TRUSTS TUTORIAL EXERCISES

Week 2

(a) settlor – look at preamble of trust deed extract and you will see that it is James

(b) trustee – again found in preamble of the trust deed and will see that it is Philal Pty Ltd

Advantages of appointing trustee – family purposes, commercial purposes and socially useful purposes. However, in relation to advantages of appointing a trustee who is a corporation there are two:

(i) the corporate trustee does not die and hence would not need to be replaced so often under clause 8 of the trust deed; and

(ii) corporations are usually set up with limited liability and hence that would shelter the trustee themselves or limit their liability personally for any breaches of the trust

Yes it is possible to have a corporate trustee under the Trusts Act, see s.5.

(c) beneficiaries – clause 1(c) of the deed you will see that in this instance they include the son, daughter-in-law and their children and grandchildren and any charitable institution, body or organisation’

(d) fixed or discretionary trust? – difference between a fixed and a discretionary trust is essentially that a fixed trust is one in which an acquisition by the beneficiary of an interest in the trust property does not depend upon the exercise of another person’s discretion. So essentially, who is to receive distributions of the trust property, when they will receive it and in what amount is already determined by provisions of the trust deed and it is not up to the trustee’s discretion to ascertain those things.

Contrast that to a discretionary trust – a discretionary trust is one in which the trustee has a discretion as to when any payment from the trust fund will be made, to whom it will be made and the amount of such payment. Therefore, the trust that we have is a discretionary trust. Recital E indicates that the powers are discretionary and also clauses 2 and 4. Here the trustee may distribute the income and/or capital of the trust as and when they think fit and essentially in such proportions and as between such beneficiaries they think fit. In addition, that the trust deed is a family trust – titled The **** Family Trust.

(e) appointor – the appointor is mentioned in clause 8 of the deed – there it is defined to be the son and after the son’s death, his executors. Essentially, the powers of the appointor is the power to remove or appoint in the place of removed, dead or retired trustees, other trustees. Essentially the appointor can remove or appoint new trustees. Clause 5(a) of the trust deed it looks at how to appoint capital and/or income. What the trustee is given a power to do there is that the trustee may by deed appoint that in the lieu of the trust declared by this trust deed that the trust fund and income shall be held on trust in favour of any such beneficiaries as the trustee thinks fit. Essentially, it enables the trustee to create more trusts out of this one trust.

What does the Trusts Act provide in relation to appointment? – look at s.12(1) of the Act, it says that a person nominated in the trust deed or the surviving or continuing trustee(s) have this power of appointment.

(f) What is the trust property? – para B of the trust deed you will see that the trust fund is defined to include $100 plus any additional property, real or personal acquired by the trust.

Under the Trusts Act the definition of trust property is contained in s.5 and that includes property settled on any trust, property subject to a trust or direction for sale, land which is vested in any person for an estate for the person’s own or any other life or for a term of years not being a lease at rent or for any greater estate as long as it is not a fee simple absolute. The Trusts Act says that trusts property also includes land in respect of which a person has by virtue of a will, a personal licence to reside for the person’s own life or for the life of any other person or for a lesser period.

(g) vesting date – the vesting date in the trust deed is listed as the date of distribution in para 1(b) and in this case it is the 80th anniversary of the execution date of the deed.

What happens on the vesting date is that the trust comes to an end and under clause 2(b) the trust fund, both the capital and income is held for the grandchildren equally of the son and daughter-in-law of if their grandchildren are dead their share is held by their descendants.

(h) the trustee’s powers are quite comprehensive and are set out in clause 6 of the trust deed. The trustee here does have the power to carry on a business. The power to carry on a business here is expressly provided for in clause 6(h) of the deed.

