LAWS3113
LAWS3113 Summary 1

1. INTRODUCTION ........................................................................................................ 6
D EVELOPMENT OF THE C OURT OF E QUITY ............................................................................. 6
Earl of Oxford’s Case [1615] ............................................................................................... 6
Chancellery = court of conscience .................................................................................... 6
D
IFFERENCE BETWEEN
CL
AND EQUITABLE REMEDIES
: ....................................................... 6
F
USION
? ...................................................................................................................................... 6
I
NTRODUCTION TO TRUSTS
: ...................................................................................................... 6
2. EQUITABLE MAXIMS ............................................................................................... 7
E
QUITY WILL NOT SUFFER A WRONG TO BE WITH A REMEDY
................................................ 7
E QUITY FOLLOWS THE LAW ...................................................................................................... 7
E QUITY WILL NOT ASSIST A VOLUNTEER ................................................................................. 7
H E OR SHE WHO SEEKS EQUITY MUST DO EQUITY ................................................................... 7
H E OR SHE WHO COMES TO EQUITY MUST COME WITH CLEAN HANDS .................................. 8
E
QUITY ACTS IN PERSONAM
...................................................................................................... 8
E
QUITY LOOK TO INTENT RATHER THAN THE FORM
,
SUBSTANCE AND NOT THE FORM
...... 8
E
QUITY LOOKS UPON THAT AS DONE WHAT OUGHT TO BE DONE
.......................................... 8
D
ELAY DEFEATS EQUITY
............................................................................................................ 8
E
QUITY IS EQUALITY
.................................................................................................................. 8
3. EQUITABLE INTERESTS IN PROPERTY ............................................................. 9
W
HAT IS AN EQUITABLE INTEREST IN PROPERTY
? ................................................................. 9
C LASSIFICATION OF EQUITABLE INTERESTS ............................................................................ 9
Equitable proprietary interest .......................................................................................... 9
Mere Equity ............................................................................................................................... 9
Latec Investments v Hotel Terrigal ................................................................................. 9
Personal equity ..................................................................................................................... 10
C
REATION OF EQUITABLE INTERESTS
................................................................................... 10
E
QUITABLE INTEREST OF PURCHASER
.................................................................................. 10
P
RIORITY BETWEEN INTERESTS
............................................................................................ 11
4. ASSIGNMENTS OF PROPERTY ........................................................................... 11
D EFINITION OF ASSIGNMENT : ................................................................................................ 11
Norman v FCT ....................................................................................................................... 11
Shepherd v FCT ..................................................................................................................... 11
Williams v Commis of Inland Revenue ........................................................................ 12
L
EGAL ASSIGNMENT
................................................................................................................ 12
Elements of legal assignment: ........................................................................................ 12
Advantages and Disadvantages of legal assignment ........................................... 12
E
QUITABLE ASSIGNMENT
....................................................................................................... 12
Elements of assignment in equity ................................................................................. 12
Milroy v Lord.......................................................................................................................... 12
Anning v Anning ................................................................................................................... 13
Corin v Patton........................................................................................................................ 13
S200 PLA – voluntary assignment ................................................................................ 13
Expectancies .......................................................................................................................... 13
Rights assignable in equity .............................................................................................. 13
Notice of equitable assignment ..................................................................................... 13
LAWS3113 Summary 2

Advantages and disadvantages of equitable assignment .................................. 13
Priority between successive equitable assignments: ............................................ 13
5. NATURE/CLASSIFICATION OF TRUSTS ......................................................... 14
W
HEN DOES A TRUST COME INTO EXISTENCE
? .................................................................... 14
D
EFINITION OF TRUST
............................................................................................................ 14
3 parties to trust: ................................................................................................................. 14
Equitable personal obligation ........................................................................................ 14
C LASSIFICATION OF TRUSTS : .................................................................................................. 14
Express trust .......................................................................................................................... 14
Resulting trust ....................................................................................................................... 15
Constructive trust ................................................................................................................ 15
O
THER TYPES OF TRUSTS
: ...................................................................................................... 15
P
OWERS OF APPOINTMENT
.................................................................................................... 15
6. THE 3 CERTAINTIES ............................................................................................. 16
2
WAYS OF CREATING AN EXPRESS TRUST
: ........................................................................... 16
R EQUIREMENTS FOR CREATION : ........................................................................................... 16
3 CERTAINTIES – K NIGHT V K NIGHT , P ASCOE V B OENSCH ................................................ 16
Certainty of intention ......................................................................................................... 16
Certainty of subject matter.............................................................................................. 17
7. BENEFICIARIES OF TRUSTS ............................................................................... 17
C
ERTAINTY OF OBJECTS
.......................................................................................................... 17
T
RUST POWER
......................................................................................................................... 18
M
ERE POWER
.......................................................................................................................... 18
H
OW DOES COURT WORK OUT WHETHER MERE OR TRUST POWER
? ................................. 18
D ISCRETIONARY TRUSTS ........................................................................................................ 18
P URPOSE T RUSTS .................................................................................................................... 19
G IFTS TO UNINCORPORATED ORGANISATIONS ..................................................................... 19
Leahy v A-G (NSW) .............................................................................................................. 19
Bacon v Piantai ..................................................................................................................... 20
S33Q Succession Act ........................................................................................................... 20
8. CHARITABLE TRUSTS .......................................................................................... 20
N
ATURE OF A CHARITABLE TRUST
......................................................................................... 20
Differences with express private trust ........................................................................ 20
Relevance of characterization as charitable trust? .............................................. 20
T EST FOR BEING CHARITABLE : .............................................................................................. 21
Income Tax Commissioner v Pemsel ............................................................................ 21
Central Bayside GP Assoc ................................................................................................. 21
AidWatch v Commis for Tax ............................................................................................ 21
Relief of poverty .................................................................................................................... 21
“Aged” ....................................................................................................................................... 21
“Sickness”................................................................................................................................. 22
“Education” ............................................................................................................................ 22
Advancement of religion ................................................................................................... 22
Public Benefit ......................................................................................................................... 22
Other benevolent purposes .............................................................................................. 23
M IXED CHARITABLE AND NON CHARITABLE PURPOSES ...................................................... 23
F AILURE OF CHARITABLE PURPOSE ....................................................................................... 23
LAWS3113 Summary 3

