1. INTRODUCTION - The University of Queensland Law Web viewHenry VII transformed English Law ... If...
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LAWS3113 Law of Trusts A LAWS3113 Summary 1
Transcript of 1. INTRODUCTION - The University of Queensland Law Web viewHenry VII transformed English Law ... If...
LAWS3113Law of Trusts A
LAWS3113 Summary 1
TABLE OF CONTENTS
1. INTRODUCTION....................................................................................................... 5DEVELOPMENT OF THE COURT OF EQUITY..............................................................................5
Earl of Oxford’s Case [1615]...............................................................................................5Chancellery = court of conscience....................................................................................5
DIFFERENCE BETWEEN CL AND EQUITABLE REMEDIES:........................................................5FUSION?.......................................................................................................................................... 5INTRODUCTION TO TRUSTS:.........................................................................................................6
2. EQUITABLE MAXIMS.............................................................................................. 6EQUITY WILL NOT SUFFER A WRONG TO BE WITH A REMEDY...............................................6EQUITY FOLLOWS THE LAW.........................................................................................................6EQUITY WILL NOT ASSIST A VOLUNTEER...................................................................................6HE OR SHE WHO SEEKS EQUITY MUST DO EQUITY...................................................................6HE OR SHE WHO COMES TO EQUITY MUST COME WITH CLEAN HANDS................................7EQUITY ACTS IN PERSONAM.........................................................................................................7EQUITY LOOK TO INTENT RATHER THAN THE FORM, SUBSTANCE AND NOT THE FORM...7EQUITY LOOKS UPON THAT AS DONE WHAT OUGHT TO BE DONE.........................................7DELAY DEFEATS EQUITY...............................................................................................................7EQUITY IS EQUALITY..................................................................................................................... 7
3. EQUITABLE INTERESTS IN PROPERTY............................................................8WHAT IS AN EQUITABLE INTEREST IN PROPERTY?.................................................................8CLASSIFICATION OF EQUITABLE INTERESTS.............................................................................8
Equitable proprietary interest..........................................................................................8Mere Equity................................................................................................................................ 8Latec Investments v Hotel Terrigal.................................................................................8Personal equity......................................................................................................................... 9
CREATION OF EQUITABLE INTERESTS........................................................................................9EQUITABLE INTEREST OF PURCHASER.......................................................................................9PRIORITY BETWEEN INTERESTS...............................................................................................10
4. ASSIGNMENTS OF PROPERTY..........................................................................10DEFINITION OF ASSIGNMENT:...................................................................................................10
Norman v FCT........................................................................................................................ 10Shepherd v FCT...................................................................................................................... 10Williams v Commis of Inland Revenue.........................................................................11
LEGAL ASSIGNMENT...................................................................................................................11Elements of legal assignment:.........................................................................................11Advantages and Disadvantages of legal assignment............................................11
EQUITABLE ASSIGNMENT...........................................................................................................11Elements of assignment in equity..................................................................................11Milroy v Lord.......................................................................................................................... 11Anning v Anning.................................................................................................................... 12Corin v Patton........................................................................................................................ 12S200 PLA – voluntary assignment.................................................................................12Expectancies........................................................................................................................... 12Rights assignable in equity...............................................................................................12Notice of equitable assignment......................................................................................12
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Advantages and disadvantages of equitable assignment...................................12Priority between successive equitable assignments:.............................................13
5. NATURE/CLASSIFICATION OF TRUSTS.........................................................13WHEN DOES A TRUST COME INTO EXISTENCE?.....................................................................13DEFINITION OF TRUST...............................................................................................................13
3 parties to trust:.................................................................................................................. 13Equitable personal obligation.........................................................................................13
CLASSIFICATION OF TRUSTS:.....................................................................................................13Express trust........................................................................................................................... 13Resulting trust........................................................................................................................ 14Constructive trust................................................................................................................. 14
OTHER TYPES OF TRUSTS:.........................................................................................................14POWERS OF APPOINTMENT.......................................................................................................14
6. THE 3 CERTAINTIES............................................................................................152 WAYS OF CREATING AN EXPRESS TRUST:............................................................................15REQUIREMENTS FOR CREATION:..............................................................................................153 CERTAINTIES – KNIGHT V KNIGHT, PASCOE V BOENSCH................................................15
Certainty of intention.......................................................................................................... 15Certainty of subject matter.............................................................................................. 16
7. BENEFICIARIES OF TRUSTS..............................................................................16CERTAINTY OF OBJECTS.............................................................................................................16TRUST POWER.............................................................................................................................17MERE POWER.............................................................................................................................. 17HOW DOES COURT WORK OUT WHETHER MERE OR TRUST POWER?................................17DISCRETIONARY TRUSTS............................................................................................................17PURPOSE TRUSTS........................................................................................................................18GIFTS TO UNINCORPORATED ORGANISATIONS.......................................................................18
Leahy v A-G (NSW)............................................................................................................... 18Bacon v Piantai...................................................................................................................... 19S33Q Succession Act............................................................................................................ 19
8. CHARITABLE TRUSTS......................................................................................... 19NATURE OF A CHARITABLE TRUST...........................................................................................19
Differences with express private trust.........................................................................19Relevance of characterization as charitable trust?...............................................19
TEST FOR BEING CHARITABLE:.................................................................................................19Income Tax Commissioner v Pemsel.............................................................................20Central Bayside GP Assoc.................................................................................................. 20AidWatch v Commis for Tax.............................................................................................20Relief of poverty..................................................................................................................... 20“Aged”........................................................................................................................................ 20“Sickness”................................................................................................................................. 21“Education”............................................................................................................................. 21Advancement of religion.................................................................................................... 21Public Benefit.......................................................................................................................... 21Other benevolent purposes...............................................................................................22
MIXED CHARITABLE AND NON-CHARITABLE PURPOSES......................................................22FAILURE OF CHARITABLE PURPOSE.........................................................................................22
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REGULATORY DEVELOPMENTS.................................................................................................23
9. FORMALITIES IN THE CREATION OF TRUSTS.............................................23REQUIREMENT OF FORM............................................................................................................23REQUIREMENT OF STATUTE......................................................................................................23EXEMPTIONS FROM WRITING REQUIREMENT........................................................................24RESULTING TRUSTS....................................................................................................................24
Automatic resulting trusts................................................................................................24Presumed resulting trusts.................................................................................................24
