HISTORY AND NATURE OF EQUITY.........................................................26 Core Principals of Equity........................................................................................ 26 The relationship between CL and Eq.....................................................................27 The legalisation of equity......................................................................................

27 1 th Century refor!s............................................................................................ 27 "usion fallacies................................................................................................... 2# Property in CL..................................................................................................... 2# Property in Eq..................................................................................................... 2# Trust and confidence.......................................................................................... 2# Case study 1$ %hen contracts go bad.............................................................2# Case &tudy 2$ "at 'enry and the proble! of trusts........................................2 Case study 2$ Part perfor!ance and the equitable (i!personation)...............2 The require!ents for writing.............................................................................. *+ Equity loo,s to substance not for!.................................................................*+ Law and Equity...................................................................................................... *+ The -elationship between Law and Equity.........................................................*+ "usion fallacies...................................................................................................... *. /a!ages for 0nnocent 1isrepresentation...........................................................*. -efusal of da!ages for breach of co2enant because the plaintiff is a 2olunteer ........................................................................................................................... *3 /a!ages on the basis of the doctrine of part perfor!ance...............................*3 3.4 Contracts for sale etc of land to be in writing ............................................*3 E5e!plary or aggra2ated da!ages for breach of an equitable obligation ........*# The doctrine of %alsh 2 Lonsdale.......................................................................*# ESTOPPEL............................................................................................41 Co!!on Law Estoppel.......................................................................................... .1 /ifferences b6w CL and Eq.................................................................................. .1 1

1odern Equitable Estoppel..................................................................................2 Proprietary estoppel.............................................................................................. .2 Two strea!s....................................................................................................... .* /etri!ent........................................................................................................... .* 7ringing Estoppel together.................................................................................... .* -epresentation................................................................................................... .. 4ssu!ption or e5pectation................................................................................... 0nduce!ent........................................................................................................ .. -eliance............................................................................................................. .3 8nowledge or intention...................................................................................... .3 /etri!ent........................................................................................................... .3 -elief.................................................................................................................. .6 LAW OF ASSIGNMENTS AND DISPOSITIONS............................................47 -ights and liabilities not capable of assign!ent ................................................7 7are rights to litigate......................................................................................... .7 7are rights to litigate 9 genuine co!!ercial interest..........................................# Pro:ect 2# Pty Ltd ;"or!erly <arui =old Coast Pty Ltd> 2 7arr ?2++3@........ <ational 1utual Property &er2ices ;4ustralia> Pty Ltd 2 Citiban, &a2ings Li!ited ;1 3>.......................................................................................... . 1aintenanceA Cha!perty and 7arratry 4bolition 4ct 1 *................................3.

-ights and liabilities not capable of assign!ent B incidental to a right of property ........................................................................................................................... 3# -ights and liabilities not capable of assign!ent B insurance..............................3# 4ssign!ent of contractual rights........................................................................3 MALLESONS SUMARRY:................................................................................ 62 Contracts for personal ser2ices..........................................................................63 4ssign!ent 4nalysis.............................................................................................. 66

4ssign!ents at law ........................................................................................... 66 Things &ection 12 can)t do..............................................................................67 Equitable assign!ents....................................................................................... 6# 0ntention is the ,ey......................................................................................... 6# 4ssign!ents of future property in equity........................................................6 Norman v Federal Commissioner of Taxa ion..............................................!" S#e$#erd v Commissioner of Taxa ion .......................................................!" "uture or PresentC .......................................................................................... 7+ /escription of the property............................................................................. 7+ 4ssign!ent of future property and specific perfor!ance...............................7+ <ature of the assignee)s right.........................................................................71 The equitable assign!ent of legal property for consideration...........................72 The 2oluntary assign!ent of legal property not assignable at law....................7* PRIORITIZATION...................................................................................74 Equitable interest 2 equitable interest...............................................................7. <otice................................................................................................................. 7. %ho has the best equityC ..................................................................................7. -ule in /earle 2 'all ;1#2#>......................................................................76 -e /allas ?1 +.@....................................................................................... 77 Lyle 2 -osher ........................................................................................... 77 1ere Equities.................................................................................................. 77 %al&er v Linom............................................................................................ !! E5ception$ tac,ing........................................................................................... 7# Prior Legal 2 Later Equitable..............................................................................7# 7arry 2 'eider........................................................................................... 7 Prior equitable interest 2 legal interest..............................................................7

0!puted <otice................................................................................................... #+ Dld &yste! Title................................................................................................. #1 =ood "aith$...................................................................................................... #1 Ealuable Consideration................................................................................... #1 Torrens Title Land.............................................................................................. #1 Co!peting -egistered 0nterests......................................................................#1 Fra'd Timin(............................................................................................... )2 Fra'd *+ #e a(en ...................................................................................... )2 /ollars F &ense "inance Ltd 2 <athan ?2++#@...........................................#2 Proble!........................................................................................................... #2 4nswer............................................................................................................ #* Se, ion 2-C of #e Conve+an,in( A, ..........................................................). Equitable assign!ent of equitable interest........................................................#. %hat if the assignor dies before the direction is carried outC.........................#6 /isposition by way of a contract to assign an equitable interest ......................#6 /isposition of an equitable interest by way of declaration of trust.................#7 Guestion.......................................................................................................... ## 4nswer............................................................................................................ ## CONFIDENTIAL INFORMATION................................................................90 The obligation........................................................................................................ + &alt!an Engineering Co Ltd 2 Ca!pbell Engineering Co Ltd ;1 .#> 63 -PC 2+* at 21*$....................................................................................................................... + %hat is confidential infor!ationC ...................................................................... + The origins of the action for breach of confidence ............................................ + Property origins 9 ................................................................................................. + "ran,lin 2 =iddins ?1 7#@ Gd - 72...................................................................... + 8rueger Transport Equip!ent Pt Ltd 2 =len Ca!eron &torage ?2++#@ "C4 #+*. 1

D7= Ltd 2 4llan ?2++#@ 1 4C 1 ......................................................................... 2 Contract origins 9 ................................................................................................. * /eta <o!inees Pty Ltd 2 Eiscount Plastic Products Pty Ltd ?1 7 @ E- 167 ....... * &eager 2 Copyde5 Ltd ?1 67@ 2 4ll E- .13 ........................................................ * 1inistry of /efence 2 =riffin ?2++#@ E%'C 13.2................................................ * The origins of the action for breach of confidence ............................................ . Tort origins 9 econo!ic torts or fusion fallacyC..................................................... . Ca!pbell 2 1irror =roup <ewspapers Ltd ?2++.@ 2 4C .37............................... . 1osley 2 <ews =roup <ewspapers Ltd ?2++#@ E%'C 177.................................. 6 'u!an rightsC....................................................................................................... 7 Hn:ust enrich!entC............................................................................................... 7 Equitable origins in conscience ...................................................................... 7 1oorgate Tobacco Co Ltd 2 Philip 1orris Ltd ;<o 2> ;1 #.> 136 CL- .1. at .*79# per /eane I............................................................................................................ 7 The !odern doctrine of breach of confidence ................................................... 7 Co,o v A N Clar& /En(ineers0 L d.................................................................1! 0nfor!ation that has a (confidential quality) ...................................................... 7 &ecrecy and the public do!ain....................................................................... 7 Lucasfil! Ltd 2 4insworth ?2++#@ E%'C 1#7# ...................................................... 7 = 2 /ay ?1 #2@ 1 <&%L- 2. ................................................................................. Au !"#$%#& F''!(#$$ L)#*u) + A*) C',-#&. L!/ 020071 12 3R 402...........99 Personal infor!ation....................................................................................... Prince 4lbert 2 &trange ............................................................................ 1arital and defacto relations........................................................................... 2iller v 3ro,o$e s ....................................................................................... 11 &e5ual preference and acti2ity .....................................................................1++ S e$#ens v Aver+ ...................................................................................... 4""

Thea,ston 2 1irror =roup <ewspapers Ltd ?2++2@ E%'C 1*7.........................1+1 1osley 2 <ews =roup <ewspapers.........................................................1+1 4 2 7 plc ?2++*@ G7 1 3..........................................................................1+1 7rown 2 4ssociated <ewspapers Ltd ?2++#@ G7 1+*..............................1+2 /iaries........................................................................................................... 1+* Prince of %ales 2 4ssociated <ewspapers ?2++6@ ..................................1+* 1edical history.............................................................................................. 1+. J 2 K ?1 ##@ 2 4ll E- 6.# ................................................................................ 1+. Ca!pbell 2 1=< Ltd ?2++.@ H8'L 22. 9 <ao!i Ca!pbell &ee abo2e..............1+. %itnesses and infor!ants............................................................................. 1+. Eenables 2 <ews =roup <ewspapers Ltd ?2++1@ 1 4ll E- +# .........................1+. -ogers 2 TE<L ?2++7@ <L&C 1.......................................................................1+3 Cultural and religious infor!ation.................................................................1+3 "oster 2 1ountford F -igby Ltd ;1 77> 1. 4L- 71...........................................1+3 Church of &cientology of California 2 8auf!an ?1 7*@ -PC 6*3.......................1+3 Co!!ercial infor!ation...................................................................................1+3 4nsell -ubber Co Pty Ltd 2 4llied -ubber 0ndustries Pty Ltd ..................1+3 &o!e trade secrets$ ........................................................................................ 1+6 Clothing$ Peter Pan 2 Corsets &illhouettes ?1 6*@...................................1+6 fil! costu!es$ Lucasfil! 2 4insworth.....................................................1+6 Che!ical for!ulae$ %eston 2 'e!!ons ;1#76>.....................................1+6 -esults of e5peri!ents$ &!ith 8line 2 &ecretaryA /DC&.........................1+6 -ecipes$ Crowder 2 'ilton.......................................................................1+6 0deas for TE shows deleloped to the point of efficacy$ "raser 2 Tha!es TE ?1 #.@..................................................................................................... 1+6 Fa,,enda C#i,&en L d v Fo5ler ................................................................4"6 /el Casale 2 4rtedo!us ;4ust> Pty Li!ited ?2++7@ <&%C4 172..........................1+6

Client Lists$....................................................................................................... 1+7 /el Casale 2 4rtedo!us ?2++7@..............................................................1+7 =o2ern!ent secrets......................................................................................... 1+# Co!!onwealth 2 Iohn "airfa5 F &onsA at CL- 31................................................1+# 4ttorneyB=eneral ;H8> 2 'eine!ann Publishers 4ustralia Pty Ltd...........1+ &e!iBgo2tC ................................................................................................... 1+ 7ritish &teel Corp 2 =ranada Tele2ision Ltd ?1 #1@ 4C 1+ 6...............................1+ Esso -esources Ltd 2 Plow!an ;1 3> 1#* CL- 1+ at *2 per 1ason..................1+

&oldiersC ....................................................................................................... 111 (-) 2 4ttorneyB=eneral ?2++*@ H8PC 22...............................................................111 1inistry of /efence 2 =riffin ?2++#@ E%'C 13.2 9 see abo2e.............................112 The duty or obligation of confidence ...............................................................112 Co,o v A N Clar& /En(ineers0 L d ..............................................................442 'itchcoc, 2 TC< Channel <ine Pty Ltd ;<o 2> ?2+++@ <&%C4 #2. ...................11* Hne5pected -esults of a /e!onstration and unsolicited co!!unications......11* "ractionated Cane Technology Pty Ltd 2 -uiMB42ila ;1 #7>.....................11* 4ccidental /isclosures...................................................................................... 11* Tre2orrow 2 &outh 4ustralia....................................................................11* 1isappropriation of infor!ation.......................................................................11* Ea2esdroppers.................................................................................................. 11. Third parties..................................................................................................... 11. Establishing a breach....................................................................................... 11. &!ith 8line and "rench Laboratories ;4ust> Ltd 2 &ecretaryA /ept of Co!!unity &er2ices F 'ealth ...............................................................11. - 2 /epart!ent of 'ealthN E5 parte &ource 0nfor!atics Ltd ..................11. /etri!entC....................................................................................................... 113 /efences.......................................................................................................... 113

Public interest............................................................................................... 113 E5pose dangers to public safety or health ......................................................113 'ubbard 2 Eosper ..................................................................................113 % 2 Edgell .............................................................................................. 113 Lion Laboratories Ltd 2 E2ans ?1 #3@ G7 326.........................................116 %oodward 2 'utchins ?1 77@ 1 %L- 76+.........................................................117 1c8ennitt 2 4sh ?2++3@ E%'C *++*................................................................117 -ichards 2 8adian ?2++3@ <&%C4 *2#.............................................................11# Public 0nterest and &e5y Ti!es........................................................................11 1osely 2 <ews =roup..............................................................................12+ The %oodward /efence..........................................................................12+ 4"L E 4ge................................................................................................ 12+ "orced disclosure............................................................................................. 12+ /elay................................................................................................................ 12+ Clean hands 9 .................................................................................................. 12+ Ca!pbell 2 1irror =roup <ewspapers Ltd...............................................12+ 4ustralian "ootball League 2 4ge Co!pany Ltd ;2++7> 13 E- .+3 ........12+ REMEDIES .........................................................................................121 0n:unctions..................................................................................................... 121 The springboard doctrine.............................................................................. 121 Terrapin 2 7uilders &upply Co ?1 67@ ....................................................121 A,,o'n of $rofi s...................................................................................... 424 /eli2ery up.................................................................................................... 122 Equitable co!pensation................................................................................ 122 Constructi2e trusts ....................................................................................... 122 L4C 1inerals 2 0nternational Corona -esources ;1 # > .........................122

The future O rights to pri2acyC .......................................................................122 4ustralian Consolidated Press Ltd 2 Ettingshausen ;1 8aye 2 -obertson ;1 1> ....................122

1> "&- 62............................................................12*

/e2elop!ents in <ew Lealand and England ...................................................12* 'os,ing 2 -unting ?2++.@ <LC4 *. .......................................................12* -ogers 2 TE<L........................................................................................ 12* %ainwright 2 'o!e Dffice ?2++2@ H8.....................................................12* /ouglas 2 'elloP Ltd ...............................................................................12. 14J 1D&LEK 2 <E%& =-DHP <E%&P4PE-& L010TE/.............................12. &0- ELTD< ID'< 2 4&&DC04TE/ <E%&P4PE-& LT/................................12. /4E0/ 1H--4K 2 70= P0CTH-E& ;H8> L010TE/ .......................................12. 4ustraliaC......................................................................................................... 12. 4ustralian 7roadcasting Corp 2 Lenah =a!e 1eats Pty Ltd ..................123 UNCONSCIONA4LE TRANSACTIONS 5 UNDUE INFLUENCE .....................126 =eneral or specific ter!C.................................................................................126 Ele!ents.......................................................................................................... 126 7argaining Power............................................................................................. 127 Ti!ing.............................................................................................................. 127 &pecial /isad2antage....................................................................................... 12# 8nowledge........................................................................................................ 12# Hnconscionable e5ploitation of the disad2antage............................................12# E5a!ples.......................................................................................................... 12# Legislation........................................................................................................ 12# Hndue 0nfluence.................................................................................................. 1*+ Categories of Hndue 0nfluence.........................................................................1*1 4ctual Hndue 0nfluence................................................................................. 1*1

Presu!ed Hndue 0nfluence ..........................................................................1*2 Class 2A and 26......................................................................................... 4-2 TrusteeB7eneficiary -elationship...................................................................1*2 Class 27........................................................................................................ 1** Re*' al..................................................................................................... 4-DECLARATIONS...................................................................................164 /efinition.......................................................................................................... 1*. %hy use the!C................................................................................................. 1*3 Equity to &tatute.............................................................................................. 1*3 <&%.............................................................................................................. 1*3 /eclarations concerning statutory rights.........................................................1*3 /iscretion..................................................................................................... 1*3 4bstract or hypothetical questions...................................................................1*6 <eed for a (real interest) O locus standi..........................................................1*7 "oreseeable consequences O utility................................................................1*7 /efences.......................................................................................................... 1*# Cri!inal lawC.................................................................................................... 1*# 4iredale <'& Trust 2 7land.....................................................................1* IN7UNCTIONS......................................................................................140 IurisdictionC...................................................................................................... 1.+ Iudicature 4ct................................................................................................... 1.+ Ex,l'sive................................................................................................... 4." %#+ does i ma er7.................................................................................. 4.4 0n:unctions Protect -ights.................................................................................1.1 0nadequacy of da!ages................................................................................1.1 The require!ent of a proprietary right.............................................................1.1 Types of 0n:unctions......................................................................................... 1.2 1+

1andatory in:unctions...................................................................................1.2 Manda or+ res ora ive in8'n, ions.............................................................4.2 Relevan Fa, ors:....................................................................................... 4.2 Manda or+ enfor,in( in8'n, ions...............................................................4.2 3er$e 'al in8'n, ions................................................................................. 4.9n erlo,' or+ in8'n, ions............................................................................ 4.3rima Fa,ie Case Re:'iremen ..................................................................4.. 6alan,e of Convenien,e Re:'iremen .......................................................4.. 0nterlocutory !andatory in:unctions.............................................................1.3 0nterlocutory in:unctions in the conte5t of defa!ation..................................1.6 Hnderta,ing as to da!ages..........................................................................1.6 Guia Ti!et 0n:unctions.................................................................................. 1.6 0n:unctions to Enforce <egati2e &tipulations.................................................1.7 0n:unctions to enforce statutory rights..........................................................1.# 1are2a orders.................................................................................................. 1. Iurisdiction.................................................................................................... 13+ &upre!e Court 4ct 1 7+ ;<&%> s 66............................................................13+ - Re:'iremen s for o* ainin( a Mareva Order..........................................4;" A ris& of dissi$a ion of asse s....................................................................4;" T#e $lain iff<s ,a'se of a, ion....................................................................4;" 6alan,e of ,onvenien,e............................................................................. 4;" 4nton Piller Drders........................................................................................... 131 Iurisdiction.................................................................................................... 131 -equire!ents for an 4nton Piller Drder........................................................131 The rights of the defendant...........................................................................132 SPECIFIC PERFORMANCE 5 MONETARY REMEDIES................................126 0n persona!..................................................................................................... 13*

11

7inding contract not for 2aluable consideration...............................................13* 0nadequacy of da!ages at co!!on law..........................................................13* Personal ser2ices contracts..............................................................................13* Constant court super2ision...............................................................................13. 'ardship........................................................................................................... 13. Eitiating factors................................................................................................ 13. Hnconscionability............................................................................................. 13. Lac, of !utuality.......................................................................................... 13. Plaintiff in substantial breach and6or not able to perfor!................................133 Contracts unenforceable at law and Part perfor!ance....................................133 Equitable co!pensation and da!ages.............................................................136 Equitable co!pensation................................................................................ 136 T#e na 're of e:'i a*le ,om$ensa ion......................................................4;6 T#e rela ions#i$ o #e ,ommon la5 ,on,e$ ion of dama(es....................4;! Ca'sa ion................................................................................................... 4;! 3lain iff<s ,on ri*' ion o loss....................................................................4;! Dther factors.................................................................................................... 13# Lord Cairns 4ct da!ages.................................................................................13 ='risdi, ion o a5ard e:'i a*le dama(es...................................................4;1 E:'i a*le dama(es in addi ion o s$e,ifi, relief........................................4;1 Equitable da!ages in lieu of specific relief......................................................13 INTRODUCTION TO TRUSTS.................................................................160 Ele!ents.......................................................................................................... 16+ /efinitions........................................................................................................ 16+ 4ctors in the trust............................................................................................. 16+ The three species of trust ................................................................................ 16+ C#ari a*le Tr's s....................................................................................... 464

12

Uni Tr's ................................................................................................... 464 Res'l in( Tr's s......................................................................................... 464 Trusts in Ter!s of Legal -elationships.............................................................162 Contracts and trusts......................................................................................... 162 "iduciary relationships and trusts....................................................................162 /eceased estates and trusts............................................................................162 7ail!ents and trust.......................................................................................... 162 Dl!a 2 4!endola ;2++.>........................................................................162 4gency and trust.............................................................................................. 16* Hnsecured debts and trusts ............................................................................ 16* Loughran 2 Perpetual Trustee ;2++7>.....................................................16* 7raMMil 2 %illoughby ;2++ >....................................................................16. 7an,ruptcy 4ct &122..............................................................................16. Guistclose Trusts.............................................................................................. 16. 7arclays 7an, 2 Guistclose 0n2est!ents ;1 7+>.....................................16. &ecurities and trusts........................................................................................ 163 Conditional dispositions and trusts...................................................................163 Personal Equitable Dbligations.........................................................................166 =ill 2 =ill ;1 21>...................................................................................... 166 -etention of title clauses and trusts.................................................................166 Powers of appoint!ent and trusts....................................................................167 Proble! Guestion............................................................................................. 16# FIDUCIARY DUTIES..............................................................................168 <ature of "iduciary /uties................................................................................ 16# Prohibiti2e /uties............................................................................................. 16 Hnfying Princple$ LoyaltyA TrustA ConfidenceA EulnerabilityA Hnderta,ing.........16

1*

The Content of "iduciary Dbligations...............................................................16 1. Hnauthorised -e!uneration.....................................................................17+ 2. 4ssu!ing a double character....................................................................17+ *. 7enefits deri2ed to the e5clusion of the principal.....................................17+ Conficts of /uty and /uty................................................................................171 P-E&H1E/ -EL4T0D&'0P&................................................................................172 PartnerBPartner.............................................................................................. 17* =uardianB%ard.............................................................................................. 17. "iduciary /uties outside Presu!ed -elationships............................................17. E!ployeeBE!ployer...................................................................................... 173 "inancial 4d2iserBClient................................................................................. 173 /octorBPatient............................................................................................... 176 Crown B 0ndiginies.......................................................................................... 176 /E"E<CE&........................................................................................................ 176 0nfor!ed Consent.......................................................................................... 176 Contractual E5clusion....................................................................................176 Clean 'ands 4nd 0llegality............................................................................ 177 -E1E/0E&$........................................................................................................ 177 CREATION OF E9PRESS TRUSTS...........................................................178 The three certainties ....................................................................................... 17# Certainty of intention.................................................................................... 17# Precatory %ords............................................................................................ 1#+ &ole intention of truseeC...............................................................................1#+ 8nowledge of 7eneficiaries...........................................................................1#+ Certainty of sub:ect !atter..............................................................................1#1 "uture property cannot be held on trust ......................................................1#2

1.

Certainty of ob:ects.......................................................................................... 1#2 -e /enley)s Trust /eed..........................................................................1#2 "i5ed trusts and certainty................................................................................ 1#* Certainty of beneficiaries in discretionary trusts..............................................1#. Certainty of beneficiaries in discretionary trusts..............................................1#. Trusts for Hnincorporated associations............................................................1#. -ad!ano2ich 2 <edel:,o2ic ;2++1> .......................................................1#. The rule against delegation of testa!entary power.........................................1#6 /eclarations of trust 9 require!ent of writing..................................................1#7 Creation by Transfer..................................................................................... 1## Creation by direction........................................................................................ 1## &ecret trusts..................................................................................................... 1# %#a is #e r's $ro$er + of a se,re r's 7..............................................4)1

Proble!............................................................................................................ 1# 3ARIATION AND TERMINATION OF E9PRESS TRUSTS.............................191 Powers to Eary Contained in E5press Trusts....................................................1 1 0nherent Power to Eary Trusts..........................................................................1 1 E!ergencies$................................................................................................ 1 1 &tatutory Power to Eary Trusts.........................................................................1 1 Trustee 4ct 1 23 ;<&%>A s #1 ................................................................1 1 Ter!ination or failure of e5press trusts ..........................................................1 2 Public policy..................................................................................................... 1 . 8ay 2 &E&4'&......................................................................................... 1 . -estraints on alienation....................................................................................1 . The rule against indestructible trusts...............................................................1 3 The rule against perpetuities........................................................................... 1 6

13

T#e modern r'le a(ains $er$e 'i ies........................................................416 SOME STE3S.............................................................................................. 41! Exam$les................................................................................................... 41! Common La5 Ameliora ion........................................................................41! -HLE 0< 4ndrews 2 Partington................................................................1 # S a ' or+ reform........................................................................................ 41) >'es ion.................................................................................................... 41) Sol' ion..................................................................................................... 41) CHARITA4LE TRUSTS...........................................................................200 /ifferences with other e5press trusts...............................................................2++ (Charitable) Purpose ........................................................................................ 2++ -eport of 0nquiry 0nto the /efinition of Charities and -elated Drganisations 2++1 ......................................................................................................................... 2+1 #e advan,emen of ed',a ion? ................................................................2"4 Charities 7ill in 2++* ....................................................................................... 2+1 3'*li, *enefi ............................................................................................. 2"4 Trusts for Political Purposes.............................................................................2+2 Trusts for the -elief of Po2erty ........................................................................2+* Trusts for the 4d2ance!ent of Education .......................................................2+* Trusts for the 4d2ance!ent of -eligion ..........................................................2+* Trusts with 1i5ed Charitable and <onBCharitable Purposes ............................2+. Enforce!ent and 4d!inistration of Charitable Trusts .....................................2+. Sa isfa, ion of Ori(inal 3'r$ose ................................................................2"6 Phillips 2 -oberts.................................................................................... 2+6 Proble!............................................................................................................ 2+6 Ans5er....................................................................................................... 2"! RESULTING TRUSTS............................................................................208

16

/efinition.......................................................................................................... 2+# A' oma i, res'l in( r's s.........................................................................2") %estdeutsche Landesban, =iroMentrale 2 0slington 7orough Council ....2+# 3res'med res'l in( r's ..........................................................................2") An ins i ' ional r's .................................................................................. 2") 0nco!plete disposition of a beneficial interest.................................................2+# "ailure of an e5press trust................................................................................2+# Guistclose trusts .............................................................................................. 2+ Trust surpluses after satisfaction of the purpose of a trust..............................2+ Purchase of property in another person)s na!e..............................................2+ Contributions to the purchase of property.......................................................2+ The nature of coBownership in resulting trusts.................................................21+ -ebutting the presu!ption of resulting trust ..................................................21+ The presu!ption of ad2ance!ent....................................................................211 =ifts and resulting trusts.................................................................................. 212 Sol' ion..................................................................................................... 24CONSTRUCTI3E TRUSTS......................................................................212 -e!edy or institutionC..................................................................................... 213 /ifferences with e5press and resulting trusts..................................................217 %hen do constructi2e trusts ariseC..................................................................217 Constructi2e trusts to enforce agree!ents concerning property ....................217 6rea,# of ,onfiden,e................................................................................. 24) Common in en ion o deal 5i # $ro$er +...................................................24) Constructi2e trusts to re!edy breach of fiduciary duty ..................................22. Constructi2e trusts to re!edy breach of fiduciary duty ..................................227 Constructi2e trusts that arise against third parties..........................................227 Tr's ees de son or .................................................................................. 22)

17

@no5in( re,ei$ ......................................................................................... 22) 8nowingly assisting a breach of trust...............................................................2*2 Constructi2e trusts and stolen property ..........................................................2** Constructi2e trusts and !oneys paid by !ista,e.............................................2*. Constructi2e trusts and ho!icide.....................................................................2*6 Constructi2e trusts to re!edy unconscionable conduct...................................2*6 The effect of legislation on constructi2e trusts in the fa!ily conte5t ..............2*# Property ;-elationships> 4ct 1 #2 ;<&%> ...............................................2.. T#e effe, of le(isla ion on ,ons r', ive r's s in #e famil+ ,on ex .......2.. The re!aining i!portance of equity................................................................2.. TRUSTEES 4ENEFICIARIES AND TRACING..............................................242 4ppoint!entA retire!ent and re!o2al of trustees ..........................................2.6 -ights of trustees ............................................................................................ 2.7 Powers of trustees ........................................................................................... 2.7 /uties of trustees ............................................................................................ 2.7 0nterests of beneficiaries..................................................................................2.# Ri(# s of *enefi,iaries .............................................................................. 2.) Personal re!edies ........................................................................................... 2.# E:'i a*le ,om$ensa ion............................................................................ 2.) Proprietary re!edies O tracing .......................................................................2. Tra,in( $ro$er + in o #e #ands of r's ees..............................................2.1 Mixed $ro$er + A #e r'le in Re Balle <s Es a e.......................................2.1 T#e lo5es in ermedia e *alan,e r'le.......................................................2;" Tra,in( val'a*le $'r,#ases from a mixed f'nd.........................................2;" Tra,in( mixed f'nds in o a$$re,ia in( $ro$er +........................................2;" Mixed $ro$er + in #e #ands of r's ees from more #an one r's ...........2;" The rule in Clayton)s case ......................................................................23+

1#

Tra,in( $ro$er + in o #e #ands of #ird $ar ies........................................2;4 /efences ......................................................................................................... 231 EQUITY AND TRUSTS PRACTICE QUESTIONS..........................................226 4ssign!ents F /ispositions............................................................................. 23* Confidential 0nfor!ation................................................................................... 23. "iduciary Dbligations........................................................................................ 236 0ntroduction to Trusts....................................................................................... 237 E5press Trusts.................................................................................................. 23# Eariation and Ter!ination................................................................................23 Charitable Trusts.............................................................................................. 26+ -esulting Trusts................................................................................................ 261 Constructi2e Trusts.......................................................................................... 261 -ights and -esponsibilities...............................................................................26* C',(%&)/ T"u ! Qu) !%'& :%!; A& :)" Gu%/) ....................................264 PAST E9AMS......................................................................................269 Hndue 0nfluence .............................................................................................. 27+ 4ssign!ent of a Chose in 4ction......................................................................272 Confidential 0nfor!ation................................................................................... 27* "iduciary -elationship...................................................................................... 27. Charitable Trust Ealidity...................................................................................276 Pri2ate E5press Trust........................................................................................ 276 4uto!atic -esulting Trust................................................................................ 276 -ule on Perpetuities and public policy..............................................................277 0ndefeasibility and ,nowing receipt of trust property.......................................277 -esulting Trust Ioint Dwners -eal Property......................................................27# /isposition of power of appoint!ent................................................................27

&ecret Trust...................................................................................................... 27 Ioint Tenancy presu!ptionA !arried couplesA 4d2ance!ent...........................2#+ "iduciary Dbligations in a Ioint Eenture............................................................2#2 4ssign!ents in Equity and consideration.........................................................2#. Estoppel........................................................................................................... 2#. Guitclose Trust................................................................................................. 2#6 Presu!ed -esulting Trust of 1atri!onial 'o!e..............................................2#6 -esulting Trust in 7an,ruptcy..........................................................................2#6 Torrens Trust 8nowing -eceipt.........................................................................2#7 &ecret Trust...................................................................................................... 2## Charitable Trust................................................................................................ 2# Charitable6Political Trust..................................................................................2# -estraint on 1arriage Trust.............................................................................. 2# -ule against Perpetuities.................................................................................. 2 + Equitable Estoppel............................................................................................ 2 1 Hndue 0nfluence 6 Hnconscionable /ealing......................................................2 1 4ssign!ent of &hares and /i2idends...............................................................2 2 Confidential 0nfor!ation................................................................................... 2 . 8nowing -eceipt and Constructi2e Trust of Torrens Land................................2 6 Guistclose Trust............................................................................................... 2 # Tracing Trust "und........................................................................................... 2 # Tracing 0n2estors.............................................................................................. 2 Tracing 0nsurance Payout.................................................................................2 -esulting Trust Purchase Price.......................................................................*++ =ift to a charitable trust 6 unincorporated body ..............................................*+1 Power of 4ppoint!ent...................................................................................... *+1

2+

'alf &ecret Trust.............................................................................................. *+1 0n:unctions and da!ages in lieu of an in:unction.............................................*+* "unds for !i5ed Charitable and <onBCharitable Purposes...............................*+3 1utual %ills...................................................................................................... *+6 Equitable Personal Dbligation and a Charge....................................................*+7 -esulting Trust and Life Estate o2er LandA &ecret Trust...................................*+# &hares and -equire!ent of %riting.................................................................*+# Charitable Trust Test........................................................................................ *+# "iduciary /uties............................................................................................... *+ /ouble Character -e!edy for Torrens Land....................................................*+

21

HISTORY AND NATURE OF EQUITY

C'") P"%&<%-#$ '= E>u%!.
Equity is discretionary The core principals are lyrical prescriptions cf. the ten co!!and!ents 9 the basis for 2alues courts should bare in !ind when reaching decision. 1...............E:'i + 5ill no s'ffer a 5ron( o *e 5i #o' a rememd+ C Core :urisdiction 2......E:'i + follo5s #e la5 C Equity is generally required to follow the statutes in all circu!stances. 'owe2erA note secret trusts designed to circu!2ent the %ills 4ct. This principle is sub:ect to$ *.. . .E:'i + 5ill no $ermi s a ' e or ,ommon la5 o *e 'sed as an en(ine of fra'd C .. %#ere #ere is e:'al e:'i +D #e la5 s#all $revail C where both parties are equally bla!elessA equity resorts to co!!on law. 3.............%#ere #e e:'i ies are e:'alD #e firs in ime s#all $revail C 'owe2erA this principal is sub:ect to$ 6................................................................................................ Eela+ defea s e:'i ies 7.....E:'i + 5ill no assis a vol'n eer C 4 person has no rights unless there is a 2alid contractA a 2alid trust or so!e statutory pro2ision. E.g. so!eone pro!ised flowers has no rights to the flowers unless they ha2e pro2ided consideration or a trust had been created. #.....Be 5#o see&s e:'i + m's do e:'i +. E.g. two people enter a contract and then both refuse to do what is required. 4 cannot see, specific perfor!ance because she has not perfor!ed her part. ..............Be 5#o ,omes o e:'i + m's do so 5i # ,lean #ands C Co!pany director co!!itted a cri!e to enrich his co!pany. &ought !oney fro! the co!pany in co!pensation but refused b6c lac, of clean hands 2'inness v S'llivan ;1 +> 1+..........E:'ali + is e:'i + C 4 last resort in situations where the different !erits are difficult to differentiate e.g. trusts of poperty of un!arried couples and co!peting !ortgagees ;Midland 6an& v Coo&e ;1 3>>. 11.. E:'i + loo&s o #e in en ra #er #an o form C equity tries to cut to the !eat of the intentions. E.g. if it loo,s li,e a trustA it)s a trust 3a'l v Cons an,e ;1 77>. 12...........E:'i + loo&s on as done #a 5#i,# o'(# o *e #ave *een done C %als# v Lonsdale creation of an equitable lease e2idenced by a 2alid contract to create a lease despite lac, of for!al require!ents. 1*.... .E:'i + im$' es an in en ion o f'lfil an o*li(a ion C e2en to the point that acts not strictly required by the obligation !ay be dee!ed to be part perfor!ance of the obligation. E.g. wo!an owes !oney to a !an and dies. Lea2es !oney to hi! in her will. Equity will dee! the !oney to be paid in satisfaction of the debt. <7. !ay be o2erco!e by e2idence that legacy pro!ised before debt. 1..........E:'i + a*#ors a va,''m C -esulting trusts in property where a gift does not co!e to fruition and the property springs bac, to its original owner. 4n owner cannot si!ply abandon property rights in a horse and not be obliged to feed or care for it or co!pensate neighbours for crops the horse ate. %hat does Equity doC Par,inson$ ;i> the e5ploitation of 2ulnerability or wea,nessA as e5e!plified in principles relating to unconscionable dealing and undue influenceN

22

;ii> the abuse of positions of trust or confidenceA as e5e!plified in the law of trusts and fiduciary obligations generallyN ;iii> the insistence upon rights in circu!stances which !a,e such insistence harsh or oppressi2e as e5e!plified in relief fro! penalties and forfeitureA the law of equitable setBoffA and the refusal of specific perfor!ance on the discretionary ground of hardshipN ;i2> the inequitable denial of obligationsA as e5e!plified in the doctrine of part perfor!ance and the principle of equitable estoppelN ;2> the un:ust retention of propertyA as e5e!plified in certain constructi2e trusts and principles of subrogation

T;) ")$#!%'& ;%- ()!:))& CL #&/ E>

Ia!es E0 of &cotland The rise of protestantis! 4bsolutis! of so2ereign 9 /i2ine -ight of 8ings or 8ingBinBparlia!entC 7acon F Elles!ere$ Earl of D5ford)s case Earl of D5ford)s case The Dffice of the Chancellor is to correct 1en)s consciences for "raudsA 7reach of TrustsA %rongs and oppressionsA of what <ature soe2er they beA and to soften and !ollify the E5tre!ity of the Law ... ?%@hen a Iudg!ent is obtained by DppressionA %rong and a hard ConscienceA the Chancellor will frustrate and set it asideA not for any error or /efect in the Iudg!entA but for the hard Conscience of the Party.

T;) $)*#$% #!%'& '= )>u%!.

The Ci2il %ar 9 equity nearly destroyed Lord <ottingha! ;167*B#2>9 father of equity Lord Eldon 9 ;1#+1B27> !odern rules Precedent and fi5ation 4ppoint!ent of EC Poor ad!inistration 0nfa!ous delay 9 record 16 years and still interlocutory

19!; C)&!u". ")='",

7entha! and the (dog law) Iudicature 4cts 1#7+s 9 1 7+s The two strea!s in one court%indeyer I in "elton 2 1ulligan ;1 71> 12. CL- *67 at * 2N ?1 72@ 4L- ** at .6

2*

Fu %'& =#$$#<%)

Salt v Cooper (1880) 16 Ch/ 3.3 at 3. A Iessel 1- said of the effect of the 4ct$ 0t has been so!eti!es inaccurately called Qthe fusion of Law and EquityQN but it was not any fusionA or anything of that ,indN it was the 2esting in one tribunal the ad!inistration of Law and Equity in e2ery causeA actionA or dispute which should co!e before that tribunal. R To carry that outA the Legislature did not create a new :urisdictionA but si!ply transferred the old :urisdictions of the Courts of Law and Equity to the new tribunalA and then ga2e directions to the new tribunal as to the !ode in which it should ad!inister the co!bined :urisdictions.

P"'-)"!. %& CL
"or!ality Creation Transfer

Hni2ersaliMedA reifiedA fetishiMed 9 the !aterialiMation of the co!!on law

-ights recognised in contract and tort 9 breach of contractA trespassA negligence -e!edies for breach of property rights 9 da!ages CL !a,es orders about the property not the people

P"'-)"!. %& E>

&ubstance Conscience Power -esponsibility 9 lunacyA infantsA !arried wo!an

T"u ! #&/ <'&=%/)&<)

7HT through the logic of precedent not unfettered discretion -ights recognised through doctrines of equity 9 !isrepresentationA undue influenceA duressA unconscionabilityA fiduciary relationshipsA part perfor!anceA equitable estoppelA breach of confidence -e!edies 9 in:unctionsA specific perfor!anceA constructi2e trustsA personal orders Equity !a,es orders about the people not the property Equitable property or interest ;equitable fee si!pleA !ortgagesA co2enants etc> Personal Equities ;=ill 2 =ill> 1ere Equities ;Latec> C# ) !u/. 1? W;)& <'&!"#<! *' (#/ 4 ;2endor> e5changes contracts with 7 ;purchaser>

2.

4 gets a better offer fro! C ;he ,nows about 7)s offer> and co!pletes the sale to C before 7 ,nows Co!!on law approachC 7reach and da!ages 9 no property held by 7 Equitable approach$ breach and specific perfor!ance 7ut what about the property interestsC Case study 1$ %hen contracts go bad 0n co!!on law 7 is not the owner as the contract has not been co!pleted so the property cannot be returned 0n equityA the rule in Lysaght 2 Edwards says that 7 gets an equitable interest fro! the e5change and that it is a for! of constructi2e trustA which can be enforced against C ;when he ,nows about 7> C# ) S!u/. 2? F#! H)&". #&/ !;) -"'($), '= !"u ! 'enry and the purse strings Ta5ation in Tudor England 9 feudal tenures Pri!ogeniture /e2ising land by will The legal re!ainder rules The use 4 BBBBBBBBBBBBBBBBBBBBBBBBBB7 BBBBBBBBBBBBBBBBBBBBC ;Landowner>;feoffee to use >;cestui que use> Legal estate CLEquitable The &tatute of Hses 13*3 Collapse the use &pringing uses The use on the use Equity creates property where there was none beforeRR C# ) !u/. 2? P#"! -)"='",#&<) #&/ !;) )>u%!#($) @%,-)" '&#!%'&A 4 Lease for a factory 9 an agree!ent to create a deed Dr a !ortgage created by deposit of title deeds Dr a pro!ise to gi2e a life interest if cared for in dotageR 7eneficial estate

23

T;) ")>u%"),)&! ='" :"%!%&*

2*74ssurances of land to be by deed <o assurance of land shall be 2alid to pass an interest at law unless !ade by deed. 2*C0nstru!ents required to be in writing &ub:ect to the pro2isions of this 4ct with respect to the creation of interests in land by parol$ ;a> no interest in land can be created or disposed of e5cept by writing signed by the person creating or con2eying the sa!eA or by the person)s agent thereunto lawfully authorised in writingA or by willA or by operation of lawA R. 3.4Contracts for sale etc of land to be in writing <o action or proceedings !ay be brought upon any contract for the sale or other disposition of land or any interest in landA unless the agree!ent upon which such action or proceedings is broughtA or so!e !e!orandu! or note thereofA is in writingA and signed by the party to be charged or by so!e other person thereunto lawfully authorised by the party to be chargedR CL says no deal Part perfor!ance E>u%!. $''B !' u( !#&<) &'! ='", %as there an agree!entC /id a party act under that agree!ent and perfor!ed an act to their detri!ent which relates solely to the agree!entC 0s the agree!ent one which a court of equity would order specific perfor!anceC 0f yes to all then equity creates an interest which is an equitable i!personation or copy of the co!!on law interest being clai!ed

L#: #&/ E>u%!.

T;) R)$#!%'& ;%- ()!:))& L#: #&/ E>u%!.

?1.1+@ The relationship between law and equity prior to the introduction of Iudicature 4ct style legislation. E2en though Iudicature 4cts ha2e now unified the ad!inistration of law and equity throughout 4ustralia the two bodies of law re!ain separate and to properly understand the nature of !odern equity it is essential to co!prehend the relationship between equity and the law before their ad!inistration was united under the one court. There were a nu!ber of !a:or features of that relationship. ?1.11@Co!!on law courts would not recognise equitable rightsA titles and interests. ThusA at co!!on lawA the trusteeA and not the beneficiary was regarded as the QownerQ of trust property. This !eantA for instanceA that no action could be brought at co!!on law for breach of a purely equitable obligation. 0n Castlereagh Motels v Davies-Roe (1967) 67 &- ;<&%> 27 a co!pany brought an action against one of its directors see,ing da!ages for breach of his duty to act in the interests of the co!pany. 4sprey and Iacobs II re:ected the 26

co!panyQs clai! saying at 2#3B6A %e do not thin, that . . . all those principles which !ust go2ern the conduct of directors as fiduciaries which ha2e been de2eloped in equity ha2e beco!e in so!e !anner transposed into the co!!on law so that there is at co!!on law an action for their breach .... The courts of equity ha2ing de2eloped the principles of duty enforce those principles by their own re!ediesQ. 7ut there were e5ceptions to this rule. The co!!on law recognised the 2alidity of de2ises of equitable interestsN in Pawlett v A-G (1667> 'ard .63N 1.3 E- 33+ a de2ise of an equity of rede!ption was upheld. The co!!on law also recognised equitable clai!s in interpleader cases Go!rla" v #i$%sa" (1879) 2 &C- ;<&%> 27#N in garnishee proceedings$ M G Charle" Pt" #t% v & ' (ells Pt" #t% )196*+ <&%- 22A and in contracts for the sale of land always held the purchaser to be entitled to insist on a con2eyance of the equitable as well as the legal title. 0n contract cases the co!!on law would so!eti!es ta,e into account the interests of a third party cestui que trust when assessing da!ages at law. 0n Ro,ertso$ v (ait (18-*) # E5ch 2 N133 E- 1*6+ a ship was chartered fro! Li2erpool to Calcutta. 4 clause in the charterparty pro2ided that at Calcutta the 2essel was to be chartered there to a third fir!A Ewing F CoA and the plaintiff e5pected to recei2e a co!!ission fro! that further charter. The ship was lost on its way to Calcutta and the plaintiff was held to be entitled to da!ages on its own account and also to substantial da!ages as trustee for the third party. 0n so!e circu!stances courts of co!!on law ha2e recognised trustsA particularly where leases ha2e been held on trustA ieA Ma" v .a"lor (18/*) 6 1an F = 261N 1*. E- # 1A and decrees in Chancery ha2e for a long ti!e been allowed as a setBoff in actions at law. Co!!on law courts also recognised equitable rightsA titles and interests where they were the sub:ect !atter of a clai! in tort or contractA such as breach of a contract to sell so!e equitable interest. There were other breaches in the wallA but none of any great effect and the disad2antages flowing fro! the separate ad!inistration of co!!on law and equity far outweighed these sli! concessions. ?1.12@Equity had no power to decide disputed legal rights and titles. 4 plaintiff see,ing an equitable re!edy to enforce a legal right would not be able to do so unless the co!!on law right was ad!itted. 0n <ew &outh %ales s . of the Equity 4ct 1##+ ;s # Equity 4ct 1 +1>A adopting s 61 of the English Court of Chancery Procedure 4ct 1#32A ga2e the &upre!e Court in its equitable :urisdiction power to deter!ine incidental questions of law arising in suits for equitable relief. ?1.1*@Equity had no power to award da!ages. The Court of Chancery had power to award !onetary re!edies by way of restitutionary relief but not da!ages as they were ,nown at law. 0n England a power to award da!ages in lieu of or in addition to the re!edies of in:unction and specific perfor!ance was conferred on Chancery by Lord CairnsQ 4ct in 1#3# which was adopted in <ew &outh %ales as s *2 of the Equity 4ct 1##+ ;s Equity 4ct 1 +1>. This has since been reBenacted as s 6# of the &upre!e Court 4ct 1 7+ ;<&%> This right to award da!ages was not unli!ited. &o!e entitle!ent to one of the two equitable re!edies had to be shown before da!ages could be awarded. 'owe2er it was ulti!ately held that a clai! for in:unction or specific perfor!ance which could be :ustified on the original pleadings was sufficientA e2en though the clai! !ight be defeated by so!e subsequent

27

inter2ening factor$ Gol%s,oro!gh Mort v 0!i$$ (1910) 11 CL- 67.A per 0saacs I. This pro2ision has been carried o2er into the :udicature syste! and the distinction between da!ages under Lord CairnsQ 4ct and da!ages at co!!on law re!ains a !atter of so!e contro2ersy. 4t the sa!e ti!e there has been considerable growth in equityQs :urisdiction to award !onetary relief by way of restitution or equitable co!pensation ;see Chapter 23>. 0n 1i$g v Poggioli (192*) *2 CL- 222 a purchaser of rural land sought specific perfor!ance against the 2endor and da!ages for the 2endorQs failure to co!plete on a specified day as stipulated. 'owe2erA the purchaser had refused to tender the full purchase price and retained a su! sufficient to co2er the cost of stoc, lost through lac, of graMing. The 'igh Court held that specific perfor!ance was not a2ailable as the purchaser could not show that he was at all ti!es ready and willing to fulfil his part of the contract andA as he was not entitled to specific perfor!anceA he could not get da!ages under s of the Equity 4ct 1 +1. ?1.1.@The co!!on law courts lac,ed power to gi2e interlocutory relief. Chancery had inherent power to order disco2eryA interrogatoriesA to award interi! in:unctions and to appoint recei2ers. The co!!on law courts lac,ed these powersA although a power to order disco2ery and interrogatories was conferred on the co!!on law courts in England by ss 3+ and 31 of the Co!!on Law Procedure 4ct 1#3.. The disco2ery power was adopted in <ew &outh %ales as ss 2*B2. of the Co!!on Law Procedure 4ct 1#37. 4part fro! those li!ited refor!sA litigants at co!!on law had to resort to equity if they wanted any such interi! relief. ?1.13@The courts of co!!on law had no power to award specific perfor!anceA or in:unctions. The only e5ceptions to this wereA firstA a power to award in:unctions in addition to da!ages gi2en to the co!!on law courts by ss .#B31 of the Co!!on Law Procedure 4ct ;0!p> 1#3.A as adopted in <ew &outh %ales by the Co!!on Law Procedure 4ct 1#37A ss ..B.7 which was necessarily li!ited by the precondition of da!agesA andA secondlyA a li!ited power to award in:unctions in co!!ercial causes gi2en in 1 63 to the co!!on law side of the &upre!e Court by s 77 of the Co!!ercial Causes 4ct 1 +* ;<&%>. ?1.16@The co!!on law courts lac,ed power to !a,e declarations. Chancery had an inherent power to !a,e declarations when gi2ing other relief but it was not until &ir =eorge TurnerQs 4ct 1#3+A s *3A that a specific power to !a,e declarationsA pro2ided the parties agreed to state a caseA was conferred on Chancery. That power was clarified in 1#32 by a pro2ision which allowed Chancery to !a,e declarations whether other relief was granted or not. 1 This power was read down to apply only to cases where other relief could ha2e been granted$ Roo3e v #or% 1e$si$gto$ (18-6) 2 8 F I 73*N 6 E- #6 ;see Chapter 2.>. ?1.17@<o power e5isted to transfer cases fro! one :urisdiction to the other. There was a 2ery real ris,A particularly in cases concerning !ista,e or breach of contractA of co!!encing proceedings in the wrong court. 0t was not until 1#3. in England and 1#37 in <ew &outh %ales that a power to recognise equitable defences was conferred on the courts of co!!on law.
1

15 & 16 Vict c 86 (Imp) s 50 which was adopted in New South Wales as s 50 of the E uit! "ct 1880 and #e$enacted as s 10 of the Equity Act 1%01&
2#

'owe2erA the courts of co!!on law had no power to i!pose conditional relief. They could only find for or against a party. 4s a result the right to raise equitable defences at law was restricted to cases in which a court of equity would ha2e granted an absoluteA perpetual and unconditional in:unction on the pleading raised Mi$es Ro"al So4ieties v Mag$a" (18-/) 1+ E5 .# N 136 E- 3*1. 0n Carter v S5ith (19-2) 32 &- ;<&%> 2 + a defendant in an action of e:ect!ent sought to rely on an oral sharefar!ing agree!ent. The rele2ant agricultural holdings statute required such agree!ents to be in writing. &treet CI held that while the agree!ent !ight be recognised in equity under the equitable doctrine of part perfor!ance it could not be raised as a defence at co!!on law as a court of equity would only grant a conditional in:unction on such a clai!A ieA one which restrained the plaintiff pending e5ecution of a lease in proper for!. ?1.1#@ 4s !ost in:unctions awarded by Chancery were conditional the benefit of this refor! was quite li!ited. Dther :urisdictions resol2ed this continuing procedural dile!!a by enacting :udicature legislation. <ew &outh %ales clung to the ancient syste! and sought to alle2iate it by passing legislation which allowed for the transfer of cases fro! co!!on law to equity where the :udge at co!!on law was of the opinion that the !atter pleaded would not produce an absoluteA perpetual and unconditional in:unction with ludicrous results. 2 There was no co!ple!entary power to transfer cases fro! equity to the co!!on law where it beca!e clear that equity could not deal with the !atter. <ew &outh %ales atte!pted a further patch up piece of refor! in 1 37 by adding s #.4 to the Equity 4ct 1 +1. * Hnder s #4 the CourtA in its equity :urisdictionA was required to transfer a suit to co!!on law when it appeared at any stage of the proceedings that the Court had no :urisdiction and that the appropriate re!edy lay in the co!!on law. There was so!e :udicial confusion about what was !eant by Qno :urisdictionQA . while the logical conclusion of Qany stage of the proceedingsQ re!ained une5plored when the &upre!e Court 4ct 1 7+ ca!e to the rescue. 1.*T;) 7u/%<#!u") S. !), ?1.1 @ The English Iudicature 4ct of 1#7* and 1#73. %hile law and equity were ad!inistered by separate courts the only way to resol2e conflicts between the twoA as in a case where a defendant at co!!on law had a good equitable defence to the clai! but could not raise it in the co!!on law courtA was the co!!on in:unction which stopped the proceedings at co!!on law. That clu!sy !echanis! was replaced in the Iudicature 4ct ;0!p> 1#7* by s 23;11> which pro2ided that where there was any conflict between the rules of equity and those of the co!!on lawA equity should pre2ail.3 Hnder the :udicature syste! the ad!inistration of these two bodies of law was brought under control of the one courtA ob2iating any need for a !ultiplicity of actions on the one cause. 0t is crucial to re!e!ber that it is only the ad!inistration of these principles which is fusedA not the principles the!sel2es. The !ain features of a :udicature syste! are$
2 * . 3

' ( & ) *15+,& ' ( & ) *15+,& ' ( & ) *15-,& .e$enacted in NSW in the )aw .efo#m ()aw and E uit!) "ct 1%/+&
2

1.4ll branches of the court ha2e power to ad!inister equitable re!edies. 2.Equitable defences can be pleaded in all branches of the court and the appropriate relief gi2en. *.4ll branches of the court !ust recognise equitable rightsA titles and interests. ..4ll branches of the court ha2e a general power to deter!ine legal rights and titles. 3.The co!!on in:unction is abolished.

Fu %'& =#$$#<%)

?1.2+@ The unification of the ad!inistration of co!!on law and equity caused so!e :udicial confusionA particularly in the early days of the :udicature syste! in EnglandA resulting in a nu!ber of decisions where the :udg!ent proceeded on the erroneous assu!ption that the Iudicature 4cts had united the co!!on law and equity into the one bundle of principles fro! which desired pieces could be pic,ed out li,e rags at a :u!ble sale. 7ut that was not the intention of the legislature in bringing in a :udicature syste!. That proposition has been recognised since. 0n 67Ro!r3e v 'oeve$ )197/+ 1 <&%L- 622 at 626 =lass I4 said of the &upre!e Court 4ct 1 7+ ;<&%> that it effected a fusion not of two syste!s of principle but of the courts which ad!inister the two syste!s. 0n 8a$3 o9 8osto$ Co$$e4ti4!t v :!ropea$ Grai$ a$% Shippi$g #t% (.he Do5i$i;!e) )1989+ 4C 1+36 at 11+ Lord 7randon said that the :udicature 4ctsA while !a,ing i!portant changes in procedureA did not alter and were not intended to alter the rights of parties. DrA as 1u!!ery LI put it in MCC Pro4ee%s <$4 v #eh5a$ 8ros <$ter$atio$al (:!rope) ?1 #@ . 4ll E- 673 at 6 1A the Iudicature 4cts were Sintended to achie2e procedural i!pro2e!ents in the ad!inistration of law and equity in all courtsA not to transfor! equitable interests into legal titles or to sweep away altogether the rules of the co!!on lawT. /espite the fact that the Iudicature 4cts did not state that the two syste!s of law were to beA as to the principles applied in each syste!A decisions ha2e been !ade o2er the years that ha2e suggested so!e :udicial confusion on this point.

D#,#*) ='" I&&'<)&! M% ")-") )&!#!%'&

4t co!!on law da!ages were a2ailable for the tort of deceit which required proof of conscious dishonesty$ Derr" v Pee3 (1889) 1. 4pp Cas **7. Equity would grant rescission of a contract on the grounds of innocent !isrepresentationA pro2ided the parties could be restored to their original positions. 0n Re%grave v '!r% (1881) 2+ Ch / 1 &ir =eorge Iessel 1- suggested that the difference between equity and the co!!on law had disappeared with the passing of the Iudicature 4cts and that da!ages !ight thus be obtainable for innocent !isrepresentation which had pre2iously been recognised in equity only as a ground for rescission. 1ore recently da!ages were awarded for breach of confidenceA a purely equitable obligationA without any reference to Lord CairnsQ 4ct as the basis for the awardA nor any suggestion that the re!edy was actually a !atter of restitutionA both of which

*+

would ha2e satisfied established principle$ Seager v Cop"%e= )1967+ 2 4ll E- .13N ?1 67@ -PC *. .6

R)=u #$ '= /#,#*) ='" (")#<; '= <'+)&#&! ()<#u ) !;) -$#%&!%== % # +'$u&!))"
The !a5i! that equity will not assist a 2olunteer hasA in one narrow line of casesA been carried across to the co!!on law to frustrate an action brought by a party entitled to the benefit of a co2enant e5ecuted under seal whichA for o2er fi2e hundred yearsA had pro2ided a perfectly good action for da!ages at co!!on law$ Re Pr"4e )1917+ 1 Ch 2*..

The trustee of a !arriage settle!ent7 approached the court for directions as to whether he ought to sue another party to the deed of settle!ent for breach of its pro2isionsA specificallyA that the party had failed to con2ey certain after acquired property to the trustee. E2e I held that the trustee Qought not to sueQ as the beneficiaries under the deedA by then the wifeQs ne5t of ,inA were 2olunteersA and equity would not assist a 2olunteer. 'is Lordship also added his 2iew thatA Qnor could da!ages be awarded either in this court orA 0 apprehendA at co!!on law where since the Iudicature 4ct the sa!e defences would be a2ailable to the defendant as would be raised in an action brought in this court for specific perfor!ance or da!agesQ. The sur2i2al of the action for da!ages for breach of co2enant at co!!on law testifies to the !agnitude of the error in this :udg!ent. 0f it was correctA apart fro! a nu!ber of odd resultsA it would be possible to plead the equitable defence of hardship at co!!on law inA sayA an action for !oney had and recei2edA with absurd consequences. %ith the legal recognitionA albeit only by statuteA of the rights of !arried wo!en to own property in their own na!eA the !arriage settle!ent has passed into history along with the breech loading !us,et. The 2aried fortunes of the law of trusts !ay produce so!e new species of arrange!ents in which co2enants to settle after acquired property in fa2our of future beneficiaries are a central feature. "or the !o!entA the issues which arose in Re 3r+,e and cases of its il, are unli,ely to trouble !odern courts of equity.

D#,#*) '& !;) (# % '= !;) /'<!"%&) '= -#"! -)"='",#&<)

Hnder the &tatute of "raudsA and its !odern reBenact!entsA certain contracts were unenforceable if they did not !eet certain for!al require!entsA usually that they be in writing. 0n <ew &outh %ales the !ost co!!on e5a!ple of that is s 3.4 of the Con2eyancing 4ct 1 1 N

24A C'&!"#<! ='" #$) )!< '= $#&/ !' () %& :"%!%&*

;1><o action or proceedings !ay be brought upon any contract for the sale or other disposition of land or any interest in landA unless the agree!ent upon which such
6 7

0his p#actice has continued in 1#each of confidence cases and is now 2ene#all! #e2a#ded as a matte# of e uita1le compensation #athe# than a fusion fallac!& " t#ust esta1lished on the ma##ia2e of a woman f#om a wealth! famil! whe#e1! p#ope#t! was settled on t#ust fo# the woman fo# life and the#eafte# fo# he# child#en o# hei#s& 0he woman3 and usuall! he# hus1and to 1e3 we#e pa#ties to the deed3 as we#e othe# mem1e#s of he# famil! 0he deed usuall! contained a co4enant to settle p#ope#t! ac ui#ed the#eafte# on the t#ustees&
*1

action or proceedings is broughtA or so!e !e!orandu! or not thereofA is in writingA and signed by the party to be charged or by so!e other person thereunto lawfully authorised by the party to be charged. This section applies to contracts whether !ade before or after the co!!ence!ent of the Con2eyancing ;4!end!ent> 4ct 1 *+ and does not affect the law relating to part perfor!anceA or sales by the court. 4t law such pro2isions !eant that no action for da!ages could be brought for breach of such a contract. EquityA on the other handA by way of the doctrine of part perfor!anceA would enforce such contracts by granting a decree of specific perfor!anceA pro2ided the party see,ing the order could pro2e acts of part perfor!ance sufficient to gi2e rise to an equity in his or her fa2our. The test for the application of the doctrine of part perfor!ance was laid down in Ma%%iso$ v Al%erso$ (188*) # 4pp Cas .67. The appellant had li2ed for !any years as house,eeper in the ser2ice of Tho!as 4ldersonA who died in 1#77. 0n return for her unpaid ser2icesA 4lderson had pro!ised to lea2e her a life estate in 1oulton 1anor "ar!. 'e included that gift in a will which he signed in 1#7. and which later failed for want of proper attestation. 4fter 4lderson)s death the appellant too, possession of the title deeds to the far!. 4lderson)s heir sought to reco2er the deeds. 0n her defence the appellant clai!ed that she was entitled to the benefit she would ha2e recei2ed under the will because of the parol agree!ent between herself and the deceased. The 'ouse of LordsA led by Lord &elborne LCA held that the agree!ent was one on which the appellant !ight ha2e been entitled to relief but for the &tatute of "raudsA there being no written !e!orandu! of itA and that the acts of the appellant were not sufficient to in2o,e the doctrine of part perfor!ance which required that the acts relied upon as part perfor!ance be unequi2ocallyA and in their own natureA referable to so!e such agree!ent as that alleged. The defendant would then be (charged) upon the equities resulting fro! the acts done in e5ecution of the contract and not upon the contract itself. 1ere continuance in 4lderson)s ser2iceA though without pay!ent of wagesA was not of itself e2idence of a new contractA !uch less one concerning land. That state!ent of the rule in 1addison 2 4lderson was followed by the 'igh Court in M48ri%e v Sa$%ila$% (1918) 23 CL- 6 A in which 0saacs and -ich IIA in a :oint :udg!entA at 7#A confir!ed that (so!e such agree!ent as that alleged) !eant so!e contract of the general nature of that alleged. 1c7ride 2 &andiland has since been followed in Coo$e" v 8!r$s (1922) *+ CL- 216A and in -egent 2 1illett ;1 76> 3+ 4LI- 7 . The latter case was applied in (atso$ v Dela$e" (1991) 22 <&%L- *3# as authority for the principle stated in 1addison 2 4lderson to gi2e effect to an oral grant of a tenancy for life. The acts of part perfor!anceA which were held to be sufficientA included going into possessionA paying rentA and effecting substantial capital repairs on the pre!ises. The doctrine is not a rule of e2idence through which the court can find proof of a contract otherwise required to be in writingN it is a rule of substanti2e law concerned with the question of whether the acts of part perfor!ance relied upon by the plaintiff gi2e rise to an equity entitling hi! or her to specific perfor!ance. The acts of part perfor!ance are not !anifestations of the alleged agree!ent which satisfy so!e spirit of the legislation requiring that the agree!ent not be secret.

*2

0n so!e cases argu!ents ha2e been put to the effect that a clai! for da!ages could be brought for breach of a Spartly perfor!edT contractA e2en though the contract was otherwise unenforceable for lac, of writing. 0n 1eagher =u!!ow F LehaneQsA Equity /octrines and -e!ediesA .th ed 2++2A when listing e5a!ples of fusion fallaciesA the learned authors ;now 1eagherA 'eydon and Lee!ing> include at para ?2B163@ U/a!ages for part perfor!anceU. 0n the opening sentence to that paragraph they sayA UPart perfor!ance is a doctrine of equity which if successfully asserted by a plaintiff will ta,e fro! the defendant to a suit for specific perfor!ance of a contract for sale of an interest in land the defence that the contract does not satisfy the require!ents for writing of s . of the &tatute of "rauds and its successors. They then point to a nu!ber of cases in which a party has sought to argue that da!ages !ight be awarded for breach of a contract rendered unenforceable by the statute but in which case the court would notA or could not decree specific perfor!ance. 0n 6>Ro!r3e v 'oeve$ )197/+ 1 <&%L- 622 per =lass I4 ;with who! -eynolds and 'utley II4 agreed> citing /i5on I in I C %illia!son Ltd 2 Lu,ey and 1ulholland ;1 *1> .3 CL- 2#2 at 2 7 in which his 'onour saidA U4n action of da!ages could not but failA because when a co!!on law re!edy is soughtA part perfor!ance ne2er did and does not now afford an answer to the &tatute of "rauds ... if the doctrine is not confined to cases in which a decree !ight be !ade for specific perfor!ance of the contractA it is at least true that the doctrine arose in the ad!inistration of that relief and has not been resorted to e5cept for that purposeU. The only possible basis upon which da!ages !ight be awarded in a case in2ol2ing a contract otherwise rendered unenforceable by the &tatute of "rauds would be in e5ercise of the power conferred by Lord Cairns 4ctA to award da!ages in lieu of or in addition to a decree of specific perfor!anceA by courts ha2ing such power. The :urisdiction to award da!ages in substitution forA or in addition to specific perfor!anceA has not been e5tended to cases where specific perfor!ance could not possibly ha2e been directed. &o that where a contract has beco!e incapable of specific perfor!anceA such as by lapse of ti!eA the equitable doctrine of part perfor!ance will not enable a plaintiff to obtain relief in da!ages. #aver" v P!rsell (1888) * Ch / 3+# at 31#B31 per Chitty I That case in2ol2ed a contract !ade in <o2e!ber 1##6 on a house standing on a property. 4s the house was thus a fi5ture the contract was held to be one for the sale of an interest in land. The 2endor subsequently repudiated the contract and returned the deposit on 17 /ece!ber 1##6. The purchaser co!!enced proceedings see,ing an order for specific perfor!ance. <o interi! orders were obtained and the !atter did not co!e on for trial until "ebruary 1###. 4t that ti!e the purchaser conceded that because of the lapse of ti!e the contract could not be specifically enforced. 'e arguedA nonethelessA that he should be awarded da!ages for breach of the contractA in lieu of specific perfor!ance. 4t 31 Chitty I said of the question of whether da!ages could be awarded on the ground of part perfor!anceN

**

U0t was suggested that after Lord CairnsQ 4ct the Court of Equity could gi2e da!ages in lieu of specific perfor!ance. KesA but it !ust be in a case where specific perfor!ance could ha2e been gi2en. 0t was a substitute for specific perfor!ance. 0t did not gi2e the old Court of chancery a general :urisdiction to gi2e da!ages whene2er it thought fitA it was only in that ,ind of case where specific perfor!ance would ha2e been the right decree and there were reasons why it would ha2e been better to substitute da!agesA but that could not apply to a case where you could not ha2e gi2en specific perfor!anceU. The point was restated by the <ew &outh %ales Court of 4ppeal in 8ate" v Gi99or% (1997) .2 <&%L- 71+ at 71# per 'andley I4 ;with who! Priestley I4 and Clar,e 4B I4 agreed>A where his 'onour said$ UCo!pensation awarded in equity ancillary to specific perfor!ance was only a2ailable as Lord 'aldane said Ufor a deficiency in the sub:ect !atter described in the contractU ;-utherford 2 4ctonB4da!s ?1 13@ 4C #66 at #7+> or as &tar,e I said Ufor so!e di!inution or deterioration in the 2alue of the property contracted to be soldU. ;1i$g v Poggioli (192*) *2 CL- 222 at 2.6.> Co!pensation could not be awarded for unliquidated da!ages for breach of contract ;8ing 2 Poggioli at 2.6>A or for Ua clai! to !a,e good a representation about ;the> sub:ect !atter !ade not in the contract but collaterally to itU. ;-utherford 2 4cton 4da!s at #7+.>U

EC),-$#". '" #**"#+#!)/ /#,#*) ='" (")#<; '= #& )>u%!#($) '($%*#!%'&

The Court of Chancery had no power to award da!ages. %ith the introduction of Lord Cairns) act in 1#3# it was gi2en power to award da!ages in lieu of or in addition to the re!edies of in:unction or specific perfor!ance. 0n A;!a4!lt!re Corporatio$ v ?@ M!ssel Co #t% )1990+ * <LL- 2 the <ew Lealand Court of 4ppeal awarded e5e!plary da!ages for a breach of confidence. Pal!er I did the sa!e in /igital Pulse Pty Ltd 2 'arris ?2++2@ <&%&C ** bringing a regrettably childish response fro! the authors of 1eagher =u!!ow F Lehane)s Equity /octrines and -e!edies .th ed ;at para 2*B+2+>. 0n the Court of 4ppealA in 'arris v Digital P!lse Pt" #t% )200*+ <&%C4 1+ ;7 "ebruary 2++*> Pal!er I8)s decision was o2erturnedA by a !a:ority ;&pigel!an CI and 'eydon I4A 1ason P in dissent>. Those :udg!ents pro2ide a !uch !ore reasoned critique of the question.

T;) /'<!"%&) '= W#$ ; + L'& /#$)

?1.21@Perhaps the !ost fa!ous fusion fallacy is that perpetrated by &ir =eorge Iessel 1- in %alsh 2 Lonsdale ;1##2> 21 Ch / . 4 !illA or factoryA was leased for se2en years under a written agree!entA but no deed of lease under seal was e5ecuted as required by s * of the -eal Property 4ct ;0!p> 1#.3 and thus the lease was 2oid at law. 4t law the tenant was !erely a tenant fro! year to yearA one yearQs rent ha2ing been paid in ad2ance. TraditionallyA equity would ha2e awarded specific perfor!ance of the agree!ent to grant a lease. The 1aster of the -olls held that a tenant holding under an agree!ent to grant a lease of which specific perfor!ance would ha2e been decreed stood in the sa!e position as to liability as if the lease had been e5ecutedA sayingA Q'e is notA since the Iudicature 4ctA a tenant fro! year to yearA he holds under the

*.

agree!ent and e2ery branch of the court !ust gi2e hi! the sa!e rights .... There are not two estates as there were for!erlyA one estate at co!!on law . . . and an estate in equity under the agree!ent. There is only one court and equity rules pre2ail in itQ. 0f that :udg!ent was ta,en literally then all distinctions between equitable and co!!on law interests would 2anish. The continued e5istence of trusts shows that that has not happened. 0t is also incorrect to tal, of the rules of equity pre2ailing. The rules of equity only Qpre2ailQ when there is a conflict between the twoN it does not apply to the relationship between equity and the co!!on law generally. 0t is also wrong to tal, of a party as ha2ing the benefits of a decree of specific perfor!ance before the re!edy has been awarded. /ecrees of specific perfor!ance are not auto!atic. They are discretionary and there are !any factorsA not the least of which is the conduct of the party see,ing reliefA which !ust be ta,en into account before a court will decree specific perfor!ance. /espite these ob2ious flawsA and considerable criticis! sinceA %alsh 2 Lonsdale has sur2i2ed and has been accepted as authority for the rule that a written lease not in proper for! willA pending a decree of specific perfor!ance requiring the lessor to e5ecute the proper for!A gi2e rise to an equitable relationship of landlord and tenant between the parties under which the for!er couldA if necessaryA be restrained by in:unction fro! acting on the footing that the latter was !erely a tenantBatBwill or a tenant fro! year to year$ Progressive Maili$g 'o!se Pt" #t% v .a,ali Pt" #t% (198-) 137 CL- 17A per 1ason I at 26N and the equitable estate thus recognised endures until the contract upon which it is founded is a2oided or dissol2ed Cri43lewoo% Propert" A <$vest5e$t .r!st #t% v #eighto$>s <$vest5e$t .r!st #t% )19/-+ 4C 221A per Lord %right at 2.+. Dther obligations arising under the written lease will notA necessarilyA be enforceable. 0n Cha$ v Cres%o$ (1989) # 4L- 322 an agree!ent for lease was e5ecuted under which the respondent agreed to lease certain land in Gueensland for fi2e years to &arcourt Pty Ltd. 4 for! of lease was anne5ed and a lease in registrable for! was si!ultaneously e5ecutedA but not registered under the -eal Property 4ct 1#61 ;Gld>. 4fter default by &arcourtA the lessor sought to reco2er fro! the appellants as guarantors under the unregistered lease. Hnder s .* of the 4ct the lease was not effectual to pass any estate or interest until registration. The 'igh CourtA by a !a:orityA held that the appellants were not liable under the guarantee. %hat they had guaranteed was the Qobligations of &arcourt Pty Ltd under this leaseQ. E2en if it was assu!ed that specific perfor!ance of the agree!ent for lease would be grantedA that was not enough to establish liability on the part of the appellants as guarantors. Dnly a lease at law would !eet this description for the purposes of the guarantee. 1ason CIA 7rennanA /eane F 1c'ugh IIA ha2ing discussed %alsh 2 Lonsdale and the authorities which had dealt with it sinceA said that case established two propositions$ firstA the courtQs willingness to treat the agree!ent as a lease in equityA on the footing that equity regards as done that which ought to be done and equity loo,s to the intent rather than the for!A rests upon the specific enforceability of the agree!entN andA secondlyA an agree!ent for a lease will be treated by a court ad!inistering equity as an equitable lease for the ter! agreed upon andA as between the partiesA as the equi2alent of a lease at lawA though the lessee does not ha2e a lease at law in the sense of ha2ing a legal interest in the ter!. 7ecause the liability of a guarantor wasA Q4t lawA as in equityA . . . strictissi!i :urisA ;so> a!biguous contractual pro2isions should be construed in fa2our of the *3

suretyQ$ A$3ar Pt" #t% v ?atio$al (est5i$ster &i$a$4e (A!stralia) #t% (1987) 162 CL- 3. N 7+ 4L- 6.1A the require!ent that the Chans guaranteed pay!ent of rent Qunder this leaseQ !eant :ust thatA and no !ore.

*6

ESTOPPEL
D)=%&%!%'&? 0n si!ple ter!sA an estoppel is an equitable clai! that pre2ents so!eone fro! denying the e5istence of a state of affairs in circu!stances where such denial would be unconscientious. This necessarily has an i!pact upon those legal rights which would otherwise be e5ercisable by the person estopped. 4 si!ple e5a!ple would be a situation where 4 has induced 7 to belie2e that 4 will not insist upon his or her strict legal rights under a contract that e5ists between the!. 0f 7 relies upon the assu!ption that 7 will not be e5posed to liability should 7 fail to perfor! his or her obligations e5actlyA the law recognises that it is unconscionable to allow 4 to subsequently sue 7 for breach of contract on those grounds.

C',,'& L#: E !'--)$

4t co!!on law the focus has been upon assu!ptions of fact. These could arise by !eans of :udicial decision ;estoppel by record or issue estoppel>A agree!ent by both parties ;estoppel by deed or estoppel by con2ention>A and also by representation !ade by one to the other ;estoppel by representation>. The general principle of co!!on law estoppel was stated by /i5on I in G"u&/! + G")#! 4'u$/)" P!. G'$/ M%&) L!/ 019671 3 CL- 6.1A at 67. as being thatA (the law should not per!it an un:ust departure by a party fro! an assu!ption of fact which he has caused another party to adopt or accept for the purpose of their legal relations) it is co!!only said of co!!on law estoppel that it is a rule of e2idence while estoppel in equity !ay confer substanti2e rights. 7y this it is !eant that co!!on law estoppel is a de2ice used !erely to deter!ine the facts upon which the legal rights of the parties will then be deter!ined by the courtA whereasA in equityA rights flow directly fro! the operation of estoppel in equity. This classification is a natural consequence of the first distinction O if the scope of co!!on law estoppel is confined to representations of factA its true role is to establish which facts the court will ad:udge. 0f the estoppel is successfully raisedA then the representor will be precluded fro! denying the facts assu!ed by the representee.

D%==)")&<) (D: CL #&/ E>

0n Silovi Pt" #t% v 8ar,aro (1988) 1* <&%L- .66A at .72A Priestley I4 set out a series of enu!erated points in order to clarify the law on estoppel. The first three offer a concise su!!ary of the ideas presented so far$ 1. Co!!on law and equitable estoppel are separate categoriesA although they ha2e !any ideas in co!!on. 2. Co!!on law estoppel operates upon a representation of e5isting factA and when certain conditions are fulfilledA establishes a state of affairs by reference to which the legal relation between the parties is to be decided. This estoppel does not itself create a right against the party estopped. The right flows fro! the court)s decision on the state of affairs established by the estoppel. *. Equitable estoppel operates upon representations or pro!ises as to future conductA including pro!ises about legal relations. %hen certain conditions are fulfilledA this ,ind of estoppel is itself an equityA a source of legal obligation. *7

M'/)"& E>u%!#($) E !'--)$

Equitable estoppel is the result of bringing together the two significant for!s of estoppel that e5isted in equity O pro!issory estoppel and proprietary estoppel Pro!issory estoppel Ce$tral #o$%o$ Propert" .r!st #t% v 'igh .rees 'o!se #t% )19/7+ 1 87 1*+. 0n that case Central London Property Trust ;CLPT> leased a bloc, of flats to 'igh Trees 'ouse ;'T'> for a period of years. 0n 1 .+A CLPT agreed to accept a reduced rentA which was paid for the ne5t fi2e years by 'T'. CLPT accepted the reduction because of the low occupancy rate for the flats during %orld %ar 00. 0n 1 .3A with the flats all fully letA CLPT asserted a clai! for the full rent thereafter. /enning I said that CLPT was entitled to the full rent as clai!edA on the basis that the agree!ent for a reduced rent was only for as long as the flats were not fully let. The critical aspect of the case was the state!ent by /enning I thatA if CLPT had clai!ed the full rent for the years 1 .+91 .3A it would ha2e failed. E2en though the pro!ise to accept a reduced rent was not supported by considerationA the principle of pro!issory estoppel would ha2e been raised against CLPTA pre2enting reco2ery of the forgone rent. Li!itations 1. the pro!ise had to be in the conte5t of one intended to affect a preBe5isting legal relationship between the parties$ Co5,e v Co5,e )19-1+ 2 87 213A at 22+. 0n 'igh TreesA this was satisfied in that the parties were in a lease relationship and the pro!ise was in relation to ter!s agreed under that lease. Li!itations 2. pro!issory estoppel could only be used as a defence to an action brought by the pro!isor against the pro!isee. 0t was said that it could only be used as a (shield) and not as a (sword)$ Co!beA at 22+. 0n 'igh TreesA this was satisfied as it was 'T'A the defendant6pro!iseeA that would ha2e used pro!issory estoppel as a defence to a clai! for the forgone rent by CLPTA the plaintiff6pro!isor

P"'-"%)!#". ) !'--)$
0n relation to proprietary estoppelA it always was able to act as a sword as well as a shield and it is this feature that it has brought to equitable estoppel generally Proprietary estoppel)s other !a:or difference fro! pro!issory estoppel is its operation in the real! of real property law. This estoppel operates to restrict the legal rights of landowners if they ha2e encouraged the belief in anotherA or at least acquiesced in that other)s beliefA that she or he has so!e entitle!ent o2er the property and that belief has been acted uponA for e5a!pleA by so!e alteration or i!pro2e!ent ha2ing been !ade to the land. 'owe2erA no proprietary estoppel clai! is a2ailable if the plaintiff and defendant ha2e a legally enforceable contract relating to the property$ Gi!5elli v Gi!5elli (1999) 1 6 CL- 1+1A at 121N 161 4L.7*A at .#2N -iches 2 'ogben ?1 #3@ 2 Gd - 2 2A at *+1. 4s Koung CI in Eq obser2ed in 8ar$es v Al%erto$ )2008+ <&%&C 1+7A at ?33@A (contract and proprietary estoppel are !utually e5clusi2e).

*#

T:' !")#,
Dillw"$ v #lewel"$ )1862+ 4ll E- *#. is the classic e5a!ple of estoppel by encourage!ent. 0n that case a father put his son into possession of land which he purported to 2oluntarily con2ey to his son. The con2eyance was ineffecti2e. %ith his father)s assent and appro2alA the son built and occupied a house on the land. 4fter the father)s death the son sought a declaration that he was the owner of the land in equity and that the trustees of the land be ordered to con2ey the land to hi! absolutely. The 'ouse of Lords !ade these orders. The other strea! of proprietary estoppel is estoppel by acquiescence which was succinctly e5plained by Cranworth LI in Ra5s%e$ v D"so$ (1866) L- 1 'L 12 A at 1.+91$ 0f a stranger begins to build on !y land supposing it to be his ownA and 0A percei2ing his !ista,eA abstain fro! setting hi! rightA and lea2e hi! to perse2ere in his errorA a Court of equity will not allow !e afterwards to assert !y title to the land on which he had e5pended !oney on the supposition that the land was his own.

D)!"%,)&!
0n 8ar$es v Al%erto$ )2008+ <&%&C 1+7A at ?.2@A Kound CI in Eq put it as follows$ <o equity arises to raise a proprietary estoppel unless the person in whose fa2our it is being raisedA has acted to their pre:udice or detri!ent in so!e way whether in ter!s of direct e5penditure or on so!e other basis. 'owe2erA the detri!ent !ay not necessarily be e5penditure of !oneyA co!!only a clai!ant lea2es her :obA !o2es in with the pro!isor and does his house,eeping for !any years R 'owe2erA R !inor e5penditure such as day to day li2ing e5penses or !inor repairs will not qualify.

4"%&*%&* E !'--)$ !'*)!;)"

0n (alto$s Stores (<$terstate) #t% v Maher (1988) 16. CL- *#7N 76 4L- 31*A the 'igh Court handed down its !ost significant decision on the topic of estoppel. The significance of this case was that it consolidated pro!issory and proprietary estoppels into the singleA and broaderA principle of equitable estoppel 1ason CI and %ilson IA at CL- .+.N 4L- 32.A said$ Dne !ay therefore discern in the cases a co!!on thread which lin,s the! togetherA na!elyA the principle that equity will co!e to the relief of a plaintiff who has acted to his detri!ent on the basis of a basic assu!ption in relation to which the other party to the transaction has (played such a part in the adoption of the assu!ption that it would be unfair or un:ust if he were left free to ignore it)$ per /i5on I in =rundt 2 =reat 7oulder Pty =old 1ines Ltd ;1 *7> 3 CL- 6.1 at 673 R Equity co!es to the relief of such a plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assu!ption. 7rennan IA in %altonsA at CL- .2#9 N 4L- 3.2A set out what he saw as the ele!ents that had to be satisfiedA as follows$

0n !y opinionA to establish an equitable estoppelA it is necessary for a plaintiff to pro2e that ;1> the plaintiff assu!ed that a particular legal relationship then e5isted between the plaintiff and the defendant or e5pected that a particular legal relationship would e5ist between the! andA in the latter caseA that the defendant would not be free to withdraw fro! the e5pected legal relationshipN ;2> the defendant has induced the plaintiff to adopt that assu!ption or e5pectationN ;*> the plaintiff acts or abstains fro! acting in reliance on the assu!ption or e5pectationN ;.> the defendant ,new or intended hi! to do soN ;3> the plaintiff)s action or inaction will occasion detri!ent if the assu!ption or e5pectation is not fulfilledN and 6> the defendant has failed to act to a2oid that detri!ent whether by fulfilling the assu!ption or e5pectation or otherwise.

R)-") )&!#!%'&
To establish a case based upon principles of equitable estoppel there needs to be a pro!ise or a sufficiently clear and una!biguous representation. 0n A44!rate &i$a$4ial Co$s!lta$ts Pt" #t% v 1o3o 8la43 Pt" #t% )2008+ E&C4 #6A at ?1*.@A /oddsB&treeton I4 said thatA when construing a representationA the court !ust assess its !eaning (by how it would be reasonably understood by the addressee in the conte5t of the surrounding circu!stances). 0n A!stralia$ Cri5e Co55issio$ v Gra" )200*+ <&%C4 *1#A at ?2++@A 0pp I4A spea,ing for the <ew &outh %ales Court of 4ppealA said$ The underlying reason for the rule thatA generally spea,ingA an a!biguous or unclear representation will not gi2e rise to a pro!issory estoppel is that the foundation of pro!issory estoppel is unconscionability. Hnconscionability is usually difficult to establish when the representation is a!biguous or unclear. The pro!ise or representation can be either e5press or i!plied$ Legione 2 'ateleyA at CL- .*#9

u,-!%'& '" )C-)<!#!%'&

0f the assu!ption is one of an e5isting factA a case of co!!on law estoppel arises. ;0n %altons the !inority found for the 1ahers on this basisA 2iewing the e2idence as establishing that the 1ahers belie2ed that %altons had co!pleted the e5change of the lease.> Equitable estoppel will arise if the assu!ption is that the representor will act in a particular way in the future. 4ccording to 7rennan IA the relying party needs to show that he or she assu!ed that a particular legal relationship e5isted or would e5ist between the parties. 4ccording to the !a:ority in %altonsA this was established on the facts of that case. 4 si!ilar approach is detected in Mo,il 6il A!stralia #t% v #"$%el ?o5i$ees Pt" #t% (1998) 13* 4L- 1 #A at 2*3A where the "ull Court of the "ederal Court said that (it is a necessary ele!ent of the principle that the ?representor@ has created or encouraged an assu!ption that Sa particular legal relationshipT or SinterestT would arise or be granted)

I&/u<),)&!
0nitiallyA it needs to be stressed that it is the assu!ption that is induced by the pro!ise or representationA rather than the pro!ise or representation itselfA that for!s the basis for a clai! based upon equitable estoppel$ %altons at CL- .1*9 1.A .+

.2#9 A .3#9 N 4L- 3*1A 3.2A 36.93N Co55o$wealth v Berwa"e$ (1990) 17+ CL- * .A at .1291*A ...93A .3*96A 3++92N 3 4L- *21A at **29*A *3697A *6*9.A * 69#. /eane I said the following in Co!!onwealth 2 EerwayenA at CL-N 4L- at *36$ The cases indicate four !ainA but not e5hausti2eA categories in which an affir!ati2e answer to that question !ay be :ustifiedA na!elyA where that party$ ;a> has induced the assu!ption by e5press or i!plied representationN ;b> has entered into contractual or other !aterial relations with the other party on the con2entional basis of the assu!ptionN ;c> has e5ercised against the other party rights which would e5ist only if the assu!ption were correctN ;d> ,new that the other party laboured under the assu!ption and refrained fro! correcting hi! when it was his duty in conscience to do so.

R)$%#&<)
The relying party !ust actA or refrain fro! actingA in reliance on the assu!ption. 4 causal lin, between the assu!ption and the action or conduct by the relying party !ust be established. The action or conduct underta,en !ust be reasonable in all the circu!stances

E&':$)/*) '" %&!)&!%'&

4ccording to 7rennan IA the representor !ust actually ,nowA or intendA that the relying party will act or refrain fro! acting in reliance on the assu!ption or e5pectation. 0n cases of assu!ptions based upon a pro!ise or representationA ,nowledge is (easily inferred). 0n cases where the assu!ption arises outside the conte5t of a pro!ise or representationA the require!ent of ,nowledge or intention is !ore difficult to establish$ %altonsA at CL- .2*N 4L- 3*#. 'owe2erA it can be establishedA as was the case in %altonsA in cases where (the defendant encourages a plaintiff to adhere to an assu!ption or e5pectation already for!edA or acquiesces in an assu!ption or e5pectation whenA in conscienceA ob:ection ought to be stated)$ PaCta Co5pa$" Pt" #t% v <%ela3e Pt" #t% )2008+ <&%&C .1A at ?26@. "urther!oreA according to 7rennan IA it is not enough that the representor ought to ha2e ,nown that the relying party would act or refrain fro! acting in reliance on the assu!ption or e5pectation. 4 contrary 2iew was suggested by /eane I in Co!!onwealth 2 EerwayenA at CL- ..3N 4L- at *36. 0n <ew Lealand Pelt E5port Co!pany Li!ited 2 Trade 0nde!nity <ew Lealand Li!ited ?2++.@ E&C4 16*A at ? @A the Eictorian Court of 4ppeal e5pressed a preference for the 2iew of /eane I o2er that of 7rennan I on this issue.

D)!"%,)&!
The relying party !ust sufferA or stand to sufferA detri!ent if the assu!ption !ade by it is not fulfilled. There !ust be a lin, between the detri!ent and the assu!ption or e5pectation

.1

0n S!lliva$ v S!lliva$ )2006+ <&%C4 *12A at ?1#@ 'andley I4 said that (?t@he detri!ent that !a,es an estoppel enforceable is that which the party asserting the estoppel would sufferA as a result of his or her original change of positionA if the assu!ption which induced it was repudiated by the party estopped)

R)$%)=
Establishing the ele!ents of equitable estoppel gi2es rise to an equity in fa2our of the relying party. This si!ply !eans that the relying party is entitled to so!e equitable relief. The relief is not based upon there being a pro!ise or representationA but rather upon the e5pectation that the pro!ise or representation generated$ =iu!elli 2 =iu!elli ;1 > 1 6 CL- 1+1A at 121N 161 4L- .7*A at .#2. Pri!a facieA the equity is enforced by (the !a,ing good of the rele2ant assu!ption on which the plaintiff actedA although where that relief would be disproportionate to the require!ents of conscionable beha2iourA equity !ayA as a !atter of discretionA decree so!ething less)$ M41a" v M41a" )2008+ <&%&C 177A at ?*2@. 0t is thus often said that there needs to be proportionality between the relief ordered and the detri!ent sufferedA or that the court willA in !a,ing its ordersA deter!ine the !ini!u! equity required to do :ustice to the relying party. "urther!oreA relief !ay be structured to recognise practical considerations such as the need for a clean brea,. The court should also ta,e into account the i!pact of its orders on rele2ant third parties and any hardship or in:ustice they would suffer$ Gi!5elliA at CL- 11*B.A 123N 4L- .76A .#3. 0n =iu!elliA parents pro!ised their son thatA if he continued to li2e on a property owned by his parentsA they would subdi2ide it and gi2e hi! the portion containing the house that he li2ed in. Dn the basis of this the son stayed and ga2e up a career opportunity that would ha2e ta,en hi! away fro! the property. The relationship between the parents and son bro,e down when the son !arried a wo!an of who! his parents did not appro2e and they refused to transfer the property to the son. The 'igh Court granted the son !onetary relief to the 2alue of the property that should ha2e been transferred to hi! by the parents. The 'igh Court did not order a transfer of the property to the son. 'owe2erA the !onetary co!pensation was ne2ertheless a re!edy based upon the son)s lost e5pectation rather than reliance loss or any actual detri!ent suffered by the son.

.2

LAW OF ASSIGNMENTS AND DISPOSITIONS

Legal and Equitable assign!ent 0n the assign!ent of propertyA the nature of the assign!ent is i!portant. 4 legal assign!ent gi2es the assignee a legal interest in that property. 0f it is an equitable assign!ent the assignee obtains an equitable interest in property. The nature of the assignee)s property right is crucial in the conte5t of co!peting rights to that property

R%*;! #&/ $%#(%$%!%) &'! <#-#($) '= #

&o!e things cannot be assigned at all Public pay

%*&,)&!

4n assign!ent of pay by the holder of a public office is prohibited on the basis that such pay is !ade to enable the office holder to !aintain his or her office with decoru! and propriety. Ar,!th$ov v ?orto$ (18/6) . 1oore 21 N ;1#.6> 1* E- .7. <ortonA a :udgeA assigned the equi2alent of si5 !onths pay to which he was entitled to his legal personal representati2e upon death. The entitle!ent was assigned as security for an ad2ance. The Pri2y Council ruledA after <orton)s deathA that the assign!ent was 2alid. This was so because the pay that was assigned only fell due upon <orton)s deathA that isA when <orton no longer held public office. 7ecause the pay was not payable during his lifeA the assign!ent in no way di!inished <orton)s ability to !aintain the dignity of his office.

4#") "%*;! !' $%!%*#!)

7are rights to litigate include rights to sue in tortA rights to sue for unliquidated da!ages in contract and bare rights to sue in equity. <one of these rights are rights of property and therefore they are not assignable. /ebts and rights to sue for liquidated su!s in contract are assignable because they are regarded as rights of property. %hyC Encourages litigation Torts and cri!es of barratry ;o2erly officious in instigating or encouraging prosection of groundless litigationT or who bring Srepeated or persistent acts of litigastionT for the purposes of profit or harass!ent>A cha!perty and !aintenance ;doctrines in co!!on law :urisdictionsA that ai! to preclude fri2olous litigation. U1aintenanceU is the inter!eddling of a disinterested party to encourage a lawsuit. ?1@ 0t is U4 ta,ing in handA a bearing up or upholding of quarrels or sidesA to the disturbance of the co!!on right.U?2@ UCha!pertyU is the U!aintenanceU of a person in a lawsuit on condition that the sub:ect !atter of the action is to be shared with the !aintainer.?*@ 4!ong laypersonsA this is ,nown as Ubuying into so!eone elseQs lawsuit.U> 9 The rule in =legg 2 7ro!ley does not preclude the assign!ent of the 2erdict ;future property> to which the assignor !ay beco!e entitled as a result of the prosecution

.*

of litigation proceedings. 0n =legg 2 7ro!ley at 87 .73N 4ll E- -ep 11.+A the assignor assigned (all that interestA su! of !oneyA or pre!ises to which she is or !ay beco!e entitled under or by 2irtue of any 2erdictA co!pro!iseA or agree!ent which she !ay obtain) in relation to an action in tort %hyC 0n Prosser v :%war%s (18*-) 16+ E- 1 6 it was said that a bare right to litigate was unassignable because itA in effectA encouraged litigation of !atters which the assignor was not disposed to prosecute. 0n ter!s of legal principleA bare rights to litigate could not be assigned on public policy grounds because such assign!ents sa2oured of !aintenance or cha!perty$ =legg 2 7ro!ley ?1 12@ * 87 .7.A at .# 9 +. Glegg v 8ro5le" )1912+ * 87 .7. 1rs = sued 7 for defa!ation. 7y a deedA 1rs = assigned (all that the interestA su! or !oneyA or pre!ises to which she is or !ay beco!e entitled under or by 2irtue of any 2erdictA co!pro!ise R) to her husbandA 1r =. &he later won 4 creditor of 1rs = sought ;as a garnishee> to ta,e the 2erdict 1r = clai!ed that he was entitled to the 2erdict Eaughan %illia!s LI said$ 0 ,now of no rule of law which pre2ents the assign!ent of the fruits of an action. &uch an assign!ent does not gi2e the assignee any right to interfere in the proceedings in the action. The assignee has no right to insist on the action being carried on R There is in !y opinion nothing rese!bling !aintenance or cha!perty in the deed of assign!ent.

4#") "%*;! !' $%!%*#!) F *)&u%&) <',,)"<%#$ %&!)") !

0f the assignee has a genuine co!!ercial interest in ta,ing the assign!ent of a bare right to litigateA then the assign!ent is 2alid .re$%te= .ra%i$g Corporatio$ v Cre%it S!isse )1982+ 4C 67 Trende5 was a &wiss coy who contracted to sell ce!ent to an English coy for sale in <igeria which went bad. The sale was to be paid by a letter of credit fro! the Central 7an, of <igeria but the ban, refused to pay. Credit &uisse was a creditor of Trende5 which helped Trende5 fund the legal action against the 7an, Trendte5 purported to assign its cause of action against Central 7an, of <igeria to Credit &uisse for V#++A+++. Central 7an, agreed to pay Trendte5 V#! in settle!ent.

..

Trendte5 sought a declaration that the assign!ent was 2oid for being a bare right to litigate sa2ouring of !aintenance. Court of 4ppeal found against Trendte5 on the basis that the assign!ent was not of a bare right to litigate. Trendte5 then appealed unsuccessfully to the 'ouse of Lords 4t 3*1A Lord -os,ill said$ ?0@t is today true to say that in English Law an assignee who can show that he has a genuine co!!ercial interest in the enforce!ent of the clai! of another and to that e5tent ta,es an assign!ent of the clai! to hi!self is entitled to enforce that assign!ent unless by the ter!s of that assign!ent he falls foul of our law of cha!pertyA whichA as has often been saidA is a branch of the law of !aintenance R The court should loo, at the totality of the transaction. 0f the assign!ent is of a property right or interest and the cause of action is ancillary to that right or interestA or if the assignee has a genuine co!!ercial interest in ta,ing the assign!ent and enforcing it for his own benefitA 0 see no reason why the assign!ent should be struc, as an assign!ent of a bare cause of action or as sa2ouring of !aintenance. 4pplied in Re .i5oth"7s Pt" #t% )1981+ 2 <&%L- 7+6 Ti!othy)s sued 4ffiliated 'oldings for breach of lease. T also indebted to 7ronMe La!p Pty Ltd. T assigned cause of action to 7ronMe La!p in return for release fro! debt. Hpheld because 7ronMe found to ha2e had little hope of being repaid without the assign!ent. Re Dale"D := parte ?atio$al A!stralia 8a$3 #t% (1992) *7 "C- * + /aley was sole shareholder in two co!panies and had guaranteed the co!panies) o2erdrafts. Co!panies assigned clai! against ban, for wrongly honouring cheques. Hpheld b6c =C0 ProEe4t 28 Pt" #t% (&or5erl" ?ar!i Gol% Coast Pt" #t%) v 8arr )200-+ The interest !ust be distinct fro! the benefit that the person supporting the action see,s to deri2e fro! the litigations ?atio$al M!t!al Propert" Servi4es (A!stralia) Pt" #t% v Citi,a$3 Savi$gs #i5ite% (199-) =enuine co!!ercial interest refers to a co!!ercial interest which e5ists already or by reason of other !atters and which recei2es ancilliary support fro! the assign!ent. Po!lto$ v Co55o$wealth (19-*) # CL- 3.+ -ight to sue in Tort is unassignable HOWE3ER 8eatt" v 8rashs Pt" #t% )1998+ 2 E- 2+1 upheld right to assign tort actions following Trendex if there is =C0. 4ppro2ed in T S F 6 Re ail S+s ems 3 + L d v -Fold Reso'r,es 3 + L d /No -0 ;2++7> 13# "C- ... at .63 where the argu!ent was put forward that 'C had appro2ed assigne!ent in Cam$*ells Cas# and Carr+ v Fos if /2""60. This 2iew was subsequently by endorsed by =yles I in Tosi,# v Tasman 9nves men Mana(emen Limi ed ;2++#> 23+ 4L- 27. at 2#3.