R
EGULATORY DEVELOPMENTS
.............................................................................................. 24
9. FORMALITIES IN THE CREATION OF TRUSTS ............................................. 24
R
EQUIREMENT OF FORM
........................................................................................................ 24
R
EQUIREMENT OF STATUTE
................................................................................................... 24
E
XEMPTIONS FROM WRITING REQUIREMENT
....................................................................... 25
R ESULTING TRUSTS ................................................................................................................. 25
Automatic resulting trusts ............................................................................................... 25
Presumed resulting trusts ................................................................................................ 25
R EBUTTAL OF PRESUMPTION OF RESULTING TRUST ........................................................... 26
T
RUSTS OF LAND
..................................................................................................................... 26
D
ISPOSITION OF EQUITABLE INTEREST
................................................................................. 26
Application of s11(1) .......................................................................................................... 27
E
QUITY WILL NOT PERMIT A STATUTE TO BE USED AS AN INSTRUMENT OF FRAUD
......... 27
C
OMMON INTENTION TRUST
.................................................................................................. 27
10. TESTAMENTARY TRUSTS ................................................................................ 28
F ORMAL REQUIREMENTS : ...................................................................................................... 28
Hensler v Padget .................................................................................................................. 28
Re Garris .................................................................................................................................. 28
R EVOCATION OF WILL ............................................................................................................. 28
P
ROPERTY THAT CAN BE DISPOSED OF BY WILL
................................................................... 28
N
ATURE OF TESTAMENTARY DISPOSITION
........................................................................... 29
N
EED FOR TESTAMENTARY CAPACITY
.................................................................................. 29
M
INORS
.................................................................................................................................... 29
T
ESTAMENTARY TRUST
.......................................................................................................... 29
D ELEGATION OF TESTAMENTARY POWER ............................................................................ 29
S ECRET T RUSTS ...................................................................................................................... 30
Elements of secret trusts ................................................................................................... 30
Blackwell v Blackwell......................................................................................................... 30
Voges v Monohan ................................................................................................................. 30
M
UTUAL TRUSTS
..................................................................................................................... 30
11. INVALIDATING FACTORS ................................................................................. 31
3
TYPES OF INVALIDATING FACTORS
: .................................................................................... 31
P
OLICY BEHIND RULE AGAINST PERPETUITIES
..................................................................... 31
R ULE AGAINST PERPETUITIES ................................................................................................ 31
P ROGRESSIVE EVOLUTION OF RULE ....................................................................................... 31
R ULE IS CONCERNED WITH THE VESTING OF PROPERTY ..................................................... 31
F
UTURE GIFTS
.......................................................................................................................... 31
E
XCEPTION TO RULE AGAINST PERPETUITIES
...................................................................... 32
P
ERPETUITY PERIOD
............................................................................................................... 32
L
IVES IN BEING
........................................................................................................................ 32
Re v Clarke .............................................................................................................................. 32
The rule in Andres v Partington .................................................................................... 32
D
ISPOSITION TO CLASS
........................................................................................................... 33
W IDOWER ................................................................................................................................ 33
R ULE IS CONCERNED WITH POSSIBILITIES AND NOT PROBABILITIES ................................. 33
P RESUMPTION AS TO FUTURE PARENTHOOD – PLA S 212 ................................................ 33
O THER REFORMS – S 212 PLA .............................................................................................. 33
“W
AIT AND
S
EE
” ..................................................................................................................... 33
LAWS3113 Summary 4

Example of ‘wait and see’ v CL ....................................................................................... 34
A
GE REDUCTION
...................................................................................................................... 34
C
LASS GIFTS
............................................................................................................................. 34
C
OMMON LAW
4
STEP PROCESS
:............................................................................................ 34
C
AN STATUTORY MODIFICATION SAVE THE GIFT
? ............................................................... 34
R ULE AGAINST PERPETUAL TRUSTS ...................................................................................... 35
P UBLIC POLICY ......................................................................................................................... 35
I LLEGALITY .............................................................................................................................. 35
12. VARIATION AND TERMINATION OF TRUSTS ............................................ 36
I
NHERENT POWER OF COURT
................................................................................................. 36
E
XPRESS POWER TO VARY TRUSTS
........................................................................................ 36
Variation of superannuation trusts ............................................................................. 37
Family law .............................................................................................................................. 38
T
ERMINATION OF TRUSTS
...................................................................................................... 38
13. COMPLETE CONSTITUTION OF TRUSTS ..................................................... 38
L EGAL TRANSFER OF TRUST PROPERTY ................................................................................ 38
N ECESSITY TO COMPLETELY CONSTITUTE TRUST ................................................................ 38
E NFORCEABILITY OF INCOMPLETELY CONSTITUTED TRUSTS ............................................. 39
M ARRIAGE CONSIDERATION .................................................................................................. 39
T
RUSTS OF BENEFIT OF COVENANT
....................................................................................... 40
LAWS3113 Summary 5

Development of the Court of Equity
Henry VII transformed English Law – developed royal courts of justice – the Normans who made English law a national law
Chancellery emerged as a distinct court of equity
Earl of Oxford’s Case [1615]
King James ruled in favour of the Chancellery – meant that no one would challenge the chancellery again
Chancellery = court of conscience
Court applied a moral test – different from CL
Courts of equity to examine conduct and whether fair or reasonable
Decide whether moral impropriety
Discretion not relevant in Cl but relevant in equity
Equity to operate on the conscience of the owner of the legal interest, in the case of trust, the conscience of the legal owner requires him to carry out the purposes for which the property was vested in him
Difference between CL and equitable remedies:
Common Law: o Damages o Ejectment
Equity: o Compensation o SP o Injunction o Rectification o Account for profits o Declaration
Fusion?
Fusion fallacy – are common law and equity fused into a new component of law? o Murakamiv v Wiryedi – rejected the fusion fallacy approach o Modern approach – no fusion o S5(11) Judicature Act 1876 (Qld) – where conflict between law and equity, equity will prevail
Introduction to trusts:
Trusts defined in Trusts (Hague Convention) Act 1991 (Cth)
LAWS3113 Summary 6

o Article 2: “trust refers to the legal relationships create intervivos or on death – by a person, the settler when assets have been placed under the control of a trustee for the benefit of a beneficiary or for a specified purpose”
Characteristics of a trust: o Trust assets are separate funds and not part of trustee’s estate o If trustee becomes bankrupt, bankruptcy laws will not apply to trust’s assets o Trustee = legal owner of trust assets o Trustee has power to dispose of assets in accordance with terms of trust and special duties imposed on them by law
Equity will not suffer a wrong to be with a remedy
Chancellery originally intervened where no remedy at CL via injunction or
SP
Demonstrates flexible nature of the courts of equity
Warman International v Dwyer (1982) o Man worked for company and was privy to sales contract beween company and consumer o Decided to leave company and open up own business, took consumer with him o Company sued him for profits gained in breach of fiduciary relationship and exploitation of goodwill
Equity follows the law
Developed after Earl of Oxford’s Case to reconcile tensions between law and equity
Courts will recognise legal rights such as legal title
Doesn’t follow law blindly, where unconscionability – scope for intervention
Equity will not assist a volunteer
Volunteer = someone who ahs not provided consideration
Maxim not strictly applied – eg. where beneficiaries under express trust – volunteers but can still enforce rights
Generally applied where courts will not enforce gifts of property
He or she who seeks equity must do equity
Person seeking relief must be ready and willing to fulfill own legal and equitable obligations
King v Poggioli
LAWS3113 Summary 7

o Courts could not award SP or damages in equity as P was not shown to be ready and willing to perform
He or she who comes to equity must come with clean hands
P seeking equitable relief must not have engaged in improper conduct regarding the matter
However, sometimes where P has engaged in improper conduct court may be prepared to grant relief if Ps disgorge themselves from wrongful benefit
Rhodes v Badenach o Ps refunded money that they were not entitled to so remedy was provided
Equity acts in personam
Originated in days where there were two actions: state or individual
Concerns with individual
Penn v Lord Baltimore o Equity maintains ability to make orders even if outside jurisdiction
Equity look to intent rather than the form, substance and not the form
Courts of equity are not concerned with unnecessary formalities
Milroy v Lord o However, court cannot look past transactional provisions – eg. production of transfer document and share certificate
Equity looks upon that as done what ought to be done
Some cases relief will be granted on assumption that legal or equitable obligation has been completed
Walsh v Lonsdale o D entered into lease and paid consideration o Lease required to comply with terms in Property Act to be enforceable at law o D didn’t pay rent and argued no leases as didn’t comply with terms o Equity held lease regarded as being notionally executed because tenant was in possession and had paid rent
Delay defeats equity
If party delays in seeking relief court will take this into account
Equity is equality
Maxim often applied where 2 or more people have intention to share property equally and equity will provided comp to ensure that this occurs
LAWS3113 Summary 8

