Monash Law Students’ Society
STUDENT TUTORIAL
PROGRAM 2015
SKETCH NOTES
Equity
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Section 1: Introduction Cases included in the Semester 2, 2015 Reading Guide which are not referred to in these notes: •
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Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266. FHR European Ventures LLP v Cedar Capital Partners LLC [2014] 3 WLR 535. Wilson v Ferguson [2015] WASC 15. 4 ASSIGNMENT OF PROPERTY RIGHTS IN EQUITY (1) Voluntary Assignment of Legal Property Where a party seeks to voluntarily assign legal property (gift), and fails at law, equity will ordinarily not assist the volunteer. However, in some circumstances the rule in Corin v Patton will find the assignment effective where the assignor has done everything they must do to effectuate the transfer, and then removed themselves from the process (Milroy). (a) Property where the rule in Corin v Patton can apply. Property Torrens System Land Legal Requirements for Assignment Registration of a proper instrument of transfers, signed by both transferee and transferor, lodged with the Duplicate Certificate of Title: (s 40 TLA 1958). Equitable Requirements for rule in CvP Instrument of transfer in registrable form delivered or constructive delivery to assignee with DCT. Won’t be made out where: • Fail to request DCT from bank (Corin). • Instrument of transfer missing or in wrong form (Milroy). Shares Registration in books of company of an Execute transfers and deliver or sold off-­‐ instrument in the prescribed form with constructive deliver share certificates market the share certificates (s 1071B (Milroy). Where only remaining step is Corporations Act 2001 (Cth)). registration by company (Re Rose). Choses Absolute transfer in writing, signed by If assignee is equipped with valid notice and in action the transferor, and notice to the debtor merely needs to show debtor to change or other party of the transfer (PLA s 134). legal title: Norman. s 134 provides only the power to assign an obligation, not change the character of the debt itself (Bluebottle). All that is assigned is the chose in action or debt, not any associated rights (Equuscorp). (b) Property where the rule in Corin v Patton can not apply Where property is either fully transferred, or not transfer (i.e. there are no steps or gaps between starting the process and the transfer) there is no scope for the rule in Corin v Patton to apply. Property General Law Land Choses in possession Cheques Requirement for transfer Assigned by deed (s 52(1) PLA 1958). Intention of transferring legal ownership with delivery: • possession (Re Stoneham); or • constructive possession (Thomas v Times). “Bearer” or “Cash” cheques by delivery. Cheques made payable to person endorsement and delivery (s 40 Cheques Act 1986 (Cth)). Cheques are either assigned or not: Jones v Lock. (c) Constructive delivery Has the assignor delivered or constructively delivered all relevant documents to the assignee? •
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Giving to agent where the assignor can still call off the relevant transaction = No (Milroy). Placing somewhere and informing the receiver wh ere the property is = Yes: (Thomas). 5 (2) Assignment Only Recognised in Equity There are two categories of assignments of present property recognised only in equity: •
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where the property is only recognised in equity; or where the manner of dealing with legal property is only permitted in equity. The test for equitable assignment is has there been a manifest intention to immediately assign (Shepherd per Kitto J). •
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Therefore there must be a manifest or clearly expressed intention, an intention that is evidenced by implication is not manifest. The intention must be for assignment to occur immediately, if I write a birthday card today purporting to grant you equitable property, but the birthday card is found tomorrow, there was not an immediate intention. However, if I deliver the birthday card tomorrow, this demonstrates that my intention is still immediate. (3) Assignment of Future Property (a) Is it future property? Future property is property that has not yet come into existence, or to which the transfer is not yet entitled. It is property that someone hopes to own. (b) For Value Where a party assigns future property for value, equity will recognise that equitable title has passed at the moment the property becomes identifiable in the hands of the assignor (Tailby). (c) Voluntarily Equity will not recognise the voluntary assignment of future property (Williams). However, in Shepherd the High Court recognised the assignment of those aspects of present property which may give rise to future gains. Case Assignment Williams The first £500 of