.3

:;!!s4orp Pt" #t% v 'a=to$ )2012+ 'C4 7 9 cleared up the !atter and appro2ed Trendex thereby authorising the assign!ent of tortious clai!s if assignee has a genuine and substantial co!!ercial interest. F#<! 0n2est!ent sche!e set up a2oid ta5 through blueberry far!ing. The F#",)" owned the landA the ,#&#*)" grew and sold the cropA the (u.)" bought and the $)&/)" lent !oney. I&+) !'" in2ested with loans fro! the $)&/)". The group had issued the interests to the in2estors without a prospectusA penalty V2+A+++. The in2estors were not on the hoo, for this. The group ran into fin difficulties and borrowed fro! Equuscorp ;the A %*&))> and ga2e the! charges o2er 2arious group property. The group defaulted on the loans fro! the assignee and the sche!e collapsed. 4cting under its registered chargesA the assignee appointed recei2ers and !anagers to the assets of the far! ownerA the !anagerA the buyer and the lender and proceeded to realise those assets. 0n relation to the lenderA this in2ol2ed entering into$ ;1> an (asset sale agree!ent) with the lender)s recei2ers and !anagers for purchase of the loan agree!entsN and ;2> a deed of assign!ent ;the deed>OagainA with the lender)s recei2ers and !anagersOto gi2e effect to the agree!ent. T;) /))/ -"'+%/)/? 1. the lender (as legal and beneficial ownerA hereby sellsA assignsA transfers and sets o2er the debts ?defined as the a!ounts each in2estor owed under the loan agree!ents@A its interests under the ?loan agree!ents@ R free fro! all encu!brances to ?the assignee@ and all interest due and beco!ing due on the debts for ?the assignee@ to hold absolutely ;Sthe assign!entT>)N 2. the assign!ent was (intended to ta,e effect i!!ediately as a legal assign!ent ofA inter aliaA ;a> the legal right to such debts R. ;b> all legal and other re!edies for these !atters in the preceding subBparagraph ;a> R) %ritten notice of the assign!ent was gi2en to the in2estors. The assignee paid the recei2ers and !anagers V3++A+++ for the loan agree!ents. 'a2ing acquired the loan agree!entsA the assignee sued the in2estors in the &upre!e Court of Eictoria to reco2er the outstanding loan !oneys ;those !oneys ha2ing beco!e due and payable>. The in2estors argued that the loan agree!entsOfirstly in the hands of the lender and then in the hands of the assigneeOwere unenforceable on the ground of illegality. They said that the loan agree!ents were contracts !ade in furtherance of an illegal purposeOna!elyA the issue of prescribed interests without the prior registration of a prospectus. The assignee denied that the loan agree!ents were unenforceable but if they were$

.6

1. the lenderA alternati2elyA had been entitled to restitution of the loan !oneys as !oneys had and recei2ed. The illegality had brought about a failure of consideration and it would ha2e been un:ust for the in2estors to be enriched at the lender)s e5penseN 2. the lender)s right of restitution was capable of being assigned to the assigneeN and *. the restitution right wasA in factA assigned to the assignee in the deed. The &upre!e Court substantially dis!issed the assignee)s proceedings. The trial Iudge held that the loan agree!ents were unenforceable for illegality and thatA in relation to all but two of the in2estorsA restitution was una2ailable. The assignee appealed to the Eictorian Court of 4ppealA but its appeal was dis!issed. 0n the 'igh CourtA the assignee did not challenge the trial Iudge)s finding that the loan agree!ents were unenforceable for illegality. 0nsteadA it relied wholly on the clai! in restitutionA once again contending that restitution was$ ;1> a2ailable to the lenderN ;2> assignable to the assigneeN and ;*> actually assigned by 2irtue of the deed. D)<% %'& 7y a !a:ority :udg!ent ;"rench CIA =u!!owA CrennanA 8iefel and 7ell IIN 'eydon I dissenting>A the 'igh Court dis!issed the assignee)s appeal. W;)!;)" ") !%!u!%'& #+#%$#($) "rench CIA Crennan and 8iefel II held that the lenderA and therefore the assigneeA had no right to reco2er the loan !oneys as !oneys had and recei2ed. Their 'onours said it is a policy consideration whether to allow a restitutionary clai! when a contractual clai! is una2ailable due to illegality. The o2erriding policy concern is to !aintain coherence in the law orA negati2elyA to a2oid selfBstultification of the law. 0f allowing restitution would !a,e nonsense of the refusal to enforce the contractOif it would defeat or frustrate the purpose of the statutory prohibitionO then restitution should be refused. Their 'onours said that if the right to clai! restitution for !oneys had and recei2ed had been a2ailable to the lender in the present caseA the lender would ha2e been able to reco2er by such clai!s what the policy of the law denied it in respect of the loan agree!ents. Their 'onours noted or obser2ed that$ ;1> the lender was not an ar!s length financierA but part of the group. ThereforeA it was in2ol2ed in the pro!otion of the in2est!ent sche!e and furthered the illegal purposeN ;2> the failure of consideration on which the assignee relied was the product of the lender)s own conduct in furthering the illegal purposeN and ;*> the in2estors were not in pari delicto with the lender. ThisA thenA was a clear case in which coherence in the lawA and the a2oidance of selfBstultification of the statutory purposeA led to the conclusion that the lenderA and therefore the assigneeA did not ha2e the right to restitution of the !oneys ad2anced to the in2estors under the loan agree!ents. 0n a separate :udg!entA =u!!ow and 7ell II agreed that the lender was not entitled to restitution of the loan !oneys. Their 'onours agreed that the sche!e and .7

purpose of the prescribedBinterest pro2isions of the CodeOto protect persons acquiring prescribed interestsOwas at odds with per!itting an action for !oney had and recei2ed where the !oney was recei2ed under loan agree!ents entered into in direct contra2ention of the statutory pro2isions. E!ploying the sa!e language as "rench CIA Crennan and 8iefel IIA their 'onour said that allowing a clai! in restitution would stultify the statutory policy. 'eydon I dissented. "ollowing 1c'ugh I in <elson 2 <elson ?1 3@ 'C4 23A at ?*3@B ?*7@A his 'onour said that withholding relief because of an illegal transaction !eans depri2ing one party of their property rights and effecti2ely 2esting the! in another person. The i!position of such a sanction can be :ustified only if$ ;1> it is proportionate to the seriousness of the illegality in2ol2edA which in turn !ust be :udged by reference to the rele2ant statuteN and ;2> it furthers the purpose of the statute and does not i!pose a further sanction for the unlawful conduct where parlia!ent has indicated that the statutory sanctions are sufficient to deal with the rele2ant breach. 'eydon I accepted that the Code rendered the loan agree!ents unenforceable at the lender)s suit. 0f the Code e5pressly preser2ed the lender)s liability to the in2estors under the loan agree!entsA it followed that all other rights and liabilities did not sur2i2e the lender)s breach of the statutory pro2isions. 'owe2erA his 'onour found that$ the Code did not pre2ent the lender fro! suing for !oneys had and recei2ed. 4!ong other things$ ;1> the Code did not e5pressly or i!pliedly e5tinguish the lender)s property rights by negating clai!s for restitutionA e2en though it could ha2e done soN and ;2> the onerous sanctions i!posed by the Code for a breach of the prescribedBinterest pro2isions indicated that those sanctions were sufficient to deal with the breachN there had been a failure of considerationN and it was un:ust for the in2estors to retain the loan !oneys. 4ccordinglyA his 'onour concluded that an action for restitution had been a2ailable to the lender andA if broughtA would ha2e succeeded. %hether restitution assignable "rench CIA Crennan and 8iefel II held thatA if the lender had been able to clai! against the in2estors in restitutionA the clai! would ha2e been assignable. 0n response to the in2estors) argu!ent that the clai! for !oney had and recei2ed was not a proprietary rightOa chose in actionObut a bare right of action which is not assignable at co!!on lawA their 'onours said that such a clai! is not assigned as a bare right of action if it is assigned along with contractual rights and the assignee has a (genuine co!!ercial interest) in the enforce!ent of the clai!. 'ereA the assignee acquired the loan agree!ents for 2alue. ThereforeA it had a legiti!ate co!!ercial interest in acquiring the restitutionary rights if the contract was found to be unenforceable. =u!!ow and 7ell II agreed that a restitutionary clai!A had it e5istedA would ha2e been assignable. Their 'onours located the (genuine and substantial co!!ercial

.#

interest) in the registered charges the assignee held o2er the lender)s assetsA reco2ery on the basis of restitution (?filling@ the gap created by the ?contractual@ debts i!ploding under illegality). 'eydon I also held that restitution was assignable. Li,e =u!!ow and 7ell IIA his 'onour found that the assignee had a genuine co!!ercial interest in enforcing a clai! in restitution because of its registered charge o2er the lender)s assets ;which his 'onour said included rights to sue for !oney had and recei2ed>. %hether restitution actually assigned "rench CIA Crennan and 8iefel II held the deed did not assign restitutionary clai!s to the assignee. <oting that cl 2 of the deed had adopted the language of s 1 ;1> of the Property Law 4ct 1 7. ;Gld>Oin particularA the phrase (all legal and other re!edies) in cl 2;b> was identical to para ;b> of s 1 ;1>Otheir 'onours said that cl 2 !ust be ta,en to ha2e the sa!e !eaning as the section. 4nd according to the case law on s 1 ;1>A the (other re!edies) of which the section spea,s are !erely the rights to reco2er or enforce the debt or chose in action that has been assigned. The phrase does not include additional causes of actionA such as a clai! for !oney had and recei2ed. =u!!ow and 7ell II too, the opposite 2iewA holding that (other re!edies) in cl 2 of the deed included a clai! for restitution. Their 'onours said that such a clai! arose out ofA or by reason ofA the failure of the loan agree!ents and that (?t@here would ha2e been little sense for the recei2ers and !anagers ?of the lender@ to retain these restitutionary actions and for ?the assignee@ to pay for so!e but not all of the rights of ?the lender@ against the ?in2estors@.) ThereforeA if the lender had possessed restitutionary rightsA those rights were assigned to the assignee under the ter!s of the deed. 'eydon I also held that the deed had effected an assign!ent of the clai! in restitution. 'is 'onour said the (other re!edies) to which the deed referred were not confined to those which supported a clai! on the loan agree!entsA but bore a wider constructionA e5tending to reco2ery of the econo!ic equi2alent of the contractual debts by actions for !oney had and recei2ed. Editorial co!!ent This case is about an assign!ent of contractual rightsOspecificallyA the rights of a lender under se2eral loan agree!ents. &uch rights are a for! of property ;a chose in action> andA thereforeA assignable. 0n this caseA the assign!ent was !ade for 2alue and the statutory for!alities for legal assign!ents of choses in action were satisfied. 0n particularA notice of the assign!ent was gi2en to the borrowers. 'owe2erA the benefit of the assign!ent started to unra2el when the assignee sued to reco2er the unpaid loan !oneys. HnfortunatelyA the loan agree!ents were tainted by illegality. They were partBandB parcel of an in2est!ent sche!e in which (prescribed interests) were issued in breach of the co!panies legislation that applied at the ti!e. The borrowers were the recipients of those prescribed interests and the lender was part of the corporate

group that pro!oted the sche!e. These circu!stances rendered the loan agree!ents unenforceable. The assignee turned to the law of restitution for helpA but this raised proble!s of its own. "irstlyA did the legislation stri,e out not only contractual clai!s but restitutionary clai!s as wellC &econdlyA if the legislation left restitutionary clai!s untouchedA were such clai!s capable of being assigned to an assigneeC 4nd lastlyA if the lender did ha2e a clai! in restitution ;despite the illegality> and that clai! was assignableA was the clai! in fact assigned to the assigneeC 0n the 'igh CourtA fi2e of the si5 :ustices held that the legislation struc, down not only the lender)s contractual clai!s but its restitutionary clai!s as well. That was enough to dispose of the appeal and deny relief to the assignee. 'owe2erA on the second questionA the Court was unani!ously of the 2iew that a clai! for restitution was assignable andA on the last questionA was equally di2ided as to whether the deed of assign!ent had effecti2ely assigned restitutionary rights to the assignee. The :udg!ent can2asses se2eral i!portant topicsOassign!ents of choses in actionN statutory illegality as a 2itiating factor in contract lawN the particular illegality of a contract !ade to further an illegal purposeN failure of considerationN the ele!ents of restitutionN the policy considerations that deter!ine the effect of contractual illegality on actions for !oneys had and recei2edN the assignability of bare rights of actionN and the principles of construction of statutes and contracts. 4s to practical lessons that can be drawn fro! the caseA two i!!ediately spring to !ind$ %hen ta,ing an assign!ent of contractual rightsA the assignee should !a,e enquiries or otherwise ta,e steps to guard the!sel2es against the possibility that the contracts are unenforceable or e2en 2oid for illegality. %hen drafting the deed of assign!entA one should clearly and unequi2ocally pro2ide for the assign!ent of not only the assignor)s contractual rightsA but also their right to clai! restitution and any other legal or equitable rights they could concei2ably ha2e against the borrowers in relation to the loan !oneys.

M#%&!)&#&<)G C;#,-)"!. #&/ 4#""#!". A('$%!%'& A<! 1996

S)<!%'& 6$ cri!e of !aintenance abolished S)<!%'& 4 $ U?a@n action in tort no longer lies on account of conduct ,nown as !aintenance ;including cha!perty>U. S)<!%'& 6$ UThis 4ct does not affect any rule of law as to the cases in which a contract is to be treated as contrary to public policy or as otherwise illegalA whether the contract was !ade beforeA or is !ade afterA the co!!ence!ent of this 4ct.S ?ow 9o!$% i$ Civil #ia,ilit" A4t 2002 F S4he% 2 Ca5p,ell>s Cash A Carr" Pt" #t% v &osti9 Pt" #t% )2006+ 'C4 .1

3+

'istoricallyA the co!!on law in 4ustralia has prohibited !aintenance ;supporting litigationA regardless of the reason> and cha!perty ;supporting litigation in e5change for a share of the proceeds of that litigation>A on the basis that they are contrary to public policy. 'owe2erA !aintenance and cha!perty ha2e now been abolished as cri!es and torts in !ost 4ustralian :urisdictionsA and recent court decisions ha2e !ade it plain that litigation funding is now a reality in 4ustralia. Courts throughout the country ha2e acceptedA as a !atter of public policyA that litigation funded by third parties !ay allow parties who would otherwise be denied access to :ustice to proceed with their clai!s. 'owe2erA until todayQs 'igh Court decision in "ostifA there was so!e uncertainty as to what ele!ents of a litigation funding agree!ent !ight render it contrary to public policy and an abuse of process. "ostif 9 bac,ground 4 class action was brought by a nu!ber of tobacco retailers against licensed wholesalers for the reco2ery of state licence feesA following the 'igh CourtQs declaration in 'a 2 &tate of <ew &outh %ales ;1 7> 1# CL- .63A that the tobacco licensing sche!es of the states and territories were in2alid. The proceeding was financed by a litigation funderA "ir!stoneA on the basis that it would ta,e oneBthird of the proceeds if the case were successful. 4t first instanceA Iustice Einstein of the <ew &outh %ales &upre!e Court held that the proceeding was an abuse of process and fell outside the court rules per!itting representati2e proceedings. The Court of 4ppeal allowed the appeal and ordered the proceedings to continue as representati2e proceedings. The Court of 4ppeal found that neither "ir!stoneQs role in connection with the litigation nor the particular funding arrange!ents :ustified staying the proceeding. The Court of 4ppealQs findings included that$ cha!perty or thirdBparty assistance per se does not a!ount to abuse of processN the court is not concerned with the arrange!ents between the funder and the plaintiff unless they ha2e corruptedA or ha2e a tendency to corruptA the processes of the courtN in circu!stances where the plaintiffQs clai! is 2iableA as was held to be the case hereA the standard of proof for a per!anent stay is highA and the court will only dis!iss the proceeding as a last resort !eans of eli!inating the abuseN and so!e !easure of control o2er the proceedings by a litigation funder is necessary if the funder is to !anage the group litigation and protect its own interestsA and is not a basis for finding abuse of process !eriting an unconditional stay. The 'igh Court granted special lea2e to appeal in &epte!ber 2++3. T;) H%*; C'u"!H Iu/*,)&! 0n Ca!pbellQs Cash F Carry Pty Ltd 2 "ostif Pty LtdA the 'igh Court upheld the wholesalersQ appeal on the question of whether the proceedings should continue as

31

representati2e proceedings. 'owe2erA the appeal was dis!issed on issues of public policy and abuse of process arising fro! the funding agree!ent between the retailers and "ir!stone. Iustices =u!!owA 'ayne and CrennanA with who! Chief Iustice =leeson and Iustice 8irby agreed on this issueA !ade the following points in concluding that the funding arrange!ents between "ir!stones and the retailers did not constitute a ground to stay the proceedings. &ection 6 of the legislation abolishing the offences of !aintenance and cha!perty in <ew &outh %alesA the 1aintenanceA Cha!perty and 7arratry 4bolition 4ct 1 * ;<&%> ;the 4bolition 4ct>A !ade it clear that questions of !aintenance and cha!perty were not to be regarded as always legally irrele2ant. That section preser2ed any Qrule of law as to the cases in which a contract is to be treated as contrary to public policy or as otherwise illegalQ. 'owe2erA the 4bolition 4ct neither stated e5plicitly whether questions of !aintenance and cha!perty are rele2ant to issues of abuse of process nor addressed the scope of public policy or doctrines of illegality concerning those questions. 0n their 'onourQs 2iewA the wholesalersQ proposition that for the !aintainer to institute and continue proceedings in the na!e ofA or on behalf ofA the !aintained plaintiffs was an abuse of process which could be a2oided only by a stay assu!ed that !aintenance and cha!perty gi2e rise to public policy questions beyond those rele2ant when considering whether the funding agree!ent is enforceable between the parties. 'owe2erA in :urisdictions where legislation li,e the 4bolition 4ct has been enactedA that assu!ption is not 2alidA for se2eral reasons$ when the cri!es and torts of !aintenance and cha!perty were abolishedA any wider rule of public policyA beyond the rules preser2ed by s6A lost any basis that it pre2iously hadN and the asserted rule of public policy would not yield any certain ruleA because the content and basis of the public policy asserted was identified only by the use of ter!s such as Qtraffic,ingQ or Qinter!eddlingQ. The particular co!plaints by the wholesalers that "ir!stone had sought out clai!antsA e5ercised a great degree of control o2er the proceedings and bought the rights to litigation to obtain profit were notA either alone or in co!binationA contrary to public policy or resulting in an abuse of process. Their 'onours held that !any people see, to profit fro! assisting in litigationA and see,ing out and encouraging litigation could only be contrary to public policy if there were still a rule against !aintaining actions. 0n the absence of such a ruleA either in cri!e or in tortA there was no foundation to conclude that !aintaining an action could be contrary to public policy. 1oreo2erA fears concerning the ad2erse effects on the processes of litigation and the fairness of the agree!ent between the funder and the plaintiff are not sufficient to :ustify an Qo2erarching rule of public policyQ that would prohibit funded actions or require funding agree!ents to !eet particular standards concerning the funderQs degree of control or reward. &uch a rule Qwould ta,e too broad an a5e to the proble!s that !ay be seen to lie behind the fearsQ. &i!ilarlyA fears for the

32

ad!inistration of :ustice ;for e5a!pleA that the funder !ight infla!e the da!ages or suppress e2idence> can be adequately !et by e5isting doctrines of abuse of processA and fears that lawyers !ight find the!sel2es in positions of conflict are also adequately addressed by the e5isting rules regulating their duties to the court and clients. 0!portantlyA their 'onours considered it neither necessary or appropriate to consider the position in :urisdictions where !aintenance and cha!perty continue to be torts or cri!es. Iustices Callinan and 'eydon dissented on this point. Their 'onours found that the Court of 4ppealQs decision on this issue should be o2erturned. Their 'onours found that a co!bination of factors rendered the proceedings an abuse of processA including "ir!stoneQs !oti2e of profiting fro! the litigation of othersA the fact that "ir!stone sought out and encouraged persons to sue who would not otherwise ha2e done soA the large gains hoped for by "ir!stoneA "ir!stoneQs control of the litigation and the subser2ience of the retailersQ interests to those of "ir!stones. I,-$%<#!%'& '= !;) H%*; C'u"!H /)<% %'& The 'igh CourtQs decision is li,ely to encourage the nu!ber of litigation funders and funded casesA particularly for class actions which through econo!ies of scale !ay be seen to offer the best chance of a large return for funders. Pre2iouslyA it was difficult to predict whether a particular litigation funding agree!ent would be stayed on public policy grounds. That uncertainty has now been largely re!o2edA at least in <ew &outh %alesA EictoriaA &outh 4ustralia and the 4CTA where the torts of !aintenance and cha!perty ha2e been abolished. The position re!ains unclear in the re!aining :urisdictions. The decision is of concern to defendants. The !a:ority :udg!ent appears to dis!iss !any of the public policy considerations that ha2e been identified in lower courts as significant. Those considerations include the i!portance of protecting plaintiffs where their interests !ight conflict with those of the funder and the need to discourage un!eritorious litigation to ensure an appropriate balance in the ci2il :ustice syste!. The decision of the !a:ority of the 'igh Court suggests that courts should be slow in staying proceedings as an abuse of process on the basis of funding agree!ents. The decision !ay also i!pact on whatA if anyA regulation of litigation funding is considered by the &tanding Co!!ittee of 4ttorneysB=eneral ;&C4=>. The /iscussion Paper released by &C4= in late 1ay on the issue of litigation funding notes the lac, of legislati2e unifor!ity across 4ustralia on this issue. That lac, of unifor!ity has been highlighted by the 'igh CourtQs decision in "ostif and !ay encourage action on the part of &C4=. "urtherA the need to protect 2ulnerable plaintiffs who enter into funding agree!ents has also been highlighted by &C4=A and !ay be gi2en further consideration in light of the 'igh CourtQs :udg!ent. 0t is unclear whether other aspects of the decision will influence the outco!e of &C4=Qs re2iew. 0n Ba v S a e of Ne5 So' # %ales ;1 7> 1# CL- .63A the 'C found that the tobacco licensing sche!es of the states and territories were in2alid 4 class action was started to reclai! the fees fro! licensed wholesalers

3*

"ir!stone was a litigation funder who agreed to finance the action in e5change for oneBthird of the proceeds of the action 4t trial Einstein I said the proceedings were an abuse of process The Court of 4ppeal o2erturned these findings and said that cha!perty does not auto!atically !ean an abuse of process 9 it is necessary to show a corruption of the court process &o!e !easure of control by the funder does not !ean there has been an abuse of process 'C$ appeal upheld but on other unrelated grounds. Dn the issue of policy and abuse of process the 'C ;=leeson CIA =u!!owA 'ayneA CrennanA 8irby IIN 'eydon and Callinan II in dissent> agrees with the Court of 4ppeal =u!!owA 'ayne and Crennan II$ ? +@ Two ,inds of consideration are proffered as founding a rule of public policy B fears about ad2erse effects on the processes of litigation and fears about the UfairnessU of the bargain struc, between funder and intended litigant. 0n =iles 2 Tho!pson?1+1@A Lord 1ustill said that the law of !aintenance and cha!perty could best Ube ,ept in forward !otionU by loo,ing to its originsN these his Lordship saw as reflecting Ua principle of public policy designed to protect the purity of :ustice and the interests of 2ulnerable litigantsU. ? 1@ <either of these considerationsA whate2er !ay be their specific application in a particular caseA warrants for!ulation of an o2erarching rule of public policy that either wouldA in effectA bar the prosecution of an action where any agree!ent has been !ade to pro2ide !oney to a party to institute or prosecute the litigation in return for a share of the proceeds of the litigationA or would bar the prosecution of so!e actions according to whether the funding agree!ent !et so!e standards fi5ing the nature or degree of control or reward the funder !ay ha2e under the agree!ent. To !eet these fears by adopting a rule in either for! would ta,e too broad an a5e to the proble!s that !ay be seen to lie behind the fears.

R%*;! #&/ $%#(%$%!%) &'! <#-#($) '= # "%*;! '= -"'-)"!.

%*&,)&! J %&<%/)&!#$ !' #

0f there is an assign!ent of property with an incidental right to litigate it is 2alid. This is so because there is no assign!ent of a bare right to litigateA the right being incidental to a right of property. 4ccordinglyA no issues of !aintenance or cha!perty can arise. ThusA the right to rescind for undue influence in Di43i$so$ v 8!rrell (1866) L- 1 Eq **7 was assignable because it was incidental to the real property assigned to the assignor.

R%*;! #&/ $%#(%$%!%) &'! <#-#($) '= #

4n assign!ent by an insured to an insurer of the insured)s right to sueA in consideration of a pay!ent !ade by the insurer to the insured in satisfaction of a clai! pursuant to an insurance policy between the insured and insurerA is 2alid. This ste!s fro! the insurer)s right of subrogation ;refers to circu!stances in which an insurance co!pany tries to recoup e5penses for a clai! it paid out when another party should ha2e been responsible for paying at least a portion of that clai!> 3.

%*&,)&! J %& u"#&<)

Co5pa$ia Colo5,ia$a %e Seg!ros v Pa4i9i4 Stea5 ?avigatio$ Co )196-+ 1 G7 1+1

The benefit ;the right to recei2e perfor!ance> of a contract !ay be assignedA but its burden ;the obligation to render perfor!ance>A !ay not be assigned$ Pa4i9i4 8ra$%s Sport A #eis!re Pt" #t% v G$%erwor3s Pt" #t% (2006) 1. "C- * 3 4ssignable contractual rights are choses in action and hence property 0!ee$sla$% <$s!ra$4e Co #t% v A!stralia$ M!t!al &ire <$s!ra$4e So4iet" #t% (19/1) .1 &- 1 3 Iordan CI said at 2+1B*$ 4s a general rule a person !ay assign to another any benefit to which he !ay be entitled under a contractA but cannot escape his contractual liabilities by purporting to assign the!A although if the contract be not of a personal natureA he !ay procure so!eone else to perfor! the! for hi!. 0f therefore a contract be assigned by one of the partiesA the assignee !ay in general co!pel the other party to do for his benefit whate2er he would ha2e been liable to do for the assignor)s benefitA sub:ectA howe2erA to the obligations of the assignor being duly perfor!ed by the assignor or by so!eone else. %hat does the contract sayC #i$%e$ Gar%e$s .r!st #t% v #e$esta Sl!%ge Disposals #t% )199/+ 1 4C #3 Two :oined cases Case 1$ Lessee hires Len!estra to re!o2e asbestos. Contract states that any assign!ent of rights !ust be with the contractor)s consent. Lease is assigned. The wor, was defecti2e. Could the new assignee sueC <o the clause was effecti2e 9 there was no policy reason for stri,ing it down as the contractor had a genuine interest in controlling who it owed contractual duties to &econd case$ Lessee of 13+ yr old lease gets building wor, done. Contract forbids assign!ent of rights without consent Later the lease is assigned 7uilding wor, is defecti2e The original party sues 9 can they get substantial da!agesC Kes 9 the contract intended for the original parties only to enforce the contract so it !ust ha2e been en2isaged that the parties could sue on behalf of successors in title for substantial da!ages.

%*&,)&! '= <'&!"#<!u#$ "%*;!

33

Pa4i9i4 8ra$%s Sport A #eis!re Pt" #t% v G$%erwor3s Pt" #t% (2006) 1. "C- * 3 Pacific 7rands bought the &ara Lee business which included the licensing rights to 8ing =ee and &tubbies Trade !ar,s 'owe2erA prior to the acquisition &ara Lee had granted an e5clusi2e subBlicense of these rights to Hnderwor,s ;a ri2al coy> for 3 yrs with a 3 yrs option The contract between P7 and &L e5pressly purported to assign the license but the subBlicense agree!ent was silent on the issue of assign!ent Hnderwor,s refused to consent to an assign!ent of the rights to Pacific 7rands 4s part of the agree!ent with &LA Hnderwor,s had to lodge !ar,eting plans and reports. P7 argued that they had failed to co!ply with this ter!s and they sought to ter!inate the subBlicense Could they do thisC 4t trial Iustice "in,elstein said that the right to ter!inate could not be assigned as it was a personal pri2ilege and not proprietorial. The require!ent to sub!it plans was personal and confidential and so could not be assigned ""C B "innA &undberg II and E!!ett II 9 upheld the trial decision but differed in approach ""C 9 found that a partyQs contractual rights ha2e a proprietary character for the purposes of assign!entA and are ordinarily assignable. They are a bundle of rights ""C re:ected the approach of choosing between so!e rights and powers of a partyA and of gi2ing to so!e proprietary characteristicsA while denying that character to others. Dnce the bundle of rights is recognised the ne5t issue is to e5a!ine any statutoryA or public policy reasons for denying assignability "inn and &undberg II$ *2 7y way of bac,groundA it is appropriate to begin with a nu!ber of relati2ely nonB contentious propositions. "irstA it is well accepted that assignable contractual rights are choses in actionN are a species of personal proprietary rightN and can be transferred to a third party at law or in equity in accordance with the for!al rules go2erning the transfer of such rights$ see <or!an 2 "ederal Co!!issioner of Ta5ation ?1 6*@ 'C4 21N ;1 6*> 1+ CL- at 26N Lo5ton 2 1oir ?1 1.@ 'C4 # N ;1 1.> 1# CL- *6+ at *7 . &econdlyA while it is not legally possible to assign the burden of a contract ;i.e. the obligation to render perfor!ance>A it !ay be possible to assign ;a> the entire benefit of a contract ;i.e. the right to recei2e perfor!ance>$ Do$ 1i$g Pro%!4tio$s <$4 v (arre$ )2000+ Ch 2 1 at *1# ;U/on 8ingU>N ;b> if a right under a contract is separate and se2erableA such a separate and se2erable right$ cf "ederal Co!!issioner of Ta5ation 2 E2erett ?1 #+@ 'C4 6N ;1 #+> 1.* CL- ..+ at .. B.3+N

36

or ;c> if so!e only of the rights under a contract are assignableA those rights. U?4@ssignability is not a !atter of all obligations arising under a contract or none at allU$ /on 8ingA abo2eA at *1 . ThirdlyA a contract !ay e5pressly or i!pliedly authorise assign!ent of rights in a contract which would not otherwise be assignable$ Deve9i Pt" #t% v Mate99" Perl ?ag" Pt" #t% (199*) 11* 4L- 223 at 2*3 ;U/e2efi 2 1ateffyU>N orA con2erselyA !ay e5pressly or i!pliedly prohibit assign!ent of rights otherwise pri!a facie assignable$ /on 8ingA abo2eA at *1 . U&uch contractual pro2isions are legally effecti2eU as between the contracting parties$ /on 8ingA ibidN Linden =ardens Trust Ltd 2 Lenesta &ludge /isposals Ltd ?1 .@ 1 4C #3 at 1+* ff ;ULinden =ardens TrustU>. "ourthlyA while the product to be deri2ed fro! a contractual perfor!ance ;the Ufruits of perfor!anceU> !ay be assignedN /e2efi 2 1ateffyA abo2eA at 2*.N the right to that perfor!ance !ayA nonethelessA be unassignable becauseA ha2ing regard to the nature of the contract and the sub:ect !atter of the contractual right in questionA that right is personal in the sense that the identity of the contractual obligee is !aterial to the contractual relationship itself ;i.e. it is a Upersonal contractU$ Peters v Ge$eral A44i%e$t &ire A #i9e Ass!ra$4e Corporatio$ #t% )19*8+ 2 4ll E- 267 at 27+N 1oore 2 Collins ?1 *7@ &4&- 1 3N or to the contractual perfor!ance to be rendered$ Linden =ardens Trust Ltd 2 Lenesta &ludge /isposals Ltd ;1 2> 37 7L- 37 at 77 ;contract requiring a party to act on the other)s instructions>N see generally &eddon and EllinghausA Cheshire and "ifoot)s Law of Contract ;#th 4ust edA 2++2>A ?#B6@N "ur!ston ;ed>A abo2eA 6.2 ffN Chitty on ContractsA Eol 1 1 B+3* ff ;2 th edA 2++.>N "arnsworthA abo2eA &&11... 4 contractual rightA thoughA will not be personal ifA construed in its settingA Uit can !a,e no difference to the person on who! the ?corresponding@ obligation lies to which of two persons ?i.e. assignor or assignee@ he is to discharge itU$ Tolhurst 2 4ssociated Portland Ce!ent 1anufacturers ;1 ++> Ltd ?1 +2@ 2 87 66+ at 66#. "ifthlyA see!inglyA a contractual right !ay itself be of such a personal character that it cannot properly be characterised as property$ cf Iac, 2 &!ail ?1 +3@ 'C4 23N ?1 +3@ 'C4 23N ;1 +3> 2 CL- 6#. at 7+.B7+3N but it is not clear whether this proposition has salience only in conte5ts other than assign!ent of such a rightA e.g. insol2encyA because of the proposition i!!ediately preceding this which relates e5pressly to assign!ents of UpersonalU contractual rights. &i5thlyA the assignee of a contractual right under a legal assign!ent is entitledA as owner of that rightA to ta,e action in respect of it$ e.g. Con2eyancing 4ct 1 1 ;<&%>A s 12. &e2enthlyA a third party !ay beco!e a Usubstituted contracting partyU by no2ation ; #e a, of ei #er re$la,in( an o*li(a ion o $erform 5i # a ne5 o*li(a ionD or re$la,in( a $ar + o an a(reemen 5i # a ne5 $ar +. 9n ,on ras o an assi(nmen D 5#i,# is valid so lon( as #e o*li(ee /$erson re,eivin( #e *enefi of #e *ar(ain0 > is gi2en noticeA a no2ation is 2alid only with the consent of all parties to the original agree!ent$ the obligee !ust consent to the replace!ent of the original obligor with the new obligor.?1@ 4 contract transferred by the no2ation process transfers all duties and obligations fro! the original obligor to the new obligor> of the original contract. <o2ation willA ordinarilyA require the agree!ent of the original and the

37

substituted party although the original contract itself !ayA on its proper constructionA authorise a party to substitute a contracting party in its place without need for a further triBpartite agree!ent$ see 'arr" v &i%elit" ?o5i$ees Pt" #t% ;1 #3> .1 &4&- .3# at .6+. Dn no2ationA thoughA there is no assign!ent of rights and obligationsA but rather the creation of new rights and obligations in a new contract$ 6lsso$ v D"so$ ?1 6 @ 'C4 *N ;1 6 > 12+ CL- *63 at *##N Cheshire F "ifoot)s Law of ContractA abo2eA ?#..3@ ff. EighthlyA a contractual obligation cannot be assigned without the consent of the other contracting party$ .olh!rst v Asso4iate% Portla$% Ce5e$t Ma$!9a4t!rers ;1 ++> Ltd ?1 +2@ 2 87 66+ at 66#. ThisA for practical purposesA requires no2ation of the original contractN "ur!stonA UThe 4ssign!ent of Contractual 7urdensU ;1 #> 1* Io Contract Law .2N see also Bi43er" v (oo%s ?1 32@ 'C4 7N ?1 32@ 'C4 7N ;1 32> #3 CL- **6 at *.3 D &ightvisio$ Pt" #t% v 6$is9oro! ?1 @ <&%C4 *2*N ;1 > .7 <&%L- .7* at . 1B. *. <inthlyA the delegation of perfor!ance of contractual obligations is per!issible where the obligations assu!ed do not require personal perfor!ance but only the producing of a result$ 8r!4e v ."le" ?1 16@ 'C4 *.N ;1 16> 21 CL- 277N 7ritish %agon Co 2 Lea F Co ;1##+> 3 G7/ 1. . 0n such cases perfect perfor!ance by the delegate will discharge the delegating contractor)s obligationA although that contractor will re!ain liable unless and until such perfor!ance is rendered. U%hether or not in any gi2en contract perfor!ance can properly be carried out by the e!ploy!ent of a subBcontractor !ust depend on the proper inference to be drawn fro! the contract itselfA the sub:ect !atter of itA and other !aterial surrounding circu!stancesU$ Davies v Colli$s ?1 .3@ 1 4ll E- 2.7 at 23+. Conclusion B the right to pro2ide plans was based on the identity of &ara lee and personal to it 67 Considered in its totalityA we are satisfied that the &ubBLicence in its settingA while not of a type that was necessarily inherently personal in character...was nonetheless intended to create an enduring relationship in which the identity of &ara Lee as the &ubBLicensor was !aterial and was !ade so by &ara Lee in particular. %hile ac,nowledging the legiti!ate interest the &ubBLicensor had in e5ercising control o2er the use of the !ar, and hence ha2ing contractual powers to that endA we consider that there are sufficient indications in the te5t of the &ubB Licence itself that the particular will to which the &ubBLicensee was as,ed to sub:ect itself was &ara Lee)sA and that that was a state of affairs that Hnderwor,s agreed to Hnderwor,s needed to gi2e consent to the assign!ent MA##:S6?S SGMARRH -e2iew of the facts Pacific 7rands acquired the business of &ara Lee through a set of transactionsA which included a licence fro! &ara!ar LCC to use its 80<= =EE and &TH770E& trade !ar,s. Prior to the acquisitionA &ara Lee granted an e5clusi2e subBlicence of its rights to Hnderwor,sA a Pacific 7randsQ co!petitor. The subBlicenceA which was for a fi2eByear ter! with an option for a further fi2e yearsA was purported to be assigned to Pacific 7rands as part of the acquisition.

3#

'owe2erA there was no e5press right of assign!ent under the subBlicenceA and despite 2arious atte!pts to replace the subBlicence with a new agree!ent between Pacific 7rands and Hnderwor,s through no2ationA Hnderwor,s refused to consent on the ter!s offered. Hnder the ter!s of the subBlicenceA &ara Lee had a right to ter!inate the subB licence if Hnderwor,s failed to sub!it appropriate !ar,eting plansA reports and audits to &ara Lee. 4fter about two years of dealingsA a dispute arose between Pacific 7rands and Hnderwor,s. EssentiallyA Pacific 7rands alleged that Hnderwor,s had breached the licence conditionsA pri!arily by failing to sub!it appropriate !ar,eting plansA reports and audits. 4s a resultA Pacific 7rands atte!pted to ter!inate the licence for breach of its rights. Pacific 7rands argued that &ara Lee had properly transferred its rights under the subBlicence to Pacific 7rands through assign!entA or alternati2elyA i!plied no2ation. ThereforeA the dispute ulti!ately turned on whether Pacific 7randsA as the purported assignee of &ara LeeQs rightsA had the right to ter!inate the subBlicence for breach. Pri!ary decision 0n the "ederal Court last yearA Iustice "in,elstein held that certain rights under an agree!entA including the right to ter!inateA were incapable of assign!ent. The basis of his honourQs decision was two fold$ 1. Dnly the QbenefitsQ of an agree!ent such as the ability to collect royaltiesA being choses in actionA !ay be legally assigned. 4 chose in action is a property right enforceable by legal action. The right to ter!inate is not a property rightA but rather a personal right or pri2ilege. 2. E2en if the first reason was incorrectA the right or pri2ilege to ter!inate and other si!ilar rights such as the right to re2iew annual !ar,eting plans and to appro2e audit and !anufacturing facilities ha2e ele!ents of Qpersonal confidenceQ which required the! to be e5ercised personally by the original contracting parties. Those personal rights could notA thereforeA be assigned without consent. 0n Iustice "in,elsteinQs 2iewA the issues !ay ha2e been resol2ed by no2ation of the contract. 'owe2erA his 'onour did not find no2ation on the facts of the case as Hnderwor,s had refused to enter into a new licence with Pacific 7rands. Pacific 7rands appealed the pri!ary decision. "ull "ederal Court decision 4l!ost e5actly a year after the pri!ary decisionA the "ull "ederal Court co!prising Iustices "innA &undberg and E!!ettA dis!issed the appeal and upheld the original decision that the critical rights that had allegedly been breachedA and the right to ter!inate for those breachesA had not been successfully assigned to Pacific 7rands. 0t was therefore not possible for Pacific 7rands to ter!inate the subBlicence. 4ssign!ent of rights

Dn the issue of assign!ent of rightsA contrary to Iustice "in,elsteinQs 2iewA the "ull Court found that all of a partyQs contractual rights ha2e a proprietary character for the purposes of assign!entA and are ordinarily assignable. The "ull Court re:ected the approach of differentiating between 2arious rights and powers of a partyA and of gi2ing to so!e the character of assignable propertyA while denying that character to others. 4ccording to the "ull CourtA the correct approach is to begin by treating all contracts as a Qbundle of rightsQA which are all pri!a facie assignable. This is followed by considering whether there are any reasons pre2enting the assignability of those rights such as statuteA public policyA the identity of the contracting partiesA or if the 2arious rights are not separable in the !anner atte!pted. 0!portantlyA contrary to the pri!ary decisionA the "ull Court found that the right of ter!ination was assignable because it is not se2erable fro! the other rights that had been assigned as a whole. -ele2ance of the identity of the contracting parties and consent The "ull Court concluded that &ara LeeQs identity was !aterial to the contract and its perfor!ance. The subBlicence established a relationship between &ara Lee and Hnderwor,s that was personal and enduringA and was therefore not assignable without Hnderwor,sQ consent. 0n the circu!stancesA Hnderwor,sQ consent was required as Pacific 7rands was a co!petitor. The "ull Court was not prepared to i!ply consent either fro! the subsequent conduct of the parties in dealing with one another for o2er two yearsA or the ter!s of the subBlicence. There was no e5press clause per!itting &ara Lee to assign its rights under the subBlicenceA and &ara Lee was not defined to include its assigns. 4ccordinglyA the "ull Court concluded that the subBlicence with Hnderwor,s was not assignable without consent due to its personal nature. Practical i!plications 4 nu!ber of i!portant principles arise fro! the "ull CourtQs decisionA which should be borne in !ind by contracting parties and those negotiating business purchase agree!ents. Contracting parties should ensure that their assign!ent rights are e5pressly set out in the contract. 0f assign!ent is per!ittedA the contract should contain an e5press clause per!itting assign!ent. &ilence on the issue of assign!ent will not necessarily !ean that the agree!ent can be assigned without the other partyQs consent. Contracting parties should also consider negotiating an auto!atic right to no2ate the agree!ent in the e2ent of a business sale. 0f desiredA the contract should require the other party to e5ecute a no2ation deed in an agreed for!A or in a for! prepared by the contracting party ;acting reasonably>. Purchasers of businesses should carefully re2iew all business contracts to be acquired. 0f a contract is significantA and there is any doubt whether or not it can be

6+

2alidly assigned without consentA the contract should be no2ated. 0deallyA no2ation of significant contracts should be a condition precedent to co!pletion. The Purchase of 7usiness 4gree!ent and other contractual docu!entation should also contain fall bac, wording to address the position where necessary consents cannot be obtained. 0n these circu!stancesA the 2endor should be required to ad!inister the business contracts on the purchaserQs behalf and sub:ect to the purchaserQs directions.

C'&!"#<! ='" -)" '&#$ )"+%<)

?o3es v Do$4aster A5alga5ate% Collieries #t% )19/0+ 4C 1+1.N ?1 .+@ * 4ll E- 3. A <oa,es wor,ed for 'ic,elton 1ain Co Ltd The business was transferred to /oncaster Colleries. <oa,es went absent and was required to pay a fine on the basis that he had a contract of ser2ice with /oncaster <oa,es said he did not ha2e a contract for ser2ice Lord 4t,in B1y LordsA 0 confess it appears to !e astonishing that apart fro! o2erriding questions of public welfare power should be gi2en to a court or anyone else to transfer a !an without his ,nowledge and possibly against his will fro! the ser2ice of one person to the ser2ice of another. 0 had fancied that ingrained in the personal status of a citiMen under our laws was the right to choose for hi!self who! he would ser2e$ and that this right of choice constituted the !ain difference between a ser2ant and a serf... .olh!rst v Asso4iate% Portla$% Ce5e$t Ma$!9a4t!rers (1900) Ltd ?1 +*@ 4C .1. Tolhurst agreedA for a ter! of up to 3+ yearsA to supply chal, to a particular ce!ent !anufacturing co!pany which later assigned this contractual right to another co!pany who too, o2er the Wrst co!pany)s business. Tolhurst)s clai! that the assign!ent was in2alid was re:ected because the 'ouse of Lords too, the 2iew that it could not !a,e any difference to Tolhurst whether it supplied chal, to the assignor or assignee. Mi%-Cit" S3i$ Ca$4er A #aser Ce$tre v @ahe%i-A$ara3 (2006) 67 <&%L- 36 LahediA a !edical practitionerA was contractually bound by an i!plied obligation of conWdence in relation to records on patients ,ept by a !edical practice where he was e!ployed. 4 new owner too, o2er the !edical practice. Lahedi too, records and then ended his e!ploy!ent to wor, elsewhere. Could the new business owner sue on the original obligationC Kes$ Ca!pbell I 61

0f one considers the contract between /r Lahedi and ?his for!er e!ployer@A it has now co!e to an endA so far as either side ha2ing ongoing obligations to pro2ide ser2ices is concerned. 'owe2erA the contractual obligation continues whereby lists of patient na!es and addresses which /r Lahedi obtained R cannot be disclosedA and cannot be used e5cept for the purposes of the ?for!er e!ployer@. The obligations of /r Lahedi under that ter! of the contract do not require any personal interaction with the person to who! the obligation is owedA and the content of the obligation is not inXuenced by any action or decision of the person to who! the obligation is owed. 0t is not an obligation requiring /r Lahedi to do things O it is an obligation requiring hi! not to do things. /r Lahedi can perfor! it perfectly by total inaction. 0n !y 2iewA for these reasons no analogy can be drawn with the reasons whereby the beneWt of a contract of ser2ice is unassignable.

4ssign!ent !eans to transfer property rights Can the property rights be assigned e.g. are there rules against assign!entC 0s the property legal property or equitable propertyC 0s the transfer a legal assign!ent or an equitable assign!entC 0s the transfer for consideration or 2oluntaryC

%*&,)&! A&#$. %

Dld syste! title 9 deedsA registration 9 s *# ;deeds for people>N s 314 ;e5ecution of deed by a corporation> Torrens title 9 registrationA indefeasibility =oods 9 giftsA sale of goods /ebts and other choses in action '0&TD-K 0n #a5pet7s 4ase (1612) 77 E. at 7A Lord Co,e said that (the great wisdo! and policy of the sages and founders of our lawA ha2e pro2idedA that no possibilityA rightA titleA nor thing in actionA who shall be granted or assigned to strangersA for that would be the occasion of !ultiplying of contentions and suitsA of great oppression of the peopleA and chieXy of terreBtenantsA and the sub2ersion of the due and equal e5ecution of :ustice). Equity always allowed the! to be assigned 7y the 1 th century the law was changed to allow assign!ent &ection 12 of the Con2eyancing 4ct stipulates$ 4ny absolute assign!ent by writing under the hand of the assignor ;not purporting to be by way of charge only> of any debt or other legal chose in actionA of which e5press notice in writing has been gi2en to the debtorA trusteeA or other person fro! who! the assignor would ha2e been entitled to recei2e or clai! such debt or chose

%*&,)&! #! $#:

62

in actionA shall beA and be dee!ed to ha2e been effectual in law ;sub:ect to all equities which would ha2e been entitled to priority o2er the right of the assignee if this 4ct had not passed> to pass and transfer the legal right to such debt or chose in action fro! the date of such noticeA and all legal and other re!edies for the sa!eA and the power to gi2e a good discharge for the sa!e without the concurrence of the assignor$ Pro2ided always that if the debtorA trusteeA or other person liable in respect of such debt or chose in action has had notice that such assign!ent is disputed by the assignor or anyone clai!ing under the assignorA or of any other opposing or conflicting clai!s to such debt or chose in actionA the debtorA trustee or other person liable shall be entitledA if he or she thin,s fitA to call upon the se2eral persons !a,ing clai! thereto to interplead concerning the sa!eA or he or she !ayA if he or she thin,s fitA pay the sa!e into court under and in confor!ity with the pro2isions of the 4cts for the relief of trustees. 1.There !ust be a clear intention to assign rather than a !ere authorisation that the debtor or other person pay another$ ?or5a$ v &C. 2.The assign!ent !ust be absolute and not by way of a charge ;a charge allows the assignee to appropriate the property if there is a defaultA it is not a property right>. The basic reason why the assign!ent !ust be absolute is to ensure that the debtor or other person is protected in that at all ti!es he or she ,nows to who! pay!ent !ust be !ade. "urther!oreA the require!ent that the assign!ent !ust be absolute enables the assignee to sue on the debt or chose in action in his or her na!e because an absolute assign!ent !eans that the assignor no longer has any interest at all in the debt or chose in action. 0n D!rha5 8ros v Ro,ertso$ )1898+ 1 G7 763 there was an assign!ent of a boo, debt which was e5pressed to endure until !oney lent by the assignee to the assignor was repaid. <ot an absolute assign!ent because it was conditional upon repay!ent P#"! '= # /)(! '" <;' ) %& #<!%'& <#&&'! () # %*&)/ pursuant to s 12. This is because the assignor still has an interest in the debt or chose in action and thus !ust be :oined in any proceedings instituted against the debtor by the assignee. 4 part of a debt of chose in action can only be assigned in equity *.The assign!ent !ust be in writing signed by the assignor (illia5 8ra$%t7s So$s A Co v D!$lop R!,,er Co5pa$" #i5ite% ;custo!er instructed his debtor to pay debt directly to the ban,. The ban, sued for pay!ent without being :oined by the assignor. 0t was that an equitable assign!ent requires no !ore than e5pression of intention to assign and notice to the debtor.> ..E5press notice in writing !ust be gi2en to the debtor by either the assignor or assignee. There are no for!al require!ents as to the notice and it need not e2en state the date of the assign!ent. The i!portance of the notice is that the debtor be ad2ised as to who! he or she !ust pay. Constructi2e noticeA notice by i!plication or operation of law is <DT sufficient$ Co$soli%ate% .r!st Co #t% v ?a"lor (19*6) 33 CL- .2* at .*#B T;%&* S)<!%'& 12 <#&A! /'

6*

1. "uture choses in action 2. Change priorities B 4n assign!ent under s 12 is sub:ect to equities ha2ing priority o2er the rights of the assignee *. 4ssign choses regulated by other pieces of legislation$ Patents 4ct 1 + ;Cth> s 1.N Copyright 4ct 1 6# ;Cth> ss 1 691 7N Trade 1ar,s 4ct 1 3 ;Cth> ss 1+69111N Life 0nsurance 4ct 1 ;Cth> ss 2++92+*N 1arine 0nsurance 4ct 1 + ;Cth> ss 36937 *. 4ssign equitable interestsCCCCC e.g. a right of partnershipC :verett v Co55issio$er o9 .a=atio$ (1980) 1.* CL- ..+ The assign!ent of part of a partnership Dbiter co!!ent 9 what if it had been an absolute assign!entC 0t could be assigned. 4t CL- ..7 S?T@hough the interest of a partner is an equitable interestA it !ay be assigned under s 12 of the Con2eyancing 4ct 1 1 ;<&%>A as a!ended R The interestA being a chose in actionA falls within the e5pression (debt or other legal thing in action) because the sectionA in pro2iding that notice shall be gi2en to a trustee (as a person liable in respect of such debt or other legal chose in action)A appears to conte!plate the assign!ent by a beneWciary of an equitable chose in action against a trustee. There would be no point in referring to a trustee if the section !ade pro2ision only for the assign!ent by strangers to the trust of debts owing byA and choses againstA persons who happen to be trustees. The e5pression (legal chose in action) !ay be read as (lawfully assignable chose in action).

E>u%!#($) #

Equitable assign!ents e5ists for$ "uture property Equitable assign!ent of legal property for consideration Eoluntary equitable assign!ent of legal property that is assignable at law Eoluntary equitable assign!ent of legal property that is not assignable at law Equitable assign!ent of equitable property I&!)&!%'& % !;) B). 0n all casesA for an assign!ent to be effecti2e in equityA the assignor !ust display an intention to assign. The assignor !ust show that he or she is parting with do!inion o2er the property. <o particular for! of words is necessary to establish consent. 8!rri%ge v MP' So44er Ma$age5e$t #t% )2011+ E%C4 Ci2 #*3 The Court of 4ppeal had to deter!ine whether the following words a!ount to an intention to assign$

%*&,)&!

6.

(The fee due to ?'arrison@ is to be sent to the "ootball 4ssociation for onward trans!ission to the agent R ?at@ Lloyds T&7R&ort code *+B *B71 R account nu!berR+*717372 1P' &occer 1anage!ent Ltd). The court unani!ously held that there was an intention to assign the fee. Co5ptroller o9 Sta5ps (Bi4toria) v 'owar%-S5ith (19*6) 3. CL- 61. 'owardB&!ith was the residuary beneficiary under his deceased wife)s estate. 'e wrote a letter to the e5ecutor and trustee of the willA who held a power of attorney fro! hi!A requesting that certain pay!ents be !ade to na!ed indi2iduals fro! his interest as residuary beneficiary. The pay!ents were !ade. The Co!ptroller of &ta!ps in Eictoria assessed the letter to be dutiableA clai!ing that sta!p duty was payable under the &ta!ps 4ct 1 2# ;Eic>. The &upre!e Court of Eictoria found the gift was not liable for sta!p duty. The Co!ptroller of &ta!ps appealed to the 'igh Court. 0ssue$ was 'owardB&!ith)s letter an assign!ent of property and therefore liable for sta!p duty or !erely an authorisation ha2ing no dispositi2e effect with no liability for sta!p dutyC The 'igh Court ;&tar,eA /i5on and 1cTiernan II> unani!ously dis!issed the Co!ptroller of &ta!ps) appeal and affir!ed the lower court decision that 'owardB &!ith)s letter did not operate as an equitable assign!ent. 0t was !erely an authorisation with no dispositi2e effect. &tar,e I$ 4 !an !ay 2oluntarily dispose of his equitable estates or interests if he choose to do so. <o ?62+@ particular for! of words is required for the purposeA but he !ust !a,e clear his intention that he di2ests hi!self of the property and gi2es it o2er to anotherA or that he creates a trust in the property in fa2our of another. 4 !ere !andate fro! a principal to his agent gi2es no right or interest in the sub:ect of the !andate. <owA all we ha2e to go on in this case is the letter fro! ' 7 'owardB&!ith to the e5ecutor of the will of his wife and his own attorney. 0t si!ply (requests) the e5ecutor and attorney to pay certain a!ounts out of his residuary interest. 0t is left to the discretion of the e5ecutor and attorney whether the pay!ent shall be in shares or in !oney. 4ndA so far as appears fro! the facts stated in the caseA the docu!entA when e5ecutedA was not co!!unicated to the persons or institutions na!ed as the recipients of 'owardB&!ith)s bounty. The absence of co!!unication suggests that the appropriation was not irre2ocable. The docu!entA it appears to !eA operates as an authority to the e5ecutor and attorney to !a,e the pay!ents !entionedA and is not a transfer or assign!ent of any interest to the persons or institutions na!edA nor the creation of any trust in their fa2our. A %*&,)&! '= =u!u") -"'-)"!. %& )>u%!. The assign!ent of future property The r!le i$ 'olro"% v Marshall (1862) 1+ 'LC 1 1 at 211N ;1#62> 11 Eat 1++7 Ealuable consideration 0s the property present or future propertyC 63

?or5a$ v &e%eral Co55issio$er o9 .a=atio$ Eoluntary deed between a husband and wife whereby the husband purported to assign to the wife two ite!s of property. "irstA there was interest on a loanA which the borrower was entitled to repay to the assignor at any ti!e and without notice. &econdA there were di2idends on certain shares owned by the assignor. Ta5 Co! argues that 2oluntary hence ineffecti2e 0& it the right to recei2e !oney ;present property> or the !oney itself ;future property>C 0n relation to the di2idendsA the 'igh Court ;/i5on CIA 1cTiernanA %indeyerA 1enMies and Dwen II> unani!ously held that the assign!ent was not effecti2e because it in2ol2ed future property for which the assignee did not pro2ide 2aluable consideration. 4 bare !a:ority ;/i5on CIA 1enMies and Dwen IIN 1cTiernan and %indeyer II dissenting> ca!e to the sa!e conclusion in relation to the interest on the loan. Shepher% v Co55issio$er o9 .a=atio$ 0n2entor was entitled to royalties in relation to the !anufacture of castors. 7y a 2oluntary deed he assigned (all ?his@ right title and interest in and to an a!ount equal to ninety per centu! of the inco!e which !ay accrue during a period of three years R fro! ?the@ royalties).. Ta5 Co! says ineffecti2e because it)s future property The !a:ority of the 'igh Court ;7arwic, CI and 8itto IN Dwen I dissenting> held in fa2our of &hepherd on the basis that the 2oluntary deed of assign!ent was an effecti2e assign!ent of presently e5isting property. Fu!u") '" P") )&!K :verett v Co55issio$er o9 .a=atio$ (1980> 1.* CL- ..+N 2# 4L- 17 a ta5payer purported to assign a fraction of his share in a partnership together with the right to recei2e a corresponding share of partnership profits. The !a:ority of the 'igh Court of 4ustralia held that the assign!ent in2ol2ed present property. 0n 8ooth v &e%eral Co55issio$er o9 .a=atio$ (1987) 16. CL- 13 N 76 4L- *73 the 'igh Court of 4ustralia ruled that the assign!ent by a landlord of a percentage of the right to recei2e rent payable in respect of particular pre!ises in2ol2ed present propertyA holding that the assign!ent was analogous to the facts of &hepherd and not <or!an. D) <"%-!%'& '= !;) -"'-)"!. "or a 2alid assign!ent of future property the property !ust be described with sufficient particularity to per!it its identification when it co!es into e5istence or into the possession of the assignor. .ail," v 69I4ial Re4eiver (1888) 1* 4pp Cas 32* A %*&,)&! '= =u!u") -"'-)"!. #&/ -)<%=%< -)"='",#&<) This passage in 'olroyd suggests that the assign!ent is not 2alid ifA as at the date upon which the sub:ect !atter of the assign!ent co!es into the hands of the 66

assignorA the court would decline an order for specific perfor!ance of the contract to assign. 0f 4A for 2aluable consideration agrees to assign future property to 7A and consideration has been paid or e5ecuted by 7A when 4 acquires property that falls within the description of that which 4 agreed to assignA equity deter!ines that the property 2ests in 7 as soon as it is acquired by 4 and can be identified. There is no need for any further assurance by 4 or action to be ta,en by 7 Equity loo,s on that as done which ought to be done N#!u") '= !;) # %*&))A "%*;! %hat is the nature of the assignee)s rightC 0f debt or si!ilar to debtA if the assignor goes ban,rupt and then discharged the debt is dischargedC Re #i$% )191-+ 2 Ch *.3 Lind had an e5pectancy under his !other)s will. Prior to her death he borrowed fro! two separate sources ;<orwich Hnion and 4rnold>A in each case assigning the e5pectancy as security for the loan. Lind was then declared ban,ruptA fro! which he was subsequently discharged. 'e then borrowed !oney fro! a third source ;0ndustrials "inance &yndicate> and again assigned his e5pectancy as security for the loan. 'is !other then died. /id the third assignee)s interest in the property inherited by Lind pursuant to his !other)s will ha2e priority o2er the interests of the first two assigneesC The Court of 4ppeal ;&winfen EadyA Philli!ore and 7an,es LII> unani!ously ruled in fa2our of the first two assignees. The Court found that the first two assign!ents sur2i2ed Lind)s ban,ruptcy. 4ll three :udges re:ected the notion that the rights of an assignee of future property rested purely in contract. -atherA there was a higher right. The crucial factor establishing this higher right was the fact that an assignee of future property obtains an equitable interest in the property i!!ediately and auto!atically upon the property co!ing into e5istence or into the possession of the assignor. This attribute of the assign!ent of future property !eant that the rights of the assignee were sufficiently proprietary in nature to attract the rules relating to priorities between co!peting interests in the property that was the sub:ect of the assign!ent. 0f the rights of the first two assignees had been !erely contractual they would ha2e been co!pletely discharged by Lind)s ban,ruptcy and no priorities issue would ha2e arisen with the third assignee.

67

The practical i!plication of -e Lind is that an assignee of an e5pectancy ta,en as security for a loan has the right not to pro2e his or her debt in the assignor)s subsequent ban,ruptcyA and can si!ply rely on the securityA in !uch the sa!e way as an ordinary secured creditor can do upon the ban,ruptcy of a debtor

T;) )>u%!#($) #

0f no require!ent for writing then an assign!ent of legal property for consideration ta,es effect i!!ediately the consideration is paid or e5ecuted 0f there is a require!ent for writing then doctrine of part perfor!ance !ay sa2e an oral agree!ent 0n :verett v Co55issio$er o9 .a=atio$A at CL- .3+N 4L- 1#3A the !a:ority of the 'igh Court of 4ustralia said$ ?4@n equitable assign!ent ofA or a contract to assignA present property for 2alue ta,es effect i!!ediately and passes the beneWcial interest to the assignee. The 2oluntary assign!ent of legal property assignable at law Milro" v #or% (1862) . /e = " F I 26. at 27.N ;1#62> .3 E- 11#3 at 11# The first li!b of 1ilroy 2 Lord$ do e2erything necessary to be done$ Corin 2 Patton ;1 +> 16 CL- 3.+ The second li!b of 1ilroy 2 Lord$ assignor has done all that is necessary to be done to render the assign!ent binding on the assignor Costin 2 Costin ;1 3> <&% Con2 - 33B#11 Cori$ v Patto$ (1990) 16 CL- 3.+ 1r and 1rs Patton owned land as :oint tenants. 1rs Patton was ter!inally ill andA on the assu!ption that she would die before her husbandA the land would ha2e passed to her husband auto!atically upon her death in accordance with the principle of sur2i2orship &he did not want this to happen so she e5ecuted three docu!ents 9 a transfer to her property of her shareA a trust and will were she left her estate to the children The transfer had not been registered 'ad she done e2erything necessary to be doneC <o 9 she did not authorise the ban, to uplift the CT to Corin for the purpose of registering the transfer Costi$ v Costi$ (1997) <&% Con2 - 339#11 Costin snr !a,es an initial atte!pt to se2er a :oint tenancy in relation to Torrens title land by an assign!ent of his interest to his son.

%*&,)&! '= $)*#$ -"'-)"!. ='" <'& %/)"#!%'&

6#

Costin snr handed o2er an appropriate transfer docu!ent as well as gi2ing written instructions to the solicitors who held the certiWcate of title to release it to the assignee. The solicitors refused to do so because they belie2ed that they needed the authority of both the :oint tenants to release the certiWcate of title to the assignee. Costin snr later changed his !ind and assigned his interest to a second son and the second son was duly registered as coBowner of the property. The Wrst son argued that there had been an effecti2e equitable assign!ent to hi! and that the second son held the interest in the property on trust for the Wrst son. The court held the assign!ent to the Wrst son was ineffecti2e.

T;) +'$u&!#". #

0f the legal property cannot be assigned at law the assign!ent will be effecti2e in equity if the assignor has !anifested an intention to !a,e an i!!ediate and irre2ocable transfer $ <or!an 2 "CT The principles set out in 1ilroy 2 Lord do not apply. <or is consideration required 4rguably the only e5a!ple of such property is part of a debt or chose in action The equitable assign!ent of equitable property The assign!ent of equitable property can only be achie2ed in equity. 7ecause equitable property is not recognised at co!!on law it cannot be the sub:ect of a legal assign!ent. "or a 2oluntary assign!ent of equitable property the assign!ent !ust be absolute. 4part fro! any statutory require!ent of writing ;see below>A all that is necessary for a 2alid equitable assign!ent is (a clear e5pression of an intention to !a,e an i!!ediate disposition)

%*&,)&! '= $)*#$ -"'-)"!. &'! #

%*&#($) #! $#:

PRIORITIZATION

Dnce you ha2e characterised the interest you can test is strength against other interests There are only four types of priority dispute$ Legal 2s legal Equitable 2s Equitable Earlier Legal 2s Later Equitable Earlier Equitable 2s Later Legal Legal interest 2 legal interest %hen two or !ore legal interests in the land conflict the !ain principle is that a person cannot con2ey an interest which he or she does not ha2e ;Sne!o dat quod non habetT> Partial eg where 4 leases to 7 9 4 then sells to C 9 C (s interest is ta,en sub:ect to the lease %holly inconsistent 9 4 sells to 7 and then sells to C$ C recei2es nothing

Equitable interest v equitable interest

Mo99ett v Dillo$ )1999+ 2 E- .#+A at . 1A it was stated by 7roo,ing I4 ;7uchanan I4 concurringA at 3+6> that the resolution of priority disputes in the conte5t of co!peting equitable interests in property could be resol2ed by applying either of two distinct rules. The first rule is thatA generallyA if the holder of the second equitable interest ta,es with notice of the first equitable interestA he or she ta,es that interest sub:ect to the first equitable interest. The second rule is thatA pri!a facieA the equitable interest first created pre2ails. 'owe2erA this pri!a facie rule can be displaced if the holder of the second equitable interest has a (better equity). The onus of proof in such cases is upon the holder of the second equitable interest to displace the pri!a facie priority of the first equitable interest holder$ 3la Ger v Common5eal # 6an& of A's ralia ?1 7@ 1 Gd - 266A at 27

Notice

<otice !ay be actual or constructi2e i.e. would ha2e disco2ered if they had ta,en proper steps 9 7arclays 7an, 2 D)7rien ?1 .@. E5ception$ if the holder of the first interest induces the holder of the second to thin, that the first no longer e5ists$ 1offet 2 /illan. E5ception$ %here holder of first agrees to postpone!ent or wai2er of their interest$ PlatMer 2 Co!!onwealth 7an,.

Who has the best equity?

-ice 2 -ice per 8indesly EC$

7+

1. nature and condition of the respecti2e equities i.e. not a !ere equity. 1ere equities always lose to a purchaser for 2alue without notice$ /ouble 7ay <ewspapers Pty Ltd 2 4 % 'oldings Pty Ltd ;1 6>. 4ll other equities treated equally. 1offett 2 /illon 9 !ortgagee had better equity but not because it was in registerable for!. 2. the circu!stances and !anner of acquisition.

*. the whole conduct of the parties 9 1ost i!portant esp. the conduct of first holder. 0f the second interest holder also acted badlyA the unconscientious beha2iour cancels out and first in ti!e. 'ei% v Relia$4e &i$a$4e Corporatio$ #t% 9 per =ibbs CI The better equity depends on the circu!stances 9 loo, to the conduct of the parties the question of negligence on the part of the prior clai!ant the effect of any representations !ade by the prior clai!ant which !ay gi2e rise to an estoppel did the conduct of the prior clai!ant enable such a representation to be !adeC G)&)"#$$.$ the earlier equitable interest !ay be postponed to the later interest where$ ;a>the conduct of the earlier interest holder has led to the later interest holderacquiring an interestN ;b>in the !ista,en belief that the prior interest did not e5ist I= !;) )>u%!%) #") )>u#$ !;)& =%" ! %& !%,) E= 4ble agrees to sell his land to 7arb. 4ble gi2es the title deeds to barb and signs a receipt for the purchase !oney e2en though he has yet to be paid. 7arb proceeds to grant an equitable !ortgage o2er the land to Clary. 'ow has the better interestC L''B !' !;) )>u%!%) ? 4ble has an equitable lien o2er the property Clary has an equitable !ortgage Equitable interest 2 equitable interest 7oth the equities are security interests 9 no real difference between the! 9 'owe2er 4ble)s negligent conduct in gi2ing the title deeds and signing the certificate !eans that it was his fault that Clary too, his interest without noticeB 'ence Clary)s interest is superior &ee Ri4e v Ri4e (18-*) 61 E- 6.6 71

Eendors sold property. Purchaser entered contract and paid so!e of purchase price. Eendors auto!atically got lien for re!ainder of rest of price. %hen deposit was paidA 2endors ga2e a deed of con2eyance and a declaration that full purchase price had been paid. Purchaser used this doc to go out and get a !ortgage. Equitable Lien o2er purchase price 2 Equitable !ortgage. 'eld equitable !ortgagee wins. Eendors foolishly and negligently ar!ed purchaser with !eans to create second equitable interestA effecti2ely encouraged second equitable interest by their actions. J?J <$vest5e$ts Pt" #t% v S!$$"ville Pt" #t% )2006+ G&C 1*#A a 2endor of property contracted to sell property to a purchaser. Dn the day of settle!ent of this contractA the 2endor co!pleted a sale of the property to a second purchaser for a higher price. The first purchaserA upon beco!ing aware of what had happenedA lodged a ca2eat to pre2ent registration of the second purchaser)s transfer. The second purchaser co!!enced proceedings to ha2e the ca2eat re!o2ed. The issue before the court was whether the first purchaser had priority o2er the second purchaser. 1ullins IA at ?7+@A held that the first purchaser had priority because the second purchaser (had notice of the first ?purchaser)s@ equitable interest at the ti!e of the acquisition of its interests).

EC<)-!%'&? in the case of land held under a trust the beneficiaries will not lose
their priority because of negligent or fraudulent conduct by the trustee$ Shropshire G$io$ Railwa"s v Ro,so$ (18*-) but !ay due to postponing conduct by the beneficiaries.

"acts$ Trustee ;'ollyoa,e> held shares for &hropshire. 0n breach of trustA trustee used share certificate as loan collateral fro! -obson. -obson held the shares but did not register the! under his na!e so equitable. 'eld$ &hropshire had priority because they had not engaged in postponing conduct e2en though their trustee had. Hp to -obson to deter!ine that 'ollyoa,e was only holding on trust. 'D%EEE-A where the second equitable interest is created because the trustee didn)t bother to get docu!ents pro2ing property 9 this is postponing despite beneficiary lac, of fault$ (al3er v #i$o5 )1907+K 0f title deeds ne2er ca!e into possessionA did the trustees e2ery hold anything on trustC %al,er created an equitable interest in a property trust in fa2our of his wife. Trustees failed to get title deeds fro! wal,er who was then able to hold hi!self out as true owner and !ortgaged. /efault and lender sold property to Lino!. Lino! winsPP EC<)-!%'& /') &A! #--$. u&$) !;) !"u ! % -"'-)"$. ='",)/ '" %& <# ) :;)") !;) !"u !)) ;# =#%$)/ !' <',-$)!) !;) !"u ! (. ")<)%+%&* !;) !"u ! -"'-)"!. R!le i$ Dearle v 'all (1828) Priority gi2en to second equity in personalty and realty if$

72

1. 2. *.

assign!ent for 2aluable consideration. without notice when consideration gi2en assignee was the first to gi2e notice to the trusteeA debtor or fundholder.

-ationale is that by failing to gi2e noticeA the first holder has opened the door for the second. <otice !ay be oral. 0f notice gi2en on the sa!e dayA held to be si!ultaneous so earlier interest pre2ails. <7 &trictly applied and e2en if first holder not at fault in not gi2ing notice. <7 <otice to one trustee is effecti2e e2en if that trustee dies before telling any other trustees$ %ard 2 /unco!be ;1# *>. Re Dallas )190/+ /allas e5ecutor and beneficiary of father)s will. 7efore recei2ing he assigned his e5pectancy to two different creditors. 4fter death he renounced probate and his sister got ad!inistration. &econd debtor sub!itted intrest the day after sister got ad!in. 4s soon as first debtor found out si5 days later he sub!itted interest. Priority to second interest holder despite no way for first to notify quic,er. <7 Dbiter held that notice gi2en to e5ecutor who subsequently renounces dutiesA this would be ineffecti2e. #"le v Rosher The trustee and the assignor cannot be the sa!e person. Mere Equities (al3er v #i$o5 EC<)-!%'&? 1ere equities 9 personal right to a re!edy 9 proprietary in nature but less than a full equitable interest E5a!ples$ the right to ha2e a docu!ent rectifiedA right to ha2e a con2eyance set aside because of the grantee)s fraud #ate4 <$vest5e$ts #t% v 'otel .errigal Pt" #i5ite%$ Terrigal had granted a !ortgage to Latec. Latec e5ercised the power of sale of the !ortgage and sold it to a wholly owned subsidiaryA &outhern 9 &outhern granted a further equitable interest to 1LC which had no notice of the Terrigal interest Terrigal argued that the sale was fraudulent 9 not at ar!)s length 9 both &outhern and Latec had conspired to sell at a low price %hat was the priority between the interest held by Terrigal and the interest held by 1LCC 0t was held that Terrigal had a bare right to sue and ha2e the transaction set aside 9 a !ere equity 4 prior !ere equity will not pre2ail o2er a later fullBblown equitable interest that was ta,en without notice

7*

Exception tac!in" EC<)-!%'&? tac,ing 9 tabula in naufragio 9 if a later equitable interest holder purchased for 2alue and without notice and is later able to acquire the legal estate then the later interest holder can tac, its equity onto the legal estate and :u!p priority E= 1ortgages 9 0f 4ble grants a !ortgage to 7ette then an equitable !ortgage to Clary and then another equitable !ortgage to /onna 9 then the order of priority will nor!ally be 7A CA / 9 but if /onna can later buy the land off 7ette then /onna equitable interest will be tac,ed to the legal estate and Clary will co!e in last

Prior #e"al v #ater Equitable

=enerally earlier legal pre2ails but there are . e5ceptions all relating to the conduct of the legal interest holder. 1. L)*#$ %&!)") ! ;'$/)" '(!#%&)/ %&!)") ! !;"'u*; ="#u/. %here the legal interest holder was a party to the fraud that led to the equitable interest being created ?orthter$ Co!$ties v (hipp Crabtree ga2e a legal !ortgage to <C. Crabtree was !anager of the co!pany where deeds were stashed and had a ,ey. 'e re!o2ed the! and e5ecuted a second !ortgage with %hippA an equity of rede!ption because of the earlier legal !ortgage. 'eld that fruad !ust ha2e been perpetrated by the interest holder. "raud by the interest assigner alone is not sufficient. Per "ry LI$ (where the owner of the legal estate has assisted in or conni2ed at the fraud which has led to the creation of a subsequent equitable interestA without notice of the prior legal interest) 2. W;)") !;) $)*#$ %&!)") ! ;'$/)" :# *"' $. &)*$%*)&! %& =#%$%&* !' %&>u%") #=!)" '" '(!#%& -' ) %'& '= !;) !%!$) /))/ (al3er v #i$o5 !;u )&#($%&* #&'!;)" -)" '& !' ;'$/ !;), )$+) 'u! # !;) !"u) ':&)". 1ere carelessness on the part of the holder of the legal interest is not enough to constitute postponing conduct$ :va$s v 8i43ell (1801) *1 E- +#A at 1++396. (=ross negligence) in the sense of a special degree of lac, of care or prudence is needed for this e5ception to arise. *. %here the legal interest holder entrusted the title deeds to an agent with li!ited authority to raise !oney by using the property as a security interestA and that agent e5ceeds authority by borrowing !ore than was intended 9 legal interest is bound to the full e5tent. 8ro43les," v .e5pera$4e Per5a$e$t 8!il%i$g So4iet" )189-+A a father authorised his son to raise a loan on the security of certain property in the su! of Y223+. The son actually raised Y*3++. The father was held liable for the full a!ount raised by the son.

7.

.. %here the legal interest holderA although not parting with title docu!entsA gi2es another person a docu!ent that confers an equitable interest or a right to acquire a legal interest. 8arr" v 'ei%er 7arry e5ecuted a transfer to &ch!idt. Transfer could not be registered because LTD was in the process of issuing a new title certificate. 7arry authorised LTD to issue the certificate direct to &ch!idt. &ch!idt !ortgaged the land to 'eider on the basis of the certificate. 7efore registrationA 7arry sought an in:unction against transfer due to fraud. 4lso sought to ha2e land freed fro! !ortgage. 1ortgage upheld because 7arry had issued certificate through LTD that allowed the fraud to be perpetrated.

Prior equitable interest v le"al interest

Pil4her v Rawli$s (1872) L- 7 Ch 23 A at 26#. The legal interest will pre2ail if it was acquired$ 1. ," a p!r4haser? 4nyone who acquire an interest for 2alue ;lesseeA fee si!ple ownerA !ortgagee> 2 9or val!e Consideration in !oney 9 needs to be !ore than no!inal a!ount but not !ar,et 2alue. 7assett 2 <osworthy ;167*> b6c equity will not assist a 2olunteer. 6 i$ goo% 9aith 7ona fide 9 no hint of conspiracy or unclean hands$ Mi%la$% 8a$3 .r!st Co #t% v Gree$ )1981+ 4C 31*A at 32# e.g. notice of prior equitable interest. 4K witho!t $oti4e o9 the prior e;!ita,le i$terest 1ost significant catch. -ele2ant ti!e is when purchaser furnishes consideration$ Pilcher 2 -awlins. E5ception is if equitable interest is beneficiary under a trust where beneficiary will pre2ail after consideration but before acquiring the legal interest. C#& () #<!u#$G <'& !"u<!%+) '" %,-u!)/ A4t!al ,nowledge of the actual facts 9 real ,nowledge Co$str!4tive ,nowledge that would ha2e co!e into the person)s attention had they !ade reasonable inquiries eg case of land sold with a tenant in possession 9 purchaser should ha2e chec,ed the rights of the lessee B constructi2e notice. 4 person who has actual notice of a docu!ent that !ight affect title will ha2e constructi2e notice of its contents$ Cosser v Colli$ge (18*2). Mu ! () #($) !' =%&/ !;) %&!)") ! F '$/ . !), !%!$) #$$':)/ !' *' (#<B 60 .)#" CA<! 164

73

The rule in (il3es v Spoo$er )1911+ 2 87 .7*$ &ubsequent purchasers are in the sa!e shoes as the legal estate holder e2en when the subsequent legal interest has notice or recei2es 2ia gift$ ?0@n :ustice to the owner of the land who had no notice when he acquired the landA it would not be right to ha!per his power of dealing with his own landA because certain personsA who possibly would be the only custo!ers for the land li,ely to pay the best priceA ha2e such notice.

I$pute% Notice

4ctual or constructi2e notice that co!es to the attention of the purchaser whether or not they ca!e to their attention in the course of their agency$ 'argreaves v Rothwell (18*6) 'owe2erA Cf C4 &.16. 9 i!plies notice within the course of agent)s duties -estriction on constructi2e notice ;1> 4 purchaser shall not be pre:udicially affected by notice of any instru!entA factA or thingA unless$ ;a> it is within the purchaser)s own ,nowledgeA or would ha2e co!e to the purchaser)s ,nowledgeA if such searches as to instru!ents registered or deposited under any 4ct of Parlia!entA inquiriesA and inspections had been !ade as ought reasonably to ha2e been !ade by the purchaserA or ;b> in the sa!e transaction with respect to which a question of notice to the purchaser arisesA it has co!e to the ,nowledge of the purchaser)s counsel as suchA or of the purchaser)s solicitor or other agent as suchA or would ha2e to co!e to the ,nowledge of the purchaser)s solicitor or other agent as suchA if such searchesA inquiriesA and inspections had been !ade as ought reasonably to ha2e been !ade by the solicitor or other agent. ;14> D!ission to search in any register or list ,ept byA or filed withA the 4ustralian &ecurities and 0n2est!ents Co!!issionA whether within <ew &outh %ales or elsewhereA shall not of itself affect a purchaser of land with notice of any !ortgage or charge. ;2> This section shall not e5e!pt a purchaser fro! any liability under or any obligation to perfor! or obser2e any co2enantA conditionA pro2isionA or restriction contained in any instru!ent under which the purchaser)s title is deri2edA !ediately or i!!ediatelyA and such liability or obligation !ay be enforced in the sa!e !anner and to the sa!e e5tent as if this section had not been enacted. ;*> 4 purchaser shall not by reason of anything in this section be affected by notice in any case where the purchaser would not ha2e been so affected if this section had not been enacted.

76

;.> This section applies to purchases !ade either before or after the co!!ence!ent of this 4ctA sa2e that where an action is pending at the co!!ence!ent of this 4ct the rights of the parties shall not be affected by this section.

Ol% &yste$ Title

Land goes to the one who registers first. Land !ust ha2e been obtained in good faith and for 2alue. <7 Dnly applies in co!peting ins r'men s e.g. two equitable !orgagesA one written instru!ent and one deposit of titleA registration will not gi2e priority and general law applies. 4lsoA Dld &yste! does not differentiate between legal and equitable. Title goes to the one registered first$ Dar,"shire v Dar,"shire (190-). 'oo% (aith =ood faith on the recipient of the interest. =" on the part of the 2endor is irrele2ant$ Jo$es v Colli$s 1ost co!!on e5a!ple of bad faith is ta,ing with notice of earlier equitable clai!. Ti!ing of notice is before the e5ecution of the transfer$ S4holes v 8l!$t. <otice after e5ecution but before registration is o,ay$ 8!rrows v Cri5p Bal!a,le Co$si%eratio$ 1ust not be no!inal$ 8!lle$ v A78e43ett (186*). 'owe2erA no!inal consideration sufficient if interest registered and co!peting interest is acquired after registration because subsequent interest will ha2e notice.

Torrens Title #an%

Pri!acy of registration$ 8res3var v (all. <o legal interest until registration$ (est9iel% v Perpet!al .r!stee (2007) Co5peti$g Registere% <$terests -egistering land acquires land sub:ect to pre2iously registered interests BZ indefeasable title &raCer v (al3er )1967+ EC<)-!%'& !' %&/)=)# %(%$%!. "raud$ 1ust relate to the current state of the titleA not fraud on past transfers. 1eans actual fraud brought ho!e to the person acquiring the asset or their agents. "raud not attributed for carelessness but can be for willful blindness$ Assets Co v Mere Roihi )190-+ 4ctual fraudA !oral turpitude$ "airclough 2 7utler E5panded recently to include equitable fraud so!ewhat but ill defined$ Grgi4 v A?@ 8a$3i$g Gro!p #t% (199/) where Powell I4 said$

77

?T@hose species of (equitable fraud) which are regarded as falling within the concept of (fraud) for the purposes of s .2 of the 4ct are those R in which there has been an ele!ent of dishonesty or !oral turpitude on the part of the registered proprietor of the sub:ect interest or on the part of his or its agent. 1ere ,nowledge of an unregistered interest will only affect title prior to registration. Dnce registeredA e2erything)s cool$ <AC (&i$a$4e) Pt" #t% v Co!rte$a" (196*) Port Swette$ha5 v #o3e Hew LK owned land and con2eyed to Eusope on the understanding that he would not be disturned on it. They agreed. Eusope then con2eyed land to P& on the understanding that LK would not be disturbed. They agreed but when they !o2ed in they ,ic,ed LK out. 'eld that agree!ent constituted !ore than !ere ,nowledge of unregistered interest and a!ounted to fruadA !a,ing an agree!ent ,nowing they wouldn)t honour it. Cf 'os3i$g v 8ar$es )1971+ where there was no deliberate plan to not honour agree!ent and no e2idence original owner had been induced to transfer on the basis of state!ents by 'os,ing. &ra!% .i5i$g 4ny ti!e up to registration$ 8ahr v ?i43ola" (?o 2). "raud afterwards doesn)t count e5cept in relation to the in persona! e5ception. &ra!% ," the age$t Counts if agent acting within the scope of the principal)s actual or apparent authority e2en if principal doesn)t ,now about it. Dollars A Se$se &i$a$4e #t% v ?atha$ )2008+ 4gent acquired !ortgage by forging signature of the principal where the !ortgagor had forwarded docs to the agent for the !ortgagee. 'eld within apparent authority P"'($), 1onicaA aged 27A and ChandlerA aged 26A were !arried fi2e years ago. Three years ago they purchasedA as :oint tenantsA a house under Torrens title. 4bout a year ago their !arriage began to brea, down. They decided to ,eep up the pretence of being !arried because a di2orce would ha2e da!aged their respecti2e careers. &i5 !onths ago 1onica was diagnosed as ha2ing breast cancer. Dne wee, ago 1onica !et with her brother -oss and told hi! that she wanted hi! to ha2e her interest in the house she had purchased with Chandler. To effectuate this gift she handed -oss a duly e5ecuted 1e!orandu! of Transfer transferring her interest in the house to -ossA together with a letter addressed to 4llyA the solicitor in whose office the certificate of title was held. The letter directed 4lly to release the title deed to -oss. The ne5t day -oss went to 4lly)s office to collect the title deed but 4lly refused to release it to -oss on the ground that she could not do so without also ha2ing a direction to that effect fro! Chandler. -oss left 4lly)s office without the certificate of

7#

title. 7efore anything else was done in relation to this !atter 1onica was ,illed in a car accident. -oss see,s your ad2ice as to whether he is entitled to 1onica)s interest in the house. A& :)" The issue raised by this proble! is whether the transaction between 1onica and -oss a!ounted to an effecti2e equitable assign!ent of the property to -oss. 0f it did the assign!ent would ha2e se2ered the :oint tenancy between 1onica and Chandler with the result that Chandler would not ha2e inherited 1onica)s interest in the property on her death pursuant to the principle of sur2i2orship. 4t her death 1onica would ha2e held her interest in the property as trustee for -oss. 0f the transaction was not an effecti2e equitable assign!ent of the propertyA 1onica would ha2e died holding her interest in the property as :oint tenant with Chandler who would inherit her interest pursuant to the principle of sur2i2orship. =i2en that 1onica sought to assign her legal interest in the property to -oss for no considerationA the question of whether it was assigned in equity in2o,es the principles in 1ilroy 2 Lord ;1#62> . /e = " F I 26. at 27.N ;1#62> .3 E- 11#3 at 11# where it was held that such an assign!ent would be 2alid in equity only if 1onica had done all that was necessary to be done in order to render the assign!ent binding upon her$ see ?..6.7@. 0t should be noted that there has been no legal assign!ent of the property because the transfer docu!ent has not been registered$ see ?..*..@. Dn the basis of the 'igh Court decision in Corin 2 Patton ;1 +> 16 CL- 3.+N 2 4L- 1A or in Gueensland pursuant to s 2++ of the Property Law 4ct 1 7. ;Gld>A the principles in 1ilroy 2 Lord !ean that 1onica would ha2e assigned her interest in the property to -oss if ;i> she had perfor!ed those acts towards a legal assign!ent of the property which she and she alone could perfor! and ;ii> whether the gift to -oss was beyond recall by 1onica$ see ?..6. @9?..6.12@. 1onica)s actions satisfy the first of these require!ents 'owe2erA 4lly)s refusal to hand o2er the title deed to -oss without Chandler)s consent !eans that the gift to -oss was not beyond 1onica)s recall. 0n Costin 2 Costin ;1 3> <&% Con2 - 339#11 the <ew &outh %ales Court of 4ppeal held that a refusal by a solicitor such as 4lly to hand o2er the title deed !eant that an assign!ent such as 1onica)s would be ineffecti2e in equity $see ?..6.1*@.. Dn the basis of this decision 1onica would not ha2e assigned her interest in the land to -oss with the result that Chandler inherits the property pursuant to the principle of sur2i2orship. Equitable assign!ent of equitable property The assign!ent of equitable property can only be achie2ed in equity. 7ecause equitable property is not recognised at co!!on law it cannot be the sub:ect of a legal assign!ent. "or a 2oluntary assign!ent of equitable property the assign!ent !ust be absolute. 4part fro! any statutory require!ent of writingA all that is necessary for a 2alid equitable assign!ent is (a clear e5pression of an intention to !a,e an i!!ediate disposition)$ <or!an at CL- *+N 4L- 1. A per %indeyer

Se4tio$ 2*C o9 the Co$ve"a$4i$g A4t 2*C 0nstru!ents required to be in writing ;1> &ub:ect to the pro2isions of this 4ct with respect to the creation of interests in land by parol$ ;a> no interest in land can be created or disposed of e5cept by writing signed by the person creating or con2eying the sa!eA or by the person)s agent thereunto lawfully authorised in writingA or by willA or by operation of lawA ;b> a declaration of trust respecting any land or any interest therein !ust be !anifested and pro2ed by so!e writing signed by so!e person who is able to declare such trust or by the person)s willA ;c> a disposition of an equitable interest or trust subsisting at the ti!e of the dispositionA !ust be in writing signed by the person disposing of the sa!e or by the person)s willA or by the person)s agent thereunto lawfully authorised in writing. ;2> This section does not affect the creation or operation of resultingA i!pliedA or constructi2e trusts. The writing require!ents within s 2*C;1> can be satisfied by !ore than one docu!ent pro2ided they are ob2iously interconnected$ 4ustralia and <ew Lealand 7an,ing =roup Ltd 2 %idin ;1 +> 1+2 4L- 2# at 2 79*++ per 'ill I. &ection 2*C;1>;b> !erely requires e2idence in writing in relation to a declaration of trust of land. 'owe2erA the disposition or creation of an interest pursuant to s 2*C;1>;a> !ust itself be in writing. 0n all 4ustralian :urisdictions e5cept GueenslandA the disposition of a subsisting interest pursuant to s 2*C;1>;c> or its equi2alents !ust also be in writing. &ection 2*C;1>;a> and s 2*C;1>;b> apply to the creation or disposition of interestsA whereas s 2*C;1>;c> only applies to the disposition of subsisting interests. &ection 2*C;1>;a> applies to the disposition of legal and equitable interests in land &ection 2*C;1>;a> and s 2*C;1>;b> apply only to landA whereas it has been held thatA despite the references to land in the opening sentence of the sectionA s 2*C;1>;c> applies to interests in land and personalty

E>u%!#($) #

2*C;1>;c> requires assign!ents of subsisting equitable interests to be in writing. 0t does not apply if the assignor has both the legal and equitable interest in the property. This is a consequence of the decision in Co!!issioner of &ta!p /uties ;Gueensland> 2 Li2ingston ?1 63@ 4C 6 . Equitable assign!ent of equitable interests <or does s 2*C;1>;c> apply when where an absolute owner of property disposes of an equitable interest in that propertyA the equitable interest is created by the #+

%*&,)&! '= )>u%!#($) %&!)") !

disposition. 4 si!ilar line of reasoning applies to the equitable assign!ent of a legal interest in property. 'ere the assignee)s interest is a newly created one and not the assign!ent of a subsisting equitable interest. /isposition by way of a direction by a beneficiary to a trustee /irection to hold property on trust for a third party %hat if a beneficiary instructed his or her trustee to hold the equitable interest in the trust on trust for so!eone elseC %hat would be required for this interest to passC Gre" v <$la$% Reve$!e Co55issio$ers )1960+ 4C 1 'unter was the beneficiary under a bare trust of 1#A+++ shares. =rey was the trustee. Dn 1# "ebruary 1 33 'unter orally and irre2ocably directed =rey to hold those shares on 2arious trusts for 'unter)s grandchildren. Dne wee, later 'unter e5ecuted 2arious declarations of trust confir!ing the effect of the oral direction gi2en to =rey. %as the oral directi2e effecti2e to pass the interestC 0f it was then sta!p duty was only payable on a no!inal basis on the confir!ing declarations The 'ouse of Lords ruled against =rey and found that the oral directions were ineffecti2e. This was the disposition of a subsisting equitable interest and needed to be in writing 4d 2alore! sta!p duty had to be paid on the written declarations of trust. Ba$%ervell v <$la$% Reve$!e Co55issio$ers )1967+ 2 4C 2 1 4 ban, was a bare trustee of shares for Eander2ell. Eander2ell orally directed the ban, to transfer the shares to the -oyal College of &urgeons. 'is intention was that the college acquire both the legal and equitable interests in the shares. Eander2ell was assessed as liable for a surta5 on the shares pursuant to rele2ant inco!e ta5 legislationA on the basis that his oral direction to the ban, did not result in a disposition of the shares to the college. 0f the oral direction was an effecti2e disposition of the shares to the collegeA Eander2ell was not liable for the surta5. /isposition by way of a direction by a beneficiary to a trustee The 'ouse of Lords unani!ously ruled in fa2our of Eander2ellA holding that his direction to the trustee was not a disposition within the para!eters of s2*C;1>;c>.

#1

Dn the issue of Eander2ell)s oral direction the 'ouse found that it was effecti2e and did not ha2e to be in writing. =rey 2 0-C was distinguishable fro! the present case because in that case the transaction was one that dealt only with the subsisting equitable interestA whereas in the present case the transaction in2ol2ed dealing with both the legal and equitable interests. 0t was not the disposition of a subsisting equitable interest <either were & 2*C;1>;a> or ;b> rele2ant because the interests were personalty W;#! %= !;) # %*&'" /%) ()='") !;) /%")<!%'& % <#""%)/ 'u!K 0n Ba$%ervell v <RCA at 4C **+N 4ll E- 1#A Lord %ilberforce said thatA if Eander2ell had died before his direction to the trustee had been carried outA the gift would ne2ertheless ha2e been 2alid on the basis that Eander2ell had done e2erything within his power to transfer the property to the college Par3er A Par3er v #e%sha5 )1988+ %4- *2 Prior to death a testatri5 ga2e trustees a written direction to pay !oney fro! her deceased husband)s estate to na!ed persons &he died before the !oney was paid. -owland I held that in such circu!stances the direction to the trustee would be re2o,ed by the death of the person !a,ing the direction.

D% -' %!%'& (. :#. '= # <'&!"#<! !' #

/o contracts for 2aluable consideration to assign an equitable interest in property ha2e to be in writingC There is di2ided opinion Dn one 2iew a contract for 2aluable consideration to assign an equitable interest in property would be a (disposition) within the !eaning of the legislationA and would therefore ha2e to be in writing. Dn another 2iew s 2*C;2> effecti2ely dispenses with the require!ent of writing in the conte5t of the creation ofA constructi2e trusts. 0t is a wellBsettled principle of law that a contract for 2aluable consideration to assign property of any ,ind gi2es rise to a constructi2e trust whereby the 2endor is a constructi2e trustee of the property for the purchaser e.g. the rule in Lysaght 2 Edwards 6!ghtre% v <$la$% Reve$!e Co55issio$ers )1960+ 4C 2+6 1rs Dughtred held a beneficial life estate in certain shares. 'er son Peter held the equitable re2ersionary interest in those shares. 1rs Dughtred also owned absolutely a nu!ber of other shares in the sa!e co!pany.

%*& #& )>u%!#($) %&!)") !

#2

7y an oral agree!ent of 1# Iune 1 36 1rs Dughtred and her son agreed that on 26 Iune 1 36 she would transfer to hi! the shares in the co!pany that she owned absolutely and in return Peter would surrender to her his equitable re2ersionary interest in the shares in which 1rs Dughtred had an equitable life estateA thereby !a,ing her the absolute beneficial owner of those shares Dn 26 Iune 1 36 three docu!ents were e5ecuted to effectuate the oral agree!ent of 1# Iune 1 36. The first docu!ent was a deed of release which noted that the shares for!erly held by trustees on trust for 1rs Dughtred for life with an equitable re2ersionary interest to PeterA were now held on trust for 1rs Dughtred absolutely and that it was intended to transfer legal title to her whereupon the trustees would be released fro! their trusteeship. The second docu!ent transferredA for no!inal considerationA the shares for!erly owned absolutely by 1rs Dughtred to Peter. The third docu!ent was a transferA for no!inal considerationA of the legal title fro! the trustees to 1rs Dughtred in relation to the shares referred to in the first docu!ent. The third docu!ent was assessed by the ta5ing authorities as liable for the pay!ent of ad 2alore! sta!p duty on the basis that the earlier oral contract was ineffectual in transferring Peter)s equitable re2ersionary interest to 1rs Dughtred 4 bare !a:ority in the 'ouse of Lords found in fa2our of the ta5ing authorities. Lord Ien,ins ;Lord 8eith concurring> opined thatA e2en if the earlier oral agree!ent created a constructi2e trustA the later transfer to 1rs Dughtred fro! the trustees would ha2e conferred upon her rights superior to those gained on the creation of the constructi2e trust. 0n such circu!stances the transfer would be dutiable at ad 2alore! rates under the sta!p duty legislation Lord /enning also was of the 2iew that the oral agree!ent was ineffecti2e to dispose of Peter)s equitable re2ersionary interest because of the require!ent of writing in s2*C;1>;c>. 0n his Lordship)s 2iew s 2*C;2> did not do away with that require!ent. Lord -adcliffe for the !inorityA accepted the 2iew that the oral agree!ent of 1# Iune 1 36 ga2e rise to a constructi2e trust and that the disposition was effected by the oral agree!ent. 0n such a situation s 2*C;2> dispensed with the need for writing. The transfer fro! the trustees to 1rs Dughtred of 26 Iune 1 36 did not dispose of Peter)s re2ersionary interest and accordingly was only liable to no!inal sta!p duty 0n ?eville v (ilso$ )1997+ Ch 1.. the Court of 4ppeal in EnglandA when confronted with this di2ersity of opinion in Dughtred 2 0-CA unani!ously endorsed Lord -adcliffe)s 2iew that a constructi2e trust had effecti2e transferred the interest orally. D% -' %!%'& '= #& )>u%!#($) %&!)") ! (. :#. '= /)<$#"#!%'& '= !"u ! 4 disposition includes a declaration of trust for the purposes of s 2*C;1>;c>

#*

Qu) !%'& 1rs /ole was the absolute beneficial owner of 1+A+++ shares in 1acquarie 1ines Ltd ;11L>. The registered holder as trustee of the shares was 11L)s ban, and it was obliged to transfer the legal title to the shares to 1rs /ole at any ti!e if called upon to do so by 1rs /ole. Dne wee, ago 1rs /ole called the !anager of the ban, and said to hi!$ (0 want !y son 7ob to ha2e !y shares in 11L. Please transfer the! to hi!). The !anager replied$ (Eery well). Two days laterA and before any steps were ta,en by the ban, !anager to carry out 1rs /ole)s instructionsA 1rs /ole died. 0n her will she left her entire estate to her husband Eric. Eric see,s your ad2ice as to who is entitled to the shares in 11L. A& :)" The issue is whether 1rs /ole)s oral direction to the trustee disposes of the property to 7ob or is the direction a disposition of a subsisting equitable interest caught by the writing require!ent in s. 2*C;1>;c> of the Con2eyancing 4ct. 7ecause the property is personalty there is no question of s. 2* ;1>;a> or s. 2*C;1> ;b> applying as they are confined to land. &ection 2*C;1>;c> does apply to both interests in land and personalty. %hether 1rs /oleQs direction is within s. 2*C;1>;c> depends upon a consideration of Eander2ell 2 0-C which held that it doesn)t on these facts. E2en though 1rs /ole is getting rid of her equitable interest s 2*C;1>;c> does not apply because 1rs /ole intends to and has the power to deal with both the legal and equitable interests in the shares. ThusA the oral direction is effecti2e to pass the equitable interest to 7ob. 4t her death 1rs /ole has no interest in the shares and Eric does not inherit any interest in the! upon her death. The issue raised by this proble! is whether the transaction between 1onica and -oss a!ounted to an effecti2e equitable assign!ent of the property to -oss. 0f it did the assign!ent would ha2e se2ered the :oint tenancy between 1onica and Chandler with the result that Chandler would not ha2e inherited 1onica)s interest in the property on her death pursuant to the principle of sur2i2orship. 4t her death 1onica would ha2e held her interest in the property as trustee for -oss. 0f the transaction was not an effecti2e equitable assign!ent of the propertyA 1onica would ha2e died holding her interest in the property as :oint tenant with Chandler who would inherit her interest pursuant to the principle of sur2i2orship. =i2en that 1onica sought to assign her legal interest in the property to -oss for no considerationA the question of whether it was assigned in equity in2o,es the principles in 1ilroy 2 Lord ;1#62> . /e = " F I 26. at 27.N ;1#62> .3 E- 11#3 at 11# where it was held that such an assign!ent would be 2alid in equity only if 1onica had done all that was necessary to be done in order to render the assign!ent binding upon her$ see ?..6.7@. 0t should be noted that there has been no legal assign!ent of the property because the transfer docu!ent has not been registered$ see ?..*..@. Dn the basis of the 'igh Court decision in Corin 2 Patton ;1 +> 16 CL- 3.+N 2 4L- 1A or in Gueensland pursuant to s 2++ of the Property Law 4ct 1 7. ;Gld>A the

#.

principles in 1ilroy 2 Lord !ean that 1onica would ha2e assigned her interest in the property to -oss if ;i> she had perfor!ed those acts towards a legal assign!ent of the property which she and she alone could perfor! and ;ii> whether the gift to -oss was beyond recall by 1onica$ see ?..6. @9?..6.12@. 1onica)s actions satisfy the first of these require!ents 'owe2erA 4lly)s refusal to hand o2er the title deed to -oss without Chandler)s consent !eans that the gift to -oss was not beyond 1onica)s recall. 0n Costin 2 Costin ;1 3> <&% Con2 - 339#11 the <ew &outh %ales Court of 4ppeal held that a refusal by a solicitor such as 4lly to hand o2er the title deed !eant that an assign!ent such as 1onica)s would be ineffecti2e in equity $see ?..6.1*@.. Dn the basis of this decision 1onica would not ha2e assigned her interest in the land to -oss with the result that Chandler inherits the property pursuant to the principle of sur2i2orship.