What is an equitable interest in property?
Equitable interests are proprietary in nature
Ability of person to exclude others from the right of that thing and transfer it at will
Yanner v Eaton o Property is a description of a legal relationship between a thing and an individual
Will not always be both equitable and legal interest in property –
Commission of Stamp Duties v Livingston
Classification of equitable interests
3 types: o Equitable proprietary interest o Mere equity o Personal equity
Equitable proprietary interest
Interest recognised by court as having equitable jurisdiction
Eg. Interest of beneficiary under fixed trust o Trustee has legal title and beneficiary has some rights to that property
Has equitable remedies open to them
Mere Equity
Equitable interest less than a equitable estate but more than a personal right of action against a person
Right to seek equitable interest to acquire proprietary interest
Not regarded by court as having property as such, requires court proceedings to establish this
Can seek relief to set aside unconscionable transaction
Mere equity capable of being transferred to 3 rd party
Latec Investments v Hotel Terrigal
Facts: o HT had mortgaged property to Latec o HT couldn’t make payments o Latex seized property and sold in sham auction o Transferred property to Southern Hotels, a subsidiary of Latec – thus selling it to themselves at gross undervalue
 This was in breach of their equitable obligation o SH charged property to MLC Insurance
LAWS3113 Summary 9

o SH liquidated
Ruling: o Agued sale of land of Latec to SH was nullity o Argued action of hotel was unconscionable because of sham auction o HT were given ‘equity in redemption’ subject to MLC’s interest as an innocent party
Personal equity
Right to seek equitable relief but cannot lead to acquisition of a proprietary right
Cannot be assigned
Creation of equitable interests
Equity will recognised interest in places where law doesn’t, for example, due to lack of form, such as an equitable lease
Walsh v Lonsdale o D entered into lease and paid consideration o Lease required to comply with terms in Property Act to be enforceable at law o D didn’t pay rent and argued no leases as didn’t comply with terms o Equity held lease regarded as being notionally executed because tenant was in possession and had paid rent
Can also arise due to implication o Eg. Vendor’s equitable lien implied where purchaser has taken transfer of estate but not paid whole purchase price – vendor has equitable lien to ensure payment of deposit even if contract is terminated – Hewett v Court
Person falling under class of objects of discretionary trust has no proprietary interest in assets of trust only mere expectancy or hope –
Kennon v Spry
Beneficiaries of unadministered estates do not have equitable interests – just right to compel due administration- Livingston v Commission of Stamp
Duties
Equitable interest of purchaser
Vendor holds property on constructive trust for purchaser who has paid consideration and where contract is capable of SP – gives purchaser equitable interest
Lysaght v Edwards o “Moment valid contract of sale, vendor becomes in equity, trustee for the purchaser of the estate sold”
KLDE Pty Ltd v Commission of Stamp Duties o Contract for sale – deposit of 10% Paid o Purchaser liquidated – assets distributed to shareholders
LAWS3113 Summary 10

o Court held beneficial ownership held by vendor until full amount paid
Priority between interests
Legal interest will yield to equitable interest where legal owner created equitable interest through fraud or negligence o Northern Counties Insurance Co v Whipp
 Legal owner lost priority as negligent by not securing certificate of tite which led to rogue getting loan
Legal interest will yield to equitable interest where equitable interest was created first o UNLESS, person who acquires legal interest is a ‘bona fide purchaser for the value of the land without notice’ – Pilcher v
Rawlins
Where two equitable interests, the first in time will prevail o Will examine whether holder of prior interest has done anything or failed to do anything to create the later interest
 Eg. Delay – Latec Investments
 Eg. Parting with transfer docs – Heid v Relance
Definition of assignment:
Norman v FCT: o “Immediate transfer of proprietary right from assignor to assignee”
Norman v FCT
Attempt to assign interest and dividend from shares to avoid tax
Dividends were held to be expectancies – property that may or may not arise in the future
Wife (receive or interest and dividend) was volunteer – equity does not assist a volunteer
Held: dividend couldn’t be assigned – merely expectancy
Shepherd v FCT
Inventor entitled to royalties
Tried to assign “right, title and interest” in 90% of royalties over 3 years
Assignment made under deed but beneficiaries did not provide consideration – volunteers
Tax commission argued beneficiaries = volunteers and royalties = expectancy
Held: Assignment was of contractual right not royalty
LAWS3113 Summary 11

Need to look at intention of parties
Williams v Commis of Inland Revenue
Attempted assignment of first $500 income from trust fund
Held: assignment = ineffective – no guaranteed income
Legal assignment
s199 PLA o Equuscorp v Haxton held that this section did not affect equitable assignments
Elements of legal assignment:
1.
Absolute assignment o Not revocable, not condition, not operate as a charge - Equuscorp
2.
Debt or other chose in action can be assigned o Eg. interest of beneficiary under trust can be assigned
3.
Writing signed by assignor o Oral assignment does not satisfy s199PLA
4.
Notice has to be given to debtor o Giving of notice amounts to receiving – Leveraged Equities v
Goodridge
Advantages and Disadvantages of legal assignment
Advantages o No requirement to be supported by consideration
Disadvantages o Cannot assign part of debt – must be whole – s 199 PLA o Identity of assignee not kept confidential
Equitable assignment
Elements of assignment in equity
1.
Clear intention to assign
2.
Subject matter must be declared with precision and certainty
Milroy v Lord
Purported voluntary assignment of 50 shares
At law: no transfer of shares – no transfer doc
Dividends had been paid under assignment
Held: Ps = volunteers, to make voluntary assignment effective assignor must have “done everything necessary to make assignment”
LAWS3113 Summary 12

Anning v Anning
Days before he died H made deed to W and children of all property inc bank acct
Held: not effective to transfer property, could not operate as will
Corin v Patton
Memo of transfer signed but not registered
Asignee = volunteer – invalid transfer
S200 PLA – voluntary assignment
Voluntary assignment is effective and complete as soon as everything possible done by assignor
Expectancies
Cannot be subject of assignment at law
But can be subject of contract to be performed in future
Tailby v Official Receiver o Can have assignment of expectancy in equity where valuable consideration has passed
Rights assignable in equity
Part of a debt (consideration not necessary) – Shepherd v FCT
Interest of beneficiary under a trust – Controller of Stamps
Notice of equitable assignment
Do not have to give notice of equitable assignment - Thomas v NAB
Do at law – s199 PLA
Advantages and disadvantages of equitable assignment
Advantages: o Part of debt can be assigned o Writing not required, provided supported by consideration o Not subject to PLA o Assignment can be made for security
Disadvantages o Need assignor to be party to any action o Assignment can be subject to any equities which arise after assignment but before the debtor has notice of assignment
Priority between successive equitable assignments:
Dearle v Hall o Priority can be postponed if fail to give notice
LAWS3113 Summary 13

