EQT Authorities Flashcards

Question

Defective Transfers > | 3 certainties > Re Lewis’s of Leicester Ltd

Answer 1

The subject matter was certain because, by placing the money in a separate account, it had been segregated from Lewis’s other money.

Answer 2

Re Lewis’s of Leicester Ltd

Answer 3

Mac-Jordan was not as fortunate Re Lewis's of Leicester. While there had been an intention to set up a trust of the retained money, this had not been accomplished because there was uncertainty of subject matter. The retention monies had not been segregated from Brookmount’s other funds. The key fact was that they had not been placed in a separate bank account.

Answer 4

Mac-Jordan Construction Ltd v Brookmount Erostin Ltd

Answer 5

1. The Three Certainties 2. The beneficiary principle 3. Rules against perpetuity 4. Formalities for the declaration

Answer 6

(trusts) Intention is ascertained by words or conduct

Answer 7

Paul v Constance

Answer 8

Re Adams and Kensington Vestry

Answer 9

(trusts) Merely preparatory words will not suffice

Answer 10

There must be identifiable human beneficiaries who can enforce the trust.

Answer 11

- For discretionary trusts: rule against remoteness of vesting – max 125 years. - For non-charitable purpose trusts: rule against alienability – limited to 21 years or allow trustees to spend all trust capital on the purpose.

Answer 12

rule against remoteness of vesting – max 125 years.

Answer 13

rule against alienability – limited to 21 years or allow trustees to spend all trust capital on the purpose.

Answer 14

evidenced in writing, signed by the transferor (s.53(1)(b) Law of Property Act (LPA) 1925) - Other: none needed, writing is desirable.

Answer 15

Land on trust must be evidenced in writing, signed by the transferor.

Answer 16

s.53(1)(b) Law of Property Act (LPA) 1925

Answer 17

1. The three certainties 2. Beneficiary Principle 3. Rules against perpetuity 4. Formalities for declaration

Answer 18

Simply physical delivery (Re Cole) or deed. | If physical delivery is impossible, the item may still be considered transferred (Jaffa v Taylor Gallery Ltd)

Answer 19

The formalities for transferring a chattel is simply physical delivery. (or deed)

Answer 20

If physical delivery is impossible, the item may still be considered transferred

Answer 21

Jaffa v Taylor Gallery Ltd

Answer 22

1. Complete and Sign Stock transfer form 2. Send STF and share certificate to transferee 3. Transferee must send documents to company to register new owner

Answer 23

- Must be done by deed. Send deed to Land Registry and notify as new legal owner (s.52(1) LPA 1925) - Deed must say it is a deed, be in writing, and be signed, witnessed and delivered as a deed. (s.1 LP(MP)A 1989)

Answer 24

Transfer of land must be done by deed. Send deed to Land Registry and notify as new legal owner.

Answer 25

s.52(1) LPA 1925

Answer 26

Deed must say it is a deed, be in writing, and be signed, witnessed and delivered as a deed

Answer 27

s.1 LP(MP)A 1989

Answer 28

In writing (Grey v IRC)- Signed by the person disposing of the interest/an authorised agent or in will

Answer 29

In writing (Grey v IRC)- Signed by the person disposing of the interest/an authorised agent or in will

Answer 30

Grey v IRC

Answer 31

When transferring equitable interest but NOT legal title (must be in writing)

Answer 32

When transferring equitable interest AND legal title, can be oral instruction

Answer 33

1. Resulting Trust 2. Constructive Trust 3. Proprietary Estoppels

Answer 34

General rule: there is no equity in this court to protect an imperfect gift; equity will not benefit a volunteer, equity will not construe a trust from an invalid gift.

Answer 35

Milroy v Lord

Answer 36

1. Strong v Bird 2. Re Rose 3. Pennington v Waine 4. Choithram International SA v Pagrani 5. Vandervell v IRC + Zeital v Kaye (Equitable interest exception

Answer 37

On death of donor, donee can claim legal title if: (a) transfer fails due to not satisfying formalities (b) intention to make immediate gift by donor (Re Freeland) (c) Intention continues until death (Re Gonin) (d) Donee becomes executor/PR/administrator of donor (Deal with this point first)

Answer 38

(d) Donee becomes executor/PR/administrator of donor

Answer 39

Strong v Bird Conditions: | (b) intention to make immediate gift by donor

Answer 40

Re Freeland

Answer 41

Strong v Bird Conditions: | (c) Intention continues until death

Answer 42

Every effort test: gift is complete in equity if the donor has done everything he can. FACTS: Once STF and share certificate has been handed over, the gift is complete in equity

Answer 43

Where the donor has failed to transfer legal title, the transfer may be regarded as complete in equity if the donor has put the property beyond his recall. The donor unsuccessfully tried to change their mind.

Answer 44

Browne-Wilkinson LJ in Mascall v Mascall

Answer 45

Possession of a transfer deed was sufficient to enable registration.

Answer 46

Mascall v Mascall

Answer 47

Applies in very specific situations only. Extends Re Rose to gifts even when incomplete. Must be unconscionable to invalidate the disposition.

Answer 48

suggests that Pennington is a case of detrimental reliance. Ada was bound because she had told her nephew she was giving him the shares and he acted to his detriment by becoming a director of the company. On this view, Pennington is simply an example of proprietary estoppel, which is a well-established exception to the rule that equity will not assist a volunteer.

Answer 49

Transferor told auditor she wanted to transfer shares to nephew. Transferor signed stock transfer form (STF) and sent to auditor. auditor told nephew that transferor wanted to transfer shares to him and that he didn't have to do anything. Transferor passed away with the transfer incomplete. it was held that it would be unconscionable not to treat the transfer as complete, even though every effort had not been made.

Answer 50

Once STF and share certificate has been handed over, the gift is complete in equity.

Answer 51

If the transfer is defective, equity will not strive officiously to defeat a gift. Rather, may interpret gift as trust if the settlor is a trustee. His conscience was affected as soon as he declared the gift and he could not subsequently resile from it.

Answer 52

- Trustee appointed himself and 6 others as trustees - He orally stated that he was giving his shares to the trust without completing the STF, therefore failing to follow the correct formalities. - Courts of equity require less from the transferor than demanded in Re Rose as it is enough that the transferor’s conscience is affected. Important that the settlor becomes a trustee - Oral declaration is sufficient in intangible assets if settlor remains trustee

Answer 53

If interest is under a bare trust, and the beneficiary directs the trustee to transfer the equitable estate with the intention of transferring the legal estate as well, s.53(1)(c) LPA 1925 will not apply and an oral instruction will be sufficient (Vandervell v IRC) However, this rule only applies if the legal estate is being transferred. (Zeital v Kaye)

Answer 54

If interest is under a bare trust, and the beneficiary directs the trustee to transfer the equitable estate with the intention of transferring the legal estate as well, s.53(1)(c) LPA 1925 will not apply and an oral instruction will be sufficient (Vandervell v IRC)

Answer 55

Vandervell v IRC Rule | only applies if the legal estate is being transferred. (Zeital v Kaye)

Answer 56

a will must normally be made in writing and signed by the testator in the joint presence of two witnesses, who must then witness the testator’s signature by signing the will in his presence.

Answer 57

s9 of the Wills Act 1837

Answer 58

A will may be altered by a later document called a codicil, provided that this also is signed and witnessed in accordance with s9 of the Wills Act 1837

Answer 59

s9 of the Wills Act 1837

Answer 60

Ademption and Lapse

Answer 61

Specific gifts fail if the testator no longer possesses the specified property when he dies, e.g. because he has sold it or given it away during his lifetime.

Answer 62

Any type of gift will fail if the beneficiary dies before the testator (subject to certain exceptions). A lapsed specific or pecuniary gift falls into the residuary estate. A lapsed residuary gift passes under the intestacy rules.

Answer 63

1. Certainty of objects a. fixed trusts b. discretionary trusts c. powers of appointment

Answer 64

2. Beneficiary principle and the rule against perpetuity a. unusual exceptions b. purpose trusts c. Charitable Exception d. Non-charitable unincorporated association

Answer 65

Step One: Did the settlor try and set up a fixed trust, discretionary trust or power of appointment? Step Two: Consider the certainty of objects test that applies to that particular trust.

Answer 66

Trustees have no discretion as to how the trust property is distributed among beneficiaries

Answer 67

Trustee is under a duty to select beneficiaries from a class and decide how much they are to receive (Mettoy Pension Trustees Ltd v Evans)

Answer 68

A person has authority to deal with property in a particular way, BUT is under no obligation to actually exercise this authority

Answer 69

Trustee is under a duty to select beneficiaries from a class and decide how much they are to receive (Mettoy Pension Trustees Ltd v Evans)

Answer 70

Mettoy Pension Trustees Ltd v Evans

Answer 71

COMPLETE LIST TEST: A comprehensive list of each and every beneficiary (IRC v Broadway Cottages Trust) For this you need both conceptual (can the group be defined?) and evidential certainty (can the people be ascertained?). E.g. in OT Computers Ltd v First National Tricity Finance Ltd a trust for ‘urgent suppliers’ failed.

