show his intention to extinguish
the debt which is in conformity with the holding in Hammond –v-Smith[xx]. The
Judicature Act section 14(2) (b)[xxi], Magistrates Court Act section 11[xxii] also
provide for the application of the doctrine of Satisfaction in Uganda’s legal
scene. Its practicability is however very insignificant.
a. Satisfaction of Debts by Legacies
i. General Rule
1. **Re Hall [1918] 1 Ch. 562
2. Thynne v. Glengall (1848) 2 HL. C. 131
ii. Exceptions
1. **Rawlins v. Powel (1718) 1 PWms 297 - Existence of Debt before a Will
2. Horlock v. Wiggins (1888) 3 a Ch. D 142 - Existence of Debt before a Will
3. Bradshaw v Huish (1889) 43 Ch. D. 260 – Direction to Pay Debt in Will
4. Barret v. Beckford (1750) 1 Ves. Sen 519 – Legacy equal to Debt
5. *Re Hawes [1951] 2 HLL E.R. 928 - Legacy equal to Debt
b. Satisfaction of Portion of Debts by Legacies: Rule against Double

Portions
1. **Re Hayward [1957] Ch. 528

2. *Taylor v. Taylor (1875) L.R. 20 Eq. 155
3. Hoskins v. Hoskins (1706) Prec Ch. 263
4. Pym v Lockyer (1841) 5 Myl & Cr. 29 – To whom Does Satisfaction Apply?
5. Ojule v. Okoya [1972] 1 AL N.L.R. (1) 385- To whom Does Satisfaction Apply?
6. Warren v. Warren (1783) 1 Brocc. – Strength of Presumption
7. Re Tussaud’s Estate (1878) 9 Ch. D 363 - Strength of Presumption
8. Re Shields [1912] 1 Ch. 291- Strength of Presumption
c. Satisfaction of Portion Debts by Portions

d. Ademption of Legacies by Portion
Doctrine of Performance
1. *Sowden v. Sowden (1785) 1 Cox Eq. 165, 166
2. *Lord Lechmere v. Lady Lechmere (1733) 3 PWms 211- Covenants in Marriage
settlements
3. Blandy v. Widmore (1716) 1 PWms 323 – Intestacy

faculty of law
4.0 DOCTRINE OF PERFOMANCE

Performance is yet another doctrine of Equity which is to the effect that where a
person
covenants to perform a particular act and later performs an act “which may be
converted to a
completion of this covenant”, it shall be supposed that he meant to complete it per
Kenyon
MR, in Sowden v Sowden.[xxiii] This doctrine is based on the maxim that “Equity
imputes
an intention to fulfill an obligation”[xxiv].
Performance may take the form of a covenant to purchase and settle land, or a
covenant to
leave money; it also applies to covenants in marriage settlements to lay out
money, on the
purchase of land to be held on trust of the settlement. The doctrine also applies to
situations
where there is a covenant to pay money to trustees to be used by them for the
purchase of
land. In this case, the covenanter will simply be regarded as performing the
covenant by
buying land himself. The doctrine also applies where the covenant is to settle
property of a
certain value.
The doctrine of performance in our legal scene today has a great effect in
succession
matters; wills are construed literally through the wording as well as the
circumstances
surrounding the making. The other factors that reflect performance in succession
matters
are the onerous bequests, contingent bequests and conditional bequests contained
in Secs
109-123 of the succession Act. . How ever the fact that there is limited case law
shows that
the doctrine is of little practical relevance in Uganda's legal scene.
Equitable Defences
Promissory Estoppel
Proprietary Estoppel

faculty of law
Laches and Acquiescence
Tutorial 2 hours
Coursework 2
Reading
D.J Bakibinga, Equity and Trusts LawAfrica, chapter 1
A J Oakley, Parker and Mellows: The Modern Law of Trusts, 9th Edition, Sweet & Maxwell
Chap.
WEEK SIX
9. INJUNCTIONS
Definitions:
A good answer shall define what injunctions are and also state the conditions under
which they are granted.
 An order of court that requires a person to refrain from doing or compels them to
do a certain act.
 Aim of an injunction is to preserve the status quo
 Injunctions are prohibitive or mandatory in nature
 Injunctions remain in force until they are discharged by the court
 Injunctive relief is not a matter of right but discretionary
punishable with a finefi ne or imprisonment for contempt of court in the event of
noncompliance.
Previously only the chancery court in Britain could grant an injunction.

faculty of law
In 1854, the common law procedure act 1854, gave common law courts power to grant
an injunction in some cases.
The jurisdiction to grant injunctions in Uganda is now governed by the judicature cap 13
**Common Law Procedure Act, 1854 (U.K.)
Judicature Act Cap 12, s. 38
Judicature Act s.33 &38 (1)1 (Grants powers to the High Court to issue injunctions)
33. General provisions as to remedies.
The High Court shall, in the exercise of the jurisdiction vested in it by the Constitution,
this Act or any written law, grant absolutely or on such terms and conditions as it thinks
just, all such remedies as any of the parties to a cause or matter is entitled to in respect
of any legal or equitable claim properly brought before it, so that as far as possible all
matters in controversy between the parties may be completely and finally determined
and all multiplicities of legal proceedings concerning any of those matters avoided.
Furthermore, the Magistrate’s Court Act gives power to Magistrates court to grant this
remedy based on the extent of their power in granting it.
Civil Procedure Act s. 98
ELT Kiyimba Kagwa v. Haji Abdu Nasser Katende [1985] HCB 43

- Injunctions used to be framed in a negative form.
- Injunctions are intended to protect rights. The plaintiff must have locus standi.
(Court only grants injunctions to a private individual to support a legal right)
Kiyimba Kagwa v. Haji Abdu Nasser Katende [1985] HCB 43

The applicant/plaintiff was the registered proprietor of the suit premises, having been
granted to leases on the land. Although they had expired, the title had not been
cancelled. The applicant /plaintiff applied for renewal of his lease and was likely to
succeed.
In the meantime, the defendant claimed that he had been offered lease for five years by
the Uganda Land Commission. The development plans of the Defendant were different
from those of the Plaintiff.
The grounds for the grant of a temporary injunction were clearly set out in this case by
His Lordship Odoki J (as he then was,) to include the following: -
(i) The applicant must show a prima facie case with a probability of success.
(ii) Such injunction will not normally be grated unless the applicant might
otherwise suffer irreparable injury which would not adequately be
compensated for by damages.
(iii) Thirdly, if the Court is in doubt, it will decide the matter on a balance of
probabilities.
Court observed that: -
“The granting of a temporary injunction is an exercise of judicial discretion and the
purpose of granting it is to preserve matters in status quo until the question to be
investigated in the suit can finally be disposed of”.
1
‘Judicature Act | Uganda Legal Information Institute’ <https://ulii.org/ug/legislation/consolidated-act/13> accessed 7 October
2019.
faculty of law
Adam v Duke
(There must be a violation, real and substantial violation of some right before an
injunction is granted)
Article 50 (2) widens the category of persons with locus standi

Any person or organisation may bring an action against the violation of another person’s
or group’s human rights
- Rights to be protected must be certain (Karama v. Aselemi)
- A right to be protected by an injunction must be one known to the law and equity
- Mandatory injunctions are issued ordering an act to be undone.
- Mandatory Injunctions are difficult to enforce and supervise thus rarely granted
Beddow v. Beddow (1878) 9 Ch. D. 89, 93 Per Jessel, M.R

what is right or just must be decided, not by the caprice of the judge, but according to
sufficient legal reasons or on settled legal principle
Day v. Brownrigg (1878) 10 Ch. D, 294, 301

Infringement of a legal or equitable right
the plaintiff lived in a house that, for some sixty years, had been called ‘Ashford Lodge’.
The defendant’s adjoining house had been known for some forty years as ‘Ashford Villa’.
The plaintiff was held to have no claim to an injunction when the defendant altered the
name of his house to ‘Ashford Lodge’, notwithstanding the resulting inconvenience. Th e
plaintiff had
suffered no legal injury because there is no right of property in the name of a house, or,
it may be added, of a political party.
Again, a husband has no legal right enforceable at law or in equity to stop his wife
having, or a registered medical practitioner performing, a legal abortion and,
accordingly, he cannot obtain an injunction for this purpose
Types of Injunctions
There are several different types of injunctions. An injunction may be

‘Prohibitory’, i.e. forbidding the performance of a particular act; or ‘mandatory’, i.e.
ordering the defendant to do a particular act.
Injunctions could also be classified as ‘perpetual’, i.e. following the final determination of
the rights of the parties or, until recently, as ‘interlocutory’ (now referred to as ‘interim’),
i.e. pending the determination of rights at the trial.
In addition, a ‘quia timet’ (literally, ‘because he fears’) injunction could be obtained
where the claimant fears that damage may occur in the future.2
Injunctions, like all equitable remedies, are discretionary, but the court will exercise its
discretion according to well established equitable principles.
2
Mohamed Ramjohn, Unlocking Equity and Trusts (Fifth edition, Routledge 2015).
faculty of law
1) Prohibitory & Mandatory Injunctions
Prohibitory injunctions forbid the doing of a specified act, such as ordering the
defendant not to build an extension to his property.
Mandatory injunctions have the effect of ordering a defendant to take positive steps to
perform a particular act, such as the demolition of an unauthorised extension of his
property.
Since the decision in Jackson v Normandy Brick Co, however, it has been the rule that if
an injunction is mandatory in substance, it should be made in direct mandatory form
**Sky Petroleum Ltd v V. I.P. Petroleum Ltd. (1974) 1 WLR 576