REBUTTAL OF PRESUMPTION OF RESULTING TRUST............................................................25TRUSTS OF LAND.........................................................................................................................25DISPOSITION OF EQUITABLE INTEREST...................................................................................25
Application of s11(1)........................................................................................................... 25EQUITY WILL NOT PERMIT A STATUTE TO BE USED AS AN INSTRUMENT OF FRAUD......26COMMON INTENTION TRUST.....................................................................................................26
10. TESTAMENTARY TRUSTS................................................................................26FORMAL REQUIREMENTS:..........................................................................................................26
Hensler v Padget................................................................................................................... 27Re Garris................................................................................................................................... 27
REVOCATION OF WILL................................................................................................................27PROPERTY THAT CAN BE DISPOSED OF BY WILL...................................................................27NATURE OF TESTAMENTARY DISPOSITION.............................................................................27NEED FOR TESTAMENTARY CAPACITY....................................................................................28MINORS.........................................................................................................................................28TESTAMENTARY TRUST............................................................................................................. 28DELEGATION OF TESTAMENTARY POWER..............................................................................28SECRET TRUSTS.......................................................................................................................... 29
Elements of secret trusts....................................................................................................29Blackwell v Blackwell......................................................................................................... 29Voges v Monohan.................................................................................................................. 29
MUTUAL TRUSTS.........................................................................................................................29
11. INVALIDATING FACTORS................................................................................293 TYPES OF INVALIDATING FACTORS:......................................................................................29POLICY BEHIND RULE AGAINST PERPETUITIES......................................................................30RULE AGAINST PERPETUITIES...................................................................................................30PROGRESSIVE EVOLUTION OF RULE.........................................................................................30RULE IS CONCERNED WITH THE VESTING OF PROPERTY.....................................................30FUTURE GIFTS..............................................................................................................................30EXCEPTION TO RULE AGAINST PERPETUITIES........................................................................30PERPETUITY PERIOD..................................................................................................................31LIVES IN BEING............................................................................................................................31
Re v Clarke............................................................................................................................... 31The rule in Andres v Partington.....................................................................................31
DISPOSITION TO CLASS.............................................................................................................. 31WIDOWER.................................................................................................................................... 32RULE IS CONCERNED WITH POSSIBILITIES AND NOT PROBABILITIES................................32PRESUMPTION AS TO FUTURE PARENTHOOD – PLA S212................................................32OTHER REFORMS – S212 PLA................................................................................................32“WAIT AND SEE”........................................................................................................................ 32
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Example of ‘wait and see’ v CL........................................................................................32AGE REDUCTION..........................................................................................................................33CLASS GIFTS.................................................................................................................................33COMMON LAW 4 STEP PROCESS:..............................................................................................33CAN STATUTORY MODIFICATION SAVE THE GIFT?................................................................33RULE AGAINST PERPETUAL TRUSTS........................................................................................34PUBLIC POLICY............................................................................................................................ 34ILLEGALITY...................................................................................................................................34
12. VARIATION AND TERMINATION OF TRUSTS............................................34INHERENT POWER OF COURT...................................................................................................34EXPRESS POWER TO VARY TRUSTS..........................................................................................35
Variation of superannuation trusts..............................................................................36Family law............................................................................................................................... 36
TERMINATION OF TRUSTS.........................................................................................................36
13. COMPLETE CONSTITUTION OF TRUSTS.....................................................37LEGAL TRANSFER OF TRUST PROPERTY..................................................................................37NECESSITY TO COMPLETELY CONSTITUTE TRUST.................................................................37ENFORCEABILITY OF INCOMPLETELY CONSTITUTED TRUSTS.............................................38MARRIAGE CONSIDERATION.....................................................................................................38TRUSTS OF BENEFIT OF COVENANT.........................................................................................38
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1. INTRODUCTION
Development of the Court of Equity
- Henry VII transformed English Law – developed royal courts of justice –the Normans who made English law a national law
- Chancellery emerged as a distinct court of equity
Earl of Oxford’s Case [1615]
- King James ruled in favour of the Chancellery – meant that no one would challenge the chancellery again
Chancellery = court of conscience
- Court applied a moral test – different from CL- Courts of equity to examine conduct and whether fair or reasonable - Decide whether moral impropriety- Discretion not relevant in Cl but relevant in equity- Equity to operate on the conscience of the owner of the legal interest, in
the case of trust, the conscience of the legal owner requires him to carry out the purposes for which the property was vested in him
Difference between CL and equitable remedies:
- Common Law:o Damageso Ejectment
- Equity:o Compensationo SPo Injunctiono Rectificationo Account for profitso Declaration
Fusion?
- Fusion fallacy – are common law and equity fused into a new component of law?
o Murakamiv v Wiryedi – rejected the fusion fallacy approacho Modern approach – no fusion o S5(11) Judicature Act 1876 (Qld) – where conflict between law and
equity, equity will prevail
Introduction to trusts:
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- Trusts defined in Trusts (Hague Convention) Act 1991 (Cth) o Article 2: “trust refers to the legal relationships create intervivos
or on death – by a person, the settler when assets have been placed under the control of a trustee for the benefit of a beneficiary or for a specified purpose”
- Characteristics of a trust:o Trust assets are separate funds and not part of trustee’s estateo If trustee becomes bankrupt, bankruptcy laws will not apply to
trust’s assetso Trustee = legal owner of trust assetso Trustee has power to dispose of assets in accordance with terms of
trust and special duties imposed on them by law
2. EQUITABLE MAXIMS
Equity will not suffer a wrong to be with a remedy
- Chancellery originally intervened where no remedy at CL via injunction or SP
- Demonstrates flexible nature of the courts of equity- Warman International v Dwyer (1982)
o Man worked for company and was privy to sales contract beween company and consumer
o Decided to leave company and open up own business, took consumer with him
o Company sued him for profits gained in breach of fiduciary relationship and exploitation of goodwill
Equity follows the law
- Developed after Earl of Oxford’s Case to reconcile tensions between law and equity
- Courts will recognise legal rights such as legal title- Doesn’t follow law blindly, where unconscionability – scope for
intervention
Equity will not assist a volunteer
- Volunteer = someone who ahs not provided consideration- Maxim not strictly applied – eg. where beneficiaries under express trust –
volunteers but can still enforce rights- Generally applied where courts will not enforce gifts of property
He or she who seeks equity must do equity
- Person seeking relief must be ready and willing to fulfill own legal and equitable obligations
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- King v Poggiolio Courts could not award SP or damages in equity as P was not
shown to be ready and willing to perform
He or she who comes to equity must come with clean hands
- P seeking equitable relief must not have engaged in improper conduct regarding the matter
- However, sometimes where P has engaged in improper conduct court may be prepared to grant relief if Ps disgorge themselves from wrongful benefit
- Rhodes v Badenacho Ps refunded money that they were not entitled to so remedy was
provided
Equity acts in personam
- Originated in days where there were two actions: state or individual- Concerns with individual- Penn v Lord Baltimore
o Equity maintains ability to make orders even if outside jurisdiction
Equity look to intent rather than the form, substance and not the form
- Courts of equity are not concerned with unnecessary formalities- Milroy v Lord
o However, court cannot look past transactional provisions – eg. production of transfer document and share certificate
Equity looks upon that as done what ought to be done
- Some cases relief will be granted on assumption that legal or equitable obligation has been completed
- Walsh v Lonsdaleo D entered into lease and paid considerationo Lease required to comply with terms in Property Act to be
enforceable at lawo D didn’t pay rent and argued no leases as didn’t comply with termso Equity held lease regarded as being notionally executed because
tenant was in possession and had paid rent
Delay defeats equity
- If party delays in seeking relief court will take this into account
Equity is equality
- Maxim often applied where 2 or more people have intention to share property equally and equity will provided comp to ensure that this occurs
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3. EQUITABLE INTERESTS IN PROPERTY
What is an equitable interest in property?