Compare power in trust deed with the powers in the Trusts Act and then determine which of those powers applies to this trust deed? The power to carry on a business is found in s.57 of the Trusts Act and you will see that is limited to the commencement of the trust, the trust property or any part of it is being used by the settlor to carry on business. In those circumstances under the Trusts Act the trustee may continue to carry on that business for two years or as necessary to wind up or sell the business or for such further time as the court approves. This power in s.57 is subject to the terms of the trust instrument. Here the trust deed validly gives a right of power to carry on business. In clause 6(h) the power of the trustee to carry on business is not limited to the businesses already established by the settlor. For example, our instrument says here that the trustee may acquire or carry on a business so it is not limited to businesses already carried on by the settlor. Therefore, the trustee provision here is much wider and will apply instead of s.57.

(i) what powers of investment does the trustee have? – clause 6(a) of the trust deed, here it says expressly that the trustees may invest the trusts monies and do and manage and realise that money as if the trustees were the sole and absolute owners. So they may invest on behalf of the trust as if they were the sole and absolute owners of the investment or property they are investing.

The trust deed also provides that the trustees shall not be accountable for any loss arising out of the making or management of any investment or the failure to realise any investment.

How do the powers of investment in the trust deed compare to the powers contained in the Trusts Act? – in relation to the trustee’s powers of investment they are contained generally in Part III of the Act. However, if you look at s.21 it gives the trustee the power to invest in any

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form of investment and to at any time to realise, reinvest or vary an investment. Therefore, the trust deed and the Trusts Act in this case both contain very wide investment powers.

(j) is the trustee entitled to payment for its services? - yes, clause 10 of the trust deed says that the trustee is entitled to a commission which is equal to 5% of the trust income. Under clause 9 of the trust deed, the trustee if they are a solicitor, accountant or any other person engaged in any profession or business shall be entitled to charge and to be paid their professional fees for any business or act done by them in connection with the trust.

The Trusts Act – s.101 – says the court may authorise or approve a trustee to charge such remuneration for their services as the court thinks fit. S.101(1) in order to provide for an entitlement as a trustee to be paid for your services you must get approval of the court.

s.79 of the Trusts Act states that the provisions in Part XII of the Act in which s.101 lies will apply regardless of the provisions in the trust deed.. Therefore, in this case regardless of what clause 10 of the trust deed says in relation to the trustee’s entitlement to charge his commission at 5% of the income he will have to get approval of the court under s.101(1) first to be able to do that.

s.101(2) covers a trustees entitlement if they are a professional trustee to charge fees for professional services provided by them to the trust and in no circumstances s.101(2) does not require the trustee to get the court’s approval before they do that. Clause 9 of the trust deed will apply to our trustee and they will not have to obtain court approval to be entitled to charge remuneration for their professional services under that clause.

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Week 3

Q1

(a) What is a trust? A trust is essentially an equitable obligation binding a person who is the trustee as owner of some specific property, referred to as the trust property, to deal with that property for the benefit of some other person, namely the beneficiary, cestui que trust. Equitable obligation binding a person, the trustee, as owner of property, to deal with that trust property to deal with it for some person or for the advancement of certain purposes.

(b) What are the essential elements of a trust? There are four essential elements of a trust:

(i) you have to have a trustee – in relation to the trustee there may be more than one trustee but trusts may not have more than four trustees – this maximum requirement is set out in s.11 of the Trusts Act but it does not apply to charitable trusts. The trustee holds legal title to the trust property.

The trust must be validly created – the trust will not then fail for want of a trustee if the trustee dies for example. So if you have a trust and it has three trustees and in carrying out the trust business those trustees fly to Mackay say for the weekend. On the return from Mackay the plane crashes and all those trustees die. As long as the trust has been initially validly constituted or created it will not then fail if all its trustees have died and it has none.

(ii) Trust property – there can be no trust unless some property is the subject matter of the trust over which the trustee has control. Trust property is widely defined in s.5 of the Trusts Act and includes property that is either legal or equitable, real or personal, tangible or intangible.

(iii) The beneficiary – generally the beneficiary holds equitable title to the property. The appropriate principle here is the beneficiary principle that requires that to have a valid trust there must be a beneficiary or beneficiaries whether they be people or objects or purposes. Therefore, trusts for objects or purposes are an exception to the beneficiary principle and the purposes are usually charitable. In addition, a trustee can be a beneficiary but they cannot be the only beneficiary. Because to have a trust you need to have the separation between the legal and equitable or beneficial ownership of the property. If you only have one beneficiary and they are also the trustee you do not have that separation in legal and equitable title.