trust income. Norman Next year’s dividends payable on shares. All right, title and interest in respect of next year’s interest payable on the first 3,000 pounds of a loan. Outcome Invalid assignment of future property. Invalid assignment of future property. Menzies CJ – invalid assignment because the future existence of the loan was contingent on it not being repaid which the debtor could do so at will. Windeyer J – valid assignment carving out a present property right. Shepherd All right, title and interest in and Barwick CJ – valid assignment of a carved out part of to 90% of the royalties entitled to the present chose in action. me under a licence agreement Importantly, it contemplated no property existing in for the next three years. the future. ‘Are you assigning the future fruit from the tree, or the part of the tree that will grow the fruit?’ 6 BREACH OF CONFIDENCE Breach of confidence is an equitable doctrine that protects rights of confidentiality. Equity will protect information that satisfies the three elements stated by Megarry J in Coco v AN Clark in addition to the requirement for specificity from O’Brien v Komesaroff. (1) The Information Must be Specific Firstly, the information claimed to be confidential must be defined with sufficient precision (O’Brien v Komesaroff). Ask, which part of the information was not common knowledge (O’Brien v Komesaroff per Mason J)? This requirement exists because a common remedy for breach of confidence is injunction, thus the information must be able to form the subject matter of an injunction (Ocular Science). In addition, the requirement exists so that the defendant may formulate an individuated defense to the items of information allegedly misused (Ocular Science). (2) Information must have the necessary quality of confidence Secondly, the information must have the necessary quality of confidence that equity is concerned with protecting. This question may be considered in two limbs, secrecy and value. (a) Secrecy It cannot be claimed that information is ‘confidential’ if it is a matter of common knowledge. Thus it cannot be public property or public knowledge (ABC v Lenah). Does the Ask: Has the information entered the public domain? Factor Degree of accessibility If generally accessible then the info will be considered in the public domain. Case Examples Jane Doe – Rape victim testifying in Court. ABC published her name. • People who know who she is due to their presence in the courtroom have been brought into the circle of secrecy. • People who were not in the courtroom were subject to a statutory regime designed to keep them uninformed. • Therefore, not easily accessible. AFL – subscribers to a media information service were notified of info. • a limited dissemination to a small group of people will not remove confidentiality. Circle of secrecy. Authority of Speculation, gossip or even an assertion from an anonymous source is not disbursement sufficient for information to have entered the public domain: AFL. Effectiveness of If an injunction is ordered, will the relevant detriment be avoided: AFL? Injunction? This will indicate information is sufficiently secret. Security of Lenah – films of possum slaughtering released and distributed by ABC. Location? • Private property did not exclude public access to the requisite level. • The slaughter of possums was heavily regulated, took place on regulated facilities and the process was privy to govt inspection. 7 (b) Value Equity is not concerned with protecting banal or trivial information. The information must have some sort of value. (i) Commercial value Case Talbot Facts/Outcome T.V producer pitched an idea for new TV show with scripts of questions, structure of episodes and camera set ups etc. • The idea of talking to millionaires about generating wealth was banal and trivial. • However, once it had been written up as a format for a T.V program, with a script, that does involve sufficient creation to attract equity’s attention. Franklin A nectarine grower owned a new breed of nectarine, developed through cross-­‐pollination and grafting. A rival and former employee stole a branch from the grower’s property. • The information was sufficiently specific as the genetic encoding contained within the product tree. • The tree, as a self-­‐replicating source of information, was distinguished from some other scientific and genetic information where there would be laboratory notes or a different source of the same information. • Once the first element was made out, secrecy was clearly established and, as a classic trade secret (a secret formula or product) value was also established. (ii) Non-­‐commercial value Equity may also protect information that has non-­‐commercial value. Case Foster Giller Facts/Outcome An anthropological book published details on a group of indigenous Australians and their religious practices • The information was secret in the relevant sense as only those initiated into the religion and brought into the circle of secrecy knew of it. • Information of religious practices has a value in social dignity. Films of sexual encounters, some with and some made without the P’s knowledge. • Typically the information that someone is having sex is not a secret (eg. a couple with a child). However the mode of depiction can be secret – knowing and seeing is different. (iii) Information without value / banal Case Lenah Facts/Outcome A factory in Tasmania processing Possum meat. A group of animal activists snuck into the factory and hid a camera which recorded the butchering of the animals. • The factory is, in the relevant sense, a public place. No gates or guard dogs or other security. Many regulatory officers attended and business tours occurred. • Everyone knows what occurs in a butchering factory. The knowledge that animals are killed and processed is banal and not of the appropriate value. Douglas Secret photos of celebrity wedding that were to be exclusively published elsewhere. v Hello! Lord Walker (in dissent) may be considered as stating the Australian position. • That a party is offering to pay for something does not mean it is valuable info. • The details of a wedding are banal. There was no personal intimacy. • There was no pioneering innovation in weddings. 8 (3) Circumstances Importing the Duty Equity does not provide a carte-­‐blanche protection for all secret and valuable information. Equity fastens to the conscience which must be bound by circumstances importing a duty of confidence. (a) Where the information was given Where the information has been given to the defendant, the question is whether a reasonable person, standing in the recipient’s shoes, would have realised that the information was given in confidence (Coco per Megarry J). The classic example is the employee, who is given information in the context of work. (b) Where the information was taken Where information is stolen or taken the Court will import a duty of confidence (Franklin v Giddins). (c) Where the information passes to a third party? Where information passes to another party, the action may be made out again. The analysis of specificity and value will be the same. However, each person in a chain of recipients must acquire the information in circumstances importing a duty to be so bound. For example, in Franklin v Giddins the male defendant stole the relevant information however the female defendant was also liable for breach of confidence by virtue of her knowledge of the theft. (d) Where the information was transmuted accidentally? Where an obviously confidential document is wafted to a third party, or where someone comes across an obviously confidential document accidentally, an obligation of confidence may arise (A-­‐G v Guardian per Lord Goff). The question is an objective one; would a reasonable person in the shoes of the recipient realise that the document was obviously confidential? (4) Unauthorised use The fourth element for breach of confidence, is that the information must be used without authorisation (Coco per Megarry J). •
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Where information is taken any use will be unauthorised (Franklin; Talbot). Where the information is given there may be some authorised uses. Ask whether the information was given as part of a voluntary scheme or mandatory scheme? What is the regulatory framework / purpose of the information? •
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Ensuring truth in advertising does not require regulative vetting of ads for truth (Castrol). Preventing poison in the community is a stricter regulative purpose and may indicate more powers to insist for information (Smith-­‐Kline). There is no need to show detriment (Moorgate per Gummow J). 9 (5) Defences (a) Iniquity A defendant may argue that they only disclosed information in breach of an obligation of confidence in order to bring to light some wrongdoing. This is the defence of Iniquity, and is subject to a three step test set out in AFL v Age: (1) is a serious wrong or civil misdeed being disclosed; (2) is the iniquity of public importance (that is, does it impact the community); and (3) is the disclosure to a third party with a real and direct interest in redressing the alleged wrong (will the disclosure actually help fix the wrongdoing)? You cannot plead your own iniquity to defeat someone else’s duty of confidence (Kumar). (b) Public Interest A defendant may argue that the UK defence of public interest ought to apply in Australia (Lenah per Gleeson CJ). This is not settled law in Australia (AFL) however may apply if D can satisfy the court that there is a public interest in having the information known (Castrol). (6) Remedies Breach of confidence gives rise to personal remedies only, therefore the available remedies are: (1) Injunction – primary remedy. a. Negative injunction – specific performance. (2) Equitable Compensation a. Lord Cairns Act damages – Talbot. b. Equitable compensation (Giller) including exemplary damages. (3) Account of Profits a. Money made from the information – usually trade secrets cases. Remember to elect! 10 FIDUCIARY RELATIONSHIPS (1) Is there a Fiduciary Relationship? (a) Accepted Categories Certain relationships are accepted as of a fiduciary character. This is not by way of a legal presumption or deeming, but because those relationships necessarily exhibit the characteristics that attract equity’s protection. •
