Express trust ... 4
Definition ... 4
Certainty requirements ... 5
THREE certainties ... 5
Certainty of intention ... 5
Quistclose trust Æ co-existence of contract & trust ... 7
Certainty of subject-matter ... 8
Fixed & Discretionary trust ... 9
Certainty of objects ... 10
Requirements for Creating express trust ... 13
Trust created by self-declaration ... 13
Declaration of trust requirement ... 13
Formal Requirements ... 13
Trust created by transfer ... 14
Declaration of trust requirement ... 14
Formal Requirements ... 15
Formal Requirements ... 15
Conveyancing Act 1919 (NSW), s 23C ... 16
Cloak for fraud doctrine ... 17
Public policy & statutory provision ... 17
Testamentary trusts ... 19
Trustee duties ... 21
Duties on assumption of trusteeship ... 21
Duty to adhere to terms of the trust ... 21
Duty to get in the trust assets ... 21
Ongoing management duties ... 22
Duty to keep assets separate ... 22
Keeping & rendering accounts ... 22
Duty to give information to beneficiaries ... 23
Duties of performance ... 24
Duty of care ... 24
Duty to act impartially ... 24
Duty to act personally ... 25
Duty to consider exercise of powers ... 26
Trustee’s fiduciary obligations ... 27
Duties on winding up of a trust ... 28
Trustees’ powers ... 29
Exercise of power & review ... 29
Court intervenes on narrow grounds ... 29
Properly exercise of power ... 29
Absolute & unfettered discretions / fettered discretion ... 30
Court’s review of trustee’s discretion ... 31
Effect of improper exercise of discretion ... 31
Investment of trust fund ... 33
Sources & content of investment powers ... 33
Trustee duties in context of investment ... 33
Duty to invest trust funds ... 33
Duties of trustee in respect of power of investment ... 33
Law & equity preserved ... 34
Matters to consider when exercising power of investment ... 34
Ethical considerations in investment ... 35
Exercise powers in best (financial) interests of beneficiaries ... 35
Investment by charity trustees ... 36
Breaches of trust & compensable loss ... 37
Exculpatory provisions ... 38
Trustees’ rights & liabilities ... 38
Trustee’s personal liability ... 38
Right of indemnity ... 39
Sources for trustee’s indemnity for expenses: ... 39
Right to reimbursement / exoneration ... 39
‘Properly incurred’ expenses ... 39
REDUCE indemnity = IF breach ... 41
Liability of directors of trustee companies ... 41
Status of trustee’s right of indemnity ... 42
Creditors’ interest in trustee’s right of indemnity ... 42
Recovery against beneficiaries personally ... 43
Rules in Hardoon v Belilios (Abolished) ... 43
LIMITATIONS ... 43
Trustee Act 1925 (NSW), s 100A ... 44
Creditor’s rights to trustee’s rights against beneficiaries ... 44
Trustee’s right to impound (没收) beneficiary’s interest ... 45
right of contribution from co-trustees ... 45
2
right to recover overpayment ... 46
Right to seek directions / advice from court ... 46
Advice ... 46
Right to seek advice read in conjunction with s 85 ... 47
Defence for Breach of trust ... 48
Exculpation under the Trust Instrument ... 48
LIMITATIONS of exemption clause ... 48
Accountability of third party ... 49
Statutory exculpation ... 49
Wilful default ... 49
The general statutory defence Æ s 85 ... 50
Equitable defences ... 51
Consent ... 51
Acquiescence (默许) ... 52
Release ... 52
Remedies for breach of trust ... 53
Standing to sue ... 53
New trustees ... 53
Claims brought against third parties ... 53
Monetary remedy ... 54
Non-monetary remedies ... 54
Equitable remedy ... 54
Removal of trustee ... 54
Termination & Variation of trust ... 56
Termination & Rule in Saunders v Vautie ... 56
Rule in Saunders v Vautie ... 56
Fixed & Discretionary trust ... 56
Limits on its application ... 57
Variation of trusts ... 59
Application to court for variation ... 59
Tracing ... 60
What is tracing ... 60
Distinguishable from following & claiming. ... 60
Mixing money in a bank account ... 61
Three main considerations ... 61
Mixtures involving wrongdoer only ... 62
Irrebuttable presumption ... 62
Backwards Tracing ... 62
Lowest intermediate balance rule ... 63
Tracing into profits ... 64
Mixtures involving multiple Innocent Parties ... 65
Proportionate / Rateable Sharing (‘pari passu’ approach) ... 65
‘lowest intermediate balance’ / ‘rolling charge’ approach ... 65
Mixtures involving Innocent Recipients ... 66
Defences to tracing claims ... 67
Resulting Trust ... 68
Presumed resulting trusts ... 68
Purchase money & resulting trust ... 68
Purchase of property where title placed in name of ANOTHER ... 69
Joint purchase of property where title placed in joint names ... 69
Rebutting presumed resulting trust ... 70
Presumption of advancement ... 71
Rebutting presumption of advance ... 72
Automatic resulting trusts ... 72
Failure of express trust / Incomplete dispositions of beneficial interest ... 72
Residuary fund with NO instructions ... 73
Failure of basis = Quistclose trusts ... 74
