lecture on equity and trusts

trustee duties

settlor removed from the picture once he declares the trust.

settlor’s intention in determining the trust is relevant

rights of B

duties of T

what is nature of rights of B? like a property right in that it can be enforced against the world

it is a legal and an equitable right

proprietary in rem – B right is more like this

personal right in personam

T’s duties

what duties does T owe to B?

starting point is T;s duties are species of wider kind of duties fiduciary

single minded loyalty –

T may

speight and gaunt / T’s duties

T appointed in Trust. Trustee hired a broker to manage the affairs

broker got it badly wrong. Broker took the Trust money

trust nullified.

B brought action against T. T is liable said B

court said no. It was reasonable for T to hire the broker because a prudent man would do it with his own money.

==============

Learoyd v Whiteley

T relied on valuation of company made by a valuer

valuer

they got a report and relied on it. report based on an erroneous valuation

T acted in good faith. invested money on the basis of this and lost.

court said T had not acted with ordinary prudence a businessman would use

valuation was only supposed to be used as a valuation. valuer was good at valuing not making business investment.

account for the loss made by T. if T makes a bad investment.

T must pay back losses if liable

ordinary businessman would or would not do this….

businessmen take risks

===========

chapman

=========

Trust . some argue a trust can perfect a gift

one person makes a gift to another person

a gift may not be effected.

can a trust be in place of a gift? can B get interest in a property

donatio mortis causa.

when is a gift effective?

when a gift is operative you do NOT need a trust

when a gift is NOT operative you might need a trust

Milroy v Lord

the uncle signed a deed to give the shares to his niece

the bank did not effect the gift. was not written in the bank’s books

niece DID not get them.a gift was intended not a trust

you cannot have a trust in place of a gift

Re Rose. here equity completed an imperfect gift.

general rule you do not need special words to effect a trust.

with gifts courts do not want loose words to bind a settlor

settlors can say things – I will definitely give you something when I die. courts do not want this to be binding

Jones v Lock

father put check into the hand of his 9 month old son. I give this to the baby.

was this a gift or trust. no it was too loose.

neither.

precatory. in a will – questionable whether words are intended to be binding

if you say they are intended to be binding then they are

re kensington vestry

it is all about INTENTION

must be an intention to create a trust

I have confidence that X will do the right thing – NOT enough

I give this to someone on the basis that he will go to university. this is precatory words. there is a trust or gift it DEPENDS on what the words are

more likely preactory words associated with gifts

if you have preactory words with a gift then the gift is valid but you do not have to abide by the precatory words

T you do something on condition that something is done

precatory words are different from conditions precedent and conditions subsequent – on these conditions will or will not be valid

whether something has to be done for you to take the gift

condition precedent if you are 6 foot tall

condition subsequent – gift on condition you then complete university

interest in a property passes usually when the item is handed over.

Paul v Constance

words – as much yours as mine. court said this made a trust

Mrs. Paul won.

ordinary people do not need to use special lang to form a trust

Twinsectra case. that is an example of a quistclose trust

known for Lord Millet’s explanation of a quistclose trust.

Quistclose Trust – 2 trusts going on. circs . He lends me money on basis that i do something with the money

I fail to do what I was told to do. purpose falls through or not possible to.

first trust is him entrusing me with the money

second trust when the purpose fails. a quistclose trust arises where I hold the property on trust for the settlor. settlor gets the money back

proprietary interest.

this matters because a bank may have lots of creditors. is a debtor to many. owe lots of people money

quistclose brings him to top of creditors pile . allows him to get money back from a bankrupt party. he has a proprietary interest.