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Partners – (Chan v Zacharia; Birchtnell). Trustees and beneficiaries – (Boardman; Keech v Sandford). Agents and Principals. Employees and Employers – (A-­‐G v Reid; Warman). Directors and companies – (Grimaldi; Regal Hastings). Solicitors and Clients – (Farrington v Rowe; KPMG; Nocton). (b) Factual Characterisation Where a relationship is not an accepted category, it may still be fiduciary where one party possesses powers or discretions, capable of affecting another’s legal or practical interests, in circumstances where the other party is vulnerable (Hospital Products per Mason J). Per Breen v Williams a doctor will not be a fiduciary relationship unless there exists some legal or practical interest of the patient in question – usually a pecuniary interest in either: • receiving competitively priced and appropriate medical care; or • commercializing aspects of the patient’s medical record. There is no general interest in: • being of good health (Breen v Williams); or • not being tortured (Habib). Parties to a joint venture will be fiduciaries where there relationship resembles a partnership and may occur prior to the actual formalities of a future partnership (UDC v Brian). (c) Scope of Relationship Relationships may be fiduciary as to all or some of their aspects. In determining the scope of the fiduciary duty, consider: • the extent of connection to the fiduciary position (VUT); • the content of the contractual relationship between the parties (Hospital Products). • the “character of the relationship” (Birtchnell); and • the “course of dealing actually pursued” (Birtchnell per Dixon J). However, the scope of duty will not extend to positive duties, which are the domain of contract and negligence (Breen v Williams). Not liable for profits gained outside scope of relationship (VUT). 11 (2) Breach of the Conflicts Rule? A fiduciary cannot enter into transactions where a serious possibility of conflict exists (Chan v Zacharia per Deane J). A real, sensible possibility of conflict, or not merely hypothetical, is required (Boardman per Lord Upjohn). There is no requirement for the fiduciary to be dishonest (Keech v Sandford). (a) Duty v Interest A conflict between a duty to one party and the interests of the fiduciary himself or herself. Nocton A solicitor advised a client to release a mortgage over a property the solicitor also had a mortgage secured against. Moved Nocton’s interest up in priority. Keech The renewal of a lease in the name of the trustee, not beneficiary. Boardman Boardman as solicitor to trustees acted with the trustees to obtain directorship of a company to great financial reward to all parties. Including Boardman = breach. Chan Dr renewed a lease in his own name, benefitting himself at expense of partnership. (b) Duty v Duty A conflict between a duty to one party and a duty to another party. No one can serve two masters Concurrent duties – arises where both duties are owed simultaneously. In Farrington a solicitor advised one client, who had won moneys in a personal injuries matter, to invest in another client (who subsequently went bankrupt). This was a conflict of the solicitor’s concurrent duties to both clients. Successive duties – arises where former duties clash with current duties. In KPMG the Court held KPMG’s obligations to a former client ended at the termination of their retainer and that the only recourse was breach of confidence. However, in Victoria Spincode suggests that KPMG was wrongly decided and that the fiduciary obligation survives the termination of any retainer. It was important that the solicitors also owed a duty to the court to act with integrity throughout the carriage of litigation. The duties to the client flow from this, not a fiduciary duty. In Chan the relevant partnership had ended yet the doctor exercised powers or discretions that the other was vulnerable to misuse. Arguably fiduciary obligations following the termination of an accepted category are possible where they satisfy a factual category of fiduciary. Pilmer Directors of M1 and M2 and shareholders in M1 convinced M2 to purchase M1. They obtained an independent evaluation of M1 which subsequently overstated its price. The fiduciary obligations of the accountants ended when they delivered their report to the board of directors (c.f. Kirby J who says it ends when delivered to shareholders). 