When does a trust come into existence?
When established by settlor
Operation of law to resolve a property dispute
Recognition of proprietary rights of a person who has contributed to property
Prevent the legal owner of land from unconscionably denying the rights of holders of equitable interests in land
Definition of trust
Equitable obligation where trustee hold property on benefit for beneficiaries or for a charitable purpose
“Relationship where legal title vest in one person (trustee) and equitable title in another (beneficiary) – Hardoon v Belilos
3 parties to trust:
Settlor – creator of trust
Trustee – one who holds legal title
Beneficiary charitable purpose – equitable title holder – right to due administration but not regarded as proprietary interest – Kennon v Spry
Equitable personal obligation
Trustee has obligation to act in benefit of beneficiaries or charitable purpose
Fiduciary obligation – must be exercised in good faith
Duties normally stated in trust deed – if not can rely on statute
Classification of trusts:
Express trust
Settlor expresses intention,
Can be classified as either: o 1) Fixed or
 Beneficiary is certain and has proprietary interest
 Eg. “ To be held in trust for A and B in equal shares”
 Also defined in statute o 2) Discretionary
 Trustee has absolute discretion as to whether beneficiary will be allocated income/capital from the trust
LAWS3113 Summary 14

Resulting trust
Court implies intention
Failure to create express trust
Often where property held on trust for settlor and evident that they did not intend trustee to have beneficial ownership
Can be classified as either: o 1) Automatic resulting
 Eg. A vests property in B for benefit of C and C dies, benefit goes back to A o 2) Presumed resulting
 Eg. A provides B with funds to purchase property in both names but B purchases in their name, presumed B in trust for A – Calari v Green
Constructive trust
Often declared irrespective of intention of the parties
Often where decided that it would be unconscionable for person to hold property without recognising person’s beneficial interest – Dodds
Other types of trusts:
Inter vivos trust o Where settlor transfers property to someone to hold in trust for someone else o Eg. A gives $500 to B to hold on trust for C
Testamentary trust o Trust created under will
Superannuation trust o Superannuation Act 1933 (Cth)
Powers of appointment
Powers of appointment are powers vested in individuals to deal with or dispose of property that is not their own, acting on behalf of someone else
Eg. power of attorney
Difference to trusts: o Whilst trusts are imperative, powers are permissive
Classified: o General – power to appoint to anyone in the world including themselves o Special – power to appoint to 3 rd persons only o Hybrid – power to appoint to anyone bar a certain class or group
LAWS3113 Summary 15

2 ways of creating an express trust:
1.
Declaration of trust
2.
Transfer of property to trustee
Requirements for creation:
1.
3 certainties
2.
Trust is completely constituted
3.
Complies with statutory requirements
4.
No invalidating factors
3 certainties – Knight v Knight, Pascoe v Boensch
1.
Certainty of intention
2.
Certainty of subject matter
3.
Certainty of object
Certainty of intention
Bahr v Nicolay (No 2) o A had option to reacquire land at the end of the lease to B o Intervening event occurred before end of lease and B sold land to another C o C were aware of option o When A sought to exercise option, C refused o Held: A could recover property – clear intention to create trust
Re Adams and the Kensignton Vestry o T gave estate to wife “in full confidence that she will do what is right” o Court held no trust obligation o Words “in full confidence” were uncertain
Dean v Cole o Words “trusting to her that she will divide in my fair, just and equal shares between my children” - words of confidence and not obligation
Hoyes v National Heart Foundation o T left estate to daughter “on the understanding” that would give to charities o Held to be trust despite no use of the word
Barclays Bank o Company A provided Company B with money to pay dividends to shareholders o Agreement that this money would not become assets o Bank was given notice of this o Money not paid for dividends because Company B liquidated
LAWS3113 Summary 16

o Held: trust for payment of shareholders and secondary trust in favour of bank if dividends not paid
Aus Elizabethan Theatre Trust Co o Donations made to AETT with preference made to specific organisation o Held: gifts were unconditional and did not create trust – no certainty of intention – merely preferential
Re Kayford o Mail order company placed customer’s payments in trust account o On liq funds were held in trust for customers o Held: trust created – company manifested clear intent to create trust
Commissioner of Stamp Duties v Joliffe o H opened bank acct in name of wife to avoid stat provisions o Signed stat dec saying bona fide trustee for wife o Held: despite doc material, H did not intend to create trust – to avoid prohibition
Certainty of subject matter
Hunter v Moss o Trust declared for over 50 shares in company o No particular separation of shares o Held: valid trust – all of the same class
Re Golay o Made trust of ‘reasonable income/ o Held: valid gift – reasonableness implied question of fact – open to beneficiaries or could go to court to decide
Assoc Alloys o Retention of ownership clause in sale of goods – would remain with seller until payment was received o Proportion of proceeds received by buyer would be subject to trust o No req for money to be kept in separate bank acct o Held: property was ascertainable – proportion of proceeds received by buyer
Certainty of objects
Object = beneficiary or beneficial purpose
Identity must be clear
Morice v Bishop of Durham o Provided to bishop “for such objects of benevolence and liberality as he in his own discretion shall approve of” o In prev case law benevolence = charitable
LAWS3113 Summary 17

o Held: Court could not exercise control, therefore the objects we’re certain, lack of enforceability inhibits judicial control
Mere fact that do no know who beneficiaries are is no longer essential to trust
Sufficient that provisions of the trust ensure that upon date of distribution the beneficiaries can be ascertained with certainty
Trust power
Donee is required to exercise power by choosing which object from a class of beneficiaries should be benefitted
If Donee fails to exercise, court may do so
Beneficiaries do not have any right to property until power is exercised, but have right ot due admin of trust
Mere power
Donee does not have obligation to exercise power in favour of a member of the class
Presence of people who will take it if the discretion is not exercised in favour of the class members
If done fails to exercise, beneficial estate vests in settlor by way of resulting trust
How does court work out whether mere or trust power?
If language is imperative – likely to be held as trust power
If discretionary – like to be mere power
BUT language not always decisive
Court looks at doc as whol
Gift over clause – often indicates mere power
Discretionary trusts
Within discretionary trusts there are distinctions depending whether trust or mere power o Trust power – given to trustee who is obliged to exercise discretion o Mere power – trustee can choose whether or not to exercise discretion, if not exercised most often will take effect in ‘gft over clause’
Re Gulbrenkian o Settlor established trust for son or any person whose house his son was residing o Regarded as mere power, although had to be exercised as result of fiduciary obligation o “Mere power is valid if can say with certainty whether or not any given individual is a member of the class but do not have to ascertain every member of the class”
LAWS3113 Summary 18

o Held: not necessary for court to determine every member of class but just whether individual a member or not
McPhail v Doulton o Settlor wanted to establish trust for employees of company and their relative dependents o Was to be in amounts as trustee saw fit o Court held did not require full list of names for this to be possible and did not need to be equal
Purpose Trusts
Trusts for non-charitable purpose is not valid because no one has standing to enforce it,
However, exceptions: o Trusts for upkeep of specific animals
 Re Dean o Trusts for erection of graves/monuments
 Valid if kept within perpetuity period
 Examples of invalidity:
 Pooley o Trust for erection of monument dedicated to child in cemetery
 Re Boning o Protecting property for 20yr after death o Trusts for purposes of unincorporated non-charitable associations o Miscellaneous cases
Gifts to unincorporated organisations
Unincorporated org is one where 2 or more persons bound for common purpose which generally has rules over its control
Not a separate legal entity and cannot hold property or be subject to legal rights
Eg. Club or society
Property cannot be left to unicorporated org
BUT can give gift if: o 1) Gift to indiv members o 2) Gift to members subject to the rules of the assoc o 3) Gift for continuing purposes of the assoc
Leahy v A-G (NSW)
Testator provided by will that property be held on trust for “nuns of
Catholic church or Christian brothers as executors and trustees shall elect” and residue of estate to build new convent or alter existing buildings
Held: gift was to selected order and not to members of order itself – held to be a trust – members spread all over world – not immediate beneficial gift
LAWS3113 Summary 19

