Trusts weaker areas

Question 1

When does an automatic resulting trust arise?

Answer 1

When property is vested in an intended trustee but the trust fails, either from the outset or subsequently, e.g. because:
* B died befire fulfilling contingency
* lacks certainty of objects
* insufficient certainty
* offends rules against perpetuity
* offends beneficiary principle

Question 2

Does a resulting trust arise if a trust fails due to constitution?

Answer 2

NO - legal title has not passed to trustee so nothing to result back

Question 3

In what 2 circumstances do presumed resulting trusts arise?

Answer 3

1. Voluntary transfer of property to another for no consideration
2. Paying for all / part of purchase price (Legal owner holds property for himself and contributor in shares proportionate to respective contributions)
   * must be contemporaneous with purchase & directed towards actual purchase price

Question 4

Are resulting trusts relevant to determining beneficial entitlement to family homes?

Answer 4

NO - constructive trusts

Question 5

2 ways in which presumption of resulting trust can be rebutted

Answer 5

1. Counter presumption of advancement (under a moral obligation to provide)
2. Evidence it was intended as a gift
   * must be intended before / at time of, or just after provided part of transaction

Question 6

Presumption of advancement categories

Answer 6

1. Father to child (minor or adult)
2. Person in loco parentis to minor child
3. Husband to wife
4. Fiance (male) to fiancee (female) if subsequently marry

Question 7

Presumption re legal title and beneficial title

Answer 7

Presumed that the beneficial ownership of the land mirrors the legal ownership
* Sole legal owner - presumed to be sole beneficial owner
* Joint legal owner - presumed to be equitable JTs

Question 8

How can common intention be demonstrated re CICT

Answer 8

1. Express (based on express statements), or
2. Inferred (i.e. determined objectively based on circumstances)

Question 9

Sole legal ownership - what must an individual seeking to establish a beneficial interest under CICT show?

Answer 9

1. Common intention they should have beneficial interest, and
2. Detrimental reliance

Question 10

Joint legal ownership - what must an individual show if they do not wish to be beneficial joint tenants?

Answer 10

Must rebut the presumption but no need to show detrimental reliance

Question 11

What is the court seeking to establish re family home cases for both sole & legal ownership?

Answer 11

The actual intention of the parties, whether express or inferred based on ‘whole course of conduct’

Question 12

Can intention change re CICT?

Answer 12

Yes - can be ambulatory

Question 13

When does quantification of parties’ interests occur re CICT?

Answer 13

Once common intention (and detrimental reliance in sole ownership cases) has been established

Question 14

How will court quantify parties’ interests re CICTs

Answer 14

1. If express agreement re quantification - will give effect to this
2. If not, court will attempt to infer intention based on conduct of parties
3. At last resort, court will impute an intention for ‘fair shares’ based on ‘whole course of conduct’

Question 15

2-step process to follow in joint legal ownership cases

Answer 15

1. Rebut the presumption (showing detrimental reliance as to the comon intention that interests should be other than joint NOT as to shared ownership - can be ambulatory)
2. Quantification (financial factors carry most weight)

Question 16

2-step process to follow in sole legal ownership cases

Answer 16

1. Establish an interest (common intention for non-legal owner to acquire ben. interest + detrimental reliance on this)
2. Quantification

Question 17

How can express common intention re sole legal ownership arise

Answer 17

• Words e.g. ‘50:50’ / ‘half yours’
• Excuses as to why partner may not be jointly registered

Question 18

How can inferred common intention arise re sole legal ownership

Answer 18

1. Direct contribution to purchase price, or
2. Significant contribution to mortgage payments falling due

NOTE: indirect financial contributions MAY suffice where, without which, the legal owner could not have made mortgage payments

Question 19

Examples of detrimental reliance re sole legal ownership

Answer 19

• Heavy DIY
• House renovations
• Payment of substantial expenses e.g. mortgage
• Initial payment towards purchase price

Question 20

Examples of cases where detrimental reliance was NOT found re sole legal ownership cases

Answer 20

• Decorating
• Giving up work to look after children
• Looking after the family and playing the ‘traditional wife’

Question 21

Requirements to establish proprietary estoppel

Answer 21

1. Assurance of share in family home (active or passive)
2. Reliance on promise (need not be sole reason)
3. C acted to their detriment

Such that it would be unconscionable to go back on promise

Question 22

Examples of detriment re proprietary estoppel

Answer 22

Need not be money expenditure, as long as it’s substantial:
* spending money on home improvements
* working without adequate remuneration
* giving up job & moving to new area
* looking after someone who is gravely ill

Must be weighed up against any benefit - claim fails it benefit outweighs detriment

Question 23

Remedy re proprietary estoppel

Answer 23

Court has discretion over whether one should be awarded and which type
* usually based on promise
* burden on legal owner to show that enforcing assurance would be disproportionate to detriment sustained by C
* court should ask itself whether remedy would do justice between parties & whether it would cause injustice to 3rd parties

Question 24

Bars to proprietary estoppel

Answer 24

1. Unconscionable / inequitable conduct
2. Unreasonable delay in bringing claim

Question 25

What is self-dealing and effect

Answer 25

Involves trustee buying from or selling to trust * Voidable (unless approved / authorised) - B can set aside within a reasonable time