Answer 72

COMPLETE LIST TEST: A comprehensive list of each and every beneficiary (IRC v Broadway Cottages Trust) For this you need both conceptual (can the group be defined?) and evidential certainty (can the people be ascertained?).

Answer 73

Mcphail v Daulton

Answer 74

COMPLETE LIST TEST: A comprehensive list of each and every beneficiary

Answer 75

IRC v Broadway Cottages Trust

Answer 76

E.g. f Complete List Test: in OT Computers Ltd v First National Tricity Finance Ltd a trust for ‘urgent suppliers’ failed.

Answer 77

OT Computers Ltd v First National Tricity Finance Ltd

Answer 78

can the group be defined?

Answer 79

can the people be ascertained?

Answer 80

GIVEN POSTULANT TEST: valid if it can be said with certainty whether any given postulant is or is not a member of the class of objects (McPhail v Dalton) does not require evidential certainty.

Answer 81

GIVEN POSTULANT TEST: valid if it can be said with certainty whether any given postulant is or is not a member of the class of objects (McPhail v Dalton) does not require evidential certainty.

Answer 82

Guidance on Given Postulant Test: - All judges agreed conceptual certainty is essential to the description of objects, but disagreed as to whether the presence of ‘don’t knows’ would mean the failure of the given postulant test for certainty of objects. - ‘Relatives’ is conceptually certain - Stamp LJ: if there are ‘don’t knows’ a trust will fail. - Sachs LJ: ‘not necessarily – rather, burden is on the claimant to prove he is within the class. - Megaw LJ: If there is a substantial number of people that say they are within the class, the trust will pass given postulant test. BUT trust can still fail due to:

Answer 83

‘Relatives’ is conceptually certain

Answer 84

if there are ‘don’t knows’ a trust will fail.

Answer 85

‘not necessarily – rather, burden is on the claimant to prove he is within the class.

Answer 86

If there is a substantial number of people that say they are within the class, the trust will pass given postulant test. BUT trust can still fail due to: - administrative workability or capriciousness

Answer 87

administrative workability (West Yorkshire Metropolitan CC) or capriciousness (Re Mainstay Settlement)

Answer 88

Administrative workability/size of class: if numbers are too large to form a class, it may make trust administratively unworkable or

Answer 89

West Yorkshire Metropolitan CC

Answer 90

Capriciousness: trust is capricious (irrational) if it ‘negatives a sensible consideration by the trustee of the exercise of the power’

Answer 91

Re Mainstay Settlement

Answer 92

GIVEN POSTULANT TEST: Re Gestetner’s Settlement; Re Gulbenkian’s Settlement. The Court can intervene if: - The trustees don’t consider a request from a potential beneficiary, or - The trustees act capriciously: trust is capricious (irrational) if it ‘negatives a sensible consideration by the trustee of the exercise of the power’ (Re Mainstay Settlement)

Answer 93

GIVEN POSTULANT TEST: The Court can intervene if: - The trustees don’t consider a request from a potential beneficiary, or - The trustees act capriciously: trust is capricious (irrational) if it ‘negatives a sensible consideration by the trustee of the exercise of the power’ (Re Mainstay Settlement)

Answer 94

Re Gestetner’s Settlement; Re Gulbenkian’s Settlement.

Answer 95

Re Mainstay Settlement

Answer 96

The trustees act capriciously: trust is capricious (irrational) if it ‘negatives a sensible consideration by the trustee of the exercise of the power’

Answer 97

Step 1: State whether it is an outright gift or a trust Step 2: Explain that the issue concerns the beneficiary principle Step 3: Remember to consider the rule against perpetuities

Answer 98

State whether it is an outright gift or a trust

Answer 99

a. Unusual Exceptions b. Purpose trusts (c. Charitable exceptions d. Non-charitable unincorporated association)

Answer 100

Care/maintenance of specific animals

Answer 101

Care/maintenance of graves/monuments

Answer 102

Re Dean Care/maintenance of specific animals | Re Hooper Care/maintenance of graves/monuments

Answer 103

Purpose trusts normally violate the beneficiary principle due to the lack of ascertainable beneficiaries

Answer 104

A trust for ‘improvement of good understandings between nations’ failed.

Answer 105

Re Astlor’s Settlement Trust

Answer 106

However, an exception will be made where purpose trusts have ascertainable beneficiaries and are directly for the tangible benefit of individuals while not offending the rule against inalienability.

Answer 107

Charitable Trusts will not violate the beneficiary principle because they are enforced by the Attorney General. An association must meet the below 3 criteria to form a valid trust: (a) A charitable purpose (b) Sufficient public benefit (c) Exclusively charitable

Answer 108

(a) A charitable purpose (b) Sufficient public benefit (c) Exclusively charitable

Answer 109

Provides that a charitable purpose is a purpose which falls within s.3(1)

Answer 110

s.2(1) Charities Act 2011

Answer 111

No presumption of benefit – it must be proved where not obvious. Any benefit must outweigh detriment

Answer 112

s.4(2) Charities Act

Answer 113

Any reference to the public benefit is reference to the public benefit as that term is understood for the purpose of the law relating to charities in England and Wales

Answer 114

s.4(3) Charities Act 2011

Answer 115

Numbers cant be negligible: can’t be a class within a class

Answer 116

IRC v Baddeley

Answer 117

Trusts for relief of poverty are charitable even if the benefit is limited to a small class of objects

Answer 118

Re Scarisbrick

Answer 119

People to benefit cannot be connected by a personal nexus; e.g. employment contract (or family, Re Compton)

Answer 120

Oppenheim v Tobacco Securities Trust Co Ltd

Answer 121

People to benefit cannot be connected by a personal nexus; e.g. family (or employment contract Oppenheim v Tobacco Securities Trust Co Ltd)

Answer 122

Re Compton

Answer 123

Schools whose sole object was the education of children whose families could afford to pay the fees would not be charitable.; they must make more than a token provision for the less well off. A trust that excludes the poor from benefit cannot be a charity. In this context ‘poor’ did not mean destitute but included people of modest means.

Answer 124

Independent Schools Council v Charity Commission for England and Wales

Answer 125

General Rule: a political purpose (e.g. abolition of torture) is NOT charitable, so Amnesty could not get charitable status.

Answer 126

Exception: If the non-charitable purpose is merely incidental to the central charitable purpose of the trust, this is acceptable.

Answer 127

McGovern v Attorney General (Amnesty Case)

Answer 128

McGovern v Attorney General (Amnesty Case)

Answer 129

Definition: (a) A group bound together for a common purpose (b) not being a business purpose (Conservative an Unionist Central Office v Burrell)

Answer 130

Definition: (a) A group bound together for a common purpose (b) not being a business purpose (Conservative an Unionist Central Office v Burrell)

Answer 131

Conservative an Unionist Central Office v Burrell

Answer 132

# Define and then go through the following steps: 1. General principle | 2. Give effect to the trust

Answer 133

1. General principle ‘Unincorporated associations have no legal personality and so cannot hold property in the name of the association.’ -> has no identifiable human beneficiaries who can enforce the trust.

Answer 134

Morice v Bishop of Durham ‘Unincorporated associations have no legal personality and so cannot hold property in the name of the association.’ -> has no identifiable human beneficiaries who can enforce the trust.

Answer 135

May go down two possible routes to give effect to the disposition by registering the property in the name of trustees, on bare trust for its members. (a) Trust as an outright gift (b) Treat as trust for purpose

Answer 136

Can be effected under Re Recher’s Will Trust as a gift to the members, as an accretion to the association's funds (to be dealt with according to the rules of the Association)

Answer 137

Can be effected under Re Recher’s Will Trust as a gift to the members, as an accretion to the association's funds (to be dealt with according to the rules of the Association)

Answer 138

if such rules prevent members from dissolving the Association and dividing the funds/spending it all at once, gift will be void - assets must be freely available (Re Grant’s Will Trust)

Answer 139

Proviso: if such rules prevent members from dissolving the Association and dividing the funds/spending it all at once, gift will be void - assets must be freely available (Re Grant’s Will Trust)

Answer 140

If a purpose is specified that benefits the members, consider whether, via Re Lioinski’s Will Trust, the gift can be effected under Re Recher or Re Delaney (however, the testator's motive will not be binding)

Answer 141

Can be effected under Re Recher’s Will Trust as a gift to the members, as an accretion to the association's funds (to be dealt with according to the rules of the Association)

Answer 142

Purpose trusts normally violate the beneficiary principle due to the lack of ascertainable beneficiaries

Answer 143

Remember to consider the rule against perpetuities

Answer 144

Non-charitable purpose trusts must either (1) allow the trustees to spend all the capital on the given purpose, hence ending the trust at any time, or (2) be limited in duration to 21 years

Answer 145

(2) be limited in duration to 21 years

Answer 146

The rule against remoteness of vesting: a contingent interest may become a vested interest within 125 years for all trusts made after 6th April 2006

Answer 147

The Perpetuities Act 2009

Answer 148

Step One: Is there an express trust? Step Two: Is there a resulting trust? Step Three: Is there a constructive trust? Step Four: Can the claimant establish an interest through the doctrine of proprietary estoppel?