===============

Quistclose. loan given to rolls razor by Q to pay off a debt

goes into liquidation not having paid the debt

creditor Quistclose rose to the top of the insolvency pile

===========

certainty of subject matter – what is the trust property?

problem when circs such as money or gold. each one is indistinguishable

Re London Wine Company

GoldCorp. bars of gold identical. no trust property because you could not tell them apart

if you have some property that meets the description of the trust property – it must be designated as belonging to the B

if gold bars are coming and going and number is not constant there is no trust property

Hunter v Moss. shares are real trust property because of share cert numbers

might be different if there was enough gold in GoldCorp’s coffers to support the claim. but there were not enough sometimes. number varied. it was X bulk

there was not enough gold to satisfy the claim

===================

certainty of objects

B principle.

morris v bishop of durham

there must be a B.

if there is a charitable purpose there is no need for a B

a trust can be for a non- charitable purposes.

saying mass. named animals. graves

Re endacott. useful memorial to myself

non charitable purpose trusts

fixed trusts. how do you tell if the trust is certain or not?

you must be able to have a list of B’s

T must have a complete list

if distributing funds equally is decided by number of Bs-‘s

with fixed trusts need complete list

is or is not test. Gulbenkian.

McPhail v Doulton. Baden No 1.

this applies to a discretionary trust

3 certainties problem question. what sort of disposition.

gift? fixed trust? discretionary trust? Power?

we know what a gift is

fixed trust

discretionary trust where an element of distributing trust property is decided by T.

power – different from trust

T you have an obligation to follow what T says if you are a trustee

with a power the holder of the power chooses to exercise or not

someone who owns property has power

disposition of a power (giving it to someone else). is rare

what did McPhail v Doulton. Trustees shall apply income of the fund at their absolute discretion for the benefit of the employees or relatives or any persons on any conditions as they think.

any of the officers or employees or ex officers or ex employees.

is that certain enough to be a trust?

In Baden 1 is it POSSIBLY a trust? yes. possible

previously for discretionary trust you needed complete list for Trust to operate

IRC case. assumption said this trust did not apply. no complete list

court said previously power was valid if is or is not test applied. say whether a person is or is not in the clas.

in cases of equal division fixed trusts you need a full list

In discretionary trust you do NOT need a full list. is or is not test

McPhail v Doulton. in trusts there is a requirement of administrative workability.

must be feasible. must be doable to distribute the funds.

district auditor. trust for benefit of any or all or some of W Yorks. unworkable.

not to with how wide the trust. if it is TOO wide the trust fails.

if it is too hard to find those people

Baden 2. decision. court of appeal. was trust valid? question was if we can prove that some people fall within the definition of trust but there are some people are unsure about does the is or is not test fulfilled?

they fudged it.

is or is not test – must be a substantial core of those who are inside the class.

Baden 1 and 2 DISCRETIONARY Trust. trust was VALID

=============

Re Tuck.

of Jewish blood.

court said valid trust. condition precedent. certain.

delegate an expert to decide

Lord Denning criticised distinction between conceptual uncertainty versus evidential uncertainty (unworkability)

Baden 2 was lenient on is not test

one judge Sachs said in Baden 2. is or is not applies to conceptual uncertainty but NOT to evidential uncertainty.

Lord Denning said distinction between conditions subsequent and precedent is wrong. he said look to the INTENTION of the settlor

Baden 2 in problem question say this test applies and is or is not test applies.

one judge said you need substantial core of objects that satisfies the test

another one said objects must be conceptually certain but not evidentially certain

you decide which approach is better

say if you think this are wrong. law is unclear.

get high marks in problem questions

Megaw LJ. he said we need a substantial core of people are in the trust that is ok

Sachs LJ said difference between conceptual and evidential uncertainty

Barlow – when does it apply. ?

goes against Baden number 2. but Barlow does NOT apply to discretionary trusts. Barlow is about gifts

Barlow. disposition. testatrix any of her friends and family could buy her pictures. had the option. gift of a power.

idea was several options exercisable who could satisfy test of friendship. friend is too vague

express trust this would not work saying it is for friends

if you need complete list of B this would not work.

condition precedent you do not need complete list of B’s.

gift of 10 pounds to be friends is valid. they might NOT get equal shares.

there is a CORE of people who are definite friends.

