EQUITY AND TRUSTS LAW EXAM NOTES

EQUITY AND TRUSTS

LAW EXAM NOTES

JUNE 1, 2019

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 EQUITY AND TRUSTS LAW EXAM NOTES

TABLE OF CONTENTS

Week 1: Nature of Equity ................................................................................................pg.3-14

Week 2: Undue Influence .............................................................................................pg.15-24
Week 3: Fiduciary Relationships ...................................................................................pg.25-39
Week 4: Equitable Compensation ..................................................................................pg.40-51
Week 5: Specific Performance.......................................................................................pg.52-68
Week 6: Trusts ..............................................................................................................pg.69-78
Week 7: Duties of Trustees ...........................................................................................pg.79-91
Week 8: Statutory Formalities ....................................................................................pg.92-102
Week 9: Certainty Requirements of Express Trusts ..................................................pg.103-111
Week 10: Charitable Trusts ......................................................................................pg.112-120

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Week 1 Notes
Nature of Equity
NATURE OF EQUITY
• Equality means everyone is treated the same
• Distributive justice is merit based and infers that those who contribute more to society should be entitled to a
higher form of justice (issue is what is the metric to measure this merit)
• Aristotle believed that justice should strive for equality so that in the eyes of the law every person should acquire
an equal chance and voice
• Equity can only intervene either where the law does not apply at all or there is a gap in the law and equity can fill
that gap.
• The tension between Law and Equity focuses around doing what is right by an individual (equity) and maintaining
a stable and predictable system (law)
• Equity [epieikeia] is justice that goes beyond the written law.
o Equity looks not to the law but toward the lawgiver intention / purpose

MAXIMS OF EQUITY
• The reason ceasing, the law itself ceases.
• No one can take advantage of his own wrong. No one should suffer by the act of another.
• An injury cannot be done to a willing person.
• The law compels no one to do anything which is useless or impossible.
• The law does not recognize trifles.
• A thing similar is not exactly the same.
• That is certain which can be made certain.
• Equity delights to do justice and not by halves (equity is about complete justice)
• Between rights otherwise equal, the earliest is preferred (if two rights equal, then the one created first is best)
• Equity aids the vigilant, not those who slumber on their rights (you snooze you lose)
• Equity abhors a forfeiture (equity doesn’t like to see rights lost without good reason)
• Equity does not suffer a wrong without a remedy (Where a person has been wronged there is a remedy)
• Equity regards substance rather than form (equity looks at the substance of the law, rather than its construct)
• Equity regards as done that which ought to be done (specific performance)
• Equality is equity. - Equity delights in equality (if rights are equal and vested at the same time, then recovery based
on those rights should be distributed equally)
• Where the equities are equal, the law will prevail (where the equitable interests in a case are equal the law will
determine the outcome)
• Equity follows the law (Statute and common law take precedents, where equity looks to fill the gaps)
• One who comes into equity must come with clean hands (a person cannot bring an equitable claim if they
themselves are tainted by unconscionable dealings)
• One who seeks equity must do equity
• Delay defeats equity (if delay is reasonable and limitation has expired, then equity court may still hear the claim)
• Equitable remedies are given as a matter of grace or discretion, not right (equitable relief is discretionary)
• Equity acts in personam, not in rem (Equitable actions are brought against the conscience of a person)
• Equity imputes an intention to fullfil an obligation (equity presumes those who have obligations intend to fulfil
those obligations)
• Equity acts specifically (Due to discretion equity is specific to each case)

MINOR MAXIMS
• Equity does not stoop to pick up pins (Equity does not deal with trivial wrongs)
• Equity will not decree a vain thing (Equity will not make a useless/no value court order)

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ACCOUNT OF PROFITS
Attorney General v Blake [2000] UKHL
FACTS
• The defendant wrote a book that disclosed information during his employment in breach of his employment
contract with the British Intelligence Services.
• The Fiduciary duties ended when Blake was dismissed from his services.
• Blake was then sentenced to 42 years in prison for treason for working with the Soviet Union
• He escaped to Berlin and then to Moscow
• He got a contract to write the book for $150,000 with $60,000 in advance
• The Crown sought to recover the $90,000 still due to Blake – the accounted profit
HELD
• Common Law damages is based on loss, except for exemplary damages, whereas, equity provides for the
disgorgement of gains. In equity a party does not need to have lost anything, if the breaching party gains
something of value, the court can be partitioned to provide the new assets to the wronged person.
o Where courts are applying similar principles the jurisdiction division between common law and equity
should be abolished to prevent wrongdoer from profiting by their gain in ‘exceptional circumstances’