12 (3) Breach of the Profits Rule? A fiduciary cannot make unauthorised profits through exercising their powers or discretions as fiduciary (Chan per Deane J). This is known as the profits rule, and extends to a benefit or gain obtained by reason or use of the fiduciary position, or opportunity or knowledge resulting from it. It is no defence that the fiduciary gave consideration for the profit or exercised skill in creating the profit. Equity will be very strict in enforcing the profits rule, even where enforcing it will grant other parties a windfall (Regal Hastings). Chan Dr refused to renew a lease with the partnership and instead, covertly renewed in his own name and to his profit. UDC v Three parties agreed to construct a shopping centre (builder, land owner, financier) as a Brian joint venture. The land-­‐owner and financier entered an agreement whereby the rents from the shopping centre would pay off a separate debt owing to the financier. Regal A cinema company’s directors, solicitor and friends formed a subsidiary, capitalised it Hastings with their own funds and acquired the lease over the only other cinema in town. They then sold this monopoly at a commercial price however, by acquiring the shares in the subsidiary had made a profit. Boardman Boardman as solicitor to trustees acted with the trustees to obtain directorship of a company to great financial reward to all parties. There was a causal nexus between Bs role as solicitor and knowledge of the opportunity and not all trustees consented. A-­‐G v Reid Taking bribes and secret commissions – clearly unauthorised profits. (4) Defences -­‐ Consent Consent may be a defence to breaches of the conflict or profit rules. There are several conditions: • All fiduciary beneficiary’s must unanimously consent (Boardman). • A company’s board can give consent on behalf of a company to all but themselves as Directors (Regal Hastings). Directors likely also need approval of the shareholders at an AGM except where the shareholders nominated the Board (QLD Mines). • Consent must be real and genuine and fully informed (QLD Mines). • The consent may come either before (approval) or after (ratification) the event. QLD Mines seems to suggest that a party may consent by acquiescence. However, this proposition is yet to be endorsed into Australian law since this 1978 Privy Council case, and is arguably at odds with the proposition of full and informed consent. (5) Remedies Personal Account of Profits • Liable for a profit made within scope/ambit of duty (Warman). • Profits in breach of duty (Regal Hastings). Equitable Compensation • Loss incurred through investing (from conflict) (Farrington). Equitable Rescission – of the transaction entered with P (McKenzie). Injunction – restraining fiduciary from breaching obligations (Spincode). Property Constructive trusts (Boardman). Equitable liens (Warman). 13 (6) The Rule in Barnes v Addy (a) Knowing Assistance A third party who, with knowledge, assists a trustee in a dishonest and fraudulent design will be liable per the second limb of the rule in (Barnes v Addy). (i) Assistance in a dishonest and fraudulent design. Assistance may in advance, helping plot or plan, or after the event in dealing with the asset. The conduct need not be criminally fraudulent nor morally reprehensible (Farah Constructions), therefore the threshold for this is very low (Westpac). (iii) Knowledge In Farah Constructions the Court endorsed the Baden scale of knowledge with categories (1) – (4) being sufficient to attach liability. (1)
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Actual Knowledge; Willful blindness; Willfully and recklessly failing to make reasonable inquiries. Knowledge of circumstances which would indicate the facts to an honest and reasonable person. (5) Knowledge of circumstances which would put an honest and reasonable man on inquiry. (b) Knowing Receipt A third party who knowingly receives trust property will be liable per the first limb of the rule in Barnes v Addy. (i) Property Includes property held on trust and subject to other fiduciary obligations (Grimaldi). However, it does not include property which does not belong with the plaintiff: •