- Equitable interests are proprietary in nature- Ability of person to exclude others from the right of that thing and
transfer it at will- Yanner v Eaton
o Property is a description of a legal relationship between a thing and an individual
- Will not always be both equitable and legal interest in property – Commission of Stamp Duties v Livingston
Classification of equitable interests
- 3 types:o Equitable proprietary interesto Mere equityo Personal equity
Equitable proprietary interest
- Interest recognised by court as having equitable jurisdiction- Eg. Interest of beneficiary under fixed trust
o Trustee has legal title and beneficiary has some rights to that property
- Has equitable remedies open to them
Mere Equity
- Equitable interest less than a equitable estate but more than a personal right of action against a person
- Right to seek equitable interest to acquire proprietary interest- Not regarded by court as having property as such, requires court
proceedings to establish this- Can seek relief to set aside unconscionable transaction- Mere equity capable of being transferred to 3rd party
Latec Investments v Hotel Terrigal
- Facts:o HT had mortgaged property to Lateco HT couldn’t make paymentso Latex seized property and sold in sham auction o Transferred property to Southern Hotels, a subsidiary of Latec –
thus selling it to themselves at gross undervalue
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This was in breach of their equitable obligationo SH charged property to MLC Insurance o SH liquidated
- Ruling:o Agued sale of land of Latec to SH was nullityo Argued action of hotel was unconscionable because of sham
auctiono HT were given ‘equity in redemption’ subject to MLC’s interest as
an innocent party
Personal equity
- Right to seek equitable relief but cannot lead to acquisition of a proprietary right
- Cannot be assigned
Creation of equitable interests
- Equity will recognised interest in places where law doesn’t, for example, due to lack of form, such as an equitable lease
- Walsh v Lonsdaleo D entered into lease and paid considerationo Lease required to comply with terms in Property Act to be
enforceable at lawo D didn’t pay rent and argued no leases as didn’t comply with termso Equity held lease regarded as being notionally executed because
tenant was in possession and had paid rent - Can also arise due to implication
o Eg. Vendor’s equitable lien implied where purchaser has taken transfer of estate but not paid whole purchase price – vendor has equitable lien to ensure payment of deposit even if contract is terminated – Hewett v Court
- Person falling under class of objects of discretionary trust has no proprietary interest in assets of trust only mere expectancy or hope – Kennon v Spry
- Beneficiaries of unadministered estates do not have equitable interests – just right to compel due administration- Livingston v Commission of Stamp Duties
Equitable interest of purchaser
- Vendor holds property on constructive trust for purchaser who has paid consideration and where contract is capable of SP – gives purchaser equitable interest
- Lysaght v Edwardso “Moment valid contract of sale, vendor becomes in equity, trustee
for the purchaser of the estate sold”- KLDE Pty Ltd v Commission of Stamp Duties
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o Contract for sale – deposit of 10% Paido Purchaser liquidated – assets distributed to shareholderso Court held beneficial ownership held by vendor until full amount
paid
Priority between interests
- Legal interest will yield to equitable interest where legal owner created equitable interest through fraud or negligence
o Northern Counties Insurance Co v Whipp Legal owner lost priority as negligent by not securing
certificate of tite which led to rogue getting loan- Legal interest will yield to equitable interest where equitable interest was
created firsto UNLESS, person who acquires legal interest is a ‘bona fide
purchaser for the value of the land without notice’ – Pilcher v Rawlins
- Where two equitable interests, the first in time will prevail o Will examine whether holder of prior interest has done anything
or failed to do anything to create the later interest Eg. Delay – Latec Investments Eg. Parting with transfer docs – Heid v Relance
4. ASSIGNMENTS OF PROPERTY
Definition of assignment:
- Norman v FCT:o “Immediate transfer of proprietary right from assignor to
assignee”
Norman v FCT
- Attempt to assign interest and dividend from shares to avoid tax- Dividends were held to be expectancies – property that may or may not
arise in the future- Wife (receive or interest and dividend) was volunteer – equity does not
assist a volunteer- Held: dividend couldn’t be assigned – merely expectancy
Shepherd v FCT
- Inventor entitled to royalties- Tried to assign “right, title and interest” in 90% of royalties over 3 years- Assignment made under deed but beneficiaries did not provide
consideration – volunteers
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- Tax commission argued beneficiaries = volunteers and royalties = expectancy
- Held: Assignment was of contractual right not royalty- Need to look at intention of parties
Williams v Commis of Inland Revenue
- Attempted assignment of first $500 income from trust fund- Held: assignment = ineffective – no guaranteed income
Legal assignment
- s199 PLAo Equuscorp v Haxton held that this section did not affect equitable
assignments
Elements of legal assignment:
1. Absolute assignment o Not revocable, not condition, not operate as a charge - Equuscorp
2. Debt or other chose in action can be assigned o Eg. interest of beneficiary under trust can be assigned
3. Writing signed by assignoro Oral assignment does not satisfy s199PLA
4. Notice has to be given to debtoro Giving of notice amounts to receiving – Leveraged Equities v
Goodridge
Advantages and Disadvantages of legal assignment
- Advantageso No requirement to be supported by consideration
- Disadvantageso Cannot assign part of debt – must be whole – s 199 PLAo Identity of assignee not kept confidential
Equitable assignment
Elements of assignment in equity
1. Clear intention to assign2. Subject matter must be declared with precision and certainty
Milroy v Lord
- Purported voluntary assignment of 50 shares- At law: no transfer of shares – no transfer doc- Dividends had been paid under assignment
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- Held: Ps = volunteers, to make voluntary assignment effective assignor must have “done everything necessary to make assignment”
Anning v Anning
- Days before he died H made deed to W and children of all property inc bank acct
- Held: not effective to transfer property, could not operate as will
Corin v Patton
- Memo of transfer signed but not registered- Asignee = volunteer – invalid transfer
S200 PLA – voluntary assignment
- Voluntary assignment is effective and complete as soon as everything possible done by assignor
Expectancies
- Cannot be subject of assignment at law- But can be subject of contract to be performed in future- Tailby v Official Receiver
o Can have assignment of expectancy in equity where valuable consideration has passed
Rights assignable in equity
- Part of a debt (consideration not necessary) – Shepherd v FCT- Interest of beneficiary under a trust – Controller of Stamps
Notice of equitable assignment
- Do not have to give notice of equitable assignment - Thomas v NAB- Do at law – s199 PLA
Advantages and disadvantages of equitable assignment
- Advantages:o Part of debt can be assignedo Writing not required, provided supported by considerationo Not subject to PLAo Assignment can be made for security
- Disadvantageso Need assignor to be party to any actiono Assignment can be subject to any equities which arise after
assignment but before the debtor has notice of assignment
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Priority between successive equitable assignments:
- Dearle v Hallo Priority can be postponed if fail to give notice
5. NATURE/CLASSIFICATION OF TRUSTS
When does a trust come into existence?