Concerning: grant of an injunction, which would amount to specific performance, where
damages would not be an adequate remedy.
The court ordered an injunction restraining the defendant from withholding supplies of
petrol. The effect of this was specific performance of the contract.
Facts;
During a petrol shortage the defendants terminated their contract with the claimants to
supply them with petrol. Where, although it is theoretically possible to use the award of
damages to buy a replacement, in practical terms this is almost impossible.
In this case, the defendant and the claimant had contracted for the sale and purchase of
petrol. Petrol prices increased significantly during the 1970s and therefore the defendant
sought to terminate the contract, because the price at which it had agreed to sell petrol
to the claimant was significantly lower than the price that would have been paid by a
new buyer. Accordingly, the claimant sought specific performance in order to compel
the defendant to sell at the agreed price. In principle, it would have been possible for the
claimant to obtain petrol from another supplier. However, because the situation at
the time was such that petrol was scarce and prices exceptionally high, Goulding J
considered
that it would be appropriate for him to grant an order of specific performance. hence
There was a petrol shortage at the time and so, if only damages had been awarded to
the claimants, they would have been unlikely to obtain supplies elsewhere. As there
were no alternative supply damages would not be adequate and the claimant would be
put out of business. An injunction was granted as specific performance would also have
been
available due to the inadequacy of damages.
I. Jackson v. Normandy Brick Co. (1899) 1 Ch. 438

II. A.G. v. Colchester Corporation (1955) 2 Q.B. 207
Pride of Derby Angling Association v. British Celanese Co. [1953] Ch. 149
A Prohibitory injunction

faculty of law
the owners of a fishery sought an injunction to stop the defendants from discharging
effluent and sewage into the river Derwent, which had killed all the fish and destroyed
the fishery.
An injunction was granted.
The primacy of the injunction was reasserted by Lord Evershed MR:
It is, I think, well settled that if A proves that his proprietary rights are being wrongfully
interfered with by B, and that B intends to continue his wrong, then A is prima facie
entitled to an injunction, and he will be deprived of that remedy only if special
circumstances exist, including the circumstance that damages are an adequate remedy
for the wrong that he has suffered.
it must be proven that a clear probability of grave damage will occur to the applicant if
such an injunction were not granted, and that, under such circumstances, damages
would be inadequate
Mandatory Injunctions. Summary

Judicature Act s.38 (1) (Grants powers to the High Court to issue injunctions)
- Injunctions used to be framed in a negative form.
- Injunctions are intended to protect rights. The plaintiff must have locus standi.
(Court only grants injunctions to a private individual to support a legal right)
Adam v Duke (There must be a violation, real and substantial violation of some right
before an injunction is granted)
Article 50 (2) widens the category of persons with locus standi
- Rights to be protected must be certain (Karama v. Aselemi)
- A right to be protected by an injunction must be one known to the law and equity
- Mandatory injunctions are issued ordering an act to be undone.
- Mandatory Injunctions are difficult to enforce and supervise thus rarely granted
Two types of mandatory injunctions
- Restorative (Requiring the defendant to undo a wrongful act)
- Mandatory (Compelling the defendant to carry out a positive obligation)
An injunction is rarely given in cases involving continuous performance of a positive act.
(Dowry Boulton Paul Ltd v. Wolverhampton Corporation).
- It is not necessary for plaintiff to show grave damage or inconvenience before a
mandatory injunction can be granted. (kelsen v. Imperial Tobacco Company Ltd)
- Court may consider the issue of hardship to the defendant in granting an
injunction.
Suspension of injunctions.
Similarity between mandatory injunctions and specific performance:

- Both are equitable remedies
- Both true to the principle equity shall not act in vain
- Both are discretionary remedies
- Both remedies can only be ordered where common law remedies are inadequate
- An order of injunction may lead to specific performance (Sky Petroleum Ltd v. V.I.P
Petroleum Ltd)

faculty of law
2) Perpetual & Interlocutory Injunctions
a perpetual injunction one that aims at settling a dispute between parties. They are
however not necessarily perpetual as held in the case of Babumba V Bunju.
The interlocutory injunction on the other hand “is given until the commencement of the
trial.” The rational for its application and subsequent execution is, as shown the case of
Musoke V Kezaala to be; that in the midst of the delayed trial the plaintiff may suffer
loss if the defendant dealt with the matter in dispute.
Perpetual
It is awarded to finally settle the existing dispute between the parties.
I. Odunuwa v. Uduaga (1952) 14. W.A.C.A. 187
Babumba v. Bunju [1988-90] HCB 119

Plaintiff entered into a lease with the respondent’s husband for 49 years for residential
purposes at a yearly rent of 400 Shs. To be paid in advance on the 1st day of march
every year.
The respondent breached the agreement.
Court was satisfied that the applicants would suffer irreparable loss in view of the
scarcity of accommodation in Kampala.
A permanent injunction would decide the whole case. It was held that a temporary
injunction which settles the dispute would not be granted.
Interlocutory
The object of an interlocutory injunction is to preserve the status quo until the trial of an
action. They are usually Prohibitory and may be applied for ex parte (i.e. without notice
to the other side).
- Are given until the commencement of the trial
- Plaintiff may realize there may be delay before the suit is heard and may suffer
damages or losses in the process.
- Hence, they are given to restrain the respondents from dealing with the subject
matter of the dispute until the case is determined.
 Jones v Pacaya Rubber & Produce Co. [1911] 1 K.B. 455
Musoke v. Kezaala [1987] HCB 81

The applicant applied for a temporary injunction to restrain the defendants from carrying
on a construction on a plot of land in disregard of a pending part heard suit between
them. Counsel for the plaintiff argued that carrying on with the construction work would
make the outcome of the part heard suit meaningless.
3) Ex-parte Injunctions
Ex-parte injunctions also help one who cannot wait for motions to be read. Thus, it is
applied until “when the application on motion is heard” but not after. Where something
is urgent and you can’t wait.
faculty of law
I. **Civil Procedure Rules (SI 71-1)
**Yoseri Mugenyi v. Wandera [1978] HCB 78

This was an application seeking an order to restrain the respondent from erecting
barriers obstructing the applicant’s road. The applicant did not inform court which
service the respondent was dispensed with. The applicant only stated that the
respondent was continuing to erect fences, barriers and other barricades to completely
block the road. The applicant did not impress upon court that the election of barriers and
the damage that would occur that therefrom could not be compensated by damages or
cause irreparable damage.
It was held that it would not help where barriers were already fixed, for the whole
purpose of injunctions is to preserve matters in status quo until dispute is investigated
and disposed off. The requirement to give notice to the opposing party was mandatory
and the burden of satisfying court was on the applicant.
II. Waswa v. Kakoza [1987] HCB 79
Law was ammednded under civil procedure rules,..it requires everyone to be informed.
4) Interim Injunctions
Interim injunctions on the other hand stop the defendant from acting in a certain way up
to the commencement of a given date. A perpetual injunction will be granted at the final
hearing, whereas an interim injunction is awarded at an early stage of proceedings in
order to preserve a position before the full trial.
 CPR
 Fenwick v East London RY (1875) L.R. 20 Eq
There are four main types of interim injunction:

􀁳 interim Prohibitory injunction
􀁳 interim mandatory injunction
􀁳 freezing order
􀁳 search order.
The claimant is normally required to give an undertaking in damages if the claimant

loses at trial or if the injunction is granted without good cause.
The undertaking is to the court not to the defendant and hence breach is contempt of
court (Hussain v Hussain (1986)).
5) Quia Timet Injunction

‘quia timet’ (literally, ‘because he fears’) injunction could be obtained where the
claimant fears that damage may occur in the future.
It is granted to restrain a threatened apprehended injury to the claimant’s rights even
though no injury has yet occurred.
It is issued where the claimant alleges that the defendant has threatened to infringe the
claimant’s rights without the actual infringement taking place, such as the threat from
the defendant to trespass on the claimant’s land.

faculty of law
Fletcher v. Bealley (1885) 28 Ch. D. 688
Quia timet is an injunction to restrain wrongful acts which are threatened or imminent
but have not yet commenced.
Fletcher v. Bealey (1884) [28 Ch.D. 688 at p. 698] stated the necessary conditions for
equity courts to properly grant an injunction in such cases:
i. proof of imminent danger;
ii. proof that the threatened injury will be practically irreparable; and
iii. proof that whenever the injurious circumstances ensue, it will be impossible to
protect plaintiff’s interests, if relief is denied.
1. Principles applicable to Issue of Injunctions
General Principles
a. Injunction is a discretionary remedy and Remedy in Personam
I. Aragba v. Elegba [1986] 1 NWLR 333
II. Judicature Act
b. Non-Compliance with Injunction

Contempt of court. Even the person who aids and baits another
I. Arrow (Automation) Ltd v. Rex Chainbelt Inc [1971] WLR 1678
c. Government Proceedings
Its rarely issued against the government but can be awarded towards statutory bodies
like KCCA,police etc
II. The Governmnet Proceedings Act (Cap 77) s. 14.
III. Ostraco v. AG (Court of Appeal)
IV. ULS v. AG (Const. App 7/2003)
V. James Rwanyarare & Ors v. AG (Const App 2/2002
d. Protection of Rights
Injunctions seek to protect rights.
Locus Standi
VI. CPR O.41 Rule 1
VII. Hoffman – La Roche (F) & Co. v. Sec of State for Trade & Industry [1975] A.C. 295
Perpetual injuctions ..principles for awarding

The prohibitory
Inadequency of damages-money is unquantifiable,
Actual loss is immaterial
Action will be useless if the infringement complained by is temporary,occasional
or trivial. Equity does not act in vain
If someone undertakes not to do the act complained of,its not awarded
Armstrong cas….
Mandatory
Guided by same principles but are difficult to supervise
faculty of law
Not given involving continuous performance
It is unnecessary to show damage or inconvenience kelsens case
Court will consider the hardship likely to be faced by the defendant.
Suspension of injuctions
When it will be hard for the defendant to comply with the injuction at once
Interlocutory injuctions
They are given to maintain the status quo.
Can be discontinued if court discovers its based on wrong application of law
Complete relief
Equity does not act in vain…will not be granted if its of no effect
There has to be a prima fasie case…a strong case against defendant

