Trusts + Gifts Flashcards
Three Certainties of Express Trust
1) Certainty of subject matter
2) Certainty of Intention
3) Certainty of Objects
Types of Trusts
Express
Constructive
Resulting
Spencer v Riesberry
A trust is a form of property
This creates a fiduciary relationship between the trustee and beneficiary
Worksafe New Zealand v RH & Jury Trust and Others
Farms was owned by trustees and child was killed on visit to the farm
Generally, a trust is not a person but can be an unincorporated group of people so can be sued
Paul v Constance
Deceased declared that his money was as much his wife’s as it was his
There was clear intention in his conduct so a trust was created
Intention can also be expressed through a series of actions
Proprietors of Wakatu v A-G
“A trust may be created by any language sufficient to show the intention, and technical words are not necessary”
Morice v Bishop of Durham
Must be sufficiently certain beneficiaries; uncontrolled power of disposition would be ownership, not a trust
Types of Beneficiaries
Fixed: all beneficiaries are identified and their interests are fixed
Discretionary: beneficiaries are selected through a class by the trustee
Gartside v IRD
A discretionary trust helps avoid tax
Westdeutche Landestbank Girosentrale v Council of London Borough or Islington
Resulting may arise due to;
- failure of express trust
- property is purchased through donation by another party (held on trust unless there is evidence showing it was a gift)
Crampton-Smith
Brother gave sister money to buy land, she then built houses on it increasing it’s value and paid the brother back for the original contribution
There was an automatic presumption of a resulting trust and this was not rebutted so the property belongs to the brother
Buffery
Husband and wife jointly purchased properties but wife stole from employer and her property would be used to pay them back
Advancement presumption; when there is a relationship between parties so there will be a gift rather then a resulting trust
This presumption was displaced by contrary evidence
Parlane
Deceased’s money was to be divided equally between children but some siblings argued they were entitled to more because she had provided one daughter with money when she was alive
The modern presumption of advancement is very weak and generally designed to infer a gap left by a lack of evidence
What is a contribution constructive trust?
In a relationship a party may be awarded a proprietary interest through a contribution constructive trust for their contributions to the relationship, although they may not have contributed to the purchase price
(no longer applies to spouses)
Gillies v Keogh
Man argued that he had a right in the house due to a contribution constructive trust
There was no constructive trust because the wife had clearly asserted over the course of the relationship that the house belonged to her
Lankow v Rose
Parties lived in de-facto union for 10 years (R was originally in debt while L had goods already and left the relationship with $500,000 more)
R was entitled to a 50% share and this was reasonable
Elements of Contribution Constructive Trust (Lankow v Rose)
1) Contributions (direct or indirect) to the owner’s property
2) An expectation to receive an interest in the property
3) That such an expectation was reasonable
4) That the owner should reasonably expect to yield an interest to the claimant
Hawkes Bay Trustee Company v Judd
Marriage, Judd claimed a share of the property was held on constructive trust
Contributions: work on house and gardens
Benefits: rent-free for her and children and ran business from a studio above property
It was reasonable for the husband to expect to have to yield some of his interest to Judd
Blumental v Stewart
Facts:
Stepfather did not leave property to stepson who claimed he was entitled from working on the farm for 9 years, visiting stepfather in hospital, helping around the house and speaking at the funeral
Mandatory duties of a trustee
S 22: States they are mandatory duties
S 23: Know the terms of the trust
S 24: Act in accordance with the trust
S 25: Act honestly and good faith
S 26: Act for the benefit of the beneficiaries
Fry v Fry
Facts:
Trustees to sell Langford in within reasonable time but failed to do so and it depreciate in price held
Held:
Breached trust duty and were liable for the lost money
Default duties
S 34: Avoid conflicts of interest
S 36: Not to profit from the trusteeship of a trust
S 35: Treat all beneficiaries equally
S 29: General duty of care
Thomas v Allen
Facts:
Allen was trustee for yacht business and decided to set up his own yacht business
Held:
This was a conflict of interest
There doesn’t need to be an actual conflict, simply the possibility of conflict is sufficient
Phipps v Boardman
Facts:
Trustees purchased shares of company included in the trust to help the company
Held:
Trustees had to disgorge the profits they made to the beneficiaries - breached duty not to profit
Re Mulligan
Facts:
