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632 results in Equity and Trusts

Page 17 of 32

  • Chapter 23 - Constructive trusts

  • from Part H - Non-Consensual Trusts
  • Michael Bryan, University of Melbourne, Vicki Vann, Monash University, Victoria, Susan Barkehall Thomas, Monash University, Victoria
  • Book:
    Equity and Trusts in Australia
    Published online:
    21 June 2018
    Print publication:
    01 September 2017, pp 368-392

  • Summary

    Introduction

    A constructive trust is imposed by operation of law when it would be inequitable, by reference to established equitable principles, for the defendant to deny the obligations of trusteeship. The award of a constructive trust usually involves the court ordering the defendant to hold property to which he has title on trust for the plaintiff. But in some situations the constructive trust is awarded as a personal remedy; the defendant is held accountable as if he were a trustee. Someone who knowingly assists a trustee or other fiduciary to commit a breach of duty will be accountable as a constructive trustee. As constructive trustee he must account to the beneficiary for loss caused by the breach. The constructive trust is an ‘as if’ trust – the defendant is treated by equity as if he were an express trustee, even though he is not. The trustee legislation of all States and Territories defines the words ‘trust’ and ‘trustee’ to include a constructive trust and constructive trustee, unless the context otherwise requires. This means that constructive trustees can exercise the statutory powers contained in the legislation.

    Whether a constructive trustee is subject to the duties imposed on an express trustee, discussed in chapter 17, is unclear. The answer will depend on the nature of the constructive trust imposed. If the duty of the constructive trustee is to convey immediately the subjectmatter of the trust to the plaintiff, the constructive trustee will not be under any ongoing management obligations. Although the constructive trust is a remedy for breach of fiduciary duty it does not follow that a constructive trustee is a fiduciary. A fiduciary is someone who voluntarily undertakes to protect the interests of another in a particular matter (see [10.2]). Constructive trusteeship, in contrast, is not voluntarily assumed but is an obligation imposed by judicial decision or by the automatic application of equitable doctrine. Indeed, a constructive trustee is usually the last person a beneficiary would want to act as a fiduciary in her best interests.

    A distinction is drawn in many of the cases between an ‘institutional’ and a ‘remedial’ constructive trust. A difficulty in applying the distinction is that judges and writers often fail to define what they mean by the terms ‘institutional’ and ‘remedial’.

  • Preface

  • Michael Bryan, University of Melbourne, Vicki Vann, Monash University, Victoria, Susan Barkehall Thomas, Monash University, Victoria
  • Book:
    Equity and Trusts in Australia
    Published online:
    21 June 2018
    Print publication:
    01 September 2017, pp xix-xx

  • Summary

    There are many books on equity and trusts. Ours has modest but important aims. It is unashamedly pedagogic, being designed for students enrolled in LLB and JD degrees taking semesterised and trimesterised equity and trusts units. It makes no attempt to be comprehensive but focuses only on those topics we regard as essential to a foundational understanding of equity and trusts, required for the purpose of obtaining professional qualification. The book is premised on the belief that equitable doctrine is a coherent body of doctrine which affords the student insights, for example into the relationship between breaches of duty and remedies, that cannot be obtained from the study of other subjects in a law degree. Moreover, although legal study is not most students’ idea of fun, the study of equity is intellectually interesting from a variety of perspectives. It is essential that students coming to the subject not be under the misconception that it is arcane or obscure.

    The opportunity has been taken in this edition to incorporate analysis of recent High Court decisions including Legal Services Board v Gillespie-Jones (2013) 249 CLR 493, Kakavas v Crown Melbourne (2013) 250 CLR 392, Howard v Commissioner of Taxation (2014) 253 CLR 83, Sidhu v Van Dyke (2014) 251 CLR 505, Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62; Crown Melbourne v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 333 ALR 384 and Paciocco v Australia and New Zealand Banking Group Ltd (2016) 333 ALR 569. Recent Federal Court and State decisions, as well as decisions from other common law jurisdictions, have been included where they raise new issues of equitable principle or provide vivid examples of established principle.

    References are made throughout the text to ‘A Sourcebook on Equity and Trusts in Australia’, published by CUP in 2016. This book is designed to be used either as a companion to the Sourcebook or as a freestanding text.