#3

CONFIDENTIAL INFORMATION
T;) '($%*#!%'&
Salt5a$ :$gi$eeri$g Co #t% v Ca5p,ell :$gi$eeri$g Co #t% (19/8) 63 -PC 2+* at 21*$ 0f a defendant is pro2ed to ha2e used confidential infor!ationA directly or indirectly obtained fro! a plaintiffA without the consentA e5press or i!pliedA of the plaintiffA he will be guilty of an infringe!ent of the plaintiff)s rights.

W;#! % <'&=%/)&!%#$ %&='",#!%'&K

SThe !yriad ways obligations of confidenceT The phrase is best 2iewed as a ter! that co2ers infor!ation that is sub:ect to an obligation of confidentiality. %hat sorts of relationships gi2e rise to obligations of confidenceC Confidences arise in three sorts of relationships$ pri2ate confidencesA confidences relating to go2ern!ent secretsA and co!!ercial confidences.

T;) '"%*%& '= !;) #<!%'& ='" (")#<; '= <'&=%/)&<)

Property origins 9 &ra$3li$ v Gi%%i$s )1978+ Q/ R 72 FACTS

"ran,lin was the owner of an orchard and had de2eloped a new type of nectarine called the "ran,lin Early %hite. This nectarine was of better quality than !ost nectarines and had the co!!ercial ad2antage of ripening before other nectarines. =iddins was a neighbour and friend of "ran,lin)s son and was aware of the co!!ercial 2alue of the new nectarine type and was also aware that "ran,lin did not wish to sell the nectarine budwood and allow others to grown the new nectarine. =iddins trespassed onto "ran,lin)s property and stole so!e nectarine budwood. =iddins later began to grow the new nectarine and sold it to the public. ISSUES 'ad =iddins breached an obligation of confidence to "ran,linA and if so was "ran,lin entitled to an order that the budwood be deli2ered by =iddins to "ran,linC FINDING 4n obligation of confidence could be i!posed e2en if the confidential infor!ation was not directly i!parted by the owner of the infor!ation to the person !isusing the infor!ation. The Court ordered that the budwood be deli2ered up to "ran,lin and =iddins be barred by in:unction fro! any further use of the budwood or new nectarines. QUOTE /unn I at page #+ said$

#6

S0 find !yself quite unable to accept that a thief who steals a trade secretA ,nowing it to be a trade secretA with the intention of using it in co!!ercial co!petition with its ownerA to the detri!ent of the latterA and so uses itA is less conscionable than a traitorous ser2ant. The thief is unconscionable because he plans to use and does use his own wrong conduct to better his position in co!petition with the ownerA and also to place hi!self in a better position than that of a person who deals consensually with the owner.T 4t page #1 he said$ S0f it be right to regard the defendants as constructi2e trustees of the producti2e woodA lea2esA flowers and fruit then they are obliged to deal with the! as the plaintiff)s direct. 0f they were directed to do so by the Plaintiff they would be bound to destroy the property.T IMPACT 4n obligation of confidence can be i!posed e2en if the person !isusing the confidential infor!ation did not recei2e it directly fro! the owner of the infor!ation. 1r!eger .ra$sport :;!ip5e$t Pt #t% v Gle$ Ca5ero$ Storage )2008+ FCA

806

FACTS 8rueger Transport Equip!ent Pty Ltd ;8rueger> is a designer and !anufacturer of trailers for the 4ustralian transport industry. The =len Ca!eron =roup ;Ca!erons> are a transport and logistics group in2ol2ed in transporting goods throughout 4ustralia. Eawdrey 4ustralia Pty Ltd ;Eawdrey> is a !anufacturer and retailer of se!iBtrailers and truc, bodies throughout 4ustralia. Eawdrey is a co!petitor of 8rueger. Ca!erons was in2ited to respond to a -equest for Proposal issued by 4!cor for the cartage of 4!cor cargo ;the tender>. Ca!erons sought designs and quotes fro! three partiesA including 8rueger and EawdreyA for the !anufacture of a nu!ber of curtainBsided trailers which it would need if it were to succeed in its proposal to 4!cor. 4fter recei2ing preli!inary quotesA Ca!erons !et separately with Eawdrey ;Ca!erons6Eawdrey !eeting> and 8rueger ;Ca!erons68rueger !eeting> to discussA a!ong other thingsA !ethods by which to restrain the trailer load. Eawdrey and 8rueger produced to Ca!erons 2arious s,etches and quotations both at the initial !eetings and subsequently. Ca!erons) response to the tenderA which was ulti!ately successfulA included drawingsA !ade by 8ruegerA of the 8rueger Concept. /espite thisA Ca!erons ulti!ately awarded the contract for the !anufacture of the trailers to Eawdrey. Eawdrey)s final sub!issionsA !ade to Ca!erons a day after Ca!erons won the tenderA included a load restraint syste! re!ar,ably si!ilar to the 8rueger Concept. 8rueger brought proceedings against Ca!erons for breach of confidential infor!ationA and against Ca!erons and Eawdrey for copyright infringe!ent and contra2ention of the Trade Practices 4ct 1 7. ;Cth>. 8rueger alleged that it had

#7

de2ised the 8rueger Concept as a load restraint syste! for the 4!cor cargo and that after it disclosed the syste! to Ca!erons at the Ca!erons68rueger !eetingA Ca!erons disclosed it to Eawdrey and Eawdrey used it to win the contract with Ca!erons. Iustice =ordon accepted these sub!issions. &he found that (the sequence and te!poral pro5i!ity of e2ents) pro2ided a reasonable basis on which to conclude that there was a disclosure of the confidential infor!ation ;and in particularA the 8rueger Concept> by Ca!erons to Eawdrey. THE DECISION ON 4REACH OF CONFIDENTIALITY 8rueger sub!itted that Ca!erons owed 8rueger an obligation of confidence in relation to the infor!ation on two bases$ firstA on the basis of a contractual obligation arising out of an e5press agree!ent to ,eep certain infor!ation confidential between 8rueger and Ca!eronsN and secondA on the basis of an equitable obligation arising fro! the relationship of the partiesA the nature of the infor!ation in issue and the circu!stances in which 8rueger disclosed it to Ca!erons. EQUITA4LE O4LIGATION OF CONFIDENCE 7oth parties) counsel referred to principles described by Iustice 1egarry in Coco 2 4< Clar, ;Engineers> Ltd ?1 6 @ -PC .1. 4ccording to Iustice 1egarryA three ele!ents are necessary for a successful action for breach of an equitable obligation of confidence$ 68G #t% v Alla$ )2008+ 1 AC 1 The defendants were recei2ers purportedly appointed under a floating charge ;a security interest o2er a fund of changing assets of a co!pany or a li!ited liability partnership ;LLP>A which QfloatsQ or Qho2ersQ until con2ersion into a fi5ed chargeA at which point the charge attaches to specific assets> which is ad!itted to ha2e been in2alid. 4cting in good faithA they too, control of the clai!ant co!panyQs assets and underta,ing. The clai!ant says that this was not only a trespass to its land and a con2ersion of its chattels but also the tort of unlawful interference with its contractual relations. 0t clai!s that the defendants are liable in da!ages for the 2alue of the assets and underta,ingA including the 2alue of the contractual clai!sA as at the date of their appoint!ent. 4lternati2elyA it says the defendants are liable for the sa!e da!ages in con2ersion. 0n /ouglas 2 'elloP Ltd ?2++6@ G7 123 the !agaMine D8P contracted for the e5clusi2e right to publish photographs of a celebrity wedding at which all other photography would be forbidden. The ri2al !agaMine 'elloP published photographs which it ,new to ha2e been surreptitiously ta,en by an unauthorised photographer pretending to be a waiter or guest. D8P says that this was interference by unlawful !eans with its contractual or business relations or a breach of its equitable right to confidentiality in photographic i!ages of the wedding. 0n 1ainstrea! Properties Ltd 2 Koung ?2++3@ 0-L- 6. two e!ployees of a property co!panyA in breach of their contractsA di2erted a de2elop!ent opportunity to a :oint 2enture in which they were interested. The defendantA ,nowing of their duties but wrongly thin,ing that they would not be in breachA facilitated the acquisition by pro2iding finance. The co!pany says that he is liable for the tort of wrongfully inducing breach of contract. ##

IH/=E1E<T Elaborating on the general principle that an agent cannot be sued for interfering with contractual relationships between a principal and another contracting partyA Lord 'off!ann held that in2alidly appointed recei2ers were not liable to the co!pany for wrongful interference with contractual relations. &uch a recei2er acting in good faith e!ploys no unlawful !eans and intends to cause no loss. 0ntangible property cannot be the sub:ect of a clai! for con2ersion. Dn the tort of inducing or procuring breach of contractA there are fi2e require!ents. ;1> there !ust be a contract ;2> the contract !ust be breached ;*> the defendantQs conduct !ust ha2e procured or induced the breach ;.> the defendant !ust ha2e ,nown about the breached ter! or turned a blind eye to itA and ;3> the defendant !ust ha2e actually realised that the conduct procuring the breach would ha2e that result.?1@ Contract origins 9 Deta ?o5i$ees Pt" #t% v Bis4o!$t Plasti4 Pro%!4ts Pt" #t% )1979+ 3R 167 -ecognised that equity will not inter2ene when there is an adequate re!edy at law under contract Seager v Cop"%e= #t% )1967+ 2 A$$ ER 412 that the :udicature syste! entitles a court to award da!ages ;presu!ably in tortA since Lord /enning had eli!inated an (i!plied contractual duty)C> for the breach of an equitable dutyC 'eld$ oThe law on this sub:ect does not depend upon any i!plied contract. 0t depends on the broad principle of equity that he who has recei2ed infor!ation in confidence shall not ta,e ufair ad2antage of it. 'e !ust not !a,e use of it to the pre:udice of hi! who ga2e it without obtaining his consent. oThe Court grants neither an account of profits norA nor an in:unctionA but only da!ages to be assessed by the !aster. /a!ages should be assessed on the basis of reasonable co!pensation for the use of confidential infor!ation which was gi2en to the defendant co!pany. /oes it followA thereforeA that any breach of contract can be restrained by in:unctionN that da!ages at co!!on law will lie against a trusteeC <D 9 see English 2 /ebha! Eale Properties Ltd ?1 7#@ 1 4ll E- *#* at * A where &lade LI doubted that the court had the general power to award da!ages in its e5clusi2e :urisdiction ;egA trustees>. 4lso see 'arris 2 /igital Pulse Pty Ltd ?2++*@ <&%C4 1+. Mi$istr" o9 De9e$4e v Gri99i$ )2008+ EWHC 1242 FACTS The 1inistry of /efence brought an action for alleged breaches of a confidentiality agree!ent and equitable duty of confidence against =A a for!er soldier who had ser2ed in the &pecial "orces ;H8&">. Hpon 2olunteering to :oin the H8&" = had signed a confidentiality agree!ent which pro2idedA a!ongst other thingsA that =

would not disclose any infor!ationA docu!ent or other article relating to the wor, of the H8&" without e5press prior written authority fro! the 1o/. &ince his discharge = had !ade a nu!ber of unauthorised public disclosures and state!ents in respect of !atters which he e5perienced or which ca!e to his ,nowledge through his ser2ice with the H8&". = had failed to see, e5press prior authority for his disclosures. The 1o/ sought a per!anent in:unction restaining any further breaches in addition to da!ages and6or an account of profits. ISSUE %hether = was per!itted to e5ercise his own :udg!ent in deciding what infor!ation was co2ered by his duty of confidenceA whether contractual or otherwiseA or in deter!ining whether there was a public interest o2erriding his obligation which would per!it hi! to !a,e disclosures. HELD The i!portant consideration was that the in:unction sought would only require = to go through the clearance procedure prescribed by the contract and would not in effect be a blan,et ban on =Qs right to publish infor!ation. Hnder the contractual ter!sA the !inistry had a right to !a,e :udg!ents as to any proposed disclosure. This was qualified by a safeguardA where appropriateA by =)s ability to !a,e an application for :udicial re2iew of any such decision. 0n essence the court was being as,ed to do no !ore than enforce the ter!s of a contract which had been held by pre2ious authority to be enforceable. =Qs plain contractual obligation was to !a,e an application for prior authority first and thenA if necessaryA consider the possibility of an application by way of :udicial re2iew. The court was bound to continue the e5isting in:unction against = until trial or further order. COMMENT The ter!s of the contract at issue had already been held to be enforceable in - 2 4ttorney =eneral of England and %ales ?2++*@ H8PC 22N ?2++*@ E1L- 2..

T;) '"%*%& '= !;) #<!%'& ='" (")#<; '= <'&=%/)&<)

T'"! '"%*%& 9 econo!ic torts or fusion fallacyC Ca5p,ell v Mirror Gro!p ?ewspapers #t% )200/+ 2 AC 427 FACTS %ellB,nown !odel <ao!i Ca!pbell was photographed lea2ing a rehabilitation clinicA following public denials that she was a reco2ering drug addict. The photographs were published in a publication run by 1=<. Ca!pbell sought da!ages under the English law through her lawyers &chillings who engaged -ichard &pear!an GC to bring a clai! for breach of confidence engaging s. # of the 'u!an -ights 4ctA which required the court to operate co!patibly with the European Con2ention on 'u!an -ights. The desired result was a ruling that the English tort action for breach of confidenceA sub:ect to the EC'- pro2isions upholding the right to pri2ate and fa!ily lifeA would require the court to recogniMe the pri2ate nature of the infor!ationA and hold that there was a breach of her pri2acy.

-ather than challenge the disclosure of the fact she was a drug addict B whichA gi2en her pre2ious denialsA !ay be considered !erely a rectification of a lieA she challenged the disclosure of infor!ation about the location of her <arcotics 1eetings. The photographsA she arguedA for!ed part of this infor!ation. 7UDGMENT F%" ! %& !#&<) 1=< was found liable. 1=< appealed. C'u"! '= A--)#$ 1=< was not liableN the photographs could be published sinceA apparentlyA they were peripheral to the published story and ser2ed only to show her in a better light. 0t was within :ournalistsQ !argin of appreciation to decide whether such UperipheralU infor!ation should be included. Ca!pbell appealed on the basisA inter aliaA that the afore!entioned breach of confidenceA sub:ect to hu!an rights principles of pri2acyA had occurred. HOUSE OF LORDS 'eldA *$2 ;Lords <icholls and 'off!an dissenting>A that 1=< was liable. Lord 'off!an and Lord <icholls dissented on the ground that as the 1irror was allowed to publish the fact that she was a drug addict and that she was recei2ing treat!ent for her addiction that printing the pictures of her lea2ing her <4 !eeting was within the !argin of appreciation of the editors as they were allowed to state that she was an addict and recei2ing treat!ent for her addictionA while the !a:ority ;'aleA 'opeA Carswell> belie2ed that the picture added so!ething of Qreal significanceQ. C'&=%/)&<) Lord <icholls in particular obser2ed that UconfidenceU was an artificial ter! for what could !ore naturally be ter!ed Upri2acyU. 'e fa!ously coined the ter! Q!isuse of pri2ate infor!ationQ. The result of which is nu!erous cases following Ca!bell such as 1c,ennit 2 4shA 1osley 2 1=< A 1urray 2 E5press newspapersA ha2e also had a clai! for !isuse of pri2ate infor!ation. This artificiality was a product of English lawQs lac, of a concept of pri2acy per se. 4ppro2ing 4 2 7 plc?1@A Lord 'ope of Craighead noted that a duty of confidence arises where2er the defendant ,nowsA or ought to ,nowA that the clai!ant can reasonably e5pect their pri2acy to be protected. %here there is doubtA the test of what is Uhighly offensi2e to a reasonable personU?2@ in the plaintiffQs position?*@ can be used for guidance. P"%+#<. The court engaged in a balancing test. "irstly deter!ining whether the applicant had a reasonable e5pectation of pri2acy ;thus deter!ining whether 4rt.# EC'- was in2ol2ed>A it then as,ed if the clai!ant was successful would this result in a significant inference with freedo! of e5pression ;balancing 4rt. # with 4rt. 1+>. Their Lordships did not gi2e the !atter as thorough a treat!ent as subsequent

casesN it was held that Ca!pbellQs right to pri2acy ;'-4A &ch 1A Part 0A 4rt #> outweighed 1=<Qs right to freedo! of e5pression ;'-4 4rt 1+>. THREE STEP TEST The !a:ority elucidated upon this balancing of Con2ention rightsA and Qadded flesh to the bonesQ ;'ale at ?112@> of pri2acy law by declaring a set of tests which would consider whether a clai!ant can rely upon the tort of !isuse of pri2ate infor!ation. "irstA the clai!ant !ust successfully show the infor!ation to be pri2ateA to the le2el of a Qreasonable e5pectation of pri2acyQ ;per Lady 'ale>. 0n an obiter argu!entA following the :urisprudence of the European Court of 'u!an -ights in Ta!!er 2. EstoniaA Lord 'off!an stated that ro!antic or se5ual relationships of the rich and fa!ous should not be co2ered by the Qcloa, of pri2acyQ ;at ?7.@> due to their co!!onplace in e2eryday life. /espite a se5ual relationship ha2ing a Qpri2ateQ connotationA a celebrity !ust reasonably e5pect their lo2eBli2es to be ,nown :ust as well as the parts of their pri2ate life they wish to share with the press. 0t is only in certain circu!stancesA such as a ho!ose5ual relationshipA where such an e5pectation will seldo! be QreasonableQ. &econdlyA in balancing the 4rticle # right with the 4rticle 1+ rightA as per Lord &teyn in -e$ &A courts !ust pay heed to &ection 12;.> 'u!an -ights 4ct. This grants the 4rticle 1+ right of e5pression far higher than the 4rticle # right of pri2acy ;the only case in Europe which runs contrary to this presu!ption is Eon 'anno2er 2 =er!anyA which can be distinguished due to the pri2ateA yet still celebrity status en:oyed by the clai!ant>. 4s a result of this presu!ptionA the &trasbourg courtB and by definition therefore the H8 &upre!e Court ;as it now is> will be gi2en a particularly broad !argin of appreciation in ter!s of what constitutes a Qpublic interestQ. Therefore it is li,elyA under s.12;.>'-4A the English courts will !ore often than not find in fa2our of 4rticle 1+A and refuse the in:unction or da!ages. The final test stated by the Court was in regard to when an in:unctionA rather than da!agesA should be issued. Hnder s.12;*>'-4A the court !ust be satisfied that the applicant is Qli,ely to establishQ that publication should not be allowed. QLi,ely to establishQ was pre2iously confir!ed in - 2 Crea! 'oldings to !ean Q!ore li,ely than notQA and this was confir!ed in the present case. Mosle" v ?ews Gro!p ?ewspapers #t% )2008+ EWHC 177 FACTS 1A the President of the "ederation 0nternationale de l)4uto!obileA the go2erning body of !otor sport worldwideA was fil!ed engaging in sadoB!asochistic acti2ities with fi2e do!inatrices in a pri2ate flat. 4n edited 2ersion of the footage was !ade a2ailable on <=<Qs website in connection with a <ews of the %orld article entitled Q"1 boss has sic, <aMi orgy with 3 hoo,ersQ. 1 accepted that the e2ents shown occurred but clai!ed that their disclosure infringed his right to pri2acy. 'e also denied any <aMi ele!ent. 4n interi! in:unction was denied on the basis that the footage was by that stage widely accessible. 1 brought proceedings for in2asion of pri2acy. ISSUE

;1> %hether the se5ual acti2ity had or was intended to ha2e a <aMi the!eA the basis upon which <=< sought to rely that it was in the public interest to disclose that a publiclyBelected "04 official engaged in such conductN ;2>The a2ailability of e5e!plary da!ages in a pri2acy clai! HELD "inding for 1 and awarding hi! [6+A+++$ ;1>There was no e2idence that the se5ual role play was intended to be an enact!ent of <aMi beha2iour or adoption of any of its attitudesA nor was it in fact. Though the se5ual acti2ities were uncon2entional there was no public interest or other :ustification for the clandestine recordingA for the publication of the footage and i!ages or for the placing of the 2ideo e5tracts on the <DT% website. ;2> There was no authority to support e5tending the application of e5e!plary da!ages into this field or to include an additional ele!ent specifically directed towards deterrence. "urtherA the clai! for e5e!plary da!ages would fail both the tests of necessity and proportionality and on the facts. COMMENT 0t re!ains to be seen whether the record figure of da!ages for in2asion of pri2acy awarded in this case will !a,e newspapers and !agaMines ta,e the threat of pri2acy actions !ore seriously in future. 'u!an rightsC Hn:ust enrich!entC E>u%!#($) '"%*%& %& <'& <%)&<) Li,e !ost heads of e5clusi2e equitable :urisdictionA its rational basis does not lie in proprietary right. 0t lies in the notion of an obligation of conscience arising fro! the circu!stances in or through which the infor!ation was co!!unicated or obtained. Moorgate .o,a44o Co #t% v Philip Morris #t% (?o 2) (198/) 136 CL- .1. at .*79# per /eane I

T;) ,'/)"& /'<!"%&) '= (")#<; '= <'&=%/)&<)

Co4o v A ? Clar3 (:$gi$eers) #t% 1egarry I $

0n !y :udg!entA three ele!ents are nor!ally required ifA apart fro! contractA a case of breach of confidence is to succeed. "irstA the infor!ation itselfA in the words of Lord =reene 1- in the &alt!an case on page 213A !ust (ha2e the necessary quality of confidence about it.) &econdlyA that infor!ation !ust ha2e been i!parted in circu!stances i!porting an obligation of confidence. ThirdlyA there !ust be an unauthorised use of that infor!ation to the detri!ent of the party co!!unicating it.

I&='",#!%'& !;#! ;# # @<'&=%/)&!%#$ >u#$%!.A

S)<")<. #&/ !;) -u($%< /',#%& #!4as9il5 #t% v Ai$sworth )2008+ E%'C 1#7#

Lucasfil!sA the H& clai!antA sued a 7ritish !odel!a,er who had produced so!e of the hel!ets and ar!our used by 0!perial Troopers and -ebel "orces in the first &tar %ars fil!A for his sales of replica ite!s and toys in the H8 and the H&. They already had a default :udg!ent against hi! in the H&N he had contested :urisdiction there. 'e counterclai!ed on the basis that he had been the designer of so!e of the hel!ets which had been !erchandised by the fil! co!pany the!sel2es. The Court concluded that there was now no copyright protection for the ite!s concerned in the H8. The effect of &ection 31 of the CopyrightA /esigns and Patents 4ct 1 ## was to re!o2e protection for designs of all products that are not the!sel2es artistic wor,s ;i.e. wor,s of sculptureA wor,s of Sartistic crafts!anshipT or engra2ings>. 0n this caseA although the hel!ets were 2isually appealing rather than functionalA and crafts!en had been in2ol2ed in !a,ing the!A they were not wor,s of Sartistic crafts!anshipT ;in fact we are unaware of any case in which so!ething has been so described by the H8 Court> as they had no Sarts and craftsT feel to the!. "urtherA although the hel!ets and ar!our were produced fro! original sculptures they were not wor,s of sculpture in the statutory sense as they were not intended as wor,s of art. &ection 31 therefore e5tinguished any H8 copyright clai! on either side. 4lthough it was not necessaryA the :udge went on to consider whether any copyright that !ight ha2e e5isted had ceased to be enforceable under &ection 32. This li!its the ter! of enforce!ent to 23 years where a copyright wor, is industrially !ultiplied ;i.e. !ore than 3+ are !adeA and so!e are sold 9 anywhere in the worldA according to the :udge>. The transitional pro2ision applies a shorter ter! of 13 years where the wor, was e5ploited before the 1 ## 4ct ca!e into force ;in 4ugust 1 # >A as the e2idence showed in this caseA so the copyright ceased to be enforceable in 2++.. <ot all articles count$ the ter! li!itation does not bite where the e5ploitation is !erely for wor,s of a pri!arily literary or artistic nature. This includes wor,s of sculpture. The clai!ants argued that the hel!ets and ar!our were sculptures and hence e5cusedN the :udge once !ore disagreed. ThusA any copyright that !ight ha2e sur2i2ed could not be enforced by 2irtue of &ection 32. 4s to 4insworth)s counterclai!A the :udge found that he was indeed the author of one hel!et designA but that under the circu!stances there was an i!plied assign!ent of copyright to the clai!ants. "inallyA the :udge considered the H& copyright clai!. 0n the pastA H8 courts ha2e been reluctant to entertain infringe!ent actions for foreign 0PA and this will no doubt re!ain so for registered rights. 'owe2erA the :udge held that he could consider the H& copyright clai! and it would be appropriate and e5pedient to do so here since the factual issues had already been deter!ined and he had e5pert e2idence as to the lawA and although the ad2ocates were illBplaced to argue the case in detailA he found infringe!ent. Part of his reasoning was based on the unusual circu!stance that the defendant had pre2iously disputed the :urisdiction of the H& CourtsA lea2ing hi! illBplaced to ob:ect to resolution by the H8 CourtsA so one should not e5pect a rush to hear H& copyright clai!s hereA but the door has clearly been inched open to a wider choice of foru!. &oA honours were e2en at first instanceN the appeal court !ay ta,e a different 2iew.

#e$$o$ v ?ews Gro!p ?ewspapers #t% )1978+ "&- 37*A Iohn Lennon failed to pre2ent his for!er wife fro! publishing secrets of their !arried lifeA on the basis that he had hi!self published infor!ation on the topic. Transitory publication B a Chinese pop star was successful in restraining the publication of an e!barrassing 2ideo tape on the 0nternetA e2en after a 2erbal account of the contents had been published in a 'ong 8ong newspaper 1wo3 v .ha$g )1999+ <&%&C 1+*. G v Da" )1982+ 1 <&%L- 2. . Protection of confidentiality applies to personal infor!ation and infor!ation of a pri2ate natureA e2en though the disclosure of this type of confidential infor!ation !ay not lead to pecuniary loss. A!stralia$ &oot,all #eag!e v Age Co5pa$" #t% (2007) 13 E- .+3 P)" '&#$ %&='",#!%'& Pri$4e Al,ert v Stra$ge The /efendant sought to publish a catalogue of a collection of etchings by Gueen Eictoria and Prince 4lbert. 'eld that the publication could be restrained either on the plaintiffQs right of property in his unpublished wor, ;copyright> or breach of trustA confidence or contractA where the i!position of liability can e2en be upon a third party who did not ha2e the engra2ings entrusted to the!. 4lso held that$ where the pri2acy is the right in2adedA the postponing of the in:unction would be equi2alent to denying it altogether. The interposition of this Court in these cases does not depend on any legal rightN and to be effectual it !ust be i!!ediate. The equitable :urisdiction in respect of unpublished wor,s was abolished with the Copyright 4ct 1 11 ;H8>. 4ccording to the se!inal article of &/ %arren and L 7randeis ;UThe -ight to Pri2acyU ;1# +> . 'ar2 L -e2 1 3>A the case ta,en as the foundation of a general right to pri2acy in the H& is 4bernethy 2 'utchison ;1#23> .7 E- 1*1* ;-- .#1>. 0n this case the plaintiff surgeon deli2ered lectures. The /efendant sought to publish notesA presu!ably fro! a student. The court held thatA as a third partyA the Plaintiff could not rely on an i!plied contract not to publishA but relief could still be granted. M#"%!#$ #&/ /)=#<!' ")$#!%'& Giller v Pro4opets 1s =iller li2ed in a de facto relationship with 1r Procopets for about three yearsA in a ho!e which he owned. The couple had twin sons. 1s =iller had a daughter fro! a pre2ious !arriage. The :udge at trial found that 1r Procopets assaulted 1s =iller fi2e ti!esA on one occasion in front of her daughter. &he did not see, !edical treat!entA but beca!e distressed and fearful as a result of the assaults. 4fter the couple separated their se5ual relationship continued. 1r Procopets fil!ed their se5ual acti2ities on a hidden 2ideo ca!era. "or a ti!e 1s =iller was unaware of thisA but she had se5 with hi! on so!e occasions after she disco2ered he was fil!ing the!. 4s their relationship deterioratedA 1r Procopets began threatening to show the 2ideos to 1s =iller)s fa!ily and

friends. 'e too, a 2ideo to her parents) house and left it with her brotherA though her fa!ily refused to loo, at it. 'e showed 1s =iller)s !other photographs of 1s =iller which in2ol2ed so!e se5ual acti2ity and nudity. 'e tried to show the 2ideo to a couple who were 1s =iller)s friends and showed it to the elderly !other of another friendA ta,ing a EC- with hi! in order to do so. 'e phoned 1s =iller)s e!ployer and said that he had a 2ideo of her engaging in se5ual acti2ityA in circu!stances where ;he said> it was unethical for her to do so. 0n 1 A 1s =iller began proceedings in the &upre!e Court see,ing an ad:ust!ent of their property interestsN and da!ages for breach of confidenceA intentional infliction of !ental har! and6or in2asion of pri2acy arising out of 1r Procopets) conduct in showing or threatening to show the 2ideo of 1s =iller. &he also sought da!ages for assault. 4")#<; '= <'&=%/)&<) The Court of 4ppeal held that 1s =iller was entitled to co!pensation for the !ental distress and e!barrass!ent caused by the publication of the 2ideotapes. The Court followed English decisions awarding da!ages for !ental distress resulting fro! a breach of confidenceA including cases in which$ \ <ao!i Ca!pbell was awarded da!ages for !ental distress suffered as a result of a newspaper report showing that she had attended <arcotics 4nony!ousN and \ 1ichael /ouglas and Catherine Leta Iones recei2ed da!ages for unauthorised publication of their wedding photos. The Court ;by !a:ority> awarded 1s =iller da!ages of V.+A+++ for breach of confidenceA including V1+A+++ as co!pensation for her hu!iliation and distress. The Court ;also by !a:ority> dis!issed 1s =iller)s separate clai! for the intentional infliction of !ental har! by 1r Procopets. 7ecause the award of da!ages in this case was based on breach of the confidential relationship between se5ual partnersA the Court did not ha2e to decide whether 4ustralian law recognises a standBalone right to reco2er da!ages for breach of pri2acy. S)Cu#$ -")=)")&<) #&/ #<!%+%!. Stephe$s v Aver" The plaintiff told the first defendant certain infor!ation relating to her se5ual relationship of a lesbian nature with one T ;who was later !urdered by the first defendant>. &o!e ti!e later an article appeared in a &unday newspaper which ga2e details of the relationship. The plaintiff issued a writ and state!ent of clai! in which she alleged that the infor!ation had been i!parted in confidence and that in breach of confidence the first defendant had i!parted the infor!ation to the second and third defendantsA the editor and proprietor of the newspaper. 0t was further alleged that the second and third defendants had ,nowingly published the infor!ation in breach of confidence. The defendants sought to ha2e the writ and state!ent of clai! struc, out as disclosing no reasonable cause of action or as being scandalousA fri2olous or 2e5atious. The !aster refused the application. The plaintiff appealed. &ir <icolas 7rowneB%il,inson EBC said that the defendants had argued that the infor!ation was :ust gossip or tittleBtattle and not entitled to the protection of the law. They further argued that se5ual conduct whether heterose5ual or ho!ose5ual lac,ed the necessary quality of confidentiality because both se5ual partners ,new what had occurred andA accordinglyA that infor!ation could not be confidential to

either of the!. Those argu!ents were not well founded. <othing either in principle or authority supported the 2iew that se5ual conduct could not be the sub:ect of a duty of confidence. EquityQs inter2ention was based on the principle that it was unconscionable for a person to who! infor!ation was con2eyed in confidenceA later to re2eal that infor!ation to others. 0nfor!ation which was gi2en in confidence re!ained confidentialA notwithstanding that another person or group of persons ,new the facts. The duty of confidenceA hereA would therefore be enforced. 4ppeal dis!issed. ;%L-> .hea3sto$ v Mirror Gro!p ?ewspapers #t% )2002+ EWHC 167

4 'igh Court :udg!ent in which 7ritish tele2ision presenter Ia!ie Thea,ston atte!pted to in:unct the &unday People fro! publishing a story about how he 2isited a brothel in 1ayfairA London.?2@ Thea,ston argued that the publication of the story breached his right to pri2acy under 4rticle # of the European Con2ention of 'u!an -ightsA that the acti2ities had ta,en place in pri2ate and therefore should be treated as confidencial and that there was no public interest in publication. The &unday people argued that the publication of the story was in the public interest gi2en the concern of the 7ritish 7roadcasting Corporation to ensure that presenters of progra!!es ai!ed at younger people conduct the!sel2es appropriately in public. The court were s,eptical of Thea,stonQs assertion that he only realised that he was in a brothel when other prostitutes entered the roo!. 'eld that 2isiting prostitutes was Sa fleeting transaction for !oneyT and distinguished fro! !arital relationships in which confidentiality could be e5pected. The fact of the 2isit was therefore not confidential but a photograph of the 2isit was.
Mosle" v ?ews Gro!p ?ewspapers A v 8 pl4 )200*+ 08 19FACTS The Clai!antA a !arried Pre!iership footballerA sought an in:unction to pre2ent the first /efendant newspaper fro! disclosing or publishing infor!ation concerning se5ual relationships that he had had with the second /efendant and another wo!an and to restrain any disclosure by those wo!en to anyone with a 2iew to such infor!ation being published in the !edia. Dn the Clai!antQs applicationA an interi! in:unction was granted. The :udge refused the newspaperQs subsequent application to set aside the in:unction on the !eritsA holding that the law of confidentiality should afford the sa!e protection to se5ual relationships outside !arriage as to se5ual relationships within !arriage and thatA since there was no public interest in the publication of the details relating to the clai!antQs relationshipsA the clai!ant was li,ely to succeed at trial in restraining publication of the infor!ation. The /efendantsQ appealed. ISSUE 7

%hether the Clai!ant should be granted an interi! in:unction to pre2ent disclosure of the infor!ation HELD %here a court was considering whether to grant relief that !ight interfere with the freedo! of the pressA as protected by 4rticle 1+ of the EC'-A that interference had to be :ustifiedA e2en where there was no public interest in the !aterial in question being published. The /efendantsQ appeal was allowed. %here one party to a relationship wished to disclose infor!ation about that relationshipA that affected the 4rticle # right to confidentiality of the other party to the relationship. %hile recognising the special status of !arriageA courts had to recognise and gi2e appropriate weight to the e5tensi2e range of relationships which now e5istedA the !ore stable the relationship the greater the significance to be attached to it. There was a significant difference between the confidentiality which attached to what was intended to be a per!anent relationship and that which attached to the category of relationships which the Clai!ant was in2ol2ed withA so!e friendly and others professional. Co!!ent The Court of 4ppeal sets out guidelines for pri2acy or confidentiality in:unctions. 'owe2er its reasoning in this case is not altogether satisfactory. Lord %oolfQs Urole !odelU :ustification for intrusion into pri2acy is not con2incing and has been quic,ly e5plained and distinguished B see para. .+ F .1 of Lord Phillips 1- in Ca!pbell 2 1=< ?2++2@ E%C4 Ci2 1*7*N ?2++*@ G7 63#N ?2++*@ 2 %L- #+N ?2++*@ E1L- 2. 8row$ v Asso4iate% ?ewspapers #t% )2008+ 08 10* FACTS? Two poofs and their pillowtal,. / wanted to publish details of shady business practices which they had learned fro! P)s aggrie2ed lo2er. 'eld that not all infor!ation gleaned during a tryste was confidential as there was no reasonable e5pectation of confidentiality. 4ppeal against the decisision of Eady I refusing to continue to restrain the /efendant fro! publishing certain categories of infor!ation concerning the Clai!antQs pri2ate and business life. "ollowing the end of their relationship C)s for!er partner ;IC> had pro2ided infor!ation to /. Eady I had held that C was entitled to a in:unction in respect of pri2ate infor!ation disclosed to IC in confidence in the course of their relationship but not otherwise. The in:unction would be lifted in respect of infor!ation about C)s alleged !isuse of co!pany resourcesA breach of confidentiality in re2ealing corporate infor!ation and docu!ents to IC and the bare fact of C)s relationship with IC 4dditionally it e!erged that C had lied to his ad2isors and the Court in respect of the circu!stances in which he !et ICA details of which were not sub:ect to the in:unction and were included in the IudgeQs public :udg!ent. ISSUE ;1> %as the :udge correct to allow publication of the infor!ationC

;2> &hould publication of the circu!stances in which the Clai!ant and IC had !et be restrainedC ;*> %as the :udge wrong to include details of the circu!stances in which the Clai!ant and IC had !et in his public :udg!entC HELD /is!issing the appeal in relation to ;1> and ;2>A but allowing the appeal in relation to ;*>$ ;1> The correct approach was balancing the 4rt # rights against the 4rt 1+ rights could the applicant de!onstrate that he was li,ely to succeed at trial within the !eaning of s.12;*> '-4 1 #. The !ere fact that the infor!ation was i!parted in the course of a relationship of confidence did not gi2e rise to an e5pectation of pri2acyA but was a 2ery i!portant consideration. The burden is on a Clai!ant to establish that he defeat any public interest defence at trial. ;2> The :udge had not carried out the balancing process in relation to this infor!ationA but the Court of 4ppeal decided that publication should be allowed. ;*> The Iudge erred in refusing to e5cise these details fro! his :udg!ent. 4pplying Crea! 'oldingsA at an interi! stage e2en if the Court refuses an in:unctionA it should not itself preBe!pt publication by the newspaper by publishing the pri2ate details itself. COMMENT The Crea! 'oldings point ;see ]26 in Lord <ichollsQ Iudg!ent> is i!portant. E2en where a Court refuses an interi! in:unction in a pri2acy caseA it should not include details in any public :udg!ent which would ha2e the effect of destroying the pri2acy. To do so ris,s depri2ing the Clai!ant of any !eaningful re!edy against the /efendant if ulti!ately it decides to publish. 4lso of note is the CourtQs acceptance that pri2acy in:unctions !ust specify clearly the infor!ation that cannot be published. D%#"%) Pri$4e o9 (ales v Asso4iate% ?ewspapers ?2++6@ PD% pre2ented his diary being published despite hi! regularly releasing e5tracts to a select group of .3 to 73 people. Partial publication did not !ean no confidentiality M41e$$itt v Ash )2008+ G7 7* FACTS 4 had written a boo, about her for!er friend and e!ployerA 1A a Canadian fol, singer. Prior to widespread publication 1 successfully obtained an in:unction pre2enting publication of so!e of the infor!ation contained in the boo, on the ground that 4 had acted in breach of confidence. 4 appealed. ISSUE ;1> %hether the infor!ation was confidentialN

;2> %hether 4Qs right to tell her own story outweighed 1Qs 4rt # rightN ;*> %hether the infor!ation was already in the public do!ainN ;.> %hetherA if infor!ation is falseA a clai!ant can bring a clai! for breach of confidence. HELD /is!issing the appeal$ ;1> The infor!ation was to be protected as confidentialA since ;a> it was sufficiently pri2ate to engage 4rt. #N and ;b> in the circu!stances 4Qs right of freedo! of e5pression under 4rt. 1+ had to yield to the 4rt. # rights of 1N ;2> 4 did not ha2e the right she clai!ed to tell her own story. The story was shared only in the sense that 1 had ad!itted 4 to her confidence. 4 had no story of her own to tell. 4 2 7 was not a binding authority on the balance to be struc, between 4rts. # F 1+A which was best illu!inated by 2on 'anno2erN ;*> The infor!ation was not already in the public do!ainN ;.> %here pri2ate infor!ation engaged 4rt. #A the question was whether the infor!ation was pri2ateA not whether it was true or false. COMMENT This widely anticipated :udg!ent deli2ers a potential body blow to ,iss and tell stories with 4 2 7 being sidelined in fa2our of &trasbourg :urisprudence. The weight gi2en to 2on 'anno2er seriously under!ines the !edia argu!ent that its effect is li!ited to cases of press harass!ent. 7oth 7u5ton and Long!ore LI e5pressly stated that a defendant cannot depri2e a clai!ant of 4rt # protection by showing the !aterial is untrue. M)/%<#$ ;% !'". L v H )1988+ 2 A$$ ER 648 The public in general and patients in particular are entitled to e5pect hospital records to be confidential and it is not for any indi2idual to ta,e it upon hi!self to breach that confidence whether or not induced by a :ournalist. Ca5p,ell v MG? #t% )200/+ UEHL 22. F N#',% C#,-()$$ S)) #('+) W%!&) ) #&/ %&='",#&! Be$a,les v ?ews Gro!p ?ewspapers #t% )2001+ 1 A$$ ER 908 FACTS The Clai!antsA the con2icted !urderers of Ia!es 7ulgerA applied for indefinite in:uncti2e relief to restrain publication of their new identities and their whereabouts. ISSUE %hether the court had :urisdiction to protect an adultQs identity in circu!stances where there was a serious ris, to physical safety. 0t was argued that the court

1++

should e5ercise its equitable :urisdiction to !a,e the orders sought by the Clai!ants. HELD ;1> The Clai!ants were uniquely notorious and at ris, of serious physical har!. They would continue to be at ris, in future. ;2> The Clai!ants rights under 4rt 2 of the Con2ention de!anded protection which could be pro2ided by e5tension of the law of confidence. ;*> 4n in:unction contra !undu! was granted restraining publication of the Clai!antsQ identities and their whereabouts. COMMENT /espite being said to be an e5ceptional case :ustifying an e5ceptional orderA the Courts ha2e gone on to !a,e two further ordersA in fa2our of 1ary 7ell and 1a5ine Carr. 4re they really so e5ceptionalA or are they going to be granted to anyone who can clai! that his6her notoriety or infa!y is li,ely to lead to so!eone !a,ing death threats against hi!6herC Rogers v .B?@ )2007+ NZ&) *+ <L&C allowed publication of a 2ideo of an accused person ad!itting to !urders e2en though he was later acquitted. 'eld that there could be no e5pectation of confidence if P was being inter2iewed by the police and ,nowingly 2ideotaped. Cu$!u"#$ #&/ ")$%*%'u %&='",#!%'& &oster v Mo!$t9or% A Rig," #t% (1977) 14 ALR 71 /r 1ountford wrote <o!ads of the 4ustralian /esert after spending ti!e in 1 .+ with 4boriginal co!!unities in the Pit:ant:ara area and being told 2arious QsecretsQ. The re2elation of these secrets to the tribeQs wo!enA children and uninitiated !en !ay under!ine Uthe social and religious stability of their hardBpressed co!!unity.U 'eld thatA e2en though the specific indi2iduals who had di2ulged the secrets could no longer be identifiedA the council representing the Pit:ant:ara people and in their indi2idual capacity had standing. "or old cases that ha2e recognised the right of successor in title to enforce confidence in relation to secret recipes and processes see 1orison 2 1oat ;1#31> 6# E- . 2A and =reen 2 "olgha!;1#2*> 37 E- 13 . Ch!r4h o9 S4ie$tolog" o9 Cali9or$ia v 1a!95a$ )197*+ )197*+ RPC 662 Cf "oster. Court will allow publication of confidential society)s practices if it dee!s the! to be har!ful to the public.

)o$$ercial in,or$ation

Trade secrets or ,nowBhowC Court will protect trade secrets but not things that are too ob2iousA general or widely ,nown. 4lsoA a global clai! without specifics will also fail. To deter!ineA courts loo, at$ A$sell R!,,er Co Pt" #t% v Allie% R!,,er <$%!stries Pt" #t% ;1> the e5tent to which the infor!ation is ,nown outside of his businessN

1+1

;2> the e5tent to which it is ,nown by e!ployees and others in2ol2ed in his businessN ;*> the e5tent of !easures ta,en by hi! to guard the secrecy of the infor!ationN ;.> the 2alue of the infor!ation to hi! and to his co!petitorsN ;3> the a!ount of effort or !oney e5pended by hi! in de2eloping the infor!ationN ;6> the ease or difficulty with which the infor!ation could be properly acquired or duplicated by others. 'eld that designs for !achinery were trade secrets.

&o$e tra%e secrets

Clothi$g Peter Pa$ v Corsets Sillho!ettes )196*+ 9il5 4ost!5es #!4as9il5 v Ai$sworth Che5i4al 9or5!lae (esto$ v 'e55o$s (1876) Res!lts o9 e=peri5e$ts S5ith 1li$e v Se4retar"M D6CS Re4ipes Crow%er v 'ilto$ <%eas 9or .B shows %elelope% to the poi$t o9 e99i4a4" &raser v .ha5es .B )198/+ 8!t $ot a ,are i%ea that is o,vio!s De Ma!%sle" v Pal!5,o )1996+ ;idea for a nightclub> &a44e$%a Chi43e$ #t% v &owler 1.tri2ial infor!ationA which is publicly a2ailable or so ob2ious that it cannot be protectedN 2.infor!ation that !ust be treated confidentially until the ter!ination of e!ploy!entA whereupon it beco!es part of the e5Be!ployee)s collecti2e s,illA ,nowledge and abilityN or *.highly confidential trade secretsA which will be protected by the courts e2en after the ter!ination of e!ploy!ent. Dnly the third will be treated as confidential. This was re:ected in (right v Gaswel% where court held that second should also be considered confidential. "urther guidance in$ Del Casale v Arte%o5!s (A!st) Pt" #i5ite% )2007+ <&%C4 172 1. The e5tent to which the infor!ation is ,nown outside the business. 2. The e5tent to which the trade secret was ,nown by e!ployees and others in2ol2ed in the plaintiff)s business. *. The e5tent of !easures ta,en to guard the secrecy of the infor!ation. .. The 2alue of the infor!ation to the plaintiffs and their co!petitors. 3. The a!ount of effort or !oney e5pended by the plaintiffs in de2eloping the infor!ation. 1+2

6. The ease or difficulty with which the infor!ation could be properly acquired or duplicated by others. 7. %hether it was plainly !ade ,nown to the e!ployee that the !aterial was by the e!ployer as confidential. #. The fact that the usages and practices of the industry support the assertions of confidentiality. . The fact that the e!ployee has been per!itted to share the infor!ation only by reason of his or her seniority or high responsibility. 1+. That the owner belie2es these things to be true and that belief is reasonable. 11. The greater the e5tent to which the SconfidentialT !aterial is habitually handled by an e!ployeeA the greater the obligation of the confidentiality i!posed. 12. That the infor!ation can be readily identified. 'odgson I4 ?%@here the confidential infor!ation is so!ething that is ascertainable by enquiry or e5peri!entA albeit perhaps substantial enquiry or e5peri!entA and the ,nowBhow which the e5Be!ployee is clearly entitled to use e5tends to ,nowledge of the question which the confidential infor!ation answersA it beco!es artificial to treat the confidential infor!ation as se2erable and distinguishable fro! that ,nowBhowN and in that ,ind of caseA courts ha2e tended not to grant relief.

)lient #ists

E5 e!ployees who approach P)s custo!ers will be held to ha2e breached confidential infor!ation$ 4007 2 7eard ?2++ @ EJCEPT where custo!er lists are public and widely ,nown$ <P =enerations 2 "enley ;2++1>. 0n these caseA the client infor!ation is considered tri2ial and not to be protected. <ote that e2en tri2ial infor!ation is sub:ect to a proper restraint of trade clause$ 7luescope &teel 2 8elly ;2++7>. <ote also that deliberate !e!orisation is not allowed but ordinary !e!ory is$ %eldon and Co 2 'arbison ?2+++@ <&%&C Del Casale v Arte%o5!s )2007+ P had disco2ered a source of rare and soughtBafter stone. %hen / left the co!panyA they agreed they would ,eep secret infor!ation confidential for * years. / then established a co!petitor and i!ported the rare stone. Cof4 held not confidential and ga2e the following helpful list of issues$ 1. The e5tent to which the infor!ation is ,nown outside the business. 2. The e5tent to which the trade secret was ,nown by e!ployees and others in2ol2ed in the plaintiff)s business. *. The e5tent of !easures ta,en to guard the secrecy of the infor!ation. .. The 2alue of the infor!ation to the plaintiffs and their co!petitors.

1+*

3. The a!ount of effort or !oney e5pended by the plaintiffs in de2eloping the infor!ation. 6. The ease or difficulty with which the infor!ation could be properly acquired or duplicated by others. 7. %hether it was plainly !ade ,nown to the e!ployee that the !aterial was ?held@ by the e!ployer as confidential. #. The fact that the usages and practices of the industry support the assertions of confidentiality. . The fact that the e!ployee has been per!itted to share the infor!ation only by reason of his or her seniority or high responsibility. 1+. That the owner belie2es these things to be true and that belief is reasonable. 11. The greater the e5tent to which the (confidential) !aterial is habitually handled by an e!ployeeA the greater the obligation of the confidentiality i!posed. 12. That the infor!ation can be readily identified. 0n cases where it is difficult to distinguish trade secrets and ,now howA the court will err in fa2our of the defendants especially where the infor!ation could ha2e been gleaned using /)s ,now how and e5peri!entation.

G'+)"&,)&! )<")!

Court !ust weigh the public interet of ,eeping secrets ;e.g. national security> and the public)s need to ,now. Co55o$wealth v Joh$ &air9a= A So$sA at CL- 31 The Co!!onwealth sought to restrain the publication of certain foreign affairs and defence policy docu!ents. 'eld that protection of confidential infor!ation ;or in this case copyright> requires !ore than the infor!ation !erely not being public ,nowledge. 0t !ust not only be Uconfidential in quality and i!parted to i!port an obligation of confidenceU but its use also will be to the detri!ent of the party co!!unicating it. The e5ecuti2e go2ern!ent acts in the public interestA thus unless disclosure is li,ely to in:ure the public interest it will not be protected. The court will not pre2ent the publication of infor!ation which !erely throws light on the past wor,ings of go2ern!entA e2en if it be not public propertyA so long as it does not pre:udice the co!!unity in other respects. ... 0fA howe2erA it appears that disclosure will be ini!ical to the public interest because national securityA relations with foreign countries or the ordinary business of go2ern!ent will be pre:udicedA disclosure will be restrained. There will be cases in which the conflicting considerations will be finely balancedA where it is difficult to decide whether the publicQs interest in ,nowing and in e5pressing its opinionA outweighs the need to protect confidentiality. 1ason I referred to its being accepted that the soBcalled co!!on law defence of public interest applies to disclosure of confidential infor!ation. 'e then went on to refer to the defence in its application to copyright as protecting the co!!unity fro! UdestructionA da!age or har!.U 1+.

Attor$e"-Ge$eral (G1) v 'ei$e5a$$ P!,lishers A!stralia Pt" #t% %hen the &pycatcher case reached the <&% Court of 4ppealA 8irby P ;as he then was> stated thatA in an 4ustralian conte5tA the public interest in an open discussion of the !atters raised in &pycatcher ?relating to the affairs of 4&0D and 4&0&@ outweigh the residual equitable duty of confidence or fiduciary duty of silence operating on ?the authorQs@ conscience. There is a wide difference between what is interesting to the public and what is in the public interest to !a,e ,nown. S),%J*'+!K 0n 4ustraliaA se!iBgo2t organisations are sub:ect to the sa!e balaning act as go2ern!ent. 8ritish Steel Corp v Gra$a%a .elevisio$ #t% )1981+ 4C 1+ 6 The defendant had broadcast a TE progra!!e using !aterial confidential to the plaintiffA who now sought disclosure of the identity of the presu!ed thief. 'eld$ ;Lord &al!on dissenting> The courts ha2e ne2er recognised a public interest right of the !edia to protect their sources where disclosure was necessary in the interests of :ustice. 4s to procedureA the courts could order disclosure of a third partyQs na!e. The defendant here could not clai! to ha2e been unaware of any wrongdoing by the person who deli2ered the docu!entsA and this was not a case where they would recei2e the li!ited protection fro! disco2ery a2ailable in defa!ation cases. L'"/ W%$()"='"<) said$ Uthere is a wide difference between what is interesting to the public and what it is in the public interest to !a,e ,nown.U Lord /enning 1- said that the <orwich Phar!acal case opened Ua new chapter in our lawU and U1r 0r2ine suggested this was li!ited to cases where the in:ured person desired to sue the wrongdoer. 0 see no reason why it should be so li!ited. The sa!e procedure should be a2ailable when he desires to obtain redress against the wrongdoer B or to protect hi!self against further wrongdoing.U Te!ple!an LI$ U0n !y :udg!ent the principle of the <orwich Phar!acal case applies whether or not the 2icti! intends to pursue action in the courts against the wrongdoer pro2ided that the e5istence of a cause of action is established and the 2icti! cannot otherwise obtain :ustice. The re!edy of disco2ery is intended in the final analysis to enable :ustice to be done. Iustice can be achie2ed against an erring e!ployee in a 2ariety of ways and a plaintiff !ay obtain an order for disco2ery pro2ided he shows that he is genuinely see,ing lawful redress of a wrong and cannot otherwise obtain redress. 0n the present case 7&C state that they will not finally deter!ine whether to ta,e legal proceedings or whether to dis!iss the e!ployee or whether to obtain redress in so!e other lawful !anner until they ha2e considered the identityA status and e5cuses of the e!ployee. The disclosure of the identity of the disloyal e!ployee will by itself protect 7&C and their innocent e!ployees now and for the future and is essential if 7.&.C. are to redress the wrong.U Dnly Lord &al!on had any doubt that =ranada had acted in a !anner which in any e2ent would ha2e disqualified the! fro! relief. :sso Reso!r4es #t% v Plow5a$ (199-) 1#* CL- 1+ at *2 per 1ason

1+3

This appeal raises the i!portant question whether an arbitrating party is under an obligation of confidence in relation to docu!ents and infor!ation disclosed inA and for the purposes ofA a pri2ate arbitration. The questionA in the conte5t of this caseA has its genesis in two agree!ents for the sale of natural gas fro! the 7ass &trait fields to two public utilitiesA the =as and "uel Corporation of Eictoria ;U="CU> and the &tate Electricity Co!!ission of Eictoria ;U&ECU>. The first agree!ent dated 1 Ianuary 1 73 was with ="C. 0t was a!ended on three occasionsA the last occasion being by a deed dated 1. "ebruary 1 #6. The second agree!ent dated *+ Iuly 1 #1 was with &EC. 0t was also a!ended on three occasionsA the last occasion being by deed dated * 4ugust 1 +. The other parties to the agree!entsA the 2endors of the natural gasA are the first and second appellants. 7y deed dated 1 Ianuary 1 ##A the second appellant assigned its rights and obligations under the second agree!ent to the third appellantA 7'P Petroleu! ;7ass &trait> Pty. Ltd. The three appellants were described as UEsso67'PU in the courts below. 2. Each of the sales agree!ents contained a clause whereby the price payable for the gas sold was to be ad:usted by ta,ing into account changes relating to royalties and ta5es attributable to the production or supply of gas ;1>. *2. SThe 2arious circu!stances in which disclosure can legiti!ately ta,e placeA two questions necessarily arise. "irstA is there a legal basis for holding that there is an obligation not to discloseC &econdlyA if soA how is the obligation to be defined and what are the e5ceptions to itCT The thrust of 1ason CIQs decision is that where the issue in2ol2es go2ern!ent see,ing to pre2ent disclosure the onus changes. 0t is the go2ern!ent that !ust pro2e that the public interest de!ands nonBdisclosure. 1ason CI said this approach Ushould be adopted when the infor!ation relates to statutory authorities or public utilities becauseA ... ^in the public sector the need is for co!pelling opennessA not burgeoning secrecyQU ?quoting fro! "innA UConfidentiality and the Public 0nterestU ;1 #.> 3# 4LI . 7 at 3+3@. The specific issue of confidentiality obligations prohibiting disclosure between go2ern!ent instru!entalities and a 1inister arose in Esso A's ralia Reso'r,es L d v 3lo5man86. 0n the conte5t of a pri2ate arbitration in2ol2ing two public utilities in Eictoria and two pri2ate parties in which the public utilities refused to disclose infor!ation concerning the arbitration to the 1inister for Energy and 1ineralsA 1ason CI repeated what has co!e to be called the Iohn "airfa5 rule$
T#e ,o'r s #ave ,onsis en l+ vie5ed (overnmen al se,re s differen l+ from $ersonal and ,ommer,ial se,re s. H ITJ#e 8'di,iar+ m's vie5 #e dis,los're of (overnmen al informa ion K #ro'(# differen s$e, a,lesK. T#is involves a reversal of #e on's of $roof: #e (overnmen m's $rove #a #e $'*li, in eres demands nonLdis,los're87.

%hile the rule applies to go2ern!ental acti2ity and infor!ationA it is in turn based on the public interest in the free flow of infor!ation$
H 5#+ s#o'ld #e ,ons'mers and #e $'*li, of Mi, oria *e denied &no5led(e of 5#a #a$$ens in #ese ar*i ra ionsD #e o' ,ome of 5#i,# 5ill affe, D in all $ro*a*ili +D #e $ri,es ,#ar(ea*le o ,ons'mers *+ #e $'*li, ' ili ies788

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%hile the Plow!an case in2ol2ed the issue of an i!plied ter! of confidentialityA 7rennan I in his :udg!ent also thought that in situations where a party is in possession of a docu!ent or infor!ation and that party is under a co!!on law or statutory duty to co!!unicate the docu!ent or infor!ation to a third partyA no contractual obligation of confidentiality could prohibit the perfor!ance of that duty89. %hile 7rennan was not sureA and was not required to decideA whether the public authorities in2ol2ed in the case had a legal duty or a !oral duty to disclose infor!ationA he also found that the public had a real interest in the arbitrations because of their effect upon the price of electricity.
3'*li, a' #ori ies are no o *e a&enD $rima fa,ieD o #ave *o'nd #emselves o refrain from (ivin( an a,,o'n of #eir f'n, ions in an a$$ro$ria e 5a+: some imes *+ (ivin( informa ion o #e $'*li, dire, l+D some imes *+ (ivin( informa ion o a Minis erD o a (overnmen de$ar men or o some o #er $'*li, a' #ori +90.

The fact that public officers ulti!ately wor, for the people !eans that they are sub:ect to higher standards of fidelityA probity and integrity than are those in the pri2ate sector. 4ndA where i!portant public interests are in2ol2edA principles of open go2ern!ent and responsible go2ern!ent will require a !ore narrow 2iew of confidentiality clai!s when infor!ation beco!es Qgo2ern!ent infor!ationQ as it ine2itably will beco!e in the course of go2ern!ents contracting out of essential ser2ices. "urther!oreA while traditional notions of responsible go2ern!ent and the role of the public ser2ice support confidentiality ;as between a 1inister and public ser2ants>A the corporatisation of the public ser2ice and the pri2atisation of go2ern!ent sector :obs !eans that accountability ;as between a 1inister and those wor,ing within the 1inisterQs portfolio> has been reduced to a substantial degree. This is particularly true in situations in2ol2ing statutory or go2ern!ent corporations in which the corporationQs 7oard is ulti!ately answerable to a 1inister but the corporationQs e!ployees and /irectors are in the first instance responsible to the 7oard S'$/%)" K NR7 v Attor$e"-Ge$eral )200*+ H8PC 22 FACTS 4fter the =ulf %arA an &4& soldier of the 7ra2o Two Lero patrol was told to sign a confidentiality agree!ent or be de!oted. 'e signed. Then he returned to <ew Lealand. 'e got a publishing contract for his !e!oirsA about !aterial in the =ulf %ar. The <ew Lealand Court of 4ppeal denied an in:unctionA but allowed an account of profits and an assess!ent of da!ages for breach of contract. - appealed to the Pri2y CouncilA contending the contract was under duress when he signedA gi2en the threat of de!otion. AD3ICE The Pri2y Council ad2ised that the contract was not a2oidable for duress. Lord 'off!ann said there was no illegiti!ate pressureA so no duress. That first ele!ent is (pressure a!ounting to co!pulsion of the will of the 2icti! and the second was the illegiti!acy of the pressure). 1+7

S =enerally spea,ingA the threat of any for! of unlawful action will be regarded as illegiti!ate. Dn the other handA the fact that the threat is lawful does not necessarily !a,e the pressure legiti!ate. 4s Lord 4t,in said in Thorne 2 1otor Trade 4ssociation ?1 *7@ 4C 7 7A #+6A (The ordinary blac,!ailer nor!ally threatens to do what he has a perfect right to do B na!elyA co!!unicate so!e co!pro!ising conduct to a person whose ,nowledge is li,ely to affect the person threatenedR %hat he has to :ustify is not the threatA but the de!and of !oney.Q Minis r+ of Eefen,e v 2riffin ?2++#@ E%'C 13.2 9 see abo2e.

T;) /u!. '" '($%*#!%'& '= <'&=%/)&<)

Co4o v A ? Clar3 (:$gi$eers) #t% "4CT&

Coco was de2eloping a !otorBassisted cycle or !oped. 'e entered into negotiations with 4< Clar, to de2elop the !oped and pro2ided infor!ation to 4.<. Clar, about his !oped. 4fter so!e ti!eA 4.<. Clar, elected to not further de2elop the Coco !oped and instead began to de2elop its own !oped. Coco beca!e suspicious that 4.<. Clar, was using so!e of his designs for the new !oped. 'e therefore applied for an in:unction to stop 4.<. Clar, !a,ing or sell any !oped using his confidential infor!ation. 4.<. Clar, had :ust released its !oped on the !ar,et while Coco had stopped de2eloping his !oped. 0&&HE& 'ad Coco established a strong pri!a facie case that the infor!ation was confidential or that there had been a breach of confidenceC &hould an in:unction be awarded to pre2ent the !a,ing and selling of the !opedC "0</0<= Coco had failed to establish that the si!ilarities between the two !opeds were achie2ed by the use of infor!ation pro2ided by hi! to 4.<. Clar,. 4lso an in:unction was not appropriate as the e2idence for the case had not been properly tested and Coco had not de2eloped his own !oped and therefore it did not need protection fro! the sale of the ri2al !oped. GHDTE 1egarry I at page .7 said$ S0n !y :udg!entA three ele!ents are nor!ally required ifA apart fro! contractA a case of breach of confidence is to succeed. "irstA the infor!ation !ust itself R ha2e the necessary quality of confidence about it. &econdlyA that infor!ation !ust ha2e been i!parted in circu!stances i!porting an obligation of confidence. ThirdlyA there !ust be an unauthorised use of that infor!ation to the detri!ent of the party co!!unicating it.T 4nd at page 3+ he said$

1+#

S0f the duty is a duty not to use the infor!ation without consentA then it !ay be the proper sub:ect of an in:unction to restrain its useA e2en if there is an offer to pay a reasonable su! for that use. 0fA on the other handA the duty is !erely a duty not to use the infor!ation without paying a reasonable su! for itA then no such in:unction should be granted.T 01P4CT %hen clai!ing that confidential infor!ation is being !isused it is i!portant to be able to clearly identify the infor!ation and e5plain how it is being !isused. 4 Court !ay not order an in:unction to pre2ent the use of confidential infor!ation if the plaintiff is not the!sel2es using that infor!ation. E5press Dbligation 0!plied Dbligation 'it4h4o43 v .C? Cha$$el ?i$e Pt" #t% (?o 2) )2000+ NSWCA 82. 4ustin I considered that it was appropriateA in deciding an application for an in:unction restraining broadcast by the respondent of allegedly confidential !aterialA to resol2e certain questions relating to the construction of a contract between the applicant and an e!ployee. 'e noted that the parties had had an opportunity to present e5tensi2e sub!issions on the issues and doubted that the e2idence would i!pro2e between the interlocutory and final hearings. 4lso significant was the fact that his conclusions on the construction issues would affect the nature and scope of the interlocutory in:unction granted.

U&)C-)<!)/ R) u$! '= # D),'& !"#!%'& #&/ u& '$%<%!)/ <',,u&%<#!%'&

(ractionate% )ane Technolo"y Pty #t% v Rui-.Avila (1987) 5 was in4ited to a p#oduct demonst#ation that p#oduced une6pected #esults& (i4en that the#e was no p#io# confidentialit! a2#eement and the #esults we#e a su#p#ise ot e4e#!one3 the#e was no dut! of confidence& 7f Sea2e# 4 7op!de6 whe#e3 despite une6pected #e4ealin2 of In4isi2#ip and lac8 of confidentialit! a2#eement3 the ci#cumstances of p#ot#acted ne2otiations 2a4e #ise to confidentialit! dut!&

Acci%ental /isclosures

.revorrow v So!th A!stralia P was suing &4 because he had suffered as an 4boriginal state ward. Dffice of &tate -ecords accidentally pro2ided hi! with confidential infor!ation including legal ad2ice. 4rgued that the infor was pri2iledged but court found the info was i!parted in a !anner that a reasonabl person would not ha2e thought the! to be confidential. Esp the crown had a policy to !a,e such docu!ents a2ailable.

Misappropriation o, in,or$ation

/ifficulty in cases of e.g. industrial espionage because info has not been i!parted in circu!stances that gi2e rise to a duty. -e:ected in &ra$3li$ v Gi%%i$s where / stole nectarine clippings. Per /unn I$ 0 find !yself quite unable to accept that a thief who steals a trade secretA ,nowing it to be a trade secretA with the intention of using it in co!!ercial co!petition with its

1+

ownerA to the detri!ent of the latterA and so uses itA is less unconscionable than a traitorous ser2ant. The thief is unconscionable because he plans to use and does use his own wrong conduct to better his position in co!petition with the ownerA and also to place hi!self in a better position than that of a person who deals consensually with the owner. :=4ha$ge .elegraph Co #t% v Ce$tral ?ews #t% )1897+ 0n:unction fro! using info stolen fro! presses. Crow%er v 'ilto$ / found liable for stealing and publishing recipes fro! P)s unpublished recipe boo,. A8C v #e$ah Ga5e Meats 9 equity protects personal infor!ation collected surreptitiousl.

Eaves%roppers

Malo$e v Metropolita$ Poli4e Co55issio$er )1979+ concerned infor!ation pic,ed up by phone tapping. Per 1egarry EC 9 those that trans!it infor!ation to others !ust accept the ris, of being o2erheard as is inherent in the syste!. &ra$4o5e v MG? )198/+ 9 re:ected the focus on the ease with which the infor!ation can be o2erheard and instead focused on the unconscionable conduct of the defendants in disclosing the infor!ation.

Thir% parties

(heatele" v 8ell )1982+ B an in:unction can be obtained against any third party who ,nowingly obtained the confidential infor!ation in breach of confidence or in any other fraudulent !anner. <7 bonafide purchasers of infor!ation without notices are not protected because infor!ation is not property for those purposes. 4ll that is necessary is that the third party ha2e actual or constructi2e notice of the breach$ Ansell R'**er v Allied R'**er.

E !#($% ;%&* # (")#<;

The test which has found widespread acceptance is whether or not the infor!ation was disclosed for a li!ited purpose. 0f the infor!ation was disclosed for a li!ited purposeA the confidence crystallises around that li!ited purpose. The confidant will be bound by an obligation the content of which is not to use or disclose the infor!ation for any purpose other than the li!ited one for which the infor!ation was i!parted. " =urryA (7reach of Confidence) in P "inn ;ed>A Essays in EquityA 1 #3. S5ith 1li$e a$% &re$4h #a,oratories (A!st) #t% v Se4retar"M Dept o9 Co55!$it" Servi4es A 'ealth %hether one adopts the (reasonable !an) test suggested by 1egarry I or so!e otherA there can be no breach of the equitable obligation unless the court concludes that a confidence reposed has been abusedA that unconscientious use has been !ade of the infor!ation 0t was reasonable for P to e5pect the go2t to use the infor!ation for public health but this had wide i!plications than P)s purpose of e5tending their patent. R v Depart5e$t o9 'ealthD := parte So!r4e <$9or5ati4s #t% The Court of 4ppeal found that the phar!acists would not breach confidence if they supplied anony!ised infor!ationA e2en though this went beyond the confider)s

11+

purpose in supplying the infor!ation. The confider)s purpose was said to be irrele2ant when the infor!ation was anony!ous

/etri$ent?

Dpen question as to whether detri!ent is required. <ot necessarily per =u!!ow in &!ith 8line 2 /DC& and 'itchcoc, 2 TC< ;<o 2>. Cf 1ason I in Cth 2 "airfa5 but set a 2ery low le2el$ 0t !ay be a sufficient detri!ent to the citiMen that disclosure of infor!ation relating to his affairs will e5pose his actions to public discussion and criticis!. 'owe2erA go2ern!ent !ust show !ore than !ere e!barrass!ent detri!ent gi2en the i!portance of freedo! of speech.

D)=)&<)

Pu($%< %&!)") ! 4lready seen defence in dealing with go2ern!ent but can also be a pri2ate citiMen confidentiality breach defence. <o confidence in an iniquity$ =artside 2 Dutra! ;1#36>N Mi$ister 9or <55igratio$ a$% CitiCe$ship v 1!5ar (2009) The 'igh Court has decided that the 1igration -e2iew Tribunal was not required to disclose to 1r 8u!ar the identity of the person who pro2ided infor!ation it had recei2ed concerning his application for a spouse 2isa. The infor!ation fell under <onBdisclosable infor!ationA defined to include infor!ation whose disclosure would found an action for breach of confidence. -elati2ely tri2ial !atters will not trigger the defenceA a relati2ely high degree of !isbeha2iour !ust be perpetrated to render confidential infor!ation liable to the public interest defence$ M41e$$itt v Ash )2008+ G7 7* <7 the public interest of disclosure !ust be weighed against the public interest of !aintaining pri2acy$ PD% 2 4ssociated Press.

EC-' ) /#&*)" !' -u($%< #=)!. '" ;)#$!;

'!,,ar% v Bosper The 1ind 7enders was written by Cyril EosperA a scientologist of 1. years who had beco!e disillusionedA 0t was the first boo, on &cientology to be written by an e5B !e!ber and the first critical boo, on &cientology to be published ;narrowly beating 0nside &cientology by -obert 8auf!an>. The Church of &cientology tried in 1 71 to ban Cyril EosperQs boo, T#e Mind 6enders on the grounds that it !ade illegal use of copyrighted !aterial and represented a breach of confidence. 'owe2erA their case was re:ectedA not least because the Church was held to be Uprotecting their secrets by deplorable !eansUN the public interest of e5posing such !aterial outweighed the other considerations. The ruling has since been applied in a nu!ber of subsequent cases. ( v :%gell Psychiatrist as,ed to consult with a patient %A who had ad!itted to ,illing 3 peopleA and was held in a secure hospital. %)s solicitors instructed /r Edgell to pro2ide an independent report that they hoped they would use to support %s transfer to a less secure hospital. The report was unfa2ourableA and % too, it upon hi!self to send a

111

copy of the report to the ho!e officeA reco!!ending that % be ,ept where he was and that he had reason to belie2e that he was a serious threat. %)s solicitors tried to sue the doctor for breach of contract and of confidentiality to %. % failedA because it was held to be in the public interest to disclose the infor!ation. Iudge said that a (doctor owes a duty not only to the patient but also a duty to the public) Iudge &cott further went on to say that failure by a doctor to disclose infor!ation about a serious ris, to public safety !ight constitute professional !isconduct. %hat would ha2e been the :udge!ent if Edgell had sold the story to the !edia or discussed the case in a learned article without concealing %)s identityC #io$ #a,oratories #t% v :va$s )198-+ 08 -26 Lion Laboratories !anufactured an electronic de2ice called an into5i!eter which !easured a dri2er)s le2el of into5ication. The !easure!ents were used as e2idence in cri!inal prosecutions. 'owe2erA Lion Laboratories had so!e confidential docu!ents which indicated that this de2ice was possibly unreliable and they ,ept this infor!ation secret. Two disloyal e!ployees !ade copies of these docu!ents and ga2e the! to a newspaper. Lion Laboratories sought to restrain the newspaper fro! !a,ing use of the confidential infor!ation and the newspaper pleaded that it was in the public interest to publish it. The court said that to encourage an e!ployee)s loyalty to his e!ployer is a public interest that will be outweighed by a co!peting 2alue only in e5ceptional circu!stances. This was such a caseA because it is a !atter of the ut!ost i!portance to disclose the ris, that people !ight well be punished for offences which they did not co!!it. The newspaper was therefore allowed to publish the infor!ation and was not required to pay any da!ages. S4heri$g Che5i4als #t% v &al35a$ lt% a$% :llstei$ )1981+ 2 4ll E- *21A The situation was a little different fro! Lion Labs. Learned :ournals and the !edia had suggested that use of the drug Pri!odos as a pregnancy test on wo!en already pregnant !ight per!anently da!age the unborn children. %hen so!e of the children were born with physical defectsA actions were instituted on their behalf. &chering Che!icalsA the !anufacturers of the drugA withdrew it fro! the !ar,et and engaged "al,!an Ltd and Ellstein to train so!e of its e5ecuti2es to spea, effecti2ely on tele2ision and radio to repudiate the criticis! which was being le2elled against the!.

112

4fter the training was o2erA Elstein produced a fil! on the sub:ect for the tele2ision. 'e used only infor!ation which was already a2ailable to the public. <e2erthelessA &chering Che!icals applied successfully to court for an order pre2enting the showing of the fil!. W;#! :# !;) /%==)")&<) ()!:))& !;) !:' <# ) K 0n the Lion Laboratories case the newspaper wanted to publish so!ething which was of current concern. /run,en dri2ers had an interest in ,nowing whether their le2el of drun,enness was being correctly assessed. 0n the &chering Che!icals caseA on the other handA the issue was no longer of current concern because the drug had already been withdrawn fro! the !ar,et. 0n su!!aryA thenA #& ),-$'.))A /u!. !' B))- # <'&=%/)&<) % '+)"('"&) '&$. %& )C<)-!%'&#$ <%"<u, !#&<) and pro2ided that so!e good can co!e fro! brea,ing it. %hat decides whether circu!stances are e5ceptional or not is a !atter for :udicial discretion which one !ay try to predict by studying pre2ious cases. (oo%war% v '!t4hi$s )1977+ 1 WLR 760 The plaintiffs were pop singers including To! IonesA Englebert 'u!perdinc, and Cilbert Df&ulli2an. 0n order that they were portrayed to the public in the best possible light the singers e!ployedA through their !anage!ent co!panyA the defendant public relations officer whose tas, it was to pro:ect a fa2ourable i!age of their public and pri2ate li2es. &hortly after the defendent left their e!ploy!ent he wrote a series of articles for a daily newspaper. These articles ga2e an account of a nu!ber of discrediting incidents that had not pre2iously been disclosed in the public do!ain.*3 The plaintiffs brought actions for libel and breach of confidence. The English Court of 4ppeal refused an in:unction and allowed the publication of the articles. Lord /enning 1-Qs approachA representing the :udg!ent of the courtA illustrates the public interest defence at its widest$ 0f a group of this ,ind see, publicity which is to their ad2antageA it see!s to !e that they cannot co!plain if a ser2ant or e!ployee of their afterwards discloses the truth about the!. 0f the i!age which they fostered was not a true i!ageA it is in the public interest that it should be corrected. 4s there should be truth in ad2ertisingA so there should be truth in publicity. The Court of appeal regarded the public interest in ,nowing the truth about celebrity i!age as !ore i!portant than the celebrity pri2acy. M41e$$itt v Ash )200-+ EWHC 6006 FACTS The Clai!ants were a Canadian fol, !usician ;C> and her corporate recording co!panies. The Clai!ants issued proceedings against a for!er friend and personal assistant of C o2er the contents of a boo, entitled STra2els with Loreena 1c8ennitt$ 1y Life as a "riendT. The Clai!ant !aintained that despite her professional successA she had always sought to ,eep her personal and business life pri2ateA sa2e for the controlled release of personal infor!ation to pro!ote a charitable cause. The Clai!ant sought a declaration that by publishing identified infor!ation in the boo, the defendants had acted in breach of confidence. 4lthough there had already been li!ited publication of boo,A C also sought to restrain 2arious categories of 11*

(confidential infor!ation) ;as well as specific passages> in the boo,A as opposed to its entire contents. The Court had ordered a speedy trial. ISSUE The fi2e !ain categories of infor!ation sought to be protected were$ ;i> C)s personal relationshipsN ;ii> her personal feelings and grief relating to the death of C)s for!er fianc_N ;iii> health F dietN ;i2> C)s e!otional 2ulnerability and ;2> a property dispute with / and /)s partner. / relied on defences of public do!ain and public interestA as well as a clai! that this was an e5pression of her personal right to freedo! of speech. HELD "inding for C on the !a:ority of passages in the boo, co!plained ofA 'eld$ the court needed to consider each passage separately to decide ;1> whether the threshold test of reasonable e5pectation of pri2acy had been passed and ;2> whether any Qli!iting factorQ appliedA such as public do!ain or public interestA including whether infor!ation should escape protection as being banalA tri2ial or anodyne. The principles in Eon 'anno2er are of wider application than harass!ent by the tabloid press. 0n !atters of personal infor!ationA the courts would be less ready to assu!e protection had been lost fore2er on the basis that it had entered the public do!ain. The rele2ant test is whether the infor!ation in question is so generally accessible that in all the circu!stances it cannot be regarded as confidential. 4 high degree of !isbeha2iour is necessary on the part of the Clai!ant to engage a defence of public interest in Qe5posure of !isconduct casesQ rather than !ere peccadillos of a celebrity. COMMENT This is an i!portant decision as it pro2ides guidance on se2eral pre2iously une5plored issues in the law of pri2acy$ ;a> the Court should be slow to allow a defence of public do!ain to succeed in relation to the disclosure of personal infor!ationN ;b> a reasonable e5pectation of pri2acy !ay arise in relation to false allegationsA untrueA distorted or !isleading infor!ationN ;c> the for!ulaic nature of clai!s for public interest !ust be carefully analysed B %oodward 2 'utchins ?1 77@ 1 %L- 76+ was i!pliedly disappro2ed. "inallyA the Court recognised that the right to pri2acy has a social di!ensionN those who ,iss and tell cannot :ustify re2ealing the pri2ate life of others by clai!ing they are e5ercising their own right to freedo! of e5pression. Ri4har%s v 1a%ia$ )200-+ NSWCA 628 0n 8adian 2 -ichardsA# the plaintiff was a si5ByearBold boy ;4n,ur> born with a congenital heart disease and a defecti2e right ,idney. The first defendant doctorA /r -ichardsA was 4n,urQs paediatrician who had care of hi! during the first nine !onths of his life. /r -ichards was sued because of an alleged delay in the diagnosis of congenital heart disease. %hen 4n,ur was nine !onths oldA he was referred by /r -ichards to a paediatric cardiologist ;/r &holler>A and also a paediatric nephrologist ;/r Lewis>.

11.

/r -ichardQs legal representati2es wished to spea, to /r &holler and /r LewisA but 4n,urQs legal representati2es refused this request. /r -ichards alleged that 4n,urA in co!!encing the proceeding against hi!A had wai2ed his right to confidentiality in his other conte!poraneous treat!ent recordsA that arose fro! the doctor6patient relationship. "urtherA he sought that 4n,urQs proceedings be stayed until he pro2ided a signed written authority per!itting /r &holler and /r Lewis to discuss their !anage!ent and treat!ent of 4n,ur with /r -ichardsQ legal representati2es. 0t was /r -ichardsQ position that a patient who brings proceedings in which their health is at issueA and where infor!ation rele2ant to the proceedings is the sub:ect of confidentialityA has i!pliedly wai2ed confidentiality in that infor!ation. I u) ='" !;) <'u"!

The court had to consider whether the patientQs right to confidentiality had been i!pliedly wai2ed by bringing proceedings in which their health is in issue. Hlti!atelyA the court too, the 2iew that a patientQs treating doctor has an obligation of confidence to that patient that precludes the treating doctor fro! disclosing details of$ the patientQs historyA the patientQs treat!entN or

co!!unications between the patient and the doctor in the course of that relationshipA otherwise than by due court processA such as the issue of a subpoena.

"urtherA the court considered that there were 2arious appropriate !eans by which a defendant ;in this caseA /r -ichards> could obtain infor!ation about the course of treat!ent that a patient ;in this caseA 4n,ur> has undergone with another doctor. Those Qappropriate !eansQ included subpoenaing the other doctorsQ recordsA or subpoenaing the doctors to gi2e e2idence at trial. Su,,#". 4 doctor is under a duty not to 2oluntarily disclose infor!ation that they ha2e gained in his6her professional capacity without the consent of their patientA e5cept in e5ceptional circu!stances. 0f a doctor is called on to discuss treat!ent of a patient in connection with legal proceedingsA the doctor is only entitled to do so under accepted court processA such as pro2iding !edical notes pursuant to a subpoenaA or attending at court to gi2e e2idence pursuant to a subpoena.

Public Interest an% &exy Ti$es

Stephe$s v Aver" per 7rownB%il,inson EBC said that the court will not uphold a confidence of gross i!!oral tendency but found it difficult to find one in these ti!es where there is not generally accepted se5ual !oral code. 113

Mosel" v ?ews Gro!p =roup of &F1 enthusiasts who played out prison roles including botto! sha2ingA cosplay and hu!iliation. <ewspaper argued breach of confidence :ustified because of <aMiBthe!e se5 play public interest. Dn re2iewing the e2idence Eady I found no <aMi se5 or holocause derision. &aid it was not for :ournalists to under!ine hu!an rights of pri2acy or for :udges to refuse to enforce the! !erely on the grounds of taste or !oral prurience. .he (oo%war% De9e$4e %oodward 2 'utchins ?1 77@ 9 publicist for To! Iones and others published a tellBall boo, about their se5 ro!ps. 'eld not a breach of confidence because TI and others had held the!sel2es out as !oral paragons and it was in the public interest to ,now the truth. 4pplied in 4 2 7 Plc ?2++*@ and Ca!bell 2 1=<. This approach has not been followed in 4ustralia. There !ust be a !ore weighty and precise public interest that !erely the truth being told$ Castrol 2 E!techN <-14 2 Kates. There is a definite de!arcation between what the public is interested in and the public interest$ &ulli2an 2 &chlanders ;2+++>. A&# B Age ;a> The proposed disclosure will in fact disclose the e5istence of or the real li,elihood of the e5istence of an inquity that is a cri!eA ci2il wrong or serious !isdeed of public i!portanceN ;b> that the iniquity is of a character of public i!portance in the sense that what is to be disclosed affects the co!!unity as a wholeA or affects the public welfareN and ;c> that the person who is see,ing to protect the confidence is doing so in order to pre2ent disclosure to a third party with a real and direct interest in redressing the alleged cri!eA wrong or !isdeed.

(orce% %isclosure

E.g. Pubic health statutes requiring reporting of the na!es and addresses of people who ha2e contracted infectious diseases. The defendant is not liable in such cases. &i!ilarly courts !ay force disclosure of confidential docu!ents during disco2ery. <o liability on court ordered disclosure.

/elay

The general equitable defence of laches is a2ailable$ 4ttorneyB=eneral ;H8> 2 'eine!ann Publishers 4ustralia Pty Ltd ;1 ##>

C$)#& ;#&/ F

The person who clai!s confidentiality !ust ha2e clean hands e.g. the woodward defence. Ca5p,ell v Mirror Gro!p ?ewspapers #t% A!stralia$ &oot,all #eag!e v Age Co5pa$" #t% (2007) 1- BR /0-

116

REMEDIES
I&Iu&<!%'& 0n:unction is the pri!ary re!edy. 'owe2erA co!pensation !ay be !ore equitable in situations where the breach was co!!itted innocently$ &eager 2 Copyde5. &ub:ect to the springboard doctrineA in:unctions will not be granted where the info has !o2ed to the public do!ain$ 4= 2 Dbser2erA but an account of profits !ay still be ordered. T;) -"%&*('#"/ /'<!"%&) Courts will not allow confidence brea,ers to get a headstart fro! confidential infor!ation. 1ay grant an in:unction e2en if that infor!ation has entered the public do!ain. Salt5a$ :$gi$eeri$g Co #t% v Ca5p,ell :$gi$eeri$g Co* . 0n that caseA Lord =reene obser2ed that the defendants Udispense?d@ in certain !aterial respects with the necessity of going through the process which had been gone through in co!piling ?drawings of a product@ R thereby sa2?ing@ the!sel2es a great deal of labour and calculation and careful drafts!anshipU. That isA the defendants in that case relied upon the wor, carried out by the plaintiff ;including the ti!eA effort and e5pense in2ol2ed in carrying out that wor,> to !ore quic,ly de2elop and !anufacture their own product. &uch relianceA in effectA allowed the defendants to UspringboardU to a better position than they would ha2e been if they independently de2eloped that product the!sel2es without reference to the plaintiffQs drawings. .errapi$ v 8!il%ers S!ppl" Co )1967+ / used P)s !anufacturing process to build preBfab structures and put the! on the !ar,et. %hen they entered the !ar,et they beca!e public do!ain because they could be re2erseBengineered. / placed under in:unction until all aspects of the process had reached the public do!ain. C'&+)" %'& /#,#*) are awarded when the court dee!s the infringing articles to ha2e been the ownerQs propertyA which the infringer hasA in effectA stolen. The a!ount of da!ages is usually referable to the a!ount that the infringer realised on the sale of the articles. Aggravate% Da5ages are a2ailable when an in:unction would be too late to pre2ent the da!age$ Giller v Pro4opets A44o!$t o9 pro9its %here the infringers ha2e sold or benefited financially fro! the infringing goodsA the court !ay order that they pay you a su! equi2alent to the profits they !ade fro! using your 0P. Peter Pa$ Ma$!9a4t!ri$g Corp v Corsets Silho!ette #t% )196*+ 4ccount of profits !ay be difficult to deter!ine so an allowance for P)s ti!e and effort in de2elop!ent can be awarded with the onus for establishing the a!ount falling on / 8l!es4ope Steel #t% v 1ell" (2007)K 4ccount of profits can be awarded for a breach that is purely contractual with no resulting quantifiable da!age. 0n AG v 8la3e )2000+ There was no da!age because the confidential info was already in the public do!ain.

117

D)$%+)". u0n cases of copyright infringe!entA the copyright owner is dee!ed to be the owner of the infringing goods. 0n deli2ery upA the owner is entitled to ha2e those goods rather than ha2e the! destroyed$ 4nsell -ubber 2 4llied -ubber. E>u%!#($) <',-)& #!%'& 'arris v Digital P!lse Pt" #t% per 'eydon I4 9 puniti2e or e5e!plary da!ages are not a2ailable in equity Giller v Pro4opets 9 e5 defacto and the se5 tape. V.+A+++ for in:ury of feelings including V1+A+++ aggra2ated da!ages. Court e!phasised se2eral ti!es that da!ages were not e5e!pary or puniti2e. 7y !a:orityA the court also denied reco2ery for intentionally causing e!otional distress falling short of psychiatric in:ury. The fact that !ental distress da!ages are now a2ailable under breach of confidence has strengthened the status of this cause of action as a quasiBpri2acy tort C'& !"u<!%+) !"u ! #AC Mi$erals v <$ter$atio$al Coro$a Reso!r4es (1989) Canadian Case de!onstrates that constucti2e trusts are a2ailable for breach of confidence if they in2ol2e property. P found gold desposits on land and approached P for a :oint 2enture. <egotiations bro,e down and / subsequently purchased land with deposits and built a !egaB!ine.

The ,uture 0 ri"hts to privacy?

N' !"#/%!%'&#$ "%*;! '= -"%+#<. =enerally pri2acy rights in 4ustralia can only be enforced when there has been an incidental tort e.g. trespass to land or nuisance. The li!itations of this approach are illustrated in 8aye 2 -obertson below where intrusion on a hospital was re:ected because P did not own the hospital and there was not tort against hi!. Bi4toria Par3 Ra4i$g A Re4reatio$ Gro!$%s Co #t% v .a"lor$ P owned a racecourse and / ereceted a 2iewing platfor! on his ad:acent land. / broadcast his 2iews to offtrac, betters. P argued this affected tic,et re2enue and as,ed for an in:unction because$ 1> SPECTACTLE? The spectacle is property and the 2alue of the ob:ect to the creator should be ta,en into account. The !a:ority disagreed. 2> NUISANCE? / was being a nuisanceA causing unreasonable and significant interference with P)s en:oy!ent of property. 1a:ority said noA loo,ing o2er a fence does not interfere with a horse race. *> PRI3ACY? <o deal.

A!stralia$ Co$soli%ate% Press #t% v :tti$gsha!se$ (1991) FACTS$ Concerns a photo in a !agaMine of EttingshausenA a wellB,nown -ugby League footballerA in the shower with tea!B!ates. 'unt I said SThe photograph is grainy in qualityA and the scene appears to ha2e been lit only fro! the top and behind. <e2erthelessA below the printing there is a shape between the P)s legs which ;despite the defendant)s sub!ission to the contrary>A is certainly capable of

11#

being interpreted as his penisT. The photo was coupled with an article that played up the suggesti2eness of the photo. &ued for defa!ation IMPUTATIONS$ -e2ised i!putations pleaded were$ a> The P deliberately per!itted a photograph to be ta,en of hi! with his genitals e5posed for the purposes of reproduction with a widespread readership. b> The P is a person whose genitals ha2e been e5posed to the readers of the defendant)s !agaMine ('G)A a publication with a widespread readership. 0s intended as a bac, up i!putation if ;a> fails. <ote these i!putations do not suggest any fault ele!entA :ust that his genitals were e5posed to widespread readership. HELD$ This i!putation went to the :ury. 'unt I held that persons of reasonable intelligence !ay differ as to whether i!putation ;a> would ha2e been con2eyed to the ordinary reasonable reader and therefore the issue is for the :ury. 0!putation ;b> does not assert any !oral bla!e for the e5posure upon the P itself. 0t is well accepted law thatA to be defa!atoryA the i!putation need not assert bla!e if it ne2ertheless tends to !a,e people shun and a2oid hi!. P argued that as a result of the e5posure of his genitalsA he has been held up to ridicule. 'e referred to the principle in 7urton 2 Crowell Pub Co #2 " ;2d> 13. ;1 *6> which says if the !atter co!plained of was calculated to e5pose the P to !ore than tri2ial ridiculeA it was pri!a facie actionableA e2en though it asserted nothing about the P hi!self and notwithstanding the i!pression which it con2eyed ;that the P in that case had e5posed his penis> was ob2iously an optical illusion. The caricature in that case affected his reputation. 4pplying this principleA he held ;b> is capable of arising . 1a"e v Ro,ertso$ (1991) &SR 62 The case in2ol2ed =orden 8ayeA a wellB,nown actor who suffered lifeBthreatening in:uries in a car accident. 8aye atte!pted to obtain an order to restrain publication of photographs of the in:uries he suffered in the crash. These photographs were obtained by deception when a tabloid :ournalist entered the hospital while he was undergoing treat!ent.

D)+)$'-,)&! %& N): Z)#$#&/ #&/ E&*$#&/

/e2elop!ent of the tort of pri2acyA si!ilar to breach of confidence but strictly deli!ited. 8ra%le" v (i$g$!t &il5s )199*+ 1 <LL- .13 9 de2eloped the tort of pri2acy to fill the gap of the co!!on law. -equires that there is a disclosure of facts which is highly ob:ectionable to a reasonable person. 'os3i$g v R!$ti$g )200/+ ?@CA */ Publication of photographs of a celebrity)s ,ids in a public space did not !a,e it because the publication was not offensi2e. Rogers v .B?@ 4llowed publication of a police 2ideo inter2iew because there could be no e5pectation of pri2acy. Ele!ent fro! traditional breach of confidence. (ai$wright v 'o5e 699i4e )2002+ G1 H8 e5panding pri2acy protection but not departing fro! the traditional 2iew that there is no general action for breach of pri2acy. 0nstead co!bining confidential

11

infor!ation and EH 'u!an -ights 4rticles # ;right to respect for fa!ily and pri2ate life> and 1+ ;freedo! of e5pression>. Do!glas v 'elloO #t% 1ichael /ouglas and Catherine Leta Iones got !arried and contracted with D8P 1agaMine to ta,e e5clusi2e pictures. 4 freelance paparaMMi !anaged to infiltrate and ta,e pics and then sell the! to ri2al 'elloP 1agaMine. ;<o 2> in:unction o2erturned because /ouglas had traded pri2acy as a co!!odity and da!ages were sufficient. ;<o 6> P recei2ed !odest da!ages and pictures treated as trade secretsA gi2en their co!!ercial 2alue. The fact that / had acted surreptitiously !eant that they had acted unconscionably. MAL M6S#:H v ?:(S GR6GP ?:(SPAP:RS #<M<.:D tort approach is radically different because it allows :udges to enforce confidences in circu!stances where there is no preBe5isting relationship gi2ing rise to an enforceable duty of confidence. &aid to be a departure but see "ran,lin 2 =iddens where equity did not require a preBe5isting duty of confidence. S<R :#.6? J6'? v ASS6C<A.:D ?:(SPAP:RS #.D &ir Elton failed to in:unct a picture of hi!self wal,ing down the street because there was nothing offensi2e about it. DAB<D MGRRAH v 8<G P<C.GR:S (G1) #<M<.:D &uccessful n:unction against pictures of I8 -owling)s son in a pra!. =i2en ,id)s ageA he did not find i!ages offensi2e. 4lso not pri2ate because ta,en on a street and did not re2eal any e!barrassing infor!ation. 'owe2erA there was a reasonable e5pectation of pri2acy which was intrusi2ely breached. The english approach is te!pered by the hu!an rights articles and departing fro! australia but as hu!an rights protections are instituted in 4ustraliaA there !ay be a re2ergence.