- When established by settlor- Operation of law to resolve a property dispute- Recognition of proprietary rights of a person who has contributed to
property- Prevent the legal owner of land from unconscionably denying the rights of
holders of equitable interests in land
Definition of trust
- Equitable obligation where trustee hold property on benefit for beneficiaries or for a charitable purpose
- “Relationship where legal title vest in one person (trustee) and equitable title in another (beneficiary) – Hardoon v Belilos
3 parties to trust:
- Settlor – creator of trust- Trustee – one who holds legal title- Beneficiary charitable purpose – equitable title holder – right to due
administration but not regarded as proprietary interest – Kennon v Spry
Equitable personal obligation
- Trustee has obligation to act in benefit of beneficiaries or charitable purpose
- Fiduciary obligation – must be exercised in good faith - Duties normally stated in trust deed – if not can rely on statute
Classification of trusts:
Express trust
- Settlor expresses intention,- Can be classified as either:
o 1) Fixed or Beneficiary is certain and has proprietary interest Eg. “ To be held in trust for A and B in equal shares” Also defined in statute
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o 2) Discretionary Trustee has absolute discretion as to whether beneficiary
will be allocated income/capital from the trust
Resulting trust
- Court implies intention- Failure to create express trust- Often where property held on trust for settlor and evident that they did
not intend trustee to have beneficial ownership- Can be classified as either:
o 1) Automatic resulting Eg. A vests property in B for benefit of C and C dies, benefit
goes back to Ao 2) Presumed resulting
Eg. A provides B with funds to purchase property in both names but B purchases in their name, presumed B in trust for A – Calari v Green
Constructive trust
- Often declared irrespective of intention of the parties- Often where decided that it would be unconscionable for person to hold
property without recognising person’s beneficial interest – Dodds
Other types of trusts:
- Inter vivos trusto Where settlor transfers property to someone to hold in trust for
someone elseo Eg. A gives $500 to B to hold on trust for C
- Testamentary trusto Trust created under will
- Superannuation trust o Superannuation Act 1933 (Cth)
Powers of appointment
- Powers of appointment are powers vested in individuals to deal with or dispose of property that is not their own, acting on behalf of someone else
- Eg. power of attorney- Difference to trusts:
o Whilst trusts are imperative, powers are permissive- Classified:
o General – power to appoint to anyone in the world including themselves
o Special – power to appoint to 3rd persons onlyo Hybrid – power to appoint to anyone bar a certain class or group
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6. THE 3 CERTAINTIES
2 ways of creating an express trust:
1. Declaration of trust2. Transfer of property to trustee
Requirements for creation:
1. 3 certainties2. Trust is completely constituted3. Complies with statutory requirements4. No invalidating factors
3 certainties – Knight v Knight, Pascoe v Boensch
1. Certainty of intention2. Certainty of subject matter3. Certainty of object
Certainty of intention
- Bahr v Nicolay (No 2)o A had option to reacquire land at the end of the lease to Bo Intervening event occurred before end of lease and B sold land to
another Co C were aware of optiono When A sought to exercise option, C refusedo Held: A could recover property – clear intention to create trust
- Re Adams and the Kensignton Vestryo T gave estate to wife “in full confidence that she will do what is
right”o Court held no trust obligationo Words “in full confidence” were uncertain
- Dean v Coleo Words “trusting to her that she will divide in my fair, just and
equal shares between my children” - words of confidence and not obligation
- Hoyes v National Heart Foundationo T left estate to daughter “on the understanding” that would give to
charitieso Held to be trust despite no use of the word
- Barclays Banko Company A provided Company B with money to pay dividends to
shareholderso Agreement that this money would not become assets
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o Bank was given notice of thiso Money not paid for dividends because Company B liquidatedo Held: trust for payment of shareholders and secondary trust in
favour of bank if dividends not paid- Aus Elizabethan Theatre Trust Co
o Donations made to AETT with preference made to specific organisation
o Held: gifts were unconditional and did not create trust – no certainty of intention – merely preferential
- Re Kayfordo Mail order company placed customer’s payments in trust accounto On liq funds were held in trust for customerso Held: trust created – company manifested clear intent to create
trust - Commissioner of Stamp Duties v Joliffe
o H opened bank acct in name of wife to avoid stat provisionso Signed stat dec saying bona fide trustee for wifeo Held: despite doc material, H did not intend to create trust – to
avoid prohibition
Certainty of subject matter
- Hunter v Mosso Trust declared for over 50 shares in companyo No particular separation of shareso Held: valid trust – all of the same class
- Re Golayo Made trust of ‘reasonable income/o Held: valid gift – reasonableness implied question of fact – open to
beneficiaries or could go to court to decide- Assoc Alloys
o Retention of ownership clause in sale of goods – would remain with seller until payment was received
o Proportion of proceeds received by buyer would be subject to trusto No req for money to be kept in separate bank accto Held: property was ascertainable – proportion of proceeds
received by buyer
7. BENEFICIARIES OF TRUSTS
Certainty of objects
- Object = beneficiary or beneficial purpose- Identity must be clear- Morice v Bishop of Durham
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o Provided to bishop “for such objects of benevolence and liberality as he in his own discretion shall approve of”
o In prev case law benevolence = charitableo Held: Court could not exercise control, therefore the objects we’re
certain, lack of enforceability inhibits judicial control- Mere fact that do no know who beneficiaries are is no longer essential to
trust- Sufficient that provisions of the trust ensure that upon date of
distribution the beneficiaries can be ascertained with certainty
Trust power
- Donee is required to exercise power by choosing which object from a class of beneficiaries should be benefitted
- If Donee fails to exercise, court may do so- Beneficiaries do not have any right to property until power is exercised,
but have right ot due admin of trust
Mere power
- Donee does not have obligation to exercise power in favour of a member of the class
- Presence of people who will take it if the discretion is not exercised in favour of the class members
- If done fails to exercise, beneficial estate vests in settlor by way of resulting trust
How does court work out whether mere or trust power?
- If language is imperative – likely to be held as trust power- If discretionary – like to be mere power- BUT language not always decisive- Court looks at doc as whol- Gift over clause – often indicates mere power
Discretionary trusts
- Within discretionary trusts there are distinctions depending whether trust or mere power
o Trust power – given to trustee who is obliged to exercise discretion
o Mere power – trustee can choose whether or not to exercise discretion, if not exercised most often will take effect in ‘gft over clause’
- Re Gulbrenkiano Settlor established trust for son or any person whose house his son
was residingo Regarded as mere power, although had to be exercised as result of
fiduciary obligation
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o “Mere power is valid if can say with certainty whether or not any given individual is a member of the class but do not have to ascertain every member of the class”
o Held: not necessary for court to determine every member of class but just whether individual a member or not
- McPhail v Doultono Settlor wanted to establish trust for employees of company and
their relative dependentso Was to be in amounts as trustee saw fit o Court held did not require full list of names for this to be possible
and did not need to be equal
Purpose Trusts
- Trusts for non-charitable purpose is not valid because no one has standing to enforce it,
- However, exceptions:o Trusts for upkeep of specific animals
Re Deano Trusts for erection of graves/monuments
Valid if kept within perpetuity period Examples of invalidity:
Pooleyo Trust for erection of monument dedicated to
child in cemetery Re Boning
o Protecting property for 20yr after deatho Trusts for purposes of unincorporated non-charitable associationso Miscellaneous cases
Gifts to unincorporated organisations
- Unincorporated org is one where 2 or more persons bound for common purpose which generally has rules over its control
- Not a separate legal entity and cannot hold property or be subject to legal rights
- Eg. Club or society- Property cannot be left to unicorporated org- BUT can give gift if:
o 1) Gift to indiv memberso 2) Gift to members subject to the rules of the assoco 3) Gift for continuing purposes of the assoc
Leahy v A-G (NSW)
- Testator provided by will that property be held on trust for “nuns of Catholic church or Christian brothers as executors and trustees shall
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elect” and residue of estate to build new convent or alter existing buildings
- Held: gift was to selected order and not to members of order itself – held to be a trust – members spread all over world – not immediate beneficial gift
- Property was gift – could not be said to benefit all members
Bacon v Piantai
- Gift to communist party not valid- “To communist party for sole use and benefit”- Could it be construed as gift to members?