    The book should be read in conjunction with its companion website at www.cambridge.edu.au/academic/equity. The website contains detailed analysis of specific equity and trusts principles which are outlined in the text, suggestions for further reading and investigation, academic analysis of controversial areas of doctrine and practice, and practice problems and guidelines to answers to assist students with exam preparation.

  • Chapter 11 - Participants in a breach of fiduciary obligation

  • from Part D - Equitable Obligations
  • Michael Bryan, University of Melbourne, Vicki Vann, Monash University, Victoria, Susan Barkehall Thomas, Monash University, Victoria
  • Book:
    Equity and Trusts in Australia
    Published online:
    21 June 2018
    Print publication:
    01 September 2017, pp 171-184

  • Summary

    Introduction

    The fiduciary may not be the only person who is accountable for a breach of fiduciary obligation. Other parties may also be liable. Suppose a solicitor misappropriates client money and then pays it into his wife's bank account. The solicitor might also have been helped to commit the breach by an accountant who gave the solicitor access to the client account. Will these third parties – the wife and accountant – be liable in equity for their participation in the fiduciary's breach? If the solicitor is solvent, the answer to this question may not matter much. The solicitor will be ordered to restore the money to the fund, together with compound interest to compensate for the loss of investment opportunity caused by the misappropriation. But if the solicitor is insolvent the client will look to other participants in the fraud with ‘deep pockets’ to recover her funds.

    Potential liability for participating in a breach of fiduciary obligation is illustrated by the following example:

    Solicitor S withdraws $10 000 of client C's money from the client account in breach of duty. He is assisted by A, the firm's accountant. S gives $10 000 to X, who spends $2000 on a family holiday and pays the remaining $8000 to Y. Y uses $4000 to buy a valuable painting and gives the balance of $4000 to Z, who pays it into his bank account. S is insolvent. Leaving aside the worthless claim against S, C has potential claims against A, X, Y and Z. C may be able to recover against them, either because equity regards them as wrongdoers too (which is discussed in this chapter), or because equity will allow C to trace and claim property from them (discussed in chapter 21).

    These claims are both personal and proprietary. C can claim a constructive trust over Y's painting as representing part of the stolen money. This is a proprietary claim. C can also claim the $4000 paid into Z's bank account. This involves a tracing (or identification) exercise to identify the money in Z's account. C can then elect to take the money from the account. On the other hand, C's claims against A and X will be personal. A never received C's money and X no longer has the money he received from S.

  • Chapter 17 - Trustees' duties and powers

  • from Part F - Performing the Trust
  • Michael Bryan, University of Melbourne, Vicki Vann, Monash University, Victoria, Susan Barkehall Thomas, Monash University, Victoria
  • Book:
    Equity and Trusts in Australia
    Published online:
    21 June 2018
    Print publication:
    01 September 2017, pp 265-288

  • Summary

    Introduction

    The trustee will in most cases hold legal title to the property held on trust for the beneficiaries, or for charitable purposes, and so enjoys the legal owner's powers to deal with the property. This form of wealth management presents opportunities for the trustee to betray the trust reposed in him. Equity therefore imposes strict obligations on the trustee to ensure the trustee's proper performance. Even when a trustee holds property on a bare trust for a single, adult beneficiary, so that the beneficiary can claim the trust property for herself under the rule in Saunders v Vautier, the trustee will have active duties to perform, including a duty of care with respect to the property. The duties are enforceable by the remedies discussed in Part B, and also by the award of the constructive trust discussed in chapter 23, all of which are designed not only to provide complete relief for the trust but also to deter wrongdoing.

    A significant number of positive duties are imposed on a trustee. Failure to perform these duties constitutes a breach of trust. Additionally, the trustee is subject to the fiduciary obligations. Instead of requiring positive action from a trustee, these require the trustee to refrain from making an illicit profit from the trust, or allowing a conflict of interest or duty to exist. Fiduciary obligations apply equally to trustees and other fiduciaries and will not be discussed further in this chapter except insofar as they are reflected in particular duties.

    In addition, equity and trustee legislation confers managerial powers on the trustee to enable the trustee to carry out the trust according to its terms. Typical powers are the power to insure trust property; to appoint agents, such as lawyers, accountants and investment advisers; to maintain infant beneficiaries; and to advance capital to a beneficiary entitled to a share of the capital. The powers may be extended or limited by the express terms of the trust instrument. It is not uncommon for a power to be coupled with a power. For example, a trust to sell land and invest the proceeds will usually include a power entitling the trustees to postpone sale until market conditions are advantageous.