Question 26

What is fair dealing and its effect

Answer 26

Involves trustee buying beneficiary's interest * Voidable unless: a) made **full disclosure** to beneficiary b) can prove they acted **fairly + honestly** c) did **not take advantage** of position

Question 27

Remedies for breach of fiduciary duty

Answer 27

1. Personal claim to account for profits 2. Proprietary claim to recover property (constructive trust?)

Question 28

How can constructive trusts be used re breach of trust

Answer 28

* Imposed by equity when justice & good conscience requires it * Not really a trust but an equitable remedy to enable C to obtain restitution * Constructive trustee has duty to transfer property to entitled beneficiary by tracing or personal action

Question 29

On which 3 people does equity impose a constructive trust on

Answer 29

1. Intermeddlers 2. Receipient 3. Dishonest assistant

Question 30

Elements required to establish recipient liability

Answer 30

1. **Received** property in *breach of trust* 2. Received property for **own benefit**, and 3. While in receipt of property, had such **knowledge** that makes it *unconscionable for them to retain* / deal with it as if it were theirs *NOT liable if only became aware after disposing of it*

Question 31

Value of claim re recipient liability

Answer 31

Personal claim up to value of trust property PLUS interest from date of receipt

Question 32

Accessory liability (i.e. dishonest assistance) requirements

Answer 32

1. Must be a **trust** 2. **Breach** of trust / fiduciary duty 3. **Assisted** in breach, and 4. Acted **dishonestly** (objective) *Tracing not available as never received property*

Question 33

Value of claim re accessory liability

Answer 33

Personal claim up to value of any loss their assistance has caused PLUS interest

Question 34

Remedies re recipient liability

Answer 34

* personal claim * recovery of property * tracing

Question 35

Remedies re intermeddling

Answer 35

* personal claim * recovery of property * tracing if no longer have property but its equivalent

Question 36

Remedies re accessory liablity

Answer 36

Personal claim only

Question 37

Following

Answer 37

Process of tracking a particular asset as it moves from hand to hand

Question 38

Tracing

Answer 38

Process of identifying exchange product of or substitute for a particular asset

Question 39

Dissipiation

Answer 39

Use of money or property in such a way that there is no exchange product

Question 40

Claiming

Answer 40

Assertion of personal or proprietary rights contingent on following or tracing

Question 41

Personal claims

Answer 41

Against trustees or against 3rd party knowing recipients

Question 42

Proprietary claims

Answer 42

* Ownership claims (full or proportionate) * Security claims (equitable lien) ancillary to personal claim

Question 43

2 preconditoins to use equity tracing rules

Answer 43

* C had equitable proprietary interest in asset being followed / traced * Asset held by person who was in a fiduciary relationship with C *not usually an issue in express trusts*

Question 44

Can Equity's Darling be claimed against re tracing?

Answer 44

No - immune to any equitable claim (personal or proprietary)

Question 45

Clean substitution

Answer 45

Misapplied exclusively with trust money

Question 46

Mixed funds - wrongful mixtures rules (i.e. derived from trustee or person who knowingly mixed own money with misapplied money)

Answer 46

* Any part of mixture **dissipated** must be *attributed to wrongdoer* * Beneficiaries can claim **most profitable** applications of mixed fund ('cherry pick') *unless wrongdoer is bankrupt*, in which casecan only claim least profitable

Question 47

Mixed funds - innocent mixture rules (i.e. from 2 or more innocent parties e.g. 2 or more trust funds by trustee, or innocent recipient misapplies trust money with own money)

Answer 47

General rule = withdrawals from innocent mixtures attributed rateably to contributors to the mixture Current bank accounts: * FIFO

Question 48

When is FIFO disapplied re innocent mixtures

Answer 48

Where it would be: * contrary to intention of contributors to mixture * impracticable, or * unfair Instead, the following rules will apply: * rolling charge, or * pari passu ex post facto

Question 49

Rolling charge rule

Answer 49

Provides that withdrawals are allocated to the fractional contributions immediately before the withdrawal

Question 50

Pari passu ex facto rule

Answer 50

Add up the total amount contributed to mixture over the period, work out what each party contributed as fraction to that total and then contributors can claim fractional interest in the mixed fund

Question 51

Proprietary claims contingent on tracing - a 'clean exchange'

Answer 51

Bs can elect between equitable ownership or equitable lien (i.e. take ownership OR sue for amount and take security) if decrease in value, go for lien, but if up go for taking asset

Question 52

Proprietary claims contingent on tracing - asset acquired from wrongful mixture

Answer 52

Bs can elect between proportionate equitable ownership or an equitable lien

Question 53

Proprietary claims contingent on tracing - assets acquired from innocent mixture

Answer 53

Innocent parties can assert proportionate equitable ownership only

Question 54

Equitable lien

Answer 54

Essentially involves suing for the amount and taking asset as security for claim

Question 55

Only when does the 6-year limitation period start running re breach?

Answer 55

* **After interest vests!** * After minor turns 18 * After fraud discovered or could have been w reasonable diligence * After disability ends

Question 56

When does the 6-year limitation period NOT apply?

Answer 56

1. Recovery of trust property 2. Fraudulent breaches 3. Equitable remedies e.g. SP / injunction