• Account of Profits are however specific to breach of fiduciary duty

• Account of Profits threatens the compensatory nature of contractual damages in CL
• Account of Profits strips accounting’s force to ensure adherence to duties under CL

A-G for HK v Reid (1994)

• Mr Charles Warwick Reid, HK Deputy Crown Prosecutor, then Acting Director for Public Prosecutions, so in a
fiduciary relationship with HK government
• Reid took bribes to obstruct prosecution of some criminals and used most money to buy land, some kept by him
and Mrs Reid, and some conveyed to solicitor
• HK government argued land held in trust for it
• Bribe money accepted by a person in a position of trust can be traced into any property bought, and is held on
constructive trust for the beneficiary
• Land bought by Mr and Mrs Reid held on trust and had to be handed to HK government
• If property badly invested fiduciary (Reid) to make good the shortfall
• Court of Appeal accepted that if principal had proprietary right to a bribe paid to fiduciary TPL must succeed
o Beneficiary of fiduciary (plaintiff) is entitled to equitable account of profits, not to proprietary interest
• CA held court of first instance right to reject TPL’s proprietary claim to the proceeds of the share sale

• The case of Reid not always followed as in the case of Sinclair Investments (UK) Ltd v Versailles Trading Finance
Ltd and Ors [2011]
• Investor (TPL) claimed that money paid to Mr Cushnie of Versailles for investment and fraudulently used to cross-
fire (circulate money amongst related entities to give the appearance of profitability and hence inflate Versailles
share price which Cushnie then sold at a profit) were subject to an equitable proprietary claim by TPL, and TPL
also had proprietary right to trace proceeds of the gain, against anyone except BFP.
• Defendant claimed TPL’s claim was an unsecured personal claim
• Does a company have proprietary interest in the unauthorised gains made by a fiduciary?
• Did TPL have proprietary interest in the proceeds of sale of shares by Versailles, or an equitable account to the
proceeds of sale?

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Week 2 EXAM PLAN Notes

UNDUE INFLUENCE
For undue influence to be established there must be some advantage that one party has over the other party to a transaction and, the
stronger party must unfairly use that advantage to the benefit of either themselves or a third party. It must be established that the
weaker party has been deprived of their free will when entering into an arrangement and rather coerced to enter the agreement:
Johnson v Buttress [1936] 56 CLR
• Weaker (innocent) party’s will was not independent and voluntary as it was overborne
• Issue: Quality of consent
• Relief: Contract void or voidable on grounds of unconscionable conduct

Categories of Undue Influence

Class 1: (Actual) actual use of coercion in form of threat that is illegitimate → influences person to enter into a decision.
Requires proof transaction was outcome of such an actual influence over the mind of the disponor that it cannot be considered to be
the free act of the disponor. The influence may not come from the relationship, but may arise from the situation: Johnson v Buttress
(1936) 56 CLR 113

Class 2A: (Presumed) relationship of trust and confidence presumed to be influential in favour of the stronger party.
If such a relationship exists, and some benefit is transferred to the stronger party, then the presumption of Undue Influence will
arise. As such, the stronger party (defendant) must show that the weaker party (applicant) entered into the agreement as per their
own free will and were sufficiently informed regarding the terms of the agreement to make an informed judgement, to negate the
presumption. ** Relationship alone = insufficient → strong party must benefit + took advantage of the benefit
• Doctor/patient→ Solicitor/client→ Guardian/ward→ Parent/child→ Trustee/beneficiary→ Religious advisor/disciple

NB: Marriage (class 2A) does not raise the presumption of undue influence but may be proved to be Actual Undue Influence:
Yerkey v Jones [1939]
NB: Nephew is undue influence if cannot show evidence + no legal advice for uncle: Janson v Janson [2007]