Answer 149

1. Consider the presumptions – which presumptions apply on the facts? 2. Can the presumption be rebutted? 3. Is the evidence admissible?

Answer 150

Presumptions of resulting trusts

Answer 151

Westdeutsche Landesbank Girozentralle v Islington London BC

Answer 152

Following this case, There is a presumption of a resulting trust from Y to X if: • X transfers property to Y • No consideration is supplied; and • There is no evidence of X’s intention (if money is to be paid back, there is no intention)

Answer 153

Thavorn v Bank of Credit and Commerce International

Answer 154

However, this does not apply to land. There is no presumption of a resulting trust after a voluntary transfer of land.

Answer 155

s.60(3) LPA, Lohia v Lohia, Khan v Ali

Answer 156

Although, this was a Supreme Court decision to the contrary

Answer 157

Pest v Petradel

Answer 158

N.B. There will be a resulting trust where the property is transferred to a solicitor

Answer 159

Foakes v Pascoe (obiter)

Answer 160

Only payments at the time of acquisition give rise to a resulting trust (not including stamp duty, legal fees, land taxes)

Answer 161

Curly v Parkes

Answer 162

Implied trust rules do not apply – writing not necessary

Answer 163

s.53(1)(b) LPA

Answer 164

There is a presumption of resulting trust from Y to X mathematically equivalent to percentage of contribution to purchase price if: • X transfers purchase money to seller; and • Property is put in Y’s name; and • Payment is made at the time of the acquisition of the property (Curly v Parkes)

Answer 165

Voluntary Transfer of Purchase Money: Payment must be made at the time of the acquisition of the property

Answer 166

Curly v Parkes

Answer 167

There is presumption of advancement of a resulting trust is: • X is Y’s father (Bennett v Bennett) ; or • X is in loco parentis of Y (Bennett v Bennett); or • X is Y’s Husband or Fiancé (Pettitt v Pettitt)

Answer 168

There is presumption of advancement of a resulting trust is: • X is Y’s father; or • X is in loco parentis of Y

Answer 169

Bennett v Bennett

Answer 170

There is presumption of advancement of a resulting trust is: | • X is Y’s Husband or Fiancé

Answer 171

Pettitt v Pettitt

Answer 172

Pettitt v Pettitt

Answer 173

Will abolish the presumption of advancement after the date of commencement of this act, but not before.

Answer 174

s.199 Equity Act 2010

Answer 175

These presumptions can be rebutted by the surrounding circumstances at the time of the transaction

Answer 176

a) Explanation for the property being put in the sole name

Answer 177

McGrath v Wallis

Answer 178

b) Retention of title deeds

Answer 179

Warren v Gurney

Answer 180

c) Proof of intention to make a gift

Answer 181

Loosemore v McDonnell

Answer 182

* Must prove that the transfer was a gift or a loan | * If property is realty, presumption of resulting trust is less likely to apply (s.60(3) LPA 1925)

Answer 183

If property is realty, presumption of resulting trust is less likely to apply

Answer 184

s.60(3) LPA 1925

Answer 185

* Must prove that the transfer was not intended as a gift | * Presumption of advancement is easily rebutted (McGrath v Wallis)

Answer 186

• Presumption of advancement is easily rebutted

Answer 187

McGrath v Wallis

Answer 188

GENERAL RULE: Only acts/statements that occurred at the time of transaction are admissible as evidence (i.e. nothing after the fact) Subject to certain exceptions, evidence of illegal or fraudulent motives cannot be used to rebut the presumption

Answer 189

Shephard v Cartwright | Subject to certain exceptions, evidence of illegal or fraudulent motives cannot be used to rebut the presumption

Answer 190

A constructive trust occurs when it would be unconscionable for the owner of the property to assert a beneficial interest in the property.

Answer 191

Paragon Finance Plc v DB Thakerar & Co

Answer 192

Constructive Trusts are more appropriate to determine equitable interests of cohabitees in a property purchased as their home

Answer 193

Stack v Dowden ; Jones v Kernott

Answer 194

a) Common intention to share ownership. Common intention that both parties have an interest can be either express (e.g. legal owner saying ‘treat this house as your own’) or inferred by conduct as set out below. b) Detrimental reliance

Answer 195

o Express Intention includes legal owner telling claimant her name would have been on legal title if did not prejudice her divorce proceedings

Answer 196

Grant v Edwards

Answer 197

o BUT – a specious excuse/explanation will not necessarily constitute an express common intention

Answer 198

Curran v Collins

Answer 199

o Contributions to purchase or mortgage payments, in this case it was remarked that it was ‘doubtful anything less will do’

Answer 200

Lloyds Bank v Rosset

Answer 201

o BUT – payment of household expenses was held to suffice where payments are substantial and made pursuant to the agreement

Answer 202

Le Foe v Le Foe and Woolwich plc

Answer 203

o Court must look at all circumstances to work out intentions. The first stage focuses on contribution, the intentions get analysed in greater detail in stage two.

Answer 204

Stack v Dowden (obiter)

Answer 205

o Claimant must significantly alter position in reliance of agreement

Answer 206

Lloyds Bank v Rosset

Answer 207

o Substantial contribution to household expenses and raising children may be sufficient (consider broad and narrow views in this case)

Answer 208

Grant v Edwards

Answer 209

a) To work out interest, court will determine a fair share with regards to the whole course of dealings (Oxley v Hiscock) b) BUT – courts shouldn’t consider what is fair. Rather, they should work out what the parties intended (explicitly or inferred). The court will start from the assumption that the property is held in equal shares, but will then consider evidence to rebut this. (Stack v Dowden) c) Need to look at intention and whole course of dealings in consideration of the final interest. This later ruling fuses the fairness of Oxley with the intention of Stack v Dowden. If an intention cannot be inferred then the courts will assess what is fair having regard to the whole course of dealings. Applied in Galarotti v Sebastianelli Step Four: Can the claimant establish an interest through the doctrine of proprietary estoppel? (Jones v Kernott)

Answer 210

a) To work out interest, court will determine a fair share with regards to the whole course of dealings

Answer 211

Oxley v Hiscock

Answer 212

b) BUT – courts shouldn’t consider what is fair. Rather, they should work out what the parties intended (explicitly or inferred). The court will start from the assumption that the property is held in equal shares, but will then consider evidence to rebut this.

Answer 213

Stack v Dowden

Answer 214

c) Need to look at intention and whole course of dealings in consideration of the final interest. This later ruling fuses the fairness of Oxley with the intention of Stack v Dowden. If an intention cannot be inferred then the courts will assess what is fair having regard to the whole course of dealings. Applied in Galarotti v Sebastianelli

Answer 215

Jones v Kernott

Answer 216

Proprietary estoppel gives rise to equity if (a) the legal owner behaves in such a way that the claimant believes he has, or will get, some rights in relation to the property, and (b) the claimant acted to his detriment in consequence to this belief.

Answer 217

N.B. only arises from the date of the court order

Answer 218

(a) An assurance is given as to the rights of the property. Assurance can be either Active or Passive: • Active: legal owner assures the claimant that they are entitled to an interest in the property (Pascoe v Turner) • Passive: Legal owner stands back and lets the claimant act to their detriment in the belief that he is entitled to an interest in the property

Answer 219

Active: legal owner assures the claimant that they are entitled to an interest in the property

Answer 220

Pascoe v Turner

Answer 221

(b) Detrimental Reliance There must be a causal connection between the reliance and the assurance: • Financial or Personal Detriment (Gillett v Holt) * Improving the legal owner’s land (Inwards v Baker) * If between relatives; must go beyond what is ‘called for by natural love and affection’ (Re Basham); or * Assisting and supporting legal owner in pursuit of career (Southwell v Blackburn)

Answer 222

There must be a causal connection between the reliance and the assurance: • Financial or Personal Detriment

Answer 223

Gillett v Holt

Answer 224

There must be a causal connection between the reliance and the assurance: • Improving the legal owner’s land

Answer 225

Inwards v Baker

Answer 226

There must be a causal connection between the reliance and the assurance: • If between relatives; must go beyond what is ‘called for by natural love and affection’;

Answer 227

There must be a causal connection between the reliance and the assurance: • Assisting and supporting legal owner in pursuit of career

Answer 228

Southwell v Blackburn

Answer 229

The remedy is flexible but should be the minimum to satisfy the equity. The guidelines for determining the nature and amount of the remedy are to be determined per the Jennings v Rice guidelines. However, in applying these Joyce v Epson and Ewell BC is authority that the courts focus must be on what is fair and proportionate between the parties