Ucb v general parts Uganda ltb
Substancial injury if the injuction is not awarded. Or irreparable injury
Balance of convenience
Undertaking and conditions
Quia timet
s.38 of the judicature act
it can be any of the other forms
Redland bricks ltd v morris
Strong probability of future infrigemnt
Future infrigementis imminent
Substancial and iireparable damage
Damage will be of a more serious nature
Exparte proceedings
Order 37 r 3 CPR
2. Defences to Injunctions
a. Delay
Equity aids the vigilant. Plaintiff must act quickly
b. Acquiescence
c. Hardship
d. Conduct of the Plaintiff
Equity will come with clean hands…related to subject matter not conduct.
e. equity will not act in vain
f. adequency of common law remedies.
3. Damages In Lieu of Injunction

Damages in substitution of an injuction
4. Injunctions in Particular Situations
a. To Restrain Breach of a Contract
b. To Restrain Breach of Trust
c. To Restrain Commission or Continuation of a Tort
faculty of law
d. To Restrain a Company from Acting Ultra Vires
e. The Mareva Injunction
f. The Anton Piller Injunction
Additionally, an injunction might be awarded with or without notice. An injunction will be

‘with’ notice, where it is awarded after a hearing of both sides of the argument. In
contrast, an injunction without notice will be awarded where only the applicant is
present.
WEEK SEVEN
10. SPECIFIC PERFORMANCE

11. Nature and Extent of the Remedy
3 Conditions to be satisfied for its grant
a. Inadequacy of Common law remedies
b. Discretionary
c. Enforceability
12. Contract must be enforceable
Doctrine of Part Performance
Specific Performance in particular situations
a. Contracts for sale of land

b. Contracts for sale of personal property
c. Contracts to pay Money
d. Contracts requiring supervision
3 Defences to Specific Performance
a. Mistake and Misrepresentation

b. Conduct of the Plaintiff
c. Laches & Acquiescence
d. Hardship
e. Where Subject matter is different in Substance
f. Misdescription of Subject Matter
g. Public Policy
Specific Performance (SP) summary

- Specific Performance is an order of court compelling a defendant to do what they
had promised to do.
faculty of law
- SP is only applicable to enforce positive contractual obligations. (There must be a
valid contract)
- The appropriate law remedies available to the plaintiff must be inadequate or non-
existent. E.g. SP will be ordered where an award of damages is not adequate
- SP is a remedy in Personam
- SP will not be granted to volunteers (The remedy is not available to a party
that has not furnished consideration)
- SP will not be granted in circumstances where the decree will require
constant supervision (Exceptions Beswick v. Beswick)
- Contracts for personal services shall not be specifically enforced (Lumley
v. Wagner)
- Court must be satisfied that the remedy granted is enforceable. Equity
does not act in vain.
Jones v. Lipman
Penn v. Lord Baltmore
Cohen v. Roche (1927) 1 KB 169
WEEK EIGHT
TUTORIALS
THE LAW OF TRUSTS

WEEK NINE
Trust
This is a relationship which arises when property is vested in a person (or persons) called
the trustees, which those trustees are obliged to hold for the benefit of other persons
called the cestuis que trust or beneficiaries’
(Hanbury and Martin (2009): 49).
The creator of the trust which is created by the settlor transferring property to the
trustees to hold on trust or alternatively declaring that they are the trustees.
If the trust is created by will then the trust is created by the testator.
Beneficiaries are those for whom the property is held on trust and therefore they have
the
equitable interest in the property.
Testator – A person who makes a valid will that disposes of his property after his
death. The female equivalent is a testatrix.
Will – A formal document executed under the Wills Act 1837 (as amended) that
distributes property on the death of the testator or testatrix.
Executor – A person appointed by will and acts as the living representative of the
deceased. He has fiduciary duties imposed on him akin to a trustee.
Legacy – Personal property that has been distributed under a will. Real property
(land) distributed under a will is referred to as a ‘devise’.

faculty of law
The Concept of a Trust
A trust has the following characteristics—

(a) the assets constitute a separate fund and are not part of the trustee’s own estate;
(b) title to the trust assets stands in the name of the trustee or in the name of another
person on behalf of the trustee;
(c) The trustee has the power and duty, in respect of which he is accountable, to
manage, employ or dispose of the assets in accordance with the terms of the trust and
the special duties imposed upon him by law.
Bona fi de transferee of the legal estate for value without notice is an innocent
party who acquires the legal title to property without notice of the existence of a
trust.This person’s estate defeats the interest of the beneficiary under a trust.
The equitable interest of the beneficiaries ceases to exist where the legal estate in the
property passes to a bonafide purchaser for value of the legal estate without notice of
the trust.
Pilcher v. Rawlins (1872) l.R. 7ch. App 2

Here James LJ explained the position of the bona fi de purchaser of a legal estate;
that an equitable interest will not avail against a subsequent bona fide purchaser for
value of a legal estate without notice of the trust—‘such a purchaser’s plea of a purchase
for valuable consideration without notice is an absolute, unqualified, unanswerable
defence, and an unanswerable plea to the jurisdiction of this court’.
Distinction from Other Legal Relations
Bailment
Sales of Goods Act, Cap 82, Ss 24-26
This concept involves the delivery of goods to someone (bailee) on condition that they
will
be returned to the bailor when the purpose of the bailment is completed (e.g. the
delivery
of a suit to the dry- cleaners). If goods are delivered to a bailee they will be held for a
particular purpose after which they will be re-delivered to the bailor. Depositing goods
for repair or for safe keeping are examples of bailments. In both cases property may be
‘handed’ over and the recipient takes the property subject to certain duties and
responsibilities. There is an element of delivery in bailment. Read part 9 of the
contract Act No 7 of 2010.
The bailment transaction, unlike the trust, involves the law of contract. It is restricted to
chattels, the bailee does not acquire legal title and this arrangement was created at
common law. Hence a bailment confers possession of property to a third party for certain
defined purposes. The distinction between trust and bailment is well evidenced in the
dealings that a trustee and bailee may have with third parties. A trustee may pass the
property on to an innocent third-party purchaser. A bailee cannot pass any proprietary
title on because a bailee only holds a possessory title. Furthermore, a bailment
faculty of law
relationship can only arise with respect to personal property, whereas a trust relationship
can be created over real or personal property. (while any type of property can be made
subject to a trust, only personalty can be bailed.)
Suppose that you are going abroad for a year. You may have a painting which you do not
want to leave in the house. You therefore hand it to a friend to look after during your
absence. This will probably amount to a bailment, though it could be a trust. Everything
will depend on the location of your title, your right to exclusive possession, of the
painting.
If you vested it in a friend, then they will be a trustee of that right for you. If however,
you kept your right in yourself, handing over only the possession of the painting, the
transactions will be one of bailment, not trust. The difference between the two is crucial
for a number of reasons. One is this. If, in breach of instructions, your friend sold his title
to the painting to an innocent purchaser, it will matter a great deal whether you created
a bailment or a trust. If your friend was a bailee, then the purchaser will not acquire a
title good against you and you will be able to recover the painting’s value from the
purchaser in an action in the tort of conversion, no matter how innocent the purchaser
may have been.
The basic rule is nemo dat quod habet (no one gives what he does not have), and
since your friend did not have your title to the painting, he could not transfer it to the
purchaser. But if your friend was a trustee, the position of the purchaser would be
different; for now your friend does have the right in question and so is capable of passing
it on to third parties. You, of course, have rights under the trust, but such rights are
destroyed when the subject-matter of the trust comes into the hands of an innocent
purchaser of value
The position of a bailee is similar to that of a trustee in the sense that both are
‘entrusted’ with another’s property.
summary
 Relationship that arises where the owner of property gives permission to another
to possess it.
 Delivery of personal chattel to a bailee subject to certain conditions.
 Nemodat quod habet (no one gives what he does not have)
 Both have duties to take care of the property put in their possession
 Bailee only acquires possession and not title to property
 Bailment is common law, whereas trust is equity
 Bailment is only applicable to personal property capable of delivery whereas trust
can arise in respect of personal and real property and tangible or intangible
 Bailment is enforced by bailor who is a party to the arrangement whereas trusts
are enforceable by beneficiaries
 Bailor can lose rights to property through estoppel whereas a beneficiary can only
lose title through transfer of it to a bona fide purchaser for value without notice of
the trust.
Agency
An agency arises where a person called the agent has expressed or implied authority to
act on behalf of another called the principal and he consents to do so.
faculty of law
The essence of the agency relationship is based on an agreement between two
parties, the principal and the agent, on the understanding that the agent acts on behalf
of the principal. Thus, the agent is under the control of the principal. Whereas the
relationship between the trustee and beneficiary is different in that the trustee is not
under the control of the beneficiary, the trustee has legal title to the trust property and
the beneficiary has an equitable proprietary interest.
A trust creates proprietary rights whereas agency creates only personal rights. This will
be important if it is sought to recover money or property.
Under a trust there will be rights created against the property itself, while only personal
claims against the agent can be made. This can be particularly important if the one
against
whom the claim is being made has become bankrupt. In cases of trust a claim can be
made against the trust property whereas it is only possible to make a claim against an
agent personally, which may have little chance of success if the debts of the agent
greatly
exceed his assets.
The office of trustee and agent are similar in that both have to be performed personally
and often an agent, like a trustee, is in a fiduciary position.
There are some similarities between trustees and agents;

-The relationship of trustee and beneficiary is fiduciary in nature while that of principle
and agent is normally fiduciary but not inevitably so.
-Both trustees and agents must act personally and should not delegate their duties
-Neither of them may make un-authorized profits from their office
Summary
 In some respect, the relationship between a principal and agent is similar to the
one between a beneficiary and a trustee
 Both are accountable for any profits, agent to principal and trustee to beneficiaries
 In both the relationship is fiduciary
 A trust is proprietary
 Where agent owes money to principal it may be recovered from him personally
 If a trustee owes someone money it can’t be recovered from the trust property
 Remedy of tracing is available to a beneficiary, whereas the same is not available
to a principal
 There exists a contractual relationship between agent and principal which is not
necessary in trust
1. Bankruptcy Act, Cap 67, Companies Act, Cap 110