Class 2B – (Proven) -
Where there is a relationship between the parties, which does not fall within the specified ‘2A’ presumed influence categories,
however, the relationship is to be presumed one of influence based on certain factors; it is for the weaker party (Applicant) to first
prove a relationship, one of influence, and if established then onus reverts to stronger party (Respondent) to disprove. Relevant
factors a court will consider:
• Vulnerability→ dependence (always asking for advice) →structural inequality→ Intelligence→ Understanding of business→
emotional or physical impairment→ financial status→age and medical status→ improvidence of the gift→ lack of independent
legal/financial advice

Rebutting the Presumption

A party can rebut the presumption of a relationship of undue influence by adducing evidence that the weaker party attained
independent legal advice that was sufficient to adequately inform the party of the nature of the transaction and the legal
consequences associated with entering the agreement. If the party then so chooses to enter the agreement, in light of the advice, with
full acknowledgement of all the relevant information understood, then it could be stated that the party entered the agreement as an
act of their own free will.
• NB: need to get adequate independent legal advice (must be Clear and not general advice in nature – no legal jargon) showing
free and independent exercise of will: Bester v Perpetual Trustees [1970]
• A party may also rebut a presumption of Undue Influence by establishing that consideration was good and adequate (this is
just a factor considered and not a complete defence): Johnson v Buttress (1936)

Undue Influence and Third Parties

A party (3rdP) can avoid a contract of guarantee (against a bank) where a party is coerced into acting as a guarantor where the
guarantee is said to be induced by undue influence where:
1. The 3rdP (bank) participates with actual or constructive notice of the circumstances from which the presumption of undue
influence is/can be exercised on the guarantor: Yerkey v Jones (1939), Amadio (1983) or
2. The 3rdP (bank) acts as an agent of the borrower to influence the innocent party to enter the guarantee, or
3. The 3rdP (bank) denied a party a full and proper explanation of the liabilities attached to the guarantee
• Banks should give separate and fully informed advice of legal consequences to avoid inducement of misrepresentation by
a party: Barclays Bank v O’Brien [1993] UKHL → Good banking practice
• Banks have a duty to ensure that the person providing the guarantee knew what they were doing and understood the
nature of the transaction they were entering into
• ** See more cases further below

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Unconscientious Dealing
Equity's jurisdiction to set aside a transaction for unconscionable dealing is invoked where one party to the transaction is (1) under a
special disadvantage in dealing with the other party, and (2) that special disadvantage was sufficiently evident to the other party
who (3) unconscionably took advantage, to make it prima facie unfair or unconscionable for that other party to accept or retain the
benefit of the transaction: Commercial Bank of Australia v Amadio (1983) 151 CLR; Louth v Diprose (1992) 175 CLR 621
• Plaintiff to show (a) special disability and (b) knowledge of special disability
• Onus then shifts to defendant: no exploitation of disability occurred
Key: did the disadvantage render the innocent party unable to decide what was in their own best interest?

Elements:
1. The existence of a special disability: information imbalance, emotional attachment, lack of business expertise
2. The stronger party is aware of the existence of the disability
3. The stronger party exploits the disability to obtain an identifiable benefit
NB: The unconscientious taking advantage of a special disadvantage

NB: Undue Influence = no free will;

NB: Unconscientious Dealing = do have free will, but unable to protect themselves
NB: Kakavis v Crown Melbourne Ltd [2013] HCA 25 - prevents victimization rather than protecting against foolish
behaviour

(1) Special Disadvantage

The special disadvantage will be sufficiently evident to the other party if the other party knows facts which would raise the
possibility of the special disadvantage in the mind of a reasonable person: Amadio.
• Where such circumstances are shown to exist, the onus is on the other party to establish that the transaction was fair, just
and reasonable: Amadio
• The special disadvantage need not have been created by the party taking the benefit of the transaction: Louth
• The special disadvantage alleged must be one 'which seriously affects the ability of the innocent party to make a
judgment as to his own best interests'; mere difference in bargaining power is insufficient: Amadio

E.g. ‘special disadvantage’ = poverty, need, sickness, age, infirmity of body or mind, sex, drunkenness, illiteracy, lack of
education and lack of assistance or explanation when assistance or explanation is necessary; lack of or limited
comprehension of the English language, impaired intelligence or infatuation/emotional dependence upon another person.