(iv) Equitable obligation which binds the trustee to deal with the trust property for the benefit of the beneficiary or the advancement of the trusts purpose. This obligation is broken into two limbs and imposes firstly a personal liability and secondly a proprietary obligation. In relation to the personal liability we are talking about the personal liability on the trustee. If a trustee is in breach of trust the beneficiary can sue them personally for damages, etc arising from that. In relation to the proprietary obligation the trustee affixes to the trust property which is the subject of the trust. Therefore, this enables a beneficiary to follow the trust property even if in the hands of someone else other than a bona fide purchaser for value who does not have notice of the trust.

(c) How did the trust develop? Trusts developed from the system of uses which formed one of the sources of conflict which arose between the common law and equity. A use was the creation of

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equity which took the form of to (a) to the use of (b) and the use enabled one person to hold legal title to land for the benefit and use of another. In such a conveyance, the legal title owner, who is called the feoffor transferred property to the (a) feoffee to the use of (b) who is known as cestui que use. The use primarily enabled land owners to hold property in the name of another and it became a popular advice for doing one of two things. Either the avoidance of feudal taxes by bid against the property owners or enabling people who could not legally own land, ie. Monks to have their rights recognised.

As one of the uses of the use was the avoidance of fuedal taxes, the Statute of Uses was passed 1535 in an attempt to eliminate the position which equity had created and it did this by declaring the beneficial owner or the holder of the equitable interest of the property so (b) to be the legal owner or holder of the legal title. To overcome the effect of the Statute of Uses, equity lawyers then developed the use upon use or the double use and this lead to (a) to the use of (b) to the use of (c) with the second beneficial owner (c) not being effected by the Statute of Uses and retaining an equitable interest, not a legal interest, in the property and therefore (c) avoided being classified as the legal owner for tax purposes.

This double use then developed to form the modern day trust. The form of the modern trust reads to (a) unto and to the use of (c) or alternatively to (a) to the use of (a) to the use of (c) and thus rolled the previous two uses contained in the double use together. Here (a) is the set law, then the second (a) or different person (b) referring to the trustee who held the legal title and (c) referring to the beneficiary who held the equitable title to the property.

The trust then went on to form the most exclusive jurisdiction of the court of chancery.

(d) How are trusts used? The uses to which trusts can be put are broken up to 3 headings:

(i) family purposes(ii) commercial purposes(iii) social useful purposes

Under those headings some of the more common uses of the trust are:

trusts allow the enjoyment of property to be divided from the burden of managing it successive interests may be laid out by the means of a trust trusts can facilitate participation by large numbers of people with common interest in

some venture, i.e. investment unit trusts or units that are sold like shares trusts enable you to protects property from wastrels socially useful purposes may be advanced by the means of a charitable trust trusts allow for estate planning, asset protection especially in the event of bankruptcy

and tax minimisation

(e) Compare position of trustee with

(i) bailee – in the situation for bailment, ownership in an article never passes only the possession of it. Therefore the bailor always returns ownership of the property and the bailee acquires only a possessory interest in it. Therefore the bailee does not have any property vested in them with which they must deal with for the benefit of another. In a trust, legal title to the property vests in the trustee with the beneficiary acquiring the beneficial interest in the property. Hence there is that separation between the legal and

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equitable interests in the property that we talked about earlier. As a result of not having ownership in the property, a bailee generally cannot pass title in the property to another whereas the trustee can pass good title to third parties if they take a bona fide purchases for value. In addition, another difference between the bailee and trustee relationship is that in a bailee or bailor relationship this relationship can only arise in relation to personal property whereas trust property as defined in s.5 of the Trusts Act is unrestricted, it can relate to personal or real property

(ii) agent – an agent has no vested interest in their principal’s property, they only have possession of it. However if the actual title to the property is vested in the agent they will hold that property as trustee. Study guide points, usually where an agent collects money for their principal then the relationship between them and the principal is of debtor/creditor only. However, when an agent holds the proceeds of sale of a specific item of property for their principal they will hold those proceeds on trust depending on the circumstances. In relation to the agency/principal relationship and whether or not an agent holds funds as a trustee – need to look at Cohen and Cohen and Walker and Corboy.