  • Chapter 12 - Breach of confidence

  • from Part D - Equitable Obligations
  • Michael Bryan, University of Melbourne, Vicki Vann, Monash University, Victoria, Susan Barkehall Thomas, Monash University, Victoria
  • Book:
    Equity and Trusts in Australia
    Published online:
    21 June 2018
    Print publication:
    01 September 2017, pp 185-198

  • Summary

    Introduction

    The equitable obligation of confidence is used to protect information from unauthorised misuse or exploitation by others. The action now has two significant aspects; it is traditionally used to protect commercially valuable information such as trade secrets, and it is increasingly used to protect personally private information. Whether the same considerations apply to these two aspects of the action is an open question.

    Though the obligation of confidence is one of the oldest in equitable jurisdiction, in many ways it is also equity's newest area of interest, and has recently been called upon to protect interests previously thought to be ineffectively protected.

    The long hiatus between the action's origins and its current development is partly due to the unusual position confidentiality has occupied. Whereas many equitable responsibilities, such as trust or fiduciary obligations, have no direct common law counterparts, confidentiality can be regulated by regimes other than equity. Up until the mid-twentieth century most cases concerning the equitable obligation of confidence also involved a breach of an obligation of confidence not sourced in equity. For this reason, the courts were not particularly rigorous in their discussions of the doctrine. In older cases it can be hard to discern whether courts are referring to an equitable obligation, a contractual obligation, or perhaps both. This is particularly noticeable in respect of remedies.

    The equitable obligation of confidence

    A comprehensive statement of the law of confidential information for Australian purposes was given in Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services. Gummow J identified the four elements of the obligation that must be demonstrated by the plaintiff:

  • The information said to be confidential must be identified with specificity and not merely in global terms;

  • The information has the necessary quality of confidentiality (and is not, for example, common or public knowledge);

  • The information was received by the defendant in such circumstances as to import an obligation of confidence; and

  • That there is actual or threatened misuse of that information, without the consent of the plaintiff.

    • Unless the defendant can establish some valid defence, equity will restrain the unauthorised misuse. If the misuse has already occurred a wide range of remedies, including an account of profits and equitable compensation, is available.

  • Chapter 10 - Fiduciary obligations

  • from Part D - Equitable Obligations
  • Michael Bryan, University of Melbourne, Vicki Vann, Monash University, Victoria, Susan Barkehall Thomas, Monash University, Victoria
  • Book:
    Equity and Trusts in Australia
    Published online:
    21 June 2018
    Print publication:
    01 September 2017, pp 149-170

  • Summary

    Introduction

    Equity closely scrutinises relationships in which one party places trust and confidence in another. There are many examples of trust in human interaction, but equity cannot grant relief against every breach of trust and confidence, any more than contract law can enforce all promises. Only some trusting relationships and some obligations of confidence are protected. The relationships which equity protects are known as fiduciary relationships.

    A relationship of trust and confidence will be recognised as fiduciary where it arises from F undertaking to act in the interests of B in a matter which confers a discretion on F, and in respect of which the exercise of discretion affects B's economic interests. B may hand over property to F, such as an investor handing over money to an investment adviser. A settlor may hand property to F to hold on trust for B. Alternatively, B may entrust F with the task of negotiating a contract on behalf of B so that F is B's agent. Or F may be entrusted with the task of obtaining information on behalf of B which will enable B to exploit a commercial opportunity. This is also an example of agency.

    In all these cases the relationship between F and B constitutes a fiduciary relationship. F will owe fiduciary obligations to B. If, in the second example, F negotiates to take the benefit of a contract for himself, and not for B, he has committed a breach of fiduciary obligation. Fiduciary relationships do not – or do not simply – require the fiduciary, F in these examples, to act reasonably, as may be the case in tort or contract. The essence of a fiduciary relationship is that the fiduciary must act exclusively in the interests of the beneficiary in matters coming within the scope of the relationship.