T will distribute it. Barlow is about that. Gift or possibly a fixed trust. complete list not need because of logic of trust.

===============

next UK election

Labour. 42% 410

Con. 28% 156

Lib Dem. 13% 20

Reform UK. 6% 0

Green. 4% 1

SNP. 3% 30

others. 4% 22

equity and trusts. chapter 16. p 184 onwards

self assessment

1. in what circs will trustess be all liable?

when they breach trust or are negligent. even if the individual did nothing wrong

2. in what circs will a T NOT be liable for a breach of trust?

no negligence or breach and ought reasonably be excused.

3. when can a T claim an indemnity from co-trustees?

not for breach

4. what is necessary for a B ‘s consent to a departure from the trust terms to be valid?

5. what does it mean for a B’s interest to be impounded?

He cannot access it or use it

6. to what limits may a trustee exemption clause go to relieve a trustee of liability for breach of trust?

to the extent that it does not allow breach of trust

7. in what circs will the court relieve a T under section 61 of the trustee act 1925?

where it is fair and reasonable and there is no personal breach of trust or negligence.

activity 16.8

watterson s limitation of actions, dishonest assistance and knowing receipt

a. In williams how did the claimant’s arguments attempt to extend the definition of trustees?

Those who were not officially trustees were considered to be trustees.

b. what did the SC reject this argument?

c. how did the claimant’s arguments attempt to extend the definition of constructive trustees?

d. why did the SC reject this argument?

e. which premise of the SC is questioned by watterson?

f. which similarities does watterson highlight between constructive trustees and expressed trustees?

g. How does Arthur v AG Turks and Caicos Islands support Watterson’s analysis?

there was property which had been Crown land. sold to the appellant – Mr. Arthur – on favourable terms

he then sold it on for a big profit- it was claimed with inside knowledge and corrupt intent

He got freehold in Jan 2008 and sold in March.

Did torrens system rule out a claim that a registered owner is a constructive trustee because he knew of breach of trust?

the interpretation and application of the Turks and Caicos Islands Registered Land Ordinance. RLO

example of Australian cases in an interpretative sense.

The Privy Council agree with Court of Appeal that Oz cases are irrelevant.

proprietary and personal remedies are DIFFERENT in knowing receipt.

The torrens system and the RLO did not allow the appellant’s arguments any merit

appeal dismissed and appellant had to pay for it

activity 16.9

AIB group plc v Mark redler

this says that the but for rule applies in equitable compensation.

a. outline the breach and the relief which the bank alleged against the solicitors

the bank said that the solicitors were supposed to find out about the money in 2 accounts. they found out about 1 account and thought this was the total for both.

b. how did the solicitors breach the terms of the council of mortgage lenders’ handbook?

they made a mistake then realised it but did not tell AIB. breach of trust and fiduciary duty

c. identify the numerical difference between the bank’s calculation of liability and the solicitor’s calculation and the important fact which explains the source of the gap.

d. which broad principle of equitable compensation was identified by lord Browne Wilkinson in the target holdings case?

Browne Wilkinson that the defendants had to compensate not just for the loss caused but ALSO for loss that occurred that would have occurred anyway even without wrongdoing by the defendant.

e. identify the two fundamental principles to an award of damages at common law?

compensation is only for damages caused by breach

put the claimant back in the position he would have been but for the breach

f. identify the basic rule to an award for breach of trust in equity.

compensation in equity does not differ with the nature of the trust

======

sample exam Q

1. to what extent is a third party defendant ‘s state of knowledge relevant in claims for personal liability to restore the trust?

it is relevant. because if he had knowledge he must disgorge ill gotten lucre. if not he may keep it.