Au !"#$%#K

8ath!rst Cit" Co!$4il v Sa,a$ 9 light tra2elling fro! land into a ca!era does not constitute tresspass to either land or airspace. 'owe2erA it beco!es an actionable tort if you ,eep ta,ing photos of people o2er and o2er again. 'owe2erA it was said that equity !ay restrain the publication of photographs e2en when they ha2e been ta,en in public spaces surreptitiouslyA if they are e!barrassing or offensi2e 1wo3 v .ha$g )1999+ <&%&C 1+*. The scope of confidentiality is tested when data is in the public do!ain or of widespread awareness. Chinese pop star ca!e to australia and rooted /. / taped encounter and threatened to distribute. 4 '8 newspaper published an account. 'odgson CI in Eq stated that one need not ha2e a longstanding friendship before equity would find an obligation of confidence. Do$$ell" v A5alga5ate% .elevisio$ Servi4es Pt" #i5ite% (1998) .3 <&%L37+

12+

F#<! $ ca!eras were ta,en on a raidN / was ta,en in his underwear and Channel 7 broadcast the footage on one of their current affairs progra!s. / sought an interlocutory in:unction restrain the broadcast of this. 'odgson I in Eq$ granted the in:unction on the basis that the police footage and the disclosure of the footage suggested an abuse of power on the part of the police and the ,nowing participation of that abuse of power by Channel 7. There are argu!ents !ade by 'I which are useful to note in passing. There was an issue of whether the footage was in the nature of confidential infor!ation or whether it should be 2iewed as pri2ate. The distinction is 2ital because the approach in England is to treat in2asions of pri2acy by reference to breaches of confidence. &uggested that there is !ore than a nuance of difference between pri2acy and confidentiality as concepts and not e2erything described as pri2ate in confidential. 4lsoA ' notes what could be considered (pri2ate). 0t is consistently recognised that what is really sub:ect to the in:unction is that which is not obser2able fro! the street and anything in ter!s of the footage reflecting what could in fact be obser2ed is not pri2ate and what was pri2ate was the footage ta,en inside the house in areas not e5posed to public 2iew. ')s reasoning in this case reinforces the restricti2e nature of what can be characterised as pri2ateA which is ta,en up by =leeson I in 47C 2 Lenah =a!e 1eats. %hen loo,ing at a case for in2asion of pri2acyA !ust consider the 2arious tortious causes of action a plaintiff could possibly ha2e. A!stralia$ 8roa%4asti$g Corp v #e$ah Ga5e Meats Pt" #t% 'C restraint of surreptitious 2ideo of slaughtering shot by a ani!al liberationists that 47C wanted to publish. 0t was assu!ed liberationists had trespassed when shooting. Clai!ed that 47C acting unconscionably by using trespass.
\ Per =leeson I$ the law of breach of confidence pro2ides a re!edy where the nature of the infor!ation obtained by the trespasser was such as to per!it the infor!ation to be regarded as confidential. 7utA if that condition was not fulfilledA then the circu!stance that the infor!ation was tortiously obtained in the first place was not sufficient to !a,e it unconscientious of a person into whose hands that infor!ation later ca!e to use it or publish it \ Co!pare this case to Lincoln 'unt 2 %illessee where the ca!era crews entered pre!ises with ca!eras rolling and whose conduct a!ounted to a trespassA but in this case the 47C was pro2ided with the footage which was obtained by a separate party o 0n this case the party publishing the !aterial ;47C> was not a party to the trespassN if they were then the court would ha2e to consider the question postulated by Koung I in Lincoln 'unt where he held that pri!a facieA if a fil! is ta,en by a trespasserA !ade in circu!stances in2ol2ing pri2ate pre!ises in respect of which there is so!e e2idence that publication of the fil! would affect goodwillA then the case is one where an in:unction should be seriously considered \ Per =u!!ow and 'ayne II$ in Lincoln 'unt Koung I stated that the court has power to grant in:unctions to pre2ent the publication of footage ta,en by a trespasser e2en though no confidentiality is in2ol2ed. The court will only inter2ene if the circu!stances !a,e the publication unconscionable. o 'eld that the !a,er of the fil! !ay be regarded as a constructi2e trustee of the copyright of the footage for the benefit of the plaintiff conferred by s # of the Copyright 4ct and as a result it would be inequitable for the !a,er of the fil! to broadcast the footage

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against the wishes of the plaintiff and the broadcast would be sub:ect to an interlocutory restraint

(his3iso%a Pt" #t% v 'SB Cha$$el 7 Pt" #t% Pt" #t% (199*)A unreportedA
&upre!e Court of EictoriaA 3 <o2e!ber 1 *A 1c/onald I "acts$ Channel 7)s e!ployee went to a 2enue operated by %N at the pre!ises there was nude tabletop dancing where Channel 7 wanted to e5plore this issue of public interest and therefore as,ed the e!ployee to 2ideo the dancing. % clai!ed that there were signs which infor!ed patrons that no photography or ca!eras were to be per!itted to be used. The e!ployee of Channel 7 clai!ed he saw no such signs but ne2ertheless concealed the ca!era because he thought % wouldn)t be a!enable to hi! openly fil!ing on the pre!ises. The footage was ta,en and a story was to be !ounted when % beca!e aware of the e2ents. They sought an interlocutory in:unction to restrain the broadcast of the footage. 1c/onald I$ had to deter!ine whether an interlocutory in:unction should be issued. -equired consideration of whether there was a serious question to be tried and where the balance of con2enience lay. -efused to grant in:unctionN in this case there was a strong case of trespass to land which would result in nonBinsubstantial da!ages which were regarded as being an adequate re!edy for % and also gi2en the fact that there was a significant dispute as to a question of fact ;whether there were signs in place>. 4s a general ruleA as Channel 7 is the trespassorN the 2ideo ta,en in the course of the trespass is considered to be the (fruits of the trespass). The issue here was whether the plaintiff was able to restrain the defendant who was both trespassor and broadcaster fro! using the fruits of the trespass. 4s a general ruleA because trespass is a tort the principal re!edy is an award of da!agesN but there !ay be circu!stances in which it can be argued that an interlocutory in:unction should be granted to a!eliorate the effects of the trespass. This can occur where the defendant broadcaster is engaged in a continuing trespass on the plaintiff)s property or as in this caseA in circu!stances where the plaintiff wants to restrain the defendant)s use of the fruits of the trespass.

UNCONSCIONA4LE TRANSACTIONS 5 UNDUE INFLUENCE

The purpose of the doctrine is to pro2ide relief in situations where one party to a transaction has acti2ely ta,en ad2antage of the wea,ness of the other. 0n this wayA equity see,s to loo, beyond the fiction of equality of bargaining power that the co!!on law ta,es for granted. Pursuant to the doctrine of unconscionabilityA equitable relief is gi2en where there has been (an abuse of power possessed by one party o2er the other by 2irtue of the other)s position of special disad2antage)$ A!stralia$ Co5petitio$ a$% Co$s!5er Co55issio$ v Ra%io Re$tals #t% (200-) 1.6 "C- 2 2A at 2 7. 0n #o!th v Diprose (1992) 173 CL- 621A at 6*#N 11+ 4L- 1A at 1.A /eane I obser2ed that (the inter2ention of equity is not !erely to relie2e the plaintiff fro! the consequences of his own foolishness. 0t is to pre2ent 2icti!isation)

G)&)"#$ '" -)<%=%< !)",K

in .a$war :$terprises Pt" #t% v Ca!4hi (200*) 217 CL- *13 at *2.B3N 2+1 4L*3 A at *6.B3A the 'igh Court held that (unconscientious) is a !ore accurate ter! than (unconscionable) in this conte5t

E$),)&!

0n C8A v A5a%ioA at CL- .7.N 4L- .22A /eane I said$

122

The :urisdiction is long established as e5tending generally to circu!stances in which ;i> a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between the! and ;ii> that disability was sufficiently e2ident to the stronger party to !a,e it pri!a facie unfair or (unconscientious) that he procureA or acceptA the wea,er party)s assent to the i!pugned transaction in the circu!stances in which he procured or accepted it. %here such circu!stances are shown to ha2e e5istedA an onus is cast upon the stronger party to show that the transaction was fairA :ust and reasonable. &pigel!an CI in Attor$e" Ge$eral (?S() v (orl% 8est 'ol%i$gs #t% (200-) 6* <&%L- 337A at 3#*$ Hnconscionability is a wellBestablished but narrow principle in equitable doctrine. 0t has been applied o2er the centuries with considerable restraint and in a !anner which is consistent with the !aintenance of the basic principles of freedo! of contract. 0t is not a principle of what (fairness) or (:ustice) or (good conscience) requires in the particular circu!stances of the case R ?-@estraint in decisionB !a,ing re!ains appropriate. Hnconscionability is a concept which requires a high le2el of !oral obloquy. 0f it were to be applied as if it were equi2alent to what was (fair) or (:ust)A it could transfor! co!!ercial relationships R The principle of (unconscionability) would not be a doctrine of occasional applicationA when the circu!stances are highly unethicalA it would be transfor!ed into the first and easiest port of call when any dispute R arises The essential ele!ents areA as /eane I identifies$ A % u&/)" # -)<%#$ /% #/+#&!#*) '" /% #(%$%!.L 4 B&):G '" % $%B)$. !' ;#+) B&':&G #('u! !;#! /% #/+#&!#*)L #&/ 4 -"'<))/ !' u ) !;#! /% #/+#&!#*) u&<'& <%)&!%'u $. %& '"/)" !' '(!#%& AA <'& )&! !' !;) !"#& #<!%'&.

4#"*#%&%&* P':)"

Practical recognition of these obser2ations can be seen in the fact that !ere inequality of bargaining power between parties does not gi2e rise to a situation of unconscionability. 0n A!stralia$ Co5petitio$ a$% Co$s!5er Co55issio$ v C G 8er,atis 'ol%i$gs Pt" #t% (200*) 21. CL- 31A at 6.N 1 7 4L- 13*A at 137A =leeson CI said$ 4 person is not in a position of rele2ant disad2antage R si!ply because of inequality of bargaining power. 1anyA perhaps e2en !ostA contracts are !ade between parties of unequal bargaining powerA and good conscience does not require parties to contractual negotiations to forfeit their ad2antagesA or neglect their own interests R Hnconscientious e5ploitation of another)s inabilityA or di!inished abilityA to conser2e his or her own interests is not to be confused with ta,ing ad2antage of a superior bargaining position.

T%,%&*

0n G!stav A Co #t% v Ma49iel% #i5ite% )2008+ <L&C .7A at ?3@A the <ew Lealand &upre!e Court held that the appropriate ti!e to assess whether a conditional

12*

contract was unconscionable was when the contract was entered into and not when it beca!eA or was declaredA unconditional. 'owe2erA the CourtA at ?21@A went on to note that (!aterial 2ariations to a contract should be e5a!ined for unconscionability as at the date upon which they are agreed).

S-)<%#$ D% #/+#&!#*)

There is no fi5ed list of what constitutes a special disad2antage. %hat is required is so!e characteristic (which seriously affects the ability of the innocent party to !a,e a :udg!ent as to his own best interests)$ C74 2 4!adioA at CL- .62N 4L- .1*. 0n ACCC v Sa5to$ 'ol%i$gs Pt" #t% (2002) 117 "C- *+1A at *1#N 1# 4L- 76A at 2A the "ull Court of the "ederal Court stated that factors going to establishing a special disad2antage fell into one of two categoriesN (constitutional) and (situational). The court said$ The special disad2antage !ay be constitutionalA deri2ing fro! ageA illnessA po2ertyA ine5perience or lac, of education. Dr it !ay be situationalA deri2ing fro! particular features of a relationship between actors in the transaction such as the e!otional dependence of one on the other.

E&':$)/*)

0t is clear that the defendant !ust ha2e ,nown or ought to ha2e ,nown of the special disad2antage of the other party. The require!ent of ,nowledge is necessary because the defendant cannot be said to ha2e acted unconscientiously if he or she had no ,nowledge of the plaintiff)s special disad2antage

U&<'& <%'&#($) )C-$'%!#!%'& '= !;) /% #/+#&!#*)

The stronger party !ust e5ploit the wea,ness that he or she ,nows to e5ist in the other in order to procure consent to a transaction. 0nequality of bargaining power will often be a factor to be ta,en into account in assessing whether the stronger party has ta,en ad2antage of the wea,er party)s special disability.

EC#,-$)

0n C8A v A5a%io F !$e%!4ate%M tr!st o9 so$ the 4!adios) special disad2antage was ,nowingly used to procure the! into signing a contract of guaranteeA which was not li!ited by ti!e or e5tent of liabilityA to secure a loan to their son who was in serious financial trouble. 0n #o!th v Diprose - i$9at!ate% the infatuated /iprose !ade a gift of V3#A+++ to Louth so that she could purchase a house. 0n 8lo5le" v R"a$ F %r!$3 the drun,en -yan sold his entire landholding to 7lo!ley at a price described by 1cTiernan IA at * 2A as (stri,ingly disproportionate) to the esti!ated !ar,et 2alue.

L)*% $#!%'&

The federalA state and territory legislatures ha2e all enacted legislation which deal with unconscionable conduct and6or related concepts dealing with what !ight generally be referred to as unfair conduct. 0n Part 0E4 entitled (Hnconscionable Conduct)of the .ra%e Pra4ti4es A4t ss -1AAM -1A8 a$% -1AC deal with statutory for!s of unconscionability. 0n all three sections

12.

there are prohibitions against corporationsA in the course of trade or co!!erceA engaging in unconscionable conduct. The need for a corporation to be in2ol2ed is a consequence of the federal go2ern!ent)s li!ited legislati2e power under s 31 of the Co!!onwealth Constitution. The federal go2ern!ent !ust ha2e a legiti!ate grant of power in order for its laws to be 2alid. The trade and co!!erce power ;s 31;i>> presents proble!s as it specifically precludes federal legislation in intrastate !attersA hence recourse to the !ore a!enable corporations power ;s 31;55>>A which will apply to intrastate !atters so long as a sufficient connection to corporations !ay be found. &ection 31447 of the 4ct stipulates that ss 3144 and 3147 do not apply to conduct in2ol2ing financial ser2ices. 'owe2erA the pro2isions of ss 3144A 3147 and 314C are replicatedA in relation to financial ser2icesA in ss 12C4A 12C7 and 12CC of the 4ustralian &ecurities and 0n2est!ents Co!!ission 4ct 2++1 ;Cth>. 0n order to co2er cases where the conduct is not within the pro2isions of either of these two federal actsA co!ple!entary legislation is found in so!e states and territories that !ay enable an applicant to see, relief. &ection 3144 is replicated only in Eictoria.?1@ &ection 3147 is replicated in all states and territories.?2@ &ection 314C has been replicated in Tas!ania and EictoriaA?*@ as well as in retail leases legislation in all states and territoriesA with the e5ception of &outh 4ustralia.?.@ ?1@ "air Trading 4ct 1 ;Eic> s 7.

?2@ "air Trading 4ct 1 2 ;4CT> s 1*N F#%" T"#/%&* A<! 1987 0NSW1 46N Consu!er 4ffairs and "air Trading 4ct 1 + ;<T> s .*N "air Trading 4ct 1 # ;Gld> s * N "air Trading 4ct 1 #7 ;&4> s 37N "air Trading 4ct 1 + ;Tas> s13N "air Trading 4ct 1 ;Eic> s #N "air Trading 4ct 1 #7 ;%4> s 11. ?*@ "air Trading 4ct 1 + ;Tas> s 134N "air Trading 4ct 1 ;Eic> ss #4 and #7.

?.@ Leases ;Co!!ercial and -etail> 4ct 2++1 ;4CT> s 22N R)!#%$ L)# ) A<! 1994 0NSW1 62A #&/ 624N 7usiness Tenancies ;"air /ealings> 4ctA 2++* ;<T> ss 7 and #+N -etail &hop Leases 4ct 1 . ;Gld> ss .64 and .67N "air Trading ;Code of Practice for -etail Tenancies> -egulations 1 # ;Tas> Cl *N -etail Leases 4ct 2++* ;Eic> ss 77 and 7#N Co!!ercial Tenancy ;-etail &hops> 4gree!ents 4ct 1 #3 ;%4> ss 13C and 13/. 0t is clear that the notion of unconscionable conduct under ss 3147 and 314C is broader than unconscionable conduct in equity$ 4ustralian Co!petition and Consu!er Co!!ission 2 &i!ply <oB8nead ;"ranchising> Pty Ltd ;2+++> 1+. "C23*A at 263N 17# 4L- *+.A at *13N Canon 4ustralia Pty Ltd 2 Patton ;2++7> 2.. 4L73 A at 767B . 0n ACCC v Sa5to$ 'ol%i$gsA at "C- *17N 4L- 1A the court identified the following four ways in which unconscionable conduct has been used in the case law$ 1. 4s an organising idea infor!ing specific equitable rules and doctrines which do not in ter!s refer toA or requireA an e5plicit finding of unconscionable conduct B eg rules on stipulations as to ti!e and notices to co!plete.

123

2. 0n relation to specific equitable doctrines of which estoppelA unilateral !ista,eA relief against forfeiture and undue influence are e5a!ples. They are united by the idea that equity will pre2ent an unconscionable insistence on strict legal rights and are conditioned upon the e5plicit finding of unconscionable conduct in the persons against who! they are in2o,ed. *. 0n relation to the discrete doctrine of unconscionable dealing which concerns one species of unconscionable conduct. .. 0n relation to unconscionable conduct founding a cause of action not !ediated by any discrete doctrine.

U&/u) I&=$u)&<)

%hereas the co!!on law has traditionally assu!ed that the parties to particular transactions ha2e equal bargaining powerA equity recognises that often this !ay not be the case and it !ay enable a party to set aside a transaction where it can be shown that the relationship between the parties was tainted by inequalityA unfairness or actual abuse. 0n equityA the principle of undue influence also focuses on the quality of consent gi2en to the transaction. This was !ade clear by /eane I in Co!!ercial 7an, of 4ustralia Ltd 2 4!adio ;1 #*> 131 CL- ..7A at .7.N .6 4L- .+2A at .2*A when he said that (?u@ndue influenceA li,e co!!on law duressA loo,s to the quality of the consent or assent of the wea,er party). The purpose of the doctrine of undue influence is (to protect people fro! being forcedA tric,ed or !isled in any way by others into parting with their property)$ All4ar% v S3i$$erA at 1#2B*. 4 new nun bequeathing her property and trying to clai! it bac, when she left the sisterhood SThe ai! is to protect people fro! being forcedA tric,ed or !isled in any way by others into parting with their property is one of the !ost legiti!ate ob:ects of all lawsN and the equitable doctrine of undue influence has grown out of and been de2eloped by the necessity of grappling with insidious for!s of spiritual tyranny and with the infinite 2arieties of fraud.T 0t is clear that the doctrines relating to unconscionable transactions and undue influence are closely related. 7ut :ust how closely is a !atter of so!e debate. 'ardingha!A while !a,ing it clear that he was not ad2ocating a (general unifying principle of uni2ersal application)A !ade the following state!ent$ ?T@he boundaries between traditional heads of inter2ention against unconscionable beha2iour O specifically between co!!on law duress and actual undue influence or pressureA between presu!ed undue influence and unconscionable dealing as such O are shifting. Lines of de!arcation are not now as clearly defined as they !ay ha2e been in the past. 4s a consequenceA the traditional heads the!sel2es !ay be ready for so!e redefinition or rationalisation 'ardingha!A (Hnconscionable /ealing) in P / "inn ;ed>A Essays in EquityA Law 7oo, CoA &ydneyA 1 #3A 1A p 2. The classic state!ents in this regard are both deri2ed fro! C',,)"<%#$ 4#&B '= Au !"#$%# + A,#/%' ;1 #*> 131 CL- ..7N .6 4L- .+2. 0n that caseA /eane I saidA at CL- .7.N 4L- .2*$ 126

Hndue influenceA li,e co!!on law duressA loo,s to the quality of the consent or assent of the wea,er party R Hnconscionable dealing loo,s to the conduct of the stronger party in atte!pting to enforceA or retain the benefit ofA a dealing with a person under a special disability in circu!stances where it is not consistent with equity or good conscience that he should do so.

C#!)*'"%) '= U&/u) I&=$u)&<)

Traditionally there ha2e e5isted two distinct categories of transactions that attract equitable inter2ention on the basis of the principles of undue influence. The distinguishing characteristic between the two categories is whether there isA or is notA a special relationship between the parties to the transaction. Cases in which there is no special relationship between the parties are generally referred to as ones of actual or e5press undue influence. Cases in which a special relationship e5ists between the partiesA are generally referred to as ones of presu!ed undue influenceA and can be subBcategorised according to the basis upon which the e5istence of the special relationship is established A<!u#$ U&/u) I&=$u)&<) 0n cases where there is no special relationship between the parties to the transactionA a person see,ing equitable relief on the basis of the principles of undue influence !ust establish that actual undue influence was e5erted by the other party to the transaction 0n Joh$so$ v 8!ttress (19*6) 36 CL- 11*A at 1*.A in discussing such casesA /i5on I said$ The source of power to practise such a do!ination !ay be found in no antecedent relation but in a particular situationA or in the deliberate contri2ance of the party. 0f this be soA facts !ust be pro2ed showing that the transaction was the outco!e of such an actual influence o2er the !ind of the alienor that it cannot be considered his free act. Cases of actual undue influence are unco!!on. They are also difficult to pro2e. ThusA in &re%eri43 v State o9 So!th A!stralia (2006) . &4&- 3.3A a &outh 4ustralian !agistrate resigned fro! his position during a !eeting with the Chief 1agistrate. The !agistrate had been recently con2icted of two cri!inal offences. 'owe2erA the con2ictions were subsequently set aside. The !agistrate argued that the resignation was ineffecti2e on the basis that it was procured by the e5ertion of actual undue influence by the Chief 1agistrate. The &upre!e Court re:ected the clai! on the basis that the !agistrateA as a person who had had a long career as a lawyer and !agistrateA was not in a position of being the 2icti! of actual undue influence. %hite IA at 3#+A said the following in relation to the !agistrate)s decision to resign$ 0 accept that ?he@ 2alued his position as a !agistrate both for the honour which the office entailedA his satisfaction with the wor, and because it was his source of li2elihood. 0 accept that ?he@ wished to !aintain his position as long as practicable and that he signed the resignation letter reluctantly. 0 accept that i!!ediately before signing the resignation letter he said words to the effect that he felt that he did not really ha2e any choice but to resign with dignityA and that that state!ent reflected his state of !ind at that ti!e. 'owe2erA that e2idence falls shortA in !y 127

opinionA of establishing that ?his@ will was o2erborne or that his agree!ent to resign was procured by undue influence. The fact that the choices apparently open to hi! were unpalatable does not indicate that his will was o2erborne. 0t is an unfortunate fact that often people are called upon to !a,e difficult decisions andA in particularA to !a,e decisions which they would prefer 2ery !uch not ha2e to !a,e. %here a person confronts the circu!stanceA and !a,es the difficult decisionA it will often be inappropriate to spea, of their will ha2ing been o2erborne. 0n !y opinionA that is the position in the present case. P") u,)/ U&/u) I&=$u)&<) The e5istence of the special relationship gi2es rise to a presu!ption that the transaction was obtained as a result of undue influence by the stronger party in the relationship o2er the wea,er party. The presu!ption of undue influence only arises upon proof of the e5istence of a special relationship. The effect of the presu!ption is that the wea,er party will be able to see, equitable reliefA unless the presu!ption of undue influence is rebutted by the stronger part Class 2A a$% 28 Class 24 include those e5isting between$ parent and child$ #a$4ashire #oa$s #t% v 8la43 )19*/+ 1 87 *#+N 1oneylender B 7orrowings by 1other B Pro!issory <ote signed by daughter recently of age B Charge gi2en by daughter on her re2ersion B /aughter a !arried wo!an li2ing with her husband B E!ancipation B Hndue 0nfluence B 0ndependent ad2ice B 0nsufficient 1e!orandu! B Transaction set aside0t was held that a daughter !ay not necessarily be independent and !ay be under the influence of the !other. guardian and ward$ '"lto$ v '"lto$ (17-/) 2# E- *. N solicitor and client$ (est5elto$ (Bi4) Pt" #t% v Ar4her A Sh!l5a$ )1982+ E*+3N doctor and patient$ 8ar-Mor%e4ai v 'illsto$ )200/+ <&%C4 63N and religious leader and follower$ All4ar% v S3i$$er. 0n Ro"al 8a$3 o9 S4otla$% v :tri%geA at 4C 7 7 Lord <icholls asserted that a presu!ption arising by 2irtue of a recognised class of relationship is (irrebuttable). This approach hasA howe2erA been rightly re:ected in 4ustralia$ Ja$so$ v Ja$so$ )2007+ <&%&C 1*..A at ? *@. This case is about a clai! of undue influence by way of a transfer of a frail and elderly !an)s residence ;sole asset> to his nephew. There was no independent ad2ice. The nephew held his uncle)s general ;not enduring> power of attorney and had gi2en hi! care and assistance for !any years. 'owe2erA it is difficult to rebut such a presu!ption and e2en being able to e5plain the relationship in so!e other wayA such as that the parties were also in a de facto relationshipA will not guarantee success$ 7arB1ordecai 2 'illstonA at ?1. @. T"u !))J4)&)=%<%#". R)$#!%'& ;%There are suggestions that the trusteeBbeneficiary relationship is a Class 24 relationship G$io$ &i%elit" .r!stee Co o9 A!stralia #t% v Gi,so$ )1971+ E37*A at 377A and Joh$so$ v 8!ttressA at 11 . 'owe2erA as 1eagherA 'eydon and

12#

Lee!ing?1@ obser2eA there is no :ustificationA in the absence of special circu!stancesA for suggesting that there is a relationship of undue influence between a trustee and beneficiaryA and that unless the transaction is one in2ol2ing trust propertyA there should be no presu!ption in2alidating the transaction. 0n cases where trust property is in2ol2edA a beneficiary is already protected by the rules relating to fiduciary obligations ?1@ - 1eagherA / 'eydon F 1 Lee!ingA 1eagher =u!!ow F Lehane)s EquityA /octrines and -e!ediesA .th edA Le5is<e5is 7utterworthsA &ydneyA 2++2A pp 31*B.. C$# 24 0f the parties to the transaction do not fall within a Class 24 relationshipA a special relationship can ne2ertheless be established on the particular facts and circu!stances of their relationship. These Class 27 relationships arise (where it is pro2ed that the party benefiting fro! the transaction occupies or assu!es towards another a position naturally in2ol2ing an ascendancy or influence o2er that otherA or a dependency or trust on the latter)s part)$ Ja$so$ v Ja$so$ )2007+ <&%&C 1*..A at ?72@. Hncle 6 <ephew not 24 but !ight ha2e been 27 b6c partial power of attorney and carer. E5a!ple 0n 8ester v Perpet!al .r!stee Co #t% )1970+ * <&%- *+A 7esterA as a young wo!anA was encouraged to !a,e a settle!ent of a substantial inheritance recei2ed fro! her father. The effect of this irre2ocable docu!ent was to put the assetsA which co!prised her inheritanceA beyond her control and pro2ide her with only a !odest annual inco!e fro! the property. 4t the ti!e of settle!entA 7ester was 21 years of ageA without parental guidance and possessed of e5tre!ely li!ited business e5perience. &he was influenced by three !uch older !en O the representati2e fro! her trustee co!panyA and her two unclesA one of who! was the solicitor who drafted the deed of settle!ent. 0n these circu!stancesA &treet I had little difficulty in finding that undue influence was raised successfully by 7ester who wasA after !any yearsA see,ing to rescind the settle!ent. 'is 'onourA at *.93A said$ The present relationship is 2ery close toA if not indeedA withinA the scope of the traditional relations. 7ut whether within or without the traditional relationsA the present facts in2ol2e a degree of confidence equi2alent thereto R 0ndeedA the 2ery presenceA in the circu!stances surrounding this deedA of the paternal ele!ent that per2ades the discussions between all concerned is consistent withA and corroboratesA the e5istence of the special relationship of influence. Re,!ttal Dnce the applicant has satisfied the court that there is a case of actual undue influence or the e5istence of a special relationship of influenceA the stronger party to the transaction has the tas, of rebutting the presu!ption that the transaction was the result of undue influence. The ai! of the stronger party is not necessarily to rebut the nature of the relationship but rather to focus upon pro2ing that (the gift was the independent and wellBunderstood act of a !an in a position to e5ercise a free :udg!ent based on infor!ation as full as that of the donee)$ Iohnson 2 7uttress ;1 *6> 36 CL- 11*A at 1*.. This test is not satisfied si!ply by establishing that the donor understood the transaction$ 7arB1ordecai 2 'illston ?2++.@ <&%C4 63A at ?167@A ?1#*@.

12

Her3e" v Jo$esA 1r and 1rs Ker,ey brought a clai! against 1r and 1rs Iones that arose out of a !ortgage o2er real property. 1r and 1rs Iones entered into a contract for the purchase of a poultry far! at Payneha! near 4delaide. The purchase price was to be paid in instal!ents. 'owe2erA it was a condition that part of the purchase price be secured by way of a second !ortgage o2er another property owned by 1rs Iones. 1r Iones negotiated the sale conditions with 1r Ker,ey and it was not until a wee, after agreeing to buy the property that 1r Iones ad2ised 1rs Iones that he had agreed to buy the Payneha! property and that he !ight get into trouble if 1rs Iones did not pro2ide a !ortgage o2er her property. &hortly thereafter 1rs Iones ga2e a second !ortgage as was requested. 1r and 1rs Iones recei2ed ad2ice fro! 1r Ker,ey)s solicitors. &ubsequentlyA 1rs Iones too, proceedings to ha2e the !ortgage set aside. 4lthough the 'igh Court denied 1rs Iones any equitable reliefA the :udg!ent of /i5on I is i!portant in that it articulates the e5istence of a special equity that protects the position of a wife acting as a guarantor in relation her husband)s debts. /i5on IA at 67#A said$ 4lthough the relation of husband to wife is not one of influenceA yet the opportunities it gi2es are such that if the husband procures his wife to beco!e surety for his debt a creditor who accepts her suretyship obtained through her husband has been treated as ta,ing it sub:ect to any in2alidating conduct on the part of her husband e2en if the creditor be not actually pri2y to such conduct in Gar4ia v ?atio$al A!stralia 8a$3 (1998) 1 . CL- * 3N 133 4L- 61.A the !a:ority of the 'igh Court dra!atically reBaffir!ed the principle in Ker,ey 2 Iones. 0n that case a !arried wo!an and her husband e5ecuted a !ortgage in 1 7 in fa2our of the <ational 4ustralia 7an, that was secured o2er their !atri!onial ho!e. The !ortgage not only secured all !oney owing under the !ortgageA it also secured any !oney owing pursuant to future guarantees gi2en by either the husband or the wife to the ban,. 7etween 1 #3 and 1 #7A the wife signed se2eral guarantees relating to loans !ade to businesses conducted by the husband. There was no e5planation of the precise e5tent of these transactions by the creditor to the wife. 4lthough she was a capable and professional wo!an who had her own business as a physiotherapistA she did not realise that the guarantees were also lin,ed to the !ortgage entered into in 1 7 . 0!portantlyA the wife obtained no personal benefit fro! the transactions. 0n 1 # A the wo!an and her husband were di2orced and she co!!enced proceedings to ha2e the guarantees set aside. The 'igh Court !a:orityA in setting aside the guaranteesA found thatA despite there being no actual undue influence by the husbandA it was ne2ertheless unconscionable for a creditor to enforce a guarantee in such circu!stances. The 'igh Court !a:ority noted that there were two possible ways in which a wife in such circu!stances could see, equitable relief. The first is where there is actual undue influence by a husband o2er a wife and the second is whereA in the absence of actual undue influenceA the Ker,ey 2 Iones principle applies. . DECLARATIONS

D)=%&%!%'&

4 declaration is a nonBcoerci2e order granted by a court that states with finality the true nature of the law or the rightsA duties and interests of the applicant under it.

1*+

The ele!ent of finality is i!portant. ThusA in <si =roup Pty Ltd 2 1o,as ?2++6@ <&%&C 76A the court refused to !a,e an interi! declaration of right as to the true construction of a contractA because the construction of a contract is so!ething to be deter!ined once and for all at the final hearing of the dispute.

W;. u ) !;),K

0t enables the parties to clarify their legal obligations and rights and a2oid further costly litigation. 4 declaration !ay also establish that there are indeed rights to be enforced with the assistance of the courtsA which !ay pro2ide da!ages or so!e coerci2e re!edy such as specific perfor!ance or in:unction upon application.

E>u%!. !' S!#!u!)

The declaration de2eloped originally as an equitable re!edyA though it has since beco!e statutory in nature. The reason for this change in :urisdictional source was the restricti2e practice of equity courts by which they would only grant a declaration as ancillary to so!e other for! of relief. "or e5a!pleA a declaration that obligations were owed under the ter!s of a contract would be granted only pursuant to an action see,ing a further orderA such as one co!pelling specific perfor!ance of those obligations. Parties could not see, the court)s in2ol2e!ent to clarify their legal positions and then be left to resol2e the !atter the!sel2es. 0t was said that equity would not grant (na,ed) or !ere declarations. The usefulness of the declaration in its own right led to its recognition by statute as a for! of relief capable of being granted by all courts and without the need for other re!edies to be sought byA or e2en !ade a2ailable toA the parties Iudicature 4cts /eclaratory relief is (neither a legal nor an equitable re!edyA but statutory)$ Tito 2 %addell ;<o 2> ?1 77@ Ch / 1+6 NSW &upre!e Court 4ct 1 7+ ;<&%> s 73 The consequence of this power is that declarations can be granted irrespecti2e of whether other re!edies are soughtA and whether or not the rights are deri2ed fro! the co!!on law or equity.

D)<$#"#!%'& <'&<)"&%&* !#!u!'". "%*;!

&tatutes !ay e5clude relief "orster 2 Iodode5 4ustralia Pty Ltd ;1 72> 127 CL- .21A =ibbs IA at .*396A indicated that such a restriction upon the court)s :urisdiction could not arise !erely by 2irtue of an i!plication drawn fro! the creation of a specialised tribunal$ The :urisdiction to !a,e a declaration is a 2ery wide one R 'owe2erA the :urisdiction !ay be ousted by statuteA although the right of a sub:ect to apply to the court for a deter!ination of his rights will not be held to be e5cluded e5cept by clear words. Law &ociety of ?S( v (eaver )197/+ 1 <&%L- 271. 0n that caseA the <ew &outh %ales Court of 4ppeal was quite prepared to grant a declaration that a solicitor had been engaged in professional !isconductA despite the e5istence of a specialist body to !a,e such deter!inations. The courtA at 272A said$ 0t is a principle of statutory construction that a superior court of law will not be depri2ed of :urisdiction e5cept by e5press words or necessary i!plication. The pro2ision of another tribunal would not of itself ordinarily be sufficient to do so. D% <")!%'&

1*1

 R%+)" + 4'&/% 7u&<!%'&JW#+)"$). RSL Su(J("#&<; L!/ 019861 3 <&%L*62A at *76 ;hope and Priestley II4>A (a plaintiff does not ha2e an auto!atic right to a declaration because he can point to a failure by the defendant to co!ply with so!e require!ent) 4insworth 2 Cri!inal Iustice Co!!ission ;1 2> 173 CL- 36. 9 procedural fairness

A( !"#<! '" ;.-'!;)!%<#$ >u) !%'&

Mellstro5 v Gar$er )1970+ 1 %L- 6+* 'ar!an LIA at 6+.A said$ ?E@ach party see,s fro! the court a declaration as to the true interpretation of this nonsensical affair. 0t is not said that either of the! has either bro,en any of its pro2isions or see,s to brea, the!N it is not suggested that there are any facts whate2er to be consideredN and we are to !a,e what in !y younger days is to be called a declaration (in the air). That is against the principles of the Court of Chancery as 0 understand the!. G$iversit" o9 ?ew So!th (ales v Moorho!se (197-) 1** CL- 1N 6 4L- 1 * B 1oorhouseA ;a successful author> applied for a declaration that the Hni2ersity of <ew &outh %ales hadA by placing a photocopier in its libraryA authorised pri2ate indi2iduals to infringe his copyright under the ter!s of rele2ant Co!!onwealth legislation. The trial :udge granted the declarationA although he ac,nowledged a lac, of factual e2idence that 1oorhouse)s copyright had been infringed. Dn appealA the 'igh Court re2o,ed the declaration. =ibbs IA at CL- 1+N 4L- 1 #A obser2ed that (as a general ruleA the power to !a,e a declaration will not be e5ercised when the court is called upon to answer a question that is purely hypothetical). This was the case here as the basis for the declaration was not any pro2en factA but rather an assu!ption that 1oorehouse)s copyright had indeed been infringed. :ga$ v (illis (1998) 1 3 CL- .2. Egan refuses to produce papers to Legislati2e Council The Council then passed a resolution ;i> finding hi! guilty of a conte!pt of the 'ouseN ;ii> suspending hi! fro! sitting in the 'ouse for the re!ainder of that dayN and ;iii> ordering hi! to attend at the 'ouse on the following day in order that he should e5plain his refusal to table the docu!ents which had been requested. Egan was escorted fro! the pre!ises on to the street by the Hsher of the 7lac, -od. Egan co!!enced an action in the &upre!e Court of <ew &outh %ales see,ing declarations thatA firstA the ter!s of the resolution were in2alidA and secondA that his re!o2al to the footpath outside Parlia!ent 'ouse constituted a trespass to his person. The !atter was !o2ed to the Court of 4ppealA which found in fa2our of Egan only to the e5tent of finding a trespass to his person fro! the ti!e he left the precincts of parlia!ent and was deposited on the footpath. =audronA =u!!ow and 'ayne IIA at CL- .*#N 4L- 32 A in the 'igh CourtA (dealt with the !erits of the !atter rather than on the footing that a bare declaration with respect to the 2alidity of proceedings in the Legislati2e Council should not be

1*2

!ade). Their 'onoursA at CL- .*#B N 4L- 32 B*+A indicated that this would not ha2e been their preferred approach to such a !atter$ Guestions respecting the e5istence of the powers and pri2ileges of a legislati2e cha!ber !ay present :usticiable issues when they are ele!ents in a contro2ersy arising in the courts under the general law but they should not be entertained in the abstract and apart fro! a :usticiable contro2ersy. /eclaratory relief should be directed to the deter!ination of legal contro2ersies concerning rightsA liabilities and interests of a ,ind which are protected or enforced in the courts. This is so e2en though in the area of public law the ground of equitable inter2ention has not been li!ited to the protection of any particular proprietary or legal entitle!ent of the plaintiff.

N))/ ='" # @")#$ %&!)") !A M $'<u

0n order to obtain a declarationA the applicant !ust ha2e a (real interest) in the !atter concerned. This is otherwise ,nown as locus standi O the require!ent that the applicant has standing to see, the relief sought. 0n respect of pri2ate rights such as those arising under a contractA it is easy to appreciate that persons whose rights are not at sta,e ha2e no standing to as, the court to declare those of others. 7ut it is in the area of public rights that the issue of standing is !ore co!ple5. 8o"4e v Pa%%i$gto$ 8oro!gh Co!$4il )190*@ 1 Ch 1+ A at 11.A 7uc,ley I said$ 4 plaintiff can sue without :oining the 4ttorneyB=eneral in two cases$ firstA where the interference with the public right is such as that so!e pri2ate right of his is at the sa!e ti!e interfered with R andA secondlyA where no pri2ate right is interfered withA but the plaintiffA in respect of his public rightA suffers special da!age peculiar to hi!self fro! the interference with the public right. 0n A!stralia$ Co$servatio$ &o!$%atio$ <$4 v Co55o$wealth (1980 > 1.6 CL. * Challenge to tourist de2elop!ent =ibbs IA at at CL- 3*+N 4L- 27+A said$ ?4@n interestA for present purposesA does not !ean a !ere intellectual or e!otional concern. 4 person is not interested within the !eaning of the ruleA unless he is li,ely to gain so!e ad2antageA other than the satisfaction of righting a wrongA upholding a principle or winning a contestA if his action succeeds or to suffer so!e disad2antageA other than a sense of grie2ance or a debt for costsA if his action fails. 0n this case the 4ustralian Conser2ation "oundation was found not to ha2e a (special interest) in the sense required.

!#&/%

F'") ))#($) <'& )>u)&<) M u!%$%!.

4 declaration should not be granted if it would produce (no foreseeable consequences for the parties).$ 4insworth 4 declaration (!ust ha2e so!e effect on the rights and obligations of the parties to the proceeding in which the declaration is pronounced)$ 4ustralian Co!petition and Consu!er Co!!ission 2 "rancis ;2++.> 1.2 "C- 1

1**

Cr!se v M!ltiple= #t% )2008@ "C4"C 17 A at ?3+@A =oldberg and Iessup II said that courtsA in e5ercising their discretionA could refuse declaratory relief in cases of this type in the following situations$ 1. %here the dispute said to underlie the proceeding as a whole is entirely hypothetical R 2. %here R the underlying dispute has been settledA and it is part of the settle!ent that the court should be as,ed to !a,e particular orders by consent. *. 4s in situation 2A but where the parties are not agreed on the re!edial orders which should be !ade ;albeit that the facts and law are agreed or not contro2ersial>. .. %here the ter!s of the declaration sought record the result of the caseA but do not establish the content of the parties) ongoing rights or obligations. 3. %here the declarations sought are in the for! of what =u!!owA 'ayne and 'eydon II described as (a bad precedent) in -ural Press Li!ited 2 4CCCA 4CCC ?at CL- 1A 4L- 2.3@. Co55o$wealth o9 A!stralia v 8<S Clea$awa" #t% )2008+ <&%C4 17+ The Co!!onwealth co!!enced proceedings on 2# Iune 2++6 in the <&% &upre!e Court against 70& Cleanaway Li!ited in relation to the depositing of industrial wastes between 1 7* and 1 #+ on land owned by the Co!!onwealth at Lucas 'eights in &ydney. The waste was deposited by 0ndustrial %aste Collection Pty Ltd under a licence agree!ent with the Co!!onwealth. The Co!!onwealth is asserting that this licence was no2ated to 7ra!bles 4ustralia Li!ited ;now ,nown as 70& Cleanaway> and thatA as a resultA 70& Cleanaway has the obligation to re!ediate the site in accordance with the ter!s of the licence. Dn 26 &epte!ber 2++7A the <&% &upre!e Court struc, out the Co!!onwealth)s clai! on the basis that it would not fully resol2e the issues between the parties. The Co!!onwealth has appealed against this decision. 4t *+ Iune 2++#A final preparations for the appeal hearing were underway.

D)=)&<)
Laches

Clean hands

&tatutory rightsC ' Sta$3e A So$s Pt" #t% v 67Meara (2007) # &4&- .3+A at .3 $ 0n these circu!stancesA the declaratory orders sought by the plaintiffs would si!ply e5press the result of the application of the rele2ant equitable principles. %hether or not this results in the declarations the!sel2es being properly regarded as equitableA there is little doubt that the plaintiffs are see,ing the aid of equity. 4ccordinglyA there is no reason to e5clude fro! the court)s consideration other equitable principles such as the require!ent as to clean hands.

C"%,%&#$ $#:K
1*.

=edeon 2 Co!!issioner of the <ew &outh %ales Cri!e Co!!ission ;2++#> 2. 4L* #A at .+.A the 'igh Court noted that the (power to !a,e declaratory orders should be e5ercised sparingly where the declaration would touch the conduct of cri!inal proceedings) Aire%ale ?'S .r!st v 8la$% 'ouse of Lords affir!ed the decisions of a "a!ily /i2ision Court and the Court of 4ppealA Ci2il /i2isionA per!itting physicians to withhold !edical treat!ent fro! an insensate patient in a persistent 2egetati2e stateA pro2ided that the patientQs death will i!!inently follow the re!o2al of lifeBsustaining treat!ent. 0n this situationA the !edical treat!ents to be withheld included artificial feeding and antibiotics to fight infection. The court reasoned that this afforded the patient a peaceful and dignified death without sufferingA and fulfilled the course of nature. The court distinguished this circu!stance fro! euthanasiaA a cri!inal offense in which a doctor acti2ely participates in bringing about a patientQs death. 0n the futureA doctors and fa!ilies in si!ilar situations were ad2ised to petition the court before ta,ing any co!parable !easure becauseA in the absence of action by Parlia!entA each instance requires caseBbyBcase deter!ination. Sa$3e" v (hitla5 (1978) 1.2 CL- 1N 21 4L- 3+3A the Crown alleged that certain docu!ents that were the sub:ect of a subpoena in cri!inal proceedings were pri2ileged and therefore did not need to be produced. The 'igh Court granted declaratory relief to the effect that the docu!ents were not pri2ileged. .o5 A 8ill (aterho!se Pt" #t% v Ra4i$g ?ew So!th (ales )2008+ <&%&C 1+1*A at ?7.@A Pal!er I said that a court (is less reluctant to !a,e a declaration in2ol2ing questions of cri!inal law where the facts are clear and undisputedA there are no cri!inal proceedings pendingA and there is a pure question of law to be decided). 0n that caseA %aterhouse sought a declaration that the way it conducted its betting business did not constitute a cri!inal offence under certain legislation. 0n the circu!stances of the caseA his 'onour found that all three of the factors !entioned were satisfied and granted the declaration

1*3

IN7UNCTIONS

0n:unctions are orders !ade by the courts either restraining or requiring perfor!ance of a specific act in order to gi2e effect to the legal rights of the applicant. 4n in:unction that pre2ents a course of action is said to be prohibiti2e in natureA and this is the traditional essence of in:uncti2e relief B it co!!ands cessation of a wrongful act. &o!ewhat rarerA yet not too distant fro! this core principleA are !andatory in:unctions that co!pel so!e beha2iour of the person to who! they are directed. 0n cases where !andatory in:unctions are granted it is clear that the defendantA while not positi2ely engaged in wrongful conductA has ne2erthelessA by a failure or o!ission to actA infringed upon the rights of the applicant. 0n co!!anding the doing of an act by such a defendantA the court is in effect co!!anding the har!ful dor!ancy to cease.

7u"% /%<!%'&K

The origins of in:uncti2e relief are found in equity)s e5clusi2e :urisdiction where it was used solely in support of equitable rights. 7ut equity soon de2eloped an au5iliary :urisdiction through which it offered !ore fle5ible for!s of relief when those of the co!!on law pro2ed to be inadequate. ThusA in particular circu!stancesA in:uncti2e relief is a2ailable to restrain breaches of contractA tortious wrongs and an array of other conduct that infringe upon rights recognised by the co!!on law. 0n addition to the e5clusi2e and au5iliary :urisdictions of equity to order in:unctionsA the co!!on law courts were granted the ability to do the sa!e through statutory refor! enacted in the Co!!on Law Procedure 4ct 1#3. ;H8> which pro2ided a distinct :urisdiction fro! both the e5clusi2e and au5iliary operations of equity. 0t was narrower than the e5clusi2e :urisdiction in that it did not enable the co!!on law courts to issue in:unctions in respect of equitable rightsA nor did it enable the !a,ing of quia ti!et in:unctions. 4t the sa!e ti!eA it was seen as wider than equity)s au5iliary :urisdiction as there was no require!ent of either a proprietary interest or inadequacy of da!ages

7u/%<#!u") A<!

Iudicature 4ct 1#7* ;H8> B &ection 23;#> stipulated as follows$ ?4@n in:unction !ay be granted or a recei2er appointed by an interlocutory order of the court in all cases in which it shall appear to the court to be :ust or con2enient that such order should be !adeN and any such order !ay be !ade either unconditionally or upon such ter!s and conditions as the court thin,s :ust. &upre!e Court 4ct 1 7+ ;<&%> s 66N :=4l!sive 0n:unctions granted in aid of equitable rights ;such as the equitable obligation of confidence or a beneficiary)s rights under a trust> are said to be awarded in equity)s e5clusi2e :urisdiction. 4u5iliary 0n:unctions granted in aid of co!!on law rights ;such as the restraint of breaches of contract or tortious wrongs> or statutory rights are said to be awarded in equity)s au5iliary :urisdiction. The distinction is i!portant because with in:unctions in the au5iliary :urisdictionA a plaintiff !ust first establish that da!ages at co!!on law

1*6

are an inadequate re!edyA and secondlyA it !ay be the case in so!e situations that he or she !ust also show that the right being protected is a proprietary right. (h" %oes it 5atterP The distinction is i!portant because with in:unctions in the au5iliary :urisdictionA a plaintiff !ust first establish that da!ages at co!!on law are an inadequate re!edyA and secondlyA it !ay be the case in so!e situations that he or she !ust also show that the right being protected is a proprietary right. 'owe2erA in the e5clusi2e :urisdictionA neither the inadequacy of da!ages nor the proprietary in nature of the plaintiff)s right are rele2ant in assessing whether the in:unction should be granted.

I&Iu&<!%'& P"'!)<! R%*;!

0n:uncti2e relief will not be ordered if there has been no 2iolation of the plaintiff)s rights ?orth #o$%o$ Railwa" Co v Great ?orther$ Railwa" Co (188*) 11 G7/ *+ I&#/)>u#<. '= /#,#*) Graha5 v 1 D Morris A So$s Pt" #t% )197/+ Gd - 1A 1orris was building a significant construction on ad:oining land owned by =raha!. 4 crane on the building site was left to rotate freely andA when the wind blew in a certain directionA its :ib encroached o2er =raha!)s property and was suspended o2er the roof of her house. Ca!pbell I held that the in2asion of =raha!)s airspace constituted a trespass and that da!ages at co!!on law were inadequate because the danger of the :ib suspended o2er =raha!)s house were 2ery real and would last for 1# !onths until the construction wor, was co!pleted. The trespass would also negati2ely i!pact on the sale price =raha! could get if she wished to sell her ho!e during that ti!e. 1orris argued that the grant of the in:unction would constitute hardship because it would ha2e to dis!antle the crane at considerable e5pense. 'is 'onour re:ected this defence on the basis that the positioning of the crane ste!!ed fro! 1orris)s negligence and its ca2alier attitude towards the building pro:ect.

T;) ")>u%"),)&! '= # -"'-"%)!#". "%*;!

0n Attor$e"-Ge$eral v She99iel% Gas Co$s!5ers Co (18-*) .* E- 11 A at 123A Turner LIA in refusing to grant an in:unctionA said that (?i@t is on the ground of in:ury to property that the in:unction of this court !ust rest). 'owe2erA in Car%ile v #:D 8!il%ers Pt" #t% (1999) 1 # CL- *#+A at * 3N 162 4L- 2 .A at *+.A the 'igh Court held that there is no general require!ent that the right !ust be proprietary before in:uncti2e relief can be granted. 1ost co!!entators now agree that the a2ailability of in:uncti2e relief in equity)s au5iliary :urisdiction is not li!ited to the protection of legal rights that are proprietary in nature. 4 !ore accurate state!ent as to the rele2ance of the proprietary nature of the right in question is gi2en by &pry when he writes as follows$ ?4@lthough it is incorrect to assert that an in:unction can be obtained only in aid of property or in aid of a proprietary rightA there are cases where in the particular circu!stances the only possible reason for equitable inter2ention happens to lie in the support of what !ay be described as a proprietary right. 1*7

T.-) '= I&Iu&<!%'&

Prohibiti2e or !andatoryC 0nterlocutory or perpetual in:unctionsC M#&/#!'". %&Iu&<!%'& Two ,inds Ma$%ator" restorative i$E!$4tio$s The first is the !andatory restorati2e in:unction which co!pels the defendant to repair the consequences of so!e wrongful act that he or she has co!!itted. 0n order to obtain such an in:unctionA the plaintiff !ust show thatA where the wrongful act had not occurred but was !erely threatenedA he or she would ha2e obtained a prohibitory in:unction in relation to the apprehended wrong. "or e5a!pleA in a situation where a house has been built in contra2ention of statutory planning appro2al require!entsA a !andatory restorati2e in:unction will be granted requiring the defendant to de!olish itA pro2ided thatA before the house was builtA the plaintiff can establish that he or she would ha2e obtained a prohibitory in:unction pre2enting the defendant fro! building it. Jessi4a :states Pt" #t% v #e$$ar% )2007+ <&%&C 1.*.A at ?22@A in the conte5t of granting a !andatory restorati2e in:unction where the defendant had al!ost co!pleted the construction of a house in 2iolation of a restricti2e co2enantA 7rereton I said$ Releva$t &a4tors the defendant)s ,nowledge of the wrongful nature of his or her actsN whether the defendant has hastened the co!pletion of the wrongful acts so as to steal a !arch on the Court ;or the plaintiff>N the hardship which would be caused to the plaintiff by the refusal of an in:unctionN the hardship which would be caused to the defendant by the grant of an in:unctionN and the e5tent to which the in:uries suffered by the plaintiff are co!pensable by an award for da!ages. 4ppeal successful in Lennard 2 Iessica Estates Pty Ltd ?2++#@ <&%C4 121A but test a rele2ant state!ent of the law Ma$%ator" e$9or4i$g i$E!$4tio$s Co!pels the defendant to do so!e positi2e act that he or she has pro!ised to do for 2aluable consideration. 0n such cases the court will need to be satisfied that the agree!ent is specifically enforceable and thatA in all the circu!stancesA it is :ust and equitable to grant the in:unction$ 8!r$s Philp .r!st Co Pt" #t% v 1wi3asair &reightli$es #t% (196*) 6* &- ;<&%> . 2A at . 6. 0n 8!si$essworl% Co5p!ters Pt" #t% v A!stralasia$ .ele4o55!$i4atio$s Co55issio$ (1988) #2 4L- . A at 3+1A it was obser2ed that courts will be

1*#

e5tre!ely reluctant to grant a !andatory enforcing in:unction if specific perfor!ance is also a2ailable. Perpet!al i$E!$4tio$s 0n:unctions can also be classified according to the period of ti!e for which the order is to re!ain in force. 4 perpetual in:unction is the in:unction granted after a full hearing of the clai! on its !erits. 7ecause the !erits of the case ha2e been arguedA the perpetual in:unction is intended to finally settle relations between the parties. <$terlo4!tor" i$E!$4tio$s 4n interlocutory in:unction is a pro2isional order !ade at an earlier stage in the proceedings before the court has had the opportunity to assess the !erits of the application. =enerallyA interlocutory in:unctions are e5pressed to be in force until the trial of the action or further order of the court. The ter! (interi! in:unction) is often used interchangeably with interlocutory in:unction. 'owe2erA there is a technical difference between the twoA in that an interi! in:unction is !ore te!porary than an interlocutory in:unctionA and is usually e5pressed to re!ain in force until a specified date prior to the final hearing. ThusA in Co55o$wealth o9 A!stralia v Joh$ &air9a= A So$s #t% (1980) *2 4L- .#3A the plaintiff obtained an e5 parte interi! in:unction on <o2e!ber 1 #+ that re!ained in force until 11 <o2e!ber 1 #+. Dn that date the defendant entered an appearance and the court granted an interlocutory in:unction pending a final hearing of the !atter. 0n &il5s Rover <$ter$atio$al #t% v Ca$$o$ &il5 Sales #t% )1986+ * 4ll E- 772A at 7#+91A 'off!ann I put is as follows$ The principal dile!!a about the grant of interlocutory in:unctionsA whether prohibitory or !andatoryA is that there is by definition a ris, that the court !ay !a,e the (wrong) decisionA in the sense of granting an in:unction to a party who fails to establish his right at the trial ;or would fail if there was a trial> or alternati2elyA in failing to grant an in:unction to a party who succeeds ;or would succeed> at trial. 4 funda!ental principle is therefore that the court should ta,e whiche2er course appears to carry the lower ris, of in:ustice if it should turn out to ha2e been (wrong) in the sense 0 ha2e described. 0n generalA interlocutory in:unctions will only be granted after notice of the application has been gi2en to the defendantA so that the defendant has the opportunity to resist the clai!. ThusA the hearing of such application is usually (inter partes). 'owe2erA in urgent casesA interlocutory or interi! in:unctions can be granted in the absence of the defendantA or (e5 parte)A as occurred initially in Co!!onwealth of 4ustralia 2 Iohn "airfa5 F &ons Ltd. 0n considering whether an interlocutory in:unction should be granted the court !ust apply the test set out in 8ee4ha5 Gro!p #t% v 8ristol #a,oratories Pt" #t% (1968) 11# CL- 61#A at 622B*A where the 'igh Court noted that the following two require!ents had to be satisfied$ The first is whether the plaintiff has !ade out a pri!a facie caseA in the sense that if the e2idence re!ains as it is there is a probability that at the trial of the action

1*

the plaintiff will be held entitled to relief ... The second inquiry is ... whether the incon2enience or in:ury which the plaintiff would be li,ely to suffer if an in:unction were refused outweighs or is outweighed by the in:ury which the defendant would suffer if an in:unction were granted. Pri5a &a4ie Case Re;!ire5e$t Sher4li99 v :$ga%i$e A44epta$4e Corporatio$ Pt" #t% )1978+ 1 <&%L- 72 A at 7*3B7A where 1ahoney I4 noted the following points$ ;i> it did not !ean a finding that at trial the plaintiff would winN

;ii> the ter! pri!a facie is used in the sense of (li,elihood)A and does not refer to a predictionA but rather to the nature of the plaintiff)s caseN ;iii> the ter! (pri!a facie) !ay !ean so!ething less than (!ore li,ely than not)A and there is no require!ent that the plaintiff !ust show a (better than e2en) chance of ulti!ate successN and ;i2> a pri!a facie case !ust always be establishedA irrespecti2e of whether the second test of balance of con2enience fa2ours the grant of interlocutory relief. 0n 2arious cases :udges use the e5pression (serious question to be tried) rather than (pri!a facie case). ThusA in A8C v 67?eill (2006) 227 CL- 37A at 6#N 22 4L- .37A at .66A =leeson CI and Crennan IA obser2ed that a plaintiff had to establish (that there is a serious question to be tried as to the plaintiff)s entitle!ent to relief). The use of the (serious question to be tried) for!ulation ste!s fro! a passage in A5eri4a$ C"a$a5i% Co v :thi4o$ #t% )197-+ 4C * 6A at .+7$ ?1 73@ 1 4ll E3+.A at 31+A where Lord /iploc, said$ The use of such e5pressions as (a probability)A (a pri!a facie case)A or (a strong pri!a facie case) in the conte5t of the e5ercise of a discretionary power to grant an interlocutory in:unction leads to confusion as to the ob:ect sought to be achie2ed by this for! of te!porary relief. The court no doubt !ust be satisfied that the clai! is not fri2olous or 2e5atiousN in other wordsA that there is a serious question to be tried. 8ala$4e o9 Co$ve$ie$4e Re;!ire5e$t The court !ust weigh up the co!parati2e in:ury that will arise fro! granting or withholding an in:unction pending trial of the actionA see,ing out the !a:or ris, of da!age andA in particularA of any irreparable da!age. 0n Ca"$e v Glo,al ?at!ral Reso!r4es pl4 )198/+ 1 4ll E- 223A at 2*7A this aspect was referred to as (the balance of the ris, of doing an in:ustice). 0n assessing the ris, of da!ageA it does not !atter thatA at the stage of the interlocutory applicationA the plaintiff has suffered no da!ageA pro2ided that actual da!age will reasonably result if the interlocutory in:unction is not granted$ Swi5s!re (#a,oratories) Pt" #t% v M4Do$al% )1979+ 2 <&%L- 7 6. E5a!ple 0n 'er5es4e4 v Car4ag$i )2008+ <&%&C 1#*A 'er!escec purchased an 0talian restaurant in <ewcastle 9 the 7ene2enuti B fro! Carcagni. &oon thereafterA Carcagni opened up a co!peting 0talian restaurant 9 the =rifone B a short distance away fro!

1.+

the 7ene2enuti. 'er!escec clai!ed that this constituted a breach of a co2enant in restraint of trade that was agreed to when Carcagni sold his restaurant. 'e initiated proceedings for an in:unction to enforce the restraint. E2en though 'er!escec established that he had a strong case against CarcagniA the application for an interlocutory in:unction failed on the grounds of the balance of con2enience. Dn this issueA 7arrett IA at ?21@B?2*@A said 0f an interlocutory in:unction is grantedA =rifone would ha2e to close down pending the court)s final decision on the entitle!ent of ?'er!escec@ to relief by way of per!anent in:unction or da!ages or both. That would be a drastic result. 0f =rifone were able to stay open with an in:unction in placeA it could only be on the basis that the co!pany of which ?Carcagni@ is sole shareholder and director was no longer the operator and ?Carcagni@ hi!self was no longer the !anager. Dn ?Carcagni)s@ e2idenceA such a situation would be i!possible to achie2e in any real senseA gi2en that =rifone is in substance a oneB!an business operated by ?Carcagni@A albeit with the assistance of e!ployees. The practical result of an interlocutory in:unction would be suspension of ?Carcagni)s@ =rifone business R ?T@his is a case in which any in:unction pending trial would produce the 2ery result to be put in issue at a final hearing. &uch an interlocutory in:unction would affect rights in a per!anent fashion on e2idence which !ay be supple!ented and !ay be found to bear so!e different co!ple5ion at the trial. 4t this stageA thereforeA (the balance of the ris, of doing in:ustice) fa2ours ?Carcagni@A e2en though the prospects that he will in due course be sub:ected to a per!anent in:unction and also be ordered to pay da!ages and costs appearA at least at this stageA to be strong. I&!)"$'<u!'". ,#&/#!'". %&Iu&<!%'& =u!!ow I in 8!si$essworl% Co5p!ters Pt" #t% v A!stralia$ .ele4o55!$i4atio$s Co55issio$ (1988) #2 4L- . A at 3+2B3+*$ ?1@andatory in:unctions generally carry a higher ris, of in:ustice if granted at the interlocutory stage ?because@$ they usually go further than the preser2ation of the status quo by requiring a party to ta,e so!e new positi2e step or undo what he has done in the pastN an order requiring a party to ta,e positi2e steps usually causes !ore waste of ti!e and !oney if it turns out to ha2e been wrongly granted than an order which !erely causes delay by restraining hi! fro! doing so!ething which it appears at the trial he was entitled to doN a !andatory order usually gi2es a party the whole of the relief which he clai!s in the writ and !a,es it unli,ely that there will be a trial R 4n order requiring so!eone to do so!ething is usually percei2ed as a !ore intrusi2e e5ercise of the coerci2e power of the state than an order requiring hi! te!porarily to refrain fro! action. The court is therefore !ore reluctant to !a,e such an order against a party who has not had the protection of a full hearing at trial. "or so!e ti!e it was said that a plaintiff see,ing an interlocutory !andatory in:unction would need to show that there was a (high degree of assurance) that he or she would succeed at trial$ Shepher% 'o5es #t% v Sa$%ha5 )1971+ Ch *.+A at *31N ?1 7+@ * 4ll E- .+2A at .12. 'owe2erA this test has now been re:ected$ ."5,oo3 Pt" #t% v State o9 Bi4toria )2006+ E&C4 # 8!r3e v &rasers #or$e Pt" #t% )2008+ <&%&C ##A at ?.@A 7rereton I said that (the sa!e considerations apply to an interlocutory !andatory in:unction as to any

1.1

other interlocutory in:unctionA although the !andatory nature of the relief soughtA and the potential consequences if it later be undoneA is often telling on ?the issue of@ the balance of con2enience). I&!)"$'<u!'". %&Iu&<!%'& %& !;) <'&!)C! '= /)=#,#!%'& A8C v 67?eillA at CL- 6#B N 4L- .66B7A after referring to the basic principles go2erning the granting of interlocutory in:unctionsA =leeson CI and Crennan I said$ 0n the conte5t of a defa!ation caseA the application of those organising principles will require particular attention to the considerations which courts ha2e identified as dictating caution. "ore!ost a!ong those considerations is the public interest in free speech. 4 further consideration is thatA in the defa!ation conte5tA the outco!e of a trial is especially li,ely to turn upon issues that areA by hypothesisA unresol2ed. %here one such issue is :ustificationA it is co!!only an issue for :ury decision. 0n additionA the plaintiff)s general character !ay be found to be such thatA e2en if the publication is defa!atoryA only no!inal da!ages will be awarded. U&/)"!#B%&* # !' /#,#*) 4 usual condition of granting an interlocutory in:unction is that the plaintiff !ust gi2e an underta,ing as to da!ages. The underta,ing operates as a protection to the defendant should the court later rule that the interlocutory in:unction should not ha2e been granted. The underta,ing binds the plaintiff to co!pensate the defendant for any da!age suffered by the defendant on account of the granting of the interlocutory in:unction. 0f the plaintiff refuses to gi2e the underta,ingA the interlocutory in:unction will be refused$ &irst ?et4o5 Pt" #t% v .elstra Corporatio$ #t% (2000) 1+1 "C- 77 ThusA in Ca5,ri%ge Cre%it Corporatio$ #t% v S!r9ers7 Para%ise &orests #t% )1977+ Gd - 261A an underta,ing gi2en by an insol2ent co!pany that was in recei2ership was ta,en to be worthless and interlocutory relief was denied. 'owe2erA the interlocutory in:unction will be granted if a satisfactory third person pro2ides the underta,ing. 0t !ay be the case that the defendant or third party !ay also ha2e to pro2ide adequate security so as to ensure that the underta,ing is not rendered worthless or less 2aluable by subsequent e2ents leading up to the final hearing of the !atter. Qu%# T%,)! I&Iu&<!%'& =enerallyA in:uncti2e relief relates to so!e infringe!ent or alleged infringe!ent of the plaintiff)s rights. 'owe2erA inunctions can be granted in relation to circu!stances where there has not yet been an infringe!ent of rights. 0n:unctions granted on the basis that there is a threat that the plaintiff)s rights will be infringed are ,nown as quia ti!et in:unctions. The e5pression (qui ti!et) !eans (since he fears). The essential purpose of a quia ti!et in:unction is to pre2ent a wrong being co!!itted$ Pro4tor v 8a"le" (1889) .2 Ch / * +A at * #. Traditionally the quia ti!et in:unction was only a2ailable in relation to equitable rightsA but is now see!ingly a2ailable in respect of all !atters by 2irtue of the in:unction pro2isions of legislation i!ple!enting the :udicature syste! 0n Re%la$% 8ri43s v MorrisA at 4C 663N 4ll E- 37 A Lord Hp:ohn obser2ed that a quia ti!et in:unction arises in the following two types of case$ ;i> whereA as yetA no har! to the defendant has occurred but it is threatened or intendedA and ;ii> where

1.2

har! has been done by the earlier actions of the defendantA and the plaintiff has been co!pensatedA but the plaintiff fears that future wrongs !ay be co!!itted by the defendant 0n assessing whether to grant a quia ti!et in:unction the courts ha2e fra!ed the test for the li,elihood of an infringe!ent of the plaintiff)s rights with e5pressions such as (reasonably certain) in &CA &i$a$4e Pt" #t% v Moreto$ Ce$tral S!gar Mill Co #t% )197-+ Gd - 23+A at 23*A and (2ery strong probability) in -edland 7ric,s 2 1orrisA at 4C 663N 4ll E- 37 . 4s to the necessary loss or da!age that is threatenedA it has been said by the courts that it !ust be (gra2e da!age) in .h"$$e v Petrie )197-+ Gd - 26+A at 262A (substantial) in "C4 "inance 2 1oreton Central &ugar 1illA at 23*A and (2ery substantial) in 'ooper v Rogers )197-+ Ch .*A at 3+N ?1 7.@ * 4ll E- .17A at .21 I&Iu&<!%'& !' E&='"<) N)*#!%+) S!%-u$#!%'& =enerallyA the equitable enforce!ent of contractual rights is by !eans of an order for specific perfor!ance which requires the defendant to carry out his or her contractual obligation. This is the order that is usually sought in relation to positi2e contractual obligations. 'owe2erA where there is a negati2e contractual obligationA the in:unction is the usual equitable relief that is sought. 4 negati2e contractual obligation is one where inacti2ity on the part of the pro!isor is the essence of the obligation. <egati2e contractual obligations can be e5press or i!plied. The classical illustration of an enforceable negati2e contractual obligation is a reasonable restraint of trade. 4n i!portant illustration of in:uncti2e relief being sought to enforce negati2e contractual obligations is with restraints of trade in the conte5t of personal ser2ice contracts. The typical e5a!ple of such cases occurs when JA a person with particular s,ills and talentsA pro!ises to pro2ide those s,ills and talents for the benefit of K ;the positi2e contractual obligation>A but also pro!ises not to pro2ide those s,ills and talents for the benefit of anybody else ;the negati2e contractual obligation>. 0f J atte!pts to breach the negati2e contractual obligationA K will see, to enforce it by obtaining in:uncti2e relief to pre2ent J perfor!ing those ser2ices for so!e other person. The usual reason that J wants to breach the negati2e contractual obligation is that he or she no longer wants to perfor! the positi2e contractual obligation and wants to offer his or her s,ills and talents to L. K)s !oti2ation for see,ing the in:unction is thatA if J is pre2ented fro! offering his or her s,ills and talents to LA J will decide to perfor! his or her positi2e contractual obligation. K will rarely see, to obtain an order against J for specific perfor!ance of the positi2e contractual obligation because it willA in !ost casesA be refused on the basis that contracts for personal ser2ices are rarely specifically enforced #!5le" v (ag$er (18-2) .2 E- 6#7. The bac,ground to this se!inal case was a cutBthroat battle between the !anagers of two London opera houses for the ser2ices of Iohanna %agnerA a fa!ous opera singer. Lu!leyA the !anager of the established 'er 1a:esty)s theatreA was first to contract %agner for a threeB!onths) season in 1#32. &ignificantlyA %agner was held to ha2e also pro!ised that during that period she was (not to use her talents at any other theatreA nor in any concert or reunionA public or pri2ateA without the consent of 1r Lu!ley). 7efore her contract with Lu!ley startedA =yeA the !anager of the recently established Co2ent =arden opera theatreA negotiated a contract with %agner for the opera singer to perfor! at

1.*

Co2ent =arden. Perfor!ance by %agner of her contract with =ye would ha2e !eant breaching the negati2e contractual obligation in her contract with Lu!ley. Lu!ley soughtA and obtainedA an in:unction to pre2ent her fro! doing so. Lord &t LeonardsA at 6 *A obser2ed that the effect of the in:unction was only to pre2ent %agner fro! appearing at Co2ent =arden and that it did not require her to fulfil her obligation to Lu!ley at 'er 1a:esty)s theatreA so!ething which his Lordship said he could not directly enforceA although he conceded that the in:unction could well te!pt %agner to perfor! her contract at 'er 1a:esty)s theatre. (ar$er 8ros Pi4t!res <$4 v ?elso$ )19*7+ 1 87 2+ A B %arner 7ros !o2ie studio obtained an in:unction against 7ette /a2isA precluding the legendary !o2ie star fro! starring in !o2ies produced by other !o2ie studios for a period of three years. 7ranson IA at 21 B2+A conceded that /a2is could well be te!pted to continue to !a,e !o2ies with %arner 7rosA but ruled that this was no grounds for refusing the in:unction. 4 crucial factor in his 'onour)s decision was the fact that /a2is was an intelligent and capable wo!an who could readily obtain alternati2e e!ploy!ent if she resol2ed not to wor, for %arner 7ros. The fact that this alternati2e e!ploy!ent would be less financially rewarding than acting was not rele2ant. 0n Page 6$e Re4or%s #t% v 8ritto$ )1967+ * 4ll E- #22A !e!bers of the pop group (The Troggs) entered into a !anage!ent and agency agree!ent with Page Dne -ecords for a ter! of fi2e years and pro!ised not to engage anyone else to be their !anager and agent. The Troggs sought to engage another !anager and agent. Page Dne -ecords sought an in:unction to pre2ent the! fro! doing so. 0n refusing the applicationA &ta!p IA at #27A after referring to %arner 7ros 2 <elsonA said$ ?%@here a contract for personal ser2ice contains negati2e co2enantsA the enforce!ent of which will a!ount either to a decree of specific perfor!ance of the positi2e co2enants of the contract or to the gi2ing of a decree under which the defendant !ust either re!ain idle or perfor! those positi2e co2enantsA the court will not enforce those negati2e co2enants. &ta!p I doubted that The Troggs could continue to function without the ser2ices of a !anager and agent or see, other e!ploy!entA and that they would need a !anager and agent to function successfully as a pop group. 4ccording to &ta!p IA at #27A this was so because$ The Troggs are si!ple personsA of no business e5perienceA and could not sur2i2e without the ser2ices of a !anager R 0 entertain no doubt that they would be co!pelledA if the in:unction were grantedA R to continue to e!ploy ?Page Dne -ecords@ as their !anager and agent R ?0@t would be a bad thing to put pressure on the Troggs to continue to e!ploy as a !anager and agent oneA whoA unli,e the plaintiff in those cases ?such as Lu!ley 2 %agner and %arner 7ros 2 <elson@ who had !erely to pay the defendant !oneyA has duties of a personal and fiduciary nature to perfor! and in who! the TroggsA for reasons goodA bad or indifferentA ha2e lost confidence and who !ayA for all 0 ,nowA fail in its duty to the!. I&Iu&<!%'& !' )&='"<) !#!u!'". "%*;! %here there has been a breach of statuteA there are a nu!ber of possibilities in so far as obtaining an in:unction is concerned. "irstA the legislation !ay e5pressly or

1..

i!pliedly e5clude any re!edy other than those which it e5pressly pro2ides forA thereby e5cluding the re!edy of an in:unction$ Ra5sa" v A,er9o"le Ma$!9a4t!ri$g Co5pa$" (A!stralia) Pt" #t% (19*-) 3. CL- 2*+A at 2* B.+A 233B6. 4 second possibility is that the statute directly confers upon a person or category of persons the right of enforce!ent. This often occurs in the conte5t of local go2ern!ent legislation. ThusA in Cooney 2 8uBringBgai 1unicipal CouncilA the local council was authorised by s 3#7 of the then Local =o2ern!ent 4ct in <ew &outh %ales to see, in:uncti2e relief to restrain the defendant fro! using pre!ises for the purposes of a trade or business contrary to the pro2isions of a residential procla!ation The third possibility is thatA if no pri2ate right is infringed by a breach of statuteA a person will be able to see, in:uncti2e relief if he or she can bring the!sel2es within the principles of 7oyce 2 Paddington 7orough Council ?1 +*@ 1 Ch 1+ 0n e5ercising its discretion to grant reliefA a court will grant an in:unction only if the breach of statute also a!ounts to an infringe!ent of public rights$ -a!say 2 4berfoyle 1anufacturing Co!pany ;4ustralia>A at 2* . -epeated infringe!ents of the statute !ay constitute an infringe!ent of public rights. 0n =ouriet 2 Hnion of Post Dffice %or,ers A at 4C .#1N 4ll E- at #*A Lord %ilberforce stated that the granting of relief in such cases was (an e5ceptional power confined R to cases where an offence is frequently repeated in disregard of aA usuallyA inadequate penalty or to cases of e!ergency). 0n <ewport 7orough Council 2 8han ?1 +@ 1 %L- 11#3A at 11 *A 7elda! LI obser2ed that the discretion to grant the in:unction is not based upon the defendant)s deliberate and flagrant flouting of the law. -atherA the court needs to draw the inference that the defendant)s unlawful acts will continue unless and until effecti2ely restrained by the law and that nothing short of an in:unction will suffice to so restrain the defendant

M#")+# '"/)"

0n &o!rie v #e Ro!= )2007+ 1 4ll E- 1+#7A at 1+ +A Lord 7ingha! of Cornhill described the purpose of 1are2a orders as follows$ 1are2a ;or freeMing> in:unctions were fro! the beginningA and continue to beA granted for an i!portant but li!ited purpose$ to pre2ent a defendant dissipating his assets with the intention or effect of frustrating enforce!ent of a prospecti2e :udg!ent. They are not a proprietary re!edy. They are not granted to gi2e a clai!ant ad2ance security for his clai!A although they !ay ha2e that effect. They are not an end in the!sel2es. They are a supple!entary re!edyA granted to protect the efficacy of court proceedingsA do!estic or foreign. The 1are2a order was initially ,nown as a 1are2a in:unction. 'owe2erA in Cardile 2 LE/ 7uilders Pty Ltd ;1 > 1 # CL- *#+A at * 3B6A .+1N 162 4L- 2 .A at *+.A *+#A =audronA 1c'ughA =u!!ow and Callinan II pointed out that the word (in:unction) was inappropriate and should be replaced with the word (order) on the basis that the doctrinal basis of an in:unction differs fro! that of the 1are2a order. The difference ste!s fro! the fact that an in:unction protects a clai!ant)s legal or equitable rights whereas the purpose of a 1are2a order is to pre2ent the frustration of the court process$ -"/ Ltd 2 'arris ?2++#@ %4&C4 #7A at ?*7@. 0n Cardile 2 LE/

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7uildersA at CL- .12N 4L- *1#A 8irby I preferred the ter! (asset preser2ation order). 0n England a 1are2a order is generally now referred to as a (freeMing order) 7u"% /%<!%'& The !ost contro2ersial issue surrounding the 1are2a order when it first appeared was the question of the :urisdiction of the court to !a,e such an order. The 1are2a order)s effect was to pre2ent an alleged debtor fro! freely dealing with his or her assets. 'owe2erA established authority had long ago declared that a person (cannot get an in:unction to restrain a !an who is alleged to be a debtor fro! parting with his property)$ Lister 2 &tubbs ;1# +> .3 Ch / 1A at 1.. 0nitially the English courts asserted that the then successor pro2ision to s 23;#> of the Iudicature 4ct 1#7* granted the! :urisdiction to !a,e 1are2a orders. &ection 23;#> and its equi2alent pro2isions in 4ustralian :urisdictions enable the court to grant interlocutory in:unctions in any cases where it is :ust and con2enient to do so Su-"),) C'u"! A<! 1970 0NSW1 66 * Re;!ire5e$ts 9or o,tai$i$g a Mareva 6r%er 0n Gle$woo% Ma$age5e$t Gro!p Pt" #t% v Ma"o (1991) 2 E- . A at . B3.A Koung CI indicated that there are three basic require!ents to be satisfied before a court will grant a 1are2a order. They are$ ;i> that the plaintiff a good arguable caseN ;ii> that there is a ris, of dissipation or secretion of assets so as to render any :udg!ent which the plaintiff !ay obtain nugatoryN and ;iii> that the balance of con2enience fa2ours the grant of a 1are2a order. 'is 'onourA at 3.B3A also obser2ed that (the three ele!ents o2erlap and that the granting of a 1are2a ?order@ is always a !atter of discretion). "or e5a!pleA (as the strength of the arguable case di!inishes so the balance of con2enience !o2es in fa2our of the defendants and 2ice 2ersa). A ris3 o9 %issipatio$ o9 assets The ris, that the defendant will dissipate assets before :udg!ent refers to the underlying basis of the 1are2a order and has been described as (the heart and core) of the 1are2a order$ 8ar4la"-Joh$so$ v H!ill )1980+ * 4ll E- 1 +A at 1 .. There !ust be a real danger that the defendant will default if :udg!ent is obtained against hi! or her .he plai$ti997s 4a!se o9 a4tio$ 4 1are2a order can only be obtained if the plaintiff has a cause of action that is :usticiable within the :urisdiction. 0f the 1are2a order is not ancillary to so!e such preBe5isting cause of action it will not be granted. 0n Sis3i$a v Distos Co5pa$ia ?aviera SA )1979+ 4C 21+A at 236N ?1 77@ * 4ll E- #+*A at #2.A Lord /iploc, said$ 4 right to obtain ?a 1are2a order@ is not a cause of action. 0t cannot stand on its own. 0t is dependent upon there being a preBe5isting cause of action against the defendant arising out of an in2asionA actual or threatened by hi!A of a legal or equitable right of the plaintiff for the enforce!ent of which the defendant is a!enable to the :urisdiction of the court. The right to obtain ?a 1are2a order@ is !erely ancillary and incidental to the preBe5isting cause of action. 0t is granted to preser2e the status quo pending the ascertain!ent by the court of the rights of the parties. 8ala$4e o9 4o$ve$ie$4e

1.6

0n e5ercising its discretion whether or not to grant a 1are2a order the court weighs up the strength of the plaintiff)s cause of action and the ris, that the defendant will dissipate his or her assets against 2arious discretionary factors such as delay and whether there has been a full and fran, disclosure by the plaintiff. 0n Car%ile v #:D 8!il%ersA at CL- *#+N 4L- *11A the 'igh Court said$ /iscretionary considerations generally also should carefully be weighed before an order is !ade. 'as the applicant proceeded diligently and e5peditiouslyC 'as a !oney :udg!ent been reco2ered in the proceedingsC 4re proceedings ;for e5a!ple ci2il conspiracy proceedings> a2ailable against the third partyC %hyA if so!e proceedings are a2ailableA ha2e they not been ta,enC %hyA if proceedings are a2ailable against the third party and ha2e not been ta,en and the court is still !inded to !a,e a 1are2a orderA should not the grant of the relief be conditioned upon an underta,ing by the applicant to co!!enceA and ensure so far as is possible the e5pedition ofA such proceedingsC 0t is difficult to concei2e of cases where such an underta,ing would not be required. Guestions of this ,ind !ay be :ust as rele2ant to the decision to grant 1are2a relief as they are to a decision to dissol2e it. These are !atters to which courts should be ali2e.

A&!'& P%$$)" O"/)"

The 4nton Piller order deri2es its na!e fro! the case of A$to$ Piller 1G v Ma$!9a4t!ri$g Pro4esses #t 4n 4nton Piller order is si!ilar to a 1are2a order in that it see,s to preser2e property and pre2ent the defendant frustrating the ad!inistration of :ustice. 7utA rather than ensuring that the :udg!ent debt will ulti!ately be !et by the defendantA it ai!s to gather and protect crucial e2idence to the plaintiff)s caseA which !ay be yet to co!!ence. The 4nton Piller order enables this by ordering the defendant to allow the plaintiff access to the defendant)s pre!ises so that the plaintiff !ay inspectA copy and collect !aterial which is necessary for it to successfully bring its case but which it fears will be destroyed$ #o$g v Spe4i9ier P!,li4atio$s Pt" #t% (1998) .. <&%L- 3.3A at 3.7 d ?1 76@ 1 Ch 33 7u"% /%<!%'& 0n Si5se3 v Ma4phee (1982) 1.# CL- 6*6A at 6.+B1N .+ 4L- 61A at 63A &tephen IA in a single instance decision in the 'igh CourtA stated that the power of the court to grant an 4nton Piller order ste!!ed for! the court)s inherent :urisdiction. 0n other cases it has been said that the :urisdiction rests either on the inherent :urisdiction of the court or the statutory conferral of powers to aid the operation of the courtsA such as s 2* of the "ederal Court 4ct 1 76 ;Cth>$ Mi4roso9t Corp v Goo%view :le4tro$i4s Pt" #t% (1999) .6 0P- 13 . 0n all 4ustralian :urisdictions the court rules now e5plicitly confer power upon the court to grant 4nton Piller orders R)>u%"),)&! ='" #& A&!'& P%$$)" O"/)" 0n A$to$ Piller 1G v Ma$!9a4t!ri$g Pro4esses #t%A at Ch 62N 4ll E- 7#.A Dr!rod LI set out the essential ele!ents of obtaining this e5 parte relief as follows$ "irstA there !ust be an e5tre!ely strong pri!a facie case. &econdlyA the da!ageA potential or actualA !ust be 2ery serious for the applicant. ThirdlyA there !ust be clear e2idence that the defendants ha2e in their possession incri!inating

1.7

docu!ents or thingsA and that there is a real possibility that they !ay destroy such !aterial before any application inter partes can be !ade The (clear e2idence) of both possession and ris, of destruction required under the third ele!ent is certainly the greatest challenge to the plaintiff. /espite an early generosity in granting 4nton Piller orders by the courtsA it is apparent that !ore is needed these days than a !ere suspicion that the defendant will shred the e2idence. 4n 4nton Piller order is not an in2estigatory order$ 1icrosoft Corp 2 =ood2iew Electronics Pty Ltd ;1 > .6 0P- 13 A at 16.N '"tra4 Co$ve"ors v Co$ve"ors <$ter$atio$al #t% )1982+ * 4ll E- .13A at .1# T;) "%*;! '= !;) /)=)&/#&! 4 defendant who is confronted on his or her doorstep by a party of persons wishing to e5ecute an 4nton Piller order faces a fairly onerous tas, in resisting the!. -efusal to co!ply with the court)s order isA of courseA conte!pt and this will be found e2en when the defendant has refused to co!ply in order to launch an ulti!ately illBfated application to ha2e the order dissol2ed. The order !ay be challenged on the ground that any of the require!ents the plaintiff was supposed to !eet B including the !anner of the order)s e5ecution B ha2e not been properly addressed. =i2en the high i!portance which the court places upon a plaintiff in respect of !eeting these require!ents prior to an order being grantedA it is e5tre!ely unli,ely that such an order will be set aside upon application by the defendant.

1.#

SPECIFIC PERFORMANCE 5 MONETARY REMEDIES

0n (olsele" <$vest5e$ts Pt" #t% v Gillespie )2007+ <&%C4 *3#A at ?**@A &antow I4 ;0pp and Tobias II4 agreeing> said that (the trigger for the co!!ence!ent of a specific perfor!ance suit will be so!e threat of refusalA e5press or at least i!pliedA or so!e actual refusalA on the part of a contracting party to perfor! the contract in whole or part). 'is 'onourA at ?1 @A also noted thatA in cases of a threatened breach of a contractA the threat does not need to be e5plicitA but there !ust be !ore than !erely a theoretical or re!ote possibility of a breach. 'owe2erA in such casesA his 'onourA at ?.7@A also obser2ed that a court has (to consider the li,elihood or degree of ris, of nonBperfor!ance before granting specific perfor!ance. 4lso to be considered is the discretionary factor of hardship and balance of con2enience).

I& -)" '&#,

Li,e !ost equitable re!edies specific perfor!ance is in persona! in nature. This essentially !eans that the re!edy attaches to the person of the defendant rather than to his or her property ;in re!>. This has the result thatA pro2ided the defendant is within the :urisdiction of the courtA specific perfor!ance can be ordered e2en though the property the sub:ect of the contract !ay be outside the court)s :urisdiction. ThusA in Ri4har% (est A Part$ers (<$ver$ess) #t% v Di43 )1969+ 2 Ch .2.A an English court ordered specific perfor!ance of a contract for the sale of land where the property was located beyond the court)s :urisdiction in &cotland. 7ecause of the in persona! nature of specific perfor!anceA the sanction for nonB co!pliance with an order for specific perfor!ance focuses on the person and not on the contract or property the sub:ect of the contract. ThusA a defendant who fails to co!ply with the order will be guilty of conte!pt of court with the ulti!ate consequence of being i!prisoned for such conte!pt

4%&/%&* <'&!"#<! &'! ='" +#$u#($) <'& %/)"#!%'&

<eed 2aluable consideration

I&#/)>u#<. '= /#,#*) #! <',,'& $#:

0f a plaintiff can be adequately co!pensated by an award of da!ages at co!!on law the court has no :urisdiction to order specific perfor!ance. The adequacy or inadequacy of co!!on law da!ages is deter!ined by reference to the date of the order for specific perfor!ance and not the date of the contract$ A?@ :=e4!tors A .r!stees #t% v '!5es #t% )1990+ E- 613A at 6*2 The question to be answered on the issue of the adequacy of da!ages is (whether relegating the plaintiff to da!ages would lea2e it in as fa2ourable a position in all respects as would e5ist if the defendant)s obligation were specifically perfor!ed)$ 0nternational 4d2isor &yste!s Pty Li!ited 2 JKKJ Pty Li!ited ?2++#@ <&%&C 2A at ?.1@ Contracts for personalty Contracts for land

P)" '&#$ )"+%<) <'&!"#<!

Equity will not enforce a contract if to do so would result in co!pelling the defendant to !aintain a personal relationship with the plaintiff. The underlying 1.

rationale for this principle lies in hu!an nature and the undesirability of !aintaining a personal relationship against the will of one of the parties to the contract. 4s was obser2ed by "ry LI in De &ra$4es4o v 8ar$!5 (1890) /- Ch/ .*+A at .*#A courts (are bound to be :ealousA lest they should turn contracts of ser2ice into contracts of sla2ery)

C'& !#&! <'u"! u-)"+% %'&

Contracts in which the parties) obligations are i!precisely defined will generally not be specifically enforced. The rationale for this principle ste!s fro! the fact that that nonBco!pliance with an order for specific perfor!ance is punishable as a conte!pt of court. =i2en the quasiBcri!inal consequence of conte!ptA it is entirely appropriate that the obligation to be specifically enforced be sufficiently certain and precise so as to !a,e the defendant)s dutyA in co!plying with the orderA clear. 0n Co-operative <$s!ra$4e So4iet" #t% v Arg"ll Stores ('ol%i$gs) #t% )1998+ 4C 1A at 1291*N ?1 7@ * 4ll E- 2 7A at 1*+29*A Lord 'off!ann said$ 0t is the possibility of the court ha2ing to gi2e an indefinite series of rulings to ensure the e5ecution of the order which has been regarded as undesirable. %hy should this be soC 4 principal reason is that R the only !eans a2ailable to the court to enforce its order is the quasiBcri!inal procedure of punish!ent for conte!pt R The prospect of co!!ittal or e2en a fineA with the da!age to co!!ercial reputation which will be caused by a finding of conte!pt of courtA is li,ely to ha2e at least two undesirable consequences. "irstA the defendant R has to !a,e decisions under a sword of /a!ocles R &econdlyA the seriousness of a finding of conte!pt for the defendant !eans that any application to enforce the order is li,ely R to be e5pensi2e in ter!s of cost to the parties and the resources of the :udicial syste!.

H#"/ ;%-

4n order for specific perfor!ance will be refused if it would result in unconscionable hardship upon the defendant. 0t is not any hardship to the defendant that will suffice. 4s was !ade clear in Dowsett v Rei% (1912) 13 CL- 6 3A the court !ust balance the potential hardship to the defendant that would result if specific perfor!ance were granted with the potential hardship to the plaintiff if specific perfor!ance were refused. 0f the two cancel each other outA specific perfor!ance will be ordered despite the hardship to the defendant.

3%!%#!%&* =#<!'"

Equitable relief will be refused if the contract is affected by 2itiating factors due to the defendant)s conduct or actions. ThusA contracts induced by a defendant)s !isrepresentationA !ista,eA duressA undue influence

U&<'& <%'&#(%$%!.

L#<B '= ,u!u#$%!. &pecific perfor!ance is not a2ailable to a plaintiff unless the defendant could also ha2e obtained relief against the plaintiff. This principle of !utuality cannot be raised by a defendant if the reason that the defendant could not get equitable relief against the plaintiff is to be found in the defendant)s own conduct or default. ThusA if the defendant cannot get equitable relief because of so!e !isrepresentationA unconscionable conductA undue influenceA laches and the li,e on his or her partA the plaintiff will not be denied relief on lac, of !utuality grounds. The classic e5a!ple of a lac, of !utuality is a contract with a !inor. The !inor will be unable to recei2e

13+

an order for specific perfor!ance against the other party as that person will be unable to insist upon his or her rights against the !inor. ThusA there is a lac, of !utualityA which i!pairs the !inor)s own ability to see, the equitable re!edy$ 8o"% v R"a$ (19/7) .# &- ;<&%> 16* The critical aspect of the !utuality principle is the question of when !utuality !ust be present. 0n Pri4e v Stra$ge )1978+ Ch **7N ?1 77@ * 4ll E- *71A it was held that the critical ti!e for !utuality to be present is the date on which the court is to !a,e the order for specific perfor!ance. The fact that !utuality !ay not ha2e e5isted at an earlier ti!e is irrele2ant. 0n Price 2 &trangeA !utuality was not present at the ti!e of the breach of contract because the plaintiff)s obligation to repair and reno2ate an aparat!ent would ha2e required the constant super2ision of the courtA thus precluding the defendant fro! obtaining specific perfor!ance 'owe2erA by the ti!e of the hearingA the repairs and reno2ations had been co!pletedA and thus there was no reason why the defendant would not ha2e been able to obtain specific perfor!ance against the plaintiff. ThusA !utuality was present at the date of hearing and the plaintiff obtained his order for specific perfor!ance. P"%<) + S!"#&*)? "4CT&$ &trange leased a flat to Price. Ter! of the lease was that Price would do certain repairs. Price did internal repairs and was willing and able to do e5ternal repairs but &trange didn)t want Price in the flat so she repudiated the contract and did the repairs herself 0&&HE$ Price sought specific perfor!ance but &trange argued lac, of !utuality because if &P cannot be obtained if it requires the court to super2ise. 'EL/$ &trange)s argu!ent was unsuccessful because she had already perfor!ed the e5ternal repairs. Price was entitled to &P of lease agree!ent.

P$#%&!%== %& u( !#&!%#$ (")#<; #&/D'" &'! #($) !' -)"='",

4 plaintiff will be denied equitable relief if he or she is in substantial breach of the contract. 4 substantial breach !eans a breach that would enable the other party to ter!inate the contract for that breach. Dther breaches do not disqualify a plaintiff fro! obtaining relief in equity. 0n Gree$ v So55erville (1979) 1.1 CL- 3 .A at 61+N 27 4L- *31A at *6*A 1ason I said$ 0t is well settled that a plaintiff in a suit for specific perfor!ance is not required to show that he has strictly co!plied with all of his obligations under the contractN it is enough that he has perfor!ed and is ready and willing to perfor! the substance of the contract.

C'&!"#<! u&)&='"<)#($) #! $#: #&/ P#"! -)"='",#&<)

The relief gi2en is such cases was described by Koung CI in Eq in Ciavarella v Poli5e$i )2008+ <&%&C 2*.A at ?11 @A as follows$ ?0@f it would be fraudulent in the eyes of equity for the opposing party to rely on the statuteA equity will order that that party e5ecute a note or !e!orandu! of the contract and will then proceed to grant specific perfor!ance. The plaintiff is not

131

gi2en relief because of the contractA rather the conduct of the parties subsequent to the contract raises an equity.

E>u%!#($) <',-)& #!%'& #&/ /#,#*)

There are two possible bases for an order for the pay!ent of !oney to an aggrie2ed party at equity. The first arises fro! the inherent :urisdiction of equity to !a,e orders for !onetary co!pensation as an appropriate !eans to re!edy a purely equitable wrong such as breach of fiduciary duty. This is ,nown as (equitable co!pensation). The second is the ability conferred by statute for an order of da!ages to be substituted forA or added toA specific perfor!ance or in:unction where those re!edies ha2e been sought in respect of contractsA torts or any wrongful act. ThusA in certain situationsA equity has the power to pro2ide for a re!edy of da!ages in respect of a co!!on law wrong. This is referred to as (equitable da!ages). E>u%!#($) <',-)& #!%'& 4lthough equity courts ne2er ordered da!ages as a re!edy for the infringe!ent of equitable obligationsA they did pro2ide for !onetary for!s of relief. 0n := parte A%a5so$ (1878) # Ch / #+7A at #1 A Ia!es and 7aggallay LII noted that relief in such cases was by way of (a suit R for equitable debt or liability in the nature of a debt. 0t was a suit for the restitution of the actual !oney or thingA or 2alue of the thingA of which the cheated party had been cheated). Equitable co!pensation orders were originally restricted to cases in2ol2ing breaches of fiduciary obligations. ThusA in Re Dawso$ (%e47%) )1966+ 2 <&%- 211A a trustee who had i!properly dealt with trust funds was ordered to pay equitable co!pensation to the trust to restore the trust to the position it would ha2e been in had there been no default on his part. The !odern authority for the a2ailability of equitable co!pensation is ?o4to$ v #or% Ash,!rto$ )191/+ 4C *2 in which 4shburton sought to reco2er co!pensation fro! his solicitor <octon for ad2ice that had resulted in a loss for hi!A but an ad2antage for the solicitor. 4shburton)s clai! for co!!on law da!ages in the tort of deceit failedA but the 'ouse of Lords was prepared to award !onetary co!pensation on the basis of <octon)s breach of fiduciary obligations. Eiscount 'aldane LCA at 32A affir!ed the longstanding ability of the equity courts to order !onetary co!pensationA and said$ Dperating in persona! as a Court of conscience it could order the defendantA notA indeedA in those daysA to pay da!ages as suchA but to !a,e restitutionA or to co!pensate the plaintiff by putting hi! in as good a position pecuniarily as that in which he was before the in:ury. .he $at!re o9 e;!ita,le 4o5pe$satio$ 0n achie2ing its goal of restoring the position of the plaintiff to the position that he or she was in before the breach of equitable obligation occurredA equity)s approach to co!pensationA li,e all other equitable re!ediesA is conditioned by its (fle5ible character)$ Cole v Ma$$i$g )2002+ <&%C4 13+A at ?6*@. The appropriate date for the assess!ent of equitable co!pensation is the date on which the court !a,es the order for co!pensation and the quantu! of co!pensation should reflect the a!ount that is necessary to put the plaintiff bac, into the position in which he or

132

she would ha2e been had there been no breach of equitable obligation$ M4?all" v 'arris (?o *) )2008+ <&%&C #61A at ?12@B?17@. .he relatio$ship to the 4o55o$ law 4o$4eptio$ o9 %a5ages 4n i!portant question in relation to equitable co!pensation is the e5tent to which equity)s purpose of restoring a plaintiff to his or her original position differs fro! that of co!!on law da!ages. Co!!on law da!ages are also focused upon returning the plaintiff to the position he or she would ha2e been in had the wrong not occurred$ (e$ha5 v :lla (1972) 127 CL- .3.. 4lthough both co!!on law and equity share the ai! of pro2iding !onetary co!pensation to a plaintiffA there are significant differences between the! in relation to the principles to be applied in assessing the quantu! of !onetary relief. The !ost i!portant of these differences is that the liability under equity for breach of trust or fiduciary duty is !ore absolute than liability that arises under the co!!on law of contract or tort. Ca!satio$ 0n Mag!ire v Ma3aro$is (1997) 1## CL- .. A at .7*N 1.. 4L- 72 A at 7..A 7rennan CIA =audronA 1c'ugh and =u!!ow II obser2ed thatA in equitable co!pensation casesA a co!!on sense 2iew of causation required that there be (an adequate or sufficient connection between the equitable co!pensation clai!ed and the breach of ?equitable obligation@). 4 consequence of this approach is that a defendant in equity cannot resist a finding of adequate causation by arguing that there was a brea, in the causal connection between breach of loss suffered by reason of so!e inter2ening act ;no2us actus inter2eniens>. Equity is not readily susceptible to such speculation about other possible causes for loss when there is a clearly identifiable breach present Plai$ti997s 4o$tri,!tio$ to loss 0n <ew Lealand and Canada courts ha2e held that a plaintiff)s clai! for equitable co!pensation !ay be successfully defended on the basis that his or her contribution to the loss !ay be a co!plete or partial defence to liability on the part of the defendant$ /ay 2 1ead ?1 #7@ 2 <LL- ..*A at .31N Canson Enterprises Ltd 2 7oughton F Co ?1 1@ * &C- 3*.A at 3#3N ;1 1> /L- ;.th> 12 A at 131. 0n 4ustraliaA howe2erA this approach has been re:ected by the 'igh Court in Pil5er v D!3e Gro!p #i5ite% (i$ li;) (2001) 2+7 CL- 163N 1#+ 4L- 2. . 0n this caseA the facts concerned the ta,eo2er by 8ia Dra =old Corp Ltd of %estern Hnited LtdA a co!pany in which !any of 8ia Dra)s directors held an interest. Hnder such circu!stancesA law required the preparation of a report by (independent qualified persons) for the infor!ation of shareholders whose appro2al was ulti!ately required at a general !eeting. The fir! of chartered accountants engaged by 8ia Dra hadA in factA a long history of dealing with both that co!pany and %estern Hnited Ltd. The report asserted that the price to be paid for the shares in %estern Hnited was fair and reasonable. 0n reality this was not the case with 8ia Dra paying out around V26! for V6! worth of shareholdings and thus enabling huge personal profits to be !ade by the 8ia Dra directors who held shares in %estern Hnited. 8ia Dra subsequently brought an action against the partners of the accountancy fir! see,ing to reco2er for its loss.