Cohen & Cohen – in this case a wife authorised her husband to do various things for her, namely she appointed him her agent to sell some of her furniture and got him to insure her property and when it was lost, claim on her insurance policy. The wife also appointed her husband her agent to collect money she was owed from Germany and to buy goods for his business with it and to import those goods back into the UK. When the goods were resold in the business the object was for the husband to repay the wife out of those proceeds.

In relation to those transactions, firstly the one involving the monies received from the furniture and insurance. The court held that the monies were held on trust for the wife as the intention was that the husband account specifically for those proceeds, ie. He had to keep that money separate from his own funds.

In relation to those other monies collected by the husband from Germany and used to buy goods for the purposes of his business, here the court held that these monies were not held on trust as the intention was that the goods be brought by the husband and that they belonged to him for his business. Therefore in relation to these monies all there was was a debt owing to the wife which the husband was obliged to repay once those goods were resold and there was no trust.

The reason why in this case it was important to determine whether or not the husband held these monies as a debtor to the wife or whether or not they were held on trust for the wife was because that different statute limitation periods applied depending on whether or not the money was held as a debt or as money on trust.

Walker v Corboy – in this case fruit and vegetable growers sold their produce through a farm produce seller licenced under the Farm Produce Act which acted as their agent in selling the goods. The agent seller went into liquidation while holding the proceeds of sale of such produce. The growers therefore claim that the money withheld by the agent seller was in trust for them. In the circumstances of the case they were unsuccessful and it was found that the monies were not held on trust for a number of reasons.

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The most important of these reasons are that none of the consignment notes that evidence the delivery by the growers of the produce to the agent for sale used the words trust in relation to the sale proceeds. In addition, there was no specific agreement that separate accounts in relation to the proceeds be kept nor was there any statutory requirement for them under the relevant legislation.

In addition, the court in that case exhibited a reluctance to introduce trust requirements into commercial transactions and said that although a trust is readily imposed on proceeds of sale arising from an isolated transaction the position may not be the same where the property is received in the ordinary course of an ongoing trading relationship. In particular, here the sales by the agent of the produce to retailers were mostly made by credit. Therefore, difficulties would arise if the agents were obliged to pay all monies received from purchases to the credit of the relevant grower into a trust account.

Another important distinction between a trust and agency is that the agent can create contractural relations between their principal and third parties without becoming personally liable on the contract. A trustee, on the other hand, contracts as principal and is personally liable. In addition, a principal may revoke an agent’s authority at will however, a set law of a trust cannot revoke or vary a trust or trustee unless they reserve the right to do so in the trust instrument.

Q2

This question essentially requires a discussion on the distinction between trust and debt and particularly quistclose trusts. Quistclose trusts generally protect a lender of money by giving them priority over other creditors of the debtor to whom the money is lent in relation to the sum lent.

In relation to the distinction between trust and debt, a debt is said to give rise to a contractural right of repayment and if a debtor becomes insolvent an unsecured creditors has to stand in line behind secured creditors to participate in the assets of the debtor. However, a trust on the other hand, if it exists, entitles the beneficiary of the trust to a proprietary interest in the assets of the trust. Therefore if a person lending money can also create a trust of the funds lent, if the debtor becomes insolvent the money is effectively secured for the creditor as it does not comprise part of the assets of the bankrupt’s estate and is therefore not available for distribution amongst their general creditors.

Therefore need to consider whether or not these categories of trust and debt are mutually exclusive.

In Barclays Bank v Quistclose Investments Ltd it was held that the categories of trust and debt and not mutually exclusive and that they therefore they both can exist in relation to any one particular transaction. So therefore a person holding someone else’s money may be both a debtor at law and a trustee of it in equity.