2. Stanley was a solicitor who often advised Tom the chief trust officer of a large trust co. In 2014 he advised him to invest in a large portion of the value of the Adams family trust in investment banned by the trust instrument to enhance the returns on the trust land. Tom agreed with the idea and did. The strategy failed and the trust is only worth half of what it was

in 2015 Stanley negligently prepared a tax saving scheme for the Bryson family trust which Tom implemented and which resulted in an unnecessary 30 K tax liability. In 2016 Tom asked Stanley to prepare docs for transfer of a house from Carling family trust to the widow of the family

Stanley was sceptical about the transfer being allowed by the trust terms but in response to question Tom said It is ok the widow needs the house and we are covered by exemption clause.

Stanley did the transfer. all 3 trust instruments contain exemptions for trustees for any loss except when caused by his own fraud.

advise B in each trust.

B can take action against Tom who breached his fiduciary duty regarding the terms of the trust. Tom must put back the lost money. this is regarding investing money.

About the tax saving scheme both the solicitor and the trustee are liable. The trustee must check it is done properly.

Regarding transferring the properties there is no cause of action because of the exemption clause.

3.

Tamara a trustee breached the Trust she manages by failing to invest the trust property with due care and so the fund is worth less than it should be

selling the title of land held by the trust a transaction banned by trust terms

making an unauthorised payment to Barney one of the B who realises it is a breach but consents

advise Tamara.

She is liable for the injudicious investment.

She is liable for selling the land.

She is liable for giving the money to Barney because the others did not consent.

17.2 boardman v phipps

Boardman solicitor of family trust including 27% of a company. He was worried by the accounts of the co.

He said to protect the trust a majority shareholding is needed. He and beneficiary Phipps went to shareholders’ AGM.

they thought they could turn co around.

they said to a trustee called Fox that it would be good to get majority shareholding. Fox said trustees could not do so.

with knowledge of the trustees boardman and phipps bought the shares themselves – a majority. they did not get the fully informed consent of all B

by capitalizing the assets the co made a distribution of capital without reducing share value/

the trust benefitted by distribution of 47 K. boardman and phipps made 75 K

John Phipps (another Phipps) was a B and he sued for profits saying their was conflict of interest

High Court. Wilberforce J saod thay Boardman had to pay for breach of duty of loyalty by not accounting to the co for that amount of money but he could be paid for his services

Court of Appeal.

Lord Denning, Russell and Pearson said Wilberforce was right and that Boardman and Phipps breached duty of loyalty. they became self appointed agents of the trust and this caused conflict of interest

they were liable for profits earned but they were able to get remuneration for services rendered

Lord Denning – even the plaintiff said that that they should get paid for services

in actions like this there must be restitution. defendant enriched himself unjustly and it is unconscionable that he be allowed to keep the money. the claim for repayment must not go so far as to be unjust.

the court could allow the defendant to be paid something if he had been above board. depends on circs.

this is equitable

the house of lords.

majority in Lords said that there MAY have been conflict of interest – solicitor and B might have come to boardman for advice about buying shares. they owed a fiduciary duty to avoid POSSIBLE conflict of interest

they were negotiating over use of trust s shares.

majority disagreed about the info used by boardman and phipps

lord cohen said the info is not property and it does not follow that because the agent go the info and the opportunity while acting as a fiduciary then he is accountable. his liability turns on the facts

boardman was liable because he got the info through fiduciary relationship

2 other menbers of the majority hodson and guest said that info can be property in certain circs and in the current case it was trust property

boardman was speculating with trust property and was liable.

majority agreed that liability to account for profits made by virtue of a fiduciary relationship is strict. does not depent on fraud of dearth of bona fides.

phipps and boardman did NOT have to account for profits. they were remunerated for their services

Upjohn said that Phipps and Boardman should NOT be liable because a reasonable man would say there was NO conflict of interests. there was no way the trustees could seek boardman s advice to buy the shares at any rate boardman could have declined to act if asked to

it is said a trustee does his duties and mau then do whatever he wants even if it causes conflict of interest.

he said reasonable man would allow phipps and boardman to keep money.

regal hastings v gulliver is different. that was where principals were thinking of buying property. shares are different

upjohn said info is not property.