    The central concern of fiduciary law is the division between the management and enjoyment of property, which is broadly defined for this purpose to include such matters as information and the opportunity to obtain the benefit of a contract. (The latter is sometimes called ‘soft property’.) Fiduciary obligations regulate managers’ behaviour where their activities cannot be properly supervised by those on whose behalf they act, whom we will refer to as ‘the beneficiaries’.

  • Chapter 22 - Resulting trusts

  • from Part H - Non-Consensual Trusts
  • Michael Bryan, University of Melbourne, Vicki Vann, Monash University, Victoria, Susan Barkehall Thomas, Monash University, Victoria
  • Book:
    Equity and Trusts in Australia
    Published online:
    21 June 2018
    Print publication:
    01 September 2017, pp 353-367

  • Summary

    Introduction

    Resulting trusts arise where property is disposed of in circumstances in which a provider of property does not intend to benefit the recipient. The recipient holds the property on trust for the provider. The property is said to ‘result back’ to the provider. This does not mean that the equitable interest in the property returns to the provider. What happens is that when the legal interest in the property is transferred to the recipient a new equitable interest is created in favour of the provider.

    Resulting trusts differ from express trusts in that an express trust gives effect to the settlor's positive intention to benefit another by way of trust, whereas a resulting trust gives effect to the provider's negative intention – an intention not to benefit the recipient. The resulting trust resembles a constructive trust in that it arises by operation of law but differs in that its imposition can be rebutted by evidence that the provider intended to benefit the recipient.

    Resulting trusts are said to be either ‘presumed’ or ‘automatic’. Presumed resulting trusts can be rebutted by evidence that the provider of the property intended to benefit the recipient. There are two types of presumed resulting trust.

  • A purchase money resulting trust. If P purchases property in the name of D equity presumes that D holds the property on trust for P.

  • A voluntary transfer resulting trust. If P voluntarily transfers property to D equity presumes that D holds the property on resulting trust for P. Legislation in some jurisdictions has abolished the application of the voluntary transfer resulting trust to land.

    • What is ‘presumed’ in these cases is that P declared a trust in her favour when the property was transferred to D. The presumption can be rebutted by proof that no trust was declared and that P intended to give or lend the property to D. In the case of property transfers made within certain family relationships, such as by a husband to wife, or a parent to child, the presumption of resulting trust is not applied. Instead, the presumption is that transferor intended to advance (or make a gift of) the property to the transferee. The presumption of advancement is described in paragraphs [22.9]–[22.14] below.

  • Chapter 16 - Trusts for charitable and non-charitable purposes

  • from Part E - Express Trusts
  • Michael Bryan, University of Melbourne, Vicki Vann, Monash University, Victoria, Susan Barkehall Thomas, Monash University, Victoria
  • Book:
    Equity and Trusts in Australia
    Published online:
    21 June 2018
    Print publication:
    01 September 2017, pp 247-262

  • Summary

    Introduction

    Students tend to approach the law of charitable trusts with a sense of relief. After the fairly dry and technical case law of private trusts, the eccentricities of testamentary trusts created for charitable purposes provide some colour.

    For example, when Beryl Campbell died, she wanted her house to be used in perpetuity, apparently for the purpose of keeping the garden for the benefit of native birds. Two kind, thoughtful, Protestant, garden-loving, non-drinking non-smokers who did not take drugs or gamble were to be installed as caretakers. They were not to have cats or dogs, and were not to paint polished furniture. If no suitable relatives could be found to act as caretakers, the Geelong Field Naturalist Club was to find someone, preferably pensioners, who fitted the description above to care-take the home. This attempted trust failed, however. A valid charitable trust must be for a charitable purpose, and for the benefit of the public. This was neither, as the principles discussed in this chapter make clear.

    A valid trust for a purpose

    Charitable trusts differ from other express trusts in several important features. First, they are trusts for a purpose rather than for the benefit of identified or identifiable individuals. Trusts for purposes are usually invalid, as there is no person with standing to enforce them. The exception is trusts that are for valid charitable purposes, and for the benefit of the public. This has an important impact on tests for certainty. As there is no identifiable person who benefits from the trust, the usual tests for beneficiary identification (list certainty and criterion certainty) are irrelevant. What is important is that the settlor intended to create a trust for a valid charitable purpose. As there is no person who has sufficient standing to see the trust performed, locus standi is given to the Attorney-General. However, in all other respects the usual rules relating to the establishment of trusts discussed in chapter 15 apply.