In Barclays Bank, a company, Rolls Razor was in serious financial difficulties and had exceeded its overdraft limit with Barclays Bank. Rolls Razor had no liquid resources and needed funds to pay dividends to its shareholders which dividends it had already declared. Quistclose agreed to lend the company enough money to pay the dividend and the agreement was the money was advanced for the purpose of paying the dividend and was to be used only to pay that dividend. In addition it was agreed that the money was to be paid into a separate bank account with the bank. Barclays Bank knew about this agreement as the cheque containing the monies was forwarded to it with a letter which set out the terms of the agreement. However, before the dividend was paid Rolls Razor went into liquidation. The

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Bank then set off the credit balance in the dividend account against the debit balance or the amount owing in Rolls Razor’s other accounts.

In this case Quistclose disputed the Bank’s entitlement to the funds claiming that there was a mutual intention that the money was held on trust to pay the dividend. This primary trust had failed, therefore a resulting trust arose in favour of Quistclose and because the Bank had notice of the trust it held the money on constructive trust to Quistclose and was not entitled to its right of set-off.

Why did a resulting trust arose in favour of Quistclose. A resulting trust arises where money is advanced for a purpose and that purpose fails. When a purpose fails the property which is held on trusts results or goes back to the person who created the trust.

So in this case when the trust for the primary purpose, the purpose of paying the dividend failed because Rolls Razor went into liquidation and therefore could no longer pay the dividend those monies were held on a resulting trust for Quistclose.

The bank of course argued that the transaction was one of a loan only and that the relationship of debt necessarily excluded any implication of trust because the transaction could only admit one action or another, it could not admit both. So they were arguing that you can’t have a transaction where there is a trust and a debt relationship.

However, in the case Lord Wilberforce had no difficulty recognising the co-existence in the one transaction of legal and equitable rights and remedies. Lord W says that after the fulfillment of the purpose there is a debtor and creditor relationship. However, if the purpose is not fulfilled the relationship depends on the intention of the parties. If there is an agreement that the monies advanced would be repaid if the purpose failed there will be a trust. However, if there is no such agreement there is a debtor/creditor relationship only.

In Quistclose’s case, the court held that there was a mutual intention that the funds should not become part of the general assets of Rolls Razor but be used exclusively to pay the dividend creditors and further that if that dividend could not be paid the money would be returned to Quistclose. This gave rise to a primary trust in favour of the creditors in relation to the payment of the dividends and if that primary trust failed a secondary trust was held to arise in favour of the provider of the funds which was here Quistclose. The court also held that the bank had sufficient notice that the money was trust money and not part of the general assets of Rolls Razor as although the opening of the separate account was not sufficient to constitute notice, here, a cheque was received with a covering letter explaining the agreement and there had been a conversation also with the bank manager.

What determines whether this type of trust arises is the intention of the parties. Where money is advanced by A to B with the mutual intention that it should not become part of the general assets of B but should be used exclusively for a special purpose there will be implied, in the absence of a contrary intention a stipulation that if the purpose fails the money will be repaid and the arrangement will give rise to a relationship of a fiduciary character or trust. – test comes from Australasian Conference Association v Main Line Constructions Pty Ltd (1979) 141 CLR 335 at –353

Therefore the most important element to establish a quistclose trust and the one which is the most difficult to establish is this requirement of a mutual intention that the funds be held upon trust and not form part of the general assets. This is because the intention is not always express. The most significant factor in finding a mutual intention is the obligation to keep the fund in a separate account.

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This will provide strong evidence of a trust although this is not conclusive. – see Henry v Hammond and Thiess Watkins v Equiticorp

In Thiess Watkins case it was held there that the circumstances upon which the money was advanced and held were such that it could be inferred from the terms of the deposit that the plaintiff intended the money to be kept separate. Therefore in that case, on that basis, a trust was found.

The principle that there is an intention that the funds should not become part of the general assets. Does this intention have to be mutual. It has been held that a quistclose trust can be established on unilateral intention only of one party even though quistclose itself was one of mutual intention. The case which says the intention may be unilateral is Re Kayford (1979) 1 WLR 279.