13*

The "ull Court of the &upre!e Court of &outh 4ustralia in D!3e Gro!p #i5ite% (i$ li;) v Pil5er (1999) 7* &4&- 6. found the accountants to be in breach of the contractualA tortiousA and fiduciary duties which they owed to the co!pany. Hlti!atelyA the court !easured the da!ages payable by the defendants using the principles rele2ant to breach of contractual dutyA since these resulted in the higher figure. 'owe2erA although thus not strictly necessary to decideA the "ull Court considered the effect which a plaintiff)s contribution to loss would ha2e upon an assess!ent of equitable co!pensation for breach of fiduciary duty. 0n this respectA the "ull CourtA at 23+A said that it would be$ R inherently un:ustA and we would sayA inequitableA to require a defendantA whose fiduciary breach unloc,ed the door to the plaintiff acting in ob2ious disregard of its own interestsA to bear sole responsibility for the total loss thereby suffered by the plaintiff where the plaintiff)s own conduct has !ade a !aterial contribution to that loss. The appeal to the 'igh Court by the for!er partners of the accounting fir! succeeded on the basis that the calculation of da!ages to co!pensate for 8ia Dra)s loss had been incorrect and also that no fiduciary obligation had been breached. 4lthough 8irby I disagreed on the latter scoreA the court was of one !ind in re:ecting any place for reduction on the basis of the plaintiff)s conduct in the deter!ination of equitable co!pensation. The reasons included an appreciation of the essence of the fiduciary relationship in which the beneficiary has no obligation to protect hi!self or herself against the fiduciary and the nature of contributory negligence in tort law. 1c'ughA =u!!owA 'ayne and Callinan IIA at CL- 2+192N 4L27.A said$ Contributory negligence focuses on the conduct of the plaintiffA fiduciary law upon the obligation by the defendant to act in the interests of the plaintiff. 1oreo2erA any question of apportion!ent with respect to contributory negligence arises fro! legislationA not the co!!on law. 4stley indicates that the particular apportion!ent legislation of &outh 4ustralia which was there in question did not touch contractual liability. The reasoning in 4stley would suggestA a fortioriA that such legislation did not touch the fiduciary relationship.

O!;)" =#<!'"
1itigation E5e!plary da!ages B 'arris v Digital P!lse Pt" #t% (200*) 36 <&%L- 2 # 4ggra2ated da!ages - Giller v Pro4opets )2008+ E&C4 2*6 Equitable /a!ages Chancery 4!end!ent 4ct 1#3# ;H8>A !ore popularly ,nown as Lord Cairns) 4ct s 68 o9 the S!pre5e Co!rt A4t 1970 (?S() which states$ %here the Court has power$

13.

;a> to grant an in:unction against the breach of any co2enantA contract or agree!entA or against the co!!ission or continuance of any wrongful actA or ;b> to order the specific perfor!ance of any co2enantA contract or agree!entA the Court !ay award da!ages to the party in:ured either in addition to or in substitution for the in:unction or specific perfor!ance.

L'"/ C#%"& A<! /#,#*)

0n (e$tworth v (oollahra M!$i4ipal Co!$4il (1982) 1. CL- 672A at 676N .2 4L- 6 A at 72A =ibbs CIA 1asonA 1urphy and 7rennan II referred to the purpose of Lord Cairns) 4ct in the following ter!s$ The !ain ob:ect of the 4ct was to enable the Court of Chancery to do (co!plete :ustice) between the parties by awarding da!ages in those cases in which it for!erly refused equitable relief in respect of a legal right and left the plaintiff to sue for da!ages at co!!on law. J!ris%i4tio$ to awar% e;!ita,le %a5ages 7efore equitable da!ages can be awardedA the court !ust ha2e the :urisdiction to order a decree of specific perfor!ance or an in:unction. ThusA if such equitable relief is refused on the basis that da!ages at co!!on law are adequateA the court has no :urisdiction to award equitable da!ages. :;!ita,le %a5ages i$ a%%itio$ to spe4i9i4 relie9 The pro2isions of Lord Cairns) 4ct clearly en2isage the !a,ing of an order for da!ages in addition to specific perfor!ance or in:uncti2e relief. This is especially useful in enabling the court to address the issue of any losses caused to the plaintiff by the defendant)s breach that are not properly addressed by an order for equitable relief.

E>u%!#($) /#,#*) %& $%)u '= -)<%=%< ")$%)=

the fact that specific relief is denied on discretionary grounds does not preclude the court fro! ordering equitable da!ages. where specific relief once ordered beco!es i!possible to carry out due to inter2ening circu!stancesA a court will readily !a,e an order for equitable da!ages in lieu of specific relief.

133

INTRODUCTION TO TRUSTS
/efintion 4 trust e5ists when the titleholder of property is obliged to deal with that property for the benefit of another person

E$),)&!

1.the trustee O a legal person who holds a 2ested legal title ;or a 2ested equitable title> in the propertyA sub:ect to fiduciary dutiesN 2.trust property O property in real or personal for! which is identified or ascertainable and capable of being held on trust. The trust property can be legal or equitable propertyN and *.the beneficiary ;so!eti!es referred to as the cestui que trust in older casesA or the ob:ect of the trust in !odern cases> O a personA or group of personsA who hold a beneficial equitable estate in the property and on whose behalf the trustee !ust act.

D)=%&%!%'&

0t should be noted that the person who creates the trust during their lifeti!e is usually referred to as a settlor. &uch a trust is often described as an inter 2i2os trust or a settle!ent. %hen the trust has been created in a willA the creator is the author of the willA na!ely the testator ;if !ale>A or testatri5 ;if fe!ale>. 4 trust created in a will is referred to as a post !orte! trust. 0n this and following chaptersA the word creator will be used as a collecti2e ter! to co2er both settlors and testators6testatri5s.

A<!'" %& !;) !"u !

1.creatorN 2.trusteeN and *.beneficiary The three legal actors need not always be different legal persons. 0t is possible for a creator and a trustee to be the sa!e personA for e5a!pleA when a trust is created by declaration of trust &i!ilarly it is possible for a creator to be a beneficiaryA in cases where the creator instructs the trustee to hold the property for his or her benefit. 4 trustee !ight also be a beneficiaryA but only in situations where the trustee is one of a nu!ber of beneficiaries. 0t is i!possible to be the sole trustee and sole beneficiary because once a person owns co!plete legal and equitable estates they are said to !erge togetherA lea2ing no distinction between the legal and equitable estates 1erger of estate will co!e about when trustee and beneficiary are one person and the legal and equitable estates are equal and coBe5tensi2e$ 4da!stoun 'oldings 2 7rogue ;2++7>.

T;) !;")) -)<%) '= !"u !

136

1.e5press trustsN 2.resulting ;or so!eti!es referred to as i!plied> trustsN and *.constructi2e trusts.

EC-")

trusts and co!!ercial trusts.

T"u ! include fa!ily trustsA charitable trustsN fi5ed and discretionary

E5press trusts are charcterised by the beneficiary)s entitle!ent. 4 9i=e% tr!st is where a beneficiary has a set interest in trust property. 4 %is4retio$ar" tr!st arises when the trustee can control how !uch each beneficiary gets. <ature of discretion can 2ary e.g. discretion relating to hwo !uch each !e!ber of a class gets or whether a person should be a beneficiary or not. 0n situations where trustees can choose beneficiaries fro! !e!bers of a classA the beneficiaries ha2e a 2ery wea, interest called an e5pectancy. 0n these casesA the trust can be called a power of appoint!ent. 8are .r!sts occur when trustees hold property until it is de!andedA without any further duty to perfor!$ %ade 2 %ade ;2++ >. &o!e !anagerial duties ha2e been i!posed$ Curo!o 'oldings 2 C 0toh ;1 1>. E.g. preser2e trust property is o,ay for a bare trustee$ 'erdegan but carrying on a business goes beyond bare trustee$ Dld Papa "ranchis 2 Ca!isa <o!inees ;2++*>. Iust because the trust can be ter!inated by the rule in &aunders 2 Eautier ;beneficiaries all of adult age and under no disability can ter!inate a trust at will> does not !ean it will be a bare trustA at least not until they e5ercise that power. 7are trusts arise if$ 1. "uture property is 2alidly assigned 9 the assignor beco!es bare trustee. 2. 4 2endor of land upon receipt of sale price$ &tern 2 1c4rthur ;1 ##> *. 4 person who holds legal title where purchase price has been gi2en to a third person 9 resultng bare trust. The rights of beneficiaries are broad including transfer of property to selfA de!anding transfer to anotherN dispose of the interes to other either by transfer or subBtrustN tracing. They !ay <DT assert their interest against a third party purchaser for 2alue without notice. Charita,le .r!sts E5press trusts set up for a particular purpose. G$it .r!st Punters pay in and the trust in2ests for the!. 1any different structures so no fi5ed nor!ati2e !eaning. Res!lti$g .r!sts 0!posed where court deter!ines a trust was intended but ne2er properly constituted e.g. e5press trust fails for want of proper disposition. 137

Trusts in Ter$s o, #e"al Relationships C'&!"#<! #&/ !"u !

Gosper v Saw"er (198-) 16+ CL- 3.# at 36#9 N 3# 4L- 1* at 26A 1ason and /eane II stated$ The origins and nature of contract and trust areA of courseA quite different. There is howe2er no dichoto!y between the two. The contractual relationship pro2ides one of the !ost co!!on bases for the establish!ent or i!plication and for the definition of a trust.. /ifferences are contract obligations are contained in the contract while trusts are contained in conscienceA trusts do not require consideration. 4lso pri2ityA beneficiaries not gi2ing consideration can sue. These two legal concepts !eet occasionally. 0f 4 !a,es a contract with 7 for the benefit of CA C can sue7 if 4 refuses to do so 0" agree!ent is found that contractual rights are to be held on trust for C$ "luor 2 4&C Engineering ;2++7>. To deter!ineA e5a!ine the words of the agree!ent. 0ntention !ust be to create a trust and not :ust benefit the third party$ /alton 2 Ellis ;2++3>. 0f there is an intention to benefit a third party and the trust is an effecti2e !echanis!A it can be i!plied$ -e E!ilco ;2++2>. Parties need not ,now that they are creating a trustA sufficient to intend to create a relationship that confor!s to a trust.

F%/u<%#". ")$#!%'& ;%- #&/ !"u !

Trusts are a subset of fiduciary relationships and the duties owed by trustees to their beneficiaries are fiduciary in character "iduciary duties and obligations of trust are not !utually e5clusi2e. 4 person can owe separate and coBe5isting fiduciary and trustee obligations$ Chan 2 Lacharia ;1 #.>

D)<)# )/ ) !#!) #&/ !"u !

E5ecutors of deceased estates occupy a si!ilar function to trustees. E5ecutorsA li,e trusteesA are fiduciaries$ Iohnson 2 Trotter ;2++6>. 'owe2erA an e5ecutor)s duties e5ist in relation to the proper ad!inistration of the deceased)s estate 9 collect and distribute assetsA pay debts$ %illia!s 2 %illia!s ;2++3>. 0f e5ecutors co!plete their duties under the wil but still retain possession of propertyA they beco!e trustees$ Pagels 2 1c/onald ;1 *6>. <7 7eneficiaries under a will gain no proprietary interest in the estate until it is ad!inistered$ Co!!issioner of &ta!p /uties 2 Li2ingston ;1 36>.

4#%$,)&! #&/ !"u !

7ail!ents are based on contract. 4 bail!ent only confers a wea, possessory title on the bailee. 0t does not create a trust as the bailee does not ta,e a 2ested title in the property and hold according to conditions$ /a2id 2 'euber ;1 2*>. 7ailees are si!ilar to Trustees in that they !ust care for the property and not use it for their own purposes without per!ission$ 'ospital Products 2 H&&C ;1 #.>. 6l5a v A5e$%ola (200/) P ga2e / his co!po !oney when / had offered to in2est it for P. P argued !oney held on trust so interest earned should be held on trust. / argued gratuitous bail!entA thus not bound to pay interest. I found trust and ordered repay!ent of interest. 13#

A*)&<. #&/ !"u !

4n agency e5ists where one person ;the principal> authorises another person ;the agent> to act as the principal)s representati2e. The actions of an agent bind the principal. Li,e bail!entsA agency agree!ents are based in contract. Hnli,e fiduciariesA agents do not ha2e title to the property and are sub:ect to directions of the principalA unli,e a trustee$ -e 7roc,ban,N %ard 2 7ates ?1 .#@. 4gent and trustee can e5ist in the sa!e relationship e.g. &olicitor Client or where agent pruchases property in his own na!e on behalf of the principal$ - 2 'op,ins ;1 13>. 4gent !ay be dee!ed a trustee if they are bound to ,eep !oney in a separate account but if they are allowed to !ingle it with their own fundsA it is li,ely to be treatd as a debt$ %al,er 2 Corboy ;1 +>.

U& )<u")/ /)(! #&/ !"u !

/ebtors are not nor!ally trustees for their creditors because they do not hold identifiable funds. The position of creditors is therefore 2ery different fro! that of beneficiaries. 7eneficiaries ha2e equitable interests in the property held by the trustee. Creditors do not ha2e an interest in their creditor)s property. 4 creditor only has access to co!!on law re!edies to pursue the debt 9 a chose in action. Guestions arise when funds fro! creditors are bound to be placed in a separate account 9 held on trustC Cohen 2 Cohen ;1 2 >. /istinction is i!portant if ban,ruptcy$ -e 8ayford Ltd ;1 73> as trust funds will not for! part of the assets. 'owe2erA e2idence !ay not support a trust$ %al,er 2 Corboy 9 lac, of separate accounts and absence of the use of the word trust. 4n issue !ay arise where trust funds are inadequate to satisfy all the interests. Drdinarily distributed proportionally in Pari Passu approach$ -e 4ustralian 'o!e "inance ;1 36> The institutions of debt and trust can coBe5ist in the one transaction if there is a co!!on intention that funds will be held for specific purposes in a separate account eg Guistclose #o!ghra$ v Perpet!al .r!stee (2007) 4pplication to produce docu!ents regarding an in2est!ent sche!e. P argued sche!e was a unit trust but once units were allocated it would beco!e a principleB agent relationship with delegated powers to enter contractsA !a,e clai!s and conduct legal proceedings. Turst funds were held in credit as agents. /espite confusion about no!enclature in agree!entA I found use of the word agent and the capacity as agent was !ore appropriate. 'owe2er 6. Co5p!ter v &irst ?atio$al .ri4it" &i$a$4e (200*) there was a situation where there were two accountA one for custo!er deposits who had not recei2ed good and one set aside to pay urgent suppliers. Pu!frey I found trusts needed certainty of words to de!onstrate intention to create trustA sub:ect !atter and ob:ects and certainty of the clss of beneficiaries. The first account was deposited into only sporadically and was short. Pu!frey I distributed the fund parnu passi. &econd account for urgent suppliers was to 2ague to satisfy the list certainty require!ent.

13

8raCCil v (illo!gh," (2009) 8&" 7an, got into trouble. H8 regulator ordered it open a segregated account and credit it with deposits !ade by custo!ers on two days in 2++# to be held on trust. The order was not !ade public and deposits continued. The deposits were credited into the account in an ad hoc fashion and were ordered to be sifted to two new accounts :ust before the ban, beca!e insol2ent. Creditors argued that funds could not be a trust b6c beneficiaries were not certain at the ti!e of creation. Dthre creditors argued there was a trust but beneficiaries should only be depositers whose funds were actually deposited. 4lternati2ely argued that beneficiaries should be all depositors who !ade deposits after the order. 'eld that trust was intended and intended beneficiaries were all depositors who deposited after the order. The trust property was the a!ount deposited !inus any withdrawals. &hortfall was di22ied up proportioanlly. 7ecause of the ad hoc fashion in which funds were depositedA it is difficult to see how there could ha2e been certainty of intention. Perhaps sol2ed by the presence of a statutory order. 8a$3r!pt4" A4t S122 Trust can be set aside as a 2oidable preference if funds were business funds which ewre then declared to be held on trust.

1uistclose Trusts

Dccur when there is an understanding that funds will be used for a specific purpose and repaid if its i!possibe. 8ar4la"s 8a$3 v 0!ist4lose <$vest5e$ts (1970) -- Ltd borrowed cash fro! Guistclose on the understanding that it would be used to pay a di2idend. -- deposited the !oney in a specific account in 7arclays who were infor!ed the !oney was only to be used to pay di2idend. -- went into liquidation before di2idend was paid. 7arclays wanted to use the !oney to pay off debts -owed to it. %ilberforce I found !utual intention between -- and G that funds would not beco!e part of --)s assets. "ound a pri!ary trust for the shareholders. %hen this failed due to insol2encyA the loan beca!e a secondary trust for G. "inallyA 7arclays had notice of intention and so was bound to respect. 4ccepted into 4ustralian law in 4usintel 2 La! ;1 +>. 'owe2erA there is so!e reluctance to allow it to be o2erused so there has been an atte!pt to li!it GTs to situations where !oney is lent to discharge debts of the borrower$ -e 1ilesN E5 parte <47 2 Dfficial -ecei2er ;1 ##>. 4uthorities ha2e a appro2ed GTs for subscription of shares or pay!ent of creditors of the lender$ Carreras -oth!ans 2 "re!an 1atthews Treasure ;1 #3>. M4Ma$!s R: v (ar% (2009) 9 !oney in a !ingled account will be harder to clai! as a trust.

16+

S)<u"%!%) #&/ !"u !

/ebts will often be secured. This !eans that the debtor has agreed to gi2e the creditor a proprietary interest in one or !ore of his or her assets. &hould the debtor not payA the creditor can realise the security by ta,ing possession of the secured property or by ordering that it be sold and the proceeds be used to satisfy the debt. The equitable charge is 2ery si!ilar to a trust. 4n equitable charge is a for! of security that allows the creditor ;chargee> to order the sale of the propertyA after a triggering e2entA li,e default of pay!ent. The proceeds of sale can then be used to satisfy a!ounts due to the chargee$ 0n re 7an, of Credit and Co!!erce 0nternational &4 ;<o #> ?1 #@ The equitable charge is 2ery si!ilar to a trust. 4n equitable charge is a for! of security that allows the creditor ;chargee> to order the sale of the propertyA after a triggering e2entA li,e default of pay!ent. The proceeds of sale can then be used to satisfy a!ounts due to the chargee. 0f the transferor intends that the title be transferredA (sub:ect to) pay!ents being !ade to anotherA then it will be construed as a charge. "or e5a!pleA property !ight be gi2en (to 4 sub:ect to 4 paying 7 V1+++). This transfer e2idences an intention that the obligation to pay is anne5ed to property as opposed to being a fiduciary obligation i!posed on the transferee. The obligation is of a finite nature. 0t is satisfied after co!pliance. 4s such it is not of the sa!e e5tent and duration as the trustee)s fiduciary obligations to care for the beneficiaries) interest in a trust 4n equitable lien is a re!edy used to protect a party against an inequitable loss$ -e &tephenson <o!inees 2 Dfficil -ecei2er ;1 #7>. 0t arises auto!atically to secure the discharge of an actual or potential indebtedness. 0t differs fro! a !ortgage in that it does not confer property. 0t can be precluded by e5press agree!ent Liens differ fro! trusts in that they do not crystallise until an e2entA whereas trust property is always in e5istence. 7eneficiaries can access the se2eral equitable re!edies to enforce their interests while holders of equitable charges can only sell the property$ 4ssociated 4llys 2 4C< ++1 .32 1+6 ;2+++>. Equitable charges do not co!e with fiduciary obligations. To differentiate trusts fro! securities o2er propertyA loo, to the intention of the transferror. 0f the transferror intends the transfer will be S&ub:ect ToT pay!ents to anotherA it will be a charge because it is anne5ed to propertyA it is of a short duration and can discharged after co!pliance.

C'&/%!%'&#$ /% -' %!%'& #&/ !"u !

Transfers of propertyA which are sub:ect to obligations being fulfilled to third partiesA will ordinarily be 2iewed as equitable charges. 0f a transferor of property indicates a !oti2eA hope or e5pectation that the property will be used in a particular wayA the condition will be 2iewed as precatory and i!port no legal or equitable obligations. "or e5a!pleA gifts !ade in the belief that (:ustice will be done to !y relati2es) will i!pose a !oral obligation which has no force$ <$ the (ill o9 (arre$D Berga v .a"lor )1907+ EL- *23

161

'owe2erA if the transfer is !ade sub:ect to a binding condition precedentA the transfer will not ta,e place until the condition precedent is satisfied$ Re Gar%i$er (%e47%) )1971+ 2 <&%L- . .. 0f the condition is a condition subsequent the property will be forfeited if the condition is not fulfilled$ /al Pont and Chal!ers ;2++.> at .*.B3. 0f the disposition states that the obligation is to be fulfilled within a ti!e period it is 2iewed as a condition precedent$ -e =ardiner ;dec)d> ?1 71@ 2 <&%L- . . at . #A per 'elsha! I. 0t should be noted that courts are reluctant to interpret a condition that requires forfeiture and require a high degree of certainty as to the transferor)s intention$ -e 7oning ?1 7@. This is so e2en though words of condition are used$ -e =ardiner ;1 71>. 0n cases where the conditional disposition is possibly a chargeA condition precedent or condition subsequentA courts prefer to 2iew the disposition as i!posing a charge. 0t has been said that a conditional disposition will be treated as ta,ing effect as a charge e2en where words of condition are used$ -e =ardiner ;dec)d> ?1 71@ 2 <&%L- . ..

Personal Equitable Obli"ations

Courts will so!eti!es interpret a conditional disposition as i!posing a personal equitable obligation on the donee e.g. paying an annuity to a third party$ -ees 2 Engelbach ;1#71>. 0t can be 2age e.g. Sta,e care ofT -e 1oore ;1##6>. &uch an obligation does not create a property right in the third party and breach will not gi2e rise to forfeiture. 'owe2erA the obligation is enforceable and !ay gi2e rise to &PA in:unctions or equitable co!po$ 8auter 2 8auter ;2++*>. Gill v Gill (1921) /isposition of far! to son on condition that son pay testator)s debts and allow three sisters to li2e there as long as they re!ain un!arried. "ound not conditions subsequent nor a trust benefitting the sisters but there was an equitable obligation to find appropriate acco!odation for his re!aining un!arried sister. 4warded da!ages for breach of quasiBcontract.

R)!)&!%'& '= !%!$) <$#u ) #&/ !"u !

-o!alpa) clausesA are contractual clauses used in the sale of goods. They allow suppliers to retain title in deli2ered goods until such ti!e as full pay!ent has been !ade$ 4lu!iniu! <$%!strie Baasse$ 8B v Ro5alpa Al!5i$i!5 #t% )1976+ 2 4ll E- 332. -o!alpa clauses operate 2ery !uch li,e a bail!ent and are therefore quite distinguishable fro! a trust relationship$ /al Pont and Chal!ers ;2++.> at .2.. They !ean the goods do no beco!e part of the assets in insol2ency. 'owe2erA where the goods ha2e been !i5ed with other goods or used in a !anufacturing process or soldA -o!alpa clauses can operate li,e a trust or a charge. E.g so!e clauses require sale proceeds to be held in a separate account and failure to do so will lea2e the buyer to account as a trustee$ Pu!a 2 &ports!en 4ustralia ;no 2> ;1 .>. /efence of acqiuiesence is a2ailable$ -ondo 7uilding 2 Casaron ;2++*>.

162

0n 4ssociated 4lloys Pty Li!ited 2 4C< ++1 .32 1+6 Pty Li!ited ;in liq> ;2+++> 8irby I said they will not be effecti2e unless$ 1. They are clearly accepted 2. The original goods can be identifiedA retrei2ed intact *. 4 separate financial account has been established to recei2e the proceeds of the sale of goods possessed by one and owned by another.

P':)" '= #--'%&!,)&! #&/ !"u !

0n a power of appoint!entA the titleholder of property ;the donor> gi2es another person ;the donee> the power to deal withA or dispose ofA the property that is the sub:ect of the power. <or!ally the power will allow the donee to transfer the property to a third party who can be chosen fro! a class of people specified in the power ;the ob:ects of the power>. Hnli,e a trusteeA the donee of a power is not usually gi2en the title to the property$ %ebb 2 1cCra,en ;1 +6>A nor is a donee sub:ected to fiduciary duties. There are four types of power of appoint!ent 1.general powersA where the donee is e!powered to appoint the property to anyone including hi!self or herselfN 2.special powersA which are powers to appoint the property to specific indi2iduals or classes of ob:ectsA not including the doneeN *.hybrid powersA where the donee can gi2e the property to anyone in the world e5cept for a particular group or class or indi2idualN and ..inter!ediate powersA where the donee can add to the specified class of ob:ects in the power. 0f the /onee is not obiged to e5ercise their powersA they ha2e a !ere or bare power. 1ere powers confer wide discretionA unli,e those of a trustee. &i!ilarlyA there is no rule against using the power to enrich the!sel2es if the power is in the gift. This differs fro! trustee obligations not to better their own position. "inallyA unli,e trusteesA powers of appoint!ent ha2e no title or authority to deal with the property. %hy does the distinction between trust powers and !ere powers !atterC 7oth !ere and trust powers are required to describe their ob:ects with sufficient certainty. 0t used to be the case that trust powers and !ere powers were sub:ected to different tests of certainty but no longer$ 1cPhail 2 /utton ;1 71> 'owe2erA if the power is obliged to e5ercise the power and it is either special or hybrid fro!A the power is a trust power. This i!poses fidiciary obligations and the donee cannot use the power for their own benefit$ &!ith 2 =legg ;2++3>. 1ost i!portantlyA the beneficiaries of trust power can co!pel proper ad!inistration$ =artside 2 0-C ;1 6#>

16*

0f the power states that if it is not used it will de2ol2e to a specified person ;4 gift o2er in conte!plation>A it will be treated as a !ere power$ 7readner 2 =ran2illeB Cross!an ;2++1>.

P"'($), Qu) !%'&

Characterise the following dispositions contained in Ioc,)s will$ 1.0 gi2e !y -olls -oyce to 0saacA and on the condition that 0saac pays !y debts to Christos. Equitable Charge 2.0 gi2e !y house in 7rewarina to Pauline absolutelyA with the hope that she shall allow !y !other to li2e there until she dies. 4bsolute transfer *.0 gi2e V23A+++ to /a2idA to be used for the costs of educating 1illie and to be hers absolutely when she attains 21 years. Personal Equitable Dbligation ..0 gi2e the residue of !y estate to "rances who !ayA at her absolute discretionA gi2e such residue to anyone she thin,s fitA barring herselfA 0saacA and Pauline. 0f "rances fails to dispose of the residue in her lifeti!eA it shall beco!e the property of 1illie. 'ybrid bare power of appoint!ent

FIDUCIARY DUTIES

<o uni2ersal definition or test of fiduciary duties. %hile a fiduciary relationship !ight e5istA it does not co2er all aspects of the relationship. E.g. 7ell 2 %7C ;2++ > per Dwen I$ Sthe fact that it is categorised as fiduciary does not !ean that all of the obligations arising fro! it are the!sel2es fiduciary. Hnless there are so!e special circu!stances in the relationshipA the duties that equity de!ands fro! the fiduciary will be li!ited to what 0 ha2e described as !;) <'") '($%*#!%'& $ not to obtain any unauthorised benefit fro! the relationship and not to be in a position of conflict. &trictA not to act in any way other than in the interests of the principalA Hndi2ided loyalty 9 7each Petroleu! 2 8ennedy ;1 >. <o intention to defraud is irrele2ant$ ?o4to$ v #or% Ash,!rto$ (1919). Loss to the principal is unneccessary$ 8irt4h$ell v :;!it" .r!stees (1929)

Nature o, (i%uciary /uties

16.

Liability arises e2en where the principal is unable to profit fro! the opportunity e5ploited$ (ar5a$ <$t v Dw"er (199-). Liability e2en if consent would ha2e been granted if principal had been infor!ed M!ra% v Al-SaraE (200-). 'oriMontal 9 parties owe duties to each other e.g. partnership. Eertical 9 duty fro! one to another e.g. guardian and ward. "iduciary /uties are prohibiti2e in nature (il%e$ v Gree$ (2009). Positi2e duties are better regulated by contract and tort 9 Pil5er v D!3e Gro!p (2001). E5ception is the positi2e duty to see, consent. 'owe2erA characterised as peripheral to negati2e duty in &itCwoo% v G$i;!e Goal (2001) 9 see,ing consent as a !eans of release fro! a negati2e duty. 8ell Gro!p v (8C (?o 9) 9 /irectors had authorised loans which were in the best interests of the corporate group but not of so!e indi2idual co!panies within that group. Dwen I found fiduciary duties e2en though to fulfill the! would ha2e required positi2e steps of in2estigation and consideration of the interests of all co!panies in the group 9 le2el of unreality. Perhaps enough that duty can be fra!ed as negati2e. E2en soA concept of negati2e duties is fir!ly lodged in 'C 9 &rie$% v 8roo3er (2009) 8ree$ v (illia5s per 1c'ugh and =audron II$

Prohibitive /uties

2n,yin" Princple #oyalty3 Trust3 )on,i%ence3 4ulnerability3 2n%erta!in"

Qthe e5istence of a relation of confidenceN inequality of bargaining powerN an underta,ing by one party to perfor! a tas, or fulfil a duty in the interests of another partyN the scope for one party to unilaterally e5ercise a discretion or power which !ay affect the rights or interests of anotherN and a dependency or 2ulnerability on the part of one party that causes that party to rely on anotherQ.

Trust and confidence is co!!on but not necessary e.g. cases where principal has ne2er !et the trustee. Eulnerability$ 'ospital Pro%!4ts v GSSC (198/) per 1ason I$ QThe relationship between the parties is therefore one which gi2es the fiduciary a special opportunity to e5ercise the power or discretion to the detri!ent of that other person who is accordingly 2ulnerable to abuse by the fiduciary of his positionQ

The )ontent o, (i%uciary Obli"ations

163

Conflict between fiduciaryQs own pecuinary concerns and their !andatory or discretionary functions. 1ust gi2e rise to a sensibleA real or substantial possibility of conflict B 'ospital Products. &o an anticpatory breach of conflict can be restrained B -e Tho!son$ Tho!son 2 4llen ;1 *+>. Three 7road 'eadings +5 2nauthorise% Re$uneration Rea%i$g v R (19/9). -eading was a sergeant in the ar!y. 'e got bribes for contraband. Court ruled fiduciary duty to the crown and ordered he repay the a!ount he recei2ed. Tips are o,ay if s!all and !ade after ser2ice B The Par,dale. 1ay not be if it can be shown they were !ade to influence future dealings. 65 Assu$in" a %ouble character "iduciary acts as a fiduciary and an undisclosed principal in the sa!e transaction. Ar5stro$g v Ja43so$ (1917) &toc,bro,er as,ed to buy shares for a client and sells his own shares to the!. 4 wholly false position because duty to buy shares for his client at the best possible price and act for hi!self by selling at the height of the !ar,et. Court will set aside the transaction. 75 8ene,its %erive% to the exclusion o, the principal 1ost co!!on type of breach of fiduciary duty. Cha$ v @a4haria (198/) B "id obtains a benefit where 1. a conflict or a signifcant possibility of conflict e5isted in the pursuit of the gain. "irst step is to ascertain the scope of the fiduciary duty B Phips 2 7oard!an ;1 67>. Loo, at surrounding relationship B ?ews #t% v AR&# (1996). Clar3 8o"4e v M!at (199/) B solicitors acted for both !other who !ortgaged her property to help son and the son. &ols told !u! to see, independent ad2ice but she ne2er did. &ols disclosed potential conflict se2eral ti!es. "ound no breach because solQs underta,ing e5tended only to legal ad2iceA not financial probity of the transaction. There need only be a re!ote possibility of conflict$ 8la43Magi4 Desig$ v 6verliese (2011). Dnce scope is establishedA only escape is full disclosure and per!ission. Phipps v 8oar%5a$ (1967> B 7oard!an ;solicitor for trust> and To! P ;beneficiary> were unhappy with the state of a co!pany that the trust had substantial holdings in. 7 gained ,nowledge as beneficiary as to 2iability of

166

ta,eo2er. 4d2ised trust of intention and there was no ob:ection. 4d2ised two of three trusteesA the third was senile. Ta,eo2er was successful and resulted in profits all round. 'owe2erA one beneficiary sued for profits personally gained by 7 and To! P. 'DL by bare !a:ority found breach of fid duty. 'eld info used by 7 was trust property and irrele2ant that Trust was not in a position to ta,e ad2antage. There was at least a re!ote possibility of conflict and needed infor!ed consent of 4LL trustees. 'owe2er offset by 7oard!anQs pay Uon a liberal scaleU. 2. benefit was obtained by use or reason of fiduciary position or by opportunity or ,owledge resulting fro! it. Coo3 v Dee3s (1916) B constuction co!pany laid trac,s for big railway. Two directors for!ed a new co!pany and gained contracts. 7reach found. .owers v Pre5ier (aste (2011) B reaffir!ed$ U0f a director obtains the opportunity for hi!selfA he will be liable to the co!pany for breach of duty regardless of the fact that he acted in good faith or that the co!pany could notA or would notA ta,e ad2antage of the opportunity.U Regal ('asti$gs) v G!lliver (1967). /irectors of -egal for!ed a subsidiary with the intention that regal own all shares. /irectors sought lease for subsidiary co!pany but landlord not prepared to lease to subsidiary without 3+++ in the ban,. -egal not in a position to top up ban, account. /irectors decided -egal would chuc, in 2+++ and they would in2est the balance the!sel2es in e5change for shares. /irectors profited fro! shares. 'DL 'eld directors liable e2en regardless of whether -egal could ha2e bought shares. 'eld liable &DLELK on the fact that /irectos used ,nowledge gained in their fid position to garner opportunity for the!sel2es. Classic e5a!pleA lawyers acting for two co!peting clients. <ot a defence that breach caused by a conflicting duty$ 'ilto$ v 8ar3er 8ooth (200-). 'owe2erA ad2ice to see, independent ad2ice is a defence$ Do5i$i4 v RiC (2009). /irector of two co!peting co!paniesA there is a rule that they can stay in both :obs until real conflict arises$ #o$%o$ a$% Masho$ola$% :=ploratio$ v ?ew Masho$ala$% :=ploratio$ (1891). (ester$ Areas :=ploratio$ v Streeter (?o *) (2009) U-eal ConflictU ` U%here the alleged breach of fiduciary duty entails a director of a co!pany di2erting a co!!ercial opportunity to so!e other 2ehicleA or placing hi!self in a situation where there is a conflict between the perfor!ance of the director)s duties to the pri!ary co!pany and the perfor!ance of his duties or the e5tent of its interest in so!e other co!pany or enterpriseA a question arises as to whether or not the

)on,icts o, /uty an% /uty

167

fiduciary is entitled to co!pete for financial benefit with a co!pany of which he is a director. "or there to be a breach of the conflict of duty or conflict of interest rules it is necessary for the gi2en conflict to be (real and sensible) and !ore than purely hypotheticalRU -ebuttable presu!ption if$

PRE&2ME/ RE#ATIO&9IP&

Trustee 7eneficiary B quintessential

D%")<!'" J C',-#&. B Consul /e2elop!ents 2 /PC Estates e2en though

irregularly appointedA if person acts as a director e.g. in2estigating opportunitiesA they are a fiduciary. /uties are strict and only escape is infor!ed consent of all interestholders$ -egal 2 =ulli2er. /uties will continue for a reasonable ti!e after cessation of e!ploy!ent$ &othern -eal Estate 2 /ellow and 4rnold ;2++*>. 'eld that co!pany only e5ists by legal fiction and not capable of acting e5cept through itQs directors. &i!ilar to a retarded child per Dwen I in 7ell =roup 2 %7C ;<o >. /irectors donQt ha2e a duty to disclose past wrongdoing in 4us$ PAB <$%!stries v Porto (2006). /irectors donQt ordinrily owe fid duties to shareholders$ Joi$er" Pro%!4ts v <5la4h (2008). 'owe2er !ay do in special factual relationship$ Pes3i$ v A$%erso$ (2011) e.g. where they are negotiating a ta,eo2er of the co!pany. 4lso duty to infor! shareholders so they can !a,e decisions at 4=1s$ Chequepoint 2 CLare!ont Petrol ;1 #6>. 4dequacy assessed in co!parison to the co!ple5ity of the decision$ E<T 2 &unraysia TE ;2++7>. M4Cl"5o$t v Crit4hle" )2011+ ratio$ale$ USThe general rule is that a director of a co!pany owes a fiduciary duty to the co!pany as a whole and not to indi2idual shareholders. The bare relationship between a director and shareholder cannot without !ore gi2e rise to a fiduciary relationship. 'owe2erA in so!e circu!stances a director of a proprietary co!pany !ay owe a fiduciary duty to a shareholder so long as it does not co!pete with the directorQs duty to the co!pany as a whole. This principle is sensiti2e toA and requires close e5a!ination of the circu!stances of the particular case. Circu!stances which !ay point to the e5istence of a fiduciary obligation include the shareholderQs dependence upon infor!ation ,nown to the directorA the e5istence of a relationship of confidenceA reliance or trustN the 2ulnerability of the shareholderA

16#

the significance of any positi2e action ta,en by or on behalf of the director to pro!ote the transactionN the structure of the shareholdingsN and the significance of the particular transaction to the parties. This is consistent with the se!inal principle that (-ules of equity ha2e to be applied to such a great di2ersity of circu!stances that they can be stated in only the !ost general ter!s and applied with particular attention to the e5act circu!stances of each case)T &o!e circu!stances are$ fa!ily owned co!panyA s!all nu!ber of shareholdersA reliance of shareholders for directorQs ad2ice. <7 <o fid duty of %ire4tors to 4re%itors R v Spies (2000). L#:.)" J C$%)&!$ 'ilto$ v 8ar3er 8ooth (200-). Pre2ents dealings without infor!ed consent and acting for third parties without consent and where there is an actual conflict$ Rigg v Sheri%a$ (2008). /oes the duty sur2i2e the ter!ination of the retainer$ KE&$ Pa4i9i4 .ele4o5 v 6pt!s (200-). E2en if notA breach will probably be caught by breach of confidentiality. 7reach can be anticipatory$ 1ria43o! v C8A (2009) B in:inction if reasonable anticipation of !isuse of confidential infor!ation. A*)&! J P"%&<%-#$ e.g. real estate agentsN power of attorneyN co!!ercial agency. /uty to co!!unicate infor!ation$ Che$ v Mar4olo$go (2009). M41e$Cie v M4Do$al% (1927) B -E4 ad2ised wo!an to sell far! and buy his own property. Hnder2alued wo!anQs property and o2er2alued his own B 7-E4C'P Pe%erse$ v #ar4o5,e (2008) -E4 bought PQs property hi!self. failed to find out !ar,et price ob:ecti2elyA failed to ad2ertiseA failed to see, other buyers B 7-E4C'P 'owe2erA if a principal appoints an agent they ,now is wor,ing for another principalA could be found breach is of principalQs own !a,ing$ 8ea4h Petrol v A,,ott .o!t (1999). 7ut agent !ust still act in principalQs best intersts 0f actual conflict arisesA they should cease acting for one or both principals. M4Co!rt v Cra$sto$ (2009) -E4 acted for both 2endor and purchaser. "ound breach and agent to inde!nify purchaser for loss. Partner.Partner 7ristol and %est 2 1othew one partner !ust ser2e other partners as honestly as if he had only one partner. 7reach need not be dishonest but it !ust be intentional. Hnconscious o!!ission fa2ouring one principal o2er another !ay not breach fiduciary duty but !ay breach duty of care and s,ill.

16

<o inhibition principle B fiduciary !ust not be inhibited by the e5istence of his other e!ploy!ent fro! ser2ing the interests of his principal as faithfully and effecti2ely as if he were the only e!ployer. Partnership e5ists when people wor, together to !a,e a profit. %here agency arises fro! a contractA fiduciary obligtions will be deter!ined by the contract$ 'osp Products 2 H&&C per 1ason I. Joh$ Ale=a$%er>s Cl!,s v (hite Cit" (2011) B ter!s of the contract are all i!portant. 0f there is no i!plied ter! of fiduciary obligation U0t will be 2ery difficult to superi!pose the suggested fiduciary obligation to that li!ited contract.U "or!al partnership is not required for fiduciary duties$ G$ite% Do5i$io$s v 8ria$ (198-). E5ists e2en though partners !y ne2er reach agree!ent on consensul ter!s. 4ll that is required is that partners ha2e e!bar,ed in the 2enture. Partnership e5ists after a business has been deter!ined Cha$ v @a4hariaA not open to one partner to continue partnershipQs lease in his own na!e. Cf &rie$% v 8roo3er (2009) Partnership changed to a corporate structure and partners beca!e directors. 'eld that directors owed fid duties to the business but not to each other. 'uar%ian.War% =uardian !ust pro2ide independant legal ad2ice$ 8e$$ett v Mi$ister o9 Co55!$it" (el9are (1992) ad2ice about lost fingers while in care. .revorrow v SA (?o -) B 4P7 had to ad2ise stolen generation that they had a case against the!. <7 =uardians are not trustees of their wardsQ property G!ar%ia$ship .ri,!$al v Perpet!al .r!stees (2008). Cla" v Cla" (2001) B 1other bought house of her late hubby. 4t ti!e she was guardian of his children and ,ids had equal beneficial share in the house. <o breach b6c house bought at fair !ar,et 2alue and pay!ent went into !aintaining the ,ids. 4lso ,ids did not ha2e an i!!ediate beneficial interest at the ti!e the house was sold. =uardianship cases often !ean long delays BZ Proble!s in e2idence and laches Salvatio$ Ar5" v R!$%le (2008). 0n 4ustraliaA no breach of fid duty for se5ual assault by a guardian. 7etter dealt with in Tort. "/ 7ased on facts. Co!e up in Co!!ercial -elationships but courts reluctant to i!pose "/ because of public interest in certainty of transactions$ 'ospital Products. 17+

(i%uciary /uties outsi%e Presu$e% Relationships

'owe2erA there are e5ceptions$ G$ite% Do5i$io$s v 8ria$. Ioint 2enture to de2elop land owned by &PL. IE financed by H/C along with a !ortgage signed by &PL. -ealised significant profits but no distribution to 7rian. H/C basis was that there was a UCollateralisation ClauseU in the !ortgage with &PL. 7rian was ne2er infor!ed of the clause and clai!ed breach of fid duty B 7-E4C'P 7oth &PL and H/ owed "/ to 7rian B the relationship itself gi2es rise to "/. Cf 'ospital Products where 'C by bare !a:ority refused to 2isit gross breach of contract and fraudulent course of conduct with equitable sanctions. "ollowed in Joh$ Ale=a$%er Cl!,s v (hite Cit" (2010) and -awley 2 7ell ;<o 2> ;2++7> noted that fiduciary relationships are less co!!on in co!!ercial transactions because there are ,nown ad2esarial interests and a reasonable e5pectation of selfB relince. E$ployee.E$ployer /epends on le2el of trust confidence and 2ulnerability in the relationship$ Mi4hael (ilso$ a$% Part$ers v ?i4holls (2009). 0t is necesary to consider the preise acti2ity the e!ploye had agreed to perfor! and as, if the e!ployee had agreed to perfor! solely i the interests of the e!ployerA to the e5clusion of their own interests. "/ will arise if the relationship requires a standard of be:a2our higher than the contractual standard$ BG. v (ilso$ (200/) for!er student approached acade!ics wor,ing for the uni. 4cade!ics helped and realised profit. 'eld that they breached "/ and Hni should ha2e been allowed to e5ploit. Cf G(A v Gra" (2009) B Hni profA while wor,ing for HniA patented !edicine in his own na!e. "ound no "/ i!plied in contract. <o agree!ent to in2ent nor property rights o2er the in2entions. =enerallyA e!ploy!ent contracts do not i!ply "/s. (inancial A%viser.)lient 1ay i!ply "/$ Calvo v Swee$e" (2009). 8ey issue is nature of ad2iserQs underta,ing e.g. they hold the!sel2es out to act in clientQs best interests. /uty to disclose buyer when rele2antN =i2e best ad2ice. #o5$ar Glo,al v (est (2010) B found no duty to disclose offers fro! co!petitors in e!ploy!ent contract but did ha2e duty if they owed fiduciary obligations. "/ will not arise si!ply because client relied on ad2ice$ Pil5er v D!3e Gro!p (2001). P in2ested hea2ily in a co!pany on the basis of ad2ice fro! /. &hare price fell. 'eld no "/ because / had been engaged to 2alue sharesA not ad2ise on sagacity of purchasing.

171

7an,s can beco!e "/s if they ta,e on a financial ad2ice role$ A?@ v ?.SC *1 (2009)K Possible for ban,s to e5pressly e5clude "/$ AS<C v Citigro!p (2007). Citigroup ad2ised on ta,eo2er of Patric, by Toll. at the sa!e ti!e they bought lots of shares which they du!ped when ta,eo2er was announced. 4&0C asserted breach of "/ but court found it was successfully contracted out. /octor.Patient -e:ected in 4ustralia B 7reen 2 %illia!s. &aid relationship was pri!arily contractual. 'owe2erA /awsonA TooheyA =audron and 1chugh II en2isioned possibility of /octorB Patient "/ in other circu!stances e.g. /oc !a,ing secret profits off the patient in clinical trials and duty to disclose !edical error ;7ut what about contract and tortC 0snQt this a positi2e dutyC> )ro:n . In%i"inies <or!ally no "/ owed by go2t to citiMens$ 'abib 2 Cth ;<o 2> ;2++ >. 'owe2erA so!e :urisdictions ha2e found "/ with abos because their land was ta,en and the land they occupy is inalienable e5cept to the crown. 1ost de2eloped in Canada but !entioned by Toohey I in 1abo 2 GL/ ;<o 2> ;1 2>.

/E(EN)E&
In,or$e% )onsent -equires disclosure of all !aterial facts and infor!ation that could affect the decision. 0ncludes all facts ,nown to / and those which a prudent person would ha2e disco2ered$ 6ra$Ee v 1!"s (197*). There is no gneral for!ula. &o!e cases require the principal recei2e indpendent s,illed ad2ice$ Mag!ire v Ma3aro$is (1997). <o defence that principal would ha2e acted the sa!e if they had been gi2en all the facts$ C8A v S5ith (1991). "iduciary cannot induce the decision to grant consent$ Co$s!l Develop5e$ts v DPC (197-). &till question of who !ust gi2e consent. 0n case of a trustA there !ust be unani!ous consent fro! the trustees$ Phipps v 8oar%5a$ (1967). &o!e lords suggested that there !ust 4L&D be the consent of the beneficiaries. 0n conte5t of /irectorsA Regal ('asti$gs) v G!lliver (1967) required shareholder consent at an 4=1 Cf. 0#D Mi$es v '!%so$ (1978) which required only consent of the board because board are in a "/ to teh co!pany. 'owe2erA what if director is on the board that gi2es consentC /isclosure alone is not sufficientA there !ust be consent$ 8la435agi4 v 6verliese (2011). )ontractual Exclusion

172

1ay be possible$ AS<C v Citigro!p (2009) but not where "/ is intrinsic to the relationshp. )lean 9an%s An% Ille"ality Caratinos 2 1agafas ;2++#> B / was a partner accused of breach of "/ on property de2elop!ents. 'owe2erA P had lodged nu!erous false state!ents to the ta5 !an. "ound to be disentitling conduct and P could only co!e to equity once ta5 and penalties were paid. A44o!$t o9 Pro9its$ %ar!an 2 /wyer :;!ita,le Co5pe$satio$$ DQ'alloran 2 - T Tho!as ;1 #>

REME/IE&

Co$str!4tive .r!st$ Chan 2 Lacharia B not to be i!posed if other re!edies are a2ailable$ Iohn 4le5ander Clubs 2 %hite City. *rd party interests !ust also be borne in !ind. Re4issio$ 4r!strong 2 Iac,son "/ !ust disgorge all profits cleaned fro! breach but with so!e discretionary allowance !ade as co!pensation for wor, and s,ill Chirnside 2 "ay ;2++7>. =uinness 2 &aunders ;1 +> B allowance only where it would not ha2e the effect of encouraging others to breach "/.

17*

CREATION OF E9PRESS TRUSTS

%ays to create a trust 1. by declarationA where a titleholder e5presses his or her intention to hold their property on trust for anotherN 2. by transferA where title is transferred to a person with instructions that it be held on trust for anotherN the transfer can occur either 2ia an inter 2i2os transaction ;which is generally referred to as a (settle!ent)> or post !orte! ;by will>N and *. by directionA where the beneficiary of an e5isting trust directs the trustee to hold his or her interest on trust for another.

T;) !;")) <)"!#%&!%)

0ntention &ub:ect !atter6Property 7eneficiaries6Db:ects %ithout all three the trust will fail There !ay also be a require!ent of writing. C)"!#%&!. '= %&!)&!%'& 4n e5press trust will not be 2alid unless it is clear that the creator has intended to create a trust. <7$ resulting and constructi2e trusts do not ha2e to satisfy certainty of intention. The require!ent of certainty of intention does not !ean that the creator has to be fully aware of the law of trusts before they can be found to ha2e intended to create a trust $ -e 4r!strong ;1 6+> 7ecause of the focus on the creator)s intention it is possible to create a trust without using the words (trust) or (trustee) $ Registrar o9 the A44i%e$t Co5pe$satio$ .ri,!$al (vi4) v &C. (199*. 'owe2erA if the trust is created by deedA intention will rarely be an issue$ 'oho$e 'ol%i$gs v #ero" (200/) There is no set trustBcreating for!ula$ Pas4oe v 8e$s4h (2008). The intention to create a trust can also be inferred fro! conduct$ Cth v 8oo3er <$ter$atio$al (2002). Co55issio$er o9 Sta5p D!ties v Joli99e (1920) 2# CL- 17# the trust was not 2alid e2en though e5press words of trust were used. &ole" v &ole" (2006) 9 4lleged that grandparents agreed to hold land on trust for their grandson. =1 !ade state!ents indicating a trust and =" did not disagree. =1 died and property transferred to =" who refused to be bound by trust. 1ulins I found that failure to arge with =1 while she !ade trustBcreating state!ents did notA of itself indicate an intention to create a trust.

17.

'owe2erA Cf. #a'o!sse v Co!$sel (2008) where deceased set up two accounts in his daughters) na!es and said he was trustee. 'e then used the !oney in the accounts to buy a house which he left to his e5Bgirlfriend. /aughters clai!ed house on constructie trust. Court found intention to create trust accounts so constructi2e trust i!posed. 4 Trust !ust be created presently. 'arp!r v #ev" (2007) <ote that a trust can be created i!!ediately but beneficiaries) rights !ay be postponed$ Re Ar5stro$g 9 two accounts only to be paid once they had !atured 4 husband opened a trust account and said that he held account in trust for his wife. There was a purported declaration of trust !ade in writing so that the for! of account was quite clear. %ife died and co!!issioner sought to e5act duty fro! wife)s deceased estate on the basis that !oney in account was in equity his wife)s property. Iolliffe said that although in na!e he held !oney in trust for his wifeA he ne2er intended wifey to ha2e any beneficial interest in the account. %as representing wife)s deceased estate and he was the ad!inistrator. There could be no estoppel raised against hi! because not saying this in personal capacity. The 'C by !a:ority 9 8no5 CIA /uffy I 9 %e ,now of no authorityA and none was citedA which would :ustify us in deciding that by using any for! of words a trust can be created contrary to the real intention of the person alleged to ha2e created it. 0saacs I ga2e a long dissent based on estoppel. That argu!ent is funda!entally !isconcei2ed because I was acting in his capacity as ad!inistrator of his wife)s estate. The burden of proof in cases where the intention of the creator is questionedA lies on the person who alleges that a trust was intended 0nter 2i2os$ oral and written e2idence allowed Parol evi%e$4e r!le will $ot appl" in situations where$ 1. The disposition of the property that constitutes the trust is not required to be in writing ;eg the disposition was of personal property>$ 8o44alatte v 8!shelle )1980+ Gd - 1#+N 2. The docu!ent was not intended to be a co!plete e5pression of the transferor)s intention$ Star v Star )19*-+ &4&- 26*N or *. The docu!ent is a!biguousA #!thera$ Ch!r4h o9 A!stralia v &ar5ers Cooperative :=e4!tors A .r!stees #t% (1970) 121 CL- 62#N 8ora$ga v &li$to99 (1997) 1 %4- 1A .. or created in circu!stances of fraudA duress or !ista,e$ Ro4he9or% v 8o!stea% (1897). 3. Parol E2idence in needed to estabish the actual intent o fthe settlor$ 6we$s v #o9tho!se (2007) 0n cases of -' ! ,'"!), !"u ! A the law restricting e5trinsic e2idence in the interpretation of a will also applies in addition to the parol e2idence rule.

173

0f the creator transfers property and e5presses a !oti2eA hope or e5pectation that the property will be used in a particular wayA the condition will be 2iewed as precatory and i!pose no obligation. 4 !ere intention to create a trust which is not acted upon will not satisfy the require!ent of certain intention Precatory Wor%s Precator words will i!part no obligation e.g. in the hopes that it will be used :ustly. 7ecause they do not i!part certainty of intention$ 4twell 2 4twell ;2++2>. Ching 2 Tihong ;2++ > 9 'ouse being held by son on trust for his parents. /ad pro2ided the purchase !oney though a co!bination of his own cash and gifts fro! his ,ids. The son died and a dispute arose about the !oney fro! the sale of the house. 0t was argued the trust was held for the father and when he died intestate the proceeds went into his assets. 0ssue re2ol2ed around whether dad had created a trust based on old letters to the son. SLoo, after !u! when 0)! goneA it is better that she li2e with a child. Hse the !oney fro! the ho!e unit for her. 0f there is any left o2er after she is goneA use it for -oy f he still needs it. There are also others in the fa!ily who need the !oney for their studies.T Pal!er I found an intention to creat a trustA not precatory words &ole intention o, trusee? Re 1a"9or% #t% (i$ li;) )197-+ 1 4ll E- 6+. A a !ail order co!pany recei2ed funds fro! custo!er orders and placed the! in a special account. The co!pany went into liquidation and it was held that the funds were intended to be held on trust for its custo!ers. The co!pany)s an5iety about protecting custo!ersA coupled with the fact the funds where placed in a separate accountA indicated an intention to hold the funds on trust. This was the caseA e2en though the custo!ers were co!B pletely unaware of the co!pany)s actions. 0f we treat the custo!ers as being creators and the co!pany as a trusteeA one can understand Re @a+ford as supporting the proposition that a trustee)s unilateral decision to create a trust will be binding. Stephe$s .ravel v 0a$tas Airwa"s #t% (1988) 1* <&%L- **1 A the <&% Court of 4ppeal upheld an e5press arrange!ent whereby a tra2el agency collected airfares for an airalineA paid the! into an account and then !ade periodic re!ittances to the airline. The custo!ers of the airline had no intention to create a trustA yet it found that the agree!ent between the agency and the airline created an e5press trust for the funds. 'D%EEE- Peter Co= <$vest5e$ts v <$ter$atio$al Air .ra$sport (1999) refused to find a trust in circu!stances si!ilar to &tephens because intention of the trustee onlyA not the clients. ;no:le%"e o, 8ene,iciaries 7eneficiaries need not ,now about the trust for it to be 2alid$ Moriart" v C!sto5ers 9o 8A Peters (2008)

176

'owe2erA there are proble!s in the case of life insurance as to who the beneficiaries are intended to be. Poli4e Asso4 o9 SA (2008) 9 /e "acto coupleA both copsA died together. %o!an had been pre2iously !arried and filled out her insurance for! at that ti!e in fa2our of her e5 hubby and ,ids or parents. 1an had a son fro! a prior relationship and had indicated that he wanted payout to go to his brother. Cops got together in 2++* and had a child together but did not sub!it new for!s. Cop association argued they were not bound to pay out to the people no!inatedA brother argued he wanted the !oney. /oyle I said there was no direct assign!ent of rights under a trust because they could be changed up until death. 'owe2erA in the conte5t of Police 4ssoc rulesA and found intention to create a trust for beneficiaries na!ed in the for!s 9 brother got the cash. %ith the girlfriendA the e5Bhubby)s trust was o2erturned by the di2orce and the failure to sub!it new for!s could not be ta,en as appro2al for hi! retaining an interest 9 police are Snotoriously inattenti2eT to such !atters. 'er cash went to the ,id in the subsequent relationship.

C)"!#%&!. '= u(I)<! ,#!!)"

4n e5press trust cannot e5ist without trust property. The trust property !ust therefore be reasonably identifiable or ascertainable at the ti!e the trust is created. This require!ent of identifiability is ,nown as (certainty of sub:ect !atter)A without whichA the trust will fail$ Re Apple,"7s :states (19*0). E5a!ples of failures$ SConsider !y near relati2esT$ Sale v Moore (1827) S1a,e a!ple pro2isionT$ (i$4h v 8r!tto$ (18//) The quantu! of interest !ust also be certain. E.g. 8o"4e v 8o"4e (18/9)A not clear which house. Dne of the equitable !a5i!s that is used here is (that which is not certain is capable of being rendered certain). 4s long as it is possible to piece together the clues to deter!ine the identity and quantu! of the property it will be sufficiently certain$ Re Gola"7s (ill .r!sts (196-) gift of Sreasonable inco!eT were capable of ob:ecti2e deter!ination Proble!s can occur when the trust property is part of a nu!ber of identical ite!sA for e5a!pleA (3b of 3+ shares). 0f the sub:ect !atter has not been specifically identified the trust is uncertain$ &C. v Clar3e (1927). <7 !odern co!panies no longer need to nu!ber their shares so it !ay no longer apply. 'erdegen 2 "CT ;1 ##>. Couple held shares in DnedinA he had 3 A she had .1. &old shares and were sub:ect to ta5 but they clai!ed e5e!pt as bare trustees. Trust arose when they said that they would hold *7 shares on behalf of 1r 7oyden and *# on behalf of 1r 4llen. Trust failed for uncertainty esp not nu!bering the shares.

177

/esignating shares !ay not be required for certainty$ -olleston 2 <at 7an, ;1 2*> cf 7usch 2 Truitt ;1 .3>. 'unter 2 1oss ;1 .> upheld where shares all ca!e fro! the sa!e co!pany 9 3+ shares of 3+A all of the sa!e class. 4ppro2ed in <&% in (hite v Shortall (2006) Pal5er v Si55o$%s (18-/) 61 E.-. 7+. ;TL4 p. 66> 9 Court held that the phrase (the bul, of !y said residuary estate) was uncertain and therefore the trust failed for uncertainty of sub:ect !atter. 0t was uncertain because the bul, !erely !eant the greater part. Re Gola"7s (ill .r!sts 9 The phrase (a reasonable inco!e fro! any other properties) described sub:ect !atter with sufficient certainty because court was in a position to deter!ine ob:ecti2ely what constituted such reasonable inco!e. Spra$ge v 8ar$ar% (1789) 2 E.-. *2+ 9 Testators ga2e property to a widower (for his sole use) pro2ided that at his death the re!ainder be di2ided between se2eral persons. 4gain the court held that there was no certainty of sub:ect !atter because re!ainder was uncertain. Courts are !o2ing towards a co!!on sense 2iew. '!$ter v Moss )199/+ 1 %.L.-. .32 ;TL4 p. 66B67> 9 0llustrates co!!on sense 2iew. / owned 3+ shares out of 1+++ identical shares. /eclared hi!self a trustee for plaintiff of 3b of 1+++ shares. 3b of 1+++ shares was supposed to be the sub:ect !atter of the trust. / later changed his !ind and said no trust because did not specify which 3+ of 3+ was to be held in trust and there was uncertainty of sub:ect !atter. C4 said that this was too technical and they would :ust ta,e 3+ shares and regard those as trust property. 0f / had said here are 3+ sharesA court would not be able identify the 3+ shares held on trust. (uture property cannot be hel% on trust Re R!le7s Settle5e$t (191-) 9 creator cannot transfer title in proprety in which she does not ha2e a present interestA it is a !ere e5pectancy. E.g. interests of a discretionary beneficiary or an intended beneficiary under a will.

C)"!#%&!. '= '(I)<!

4 trust will fail if the beneficiaries are not identified with sufficient certainty. This is so!eti!es ,nown as (the beneficiary principle)$ Mori4e v 8ishop o9 D!rha5 (180/) There are two e=4eptio$s to this rule. The first e5ception is charitable trusts. The second e5ception is a particular ano!alous group of trusts for ani!als The le2el of certainty required by the beneficiary principle changes sub:ect to whether the trust is a fi5ed trust or a discretionary trust Mori,e v 6is#o$ of E'r#am ;1#+3> *2 E.-. 636 ;TL4 pp. 6#B6 > 9 The testatri5 ga2e residue of estate (to such ob:ects of bene2olence and liberality as the bishop in his own discretion shall !ost appro2e of.) Court said trust was 2oid because don)t ,now what ob:ects are. Court also said that ob:ects of bene2olence and liberality are not e5clusi2ely charitable. 0f ,new that charitable trustA could ha2e upheld it as a purpose trust. <o indi2idual beneficiaries and trust was 2oid for uncertainty of ob:ects Re De$le"7s .r!st Dee%

17#

Trust for !aintenance and creation of a sports ground upheld b6c ground was to be used by e!ployees of the co!pany. Hsers were held to be beneficiaries. This is not the position in 4ustrlia$ Strathal,"$ Show J!5p v Ma"es (2001).

F%C)/ !"u ! #&/ <)"!#%&!.

0n a fi5ed trust the beneficiaries !ust be identifiable in such a way as to allow the court to draw up a co!plete list of the beneficiaries at the ti!e their beneficial interests co!e into effect$ 1i$sela v Cal%well (197-) Proble!s of certainty can be caused by loose ter!s e.g. friends. 0n Re G!l,e$3ia$7s Settle5e$ts (1970)$ The class !ust be identified as indi2idualsA the court cannot guess at it. SfriendsT is bad as bein g too uncertain. Dld friends cannot clai! the whole property because they cannot pro2e they are the entirety of the class. #a5pe$s v Rei% (2009) S&uch of the! !y friends who resided with !e fro! o2erseasT failed because deceased had not said who they were and atte!pts at finding the! had failed. Construction -ules can sa2e the trust e.g. SrelationsT !eans blood relations who would ha2e ta,en under intestacy rules$ Re &o= (1997). Certainty is ti!ed at the date the trust instru!ent beco!es effecti2e$ 1i$sela v Cal%well. 4 trust will not fail if it was effecti2e at creation but later beca!e unascertainable$ Re 'ai$s Settle5e$t (1961). Prosper v (oEtowi4C (200-) 9 Spersons who attend !y funeral and who are not at any ti!e related to !eT. <o list was ,ept of funeral attendees but this did not in2alidate the trust because it was ascertainable when it was created. Proble!s can occur when the list of possible beneficiaries is e5tre!ely long and the :ob of discerning the identity of the beneficiaries cannot be co!pleted at the ti!e the trust co!es into effect. 0n -e &acone &hoe Trust /eed said that the tas, of identifying beneficiaries depended on what was Sprobably rather than theoretically possible.T (est v (esto$ (1998) .. <&%L- 637 0n this case a testator had created a trust for (the li2ing issue at the ti!e of !y death of !y four grandparents R as attain 21 years). The e5ecutri5 had !ade e2ery effort to discern the identities of the beneficiariesA which nu!bered o2er 16++ people. 'owe2erA the e5ecutri5 was unable to be certain as to the identity of any further beneficiaries. 0f the trust failed the entire estate would go to the Crown as bona 2acantia. Dnce the identity of the beneficiaries has been ascertained the fact that it is difficult to find the whereabouts or continued e5istence of the beneficiaries does not affect the certainty of the disposition. Trustees can always apply to the court for directions or pay the !issing beneficiary)s share into court. Koung I)s new for!ulation was that certainty can be satisfied ifA on the balance of probabilities that the substantial !a:ority of beneficiaries ha2e been ascertained and that no reasonable enquiries could i!pro2e the situation.

17

Trustees can apply for an order if they ha2e doubts or pay property into court. 0f a new beneficiary turns upA they ha2e rights against other beneficiariesA not the trustee$ ?eville v 8e$Ea5i$ (1902).

)ertainty o, bene,iciaries in %iscretionary trusts

0t should be recalled that discretionary trustsA or trust powersA are for!s of trust whereby the trustee is gi2en the discretion to choose the beneficiaries.0n cases where the trustee)s discretion is unfettered the power of the trustee is called a general power. <oteA howe2erA that in such circu!stances the trustee will be unable to use the power for his or her benefit. 0f the trustee is per!itted to appoint the!sel2es under a general power then there will be no trust as such a power is tanta!ount to ownership. %here the trustee is allowed to choose fro! beneficiaries of a particular classA the power is referred to as a special power. The trustee)s power !ight also be an inter!ediate or hybrid power where the trustee is allowed to choose beneficiaries as long as they are not part of a particular class

C)"!#%&!. '= ()&)=%<%#"%) %& /% <")!%'&#". !"u !

<$ Re 8a%e$7s Dee% .r!stsD M4Phail v Do!lto$ )1971+ 4C .2. re!o2ed the list certainty rule as it applied to discretionary trusts. Created a trust that g2e trustees discretion to use the inco!e of the trust for the benefit of SstaffA their relati2es and dependantsT. E5ecutor aregued trust 2oid because of list uncertainty. Trustees argued disposition was a !ere power so not sub:ect to list certainty. 'DL ruled disposition was a trust power due to !andatory language. 1a:ority de2loped the criterion certainty principle$ test for certainty is whether or not it is possible to say with certainty whether a gi2en indi2idual was a !e!ber of a class. 'owe2erA a class can fail if it is ad!inistrati2ely unwor,able if e.g. they class is !assi2e Sthe residents of greater londonT. (criterion certainty) brought the certainty requir!ent for trust powers in line with the certainty require!ent for !ere powers. Certainty of beneficiaries in discretionary trusts 9 in 1cPhail Srelati2esT and SdependantsT were argued to be se!antically uncertain. 'eld o,ay if it could be pro2en that a person !et the criteria. 1egaw LI said it was o,ay so long as a substantial nu!ber could be ascertained e2en if !any were unascertainable. 4ccepted in 4ustralia below 'C$ &potlight &tores 2 Ta5!an ;2++.>.

T"u ! ='" U&%&<'"-'"#!)/ #

Hnincorporated assiciations are not legal persons and ha2e no separate identity fro! their !e!bers. Can fail for beneficiary principle by not describing the ob:ects with certainty. 1ay also offend the perpetuity rule if the disposition includes gifts to future !e!bers 2esting beyond the perpetuity period. Ra%5a$ovi4h v ?e%elE3ovi4 (2001) Can be construed in three !ain ways$ 1. 4bsolute gift to !e!bers to hold as :oint tenants ;&tarting Point Presu!ption>

'<%#!%'&

1#+

2. 0f presu!ption rebutted$ 4 gift to the e5isting !e!bers sub:ect to the rules of the association. E2idence for rebuttal !ay be$ for! of the giftN nu!bers and identity of the !e!bersN sub:ect !atter of the gift and the capacity of !e!bers to end their relationship and reco2er interests in the property$ 8a4o$ v Pia$ta (1966) "acts$ 4 gift to the Co!!unist Party of 4ustralia for its sole use and benefit. 0n2ol2ed gi2ing the !oney to a large nu!ber of peopleA not an entity. 'eld$ 4 gift to an unincorporated association operates pri!a facieA as a gift to the indi2idual !e!bers at the ti!e when the bequest beco!es operati2e 9 Per 1cTiernanA Taylor and Dwen II. This was in2alid as it atte!pted to create a nonBcharitable purpose trust. This is because the !e!bership is constantly changingA and so who can e2er be the owners of the property. 0t is not a gift solely for the presently !e!bersN future !e!bers will also be entitled to the property. 0f it appears that gift is for future !e!bersA it offends perpetuity. 0f it is for a purpose it !ust be charitable. 7asic Principles ;Iacobs ?11+.@>$ 1. 4 gift to an unincorporated association is 2alid if it operates as one to the indi2idual !e!bers at the ti!e of the bequest. 2. 4 gift in trust for the benefit of present and future !e!bers will fail as not 2esting within the perpetuity periodN *. 4 gift for a purpose will fail unless charitableA e2en if the association has a charitable Sfla2ourT. 0f the disposition is interpreted as an absolute giftA it will not be sub:ect to trust law$ Re Goo%so$ (1971>A nor will it offend the rule against perpetuities if ascertained !e!bers can ta,e their interests during the perpetuity period$ Re S5ith (191/) 'owe2erA gifts are sub:ect to the rules of the association e.g. -e 7uc,s Consatulary "und ;<o 2> ;1 7 > association forbade !e!bers fro! di2iding up propertyA new !e!bers ta,e and interest in shares of retiring !e!bers and property cannot be di2ided up. 1e!bers are bound by these rules because they act as a contract. 0n such situationsA the disposition !ay fail because it breaches require!et of certainty and the rule against perpetuities$ ?eville :states v Ma%%e$ (1962) *. Trust to be held to further the purposes of the association 0f the association co!es to an end Re G1? 8olts a$% ?!ts (1982) 1egarry EC said court sould approach with reasonablenessA fairness and co!!on sense. =i2en the association rules were silent on distributionA there should be equality a!ong !e!bersA irrespecti2e of length of !e!bership.

1#1

0f the na!e of the association changesA that is no bar to the gift$ :state o9 D!l4ie :%$a Ra$% (2009)K 0f the association is reduced to one !e!ber Re 8!43s Co$sta,!lar" &!$% 9 &ociety co!es to an end and cash to the state bona 2acantia. Cf 'a$s4hettSta59or% v AG (2008) where court found last re!aining !e!ber gets absolute ownership. 0f the dispositionis a trust for a charitable purposeA it will be 2alid$ -e -echer)s %ill ;1 72>. #eah" v Attor$e" Ge$eral (?S() )19-9+ 4C .37 There was a trust to pro2ide a!enities to certain orders of nuns. The phrase (orders of nuns) e!braced both acti2e orders which were charitable and conte!plati2e orders which were not charitable because conte!plati2e orders were orders which could not de!onstrate the ele!ent of public benefit. The issue was whether the phrase could be se2ered so that the trust would only apply to the charitable purposesA na!ely to acti2e orders of nuns. /ecided that you could se2er the nonBcharitable purposes e2en though they were contained in a co!posite e5pression which also contained charitable purposes. Eiscount &i!onds said that the section did apply to se2er fro! the co!posite e5pression such orders of nuns as were conte!plati2e and as were not acti2e. Eiscount &i!onds said 2ery con2incingly ;Dng> that if the e5pression had been such order of nuns whether acti2e or conte!plati2eA the section would ha2e applied. Dng agrees with hi!. &1+. applies to se2er the e5pressions respecti2ely containing charitable and nonBcharitable purposes and also to co!posite e5pressions e!bracing charitable as well as nonBcharitable purposes. 'owe2erA there is still a proble! because can ha2e a co!posite e5pression which contains charitable and nonBcharitable purposes but which is not sufficiently charitable and this is an area that is difficult.

T;) "u$) #*#%& ! /)$)*#!%'& '= !) !#,)&!#". -':)"

<7 This rule has been re!o2ed by legislation in <&% .atha5 v '!=ta,le (19-0) #1 CL- 6* B 'igh Court struc, out a power of appoint!ent in a will on the basis that the testator was not allowed to delegate his or her willB!a,ing power. The e5ecutor was gi2en power to distribute the balance of an estate to people the e5ecutor belie2ed had (rendered ser2ice !eriting consideration by the testator). This disposition offended the cardinal rule against nonBdelegation. Later decisions of the 'igh Court ha2e left the rule undisturbed$ #!thera$ Ch!r4h o9 A!stralia v &ar5ers Cooperative :=e4!tors A .r!stees #t% (1970) 121 CL- 62#.Co!plete constitution of an e5press trust There are four e5ceptions$ 1. =eneral powers of appoint!ent because they are practically equi2alent to a gift$ Tatha! 2 'u5table

1#2

2. &pecial Powers if they can satisfy list certainty. The testator is treated as ha2ing already disposed of their property and the donee !erely allocates the respecti2e shares$ Re 8l"th (1997). *. 4 hybrid or inter!ediate power if there is a gift in default of appoint!ent$ Lutheran Ch!r4h v &ar5ers Coop (1970) e.g. all to 4 on basis that she distributes to anyone apart fro! 4 and 7 and if she fails to do soA all to C. <7 0f there is no gift o2er in conte!plationA the trust will not stand e2en if the criteria is certain. 'ora$ v Ja5es (1982) residue of estate to trustees with power to choose anybody to be a beneficiary e5cept the testator)s wife. D,ay by 1cPhail 2 /oulton but not o,ay as it did not ha2e a gift o2er in conte!plation. .. Charitable Trusts are not sub:ect to the rule$ 'ora$ v Ja5es (1982)K (C',-$)!) C'& !%!u!%'& O= A& EC-")

T"u !

Co!plete constitution) generally refers to the irre2ocable transfer of the trust property and the creation of the beneficial interest. e5ecuted trust which has been co!pletely constituted e5ecutory trustA which is !erely an unco!pleted agree!ent to create a trust$ !erely an agree!ent to create a trust$ Paul 2 Paul ;1##2> 4n e5ecutory trust that is not supported by consideration cannot be specifically perfor!edA nor can there be an order of part perfor!ance in relation to it. This is because equity will not assist a 2olunteer. 'owe2erA this !a5i! does not apply once the trust is e5ecuted. 4n e5ecuted trust is enforceableA e2en at the suit of a 2olunteerA because the trustee has been fully burdened with fiduciary responsibilities. 0f there is considerationA the question arisesA who should be able to sue on an e5ecutory trust. 7eneficiaries can)t sue when they are not a party to the agree!ent 7HT if there is an agree!ent for the contractual rights to be held on trust for the!A the contracting party can sue on their behalf andA failing thatA they can sue the!sel2es$ "letcher 2 "letcher ;1#..>.

D)<$#"#!%'& '= !"u ! F ")>u%"),)&! '= :"%!%&*

%hen a creator declares herself a trusteeA there need be no transfer of property 7HT if the trust property is real propertyA the trust !ust be e2idenced in writing$ &2*C;1>;a> of the C4. Pas4oe v 8e$s4h (2008) 9 !arried couple di2orced. 1rs agreed to transfer her share to 1r if he would pro!ise to hold the property on trust for their children. 7oth declared in 1 that the propety was being held for the benefit of the S7ensch "a!ilyT but not registered because the ban, would not allow it unless 1r refinanced. 1an beca!e ban,rupt in 2++3 and creditor)s wanted the houseA arguing that it did not satisfy &2*C;1>;b>.

1#*

%riting pre2ents a trustee fro! re2o,ing the trust. E.g. %ratten 2 'unter ;1 7#>A son gi2en land by his dying dad. 4t the funeralA son declared that he would hold the land on trust for the fa!ily. LaterA siblings could not enforce because no writing and no partBperfor!ance because they were 2olunteers. 'owe2erA if trustee declares hi!self to be one of a nu!ber of trusteesA courts will bind e2en if property has not been transferred to other trustees$ T Choithra! 2 Pagarani ;2++1>. Legal personal property B no writing Equitable personal property 9 writing because it is a trust of a subsisting equitable interest and so co2ered by &2*C;1>;c> Equitable real property !ust be in writing to co2er both &2*C;1>;a> and ;c> Legal -eal Property 9 writing for &2*;1>;a> 0f a trustee does not co!ply with writing require!ent and then see,s to rely on the failure to deny the trustA !ay be fraud. Con2erselyA if trustee beco!es ban,rupt and tries to protect trust property that has not !et writing require!entA it will be difficult$ 6we$s v #o9tho!se (2007) (ratte$ v '!$ter )1978+ 2 <&%L- *67A a son was gi2en land by his dying father. 4t the funeral of the father the son declared that he was going to hold the land on trust for the other !e!bers of the fa!ily. 'owe2erA his brother and sister later were unsuccessful in enforcing the trust as the trust was not e2idenced in writing. <or could they see, re!edies in part perfor!ance as they were 2olunteers. )reation by Trans,er Trusts created by transfer will be e5ecuted when the title of the trust property has been co!pletely and irre2ocably transferred to the trustee. 0nter 2i2os 9 perhaps writing if real property or subsisting interest in a trust but e5ecutory trusts !ay be enforceable if e2erything neessery to transfer title has been done by the creator$ Milro" v #or% (1862). 'owe2erA strictly applied$ Cori$ v Patto$ (1990) where transger o ftitle to creat a trust was ineffecti2e b6c settlor had not requested production of title 0n Mar4hesi v Apostolo! (2006) a declaration of trust was denied because settlor had not gained per!ission fro! registered !ortgagees and trust co would not ha2e been registered without their per!ission Post !orte! 9 wills and their statutory require!ents$ signed by the testator in the presence of two or !ore witnesses$ &7 probate and ad!inistration act <&% ;1# #> Co!plete constitution of an e5press trust

C")#!%'& (. /%")<!%'&

4 trust is created when the beneficiary of an e5isting trust directs the trustee to hold his or her interest on trust for another. This is a disposition of an e5isting

1#.

equitable interest andA as suchA needs to be e2idenced in writing$ =rey 2 0nland -e2enueA C4&2*C;1>;c>

S)<")! !"u !

"or! of testa!entary trust 9 !ade outside the will b6c the will is a public docu!ent 4 secret trust occurs when the testator lea2es property to a donee in a willA but co!!unicates his or her intention that the donee hold the property on trust for another person. "ully secret trusts where there is no record of the testator)s intention to create a trust in the will 'alf secret trustsA where the testator indicates his or her intention that the gift is not to be held beneficiallyA but is held sub:ect to so!e pri2ate instruction that has been co!!unicated by the testator$ 'owell v '"%e (200*) There are three things necessary$ #e%gerwoo% v Perpet!al .r!stee Co #t% (1997) 1. 2. *. the testator !ust intend to sub:ect the donee to an obligation of trustN the testator !ust co!!unicate the intention to the doneeN and the donee !ust accept the obligation before the testator)s death.

The nature of the secret trust has been sub:ect to long debate. Dn the one handA a secret trust can be understood as part of the willA on the otherA the trust can be seen as an independent trust that e5ists separately fro! the will. 0t is now accepted that the secret trust is the latter (hat is the tr!st propert" o9 a se4ret tr!stP Contsructi2eC 0f the trust is enforceable independently of the will then the trust co!es into being at the ti!e the require!ents for a secret trust ha2e been !et. This ob2iously has to occur before the death of the testator. 7ut at such a ti!e the donee does not ha2e any property interest that can be held on trust. The donee)s interest is a !ere e5pectancy and as such cannot be held on trust ;see JJJ>. Dn this 2iew it !ight be possible to classify the secret trust as an e5press trust of the actionable !ere equity created when the donee accepts the duties of being a trustee. This !ere equity is created when the donee binds his or her conscience to the trust. This !ere equity would be one with proprietory di!ensions and could thus for! the trust propertyA at least until the will co!es into operation. Dnce the will operates the trust property is perfected by the transfer of the property of the testator to the donee.

P"'($),

Eric was a wealthy fashion designerA and was happily !arried to &tephanie. /uring the Eietna! %arA while stationed at /arwinA Eric had an affair with 7roo,e. 4s a result of that affair Eric and 7roo,e had a son na!ed Eric Inr. Eric)s past was un,nown to &tephanie. Eric was concerned that 7roo,e and Eric Inr were

1#3

satisfactorily pro2ided for in his will. Eric thus !ade a willA in 1 #+A and clause 7 of the will read as follows$ 0 lea2e V3++A+++ to !y son -idge feeling confident that !y e5press wishes in relation to this !oney will be carried out. 7y clause 13 of Eric)s willA &tephanie was na!ed as beneficiary of the residue of his estate. Dn 1 4pril 1 7 Eric showed his will to his son -idge and handed hi! a sealed en2elope. 'e said to -idge$ (0 want you to carry out the instructions contained in this letter after 0 die. Kou are not to tell your !other about it.) -idge said nothing in response but nodded to indicate that he agreed to abide by his father)s wishes. Dn 1 1ay 1 7A 7roo,e died in an auto!obile accident. Hpon hearing of the news of 7roo,e)s death Eric suffered a heart attac, and e2entually died on 1 Iune 1 7. 4fter his father)s death -idge opened the en2elope he had been gi2en in 4pril 1 +. 0n the letter Eric stated that the V3++A+++ referred to in clause 7 of his will was to be held on trust for 7roo,e. 0n trying to locate 7roo,eA -idge disco2ered that she had died and had left a will appointing her son Eric Inr as e5ecutor and beneficiary of her entire estate. -idge see,s your ad2ice as to what is to happen to the V3++A+++ referred to in clause 7 of Eric)s will.

1#6

3ARIATION AND TERMINATION OF E9PRESS TRUSTS

There are se2eral reasons why a trustee !ay want to 2ary a trust. "or e5a!pleA if the trust instru!ent has been drafted in a restricti2e fashion it !ay se2erely li!it the power of the trustee to structure funds so as to li!it the i!pact of ta5ation.

P':)" !' 3#". C'&!#%&)/ %& EC-")

4 trust instru!ent can contain pro2isions which gi2e the trustee the power to !a,e certain a!end!ents to the trust arrange!ent. "or e5a!pleA it is co!!on for discretionary trusts to grant a power to the trustee to add beneficiaries to the class of ob:ects$ "ord F Lee at ?1326+@. 0n 1ear$s v 'ill (1990) 21 <&%L- 1+7 the <&% Court of 4ppeal found that the power of 2ariation contained in a trust instru!ent was to be gi2en its natural and ordinary !eaning e2en where it included a power to 2ary the identity of the beneficiaries of the trust.

T"u !

I&;)")&! P':)" !' 3#". T"u !

E,)"*)&<%) ? Changes in the nature of in2est!ents for infants fro! personalty to realtyA #or% 4shburton 2 Lady 4shburton ;1#+1> 6 Ees 6N *1 E- 1+N -e Iac,son ;1##2> 21 Ch / 7#6N 0n2est!ents in business transactions not authorised by a trust of settled landA -e Collins ;1##6> *2 Ch / 22 N 'a2eloc, 2 'a2eloc, ;1##1> 17 Ch / #+7N Pay!ent of !aintenance out of inco!e A e2en where there is a direction to accu!ulate inco!eA -e <ew ?1 +1@ 2 Ch 3*.N -e Tolle!ache ?1 +*@ 1 Ch 33N and Co!pro!ises in fa2our of unborn childrenA -e Trenchard ?1 +2@ Ch *7#N &al,eld 2 &al,eld ;<o 2> 7C 2++++1626N ?2+++@ &4&C 2 6 .i43le v .i43le (1987) 1+ <&%L- 3#1A Koung I decided not to follow the restrictions placed on the courts power as set down by Chap!an 2 Chap!an. 0nsteadA 'is 'onour found at 3#6 that the inherent power !ight e!brace circu!stances where there was Qan ele!ent of sal2age and a fla2our of co!pro!ise and the co!bination of these factors !ay !a,e it a proper case for the court to e5ercise :urisdiction to 2ary.Q 4s such Koung I thought it wise to add a fifth category where the power to 2ary should be e5ercised when circu!stances ha2e occurred which ha2e tended to thwart the settlorQs intention and where the parties ha2e consented to a course which will effect an alternati2e sche!e in line with the settlorQs intention.

S!#!u!'". P':)" !' 3#". T"u !

4fter the &econd %orld %arA the ta5ation of fa!ily trusts in 7ritain led to political pressure to allow 2ariation of e5press trusts in ways that would lessen the i!pact of ta5ation .r!stee A4t 192- (?S()M s 81 Ter!ination or failure of e5press trusts <llegalit"$ Trusts are 2oid for illegality. 4ny estate in2ol2ed will be allowed to lie where it fallsA !eaning that equity will not upset the legal title of the property by i!posing a trust$ 'ol5a$ v Joh$so$ (177-). E.g. Trust dedicated to paying the

1#7

fines of poachers i!prisoned for nonBpay!ent in2alid because it encouraged illegality$ .hr!pp v Collett (?o 1) (18-8) The court)s finding of illegality depends on whether the party has to rely on e2idence of his or her own fraud to pro2e their title O equity will not assist the!$ .i$sle" v Milliga$ )199/+ ?8 ?ot A!stralia$ Positio$ F see ?elso$ v ?elso$ ,elowK F#<! 1iss Tinsley sought possession of a house that was solely in her na!e. 'er relationship with her partnerA 1iss 1illiganA had co!e to an unfortunate end. 1iss 1illigan had been li2ing there and had contributed to the purchase price. 0t had been in Tinsley)s na!e alone when they bought itA as a way of clai!ing !ore in social security. 1illigan later repented and confessed to the benefit fraud. Then Tinsley !o2ed out and sought possession of the houseA arguing she was solely entitled. 1iss 1illigan pleaded that it was the co!!on intention that the property should belong to both of the! ;and so did not need to rely on the illegality>. 7u/*,)&! The 'ouse of Lords held that because 1iss 1illigan could in2o,e the presu!ption of a resulting trust without relying on the illegal purposeA she did ha2e a share in the house. 1iss Tinsley would ha2e to rely on her intention to defraud the social security syste! to rebut the presu!ption of a resulting trust and get the property in her own na!e. Lord 7rowneB%il,inson said the following.?1@ S Dnly in the reply and the course of 1iss 1illigan)s cross e5a!ination did such illegality e!erge$ it was 1iss Tinsley who had to rely on that illegality.... ...4lthough the presu!ption of ad2ance!ent does not directly arise for consideration in this caseA it is i!portant when considering the decided cases to understand its operation. Dn a transfer fro! a !an to his wifeA children or others to who! he stands in loco parentisA equity presu!es an intention to !a,e a gift. Therefore in such a caseA unli,e the case where the presu!ption of resulting trust appliesA in order to establish any clai! the plaintiff has hi!self to lead e2idence sufficient to rebut the presu!ption of gift and in so doing will nor!ally ha2e to pleadA and gi2e e2idence ofA the underlying illegal purpose.

T)",%&#!%'& '" =#%$u") '= )C-")

'owe2erA if it is possible to pro2e title without the need to rely on e2idence of illegalityA the title can be upheld in equity. "or e5a!pleA in Tinsley 2 1illiganA a house had been purchased :ointly by the parties but registered in the na!e of one partyA so as to allow the other to continue to get social security. =i2en that one party had pro2ided part of the proceeds an auto!atic presu!ption arose of a resulting trust$ see Chapter 21. The resulting trust was found to be 2alid because it arose without the necessity to bring e2idence of the illegal purpose behind the transaction. 0n 4ustralia the Tinsley 2 1illigan approach has been re:ected and a !ore fle5ible test adopted that requires the court to e5a!ine the policy behind the law that has been breached

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1##

?elso$ v ?elso$ (199-) 1#. CL- 3*# 4 !other paid the purchase price of a house which was then registered in her son and daughter)s na!es. The purpose behind the transaction was to allow the !other to purchase another ho!e at so!e future ti!eA with the benefit of a subsidy under the /efence &er2ice 'o!es 4ct 1 1# ;Cth>. The subsidy was only a2ailable for one house. &o!eti!e later the !other purchased another house with the use of the subsidyA !a,ing false declarations that she did not own any other property. The first house was sold. The daughter argued that she had a beneficial interest in the proceedsA whereas the !other and the son clai!ed a beneficial interest for the !other. D)#&) #&/ Gu,,': 77 found that there should be no general policy of letting the loss fall where it lies. 0nstead equity should loo, at the specific circu!stances of the case and the particular policy behind the law that had been breached. 4fter analysing the 4ctA /eane and =u!!ow II found at CL- 37+N 4L- 13# that the policy was to help eligible persons purchase dwellings. 0t was not to pre2ent the! fro! owning !ore than one house. 4s suchA the policy did not require the court to auto!atically refuse equitable relief. 4dditionallyA gi2en the !other was see,ing equitable reliefA she was obliged to !a,e good the a!ounts that she had defrauded fro! the go2ern!entA before a resulting trust would be enforced M<Hu*; I stated at CL- 61*N 4L- 1 *$ R courts should not refuse to enforce legal or equitable rights si!ply because they arose out of or were associated with an unlawful purpose unless$ ;a> the statute discloses an intention that those rights should be unenforceable in all circu!stancesN or ;b> ;i> the sanction of refusing to enforce those rights is not disproportionate to the seriousness of the unlawful conductN ;ii> the i!position of the sanction is necessaryA ha2ing regard to the ter!s of the statuteA to protect its ob:ects or policiesN and ;iii> the statute does not disclose an intention that the sanctions and re!edies contained in the statute are to be the only legal consequences of a breach of the statute or the frustration of its policies. T'';). IA at CL- 3 7#N 4L- 1#+ did not require the !other to pay bac, the subsidy as that was a !atter for the go2ern!ent D#: '& I too, a different path and found that the false declaration was not sufficiently related to the circu!stances gi2ing rise to the resulting trust. The purchase of the ho!e occurred a substantial period before the false declaration was !ade. 'is 'onour re:ected at CL- 3#1N 4L- 166 the distinction drawn in Tinsley 2 1illigan between cases where the illegality needs to be relied upon and those where it does not. Li,e Toohey IA /awson I did not require the !other to repay the subsidyA gi2en that the go2ern!ent had the power to recall it.

1#

Da" v Co!4h )2000+ <&%&C 2*+A the plaintiff was in a car accident and belie2ed that he was liable for a large clai! of da!ages. 'e transferred properties to his father for the purpose of !a,ing the! una2ailable to any possible creditors. 'owe2erA no clai! was brought against hi!. 4fter his father)s death he sought a declaration that he was the beneficial owner of the properties on resulting trust. There was no breach of any statute as the consequences of the illegal intent did not occur. 4s such 7ryson I upheld the i!position of a resulting trust.

Pu($%< -'$%<.

0!!orality$ 4 trust that pro!otes i!!orality will be in2alid. Hnder this heading trusts in fa2our of future illegiti!ate children ha2e been struc, down$ Re A"les7 .r!sts (187-) 1 Ch / 2#2A although it would see! highly unli,ely that this would be the case in !odern ti!es Trusts that co!pletely restrain a person fro! !arryingA or which encourage a person to di2orceA are also 2oid$ Re Joh$so$7s (ill .r!sts )1967+ 1 4ll E- 33*. Trusts which ha2e the effect of separating parent and child will also offend public policy$ -e 7oulterN 8o!lter v 8o!lter )1922+ 1 Ch 73. 4 trust for one)s widow or widower which ceases on their re!arriage % +#$%/$ #lo"% v #lo"% (18-2) 2 &i! ;<&> 233N 61 E- **#. Partial restraints on !arriageA such as pre2enting !arriage to a person of a particular religious deno!inationA raceA ethnicity or classA ha2e also been u-;)$/$ Sei%ler v S4hallho9er 1a" v S:SA'S 0 gi2e the Children)s hospital at -andwic, V1+A+++ for the treat!ent of %hite babies -acial /iscri!ination 4ct s #;2> This Part does not apply to$ ;a> any pro2ision of a deedA will or other instru!entA whether !ade before or after the co!!ence!ent of this PartA that confers charitable benefitsA or enables charitable benefits to be conferredA on persons of a particular raceA colour or national or ethnic originN or ;b> any act done in order to co!ply with such a pro2ision 0t was argued that the condition was against public policy and that the condition could be struc, off lea2ing the disposition free of it. Koung I disagreed and found that the condition was an integral part of the gift which could not be re!o2ed. 7oth the -acial /iscri!ination 4ct 1 73 ;Cth>A s # and the 4ntiB/iscri!ination 4ct 1 77A s 33A e5pressly pro2ide that any charitable disposition is not sub:ect to the 4ct. Dn that basis Koung I found that there was no public policy against a racist condition of a will. The gift was a 2alid charitable gift and on that basis could be upheld. 'owe2erA <onBCharitable trusts !ay still offend public policy because not specifically e5cluded in the acts.

R) !"#%&! '& #$%)&#!%'&

1 +

Dnce property has been gi2en absolutely on trustA any restraint that is inconsistent or repugnant to that absolute gift will be in2alid. "or e5a!pleA a restraint purporting to pre2ent the sale of the property after it has been gi2en absolutely will be 2oid$ P!,li4 .r!stee v Do$ogh!e )1999+ T4&&C 1.7. &i!ilarly in 8ra$%o$ v Ro,i$so$ (1811) 1# Ees .2 N *. E- *7 A a trust which granted a life interest was gi2en on the basis that the life interest was not transferable. This restraint was 2oid because the life interest contained a power to alienateA which was offended by the condition subsequent. 4 distinction !ust be drawn between an absolute gift that is sub:ect to a restraintA and a deter!inable interest that auto!atically ends on the happening of so!e e2ent. The absolute giftA which is sub:ect to a condition subsequentA in effect grants a co!plete interestA that is then di2ested on the satisfaction of the condition. 4s suchA this type of condition subsequent is 2oid as a restraint on alienation. 0fA howe2erA the interest transferred in trust is deter!inableA the interest is considered to ha2e ended naturally on the occurrence of the e2ent$ "or e5a!pleA (to 4 on trust for 7 for lifeA but if 7 ceases to use the property as a hotelA then to C) is considered to contain a restraint on alienation. The life interest is granted to 7A but can be artificially cut short by the e2ent of 7 no longer using the property as a hotel. &uch a condition subsequent is a restraint on alienation. 'owe2erA if the trust was worded (to 4 on trust for 7 for life until 7 ceases to use the property as a hotel)A 7)s life interest is always li!ited in ti!e to the e2ent of the property no longer being used as a hotel. 0f and when the property is no longer used as a hotel 7)s estate co!es naturally to an end. This disposition is not considered to be an absolute gift with a li!itationA as the interest contains the li!itation within itself. 4s such there is no restraint on the interest granted

T;) "u$) #*#%& ! %&/) !"u<!%($) !"u !

4 trust instru!ent that see,s to pre2ent the beneficiaries fro! e2entually using and e5hausting the capital of the trust funds will be 2oid. &uch a trust is ob:ectionable because it pre2ents the trust property fro! being alienable$ Re Cai$ )19-0+ E*#2 at * 1. &uch a trust also offends the rights of beneficiaries under the r!le i$ Sa!$%ers v Ba!tier (18/1) if all of the beneficiaries in the trust are of adult age and under no disabilityA the beneficiaries !ay require the trustee to transfer the legal estate to the! and thereby ter!inate the trust. F#<! 4 testator had bequeathed [2A+++ worth of stoc, in the East 0ndia Co!pany on trust for Eautier. 4ccording to the ter!s of the trustA it was to accu!ulate until E attained the age of 23. The stoc,Qs di2idends were to be accu!ulated along with the capital. Hpon reaching the age of !aturity ;21 at the !aterial ti!e> he sought access to the capital and di2idends i!!ediately. 7u/*,)&! The case was ruled in fa2or of the defendant. The rights of the beneficiary were held to supersede the wishes of the settlor as e5pressed in the trust instru!ent.