explain the views of the majority and minority

majority said info is property and there was conflict of loyalty

minority said it is not property and no conflict. what the T did was not to impair B’s interest.

state which view you prefer

minority.

self assessment

1. to which of the folllwing profits does the no profits rule apply?

a. director s fees earned by a trustee elected to represent the trusts share holding

b. a company agent s year end performance bonus

c, bribe paid to a solicitor to settle a case on favourable terms

d. a secret commission paid by a vendor to a purchaser s agent

17.3

read holder v holder 1967 and explain why the self dealing rule was not applied here

17.4

state whether the self dealing rule, fair dealing rule or neither applies

a. a trustee sells her shares in XYZ to the trust

v. an agent for an antiques dealer offers to buy the latter s antiques business

c. a trustee pays an income B 10 000 to purchase the B ‘s right to income under the trust for the next 10 years

d. a solicitor buys a painting for Jonah for whom he acted in divorce proceedings

e. a director of ABC ltd enters into a contract on behalf o for the purchase of raw materials from XYZ ltd a private company she owns.

self assessment

1. in a trust who is the fiduciary?

2. state the no conflict rule as simply as you can.

3. what is the no profit rule?

4. what was the breach of fiduciary duty in swindle v harrison?

5. what duties if any breached if

a Trustee buys a second hand car from the trust

b. a trustee biys a second hand care from one of the B of the trust?

sample exam Q.

equity and trusts. Simon Jones

a trust document makes things clear

resulting and constructive trust there is no trust doc or written trust created but is inoperable

a court implies a trust to create R or C trust.

resulting T. court says it imposes a trust ebcause that was REAL intention of parties. No general equitable doctrine.

R trust gives expression to true intention of parties . Beneficiary will be original donor.

Simon wants to go abroad. has land thinks him being abroad will not enable him to manage the land

Simon makes simple convyenace of land to me. 2 possibilities –

idea is that i hold land on trust for simon.

maybe we agreed orgally that I use it for SImon s benefit

but if I am a crook because no formal trust set up expcet formal transfer of land

then I claim it is absolutely mine.

Simon can applies to court to say he never intended to deprive himself of the land beneficially and intended to create a trust

if simon can persuade the court hat he never intended to make a transder then even if I make oppsite argument then the land will make it a resulting trust

land has been transferred to me.

in circs where there was no proper agreement then there is a resulting trust

‘if Simon gives land for free there is no presumption of advancement because I am not a relative.

it was never his intention to deprive himself of beneficial interest

I own land for SImon s benefit

as he is sole beneficiary of full age then he can apply to have land formally re transferred back to him once there is a resulting trust

court gives true effect to the agreement or intentions

leading case- Westdeutschlands bank v LBC Islington. 1996

A makes a voluntary payment to B. A did not intend to make a gift to B.

If there was a joint purchase by A and B there is a rebuttable presumption

A transfers property to B on express trust but trust does not exhaust beneficial interest

trust is incapable of being performed.

held on trust for the donor.

what looks like a gift cannot be a gift. give reality to the expressed intentions.

constructive trust. grey area.

more where the court says that cannot be right. general idea of trusts as equity

funds or property given by mistake. common intention to give property to a party.

it is unfair that a person is claiming legal and beneficial ownership

case that identified partially resulting trust and partially constructive

Re Denshan 1975. dispute about matrimonial home

husband sole legal owner. wife contributed to purchase price. they had agreed joint ownership

court said wife owned half the house through a constructive share. she had 1/9th share as a resulting trust.

constructive trust is not about presumed intention.

family arrangement – parents and children. if parents give it to kids there is presumption of advancement.

burden is on me to prove that the presumption should be overturned.

constructive trust is more flexible

if the woman has made contributions to mortgage direct or indirect then she gets a constructive trust even i f they couple are not married.

matrimonial assets. a spouse does NOT need to prove contributions.

