Equity and Trusts
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LAWS2385: EQUITY AND TRUSTS LAWS2385: EQUITY AND TRUSTS ..................................................................................... 1 Express Trusts .................................................................................................................. 3 General principles ..................................................................................................................... 3 Methods of Creation: RUN THROUGH ASSIGNMENT REQUIREMENTS AND THEN THE CERTAINTIES ............................................................................................................................. 3 The Three Certainties: Knight v Knight ...................................................................................... 4 Duties and Powers of Trustees .................................................................................................. 4 Rights and Liabilities of Trustees ............................................................................................... 7 Rights of Beneficiaries .............................................................................................................. 7 Breach of Trusts ............................................................................................................... 9 Exculpation in the trust instrument ........................................................................................... 9 Statutory exculpation ............................................................................................................. 10 Quisclose constructive trusts – not yet adopted in Australia..................................................... 10 Resulting Trusts ..............................................................................................................11 Presumed Resulting Trusts ...................................................................................................... 11 Automatic Resulting Trusts ..................................................................................................... 12 Policy ..................................................................................................................................... 12 Assignment ....................................................................................................................13 Assignment of an equitable chose ........................................................................................... 15 Assignment of a legal chose – statutory rules .......................................................................... 15 Assignment of a legal chose – no legal rules available .............................................................. 15 Priorities .........................................................................................................................15 Competing legal interests ....................................................................................................... 16 Competing equitable interests: ............................................................................................... 16 Prior legal interest vs later equitable interest .......................................................................... 17 Prior equitable interest vs later legal interest .......................................................................... 17 Prior mere equity vs subsequent equitable interest ................................................................. 18 Tracing ...........................................................................................................................18 Third Party Liability: Barnes v Addy .................................................................................19 1 Knowledge Requirement: Baden ............................................................................................. 20 Knowing Receipt ..................................................................................................................... 20 Knowing Assistance ................................................................................................................ 20 Proprietary Remedies .....................................................................................................21 Constructive Trusts ................................................................................................................. 21 Personal Remedies .........................................................................................................23 Account of Profits ................................................................................................................... 23 Equitable Compensation ......................................................................................................... 24 Bars to Relief ..................................................................................................................25 Laches .................................................................................................................................... 25 Acquiescence.......................................................................................................................... 26 Unclean Hands ....................................................................................................................... 26 Hardship................................................................................................................................. 26 Effect on Third Parties............................................................................................................. 26 Equitable Property ..........................................................................................................26 Property in common law ......................................................................................................... 26 Equitable proprietary rights .................................................................................................... 27 Fiduciary Relationships ...................................................................................................27 Status-Based .......................................................................................................................... 27 Emerging category: financial advisor-client .............................................................................. 28 Outside recognised categories ................................................................................................ 28 Concurrent contractual and fiduciary relationships .................................................................. 29 Scope ..................................................................................................................................... 29 Fiduciary obligations ............................................................................................................... 29 Defence: informed consent ..................................................................................................... 29 2 Express Trusts General principles 1. Public or private a. Public: charitable trusts for a purpose (incl education or research) in the public interest b. Private 2. Fixed or discretionary a. Fixed: fixed beneficiaries have fixed benefits, creates a proprietary right b. Discretionary: T to allocate benefits. Two kinds of discretion: i. Who the beneficiary will be and how much; ii. The amount has to be paid and the discretion is to decide to whom (look to wording of the question e.g. “shall be paid”) – no discretion whether to pay or not 3. Ts can be Bs and Bs can be Ts so long as there is NO MIRROR IMAGE Methods of Creation: RUN THROUGH ASSIGNMENT REQUIREMENTS AND THEN THE CERTAINTIES 1. Self-declaration a. No formalities required for personal property b. Interests in land can only be created or disposed of in writing: s 23C(a) Conveyancing Act 1919 c. Declarations of trust over land must be evidenced (but not necessarily created) in writing: s 23C(a) Conveyancing Act 1919; Byrnes v Kendle d. The assignor must indicate an intention to immediately hold the property on trust for the intended beneficiary: Re Armstrong i. Specific words need not be used provided that the intention is clear: Richards v Delbridge e. The declaration need not be communicated to the assignee: Standing v Bowring 2. Transfer (assignment) a. Declaration (establish that donor intended recipient to take property as trustee); and b. Valid transfer of property to intended trustee (compliance with common law and statutory formalities incl assignment) i. Settlor must have done all they need to do to effect the transfer: Corin v Parron c. Declaration of trust must be made BEFORE transfer of property to be a complete and effective trust: Re Bowden d. Incorporation by reference – document must be in existence at time will executed and will refers to doc as an existing doc: In bonis Smart e. If trust by transfer fails, would-be trustee hold property on resulting trust for the settlor and must transfer back 3 The Three Certainties: Knight v Knight 1. Certainty of intention: a. Need not use the word ‘trust’: Re Armstrong b. Intention determined objectively: Byrnes v Keddie i. Subjective intention only relevant to sham trusts: Midlam v Wyatt c. Intention to be proved is an intention to impose on a property owner an obligation to apply the property for the benefit of beneficiaries or recognised charitable purpose i. Re Armstrong: did not intend to be absolute owner of term deposits he bought but imposed obligation on executor to have