1 1

Lord Langdale 1- held as follows$ S0 thin, that principle has been repeatedly acted uponN and where a legacy is directed to accu!ulate for a certain periodA or where the pay!ent is postponedA the legateeA if he has an absolute indefeasible interest in the legacyA is not bound to wait until the e5piration of that periodA but !ay require pay!ent the !o!ent he is co!petent to gi2e a 2alid discharge.T

T;) "u$) #*#%& ! -)"-)!u%!%)

The purpose behind the rule is to place ti!e li!its on the creation of interests in property that pre2ent testators fro! being able to fore2er control property fro! the gra2e 2ia the use of infinite successi2e interests. 1cCri!!on states at 1*+$ %hile strong argu!ents can be !ade for the abolition of the -uleA that fact re!ains that it is part of our law and legal practitioners and law students should ha2e an understanding of its application .he 5o%er$ r!le agai$st perpet!ities 4n interest that is created to 2est so!e ti!e in the futureA !ust 2est within a life in being plus 21 years fro! the date the instru!ent beco!es effecti2e <ote that the rule is not concerned with how long an interest will last. 0t is only concerned that the interest 2est within the perpetuity period. 4 (2ested interest) is an interest in property that has ta,en effect in possessionA or one that will ta,e effect in possession through the natural deter!ination of prior estates. To illustrateA consider a gift (to 4 on trust for 7 for lifeA and then to C). This disposition contains three separate interests$ the legal title of 4 as trusteeA the equitable life estate in 7 and the re!ainder to C. 4ll of these interests are considered to be 2ested. 4)s interest has ta,en effect in possession. To contrastA consider a gift of property (to 4 on trust for 7 for lifeA then to C if C attains 21 years). Hnli,e the pre2ious e5a!pleA C)s interest will not auto!atically co!e into possession on 7)s death. C)s interest is sub:ect to a contingencyA and is referred to as a (contingent re!ainder.) C)s interest will only 2est if C attains the age of 21. The perpetuity period is equi2alent to a life in being plus an additional 21 years. The phrase a (life in being) is usually a reference to the life of so!eone !entioned e5pressly in the disposition. The life in being !ust be hu!an and the person !ust be ali2e at the date of the creation of the interest$ "or e5a!pleA in a gift to (7 for life and then to any children of 7 who attain 1# years) the life in being is ta,en to be 7. The contingent interests of the unborn children !ust 2est within 21 years after the death of 7. 1ore than one person can be e!ployed in a disposition as (li2es in being). %hen a class is used the 21 years runs fro! the death of the last sur2i2or in the class. Classes will only be 2alid if the class is not capable of increasing in nu!ber when

1 2

the instru!ent ta,es effect. 1oreo2erA the class !ust be capable of ascertain!ent at the date the instru!ent co!es into effect. 4 popular e5a!ple of this principle is the (royal li2es) clause where the li2es in being are defined to be the descendants of a particular !e!ber of the royal fa!ily. "or e5a!pleA in Cla" v 1arlso$ (1998) 1 %4- 2#7A the life in being was defined to be the last li2ing sur2i2or of 8ing =eorge E. 0f the life in being is an unborn child ;en 2entre sa !ere O (in the belly of the !other)> the length of gestation is added to the perpetuity period. People are presu!ed to be able to reproduce no !atter what age they arePPPPP S6M: S.:PS 1. 0s this a perpetuity proble!C 0.e. is there a contingent re!ainder 2. %hen is the interest createdC ;deathC 0nter 2i2os> *. %ho is the life in beingC ;li2ing person or closed class of li2ing persons> .. 0s there any possibility that it will 2est outside the period of L07 c 21 years 3. 0s there so!e !itigating rule or statute ;will tal, about later> :=a5ples 4n inter 2i2os gift (to 4 on trust for 7 for lifeA and then to any of 7)s children that !arry). 0n this disposition the life in being is ta,en to be 7. 0f 7 is ali2e at the ti!e of the creation of the trustA the gift is to the children is 2oid. 7)s interest is 2ested but the children)s interest is contingent on the! !arrying. 7 !ay ha2e children after the trust is created and those children !ight !arry !ore than 21 years after 7)s death 4 gift of a gra2el pit on trust to 4 to use until the pit is e5haustedA and then to be sold and di2ided equally a!ong the testator)s li2ing issue. 4ssu!e that the pit is actually e5hausted after si5 years. This gift will still be 2oid because at the date the gift beco!es effecti2e it !ay ta,e longer than a life in being and 21 years for the pit to be e5hausted. This is ,nown as an e5a!ple of the !agic gra2el pit 4 testa!entary gift (to 4A !y wifeA for lifeA then to 4)s children for lifeA then for such of any children of !y brother and sister who attain 21). 0n this e5a!pleA the wife is treated as the life in being. 4ssu!e that at the death of the testator his parents were both aged 66. -egardless of this factA it is presu!ed under the !odern rule that both parents were fertile and could produce !ore children. Therefore the gift o2er to the nephews and nieces is too re!ote as it was possible that the parents of the testator could ha2e !ore children who !ight then breed and add to the class !ore than 21 years after the death of the wife. This is ,nown as the e5a!ple of the fertile octogenarian Co55o$ #aw A5elioratio$ To soften the -ule against perpetuitiesA courts de2eloped the -ule in 4ndrew 2 Partington ;17 1> * 7ro CC .+1N 2 E- 61+. 0t is best e5plained through e5a!ple. T48E T'E ED0/ =0"T$

1 *

(4 on trust for 7 for life and then such of 7)s children that attain 23 years) RG#: <? A$%rews v Parti$gto$ 0f one of 7)s children turns 23 before the first interest 2estsA the class of 7)s children is closed. Children born after that date don)t get anything. &o the gift doesn)t offend the -ule &tatutory refor! The pri!ary refor! has been the introduction of waitBandBsee pro2isions$ Perpetuities 4ct 1 #. ;<&%>A s #;1> The second !a:or refor! is in relation to the calculation of the perpetuity period. The period is set at #+ years auto!atically$ Perpetuities 4ct 1 #. ;<&%>A s 7 Stat!tor" re9or5 The third refor! consists of an auto!atic reduction in age for beneficial interests that would fail because they are stipulated to ta,e effect upon the beneficiaries reaching a specified age beyond 21 years plus a life in being. 0n so!e :urisdictions the age can be read down to an age that would not infringe the !odern rule$ Perpetuities 4ct 1 #. ;<&%>A s ;1> 0!estio$ &ue died lea2ing a far!ing property and a large ban, account. Hnder her willA &ue appointed her brother Le5 as e5ecutor and trustee of her estate. &ue was a pre:udiced wo!an and disli,ed Catholics i!!ensely. Clause . of her will stated$ 0 gi2e the far! to Le5 on trust for EliMabeth for lifeA on the condition that EliMabeth is not !arried to a Catholic. Clause # of her will states$ 0 gi2e V2++A+++ to Le5 on trust for 4nthonyA then for any wife he !ay !arry for lifeA then to 4nthony)s children that attain 23 years. 4t the ti!e of &ue)s deathA EliMabeth had been !arried to Patric, ;a Catholic> for fi2e years. &ue had been aware of the !arriage and did not appro2e. 4nthony was aged 63 and had not yet !arried or had any children. 'e wasA howe2erA considering !arriage to 7ronwynA his girlfriend who was aged 7+. 4nalyse the 2alidity of these trusts. Sol!tio$ =i2en the use of the phrase (on the condition that) in cl .A the gift of the life estate to EliMabeth has ta,en the for! of a disposition with a condition subsequent. The condition subsequent concerning a !arriage to a Catholic can be struc, out as being against public policy because it requires EliMabeth to di2orce. 4t first glance the gift appears to be a 2alid partial restraint of !arriage as the condition restrains !arriage to a person of a particular religious faith

1 .

'owe2erA if a partial restraint is worded in such a way that it forces the beneficiary to di2orce it will be struc, down . 0t is clear that the testator)s intention is to force the beneficiary to di2orce. 4s the condition is se2erable fro! the dispositionA EliMabeth can ta,e her interest free fro! it. Clause # needs to be e5a!ined to deter!ine whether it offends the rule against perpetuities. "or the purpose of calculating the perpetuity periodA 4nthony !ust be the life in being as the future wife and children are not ascertainable at the date the will co!es into effect. The gift to the future wife is 2alid as it will 2est within the life in beingA because her interest will 2est when she !arries 4nthony. 'owe2erA the children)s interest offends the rule. "irst it is presu!ed that 4nthony is fertile and that any wife he !arries will also be fertileA regardless of their age. 0t is therefore possible that 4nthony)s wife will bear hi! a child that will not reach 23 years of age within 21 years of his death. ThereforeA that child)s interest could possibly 2est outside the period. The gift would be sa2ed by legislationA which auto!atically reduces the age restriction to bring it within the perpetuity period. This would ha2e the effect of reducing the age restrictions to 21 years as opposed to 23 years. "inallyA the waitB andBsee pro2isions would allow the gift to sur2i2e initial uncertainty

1 3

CHARITA4LE TRUSTS
0ntroduction Charitable trusts are e5press trusts which e5ist for a purpose rather than for identifiable beneficiaries. 0n Attor$e"-Ge$eral (?S() v Perpet!al .r!stee Co #t% (19/0) 6* CL- 2+ at 222A /i5on and E2att II stated$ 4 charitable trust is a trust for a purposeA not for a person. The ob:ects of ordinary trusts are indi2idualsA either na!ed or answering a descriptionA whether presently or at so!e future ti!e. To dispose of property for the fulfill!ent of ends considered beneficial to the co!!unity is an entirely different thing fro! creating equitable estates and interests and li!iting the! to beneficiaries. 0n this funda!ental distinction sufficient reason !ay be found for !any of the differences in treat!ent of charitable and ordinary trusts.

D%==)")&<) :%!; '!;)" )C-")

<o beneficiary principle Public trusts 0ndestructible

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Courts and 4= ha2e power of super2ision

@C;#"%!#($)A Pu"-' )

&tatute of Charitable Hses 16+1 ;.* EliM 0A c..> the relief of po2ertyN care of aged persons and the sic,N care of soldiers and !arinersN ad2ance!ent of education through uni2ersities and schoolsN repair of bridgesA ha2ensA portsA churches and highwaysN the care of orphansN the !aintenance of prisonsN the !arriage of poor !aidsN support for young trades!en and persons decayedN the relief or rede!ption of prisoners or capti2esN and relief for poor persons concerning the pay!ent of ta5es Gil5o!r v Coates )19/9+ 4C .26 at ..2B*N ?1 . @ 1 4ll E- #.# at #32A by Lord &i!onds$ ?"@ro! the beginning it was the practice of the court to refer to the prea!ble of the statute in order to deter!ine whether or not it was charitable. The ob:ects there enu!erated and all other ob:ects which by analogy are (dee!ed within its spirit and intend!ent) and no other ob:ects are in law charitable. That is settled and fa!iliar law. Ro"al ?atio$al Agri4!lt!ral a$% <$%!strial Asso4iatio$ v Chester (197/) * 4L- .#6 a trust for the breeding and racing of pigeons failed because there was no analogous charitable purpose in the prea!ble.

1 6

4 trust for the notBforBprofit publication of law reports was found to be charitable in 0ncorporated Co!$4il o9 #aw Reporti$g (0l%) v &e%eral Co55issio$er o9 .a=atio$ (1971) 123 CL- 63 N ?1 72@ 4L- 127A on the grounds that the reporting of cases was funda!ental to society in the sa!e way that the !aintenance of roadsA and the pro!otion of agriculture were funda!ental and within the spirit of the prea!ble Co55issio$er 9or Spe4ial P!rposes o9 <$4o5e .a= v Pe5sel )1891+ 4C 3*1 at 3#*. 'is Lordship stated at (Charity) in its legal sense co!prises four principle di2isions$ trusts for the relief of po2ertyN trusts for the ad2ance!ent of educationN trusts for the ad2ance!ent of religionN and trusts for other purposes beneficial to the co!!unityA not falling under the preceding heads.

R)-'"! '= I&>u%". I&!' !;) D)=%&%!%'& '= C;#"%!%) #&/ R)$#!)/ O"*#&% #!%'& 2001

the ad2ance!ent of healthA which includes the pre2ention and relief of sic,nessA disease or of hu!an sufferingN the a%va$4e5e$t o9 e%!4atio$D the ad2ance!ent of social and co!!unity welfareA which includes the pre2ention and relief of po2ertyA distress or disad2antage of indi2iduals or fa!iliesN the careA support and protection of the aged and people with a disabilityN the careA support and protection of children and young peopleN the pro!otion of co!!unity de2elop!ent to enhance social and econo!ic participationN and the care and support of !e!bers or for!er !e!bers of the ar!ed forces and the ci2il defence forces and their fa!ilies -eport of 0nquiry 0nto the /efinition of Charities and -elated Drganisations 2++1 the a%va$4e5e$t o9 religio$N the ad2ance!ent of cultureA which includes the pro!otion and fostering of culture and the careA preser2ation and protection of the 4ustralian heritageN the a%va$4e5e$t o9 the $at!ral e$viro$5e$tD and other purposes beneficial to the co!!unityA which without li!itation include the pro!otion and protection of ci2il and hu!an rightsN and the pre2ention and relief of suffering of ani!als.

C;#"%!%) 4%$$ %& 2006

E5tension of Charitable Purpose 4ct 2++.. P!,li4 ,e$e9it The benefit !ust be for the entire public or for a significant proportion of it$ "ord F Lee at ?1 +7+@. 'owe2erA the purpose of the trust need not be effected in the :urisdiction for it to be of benefit to the public$ 1"theria$ Asso4iatio$ o9 0l% v S3lavos (19-8) 1+1 CL- 36.

1 7

To illustrate these principlesA trusts for the ad2ance!ent of religion ha2e failed where they ha2e the ob:ect of fa2ouring cloistered or conte!plati2e orders who ha2e little contact with the outside world$ Gil5o!r v Coats )19/6+ 4C .26. Trusts established to stop the practice of 2i2isection ha2e also failed because there would be an o2erall detri!ental effect to the public should such e5peri!entation cease$ A$ti-Bivise4tio$ So4iet" v <$la$% Reve$!e Co55issio$ers )19/8+ 4C *1. Re Co5pto$ )19/-+ Ch 12*. Lord =reene 1- stated at 1*1A R?4@ gift under which the beneficiaries are defined by reference to a purely personal relationship to a na!ed propositus cannot on principle be a 2alid charitable gift. 4nd thisA 0 thin,A !ust be the case whether the relationship be near or distantA whether it is li!ited to one generation or is e5tended to two or three or in perpetuity. The inherent 2ice of the personal ele!ent is present howe2er long the chain and the clai!ant cannot a2oid basing his clai! on it. The Co!pton test has been used to stri,e down charitable trusts when the potential recipients of the trust funds ha2e been defined by reference to blood relationA e!ploy!ent or contract 7HT the require!ent for public benefit does not apply to trusts for the relief of po2erty$ Di$gle v .!r$er )1972+ 4C 6+1N ?1 72@ 1 4ll E- #7#. &econdlyA trusts for people fro! particular geographic locales do not offend the ruleA as they can be applied regardless of inherent personal characteristics Re .ree )19/8+ Ch *23N 2 4ll E- 63. ThirdlyA a request by the creator that fa!ily !e!bersA or others connected by association or contractA be gi2en preference in the ad!inistration of the charityA will not in2alidate the trust

T"u ! ='" P'$%!%<#$ Pu"-' )

4 trust which has a political purpose will not be charitable$ 8ow5a$ v Se4!lar So4iet" )1917+ AC /06D )1916-17+ 4ll E- -ep 1. 4 trust will be dee!ed to be political when it has the purpose of changing the law$ A$ti-Bivise4tio$ So4iet" v <$la$% Reve$!e Co55issio$ers )19/8+ 4C *1. E5a!ples include a trust to establish a nationalised health ser2iceA Re 8!shell (%e47%) )197-+ 1 4ll E- 721A or to refor! the alphabetA Re Shaw )19-7+ 1 4ll E- 7.3. Attor$e" Ge$eral (?S() v .he ?S( 'e$r" George &o!$%atio$ #t% )2002+ &antow I There is a crucial distinctionA inhering in 1c=o2ernA between per!issibly changing the law within the fra!ewor, of its established policy and i!per!issibly re2ersing the law along with its established policy. 0ncre!ental change to the law consistent with its established direction !ay indeed be per!itted today. That case concerned a trust to further the study of 'enry =eorge)s ideas about a unitary land ta5 syste!A and pursuing the! 2ia legislati2e change. 'is 'onour stated at ?6*B.@$ There is a feeling of what 0 !ight call S:udicial cop outT in the policy that the court cannot :udge the public benefit of proposals to a!end the law. 0ndeedA in !any instancesA the fact that di2erse argu!ents are presented to the public on issues of

1 #

i!portance !ay itself be i!portant to the co!!unity. 0ndeedA it is clear that when considering what is of benefit to the co!!unityA the court rules on what is beneficial at the date of the trust or at the hearing. Courts are well equipped to do this.

T"u ! ='" !;) R)$%)= '= P'+)"!.

0n order to be 2alid as a gift for the relief of po2erty the law does not require that the persons to be benefited should be destituteA or e2en on the border of destitution$ Re Gillespie (%e4>%) )196-+ E- .+2 at .+6A per Little I. -ather a trust will relie2e po2erty when it pro2ides !oney to those who would ha2e to (go short) because of their financial status$ Re Co!lth!rst (%e4>%) The 4ged The 0!potent

T"u ! ='" !;) A/+#&<),)&! '= E/u<#!%'&

0t includes gifts to particular educational institutionsA such as schools and uni2ersitiesA whichA co!ing under the prea!bleA are pri!a facie charitable Educational trusts can e!brace specific purposes which are relatedA so!eti!es looselyA to education. Trusts for scholarshipsA buildings and the dra!atic arts are all e5a!ples of 2alid educational trusts

T"u ! ='" !;) A/+#&<),)&! '= R)$%*%'&

The definition of (religion) was pro2ided by 1ason CI and 7rennan I in Ch!r4h o9 the ?ew &aith v Co55issio$er o9 Pa"-roll .a= (Bi4) (198*) 13. CL- 12+ at 1*6$ ?"@or the purposes of the lawA the criteria of religion are twofold$ firstA belief in supernatural 7eingA Thing or PrincipleN and secondA the acceptance of canons of conduct in order to gi2e effect to that beliefA though canons of conduct which offend against ordinary laws are outside the area of i!!unityA pri2ilege or right conferred on the grounds of religion. 4d2ance!ent of -eligion =enerally Trusts for 7uildingsA =rounds and Ce!eteries Trusts for PrayersA 1asses and Cere!onies =ifts to -eligious Dffice 7earers Trusts for Purposes which are 7eneficial to the Co!!unity =ifts to a Co!!unity Public %or,s and 7eautification Trusts 4ni!als and %ildlife Protection fro! %ar and /isaster -elief of Ta5es 1

Public -ecreation and &port Public &afety and /efence

T"u ! :%!; M%C)/ C;#"%!#($) #&/ N'&JC;#"%!#($) Pu"-' )

Co!pendious gifts include gifts for (ob:ects of bene2olence and liberalityA) Mori4e v 8ishop o9 D!rha5. 4dditionallyA if the gift is worded to gi2e the trustee a discretion to choose between charitable and nonBcharitable purposesA the gift will fail. 4n e5a!ple of such a gift is a gift for (charitable or bene2olent purposes)

E&='"<),)&! #&/ A/,%&% !"#!%'& '= C;#"%!#($) T"u !

Ge$eral A%5i$istrative S4he5es J Charitable Trusts 4ct 1 12 4ttorney =eneral !ay establish sche!es

* <o 1+

;1> The 4ttorney =eneral !ay by order establish a sche!e for the ad!inistration of any charitable trust. 0n particularA the 4ttorney =eneral !ay by such an order$ ;a> establish a sche!e for the alteration of the original purposes of a charitable trust so as to enable the trust property or any part of it to be applied cy pres if it appears to the 4ttorney =eneral that the trust property or any part of it !ay be so appliedA or ;b> establish a sche!e to e5tend or 2ary the powers of trustees of a charitable trust or prescribe or 2ary the !anner or !ode of ad!inistration of any charitable trustA either generally or in a particular caseA if it appears to the 4ttorney =eneral that it is e5pedient to do so in the interests of the ad!inistration of the charitable trustA or ;c> in the case of 2 or !ore charitable trustsA establish a sche!e to authorise the trustees to use co!!on pre!ises or e!ploy co!!on staff in the ad!inistration of the trustsA to pool the trust property for the purpose of in2est!entA or otherwise to co!bine for any purpose of ad!inistration of the trusts. ;2> %ithout li!iting the generality of any pro2ision of this PartA a sche!e under this Part !ay 2est in any trustees of a charitable trust who desire to sellA !ortgage or lease the trust property or any part of itA but who cannot do so for lac, of power 2ested in the! by the instru!ent ;if any> creating the trust or by lawA the necessary power for such a saleA !ortgage or lease. ;*> 0f there are no trustees of a charitable trustA a sche!e under this Part !ay appoint trustees for the purposes of the sche!e. ;.> 4 sche!e for the ad!inistration of a charitable trust established by the 4ttorney =eneral under this Part has the sa!e effect as it would ha2e if it had been established by the Court.

C.J-") S<;),)
Uas near as possibleU or Uas near as !ay be.U %hen the original ob:ecti2e of the settlor or the testator beca!e i!possibleA i!practicableA or illegal to perfor!A the cyBprds doctrine allows the court to a!end the ter!s of the charitable trust as 2++

closely as possible to the original intention of the testator or settlorA to pre2ent the trust fro! failing. The cyBprds doctrine applied in England and %ales li!ited the strictness of the rules of !ort!ain under which property disposed of otherwise than to a legal heir was sub:ect to forfeiture in certain circu!stances. "ollowing abolition of !ort!ainA the !odern application of the cyBprds doctrine has predo!inantly occurred in relation to charities as these are the !ost i!portant trusts for a general purpose ;not pri2ate benefit> per!itted under English law. The Charity Co!!ission for England and %ales has the statutory power to apply the cyBprds doctrine on behalf of a charity whereA for e5a!pleA no trustees re!ain in a charity or the necessary !andate cannot be agreed. These powers e5tend to a corporate charity or unincorporated association ;which the co!!on law rules !ay not co2er>. &i!ilar powers apply to the equi2alent bodies in <orthern 0reland and &cotland. The cyBprds doctrine will not be applied where a charity has alternati2e powers to redirect its funds under its constitution. 0n :urisdictions which ha2e retained the English cyBprds doctrine but do not ha2e an equi2alent state body to the Charity Co!!ission ;or in relation to foreign charitiesQ assets in the Hnited 8ingdo!>A charity trustees !ay see, the appro2al of the Court to their entry into cyBprds arrange!ents to a2oid later accusations of breach of trust. <$itial <5possi,ilit" 9 where the gift fails at inceptionA it can be applied cyBpres if it e5hibited general charitable intent i.e. the settlor intended to gi2e to charity and this intention supersedes the intention to gi2e to a particular purpose. AG ?S( v Perpet!al .r!stee (19/0) Testator left far! and land for the establish!ent of a training far! for Sorphan 4ustralian ladsT but the pastoral inspector dee!ed the land unsuitable for that purpose. 'C found general charitable intent not li!ited to the specific purposes. Charitable intent required no !ore than a purpose wider than the e5ecution of a specific plan. This allowed the court to apply cyBpres and select a 2alid sche!e for the property. S!perve$i$g <5possi,ilit" 9 %here a gift ta,es effect according to its ter!s but later beco!es i!possible or i!practical. Re #"saght Dee% "acts$ =ift to the -oyal College of &urgeons to pro2ide scholarships for 7ritish born students Snot of Iewish or -o!an Catholic faith.T The college refuses to accept the gift on these discri!inating ter!s. 'eld$ The gift was 2aried because$ SThe i!practicability of gi2ing effect to so!e inessential part of the testatri5)s intention cannotRbe allowed to defeat her para!ount charitable intention.T B Court found that the testator wasn)t really a SbigotT. They also held that there was a super2ening i!possibility or i!practicality. The testator really wanted the College to decide the scholarship. B This !eant the court could institute a cy pres sche!e by re!o2ing the restricti2e pro2ision to ensure that the College could still get the !oney

2+1

Satis9a4tio$ o9 6rigi$al P!rpose Phillips v Ro,erts F#<! $ Testatri5 lea2es property to Si!pro2e biblical ,nowledgeT by establishing a new church. H)$/$ =i2ing effect to the intentions of the testator was clearly i!practicalA but the Court held that the gift was generally charitable ;loo,ing at the will pri!arily>. Proble! as to how to apply the principle. The intentions of the testator were clearly to establish a new church as she was 2ery unhappy with the current faiths. There were two sche!es suggested. Trustees suggested the !oney should benefit the 0nstitute of 4rchaeology. The 4= wanted the fund to be di2ided a!ong se!inaries. 'utley I was prepared to assess e2idence fro! testatri5)s associates to infer what her reactions would ha2e been to the way her property was disse!inated. E2idence fro! friend of testatri5 disclosed that she would not ha2e wanted !oney to go to se!inaries. 1oney can go to the 0nstitute of 4rchaeology. S!#!u!'". P':)" Bali% ?o$-Charita,le P!rpose .r!sts Mori4e v 8ishop o9 D!rha5 \ 4 trust for ob:ects of Sbene2olence and liberalityT is not charitableA and lac,ing Sso!ebody in whose fa2our the court can decree perfor!anceTA therefore in2alid. .he !p3eep o9 a$i5als$ People would lea2e !oney in trust to be used to loo, after their ani!als. These trusts do not satisfy the public benefit test. 'owe2erA these cases ha2e been held 2alid as an e5ception. They cannot li2e beyond the perpetuity period. This was o,ayA as the person entitled to the !oney in the e2ent of default would always be there to ensure that the gift could be enforced. Pettingall 2 PettingalN -e /eanN CooperB/ean 2 &te2ens .he 5ai$te$a$4e o9 graves a$% to5,sto$es$ <ot charitable to !aintain your own gra2e and to!bstoneA but trust can sur2i2e so long as it only sur2i2es during the perpetuity period. There was a residuary legatee to bring before the court any failure to co!ply with the decisions. Pirbright 2 &alweyN -e 'ooper

P"'($),

4t the end of %orld %ar 00A Pierre CullifordA a dentist)s assistantA left his birthplace in 7elgiu! and e!igrated to 4ustralia. 'e settled on a far! he purchased near &o!!ersby. The far! was in a 2ery runBdown condition when he purchased it. Pierre de2oted all his ti!eA energy and resources to establishing his belo2ed far!A which he na!ed (&chtrou!pfland) ;the na!e of the 7elgian 2illage in which he was born>. 0n 1 # Pierre contracted !otor neurone disease. 4s a result of his affliction Pierre ca!e into contact with the <&% 1otor <eurone /isease -esearch CouncilA an unincorporated bodyA which was engaged in research for an effecti2e cure for !otor neurone diseaseA and which had its research centre and headquarters in =osford.

2+2

0n 4pril 1 +A the <&% 1otor <eurone /isease -esearch Council was effecti2ely dissol2edA but its functions were ta,en o2er by a newly for!ed body called the 1otor <eurone /isease -esearch 0nstitute of <&%. 4t all rele2ant ti!es the only other institution concerned with !otor neurone disease in <&% was the <ewcastleB based 1otor <eurone /isease &ufferers 4ssociation. 4s a result of Pierre)s disease he was unable to wor, his far! and the far! proB ceeded to decline rapidly. 0n 1ay 1 7 Pierre died. 4t the ti!e of his death the (&chtrou!pfland) far! was worth V*3+A+++A but had ceased to generate any inco!e at all. 0t was esti!ated that the costs of repair would run into the !illions. 0n his will Pierre appointed his nephew Iohan as e5ecutor and trustee as well as residuary beneficiary. Consider the following pro2isions left by Pierre to his trustee in his will$ a>V3+A+++ to the 4ntiB1otor <eurone /isease Centre. b>The whole of !y belo2ed (&chtrou!pfland) far! for a training far! for orphan lads being 4ustralians. c>V3+++ to pro2ide a stone and !arble !e!orial to past and present sufferers of !otor neurone disease.. A$swer The first disposition suffers fro! an initial i!possibility as the gift is to a nonB e5isting institution. &uch a gift will fail in the absence of a general charitable intention that can be effected cyBprds. 4 general charitable intention is presentA gi2en that the gift appears intended to address the woes associated with !otor neurone disease. &uch a gift is clearly a trust to aid the i!potent$. 4 cyBprds sche!e could be ordered under the inherent power of the court. The court will e5a!ine the e2idence of the purposes of the association to see which association carries out purposes as (near as possible) to the intention of the testator. The second gift fails because of initial i!possibility. 'ere the initial i!possibility is related to the fact that the trust is i!practicalA gi2en the condition of the far!. The facts of this question are 2ery si!ilar to those in 4ttorneyB=eneral ;<&%> 2 Perpetual Trustee Co Ltd ;1 .+> 6* CL- 2+

2+*

RESULTING TRUSTS
D)=%&%!%'&
4 resulting trust is a trust that arises because equity presu!es an intention to create a trust. They are often referred to as (i!plied) trustsA although they should not be confused with e5press trusts where an intention to create the trust is i!plied fro! wording or surrounding circu!stances. A!to5ati4 res!lti$g tr!sts (est%e!ts4he #a$%es,a$3 GiroCe$trale v <sli$gto$ 8oro!gh Co!$4il -esulting trusts which arise when there has been a failure of an e5press trustA orA alternati2elyA where there is a surplus of trust property after a trust has been ter!inated. 0n these situations the re!aining trust property is held on resulting trust for the creator of the trust because it is presu!ed that the creator intended to recei2e any lefto2er beneficial interest Pres!5e% res!lti$g tr!st -esulting trusts which arise because contributions ha2e been !ade to the purchase of property but the contributor has not been gi2en a legal title that is equi2alent to that contribution. 0n such a transactionA equity presu!es that the equi2alent legal title is held on trust for the contributor A$ i$stit!tio$al tr!st 4ny presu!ption that equity !a,es about a person)s intention can be rebutted by e2idence of actual intention 4 resulting trust co!es into e5istence fro! the date of the circu!stances gi2ing rise to its presu!ption The resulting trust is a property institution li,e an e5press trustA rather than a re!edy -ic,ett and =rantha! ;2+++> at 1 $ The resulting trust and its foundational presu!ptions operate as part of the law of propertyA si!ply as a series of default rules locating the beneficial interest in property when the transfer of the property is itself a!biguous as to the location of that interestA or ineffecti2e to dispose of that interest &o!e scholarsA li,e Cha!bers ;1 7>A ha2e argued that beyond this basic but funda!ental roleA lies an atte!pt by equity to pre2ent or re2erse un:ust enrich!ent on the part of those who ha2e recei2ed legal title where there was no intention for the! to obtain a beneficial interest.

I&<',-$)!) /% -' %!%'& '= # ()&)=%<%#$ %&!)") !

4 resulting trust will be i!posed when there has been an inco!plete disposition of a beneficial interest in a trust. This can occur when an e5press trust failsA when the purpose of a trust fails or when a trust surplus e5ists after satisfaction of the purpose of a trust.

F#%$u") '= #& )C-")

!"u !
2+.

4fter an e5press trust failsA equity i!poses a resulting trust by presu!ing an intention on the part of the creator for the trust property to re2ert bac, to the creator. 0f a trust fails for illegalityA equity loo,s at the specific circu!stances of the case and the particular policy behind the law that had been breachedA before deter!ining whether a resulting trust should be applied$ ?elso$ v ?elso$ "ailure of the purpose of a loan

Qu% !<$' ) !"u !

This trust has been classified by Lord 1illet in Twinsectra Ltd 2 Kardley ?2++2@ 2 4C 16.N ?2++2@ 2 4ll E- *77A as a resulting trust Salvo v ?ew .el #t% )200-+ <&%C4 2#1$ the !a:ority ;&pigel!an CI and Koung CI in Eq> fa2oured an e5press trust treat!ent

T"u ! u"-$u ) #=!)" #!% =#<!%'& '= !;) -u"-' ) '= # !"u !

4 trust surplus !ight e5ist after the beneficiaries in a fi5ed trust ha2e ta,en all their entitle!ents or ha2e died. 0n such cases there will be a resulting trust of the surplus bac, to the creator of the trust

Pu"<;# ) '= -"'-)"!. %& #&'!;)" -)" '&A &#,)

0f a purchaser buys property and 2oluntarily directs the transfer of the property into the na!e of another personA equity presu!es that the owner holds that property on resulting trust for the purchaser$ ?apier v P!,li4 .r!stee ((A) "or e5a!pleA if 4 purchases property fro! 7A and directs that 7 transfer the title into C)s na!eA equity presu!es that C holds the property on trust for 4. The presu!ption applies to both real and personal property Eg R!ssell v S4ott (19*6) 33 CL- ..+A the presu!ption of resulting trust applied to a ban, account that was opened by one party in her own na!e and the na!e of her carer. That presu!ption was rebutted by e2idence of an intention to con2ey a beneficial interest on the carer The presu!ption of resulting trust will not arise in cases where the purchase !onies ha2e been pro2ided as a loan. The presu!ption only applies when the pro2ider of the !onies acts as a purchaser or directs that the purchase ta,e place

C'&!"%(u!%'& !' !;) -u"<;# ) '= -"'-)"!.

0n cases where the purchase !oney is pro2ided by two or !ore parties :ointlyA and the property is put into the na!e of one of the partiesA equity will presu!e a resulting trust in fa2our of the other party or parties "or the presu!ption of resulting trust to ariseA contributions that are !ade by the parties !ust go towards the purchase price of the property. 0!portantlyA equity deter!ines this by loo,ing at what was pro2ided by the parties at the date of purchase

2+3

&e2eral types of contribution can be recognised as contributions to purchase price. Db2iouslyA direct pay!ent of !oney towards purchase will be includedA as will be legal feesA sta!p duty and incidental costs associated with the costs of acquisition 0f a party has incurred a !ortgage liability to pro2ide contributions to the purchase priceA that !ortgage liability counts as a contribution 7ecause equity loo,s at contributions that are !ade at the date of purchaseA the presu!ption of resulting trust will not arise when pay!ents are !ade towards costs incurred after the property has been acquired 4ustralian courts ha2e refused to recognise pay!ents of !ortgage instal!ents as contributions if they are !ade by a party who incurred no !ortgage liability at the date of purchase in England the courts ha2e recognised that so!e indirect financial contributionsA which occur after purchaseA !ay be considered in the calculation of the beneficial interests 0n Mi%la$%s 8a$3 v Coo3eA the Court of 4ppeal found that once so!e direct financial contribution had been !ade it was then open to the court to calculate the beneficial interests on the basis of all contributionsA whether direct or indirectA whether prior to or after purchase Hpgrades and !aintenance will not be considered as contributions unless there was a co!!on intention or agree!ent between the parties that is enforceable or gi2es rise to an estoppel

T;) &#!u") '= <'J':&)" ;%- %& ") u$!%&* !"u !

Drdinarily equity)s presu!ption of resulting trust is based on the coBowners holding their shares as tenants in co!!on 'owe2erA in cases where the parties !ade equal contributionsA equity presu!ed that the interests were held as :oint tenants and not as tenants in co!!on. %hy did equity prefer :oint tenancy when the contributions were equalC 0n such circu!stances it was said that (equity followed the law) and the co!!on law always presu!ed that coBowners too, as :oint tenants in the absence of an e5press declaration of tenancy in co!!on &tatutory refor!s ha2e re2ersed the co!!on law presu!ption of :oint tenancy in so!e :urisdictions and i!posed a presu!ption of tenancy in co!!on 0n Deleh!$t v Car5o%" (1986) 161 CL- .6.N 6# 4L- 23*A the 'igh Court found that equity still followed the law in these :urisdictions andA gi2en that the law had changedA equity would now presu!e tenancy in co!!on when the parties !a,e equal contributions to purchase price.

R)(u!!%&* !;) -") u,-!%'& '= ") u$!%&* !"u !

%hen the presu!ption of resulting trusts arisesA e2idence can be ad!itted of the actual intention of the parties to pro2e that no such trust was intended

2+6

0ntention re!ains para!ount in resulting trusts and e2idence of the circu!stances surrounding the transfers is ad!issibleA whether it be written or parol e2idence. 'owe2erA it is i!portant to note that the e2idence !ust relate to the intention of the parties at the ti!e that the interests were created

T;) -") u,-!%'& '= #/+#&<),)&!

0n so!e cases equity refuses to presu!e an intention to create a resulting trust and instead presu!es that any purchase or contribution was intended to be a gift by way of ad2ance!ent. This presu!ption of ad2ance!ent only arises in cases where purchase !onies or contributions are pro2ided by a husband to a wife or by a parent to a child ;not necessarily biological children but so!eone to who! the pro2ider of funds stands in the position of a parent>. 0t does not arise in other fiduciary relationshipsA li,e those between co!panies and directors$ SC: 8!il%i$g Co$str!4tio$s Pt" #t% (i$ li;) v Saa% )200*+ <&%&C 7 6 The effect of a presu!ption of ad2ance!ent is to o2erride the presu!ption of resulting trust with the result that the legal and equitable estates will stay where they lie The presu!ption of ad2ance!entA li,e the presu!ption of resulting trustA can be rebutted by e2idence of the intention of the parties at the ti!e of the transfer. 0f it is shown that there was no actual intention to confer a beneficial interest on the legal title holder the presu!ption will not be effecti2e and the nor!al presu!ption of resulting trust will apply The presu!ption of ad2ance!ent arises when a husband either pro2ides the purchase price or !a,es contributions to the purchase price of property in which the wife is gi2en a legal interest 0t does not arise in cases of transfers fro! a wife to her husband$ 1arch 2 1arch ;1 .3> 62 %<;<&%> 111. 0n the past it has been assu!ed that the husband had a natural duty to pro2ide for his wife ;and children> and this ga2e rise to the presu!ption 0n S4ott v Pa!l" (1917) 2. CL- 27. at 2#2A 0saacs I stated that the presu!ption of ad2ance!entA R is an inference which the courts of equity in practice drew fro! the !ere fact of the purchaser being the fatherA and the head of the fa!ilyA under the pri!ary !oral obligation to pro2ide for the children of the !arriageA and in that respect differing fro! the !other. The presu!ption of ad2ance!ent 0n Calverle" v Gree$ (198/) 133 CL- 2.2 at 26#N ;1 #.> 36 4L- .#* at 3+1A /eane I ad2ocated an ad:ust!ent of the doctrine to (reflect !odern conceptions of equality in status and obligations of a wife 2isBaB2is a husband). The presu!ption of ad2ance!ent 2+7

The presu!ption can also arise in cases where a transfer occurs between a !an and his intended wife or fiancee$ (irth v (irth (19-6) # CL- 22#N 7ertei 2 "eher ?2+++@ %4&C4 163. &uch a transfer is considered to be a gift in conte!plation of !arriage. 0f the !arriage does not occur the gift should be returned. 0f the gift is not returned it will be then held on resulting trust$ Je$3i$s v ("$e$ )1992+ 1 Gd - .+ The presu!ption of ad2ance!ent does not arise in de facto relationships Calverle" v Gree$ (198/) 133 CL- 2.2 1ason and 7rennan II stated at CL- 26+N 4L- . 3 that$ The ter! (de facto husband and wife) e!braces a wide 2ariety of hetero se5ual relationshipsN it is a ter! obfuscatory of any legal principle e5cept in distinguishing the relationship fro! that of husband and wife. 0t would be wrong to apply R the presu!ption of ad2ance!ent R There is a presu!ption of ad2ance!ent when purchase !oney is pro2ided by a parent and the legal title is ta,en by a child The ,ey require!ent is that the purchase price be pro2ided by so!eone in loco parentis ;in the position of a parent>. 4s such the presu!ption can also apply to illegiti!ate and adopted childrenA as well as to other for!s of fa!ilial relationshipA as long as one party has acted as the parent for the other TraditionallyA it was thought that the presu!ption of ad2ance!ent would only arise when a father pro2ided funds for the purchase of property for his children$ S4ott v Pa!l" (1917) 2. CL- 27. at 2#2A per 0saacs I. 'owe2erA in !ore recent cases the presu!ption has been recognised as arising between a !other and her children$ 8row$ v 8row$ (199*) *1 <&%L- 3#2

G%=! #&/ ") u$!%&* !"u !

Presu!ptions of resulting trust and of ad2ance!ent can also arise in gifts ;2oluntary transfers of property>. "or e5a!pleA if 4 !a,es a gift of property to 7A a presu!ption of resulting trust !ay arise that 7 holds the property on trust for 4 Equity treats gifts of realty differently to gifts of personalty. Hnfortunately the operation of the presu!ptions in gifts of land has been !ade proble!atic because of the operation of the &tatute of Hses 13*3. Prior to that statuteA equity presu!ed that any interest in land gi2en without consideration to a stranger ;!eaning so!eone to who! a presu!ption of ad2ance!ent would not arise> was held on resulting use 4fter the statute the use was e5ecuted and the ownership re2erted bac, to the grantorA lea2ing the transfer ineffectual To enable people to !a,e gifts of realtyA the courts recognised the 2oluntary transfers if they were e5pressed to be gi2en (unto and to the use of) the stranger Legislation pro2ides that no presu!ption of resulting trust will arise in a 2oluntary transfer of realtyA unless the transferor e5presses an intention to create a use or a trust$ Co$ve"a$4i$g A4t 1919 (?S()M s //

2+#

%ith regards to personaltyA if a gift is !ade to a stranger of personalty which can produce inco!eA then a resulting trust will be presu!ed$ 'e$%r" v : & 'e$%r" Pt" #t% )200*+ &4&C 137. DtherwiseA gifts of personalty will not gi2e rise to a resulting trust. 'an and Leia entered into a de facto relationship in 1 73. 0n 1 76 they had a child na!ed Lu,e. 0n 1 #7 they purchased a house in Lucastown for V13+A+++. The purchase price was paid by 'anN the !oney co!ing to 'an as an inheritance fro! the estate of his late uncle. 4t the ti!e of purchaseA 'an decided to ha2e the property registered in hisA Leia)s and Lu,e)s na!es as tenants in co!!on and in equal shares. 0n 1 .A when Lu,e reached his !a:ority ageA with the Ka2in 7an, Ltd in the :oint na!es of 'an and Lu,e. 'an told Lu,e that he would be !a,ing all the deposits into the account and would withdraw fro! the account whene2er it !ay beco!e necessary. 'owe2erA he also said that if anything should e2er happen to hi! ;ie 'an> the !oney then in the account would belong to Lu,e. Two wee,s ago 'an and Leia died in a car accident. 0n his will 'an left his entire estate to 7eruA his daughter that he had fathered in 1 72 before he had !et Leia. 0n her will Leia left her entire estate to Lu,e. 4t the ti!e of their deaths the Lucastown property was worth V*++A+++A and the ban, account at Ka2in 7an, Ltd had a balance of V3+++ 7eru see,s your ad2ice as to whether she has any entitle!ents in the Lucastown property and the ban, accountA and if not who is entitled and to what e5tent. Sol!tio$ =i2en that the proble! concerns parties who are deceasedA it is not sub:ect to any of the legislati2e regi!es controlling de facto relationships and !ust be dealt with using equity /ealing first with the interests in the property at LucastownA 'anA Lu,e and Leia each owned an equi2alent tenancy in co!!on equalling oneBthird of the 2alue of the property. Tenancies in co!!on contain no right of sur2i2orship so at law the interests that will pass through 'an)s will to 7eru are her father)s oneBthird interest in the house. &i!ilarly Lu,e will recei2e Leia)s oneBthird interestA lea2ing hi! with a twoBthirds interest at co!!on law. 'owe2erA it is open to equity to ad:ust the beneficial interests of the parties and whate2er interests equity belie2es were beneficially owned by 'an at the ti!e of his death will pass to 7eruA 2ia 'an)s will. &i!ilarlyA any beneficial interests held by Leia will pass to Lu,eA 2ia her will. =i2en that 'an pro2ided the entirety of the purchase priceA a presu!ption of resulting trust is raised in 'an)s fa2our o2er both Leia)s oneBthird interest and Lu,e)s oneBthird interest There is no presu!ption of ad2ance!ent in fa2our of Leia that will o2erride the presu!ption of resulting trust. &he is a de facto partner andA as suchA no presu!ption of ad2ance!ent can be raised in her fa2our

2+

There does not appear to be any e2idence of 'an)s actual intention to rebut this presu!ption. The beneficial interest therefore belonged to 'an and passes to 7eru in his will 4 presu!ption of ad2ance!ent can be successfully raised in Lu,e)s fa2our 0t !atters not that Lu,e was born out of wedloc, Therefore his interest is not held on resulting trust and oneBthird legal title stays with hi! 0n relation to the ban, accountA it should be noted that the presu!ptions arise o2er transfers of both real and personal property The presu!ptions of resulting trust and ad2ance!ent apply to :oint ban, accounts where one party pro2ides all the funds for that account$ -ussell 2 &cott ;1 *6> 33 CL- ..+ The presu!ption of ad2ance!ent is ob2iously para!ount hereA gi2en the relationship between 'an and Lu,e. 0t does not !atter that Lu,e was an adult when the ban, account was opened$ 7rown 2 7rown ;1 *> *1 <&%L- 3#2. There is no e2idence of actual intention that rebuts the presu!ption of ad2ance!ent. Therefore the beneficial interest re!ains with Lu,e.

21+

CONSTRUCTI3E TRUSTS
/efinition 4 constructi2e trust is a trust i!posed by law. 7ecause a constructi2e trust arises by operation of lawA it is often said that the intention of the parties sub:ect to a constructi2e trust is irrele2ant to its application 'owe2erA as shall beco!e clear belowA it is wrong to state that the intention of the parties to a relationship is co!pletely irrele2ant to constructi2e trusts as there are for!s of constructi2e trust that arise by way of co!!on intention and agree!ent. 0n that sense it is preferable to say that intention is not a necessary ele!ent of the constructi2e trustA as it is for both e5press and resulting trusts.

R),)/. '" %& !%!u!%'&K

Property institution$ This !eans that the e5press and the resulting trust reflect defined relationships between parties that co!e into e5istence at a ti!e deter!ined by the conduct of those parties. Dnce in e5istenceA the relationships are go2erned by the institution of trustA !eaning that rightsA powers and duties of trust should be e5ercised and honoured between the parties. 4 re!edy differs fro! a property institution in the ti!e of its a2ailability and its discretionary nature 0f the constructi2e trust is an equitable re!edy it will e5ist fro! the ti!e that an order is !ade by the court$ Re Poll" Pe43 <$ter$atio$al pl4 (i$ a%5i$istratio$) v Ma4<$tosh )1998+ * 4ll E- #12 at #23 &i!ilarlyA if constructi2e trusts are treated as an equitable re!edyA they will be discretionary in nature. 4 :udge could refuse to order a constructi2e trust if it was a re!edyA whereas if the trust was an institution it would e5ist independently of the :udge)s e5ercise of discretion M!s4hi$s3i v Do%%s (198-) 16+ CL- 3#* at 6129. A /eane I$ 4t ti!esA disputing factions ha2e tended to polarise the discussion by reference to co!peting rallying points of (re!edy) and (institution). The percei2ed dichoto!y between those two catchwords hasA howe2erA largely been the consequence of lac, of definition. 0n a broad senseA the constructi2e trust is both an institution and a re!edy of the law of equity. 4s a re!edyA it can only properly be understood in the conte5t of the history and the persisting distinctness of the principles of equity that enlighten and control the co!!on law. The use or trust of equityA li,e equity itselfA was essentially re!edial in its origins R Li,e e5press and i!plied trustsA the constructi2e trust de2eloped as a re!edial relationship superi!posed upon co!!on law rights by order of the Chancery Court. 0t differs fro! those other for!s of trustA howe2erA in that it arises regardless of intention. "or that reasonA it was not as well suited to de2elop!ent as a con2eyancing de2ice or as an instru!ent of property law. 0ndeedA whereas the rationale of the institutions of e5press and i!plied trust is now usually identified by reference to intentionA the rationale of the constructi2e trust !ust still be found essentially in its re!edial function which it has predo!inantly retained

211

The effect of /eane I)s reBclassification has been to allow courts to choose the ti!e fro! which a constructi2e trust arisesA and in that sense the re!edial function of the trust is gi2en effect through the i!position of the institution of trust The effect of /eane I)s reBclassification has been to allow courts to choose the ti!e fro! which a constructi2e trust arisesA and in that sense the re!edial function of the trust is gi2en effect through the i!position of the institution of trust 0f a :udge has decided to i!pose a constructi2e trust retrospecti2elyA equity regards as done what ought to ha2e been done and the trust is considered to ha2e e5isted as an institution fro! that ti!e onwardsA rather than fro! the ti!e of the order The proble! with the e5ercise of such discretion is the uncertainty it generates for third parties who ha2e an interest in the property in question. This is particularly the case in insol2encies where the parties are :ostling for priority to access property to satisfy their debts The institutional 2iew of a constructi2e trust !ight be signficantly unfair to unsecured creditors who were not aware of the e5istence of a constructi2e trustA but !ay ne2ertheless find their clai!s cannot be satisfied because the property is held on trust 0n Parso$s v M48ai$ (2001) 1+ "C- 12+A when discussing the i!position of co!!on intention constructi2e trusts the "ull "ederal Court held that the trust was created by the conduct of the parties and arose at that ti!eA e2en if that had the effect of defeating unsecured creditors. This has been followed in later cases$ Ja,,o!r v Sherwoo% )200*+ "C4 32 N Parianos 2 1elluish ;Trustee> ;2++*> *+ "a! L- 32.. 0n Clo!t v Mar3well )200*+ G&C 1 at ?21@A it was said that creditors should be e5pected to be aware of constructi2e trusts which !ay arise when the debtor is !arried or in a de facto relationship. 0n A!stralia$ 8!il%i$g a$% .e4h$i4al Sol!tio$s Pt" #t% v 8o!5elhe5 )2009+ <&%&C .6+A parents had pro2ided funds to their son to purchase land and build duple5es on itA one of which would be transferred into the parents) na!es on co!pletion. Parents had increased the !ortgage on their own ho!e to get the funds. Property used as security on debts owed by his business. 7usiness then collapsed Parents clai!ed an interest under both a resulting trust ;to secure their initial contribution> and a constructi2e trust ;for later contributions they !ade to the building effort>. These clai!s were resisted by the son)s creditors. %ard I declared that there was a resulting trust for the contributions to the purchase price but did not order a constructi2e trust o2er the further a!ounts paid

212

by the parents. These a!ounts were instead secured by equitable liens which could then be ran,ed against the other security interests held by the creditors.

D%==)")&<) :%!; )C-")

1illet I in #o$hro v &a"e% (?o 2) )1991+ . 4ll E- 61 at 7192$ 0t is a !ista,e to suppose that e2ery situation in which a constructi2e trust arises the legal owner is necessarily sub:ect to all the fiduciary obligations and disabilities of an e5press trustee. The second !a:or difference is that constructi2e trusts are not always sub:ect to the require!ent of certainty of sub:ect !atter Gi!5elli v Gi!5elli (1999) 1 6 CL- 1+1 at 112 =leeson CIA 1c'ughA =u!!ow and Callinan IIA found that so!e constructi2e trusts create or recognise no proprietary interest but rather i!pose a personal liability to account for losses sustained by constructi2e beneficiaries. 0n that situation there is no identifiable trust property

#&/ ") u$!%&* !"u !

W;)& /' <'& !"u<!%+) !"u ! #"% )K

institution6re!edy dichoto!y The institutional approach is that it li!its constructi2e trusts to defined sets of circu!stances andA by doing soA li!its the :udge)s discretion in deciding when and how to ad:ust a person)s beneficial entitle!ents. /uring the 1 7+s the Hnited 8ingdo!)s Court of 4ppealA led by Lord /enning 1-A adopted a freeBranging re!edial basis for constructi2e trusts and ca!e to the 2iew that a constructi2e trust is (i!posed by law whene2er :ustice and good conscience require it)$ '!sse" v Pal5er )1972+ * 4ll E- 7.. at 7.7 Later English decisions re:ected the new !odel of constructi2e trust$ #lo"%s 8a$3 v Rosset )1991+ 1 4C 1+7N ?1 +@ 1 4ll E- 1111. 0t ne2er too, a foothold in 4ustralia where it was criticised as a for! of (pal! tree :ustice)$ A!stralia 8r"so$ v 8r"a$t (1992) 2 <&%L- 1## at 1 6A per 8irby P. /eane I B Hnder the law of this country O asA 0 2enture to thin,A under the present law of England R proprietary rights fall to be go2erned by principles of law and not by so!e !i5 of :udicial discretion RA sub:ecti2e 2iews about which party (ought to win) R and (the for!less 2oid of indi2idual !oral opinion) R Long before Lord &eldon)s anachronis! identifying the Chancellor)s foot as the !easure of Chancery reliefA undefined notions of (:ustice) and what was (fair) had gi2en way in the law of equity to the rule of ordered principle which is of the essence of any coherent syste! of rational law. The !ere fact that it would be un:ust or unfair in a situation of discord for the owner of a legal estate to assert his ownership against another pro2idesA of itselfA no !andate for a :udicial declaration that the ownership in whole or in part liesA in equityA in that other R

C'& !"u<!%+) !"u ! !' )&='"<) #*")),)&! <'&<)"&%&* -"'-)"!.

0nco!plete contract for the sale of property B #"saght v :%war%s B equitable con2ersion

21*

* quals 9 specific perfor!anceA unconditionalA identified property 0nco!plete gifts 9 Cori$ v Patto$ "raudulent transactions B Avo$%ale Pri$ters a$% Statio$ers #i5ite% v 'aggie )1979+ 2 <LL- 12. N (hite Cit" .e$$is Cl!, #t% v Joh$ Ale=a$%er7s Cl!,s Pt" #t% )2009+ <&%C4 11. &ecret trusts M!t!al wills B wills !ade as part of an agree!entA whereby the parties pro!ise not to re2o,e their wills after one of the other parties dies. The essential characteristic of !utual wills is that there be an agree!ent between the parties not to re2o,e their wills 8ar$s v 8ar$s (200*) 21. CL- 16 ;i> it is the disposition of the property by the first party under a will in the agreed for! and upon the faith of the sur2i2or carrying out the obligation of the contract which attracts the inter2ention of equity in fa2our of the sur2i2orN ;ii> that inter2ention is by the i!position of a trust of a particular characterN ;iii> the sub:ectB!atter is Sthe property passing ?to the sur2i2or@ under the will of the party first dyingT 8ir5i$gha5 v Re$9rew (19*7) 37 CL- 666 at 6# @N ;i2> that which passes to the sur2i2or is identified after due ad!inistration by the legal personal representati2e ?:aster,roo3 v Ho!$g (1977) 1*6 CL- *+# at *1 B *2+@ whereupon Sthe dispositions of the will beco!e operati2eT?4ttenborough 2 &olo!on ?1 1*@ 4C 76 at #*@N ;2> there is Sa floating obligationT o2er that property which has passed to the sur2i2or The essential characteristic of !utual wills is that there be an agree!ent between the parties not to re2o,e their wills :stoppel BConstructi2e trusts will often be e!ployed as a way of enforcing the equity arising in an estoppel 7efore a constructi2e trust is i!posed to enforce an estoppelA the court should firstly decide whether there is an appropriate equitable re!edy which falls short of the i!position of a trust 8rea4h o9 4o$9i%e$4e Constructi2e trusts are a !a:or re!edy for breach of confidenceA not only for breaches of agree!ents to ,eep infor!ation confidentialA but also for situations where infor!ation has been acquired by stealth Co55o$ i$te$tio$ to %eal with propert" %here parties ha2e entered into a relationship with a co!!on intention that property is to be held between the! in a particular wayA equity !ay enforce that co!!on intention by the i!position of a constructi2e trust.

21.

%hile the parties !ay ha2e had a shared intention or an agree!ent as to how property was to be heldA such an agree!ent !ay not be enforceable as a contract because the agree!ent is not in writingA or because the parties !ay not ha2e e2idenced a sufficient intention to enter into legal relations %hile the parties !ay ha2e had a shared intention or an agree!ent as to how property was to be heldA such an agree!ent !ay not be enforceable as a contract because the agree!ent is not in writingA or because the parties !ay not ha2e e2idenced a sufficient intention to enter into legal relations Pettit v Pettit )1970+ 4C 777 FACTS 0n PettittA the wife had used her own !oney to buy a house during the !arriage and both she and her husband resided therein until the wife left the husband. The husband clai!ed that he had carried out a considerable nu!ber of i!pro2e!ents to the house and garden. These i!pro2e!ents consisted of internal decoration wor,A building a wardrobeA laying a lawn and constructing an orna!ental wall and a side wall in the garden. 7y 2irtue of these efforts the husband sought a beneficial interest in the proceeds of sale of the property. Title to the house had been in the wifeQs na!e. 7UDGMENT <o Property right to hubby 0n the course of his :udg!entA Lord /iploc, saidA U0t wouldA in !y 2iewA be an abuse of the legal technique for ascertaining or i!puting intention to apply to transactions between the postBwar generation of !arried couples Upresu!ptions which are based upon inferences of fact which an earlier generation of :udges drew as to the !ost li,ely intentions of earlier generations of spouses belonging to the propertied classes of a different social era.U <otes ;a> &. 17 of the 1##2 4ct gi2es the courts no discretion to 2ary the property rights of the parties established on ordinary equitable principles. ;b> 1arried couples are to be treated no differently fro! anybody else. ;c> Though Lord -eid e5presses doubtA it appears that i!pro2ing a propertyA unli,e contribution to the purchase priceA will not generally gi2e rise to an equitable interest in it. ;d> The presu!ptions of ad2ance!ent ha2e little if any application to this area of law. 7ut see further 1c=rath 2. %allis and Tribe 2. Tribe. ;e> Legislati2e reaction was the 1atri!onial Proceedings and Property 4ct 1 7+A s. *7 B which applies only to !arried couples and fiancees. Gissi$g v Gissi$g )1971+ 4C ##6N ?1 7+@ 2 4ll E- 7#+

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FACTS 1rs =issing had been !arried to 1r =issing for 16 yearsA and had paid a substantial su! towards furniture and the laying of a lawnA but the house had been con2eyed into the na!e of 1r =issing aloneA and 1rs =issing had !ade no direct contributions towards its purchase. Dn their di2orceA she clai!ed a beneficial interest. HELD The 'ouse of Lords held that she had no interest. NOTES 1. Lord /iploc, drew a distinction between e5press agree!ent and inferred intentionA which is essentially the sa!e as that drawn by Lord 7ridge in Lloyds 7an, 2 -osset between the first and second categories. 2. The interests of the parties were deter!ined on the basis of their inferred intentions at the ti!e of acquisition of the propertyA and not by their subsequent conduct. 0n the absence of e5press agree!entA only conduct rele2ant to the acquisition of the property will generally be rele2ant. 'owe2erA subsequent conduct !ay be e2idence of intention at the ti!e of acquisition. *. 4s in Pettitt 2 Pettitt the fact that the parties were !arried !ade no difference. 4 finding of e5pressed co!!on intention can be !ade on the basis of e2idence of intention prior to or at the ti!e of purpose$ =issing 2 =issing at 4C +#N 4ll E- 7 1. E2idence !ay also be ad!issible of intention in the i!!ediate after!ath of purchase$ #lo"%7s 8a$3 pl4 v Rossett )1991+ 1 4C 1+7 at 1*2 0n the absence of e2idence of e5press agree!entA inferences of a co!!on intention to grant a beneficial interest will arise when the party has !ade a direct financial contribution to the acquisition of the property. 0ndirect contributionsA such as ho!e!a,ingA will not be considered unless there was an e5press agree!ent to recognise the!. Mi%la$% 8a$3 v Coo3e )199-+ . 4ll E- 362A where the Court of 4ppeal found thatA once so!e direct financial contribution had been !ade ;howe2er !ini!al> it was then open to the court to calculate the beneficial interests on the basis of all contributionsA whether direct or indirect 6=le" v 'is4o43 )200-+ "a! 211 FACTS 1rs Elayne D5ley was li2ing at * Page CloseA 7eanA near /artfordA where under the 'ousing 4ct 1 #3 she had had the (right to buy). &he and 1r 4llan 'iscoc,A a "irst 0raq %ar soldier who had been capturedA bought a new house together in &epte!ber 1 #7A *3 /ic,ens Close. &he paid 2#bA he paid .#b of [23A2++. They both contributed to household e5penditureA i!pro2e!entsA !aintenance and paying off the !ortgage. 1rs D5ley clai!ed 3+b of the proceeds.

216

7UDGMENT Chadwic, LI held 1rs D5ley was entitled to a .+b share on the factsA not equal in light of the difference between their initial cash contributions. 'e said there were two questions ;1> was there a constructi2e trustA and ;2> how was it to be quantified. 0n particularA when there is no e5pression of what share each was toA then it is up to the courts to decide. 1ance LI and &cottB7a,er LI$ ee6 . 0t !ust now be accepted that ;at least in this court and below> the answer is that each is entitled to that share which the court considers fair ha2ing regard to the whole course of dealing between the! in relation to the property.) 0ncludes arrange!ents to !eet outgoings li,e !ortgageA council ta5A utilitiesA repairsA insurance and house,eeping.ff Sta43 v Dow%e$ )2007+ 2 4C .*2 FACTS 1r & and 1s / for!ed a relationship in 1 73. They cohabited and had four children together. Prior to 1 * they li2ed in a house which had originally been bought by 1s / at a preferential price fro! a deceased relati2e. The house was bought in her na!e and the purchase price raised in part by a !ortgage in her sole na!eA and the balance fro! a sa2ings accountA also in her sole na!e. %hen the property was sold in 1 *A she recei2ed the net proceeds of [66A61*. They then bought another property in :oint na!es for [1 +A+++. [63A+23 was raised by way of :oint !ortgageA secured by way of one :oint endow!ent policy and another in 1s /Qs sole na!e. The balance of the purchase priceA plus the sta!p duty and legal fees ;[12#A#1*> ca!e fro! 1s /Qs sa2ings account ;into which had been paid the net proceeds of the Pur2es -oad property>. &o!e other facts relating to the property$ 1r & paid the !ortgage interest and endow!ent policy pre!iu!s on the :oint policy. 1s / paid the endow!ent pre!iu!s on her own policy.

0n due courseA the !ortgage was paid off by way of a series of lu!p su! pay!entsA as to [27A+++ by 1r & and [*#A.*3 by 1s /. The utility bills were all in 1s /Qs na!eA although 1r & !ade so!e contributions. There were so!e li!ited i!pro2e!ents to the property.

Throughout their ti!e togetherA they ,ept separate ban, accounts and held separate sa2ings and in2est!ents. The parties separated in Dctober 2++2. 1r & left the property. 1s / re!ained in occupation with the children. 0n proceedings in the "a!ily CourtA 1r & agreed to

217

stay away upon 1s /Qs underta,ing to pay hi! [1A+++ per !onth to rei!burse hi! for the cost of alternati2e acco!!odation. IH/=E1E<T$

1. Lord 7ridgeQs two categoriesA defined in Rosse A still pro2ide the acid test for the establish!ent of the beneficial interest. 2. These further propositions should be clearly understood$ ;a> U"airnessU is not a basis for establishing a beneficial interest. ;b> <either a co!!on intention to pursue i!pro2e!ents as a :oint 2entureA nor to occupy as a fa!ily ho!e will be sufficient in itself to establish a beneficial interest. ;c> There is no inference fro! the purchase of property by a couple for their :oint occupation that it is a fa!ily asset in which each is entitled to an equal beneficial interest. ;d> 0ndirect contributions will only establish a beneficial interest if based on an agree!entA arrange!ent or understanding to that effect.
0!a$ti9"i$g the ,e$e9i4ial i$terest 9 D5ley has significantly clarified the law 4 ,ey distinction !ust be borne in !ind fro! the start B between cases where ;0> there is e5press e2idence of shared intention as to proportions and ;00> there is no e2idence of any discussion between the parties as to the a!ount of the shares. 0n class ;0> the answer ?to the question of the e5tent of the beneficial interests@ will be pro2ided by e2idence as to what the parties said and did at the ti!e of the acquisition ;D5ley para 6 >. 0n class ;00>A where there is no e2idence of any discussion as to the a!ount of the beneficial interestsA D5ley states$ U?6 @ the answer is that each is entitled to that share which the court considers fair ha2ing regard to the whole course of dealing between the! in relation to the property ?which@ includes the arrange!ents which they !a,e fro! ti!e to ti!e in order to !eet the outgoings ;for e5a!pleA !ortgage contributionsA council ta5 and utilitiesA repairsA insurance and house,eeping> which ha2e to be !et if they are to li2e in the property as their ho!e.U 4bbott 2 4bbott ;4ntigua and 7arbuda> ?2++7@ H8PC 3* "owler 2 7arron ?2++#@ E%C4 Ci2 *77 1orris 2 1orris ?2++#@ E%C4 Ci2 237 21#

The co!!on intention constructi2e trust has been recognised and accepted by 4ustralian courts &tate!ents !ade by the parties such as (it)s for you and !e) or (this is your house) our house) ha2e been ta,en as sufficient to pro2e a co!!on intention to grant a beneficial interest <$ A!stralia Alle$ v S$"%er (1977) 2 <&%L- 6#3 /e facto couple purchased a house that was financed through a loan granted by the %ar 'o!es &er2ices /epart!ent. 4 condition of granting the loan was that the wo!anA 4llenA !a,e a declaration that she was financially dependent on the !anA &nyder. 4n additional condition of the loan was that the title of the house should only be held by the !an /uring the course of the relationshipA 4llen paid for furniture and &nyder !ade a will in which his interest in the house was to be passed to 4llen. 4fter the brea,down of the relationshipA 4llen clai!ed that she was entitled to an equal beneficial share on the basis that it was the parties) co!!on intention that she be granted such an interest. =lass I4 e5a!ined the :udg!ents in Pettitt and =issing and accepted that a trust could arise through the co!!on intention of partiesA as long as the party asserting the interest !ade so!e contribution in reliance on the agree!ent. 0nterestinglyA his 'onour found that the trust was an e5press trust that lac,ed writing. The trust was enforceable because it would be fraudulent to deny the interest that was intended$ at 6 2. 1ost i!portantlyA =lass I4 stressed that the intention !ust be actual or inferred intention. 0t could not be an i!puted intentionN that being an intention ascribed to the parties by operation of law$ at 6 .. The factual e2idence pointed out that there was a co!!on intention that 4llen be granted an interest in the house upon the occasion of the parties getting !arriedA or on the death of &nyder. 'owe2erA there was no intention to grant her an interest during the course of the de facto relationship. 6gilvie v R"a$ )1976+ 2 <&%L- 3+.A an agree!ent between a testator and his house,eeper to grant her a life interest in a house in his will in return for her ser2icesA was upheld on the basis that it would be fraudulent to allow the legal title holder to recei2e the benefit of care without granting the agreed beneficial interest Co!pare to 8og%o$ovi4 v 1ote99
o "4CT& 8oteff senior in2ites 7ogdano2ics to li2e \ =i2es 1rs 7 a life estate o Equitable interest under constructi2e trust B %hen he diesA house gi2en to sonA who ,new nothing of equitable or contractual interest to 7 9 wants her out B 'e beca!e registered proprietor without ,nowledge of equitable or contractual rights o 'EL/ B 0ndefeasibility pro2isions apply sa!e to registered proprietor of land who ta,es interest in land as 2olunteer \ 4llows rp to ta,e title free fro! prior equitable interests which she had no notice of B

21

B The oral pro!ise to her would be sufficientA howe2er in this caseA 8oteff)s son beca!e registered proprietor without prior ,nowledge of contractual or equitable rightA and obtained indefeasible title B 8ing 2 &!ail ;Eictorian Case> should no longer be followedA as 7res,2ar 2 %allA following "raMer 2 %al,erA established that the title of each registered proprietor arises fro! registration

The Court of 4ppeal held that a registered 2olunteer obtained an i!!ediately indefeasible title and was thereby not sub:ect to a prior unregistered interest created by the pre2ious registered proprietor. 4s the appellantA who was see,ing to upset the title of the registered proprietorA could not point to anything in the -P4 preser2ing her rights against the registered proprietor who too, as a 2olunteerA s .2 operated so as to gi2e 1r 8oteffA the 2olunteerA an interest Sabsolutely freeT fro! any estate or interest in 1rs 7ogdano2ic. 4 nu!ber of authors ha2e suggested that there are no co!pelling reasons why a 2olunteer should obtain the benefit of the para!ountcy pro2ision. 0ndeed %halan has suggested that the !atter of whether a 2olunteer)s title should be indefeasible should be put to rest by a legislati2e pro2ision withholding the benefit of indefeasibility fro! a 2olunteer. 0n this conte5tA one proble! re!ains as a result of the decision in 7ogdano2ic 2 8oteff. The conclusion that a 2olunteer had an i!!ediately indefeasible title ;on the basis that this was the o2erall ob:ecti2e of the 4ct> was clearly at odds with the earlier decision of Iustice 4da! in 1i$g v S5ailK Iustice 4da! reasoned on the basis of repeated references in the Eictorian 4ct to Spurchasers for 2alueT and the need to read the 4ct as a whole that the indefeasibility pro2isions considered as a whole suggested that 2olunteers ought not to be gi2en the sa!e protections as purchasers. The Eictorian equi2alent to s 1*3 was one such pro2ision referred to. 4s a result of 7ogdano2ic 2 8oteff the curious position arises that 2olunteers would see! to get the protection of i!!ediate indefeasibility under s .2A yet !ight still be liable to a clai! for da!ages for the reason that they do not co!e within the a!bit of s 1*3. This apparent result raises an acute proble! analogous to that identified by Iustice 1ason in "ranMon. That isA the need for persons who ha2e an indefeasible title and who cannot therefore be re!o2ed fro! the register to be equally i!!une fro! clai!s for da!ages. 4fter 7ogdano2ic 2olunteers would see! to be in precisely this in2idious position. This would appear to be another reason for resol2ing this !atter by statutory a!end!ent. Clo!t v Mar3well )200*+ G&C 1A it was argued that the wife could not clai! an interest in property ;e2en though there had been a co!!on intention with her husband> because her husband had not denied her interest. 0nstead the husband had gone ban,rupt and the trustee was denying the e5istence of the wife)s interest. 4,tinson I said that a co!!on intention constructi2e trust does not require there to ha2e been an actual denialA but rather it arises because such a denial would be unconscionable. This e5planation appears to bring co!!on intention constructi2e trusts !ore in line with the unconscionabilityBbased construti2e trust

C'& !"u<!%+) !"u ! !' "),)/. (")#<; '= =%/u<%#". /u!.

Constructi2e trusts are the !a:or re!edy for breach of fiduciary duty

22+

The constructi2e trust that arises in response to a breach of fiduciary duty is institutionalA in that it arises on the occurrence of the breachA not the court order E5ceptions 9 loansA 2oidable contractsA bribes and secret co!!issions (ester$ Areas :=ploratio$ Pt" #t% v Streeter (?o *) )2009+ %4&C 21* -ecentlyA the &upre!e Court of %estern 4ustralia handed down its :udg!ent in the case of %estern 4reas E5ploration Pty Ltd 2 &treeter ?<o *@ ?2++ @ %4&C 21*. The case is an i!portant re!inder that opportunities presented to a co!pany !ay not be ta,en up by its directorsA e2en if the directors belie2e that the co!pany cannot ta,e up the opportunity itself. "acts of the case 0n late 1 A a group of geologists contacted 1r 7raileyA who was a director of %estern 4reas E5ploration Pty LtdA with a proposal that in2ol2ed !ining tene!ents held by the geologists being sold to a co!pany that would conduct an 0PD and list on 4&J. 1r 7railey referred the geologists to 1r &treeter and 1r Cooper who were also directors of %estern 4reas E5ploration Pty Ltd. 4lthough 1r 7railey understood that they were considering the proposal for %estern 4reas E5ploration Pty LtdA 1r &treeterA 1r Cooper and the geologists agreed that the !ining tene!ents would be sold to a newly for!ed co!pany called %estern 4reas <L ;of which 1r CooperA 1r &treeter and the geologists would be directors> . %hen 1r 7railey disco2ered thisA he resigned as a director of %estern 4reas E5ploration Pty Ltd. Dn 2# Iuly 2+++ %estern 4reas <L listed on the 4&J and acquired the !ining tene!ents fro! the geologists. 1r &treeter and his pri2ate co!pany were issued shares and options by %estern 4reas <L as consideration for seed capital pro2ided by the!. 1r Cooper was also issued options by %estern 4reas <L. 4t the sa!e ti!eA %estern 4reas E5ploration Pty Ltd held a 7+b interest in certain !ining tene!ents near Cue. 0ts :oint 2enture partner contacted 1r &treeter and offered to sell the re!aining *+b interest in the tene!ents to %estern 4reas E5ploration Pty Ltd for V3A+++. 1r &treeter did not disclose the offer to 1r 7railey and instead declined the offer on behalf of %estern 4reas E5ploration Pty Ltd and arranged for his pri2ate co!pany to acquire the *+b interest. %estern 4reas <L purchased a 1++b interest in the tene!entsA 7+b fro! %estern 4reas E5ploration Pty Ltd and the re!aining *+b fro! 1r &treeter)s pri2ate co!pany in return for an allot!ent of shares. The case against 1r &treeter and 1r Cooper 0n 2++6A 1r 7railey and others requisitioned an e5traordinary general !eeting of %estern 4reas E5ploration Pty Ltd at which 1r &treeter and 1r Cooper were re!o2ed as directors. %estern 4reas E5ploration Pty Ltd then in2estigated the transactions and co!!enced proceedings against the! alleging that they wrongfully !isused the opportunity to participate in the geologists) proposal in breach of their fiduciary duties as directors. 221

0n their defenceA 1r &treeter and 1r Cooper argued a!ong other things that$ 1. The opportunity ca!e to the! independently of their connection with the plaintiff. The court did not agree that 1r 7railey independently referred the geologists to 1r &treeter because he was wellB,nown wealthy in2estor in !ining pro:ects. 'owe2erA the court co!!ented that if the opportunity had co!e to 1r &treeter and 1r Cooper independently of 1r 7railey or of their roles as directors of the plaintiffA they would ha2e been free to pursue it through %estern 4reas <L or in any other for!. 2. They were nonBe5ecuti2e directors of the plaintiff which reduced the scope of their fiduciary duties. The court held it was S2irtually !eaninglessT to distinguish between e5ecuti2e and nonBe5ecuti2e directors becauseA together with 1r 7railey they were the only directors of %estern 4reas E5ploration Pty LtdA they were directly in2ol2ed in its acti2ities and all of the wor, was perfor!ed by the!A which a!plified rather than circu!scribed their fiduciary duties. *. The plaintiff was a failed co!pany and was an unsuitable 2ehicle for the geologists) proposal. The court held that %estern 4reas E5ploration Pty Ltd was still intent upon its original a!bition of acquiring interest in !ineral tene!entsA raising further capital 2ia public offers and beco!ing listed on 4&J and that what it needed was a suitable opportunityA li,e the geologists) proposalA to acquire !ining prospects sufficiently attracti2e to support a prospectus for an 0PD and encourage shareholders to subscribe for further capital. T;) <'u"!A /)<% %'& The court concluded that 1r &treeter and 1r Cooper breached their fiduciary duties in di2erting fro! %estern 4reas E5ploration Pty Ltd and using to their own ad2antage the opportunity to participate in the geologists) proposal. 1r &treeter)s pri2ate co!pany was also found to be ,nowingly in2ol2ed in the breaches. The court ga2e two alternati2e sets of orders which %estern 4reas E5ploration Pty Ltd was entitled to elect between. The first set of orders was that the shares in %estern 4reas <L recei2ed by 1r &treeter and his pri2ate co!pany in return for seed capital and the *+b interest in the Cue tene!ents were held on trust for %estern 4reas E5ploration Pty LtdA sub:ect to %estern 4reas E5ploration Pty Ltd paying to the! an a!ount equal to the seed capital paid to %estern 4reas <L and the consideration paid to acquire the *+b interest in the Cue tene!ents. &i!ilarlyA it was held that shares held by 1r &treeterA his pri2ate co!pany and 1r Cooper on the e5ercise of options granted to the! by %estern 4reas <L upon listing were held on trust for %estern 4reas E5ploration Pty LtdA sub:ect to %estern 4reas E5ploration Pty Ltd paying to the! a!ount equal to the e5ercise fees they paid.

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The second set of orders was that 1r &treeterA his pri2ate co!pany and 1r Cooper be required to pay to %estern 4reas E5ploration Pty Ltd an a!ount equal to the !ar,et 2alue of the shares referred to abo2e as at the date of the :udg!ent less the allowances referred to abo2e. The effect of the orders is that %estern 4reas E5ploration Pty Ltd is entitled to either 11.+73 !illion shares in %estern 4reas <L upon pay!ent of V1.73 !illion to the defendants or to be paid by the defendants appro5i!ately V63 !illion. L) '& $)#"&)/ ="', !;) <# )

The case ser2es as a re!inder for all directors not to act on any opportunities which they co!e across in their capacity as directors other than to pursue the opportunity for the co!pany itself. This applies whether or not the directors belie2e that the co!pany would be willing or capable of pursuing the opportunity. 0!portantlyA it also highlights that in assessing the scope of a director)s fiduciary dutiesA courts will focus on the actual role perfor!ed by the director and the circu!stances of the co!panyA rather than being whether the director is e5ecuti2e or nonBe5ecuti2e. "inallyA the case indicates the increasing willingness of courts to allow inco!ing boards of directors to co!!ence proceedings in relation to the conduct of the outgoing directorsA e2en where that conduct too, place se2eral years in the past. 0n the &treeter caseA the proceedings were co!!enced in 4ugust 2++6A !ore than si5 years after the listing of %estern 4reas <L. Mi4hael (ilso$ a$% Part$ers #t% v ?i4holls )2009+ <&%&C 1+** FACTS? The case arose out of the e!ploy!ent of two 4ustralian citiMens by a law fir! operating in 8aMa,hstan. The fir! co!!enced proceedings against the e!ployees in the &upre!e Court of <ew &outh %ales alleging that they and a partner of the fir! had stolen clients of the fir! when they left the fir! and set up a ri2al business. The fir! alleged that the e!ployees were liable for breach of contractA inducing breach of contractA conspiracy to in:ureA breach of fiduciary duty and ,nowing assistance. The partner was not a party. The fir! separately co!!enced arbitration proceedings in London against hi!A to which proceedings the e!ployees were not party. HELD? The &upre!e Court of <ew &outh %ales held the e!ployees liable to the fir! and awarded an equitable account of profits or equitable co!pensationA not a constructi2e trust o2er the corporate 2ehicle.

C'& !"u<!%+) !"u ! !' "),)/. (")#<; '= =%/u<%#". /u!.

The rule in 1ee4h v Sa$%9or%B the rule that the trustee of a tenancy who obtains a right to renew that tenancy holds that renewal on constructi2e trust for the beneficiaries

C'& !"u<!%+) !"u ! !;#! #"% ) #*#%& ! !;%"/ -#"!%)

Third parties ;(strangers) to trusts> can be !ade constructi2e trustees in three ways$ 1.by acting as a trustee without authority ;trustee de son tort>N

22*

2.through ,nowing receipt of trust propertyN and *.through acti2ely assisting in a breach of trust. .r!stees %e so$ tort 4 trustee de son tort is a person who has inter!eddled in the affairs of the trust without proper authority and hasA in effectA beco!e a trustee through his or her wrongdoing To qualify as a trustee de son tort the person !ust ha2e assu!ed so!e !easure of control of the trust property. 'onesty irrele2ant 1$owi$g re4eipt 0n cases of ,nowing receipt the plaintiff !ust pro2e$ ;1>the defendant has recei2ed trust !oneysN ;2>the defendant ,new the !oneys paid were trust !oneysN and ;*>the defendant ,new of circu!stances which !ade the pay!ent a !isapplication of trust !oneys. "or a person to ha2e (receipt) requires hi! or her to ha2e possession of the trust property for his or her (own use and benefit) 7an,s will not generally be treated as ha2ing recei2ed funds placed in accountsA unless they apply the proceeds to the reduction of an o2erdraftA or for security$ :va$s v :!ropea$ 8a$3 #t% )200/+ <&%C4 #2. 0n 8a%e$ v So4iete Ge$erale )1992+ . 4ll E- 161 at 2*3A Peter =ibson I stated that there were fi2e categories of ,nowledge in a recipient that were rele2ant to the decision to i!pose a constructi2e trust$ 1. 2. actual ,nowledgeN wilfully shutting one)s eyes to the ob2iousN

*. wilfully and rec,lessly failing to !a,e such inquiries as an honest and reasonable person would !a,eN .. ,nowledge of circu!stances which would indicate the facts to an honest and reasonable personN 3. ,nowledge of circu!stances which would put an honest and reasonable person on inquiry. The first three categories are often collecti2ely described as (actual ,nowledge) while the last two are :ointly referred to as (constructi2e ,nowledge) The courts appear to be split between acceptance of all fi2e categories or with li!iting liability to those cases of actual ,nowledge. 0t has been argued thatA in

22.

cases of receiptA the recipient gets the full ad2antage of the breach of trust andA as a resultA the liability should be strict The !ore recent English approach is to treat the 7aden categories of ,nowledge as fle5ible aids to categorisationA rather than as concrete tests This rela5ation in the use of 7aden categories reached its Menith in 7CC0 ;D2erseas> Ltd 2 4,indele ?2++1@ Ch .*7 0n 4ustraliaA it appears that ,nowing receipt will be established in cases 1 to . of the 7aden categoriesA but confusion e5ists as to whether the category 3A negligent failure to inquireA should be included &arah Co$str!4tio$s Pt" #t% v Sa"-Dee Pt" #t% (2007) 2*+ CL- # "acts "arah in2ol2ed a :oint 2enture between "arah Constructions Pty Ltd and &ayB/ee Pty Ltd to purchase and rede2elop a plot of land ;no. 11>. "ollowing the purchase of the landA 2 de2elop!ent applications were sub!itted by "arah Constructions to the Council and each was refused on the basis that the land was too narrow to !a5i!ise its de2elop!ent potential without a!alga!ation with ad:oining sites. "ollowing this refusalA 1r Elias ;the principal of "arah Constructions>A his wife and their 2 daughters purchased a unit in each of 2 separate plots of nearby land ;nos. 13 and 2+>A and Les!int Pty Ltd ;controlled by 1r Elias> purchased another plot of nearby land ;no. 1*>. 1r Elias sought to purchase &ayB/eeQs interest in no. 11A &ayB /ee refused and "arah Constructions bought proceedings see,ing a trustee to be appointed and the property sold. &ayB/ee cross clai!edA arguing that "arah Constructions held its interests in nos. 1*A 13 and 2+ on constructi2e trust for the :oint 2enture between "arah Constructions and &ayB/ee ;although the clai! in relation to no. 2+ was abandoned at the start of the trial>. 4t trialA Pal!er I !ade the orders sought by "arah Constructions in its su!!ons and dis!issed &ayB/eeQs cross clai!. Dn appealA Pal!er IQs findings were o2erturned by the Court of 4ppeal ;<&%>. /espite neither party raising the issueA the Court of 4ppeal held as an independent ground for the decision that the first li!b of 7arnes 2 4ddy was satisfied ;and therefore a constructi2e trust established> on the basis of un:ust enrich!ent. DECISION? 0n an unani!ous :udg!entA the 'igh Court allowed the appeal and in doing so re2ersed !any of the findings of the Court of 4ppeal. The Court identified 1* issues for deter!inationA the !ain issues were$ %hether the scope of the :oint 2enture created a duty on "arah Constructions to disclose the CouncilQs 2iew of the need for a!alga!ation and the opportunities to buy nos. 1* and 13 and if soA whether "arah Constructions had co!plied with that duty

223

 %hether the Court of 4ppeal erred in finding that 1rs Elias and her daughters were liable under the first li!b in 7arnes 2 4ddy ;,nowing receipt> whether 1rs Elias and her daughters were liable under the second li!b of 7arnes 2 4ddy whether the Court of 4ppeal erred in failing to find that 1r F 1rs EliasA their 2 daughters and Les!int Pty Ltd had acquired an indefeasible title to the respecti2e properties in their na!es under s .2;1> of the -eal Property 4ct 1 ++ ;<&%>. FIDUCIARY DUTIESDDISCLOSURE The court held that "arah Constructions owed a fiduciary duty which was broader than that held by Pal!er I at trial. The duty firstly required &ayB/ee to disclose the CouncilQs 2iew on the need for a!alga!ation and it was held that this duty had been !et. 0t was further held that while "arah Constructions was not obliged to disclose the opportunities to purchase the neighbouring propertiesA "arah Constructions could not e5ploit these opportunities without the infor!ed consent of &ayB/ee as this would place "arah Constructions in a position of selfBconflict between its self interest and its duty to &ayB/ee in relation to the :oint 2enture land. Dn account of the business e5perience and intelligence of the principals of &ayB/eeA it was held that infor!ed consent had been gi2en by &ayB/ee. 4s a resultA "arah Constructions had not breached any of its fiduciary duties to &ayB /ee. ENOWING RECEIPT The Court affir!ed that the first li!b of 7arnes 2 4ddy requires the recipient of property to ha2e notice of the related breach of fiduciary duty. 0t was held that 1rs Elias and her daughters could not be liable under this li!b because they ne2er recei2ed property to which a fiduciary obligation attached nor was there rele2ant notice. &ayB/ee proposed a refor!ulation of the first li!b ;effecti2ely disposing with the require!ent for receipt of property and !odifying the notice test>A which the court re:ected on the basis that it would constitute a radical change to the law and was unnecessary gi2en the a2ailability of relief under other areas of law. The 'igh Court also addressed the Court of 4ppealQs atte!pt to !odify the first li!b of 7arnes 2 4ddy by abandoning the require!ent for noticeA actual or constructi2e in fa2our of a strict liability approach based in restitution. 0t was held that the atte!pt was a gra2e error that flew in the face of pre2ious 'igh Court authority and was both un:ust ;as neither party was able to address the issue in their argu!ents> and li,ely to cause confusion a!ong trial :udges. The Court confir!ed that the second li!b of 7arnes 2 4ddy !ade liable a defendant who assisted a trustee or fiduciary with ,nowledge of a dishonest and fraudulent breach of trust or breach of fiduciary duty on the part of the trustee or fiduciary.

226

The Court affir!ed that Consul /e2elop!ent represents the law that the requisite degree of ,nowledge needed for liability under the second li!b included the first four categories of ,nowledge as set out in 7aden 2 &oci_t_ =enerale pour "a2oriser le /e2elop!ent du Co!!erce et de LQ0ndustrie en "rance &4 ?1 *@ 1 %L- 3+ . 0t was noted that the case of -oyal 7runei 4irlines &dn 7hd 2 Tan ?1 3@ 2 4C *7# ;-oyal 7runei 4irlines> could ha2e an effect on the operation of the second li!b although it was not necessary to deter!ine the issue in the present case. 1rs Elias and her children were held not liable under the second li!b for two reasons. "irstlyA e2en if 1r EliasQ disclosures did not constitute full disclosure sufficient to result in infor!ed consents by &ayB/ee to the acquisitions of nos. 1* and 13A this would not constitute conduct that was (dishonest F fraudulent). &econdlyA e2en if 1r EliasQ conduct did a!ount to dishonest and fraudulent designA there was no e2idence that 1rs Elias and her daughters had any sufficient notice or ,nowledge of it. &ayB/ee proposed a refor!ulation of the second li!b of 7arnes 2 4ddy to abandon the Qdishonest and fraudulent designQ require!ent and this was re:ected on the basis that no sufficient difficulty in the rules :ustified the ta,ing of any such step. .he 8ell Gro!p #t% (i$ li;) v (estpa4 8a$3i$g Corporatio$ (?o 9) (2009) 7+ 4C&- 1 at *1 The case concerned a refinancing of the 7ell =roupQs borrowings with a group of 4ustralian ban,s and a syndicate of foreign ban,sA with the effect that debts to certain ban,s were to be paid in priority to the clai!s of other creditors. The court held that in underta,ing the refinancingA the groupQs directorsA ,nowing that the co!panies were either Unearly insol2ent or of doubtful sol2encyUA acted in breach of their fiduciary duties. The plaintiffs argued that the ban,s were liable for the directorsQ breach of fiduciary dutyA and that with that ,nowledge they entered into the reBfinancing docu!ents. 4s such it was clai!ed the ban,s should be liable to account to the liquidators. The clai!s turned on what each ban, ,new. The plaintiffs !aintained that %estpac and Lloyds 7an, were agents forA respecti2elyA the 4ustralian and foreign ban,s. 0t was alleged that both UagentsU undertoo, obligations to coordinate the sharing of infor!ation rele2ant to the proposed refinancing and that such infor!ation could therefore be i!puted to all ban,s on the basis of the agency relationships. The court identified the critical ele!ent of any agency relationship as being the purported agentQs ability to affect the principalQs legal relations with third parties. %hile the ter! UagentU is co!!only used in collaborati2e financing arrange!entsA whether an Uagent ban,U is in fact an agentA and owes fiduciary dutiesA will depend on the ter!s of the agree!ent between the parties. The ability to recei2e and co!!unicate infor!ation on behalf of another is insufficientA in itselfA to constitute a power to affect legal relations with third parties. 0n 7ellA the role of the Uagent ban,sU was purely ad!inistrati2e. The court also found that there was no otherA broader legal relationship to support the agency clai!. Each ban, was required to for! its own conclusions as to the borrowing groupQs financial position and to contribute separately to the reBfinancing.

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The author concludes that the findings are an i!portant re!inder that contractual pro2isions are highly rele2ant to whether an agency relationship e5ists andA if it doesA to the scope of the agentQs duties and the le2el of ,nowledge which !ay be i!puted thereby to the principal. The fra!ing of responsibilities of the agent ban, in a syndicated agree!ent is critical when deciding whether the agentQs state of !ind !ay be attributed to another ban,. 8nowing receipt principles ha2e caused difficulties for the courts when applied to interests in land under the Torrens syste!. 0n the Torrens syste! registered interests can be set aside if they ha2e been procured by fraudA where fraud refers to actual fraudA personal dishonesty or !oral turpitude 0n Ma4;!arie 8a$3 #t% v Si=t" &o!rth .hro$e Pt" #t% )1998+ * E- 1**A a !a:ority of the Eictorian Court of 4ppeal decided that a registered !ortgage under the Torrens syste! could not be set aside in a situation where the !ortgagee acted honestly but with constructi2e ,nowledge that the !ortgage docu!ent was a forgeryA in breach of trust 7ut what if the registered proprietor has actual ,nowledge that their interest ca!e 2ia breach of trustC Dn this issue the authorities are split. 0n .ara Shire Co!$4il v Gar$er )200*+ 1 Gd - 336A a !a:ority of the Gueensland Court of 4ppeal accepted that ,nowing receipt would apply in circu!stances where a registered properietor had actual ,nowledge that the property was trust property and that the registered transaction was a breach of trust. 4 si!ilar approach was ta,en in 1ooroota$g ?o5i$ees Pt" #t% v A?@ 8a$3i$g Gro!p #t% )1998+ * E- 16 at 1+3A although that case is distinguishable because it in2ol2ed actual dishonesty on the part of the registered proprietorA in addition to ,nowing receipt 0n contrastA the "ull Court of %estern 4ustralia re:ected this use of ,nowing receipt principles in #'1 ?o5i$ees Pt" #t% v 1e$worth" (2002) 26 %4- 317. 4ndersonA &teyler and Pullin II all found thatA absent (TorrensBstyle) fraudA ,nowledge of a breach of trust would not defeat a registered interestA and ,nowing receipt principles could not be applied to set aside a registered interest. "arah Constructions Pty Ltd 2 &ayB/ee Pty Ltd at CL- 16 N

E&':%&*$. #

There are three ele!ents to the clai! of ,nowingly assisting a breach of trust. They areA firstA the defendant !ust ,now that a dishonest and fraudulent design is being i!ple!ented. &econdA the defendant !ust ,now that his or her acts ha2e the effect of assisting the design. ThirdA the ,nowledge of the assistant ;or accessory> !ust be of actual facts and not ,nowledge of !ere clai!s or allegations The requisite type of ,nowledge in cases of (,nowing assistance)A therefore in2ol2es co!plicity in the fraudA and dishonesty in2ol2ed in the original breach of trust the 7aden categories ha2e been discarded in the Hnited 8ingdo! for cases of ,nowing assistance and replaced with a !ore general test of (dishonesty). 0n Ro"al 8r!$ei Airli$es S$% 8h% v .a$ )199-+ 2 4C *7# at * +91N ?1 3@ * 4ll E- 7 at 1+7A Lord <icholls stated that the test of dishonesty was an ob:ecti2e test of

% !%&* # (")#<; '= !"u !

22#

whether the person acted as (an honest person would in the circu!stances) in light of what the person actually ,new at the ti!eA rather than what a reasonable person would ha2e ,nown The test of dishonesty was further clarified in .wi$se4tra #t% v Har%le" )2002+ 2 4C 16.N ?2++2@ 2 4ll E- *77A where a co!bined test was proposedA enco!passing ob:ecti2e and sub:ecti2e ele!ents. The test ;as proposed by Lord 'utton> required a finding that the defendant)s conduct was dishonest by ordinary standards of reasonable and honest peopleA and that the defendant realised that by those standards he or she had acted dishonestly. Lord 1illetA was critical of this test in his dissentA as he belie2ed that this test should not ha2e to ta,e account of whether the defendant actually ,new he or she was acting dishonestly 8arlow Clowes <$ter$atio$al #t% (i$ li;) v :!rotr!st <$ter$atio$al #t% )2006+ 1 4ll E- *** B bac, to ob:ecti2e test 0n ?CR A!stralia v Cre%it Co$$e4tio$ )200/+ <&%&C 1A 4ustin I su!!arised the position at ?16#B @ as follows$ %hat see!s to e!erge fro! these obser2ations is that liability arises where the defendant has assisted in the trusteeQs dishonest and fraudulent design and$ has actual ,nowledge of the dishonest and fraudulent designN or has deliberately shut his or her eyes to such a designN or

has abstained in a calculated way fro! !a,ing such inquiries as an honest and reasonable person would !a,eA where such inquiries would ha2e led to disco2ery of the dishonest and fraudulent designN or has actual ,nowledge of facts which to a reasonable person would suggest a dishonest and fraudulent design. Dther 4ustralian cases ha2e indicated support for the test of dishonesty set out in -oyal 7runei 4irlines and Twinsectra$ 1acquarie 7an, Ltd 2 &i5ty "ourth Throne Pty Ltd ?1 #@ * E- 1**N Eoss 2 /a2idson ?2++2@ G&C *16N 1aher 2 1illenniu! 1ar,ets Pty Ltd ?2++.@ E&C 17.. '% 9 "arah Constructions

C'& !"u<!%+) !"u ! #&/ !'$)& -"'-)"!.

0t has been said that a thief holds stolen property on constructi2e trust for the true ownerA e2en in the absence of a prior fiduciary relationship$ 8la43 v S &ree%5a$ A Co (1910) 12 CL- 1+3. 0f the thief then !a,es a gift of the property to a third party that third party will also be held liable to the trust. 'owe2er if the third party pro2ides considerationA the constructi2e trust will only beco!e effecti2e when the third party acquires ,nowledge of the theft 0n :va$s v :!ropea$ 8a$3 #t% )200/+ <&%C4 #2A &pigel!an CI thought that such a trust was better described as resulting trust because of its auto!atic nature and institutional characteristics. 4 si!ilar approach was adopted in Port o9 8ris,a$e Corp v A?@ Se4!rities #t% )200*+ 2 Gd - 661A a case in2ol2ing the

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theft by an e!ployee of se2eral !illion dollars fro! a co!panyA which was then in2ested in a trust account with the defendant ban,. 7y the ti!e the theft had been disco2ered the trust !onies had been dispersed fro! the trust account The plaintiff co!pany argued ;a!ongst other things> that the defendant ban, had held the !onies on resulting trust for it and that the disperse!ent of those funds was a breach of that trust. 0n dis!issing this clai!A the Court of 4ppeal accepted the resulting trust analysis. 0t was said that these resulting trusts e5ist i!!ediately on the transfer of trust property but that third parties are not sub:ect to the! until they beco!e aware of their positions. 0t was also said that this resulting trust was not a fiduciary relationship. "inallyA it was said that the resulting trust could not e5ist if the trust property had disappeared by the ti!e of the :udg!ent. 0t is hard to see how the classification of these trusts as resulting trusts can be correct. 4ccording to the presu!ptions of resulting trustA all the thief need do to destroy the trust is pro2e that there was no trust intended by the 2icti! ;which will always be the case>. =i2en these trusts are i!posed regardless of the intentions of the parties they are better classed as constructi2e trustsA albeit of an institutional ,ind.

)onstructive trusts an% $oneys pai% by $ista!e

To reco2er !oney paid by !ista,eA itQs i!portant to let the recipient ,now about the !ista,e as soon as possible. 0tQs bad enough paying !oney to so!eone by accident. %hat do you do if the recipient has transferred the !oney to so!eone elseC 4 recent case shows thatA once you disco2er the !ista,eA you shouldnQt waste any ti!e letting the other side ,now about it. 4#<B*"'u&/ &ingleton Earth!o2ing Pty Ltd was in liquidation. %a!bo had once owed !oney to &ingletonA but had paid it off. %a!bo did howe2erA owe !oney to Guensor. Guensor was no relation to &ingletonA but did use a si!ilar trading na!e. 4pparently confused by the si!ilar na!esA %a!bo paid &ingleton the !oney due to Guensor. &ingletonQs records were out of dateA so its liquidator belie2ed that %a!boQs pay!ent was the pay!ent of a current debt. The liquidator then directed a transfer of !oney fro! &ingletonQs ban, account to his own fir! ;for disburse!ents>. %hen %a!bo found out about the !ista,en pay!entA it infor!ed &ingleton and de!anded the return of the !oney. The liquidator clai!ed that %a!bo was still a debtor. &ingleton retained the !oney. 4nother transfer was !ade to the liquidators fir!Qs account. %a!bo too, &ingleton and the liquidator to court.

2*+

D%/ S%&*$)!'& ;'$/ !;) ,% !#B)& -#.,)&! '& !"u ! ='" W#,('K %a!bo argued that the recipient of !oney !ista,enly paid without consideration holds the !oney on trust for the payer. The Court re:ected that argu!entA but this case in2ol2ed so!ething a bit !ore$ not only had the !oney been paid by !ista,eA but the recipient had been infor!ed about the !ista,e. The Court said that a constructi2e trust would arise fro! the retention of !oneys ,nown to ha2e been paid by !ista,eA and for which there was no consideration ;pro2ided the !oneys could still be identified at the ti!e that ,nowledge was acquired>. 0t would be Uagainst conscienceU for &ingleton to use the !oneys as its own once it ,new of %a!bo)s !ista,e. The fact that the recipient of the !oney in this case was insol2ent did not affect this conclusion. 0t wouldA said the CourtA be an unwarranted windfall for the co!pany)s creditors to share in the pay!ent. D%/ S%&*$)!'& ;#+) !;) ")>u% %!) B&':$)/*)K The liquidatorQs !ind was &ingletonQs !ind. Dn the e2idenceA the Court concluded that he had not ,nown that the !oney had been paid by !ista,e when the first transfer was !ade to his fir!. 0n reaching this conclusionA the Court ac,nowledged thatA before authorising the first transferA the liquidator had ,nown that &ingletonQs records had not been updated. 'owe2erA the issue was not whether he ought to ha2e ,nown that the pay!ents were !ade in errorA but whether he Udid ,now that they had been paid by !ista,eA or whether he wilfully shut his eyes to that possibilityA or wilfully and rec,lessly failed to !a,e inquiriesA or had actual ,nowledge of the circu!stances which would indicate the facts to an honest and reasonable person.U That !o!ent only arose when %a!boQs solicitors infor!ed hi! that the pay!ent had been in error. "ro! that ti!eA the !oney in &ingletonQs account had been held on trust for %a!bo. T;) $%>u%/#!'"H $%#(%$%!. %a!bo had ta,en reco2ery proceedings against &ingleton and its liquidator. The liquidator argued thatA since he was not a recipient of any !oneyA he could not ha2e any liability for the !oneys that had been transferred fro! &ingleton. 'e pointed out that the transfers had been !ade to his fir!A and that the fir! was not a party to the proceedings. The Court dis!issed this argu!entA on the grounds that any e5penses incurred by the liquidatorQs fir! could only ha2e been incurred because the liquidator incurred those e5penses and the fir! had paid the! on his direction. The only person entitled to be inde!nified out of &ingletonQs assets in respect of e5penses incurred in its liquidation was the liquidator.