Answer 230

Joyce v Epson and Ewell BC

Answer 231

The remedy will be somewhere on a sliding scale where in the high point is likely to be the claimant’s expectation and the low point the claimant’s detrimental reliance – with the length of time the expectation held, the clarity of their expectation and the extent of the detrimental reliance adding weight to an award at the higher end of the scale

Answer 232

Davies v Davies

Answer 233

Remedies might include for example a transfer of an interest of property

Answer 234

Gillet v Holt

Answer 235

Remedies might include for example compensation

Answer 236

Jennings v Rice

Answer 237

``` the remedy depends on: • unconscionability • alteration to the defendant’s finances • financial obligations • the effect of taxation • the defendant’s benefit • the claimant’s benefit • practical remedy and • proportionality ```

Answer 238

The person nominated in the trust instrument for appointing trustees, or if not, the remaining trustee(s)/ the PR of the last surviving trustee can, by writing: 1. Appoint a new trustee in substitution 2. Appoint additional trustees (only if not more than three trustees)

Answer 239

s.36 TA 1925

Answer 240

``` Appoint a new trustee in substitution, if a trustee is: • dead; • out of the UK for a year; • desiring to be discharged; • refusing to act; • unfit to act; • incapable of acting; or • an infant ```

Answer 241

s.36(1) TA 1925

Answer 242

2. Appoint additional trustees (only if not more than three trustees)

Answer 243

s.36(6) TA 1925

Answer 244

Property automatically vests in the trustee

Answer 245

s.40 TA 1925

Answer 246

The court will only appoint trustees where it is inexpedient, difficult or impracticable for the appointment to be made without the court.

Answer 247

s.41 TA 1925

Answer 248

A trustee can retire without replacement if: • There are at least two trustees remaining • He declares discharge by deed; and • The other trustees consent by deed

Answer 249

s.39 TA 1925

Answer 250

Beneficiaries can remove and appoint trustees by writing if: • No one nominated for the purpose of appointing new trustees; and, • Beneficiaries are of full age, capacity, (sui juris) and taken together are absolutely entitled to the trust property

Answer 251

s.19 TLATA 1996

Answer 252

• Something expected to produce income or capital growth

Answer 253

Harries v C of E Commissioners

Answer 254

• Unsecured loan for B was held not to be an investment

Answer 255

Khoo Tek Keong v Ch’ng Joo Tuan Neoh

Answer 256

• Act impartially between beneficiaries • Not to place self in a position of conflict between personal interests and trust obligations (fiduciary duty) • Act in the best interests of beneficiaries. Interest of beneficiaries = best financial interest (Cowan v Scargill), unless: o Ethical investment yielded as good a return; o Beneficiaries are adults and have strong relevant ethical views; o Not appropriate, e.g. charitable trustees; or o Settler has so provided in the trust instalment

Answer 257

• Act in the best interests of beneficiaries. Interest of beneficiaries = best financial interest, unless: o Ethical investment yielded as good a return; o Beneficiaries are adults and have strong relevant ethical views; o Not appropriate, e.g. charitable trustees; or o Settler has so provided in the trust instalment

Answer 258

Cowan v Scargill

Answer 259

Trustees can make any investment that they would make if there were absolutely entitled…

Answer 260

s.3(1) TA 2000

Answer 261

Subject to the statutory duty of care, ‘such care and skill as is reasonable in all circumstances,’ Having regard to: • Any special knowledge or experience he holds himself as having; • The special knowledge or experience reasonably expected in the course of the business or profession; and • The size of trust fund

Answer 262

s.1 TA 2000 Having regard to: • Any special knowledge or experience he holds himself as having; • The special knowledge or experience reasonably expected in the course of the business or profession; and • The size of trust fund

Answer 263

Can purchase land (in UK ONLY) for investment or other purposes

Answer 264

s.8 TA 2000

Answer 265

For day-to-day running of the trust, trustees have a common law standard duty of care – how an ordinary prudent man of business would conduct his own affairs

Answer 266

Speight v Gaunt

Answer 267

A statutory duty of care (s.1 TA 2000) applies to matters dealt with under TA 2000 (i.e. investments). When making investments, the standard of care they must exercise is the same as the common law duty of care – that of a reasonable business person when investing for someone for whom they feel morally bound.

Answer 268

Learoyd v Whiteley

Answer 269

Under the statutory duty of care (s.1 TA 2000), the trustees can be sued if: • Gain made by the trust fund is less than gain made by a reasonable man would be

Answer 270

Nestlé v National Westminster Bank

Answer 271

Under the statutory duty of care (s.1 TA 2000), the trustees can be sued if: • Trustee’s investment decision was one which no reasonable trustee (with similar knowledge/skill) would take

Answer 272

Wight v Olswang

Answer 273

Trustee must consider the standard investment criteria: • Suitability – nature/type • Diversification; and • Obligation to review investments

Answer 274

s.4 TA 2000

Answer 275

Trustees must obtain and consider advice except when the trustee can reasonably conclude otherwise

Answer 276

s.5 TA 2000

Answer 277

Trustees cannot delegate unless they have authority to do so.

Answer 278

Pilkington v IRC

Answer 279

a) Collective Delegation (Trustee Act 2000) | b) Individual delegation (s.25 TA 2000)

Answer 280

• Trustees can delegate delegable functions to agents o But cannot delegate: ‘dispositive’ powers or discretions which involve the distribution of trust capital/income amongst beneficiaries; or o The power to appoint new trustees

Answer 281

s.11 TA 2000

Answer 282

• A beneficiary cannot be appointed as an agent, even if also a trustee

Answer 283

s.12 TA 2000

Answer 284

• Agents appointed under s.11 are subject to the usual conditions attached to such powers

Answer 285

s.13 TA 2000

Answer 286

• Trustees can delegate asset management functions, but note special restrictions

Answer 287

s.15 TA 2000

Answer 288

• Trustees may appoint, and vest trust property, in nominees

Answer 289

s.16 TA 2000

Answer 290

• Trustees must review the performance of agents

Answer 291

s.22 TA 2000

Answer 292

• Trustees can pay agents reasonable remuneration out of the trust funds

Answer 293

s.32 TA 2000

Answer 294

The trustees may be liable to sue in negligence or breach of contract and hold the damages on trust for beneficiaries

Answer 295

NOT vicariously liable for their agent’s breaches unless they have breached their own duty of care with respect to selection and review of agents

Answer 296

A trustee may execute a power of attorney if he wishes to delegate his office.

Answer 297

s.25 TA 2000

Answer 298

• Can appoint an attorney to act as alter ego for up to 12 months

Answer 299

ss.25(1) & (2) TA 2000

Answer 300

• Within 7 days of giving a power of attorney, the trustee must give written notice to anyone who can appoint new trustees and all existing trustees.

Answer 301

s.25(4) TA 2000

Answer 302

• Trustees are vicariously liable for attorney’s acts.

Answer 303

s.25(7) TA 2000

Answer 304

Performance is at the discretion of trustees, i.e. they can’t be forced to exercise their power.

Answer 305

Re Brockbank

Answer 306

Trustee’s powers are subject to common law standard of care, i.e. must act as an ordinary prudent man of business in the conduct of his own affairs would do in that situation.

Answer 307

Speight v Gaunt

Answer 308

s.32 TA 2000

Answer 309

Advancement = any use of money which will improve the beneficiary’s material situation

Answer 310

Pilkington v IRC

Answer 311

Trustees have the power to advance at their absolute discretion, provided it: • Does not exceed half of the beneficiary’s share (even if the trust fund goes up in value) • Is brought in account as part of such share; and • Does not prejudice the beneficiaries prior interest (unless of full age and give consent in writing)

Answer 312

• Does not exceed half of the beneficiary’s share (even if the trust fund goes up in value)

Answer 313

Re Marquess of Abervenny’s Estate Act Trusts

Answer 314

Amended s.32 TA 2000. Trustees are allowed to advance the FULL amount of the beneficiary’s share for trusts created or arising AFTER the acts commencement date.

Answer 315

s.9 of the Inheritance and Trustees’ Powers Act 2014

Answer 316

When parents of young beneficiaries request an advancement to the beneficiary, trustees should be cautious, and, if they doubt intentions, they should apply money directly to the cause.

Answer 317

Re Pauling’s Settlement Trust

Answer 318

Beneficiary’s estate need not repay any advancement if the beneficiary dies before reaching contingency age

Answer 319

s.31 TA 2000

Answer 320

Applies only if there are no prior interests – e.g. beneficiary is the life tenant

Answer 321

s.31(1)(i) TA 2000

Answer 322

If the beneficiary is under 18, the trustee can pay whole/part of trust income (whatever is reasonable) to his parents or towards beneficiaries maintenance, education or benefit.

Answer 323

Amended s.31 TA 2000 – trustees may now pay or apply the whole or any part of the trust as they see fit (as opposed to a reasonable amount) but only for trusts arising AFTER the Act’s commencement date.