2. Re Hallets Estate (1880) 13 Ch. D 696
3. Lister v. Stubbs [1890] 45 Ch. D
Contract
A contract is not a trust because it creates personal, common law obligations between
the contracting parties; a contract does not, per se, create proprietary interests or
impose fiduciary obligations. Contractual obligations are enforceable under common law,
faculty of law
whilst obligations arising under a trust are enforceable in the equitable jurisdiction.
Under the doctrine of privity in contract law, third parties to the contract cannot enforce
contractual terms. However, under a trust, a third-party beneficiary holds an equitable
interest in the trust property and is entitled to enforce the terms of the trust.
In some situations, a contract can result in the imposition of fiduciary obligations and
even a trust relationship; it will depend upon the intention of the parties.
For example, if a person paying over money intends the recipient to hold that money for
the benefit of a third party, then the money will vest in the recipient, who may then be
under an equitable obligation to look after the money for the benefit of the third party.
Equity may impose a trust, so that the contracting party is bound in equity to look after
the money, and the third party acquires an equitable proprietary interest in the money.
Alternatively, if the person paying over the property allows the person receiving the
property to use the money as their own, and to be under an obligation to repay the
money at a future date with no specific obligation towards a third party, it is likely that a
contractual rather than a trust relationship will arise.
If, for example, A agrees to pay B a sum of money with the common intention that B
should invest the money for a period of one year, and at the end of the year should
return the money to A together with a half share of the profits earned by the investment,
B may hold the money on trust for A, or B may hold the money under a loan contract
with A.
In determining whether the relationship is one of trust or contract, consideration must be
given to the intention of the parties and an examination of the express terms and the
nature
and circumstances of the case is necessary.
If a trust is created in the example, then A will be able to trace his money into B’s hands
or into any property B may have purchased with that money. If a debt contract exists, A
will be limited to common law contractual remedies for the recovery of the money.
 Many of the rights held in trusts are born of contract

 A contract is a common law personal obligation resulting from an agreement
between parties
 On the other hand a trust is an equitable relation which can rise independently of
an agreement
 There are difficulties in drawing up distinctions
Settlement and covenants to settle

Where property is vested in trustees on a settlement, it is held upon a trust on the
settlement. However, if the property has not yet been transferred to the trustees but it is
simply subject to a consent to settle, the beneficiaries will only be able to enforce the
consent if they have given consideration. This is based on the principle that “equity will
not assist a volunteer”
Tweddle v. Atkinson (1861) 1 B & s. 393

At common law, the rule was that only a person who is a party to a contract can sue on
it:
Fletcher v. Fletcher (1844) 4 Hare: 67; 141 L.J.C. 66
Here, the settlor, by a voluntary deed, covenanted with trustees that if A and B (his
natural sons, at that time infants) or either of them should survive him and attain full
faculty of law
age, his personal representatives should, within twelve months of his death, pay £60,000
to the trustees on trust for A and B or such one of them as should attain the age of
twenty-one. A and B both survived the settlor, but B died without attaining full age. The
trustees refused to sue, but the court held that this fact did not prejudice the right of A
to recover payment of the debt out of the assets of the convenantor.
Debt
Take a simple example. If I lend you £100, your obligation to repay me £100 will not be
taken away if a bolt of lightning immediately destroys the very banknotes I gave you.
But if you hold £100 on trust for me, then destruction of the subject-matter of the trust
by lightning (so long as it was without fault on your part) will mean that your obligations
to me are at an end; it is not possible for me to bring an action against you, claiming that
you owe me £100
A debt may or may not be contractual and the duty of the debtor is to repay money to
the creditor. In contrast, the trust does not need to be contractual and the duty of a
trustee is to hold trust property for the beneficiary.
The obligation of a debtor is personal but a trust is proprietary.
A trustee should where possible use trust property in income bearing investment and
account to the beneficiary for income. In the case of a debtor, such an obligation is
unnecessary except in so far as provided for in agreements express or implied. Potters
v loppert (1973) CH. 399.
Furthermore, if money borrowed is stolen from the borrower, he is still under obligation
to repay it. However, within trusts, a trustee is not liable for the loss which is not
attributed to his negligence. Morley v Morley 22 ER 817 (1678) 2 CH.D.2
Further the words of an instrument may be employed in such a manner as to create both
personal and trust obligation thereby creating a situation where a debt and trust exist.
Barclays Bank ltd v quitsclose investment ltd 1970 AC 567

In the above case Rolls Royce Razor ltd was highly indebted to Barclays bank and was in
need of 209,000 pounds to pay dividends which had been declared on its shares. The
sum was borrowed from Quitsclose under an arrangement whereby the loan was to be
used for that purpose. The money paid into a separate account at Barclays Bank which
had notice of the nature of the arrangement. Before dividends were paid, Rolls Razor
went into liquidation. The issue was whether the money on the account was owned by
the beneficiary Rolls Razor, in which case Barclays Bank claimed to set it off against the
overdraft or whether Rolls Razor had received the money as trustee and still held it in
trust for Quitsclose.
The House of Lords unanimously held that the money had been received in trust to
be applied for payment of dividends that purpose having failed, the money was held in
trust for Quitclose. The fact that the transaction was a loan, recoverable by an action at
law did not exclude the implication of a trust. The legal and equitable rights of remedy
could coexist; the bank having notice of the trust could not retain the money against
Quitsclose.

faculty of law
 Relationship between Trustee and beneficially is not one of debtor /creditor.
 Trustee doesn’t owe the value to beneficiaries
Morley v Morley (1678)
Twinsectra v Yardley [2002]
 A debt may or may not be contractual and the duty of the debtor is to repay
money to the creditor. In contrast, the trust doesn’t need to be contractual and the
trustee’s duty is to hold trust property for the beneficiaries.
 Obligation of a debtor is personal, whereas that of a trust is proprietary
 Trustee can use trust property in income generating investments, it is not
necessary for a debt
Potters v. loppert (1973) CH. 399
 There is obligation to repay money in a debt, for trust property, trustee has no
obligation for liability for losses.
4. Potters v. Loppert [1973] Ch. 399

5. Morley v Morley (1678) 2 Ch. Cos 2; 22 ER 817
6. Barclays Bank Ltd v. Quistclose Investment Ltd. [1970] A.C 567
7. Re Lester (1942) Ch. 324
8. Re Cowley (1885) 53 L.T 494
Conditions and Charges

9. Re: Frame [1939] 2 ALL ER 865
10. Re Cowley (1885)
11. Re: Oliver (1890) 62 L.T 533
Power of Appointment
Power is defined as an authority to dispose of some interest in land, but confers no right
to the enjoyment of the land. A power is the right to dispose of an estate or interest in
property rather than ownership of an estate or interest.
A person writing a will or trust can give his or her beneficiaries a power of appointment,
which enables them to direct where their share of the estate or trust goes at their death.
A power of appointment provides flexibility for transferring property to children and
grandchildren. A power can be sufficiently defined for present purposes as an authority
vested in a person to deal with or dispose of property not his own. It can be distinguished
from a trust succinctly: a trust is imperative (if a person accepts to act as a trustee, he
must do as the settlor directs); a power, discretionary.
A power of appointment grants authority to designate the recipients of property held in
an estate or trust. A power of appointment may be given to a beneficiary to permit that
beneficiary to direct the ultimate distribution of his or her share.
Here is an example of a power of appointment.

faculty of law
‘My residuary estate on trust for my widow for life with power to dispose of it amongst
my children and grandchildren as she may think fit and in default of appointment to be
divided amongst my children equally.’ powers often arise behind a trust.
There is a difference in terminology between powers and trusts. Under a trust, the settlor
transfers the property to trustees who will hold for the benefit of beneficiaries.
Under a power of appointment, the power is given by the donor of the power to the
donee who has the power to appoint the property to the objects of the power. In many
cases the objects of powers of appointment are individuals but it is possible to create
powers in favour of purposes. The problem in creating a power is that there is no
possibility of the objects seeking the aid of the court if appointments are not made.
Re Weeks Settlement [1897] 1 Ch. 289

the court found that a power had been created in a case where there was no express gift
over in default. Mrs. Slade gave her husband a life interest in some property and went on
to state ‘and I give him the power to dispose of all such property by will amongst our
children’. No appointment was made by the husband. If a trust had been imposed on the
husband the children would have been entitled to take, but as a power had been
created, the property resulted back to the estate of Mrs. Slade.
Romer J said: If in this case the testatrix really intended to give a life interest to her
husband and a mere power to appoint if he chose, and intended if he did not think fit to
appoint that the property should go on default of appointment according to the
settlement, why should she be bound to say anything more than she has said in this will?
Hence a power had been created.
Brown v Higgs (1799) 4 ves 708.

As Lord Eldon said in Brown v Higgs,52 ‘the court adopts the principle as
to trusts and will not permit his [ie the donee of the power] negligence, accident or other
circumstances to disappoint the interests of those for whose benefi t he is called upon to
execute it’ but will ‘discharge the duty in his room and place’.
Qn 2 differences between trust and power of Attorney include the following as discussed
below;
In trust, the trustee holds and manage the property of the settlor for the benefit of other
persons called the beneficiaries while in power of Attorney it does not.
In trust, if the asset is owned by the trust, then the trustee is in charge of that asset. The
trustee can borrow, sell, encumber and invest in this asset if the trust document gives
them power to do so in contrast a power of Attorney does not control anything that is
own by your trust.
A trustee always take control over the property in the estate after the death of the
settlor whereas a power of attorney dose not.
A power of attorney is authorised to carry out transaction over real property whereas in
trust, a trustee dose not unless otherwise.
A power of attorney may be hired for instituting claims and assist in litigation which is
not the case with the trust.
A power of ATTORNEY is entrusted with power to sign legal document and execute legal
transaction whereas a trustee is not.

faculty of law
In comparison, a trustee and a power of Attorney both operate on behave of another
person ie they don’t operate on their own.
In another development, both are no entitle to benefit from the property in question.
Q.6
Compare and Contrast a trust with the following
a. Bailment
b. Agency
c. Debt
d. Contract
Total 25 Marks
 A good answer will define a trust and has it is created.