    Unlike private express trusts, charitable trusts can run indefinitely. Once the trust fund has been applied for a charitable purpose it can only ever be available for a charitable purpose and cannot be returned to the settlor. This remains so even if the original charitable purpose has ceased or is no longer needed.

  • Chapter 13 - The concept of the express trust

  • from Part E - Express Trusts
  • Michael Bryan, University of Melbourne, Vicki Vann, Monash University, Victoria, Susan Barkehall Thomas, Monash University, Victoria
  • Book:
    Equity and Trusts in Australia
    Published online:
    21 June 2018
    Print publication:
    01 September 2017, pp 201-214

  • Summary

    Introduction

    Express trusts are a form of wealth management. Ownership and management of the property is split from the enjoyment of the property. In its simplest terms, the trustee manages the property but not for his own benefit. Express trusts emerged from medieval ‘uses’ of land and have been recognised and enforced in common law systems for over 700 years. They are no longer limited to land; any form of property can be held on trust.

    Today, the express trust is used for a wide variety of purposes, both private and commercial, where it is necessary or desirable to split management from benefit.

    These include:

  • • Managing family wealth under a family trust;

  • • Managing property for those unable to do so themselves, such as children or those under disabilities;

  • • Group investment trusts, such as unit trusts;

  • • Trading trusts;

  • • Trusts set up under wills;

  • • Superannuation trusts, which operate for the benefit of large numbers of members; and

  • • Trusts used as security for borrowings.

    • Almost all Australians over the age of 18 will have some involvement in a superannuation trust. Many kinds of trusts are now largely regulated by statute but all are based on the equitable principles for controlling trusts. Except where otherwise stated, we will use the simplest form of express trust as an example – that set up under a will for the benefit of the testator's relatives.

    Definition

    The express trust has never been authoritatively defined. Indeed, the very lack of definition has been partly responsible for its evolution as a flexible and effective method for managing wealth. The principal features of a trust can nevertheless be described in general terms. Ford and Lee describe it as:

    … an obligation enforceable in equity which rests on a person (the trustee) as owner of some specific property (the trust property) to deal with that property for the benefit of a certain person (the beneficiary) or persons, or for the advancement of certain purposes.

  • Chapter 19 - Trustees' rights and liabilities

  • from Part F - Performing the Trust
  • Michael Bryan, University of Melbourne, Vicki Vann, Monash University, Victoria, Susan Barkehall Thomas, Monash University, Victoria
  • Book:
    Equity and Trusts in Australia
    Published online:
    21 June 2018
    Print publication:
    01 September 2017, pp 304-318

  • Summary

    Introduction

    Both equity and trustee legislation confer rights on trustees which enable them to perform their obligations effectively and protect them from some of the more onerous aspects of the responsibilities of trusteeship. Only selected rights are covered in this chapter, the most important of which is the trustee's right of indemnity.

    The trustee's most significant liability is for breach of trust; however, the trustee is also liable at law to incur the expenses of the trust. This liability gives rise to the trustee's right of indemnity. The trustee's exposure to liability must therefore be understood before his rights can be considered.

    Trustees’ liabilities

    A trust is not a legal entity. At law the trustee is the legal owner (or holder) of the trust property. The trustee is therefore legally liable for all expenses incurred in respect of that property, whether those expenses arise in contract, tort or otherwise.

    Intentionally incurred expenses usually arise in contract. It is sometimes possible for a trustee to limit or avoid personal liability under the contract. The trustee and other contracting party can agree that the other party will be limited to the trust assets for debt recovery, with the trustee not exposed to personal liability for breach. Very clear language is required. It is not sufficient for the contract to state that the trustee signs ‘as trustee’. That term is descriptive only, and does not indicate the parties’ intention to restrict the trustee's personal exposure. An example of words indicating that the trustee is not exposing itself to personal liability is a signature ‘as trustee and not otherwise’.

    Trustee's right of indemnity

    The trustee is not the beneficial owner of the trust property. Expenses the trustee incurs in managing the trust property are in equity incurred on behalf of the beneficiaries. The beneficiaries must do equity in return for the expenditure incurred by the trustee; the trustee must be reimbursed, if necessary by the beneficiaries themselves. At general law and under statute the trustee is entitled to reimburse himself for expenses already discharged out of trust property, and is also entitled to discharge the expense directly out of trust property.