2*1

The Court also dis!issed the liquidatorQs argu!ent that his only fiduciary duty was to &ingleton$ in this caseA a separate fiduciary obligation ;owed to %a!bo> arose fro! the circu!stances in which the constructi2e trust arose. %a!bo was also entitled to re!edies against &ingletonA but as &ingleton apparently had no assetsA this wasA in the CourtQs wordsA acade!ic. T;) $) '&

4lthough %a!bo got so!e of its !oney bac,A it still ended up out of poc,et. E2en thenA it was probably a little fortunate. 4s noted abo2eA the Court said that a trust would arise if the !oneys could still be identified when the payer notified the recipient about the !ista,e. 0n this caseA &ingletonQs ban, account was so e!pty that it was easy to trace the !o2e!ent of %a!boQs !oney in and out of the account. The ob2ious lesson fro! this caseA of courseA is to act quic,ly if you disco2er that youQ2e !ade an accidental pay!ent. 0n factA it is probably a good idea to let the recipient ,now as soon as you ha2e reasonable grounds to suspect an accidental pay!ent. 4 recipient who is put on notice that a pay!ent !ay ha2e been !ista,en will ha2e difficulty resisting a de!and for repay!ent if he goes ahead and disburses the !oney.

)onstructive trusts an% ho$ici%e C'& !"u<!%+) !"u ! !' "),)/. u&<'& <%'&#($) <'&/u<!

0n CanadaA the principle of un:ust enrich!ent has been adopted as the funda!ental principle :ustifying the re!edial constructi2e trust$ Rathwell v Rathwell (1978) #* /L- ;*d> 2# . 0n Pett3!s v 8e43er (1980) 117 /L- ;*d> 237A the &upre!e Court of Canada accepted thatA in the absence of so!e co!!on intention between the partiesA a constructi2e trust should be i!posed to re!edy un:ust enrich!ent in a do!estic property dispute. HnfortunatelyA the decision in Pett,us 2 7ec,er ga2e rise to the belief that constructi2e trusts could only be i!posed when there was un:ust enrich!ent 0n 4ustraliaA un:ust enrich!ent has not yet been accepted as a ground for the i!position of a constructi2e trust$ <$ A!stralia Stephe$so$ ?o5i$ees Pt" #t% v 699i4ial Re4eiver (1987) 16 "C- 3*6N R!sh v 1eogh )2000+ <&%&C 62.. The go2erning principle is that equity will i!pose a constructi2e trust to pre2ent the unconscionable retention of benefit M!s4hi$s3i v Do%%s (198-) FACTS? 'ilga 1uschins,i and -onald /odds bought a dilapidated cottage in the country with the intention of running an arts and crafts centre. They planned to erect a ,it ho!e elsewhere on the site. 1 paid the purchase price. / was to contribute the proceeds of a pending di2orce settle!entA and labour. The property was registered in both na!es as tenants in co!!on on /)s insistence. Council refused de2elop!ent consent. / did not get the settle!ent he had hoped for. The 2enture failedA and the relationship soured. 7y separationA 1 had contributed V23A+++ to the pro:ectA and / V2A+++. 1 sought a declaration that she was the only beneficial owner of the property.

2*2

LegallyA there was half ownership to each. %as it unconscionable for /odds to assert half ownershipA requiring the court to i!pose a constructi2e trustC HELD$ /eane I$ There was a constructi2e trust here.

4t the startA there was a shared intention that each should ha2e a one half beneficial and legal interest in the property. /odds should be precluded fro! asserting or retaining this half ownership to the e5tent that it would be unconscionable for hi! to do so. 0f the relationship had been !erely co!!ercialA it would ha2e been clearly unconscionable for /odds to clai! a half share without co!pensationA as at the ti!eA he had contributed 2ery littleA while 1uschins,i had contributed al!ost all that she was supposed to. 4lthough not quite a :oint 2enture or a partnershipA the law relating to these enterprises !ay be appropriate here. 0n particularA where a :oint 2enture failsA there should be a proportionate repay!ent of capital contributions. 'ereA each party should get bac, the contribution that they ha2e !adeA and then any surplus should be distributed e2enly ;not $1>. &ince they agreed to go into the pro:ect 3+$3+A that was their intentionA and that was what would ha2e happened if the 2enture had succeeded. \ 1uschins,i 2 /odds lea2es us with the proposition that only when you can identify these situations as co!!ercialBli,e situations can you find this resultA because /eane I does focus on the fact this was an enterprise ;there was a co!!ercial relationship sideBbyBside to the personal relationship>. 8a!5gart$er v 8a!5gart$er (1987) 16. CL- 1*7 FACTS? 'e and she entered a de facto relationship in 1 7#. They li2ed in a unit owned by hi!. 0n 1 7 A he sold the unit and bought so!e land with the proceeds of the saleA and a loan ta,en out in his na!e. They pooled resources to !eet !ortgage repay!ents. 'er inco!e represented .3b of the co!bined earnings. They separated in 1 #2. &he sought a declaration that she had a beneficial interest in the property. HELD? 4 constructi2e trust could be i!posed to gi2e her a share of the proceeds of the property. The land was acquired and the house built for the purpose of their :oint relationshipA and the pooling of earnings was for their !utual security and benefit. 0n these circu!stancesA the !an)s assertion that he owned it all was enough to be unconscionableA so equity inter2ened to i!pose a constructi2e trust at the suit of 1rs 7. Equity fa2ours equality andA in circu!stances where the parties ha2e li2ed together for years and ha2e pooled their resources and their efforts to create a :oint ho!eA they should share the beneficial ownership equally as tenants in co!!onA ta,ing into account any disparity between the worth of their indi2idual contributions either financially or in ,ind The !an was gi2en bac, the depositA and then the proceeds were di2ided 33$.3. 2**

.!r$er v D!$$e )1996+ GC4 272 at .93 as$ 1. 4 constructi2e trust !ay be i!posed e2en though the person held to be trustee had no intention to create a trust or hold property on trust. 2. 4n intention to create a trust !ay be i!puted where it is necessary to do so (in good faith and in conscience). *. 4 principle which !ay be applied is that which restores to a party contributions !ade to a :oint endea2our which failsA when the contributions ha2e been !ade in circu!stances in which it was not intended that the other party should en:oy the!. .. ContributionsA financial and otherwiseA to the purposes of the :ointed relationship are rele2ant for this purpose. 0n (est v Mea% )200*+ <&%&C 161A Ca!pbell I pro2ided a !ore detailed brea,down of the require!ents of the 1uschins,i67au!gartner trust. Ca!pbell I listed three require!ents$ 1. There !ust be both a :oint relationship or endea2ourA where funds are spend towards a co!!on benefitN 2. The :oint relationship or endea2our !ust ha2e co!e to an end (without attributable bla!e)N and *. There !ust be unconscionability6 unconscientiousness

T;) )==)<! '= $)*% $#!%'& '& <'& !"u<!%+) !"u ! %& !;) =#,%$. <'&!)C!
&ection 7 of the "a!ily Law 4ct 1 73 ;Cth> A$!)"#!%'& '= -"'-)"!. %&!)") ! ;1> 0n property settle!ent proceedingsA the court !ay !a,e such order as it considers appropriate$ ;a> in the case of proceedings with respect to the property of the parties to the !arriage or either of the!BBaltering the interests of the parties to the !arriage in the propertyN or ;b> in the case of proceedings with respect to the 2ested ban,ruptcy property in relation to a ban,rupt party to the !arriageBBaltering the interests of the ban,ruptcy trustee in the 2ested ban,ruptcy propertyN including$ ;c> an order for a settle!ent of property in substitution for any interest in the propertyN and ;d> an order requiring$ ;i> either or both of the parties to the !arriageN or ;ii> the rele2ant ban,ruptcy trustee ;if any>N

2*.

to !a,eA for the benefit of either or both of the parties to the !arriage or a child of the !arriageA such settle!ent or transfer of property as the court deter!ines. ;14> 4n order !ade under subsection ;1> in property settle!ent proceedings !ayA after the death of a party to the !arriageA be enforced on behalf ofA or againstA as the case !ay beA the estate of the deceased party. ;17> The court !ay ad:ourn property settle!ent proceedingsA e5cept where the parties to the !arriage are$ ;a> parties to concurrentA pending or co!pleted di2orce or 2alidity of !arriage proceedingsN or ;ba> parties to a !arriage who ha2e di2orced under the law of an o2erseas countryA where that di2orce is recognised as 2alid in 4ustralia under section 1+.N or ;bb> parties to a !arriage that has been annulled under the law of an o2erseas countryA where that annul!ent is recognised as 2alid in 4ustralia under section 1+.N or ;c> parties to a !arriage who ha2e been granted a legal separation under the law of an o2erseas countryA where that legal separation is recogniMed as 2alid in 4ustralia under section 1+.N on such ter!s and conditions as it considers appropriateA for such period as it considers necessary to enable the parties to the !arriage to consider the li,ely effects ;if any> of an order under this section on the !arriage or the children of the !arriageA but nothing in this subsection shall be ta,en to li!it any other power of the court to ad:ourn such proceedings. ;1C> %here the period for which a court has ad:ourned property settle!ent proceedings as pro2ided by subsection ;17> has not e5pired and$ ;a> di2orce or 2alidity of !arriage proceedings are instituted by one or both of the parties to the !arriageN or ;ba> the parties to the !arriage ha2e di2orced under the law of an o2erseas country and the di2orce is recognised as 2alid in 4ustralia under section 1+.N or ;bb> the !arriage is annulled under the law of an o2erseas country and the annul!ent is recognised as 2alid in 4ustralia under section 1+.N or ;c> the parties to the !arriage are granted a legal separation under the law of an o2erseas country and the legal separation is recogniMed as 2alid in 4ustralia under section 1+.N a party to the firstB!entioned proceedings !ay apply to the court for the hearing of those proceedings to be continued. ;2> The court shall not !a,e an order under this section unless it is satisfied thatA in all the circu!stancesA it is :ust and equitable to !a,e the order.

2*3

;.> 0n considering what order ;if any> should be !ade under this section in property settle!ent proceedingsA the court shall ta,e into account$ ;a> the financial contribution !ade directly or indirectly by or on behalf of a party to the !arriage or a child of the !arriage to the acquisitionA conser2ation or i!pro2e!ent of any of the property of the parties to the !arriage or either of the!A or otherwise in relation to any of that lastB!entioned propertyA whether or not that lastB!entioned property hasA since the !a,ing of the contributionA ceased to be the property of the parties to the !arriage or either of the!N and ;b> the contribution ;other than a financial contribution> !ade directly or indirectly by or on behalf of a party to the !arriage or a child of the !arriage to the acquisitionA conser2ation or i!pro2e!ent of any of the property of the parties to the !arriage or either of the!A or otherwise in relation to any of that lastB!entioned propertyA whether or not that lastB!entioned property hasA since the !a,ing of the contributionA ceased to be the property of the parties to the !arriage or either of the!N and ;c> the contribution !ade by a party to the !arriage to the welfare of the fa!ily constituted by the parties to the !arriage and any children of the !arriageA including any contribution !ade in the capacity of ho!e!a,er or parentN and ;d> the effect of any proposed order upon the earning capacity of either party to the !arriageN and ;e> the !atters referred to in subsection 73;2> so far as they are rele2antN and ;f> any other order !ade under this 4ct affecting a party to the !arriage or a child of the !arriageN and ;g> any child support under the Child &upport ;4ssess!ent> 4ct 1 # that a party to the !arriage has pro2idedA is to pro2ideA or !ight be liable to pro2ide in the futureA for a child of the !arriage. ;3> %ithout li!iting the power of any court to grant an ad:ourn!ent in proceedings under this 4ctA whereA in property settle!ent proceedingsA a court is of the opinion$ ;a> that there is li,ely to be a significant change in the financial circu!stances of the parties to the !arriage or either of the! and thatA ha2ing regard to the ti!e when that change is li,ely to ta,e placeA it is reasonable to ad:ourn the proceedingsN and ;b> that an order that the court could !a,e with respect to$ ;i> the property of the parties to the !arriage or either of the!N or ;ii> the 2ested ban,ruptcy property in relation to a ban,rupt party to the !arriageN

2*6

if that significant change in financial circu!stances occurs is !ore li,ely to do :ustice as between the parties to the !arriage than an order that the court could !a,e i!!ediately with respect to$ ;iii> the property of the parties to the !arriage or either of the!N or ;i2> the 2ested ban,ruptcy property in relation to a ban,rupt party to the !arriageN the court !ayA if so requested by either party to the !arriage or the rele2ant ban,ruptcy trustee ;if any>A ad:ourn the proceedings until such ti!eA before the e5piration of a period specified by the courtA as that party to the !arriage or the rele2ant ban,ruptcy trusteeA as the case !ay beA applies for the proceedings to be deter!inedA but nothing in this subsection requires the court to ad:ourn any proceedings in any particular circu!stances. ;6> %here a court proposes to ad:ourn proceedings as pro2ided by subsection ;3>A the court !ayA before so ad:ourning the proceedingsA !a,e such interi! order or orders or such other order or orders ;if any> as it considers appropriate with respect to$ ;a> any of the property of the parties to the !arriage or of either of the!N or ;b> any of the 2ested ban,ruptcy property in relation to a ban,rupt party to the !arriage. ;7> The court !ayA in for!ing an opinion for the purposes of subsection ;3> as to whether there is li,ely to be a significant change in the financial circu!stances of either or both of the parties to the !arriageA ha2e regard to any change in the financial circu!stances of a party to the !arriage that !ay occur by reason that the party to the !arriage$ ;a> is a contributor to a superannuation fund or sche!eA or participates in any sche!e or arrange!ent that is in the nature of a superannuation sche!eN or ;b> !ay beco!e entitled to property as the result of the e5ercise in his or her fa2ourA by the trustee of a discretionary trustA of a power to distribute trust propertyN but nothing in this subsection shall be ta,en to li!it the circu!stances in which the court !ay for! the opinion that there is li,ely to be a significant change in the financial circu!stances of a party to the !arriage. ;#> %hereA before property settle!ent proceedings are co!pletedA a party to the !arriage dies$ ;a> the proceedings !ay be continued by or againstA as the case !ay beA the legal personal representati2e of the deceased party and the applicable -ules of Court !ay !a,e pro2ision in relation to the substitution of the legal personal representati2e as a party to the proceedingsN ;b> if the court is of the opinion$

2*7

;i> that it would ha2e !ade an order with respect to property if the deceased party had not diedN and ;ii> that it is still appropriate to !a,e an order with respect to propertyN the court !ay !a,e such order as it considers appropriate with respect to$ ;iii> any of the property of the parties to the !arriage or either of the!N or ;i2> any of the 2ested ban,ruptcy property in relation to a ban,rupt party to the !arriageN and ;c> an order !ade by the court pursuant to paragraph ;b> !ay be enforced on behalf ofA or againstA as the case !ay beA the estate of the deceased party. ; > The "a!ily CourtA or a "a!ily Court of a &tateA shall not !a,e an order under this section in property settle!ent proceedings ;other than an order until further order or an order !ade with the consent of all the parties to the proceedings> unless$ ;a> the parties to the proceedings ha2e attended a conference in relation to the !atter to which the proceedings relate with a -egistrar or /eputy -egistrar of the "a!ily CourtA or a -egistrar or /eputy -egistrar of the "a!ily Court of that &tateA as the case !ay beN ;b> the court is satisfied thatA ha2ing regard to the need to !a,e an order urgentlyA or to any other special circu!stanceA it is appropriate to !a,e the order notwithstanding that the parties to the proceedings ha2e not attended a conference as !entioned in paragraph ;a>N or ;c> the court is satisfied that it is not practicable to require the parties to the proceedings to attend a conference as !entioned in paragraph ;a>. ;1+> The following are entitled to beco!e a party to proceedings in which an application is !ade for an order under this section by a party to a !arriage ;the sub:ect !arriage >$ ;a> a creditor of a party to the proceedings if the creditor !ay not be able to reco2er his or her debt if the order were !adeN ;aa> a person$ ;i> who is a party to a de facto relationship with a party to the sub:ect !arriageN and ;ii> who could applyA or has an application pendingA for an order under section +&1A or a declaration under section +&LA in relation to the de facto relationshipN ;ab> a person who is a party to a Part E00047 financial agree!ent ;that is binding on the person> with a party to the sub:ect !arriageN ;b> any other person whose interests would be affected by the !a,ing of the order. 2*#

;1+4> &ubsection ;1+> does not apply to a creditor of a party to the proceedings$ ;a> if the party is a ban,ruptBBto the e5tent to which the debt is a pro2able debt ;within the !eaning of the 7an,ruptcy 4ct 1 66 >N or ;b> if the party is a debtor sub:ect to a personal insol2ency agree!entBBto the e5tent to which the debt is co2ered by the personal insol2ency agree!ent. ;1+7> 0f a person beco!es a party to proceedings under this section because of paragraph ;1+>;aa>A the person !ayA in the proceedingsA apply for$ ;a> an order under section +&1N or ;b> a declaration under section +&LN in relation to the de facto relationship described in that paragraph. ;11> 0f$ ;a> an application is !ade for an order under this section in proceedings between the parties to a !arriage with respect to the property of the parties to the !arriage or either of the!N and ;b> either of the following subparagraphs apply to a party to the !arriage$ ;i> when the application was !adeA the party was a ban,ruptN ;ii> after the application was !ade but before it is finally deter!inedA the party beca!e a ban,ruptN and ;c> the ban,ruptcy trustee applies to the court to be :oined as a party to the proceedingsN and ;d> the court is satisfied that the interests of the ban,ruptQs creditors !ay be affected by the !a,ing of an order under this section in the proceedingsN the court !ust :oin the ban,ruptcy trustee as a party to the proceedings. ;12> 0f a ban,ruptcy trustee is a party to property settle!ent proceedingsA thenA e5cept with the lea2e of the courtA the ban,rupt party to the !arriage is not entitled to !a,e a sub!ission to the court in connection with any 2ested ban,ruptcy property in relation to the ban,rupt party. ;1*> The court !ust not grant lea2e under subsection ;12> unless the court is satisfied that there are e5ceptional circu!stances. ;1.> 0f$ ;a> an application is !ade for an order under this section in proceedings between the parties to a !arriage with respect to the property of the parties to the !arriage or either of the!N and ;b> either of the following subparagraphs apply to a party to the !arriage ;the debtor party >$

2*

;i> when the application was !adeA the party was a debtor sub:ect to a personal insol2ency agree!entN or ;ii> after the application was !ade but before it is finally deter!inedA the party beco!es a debtor sub:ect to a personal insol2ency agree!entN and ;c> the trustee of the agree!ent applies to the court to be :oined as a party to the proceedingsN and ;d> the court is satisfied that the interests of the debtor partyQs creditors !ay be affected by the !a,ing of an order under this section in the proceedingsN the court !ust :oin the trustee of the agree!ent as a party to the proceedings. ;13> 0f the trustee of a personal insol2ency agree!ent is a party to property settle!ent proceedingsA thenA e5cept with the lea2e of the courtA the party to the !arriage who is the debtor sub:ect to the agree!ent is not entitled to !a,e a sub!ission to the court in connection with any property sub:ect to the agree!ent. ;16> The court !ust not grant lea2e under subsection ;13> unless the court is satisfied that there are e5ceptional circu!stances. ;17> "or the purposes of subsections ;11> and ;1.>A an application for an order under this section is ta,en to be finally deter!ined when$ ;a> the application is withdrawn or dis!issedN or ;b> an order ;other than an interi! order> is !ade as a result of the application. Propert" (Relatio$ships) A4t 1982 (?S() 0n <ew &outh %ales the definition of de facto relationships includes all relationships between two adult persons who li2e together as a couple on a genuine do!estic basis .he e99e4t o9 legislatio$ o$ 4o$str!4tive tr!sts i$ the 9a5il" 4o$te=t The 4CTA <ew &outh %ales and Tas!ania ha2e e5panded their legislati2e regi!es to include clai!s !ade by parties in (do!estic relationships) ;in 4CT and <&%> and (personal relationships) ;in Tas!ania>

The re$ainin" i$portance o, equity

<ot all relationships Equity preser2ed /eceased parties Third parties

2.+

TR2&TEE& 8ENE(I)IARIE& AN/ TRA)IN'

4ppoint!entA retire!ent and re!o2al of trustees Dnly a legal person ;a natural person or corporation> with the capacity to hold and deal with property can be appointed as a trustee 0fA for whate2er reasonA a prospecti2e trustee is unable to ta,e up the office of trusteeA the trust will not fail 1ost trusts will contain an e5press power of appoint!ent. 0n the absence of an e5press power of appoint!entA !ost :urisdictions ha2e granted powers of appoint!ent to particular classes of indi2iduals 0n relation to e5press powers of appoint!ent of trustees set out in a trust instru!entA in S,affidi v Mon even o Boldin(s 3 + L d ?2+11@ %4&C4 1.6 at ?1.3@B ?132@A 1urphy I4 F 'all IA noted the following$
%hether the power gi2en in an instru!ent to re!o2e trustees and appoint new trustees isA by its ter!sA wide enough in scope to allow an appointor to appoint hi!self or herself as trusteeA is a question as to the proper construction of the language of the power. E2en where the language is wide enough to per!it the appointor to appoint hi!self or herself as trusteeA it is a (2ery salutary) or (!ost salutary) rule that the power should only be e5ercised to that end in (e5ceptional circu!stances) or (special circu!stances). 0n a discretionary trust ;and sub:ect to the ter!s of the instru!ent> the power to appoint trustees !ay be construed as a (fiduciary power). 0n ?9n re S&ea s< Se lemen ;1## > .2 Ch / 322 at 326B7@A 8ay I said$ The ordinary power of appointing new trusteesA under a settle!ent such as this isA of course i!poses upon the person who has the power of appoint!ent the duty of selecting honest and good persons who can be trusted with the 2ery difficultA onerousA and often delicate duties which trustees ha2e to perfor!. 'e is bound to select to the best of his ability the best people he can find for the purpose. 0s that power of selection a fiduciary power or notC R <ow what is the ruleA the uni2ersal ruleA obser2ed in Courts of Iustice as to a duty of that ,indC The uni2ersal rule is that a !an should not be :udge in his own caseN that he should not decide that he is the best possible personA and say that he ought to be the trustee. <aturally no hu!an being can be i!agined who would not ha2e so!e bias one way or the other as to his own personal fitnessA and to appoint hi!self a!ong other peopleA or e5cluding the! to appoint hi!selfA would certainly be an i!proper e5ercise of any power of selection of a fiduciary character such as this is. 0n !y opinion it would be e5tre!ely i!proper for a person who has a power to appoint or select new trustees to appoint or select hi!selfA for that principal reason. 'asA thenA the practice of such a person appointing hi!self been sanctioned by con2eyancers or the profession in generalC The answer !ust beA certainly not. E2en if not correctly technically described as a (fiduciary power) R such a power !ust ne2ertheless be e5ercised bona fide for the purpose for which it was conferred. The purpose of the power of re!o2ing and appointing trustees is ascertained by reference to the fiduciary nature of the office the ob:ect of the appoint!ent. The trustee is the (archetype) fiduciary. The office e5ists for the benefit of the beneficiaries. 0t is an essential ele!ent of the trust that the trustee is under a personal obligation to deal with the trust property for the benefit of the beneficiariesA an obligation gi2ing correlati2e rights to the beneficiaries.

2.1

There is an irreducible core of obligations owed by the trustees to the beneficiaries and enforceable by the beneficiaries which is funda!ental to the concept of a trust. 0f these do not e5istA or if the beneficiaries ha2e no rights to enforce the!A there is no trust. The !ini!u! duty is the duty to perfor! the trust honestly and in good faithA for the benefit of the beneficiaries. 4ccordinglyA notwithstanding the breadth of the discretion conferred on the trustee in an instru!ent such as the one in this caseA the discretion is to be e5ercised by reference to the ob:ects and purposes of the trustA ha2ing regard to the co!peting interests of the 2arious potential beneficiariesA and without ta,ing into account i!properA irrele2ant or irrational considerations. The discretions !ust be e5ercised personally and not in con:unction withA or under the direction ofA so!ebody else R 0fA howe2erA on the proper construction of the instru!entA the power of the appointor to re!o2e and appoint trustees !ay be e5ercised for the purpose of controlling the trust estate for the appointor)s benefitA the trust property !ay be regardedA at least for certain statutory purposesA as effecti2ely owned by the appointorA or as property in which the appointor has a contingent interest. 0t has been held that it is not proper to appoint new trustees without co!!unicating with beneficiaries and hearing their ob:ectionsA at least where it is li,ely that they would oppose the appoint!ent. 'owe2erA beneficiaries cannot dictate or control the e5ercise of the power.

Appoint$ent3 retire$ent an% re$oval o, trustees

-etire!ent Re5oval B0f the trust instru!ent is silent on the issue of re!o2alA only the court has the power to re!o2e a trustee who wishes to re!ain in office. The welfare of the beneficiaries is the do!inant consideration in deter!ining whether or not it is proper to re!o2e a trustee The court)s powers of re!o2al were discussed in Ee' s,# v Ee' s,# ?2+11@ E&C *.3 at ?1+@B?1*@A by /i5on I who said$
The court has a wide discretion to re!o2e or replace trustees. The :urisdiction of the court to re!o2e a trustee is inherent. 0t is e5pressed in the Tr's ee A, 41;). &ection .# pro2ides that (the Court !ayA whene2er it is e5pedient to appoint a new trustee or new trusteesA and it is found ine5pedient difficult or i!practicable so to do without the assistance of the CourtA !a,e an order appointing a new trustee or new trustees either in substitution for or in addition to any e5isting trustee or trustees). 4s to when it !ay be e5pedient to actA courts ha2e consistently started with obser2ations of &tory in E:'i + ='ris$r'den,e at s 12# $ 7ut in cases of positi2e !isconductA courts of equity ha2e no difficulty in interposing to re!o2e trustees who ha2e abused their trustN it is not indeed e2ery !ista,e or neglect of dutyA or inaccuracy of conduct of trusteesA which will induce courts of equity to adopt such a course. 7ut the acts or o!issions !ust be such as to endanger the trust property or to shew a want of honestyA or a want of proper capacity to e5ecute the dutiesA or a want of reasonable fidelity. "requently cited are the re!ar,s of Lord 7lac,burn in Le ers ed v 6roers ?;1##.> *71 at *#6@$ 4pp Cas

0t see!s to their Lordships that the :urisdiction which a court of equity has no difficulty in e5ercising under the circu!stances indicated by &tory is !erely ancillary to its principal

2.2

dutyA to see that the trusts are properly e5ecuted. This duty is constantly being perfor!ed by the substitution of new trustees in the place of original trustees for a 2ariety of reasons in nonBcontentious cases. 4nd thereforeA though it should appear that the charges of !isconduct were either not !ade outA or were greatly e5aggeratedA so that the trustee was :ustified in refusing the!A and the court !ight consider that in awarding costsA yet if satisfied that the continuance of the trustee would pre2ent the trusts fro! being properly e5ecutedA the trustee !ight be re!o2ed. 0t !ust always be borne in !ind that trustees e5ist for the benefit of those to who! the creator of the trust has gi2en the trust estate. The do!inant considerations are the preser2ation of the trust property and the welfare of the beneficiaries. The power is not e5ercised as a sanction or punish!ent of an errant trustee. There is notA in this proceedingA any question that the court could e5ercise the power. PlainlyA where the !anage!ent of a corporate trustee is deadloc,ed by internecine dispute between two partiesA who are equal director6shareholder6appointor and in consequence the trustee is not attenti2e to the trust or perfor!ing its officeA considerations of the need for preser2ation of the trust property and regard for the welfare of the beneficiaries !ay arise. Co!!onlyA with corporate trusteesA the issue arises in the conte5t of insol2ency. There is no e2idence here as to the sol2ency of the corporate trustees and it is not suggested that they are insol2ent.

Ri"hts o, trustees

The right to rei!burse!ent and e5oneration The right of contribution The right to i!pound a beneficial interest The right to get directions fro! the court

Po:ers o, trustees
Powers of sale Powers of !anage!ent Powers of !aintenance and ad2ance!ent Powers of in2est!ent

/uties o, trustees
/uty to inquire

/uty to obey the ter!s of the trust

/uty to ,eep accounts and gi2e infor!ation to beneficiaries B-e Londonderry)s &ettle!ent /uty to correctly pay beneficiaries /uty not to profit fro! the trust /uty to act i!partially between beneficiaries /uty to sell trust property /uty to in2est

2.*

/uty to act personallyA unfettered and unani!ously /uty to consider the e5ercise of trust powers 0n relation to the trustee)s duty of !anage!entA in 8"r$es v 1e$%le (2011) 27 4L- 212A the 'igh Court dealt with a case which raised the duties of a trustee of a 2acant residential property. =u!!ow F 'ayne IIA at 2*1A noted that in such a caseA (as a general proposition R it is the duty of the trustee to render the land producti2e by leasing itA and this is so e2en if the trust instru!ent does not e5pressly so pro2ide). 'eydon F Crennan IIA at 2.*A elaborated on this duty as follows$
Even if there is no direction in the trust instrument that the trust property be invested, it is the duty of the trustee to invest the trust property subject to the limits permitted by the legislation in force under the proper law of the trust and subject to any limits stated in the trust document. If there are no limits of that kind, a trustee who receives a trust asset, like an executor of a deceased estate, must lay it out for the benefit of the estate. [ Rocke v Hart (1805) 32 ER 1009 at 1010]. That is, it is the duty of a trustee to obtain income from the trust property if it is capable of yielding an income. If the property is money, it should be invested at interest or used to purchase income-yielding assets like shares. If the property consists of business assets, it should be employed in a business. If the property is lettable land, it should be let for rent. And if the intended means of gaining an income turn out to be unsatisfactory, those means must be abandoned and others found.

Interests o, bene,iciaries

Rights o9 ,e$e9i4iaries The right to co!pel perfor!ance The right to restrain a breach of trust The right to possession of trust property The right to approach the court The right to infor!ation The right to e5tinguish the trust -ight to trace

Personal re$e%ies

:;!ita,le 4o5pe$satio$ Ho!"a$g Pt" #t% v Mi$ter :lliso$ Morris &let4her (200*) 212 CL- .#. at 3++A a unani!ous 'igh Court said$ ?T@here !ust be a real question whether the unique foundation and goals of equityA which has the institution of the trust at its heartA warrant any assi!ilation e2en in this li!ited way with the !easure of co!pensatory da!ages in tort and contract. 0t !ay be thought strange to decide that the precept that trustees are to be ,ept by courts of equity up to their duty has an application li!ited to the obser2ance by trustees of so!e only of their duties to beneficiaries in dealing with trust funds. &etBoff 4ccount of profits

2..

Iust allowance Personal clai!s against third parties

Proprietary re$e%ies 0 tracin"

Tracing is a2ailable as a re!edy in co!!on law as well as in equity. Co!!on law tracing differs fro! equitable tracing in that equity recognises that a beneficiary retains his or her property rights o2er trust property in cases where the trust property is !i5ed with other property or con2erted into a new type of property &os3ett v M41eow$ )2000+ * 4ll E- 7$ Tracing is thus neither a clai! nor a re!edy. 0t is !erely the process by which a clai!ant de!onstrates what has happened to his propertyA identifies its proceeds and the persons who ha2e handled or recei2ed the!A and :ustifies his clai! that the proceeds can properly be regarded as representing his property. Tracing is also distinct fro! clai!ing. 0t identifies the traceable proceeds of the clai!ant)s property. 0t enables the clai!ant to substitute the traceable proceeds for the original asset as the sub:ect !atter of his clai!. 7ut it does not affect or establish his clai! The e5istence of a prior fiduciary relationship is an essential prerequisite to a clai! of tracing in equity The effect of grounding tracing in the e5clusi2e :urisdiction is to substantially li!it its a2ailability. 1any co!!entators ha2e been critical of this 2iew of tracing)s origins becauseA in the absence of a prior fiduciary relationshipA any person whose property is stolen by a thief will be unable to trace that property in co!!on law or equityA if the thief !i5es the property 0n addition to the require!ent that there be a preBe5isting fiduciary duty between the partiesA a clai!ant see,ing to trace trust property !ust also establish that he or she had an equitable interest in the property prior to the breach of fiduciary duty and that the property now lies in the hands of the defendant. 0n equity it does not !atterA for the purpose of identificationA that the property has beco!e !i5ed with other property. <or does it !atter that trust funds ha2e been used to purchase other property. Equity presu!es that the trust property continues to e5ist in both situations .ra4i$g propert" i$to the ha$%s o9 tr!stees 0f trustees !isappropriate trust property and use it e5clusi2ely to purchase other property in their own na!eA equity allows the beneficiaries to trace the funds into the newly acquired property The beneficiaries can choose to enforce their beneficial interests in the new property by either asserting beneficial ownership of itA or by bringing a personal clai! against the trustee for breach of trust. This clai! can be enforced by an equitable lien or charge o2er the new property Mi=e% propert" Q the r!le i$ Re 'allett7s :state

2.3

Equity presu!es in such circu!stances thatA once funds are !i5ed in an accountA any following transactions co!e fro! the trustee)s personal funds first. 4ny funds re!aining in the account are treated as trust funds .he lowest i$ter5e%iate ,ala$4e r!le 'ow do you calculate beneficial proprietary interests in cases where deposits and withdrawals are !ade o2er ti!e to accounts of !i5ed fundsC The lowest inter!ediate balance rule states that the beneficiaries) clai! is li!ited to the lowest account balance in the period starting fro! the date of !i5ture to the date of the clai! against the account. .ra4i$g val!a,le p!r4hases 9ro5 a 5i=e% 9!$% 4n e5ception to the rule in -e 'allett)s Estate applies when the fiduciary !a,es a purchase of 2aluable property fro! the !i5ed fund and then proceeds to dissipate the rest of the account. 0n such circu!stances the fiduciary is not entitled to use the rule in -e 'allett)s Estate to pre2ent tracing into the 2aluable property. 0n Re 6atwa" )190*+ 2 Ch *36A a trustee !isappropriated trust funds by placing the! in his account and then proceeded to use twoBthirds of the !oney to buy shares. The rest of the account was then dissipated. The court found that the trust property should be traced into the sharesA o2erturning the presu!ption in -e 'allett)s Estate that transactions co!e fro! the trustee)s personal funds first. .ra4i$g 5i=e% 9!$%s i$to appre4iati$g propert" 0n cases where trustees !i5 funds and profitably in2est the !i5tureA beneficiaries will ordinarily be entitled to a proportionate share of any gain !ade by the in2est!ent Mi=e% propert" i$ the ha$%s o9 tr!stees 9ro5 5ore tha$ o$e tr!st HnfortunatelyA it is not unusual for defaulting trustees to !i5 funds fro! !ore than one trust. 0n this situation two rules can be applied to apportion whate2er property re!ains between the different beneficial interests traced into the !i5ed fund. The general approach O pari passu "or e5a!pleA if V*+++ fro! Trust 4 together with V2+++ fro! Trust 7 were used to purchase 3++ shares of equal 2alueA *++ shares would be held in fa2our of Trust 4 and 2++ shares in fa2our of Trust 7. .he r!le i$ Cla"to$7s 4ase 0t displaces the pari passu rule and states that all beneficial interests in a !i5ed ban, account are sub:ect to a (first inA first out) rule. Presu!e that a trustee !i5es V1+++ fro! Trust 4 with V2+++ fro! Trust 7 and V*+++ fro! Trust CA in successi2e daysA totalling V6+++. Dn the ne5t day the trustee withdraws V2+++ fro! the accountA lea2ing a balance of V.+++. Hnder the rule in Clayton)s case the withdrawal is presu!ed to co!e fro! Trust 4)s funds and fro! Trust 7)s funds. The re!aining funds in the account are therefore said to be traced to Trust 7 for an a!ount of V1+++A and Trust C for an a!ount of V*+++.

2.6

The rule in Clayton)s case is difficult to apply where the facts concern large estates with co!ple5 ban, accounts. 0t also wor,s unfairly against the first 2icti!s of a breach of trustA by practically eli!inating their atte!pts to trace. 0n 4ustralia it has been found that if there are large nu!bers of beneficiaries it is better to apply the pari passu rule to pre2ent in:ustice$ -e 4ustralian 'o!e "inance Pty Ltd ?1 36@ EL- 1. 1ore recentlyA Ca!pbell I o2er2iewed the entire history of the rule in Clayton)s case and decided that it should not be applied in 4ustralia$ Re &re$4h Cale%o$ia .ravel )200*+ <&%&C 1++# .ra4i$g propert" i$to the ha$%s o9 thir% parties 7ona fide purchasers for 2alue without notice of the breach of trust are i!!une fro! tracing clai!s 'owe2erA if a third party recipient has actual or constructi2e ,nowledge of the breach of fiduciary dutyA or if the recipient is a 2olunteerA the property !ay be traced into his or her hands. &os3ett v M41eow$ )2000+ * 4ll E- 7A a trustee !isappropriated !oney fro! the trust fund and used it to pay the last two of fi2e pre!iu!s on a life insurance policy. The policy was in fa2our of the trustee)s children. 4fter the trustee)s suicideA the children recei2ed the policy !oney The beneficiaries under the trust clai!ed that they were entitled to trace their !oney through the policy into the su! paid out by the insurers. They belie2ed they were entitled to a proportionate share of the policy !oney. The !a:ority of the Court of 4ppeal upheld the beneficiaries) clai! but li!ited it to the a!ount of the two pre!iu!s together with interest. The beneficiaries were denied a proportionate share of the policy proceeds. 4 !a:ority of the 'ouse of Lords upheld an appeal by the beneficiaries$ . Lord 7rowneB%il,inson said at 1+2$ Therefore the critical question is whether the assets now sub:ect to the e5press trusts of the purchasers trust deed co!prise any part of the policy !oneysA a question which depends on the rules of tracing. 0fA as a result of tracingA it can be said that certain of the policy !oneys are what now represent part of the assets sub:ect to the trusts of the purchasers trust deedA then as a !atter of English property law the purchasers ha2e an absolute interest in such !oneys. There is no discretion 2ested in the court. There is no roo! for any consideration whetherA in the circu!stances of this particular caseA it is in a !oral sense (equitable) for the purchasers to be so entitled

/e,ences
Laches

ConsentA acquiescence and release

-elief fro! liability 0nde!nity pro2ided in the trust instru!ent

2.7

0nde!nity pro2ided by coBtrustees E5cusing a breach of trustB acted honestly and reasonablyA and ought fairly to be e5cused for the breach of trust and for o!itting to obtain the direction of the Court in the !atter in which the trustee co!!itted the breach

2.#

E12IT< AN/ TR2&T& PRA)TI)E 12E&TION&

Assi"n$ents = /ispositions
1. 0n a 2oluntary deed 4ndrew assigned to 7rian the 2erdict of his pending accident co!pensation clai! against Charles. Two wee,s later 4ndrew obtained a 2erdict of V3+A+++B++ against Charles. 4ndrew then repudiated the deed between 7rian and hi!self. 4d2ise 7rian of his rights ;if any> in relation to the 2erdict proceeds. T#e assi(nmen is no ,on,l'ded on #e *asis of ,#am$er + and main enan,e *e,a'se 6rian is no $ar i,i$a in( in #e ,o'r ,ase in an+ 5a+: Glegg v 8ro5le". Bo5everD #e assi(nmen 5ill no *e '$#eld *e,a'se #e verdi, is f' 're $ro$er + and 6rian is a vol'n eer: 'olro"% v Marshall (1862)K 2. /iscuss the 2alidity of the following assign!ents set out in a deed and for which no consideration has been gi2en$ ;a>('alf of !y contractual right to recei2e royalties fro! D5ford Publishers in relation to !y boo, entitled Principles of Equity). ;4t the ti!e of the assign!ent D5ford Publishers had gone into liquidation without ha2ing yet printed the boo, and it is unli,ely that it will be printed at all.> ;b>('alf of !y right to recei2e interest in relation to !y loan to Iac, &!ith). ;The loan is repayable i!!ediately on de!and with interest to be paid to the date of repay!ent.> ;c>(The first V #++B++ of the yearly net inco!e to accrue to !e as di2idends fro! !y shares in 4c!e 0ndustries Ltd). ;d>(4ll the shares in "astbuc, Enterprises Ltd that 0 stand to inherit pursuant to !y !other)s will when she dies). *. 1rs /ole was the absolute beneficial owner of 1+A+++ shares in 1acquarie 1ines Ltd ;11L>. The registered holder as trustee of the shares was 11L)s ban, and it was obliged to transfer the legal title to the shares to 1rs /ole at any ti!e if called upon to do so by 1rs /ole. Dne wee, ago 1rs /ole called the !anager of the ban, and said to hi!$ (0 want !y son 7ob to ha2e !y shares in 11L. Please transfer the! to hi!). The !anager replied$ (Eery well). Two days laterA and before any steps were ta,en by the ban, !anager to carry out 1rs /ole)s instructionsA 1rs /ole died. 0n her will she left her entire estate to her husband Eric. Eric see,s your ad2ice as to who is entitled to the shares in 11L. .. 1ar, is the trustee of shares in 7lue /ia!onds Ltd under a bare trust in which 8elly is the beneficial owner. 8elly telephones 1ar, and directs hi! to hold the shares on trust for 8elly)s friend Catherine. %hat is the effect of 8elly)s direction to 1ar,C 3. 7ill was the sole beneficiary under a trust of a painting by the fa!ous English artist Constable. 7ill agreed to transfer his interest in the painting to "ran, for a no!inal su!. 7ill died lea2ing his entire estate to Charles.

2.

Charles see,s your ad2ice as to the e5tent ;if any> of his interest in the painting. 6. Ianine is the registered proprietor of Torrens title land ,nown as =reenacre. &he was also the registered shareholder of 2+++ shares in Concrete Constructions Ltd. Ianine wanted to !a,e a gift of property to her niece E2a. To do this she !ade an oral declaration to the effect that she held =reenacre and the shares on trust for E2a. 4 few days after Ianine)s declaration E2aA in a letter to her sister 1argotA wrote$ (0 gi2e to you any interest 0 ha2e in =reenacre). 0n a telephone con2ersation with Ianine on the sa!e day E2a said$ (0 want 1argot to ha2e !y shares in Concrete Constructions Ltd. Transfer the! to her as soon as possible). E2a died the ne5t day. %ithout ,nowing of the deathA Ianine transferred the shares to 1argot and the share transfer was duly registered in 1argot)s na!e. 4 few days later 1argotA clai!ing to be the beneficial owner of =reenacreA wrote to Ianine and de!anded that she be gi2en the certificate of title to =reenacre and an e5ecuted transferA transferring =reenacre into her na!e. Ianine ignored this letter. 1argot see,s your ad2ice as to the effect of these transactions on the legal and equitable ownership of =reenacre and the shares.

)on,i%ential In,or$ation

1. 8en wor,ed for Car!el in Car!el)s phone counselling businessA (PhoneBaB"riend). The business pro2ided personal counselling for clients who registered with the ser2ice and paid a fee of each halfBhour of telephonic counselling. The business was 2ery successful pri!arily because it pro2ided a particularised ser2ice that catered for the indi2idual needs of its clientele. -ecords were ,ept of counselling sessions. The records included details such as the clientQs personal history and preferred !ethod of pay!ent. Car!el wor,ed hard to !a,e the business a success and decided to ta,e a holiday. &he left 8en in charge of the other e!ployees. %hen she returned she found no one at wor, and so!e of the client records appeared to be !issing. &he then contacted so!e of the clients and they told her that they were infor!ed by 8en that the business was closing but reopening under a new na!eA (Telephone 1ates.) 4fter so!e hurried searches Car!el disco2ered that (Telephone 1ates) was being run by 8en. 4ll the e!ployees had crossed o2er to wor, for hi!. 4fter a period of wee,s Car!elQs business closed per!anently as she had no clients left. %hat rights does Car!el ha2e to bring an action in for breach of confidenceC Confiden iali + a(reemen s ,an *e im$lied in o ,on ra, s: Deta ?o5i$ees v Bis4o!$t Plasti4 Pro%!4ts *' do no ne,essaril+ de$end on ,on ra, 'al rela ions#i$s: Seager v Cop"%e= (1967) F e:'i + in ervenes o $reven 'n,ons,ien io's *e#avio'r. A$ar from ,on ra, D #ree elemen s are ne,essarr+ for informa ion o *e #eld ,onfiden ial: Co4o v AK?KClar3 (:$gi$eers) #t% )1969+: informa ion m's #ave #e :'ali + of ,onfiden iali +? #e informa ion m's #ave *een im$ar ed in ,ir,'ms an,es im$l+in( ,onfiden iali +? and #ere m's *e a de rimen ,a'sed *+ #e 'na' #orised 'se of #e informa ion. ."pes o9 Clai5:

23+

Tor for a&in( #e $#+si,al re,ords. Res i ' ion for 'n8's enri,#men : E:'i a*le Com$ensa ion for 'n,ons,ien io's *e#avio'r L R v Ee$ of Beal #? Ex $ar e So'r,e 9nforma i,s L d I2"""J Eeliver+ '$ of ,onfiden ial informa ion T#e informa ion #as #e :'ali + of ,onfiden iali +D i #as no en ered #e $'*li, domain. 3ar s of #e informa ion #ave #e :'ali + of medi,al re,ords 5#i,# ma+D if $'*li,isedD s'*8e, #e $a ien o ridi,'le: N v Y I41))J. N P Generations Pty Ltd v Feneley (2001) Feneley manager of rental property biz. esponsibility to !eep rent roll "p to date. #lso !ept a $and %ritten diary and address boo! in&l"ding &onta&t details of landlords. '"it employer and %ent to a ne% one. (onta&ted landlords and some of t$em too! "p %it$ $er at ne% pla&e. )*L+, -n t$e absen&e of a restraint of trade &la"se. former employer &annot prevent &ompetition *mployee may not "se &onfidential information to &ompete t$at is detrimental to Former *mp. ADDRESS BOOK &ontained private &onta&t information. -nformation $ad been imparted to $er for $er "se as an employee and no ot$er p"rpose. #ddress boo! $ad to be delivered "p. DIARY related over%$elmingly to $er %or!. (ontained &onta&t details %$i&$ &o"ld form t$e basis of a &onta&t list b"t %as not &ompiled from t$e address boo! b"t from meeting and appointment notes. Not information t$at L/ )oo!er re0"ired to be &onfidential did not need to be delivered "p. Res i ' ionar+ ,laim o ma&e (ood $rofi s o* ained from #e 5ron(f'l 'se of ,onfiden ial ma erial e:'i a*le ,om$ensa ion /loss s'ffered *+ 30 C more ,ommon #an 'n8's enri,#men /*ased on $rofi s of E0 @en a fid',iar+7 Co'ld *e ar('ed *e,a'se of #e level of r's im$lied in Carmel leavin( #im in ,on rol of #e *'siness seems o s#o5 #e re:'isi e level of r's D ,onfiden,e and v'lnera*ili + a,,ordin( o Eins ein =<s es in Mi4hael (ilso$ a$% Part$ers #t% v ?i4holls )2009+. @en #as a(reed o a&e ,on rol of #e ,om$an+ so #is a, ions #ave a $ra, i,al effe, on Carmel<s in eres s o #e ex,l'sion of #is o5n in eres s. 9f @en is a fid',iar+ an+ $rofi s #e made as a res'l of #e *rea,# ma+ *e #eld on a ,ons r', ive r's for Carmel: 6oardman v 3#i$$s I416!J AC .6. REMEE9ES 1.44- T+$i,al remedies (ran ed in ,ases involvin( *rea,#es of fid',iar+ d' ies in,l'de: O an a,,o'n for $rofi s: %arman 9n erna ional L d v E5+er?

231

O e:'i a*le ,om$ensa ion: O<Balloran v R T T#omas F Famil+ 3 + L d /411)0 .; NS%LR 262? O #e im$osi ion of a ,ons r', ive r's : C#an v Pa,#aria? and O res,ission: Arms ron( v =a,&son.

(i%uciary Obli"ations

1. Iohn &!ith owns a 1 76 4ston 1artin sports car. 'e has been ta,ing the car to 7ob <ur, for ser2icing and repairs e2er since he bought it. 0t has now beco!e too s!all for his needs and he decides to sell it. The ne5t ti!e he ta,es the car to 7ob <ur, for a ser2iceA he !entions this to hi!. 7ob <ur, ,nows the car is in good order and thin,s it is a good buy. 'e offers Iohn &!ith V 1+A+++ for the carA which he suggests is a fair price. Iohn &!ith acceptsA but later disco2ers that the !ar,et 2alue for a 1 76 4ston 1artin is V 13A+++. 4d2ise Iohn &!ith. 7ob !ay ha2e breached a fiduciary duty andA if soA Iohn !ay ha2e the transaction set aside. This will be difficult to establish. 7ob)s position as !echanic does ha2e so!e of the characteristics of a fiduciary according to 6reen v %illiams? 2ulnerabilityN trustN a relation of confidenceN inequality of bargaining power and great scope to e5ercise discretion. 'e also bought the car hi!self without ob:ecti2ely deter!ining the fair !ar,et 2alue and a si!ilar fact pattern was held to be a breach by a -E4 in 3edersen v Lar,om*e ;2++#>. The stu!bling bloc,A howe2erA see!s to be that dealing with the car is outside the scope of the duties that 7ob has underta,en to perfor!. 0f the act that breaches the purported duty is outside the scope of the underta,ingA no re!edy will be a2ailable$ 3#i$$s v 6oardman ?1 67@. 2. -owena is a pro!inent real estate agent in Ca!pbelltown. &il2ester is a de2eloper who has plans appro2ed by the local council to build a bloc, of four townB houses on one of the few parcels of land in Ca!pbelltown Moned for such purposes. /ue to a cashBflow proble!A &il2ester decided to sell two of the townBhouses Soff the planT before construction had co!!enced. &il2ester engaged -owena to find buyers for these two townBhouses. 4fter discussions between -owena and &il2ester on the question of a sale priceA a figure of V 13+A+++ per townBhouse was agreed. -owena ad2ertised the sale in the local press and was approached by Lelda. LeldaA who had only V 13+A+++ to in2estA was interested in purchasing one townBhouseA but only if the townBhouse was li,ely to appreciate by at least 23b by the ti!e it was actually built. Lelda instructed -owena to !a,e enquiries along these lines. -owena disco2ered that once co!pletedA the townBhouses would each fetch V 223A+++. &he further disco2ered that V 17+A+++ each was the then current !ar,et 2alue of the proposed townBhouses. -owena ad2ised Lelda of the results of her enquiriesA and Lelda i!!ediately contracted to buy one townBhouse for V 13+A+++. -owenaA with Lelda)s consentA also contacted an old friend %alter. %alter is a retired politician who was see,ing to in2est his superannuation payout. 'e had as,ed -owena to ,eep an eye open for a Sgood dealT if one ca!e along. -owena told %alter$

232

0 ha2e a townBhouse for sale Soff the planT for V 13+A+++ which by the ti!e it is built will fetch V 223A+++ on the open !ar,et. %alter i!!ediately contracted to purchase the second townBhouse fro! &il2ester. -owena did not at any ti!e infor! &il2ester of the infor!ation she disco2ered as a result of the enquiries pursued on behalf of Lelda. Contracts for both sales were co!pleted a few days after &il2ester co!pleted the building of the townBhouses. &il2ester has now disco2ered e2erything that happened and feels terribly cheated. 'e see,s your ad2ice as to re!ediesA if anyA that he !ay ha2e a2ailable to hi!.

*. Ioe for!ed 1etal 1ines Pty Ltd together with 8eith who was a !a:or figure in 4ustralian business and financial circles at the ti!e. 1etal 1ines was for!ed for the purpose of e5ploiting certain uraniu! deposits in Gueensland. Ioe beca!e the co!panyQs !anaging director. 8eith wasA inter aliaA to pro2ideA through his own co!paniesA financial support for the de2elop!ent of this pro:ect. %hilst acting as !anaging director of 1etal 1inesA Ioe co!!enced negotiations with the Tas!anian go2ern!ent for the issue of e5ploration licencesA in connection with a sche!e for e5ploiting so!e of Tas!aniaQs iron ore deposits. <egotiations were carried out through the offices of 1etal 1ines e2en though that co!pany had been for!ed for a different purpose. "inancial difficulties confronted 8eith and his co!panies and they were unable to support 1etal 1ines any longer. 0t had been pre2iously agreed by the board of directors of 1etal 1ines and 8eith thatA if such a situation would ariseA the co!pany would be Q!othballedQA that isA ,ept in beingA but inacti2eA until circu!stances changed and it again beca!e possible to continue with the e5ploitation of the rele2ant uraniu! deposits in Gueensland. 0n the !eanti!e Ioe continued with his negotiations with the Tas!anian go2ern!ent and earned significant profits as a result. Later he resigned as !anaging director of 1etal 1ines and this was co!!unicated to the Tas!anian go2ern!ent. Ioe now see,s your ad2ice as to whether he is liable to account for the profits that he has !adeA and is li,ely to !a,e in the futureA as a result of his wor, with the Tas!anian go2ern!ent in the issue of e5ploration licencesC

Intro%uction to Trusts

1. Characterise the following dispositions contained in IohnQs will$ a. 0 gi2e !y -olls -oyce to EricA and on the condition that Eric pays !y debts to ChristosN b.0 gi2e !y house in 7rewarina to Cathy absolutelyA with the hope that she shall allow !y !other to li2e there until she dies. c.0 gi2e V23A+++ to 1ar,A to be used for the costs of educating Penelope and to be hers absolutely when she attains 21 years.

23*

d. 0 gi2e the residue of !y estate to "rancine who !ayA at her absolute discretionA gi2e such residue to anyone she thin,s fitA barring herselfA EricA and Cathy. 0f "rancine fails to dispose of the residue in her lifeti!eA it shall beco!e the property of Penelope. 2. 4lain co2enants with 7ruce that he will settle e5isting property on 7ruce as trustee for Claude. Dnly 4lain and 7ruce are party to the deedA and no consideration has been pro2ided by either 7ruce or Claude. 4lain later refuses to settle the property. ;a>Can Claude require 7ruce to sue 4lain on the co2enantC ;b>%ill 7ruce be allowed to sue 4lain on the co2enantC ;c>0f 7ruce can sueA what will his re!edy beC 0f he obtains da!ages on what basis will they be assessedA and will he be allowed to ,eep the! for hi!selfC

Express Trusts

1. Ioc,A a wealthy oil tycoonA is happily !arried to Ellie. /uring the Eietna! %arA while stationed at /arwinA Ioc, had an affair with %endy. 4s a result of that affair Ioc, and %endy had a son na!ed -ay. Ioc,)s past is un,nown to Ellie. Ioc, was concerned that %endy and -ay were satisfactorily pro2ided for in his will. Ioc, thus !ade a willA in 1 #+A and clause 7 of the will read as follows$ 0 lea2e V 3++A+++B++ to !y son 7obby feeling confident that !y e5press wishes in relation to this !oney will be carried out. 7y Clause 13 of Ioc,)s willA Ellie was na!ed as beneficiary of the residue of his estate. Dn 1 4pril 1 7 Ioc, showed his will to his son 7obby and handed hi! a sealed en2elope. 'e said to 7obby$ Q0 want you to carry out the instructions contained in this letter after 0 die. Kou are not to tell your !other about it.Q 7obby said nothing in response but nodded to indicate that he agreed to abide by his father)s wishes. Dn 1 1ay 1 7A %endy died in an auto!obile accident. Hpon hearing of the news of %endy)s death Ioc, suffered a heart attac, and e2entually died on 1 Iune 1 7. 4fter his father)s death 7obby opened the en2elope he had been gi2en in 4pril 1 +. 0n the letter Ioc, stated that the V 3++A+++B++ referred to in Clause 7 of his will was to be held on trust for %endy. 0n trying to locate %endyA 7obby disco2ered that she had died and had left a will appointing her son -oy as e5ecutor and beneficiary of her entire estate. 7obby see,s your ad2ice as to what is to happen to the V 3++A+++B++ referred to in Clause 7 of Ioc,)s will. 2. 4nita Constructions Ltd is in financial difficulties. 0ts !anaging director 1r 'aw,eA thin,s that liquidation can be sta2ed off if fi2e !a:or creditorsA who are owed a total a!ount of V 1++A+++ are paid. 1r 'aw,e arranges for a loan of V 1++A+++ fro! an associated co!panyA Paul 4cceptance Ltd. Paul 4cceptance Ltd sends a cheque for V 1++A+++ to 4nita Constructions Ltd with a co2ering letter which saysA inter alia$

23.

This su! is lent to you on the following conditions$ ;a> 0t is repayable on de!andA ;b> 0t will bear interest until repay!ent of 1+b per annu!A andA ;c> 0t is to be used only for the purposes of discharging your indebtedness to the fi2e !a:or creditors. 4nita Constructions Ltd pays the cheque to the credit of a new account opened with a ban, with which it had not pre2iously dealt with and which was not aware of the ter!s on which the cheque had been recei2ed. 7efore any further steps were ta,en 4nita Constructions Ltd went into liquidation. The fi2e creditorsA Paul 4cceptance Ltd and the liquidator of 4nita Constructions Ltd all clai! that the a!ount outstanding to the credit of the new ban, account. 4d2ise the ban, as to who is entitled to the a!ount in the ban, account.

4ariation an% Ter$ination

1. Each of the following dispositions fails the !odern rule of perpetuity. %hyC ;a>4n inter 2i2os gift (to 4 on trust for 7 for lifeA and then to any of 7)s children that !arry.) ;b> 4 gift of a gra2el pit on trust to 4 to use until the pit is e5haustedA and then to be sold and di2ided equally a!ong the testator)s li2ing issue. ;c> 4 gift (to 4 on trust for 7 for lifeA then to anyone who !ay beco!e 7)s wife for lifeA then for 7)s eldest son then li2ing.) ;d> 4 testa!entary gift (to 4A !y wifeA for lifeA then to 4Qs children for lifeA then for such of any children of !y brother and sister who attain 21.) ;e> 4 testa!entary gift to (4 for lifeA then for such of 4)s grandchildren that are ali2e at !y deathA or born within fi2e years afterA who attain the age of 21.) 2. 7ronwyn died lea2ing a far!ing property and a large ban, account. Hnder her will 7ronwyn appointed her brother 7rian as e5ecutor and trustee of her estate. 7ronwyn was a pre:udiced wo!an and disli,ed Catholics i!!ensely. Clause . of her will stated$ 0 gi2e the far! to 7rian on trust for &onya for lifeA on the condition that &onya is not !arried to a Catholic. Clause # of her will states$ 0 gi2e V2++A+++ to 7rian on trust for DwenA then for any wife he !ay !arry for lifeA then to Dwen)s children that attain 23 years. 4t the ti!e of 7ronwyn)s deathA &onya had been !arried to Lucas ;a Catholic> for fi2e years. 7ronwyn had been aware of the !arriage and did not appro2e. Dwen was aged 63 and had not yet !arried or had any children. 'e wasA howe2erA

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considering !arriage to -osieA his girlfriend who was aged 7+. 4nalyse the 2alidity of these trusts

)haritable Trusts

1. Consider the following gifts to trustees in the will of 1elina$ ;a>V 2++A+++ to the 0ndustrial -elations Co!!ittee of the Ca!pbelltown 7ranch of the Dne <ation Party of 4ustraliaA for the benefit of the said branch. ;b>V 2++A+++ to establish a sanctuary for the preser2ation of the nati2e flora and fauna of <ew &outh %ales. ;c>V 2++A+++ for the general purposes of &t Eincent)s Pri2ate 'ospital. ;d>V 2++A+++ to those of !y friends who are poor. ;e>V 2++A+++ for the building of a recreation centre for the benefit of wor,ers in the tobacco industry. ;f>V 2++A+++ for the education in the =ree, language of police officers of the <&% Police /epart!ent. ;g>V 2++A+++ for the pro!otion of croquet in the pri2ate schools of <ew &outh %ales. ;h>V 1+A+++ to the =ree, Drthodo5 4rchbishop of 4ustralia for !asses for the repose of the souls of !y husband and !y parents and !y sisters and also !yself when 0 die. 2. 4t the end of %orld %ar 00A 1ilan Petro2icA a &erbian peasant far!erA left his birthplace in Kugosla2ia and e!igrated to 4ustralia. 'e settled on a far! he purchased near Leppington. The far! was in a 2ery runBdown condition when he purchased it. 1ilan de2oted all his ti!eA energy and resources to establishing his belo2ed far! which he na!ed S"lat TopsT ;a translation in to English of the &erbian 2illage in which he was born>. 0n 1 # 1ilan contracted leprosy and ulti!ately had to ha2e his left leg a!putated. 4s a result of his affliction 1ilan ca!e into contact with the <&% Leprosy -esearch CouncilA an unincorporated bodyA which was engaged in research for an effecti2e cure for leprosyA and which had its research centre and headquarters in Leppington. 0n 4pril 1 +A the <&% Leprosy -esearch Council was effecti2ely dissol2edA but its functions were ta,en o2er by a newly for!ed body called the Leprosy -esearch 0nstitute of <&%. 4t all rele2ant ti!es the only other institution concerned with leprosy in <&% was the <ewcastleBbased <&% 4ntiBLeprosy League. 4s a result of 1ilan)s suffering he was unable to wor, his far! and it proceeded to decline rapidly. 0n 1ay 1 7 1ilan died. 4t the ti!e of his death the S"lat TopsT far! was worth V *3+A+++A but had ceased to generate any inco!e at all. 0n his will 1ilan appointed his nephew &tanisla2 as e5ecutor and trustee as well as residuary beneficiary. Consider the following pro2isions left by 1ilan to his trustee in his will$

236

;a>V 3+A+++ to the Leppington 4ntiBLeprosy Centre. ;b>The whole of !y belo2ed S"lat TopsT far! for a training far! for orphan lads being 4ustralians. *. Consider the following gifts to trustees by will$ ;a>V 2++A+++ to establish a training far! in Pa,istan for refugee boys fro! 4fghanistan. ;b>V 2++A+++ to establish a Catholic wee,ly newspaper. ;c>V 2++A+++ for such Drder of <uns of the Catholic Church whether acti2e or conte!plati2eA as !y trustees shall select

Resultin" Trusts

1. Iac, and Iill entered into a de facto relationship in 1 73. 0n 1 76 they had a child na!ed Lac. 0n 1 #7 they purchased a house in -ich!ond for V 13+A+++. The purchase price was paid by Iac,A the !oney co!ing to Iac, as an inheritance fro! the estate of his late uncle. 4t the ti!e of purchase Iac, decided to ha2e the property registered in hisA Iill)s and Lac)s na!es as tenants in co!!on and in equal shares. 0n 1 .A when Lac reached his !a:ority age Iac, opened a ban, account with the %estern &ydney 7an, Ltd in the :oint na!es of Iac, and Lac. Iac, told Lac that he would be !a,ing all the deposits into the account and would withdraw fro! the account whene2er it !ay beco!e necessary. 'owe2erA he also said that if anything should e2er happen to hi! ;ie Iac,> the !oney then in the account would belong to Lac. Two wee,s ago Iac, F Iill died in a car accident. 0n his will Iac, left his entire estate to LucyA his daughter that he had fathered in 1 72 before he had !et Iill. 0n her will Iill left her entire estate to Lac. 4t the ti!e of their deaths the -ich!ond property was worth V *++A+++A and the ban, account at %estern &ydney 7an, Ltd had a balance of V 3A+++. Lucy see,s your ad2ice as to whether she has any entitle!ents in the -ich!ond property and the ban, accountA and if not who is entitled and to what e5tent.

)onstructive Trusts

1. Car!el and 7rian were brother and sister. 7oth were raised on the land and wanted to be far!ers. 0n 1 63A 7rian he bought a far! at Gueensland with V2+A+++ of his own !oney and a loan fro! Car!el of V3A+++. HnfortunatelyA the far! was 2ery run down and in the early stages of its running 7rian had to call upon the aid of his sister ;who was a qualified carpenter> to upgrade and !aintain the far!. 4t first Car!el would wor, on the far! on wee,ends and holidaysA but e2entually 7rian in2ited Car!el to wor, on the far! full ti!e in return for her li2ing e5penses being paid. &he agreed but she stated that she e5pected to recei2e so!e partBownership of the far! should she stay for so!e ti!e. 7rian stated that he would always !a,e sure that Car!el was (ta,en care of.) Car!el and 7rian continued to li2e and wor, on the far!. 0n 1 7# 7rian fell in lo2e with -onaldA his old school sweetheartA and -onald !o2ed onto the far! to li2e.

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4fter -onald !o2ed inA the parties 2ery quic,ly fell into a pattern of wor, whereby Car!el and 7rian would labour on the far! and -onald would ta,e care of the householdA by coo,ingA cleaning and organising the siblings and their affairsA including the far!Qs accounts. -onald ga2e up his :ob at a country newspaper to de2ote his ti!e to helping 7rian and Car!el on the far!. 7rian ne2er stated that -onald would recei2e an interest in the far!. 7rian and -onald relationship deteriorated in 1 # and -onald e2entually left the far!. Car!el left soon afterA as she belie2ed that -onald was unfairly treated by 7rian. 7rian indicated that both Car!el and -onald would ne2er recei2e any interest in the property. %hat constructi2e trusts !ight arise to gi2e Car!el and -onald a beneficial interest in the far!C 2. To! and 1illieA who were husband and wifeA orally agreed that each would !a,e a will lea2ing the whole of his or her estate to the sur2i2orA who would in turn lea2e his or her estate to 1illie)s sister "ay. 4fter 1illie died lea2ing the whole of her estate to To!A To! !arried <ancy and used all of his assetsA including 1illie)s estateA as the full purchase price for a !ansion at Point PiperA title to which was transferred to his and <ancy)s na!e as tenants in co!!on in equal shares. To! e5ecuted a will lea2ing all of his estate to <ancyA butA tor!ented by scruplesA he later told <ancy that he e5pected her to de2ise the !ansion to "ay. <ancy said nothing. To! then diedA without changing his willA and <ancy inherited his estate. Then <ancy diedA lea2ing the whole of her estate to her brother 7ob. "ay has :ust disco2ered the facts. 4d2ise "ay of her rightsA if anyA in respect of the Point Piper !ansion *. 4lain !a,esA in the Hnited &tatesA high quality s,iBboots. 'is ,nowBhow is not patented. 7rian has successfully distributed 4lain)s s,iBboots in Canada for !any years and is respected by 4lain as an energetic and loyal distributor. 4lain confides to 7rian that he wants to e5pand into the 4ustralian !ar,et. 7rian successfully persuades 4lain to engage 7rian as his e5clusi2e distributor for 4ustralia. The arrange!ent is that 7rian will purchase the s,iBboots and pro!otional !aterial fro! 4lain and then !ar,et the product in 4ustralia by hi!self. There is no contract recording this arrange!ent. 7rian stresses that the arrange!ent for 4ustralia will be li,e his pre2ious dealings with 4lain and that it will wor, to their !utual benefit and ad2antage. 7rian then builds and equips a factory in 4ustralia using his own funds. 'e plans to identify 4lain)s ,nowBhow by Sre2erse engineeringT and then to begin !anufacturing his own s,iBboots for 4ustralian distribution. This he does to great ad2antage. 'e winds down the sales of 4lain)s product to a negligible le2el. 4lain beco!es aware of 7rian)s acti2ities and ter!inates 7rian)s e5clusi2e distributorship arrange!ent. 4lain)s solicitor writes to 7rian and threatensA in nonB specific ter!sA the institution of legal proceedings against 7rian. 7rian then sells the plantA goodwill and underta,ing of his s,iBboots business to Claude. Claude is aware that 7rian once had a close business relationship with 4lain and that 4lain is now threatening legal proceedings of so!e ,ind against 7rian. Claude is not aware that 7rian was 4lain)s e5clusi2e distributor for 4ustralia. Claude !a,es no further enquiries.

23#

4d2ise 4lain of his rights and re!edies in respect of the acti2ities of 7rian and Claude.

Ri"hts an% Responsibilities

1. Paul was a busy solicitorA who had an unfortunate habit of cutting corners. Paul)s practiceA Paul F CoA had a large trust account of which he was the trustee. Paul was also a coBtrustee of the Landwall "a!ily Trust which had two beneficiariesA <icole and 1arc. The other coBtrustee was -ichardA who was an old fa!ily friend of the Landwalls and was a retired landscaper. The !anage!ent of the fa!ily trust wasA as a !atter of practiseA left in Paul)s hands and -ichard had 2ery little to do with the decisionB!a,ing. Paul had drea!s of de2eloping a large landholding into an industrial area but was in desperate need of capital. The Landwall Trust instru!ent granted li!ited in2est!ent powers and forbade speculati2e in2est!ents in land. Dn 1onday . "ebruaryA Paul was !ade an offer for the land that he could not refuse. 'e drew V1 !il fro! the fir!)s trust account and deposited into his own personal account. The ne5t day he transferred another V1 !il fro! the Landwall Trust into the personal account. 'e ,new that both actions were serious breaches of ethics and lawA but he belie2ed that he would able to repay the loans fro! de2elop!ent within a year. Paul then used V1.3 !il to purchase the land in his na!e. -ichard was obli2ious to the entire e2ent. &i5 !onths after these transactions Paul)s withdrawal of !oney fro! the Paul F Co trust account was !ade ,nown. The authorities launched an in2estigationA disco2ering nu!erous serious breaches of professional standards and they threatened to stri,e Paul off. Paul beca!e depressed and ,illed hi!self. Paul was insol2ent at the ti!e of his deathA owing V7++A+++ to unsecured creditors. 4t the ti!e of Paul)s deathA his personal account had a balance of V1++A+++ and the 2alue of the land was V2 !il. /iscuss what re!edies are a2ailable to the beneficiaries of the Landwall "a!ily Trust and to the beneficiaries of the Paul F Co trust account. 2. =ordon died on the 1 Ianuary 2+++. 0n his will =ordon appointed his sisterA PhyllisA as trustee of his estate and granted his wifeA "rancesA a life estateA and his three childrenA 8en ;aged 21>A Iocelyn ;aged 1 > and -onnie ;aged 13> an equal beneficial interest in the re!ainder. The estate consisted of two !ain assets$ a collection of rare China plates and a far! property in ClunesA in northern <ew &outh %ales. The far! was being leased to 7obA who paid an annual rent payable on *+ Iune e2ery year. The trust pro2ides that the children are not entitled to their interests until they reach the age of 23 years. /iscuss possible solutions to the following scenarios$ ;a>Hpon ta,ing up her officeA Phyllis was gi2en ad2ice to the effect that the !ar,et for =ordon)s China plates is falling dra!atically and she is fearful that the plates will be worthless in the future. ;b> Tragedy struc, a second ti!e on 1 1ay 2+++. "rances died in a car accident. &he left her entire estate to the /og 'o!es LtdA a statutory corporationA set up to

23

care for dogs. /ogs 'o!e Ltd are clai!ing part of the inco!e fro! the far! rental but Phyllis does not ,now how !uch is owed to PhyllisA if anything. Phyllis) records indicate that "rances had not recei2e any a!ounts for rent fro! the far! in 2+++. ;c> 4fter "rances) death all three children began de!anding that they be gi2en their beneficial interests in the far!. Phyllis refuses to gi2e the! the property on the grounds that it would be a breach of the trust. *. 8en is the sole trustee of the Croydon "a!ily Trust ;Sthe TrustT>. The trust has three discretionary beneficiaries. They are 8e2in ;aged 23>A Ia!es ;aged 21>A and Car!el ;aged 17>. The Trust property consists of a 2ery large in2est!ent account at the %estern 7an,. The Trust pro2ides that 8en shall ha2e the discretion to pay inco!e each year to the beneficiaries fro! the interest earned on the account. 8en is obliged in the trust deed to distribute all the inco!e e2ery year but he can choose to who! it is distributed. The Trust deed also gi2es ,en the widest powers to in2est the !oney as he sees fit to get the best return. 8en wishes to re!ain as trustee. 'owe2er the beneficiaries are not happy with his !anage!ent of the trust as 8en has ta,en so!e of the !oney fro! the account for hi!self. 8en belie2es he has done nothing illegal. 'e used trust funds to rei!burse hi!self for costs spent in getting ad2ise about how to in2est the trust funds properly. The beneficiaries are also angry at 8en)s decision to in2est with the %estern 7an,. The beneficiaries ob:ect to this as the %estern 7an, was responsible for en2iron!ental degradation in <uigini. The beneficiaries would prefer the funds to be in2ested with the =reen 7an, ;which has strict en2iron!ental policies>A e2en thought this would !ean that there would be less returns on the in2est!ent. 8en is worried that the beneficiaries will see, to call on hi! the distribute all the funds and ter!inate the trust. 'e is unsure of whether the beneficiaries ha2e the power to !a,e that decision. 'e is also worried that they will sue hi! for the rei!burse!ent !onies or force hi! to in2est in the =reen 7an,. /iscuss and analyse.

)o$bine% Trust 1uestions :ith Ans:er 'ui%es

1. The facts of this question are set in <&%. 4le5A a successful industrialist and founder of 7usy CorporationA died on the 1 Ianuary 2++#. 'is will contained two trusts with a residuary beneficiary. The first trust was for V3 !illion to be held for (the education of e!ployees of 7usy CorporationA their children and dependants.) The second trust was worded as follows$ 0 gi2e !y property at -e5 Le5 to !y sister Iuliette on trust for !y children for lifeA and then to any of !y grandchildren that !arryA on the condition that the grandchildren not !arry a &cot.)

26+

The property at -e5 Le5 was a large cattle station in western <&% worth V1++ !illion. 4t the ti!e of 4le5)s deathA 4le5)s children were 1ichael ;aged 3+>A Iohn ;aged *2> and Peter ;aged 2#>. 4t the ti!e of his death 4le5 had one grandchildA PenelopeA who was un!arried but had been dating Ca!eron fro! &cotland. The residuary beneficiary in the will was PatriciaA 4le5)s estranged wife. Patricia sought to challenge the 2alidity of the 7usy Corporation trust. 4t the sa!e ti!e IulietteA who had possession of the certificate of titleA saw an opportunity to beco!e 2ery richA 2ery fast. 7efore the sons could collapse the trust and get possession of the title deeds she entered into a contract for sale of the property with <idal. 0t was co!!on ,nowledge that the property was held by 4le5)s fa!ily in a trust for the sons. <idal realiMed that the circu!stances were suspicious but he decided that the best thing to do was basic title searching and settle the transaction as soon as possible. <idal beca!e the registered owner on 1 Iune 2++# and Iuliette then disappeared. 4nswer each of the following Can Patricia ha2e the 7usy Corporation trust struc, down andA if soA on what basisC 0f the trust fails what trust !echanis! could be used to bring the funds bac, to the estate and into Patricia)s possession. The first issue is whether the trust fails as a charitable trust. Education is a 2alid head of charity but it fails the Co!pton test of public benefit. The facts are si!ilar to -e Dppenhei! The second issue here is whether it could sur2i2e as a pri2ate e5press trust. The trust appears to be certain according to the criterion certainty test in 1cPhail 2 /oulton. The !echanis!A for sa2ing it is the auto!atic resulting trust /iscuss the wording of the second disposition and whether it offends the rule against perpetuities and6or public policy. Dn perpetuitiesA it fails the !odern rule. The li2es in being are the children. The grandchildren could get !arried !ore than twenty fi2e years after the death of the last child. Class closing cannot apply because the condition is not age related. The Perpetuities 4ct 1 #. would sa2e the disposition fro! initial uncertainty and the waiting ti!e would be #+ years. ;* !ar,s> The restriction on !arriage would be upheld$ &eidler 2 &challhofer ?1 #2@ 2 <&%L#+. Therefore the disposition sur2i2es. ;* !ar,s> Can -e5 Le5 be reco2ered by the sonsC The issue of /a2id)s registration is whether he can clai! indefeasibility fro! the ,nowing receipt of the trust property. The rule in 7arnes 2 4ddy applies to ,nowing receipt. Df interest is /a2id)s state of ,nowledge which see!s to !atch category . of the 7aden categories of ,nowledge. 0n 4ustralia both categories satisfy the require!ent for ,nowing receipt but the question here is co!plicated by the Torrens syste!. The 'igh Court has said that outside of fraud ,nowing receipt does 261

not apply to Torrens$ "arah Constructions Pty Ltd 2 &ayB/ee Pty Ltd ?2++7@ 'C4 22. The !ost probable answer is that he has indefeasibility and that tracing will be ineffecti2e. 2. This question occurs in <&%. Lu,e and -obert were brothers. They purchased a house together with each pro2iding 3+b of the purchase price but Lu,e did not want the house to be in his na!e because he wanted to later access a go2ern!ent sche!e for e5Bser2ice!en where they could borrow !oney fro! the go2ern!ent for their first house at a cheap rate. Lu,e had fought in the "irst =ulf %ar. The house was registered in -obert)s na!e. Lu,e earned inco!e through pro2iding loans to s!all businesses. Lu,e later won the lottery and with the !oney decided that he would li,e to pro2ide for his friend Dwen who was in dire financial straits. Lu,e decided to gi2e Dwen 3+b of his ;Lu,e)s> right to recei2e interest on a large loan he !ade to a colleague na!ed Iac, &!ith. The loan was repayable i!!ediately on de!and with interest to be paid to the date of repay!ent. Lu,e also had a large holding of shares in 4us&teel Pty Ltd and decided to also gi2e Dwen (E2ery year for the rest of Dwen)s lifeA the first V1+++ of the yearly net inco!e to accrue to !e as di2idends fro! !y shares in 4us&teel Pty Ltd). "inally Lu,e also ga2e Dwen (all the rights and !oneys owed to !e as !ortgagee pursuant to an equitable !ortgage that 0 ha2e with Clary 7ruce.) Clary 7ruce was another borrower who had borrowed !oney fro! Lu,e and e5ecuted an equitable !ortgage in fa2our of Lu,e as security for the loan. 4ll the gifts to Dwen were recorded in a deed. Lu,e also wrote a will which contained the following clauses$ 0 gi2e V3++A+++ to !y brother -obertA on conditions that he will be !ade aware of. 0 gi2e the residue of !y estate to !y sister Lisa who !ayA at her absolute discretionA gi2e such residue to anyone she thin,s fitA barring herselfA and -obert. 0f Lisa fails to dispose of the residue in her lifeti!eA it shall beco!e the property of !y nephewsA EthanA Lachlan and 7ryce. Three days after writing the will Lu,e ga2e a letter to -obert and as,ed hi! to follow the instructions in the letterA but only after he died. -obert agreed with a win, and wry s!ile. Lu,e died three !onths later in a !otorcycle accident. -obert opened the letter and found that it instructed hi! to trac, down his illegiti!ate sonA TerryA who was born in &audi 4rabia during Lu,e)s ser2iceA and gi2e the V3++A+++ gift to hi!. ;a> /oes Lu,e)s estate ha2e a clai! on the houseC The facts of this are si!iliar to <elson. The resulting trust will be upheld for Lu,e)s estate because the policy of the law has not been offended. Lu,e)s estate !ay ha2e to rei!burse the go2ern!ent for any pay!ents they wrongfully recei2edA on the basis of clean hands ;b> %ere the gifts to Dwen effecti2e or do they for! part of Lu,e)s estate The first gift is si!ilar to &hephard and is successful. 4ll these parts deal with whether the property being assigned is present or future propertyA gi2en that the 262

assign!ents are for no consideration. Present property can be assigned for no considerationA but not so future property. &tudents !ust ,now &hepherd and <or!an in particular. The ,ey to this type of question is to !a,e clear that there is a distinction between assigning an e5isting right to recei2e future property ;present property> as opposed to the future property itself. The tree and fruit !etaphor is often used. 0n cases of presently e5isting rights to future property being assigned it doesnQt !atter that it !ay not e2er co!e to fruitionA so to spea,$ &ee &hepherd. The second fails because it can only be an equitable assign!ent gi2en it is future propertyA and it)s a gift. The third gift is the 2oluntary transfer of a subsisting equitable interest. 0ts needs to be in writing as per s 2*C;1>;c>. ;c> Df what ,ind is the disposition to Lisa and is it effecti2eC This disposition is a !ere hybrid power of appoint!ent. The disposition is a !ere power because there is no obligation to e5ercise the power. This is indicated by the words Q!ayAQ and Qabsolute discretionQ. 4dditionallyA the disposition contains a gift in conte!plation of defaultA which is the hall!ar, of a !ere power. The power is hybrid because the donee is able to choose anyone as the beneficiary of the powerA apart fro! a na!ed group of persons. <ote also that because the disposition contains a gift o2er it satisfies the rule against delegation of testa!entary power ;Tatha! 2 'u5table>. Tatha! should be discussed at length. 7ut it has now been re!o2ed 2ia the new &uccession 4ct 2++6 ;d> 0s the gift to Terry effecti2eC This question concerns a halfBsecret trustA as the testator has indicated that the donee is not to hold the property beneficially. To be binding the trust !ust satisfy the three require!ents of intentionA co!!unication and acceptance$ Ledgerwood 2 Perpetual Trustee Co Ltd ;1 7> .1 <&%L- 3*2 at 3*3A per Koung I. =i2en the state!ent !ade by Lu,eA there is no contro2ersy that a trust was intended. "urther circu!stantial e2idence could be led if necessary to pro2e intention on the balance of probabilities$ Eoges 2 1onaghan ;1 3.> . CL- 2*1. 4 proble! !ight arise in relation to co!!unicationA gi2en that Lu,e did not spea, with -obert regarding the trust until 17 years after the will was !ade. Dlder authority suggested that co!!unication needed to occur before or at the ti!e of the will for a half secret to be 2alid$ =uest 2 %ebb ?1 63@ E- .27. 'owe2erA in Ledgerwood 2 Perpetual Trustee Co Ltd ;1 7> .1 <&%L- 3*2A it was held that co!!unication could occur at any ti!e until death. 0t is of no rele2ance that the ter!s of the trust were not co!!unicated until after death$ -e 7oyes ;1##.> 26 Ch / 3*1. -obert has accepted the trust by nodding. E5press acceptance of the obligations are not necessary$ Dttaway 2 <or!an ?1 72@ Ch 6 #N ?1 71@ * 4ll E- 1*23. 4 2alid secret trust has therefore been created. *. This question occurs in <&%.

26*

Colin was a busy industrialist who was in2ol2ed in refinancing of s!all to !ediu! siMed businesses. 'e was !arried to 7elinda. Colin also has a son na!ed -ogerA who was of school age. -oger)s !u!A LoaneA had been a for!er girlfriend of Colin)s but they were no longer ro!antically in2ol2ed. 7elinda did not ,now that -oger was Colin)s son. 0n an effort to sa2e for -oger)s futureA Colin opened a :oint ban, account in his and -oger)s na!es and !ade regular contributions to it. 7elinda did not ,now about the account. Colin died on the 1 Ianuary 2++3A fro! a recurring cancer that he fought for !any years. Dne !onth before he died he !ade a loan of V1++A+++ to =ilbertA a newsagent who ran a newsagency at %indang. The purpose of the loan was set out in a letter to =ilbert which read$ This su! is lent to you on the following conditions$ ;a> 0t is repayable on de!andA ;b> 0t will bear interest until repay!ent of 1+b per annu!A andA ;c> 0t is to be used only for the purposes of discharging your indebtedness to your two largest creditors. The su! of !oney was deposited in an account to which =ilbert was a signatory. The account was called the (=ilbert creditor a6c). Dn the sa!e day he loaned !oney to =ilbertA Colin spo,e to his friend 4le5 and ga2e hi! an en2elope. 'e told 4le5 that he wanted 4le5 to follow the instructions in the en2elope and 4le5 agreed. Colin said that 4le5 was not to open the en2elope until after Colin)s death. %hen Colin died his will granted 4le5 V1++A+++. 4le5 opened the en2elope and the letter inside said that the !oney was to be held on trust for -oger. The will left the rest of the estate to 7elinda. %hen 7elinda confronted 4le5 about the !oney 4le5 told her about Colin being -oger)s father. &he was e5tre!ely upset. &he beca!e enraged when she disco2ered the ban, account Colin had set up for -oger)s future. ;a> /oes 7elinda ha2e the right to inherit the entire 7an, account in Colin)s and -oger)s na!esC ;# !ar,s> This is a resulting trust question. -esulting trusts can be applied to ban, accounts$ -ussell 2 &cott. E2en though -oger !ade no contributions there is a presu!ption of ad2ance!ent which counteracts the presu!ption of resulting trust in Colin)s fa2our. 4s such -oger gets to ,eep the half in his na!e. 'e !ay also get to ,eep the other half if the account was held in a :oint tenancy ;due to the right of sur2i2ourship>A but there is no e2idence of what was intended so the statutory presu!ption in fa2our of tenancy in co!!on will probably apply. &ee -adan &tewart and Lynch ?21.*.1+B 11@ ;b> Can 7elinda challenge the disposition to 4le5C %ill -oger be able to beneficially en:oy the V1++A+++C ;6 !ar,s>

26.

This is a secret trust question. This question concerns a fully secret trustA as the testator has not indicated that the donee is not to hold the property beneficially. To be binding the trust !ust satisfy the three require!ents of intentionA co!!unication and acceptance$ Ledgerwood 2 Perpetual Trustee Co Ltd ;1 7> .1 <&%L- 3*2 at 3*3A per Koung I. =i2en the beha2iour of Colin and the letterA there is no contro2ersy that a trust was intended. "urther circu!stantial e2idence relating to Colin)s approach to the care of -oger could be led if necessary to pro2e intention on the balance of probabilities$ Eoges 2 1onaghan ;1 3.> . CL- 2*1. 4 proble! !ight arise in relation to co!!unicationA gi2en that Colin did not spea, with 4le5 regarding the trust until after the will was !ade. Dlder authority suggested that co!!unication needed to occur before or at the ti!e of the will for a half secret to be 2alid$ =uest 2 %ebb ?1 63@ E- .27. 'owe2erA in Ledgerwood 2 Perpetual Trustee Co Ltd ;1 7> .1 <&%L- 3*2A it was held that co!!unication could occur at any ti!e until death. 0t is of no rele2ance that the ter!s of the trust were not co!!unicated until after death$ -e 7oyes ;1##.> 26 Ch / 3*1. 4le5 clearly accepted the trust when being gi2en the en2elope. E5press acceptance of the obligations are not necessary$ Dttaway 2 <or!an ?1 72@ Ch 6 #N ?1 71@ * 4ll E- 1*23. 4 2alid secret trust has therefore been created which -oger get en:oy beneficially. ;c>4fter Colin)s death =ilbert was ban,rupted. The funds were still in the ban, account. %ill 7elindaA =ilbert)s two largest creditorsA or =ilbert)s trustee in ban,ruptcy get the !oneyC ;6 !ar,s> This is a Guistclose trust question. This question is ob2iously based on Guistclose and deals with the debtBtrust distinction. The loan has an initial purpose which fails hence the initial trust for the creditors fails. 4 secondary trust is created with the funds being held on trust for Colin. The ban, holds this !oney on trust and the funds should not be !ade a2ailable to the trustee in ban,ruptcy. 0nterestingly the courts ha2e not found that the pri!ary trust gi2es the right to the creditors. 0f the Guistclose trust is !eant to be an e5press trust with two li!bs then why don)t the creditors get itC. Lord 1illet)s solution is to call the trust a resulting trust but this has been re:ected by the <&% Court of 4ppeal in &al2o 2 <ew Tel Ltd

PA&T E>AM&
EQUITY E9AMINERAS COMMENTS WINTER 2010 =eneral Co!!ents D2erall the e5a! was well done. 1any students struggled with ti!e !anage!ent and were not able to co!plete the e5a! in ti!e. 4 nu!ber of students struggled with questions 1 and 2 in particular. Qu) !%'& 1

263

8i! and Lee ha2e been !arried for 23 years. Driginally born in ChinaA 8i! and Lee e!igrated to 4ustralia together in 1 +. 8i! holds a 7achelor of 7usiness fro! &hanghai Hni2ersity. 0n 4ustraliaA 8i! and Lee ha2e de2eloped a profitable te5tile businessA /raping /elicately Pty Ltd. 7oth 8i! and Lee are directors and shareholders in that co!pany. %hile 8i! spea,s and reads English reasonably co!petentlyA Lee spea,s and understands only a little English. =enerallyA Lee is !ore co!fortable spea,ing her nati2e languageA 1andarin. 0n 1 A 8i! and Lee purchased a property in 1os!an as :oint tenants for V2.33 !illion. The purchase was partially funded by a loan fro! Hpright 7an,ing Co of V2 !illionA secured by a !ortgage o2er the property. 0n 2++# Lee noticed so!e newspaper and !agaMine ad2ertise!ents for 1ortgages (-) Hs !ortgage bro,ers. Lee telephoned 1ortgages (-) Hs and spo,e with =loriaA the !anager of the co!pany who spo,e 1andarin. =loria said that /odgy7an,er Co was offering loans at a rate below the !ar,etA and reco!!ended that Lee and 8i! refinance their ho!e loan with /odgy7an,er Co. Dn =loria)s ad2iceA Lee and 8i! signed an application for! for a loan of V2 !illion fro! /odgy7an,er CoA to be secured by a !ortgage o2er the property. The application was sub!itted to /odgy7an,er Co by =loria on behalf Lee and 8i!. Lee could not read or understand the contracts as they were written in English. 8i! also did not read the contractsA e2en though he could do so. Dther than ad2ising on the interest rateA =loria did not e5plain the contracts to Lee and 8i!. 0n 4pril 2++ A /raping /elicately Pty Ltd)s business started to deteriorate. 4s a resultA in & epte!ber 2++ A Lee and 8i! failed to !a,e the required repay!ent on their !ortgage. /odgy7an,er Co is now see,ing possession of the 1os!an house.

2n%ue In,luence
/a0 Advise Lee and @im on an+ a, ion #e+ ma+ #ave a(ains Eod(+6an&er Co in e:'i +. 9n,l'de a dis,'ssion of remedies in +o'r ans5er. @im and Lee ma+ #ave an a, ion for 'nd'e infl'en,e a(ains Eod(+6an&er if #e+ ,an s#o5 #a #eir rela ions#i$ 5i # 2loria 5as a $res'med ,a e(or+D #a s#e 'sed #er $osi ion o over*ear #eir 5ill and #a Eod(+6an&er #ad no i,e of #er 'n,ons,iona*le ,ond', . 9f s',,essf'lD #e e:'i a*le remed+ 5ill *e re,ission. 2loria is #e mor (a(e *ro&er for a ,o'$le 5#o s$o&e li le en(lis#. T#is 5o'ld *e a ,lass 26 s$e,ial rela ions#i$: 6ar,la+sD if i is fo'nd 2loria 'sed #er $osi ion and #e s$e,ial disa*ili ies of #er ,lien s o $ro,'re #eir a,,e$ an,e of #e ne5 mor (a(e 9n Milinex I2"44JD a mor (a(e *ro&er a, in( for a ,lien 5#o #ad li le 'nders andin( of #eir ,on ra, 5as #eld o *e 'nd'e infl'en,e. Similarl+ in Amadio /41)-0D la,& of en(lis# 5as #eld o *e a fa, or s ren( #enin( #e ,ase for 'nd'e infl'en,e.

266

Bo5everD #ese disa*ili ies ma+ *e offse *+ #eir #avin( en ered in o a mor (a(e *eforeD #eir +ears of *'siness ex$erien,eD @im<s level of ed',a ion and #e fa, #a #e ne5 mor (a(e 5as no im$roviden D a leas o #e ex en #a #e loan 5as for a lo5er ra e. 9 is also 'n,lear #a 2loria &ne5 of #eir disadvan a(e. 9f s#e ,ond', ed #er dealin(s 5i # #e ,o'$le i ma+ no #ave *een a$$aren #a Lee #ad diffi,'l ies 5i # En(lis#: =o#nson v 6' ress. Ass'min( #a #ere 5as 'nd'e infl'en,e on 2loria<s $ar D ,o'ld #is *e *ro'(# *a,& o #e mor (a(ee7 On #e fa, sD 2loria is a, in( for @im and Lee so #ere 5ill no *e a(en <s no i,e *' #ere ma+ s ill *e ,ons r', ive no i,e de$endin( on #e 6an&<s level of &no5led(e of Lee<s s#or ,omin(s: 7an, of <ew &outh %ales 2 -ogers and #eir rela ions#i$ 5i # 2loria: Co'$er Boldin(s 3 + L d /in li:0 v 6ell I4111J /NP0? 3er$e 'al v Manden*er(# /2"4"0. 9f @im and Lee are s',,essf'lD #e 's'al rememd+ is re,ission of #e ,on ra, so Eod(+6an&er 5ill (ive '$ #e e:'i a*le lien over #e Mosman $ro$er + and @im and Lee 5ill #ave o re 'rn #e Q2 million. 2iven #eir finan,ial #ards#i$D i seems 'nli&el+ #a #is remed+ 5o'ld assis #em. PART 4 %hen /raping /elicately Pty Ltd)s business started to deteriorateA 8i! decided that the best course of action was to sell the business)s boo, debts to an in2estor. 8i! sold the co!pany)s boo, debts for V*++A+++ to 7uy E! Cheap Pty Ltd. The contract included the following ter!s$ The 4ssignor assigns to the 4ssignee the benefit of and all of the 4ssignor)s rights powers and re!edies ?in relation to the boo, debts@ includingA but without li!iting the generality of the foregoing$ ;a> 4ll !onies now or which !ight hereafter beco!e owing or payableN and ;b> 4ll obligations now or which !ight hereafter beco!e due for perfor!ance. Two wee,s after the contract was signedA 7uy E! Cheap Pty Ltd sent letters to each of /raping /elicately Pty Ltd)s debtors which read$ /ear &irA -e$ /ebt to /raping /elicately Pty Ltd ;4C< 12* .36 7# > %e note that you owe !oney to /raping /elicately Pty Ltd under a nu!ber of bills of sale. /raping /elicately Pty Ltd has entered into a /eed of 4ssign!ent with 7uy E! Cheap Pty Ltd dated 12 Iune 2++ A which included the debt due and owing by you to /raping /elicately Pty LtdA which was subsequently assigned to our client. Dur client requires the i!!ediate pay!ent of all a!ounts due and owing

267

whichA as at 22 Iune 2++ A a!ount to V*+2A.33 R 0f we do not recei2e the pay!ent of V*+2A.33 by . p! on 2+ Iuly 2++ we will co!!enceA without further noticeA legal proceedings against you to reco2er the outstanding debt of V*+2A.33A together with all continuing interest and costs. 0n each of these lettersA 7uy E! Cheap Pty Ltd o2erstated the a!ount owing to /raping /elicately Pty Ltd by up to V2++A+++.

Assi"n$ent o, a )hose in Action

0(1 A/+% ) D"#-%&* D)$%<#!)$. P! . L!/A /)(!'" '& :;' % )&!%!$)/ !' !;) ")-#.,)&! '= !;)%" /)(! . 010 ,#"B 1 Era$in( Eeli,a el+ #as assi(ned a ,#ose in a, ion. T#e mone+ is no an ex$e, an,+ in #a i is alread+ o5in( Ee$endin( on #e in er$re a ion of #e 5ordin(D #e+ #ave assi(ned ei #er f' 're or $resen $ro$er + and #ese 5ill *e examined in 'rn. T#e assi(nmen refers o Rri(# sD $o5ers and remediesS 5#i,#D al #o'(# #e+ ,on,ern f' 're $ro$er +D are #emselves $resen ri(# s. 9n #is #e+ are similar o #e 5ordin(: RM+ ri(# i le and in eres inS #a 5as fo'nd in S#e$#erd v FCT /416;0 in 5#i,# #e ri(# s 5ere fo'nd o *e $resen $ro$er +. 9f #e assi(ned $ro$er + is $resen $ro$er +D i ,an *e assi(ned 'nder S42 of #e Conve+an,in( A, if no i,e is $ro$erl+ (iven o #e de* or. T#e assi(nee (ivin( no i,e is allo5ed: Norman v FCT? as is no i,e af er #e assi(nmen : 6is#o$ v Finan,ial Tr's Limi ed I2"")J? as is no i,e *+ $os : S4!" of #e CA and Levera(ed E:'i ies Limi ed v 2oodrid(e /2"440. T#e ,on en io's $oin is #e overs a in( of #e amo'n d'e *' all #a is re:'ires is #a #e de* is iden ifia*le. On #e *asis of all #e o #er informa ion $rovided i 5o'ld seem #a #e de* ,o'ld *e iden ified. 9f no i,e is made o' D #e de* $asses o #e assi(nee: 6a eman v B'n I41".J. No i,e a,,om$an+in( a le er of demand is s'ffi,ien : Condor 4sset 1anage!ent 2 E5celsior Eastern. T#e de* orsD of ,o'rseD s#o'ld no $a+ more #an #e amo'n #e+ o5ed dra$in( deli,a el+. 9f #e assi(nmen is for a f' 're $ro$er +D #a isD for #e mone+ 5#en i is $aid ra #er #an #e ri(# o #e mone+D #e assi(nmen is valid *e,a'se i 5as (iven in ex,#an(e for ,onsidera ion: Bolro+d v Mars#all /4)620. All #a is re:'ired is an in en ion o assi(n 5#i,# ,an *e fo'nd in #e 5ordin( of #e ,on ra, : Norman v FCT. T#e assi(nmen of f' 're $ro$er + *es o5s an e:'i a*le ,laim and is no ,overed *+ S 42 of #e CA. A(ainD #e assi(nmen is for no more #an 5as o5ed o Era$in(Eeli,a el+. Qu) !%'& 2 =ears (n) %heels 8= is a =er!an co!pany specialising in gears for industrial !achines. 0n 1 #A =ears (n) %heels entered into a licence agree!ent with the

26#

0ndian co!pany 7ash Thu!p %allop Co Ltd. Hnder the agree!entA =ears (n) %heels agreed to pro2ide !anufacturing infor!ation and design specifications for its gears to 7ash Thu!p %allop. 7ash Thu!p %allop would ha2e e5clusi2e licence to !anufacture and sell the gears in 0ndia. The contract also allowed 7ash Thu!p %allop to sell the gears in other placesA li,e 4ustraliaA during the contract)s ter!. 0n returnA 7ash Thu!p %allop was to pay =ears (n) %heels H&V*++A+++ per year and royalties of .b on all articles !anufactured and sold or leased under the contract. The contract was for the period of se2en yearsA with the possibility of e5tension for three years by !utual consent. The contract was ter!inated in 2++2. 0n 2++.A 7ash Thu!p %allop tendered successfullyA through an 4ustralian subsidiaryA for a contract to pro2ide gears to a !ining 2enture in <orth Gueensland. The gears pro2ided to the !ining 2enture !ade use of the !anufacturing infor!ation and design specifications pro2ided by =ears (n) %heels. =ears (n) %heels were !ade aware of 7ash Thu!p %allop)s tender in Ianuary 2++3.