NB: Absent independent legal advice may be of importance in determining whether a special disability exists;
NB: Being old, frail and mental decline are not necessary elements of a special disadvantage;
NB: Elderly parents guaranteeing loan to children will not per se be sufficient: Davey v Challenger Managed Investments
Ltd [2003] NSWCA 172.

Commercial Bank of Australia v Amadio (1983) 151 CLR

FACTS
• Two elderly migrants with little English executed a mortgage over their land to secure an overdraft for sons company.
• They mistakenly believed it was limited to $50,000 when it was actually unlimited.
• Signed by couple in their kitchen in front of a bank officer.
• Bank relied upon son’s advice that he had explained the document to his parents so did not explain nature and purport of
documents.
ISSUE
• Was there Unconscientious Dealing?
HELD → High Court
• Set aside mortgage holding that unconscionable dealing looks to the conduct of the stronger party in attempting to
enforce or retain the benefit of a dealing with a person under a special disability.
• The bank had used their superior position and taken advantage of the ‘information imbalance’ of the Amadios.
o Bank knew or ought to have known
o Special disability: holistic view of circumstances with no single factor being determinative
o Unequal bargaining power opened Amadios to exploitation
o Objective comparison of relative positions and ability to protect own interest

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Week 4 Notes
Equitable Compensation
Equitable Damages
Equity does not have inherent jurisdiction to apply common law damages to remedy a common law breach as equity follows the
law. If the law can deliver justice, then equity has no role to play.

Exam: As per Supreme Court Act (Vic) s 38, where a court has jurisdiction to hear an application for an injunction or specific
performance, it may award damages in addition to, or in substitution for, an injunction or specific performance.
Exam: This above section indicates that it also contemplates equitable wrongs additional to common law wrongs. Therefore, courts
can award damages in a situation where an injunction would have prevented the infringement of a purely equitable right as well as a
common law infringement. So, in Vic, where a party is able to seek an injunction or specific performance, they are able to seek
equitable damages as a substitute or in addition to the common law remedy.

(1) Plaintiff must show that the court has jurisdiction to order specific performance or award an injunction
o Must first show that common law damages are an inadequate remedy for the harm alleged and,
o The plaintiff only needs to show that common law damages could be available and does not have to show that
it would have been granted to meet the jurisdictional requirement.

The case of Wentworth v Wollhara Municipal Council (1982) 149 CLR 672 at 678-679, stated that the discretionary nature of
equitable damages can be awarded where a court may consider the following factors:
• Laches (delay on the part of the plaintiff), acquiescence, clean hands etc
The above factors may influence a court as to whether orders for damages should/shouldn’t be granted and how much to grant

The case of Shelfer v City of London Electric Lighting Co [1895] 1 Ch 287 at 322-333, stated that equitable damages should be
awarded:
IF
• The injury to the plaintiff’s legal rights is small, and
• Is capable of being estimated in money, and
• It can be adequately compensated by a small money payment, and
• The case is one in which it would be oppressive to the defendant to grant an injunction
THEN
• Damage in substitution for an injunction may be given.

Assessment of Damages
The assessment of damages is done at the court’s discretion
In the case of Wroth v Tyler [1974] Ch 30 at 60 Megarry J, stated that equitable damages can be assessed either at the time of the
breach or at another time (before breach) which will put the plaintiffs into as good a position as if the contract had been performed,
to better serve the purpose of equity.

In the case of Johnson v Agnew [1980] AC 367 at 400, the court stated that damages should be assessed from the time of the
breach, limiting the court’s discretion to assess the damages at any other time, however, this was not seen as an absolute rule, if an
injustice would result.

In the case of Madden v Kevereski [1983] 1 NSWLR 305 at 306-307, the court stated that the court must fix the date for the
assessment of damages as any date that is just between the parties in the particular circumstances of the case.

Damages prior to injury

• Common Law damages are not available until there has been an injury
• However, equitable damages are available for a threatened or anticipated wrong. This is due to the fact that a court may
provide equitable damages in place or in addition to an injunction to prevent the wrong taking place: Leeds Industrial
Cooperative Society Ltd v Slack [1924] AC 851.