 Make a comparison with each
 Contrast where they are different
The structure of the trust relationship.
Reading: Hudson, sections 2.1 and 2.2; Martin 49-78; Pettit 30-65
‘The essence of a trust is the imposition of an equitable obligation on a person who is the
legal owner of property (a trustee) which requires that person to act in good conscience
when dealing with that property in favour of any person (the beneficiary) who has a
beneficial interest recognised by equity in the property. The trustee is said to “hold the
property on trust” for the beneficiary.
There are four significant elements to the trust:
1. that it is equitable,
2. that it provides the beneficiary with rights in property,
3. that it also imposes obligations on the trustee, and
4. that those obligations are fiduciary in nature.’ –
Thomas and Hudson, The Law of Trusts ‘
A trust is an equitable obligation, binding a person (called a trustee) to deal with

property owned by him (called trust property, being distinguished from his private
property) for the benefit of persons (called beneficiaries or, in old cases, cestuis que
trust), of whom he may himself be one, and any one of whom may enforce the obligation
[or for a charitable purpose, which may be enforced at the instance of the Attorney-
General, or for some other purpose permitted by law though unenforceable].’ –
Underhill and Hayton, The Law of Trusts and Trustees, as amended by Pettit
Classification of trusts.

faculty of law
Reading: Hudson, section 2.2; Martin 49-78; Pettit 66-85
Types of trusts
Express trusts
these are trusts created in accordance with the express intention of the settlor. This
intention may be expressed orally or in writing or affirmed by the conduct of the parties.
An express trust is one which is deliberately established and which the trustee
deliberately Accepts. This is one intentionally declared by the creator of a trust who is
known as the settler or if the trust is created by a will, the testator. It is one that has
been created by the settler himself through the manifestation of an intention to create
one. An express trust is "created not by facts and circumstances, but by the express
words of the settlor". (Fitzgerald v Stewart)
It may be created in the following ways:
1. A declaration of trust by the settlor whereby he makes himself the trustee of
property for the benefit of some person; or
2. The transfer by the settlor of the ownership of the trust property to trustees, and
the communication to the trustees of the terms upon which they are to hold that
property; or
3. By will.
Subdivided into completely and incompletely Constituted trusts

In all cases the trust must be completely constituted. A trust is completely constituted
when the trust property has been vested in trustees for the benefit of the beneficiaries.
Where there is merely a contract or covenant to create a trust, the trust is said to be
incompletely constituted. A completely constituted trust may be enforced by any
beneficiary, including a volunteer; an incompletely constituted trust can only be enforced
by a beneficiary who has given value. Thus, a trust is incompletely constituted where
there is merely a covenant by a settlor to settle property which he expects to acquire. a
trust will be completely constituted
when either:( Milroy v. Lord)
(a) the settlor has vested the legal title to the trust property in the trustee(s) (Method
One); or
(b) the settlor has declared that he now holds the property as trustee (Method Two).
The constitution of a trust has important consequences for all parties:

(a) The settlor cannot change her mind and re-claim the property.
(b) The trustees must hold the property in accordance with the terms of the trust.
(c) The beneficiaries can enforce the trust against the trustees (Paul v. Paul
(1882)).
A trust is incompletely constituted when it has not been constituted by any of the above
methods. For example, X is the owner of Blackacre. He executes a declaration of trust
under which Y is now to hold Blackacre on trust for Z. X fails to convey Blackacre to Y. In
this case the trust is not constituted and the beneficiary has no rights unless he gives
consideration to X. The reason is that ‘equity will not assist a volunteer’ (Lord Eldon in
Ellison v. Ellison (1802)).
faculty of law
Paul v. Constance (1977).

Here Mr. Constance and the claimant lived together, although they were not married. An
account was opened in Mr. Constance’s name only because they would have been
embarrassed by having a joint account in different names, and £950 awarded to
Constance following an injury at work together with three small joint bingo winnings
were paid into it. One withdrawal was made which was for their mutual benefit. At
various times Constance said to the claimant: ‘the money is as much yours as mine’. The
court held that these words, supported by the evidence of the transactions in the
account, established that Constance intended to declare himself a trustee of the money
in it for himself and the plaintiff jointly.
1. Re Bostocks Settlement [1921] 2 Ch. 469

2. Re Flavell’s Wills Trusts (1969) I.W.L.R 445
3. Cook v. Fountain (1676) 3 Swan 585
a. The rudiments of Express Trusts
Reading: Hudson, section 2.3; Martin 79-122; Pettit 86- 99
An express trust can be understood as follows, comprising the “magic triangle” of settlor,
trustee and beneficiary. The core of the “trust” is the inter-action of personal rights and
claims between these persons in relation to the trust property. It is therefore vital to
distinguish between “in personam” and “in rem” rights.
Resulting trusts
these are trusts that arise in accordance with the implied intention of the transferor or
where a transfer of property fails or does not exhaust the entire property. This arises
where property has been transferred from one person to another but the beneficial
interest results back to the transferor. A resulting trust can arise from the presumed
intention of the transferor but this does not explain all cases of resulting trusts. A
resulting trust gets its name from the Latin verb resalire (to jump back) and this
identifies the essential feature of the trust: that the beneficial interest results to, or
jumps back to, the settlor who created the trust. The basis of an action founded on a
resulting trust is that one is seeking to recover one’s own property.
The idea is strange: a person (X) gives property to another (Y) and then Y ends up
holding it on trust for X.
In summary;
- Resulting trusts return the beneficial interest in the property to the settlor who
created the trust.
- Resulting trusts arise where property is purchased in another’s name.
faculty of law
- Presumption of a resulting trust may be rebutted by a presumption of
advancement.
- Problems where the transfer giving rise to the alleged trust is made for a
fraudulent purpose.
- Resulting trusts arise where the settlor fails to specify the beneficial interests.
- ‘Quistclose trust’ arises in circumstances where a loan is made for a purpose
which fails. It may also arise in other cases.
Re Llanover Settled Estates [1926] Ch. 626
Constructive trusts
these are trusts created by the courts in the interests of justice and conscience. In
English law, a constructive trust arises by operation of law. It is imposed whenever the
defendant knows that she has dealt with the property in an unconscionable manner.
These have been defined by Millett (1998) as arising ‘whenever the circumstances are
such that it would be unconscionable for the owner of the legal title to assert his own
beneficial interest and deny the beneficial interest of another’. a constructive trust will
be imposed when the conscience of the owner of property is affected in such a way that
equity insists that he/she should hold it for the benefit of another. Situations in which
a constructive trust has been imposed:
a summary
(a) Profits made by a person in a fiduciary position.
(b) Where a statute has been used as an ‘instrument of fraud’.
(c) The remedial constructive trust.
1. Barnister v. BArnister (1948) 2 ALL ER 133
Implied trusts
These are trusts which court deduces from the conduct of the parties and the
circumstances of the transaction. For example, where a person in return for valuable
consideration agrees to settle property for the benefit of another, that other person
immediately becomes a trustee of the property. In one sense, an implied trust may be
said to arise where the intention of the settlor to set up a trust is inferred from his words
or actions: for example, precatory trusts
1. Barnister v. BArnister (1948) 2 ALL ER 133
2. Re Llanover Settled Estates [1926] Ch. 626
Statutory Trusts
these are trusts that are created by Parliament
1. Cook v. Fountain
2. Succession Act Cap 162
Section 53(2) Law of Property Act 1925 refers to “implied, resulting and constructive
trusts”.
faculty of law
**Westdeutsche Landesbank v. Islington [1996] 1 AC 669, per Lord Browne-
Wilkinson:-
“(i) Equity operates on the conscience of the owner of the legal interest. In the case of a
trust, the conscience of the legal owner requires him to carry out the purposes for which
the property was vested in him (express or implied trust) or which the law imposes on
him by reason of his unconscionable conduct (constructive trust).”
A. The means by which the different forms of trusts come into existence
Reading: Hudson, section 2.2, Martin 123-154; Pettit 86-99
The three forms of trust come into existence in the following ways:
‘A trust comes into existence either by virtue of having been established

expressly by a person (the settlor) who was the absolute owner of property
before the creation of the trust (an express trust); or by virtue of some
action of the settlor which the court interprets to have been sufficient to
create a trust but which the settlor himself did not know was a trust (an
implied trust); or by operation of law either to resolve some dispute as to
ownership of property where the creation of an express trust has failed (an
automatic resulting trust) or to recognise the proprietary rights of one
who has contributed to the purchase price of property (a purchase price
resulting trust); or by operation of law to prevent the legal owner of
property from seeking unconscionably to deny the rights of those who have
equitable interests in that property (a constructive trust).’
- Thomas and Hudson, The Law of Trusts 11
WEEK TEN
Creation of a Trust
a. Capacity
Minors
1. Edward v. Carter [1893] A.C. 360
Mental Abnormality
Married Women
1. Married Women Property’s Act, 1882
2. Jackson v. Hobhouse (1817) 2 Mer. 483
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Companies
Formalities of Creation of a Trust
a. Intervivos or a living trust

b. Testamentary
c. Succession Act Cap 139; s. 50
Jones v. Lock
A father, on returning from a business trip, was scolded by his family for his failure to
bring a present for his baby son. He therefore produced a cheque made out in his name
for £900
and said ‘Look you here, I give this to baby’, and placed the cheque in the baby’s hand.
He then took the cheque back but apparently intended to see his solicitor to make
provision for the baby. However, he died before he could do this.
The court held that:
(a) There was no gift to the baby because the cheque had not been endorsed (this
is no longer necessary: s. 2 Cheques Act 1957).
(b) Nor was there a declaration by Jones that he now held the cheque on trust for the
baby. The court said that it would not impose the onerous duties of a trustee on a person
unless it was clear that a declaration of trust was intended.
Here the father’s giving of the cheque to the baby was only symbolic of intention to
make proper provision for him. The baby therefore received nothing
Importance of formalities
To avoid fraud
Key to note; all trusts created in relation to land must be in writing.
It must be signed or attested to by atleast two witnesses
It must be signed and attested to RTA sec 32
Trusts created by will-2 categories
Secret trusts
Or
Either Intervivos
Testamentary trusts..transfer of property happens after death of the maker/
at the reading of the will.
Under sec 50 of the succession act,all trusts created by testamenatary
disposition must be executed and attested to by formalities described
1. Will must be in writing
2. It shall be signed at bthe foot by the testator or some other person in his
presence and at his direction
3. Signature must be witnessed by 2 witness

faculty of law
A secret trust arises where a testator wishes to transfer the benefit of property to a
person …u rely on a trustee to act in a good will….they don’t mention who the
beneficiary is.
Exceptions to the rule that equity will not assist a volunteer
a. Donatio Mortis Causa