Answer 324

s.8 of the Inheritance and Trustees’ Powers Act 2014

Answer 325

When the beneficiary reaches 18 and still does not have a vested interest, he may demand the trustees pay him all trust income.

Answer 326

s.31(1)(ii) TA 2000

Answer 327

Also removed the proviso in 31(1) TA 2000 for trusts created or arising after the Act’s commencement date: trustees need not consider the age and requirements of the infant and other income available to him or her.

Answer 328

s.8 of the Inheritance and Trustees’ Powers Act 2014

Answer 329

a) Trustees’ duties: beneficiaries can compel trustees to carry out duties. This includes Trustees’ duty to consider whether to exercise a power, but not to exercise the power itself. b) Trustees’ discretion as to a power c) Beneficiaries are entitled to see trust documents, subject to confidentiality [Schmidt v Rosewood Trust]. Although, even if confidential, court has power to order them to be disclosed. d) Trustees’ deliberations/reasons for decisions made

Answer 330

Court may intervene if ‘improper’

Answer 331

Tempest v Lord Camoys

Answer 332

• Court may intervene if trustees merely do as settlor tells them rather than exercising discretion

Answer 333

Turner v Turner

Answer 334

• Court my intervene if trustees act capriciously

Answer 335

Re Mainstay’s Settlement

Answer 336

c) Beneficiaries are entitled to see trust documents, subject to confidentiality [case]. Although, even if confidential, court has power to order them to be disclosed.

Answer 337

Schmidt v Rosewood Trust

Answer 338

• Beneficiaries are not entitled to see these.

Answer 339

Re Londonderry’s settlement

Answer 340

Beneficiaries are not entitled to see these. Unless: o The beneficiary had a legitimate expectation that discretion would be exercised in his favour and it wasn’t – e.g. if income suddenly stops [case] o Pension funds

Answer 341

Scott v National Trust

Answer 342

• If trustees do give reasons, court may find a decision void if they deem it irrational.

Answer 343

Klug v Klug

Answer 344

1. Saunders v Vautier | 2. Variation of Trusts Act 1958

Answer 345

Beneficiaries can end the trust if: • 18+ and of sound mind (sui juris) • All agree; and • Are all in existence and ascertained, and absolutely entitled Where beneficiaries are not all over 18, consider the Variation of Trusts Act

Answer 346

On application, courts can consent for those who cannot consent themselves, provided variation will benefit them.

Answer 347

s.1(1) Variation of Trusts Act 1958

Answer 348

Immaterial whether variation is contrary to settlor’s wishes.

Answer 349

Goulding v James

Answer 350

A benefit could be: • Tax saving scheme; or • Raising the contingency age to a more responsible age (Re T)

Answer 351

• Variation of the trust (e.g. altering interests) is permitted, but a complete resettlement of the trust will not be approved, e.g. changing the beneficiaries

Answer 352

Re Ball’s Settlement

Answer 353

• Court cannot consent for an adult ascertained beneficiary who is capable of consenting himself

Answer 354

Knocker v Youle

Answer 355

Step One: Was there a Fiduciary Duty? Step Two: Did he breach his Fiduciary Duty? Step Three: Has the trustee received authorisation Step Four: Remedies

Answer 356

A person in a fiduciary position has a duty not to put himself in a position where his personal interests and his duties conflict. Therefore, even if trustees were honest, if they put themselves in a position where there was a conflict of interest, they will be accountable for any profit made.

Answer 357

Bray v Ford Therefore, even if trustees were honest, if they put themselves in a position where there was a conflict of interest, they will be accountable for any profit made.

Answer 358

* Trustee * Personal Representatives (to beneficiaries under a will or intestacy) * Agents (vis-à-vis their principals) * Partners (duty to each other) * Directors (duty to their company) * Senior employees with access to confidential information (duties to their employees)

Answer 359

Fact-Based Fiduciary: a duty exists where: • X has undertaken to act for Y; and • Y reasonably believes that X will act exclusively in Y’s interests/joint interests

Answer 360

LAC Minerals Ltd v International Corona Resources Ltd

Answer 361

This can also arise in a commercial context

Answer 362

English v Dedham Vale Properties Ltd

Answer 363

Identify the type of breach of Fiduciary Duty: 1. The Trustee as a purchaser 2. Competition with the trust 3. Unauthorised remuneration of trustees 4. Incidental profits 5. Company Directors

Answer 364

(a) Making a purchase from himself/co-trustee of the legal title (b) Making a purchase From a beneficiary of the equitable title

Answer 365

* There is a conflict of interest under the SELF-DEALING rule – strict liability, so fairness/context is irrelevant. (Ex p Lacey) * Beneficiaries can void the sale within a reasonable time if self-dealing has occurred * To avoid breach, trustees can seek court order for purchase or seek consent of beneficiaries if they are all sui juris. Must prove that they have all been informed of all the relevant facts, the transaction was fair and there was no undue influence.

Answer 366

(a) Making a purchase from himself/co-trustee of the legal title • There is a conflict of interest under the SELF-DEALING rule – strict liability, so fairness/context is irrelevant.

Answer 367

Ex p Lacey

Answer 368

where the trust includes a business and trustee sets up his own business in competition, then the trustee is accountable for any profits and possibly an injunction.

Answer 369

Re Thomson

Answer 370

Trustees cannot demand payment for their services unless authorised by: • Charging close in the trust instrument; • Beneficiaries’ consent (presumption of undue influence is rebutted by fair dealing rule and sui juris beneficiaries) • Court order • Trustees act 2000

Answer 371

Trustees cannot demand payment for their services unless authorised by: • Court order

Answer 372

Re Duke of Norfolk’s Settlement trust

Answer 373

o There is a provision for remuneration in the trust instrument

Answer 374

s.28(1) TA 2000

Answer 375

o trustee acts in a professional manner e.g. management/ administration of trust

Answer 376

s.28(5) TA 2000

Answer 377

o a trust Corporation can charge reasonable remuneration even though it is a sole trustee

Answer 378

s.29(1) TA 2000

Answer 379

o a trustee who is not a trust Corporation can charge fees only if all other trustees agree in writing

Answer 380

s.29(2) TA 2000

Answer 381

o reasonable remuneration = nature of services and attributes of trustee

Answer 382

s.29(3) TA 2000

Answer 383

o trustee can recover out of pocket expenses from the trust fund, e.g. travelling expenses

Answer 384

s.31(1)(a) TA 2000

Answer 385

• Remuneration from a third party by virtue of being a trustee

Answer 386

Williams v Barton

Answer 387

[Remuneration from a third party by virtue of being a trustee(Williams v Barton)] o or football agent

Answer 388

Imageview Management v Jack

Answer 389

• Remuneration stemming from a position gained by virtue of trust property – e.g. company shares held on trust used to become a director

Answer 390

Re Macadam; Re Gee

Answer 391

Assignment of business contracts upon dissolution of a company

Answer 392

Don King Productions Inc v Warren & Others

Answer 393

Renewal of trust lease, i.e. the trustees arrange to take the new lease or buy the freehold on their own, not as part of the trust property. This is strict liability, therefore honesty of the trustee and circumstances are not taken into account

Answer 394

Keech v Sandford

Answer 395

Use of information on opportunities - a trustee is accountable for profits made out of info/ opportunities made available through trusteeship; however, can be rewarded remuneration for honest behaviour that benefits the trust

Answer 396

Boardman v Phipps

Answer 397

Remuneration (under Boardman v Phipps) will be limited to cases that would not encourage other trustees to do the same

Answer 398

Guinness v Saunders

Answer 399

Strict liability also applies to company directors

Answer 400

Regal (Hastings) Ltd v Gulliver; IDC v Cooley

Answer 401

The Fiduciary Duties of directors are codified in the Companies Act 2006

Answer 402

• A director must avoid a situation in which he has or may have a direct or indirect interest that conflicts or possibly may conflict with other interests of the company

Answer 403

s.175 CA 2006

Answer 404

o In particular, the exploitation of property, information or opportunity, whether or not the company could take advantage of it.

Answer 405

s.175(2) CA 2006 | IDC v Cooley

Answer 406

• The duty will not be breached if the situation cannot be reasonably regarded as likely to give rise to a conflict. If the company is incorporated before the 1st of October 2008, such a conflict can be authorised by directors

Answer 407

s.175(4) CA 2006

Answer 408

Directors cannot accept benefits from third parties unless authorised by shareholders

Answer 409

s.176 CA 2006 | Williams v Barton

Answer 410

• If directors negotiate contracts between themselves and the company they should disclose interest to other directors

Answer 411

s.177 CA 2006

Answer 412

A trustee could obtain consent of all the beneficiaries if: • Sui juris; • Consent is fully informed; and • There has been no undue influence

Answer 413

1. Personal Remedy – stripping fiduciaries of any gain they make from a conflict situation, i.e. disgorgement. 2. Proprietary Remedy – a claim to the property derived from the profit (Williams v Barton) • A proprietary claim is preferable if (1) the fiduciary is bankrupt (2) an asset has gone up in value • Proprietary remedies are always available (Confirmed in FHR European Ventures LLP v Cedar Capital Partners LLC)

Answer 414

2. Proprietary Remedy – a claim to the property derived from the profit

Answer 415

Williams v Barton

Answer 416

Confirmed in FHR European Ventures LLP v Cedar Capital Partners LLC

Answer 417

• Proprietary remedies are always available

Answer 418

Step One: Explain why discussion personal/proprietary claims Step Two: Identify the breach of the trust Step Three: Establish that breach of trust has caused a loss Step Four: Consider defences available for trustees Step Five: Consider contributions and indemnity

Answer 419

There is no vicarious liability between trustees; they can only be sued if they have breached their own duties.