Property was gift – could not be said to benefit all members
Bacon v Piantai
Gift to communist party not valid
“To communist party for sole use and benefit”
Could it be construed as gift to members? o “Gift to unicorp org prima facie construed as gift to member BUT if disposition amounts to a trust for benefit of both present and future or not for indiv but for some purpose gift will not be regarded as charitable”
Factors to look at: o Form of gift o Number/disposition of members o Subject matter of gift o Capacity for member to put end to assoc and distribute assets
Held: to be bequest to present and future members for purposes of party
– not construed as gift to indiv
Political purpose was not valid charitable purpose
S33Q Succession Act
Can save gift to unicorp org by classifying it as an augumentation of the funds of org
Nature of a charitable trust
Express trust created for charitable purpose
Eg. A transfers $1million to Uni of Bris to be used to create new scholarship
Differences with express private trust
Must be certainty of intention and subject matter
No need to stipulate which beneficiaries will benefit – just valid charitable purpose
Absence of named beneficiaries does not mean it will not be enforced – A-
G will enforce the trust
Relevance of characterization as charitable trust?
Tax concessions
Not subject to rule against perpetuities – could in theory last forever
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Test for being charitable:
For trust to be regarded as charitable it must come within ‘spirit and intent’ of Statute of Charitable Uses 1601 o Relief of aged, impotent and poor people o Maintenance of sick and maimed soldiers and mariners o Schools of learning, free schools and scholars in unis o Repair of bridges, ports, havens, causeways – public infrastructure o Education and preferment of orphans o Maintenacne of house of correction o Marriages of poor maids
Income Tax Commissioner v Pemsel
Redefined def. of charity: o 1) Trusts for relief of poverty o 2) Trusts for advancement of education o 3) Trusts for advancement of religion o 4) Other purpose beneficial to the community
Central Bayside GP Assoc
Non-profit company whose object was to improve health of community
Officers were largely funded by Cth
Lower courts held if link with gov could not be charity
HC rejected this saying that its key aim was improving care = charitable
AidWatch v Commis for Tax
Promotes advantageous relief of foreign aid
Engages in advocacy as to how funds should be allocated
FC said purpose was political – influence to change policy
Relief of poverty
Does not require destitution
Downing v Fed Commis for Tax o Trust for amelioration of condition of families of ex-servicemen = trust for relief of poverty
Re Gwyon o Reverend to provide clothing for boys in community not supported by charities o Held to be invalid as non indication that need was a feature
“Aged”
Hilder o House and land gifted to be used for nurses or elderly women
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o Held: accepted as valid trust, no need for extra element of poverty, need or adversity etc.
“Sickness”
Resch’s Will Trusts o Left residue of estate to hospital o Fact hospital charges fees did not deprive it of a charitable nature
– valid gift
“Education”
Not just confied to schools
Promotion of the arts = charitable o Perpetual Trustee v Gorth – gift of Archibald Prize o Re Municipal Orchestra – gift to orchestra – public benefit
Re Hopkins Will Trusts o Society behind working out where Shakespeares works came from o Held: pure research will be for education as long as published
Advancement of religion
Church of the New Faith v Commissioner of Pay-roll Tax o Religion requires:
 1) Belief in supernatural being, thing or principle and
 2) Acceptance of canons of conduct in order to give effect to that belief
Roman Catholic Archbishop of Melbourne v Lawlor o Trust must actually advance religion o Gift to Catholic daily newspaper was not confined to teaching catholic doctrine
Dunne v Byrne o Bequest to RC Archbishop of Brisbane o Possible for funds to be used for more than just the advancement of religion
Private religious ceremonies can be charitable – Crowther v Brophy
Public Benefit
Charitable trust must be for public benefit, presumed in some cases for relief of poverty, advancement of religion and education
Jensen & Ors v BCC o Religious fellowship – Brethren o Exclusivity of Brethren meant it was public worship/benefit
Re Comption o Trust to provide for education of children of 3 families o Not public benefit – only a small section of public
Oppenheim v Tobacco Industries o Trust provided for education of children of employees
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o > 11 000 employees o Not regarded as section of the public – beneficiaries must not be numerically determinable
Dingle v Turner o Trust for poor employees held to be charitable purpose
Other benevolent purposes
Incorporated Council of Law Reporting o Production of law reports = benefit to whole community
Bathurst CC o Public infrastructure = public benefit
Mixed charitable and non-charitable purposes
Trust for both charitable and non-charitable purposes used to be held to be non-charitable
If uses word charity courts will construe as charitable unless there is a contrary indication
Chicester Diocesan Fund v Simpson o Trust for ‘charitable or benevolent circumstances’ was not held to be a charitable purpose
Congregational Union v Thistlewaite o Trust for religious group which had objects of “the preservation of civil and religious liberty” and “maintenance of philanthropic agencies” o Objects were non-charitable but were construes as ancillary to religious objects of the union
Trusts Act 1973 s104 o Trust not invalid merely because its terms extend to both charitable and non-charitable purpose o Trust shall be construed as if no application of the trust property for a non-charitable purpose should be allowed
Roman Catholic Archbishop of Melbourne v Lawlor o Leg cannot be applied where charitable and non-charitable purpose cannot be separated
Failure of charitable purpose
If impossible or impractical to carry out charitable purpose trust may be saved under cy-pres doctrine
Doctrine is inherent chancellery doctrine now based on s105 Trusts Act
Re Anzac Cottage Trust o Purpose was to provide housing for homeless widows and dependents who died in WWI o Dominant purpose of trust was fulfilled – no longer able to advance purpose o Court held property could now be applied cy-pres
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o No indispensible requirement that money be used to provide for funds of the dependends of WWI o General charitable intention which can be fulfilled by providing for dependents of more recent conflicts
Is it impossible or impractical direction? Is it an indispensible part of the trust? o If yes then Cy pres can be applied
AG v Perpetual Trustee Co o T left farm to train ‘orphan lads’ o Farm was impractical for purpose o However use of farm was not ‘indispensible part of trust’
Re Lysaght o Money left to Royal College of Surgeons o Had discriminatory provision o College disclaimed gift rather than give effect to discrimination
Phillips v Roberts o Left property to improve biblical knowledge by establishing a new church o Held to be impractical to establish new church o Yet still expressed charitable intention o Applied in another way
Regulatory developments
Established ACNC – Australian Charities and Not for profit Commission
Charities use it for access to Cth tax concessions
This year draft was release a draft of leg to provide a statutory definition of charity
Requirement of form
Generally speaking, trust can be created in any form: o Deed o Will o Simple writing o Parol/word of mouth – Kennon v Spry
Requirement of statute
Rule has been modified by statute in relation to: o Trusts of land – PLA s11(1)(b)
 Has to be in writing and signed o Assignments or dispositions of existing equitable interests – PLA s11(1)(c)
 Signature and writing
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o Testamentary trusts – Succession Act 1981
 Will must be in writing and signed by testator and executed in accordance with act
Exemptions from writing requirement
PLA s11(2) o Resulting trusts o Implied trusts o Constructive trusts
 All trusts imposed by court and not express trusts
Resulting trusts
Implied by the courts
Resulting trusts classified as either: o Automatic resulting trusts o Presumed resulting trusts
Automatic resulting trusts
Where settlor has failed to dispose of beneficial interest