resulting trust is more powerful because in Denshan husband had gone bankrupt. trustee in bankruptcy wanted to seize the house. wife wanted the house .

she was not fighting her husband but against the trustee in bankruptcy. court ruled she has a resulting

trust of 1/9th of the house. that meant she did not have to give it to trustee bankruptcy

her constructive trust over 1/2 the house did NOT prevent the trustee in bankruptcy.

resulting trusts go back to donor.

if a trustee uses property for himself this is wrong.

a trust can be held for child as beneficiary. The donor has given the legal ownership to trustee.

charitable trusts.

purposes. poverty. education.

only by charitable trust that you may create a trust for a purpose. does not need to have an identified human beneficiary.

no political trusts.

a charitable trusts are enforced by charities commission.

charities must benefit the public.

a political party is an incorporated association

unincorporated associations. small clubs

a political party can incorporate companies to own assets.

resulting trust is always beneficial interest goes back to donor

constructive decides that another person is the beneficiary not the donor

trust fund. if you create a trust fund for your child as a tax avoidance mechanism it will fail.

if you create a trust for grandchildren

a donor cannot revoke a trust even if he is the sole trustee

fiduciary – Fee dosh a ree.

law against perpetuities – 99 years

cestui que

he who comes to equity must come with clean hands

equitable remedies – concerning laches meaning delay. you must bring equitable claim asap.

tops Irina and Anne Marie

Irina

Oct 2017

August 2019

December 2019

October 2020

October 2023

ANNE Marie

May 2017

August 2017

December 2017

March 2019

August 2019

December 2019

August 2020

MORE tops

Sasha

Vika

Sarah R

Judith M

Jenn P

Nigerian

Benedetta

Jane T

Lizzie

Zulfira

Gulya

Danara

Nori

Elena

Irina Architect

Leena

Camini

Jade

Rifat

Katrin

Angharad

Sarah E

sex equality in the UK

men get in trouble for looking at women, compliments, asking women on dates

women get away with murder

only women get pregnant but leftists are willfully stupid.

women can end a career by accusing someone of harassment

unfair trials for men accused by women of crimes

women can take off jackets.

men pay on dates

men work longer hours, die younger, worse educational results. higher unemployment, prison, suicide, drug addiction, alcoholism.

women can get rich in their 20s through marriage

=============

pro life and pro choice

pro life – mum, dad and baby get to live

pro choice – 1 gets killed and only 1 gets a choice.

rugger world cup

A. Australia. Wales. Romania. Uruguay

B. New Zealand. Scotland. Italy. Japan.

C. England. France. Tonga. Canada.

D. South Africa. Ireland. Georgia. Western Samoa.

E. Tonga. USA. Russia. Namibia.

F. Zimbabwe. Fiji. Argentina. Spain.

G. Ivory Coast.

best name for a welsh florist

Dafydd Ill

samizdat

Fr forrester

eireannach v eamonn

methinks

redactions and reactions

Neil hamilton

figures and facts

citizenship

countries of the world

prime ministers

adolescent odyssey

oligarch’s repititer

history of ireland

history of england

history of france

history of germany

international relations

why the recitation is false

feminism is evil

a vindication of the raj

torrid tales

the man of the moment

black and tans

malachi

loyalists

a dream of Anthony Turner

I was in winterland. methinks I met relies.

I got the news taht Anthony had died. I had met him the day before. He was uncharacteristically quiet. Unemotional – distant. lost in thought. a touch melancholy

WHen I found out he was dead i SHRUgged it off. seemed to represent his nihilism – that his death is nothing

i went to the funeral. oddly it was only the priest and I there. The church was a modern Catholic one – bland empty interior

everyone else showed up late and they were apologetic. Olan was there. he came to Bridget;s removal despite not being related. I shrugged it off. did not mind

did not seem strange that priest went ahead without the others present

I hVE BEEN thinking that Anthony shall die this year and Joan next year. I feel at peace with it. such vapid conversations with them. what is there to say? they shan’t change