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In Consul a director misappropriated an opportunity to acquire a house and used another company to acquire it instead. Knowing assistance, not receipt, as house never belonged to P. Would also include bribe moneys / secret commissions etc (A-­‐G v Reid). (ii) Receipt Must acquire some form of title, not merely act as a conduit in the transfer of the fiduciary asset. (iii) Knowledge • Categories (1) – (4) of the Baden scale will be sufficient: Farah confirmed in Grimaldi. • May receive the property innocently and receive the knowledge later: (Varga). (c) Remedies Barnes v Addy liability is personal, therefore only personal remedies are available. 14 PERSONAL REMEDIES Where more than one is available the plaintiff may elect (Warman). The P may collect from each defendant to the extent of the elected remedy (Club of Clubs). However there is to be no double compensation. (1) Remedies (a) Non-­‐money legal remedies Remedy Factors Specific 1. Parties must be willing and able to perform. Performance 2. No continued supervision required (JC Williamson – where services required ongoing cooperation (cinema confectionary)). Commonly ordered where one off performance contracts – e.g. sale of land. Injunction & 1. Granting must be just and convenient (s 37(1) SCA). Specific 2. Balance of convenience may be influenced where one Delivery party makes an undertaking (Foster). 3. Parties need to show a serious question to be tried and that they have a prima facie case (ABC v Lenah). 4. Does a negative injunction effectively demand specific performance? a. Lumley – opera singer can chose not to sing at all. b. Atlas – company is not versatile and has no other operations. Declarations 1. Will only be useful where the relevant party would follow the declaration of law (E.g. Government) (Cth v Sterling). 2. Need not be the only remedy (r 23.05 Sup Court Rules). Equitable 1. Because there is a transaction you may assume consent Rescission to entering the transaction. 2. Rescission to the extent of non-­‐disclosure (Vadasz – party gave a guarantee on a misunderstanding of its terms). 3. Partial rescission is not available for unauthorised profits (Maguire – contrasted Vadasz as a stand alone transaction). 4. Where you would be entitled to rescission however can not obtain it (e.g. BFPVWN) money in lieu is permitted: (McKenzie v McDonald). Pecuniary rescission v equitable compensation – timing? Outcome Obligations under the relevant contract must be performed. The status quo is maintained. The correct statement of law is made authoritatively The transaction is rescinded. 15 (b) Money remedies Remedy Account of Profits Factors 1. Extends to all profits made in the context of the breach (Boardman). However, if it is argued that the profits themselves are held on trust, then dealings in them may also be within scope. 2. Where the D has made a simple gain, strip the D of that gain (Regal Hastings). 3. Where the D has created a stream of profits, obtain AoP for the ‘head start’ period (Warman). 4. Allowances can be made for contributions of time and effort to make the profit (VUT). Lord Cairns Court may grant damages in addition to, or in substitution Act Damages for, an injunction or specific performance (s 38 SCA). 1. Injunction or specific performance must have been available at the time of the suit commencing (Mills). Mills decided not to exercise an option to purchase based on a misrepresentation. Sought specific performance then discovered another had acquired title. Note: no duty to mitigate whilst in Court seeking ownership of the relevant property. Outcome Creates a debt owing by the D to the P. A disgorgement remedy which does not impact ownership. Moneys in lieu of specific performance (c) Equitable Compensation Remedy Equitable Comp Factors Outcome 1. Measured at the time of the judgment: Re Dawson. Compensates the P 2. Causation of loss is a “but for” test (Youyang – Minters for their losses. released moneys improperly. Even though some loss would have occurred anyway, Minters liable). a. However, note the “common sense” test in Canson. b. Why can’t we rely on mitigation? Orthodoxy. What losses are compensable? 1. Trustee paying out money improperly (Re Dawson). 2. Releasing trust money prematurely (Minters). 3. Compensation for the release of security interest (Nocton). 4. Costs of maintaining children based on estoppel (W-­‐G). 5. Embarrassment and humiliation (Giller). 3. Not exemplary damages: (Harris per Heydon J) however possibly aggravated damages (Giller). 16 (4) Causation and the Common Law Common Sense Causation -­‐ equitable novus actus interveniens? In Canson solicitors aided in a land transaction however “flipped” the property to give themselves a secret profit as part of the transaction. A building was constructed however, due to an engineering error, had to be reconstructed. •
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Breach of the profits and conflicts rule was made out an, applying “but for” causation the solicitors would be liable for the reconstruction. However, applying equity’s “common sense” approach the solicitor’s could not be said to have caused the engineering error. Therefore no liability. Common Sense Causation -­‐ Equitable mitigation? In CBA v Smith clients of the CBA sought financial advice in circumstances comparable to a solicitor-­‐