Pugh’s Will Trusts o P appointed solicitor as trustee and executor – not to take beneficial interest o Property left to trustee to dispose of at discretion o Held not to be trust – no instructions as to residuary estate o Failure of certainty of objects o Residual estate was held on resulting trusts for next of kin of testator
Re Trustess of Abbott Fund o Automatic resulting trusts are sometimes imposed hwere surplus assets in fund and where trustee has more than sufficient assets to satisfy express trust
Gillingham Bus Disaster Fund o Donations for memorial fund o Smaller donations made by unknown persons o Held: surplus was donors if could be identified as had given for particular purpose
Re West Sussex Constabulary Widows o Fund to be wound up o Rules said members couldn’t benefit, only widows o Money was held should go to donors
Presumed resulting trusts
Property purchased in ‘name of another’ – Calverley v Green o Equity adopts policy that if provided consideration prima facie you will be entitled to it
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o Often depends on intention of purchaser o Held: if no discernible intention then resulting trust in favour of purchaser o Man and woman lived together – man making payments – no presumption of advancement for de facto
 This has since been changed by leg
Napier v Public trustee o Man purchased in name of de facto wife who died and left house to
3 rd party o Held: when property transferred in name of someone else without consideration there is presumption transferee will hold property on trust for transferor
 Can be rebutted where ev idence of advancement – ie H puts in name of W
Rebuttal of presumption of resulting trust
Russell v Scott o Joint account between lady and nephew o Court had evidence of lady saying that on her death money would go to nephew o Prima Facie as lady had provided money should go to her estate o But evidence suggested nephew had interest
Re Bulankoff o Where gift made from parent to child – presumed to method of intended advancement
Nelson v Nelson o Woman obtained financial benefit from gov and made false declaration o Put house in name of children to get benefit o Aus recognised mother’s equitable interest and awarded relief on the basis that she must repay interest on loan
Trusts of land
PLA s11(1)(b) o 1) Declaration of trust – where one declares ptoperty will be held for someone else – Kenneth v Spry o 2) Land o 3) Proved by writing o 4) Who is entitled to that land
Disposition of equitable interest
PLA s11(1)(c) o 1) Disposition – defined in Sch 6
 Note: dif definition to Succession Act o 2) Equitable interest o 3) Subsisting at time of disposition
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Application of s11(1)
Will apply where a beneficiary under trust assigns or transfers his/her interest in trust o ‘Disposition’ for purposes of s11
Qld requirement: needs to be proved by some writing and signed by person disposing of interest
Gray v IRC o Oral direction to trustees to hold on trusts for another was an attempted disposition and was void
Applies to both land and personalty
Vandervell v IRC o Transfer by bare trustee of entire legal and equitable estate to third party at direction of beneficial owner o Held: equitable interest had been transferred and leg didn’t apply as both legal and equitable estate had been transferred to 3 rd party
Equity will not permit a statute to be used as an instrument of fraud
Equitable intervention: o Doctine of part performance o Rochefoucald v Boustead o Doctrine of secret trusts
Part performance o Prevents fraud though admission of fabricated oral evidence
Rochefoucald v Boustead o Equity considers it to be a fraud on the part of the person to whom the land is conveyed as trustee to deny the trust o Beneficiary of oral declaration of trust may enforce the trust not withstanding the lack of written evidence
Common intention trust
As requirement of writing has been excluded from creation of constructive trusts, many former co-habitees have relied on constructive trust
Gissing v Gissing o No written declaration/agreement or direct provision by P of purchase price o Must establish common intent between parties and could give rise to beneficial ownership
No requirement that common intent should be limited to time when property was first acquired
Difficulties of advising on extent of beneficial interest in common intention trust
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Formal requirements:
Manner of execution of will – Succession Act s10 o Must be in wiritng and signed by testator o Must be witnessed – 2 or more at same time
 S10(4) – changed law – witnesses do not have to be present at same time or know they are witnessing a will o (6) signatories can be on any part of will o s10 – must have intention of executing will o s10(9) - needs attestation clause – records how will was done o Testator must have signed doc with intent to make “last will and testament”
Hensler v Padget
Decided after amendments to the Succession Act in 2006
S18 confers power on court to dispense with execution requirements for will, alteration of revocation
Court will strive to save will if possible
If satisfied shows testamentary intention, courts will try save will even if other requirements are not met
Re Garris
Recognised s18 allows court to sanction making of will where some requirements haven’t been carried out - will admit evidence, even hearsay
(4) court not limited to what factors to take into account
(3) statements made by testator are admissible in court
If testamentary intention is clear then doc should act as will despite any lack of formalities
Revocation of will
Can be revoked by: o Another will revoking it o S14 – Marriage o S15 – Divorce
Property that can be disposed of by will
s8 – Property to which a person is entitled at time of death
Matrimonial home and superannuation may be governed by separate contract
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Nature of testamentary disposition
s5 – will includes codicil and other testamentary disposition – inc. gift, devise or bequest by will and creation or exercise of will by power of appointment
Nominations under super or pension schemes – Baird v Baird o Nominations are not testamentary dispositions as the interest of a member in the fund was not assignable o Don’t have to be executed in same manner as will
Need for testamentary capacity
Banks v Goodfellow o Test laid down – testator must understand the nature of act and it effects
Timbury v Coffee o Before will can be upheld must show testator had ‘sufficient mental capcity’ to understand nature of what doing and effects o Testator was drunk when made will – did not have testamentary capcity
Hensler v Paget o Had testamentary capacity but then was diagnosed with dementia o Was drafted with aid of solicitor o Held: valid testament
Minors
Minors can execute will if: o Married o Will in contemplation of marriage o Authorised by court order
Testamentary trust
Established under will
Takes effect of death of testator
Re Graham o “Give and bequeath… to my trustees upon trusts…” o Classic example of trust
Delegation of testamentary power
General presumption against delegation of testamentary power
Tatham v Huxtable o Person may not delegate testamentary power and is necessary, except in case of charitable trusts, for objects to be benefitted to be ascertainable o Will and power of executor to distribute estate to others not provided in will but who trustee thinks deserves benefit o Void due to uncertainty as class of beneficiary not defined
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Gregory v Hudson o Trustee had discretion to administer funds to world at large inc himself o Class of beneficiary not defined at all
S33r Succession Act o Power of trust, created by will to dispose of poerty is not void on ground that it is delegation of testator’s power to make will, if same power of trust would be valid if made by testator in lifetime
Secret Trusts
2 types: o Fully secret trust – eg. “I leave 50k” o Half secret trust – eg. “I leave 50 k on trusts which I have already told”
Elements of secret trusts
3 key elements: o Intention o Communication o Acceptance
Blackwell v Blackwell
Widow discovered after H’s death he had another child out of wedlock
Legatee bound to give effect to trust communicated to legatee and accepted by legatee
Voges v Monohan
Court enforced trust where evidence legatee was provided with money
Testator had 2 claims on etstae – servant and niece by marriage
Left whole estate to servant
Maj said trust was present
Voges was to provide for niece