  • Chapter 14 - Certainty requirements in the law of trusts

  • from Part E - Express Trusts
  • Michael Bryan, University of Melbourne, Vicki Vann, Monash University, Victoria, Susan Barkehall Thomas, Monash University, Victoria
  • Book:
    Equity and Trusts in Australia
    Published online:
    21 June 2018
    Print publication:
    01 September 2017, pp 215-232

  • Summary

    Introduction

    All dispositions that are intended to transfer property, such as contracts, gifts, trusts and wills must be clearly defined if they are to be legally effective. In the event of a dispute a court may have to ascertain whether the property owner intended to dispose of her property and, if so, on what terms. In some cases the court may have to determine the identity, or identities, of the recipients of the property, or the quantum of property transferred. A recipient of property will need to know if the transfer constitutes a gift, a loan or a trust.

    All trusts, whether or not they also have to satisfy writing requirements, must be sufficiently certain in order to be enforceable. The certainty requirements for trusts are more demanding than for contracts because trusts can affect the rights of parties who did not agree to, or participate in, its creation. These parties may include the beneficiaries and third parties who do business with the trustee.

    An express trust must be certain in three distinct respects, sometimes called the ‘three certainties’. They are:

  • (a) Certainty of intention. The settlor must have intended to create a trust of her property, as opposed to making a gift of it or lending it to another.

  • (b) Certainty of subject-matter. The subject-matter of the trust must be specified with reasonable certainty.

  • (c) Certainty of objects. The beneficiaries of the trust must be sufficiently identifiable.

    • Charitable trusts are not required to satisfy the requirement of certainty of objects. They are discussed in chapter 17. Resulting and constructive trusts, which are not created by a settlor but are judicially imposed, will not satisfy the requirement of certainty of intention although the other two certainty requirements are still applicable to them.

    The certainty requirements are related to each other in the sense that failure to satisfy one of the certainties may cast doubt on whether one of the other requirements has been met. For example, if the subject-matter of a trust is uncertain it may well also be the case that the settlor did not truly intend to make the recipient of her property a trustee.

    Certainty of intention

    The settlor must have intended to create a trust of her property, as opposed to making a gift or a loan.

  • Chapter 3 - Specific performance, injunctions and equitable

  • from Part B - Equitable Remedies
  • Michael Bryan, University of Melbourne, Vicki Vann, Monash University, Victoria, Susan Barkehall Thomas, Monash University, Victoria
  • Book:
    Equity and Trusts in Australia
    Published online:
    21 June 2018
    Print publication:
    01 September 2017, pp 32-52

  • Summary

    Introduction

    The title of this chapter may look like a grab bag of remedies, but this is not the case. Specific performance and injunctions are equitable remedies. The remedy of equitable damages is a creature of statute available either in lieu of or in addition to the equitable remedies of specific performance and injunction. Thus the three remedies are closely related. They will be discussed in turn.

    Specific performance

    An order of specific performance is an order directing a party to a contract to perform the contract according to its terms. The party will be directed to perform all his obligations under the contract. The remedy of specific performance illustrates the dualist nature of our legal system. It is only available in respect of the common law action of breach of contract. Specific performance exemplifies equity acting in its auxiliary jurisdiction. As the remedy is usually dealt with in contract law or remedies courses our coverage will be brief.

    General considerations

    There are two considerations generally relevant to an award of specific performance. These are: (a) fairness to both parties; and (b) the supervision requirement.

    Fairness to both parties

    It will be unjust to hold the defendant strictly to his side of the bargain unless the plaintiff has performed her obligations under the contract, or is in a position to do so. Courts of equity have formulated tests to determine the overall fairness of an order of specific performance. One, known as ‘mutuality’, is that specific performance will not be ordered unless the court is satisfied that the defendant will be sufficiently protected in the event that the plaintiff does not perform her obligations. This is sometimes taken to mean that the plaintiff cannot have the defendant's obligations specifically performed unless the defendant has an equivalent right to performance of the plaintiff's obligations. But mutuality does not have to take the form of ‘tit for tat’ specific performance – the possibility of obtaining other remedies, such as an injunction, may be sufficient in some cases. Exceptionally, a court might even consider the defendant to be protected by a damages award in the event of the plaintiff's breach.