Only equitable damages available

If a party asserts rights that are only recognised in equity and not by the common law, then only equitable damages are available.
• E.g. A party may seek specific performance of a contract not recognised at law, but recognised in equity under the
doctrine of part performance
• E.g. A party eligible to obtain an injunction restraining breach of confidence may be granted LCA damages

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Week 5 Notes
Specific Performance

SPECIFIC PERFORMANCE
The remedy of specific performance is an order imposed by a court, that a legal act be done to fulfil contractual obligations by one
of the parties refusing to adhere to an enforceable contract between them: J C Williamson v Lukey and Mulholland (1931) 45 CLR
282 AND Lighting By Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd (2008) 35 WAR 520
• Specific performance is ONLY available if Common Law damages are an insufficient compensation
• Specific performance is a discretionary remedy, so it is up to the courts to decide whether to make the order for specific
performance
• If a court makes an order for specific performance against a party in Vic, but the land in question relating to the order is
in another area (Tas) where the court has no jurisdiction, that order will still be upheld as specific performance attaches to
the person and not the land: J C Williamson Ltd v Lukey & Mulholland (1931) 45 CLR 287 at 297, Dixon J

Wolseley Investments Pty Ltd v Gillespie [2007] NSWCA 358, at [33], Santow JA (Ipp and Tobias JJA agreeing) stated that
commencement for an order of specific performance is a threat, express or implied, of breach of contract on the part of a contracting
party to perform the contract in whole or part.
• Don’t have to wait for damage to have occurred.
• Can initiate on threat of damage occurring through refusal to perform
o If a party refuses to perform, but time hasn’t lapsed for performance, then it must be established that there is a
real threat of breach and not just a remote possibility of a breach. Also, to be considered is the discretionary
factor of hardship and balance of convenience by forcing the contracting party to perform.

REQUIREMENT
1. FIRST requirement of specific performance is that the defendant has to be in the same jurisdiction of the court;
2. SECOND requirement is that there is a legally enforceable agreement between the parties;
a. A court has no jurisdiction to grant specific performance of a promise not supported by valuable consideration:
Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516
3. THIRD requirement is that common law damages are an inadequate remedy for breach of that agreement.

Exam: Sometimes courts can enforce non-contractual agreements by specific performance. In these instances, the source of the right
is usually found in a contract, and if there is a contract then the plaintiff has met the second requirement. The applicant for relief
(plaintiff) should be a party to the proceedings – privity of contract is important.

Coulls v Bagot’s Executor and Trustee Co Ltd (1967) 199 CLR 460 → Privity of contract needed to enforce SP
FACTS
• Contractual rights held by O’Neill Construction to conduct a quarrying business on the property owned by Mr and Mrs
Coulls
• O’Neill was to pay royalties to the Coulis’s as joint tenants even though the contract was only executed between O’Neill
and Mr Coulls.
• Mr Coulls died leaving it uncertain where his royalties should proceed to once deceased
ISSUE
• Did his royalties proceed to Mr O’Neill’s estate or to Mrs Coulls as survivor of the joint tenancy?
HELD
• Majority (High Court)
o There was no effective assignment of the interest to Mrs Coulls as she was not privy to the contract and
therefore not entitled to the benefit.
o Windeyer J: a third party has no rights of their own to enforce a contract to which they are not a party
• Minority (High Court)
o She was privy to the contract

Beswick v Beswick [1968] AC 58 2 → Privity of contract needed to enforce SP for 3rdP, but not administrator
FACTS
• Husband deceased
• Wife was administrator of husband’s estate
• Wife tried to claim payments that were owed to her husband
HELD
• Wife able to claim payment as administrator of estate, rather than as 3rdP whom her husband wished to benefit

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Week 6 Notes
Trusts
Trust
A trust is an equitable obligation, binding a person, called a trustee, to deal with property (called trust property), owned by him as a
separate fund, distinct from his own private property, for the benefit of persons (beneficiaries)
• Beneficial ownership is an equitable ownership of property
• If the same party owns the beneficial ownership and legal title, then there is no Trust
• The obligation imposed on a trustee is imposed by equity and not law.
• Common Law is not concerned with what the trustee does with the property they legally own.
➢ There can be multiple trustees
➢ There can be multiple beneficiaries
• A Trust is established when the creator (settlor) transfers legal ownership of their property to another person (Trustee)
with instructions to use it for the benefit of a 3rdP (Beneficiary)
• A Trust usually ends when all the property has been disposed of