In Re Kayford a mail order company was in financial difficulties. On the advice of its accountant to protects its customers it set up a trust account into which it deposited customers’ payments pending receipt by them of the goods delivered. On the winding up of the mail order company it was held that the money in the account was held on trust for the customers and did not form part of the general assets of the company even though the trust was created unilaterally by the company. This case has been criticised as not really being an example of a quistclose trust as a quistclose trust in the case itself was a resulting or constructive trust whereas the Re Kayford trust is more like an express trust.

Further, in Re Kayford when the money was received it was received beneficially, wholly in favour of the mail order company and then the trust was created. Arguably this would amount to a voidable preference under bankruptcy law. A way of avoiding this voidable preference would be to impress the funds with the trust on receipt. For example, the invoice saying that the funds are to be held on trust until the delivery of the goods and the customer acknowledging that by signing that receipt. As in quistclose’s case the parties agreed before the advancement of the monies to rolls Razor that the funds were to be held on trust, i.e. in those separate accounts and for that specified purpose and were to be returned if that purpose were not satisfied. Whereas in Re Kayford’s case the mail order company received the money and then decided to hold those monies on trust unilaterally.

Apply law to facts of this problem.

Aaron would be trying to argue that there was a quistclose trust of the $90K in the Melpac bank account of which he was a beneficiary. This is important for him as then Amanda has no beneficial entitlement to the money and therefore it would not be available to the general creditors on her bankruptcy. If no trust is established, however, then Aaron would need to stand in line with the other creditors in relation to the repayment to him of the money lent to Amanda.

Therefore, Aaron would argue that the funds were advanced for a particular purpose, not intended to form part of Amanda’s general assets and that there was a mutual intention that if the purpose failed the money would be returned to the provider of the funds. A primary trust would then arise for the benefit of the creditors as the monies were advanced to pay Amanda’s business creditors and to keep her business going and a secondary trust would arise if that purpose or primary trust failed and the secondary trust would be for the benefit of Aaron as the provider of the funds.

So in these circumstances, if a trust was established, it would be argued that Aaron is the settlor, Amanda is the primary trustee and the bank is a constructive trustee to the extent that it tried to set-off its $15K overdraft against the $90K funds remaining in the account and they would be a constructive trustee as they had notice of the arrangements as in quistclose’s case and in Theiss Watkins.

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In relation to the trust arrangement, the beneficiaries would be Amanda’s business creditors and they would be the beneficiary of the primary trust established and Aaron would be the beneficiary of the secondary trust if that first or primary trust fails.

How do we establish a quistclose?

apply test that there must be a mutual intention that the monies not form part of Amanda’s general assets which are available for distribution to her creditors and therefore there must be a mutual intention that the monies are held on trust. The facts state that Aaron deposited the $100K into Amanda’s bank account and at the time he made the deposit he notified both Amanda and her bank that the deposit was to be used to pay the business creditors in order to prevent her from being declared bankrupt.

From these facts we can establish that there perhaps was a mutual intention that the monies here were advanced for a specific purpose, namely, to allow Amanda to pay her creditors so that she did not go bankrupt. But can it be stated that there is this mutual intention that the trust fund not form part of Amanda’s general assets. The best evidence to establish this mutual intention is maintenance or the existence of a separate bank account in relation to those funds. Here the monies do not seem to have been put into a separate bank account and appear only to have been put into Amanda’s other bank account and mixed with her own money.

In addition, there does not seem to be any express agreement that the money is not to form part of Amanda’s general assets. However, can that agreement be inferred. May be able to argue by analogy to Cohen and Cohen where the court was prepared to infer such an obligation having established that the proceeds of sale of the furniture and the proceeds of the insurance policy were trust monies. They held there that failure to establish the separate account gave rise to a constructive trust in relation to those monies held by the husband. However, it is arguable on the facts here that you cannot infer this.