Answer 420

Duty to actively watch over, and if necessary, correct conduct of fellow trustees.

Answer 421

Styles v Guy

Answer 422

Duty to keep the trust property in joint control and not allow co-trustees to control it [unless there has been a delegation under ss.11 and 12 Trustee Act 2000]

Answer 423

Under ss.11 and 12 Trustee Act 2000 [unless there has been a delegation under ss.11 and 12 Trustee Act 2000]

Answer 424

* Duty to ensure the trust property is vested in names of all trustees. * Duty to do something to stop a breach if they are aware of it being committed.

Answer 425

• Duty of care under the TA 2000 (this applies only to investment and delegation duties) – duty to exercise such care and skill as is reasonable having regard to any special knowledge or experience trustee has/holds himself out as having. Consider: o Size and nature of the trust fund; and o Whether the trustee is professionally qualified

Answer 426

s.1 Trustee Act 2000

Answer 427

• General Duty of Care – trustees must reach the standard of a ‘reasonably prudent man of business’.

Answer 428

Speight v Gaunt

Answer 429

If breach by co-trustees has been established, joint and several liability applies, i.e. you may sue any/all of the trustees for all/any amount of the money.

Answer 430

1. is the trust fund worth less? | 2. If breach has caused both loss and profit

Answer 431

Trustees only liable if breach has caused loss (e.g. there must be evidence to show that profit from a particular investment was less than what a reasonable man would have accrued.)

Answer 432

Nestlé v National Westminster Bank (e.g. there must be evidence to show that profit from a particular investment was less than what a reasonable man would have accrued.)

Answer 433

Beneficiaries may keep the profit, and sue for the loss

Answer 434

EXCEPTION: If the loss and profit arise from the same breach, court will allow the profit to offset the loss.

Answer 435

Bartlett v Barclays Bank Trust Co Ltd

Answer 436

1. Trustees had the knowledge and consent of the beneficiaries 2. There is an express exclusion clause in the trust document (e.g. the will) 3. s.61 Trustee Act 1925 4. Limitation and laches

Answer 437

This will only work if all beneficiaries are sui juris and have given consent will full knowledge of relevant facts. Beneficiary must fully understand what he was concurring in, but need not know it was a breach.

Answer 438

Re Pauling’s Settlement Trust

Answer 439

* May relieve trustees of liability for negligent or innocent breaches, but will be void if the breach was fraudulent * You should mention this even if it is not expressly mentioned in the exam question as such clauses are very common in practice.

Answer 440

Armitage v Nurse • You should mention this even if it is not expressly mentioned in the exam question as such clauses are very common in practice.

Answer 441

Trustee may be relieved of liability (wholly or in part) if they have acted honestly and reasonably. Courts reluctant to grant relief if: • Trustee is a professional (Bartlett v Barclays Bank Trust Co Ltd) o Even if they have taken advice (National Trustee Co of Australia Ltd v General Finance Co); or • Breach was committed as a passive trustee (courts wish to encourage trustees to be active)

Answer 442

Trustee may be relieved of liability (wholly or in part) if they have acted honestly and reasonably. Courts reluctant to grant relief if: • Trustee is a professional

Answer 443

Bartlett v Barclays Bank Trust Co Ltd

Answer 444

o Even if they have taken advice;

Answer 445

National Trustee Co of Australia Ltd v General Finance Co

Answer 446

• Statutory limitation period of six years for bringing a breach of trust action. (s.21(3) Limitation Act 1980) However, this does not apply: o To a proprietary claim (s.21(1) Limitation Act 1980) or; o For a fraudulent trustee • LACHES (Equitable Doctrine) Courts will not allow claim to succeed where inequitable (e.g. where the claimant has acquiesced in breach for long period)

Answer 447

• Statutory limitation period of six years for bringing a breach of trust action

Answer 448

s.21(3) Limitation Act 1980

Answer 449

However, this does not apply: o To a proprietary claim [o or For a fraudulent trustee]

Answer 450

s.21(1) Limitation Act 1980

Answer 451

• Courts will not allow claim to succeed where inequitable (e.g. where the claimant has acquiesced in breach for long period)

Answer 452

Laches (equitable doctrine)

Answer 453

Due to joint and several liability, trustee X may be sued for the whole amount. If no defences available, consider whether a contribution or indemnity is available for trustees being sued.

Answer 454

The court may order such contribution as is just and equitable vis-à-vis each trustee’s responsibility for the loss. The court may find trustees owe different amounts.

Answer 455

s.2 Civil Liability (Contribution) Act 1978

Answer 456

In theory, a trustee is entitled to 100% indemnity from co-trustees also in breach. Can be sought where: • Co-trustee fraudulently obtained benefit from breach; • Co-trustee received trust property and used it for his own benefit (Bahin v Hughes); • Trustee blindly followed the advice of co-trustee who is a solicitor (Re Partington) o But must show that the solicitor exerted such a controlling influence that he did not exercise own judgement. (Head v Gould)

Answer 457

In theory, a trustee is entitled to 100% indemnity from co-trustees also in breach. Can be sought where: • Co-trustee received trust property and used it for his own benefit;

Answer 458

Bahin v Hughes

Answer 459

In theory, a trustee is entitled to 100% indemnity from co-trustees also in breach. Can be sought where: • Trustee blindly followed the advice of co-trustee who is a solicitor

Answer 460

Re Partington

Answer 461

In theory, a trustee is entitled to 100% indemnity from co-trustees also in breach. Can be sought where: o But must show that the solicitor exerted such a controlling influence that he did not exercise own judgement.

Answer 462

Head v Gould

Answer 463

Step One: Identify breach of trust and loss caused Step Two: Consider whether proprietary claim is relevant Step Three: What has happened to the trust property? Which of the following scenarios apply.

Answer 464

When considering whether a proprietary claim will be relevant, the following issues should be addressed: * Is the trust property (or trust property in a different form) in the hands of the defendant? Where the trust property is dissipated, a proprietary remedy is unavailable (no property to claim against) * Is trustee bankrupt? If so, personal claim is pointless, while a proprietary claim will give the claimant priority over the trustee’s creditors. * Has the asset purchased with trust funds increased in value? If so, proprietary claim better than personal claim. * Did breach occur more than six years ago? If so, personal claim is barred due to statutory limitation period, but proprietary claims are not. * Has trustee died? If so, may bring proprietary claim against his executors.

Answer 465

The trustee holds original trust property The trustee has made a straight exchange of trust property for an asset = clean substitution The trustee has purchased an asset using partly own money, and partly money withdrawn wrongfully from trust = mixed asset purchase. The trustee has mixed trust funds with own money, and spent only part of this total fund on something = mixed bank account The trustee (who is a trustee of more than one trust) mixes two trust funds together. The trustee (who is a trustee of more than one trust) mixes two trust funds together with this own money

Answer 466

Make a proprietary claim against original trust property (‘following’, not tracing)

Answer 467

Under Re Hallet’s Estate There are two options available to the beneficiary: 1. Claim ownership of new asset; or 2. Claim an equitable lien (a charge over the asset to secure the amount)

Answer 468

Clean Substitution Under Re Hallet’s Estate There are two options available to the beneficiary: 1. Claim ownership of new asset; or 2. Claim an equitable lien (a charge over the asset to secure the amount)

Answer 469

Under Foskett v McKeown There are two options available to beneficiary: 1. Claim proportionate share of asset (choose if asset has gone up in value); 2. Enforce a lien upon the asset for the precise amount of money taken (choose if asset has depreciated)

Answer 470

Mixed asset purchase. There are two options available to beneficiary: 1. Claim proportionate share of asset (choose if asset has gone up in value); 2. Enforce a lien upon the asset for the precise amount of money taken (choose if asset has depreciated)

Answer 471

The trustee has mixed trust funds with own money, and spent only part of this total fund on something = mixed bank account Must determine whether it was the trustees own money or the trust money that was spent there is a general rule that everything is presumed against the wrongdoing trustee this presumption may manifest itself in two different ways 1. The trust deemed to have spent own money first (most common solution) (Re Hallet's Estate) OR 2. The trustee deemed to have spent trust money first (Re Oatway)

Answer 472

1. The trust deemed to have spent own money first (most common solution)

Answer 473

Re Hallet’s Estate

Answer 474

2. The trustee deemed to have spent trust money first

Answer 475

However, whether trustee has dissipated trust money then paid in own money beneficiaries cannot claim this.