Widow mismanaged trust fund by only investing in low-risk opportunities
Held:
She had a duty to take into account the interests of the other beneficiaries which she did not (breach of duty)
Personal Remedies Against Trustees
1) Account for profits
2) Compensation/damages
Chirnside v Fay
Facts:
Parties entered a joint venture to split profits but one party refused to share
Held:
Remedy was account for profits; party had the pay the other what he was owed
Target Holdings Ltd v Referns
Trust must ensure that there is the correct amount of money in the trust fund in order to pay the beneficiaries, if not they are liable for the difference
Spencer v Spencer
Facts:
Robert was entitled to a weekly allowance which was not paid
Spencer was a trustee but also a director, shareholder and employee of SGL and set up agreement so SGL would get a significant portion and didn’t seek payment of dept
Held:
Spencer did not act honestly or reasonably and was liable for the breach of trust; paid money owed to Robert
Defences and Excuses Against Personal Remedies
S 131 Trusts Act: Court can order relief for a trustee fully or partially if they acted honestly and reasonably and ought to be fairly excused (did not award in Spencer or Mulligan)
Proprietary Remedies
1) Following
2) Tracing
Foskett v McKeown
Facts:
Murphy used money for construction of holiday homes to pay last premiums of life insurance
Held:
Purchasers had an interest in a percentage of the life insurance equal to the trust money used to pay the premiums
Children were not protected because they were volunteers
Clayton’s Case
Rule: the first to pay in is the first to be paid out
Re Hallet’s Estate
Exception to Claytons: where a trustee deposits the trust’s money in their personal account, there is the presumption that they first withdraw their own personal money in the bank account before withdrawing the trust money
Roscoe v Winder
If the personal bank account which the trust money has been deposited into falls below the amount of trust money, the trust money is only traceable to the lowest intermediary balance
Re Oatway
If money from an account where the trust money has been deposited has been used to purchase a piece of property, and the remaining funds have subsequently dissipated, the beneficiary can choose to claim a portion of the property to the trust money deposited in the account
Remedies Against Third Parties
Dishonest Assistance
Knowing Receipt
Royal Brunei Airlines v Tan
Tan (third party) used trust money
Dishonest assistance requires dishonest conduct (conscious impropriety, not mere carelessness tested objectively)
Westpac New Zealand Ltd v Map & Associates
Westpac refused to carry out instructions because they believed they may be assisting in a breach of trust
Dishonest requires actual or constructive knowledge (sufficiently strong suspicion and deliberative decision not to make inquiries = wilful blindness)
Baden Scale
(a) Actual knowledge
(b) Wilful blindness - sufficiently strong suspicion and deliberate failure to make enquiries to check, shutting your eyes to the obvious
(c) Wilfully and recklessly failing to make enquiries that an honest and reasonable person would make
(d) Knowledge of circumstances that indicate the facts to an honest and reasonable person
(e) Knowledge obtainable from making enquiries that an honest and reasonable person would feel obliged to make because of suspicious circumstances
Pounamu Properties Ltd v Brons
Wife bought house from husband for significantly less then what it was worth
An honest and reasonable person would have known that it was suspicious and would have made inquiries
McLennan v Livaja
Suggested knowing receipt requires higher bar for knowledge then dishonest assistance
Knowledge: person is sufficiently put on notice and fails to inquire
Scott v ANZ New Zealand Ltd
Suggests the test could change to include people who ‘should’ have made inquiries but this is not binding
Requirements for a Gift
1) Intention to gift the immediate ownership of the property
2) Delivery, actual or constructive
3) Acceptance
Williams v Williams
There was no intention to give his child the pianola although he stated he would
Shower v Pick
No intention because gift of silver plate was stated in a future tense
Olsson v Dyson
For there to be a gift, it must be given to the recipient in a way recognised by law, either by actual delivery or constructive delivery (handing over car keys)
Rawlinson v Mort
Organist was given key to church organ, this constituted delivery
Chaplin v Rogers
Where goods are incapable of being handed from one to another, there does not need to be an actual delivery, but rather it may be done by something tantamount
Standing v Bowring
An incomplete gift can be cancelled at any time but after delivery, the only way to get it back is if it is given back to you
Conditional Gifts
Conditions Subsequent; gift is awarded but can be lost if condition fails to be met
Conditions precedent; gift will be received when a condition is met