1. Cain v. Moon (1896) 2 Q.B. 283
2. Wilkes v. Allington (1931) 2 Ch. 104
3. Re Weston (1902) 1 Ch. 680
4. Delgate v. Fader [1939] Ch. 922
5. Woodward v woodward
6. Reedl v dobree
b. Non-Application to wills
c. Equitable Estoppel
d. Statutory Exceptions
Significant features of the trust
1. Once a trust is created, the settlor ceases to have any property rights in the trust or
any control over the trust in her capacity as settlor.
2. The instant that the trust is declared (or deemed to have been created in the case of a
constructive or resulting trust) the legal title in the trust property is owned by the
trustee(s) and the equitable interest is owned by the beneficiary(-ies).
3. The trustee(s) hold the legal title in the trust property.
4. The trustee(s) owe equitable obligations to the beneficiaries to obey the terms of the
trust. The trustee(s)’ obligations are fiduciary in nature (thus requiring the utmost good
faith and prohibiting any conflict of interest).
5. The beneficiaries own equitable proprietary rights in the trust fund (each has an
“equitable interest” as a consequence).
6. There can be an infinite number of beneficiaries in theory, or there may be only one
beneficiary (a bare trust).

faculty of law
7. The same human being can be settlor, one of the trustees and also one of the
beneficiaries. If she is only one of the trustees or only one of the beneficiaries then some
other person will have acquired rights in relation to that property. Importantly, she will
be acting in different capacities in each context (as though she were three different
people). However, the same person may not be the settlor, the sole trustee and the sole
beneficiary because then no property rights would have moved at all.
8. The beneficiaries may fall into various classes with different qualities of rights: e.g.
there may be a beneficiary entitled to the income from the trust fund during her lifetime
(a “life tenant”) with the capital being divided among the other beneficiaries after her
death (“remainder beneficiaries” or “remaindermen”).
9. Individual items of property making up the trust fund may, if the terms of the trust
permit it, be sold or exchanged for other property – that other property then becomes
part of the trust fund.
10. Significantly, then, more than one person can have property rights in the same
property at the same time: this enables settlors to create an infinite range of property
holdings to suit their circumstances.
11. The trustee(s) will be personally liable for any loss caused to the trust by her/their
breach of trust. 12. The trust, or “settlement”, is endlessly flexible (provided it is not
illegal).
The concept of fiduciary responsibility.
Reading: Hudson, section 2.3.3; and the essay comprising chapter 14.
A trustee is an example of a fiduciary (along with, inter alia, company directors, agents,
and partners “acting in common with a view to profit”). So, it is important to understand
what the concept of fiduciary responsibility entails.
‘A fiduciary is someone who has undertaken to act for or on behalf of another

in a particular matter in circumstances which give rise to a relationship of
trust and confidence. The distinguishing obligation of a fiduciary is the
obligation of loyalty. The principal is entitled to the single-minded loyalty of
his fiduciary. The core liability has several facets. A fiduciary must act in
good faith; he must not make a profit out of his trust; he must not place
himself in a position where his duty and his interest may conflict; he may not
act for his own benefit or the benefit of a third person without the informed
consent of his principal. This is not intended to be an exhaustive list, but it is
sufficient to indicate the nature of fiduciary obligations. They are the defining
characteristics of the fiduciary.’

faculty of law
- Bristol and West Building Society v Mothew [1998] Ch 1 at 18, per Millett LJ
"A person will be a fiduciary in his relationship with another when and in so
far as that other is entitled to expect that he will act in that other's interests
or (as in a partnership) in their joint interests, to the exclusion of his own
several interest."
Paul Finn, "Fiduciary Law and the Modern Commercial World", in Commercial Aspects of
Trusts and Fiduciary Relationships (ed. McKendrick, 1992), p. 9.
See also: Finn, Fiduciary Obligations (1977); Finn, "The Fiduciary Principle", in Equity,
Fiduciaries and Trusts (ed. Youdan, 1989); A.J. Oakley, Constructive Trusts (1997), Ch. 3;
A.J. Oakley (ed.), Trends in Contemporary Trust Law (1996) generally.
The benefits of trusts
Reading: Hudson, section 2.5
A framework for understanding change in the law of trusts: three conceptions of the trust
- moralistic, individual property, capital management: see Cotterrell, "Trusting in Law"
(1993) 46 CLP 75, 86-90.  Proprietary right in the trust property for beneficiaries, not
simply a personal claim against the trustees.  Provides preferential rights in an
insolvency. Important in giving priority for beneficiaries in the event of the trustee’s
bankruptcy.
 A range of equitable remedies enforceable against the trustees and any third parties by
the beneficiaries in the event of loss.
 Flexibility – useful in commercial and domestic situations, as considered below.
 Usefulness in tax planning and estate planning generally.
 A trust is a “gift over the plane of time” giving the settlor flexibility and control.
 Trusts constitute the most significant players in UK securities markets in the form of
pension funds and investment funds (like unit trusts).
Fundamental principles of trusts: the obligations of trustees and

the rights of beneficiaries
faculty of law
Reading: Hudson, section 2.4
1. **Westdeutsche Landesbank v. Islington [1996] 2 All E.R. 961, 988. [1996] AC 669
2. *Saunders v Vautier (1841) – the rights of the beneficiary
13 Lord Browne-Wilkinson in Westdeutsche Landesbank v. Islington [1996] AC 669,

[1996] 2 All E.R. 961, 988 sought to set out the framework upon which the trust
operates:- “
THE RELEVANT PRINCIPLES OF TRUST LAW:
(i) Equity operates on the conscience of the owner of the legal interest. In the case
of a trust, the conscience of the legal owner requires him to carry out the
purposes for which the property was vested in him (express or implied trust) or
which the law imposes on him by reason of his unconscionable conduct
(constructive trust).
(ii) (ii) Since the equitable jurisdiction to enforce trusts depends upon the
conscience of the holder of the legal interest being affected, he cannot be a
trustee of the property if and so long as he is ignorant of the facts alleged to
affect his conscience …
(iii) (iii) In order to establish a trust there must be identifiable trust property …
(iv) (iv) Once a trust is established, as from the date of its establishment the
beneficiary has, in equity, a proprietary interest in the trust property, which
proprietary interest will be enforceable in equity against any subsequent holder
of the property (whether the original property or substituted property into which
it can be traced) other than a purchaser for value of the legal interest without
notice.”
CERTAINTY OF INTENTION AND CERTAINTY OF SUBJECT MATTER
General reading: Hudson, chapter 3; Martin 98-106; Pettit 47- 58
The need for the three certainties. if any of these are absent, the purported trust will fail
Reading: Hudson, sections 3.1 and 3.2
**Wright v. Atkyns (1823) Turn. & R. 143, 157,

per Lord Eldon: “...first...the words must be imperative...; secondly...the subject must be
certain...; and thirdly...the object must be as certain as the subject"

faculty of law
**Knight v Knight (1840) 3 Beav 148
Lord Langdale’s judgment in Knight v Knight28 is frequently referred to as setting out
the
proposition that, in order for a trust to be valid, the ‘three certainties’ must be present:
certainty of words, certainty of subject, and certainty of object.
CERTAINTY OF INTENTION.
Reading: Hudson, section 3.3, and also
2.6; Martin 98- 101; Pettit 47-50
Question: When a person seeks to create a trust (the settlor) in what ways
must that person’s intention be manifested?
Since ‘equity looks to the intent rather than the form’, there is no need for any technical
expression to be used in order to constitute a trust.30 It is a question in every case of
(1)The core principle: an intention to create a trust can be inferred from the
circumstances
Reading: Hudson, section 3.3.1
**Paul v Constance [1977] 1 W.L.R. 527

Only sufficient intention to create a trust must be shown. Intention to create a trust can
be shown without using the word trust so long as there is intention to be bound.
**Re Kayford [1975] 1 WLR 279, Megarry

The best words are clearly ‘to hold upon trust for’ – but the word ‘trust’ is not vital –
Megarry J in this case
“The sender may create a trust by using appropriate words when he sends the money
(though I wonder how many do this, even if they are equity lawyers), or the company
may do it by taking suitable steps on or before receiving the money. If either is done, the
obligations in respect of the money are transformed from contract to property, from debt
to trust. Payment into a separate bank account is a useful (though by no means
conclusive) indication of an intention to create a trust, but of course there is nothing to
prevent the company from binding itself by a trust even if there are no effective banking
arrangements.”
1. Twinsectra Ltd v Yardley [2002] UKHL 12 at [71], [2002] 2 All ER 377 at

[71], [2002] 2 AC 164:
'A settlor must, of course, possess the necessary intention to create a trust, but his
subjective intentions are irrelevant. If he enters into arrangements which have the effect

faculty of law
of creating a trust, it is not necessary that he should appreciate that they do so; it is
sufficient that he intends to enter into them.'
2. Don King Productions v. Warren [1998] 2 All E.R. 608 (an example of how
the court may have to infer the intention to create a trust even in complex
commercial cases)
3. Re Farepak Food and Gifts Ltd [2006] All ER (D) 265 (Dec) (an anomalous
decision of Mann J which was per incuriam Re Kayford and which sought to rely on
Quistclose trust)
4. *Annabel’s (Berkley Square) Ltd v Revenue and Customs Commissioners
[2009] EWCA Civ 361, [2009] 4 All ER 55 (tronc system for restaurant wait
staff = trust in favour of staff, held by troncmaster as trustee)
5. Byrnes v Kendle [2011] HCA 26, 14 ITELR 299 (use of the word “trust” usually
suggests a trust – here husband disingenuously seeking to argue that when he had
used word “trust” it had not meant trust) 15
(2)Trusts as opposed to merely moral obligations
1. (Lambe v. Eames (1871) L.R. 6 Ch. 597 ("to be at her disposal in any way she may
think best, for the benefit of herself and her family" = merely moral obligation)).
2. Re Adams and the Kensington Vestry (1884) 27 Ch. D. 394 ("unto and to the
absolute use of my dear wife ... in full confidence that she will do what is right as to
the disposal thereof between my children" = a merely moral obligation).
Re Adams and Kensington Vestry (1884) 27 Ch D 394 (CA)