o “Gift to unicorp org prima facie construed as gift to member BUT if disposition amounts to a trust for benefit of both present and future or not for indiv but for some purpose gift will not be regarded as charitable”
- Factors to look at:o Form of gifto Number/disposition of memberso Subject matter of gifto Capacity for member to put end to assoc and distribute assets
- Held: to be bequest to present and future members for purposes of party – not construed as gift to indiv
- Political purpose was not valid charitable purpose
S33Q Succession Act
- Can save gift to unicorp org by classifying it as an augumentation of the funds of org
8. CHARITABLE TRUSTS
Nature of a charitable trust
- Express trust created for charitable purpose- Eg. A transfers $1million to Uni of Bris to be used to create new
scholarship
Differences with express private trust
- Must be certainty of intention and subject matter- No need to stipulate which beneficiaries will benefit – just valid charitable
purpose- Absence of named beneficiaries does not mean it will not be enforced – A-
G will enforce the trust
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Relevance of characterization as charitable trust?
- Tax concessions- Not subject to rule against perpetuities – could in theory last forever
Test for being charitable:
- For trust to be regarded as charitable it must come within ‘spirit and intent’ of Statute of Charitable Uses 1601
o Relief of aged, impotent and poor peopleo Maintenance of sick and maimed soldiers and marinerso Schools of learning, free schools and scholars in uniso Repair of bridges, ports, havens, causeways – public infrastructureo Education and preferment of orphanso Maintenacne of house of correctiono Marriages of poor maids
Income Tax Commissioner v Pemsel
- Redefined def. of charity:o 1) Trusts for relief of povertyo 2) Trusts for advancement of educationo 3) Trusts for advancement of religiono 4) Other purpose beneficial to the community
Central Bayside GP Assoc
- Non-profit company whose object was to improve health of community- Officers were largely funded by Cth- Lower courts held if link with gov could not be charity- HC rejected this saying that its key aim was improving care = charitable
AidWatch v Commis for Tax
- Promotes advantageous relief of foreign aid- Engages in advocacy as to how funds should be allocated- FC said purpose was political – influence to change policy
Relief of poverty
- Does not require destitution- Downing v Fed Commis for Tax
o Trust for amelioration of condition of families of ex-servicemen = trust for relief of poverty
- Re Gwyono Reverend to provide clothing for boys in community not supported
by charitieso Held to be invalid as non indication that need was a feature
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“Aged”
- Hildero House and land gifted to be used for nurses or elderly womeno Held: accepted as valid trust, no need for extra element of poverty,
need or adversity etc.
“Sickness”
- Resch’s Will Trustso Left residue of estate to hospitalo Fact hospital charges fees did not deprive it of a charitable nature –
valid gift
“Education”
- Not just confied to schools- Promotion of the arts = charitable
o Perpetual Trustee v Gorth – gift of Archibald Prizeo Re Municipal Orchestra – gift to orchestra – public benefit
- Re Hopkins Will Trustso Society behind working out where Shakespeares works came fromo Held: pure research will be for education as long as published
Advancement of religion
- Church of the New Faith v Commissioner of Pay-roll Taxo Religion requires:
1) Belief in supernatural being, thing or principle and 2) Acceptance of canons of conduct in order to give effect to
that belief - Roman Catholic Archbishop of Melbourne v Lawlor
o Trust must actually advance religion o Gift to Catholic daily newspaper was not confined to teaching
catholic doctrine- Dunne v Byrne
o Bequest to RC Archbishop of Brisbaneo Possible for funds to be used for more than just the advancement
of religion- Private religious ceremonies can be charitable – Crowther v Brophy
Public Benefit
- Charitable trust must be for public benefit, presumed in some cases for relief of poverty, advancement of religion and education
- Jensen & Ors v BCCo Religious fellowship – Brethren
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o Exclusivity of Brethren meant it was public worship/benefit- Re Comption
o Trust to provide for education of children of 3 familieso Not public benefit – only a small section of public
- Oppenheim v Tobacco Industrieso Trust provided for education of children of employeeso > 11 000 employees o Not regarded as section of the public – beneficiaries must not be
numerically determinable- Dingle v Turner
o Trust for poor employees held to be charitable purpose
Other benevolent purposes
- Incorporated Council of Law Reportingo Production of law reports = benefit to whole community
- Bathurst CCo Public infrastructure = public benefit
Mixed charitable and non-charitable purposes
- Trust for both charitable and non-charitable purposes used to be held to be non-charitable
- If uses word charity courts will construe as charitable unless there is a contrary indication
- Chicester Diocesan Fund v Simpsono Trust for ‘charitable or benevolent circumstances’ was not held to
be a charitable purpose- Congregational Union v Thistlewaite
o Trust for religious group which had objects of “the preservation of civil and religious liberty” and “maintenance of philanthropic agencies”
o Objects were non-charitable but were construes as ancillary to religious objects of the union
- Trusts Act 1973 s104o Trust not invalid merely because its terms extend to both
charitable and non-charitable purposeo Trust shall be construed as if no application of the trust property
for a non-charitable purpose should be allowed - Roman Catholic Archbishop of Melbourne v Lawlor
o Leg cannot be applied where charitable and non-charitable purpose cannot be separated
Failure of charitable purpose
- If impossible or impractical to carry out charitable purpose trust may be saved under cy-pres doctrine
- Doctrine is inherent chancellery doctrine now based on s105 Trusts Act
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- Re Anzac Cottage Trusto Purpose was to provide housing for homeless widows and
dependents who died in WWIo Dominant purpose of trust was fulfilled – no longer able to
advance purpose o Court held property could now be applied cy-preso No indispensible requirement that money be used to provide for
funds of the dependends of WWIo General charitable intention which can be fulfilled by providing for
dependents of more recent conflicts- Is it impossible or impractical direction? Is it an indispensible part of the
trust?o If yes then Cy pres can be applied
- AG v Perpetual Trustee Coo T left farm to train ‘orphan lads’ o Farm was impractical for purposeo However use of farm was not ‘indispensible part of trust’
- Re Lysaghto Money left to Royal College of Surgeonso Had discriminatory provisiono College disclaimed gift rather than give effect to discrimination
- Phillips v Robertso Left property to improve biblical knowledge by establishing a new
churcho Held to be impractical to establish new churcho Yet still expressed charitable intentiono Applied in another way
Regulatory developments
- Established ACNC – Australian Charities and Not for profit Commission- Charities use it for access to Cth tax concessions- This year draft was release a draft of leg to provide a statutory definition
of charity
9. FORMALITIES IN THE CREATION OF TRUSTS
Requirement of form
- Generally speaking, trust can be created in any form:o Deedo Willo Simple writingo Parol/word of mouth – Kennon v Spry
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Requirement of statute
- Rule has been modified by statute in relation to:o Trusts of land – PLA s11(1)(b)
Has to be in writing and signedo Assignments or dispositions of existing equitable interests – PLA
s11(1)(c) Signature and writing
o Testamentary trusts – Succession Act 1981 Will must be in writing and signed by testator and executed