However, if you can infer that there was a mutual intention that the money not form part of the general assets then the court will usually infer the obligation to return the money if the purpose is not fulfilled – see Quistclose and also Thiess Watkins. In addition, Amanda may try to argue here that the advancing of money by Aaron was a gift to her and not merely a loan. However, no presumption of advancement exists between a stepfather and a stepdaughter. A presumption of advancement would mean that there was a presumption that the money was intended to be a gift and that presumption may then be rebutted by contrary evidence.

However, as the relationship here between Aaron and Amanda is one of stepfather and stepdaugther there is no presumption of advancement and therefore there is no presumption in this case that the advancing of the money was intended to be a gift to Amanda. However such a presumption does exist between fathers and their children so if the circumstances of the relationship between the parties here was different Amanda may well be able to argue that there was an intention here that these monies were intended to be a gift to her and then the onus would be on Aaron to adduce evidence rebutting that presumption.

Therefore, the major difficulty that arises in Aaron’s case is that there was no separate account and therefore there is no clear evidence of an intention that the money not form part of Amanda’s general assets. On that basis Aaron may run into difficulties in establishing a quistclose trust in relation to the sums lent to Amanda.

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There is also an issue here as to whether or not the intention is a mutual one as to whether or not the intention is merely Aaron’s in relation to the intention that the funds not form part of Amanda’s assets and that they are advanced for a specific purpose – in relation to this issue need to refer to Re Kayford’s case.

Assuming that Aaron was successful in establishing that a quistclose trust arrangement had been created here you would then to consider to what extent has the purpose of the primary trust here failed. Remember in the quistclose trust structure here the primary trust has been created for the primary purpose of paying Amanda’s creditors to prevent her from becoming a bankrupt. On reliance on that purpose it is argued that Aaron advanced or deposited $100K into Amanda’s bank a/c.

Amanda has paid our $10K of that amount to pay her debts to stave off her bankruptcy. Therefore when Amanda goes bankrupt here the purpose has only failed to the extent that the creditors were not paid, i.e. only to an amount of $90K which has not been applied to the purpose. Therefore, in relation to that $90K once the primary trust fails the secondary trust will arise as a resulting trust in favour of Aaron and Aaron will therefore be secured to the extent of $90K and will not have to rank in line with the general creditors of Amanda in receiving repayment of that money.

However, in respect to the other $10K which has already been applied by Amanda for the purpose of paying off her creditors, Aaron here is only an ordinary creditor because the purpose has been satisfied. So therefore the relationship between him and Amanda is only one of debtor and creditor and Aaron therefore must stand in line with all the other creditors of Amanda to recover that money as a debt. In Quistclose’s case at p.581 – 582 in relation to this point.

Position of Melpac as the bank. Ordinarily a bank may amalgamate accounts setting off credit balances against debit balances because a relationship between a bank and a customer and is one of creditor/debtor. So in the normal course the bank would set-off the $15K overdraft against the balance in the other account here. However, if a trust is established, the bank cannot exercise this right of set-off as the bank here has notice of the trust because Aaron has told the bank of the circumstances in which the money has been advanced to Amanda. So therefore if the bank with this notice tries to set-off thee money it will be held to be a constructive trustee of those funds and the bank will be liable to account for them.

In summary, if a quistclose trust has been established in favour of Aaron to the extent of $90K Melpac bank will not be able to set-off the overdraft against the $90K.

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Week 4

Classify type of trust – express trust – this is trust where the settlor or testator has expressed his or her intention to set up a trust. In order to create an express trust there are four broad requirements:

1. there must be capacity in the settlor, trustee and beneficiary;2. there must be present the three certainties of intention, subject matter and object;3. the trustee must have title to the trust property in that the trust is completely constituted and any

statutory requirements of writing for the creation of trust are satisfied; and4. there must be no other vitiating factor.

Looking at the last two requirements first, i.e. is there here the creation of an express trust in that is the trust completely constituted, so does the trustee have title to the trust property?

The trust that we have here in clauses 1 and 2 is created by a will so it is a trust post mortem. So to be valid the trust must be in writing, signed by the testator and signed by the testator in the presence of two witnesses who are present at the same time. These requirements of writing for trusts created by a will are dictated by s. 9 of the Qld Succession Act.