Answer 476

Roscoe v Winder

Answer 477

Implies that the beneficiary will be entitled to recover any increase in the value of the purchase and not merely a share equivalent to the trust money taken.

Answer 478

Foskett v McKeown

Answer 479

FIFO – First in first out rule applies

Answer 480

Clayton’s case

Answer 481

Unless, it: (three i’s) 1. It would result in injustice 2. Is impractical/difficult/expensive to ascertain order of payments; or 3. Is contrary to parties intentions

Answer 482

Barrow Clowes International Ltd (In Liquidation) v Eurotrust International Ltd)

Answer 483

Barrow Clowes International Ltd (In Liquidation) v Eurotrust International Ltd) If FIFO will not apply, divide the account balance/assets in proportion to original contributions.

Answer 484

1. Apply Re Hallet’s Estate and Re Oatway to withdrawals from the account 2. Apply Clayton’s case to the balance

Answer 485

Step One: Has there been a breach of trust and by whom? Step Two: Did the stranger receive property as a result of breach of trust or fiduciary duty? If YES, go to step three; if NO, did the stranger dishonestly assist the breach? Step Three: Did the stranger receive property as a result of breach of trust or fiduciary duty? If YES – consider whether the stranger is an intermediary, has recipient liability or is an innocent volunteer. Step Four: Consider which action to bring Step Five: Conclude – mention that all possible claims should be considered but that you cant recover the same loss twice, so suggest which one claim is best to bring on the facts.

Answer 486

(Consider claims against trustees first.) The claim may not be worthwhile because the trustee is bankrupt or has fled the country etc. Then state, ‘this question is about remedies against strangers.’

Answer 487

‘the claimant can consider bringing a PERSONAL equitable action against the defendant on the grounds of accessor liability.’

Answer 488

Strangers found to be accessories or recipients are liable to account as though they are trustees but they are not actual or constructive trustees, and they are not subject to s.21(1) of the Limitation Act 1980.

Answer 489

Williams v Central Bank of Nigeria

Answer 490

Accessory Liability is defined as a breach of trust or fiduciary duty assisted by a stranger where the stranger is dishonest

Answer 491

Objective test: ‘not acting as an honest person would in the circumstances’, i.e. more than carelessness.

Answer 492

Royal Brunei Airlines v Tan

Answer 493

Take into account circumstances and the defendant’s experience and intelligence.

Answer 494

Not necessary for the defendant to know he was being dishonest.

Answer 495

Royal Brunei; as confirmed by Barlow Clowes

Answer 496

Not necessary for the defendant to know exact details of the breach, but must know he was participating in some illegal scheme.

Answer 497

Barlow Clowes

Answer 498

Strangers found to be accessories are personally liable for the loss to the trust. No proprietary claim can be brought if they have not received any trust property.

Answer 499

Where someone who is not a trustee, acts: • As though he were a trustee; or • Beyond the scope of his authority as an agent;

Answer 500

He will be liable for loss just as if he’d been appointed as an express trustee

Answer 501

Mara v Browne

Answer 502

For example, the agent of trustee continuing to collect rent from tenants after death of trustee is liable as a ‘trustee de son tort’. This is strict liability.

Answer 503

Lyell v Kennedy

Answer 504

Recipient liability arises when the following three criteria are satisfied: • Trustee (or fiduciary) transferred trust property to stranger in breach of trust (or fiduciary duty); • The stranger received trust property for his own benefit • The stranger received trust property with requisite degree of knowledge that the transfer was in breach of trust, or later acquired that knowledge and then dealt with the property in a manner inconsistent with trust. (Consider whether the defendant is used to receiving similar gifts/sums of money. o Explain on the facts: has the defendant’s knowledge made it ‘unconscionable’ for him to retain the property (as per BCCI v Akindele)? It is still unclear what constitutes ‘unconscionable’, but it’s wider than the test for dishonesty in Royal Brunei. o Unconscionability unlikely to encompass constructive NOTICE (Re Montagu’s Settlement) approved (obiter) in Westdeutsche Landesbank Girozentralle v Islington London Borough Council; BUT may encompass constructive KNOWLEDGE.

Answer 505

Actions may only be brought by beneficiaries under a trust/people owed fiduciary duty.

Answer 506

* Trustee (or fiduciary) transferred trust property to stranger in breach of trust (or fiduciary duty); * The stranger received trust property for his own benefit * The stranger received trust property with requisite degree of knowledge that the transfer was in breach of trust, or later acquired that knowledge and then dealt with the property in a manner inconsistent with trust.

Answer 507

has the defendant’s knowledge made it ‘unconscionable’ for him to retain the property

Answer 508

BCCI v Akindele

Answer 509

It is still unclear what constitutes ‘unconscionable’, but it’s wider than the test for dishonesty in Royal Brunei.

Answer 510

Unconscionability unlikely to encompass constructive NOTICE BUT may encompass constructive KNOWLEDGE.

Answer 511

Re Montagu’s Settlement) approved (obiter) in Westdeutsche Landesbank Girozentralle v Islington London Borough Council

Answer 512

A stranger will be an innocent volunteer where the first two conditions for recipient liability are met, but the stranger lacked the requisite degree of knowledge. This means that their retention of the trust property is not ‘unconscionable’.

Answer 513

1. Personal Equitable Action 2. Common Law Action for Restitution 3. Proprietary Equitable Claim

Answer 514

Can be brought against intermeddlers and those with recipient liability only. No personal claim can be bought against an innocent volunteer.

Answer 515

Can be brought against: intermeddlers, recipients and innocent volunteers.

Answer 516

The claimant can consider bringing a personal common law action for restitution.

Answer 517

Under Lipkin Gorman v Karpnale Ltd, a personal common law action can be sought where: • The claimant is the legal owner, e.g. where a director has breached his fiduciary duty, company is the legal owner of the property • The defendant has been unjustly enriched (application to facts: of yes, must be clear on WHY – e.g. if director misappropriated company money, state that the company’s consent is vitiated because of director’s fraud.); and • There is no mixing PRIOR to receipt by the defendant. Any mixing or dissipation of funds after receipt will not defeat the action.

Answer 518

Lipkin Gorman v Karpnale Ltd * The claimant is the legal owner, e.g. where a director has breached his fiduciary duty, company is the legal owner of the property * The defendant has been unjustly enriched (application to facts: of yes, must be clear on WHY – e.g. if director misappropriated company money, state that the company’s consent is vitiated because of director’s fraud.); and * There is no mixing PRIOR to receipt by the defendant. Any mixing or dissipation of funds after receipt will not defeat the action.

Answer 519

There is strict liability in such cases – the defendant will have to return any enrichment unjustly received unless they have a defence. However, if the defendant is bankrupt, any action will be fruitless (as personal claim).

Answer 520

* The defendant is a bona fide purchaser who has provided full consideration, i.e. has not been unjustly enriched. * ‘Change of position by innocent defendant.’ – would it be unjust to force restitution? This will be the case where the defendant spent all the cash in an irretrievable manner before he knew he wasn’t entitled to it and made exceptional expenditures that he wouldn’t have otherwise made. (Lipkin Gorman)

Answer 521

• ‘Change of position by innocent defendant.’ – would it be unjust to force restitution? This will be the case where the defendant spent all the cash in an irretrievable manner before he knew he wasn’t entitled to it and made exceptional expenditures that he wouldn’t have otherwise made.

Answer 522

Lipkin Gorman

Answer 523

This defence is only available if made in good faith

Answer 524

Abou-Rahmah v Abacha

Answer 525

Can be brought against intermeddlers, those with recipient liability and innocent volunteers.

Answer 526

‘The claimant can consider bringing a proprietary equitable claim against the defendant.’

Answer 527

* Claim ownership of new asset; or | * Claim an equitable lien (a charge over the asset to secure the amount).

Answer 528

* Assume that the first withdrawal uses trustee’s own funds; the second withdrawal is the trust’s money (Re Hallet); or, * If necessary to satisfy the beneficiaries claim, it can be assumed that the first withdrawal was from trust money (Re Oatway).

Answer 529

Claimant can choose to take proportionate share of asset or equitable lien over it, e.g. if additions to real property have increased its value (Foskett v McKeown). Consider whether the beneficiaries can claim any balance in the account.

Answer 530

There are two options available to the beneficiary: • Claim ownership of new asset; or • Claim an equitable lien (a charge over the asset to secure the amount)

Answer 531

• FIFO Re Clayton’s Case • If unjust, rule in Clayton wont be used, instead court will share funds out in appropriate portions (Barrows v Clowes) o Defence: Inequitable result (Re Diplock) o Can beneficiaries claim any balance in the account?