Mutual trusts
Binding on both parties, provides reciprocal benefits
Prevents 3 rd party taking benefical interest
Bigg v Qld Trustees o H and W agreed to leave assets to each other and then equally to children from former marriages o H made investments in W’s name in accordance with agreement o W made will leaving assets to own children o Court held evidence of oral agreement and equity provided remedy
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3 types of invalidating factors:
1.
Rule against perpetuities
2.
Public Policy
3.
Illegal purposes
Policy behind rule against perpetuities
Performs useful social function in limiting the power of members of generations past from tying up property in such a form as to prevent its being freely disposed of in the present or future
Re Clark o Necessary to prevent tying up property forever
Rule against perpetuities
Air Jamaica v Charlton o “No interest is valid unless it must vest with a certain period of time – the date of the gift plus 21 years”
Rule has been modified by courts over time
Progressive evolution of rule
Duke of Norfolk’s case o Property has to vest within a life in being
Stephens v Stephens o Extended to include length of time that child was under gestation
Cadell v Palmer o Extended to be within 21 years of life in being
Rule is concerned with the vesting of property
Gift must vest within perpetuity period
When interest to vest several matters must be known: o 1) Who is person entitled to interest o 2) Interest must be ready to take effect upon possession upon any prior interest o 3) Gift mustn’t be subject to contingents
Future gifts
Rule against perpetuities has general application to future gifts
Doesn’t apply where immediately given gift, only where someone is given it in future o Eg. Successive generations enjoying same property
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Exception to rule against perpetuities
Mt Gravatt Showgrounds Act 1988 s24 o Rule against perpetuities has been excluded – any gift to showgrounds can continue indefinitely
Gift from one charity to another – s219(2) PLA
Options contained in leases – sometimes leases will contain option to purchase property subject of lease – if option exercisable within one year following determination it is protected by s219(2) PLA
Options for renewal or right of preemption contained in will – s218 PLA
Exercise of trustee power – s220A(1)(a)-(c) PLA
Superannuation trusts – s220(1)(d)
Perpetuity period
Maximum period for which the vesting can be postponed o A) Period of life in being + 21 years o B) 21 years where there is no life in being o C) Period not exceeding 80 years which is specified in the instrument – PLA s209
When does perpetuity period commence? o As soon as disposition takes effect
 A) Instrument inter vivos – immediately
 B) Will – at death
 C) Deed – when signed, sealed and delivered (may be exception)
Lives in being
a) Measuring life must be human
b) Person must be living at date when interest is created
c) If group of persons is used that group cannot be capable of increase – s210(5) PLA
d) Group must be ascertainable
Re v Clarke
Testator dies, one of provisions is trust for children of sons who attain the age of 25
Perpetuity period was 21 years after death of last life in being – which was children
If child did not obtain age of 25 in that 21 years they would be outside that vesting period
Thus, gift to grandchildren was held to be void
The rule in Andres v Partington
If, at the time the disposition takes effect, A has at least one grandchild who has attained the age of 21years, the class of beneficiaries is deemed to only include those already
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Disposition to class
s210(5) – In case of disposition to class, any person living at the date of disposition whose life is so expressed to be relevant for any member of the class may be reckoned as a life in being
Widower
Settlor provides that A has life in an estate, then to the widower of A for his life, and then for the children of A then living
PLA s214 deems the widower the life in being
Rule is concerned with possibilities and not probabilities
If possibility that gift may vest outside perpetuity period then gift is void gift – Air Jamaica
Re Dawson o Testator gave property to trustees to hold on trust for daughter for life with remainder to children that attain age of 21 o Gift was held void despite daughter > 60 and all children > 21 o Possibility that daughter could have more children who would be
21 outside perpetuity period o Assumption that males and females could reproduce at anytime
Presumption as to future parenthood – PLA s212
It is presumed that: o Male > 12 can have child o Woman > 12 can have child o Woman > 55 cannot have child o However, these presumptions may be rebutted with evidence to the contrary
Other reforms – s212 PLA
s212(1)(b) – in case of living person evidence may be shown not capable of having child – eg. vasectomy, STI
s212(2) – court may make order as it sees fit
s212(4) – with exception of s212(1)(b) extends age presumptions to case of having child by adoption, legitimation or other means
“Wait and See”
At CL validity of gift is assessed at start of perpetuity period
S210 PLA allows court to wait and see whether interest will vest outside perpetuity period
Parties may compromise on appropriate distribution of property if don’t want to wait
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Enables court to look at what actually occurs before expiration of perp period to see if there has been vesting – Nemesis Australia
Example of ‘wait and see’ v CL
“Inter vivos to my trstees on trust for first child of A to attain 21” A = 51, has 2 children. One grandchild aged 3 o Common law:
 A’s children not lives in being because A may have more children
 Child of A may have child after A’s death, which becomes first to reach 21
 Disposition is void o ‘Wait and see’
 Disposition not struck down immediately
 If living grandchild survives to 21 (in 18yrs) vesting will have occurred within life of A or within 21 years of A’s death
 Disposition will only be void if at end of perpetuity period the oldest living grandchild has not attained 21
Age reduction
Applies where disposition is limited by reference to person attaining age exceeding 18 years
Disposition void as stands byt would not have been had the age between
18 years
Aged reduced as far as necessary to save disposition (but no futher than
18 years) – s213 PLA
Class gifts
At CL for a gift to be valid, every member of the class must have satisfied the necessary requirements within the perpetuity period
Exclusion of class members: PLA s213(3)
Exclusion of some class members is now permitted to save the validity of an interest
Common law 4 step process:
1.
Does the rule apply to the interest?
2.
What is the date when an interest is created?
3.
Who are the lives in being?
4.
Can vesting occur outside the perpetuity period?
Can statutory modification save the gift?
1.
Power to specify perpetuity period – s212
2.
Presumptions and evidence of future parenthood – s212
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3.
Unborn husband and wife – s214
4.
Wait and See – s210
5.
Reduction of age - s213
6.
Exclusion of class members – s213(3)
These reforms take place after 1 April 1974
Rule against perpetual trusts
Trust will be void where, under terms of trust, capital will be kept in tact so that the income can be used for indefinite period
Public policy
Trusts which are contrary to public policy will not be enforced by the court
Trusts which undermine the sanctity of marriage will not be enforced
Ellaway v Lawson o Trust was made only if person divorced husband o Was allowed to stand as “no obligation” and “changing standards of society”
Attitude of courts as to public policy largely formed by reference to legislation – eg. Anti-Discrimination Act etc
Thus authority on such matters as cohabitation agreements and trusts for ex-nuptial children will no longer be authoritative
Illegality
Trusts may be unenforceable on the basis that enforcing the trust would assist party in carrying out illegal purpose
Nelson v Nelson o Defence service home loan o Mother put house in name of children to take advantage of benefit that she was not entitled to o Demonstrates that you can plead existence of a resulting trust even if must confess to illegal act
Robins v Robins o First homebuyers grant and stamp duty
Timsley v Milligan o Joint party purchased in P’s name so D could receive social security payments o Held: illegality did not defeat D’s claim of resulting trust