  • Chapter 18 - Investment of trust funds

  • from Part F - Performing the Trust
  • Michael Bryan, University of Melbourne, Vicki Vann, Monash University, Victoria, Susan Barkehall Thomas, Monash University, Victoria
  • Book:
    Equity and Trusts in Australia
    Published online:
    21 June 2018
    Print publication:
    01 September 2017, pp 289-303

  • Summary

    Introduction

    As we saw in chapter 13 express trusts are created to manage assets. Asset management means active asset management. Thus, the trustee is under a duty to invest trust funds rather than to simply hold them safe. Resulting or constructive trustees are usually not under a duty to invest funds as their responsibility is to transfer the property to the person entitled to it. However, they can come under a duty to invest if the period of time for which the asset is held allows investment. It has been held that a trust fund should be invested within six months although there are occasions when funds should be invested more promptly. Failure to actively manage the trust is a breach of trust and can result in personal liability for the trustee. If a trustee under a resulting or constructive trust invests the funds, the trustee is under the same investment duties as a trustee of an express trust.

    Sources of trustees’ investment powers

    Trustees’ investment powers derive from the trust instrument, statute or court order. Early trusteeship legislation gave trustees limited investment powers. Unless the trust instrument contained extended investment powers the trustee could only invest in securities authorised by statute or obtain an order of the court allowing another form of investment. By the middle of the twentieth century this scheme exhibited a number of disadvantages. One major flaw concerned the statutory list of authorised investments in which a trustee was permitted to invest. This required investment in highly conservative assets such as government bonds. Most Australian jurisdictions did not even permit investment in land. Further, the prudence of each independent investment was considered separately. This was called ‘line by line’ analysis. As no individual investment could be at all speculative the conservative nature of authorised list investments was magnified.

    Investment in authorised securities worked well enough when inflation was low, and returns on permitted investments were stable and aligned to the inflation rate. However, as the nature of capital markets changed and inflation became ‘a persistent phenomenon’, investment in authorised investments no longer protected beneficiaries. They found that the capital value of their trust funds was eroded over time.

  • Chapter 8 - Equitable proprietary interests

  • from Part C - Equity, Contract and Property
  • Michael Bryan, University of Melbourne, Vicki Vann, Monash University, Victoria, Susan Barkehall Thomas, Monash University, Victoria
  • Book:
    Equity and Trusts in Australia
    Published online:
    21 June 2018
    Print publication:
    01 September 2017, pp 119-128

  • Summary

    Introduction

    We saw in Part B that equity developed an armory of personal remedies, such as specific performance and injunctions, directed at the person of the defendant. Their principal function is to enforce personal rights, such as performance of a contract. However, over time equity proved willing to award personal relief almost routinely, not only against owners of property but also against third parties who had received the property. This regular award of equitable personal relief was eventually perceived as having created a proprietary interest in favour of the party entitled to the relief. For example, if A signs a contract to purchase land from B, but B refuses to complete the contract, equity will grant the remedy of specific performance against B, and B will have to transfer the land to A. This happened so routinely that eventually A was treated in equity as if he held a property interest in the land once the contract was signed. Similarly, the regular awards of personal relief against trustees in breach of trust eventually gave rise to a proprietary interest in the beneficiary. All equitable property rights are sourced in a personal obligation enforced in equity.

    The availability of an equitable remedy does not necessarily mean that the interest protected by the remedy constitutes property. For example, equity grants injunctions and other relief to prevent the unauthorised use of confidential information. But confidential information is not recognised as a species of equitable property. Information is only protected against misuse by parties who act in breach of an equitable obligation of confidence. A person who has confidential information has only a personal right to protection in equity.

    Equitable property, like common law property, must be of a kind that is recognised as property in law.

    Equity recognises and enforces interests in property which are not recognised or enforced at common law. Interests include:

  • (a) a beneficiary's interest under a fixed trust;

  • (b) a partner's interest in the partnership;

  • (c) proprietary interests that are counterparts to common law interests, such as the equitable fee simple and the equitable lease. (These differ from equivalent common law interests in their method of creation and the extent of their enforceability);

  • (d) equitable security interests, such as the equitable charge. An equitable charge is created more informally than the common law mortgage.

Page 17 of 32