Answer 532

Withdrawal from mixed bank account: FIFO

Answer 533

Re Clayton’s Case

Answer 534

• If unjust, rule in Clayton wont be used, instead court will share funds out in appropriate portions

Answer 535

Barrows Clowes

Answer 536

o Defence: Inequitable result

Answer 537

Re Diplock

Answer 538

* Trust can only make a claim proportional to its initial investment, i.e. not a lien as well as in Foskett. * Court will not allow a claimant a lien over innocent volunteer’s real property.

Answer 539

Mention that all possible claims should be considered but that you can’t recover the same loss twice, so suggest which one claim is best to bring on the facts

Answer 540

Trusts may be used by potential creditors to gain priority in instances of insolvency. If the claimant has made a prepayment a trust can be used to protect their money.

Answer 541

Re Kayford, Re Goldcorp Exchange Ltd

Answer 542

What motivates companies to set up trusts? A director may have to contribute from his personal wealth if he has not taken all possible steps to minimise the risk to creditors

Answer 543

s.214 Insolvency Act 1986

Answer 544

Step One: Will a valid trust be found to exist over the claimant’s money? Go through the usual requirements Step Two: If a trust is found to exist in favour of a company’s customers, and later becomes insolvent, consider the preferences of its creditors – is the declaration of trust unlawful? Step Three: Conclude – does the company hold the customers pre-payments on trust for the customers?

Answer 545

1. There must be certainty of intention 2. There must be certainty of subject matter 3. There must be certainty of objects 4. Beneficiary Principle 5. Formalities 6. Trust must be properly constituted

Answer 546

Separate bank account need not be labelled ‘customer’ or ‘trust’ as per Paul v Constance. Certainty of intention to create trust for customers can be inferred from: • Payments of customers’ money into a separate bank account • Evidence that the company’s accountants had advised the above, in order to protect the customers’ money; or • The company need not expressly state that the bank account was held on trust for customers, if evidence of such intention existed otherwise

Answer 547

Re Kayford

Answer 548

Cannot create a trust over undifferentiated massive property; therefore, the company must keep customers’ property separated, e.g. in a different account

Answer 549

Re London Wine Company (Shippers) Ltd

Answer 550

o For example: specific gold ingots had not been assigned to customers; as the stock of bullion was constantly traded, there was no intention to create a trust over the bullion for the customers and it was unclear which ingots belonged to the customers. trust failed due to lack of certainty of subject matter and intention.

Answer 551

Re Goldcorp Exchange Ltd

Answer 552

The company can create a valid trust over a percentage of that property if the subject matter comprises intangible assets.

Answer 553

Hunter v Moss

Answer 554

‘urgent suppliers’ deemed uncertain. Must be able to draw up a complete list of objects (customers)

Answer 555

OT Computers Ltd v First National Tricity Finance Ltd

Answer 556

A preference occurs if a company does anything which puts one of its unconnected creditors in a better position than it otherwise would have been on the company’s insolvency.

Answer 557

s.239 Insolvency Act 1986

Answer 558

1. The Effect of such preference The court can make an order to put the parties into the same position they would have been in without the trust if: • preference occurs within six months before onset of insolvency (or two years if creditor is connected to company); and • company is influenced by desire to put creditor in better position 2. Declaration of trust by company in favour of its future customers was not an unlawful preference (Re Kayford) 3. But, declaration of trust over money already paid by existing customers is an unlawful preference (Re Farepak Food and Gifts Ltd)

Answer 559

The court can make an order to put the parties into the same position they would have been in without the trust if: • preference occurs within six months before onset of insolvency (or two years if creditor is connected to company); and • company is influenced by desire to put creditor in better position

Answer 560

Declaration of trust by company in favour of its future customers was not an unlawful preference

Answer 561

Re Kayford

Answer 562

But, declaration of trust over money already paid by existing customers is an unlawful preference

Answer 563

Re Farepak Food and Gifts Ltd

Answer 564

If so, on insolvency: • If a trust is declared over existing customers’ money, will be unlawful. (Re Farepak) • If a trust is declared over new customers’ money, will be lawful and therefore recoverable. (Re Kayford) • But, if old and new customers’ money has been mixed, may not be possible to distinguish new from old, and therefore the whole trust might fail.

Answer 565

If a trust is declared over existing customers’ money, will be unlawful.

Answer 566

Re Farepak

Answer 567

If a trust is declared over new customers’ money, will be lawful and therefore recoverable.

Answer 568

Re Kayford

Answer 569

Step one: Introduce the concept of Quistclose trust Step two: is the Quistclose Trust validly established? Are the three certainties present? Not necessary to address the beneficiary principles and formalities Step three: Has the purpose of the primary trust failed?

Answer 570

State: ‘In scenarios of insolvency, a Quistclose trust may arise. a Quistclose trust comprises of two trusts: a primary trust, where a lender has lent money for a specific purpose; and, on failure of the purpose of this trust, a secondary, resulting trust in favour of the lender.’

Answer 571

Barclays Bank v Quistclose Investments Ltd

Answer 572

Quistclose trusts may be used to protect purely private contractual interests

Answer 573

Cooper v PRG Powerhouse Ltd

Answer 574

‘In scenarios of insolvency, a Quistclose trust may arise. a Quistclose trust comprises of two trusts: a primary trust, where a lender has lent money for a specific purpose; and, on failure of the purpose of this trust, a secondary, resulting trust in favour of the lender.’

Answer 575

The money should have been lent for a sole specified purpose and not intended to be at the borrowers’ free disposal.

Answer 576

Quistclose Investments; Twinsectra v Yardley

Answer 577

The money was lent for the sole purpose of paying third party creditors said the defendant was never free to deal as it so pleased with the monies

Answer 578

Carreras Rothmans Ltd v Freeman Matthews Treasure Ltd

Answer 579

the money was lent for the sole purpose of buying new equipment and so could not be used in any other way

Answer 580

whether money is at the free disposal of the defendant no trust will arise and the customers or lenders will be ordinary unsecured creditors

Answer 581

Re Farepak

Answer 582

The lender is likely to be deemed to be the object of a Quistclose trust as per Lord Millett in Twinsectra however this issue has not yet been conclusively decided

Answer 583

A resulting trust arises in favour of the original lender. The original lender has a trust interest. As the lender has a trust interest, any proprietary claim they make will have priority overall other secured and unsecured creditors on the business’s insolvency.

Answer 584

The primary trust ceases. No longer having a beneficial interest the lender will then only have a contractual claim for the repayment of the loan and will consequently rank alongside other unsecured creditors

Answer 585

• Parties and decide when title to the goods passes from the seller to the buyer • Sellers can protect themselves with a retention of title clause (ROT). this means the seller holds the title in the goods until some future event (usually full payment). • If the buyer becomes insolvent: o without ROT, the supplier will rank as an unsecured creditor and will be unlikely to recover any outstanding debt owed by the buyer; o with ROT, a successful ROT close gives the seller a proprietary right, affording him priority status over all other (secured and unsecured) creditors. (Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd)

Answer 586

• A.I.V supplied aluminium foil to Romalpa. Romalpa went into liquidations till owing A.I.V. £122,239. The case concerned A.I.V.’s attempts to recover this debt from two potential sources: o £50,000 unsold aluminium foil o £35,152 in proceeds from sub-sales to third parties • A.I.V. relied on the following clause: ‘the ownership of the material to be delivered by A.I.V. will only be transferred to the purchaser when he has met all that is owing to A.I.V., no matter on what grounds.’

Answer 587

* The client was successful in its claim over the 50,000 pounds of unsold foil. it was held that this clause enabled A.I.V. to recover the unprocessed foil because the claimant had effectively retained title to it. * Second, the Court of Appeal argued that as the parties were fiduciaries, A.I.V. was entitled to the proceeds of sub sales on the basis of the equitable doctrine of tracing established in Re Hallet’s Estate.

Answer 588

Courts have shown reluctance to allow suppliers to trace a transformed product: Borden (UK) Ltd v Scottish Timber Products • Seller supplied resin to the buyer. Buyer used resin to make chipboard. HELD: resin ceased to exist once used in making chipboard; therefore, fell outside retention of title clause and the seller lost title. (Borden (UK) Ltd v Scottish Timber Products) Re Peachdart Ltd • Seller supplied leather; buyer cut leather into shape to make handbags. HELD: cutting the leather is irreversible manufacturing process therefore lost identity and retention of title didn't work (Re Peachdart Ltd)

Answer 589

• Seller supplied resin to the buyer. Buyer used resin to make chipboard. HELD: resin ceased to exist once used in making chipboard; therefore, fell outside retention of title clause and the seller lost title.

Answer 590

Borden (UK) Ltd v Scottish Timber Products

Answer 591

• Seller supplied leather; buyer cut leather into shape to make handbags. HELD: cutting the leather is irreversible manufacturing process therefore lost identity and retention of title didn't work

Answer 592

Re Peachdart Ltd

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