Facts; The testator gave his estate to his wife ‘in full confidence that she will do
what is
right as the disposal thereof between my children . . .’.
Legal principle; The words ‘in full confidence’ did not create a trust.
3. Cf. Comiskey v. Bowring-Hanbury [1905] A.C. 84 (HL) ("in full confidence that... she
will devise it to one or more of my nieces as she may think fit..." = a trust).
Comiskey v Bowring-Hanbury [1905] AC 84 (HL)

Facts; A testator gave his property to his wife ‘in full confidence that at her death
she
will devise it to one or more of my nieces as she shall think fit’. If she did not do
this then the will directed that the property should be divided equally among the
nieces. It was held that this created a trust.

faculty of law
Legal principle; Look at the meaning of the words used taken as a whole and not in
isolation. Although the words ‘in full confidence’ were used here as in Adams
(above), here the second sentence was clearly mandatory and so created a trust.
Precatory words do not show intention to create a trust
4. Re Hamilton [1895] 2 Ch 370 (“take the will you have to construe and see what it
means, and if you come to the conclusion that no trust was intended you say so”,
per Lindley LJ)
(3)Intending to create express trusts without knowing what a trust is

1. Paul v. Constance [1977] 1 W.L.R. 527 ("… we are dealing with simple people,
unaware of the subtleties of equity …").
(4)Lack of intention where a joke or an imperfect gift

1. Jones v Lock (1865) 1 Ch App 25 (“… look you here, I give this to the baby …”)
2. Richards v Delbridge (1874) LR 18 Eq 11 (failure to effect transfer of lease)
(5)Sham trusts and trusts intended to defraud creditors
1. Snook v London and West Riding Investments Ltd [1967] 2 QB 786, esp 802
2. *Midland Bank plc v. Wyatt [1995] 1 F.L.R. 696, [1997] 1 BCLC 256 (sham trusts).
3. Marquis-Antle Spousal Trust v R 2009 TCC 465, 12 ITELR 314 (Canadian case:
sham discretionary trust in Barbados seeking to avoid liability to tax)
(6)Intention to create a charge not a trust Reading:
Hudson, section 3.3.3
1. Clough Mill v Martin [1984] 3 All ER 982 (floating pool of property)
(7)Trusts and bank accounts
1. Foley v Hill (1848) 2 HL Cas 28

2. Alastair Hudson, The Law of Finance (Sweet & Maxwell, 2009), para 30-04.
Certainty of intention means that the person who is given the property shall hold it on
trust, i.e. it is evidence that the settlor or testator intended to impose a binding
obligation that the property was to be held on trust. Often common sense and an ability

faculty of law
to see clearly what precise words and phrases mean is enough when answering a
problem question.
Example
(a) John by will leaves £1000 to Albert and says that he would like Albert to look
after his children.
(b) John leaves £1000 to Albert on trust for his children.
It is obvious that (b) is a trust but that (a) is not. Why? Because in (a) there is only a
request. It is often said that ‘precatory words do not create a trust’. Precatory words are
words such as request, hope and desire which do not impose a trust and where the
recipient can keep the property as a gift. A good example is Re Diggles (1888) where the
word desire did not create a trust.
CERTAINTY OF SUBJECT MATTER

Question: What is the necessity of ascertaining subject matter and extent of beneficial
interests; and what is the effect of lack of certainty of subject-matter?
(1)The traditional principle – the trust fund must be separately identifiable
1. Palmer v Simmonds (1854) 2 Drew. 221 ("bulk of my... residuary estate"; not
valid).
2. Sprange v. Barnard (1789) 2 Bro. C.C. 585 ("remaining part of what is left, that he
does not want for his own wants and use to be divided..."; not valid).
3. *Re London Wine Co. (Shippers) Ltd. (1986)
4. Palmer's Co. Cas. 121, Oliver J (wine bottles to be held on trust not separated from
other bottles):
‘I appreciate the point taken that the subject matter is a part of a homogenous
mass so that specific identity is of as little importance as it is, for instance, in the
case of money. Nevertheless, as it seems to me, to create a trust it must be
possible to ascertain with certainty not only what the interest of the beneficiary is
to be but to what property it is to attach.’
5. *MacJordan Construction Ltd v Brookmount Erostin Ltd [1992] BCLC 350
6. **Re Goldcorp [1995] 1 A.C. 74 (necessity of segregating trust property - bullion
“ex bulk”) Westdeutsche Landesbank v Islington [1996] AC 669
(2)A different principle for intangible or for fungible property?

faculty of law
1. **Hunter v. Moss [1994] 1 W.L.R. 452 (identification of shares - the nature of
intangible property).
2. *Re Harvard Securities [1997] 2 BCLC 369 Cf. MacJordan Construction Ltd v
Brookmount Erostin Ltd [1992] BCLC 350 above.
3. *White v Shortall [2006] NSWSC 1379 (criticism of Hunter v Moss).
Summary
The traditional rule

 Re London Wine
 Re Goldcorp
 MacJordan v Brookmount
 Re Global Trader
 Lehman Brothers per Briggs J
Bending the rule

 Hunter v Moss
 Lehman Bros (No2) Criticising Hunter v Moss, and finding a large single trust
CERTAINTY OF OBJECTS
Question: how certain must the words used by the settlor be in creating a trust, and in
what way will the court measure sufficient certainty?
Introduction: the central principle
1. Morice v. Bishop of Durham (1804) 9 Ves. Jr. 399 (affd. (1805) 10 Ves. Jr. 522):
there must be some person in whose favour the court can decree performance.
 The need for the court to be able to police the trustees’ management of the trust
 If the court cannot know with certainty, how can the trustees know and how can
the court police the trustees?
2. **Re Hay's Settlement Trusts [1982] 1 W.L.R. 202: for the most useful summary of
these principles and of the various forms of power.
1) Distinguishing between types of power and of trust The distinction between
“powers” and “trusts”:
 Fixed trusts and bare trusts obligations
 Discretionary trusts, (once known as “powers in the nature of a trust”)
 Fiduciary powers: powers of appointment and powers of advancement (known as
“mere powers” because they are merely powers and not trusts)
faculty of law
 Personal, non-fiduciary powers Cf. The nature of beneficial entitlements (cf. mere
powers) in general and of corresponding trustees’ duties.
Burrough v. Philcox (1840) 5 My. & Cr. 72.
*Re Hay's Settlement Trusts [1982] 1 W.L.R. 202
2) Certainty rules for fixed trusts (e. g. fixed shares within a class).
1. *I.R.C. v. Broadway Cottages Trust [1955] Ch. 20.
 A complete list of the beneficiaries must be possible.
 Both conceptual and evidential certainty required.
2) Certainty rules for fiduciary “mere powers”, e.g. powers of appointment.
1. Re Gestetner Settlement [1953] Ch. 673 (the old, strict approach).

2. **Re Gulbenkian's Settlement [1970] A.C. 508: the “any given postulant test”;
aka the “is or is not test”.
Effect of Uncertainity
Word
Subject matter
1. Re Jones (1898) 1 Ch 438
THE BENEFICIARY PRINCIPLE
Question: when will a trust be void for want of a beneficiary, and what manner of
beneficiary will be necessary?
General reading: Hudson, Chapter 4; Martin 385-414; Pettit 58- 65
e. The nature of the beneficiary’s rights in the trust fund

Reading: Hudson, section 4.1 1)
The principle in Saunders v Vautier
1. **Saunders v Vautier (1841) 4 Beav 115

2. Re Bowes [1896] 1 Ch 507

faculty of law
3. Re Smith [1928] Ch 915 (could compel transfer to beneficiaries even where two
classes of beneficiaries under discretionary trusts)
4. In re Holt’s Settlement [1969] 1 Ch 100, 111, per Megarry J:
‘If under a trust every possible beneficiary was under no disability and concurred
in the re-arrangement or termination of the trusts, then under the doctrine in
Saunders v Vautier those beneficiaries could dispose of the trust property as they
thought fit; for in equity the property was theirs. Yet if any beneficiary was an
infant, or an unborn or unascertained person, it was held that the court had no
general inherent or other jurisdiction to concur in any such arrangement on behalf
of that beneficiary.’
The proprietary rights of beneficiaries
1. Saunders v Vautier (1841) 4 Beav 115

2. Re Nelson [1928] Ch 920
3. Stephenson v Barclays Bank [1975] 1 All ER 625 (beneficiary able to take separate
share from the trust where property naturally divisible)
4. Lloyds Bank v Duker [1987] 3 All ER 193 (prevention of removal of interest
because loss of majority shareholding for other beneficiaries)
The nature of the rights of objects of discretionary trusts
Reading: Hudson, section 4.1.4 Prof Geraint Thomas, Powers (2nd ed, Sweet & Maxwell,
2011), para 6-268 Thomas & Hudson, The Law of Trusts (OUP, 2004), p.184 et seq., &
p.1587 et seq.
1. Saunders v Vautier (1841) 4 Beav 115

2. Gartside v IRC [1968] AC 553, at 617, per Lord Wilberforce
3. CPT Custodian Pty Ltd v Commissioner of the State Revenue [2005] HCA 53
4. Richstar Enterprises Pty Ltd v Carey (No.6) [2006] FCA 814
The beneficiary principle
Reading: Hudson, section 4.2 1)
The general principle
1. *Morice v. Bishop of Durham (1804) 9 Ves. 399; (1805) 10 Ves 522.
"There can be no trust, over the exercise of which this court will not assume control
..If there be a clear trust, but for uncertain objects, the property... is undisposed of...
Every...[non-charitable] trust must have a definite object. There must be somebody in
whose favour the court can decree performance" (per Lord Grant M.R.).