Illegal purpose ... 74
Illegal purpose has been carried / NOT carried out ... 74
Constructive trusts ... 76
What is constructive trust ... 76
Institutional’ & ‘remedial’ constructive trust ... 76
Recognized categories ... 77
Common intention constructive trusts ... 77
Summary of the principle ... 77
TWO / THREE criteria ... 77
1ST ELEMENT: Common intention ... 77
2nd ELEMENT: Detriment ... 78
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The date common intention constructive trust takes effect ... 78
As a remedy for proprietary estoppel ... 78
The criteria ... 78
Alternatives to constructive trust ... 78
Personal & proprietary relief in proprietary estoppel ... 78
Unconscionability based / Baumgartner CT ... 79
Elements ... 79
1st ELEMENT: Failure of a joint endeavor ... 79
3rd ELEMENT: Contribution ... 80
Equitable adjustments ... 80
Classified as remedial trust ... 80
As remedy for breach of fiduciary obligation ... 81
Actual / possible conflict & misuse of fiduciary power ... 81
Bribes & secret commissions ... 82
As restitutionary remedy for unjust enrichment ... 82
Stolen money ... 82
ELEMENT of proprietary unjust enrichment claim ... 82
Non-contractual transfers of property payment ... 83
Contractual transfers of property ... 83
Doctrine of mutual wills ... 83
Property transferred under specifically enforceable contracts ... 84
Sell of land ... 84
Property other than land ... 85
Assignments of FUTURE property ... 85
Equitable Remedies ... 86
Personal & proprietary remedies ... 86
Objectives of equitable remedies ... 86
Specific performance ... 88
Prerequisites to award ... 88
Money Remedies: Accounts of profits ... 89
Basis for Calculating Account of Profits ... 89
Causative link ... 90
Allowances for honest / well-intentioned defendants ... 90
Money Remedies: Equitable compensation ... 92
Calculating Equitable Compensation ... 92
compensation for breach of TRUST ... 92
Duty to account ... 92
Substitutive compensation ... 93
Compensateon for breach of FIDUCIARY duty ... 94
Causation standard: but for / common sense ... 94
Common sense standard ... 95
‘But for’ test ... 95
Causative link between the wrong & loss ... 96
Bars to Relief ... 97
Laches ... 97
TWO Requirements ... 97
Acquiescence ... 98
Unclean hand ... 99
Connection ... 99
‘Depravity’ in a legal & a moral sense ... 99
Proportionality ... 99
‘wash her hands’ ... 100
Public interest ... 100
Hardship ... 100
Effect of relief on third parties ... 101
4
EXPRESS TRUST
Definition
Ford and Lee:
• Trust is an obligation enforceable in equity which rests on a person (the trustee) AS owner of some specific property (the trust property) to deal with that property
o for benefit of beneficiary) OR o for advancement of certain purposes
Re Scott [1948]
• The word ‘trust’ refers to: duty / aggregate accumulation (总积累) of obligations that rest upon trustee.
• That property he will be compelled to administer in the manner:
o prescribed by trust instrument, or
o IF NO specific provision written / oral OR to the extent that such
provision is invalid / lacking – in accordance with equitable principles.
• A trustee may be a beneficiary Æ advantages will accrue in his favour – to the extent of his beneficial interest.
THREE parties
® Settlor
• The settlor – creates the trust.
• Once settlor has created trust –NO rights in respect of trust property.
• Method for settlor to retain control:
o Expressly reserving a power in trust instrument – to vary / revoke trust.
o for settlor to be named as ‘appointor’
- discretionary trust deeds may confer power of appointment onto specified person – the ‘appointor’.
- The appointor may be given power to – replace trustee & add / remove people from class of eligible beneficiaries.
• Court can IGNORE a nominal settlor.
o instead determine whether the provider of substantial funds to trustee in fact exercises practical control of the funds – so as, in reality, to remain their owner (Webb)
o This is an example of law looking at substance of a transaction & NOT its form.
® Trustee
• The trustee (individual / corporation) – holds title to trust property AND must perform trust obligations.
• A trustee does NOT have to consent to his appointment – BUT IF NOT want to act as trustee, he must disclaim trusteeship (Mallot)
® Beneficiary
• The beneficiary (individual / corporation) – benefits from administration of trust.
• A trust can also benefit – charitable objects / non-charitable objects.
® Combined role
• Self-declared trusts:
o A settlor becomes a trustee – by declaring herself trustee of her own property for another.
• A settlor can be a beneficiary – although may attract adverse tax consequences
• A trustee can be a beneficiary:
o trust CANNOT be created – where a person is intended to be SOLE trustee & beneficiary
o a trust will terminate – when one person becomes SOLE trustee &
beneficiary (DKLR Holding Co (No 2))