in accordance with act
Exemptions from writing requirement
- PLA s11(2)o Resulting trustso Implied trustso Constructive trusts
All trusts imposed by court and not express trusts
Resulting trusts
- Implied by the courts- Resulting trusts classified as either:
o Automatic resulting trustso Presumed resulting trusts
Automatic resulting trusts
- Where settlor has failed to dispose of beneficial interest- Pugh’s Will Trusts
o P appointed solicitor as trustee and executor – not to take beneficial interest
o Property left to trustee to dispose of at discretiono Held not to be trust – no instructions as to residuary estateo Failure of certainty of objectso Residual estate was held on resulting trusts for next of kin of
testator- Re Trustess of Abbott Fund
o Automatic resulting trusts are sometimes imposed hwere surplus assets in fund and where trustee has more than sufficient assets to satisfy express trust
- Gillingham Bus Disaster Fundo Donations for memorial fundo Smaller donations made by unknown personso Held: surplus was donors if could be identified as had given for
particular purpose- Re West Sussex Constabulary Widows
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o Fund to be wound up o Rules said members couldn’t benefit, only widowso Money was held should go to donors
Presumed resulting trusts
- Property purchased in ‘name of another’ – Calverley v Greeno Equity adopts policy that if provided consideration prima facie you
will be entitled to ito Often depends on intention of purchasero Held: if no discernible intention then resulting trust in favour of
purchasero Man and woman lived together – man making payments – no
presumption of advancement for de facto This has since been changed by leg
- Napier v Public trusteeo Man purchased in name of de facto wife who died and left house to
3rd partyo Held: when property transferred in name of someone else without
consideration there is presumption transferee will hold property on trust for transferor
Can be rebutted where ev idence of advancement – ie H puts in name of W
Rebuttal of presumption of resulting trust
- Russell v Scotto Joint account between lady and nephewo Court had evidence of lady saying that on her death money would
go to nephewo Prima Facie as lady had provided money should go to her estateo But evidence suggested nephew had interest
- Re Bulankoffo Where gift made from parent to child – presumed to method of
intended advancement- Nelson v Nelson
o Woman obtained financial benefit from gov and made false declaration
o Put house in name of children to get benefito Aus recognised mother’s equitable interest and awarded relief on
the basis that she must repay interest on loan
Trusts of land
- PLA s11(1)(b)o 1) Declaration of trust – where one declares ptoperty will be held
for someone else – Kenneth v Spryo 2) Land
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o 3) Proved by writing o 4) Who is entitled to that land
Disposition of equitable interest
- PLA s11(1)(c) o 1) Disposition – defined in Sch 6
Note: dif definition to Succession Acto 2) Equitable interesto 3) Subsisting at time of disposition
Application of s11(1)
- Will apply where a beneficiary under trust assigns or transfers his/her interest in trust
o ‘Disposition’ for purposes of s11- Qld requirement: needs to be proved by some writing and signed by
person disposing of interest- Gray v IRC
o Oral direction to trustees to hold on trusts for another was an attempted disposition and was void
- Applies to both land and personalty- Vandervell v IRC
o Transfer by bare trustee of entire legal and equitable estate to third party at direction of beneficial owner
o Held: equitable interest had been transferred and leg didn’t apply as both legal and equitable estate had been transferred to 3rd party
Equity will not permit a statute to be used as an instrument of fraud
- Equitable intervention:o Doctine of part performanceo Rochefoucald v Bousteado Doctrine of secret trusts
- Part performanceo Prevents fraud though admission of fabricated oral evidence
- Rochefoucald v Bousteado Equity considers it to be a fraud on the part of the person to whom
the land is conveyed as trustee to deny the trust o Beneficiary of oral declaration of trust may enforce the trust not
withstanding the lack of written evidence
Common intention trust
- As requirement of writing has been excluded from creation of constructive trusts, many former co-habitees have relied on constructive trust
- Gissing v Gissing
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o No written declaration/agreement or direct provision by P of purchase price
o Must establish common intent between parties and could give rise to beneficial ownership
- No requirement that common intent should be limited to time when property was first acquired
- Difficulties of advising on extent of beneficial interest in common intention trust
10. TESTAMENTARY TRUSTS
Formal requirements:
- Manner of execution of will – Succession Act s10o Must be in wiritng and signed by testatoro Must be witnessed – 2 or more at same time
S10(4) – changed law – witnesses do not have to be present at same time or know they are witnessing a will
o (6) signatories can be on any part of willo s10 – must have intention of executing willo s10(9) - needs attestation clause – records how will was doneo Testator must have signed doc with intent to make “last will and
testament”
Hensler v Padget
- Decided after amendments to the Succession Act in 2006- S18 confers power on court to dispense with execution requirements for
will, alteration of revocation- Court will strive to save will if possible- If satisfied shows testamentary intention, courts will try save will even if
other requirements are not met
Re Garris
- Recognised s18 allows court to sanction making of will where some requirements haven’t been carried out - will admit evidence, even hearsay
- (4) court not limited to what factors to take into account- (3) statements made by testator are admissible in court- If testamentary intention is clear then doc should act as will despite any
lack of formalities
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Revocation of will
- Can be revoked by:o Another will revoking ito S14 – Marriageo S15 – Divorce
Property that can be disposed of by will
- s8 – Property to which a person is entitled at time of death- Matrimonial home and superannuation may be governed by separate
contract
Nature of testamentary disposition
- s5 – will includes codicil and other testamentary disposition – inc. gift, devise or bequest by will and creation or exercise of will by power of appointment
- Nominations under super or pension schemes – Baird v Bairdo Nominations are not testamentary dispositions as the interest of a
member in the fund was not assignableo Don’t have to be executed in same manner as will
Need for testamentary capacity
- Banks v Goodfellowo Test laid down – testator must understand the nature of act and it
effects- Timbury v Coffee
o Before will can be upheld must show testator had ‘sufficient mental capcity’ to understand nature of what doing and effects
o Testator was drunk when made will – did not have testamentary capcity
- Hensler v Pageto Had testamentary capacity but then was diagnosed with dementia o Was drafted with aid of solicitoro Held: valid testament
Minors
- Minors can execute will if:o Marriedo Will in contemplation of marriageo Authorised by court order
Testamentary trust
- Established under will
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- Takes effect of death of testator- Re Graham
o “Give and bequeath… to my trustees upon trusts…”o Classic example of trust
Delegation of testamentary power
- General presumption against delegation of testamentary power- Tatham v Huxtable
o Person may not delegate testamentary power and is necessary, except in case of charitable trusts, for objects to be benefitted to be ascertainable
o Will and power of executor to distribute estate to others not provided in will but who trustee thinks deserves benefit
o Void due to uncertainty as class of beneficiary not defined- Gregory v Hudson