Elements of a trust
Once a Trust comes into existence, there are 3 essential elements:
• Trustee – legal person (fiduciary) holding vested legal title or vested equitable title in property subject to fiduciary duties
➢ May be among the beneficiaries of a trust, but cannot be the only beneficiary of the trust.
E.g. A group of people benefiting from a trust, and one of those are the Trustee.
• Trust property – real or personal property, legal or equitable, identified or ascertainable, capable of being held on trust
• Beneficiary –object of the trust – person or group holding beneficial equitable estate in property on whose behalf trustee
must act
• Settlor – can be a testator or a creator

A Trust has 4 Key Elements

1. Trustee: can be a person or corporation.
a. Trust survives if the Trustee dies or otherwise becomes unavailable. The trust instrument which establishes the
trust will usually have some provision for what happens if a trustee does or is unavailable. If there is no
provision, then a court will appoint a trustee.

2. Trust Property: the property which is capable of being held on trust.

a. Must be identifiable
b. Must be vested in the trustee.
c. Must be presently existing and not conditional.
d. Can be real/personal and corporeal or incorporeal

3. Must have an identifiable beneficiary or a charitable purpose: If the Trust does not have an identifiable beneficiary or a
charitable purpose (so someone who can enforce the trust) then the Trust fails.
a. Attorney-General will enforce charitable trusts.
b. A trust may be created without communication to beneficiary and beneficiary does not have to be born or even
selected from a designated class.

4. The trustee must be under a personal obligation involving the trust property: The personal obligation of the trustee
towards the trust property is the core characteristic of the trust.
a. The personal obligation attaches to the trustee in personam but is also annexed to the property and confers
upon the beneficiary an equitable interest in the trust property.

Exam: Trust can be created as part of a ‘Will’ to hold property for children until they reach a certain age
Exam: Testator Trust comes into being after a person’s death
Exam: Inter-Vivos trust comes into existence during the life of a settlor
Exam: Trust is not a juristic person like a corporation

There are three species of trust:

• Express
➢ Parties intentionally create a Trust for the benefit of another
• Resulting (‘implied’)
➢ Parties tried to create a trust but failed through a lack of formality or some other error so a court will establish a
Trust
• Constructive
➢ Created by courts to remedy a legal problem the court cannot fix.
➢ As it is imposed by the courts, intention of the parties is irrelevant.

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Week 9 Notes
Certainty Requirements for Express Trusts

Certainty of intention
An ‘Express Trust’ is not valid unless it is clear that that the intention of the settlor was to create the Trust: Kauter v Hilton (1953)
• Not an issue if Trust is in the form of a deed
• Intention to create trust is presumed = Resulting Trust
• Intention to create trust is irrelevant = Constructing Trust
o No requirement for Settlor to have knowledge of trust law

NB: Precatory words don’t point towards a Settlor’s intention to create a trust: ‘wish, hope, desire, trust’
NB: Mandatory words point towards a Settlor’s intention to create a trust: ‘will, must’
NB: mere conversation or loose expressions of thought will be insufficient to prove an intention to declare a trust: Jones v Lock
[1865] → cannot be intention to gift in the future
NB: “the money is as much yours as it is mine” → language used sufficient to create a trust + also because of the context (couple
and husband died, first wife tried to claim money): Paul v Constance [1977] ** borderline case

NB: word ‘trust’ does not in itself create a trust

NB: party alleging trust was intended (applicant) bears the burden of proving intention
NB: For Inter Vivios Trust – can be evidenced through oral or written statements
NB: Parol evidence rule does not apply in situations where:
• the disposition of the property constitutes the Trust is not required to be evidence by writing ???
• the document was not intended to be a complete expression of the transferor’s intentions
• the document is ambiguous, fraudulent, duress or mistake