faculty of law
2. Bowman v Secular Society Ltd [1917] AC 406 2) The strict, traditional principle
**Leahy v. Att.-Gen. for New South Wales [1959] A.C. 457 (trust for ‘such order of
nuns’ as trustees shall select) – this case is considered in detail below
THE DUTIES OF TRUSTEES & BREACH OF TRUST
THE DUTIES OF TRUSTEES
Reading: Hudson, Ch8&9; Martin,Ch18-19,23; Pettit,Ch16-17,23 (A) The trustees’ duties

in outline. 1)
The core trustees’ duties
This chapter of the course considers a selection of the key duties of trustees.
Hudson, 2005, chapter 8 considers 13 general duties, as well as the procedures for the
appointment and removal of trustees:
(1) The duties on acceptance of office relating to the need to familiarise oneself with the
terms, conditions and history of the management of the trust.
(2) The duty to obey the terms of the trust unless directed to do otherwise by the court.
(3) The duty to safeguard the trust assets, including duties to maintain the trust
property, as well as to ensure that it is applied in accordance with the directions set out
in the trust instrument.
(4) The duty to act even-handedly between beneficiaries, which means that the trustees
are required to act impartially between beneficiaries and to avoid conflicts of interest.
(5) The duty to act with reasonable care, meaning generally a duty to act as though a
prudent person of business acting on behalf of someone for whom one feels morally
bound to provide. (6) Duties in relation to trust expenses.
(7) The duties of investment, requiring prudence and the acquisition of the highest
possible rate of return in the context.
(8) The duty to distribute the trust property correctly.
(9) The duty to avoid conflicts of interest, not to earn unauthorised profits from the
fiduciary office, not to deal on one’s own behalf with trust property on pain of such
transactions being voidable, and the obligation to deal fairly with the trust property.
(10) The duty to preserve the confidence of the beneficiaries, especially in relation to
Chinese wall arrangements.

faculty of law
(11) The duty to act gratuitously, without any right to payment not permitted by the
trust instrument or by the general law.
(12) The duty to account and to provide information.
(13) The duty to take into account relevant considerations and to overlook irrelevant
considerations, failure to do so may lead to the court setting aside an exercise of the
trustees’ powers.
There are other duties considered in Hudson, section 8.1 and in chapter 9
(relating specifically to investment of the trust property); and there are also
general powers for trustees considered in Hudson, chapter 10.
Key concepts in the obligations of trustees
i) The requirement of good conscience
Reading: Hudson, para 8.2.4
1. Westdeutsche Landesbank v Islington [1996] AC 669. 38
ii) The general duty of care and prudence
iii) Duties to act jointly

1. Luke v South Kensington Hotel (1879) 11 Ch D 121 – ordinarily trustees must
act jointly Trustee Act 2000, s.11 – the trust instrument may permit some
other arrangement
2. Consterdine v Consterdine – (1862) 31 Beav 330 – or the nature of the trust
property may require separate holding.
iv) Liability for breach of trust
1. *Target Holdings v Redferns [1996] 1 AC 421 This topic is considered in detail in

the next chapter of these Course Documents.
i. Fiduciary responsibility of trustees.
Reading: Hudson, section 8.6 Trustee Act 2000 Trusts of Land and Appointment of
Trustees Act 1996, ss. 19-21. 1) What it means to be a fiduciary
1. White v Jones [1995] 2 AC 207 at 271, per Lord Browne-Wilkinson: ‘The

paradigm of the circumstances in which equity will find a fiduciary relationship is
where one party, A, has assumed to act in relation to the property or affairs of
another, B’.
2. Bristol and West Building Society v Mothew [1998] Ch 1 at 18, per Millett LJ:
faculty of law
‘A fiduciary is someone who has undertaken to act for or on behalf of another in a
particular matter in circumstances which give rise to a relationship of trust and
confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The
principal is entitled to the single-minded loyalty of his fiduciary. The core liability has
several facets. A fiduciary must act in good faith; he must not make a profit out of his
trust; he must not place himself in a position where his duty and his interest may
conflict; he may not act for his own benefit or the benefit of a third person without the
informed consent of his principal. This is not intended to be an exhaustive list, but it is
sufficient to indicate the nature of fiduciary obligations. They are the defining
characteristics of the fiduciary.’
ii. Conflicts of interest not permissible
(i) The general principle against secret profits and conflicts of interest in
general terms
1. Keech v Sandford (1726) Sel Cas Ch 61 Boardman v. Phipps [1967] 2 AC 46
(ii) The self-dealing principle

1. Ex parte Lacey (1802) 6 Ves 625 (any transaction in which the trustee has a
personal interest is voidable at the instance of the beneficiary) Holder v
Holder [1968] Ch 353 (the court may not inquire into the trustee’s intentions)
(iii) The fair-dealing principle
1. Tito v Waddell (No 2) [1977] 3 All ER 129, per Megarry V-C: “... if a trustee
purchases the beneficial interest of any of his beneficiaries, the transaction is
not voidable ex debito justitiae, but can be set aside unless the trustee can
show that he has taken advantage of his position and has made full
disclosure to the beneficiary, and that the transaction is fair and honest.”
iii. Duty of impartiality
Reading: Hudson, section 8.3.4; Pettit Ch.18
a) The duty in general terms

1. **Cowan v Scargill [1985] Ch 270, 286, per Megarry V-C:
‘It is the duty of trustees to exercise their powers in the best interest of the
present and future beneficiaries of the trust, holding the scales impartially
between the different classes of beneficiaries.’ b) The duty in relation to
trustees’ powers of investment

faculty of law
2. **Nestlé v National Westminster Bank (1988) [2000] WTLR 795, 802,
Hoffmann J:
‘A trustee must act fairly in making investment decisions which may have
different consequences for differing classes of beneficiaries. … The trustees
have a wide discretion. They are, for example, entitled to take into account the
income needs of the tenant for life or the fact that the tenant for life was a
person known to the settlor and a primary object of the trust whereas the
remainderman is a remoter relative or stranger. Of course, these cannot be
allowed to become the overriding considerations but the concept of fairness
between classes of beneficiaries does not require them to be excluded. It would
be an inhuman rule which required trustees to adhere to some mechanical rule
for preserving the real value of capital when the tenant for life was the
testator’s widow who had fallen upon hard times and the remainderman was
young and well-off.’
Nestlé v National Westminster Bank plc (1988) [1993] 1 WLR 1260, CA (deciding
between life tenants and remainder beneficiaries)
iv. The duty in relation to pension funds

1. Edge v Pensions Ombudsman [2000] Ch 602, 627:
‘the so-called duty to act impartially … is no more than the ordinary duty which the
law imposes on a person who is entrusted with the exercise of a discretionary
power: that he exercises the power for the purpose for which it is given, giving
proper consideration to the matters which are relevant and excluding from
consideration matters which are irrelevant. If pension fund trustees do that, they
cannot be criticized if they reach a decision which appears to prefer the claims of
one interest – whether that of employers, current employers or pensioners – over
others. The preference will be the result of a proper exercise of the discretionary
power.’

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faculty of law

EQUITY AND TRUSTS personal notes

a. The principles associated with equity and with trusts law;

By the end of this module, a successful student will be able to explain;

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III. CASES AND MATERIALS BOOKS

IV. BACKGROUND READING

1. GENERAL PRINCIPLES OF EQUITY

1. D.J Bakibinga, Equity and Trusts Law Africa, chapter 1

Early Case Law on the Role of Equity

 The requirement to obtain writs bearing a royal seal in order to obtain

 Conservative common law judges opposed these new judicial developments,

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 Oxford 1258 approved judicial policies of then common law

 Statute of Westminster 1285 tried to rectify this unsatisfactory situation by

 This marked the beginning of Lord Chancellors judicial power.

 Issue instigated by the chancery’s power to issue the common injunction to

 The conflict crystallised in the Earl of Oxford case

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**Earl of Oxford’s Case (1615) 1 Ch Rep 1, per Lord Ellesmere:

The fusion of common law and equity

Judicature Act 1873, its effect on equity.

COMMON LAW EQUITY

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INTRODUCTION: History of equity

1. Kerly, A Historical Sketch of the Equitable Jurisprudence (3rd Ed) P.25

Introduction of the doctrines of Equity into Uganda

Equity is a body of rules of fairness or natural justice or public morality. Equity is

Sempa Mbabali v. Kidza [1985] HCB 46 – Bonafide purchaser for value

1. **Yesero Mugenyi v. Wandera [1987] HCB 79 – Temporary Injunction

1. Rex v. Amkeyo (1971) 7 F.A.L,R14

The Relation between Equity and Common Law

**The Earl of Oxford Case

Nature of equitable rights I

Rights in Rem or Personam

Types of Equitable interests

The Doctrine of Notice

1. Lloyd v. Banks (1868) 3Ch. App 488

1. Williamson v. Brown (1857) 15 N.Y. 354, 362 per Slden J.

1. Sharpe v. Foy (1868) 4 Ch. App. 35

A. General Principles of Equity II

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1. Equity will not suffer a wrong to be without a Remedy.

2. Equity follow the Law

3. Where there is Equal Equity Law Prevails

In a situation in which there is no clear distinction to be drawn between parties as to

4. Where Equities are Equal, First in Time Prevails

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*Cave v. Cave (1980) 15 Ch. D. 6;30

*Rice v. Rice (1854) 2 Drew 73

Dearle v. Hall (1828) 3 Russ. 1

5. He who Seeks Equity Must Do Equity

6. He who Comes to Equity Must Come with Clean Hands

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7. Delay Defeats Equities (Doctrine of Laches)

1. Smith v. Clay (1767) 3 Broc. C. 639

s. 28 Succession Act Cap 162

9. Equity Looks at Substance Rather than Form

1. Article 126 (2) (e) Uganda 1995 Constitution

- Equity looks to the intent or substance rather than the form

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10. Equity Looks on That as Done which Ought to be Done#