o Trustee had discretion to administer funds to world at large inc himself
o Class of beneficiary not defined at all- S33r Succession Act
o Power of trust, created by will to dispose of poerty is not void on ground that it is delegation of testator’s power to make will, if same power of trust would be valid if made by testator in lifetime
Secret Trusts
- 2 types:o Fully secret trust – eg. “I leave 50k”o Half secret trust – eg. “I leave 50 k on trusts which I have already
told”
Elements of secret trusts
- 3 key elements:o Intentiono Communicationo Acceptance
Blackwell v Blackwell
- Widow discovered after H’s death he had another child out of wedlock- Legatee bound to give effect to trust communicated to legatee and
accepted by legatee
Voges v Monohan
- Court enforced trust where evidence legatee was provided with money- Testator had 2 claims on etstae – servant and niece by marriage
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- Left whole estate to servant- Maj said trust was present- Voges was to provide for niece
Mutual trusts
- Binding on both parties, provides reciprocal benefits- Prevents 3rd party taking benefical interest- Bigg v Qld Trustees
o H and W agreed to leave assets to each other and then equally to children from former marriages
o H made investments in W’s name in accordance with agreemento W made will leaving assets to own childreno Court held evidence of oral agreement and equity provided
remedy
11. INVALIDATING FACTORS
3 types of invalidating factors:
1. Rule against perpetuities2. Public Policy3. Illegal purposes
Policy behind rule against perpetuities
- Performs useful social function in limiting the power of members of generations past from tying up property in such a form as to prevent its being freely disposed of in the present or future
- Re Clarko Necessary to prevent tying up property forever
Rule against perpetuities
- Air Jamaica v Charltono “No interest is valid unless it must vest with a certain period of
time – the date of the gift plus 21 years”- Rule has been modified by courts over time
Progressive evolution of rule
- Duke of Norfolk’s caseo Property has to vest within a life in being
- Stephens v Stephenso Extended to include length of time that child was under gestation
- Cadell v Palmero Extended to be within 21 years of life in being
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Rule is concerned with the vesting of property
- Gift must vest within perpetuity period- When interest to vest several matters must be known:
o 1) Who is person entitled to interesto 2) Interest must be ready to take effect upon possession upon any
prior interesto 3) Gift mustn’t be subject to contingents
Future gifts
- Rule against perpetuities has general application to future gifts- Doesn’t apply where immediately given gift, only where someone is given
it in futureo Eg. Successive generations enjoying same property
Exception to rule against perpetuities
- Mt Gravatt Showgrounds Act 1988 s24o Rule against perpetuities has been excluded – any gift to
showgrounds can continue indefinitely - Gift from one charity to another – s219(2) PLA- Options contained in leases – sometimes leases will contain option to
purchase property subject of lease – if option exercisable within one year following determination it is protected by s219(2) PLA
- Options for renewal or right of preemption contained in will – s218 PLA- Exercise of trustee power – s220A(1)(a)-(c) PLA- Superannuation trusts – s220(1)(d)
Perpetuity period
- Maximum period for which the vesting can be postponedo A) Period of life in being + 21 years o B) 21 years where there is no life in beingo C) Period not exceeding 80 years which is specified in the
instrument – PLA s209- When does perpetuity period commence?
o As soon as disposition takes effect A) Instrument inter vivos – immediately B) Will – at death C) Deed – when signed, sealed and delivered (may be
exception)
Lives in being
- a) Measuring life must be human- b) Person must be living at date when interest is created
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- c) If group of persons is used that group cannot be capable of increase – s210(5) PLA
- d) Group must be ascertainable
Re v Clarke
- Testator dies, one of provisions is trust for children of sons who attain the age of 25
- Perpetuity period was 21 years after death of last life in being – which was children
- If child did not obtain age of 25 in that 21 years they would be outside that vesting period
- Thus, gift to grandchildren was held to be void
The rule in Andres v Partington
- If, at the time the disposition takes effect, A has at least one grandchild who has attained the age of 21years, the class of beneficiaries is deemed to only include those already
Disposition to class
- s210(5) – In case of disposition to class, any person living at the date of disposition whose life is so expressed to be relevant for any member of the class may be reckoned as a life in being
Widower
- Settlor provides that A has life in an estate, then to the widower of A for his life, and then for the children of A then living
- PLA s214 deems the widower the life in being
Rule is concerned with possibilities and not probabilities
- If possibility that gift may vest outside perpetuity period then gift is void gift – Air Jamaica
- Re Dawsono Testator gave property to trustees to hold on trust for daughter for
life with remainder to children that attain age of 21o Gift was held void despite daughter > 60 and all children > 21o Possibility that daughter could have more children who would be
21 outside perpetuity periodo Assumption that males and females could reproduce at anytime
Presumption as to future parenthood – PLA s212
- It is presumed that:o Male > 12 can have childo Woman > 12 can have childo Woman > 55 cannot have child
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o However, these presumptions may be rebutted with evidence to the contrary
Other reforms – s212 PLA
- s212(1)(b) – in case of living person evidence may be shown not capable of having child – eg. vasectomy, STI
- s212(2) – court may make order as it sees fit- s212(4) – with exception of s212(1)(b) extends age presumptions to case
of having child by adoption, legitimation or other means
“Wait and See”
- At CL validity of gift is assessed at start of perpetuity period- S210 PLA allows court to wait and see whether interest will vest outside
perpetuity period - Parties may compromise on appropriate distribution of property if don’t
want to wait- Enables court to look at what actually occurs before expiration of perp
period to see if there has been vesting – Nemesis Australia
Example of ‘wait and see’ v CL
- “Inter vivos to my trstees on trust for first child of A to attain 21” A = 51, has 2 children. One grandchild aged 3
o Common law: A’s children not lives in being because A may have more
children Child of A may have child after A’s death, which becomes
first to reach 21 Disposition is void
o ‘Wait and see’ Disposition not struck down immediately If living grandchild survives to 21 (in 18yrs) vesting will
have occurred within life of A or within 21 years of A’s death
Disposition will only be void if at end of perpetuity period the oldest living grandchild has not attained 21
Age reduction
- Applies where disposition is limited by reference to person attaining age exceeding 18 years
- Disposition void as stands byt would not have been had the age between 18 years
- Aged reduced as far as necessary to save disposition (but no futher than 18 years) – s213 PLA
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Class gifts
- At CL for a gift to be valid, every member of the class must have satisfied the necessary requirements within the perpetuity period
- Exclusion of class members: PLA s213(3)- Exclusion of some class members is now permitted to save the validity of
an interest
Common law 4 step process:
1. Does the rule apply to the interest?2. What is the date when an interest is created?3. Who are the lives in being?4. Can vesting occur outside the perpetuity period?
Can statutory modification save the gift?