client relationship. The CBA advised Smith’s to invest in property of another client which was non-­‐
profitable. • Breach of the conflicts rule was made out and clearly the losses would not have occurred but for the advice of the CBA. • However the CBA was not liable to compensate for the entire loss as the Smith’s should have abandoned the investment when they discovered it was unprofitable. Not mitigation, but an application of “common sense” causation. Both are an application of equity’s common sense causation, however rely on analysis rooted in the same motivations for the doctrine of novus actus or mitigation. Therefore, when shaping your understanding of common sense causation, look to the same sorts of matters as in common law. 17 PROPRIETARY REMEDIES Proprietary remedies are only available for breach of fiduciary duty. Two remedies: Remedy Constructive Trust Equitable Lien Outcome P gains equitable title in the asset -­‐ must be yielded to them P gains a security interest in the asset, securing another debt. Priority Yes – trust assets excluded from bankrupt estate. Yes – secured creditors take priority over unsecured. Change in $ Yes – P has ownership. No – P limited to debt. (1) Constructive Trust A trust imposed by equity where it would be unconscionable for the legal owner of an asset to retain the beneficial interest in that property. (a) Misappropriation of fiduciary asset A constructive trust is automatically imposed at the moment the misappropriation occurs. (b) Misappropriation of opportunity Occurs where the property would have come to the plaintiff, but for the defendant. A constructive trust may be imposed over the asset at the moment the misappropriation occurs. This is discretionary for the Court to determine, having regard to the impact of the CT on innocent parties (VUT v Wilson). Where a constructive trust cannot be imposed, consider imposing a lien or other arrangement. Boardman Boardman acquired the opportunity to take up directorship over the textiles company and make a profit for himself and the other trustees in his role as fiduciary. • Therefore a CT was imposed over his shares in the company. VUT v Two university employees collaborated with a third person to invent and patent a new Wilson IP right -­‐ whilst on Uni time, using Uni resources and on Uni premises. • Could not impose a CT over the patent as that would unduly hurt the third party. Cannot carve out a right held in a joint venture. • Since the three had incorporated a company and assigned it the patent in exchange for shares the Uni could be granted a CT over the shares of the two fiduciaries. (c) Fiduciary receipt of bribes or secret commissions Where the property would never have left the third party had the fiduciary had acted properly. Lister A-­‐G v Reid Sinclair P has no logical property claim to ownership, therefore no CT available. Lister is wrong, do not treat criminal fiduciaries worse than the innocent Boardman. CT imposed at the moment of receipt on the basis of doing justice. Lister is correct, there is no property logic for the property falling to the plaintiff. Proprietary remedies unduly impact third parties and justice should be done through personal remedies. Grimaldi Lister is not correct Australia law. A proprietary remedy is available however not mandatory and should not be granted where it would unduly impact third parties. 18 (2) Tracing Where a fiduciary exchanges an asset, which another enjoys equitable title to, the equitable owner may trace their title to the new asset (Foster). (a) Where Property is mixed into an indistinguishable pile. Where property is mixed in an indistinguishable pile and then used, for profit or loss, the plaintiff can elect whether or not it was their property that was used (Brady v Stapleton). (b) Where property is combined into an intangible asset. Where the indistinguishable bundle is used to acquire an intangible asset, ownership is proportionate to ownership of the bundle (Foskett). (c) Where property is combined to create a new tangible asset. Where the indistinguishable bundle is used to acquire a new tangible asset ownership is proportionate to ownership of the bundle (Scott v Scott). (d) Where property is combined to improve an existing tangible asset. Where the relevant asset is added to an existing tangible asset (e.g. bricks are added to someone else’s house, or fur pelts are added to someone else’s coat) equitable title is extinguished. (i) Against a wrongdoer: The Plaintiff can instead claim equitable compensation for the reduction of trust property secured by an equitable lien over the improved asset. (ii) Against a third party However, where the recipient is an innocent volunteer (that is, a volunteer without notice) or BFPFVWN the title will be extinguished and no personal remedies will be available (Re Dawson). 19