)on,i%ential In,or$ation
0#1 A/+% ) G)#" @&A W;))$ '& #&. #<!%'& !;). ,#. ;#+) #*#%& ! 4# ; T;u,- W#$$'- %& )>u%!.. I&<$u/) # /% <u %'& '= "),)/%) %& .'u" #& :)". T#e :'es ion ,on,erns ,onfiden ial informa ionD namel+ #e (ear desi(ns. T#e (ear desi(ns seem o *e rade se,re s *e,a'se #e+ 5ere of a de ailed na 're and oo& effor o $rod',e: Ro** v 2reen I4)1;J. Ma,#iner+ desi(ns #ave *een #eld o *e rade se,re s: Ansell v Allied I416!J andD a*sen ,on radi, or+ fa, sD i 5o'ld seem #a #e desi(ns 5ere rade se,re s in #a #eir val'e o #e o5ner lies in #e ina,,essi*ili + of #e informa ion o $ersons 5#ose 'se of #e rade se,re is no res ri, ed or ,on rolledD and #e ,om$e i ive advan a(e 5#i,# #a (ives. T#e li,en,in( a(reemen seems o f'lfill #e o*8e, ive es #a #e informa ion 5as im$ar ed in a 5a+ #a im$lied an o*li(a ion of ,onfiden iali +: Co,o v A N Clar&. T#e man'fa, 're of #e (ears for #e minin( ,om$an+ and $rovidin( of #e desi(n s$e,ifi,a ions o #e s'*sidiar+ ,om$rised a *rea,# of ,onfiden iali + in #a 6T% 'sed #e informa ion *e+ond #e erms of #eir li,en,in( a(reemen . 9m$ar in( #e informa ion for #e li,en,ee<s 'se for a $eriod of ime does no a' #orise 'nlimi ed 'se of #e informa ion. Al #o'(# no ne,essaril+ an elemen of #e *rea,#D #e de rimen s'ffered *+ #e li,en,or in li,en,e fees i o #er5ise 5o'ld #ave ,olle, ed from 6T% ma+ lend 5ei(# o #e *rea,#: 1oorgate 2oba&&o. n 3 (1456)D Smi # @line /No 20 /411"0. 9n defen,eD 6T% ma+ ar('e #e e:'i a*le defen,e of la,#es: A2 /U@0 v Beinemann /41))0. Similarl+D #eir silen,e ma+ indi,a e a,:'iesen,e 5i # #e *rea,#: %al ons S ores v Ma#er /41))0.

26

As o remediesD T#e Co'r fas#ions remedies a(ains an infrin(er 5#i,# are a$$ro$ria e o #e ,ir,'ms an,es a #and ,onsis en l+ 5i # e:'i a*le $rin,i$lesD and in,l'de in8'n, ive reliefD deliver+ '$ of #e s$e,ifi,a ionsD dama(esD an a,,o'n of $rofi s or #e im$osi ion of a ,ons r', ive r's . 041 Ioe is the sole director of =u!by Pty Ltd. The sole shareholder of =u!by Pty Ltd is 0reneA Ioe)s wifeA who has been allocated one share in the co!pany. =u!by Pty Ltd is the registered proprietor of land located in Cairns. The land is pri!arily used for a golf course ;S=olden 7irdies =olf CourseT>A with the rest of the land re!aining unde2eloped. 0n 2++*A Ioe !et with a group of his golfing buddies. The group agreed that it was scandalous that =u!by Pty Ltd was sitting on unde2eloped land. &o!ething needed to be doneP =i2en =u!by Pty Ltd did not ha2e the resources to de2elop the landA it was agreed that a new co!panyA 7uild 7ig Pty LtdA should be for!ed for the purpose of de2eloping the unde2eloped land. Ioe and his golfing buddies would each in2est V2++A+++ in the pro:ect and would each beco!e shareholders in 7uild 7ig Pty Ltd. 8een to ensure there was no i!proprietyA Ioe transferred V*++A+++ to =u!by Pty Ltd before transferring the unde2eloped land into 7uild 7ig Pty Ltd)s na!e. 1ar,et 2alue for the land was appro5i! ately V2 3A+++. Hsing the in2ested fundsA 7uild 7ig Pty Ltd de2eloped a !agnificent golf resort on the land. The property dra!atically increased in 2alue to V*A.++A+++. The last di2idend paid to each of the shareholders in 7uild 7ig Pty Ltd was V3+A+++. &oon after the golf resort was constructedA 0rene left IoeA tired of his golfing ways. 0n re2iewing her assets to prepare for the di2orceA 0rene realised that =u!by Pty Ltd no longer owned the ;for!erly> unde2eloped land.

(i%uciary Relationship
0(1 A/+% ) I")&) '& #&. #<!%'& ;) ,#. ;#+) #*#%& ! 7') %& )>u%!.. I&<$u/) # /% <u %'& '= "),)/%) %& .'u" #& :)". 0rene !ay ha2e an equitable action against Ioe if she can establish that Ioe owed her fiduciary duties as the director and breached those duties. 4s a director of the co!panyA Ioe has underta,en to act in the best interests of the co!pany and has a fidcuiary duty of Sundi2ided loyaltyT to the co!pany$ 7each Petroleu! <L 2 8ennedy ;1 >. 4 director of a co!pany is presu!ed to ha2e fiduciary duties to the co!pany$ Consul /e2elop!ents 2 /PC Estates ;1 73>. "urther!oreA Ioe as sole director of a co!pany with only one share holder who is also a fa!ily !e!berA Ioe also !ay ha2e a fiduciary duty directly to the shareholderA herselfA because there is a greater reliance and 2ulnerability than in !ost co!panies$ Cole!an 2 1yers ;1 77>.

27+

Hnder his dutyA Ioe !ust a2oid conflicts of interest$ 4berdeen -ailway 2 7lai,ie 7ros ;1#3.>. 7y participating in the for!ation of a new co!pany and selling the land to the new co!panyA it see!s that Ioe has placed hi!self in a position of conflict of interest. 4s a colloraryA by not ifor!ing 0reneA he has breached his duty to disclose the conflict$ "itMwood 2 Hnique =oal ;2++1>. 0t is no defence that by paying abo2e the !ar,et price for the landA Ioe can de!onstrate that he had no intent to defraud$ <octon 2 Lord 4shburton ?1 1 @. <or is it a defence that =u!by Co was unable to ha2e profited fro! the opportunity to de2elop the land$ %ar!an 0nt 2 /wyer ;1 3>. 0nfor!ed consent to the transaction is what is required to fulfill the duty$ 1urad 2 4lB&ara: ?2++3@. 4s noted abo2eA because of the structure of the co!pany and relationships of the principalsA 0rene !ay see, re!edies directly for a breach of fiduciary duty owed to her as shareholder. The !ost li,ely re!edies are a constructi2e trust on Ioe)s shares in 6i( 6'ild: LAC Minerals v 9n erna ional Corona Reso'r,es ;1 # >. 4lternati2elyA or e2en additionallyA 0rene !ay be awarded an account of profits reaped by Ioe as a result of his breach$ Mi,#ael %ilson and 3ar ners L d v Ni,#olls ?2++ @ Qu) !%'& 6 This question occurs in <&%. PeterA a successful industrialist and founder of =lory Corporation ;(=lory)>A died on the 1 Ianuary 2++.. 'is will contained two trusts with a residual beneficiary. The first trust was for V3 !illion to be held for (the education of e!ployees of =loryA their children and dependants.) The second trust was worded as follows$ 0 gi2e !y property at Da,hill on trust to !y sister "rancesca for !y children for lifeA and then to any of !y grandchildren that !arryA on the condition that the grandchildren not !arry a &cot.) The property at Da,hill was a large cattle station in western <&% worth V1++ !illion. 4t the ti!e of Peter)s deathA Peter)s children were Lawrence ;aged 3+>A 0ain ;aged *2> and &i!on ;aged 2#>. 4t the ti!e of his death Peter had one grandchildA LyMaA who was un!arried but had been dating Ca!eron fro! &cotland. The residual beneficiary in the will was %endyA Peter)s estranged wife. %endy sought to challenge the 2alidity of the =lory trust. 4t the sa!e ti!e "rancescaA who had possession of the certificate of titleA saw an opportunity to beco!e 2ery richA 2ery fast. 7efore the sons could collapse the trust and get possession of the title deeds she entered into a contract for sale of the property with /a2id. 0t was co!!on ,nowledge that the property was held by

271

Peter)s fa!ily in a trust for the sons. /a2id realiMed that the circu!stances were suspicious but he decided that the best thing to do was basic title searching and settle the transaction as soon as possible. /a2id beca!e the registered owner on 1 Iune 2++. and "rancesca then disappeared. 4nswer each of the following

)haritable Trust 4ali%ity

A1 I !;) G$'". !"u ! # +#$%/ <;#"%!#($) !"u !K 02 ,#"B 1 Ed', a ion is a valid fo'nda ion for a ,#ari a*le r's : London Bos$i al Medi,al Colle(e v 9RC /41!60. Bo5everD #is r's seems o fail #e Com$ on Tes of $'*li, *enefi . T#e Com$ on Tes re8e, s r's s ,#ari a*le r's s 5#ose *enefi,iaries are defined *+ referen,e o a $'rel+ $ersonal rela ions#i$. T#is Tr's *enefi s em$lo+ees and #eir familiesD indi,a in( a $ersonal nex's *e 5een #e donor and #e *enefi,iaries #a 5o'ld $' #e r's o' side #e fo'r ,a e(ories of ,#ari a*le r's se o' *+ Lord M,Na(# en in 9RC v 3emsel des$i e #e re,o(nised aims of #e r's . T#e fa, s are similar o O$$en#eim v To*a,,o Se,'ri ies Tr's /41;40 in 5#i,# an ed',a ional ,#ari a*le r's for em$lo+ees and exLem$lo+ees 5as #eld o *e invalid *e,a'se of #e $ersonal ,onne, ion.

Private Express Trust

0(1 I !;) G$'". !"u ! # +#$%/ -"%+#!) )C-") !"u !K 02 ,#"B 1

T#e 2lor+ Tr's is a dis,re ionar+ r's *e,a'se #e *enefi,iaries and #eir individ'al en i ilemen s o #e r's $ro$er + are no fixed: T#e 2lor+ Tr's 5ill *e a valid $riva e ex$ress r's if i mee s #e #ree ,er ain ies: @ni(# v @ni(# /4)))0. Ee erminin( #e s'*8e, and in en ion seem ,lear from #e fa, s *' de erminin( #e o*8e, of #e r's ma+ $resen diffi,'l ies. T#e em$lo+ees and #eir ,#ildren ,an *e readil+ as,er ainedD #e onl+ diffi,'l + ma+ *e in as,er ainin( #e de$endan s as #ere is no ,on ra, 'al or (enealo(i,al eviden,e of #eir s a 's. T#e 5ordin( of #e r's is ver+ similar o #e r's examined in Re 6aden<s Eeed Tr's s /No 40 /41!"0. 9n #a ,aseD #e 5ord Rrela ionS 5as 'sed. RRela ionS $resen s #e same diffi,'l ies as Rde$endan sSD i is diffi,'l o *e ,er ain of 5#o is in,l'ded as a *enefi,iar+ of #e r's as #ere is no defin ive meanin( of ei #er 5ord. T#e Bo'se of LordsD #o5everD #eld -:2 #a #e 5ord Rrela ionsS 5as s'ffi,ien l+ ,er ain o sa isf+ #eir ne5 Ris or is no S es soD *+ analo(+D i 5o'ld seem #a #e 5ord Rde$enden sS is also s'ffi,ien l+ ,er ain. So #e r's s'rvives

Auto$atic Resultin" Trust

0<1 P") u,%&* !;#! !;) !"u ! =#%$ :;#! !"u ! ,)<;#&% , <'u$/ () u )/ !' ("%&* !;) =u&/ (#<B !' !;) ) !#!) #&/ %&!' W)&/.A -' ) %'&K 02 ,#"B 1

272

%#en r's s fail #e r's $ro$er + is re 'rned o #e se lor *+ means of a res'l in( r's : $er Me(arr+ = in Re Mandervell<s Tr's /No 20. T#e r's ma+ *e deemed Ra' oma i,S *' #ere is some ,on rovers+ a*o' #is erm: $er Lord 6ro5ne %il&inson in %es de' s,#e Landes*an& 2iroGen rale v 9slin( on 6oro'(# Co'n,il /41160 and On( in Tr's La5 in A's ralia $$s --) and -!1. Bo5everD des$i e #is 'n,er ain +D #e $ro$er + 5ill rever o #e es a e #ro'(# a res'l in( r's and #e $re$onderan,e of o$inion seems o *e #a i 5ill *e an a' oma i, res'l in( r's .

Rule on Perpetuities an% public policy

0/1 D% <u !;) :'"/%&* '= !;) )<'&/ /% -' %!%'& #&/ :;)!;)" %! '==)&/ !;) "u$) #*#%& ! -)"-)!u%!%) #&/D'" -u($%< -'$%<. 02 ,#"B 1 T#e modern r'le a(ains $er$e ' i ies s a es #a #a #e in eres m's ves 5i #in a life in *ein( $l's 24 +ears from #e da e #a #e ins r'men *e,omes effe, ive. T#e ves in( 5ill no *e allo5ed even if i is remo el+ $ossi*le #a #e ,ondi ions of #e ,on in(en remainder 5ill no *e sa isfied 5i #in #is imeD as vie5ed from 5#en #e r's is (ran ed: Caldell v 3almer /4)--0. T#e r'le a(ains $er$e ' ies a$$lies o $riva e r's s: Na ional To'rism Eevelo$men A' #ori + v Co'(#lan I2""1J. 9n #is ,aseD #e life in *ein( is #e life of #e ,#ildren and #e ,ondi ion is #a #e (rand,#ildren marr+. 9 is ,er ainl+ $ossi*le #a #e (rand,#ildren 5ill no marr+ 5i #in 24 +ears of #e dea # of las s'rvivin( ,#ild so #e r's fails #e r'le a(ains $er$e 'i ies *e,a'se #e $ro$er + fails o ves 5i #in #e $er$e 'i ies $eriod. T#e r's ma+D #o5everD *e saved *+ S! of #e 3er$e 'i ies A, 41). 5#i,# de,rees #a #e $ro$er + 5ill ves af er )" +ears even if #e ,ondi ions of #e r's #ave no +e *een sa isfied. 9n erms of #e $'*li, in eres D #e iss'e is #e res rain on #e marria(e o a S,o . Al #o'(# ,om$le e res rain on marria(e #as *een #eld o *e a(ains $'*li, $oli,+: Re =o#nson<s %ill Tr's s /416!0D $ar ial res rain on marria(e #as *een '$#eld: Seidler v S,#al#offer /41)20 #o'(# i s#o'ld *e no ed #a $'*li, $oli,+ ,#an(es 5i # #e imes and #e same res'l ma+ no o,,'r oda+.

In%e,easibility an% !no:in" receipt o, trust property

0)1 C#& O#B;%$$ () ")<'+)")/ (. !;) '& G #&/ %= 'G ;':K 02 ,#"B 1 Oa&#ill ,an *e re,overed *+ #e sons if #e+ ,an es a*lis# &no5in( re,ei$ and over,ome Eavid<s indefeasi*ili + #ro'(# re(is ra ion. T#e sale of #e $ro$er + is a dis$osal of #e r's <s $ro$er + in *rea,# of #e fid',iar+ d' +? Oa&#ill is ra,ea*le as asse s of #e sons? and Eavid seemed o #ave &no5led(e #a #is re,ei$ of Oa&#ill 5as ra,e*ale o a *rea,# of #e fid',iar+ d' + *e,a'se i 5as $'*li, &no5led(e #a #e $ro$er + 5as #eld on r's and #a 5o'ld #aveD a leas D $' #im on en:'ir+: 6aden v So,ie e 2enerale I4112J. So #e ransa, ion sa isfies #e re:'iremen s of Cons'l Eevelo$men 3 + L d v E.3.C. Es a es 3 + L d /41!;0D follo5in( 6arnes v Add+ /4)!.0 and ,an *e ,a e(orised as &no5in( re,ei$ of r's $ro$er +. 27*

Bo5everD #e ,las# *e 5een &no5in( re,ei$ of r's and orrens indefeasi*ili + 5as examined re,en l+ in Fara# Cons r', ions v Sa+LEee I2""!J. 9n #a ,ase i 5as #eld #a &no5in( re,ei$ ,an onl+ affe, re(is ered indefeasi*ili + in ,ases of fra'dD 5#i,# is a*sen #ere and #a o ma&e an order o dives 5o'ld *e an 'n$ermissa*le ex ension of #e rea,# of e:'i +. Qu) !%'& 4 This question occurs in <&%. Lu,e and -obert were brothers. They purchased a house together with each pro2iding 3+b of the purchase price but Lu,e did not want the house to be in his na!e because he wanted to later access a go2ern!ent sche!e for e5Bser2ice!en where they could borrow !oney fro! the go2ern!ent for their first house at a cheap rate. Lu,e had fought in the "irst =ulf %ar. The house was registered in -obert)s na!e. Lu,e also wrote a will which contained the following clauses$ 0 gi2e V3++A+++ to !y brother -obertA on conditions that he will be !ade aware of. 0 gi2e the residue of !y estate to !y sister Lisa who !ayA at her absolute discretionA gi2e such residue to anyone she thin,s fitA barring herselfA and -obert. 0f Lisa fails to dispose of the residue in her lifeti!eA it shall beco!e the property of !y nephewsA EthanA Lachlan and 7ryce. Three days after writing the will Lu,e ga2e a letter to -obert and as,ed hi! to follow the instructions in the letterA but only after he died. -obert agreed with a win, and wry s!ile. Lu,e died three !onths later in a !otorcycle accident. -obert opened the letter and found that it instructed hi! to trac, down his illegiti!ate sonA TerryA who was born in &audi 4rabia during Lu,e)s ser2iceA and gi2e the V3++A+++ gift to hi!. 4 wee, after Lu,e)s death a wo!an called <ora ca!e to -obert)s ho!e. <ora clai!ed to ha2e been !arried to Lu,e for 1+ years. &he infor!ed -obert that she and Lu,e bought a house together in 1 #. Lu,e pro2ided 73b to the costs of acquisition and she pro2ided the re!aining 23 b. The house was registered in the Torrens syste! and they were registered as :oint tenants. -obert later disco2ered that the house was worth o2er V3!.

Resultin" Trust ?oint O:ners Real Property

0#1 D') LuB)A ) !#!) ;#+) #& )>u%!#($) <$#%, '& !;) ;'u ) ")*% !)")/ %& R'()"!A &#,)K 06 ,#"B 1 L'&e<s es a e 5ill #ave an e:'i a*le ,laim on #e #o'se ei #er *+ o$era ion of a $res'med $'r,#ase mone+ res'l in( r's /Na$ier v 3'*li, Tr's ee /%A00 orD 'ni:'el+D *+ 5a+ of a e:'i a*le ,#ar(e /$er 6r+son = in Li le v Li le /41)10 42 Fam

27.

LR )""0 over #e $ro$er + o #e val'e of #is ,on ri*' ionsD #o'(# #e la er seems no o *e a $re,eden #a #as *een follo5ed. A res'l in( r's 5ill *e $res'med in si 'a ions 5#ere A #as $aid C in 5#ole or in $ar for a ,onve+an,e o 6: T'rn*'ll v 2or(ievs&i /2"""0. 2$e e0"itable pres"mptions of
res"lting tr"st. $o%ever. may be vie%ed as t$e bats of t$e la% 7flitting in t$e t%ilig$t. b"t disappearing in t$e s"ns$ine of a&t"al fa&ts. T#e $res'm$ ion ,an *e re*' ed *+ eviden,e of ,on rar+

in en ion on L'&e<s $ar D for exam$leD eviden,e of #e in en ion o ma&e a (if of #e $ro$er + 5#i,# a$$ears o *e a*sen . 9 ma+ also *e re*' ed *+ eviden,e of ,onsidera ion on 6<s $ar in ex,#an(e for #e $ro$er + 5#i,#D a(ainD is a*sen in #is ,ase. T#e $res'm$ ion ,an also *e re*' ed *+ #e $res'm$ ion of advan,emen . T#e $res'm$ ion of advan,emen #as *een fo'nd in ,ases of si*lin(s: M,2re(or v Ni,#ol I2""-JD *' #a ,ase res ed on ex rinsi, eviden,e #a is no $resen #ere. Finall+D e:'i + re:'ires #a a$$li,an s ,ome 5i # ,lean #ands. 9n #is ,aseD L'&e made #e ransfer 5#i,# ,rea ed #e $o en ial res'l in( r's in an a em$ o a,#ieve an ille(al $'r$ose. A similar ,ase 5as examined in Tinsle+ v Milli(an /411.0 5#ere #ree la5 lords o 5o #eld #a #e res'l in( r's s ands so lon( as #e ille(al *enefi s 5ere $'r(ed from #e r's . T#is de,ision 5as follo5ed in A's ralia in Nelson v Nelson /411;0. Sin,e #e fa, s are silen on L'&e ,om$le in( #is ille(al $'r$oseD no *enefi need *e $'r(ed and #e res'l in( r's s ands. L'&e<s es a e #as an e:'i a*le ,laim on #e #o'se.

/isposition o, po:er o, appoint$ent

0(1 W;#! B%&/ '= /% -' %!%'& % !;) /% -' %!%'& !' L% # #&/ % %! )==)<!%+)K 06 ,#"B 1 The disposition to Lisa is a power of appoint!ent to dispose of the estate at her absolute discretion with the pro2isions that she not dispose of it in fa2our of herself or her brother. 7ecause she is not obiged to e5ercise the powerA it is a bare power. 7ecause the power e5cludes peopleA it is an inter!ediate power. 7ecause the gift has a re2ersion to the nephewsA the discretionary power of appoint!ent is allowed$ 'oran 2 Ia!es ?1 #2@A &uccession 4ct 2++6 &.. so it is effecti2e.

&ecret Trust
0<1 I !;) *%=! !' T)"". )==)<!%+)K 07 ,#"B 1 T#e (if o Terr+ is *+ #e devi,e of a #alf se,re r's . T#e r's is #alf se,re *e,a'se L'&e indi,a ed #a Ro*er 5o'ld no *e #e f'll *enefi,ial o5ner in #is 5ill *' #e did no indi,a e 5#o 5o'ld *e #e 'l ima e *enefi,iar+ of #e $ro$er +: 6la,&5ell v 6la,&5ell I4121J.

273

For #e #alf se,re r's o *e effe, ive i m's sa isf+ #e #ree re:'iremen s in Led(er5ood v 3er$e 'al Tr's ee Co L d /411!0: #e es a or m's in end #e le(a ee o *e s'*8e, o a r's D #is is fo'nd in *o # #e 5ill and #e le er? #e es a or m's ,omm'ni,a e #e in en ion o #e le(a eeD 5#i,# L'&e did 5#en #e (ave Ro*er #e le er? and #e le(a ee m's a,,e$ #e o*li(a ion *efore #e es a or<s dea #. T#e final re:'iremen does no seem o *e sa isfied. %#ile Ro*er a,,e$ ed #e le erD L'&e did no indi,a e a #e ime #a #e 5as ,rea in( a #alfLse,re r's and #e le er did no $rovide #e o$$or 'ni + for Ro*er o a,,e$ #e res$onsi*ili + 'n il af er L'&e<s dea #. 9n #is 5a+D #e fa, s are ver+ similar o Re @een /41-!0 in 5#i,# #e En(lis# Co'r of A$$eal fo'nd #a #e r's failed *e,a'se of #e fail're of ,omm'ni,a ion and a,,e$ an,e *efore #e 5ill 5as exe,' ed. On #e o #er #andD in Led(er5ood v 3er$e 'al Tr's ee /411!0D Yo'n( = fel #a a #alfLse,re r's ,o'ld arise even if ,omm'ni,a ion o,,'rred af er #e 5ill 5as exe,' ed. T#e si 'a ion is $er#a$s ,larified *+ On(<s ,on,e$ ion of a #alf se,re r's in Tr's La5 in A's ralia 2"". as (ivin( rise o a $ro$rie ar+ es o$$el ra #er #an a fid',iar+ d' +. L'&e m's #ave *een ind',ed o ma&e #e (if on #e 'nders andin( #a i 5o'ld *e #eld on r's for Terr+ *' D 5i #o' Ro*er <s a,,e$ an,e of #e d' +D #ere ,an *e no ind',emen .

?oint Tenancy presu$ption3 $arrie% couples3 A%vance$ent

0/1 D') LuB)A ) !#!) ;#+) # "%*;! !' <$#%, # ;#") %& !;) ;'u ) ")*% !)")/ %& N'"#A &#,)K 06 ,#"B 1 9f 8oin enan,+ is es a*lis#edD L'&e<s es a e 5ill no #ave a ri(# o ,laim a s#are in #e #o'se *e,a'se Nora 5ill (e f'll *enefi,ial i le 'nder #e do, rine of s'rvivors#i$: Bi,&man v 3ea,e+. T#ere seems o *e no :'es ion of severan,e of #e 8oin enan,+ in #e fa, sD nor is an+ r'$ 're of #e fo'r 'ni ies. Al #o'(# #ere is (enerall+ a $res'm$ ion a(ains 8oin enan,iesD #is $res'm$ ion ,an *e re*' ed *+ re(is ra ion as 8oin enan s: Conve+an,in( A, 4141 S26/40. Addi ionall+D #ere is a $res'm$ ion of 8oin enan,+ in #e ,ase of married ,o'$les des$i e 'ne:'al ,on ri*' ions o #e $'r,#ase $ri,e: 3ro$er + of C'mmins /a *an&r'$ 0 v C'mmins /2""60. Finall+D 'nli&e in #e ,ase of si*lin(s dis,'ssed a*oveD in #e ,ase of married ,o'$lesD #ere is a $res'm$ ion of advan,emen . L'&e<s 'ne:'al ,on ri*' ion 5ill *e $res'med o *e a (if o #is 5ife. T#is 5o'ld override #e res'l in( r's #a mi(# o #er5ise ,onver #e 8oin enan,+ o a enan,+ in ,ommon. E</ D" P4PEGuestion 1 Iane has decided that she needs to beco!e !ore entrepreneurial in !anaging her finances. <ot ,nowing where to startA Iane attends a se!inar called S1a,e 1oney in

276

Property without TryingT conducted by the charis!atic <ed. 4fter the se!inarA Iane starts tal,ing with <edA and they decide to go into business together with Iane)s friend 4llan. To pursue this 2entureA Iane establishes a co!pany called 1a,in) 1oney Pty LtdA of which Iane and 4llan are directors. <edA Iane and 4llan beco!e shareholders in 1a,in) 1oney Pty Ltd. Iane obtains a loan for V.++A+++A secured by a guarantee fro! Iane)s husband Dllie o2er the fa!ily ho!eA which is deposited into an account in the na!e of the directors of 1a,in) 1oney Pty Ltd. The business plan of 1a,in) 1oney Pty Ltd is to purchase an option o2er a propertyA with the ai! of selling that option at a profit before it is due to lapse or be e5ercised. 4n option was obtained o2er =reenacre for V1++A which entitled 1a,in) 1oney Pty Ltd to purchase the land for V2.* !illion. 4 few !onths laterA <ed disappearedA and Iane and 4llan decided they should enter into a for!al :oint 2enture agree!ent togetherA gi2en their dubious e5periences with <ed. The agree!ent rele2antly pro2ided$ 1. The parties shall each share in the profit !ade by 1a,in) 1oney Pty Ltd ;the Co!pany>. 2. The parties intend to acquire a property or properties ;the Property> and engage in a property de2elop!ent enterprise using the Co!pany as the 2ehicle for the conduct of that enterprise ;the Eenture>. *. Iane and 4llan ;the /irectors> shall !anage and ad!inister the business of the Co!pany and of the EentureA including financial !anage!ent. .. The Eenture shall continue until the property acquired by the Co!pany for the purposes of the Eenture is sold until or before its settle!ent in whate2er for! or either 2enturer gi2e one wee,Qs notice to the other 2enturer or the !oney is finished to run the business. 3. 4ll decisions of the Eenture would be !ade by the /irectors togetherA including the e5penses etc. 6. The Eenturers shall at all ti!es act in the ut!ost good faith in their dealings with each other and will !eet their respecti2e obligations to the Co!panyA the Eenture and each other with due diligence. Iane and 4llan continued to !anage the business of 1a,in) 1oney Pty Ltd. Later that yearA 1a,in) 1oney Pty Ltd started running out of fundsA and Iane was unable to obtain another loan. Iane started losing confidence in 4llanA as he had been unable to find a buyer for the option o2er =reenacre. Iane decided to contact a friend fro! uni2ersityA TaylorA to see if he ,new of anyone who would be interested in buying the option. Taylor suggested that he buy the

277

option hi!self for V2++A+++. Iane belie2ed this was the co!pany)s best optionA gi2en it was running out of funds. Iane sent a bundle of blan, assign!ent docu!ents to 4llanA on the pretence of ensuring the co!pany did not lose the option. Iane did not tell 4llan that she was intending to assign the option to Taylor. 4llan signed the docu!ents and Iane e5ecuted the assign!ent of the option to Taylor. Iane deposited the !oney fro! the sale into her pri2ate ban, account. 1a,in) 1oney Pty Ltd has now been placed into ad!inistration.

(i%uciary Obli"ations in a ?oint 4enture

0#1A/+% ) A$$#& '& #&. #<!%'& ;) ,#. ;#+) #*#%& ! 7#&) %& )>u%!.. I&<$u/) # /% <u %'& '= "),)/%) %& .'u" #& :)". 010 ,#"B 1 4llan will ha2e an action against Iane if a fiduciary relationship and a breach of that relationship can be established. This can be established either on the basis that Iane was a director of 1a,in 1oney or as a participant in a :oint 2enture. Iane !ay owe a fiduciary duty as a director of 1a,in 1oney. &he will owe the duty to the co!pany

The ,ey issue in this question relates to whether Iane owed fiduciary obligations to 4llanA either as part of a :oint 2enture or through her role as a /irector of 1a,in) 1oney Pty Ltd. =ood answers e5a!ined Hnited /o!inions Corporation Ltd 2 7rian Pty Ltd ;1 #3> 137 CL- 1 to deter!ine if a :oint 2enture was present andA if it wasA whether fiduciary obligations were owed. The agree!ent between the parties should ha2e infor!ed this discussion. &tudents should ha2e considered whether the duty was breached by Iane andA if soA whether any defence was a2ailable. "inallyA students should ha2e considered what re!edy would be appropriateA gi2ing particular attention to the i!pact of third parties on the court)s li,ely decision. This question was generally well answered. 'owe2erA so!e students failed to adequately e5a!ine whether a fiduciary duty was owed on the facts. 0(1 A/+% ) 7#&)A ;u (#&/ O$$%) '& :;)!;)" ;) <#& #+'%/ !;) *u#"#&!)) '+)" !;) =#,%$. ;',) %& )>u%!.. 010 ,#"B 1 T#e ('aran ee ma+ *e res,inded if Ollie ,an demons ra e 'nd'e infl'en,e 5as $resen in #e ransa, ion and #a 'nd'e infl'en,e ,an *e s#ee ed *a,& o #e

27#

*an&. A, 'al 'nd'e infl'en,e is diffi,'l o ma&e o' d'e o a $a',i + of fa, s. Bo5everD Ollie ma+ *e a*le o invo&e #e Yer&e+ v =ones s$e,ial %ive<s e:'i +. Yer&e+ v =ones is a s$e,ial e:'i + *indin( lenders in ,ases 5#ere: a0 #e ('aran or did no 'nders and #e $'r$or and effe, of #e ransa, ion? *0 T#e ('aran or o* ained no (ain from #e ransa, ion? ,0 #e lender is a&en o #ave 'nders ood #a #e ('aran or is lia*le of #ave *een misled *+ #e *orro5er and? d0 #e lender did no #in( o ex$lain #e ransa, ion. 9n #is ,aseD #e fa, s don< men ion a0D seem o ass'me *0D ,0 and d0. T#e $ro*lem for Ollie is #a Yer&e+ v =ones $ro e, s 5ives from #eir #'s*ands. 3ain in( 5ives as in,a$a*le of ma&in( 'n*iased de,isionsD inde$enden of #eir #'s*ands $'rel+ on #e *asis of *ein( 5ives #as *een ,ri i,ised and #ere #ave *een moves o ex$and #e ,a e(or+. 9n 2ar,ia v NA6 /411)0D #e ma8ori + of #e BC #eld #e s$e,ial e:'i + ,o'ld ex end o ,o'ld ex end o lon( erm and $'*li,l+ de,lared rela ions#i$s s#or of marria(e of #e same or o$$osi e sexD 5#i,#D al #o'(# i does no in,l'de #'s*andsD seems a leas o ,on em$la e #a men ma+ *e misled. Similarl+D 9n 3ermanen Mor (a(es v Manden*er(# /2"4"0D #e ,a e(or+ 5as ex ended o elderl+ $aren s and #eir ,#ildren and 9n A(ri$a+ 3 + Limi ed v 6+rne I2"44J M,M'rdo 3 oo& #e *roades vie5 #a #e Yer&e+ v =ones R$rin,i$les s#o'ld a$$l+ e:'all+ o all v'lnera*le $ar ies in $ersonal rela ions#i$s.S So Ollie ma+ *e a*le o #ave #e ('aran ee se aside if #e ,an ,onvin,e #e ,o'r #a #e #as a s$e,ial e:'i + *e,a'se #e did no 'nders and #e ('aran eeD 5as misled *+ #is 5ifeD #e *an& 5as a5are of #e si 'a ion and did no #in( o re, if+ i . Qu) !%'& 2 Tully is an elderly !e!ber of the racing fraternity. 0n his ad2anced yearsA Tully has decided to in2est in a Sgood horseT 9 while he has owned horses beforeA they ha2e ne2er been winners. This finalA good horseA is intended to change all that. Tully contacted 7obA an old friendA and as,ed hi! to help hi! acquire a quality racehorse for up to V13+A+++. Tully offered to pay 7ob for his ti!e. 4 few !onths laterA 7ob found a suitable horse and Tully ga2e instructions for 7ob to buy it on his behalf. %hile !a,ing these arrange!entsA Tully said to 7ob$ (0 a! not going to pay you for getting !e the horse. 0nsteadA why don)t you beco!e halfB owner of the horse. 0 will pay for all the billsA and we can share any priMe !oney. Kou can continue to do any paperwor, and !anage the accounts and tal, to the trainer.) 7ob agreed to ta,e a halfBshare in the horse. Tully recei2ed the registration papers for the horse a few wee,s later. 'owe2erA he decided that 7ob)s share of the horse would best be regulated by a gentle!an)s agree!entA and did not i!!ediately see, to register their respecti2e shares. 27

&i5 !onths laterA Tully died of a heart attac,. The registration papers were found half co!plete on Tully)s des,. The S4pplication to -egister 'orseT was ne2er lodged with the rele2ant go2ern!ent body. The horse has continued to raceA with success. The priMe !oney fro! the horse currently stands at V**#A. *.

Assi"n$ents in Equity an% consi%eration

;a> 4d2ise Tully)s estate on whether the assign!ent of the halfBinterest in the horse to 7ob was effecti2e in equity. ;1+ !ar,s>

The ,ey issue in this case is whether the assign!ent to 7ob was an i!perfect gift. The rele2ant authority is 1ilroy 2 LordA Corrin 2 Patton and Costin 2 Costin. 0t appears clear that Tully intended to !a,e the gift to 7ob. 'owe2erA on the factsA it appears that Tully has not done e2erything necessary to be done by hi! to !a,e the transfer effecti2eA which would include e5ecution of the registration docu!ents. 4s a resultA it is unli,ely that the assign!ent was effecti2e. =ood answers considered whether 7ob)s wor, to find the horse constituted 2aluable consideration or whether it was a gift. &o!e students struggled to identify the nature of the property being assigned and considered whether the property was a chose in action or future property. Dn the factsA the property being assigned was a half interest in a horse ;i.e. a chose in possession and present property>.

Estoppel
;b> 4ssu!ing the assign!ent is ineffecti2eA ad2ise 7ob on any action he !ay ha2e against Tully)s estate in equity. 0nclude a discussion of re!edies in your answer. ;1+ !ar,s> 7ob is !ost li,ely to be successful on the basis of an action in estoppel. 7ob could argue that he relied on Tully)s representation to his detri!ent by procuring the horse and continuing to assist with the paperwor, and finances. =ood answers considered whether 7ob)s wor, in finding the horse was actually done in reliance on this representationA particularly gi2en the representation was only !ade after the horse was found. &tudents should ha2e addressed whether 7ob)s reliance on Tully)s representation was reasonable in the circu!stances. &tudents also should ha2e addressed what re!edy would be appropriate in the circu!stances and whether the court should see, to a2oid the detri!ent or !a,e good the e5pectation in deter!ining the

2#+

re!edy. =ood answers considered the case of =iu!elli 2 =iu!elli and its li,ely i!plications for the court)s decision in this case. This question was generally well answered. Guestion * This question occurs in <&%. Ca!eron ran and owned a boat building business in 8incu!ber called 8incu!ber 7oats. 'e was a sole trader !eaning that the business was not a separate entity to hi!. Ca!eron)s business was struggling and he owed large su!s to its !a:or creditorA -adan &teel Ltd. Peter was an industrialist who had was in the business of !oney short ter! business loans. 'e lent a large su! to Ca!eron on the condition that Ca!eron would use the funds to pay out the debts to -adan &teel. The agree!ent required the su!s to be paid into a special account at the Eastpac 7an, called (8incu!ber 7oats Creditor 4ccount). The agree!ent stated that if the !oney was not paid to -adan &teel and Ca!eron beca!e insol2entA the !oney should be returned to Peter. Ca!eron also told Peter of an in2est!ent opportunity that they could share in a :oint 2enture. 4 large bloc, of land was for sale at 13 Coast &tA 7ens2ille which Ca!eron belie2ed could be de2eloped into a resort. The title was Torrens title. They agreed to each pro2ide equal funds and share the profits equally. Ca!eron and Peter each pro2ided 3+b of the funds but the land was put into Ca!eron)s na!e onlyA as Peter had pre2iously had poor relationships with the Council and it was thought that his na!e on the title !ight ad2ersely affect the chance for de2elop!ent appro2al. Ca!eron also owned a house with his wife <erida at 42oca in the Torrens syste!. %hen they bought the house Ca!eron pro2ided 2+b and <erida pro2ided #+b of the purchase price. <e2ertheless they were registered as :oint tenants. The boat business was going reasonably well so Ca!eron held off using the funds in the creditor account. The de2elop!ent of the land also was proceeding well until the de2elop!ent application was refused on the grounds that the land was not big enough for the de2elop!ent proposed and that !ore land was required. The results of the application were published in the local newspaper. &eeing an opportunity for !a,ing further !oneyA Ca!eron spo,e with the owner of the ad:oining land at 16 Coast &tA 7ens2ille and negotiated a price to purchase it. The land was quic,ly purchased but registered in <erida)s na!e in the Torrens register. Life went on and nothing !uch happened for 2 years but then things too, a turn for the worse. Ca!eron was !ade ban,rupt. The trustee in ban,ruptcy clai!ed the ban, accountA 3+b of the house at 42oca and all of the land at 13 Coast &t

2#1

8incu!ber. %hen it was disco2ered that Ca!eron had pro2ided the purchase price for 16 Coast &tA the trustee !ade a clai! for its ownership as well. Peter also disco2ered that <erida was the registered owner of 16 Coast &t and was incensed at Ca!eron)s betrayal. &he was de!anding an e5orbitant price for the land but Peter could not progress the de2elop!ent of his land without buying it. 'e felt that Ca!eron had bro,en their :oint 2enture agree!ent by buying the ad:oining land and putting it into <erida)s na!e.

1uitclose Trust
;a> %ill <eridaA Peter or -adan &teel get the funds in the ban, accountC ;. !ar,s> This is a Guistclose trust question$ 7arclays 7an, Ltd 2 Guistclose 0n2est!ents Ltd ?1 7+@ 4C 367. These trusts are based on the !utual intention of the parties. The !utual intention of the parties can be discerned fro! the language e!ployed by the partiesA the nature of the transaction and the rele2ant circu!stances attending the relationship between the! $ -e 4ustralian EliMabethan Theatre TrustN Lord 2 Co!!onwealth 7an, of 4ustralia ;1 1> *+ "C- . 1 at 3+29*N 1+2 4L- 6#1 at 6 *A per =u!!ow I. 4 significant factor to consider is the way that the !onies are held in account. 0f they are ban,ed into a general account and !i5ed with other !onies it will be harder to infer a !utual intention that the !onies be held on trust$ &al2o 2 <ew Tel Ltd ?2++3@ <&%C4 2#1 at ?7 @N =liderol 0nternational Pty Ltd 2 'all ;2++1> #+ &4&- 3.1. Dn that basis the !oney is held on trust for Peter.

Presu$e% Resultin" Trust o, Matri$onial 9o$e

;b> %ill the trustee in ban,ruptcy be able to clai! 3+b of the house in 42ocaC ;. !ar,s> The purchase of the house by Ca!eron and <erida would ordinarily gi2e rise to a presu!ed resulting trust in fa2our of <erida for *+b which is held by Ca!eron for <erida. There is no presu!ption of ad2ance!ent in fa2our of Ca!eron as wi2es are not presu!ed to ad2ance their husbands. 'owe2er if the property is a !atri!onial ho!e the house will be presu!ed to be held in equal shares and there will be no resulting trust$Trustees of the Property of Cu!!ins ;a ban,rupt> 2 Cu!!ins ;2++6> 227 CL- 27#. Dn that basis the Trustee will be able to clai! 3+b registered in Ca!eron)s na!e.

Resultin" Trust in 8an!ruptcy

;c> /oes the trustee in ban,ruptcy ha2e a clai! on the house at 13 Coast &tA 7ens2illeC ;. !ar,s>

2#2

There is a presu!ption of resulting trust in fa2our of Peter for 3+b of the 2alue of the property as he pro2ided that a!ount but was not gi2en an equi2alent legal title. The trustee can clai! Ca!eron)s share of 3+b. ;d> /oes the trustee in ban,ruptcy ha2e a clai! on the house at 16 Coast &tA 7ens2illeC ;. !ar,s> <o 16 is registered in <erida)s na!e but will be held by her in resulting trust for Ca!eron as he pro2ided the purchase price. 4 presu!ption of ad2ance!ent does arise in fa2our of <erida as she is Ca!eron)s wife. 4rguably this presu!ption could be rebutted with e2idence to show that it was a sha! transaction for Ca!eron to squeeMe funds fro! the :oint 2entureA with no real intention to benefit <erida but the onus would be on the Trustee to rebut the presu!ption.

Torrens Trust ;no:in" Receipt

;e> /oes Peter ha2e a clai! on the house at 16 Coast &tA 7ens2illeC ;. !ar,s> Peter will struggle to !a,e a clai! here. The facts are si!ilar to "arah Constructions Pty Ltd 2 &ayB/ee Pty Ltd ;2++7> 2*+ CL- # . The issue is whether <erida can be treated as holding the property on trust 2ia the doctrine of ,nowing receipt. 0n the Torrens syste! ,nowing receipt can only wor, when the registered proprietor has engaged in fraudA as defined in the -eal Property 4ct. This was a :oint 2enture and not a presu!ed fiduciary relationship. There is no confidential infor!ation being !isused. <erida)s registration does not see! to satisfy the definition of fraud and therefore it would appear that she will not be sub:ected to a constructi2e trust o2er the property in Peter)s fa2our. Guestion . Le5 was a wealthy !an who had !ade the following dispositions in his will which was dated 1 Ianuary 2++ $ 1. 0 gi2e V3++A+++ to !y friend 4ndrew for reasons which will be !ade ,nown only to hi!. 2. 0 gi2e V3+A+++ to the 8incu!ber -ugby Club to de2elop a progra! for i!pro2ing first aid at rugby union !atches ?the club is an unincorporated association@ *. 0 gi2e V1++A+++ to the 4ustralian Law -efor! Co!!ission to put towards their charitable wor, in refor!ing the laws of this country. .. 0 gi2e V#++A+++ to Iohn on trust for !y sister 1elanie on the condition that she is not allowed the access the ! oney until she has !arried a practising Catholic. 3. 0 gi2e V3+A+++ to Iohn on trust for "ayeA !y wifeA for lifeA then to any of "ay)s children for lifeA then for such of any children of 1elanie who attain 21.

2#*

The will appointed Le5)s friend Iohn as e5ecutor and trustee. Iohn was also na!ed as the residuary beneficiary. Le5 died on *+ 1ay 2+11. Iohn see,s ad2ice as to what to do in with the will. 0t appears clear that 4ndrew was gi2en a letter by Le5 so!eti!e in 2+1+A after the will was written. %hen gi2ing 4ndrew the letterA Le5 told 4ndrew that he was not to open the letter until after Le5)s death and that he had to pro!ise to do as instructed in the letter. 4ndrew agreed to be bound by the letter. The contents of the letter read$ /ear 4ndrewA Kears ago 0 had an affair with !y secretary and fathered an illegiti!ate child called Terry. 0 a! going to lea2e you so!e !oney in !y will but you !ust gi2e the !oney to Terry. 4ndrew has disco2ered that Terry had died a year before Le5A about a wee, after the letter was deli2ered by Le5 to 4ndrew. Terry had a child called 7runo who was Terry)s sole heir under his will. ;a> %ill the V3++A+++ gift to 4ndrew go to 7runo or will it fail and go to IohnC 4lternati2elyA can 4ndrew ,eep itC ;. !ar,s>

&ecret Trust
This is a secret trust question. The trust is a half secret trustA where the testator indicates his or her intention that the gift is not to be held beneficiallyA but is held sub:ect to so!e pri2ate instruction that has been co!!unicated by the testator$ 'owell 2 'yde ;2++*> .7 4C&- 2*+ at ?* @. There are three necessary steps to create a secret trustA Ledgerwood 2 Perpetual Trustee Co Ltd ;1 7> .1 <&%L- 3*2 at 3*3N Dttaway 2 <or!an ?1 72@ 1 Ch 6 # at 711$ 1. the testator !ust intend to sub:ect the donee to an obligation of trustN 2. the testator !ust co!!unicate the intention to the doneeN and *. the donee !ust accept the obligation before the testator)s death. These three require!ents appear to ha2e been satisfied so Terry should be the beneficiary. The second part of the question is concerned with whether Terry)s death !eans that the trust fails for the want of a beneficiary. 0f the trust only co!es into being on the death of the testator then the trust will fail as Terry is already dead.

2#.

'owe2er older authorities ha2e suggested that the secret trust is separate fro! the will and e5ists fro! the !o!ent of acceptance of the donee. That !eans that the trust already e5ists when Terry dies and his beneficial interest can pass to 7runo. The ! odel of trust here !ust be the constructi2e trust as there is no beneficial proprietary interest in e5istence before the testator dies and the only trust that can e5ists without a defined piece of property is the constructi2e trust$ 7athurst City Properties.

)haritable Trust
;b> %ill the gift to the 8incu!ber -ugby Club be effecti2eC ;. !ar,s> 4s the club is unincorporated the first issue is to e5a!ine whether is can be considered a charitable gift. 4 trust that !erely pro!otes sport is not charitable$ -oyal <ational 4gricultural F 0ndustrial 4ssociation 2 Chester ;1 7.> * 4L- .#6N 4!ateur Kouth &occer 4ssociation 2 Canada 2++7 &CC .2N -e <ottage ?1# 3@ 2 Ch 6. N ?1# 39 @ 4ll E- -ep 12+*. 'owe2er the gift here is tied to public safety and loo,ing after the in:ured. This !ight fall into the first heading or fourth heading under Pe!sel)s case. 0t also see!s to ha2e an educational aspect in ter!s of i!pro2ing first aid.

)haritable@Political Trust
;c> 0s the gift to the 4ustralian Law -efor! Co!!ission charitableC ;. !ar,s> This trust is arguably political. 4 trust that has a political purpose will not be charitable$ 7ow!an 2 &ecular &ociety ?1 17@ 4C .+6N ?1 16917@ 4ll E- -ep 1. 4 trust will be dee!ed to be political when it has the purpose of changing the law$ 4ntiBEi2isection &ociety 2 0nland -e2enue Co!!issioners. 4 gift to an organisation will be dee!ed political when the do!inant purpose of the organisation can only be effectuated through legal change$ -e Cr ipps ?1 .1@ Tas &- 1 . 'owe2erA if changing or !aintaining a law is only an incidental part of the purpose of the associationA the gift !ay succeed$ -oyal <orth &hore 'ospital of &ydney 2 4ttorneyB =eneral ;<&%> ;1 *#> 6+ CL- * 6. The 7ow!an principle has recently been attac,ed by the 'igh Court in 4id6%atch 0ncorporated 2 Co!!issioner of Ta5ation ?2+1+@ 'C4 .2 9 although students were not e5pected to ,now this case for the e5a!.

Restraint on Marria"e Trust

;d> 0s the trust for 1elanie 2alidC ;. !ar,s> Kes. Partial restraints on !arriageA such as pre2enting !arriage to a person of a particular religious deno!inationA raceA ethnicity or classA ha2e also been upheld$

2#3

&eidler 2 &challhofer ?1 #2@ 2 <&%L- #+N /uggan 2 8elly ;1#.7> 1+ 0r E q - 2 3N Ienner 2 Turner ;1##+> 16 Ch / 1##.

Rule a"ainst Perpetuities

;e> 0s the gift to "ayA her children and the children of 1elanie effecti2eC ;. !ar,s> 0n this e5a!pleA "aye is treated as the life in being. &he cannot ha2e children !ore than 21 years after her death so the gift to the children of "aye is 2alid. The gift to 1elanie)s children is contingent. 1ight they ta,e !ore than 21 years after "aye)s death to turn 21C Kes because she is presu!ed to be fertile into her old age and it is possible that she has children !any years after "aye)s death who will turn 21 outside the perpetuity period. 4ge reduction will not help here as the proble! is with 1elanie)s ability to ha2e children at a later ti!e in her old age ;fertile octogenarian>. Dn that basis the Perpetuities 4ct will need to be used to wait and see for the #+ year period. EGH0TK EJ410<E-)& CD11E<T& &H11E- 2+1+B11 Qu) !%'& 1 Ioe has always been a !an with a strong personality and charis!a. D2er the yearsA Ioe has used this charis!a to build a s!all property e!pire consisting of =reenacreA 'illbroo,A Eally2iew and Dcean2ille. 'owe2erA as he has grown olderA Ioe has realised that it is not possible to do e2erything yourself 9 so!eti!es a !an needs a helping hand. To obtain this assistanceA Ioe approached his old friend Ei2ienne. %hile !any years younger than IoeA Ei2ienne has a si!ilarly strong personality ;but without the property e!pire>. Ioe pro!ised Ei2ienne thatA if she would care for hi! until his deathA Ioe would transfer =reenacre to Ei2ienne. "eeling this was a reasonable propositionA Ei2ienne quit her :ob as a s!allBtown solicitor and !o2ed onto Ioe)s property as his carer. Eight years laterA Ei2ienne realised that the :ob she had ta,en on caring for Ioe was a little larger than anticipated 9 Ioe showed no signs of going anywhere. 4s a resultA Ei2ienne started to feel that the e2entual transfer of =reenacre was insufficient co!pensation for her wor,. Ei2ienne approached Ioe and said$ SThis arrange!ent isn)t fair. Hnless you transfer 'illbroo, to !e as wellA 0)! out of here.T "earing that without Ei2ienne)s assistance he would need to !o2e to a nursing ho!eA Ioe decided to transfer 'illbroo, to Ei2ienne. Ioe handed Ei2ienne a signed ! e!orandu! of transfer and a letter to his solicitor authorising the release of 'illbroo,)s certificate of title to Ei2ienne. Two

2#6

wee,s laterA Ei2ienne obtained 'illbroo,)s certificate of title fro! the solicitor. =reenacre)s certificate of title re!ained with Ioe)s solicitor. Three years laterA Ioe died une5pectedly while feeding his chic,ens. Ioe)s will ga2e his entire property e!pire to his estranged niece Claire. The properties are all still registered in Ioe)s na!e.

Equitable Estoppel
;a> 4d2ise Ei2ienne on whether she is entitled to the =reenacre property. ;13 !ar,s> The ,ey issue in this question was whether Ei2ienne could bring an action in equitable estoppel. & tudents should ha2e addressed whether Ei2ienne)s reliance on Ioe)s representation was reasonable in the circu!stancesA particularly gi2en her e5perience as a solicitor. &tudents also should ha2e addressed what re!edy would be appropriate in the circu!stances and whether the court should see, to a2oid the detri!ent or !a,e good the e5pectation in deter!ining the re!edy. =ood answers considered the case of =iu!elli 2 =iu!elli and its li,ely i!plications for the court)s decision in this case. 1any students struggled to identify the issue in this questionA instead considering whether the transfer was effecti2e in law or equityA drawing on 1ilroy 2 Lord. Dn the facts a2ailableA it is fairly clear that 1ilroy 2 Lord is not satisfied. &tudents were awarded only a few !ar,s for ta,ing this approach on its own.

2n%ue In,luence @ 2nconscionable /ealin"

;b> 4ssu!ing the transfer of 'illbroo, to Ei2ienne was effecti2eA ad2ise Claire on whether she can challenge the transfer. ;1+ !ar,s> &tudents could ha2e approached this question as an instance of undue influence or inconscionable dealing. 0n relation to undue influenceA good answers co!pared the facts of this case to those in Iohnson 2 7uttressA particularly considering Ioe)s business e5perienceA strong personality and possession of a property e!pireA and the li,ely i!plications of these factors for the court)s decision. 0n relation to unconscionable dealingA good answers tended to question whether Ioe was really under any special disad2antage or disability gi2en his le2el of business e5perience and strong personality. E5ceptional answers considered whether Louth 2 /iprose could be used to argue that Ei2ienne created and e5ploited an at!osphere of crisis by threatening to lea2e IoeA thereby lea2ing hi! to enter a nursing ho!e.

2#7

-egardless as to the approach ta,enA the li,ely re!edy to be sought is rescission of the transaction. &o!e students answered this question on the basis of 1ilroy 2 Lord to deter!ine if the transfer was effecti2e. =i2en the question as,ed students to assu! e the transfer was effecti2eA few !ar,s could be awarded for this approach. Guestion 2 ;a> 7lue &,ies Pty Ltd is an a2iation co!pany with !any shareholders. Dn *+ Iune 2+1+A the 7oard of 7lue &,ies indicated to its shareholders that it intended to declare a di2idend in the near future. Dn that sa!e dayA Ioe "areA a shareholder in 7lue &,iesA entered into an agree!ent with his friend &ally &oar in the following ter!s$ Dn the date of this /eedA 0A Ioe "are ;the 4 ssignor> transfer and assign to &ally &oar ;the 4 ssignee> in equity all !y -ights which are capable of assign!ent. S-ightsT !eans all rightA title and interest to recei2e any di2idend deter!ined by 7lue &,ies Pty Li!ited. Dn the sa!e dayA &ally &oar ga2e an irre2ocable direction to 7lue & ,ies to pay the di2idends assigned to her by Ioe "are to her brotherA 7en 7arryA which read as follows$ %ith effect fro! the date of this letterA &ally & oar irre2ocably and unconditionally authorises and directs that any di2idend owed to Ioe "are be paid to 7en 7arry. &ally &oar underta,es and agrees with Ioe "are that they will not 2aryA re2o,e or alter this irre2ocable direction in any way. Dn 1 Iuly 2+1+A Ioe "are ga2e notice to 7lue &,ies of his assign!ent to &ally &oar. Dn *+ Iuly 2+1+A 7lue &,ies declared a di2idend for its shareholders.

Assi"n$ent o, &hares an% /ivi%en%s

A/+% ) 4$u) SB%) P!. L!/ '& :;' % )&!%!$)/ !' !;) /%+%/)&/ '& 7') F#")A ;#") . ;1+ !ar,s> This is an assign!ent question. The proble! raises a nu!ber of co!ple5 issues. &tudents were not e5pected to identify all the issues 9 ratherA !ar,s were awarded based on the logic of the approach adopted by each student.

2##

0n relation to the first assign!ent fro! Ioe to &allyA students should ha2e considered whether the SrightT to the di2idends was future or present property. 7ased on &hepherd 2 Co!!issioner of Ta5ationA it is li,ely that this is a transfer of present property. 4s a resultA Ioe is assigning a present chose in actionA assignable under s 12 of the Con2eyancing 4ct 1 1 ;<&%>. &tudents could ha2e considered whether the require!ents of s 12 were satisfied. 4lternati2elyA students could ha2e considered whether the assign!ent was effecti2e in equityA including considering whether the rules in 1ilroy 2 Lord applied. 0f students considered the first assign!ent to be effecti2e under s 12A they should then ha2e considered the i!plications of 7lue &,ies recei2ing notice of the assign!ent after it recei2ed the direction fro! &ally. 4lternati2elyA if students considered that the first assign!ent had been effected in equityA they should ha2e considered whether the second assign!ent concerned future or present property and whether the direction was effecti2e in law or equity. This question was designed to test students) understanding of the law of assign!ents. %hile so!e students struggledA others presented clear and wellB reasoned responses. ;b> -ing -ing Pty Ltd and DneCall Pty Ltd are teleco!!unications co!panies based in &ydney. 7oth -ing -ing and DneCall !aintain their own teleco!!unications networ,s for carrying phone calls. 'owe2erA these networ,s are interconnectedA !eaning that both -ing -ing and DneCall)s networ,s carry phone calls !ade by each other)s custo!ers. 7ecause -ing -ing and DneCall)s teleco!!unications networ,s are interconnectedA they each ha2e access to infor!ation regarding each other)s teleco!!unications traffic. This includes infor!ation about the quantityA sourceA destinationA durationA ti!e of occurrence and ,ind of the teleco!!unications trafficA as well as the !onetary 2alue of the teleco!!unications traffic. -ing -ing and DneCall entered into an agree!ent which regulated the interconnection of their networ,s. The agree!ents states$ Confidential 0nfor!ation of a party !eans all infor!ationA ,nowBhowA ideasA conceptsA technologyA !anufacturing processesA industrialA !ar,eting and co!!ercial ,nowledge of a confidential nature relating to or de2eloped in connection with or in support of the business of the party but does not include$ ;i> infor!ation which is or beco!es part of the public do!ain ;other than through any breach of this agree!ent>N or ;ii> 0nfor!ation rightfully recei2ed by another party fro! a third person without a duty of confidentiality being owed by the other party to the third personA e5cept

2#

where the other party has ,nowledge that the third person has obtained that infor!ation either directly or indirectly as a result of a breach of any duty of confidence owed to the first !entioned partyN or ;iii> infor!ation which has been independently de2eloped by another party. Each party !ust ,eep confidential all Confidential 0nfor!ation of another party which$ ;i> is disclosedA co!!unicated or deli2ered to it by a party pursuant to this agree!entN or ;ii> co!es to its ,nowledge or into its possession in connection with this agree!entA and !ust not ;iii> use or copy such Confidential 0nfor!ation e5cept for the purposes of this agree!entN or ;i2> disclose or co!!unicateA cause to be disclosed or co!!unicated or otherwise !a,e a2ailable such Confidential 0nfor!ation to any third person other than its directorsA officersA e!ployeesA agentsA contractors or representati2es to who! disclosure is necessary for the purpose of this agree!ent. 0n 2++6A -ing -ing disco2ered that DneCall had been using infor!ation about -ing -ing)s teleco!!unications traffic for !ar,etingA pro!otional and related purposesA including by producing and using reports about DneCall)s !ar,et share.

)on,i%ential In,or$ation
4d2ise -ing -ing Pty Ltd on any action it !ay ha2e against DneCall Pty Ltd in equity. 0nclude a discussion of re!edies in your answer. ;13 !ar,s> This question concerned confidential infor!ation. &tudents should ha2e considered whetherA on the factsA the infor!ation about -ing -ing)s teleco!!unications traffic was of a confidential nature ;including whether it constituted a trade secret>. &tudents could ha2e considered whether the agree!ent)s definition of confidential infor!ation would be deter!inati2eA or whether a court would still consider equitable principles. "ro! the factsA it appears that the infor!ation was disclosed only for the purpose of the agree!entA thereby i!porting an obligation of confidence. "urtherA the

2 +

disclosure was specifically regulated by the agree!ent itself. Hsing the infor!ation for !ar,etingA pro!otional and related purposesA and presu!ably disclosing the infor!ation to third partiesA was clearly unauthorised use of the infor!ation. 0t is unclear whether this would ha2e caused detri!ent to -ing -ing. &tudents should ha2e considered whether -ing -ing)s fi2e year delay in bringing an action would affect their right to a re!edy 9 did it signify acquiescence to DneCall)s breachC Possible re!edies !ay ha2e included deli2ery up of rele2ant docu!entsN an account of any profits deri2ed fro! rele2ant !ar,etingA pro!otional and related acti2itiesN equitable co!pensationN or an in:unction. &tudents should ha2e considered the relati2e !erits of each re!edy and their suitability on the facts. &o!e students answered this question on the basis of a fiduciary relationship. Dn the factsA this relationship appears !ore si!ilar to that in 'ospital Products Ltd 2 H&&C than to H/C 2 7rian or L4C 1inerals Ltd 2 0nternational Corona -esources Ltd 9 that isA it is !ore li,ely to be regarded by the courts as two co!!ercial parties acting at ar!)s length. 0t is unli,ely that this is a partnership or :oint 2enture in which confidential infor!ation was disclosed. "urtherA the parties ha2e chosen to regulate their relationship through a contractual agree!entA possibly li!iting the scope of any fiduciary obligations in regulating the relationship. 4s a resultA it is unli,ely that a fiduciary duty is owed. Guestion * This question occurs in <&%. 4ndrew was a wealthy business!an who spent his ti!e in2esting in s!all businesses and helping the! to turn a profit. 'e was in a long ter! de facto relationship with /enise. 4ndrew had an illegiti!ate sonA Ca!eronA who was un,nown to /enise and aged 2+. 4ndrew created a trust for Ca!eron. The !ain asset of the trust was a house at 23 %aterloo -dA <orth -yde. The house was held in the Torrens syste!. The trust stated that the house would be held on trust for Ca!eron until he turned *+ years of age. 4ndrew was as,ed to in2est in a s!all business called ('ayBTed Corporation) run by his friend Lawrence. Lawrence had got the co! pany to declare a di2idend to its shareholders but had found the co!pany without the cash to pay the di2idend. 4ndrew agreed to loan the !oney to Lawrence and set out the conditions of the loan in a letter which stated$ This su! is lent to you on the following conditions$ ;a> 0t is repayable on de!andA 2 1

;b> 0t will bear interest until repay!ent of 1+b per annu!A andA ;c> 0t is to be used only for the purposes of paying the outstanding di2idends owed to shareholders. The su! of !oney was deposited in an account to which Lawrence was a signatory. 0t ca!e fro! 4ndrew)s own funds. The account was called the ('ayBTed Corporation creditor a6c). 4ndrew also !anaged an in2est!ent trust on behalf of a group of 1+ in2estors ;(The 1t %arning Trust)>. Each in2estor had deposited V1++A+++ into a trust with 4ndrew as the trustee. The rules of the trust stated that 4ndrew was to ta,e the funds of the in2estors and use the! to purchase land around 1t %arning in 1urwillu!bah in the in2estors) na!es. 0f after * years the title to these properties had not been secured 4ndrew was to return the funds with interest. Hnfortunately 4ndrew was unable to secure the title. Things beca!e worse when it was disco2ered that 4ndrew had cancer. 4ndrew beca!e depressed. The first thing he did was to sell the house at 23 %aterloo -dA <orth -yde. 'e sold the land to Ia!es for V3++A+++. Ia!es did his own con2eyancing. Ia!es ,new that the property was held on trust and he felt that there !ay ha2e been so!ething suspicious about the sale so he decided to !a,e no further enquiries. Ia!es beca!e registered as the owner. 4ndrew too, the funds fro! the sale and ban,ed the! into the 1t %arning trust account. 4ndrew also started to !a,e distributions fro! the 1t %arning trust. 4ndrew initially ga2e away V1A+++A+++ of the fund to the & isters of Charity. 'e ga2e another V.#+A+++ of the fund to the Christian 7rothers who used the funds to pay off a !ortgage that they had o2er a school in Lis!ore. 'e too, the last V2+A+++ and used it to pay off the last 2 pre!iu! ;V1+A+++ each> of a life insurance policy. 4ndrew had already paid the first pre!iu! of V1+A+++ with his own !oney and the right to a payout on death arose with the pay!ent of the first pre!iu!. The insurance pay out for death was V*A+++A+++. 4ndrew na! ed /enise as the beneficiary. 4ndrew ended up dying fro! the cancer. 'is will ga2e his entire estate to /enise. 4t the ti!e of 4ndrew)s death the 'ayBTed shareholders ha2e yet to be paid out of the creditor account. 'ayBTed is still operating although a large creditor has started to threaten legal action to wind the co!pany up. The insurance co!pany ha2e agreed to pay out the entire V*A+++A+++ death benefit. 4nswer the following$

;no:in" Receipt an% )onstructive Trust o, Torrens #an%

2 2

;a> Can Ca!eron reco2er the property at 23 %aterloo -d fro! Ia!esC ;3 !ar,s> This question concerns whether a constructi2e trust can arise under the doctrine of ,nowing receipt in 7 arnes 2 4ddy. The land is in the Torrens syste!. 0n The 7ell =roup Ltd ;in liq> 2 %estpac 7an,ing Corporation ;<o >A Dwen I set out the require!ents for ,nowing receipt as follows$ ;a> there !ust be a (trust)N ;b> the trustee !ust ha2e !isapplied (trust property)N ;c> the third party !ust ha2e recei2ed trust propertyN ;d> at the ti!e of recei2ing the trust propertyA the third party !ust ha2e ,nown of the trust and of the !isapplication of the trust propertyN and ;e> the third party will be ta,en to ha2e (,nown) in the rele2ant sense if the third party$ ;i> has actual ,nowledge of the trust and the !isapplication of trust propertyN or ;ii> has deliberately shut his or her eyes to those thingsN or ;iii> has abstained in a calculated way fro! !a,ing such enquiries as an honest and reasonable person would !a,eA about the trust and the application of the trust propertyN or ;i2> ,nows of facts which to an honest and reasonable person would indicate the e5istence of the trusts and the fact of !isapplic ation. 0n the Torrens syste! registered interests can be set aside if they ha2e been procured by fraudA where fraud refers to actual fraudA personal dishonesty or !oral turpitude$ 4sset Co 2 1ere -oihi. 'owe2erA !ere notice of an unregistered interest prior to registration does not a! ount to personal dishonesty. 0n 1acquarie 7an, Ltd 2 &i5ty "ourth Throne Pty Ltd ?1 #@ * E- 1**A a !a:ority of the Eictorian Court of 4ppeal decided that a registered !ortgage under the Torrens syste! could not be set aside in a situation where the !ortgagee acted honestly but with constructi2e ,nowledge that the !ortgage docu!ent was a forgeryA in breach of trust. 4s suchA both %inne,e P and Tadgell I4 found that recipients who act honestlyA but in

2 *

circu!stances where they should ha2e disco2ered a breach of trustA could not be said to ha2e acted fraudulently under the Torrens syste!. Therefore absent (TorrensBstyle) fraudA ,nowledge of a breach of trust would not defeat a registered interestA and ,nowing receipt principles could not be applied to set aside a registered interest. The 'igh Court accepted this as the correct approach in "arah Constructions Pty Ltd 2 &ayB/ee Pty Ltd. Loo,ing then at Ia!es) conduct it could be argued that a deliberate shutting of ones eyes falls within the definition of Torrens style fraud. 0t was defined as such in the 4sset case. 0f that were accepted then a constructi2e trust could arise. 4nother issue that could be !entioned is the in persona! e5ception to indefeasibility which arises when the he registered proprietor owes an enforceable co!!on law or equitable duty which can be enforced against the ownerA e2en though they !ay be indefeasible. Equitable re!edies including constructi2e trusts ha2e been e!ployed to enforce such obligations. 'owe2er the 'igh Court in "arah refused to find that the rule in 7arnes 2 4ddy fell within the in persona! e5ception. This question was generally well answered. 'owe2erA so!e students failed to address all the issues raised.

1uistclose Trust
;b> %hat rights does /enise ha2e o2er the funds in the 'ayBTed Corporation creditor a6cC ;3 !ar,s> This is a Guistclose trust question$ 7arclays 7an, Ltd 2 Guistclose 0n2est!ents Ltd ?1 7+@ 4C 367. These trusts are based on the !utual intention of the parties. The !utual intention of the parties can be discerned fro! the language e!ployed by the partiesA the nature of the transaction and the rele2ant circu!stances attending the relationship between the!$ -e 4 ustralian EliMabethan Theatre TrustN Lord 2 Co!!onwealth 7an, of 4ustralia. 4 significant factor to consider is the way that the !onies are held in account. 0f they are ban,ed into a general account and !i5ed with other !onies it will be harder to infer a !utual intention that the !onies be held on trust$ &al2o 2 <ew Tel LtdN =liderol 0nternational Pty Ltd 2 'all. Dn the facts it would appear that a trust was createdA and that it would be Lawrence holding the beneficial interest on trust for 4ndrew as part of a secondary trustA as e5plained by Guistclose. This question was well answered.

Tracin" Trust (un%

2 .

;c> Can the in2estors and6or Ca!eron reco2er !oney fro! the &isters of CharityC ;3 !ar,s> This question and the following 2 questions are about tracing. That facts are 2ery si!ilar to -e /iploc,. The !oney can be traced and reco2ered. The trust account hasV1! fro! the in2estors and V3++8 fro! the sale of the house which belongs to Ca!eron. The sisters of Charity do not appear to ha2e done anything yet with the funds so they are potentially traceable. The first issue is whether Clayton)s case should be applied which would !eant that the funds co!e totally fro! the in2estors share. 'owe2er after "rench Calendonia it would appear that Clayton)s case should not to be used. This would allow the funds to be traced as to one third Ca!eron and two thirds in2estors. This question was answered well by so!e students. 'owe2erA !any did not address the issue of the rule in Clayton)s case or that in "rench Calendonia. &o!e students tried to address this question as concerning the 2alidity of a charitable trust.

Tracin" Investors
;d> Can the in2estors and6or Ca!eron reco2er !oney fro! the Chritian 7rothersC ;3 !ar,s> 'ere the issue is whether the funds are traceable into the reduction of a security. This would effecti2ely allowed the in2estors6Ca!eron to be subrogated to the position of the !ortgagee. 'owe2er -e /iploc, says that this is not allowed. The funds cannot be traced. This was doubted in 7oscawen 2 7a:wa but accepted by Einstein I in Co!!onwealth 7an, of 4ustralia 2 &aleh. This question was generally answered well. 'owe2erA so!e students argued that a charge could be created o2er the property.

Tracin" Insurance Payout

;e> Can the in2estors and6or Ca!eron clai! all or part of t he life insurance payout held beneficially by /eniseC ;3 !ar,s> The facts are si!ilar to "os,ett 2 8eown. There the funds were traceable on the proportionate contribution to the pre!iu!s. 'ere the co!bined contribution of the in2estors and Ca!eron is 26*s. They should be therefore entitled to V2!. The V2! should also be di2ided proportionately between the! 16* Ca!eron and 26*

2 3

in2estors. This will result in a profit but that is per!issible under the rule of tracing. -e 'allett does not pre2ent the defaulting trustee to retain so!e of the funds represented by their own contribution. 1ost students recognised that "os,ett 2 8 eown was the rele2ant authority. 'owe2erA there was so!e confusion as to whether the in2estors and Ca!eron would be entitled to :ust the pre!iu!s or to the actual payout. Guestion . This question occurs in <&%. Lawrence and 4ndrew were friends and business partners. They purchased a house together with each pro2iding 3+b of the p urchase priceA but Lawren ce did not want the house to be in his na!e because he wanted to later access the first ho!e buyers grant on another purchase. The house was registered solely in 4ndrew)s na!e. Lawren ce had a life long interest in tennis and had been a !e!ber of the local Tennis Club for !an y years. The Club was unincorporated. 'e had also collected antique tennis racquets o2er the years worth V3++A+++. Lawren ce later won the lottery and with the !oney decided that he would li,e to pro2ide for his fa!ily and friends. 'e wrote a will which !ade his sister "elicity the e5ecutor and trustee. 0t contained the following clauses$ 0 gi2e V3++A+++ to !y friend 4ndrew for reasons which will be !ade apparent to hi!. 0 also gi2e 4ndrew !y collection of antique tennis racquets on the condition that he pays !y outstanding debts to Terry. 0 gi2e another V2A+++A+++ to the 42oca Tennis Club to encourage the playing of tennis in <ew &outh %ales public schools. 0 gi2e the residue of !y estate to !y sister "elicity who !ayA at her absolute discretionA gi2e such residue to anyone she thin,s fitA barring herselfA and 4ndrew. Three days after writing the will Lawren ce ga2e a letter to 4ndrew and as,ed hi! to follow the instructions in the letterA but only after he died. 4ndrew agreed to follow the instructions.

Resultin" Trust Purchase Price

;a> /oes "elicity ;on behalf of Lawrence)s estate> ha2e a clai! on the houseC ;3 !ar,s>

2 6

The purchase of the house gi2es rise to a presu!ed resulting trust in fa2our of Lawrence for 3+b. 0f a purchaser buys property and 2oluntarily directs the transfer of the property into the na! e of another personA equity presu!es that the owner holds that property on resulting trust for the purchaser$ <apier 2 Public TrusteeN Turnbull 2 =orgie2s,i. &tudents should ha2e discussed the presu!ption and whether it could be rebutted. The ne5t issue concerns the illegality of atte!pting to hide the beneficial 3+b raises the applicability of <elson 2 <elson and whether the resulting trust is against the policy of the statute. Li,e <elson Lawrence)s intention to get the subsidy should not pre2ent a trust fro! arising although he !ay ha2e to co!e with clean hands and the estate !ay ha2e to pay the subsidy bac,. This question was generally well answered. ;b> 0s the disposition to the 42oca Tennis Club effecti2eC

'i,t to a charitable trust @ unincorporate% bo%y

;3 !ar,s> The gift to the Club appears to be a gift to an unincorporated body but on closer inspection it is probably a charitable trust. The playing of sport is not charitable ;-e <ottage> unless it falls under another head of charityA li,e education$ 8earin 2 8earins. This question was generally well answered.

Po:er o, Appoint$ent
;c> Characterise the disposition to "elicity and describe whether it is effecti2e. ;3 !ar,s> The gift to "elicity is a power of appoint!ent. 0t is a !ere or bare power as she is not obliged to e5ercise the power. The disposition is also in a hybrid for! as it e5cludes !e!bers fro! the class. 0n the past such as disposition would ha2e offended the rule in Taha! 2 'u5table if it did not contain a gift o2er in conte!plation$ 'oran 2 Ia!es. This gift does ha2e such a gift o2er. 0n any e2ent the rule in Tatha! has been re!o2ed by the &uccession 4ct 2++6A s ... This question was generally well answered.

9al, &ecret Trust

;d> %ill the gift to Craig be effecti2eC ;3 !ar,s>

2 7

This is a secret trust question. The trust is a half secret trustA where the testator indicates his or her intention that the gift is not to be held beneficiallyA but is held sub:ect to so!e pri2ate instruction that has been co!!unicated by the testator$ 'owell 2 'yde. There are three necessary steps to create a secret trustA Ledgerwood 2 Perpetual Trustee Co LtdN Dttaway 2 <or!an$ 1. the testator !ust intend to sub:ect the donee to an obligation of trustN 2. the testator !ust co!!unicate the intention to the doneeN and *. the donee !ust accept the obligation before the testator)s death. These three require!ents appear to ha2e been satisfied so Craig should be the beneficiary. This question was generally well answered. ;e> /oes Terry ha2e any rights o2er the antique tennis racquetsC ;3 1ar,s> This disposition creates a charge in fa2our of Terry. 4n equitable charge is a for! of security that allows the creditor ;chargee> to order the sale of the propertyA after a triggering e2entA li,e default of pay!ent. The proceeds of sale can then be used to satisfy a!ounts due to the chargee$ 0n re 7an, of Credit and Co!!erce 0nternational &4 ;<o #>. 0f the transferor intends that the title be transferredA (sub:ect to) pay!ents being !ade to anotherA then it will be construed as a ch arge. "or e5a!pleA property !ight be gi2en (to 4 sub:ect to 4 paying 7 V1+++). This transfer e2idences an intention that the obligation to pay is anne5ed to property as opposed to being a fiduciary obligation i!posed on the transferee. The o bligation is of a finite nature. 0t is satisfied after co!pliance. 4s such it is not of the sa!e e5tent and duration as the trustee)s fiduciary obligations to care for th e beneficiaries) interest in a trust$ Countess of 7ecti2e 2 "ederal Co!!issioner of Ta5ation ;1 *2> .7 CL- .17N ?1 *2@ 4L- *62. This question was generally well answered. E</ D" P4PE-

MARCH 2012
Question 1 Answer BOTH parts of this question. (a)Wa ter !an"e i owns a s#a far# south of $%&ne%. 'usta( $trasser owns an a&)oinin" propert% of appro*i#ate % 2+000 he,tares. 'usta(+ a - ue"rass #usi,ian+ is

2 #

p annin" to ho & a wee./ on" - ue"rass #usi, festi(a on his propert% on 0/1 Mar,h 2012. 2n ear % 3e,e#-er 2011+ 'usta( -e"an a&(ertisin" his - ue"rass #usi, festi(a . 4rior to that point he ha& spent 5200+000 on preparations an& fa,i ities for the -i" e(ent. At no sta"e &i& 'usta( see. or o-tain o,a authorit% appro(a as he was require& to &o -% the pro(isions of the Bluegrass Music Act 2001 (6$W). 'usta(7s fai ure to &o so ren&ers hi# ia- e to a possi- e pena t% un&er the A,t of 520+000. Two &a%s a"o+ Wa ter+ who ha& sin,e #i&/2011 -een ho i&a%in" an& (isitin" his parents in a re#ote part of 2,e an&+ returne& to $%&ne%. He i##e&iate % -e,a#e aware of 'usta(7s p ans. He is "reat % ,on,erne&+ parti,u ar % so as his parents (-oth in their ate ei"hties) wi -e (isitin" for a wee. at e*a,t % the sa#e ti#e as 'usta(7s propose& festi(a is s,he&u e& to -e he &. Wa ter has a rea&% pai& 518+000 for their return airfares fro# an& to 2,e an&. Wa ter has now ,onsu te& %ou -e,ause he wants to see if he ,an "et an or&er to pre(ent the - ue"rass #usi,a festi(a fro# ta.in" p a,e. He see.s %our a&(i,e in re ation to the possi- e out,o#es of an% su,h app i,ation. (9ou ,an assu#e that the ho &in" of the - ue"rass #usi, festi(a wou & resu t in 'usta( -ein" ia- e to Wa ter for &a#a"es in the tort of nuisan,e.) (18 #ar.s)

InAunctions an% %a$a"es in lieu o, an inAunction

(b) Explainthedifferenceandsignificancebetweenjurisdictionaland discretionary factors for declining equitable relief. (5 marks) his question in!ited students to discuss the a!ailability of injunctions and damages in lieu of an injunction. "ost students discussed this question reasonably well. 4art B # fundamental distinction between damages at common law and the equitable order of specific performance is that$ whereas a plaintiff will always get an award of damages if he or she establishes a breach of contract by the defendant$ the same plaintiff will not automatically be entitled to equitable relief simply by establishing a breach of contract by the defendant. %f a plaintiff&s application for equitable relief is denied$ he or she is confined to obtaining damages for breach of contract. %t is often said that common law damages for a breach of contract are a!ailable to a plaintiff 'as of right& but that equitable relief for the same breach is 'discretionary&. (owe!er$ such a statement is$ strictly speaking$ not correct. %t is correct that a damages award will always be made in fa!our of a plaintiff$ who is ready$ willing and able to perform the contract$ upon proof

of a breach by the defendant. )ith specific performance$ it is only partially correct to say that it is discretionary. )hile the court can refuse such relief in the exercise of its discretion$ the exercise of that discretion is subject to the court ha!ing the jurisdiction to entertain the application for specific performance. %f the court does not ha!e such jurisdiction the question of exercising its discretion does not arise. %t is thus more accurate to say that specific performance will be denied on jurisdictional grounds and may be refused on discretionary grounds. he distinction between jurisdictional and discretionary factors is of practical significance in relation to equitable damages under s *+ of the ,upreme -ourt #ct ./01. %f specific performance or an injunction is denied on jurisdictional grounds there is no power to award equitable damages. %f specific performance or an injunction is refused on discretionary grounds$ equitable damages can be awarded. 2efore equitable damages can be awarded$ the court must ha!e the jurisdiction to order a decree of specific performance or an injunction. hus$ if such equitable relief is refused on the basis that damages at common law are adequate$ the court has no jurisdiction to award equitable damages3 8ater%ays #"t$ority of Ne% 9o"t$ 8ales v (oal : #llied (;perations) Pty Ltd. 4urthermore$ if specific performance or an injunction is impossible to grant at the time proceedings are commenced$ and remains so to the date of judgment$ there is no jurisdiction to award equitable damages3 1&1a$on v #mbrose. (owe!er$ if at the time of hearing it has become possible to order such equitable relief$ then there is jurisdiction to award equitable damages3 ;a!a&re Ltd v (laire (leaners ()oldings) Ltd. )here the court has no jurisdiction to award specific performance or an injunction$ the court will lea!e the plaintiff to his or her common law remedy of damages. )here specific performance or an injunction is denied on discretionary grounds does not disentitle a plaintiff to equitable damages3 8ent%ort$ v 8oolla$ra 1"ni&ipal. %n 8ater%ays #"t$ority of Ne% 9o"t$ 8ales v (oal : #llied (;perations)$ 2ea5ley 6#$ speaking for a unanimous -ourt of #ppeal$ referred to the 'well understood principle that damages under s *+(b) of the 9"preme (o"rt #&t can be awarded e!en if the court would not ha!e made an order for specific performance or final injunction by reason of some discretionary defence&. he part was done poorly. "ost students did not discuss these issues well and many did not discuss them at all. Question 2 Chan& er an& Moni,a #arrie& in 1:;:. Chan& er wor.e& as a #ar.etin" #ana"er for an e e,troni,s ,o#pan% in $%&ne%. Moni,a &i& not wor.+ -ut &e(ote& #u,h of her spare ti#e as a (o unteer preparin" #ea s for a nu#-er of ,harities ,aterin" to the nee&s of $%&ne%7s ho#e ess ,hi &ren. Chan& er an& Moni,a owne&+ as tenants/in/ ,o##on in equa shares+ a Torrens tit e ho#e unit in 'reenwi,h. Apart fro# the ho#e unit+ the% )oint % owne& a ,ar an& their furniture as we as a )oint -an. a,,ount with <ast4a, Ban.in" Corporation. 2n a&&ition to these interests+ Moni,a was the so e

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proprietor of shares in Centra 4er. Cafes =t&+ ha(in" inherite& the# on the &eath of Ri,har&+ her for#er &e fa,to partner+ who ha& &ie& in 1:;;. Centra 4er. Cafes =t& is a ar"e ,orporation operatin" o(er 28+000 ,afes in o(er 180 ,ountries. 2n 1::8 Chan& er an& Moni,a e*e,ute& their wi s. The e*e,utor an& trustee of -oth wi s was their frien& 4hoe-e. B% , ause 0 of his wi + Chan& er eft his entire estate to Moni,a. C ause 1 of his wi stipu ate& that if Moni,a pre&e,ease& hi#+ the 'reenwi,h ho#e unit was to "o to his an& Moni,a7s -est frien&+ >oe%+ an& that the rest of the estate wou & "o to Moni,a7s -rother Ross. C ause 2 of Moni,a7s wi stipu ate& that her shares in Centra 4er.s Cafes =t& were to -e so & -% 4hoe-e a,tin" in her ,apa,it% as e*e,utor an& trustee of the wi . C ause 2 further stipu ate& that the sa e pro,ee&s were to -e app ie& for ?su,h ,harita- e or -ene(o ent purposes as #% e*e,utor an& trustee sha thin. fit7. B% , ause 0 of her wi Moni,a eft the rest of her estate to Chan& er. C ause 1 of her wi stipu ate& that if Chan& er pre&e,ease& her she eft the 'reenwi,h ho#e unit to >oe% an& the rest of her estate to Ross. At the ti#e of e*e,utin" their wi s Chan& er an& Moni,a si"ne& a &o,u#ent whi,h a,.now e&"e& that -% e*e,utin" their wi s the% ha& set out their wishes as to what was to happen to their assets after the% &ie& an& further that the% a"ree& that+ no #atter what happene& in the future+ the% -oth wante& the 'reenwi,h ho#e unit to "o to >oe% after the% -oth &ie& an& that the rest of their )oint % owne& assets to "o to Ross after the% ha& -oth &ie&. 2n 200@ Chan& er &ie&. 2n a,,or&an,e with his wi + Chan& er7s entire estate was transferre& to Moni,a. 2n 200; >oe% &ie& ea(in" a wi in whi,h his who e estate was eft to his frien& Ra,he . 2n 200: Moni,a ,reate& a )oint tenan,% -etween herse f an& Ross in re ation to the 'reenwi,h ho#e unit -% transferrin" to Ross+ for no ,onsi&eration+ a ha f/share in the ho#e unit. 2n >anuar% 2012+ Moni,a &ie&. 4hoe-e see.s %our a&(i,e as to the fo owin"A

(un%s ,or $ixe% )haritable an% Non.)haritable Purposes

(a)What is to happen to the su# of 51+000+000 -ein" the pro,ee&s of sa e of Moni,a7s shares in Centra 4er.s Cafes =t&B (8 #ar.s) he funds for 'charitable or bene!olent purposes& prima facie fails as it is for mixed charitable and non7charitable purposes3 #<G v 8a$r<)ansen. (owe!er$ s. 89 ($aritable 2r"sts #&t .//9 would allow it to be applied to charitable purposes by remo!ing the reference to bene!olent. he court would then be approached to order an administrati!e

*+1

scheme in order to gi!e effect to the charity. he court can accept e!idence of "onica&s intentions$ beliefs etc and it is likely that the funds may apply to a charity for homeless children or something similar to that. (-)Who is entit e& to the 'reenwi,h ho#e unitB (18 #ar.s) #s to the :reenwich house the issue raised is mutual wills. he requirements of mutual wills must be set out. %n all likelihood they ha!e been satisfied. ;pon -handler&s death the constructi!e trust arises in fa!our of 6oey3 =irming$am v enfre%. he fact that 6oey died before "onica does not mean that 6oey&s interest lapses3 e )aggar. )hate!er 6oey gains$ if anything$ passes to his beneficiary$ <achel. "onica has transferred the property the subject of the mutual wills to <oss as her joint tenant. =rima facie this would mean that <oss takes the property on the sur!i!orship principle. (owe!er$ this is subject to the issue of whether "onica had an unqualified right to freely deal with the :reenwich house after -handler&s death. #ccording to =irming$am v enfre% the right is not unfettered. %f what she did was calculated to defeat the mutual wills compact$ <oss will not be able to take the property on "onica&s death. )ealey v =ro%n is a case on the facts of the problem and indicates that <oss would not get the property and that the mutual wills compact would be enforced$ with <achel ending up with the property. >!erall this question was done poorly because students failed to recogni5e the second part as a mutual wills?constructi!e trust question. Question 0 2n 1:@0 C ar. Cent ,a#e to Austra ia fro# the Dnite& $tates of A#eri,a to ta.e up a position as the #ana"in" &ire,tor of Cr%ptonite <nterprises =t&. As part of his sa ar% pa,.a"e+ 10+000 shares in Cr%ptonite <nterprises =t& were transferre&+ at C ar.7s request+ to CC Trustees 4t% =t& to ho & as -are trustees for an& on C ar.7s -eha f. 2n 1:@1 C ar. pur,hase& an o & s%ste# tit e propert% at 12 Bat#an Roa&+ Chatswoo& as his resi&en,e. 2n 1:;0 he pur,hase& a Torrens tit e house at 11 3un&as A(enue+ Mos#an+ -ut ha& it re"istere& in the na#e of his o%a assistant #ana"er at Cr%ptonite <nterprises =t&+ >i##ie O sen. At the ti#e of pur,hasin" the propert%+ C ar. to & >i##ie that the house was >i##ie7s for as on" as he (>i##ie) i(e&. C ar. .ept the tit e &ee& an& p a,e& it in his safe at wor.. $oon after arri(in" in Austra ia+ C ar. -e,a#e "oo& frien&s with 3i,. Tra,e%. 2n 1:;8 3i,. intro&u,e& C ar. to =ois =ane. =ois+ who was fi(e %ears %oun"er than C ar.+ i(e& in a house that she owne& at 10 'otha# $treet+ Cirri-i i. =ois an& C ar. soon entere& into an inti#ate re ationship whi,h was .ept se,ret fro# e(er%one e*,ept their #utua frien& 3i,. Tra,e% an& C ar.7s o%a se,retar%+ 3e a $treet. To"ether+ =ois an& C ar. ha& three sons+ =arr%+ Cur e% an& Moe+ -orn in 1:;;+ 1:;: an& 1::0 respe,ti(e %. =ois an& the ,hi &ren ne(er i(e& with C ar.+ an& the ,hi &ren were ne(er to & that C ar. was their father. 2n *+2

Mutual Wills

1::1 =ois e*e,ute& a wi in whi,h she appointe& 3i,. Tra,e% as her e*e,utor an& trustee+ an& eft her entire estate to =arr%+ Cur e% an& Moe in equa shares as )oint tenants. 2n Mar,h 1::8 C ar. e*e,ute& a wi . The wi was witnesse& -% =ois an& >i##ie. Apart fro# C ause 8 whi,h na#e& 3i,. Tra,e% as C ar.7s resi&uar% -enefi,iar%+ the other su-stanti(e pro(isions of the wi were as fo owsA 1.2 re(o.e a pre(ious testa#entar% a,ts. 2.2 appoint 3i,. Tra,e% #% e*e,utor an& trustee. 6.2 "i(e #% propert% at 12 Bat#an Roa&+ Chatswoo& to 4au 3ra.e on ,on&ition that he .eep the propert% as a ho#e an& pro(i&e -oar& for his sisters 4i*ie an& 3i*ie 3ra.e. 4.2 "i(e #% interest in the propert% at 11 3un&as A(enue+ Mos#an to 3e a $treet on trust. 2.2 "i(e #% -an. a,,ount with Metropo is Ban.in" Corporation to #% trustee to use the in,o#e thereof to pro(i&e for the e&u,ation of the ,hi &ren of e#p o%ees an& for#er e#p o%ees of the sai& -an.. 2n $epte#-er 2000 C ar. spo.e a-out his wi to 3e a $treet an& to & her the ter#s of C ause 1. He a so to & 3e a that he wante& her to -e the trustee of his propert% interest for =ois. 3e a sai& she wou & &o so. On 1; O,to-er 2011 C ar. te ephone& the #ana"er of CC Trustees =t& an& sai& to hi#A ?2 want =arr%+ Cur % an& Moe to ha(e #% shares in Cr%ptonite <nterprises =t&. 4 ease transfer the# to then as )oint tenants7. The #ana"er rep ie&A ?Eer% we 7. On 21 O,to-er 2011 =ois an& C ar. were in(o (e& in a ,ar a,,i&ent in whi,h =ois was .i e& instant % an& C ar. &ie& the fo owin" &a%. At the ti#e of C ar.7s &eath+ the #ana"er of CC Trustees =t& ha& &one nothin" in re ation to the (er-a instru,tions he ha& re,ei(e& for# C ar. on 1; O,to-er 2011. !urther#ore+ the a,,ount with the Metropo is Ban.in" Corporation ha& a ,re&it -a an,e of 5180+000. On 01 O,to-er 2011+ 4au 3ra.e a&(ise& 3i,. Tra,e% that he (4au 3ra.e) wou & not ,o#p % with the ,on&itions set out in C ause 0 of C ar.s wi . 2n the i"ht of the a-o(e fa,ts+ 3i,. Tra,e% see.s %our a&(i,e as to the fo owin"A (a)What ri"hts &o 4au + 4i*ie an& 3i*ie 3ra.e ha(e in re ation to the propert% at 12 Bat#an Roa&+ Chatswoo&B

Equitable Personal Obli"ation an% a )har"e

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(8 #ar.s) -lause 9 of -lark&s will is based upon the facts of Gill v Gill. %n that case it was held that the clause created an equitable personal obligation coupled with a charge. hus the sisters ha!e a personal claim against =aul. %t would also appear that they ha!e a claim against the property in the form of a charge in relation to =aul&s failure to act in accordance with the condition (-) Who is entit e& to or has an% interest in the propert% at 11 3un&as A(enue+ Mos#anB #t the time of purchase the principle of resulting trust in fa!our of -lark is partially rebutted in that there is a life estate for 6immie and this remains the case following -lark&s death. he remainder interest is held by 6immie of resulting trust for -lark$ and ultimately -lark&s successors in title$ ie. @ick racey as residuary beneficiary. ,ee Napier v 8#. he question then is whether -lark&s interest is held by @ella on secret trust for Aois. he elements of secret trust ha!e been satisfied. (owe!er$ Aois witnessed -lark&s will and the issue is whether her interest lapses on this basis. his depends upon whether secret trusts are testamentary trusts or ones arising outside the context of a will3 e >o"ng$ Ledger%ood (ase. =roperty goes e!entually to Aois& children. (,)Who is entit e& to the shares in Cr%ptonite <nterprises =t&B (8 #ar.s) he shares in Bryptonite Enterprises raises the issue of writing under s. 89-(.)(c) of the (onveyan&ing #&t and ?andervell. (&)

Resultin" Trust an% #i,e Estate over #an%3 &ecret Trust

&hares an% Require$ent o, Writin"

)haritable Trust Test

Who is entit e& to the fun&s in C ar.7s a,,ount with Metropo is Ban.in"

CorporationB his question raises the issue of whether the charitable trust is for the benefit of the public. %t is based upon the facts of ;ppen$eim v 2oba&&o 9e&"rities where is was held that the trust failed the (ompton test. hus the pro!ision fails and passes to @ick racey as residuary beneficiary. "ost students did reasonably well with this question and some did exceptionally well by recogni5ing the issues and identifying the rele!ant propositions and cases. Question 1 <owena is a prominent real estate agent in -ampbelltown. ,il!ester is a de!eloper who has plans appro!ed by the local council to build a block of four town7houses on one of the few parcels of land in -ampbelltown 5oned for such purposes. @ue to a cash7flow problem$ ,il!ester decided to sell two of the town7houses Coff the planD before construction had

*+.

commenced. ,il!ester engaged <owena to find buyers for these two town7houses. #fter discussions between <owena and ,il!ester on the question of a sale price$ a figure of E.51$111 per town7house was agreed. <owena ad!ertised the sale in the local press and was approached by Felda. Felda$ who had only E.51$111 to in!est$ was interested in purchasing one town7house$ but only if the town7 house was likely to appreciate by at least 85G by the time it was actually built. Felda instructed <owena to make enquiries along these lines. <owena disco!ered that once completed$ the town7houses would each fetch E885$111. ,he further disco!ered that E.01$111 each was the then current market !alue of the proposed town7houses. <owena ad!ised Felda of the results of her enquiries$ and Felda immediately contracted to buy one town7 house for E.51$111. <owena$ with Felda&s consent$ also contacted an old friend )alter. )alter is a retired politician who was seeking to in!est his superannuation payout. (e had asked <owena to keep an eye open for a Cgood dealD if one came along. <owena told )alter3 % ha!e a town7house for sale Coff the planD for E.51$111 which by the time it is built will fetch E885$111 on the open market. )alter immediately contracted to purchase the second town7house from ,il!ester. <owena did not at any time inform ,il!ester of the information she disco!ered as a result of the enquiries pursued on behalf of Felda. -ontracts for both sales were completed a few days after ,il!ester completed the building of the town7houses. ,il!ester has now disco!ered e!erything that happened and feels terribly cheated. (a)3efine ?fi&u,iar% &uties7. (8 #ar.s) ,tudents should ha!e gone through the definitions in )ospital Prod"&ts and the @+( v =rian cases. he traditional categories should ha!e been discussed. (-)Who owes fi&u,iar% &uties in this question an& to who#B Wh%B <owena is ,il!ester&s agent so fall into that category of fiduciary relationship. other relationships present. (8 #ar.s) here are no

(i%uciary /uties

(,)Has $i (ester an% , ai# an& For re#e&% in equit% for what Rowena has &oneB

/ouble )haracter Re$e%y ,or Torrens #an%

here has been a clear breach by <owena acting in a double character and withholding information. he only rele!ant remedy is equitable compensation. he cost of reselling the properties would not justify the cancellation of the contracts and its unlikely that it would be *+3

fraud in any case under orrens3 Fara$. Ho does an account of profits work as a remedy as <owena would ha!e actually sustained a small loss from her breach. -ompensation of the price difference is the only rele!ant remedy. >!erall this question was done !ery well by most students

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