1. Power to specify perpetuity period – s2122. Presumptions and evidence of future parenthood – s2123. Unborn husband and wife – s2144. Wait and See – s2105. Reduction of age - s2136. Exclusion of class members – s213(3)These reforms take place after 1 April 1974
Rule against perpetual trusts
- Trust will be void where, under terms of trust, capital will be kept in tact so that the income can be used for indefinite period
Public policy
- Trusts which are contrary to public policy will not be enforced by the court
- Trusts which undermine the sanctity of marriage will not be enforced- Ellaway v Lawson
o Trust was made only if person divorced husbando Was allowed to stand as “no obligation” and “changing standards
of society”- Attitude of courts as to public policy largely formed by reference to
legislation – eg. Anti-Discrimination Act etc- Thus authority on such matters as cohabitation agreements and trusts for
ex-nuptial children will no longer be authoritative
Illegality
- Trusts may be unenforceable on the basis that enforcing the trust would assist party in carrying out illegal purpose
- Nelson v Nelson
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o Defence service home loano Mother put house in name of children to take advantage of benefit
that she was not entitled too Demonstrates that you can plead existence of a resulting trust even
if must confess to illegal act- Robins v Robins
o First homebuyers grant and stamp duty- Timsley v Milligan
o Joint party purchased in P’s name so D could receive social security payments
o Held: illegality did not defeat D’s claim of resulting trust- The situation in which trusts will not be effective to avoid creditors or to
reduce or avoid tax liability is now largely governed by statute
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12. VARIATION AND TERMINATION OF TRUSTS
Inherent power of court
- Originated with court of Chancellery – inherited by Sup Ct Qld – has equity jurisdiction
- Chapman v Chapman o Recognised inherent jurisdiction to allow trustees to act in manner
not authorised by the trust instrumento As matter of emergency, trustee would be allowed to do something
not expressly allowed by trust instrumento For example:
Giving trustee powers to repair roof May be inbenefit to allow breach where trustee had not
provided for education advancement of beneficiary Seettlor may have not anticipated situation which may arise
in future which may need to give power to trustee to do something not authorised in deed
- Re Duke of Norfolk’s Settlement Trustso Wider jurisdiction re: administration of trusto Concerned provision of remuneration of trusteeo Ordinary having trust is obligation and does not normally involve
remunerationo Trustee need remuneration for administering trust as would
reconsider position if noto Court gave power to trustees to claim remuneration under estate
under inherent jurisdiction
Express power to vary trusts
- s95 Trusts Acto Introduced following Chapman v Chapmano Leg intervened to allow court to grant authorization to vary trusts
in certain caseso Section usually operates where beneficiaries are unable to give
consent Often concerning infants or children yet unborn where
steps are being taken which may prejudice their interest- S94 – expediency provision which allows discretion in varying trust- Provision in trust deed
o May allow trustee to amend deed 1) Often to allow for addition/deletion of beneficiaries 2) Often amended due to taxation law changes 3) Often necessary for powers of administration
- Australian approach less restrictive than English approach
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o Re Ball’s Settlement Trusts (ENG) – courts regard any major change as not being within the intention of settlor or trust
o Kearns v Hill (AUS) – variation clause given natural meaning- Graham Australia v Perpetual Trustees WA
o Deed enabled unit holders to redeem units by giving notification to trustee who would have to pay them value of units as listed on exchange market
o Unit holder allowed to redeem unit at price which prevailed 7 days before redemption form was lodged
o Stockmarket crash led to many seeking redemptiono Trustees refused to deal with these applications until meeting with
all unit holderso This was fair because those that acted quicker than others would
receive better benefito Varied trust to mean that units would be redeemed at current rateo Court upheld thiso Imposed 2 tier test:
1) Must be made in good faith 2) Made to benefit unit holders as a whole
Variation of superannuation trusts
- Cases where injunctions have been sought against super trustees from exercising power of amendment
- Surplus funds often sent back to employer who originally contributed them
- Wilson v MGMo MGM restructuring business and winding up pension fundo Trust contained clause allowing trustee and owner of company to
alter/amend deed but could not be prejudiced and had to be to benefit of members
o Did not confer absolute discretion to deal with surplus fundso Amendment to trust deed to return surplus funds to company was
contrary to what was intendedo Fiduciary obligations – company had one to prevent using power
of amendment to benefit itself- Lock v Westpac Banking Group
o Questionable authority…o Defined benefit fund conferred right on members to get payment
of percentage of final salary as pensiono Rules specified amount of benefit, how paid, what contributitions
had to be paid by member and banko Board of bank had power to amend deed with consent of trustees –
had to have consent of 75% of memberso Court said courts take different approach to super and pension
funds as do to ordinary trusts
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o Rejected submission that in defined benefits scheme that once benefits were provided company was precluded by fiduciary obligations from acting in own interest
o Company must act in good faith but no fiduciary obligationo Trustees had not acted in breach of duty by consenting to
amendment – entitled to consider whether amendment was in interest of members and bank as a whole
Family law
- FLA 1975 s90AC – can make order which overrides terms of trust deed
Termination of trusts
- Trust can be terminated by all beneficiaries acting together and giving direction to the trustee
o Saunders v Vautier When > 1 beneficiary can all combine to terminate trust
provided that they are all entitled and unanimous - Trust can be terminated by distribution
o Hawkesley v May 2 beneficiaries entitled to joint fund at 21 Trustees didn’t advise first beneficiary to come of age of
their rights under the fund and sever joint tenancy Trustees accumulated income from that share even after
other beneficiary came of age Trustees bound to pay income of that share to which eldest
was entitled Case for fixed trust – not the same for discretionary trust In case of complete distribution trust wil be brought to end
when no more property, but when partial distribution will continue
13. COMPLETE CONSTITUTION OF TRUSTS
Legal transfer of trust property
- Distinction where:o Declaration of trust of property by settlor ando Inter vivos transfer
Necessity to completely constitute trust
- Once trust is completely constituted court of equity will recognise the beneficial interest of the beneficiaries
- Milroy v Lord
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o For trust to be effective settlor must have “done everything… which was necessary to be done in order to transfer the property and render the settlement binding”
For Inter vivos – settlor must lose all interest in property For declaration – settlor will retain legal title but beneficial
interest will vest in beneficiarieso Facts:
A purported to assign 50 shares to Lord to be held on trust for Ps
Certain procedures needed to be carried out No transfer ever made, lord never registered as owner Dividends were paid to lord and passed onto Ps After A’s death held no trust as property hadn’t actually
been transferred to Lord S200 PLA – for transfer to be effective in equity
donor must have done everything necessary
Enforceability of incompletely constituted trusts
- Where trust is not completely constituted, a beneficiary faces difficulties in obtaining relief
- Where settlor makes promise to create trust – promise may be enforceable as contract
- Where beneficiary or trustee has given consideration, beneficiary can seek equitable remedy such as SP of performance of promise of settlor to create trust
o Where no consideration court will not grant SP to volunteer but may award damaged for breach of promise – Cannon v Hartley
- Cannon v Hartleyo H promised to provide for daughter once he came into property
from the will of his parents – “after property acquired clause”o Came into property and refused to settle to daughtero Court held no relief in equity to daughter as volunteer byt could
get damages for breach of deed – solemn promise under seal – CL regards seal as providing consideration
Marriage consideration
- Sometimes court of equity will regard promise to enter into marriage as being marriage consideration
- Promise to create trust can be made in expectation of marriage of child of the settlor
- Pullan v Koeo W made covenant with trustee for marriage settlemento Setlements would give some benefits to wife but she would be
obliged to pass some oneo W refusedo Trustees tried to enforce “after property acquired clause”
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o Court held once money paid to wife became in equity bound subject to trust and wife had to pass money on
Trusts of benefit of covenant
- Where settlor has failed to constitute the trust, trustee may hold the promise which the trustee made on trust for the beneficiary
- Fletcher v Fletchero Held: Trustee or beneficiary may enforce covenanto Example of providing equity providing remedy where none at lawo Beneficiary not party to covenant but beneficiary could enforceo In deed F wanted to provide for sons born out of wedlock when
turned 21 after he diedo Had already bequeathed property to them in will as wello Trustees refused to pass on moneyo Sons compelled trustees to enforce promiseo Despite being volunteers, settlor’s intention was paramount
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