Korda v Australian Executor Trustees (SA) Ltd (2015) HC tb 27.2.3

FACTS
• A trustee of an investment scheme argued that a 1964 trustee deed should limit the interests of investors to those proceeds
from the scheme that were transferred to the trustee.
• The VSCA upheld the decision of the trial judge, by a majority, that the parties intended the proceeds from timber sales
to be held on trusts for investors who applied for covenants issued through a prospectus.
• Subsequently issued prospectuses meant that the proceeds were held on trust for the investors.
• The VSCA held that the investors only took on risks related to the forestry operations and it was a matter of necessity that
the timber investments not be at risk from the company’s other operations.
• AET sought declarations that the Forrest Company and the milling company hold the proceeds of the sale of the timber
and the land on trust for the benefit of the covenant holders
ISSUE
• Whether the arrangements between the parties gave rise to a trust?
• Whether commercial necessity imposed a trust?
HELD
• Rule: An Express Trust will not be inferred when it is just a means to protect or create an interest in a commercial setting.
It will only be created where an intention to create a trust can be discerned of inferred from the text of their written
agreements and/or their oral dealings, rather than from their commercial preferences
o Rule: The critical point was the absence of an obligation to hold the proceeds separately from their own – this
precluded any intention to separate legal and equitable title and this was the foundation of a trust: Gageler J
o Rule: no trust arose because the documents did not make express provision for a trust: Keane J
o Rule: A perceived need for commercial protection of covenant holders is not a proper basis for discerning a
Trust relationship
• Dealings between the parties were purely contractual and no trust could be presumed. The documentation provided, when
placed in its commercial and regulatory context, did not support the existence of a trust.

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Week 10 Notes
Charitable Trusts
Charitable Trusts
The definition of Charitable Trusts is precisely in relation to beneficiaries as defined in Attorney General (NSW) v Perpetual
Trustee Co Ltd (1940) 63 CLR 209:
• A charitable trust is:
o An Express Trusts for unidentified beneficiaries.
o for a purpose, not for a person
o disposes of property for the fulfilment of ends considered beneficial to the community → (public benefit
function)
• Contrasts to an Ordinary Trust which is:
o For identified beneficiaries or class of beneficiaries
o To create equitable estates and interests and limiting them to beneficiaries

Test: If a trust lacks identifiable or ascertainable subjects (beneficiaries) but has a public benefit function, then the trust is valid as
a charitable trust.

A charitable trust is not subject to the beneficiary principle. They exhibit the same characteristics and are subjected to the same rules
of an Express Trust, namely constitution, fiduciary duties etc, but there are differences between Charitable Trusts and other forms of
Express Trusts.

Differences:
1. Charitable trusts have a purpose to benefit the general public → supervised by courts and Attorneys General
2. Charitable trusts can exist indefinitely:
a. not subject to ‘rule against indestructible trusts’
b. are subject to ‘rule against perpetuities’: Monds v Stockhouse (1948)
i. The Trustees interest must vest within the perpetuities period.
3. Courts, unlike Express Trusts, have inherent power to enforce and extensively vary charitable trusts: Commissioner of
Stamp Duties (NSW) v Way (1951) … due to this Court power, it is unlikely that for a Charitable Trust to fail due to
administrative unworkability – the Court will make it work.

Charitable Purpose
There is no single or exhaustive definition of a Charitable Purpose. When a court examines whether a Trust has a Charitable
Purpose the courts will look to the following purposes (except in ACT, NSW, QLD), known as a ‘Classically Charitable Trust’:
Statute of Charitable Uses 1601 (43 Eliz I c 4)
• Relief of poverty
• Care of the aged and sick
• Care of soldiers and mariners
• Advancement of education
• Repair of bridges, havens, ports, churches and highways
• Care of orphans
• Maintenance of prisons
• Marriage of poor maids
• Support for young tradesmen and persons decayed
• Relief or redemption of prisoners or captives
• Relief for poor persons concerning the payment of taxes

Rule: if there is some analogy between the purpose of a new Charitable Trust and one of the purposes set out in the preamble or
other case law, then the new Charitable Trust purpose will be deemed sufficient.
Rule: Anything for the benefit of the public, falls within the Statute of Charitable Uses 1601

Reason by analogy
In Royal National Agricultural and Industrial Association v Chester (1974) a trust for the breeding and racing of pigeons failed as
there was no analogous Charitable Purpose to that in the preamble of Statute of Charitable Uses 1601

In Incorporated Council of Law Reporting (Qld) v Federal Commissioner of Taxation (1971) a Trust for the ‘not for profit’
publication of law reports was found to be charitable as the reporting of cases had a public benefit that was fundamental to society
akin to the ‘Repair of bridges, havens, ports, churches and highways in Statute of Charitable Uses 1601.
• NB: Results not always logical, but procedure flexible

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