The situation in which trusts will not be effective to avoid creditors or to reduce or avoid tax liability is now largely governed by statute
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-
Inherent power of court
Originated with court of Chancellery – inherited by Sup Ct Qld – has equity jurisdiction
Chapman v Chapman o Recognised inherent jurisdiction to allow trustees to act in manner not authorised by the trust instrument o As matter of emergency, trustee would be allowed to do something not expressly allowed by trust instrument o For example:
 Giving trustee powers to repair roof
 May be inbenefit to allow breach where trustee had not provided for education advancement of beneficiary
 Seettlor may have not anticipated situation which may arise in future which may need to give power to trustee to do something not authorised in deed
Re Duke of Norfolk’s Settlement Trusts o Wider jurisdiction re: administration of trust o Concerned provision of remuneration of trustee o Ordinary having trust is obligation and does not normally involve remuneration o Trustee need remuneration for administering trust as would reconsider position if not o Court gave power to trustees to claim remuneration under estate under inherent jurisdiction
Express power to vary trusts
s95 Trusts Act o Introduced following Chapman v Chapman o Leg intervened to allow court to grant authorization to vary trusts in certain cases o Section usually operates where beneficiaries are unable to give consent
 Often concerning infants or children yet unborn where steps are being taken which may prejudice their interest
S94 – expediency provision which allows discretion in varying trust
Provision in trust deed o May allow trustee to amend deed
 1) Often to allow for addition/deletion of beneficiaries
 2) Often amended due to taxation law changes
 3) Often necessary for powers of administration
Australian approach less restrictive than English approach
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o Re Ball’s Settlement Trusts (ENG) – courts regard any major change as not being within the intention of settlor or trust o Kearns v Hill (AUS) – variation clause given natural meaning
Graham Australia v Perpetual Trustees WA o Deed enabled unit holders to redeem units by giving notification to trustee who would have to pay them value of units as listed on exchange market o Unit holder allowed to redeem unit at price which prevailed 7 days before redemption form was lodged o Stockmarket crash led to many seeking redemption o Trustees refused to deal with these applications until meeting with all unit holders o This was fair because those that acted quicker than others would receive better benefit o Varied trust to mean that units would be redeemed at current rate o Court upheld this o Imposed 2 tier test:
 1) Must be made in good faith
 2) Made to benefit unit holders as a whole
Variation of superannuation trusts
Cases where injunctions have been sought against super trustees from exercising power of amendment
Surplus funds often sent back to employer who originally contributed them
Wilson v MGM o MGM restructuring business and winding up pension fund o Trust contained clause allowing trustee and owner of company to alter/amend deed but could not be prejudiced and had to be to benefit of members o Did not confer absolute discretion to deal with surplus funds o Amendment to trust deed to return surplus funds to company was contrary to what was intended o Fiduciary obligations – company had one to prevent using power of amendment to benefit itself
Lock v Westpac Banking Group o Questionable authority… o Defined benefit fund conferred right on members to get payment of percentage of final salary as pension o Rules specified amount of benefit, how paid, what contributitions had to be paid by member and bank o Board of bank had power to amend deed with consent of trustees – had to have consent of 75% of members o Court said courts take different approach to super and pension funds as do to ordinary trusts o Rejected submission that in defined benefits scheme that once benefits were provided company was precluded by fiduciary obligations from acting in own interest
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o Company must act in good faith but no fiduciary obligation o Trustees had not acted in breach of duty by consenting to amendment – entitled to consider whether amendment was in interest of members and bank as a whole
Family law
FLA 1975 s90AC – can make order which overrides terms of trust deed
Termination of trusts
Trust can be terminated by all beneficiaries acting together and giving direction to the trustee o Saunders v Vautier
 When > 1 beneficiary can all combine to terminate trust provided that they are all entitled and unanimous
Trust can be terminated by distribution o Hawkesley v May
 2 beneficiaries entitled to joint fund at 21
 Trustees didn’t advise first beneficiary to come of age of their rights under the fund and sever joint tenancy
 Trustees accumulated income from that share even after other beneficiary came of age
 Trustees bound to pay income of that share to which eldest was entitled
 Case for fixed trust – not the same for discretionary trust
 In case of complete distribution trust wil be brought to end when no more property, but when partial distribution will continue
Legal transfer of trust property
Distinction where: o Declaration of trust of property by settlor and o Inter vivos transfer
Necessity to completely constitute trust
Once trust is completely constituted court of equity will recognise the beneficial interest of the beneficiaries
Milroy v Lord o For trust to be effective settlor must have “done everything… which was necessary to be done in order to transfer the property and render the settlement binding”
 For Inter vivos – settlor must lose all interest in property
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 For declaration – settlor will retain legal title but beneficial interest will vest in beneficiaries o Facts:
 A purported to assign 50 shares to Lord to be held on trust for Ps
 Certain procedures needed to be carried out
 No transfer ever made, lord never registered as owner
 Dividends were paid to lord and passed onto Ps
 After A’s death held no trust as property hadn’t actually been transferred to Lord
 S200 PLA – for transfer to be effective in equity donor must have done everything necessary
Enforceability of incompletely constituted trusts
Where trust is not completely constituted, a beneficiary faces difficulties in obtaining relief
Where settlor makes promise to create trust – promise may be enforceable as contract
Where beneficiary or trustee has given consideration, beneficiary can seek equitable remedy such as SP of performance of promise of settlor to create trust o Where no consideration court will not grant SP to volunteer but may award damaged for breach of promise – Cannon v Hartley
Cannon v Hartley o H promised to provide for daughter once he came into property from the will of his parents – “after property acquired clause” o Came into property and refused to settle to daughter o Court held no relief in equity to daughter as volunteer byt could get damages for breach of deed – solemn promise under seal – CL regards seal as providing consideration
Marriage consideration
Sometimes court of equity will regard promise to enter into marriage as being marriage consideration
Promise to create trust can be made in expectation of marriage of child of the settlor
Pullan v Koe o W made covenant with trustee for marriage settlement o Setlements would give some benefits to wife but she would be obliged to pass some one o W refused o Trustees tried to enforce “after property acquired clause” o Court held once money paid to wife became in equity bound subject to trust and wife had to pass money on
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Trusts of benefit of covenant
Where settlor has failed to constitute the trust, trustee may hold the promise which the trustee made on trust for the beneficiary
Fletcher v Fletcher o Held: Trustee or beneficiary may enforce covenant o Example of providing equity providing remedy where none at law o Beneficiary not party to covenant but beneficiary could enforce o In deed F wanted to provide for sons born out of wedlock when turned 21 after he died o Had already bequeathed property to them in will as well o Trustees refused to pass on money o Sons compelled trustees to enforce promise o Despite being volunteers, settlor’s intention was paramount
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