Here the will is validly created as the statutory requirements set down by s.9 have been observed. We have been told here that the trust instrument has been properly executed and witnessed and therefore the trust has been completely constituted here.

Capacity

Look at capacities to create a trust by will or the capacity of the settlor, here presumably Alexander is over 18 and therefore has capacity to make a will. The requirements for capacity to make a will for our purposes are set out in s.8(1) of the Qld Succession Act. Because Alexander is over 18 and therefore has the capacity to make a will, he therefore has the capacity to make a trust by will.

Capacity of a trustee – both individuals and corporations can be trustees – s.5 of the Trusts Act. Note that personal representatives which term includes executors appointed by a will is also included in the definition of trustees in s.5. Therefore on our facts, Qld Trustees Ltd as a company in addition to William Bald as an individual and both of them as personal representatives of Alexander’s estate can be trustees.

Thirdly consider capacity of the beneficiaries – anyone who can hold an interest in property can be a beneficiary including a corporation. On our facts, all the beneficiaries are either individuals or in the case of the disposition to Bald Pty Ltd, a company and therefore can validly hold as a beneficiary.

In addition, in order to be valid an express trust must have necessary certainties. Firstly, if we look at the certainty of intention to create a trust. In relation to this requirement, the settlor, here Alexander Bald must manifest an intention, either express or implied, to create a trust. You will know that equity in this matter looks at the intent and not the form. Hence, you do not need to create the word trust itself to create a trust. However, the word is used here and this will be a relevant consideration in determining the intention to create a trust. Authority Walker v Corboy.

Pursuant to Re Joliff’s case there is nothing here on the facts to indicate that the real intentions of the settlor were any different other than to create a trust. Therefore, here there is an intention to give the potential beneficiaries an equitable interest in the property which can be enforced against the trustee.

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Hence, there is this intention to create a trust. However, this intention is subject to perhaps the disposition here to Kimberly of the residue of the estate.

In relation to the remaining 2 certainties, namely the subject matter of the trust and the object of the trust – will go through them as follows:

Clause 2 (a) – gift to 2 deserving film critics – the first issue that arises in relation to this gift is in relation to certainty of subject matter. In relation to the certainty of subject matter the settlor must sufficiently identify what property is intended to be subject to the trust so that the trustee knows the extent of their obligations under the trust. Therefore, if there is no certainty here the trust will fail and will result to the settlor’s residuary estate. Here the residuary estate by virtue of clause 2(d) goes to Alexander’s wife, Kimberly. What we are dealing with here in relation to clause 2(a) is an objective criteria, namely a reasonable amount of money. It has been held in Re Goulay that where the words used are capable of being made certain the court will save the gift. In that case the words ‘reasonable income” were held not to make the trust fail for uncertainty of subject matter as the term reasonable was an objective yardstick which could be made certain, i.e. the court interprets what the word “reasonable” means all the time. I.e. the words “reasonable person” in torts law. In this case it would be unlikely that they would have any difficulty interpreting what a reasonable amount of money will be on the authority of Re Goulay’s case.

The second issue in relation to this gift is in relation to certainty of object. The beneficiary principle dictates that to be valid a trust must have a beneficiary. Therefore, it must be clear for whose benefit the trust is to be held as once again the trustee should know for whose benefit the trust is to be managed. Here clause 2(a) creates a discretionary trust in that the trustee has the discretion as to the ascertainment of the beneficiaries, here 2 deserving film critics.

In the case of discretionary trusts the test for certainty of object is that the trust will be valid if it satisfies the criteria and certainty test laid out in McVale v Doulton, that is to say that it is enough to be able to say whether or not a person is or is not a member of a designated class of potential beneficiaries. Here, the test is deserving film critics. In the case of Perpetual Trustees v Fairfax it was held that it was not sufficiently certain in the case the criteria of a deserving journalist as no criteria was provided to determine what the phrase “deserving” meant. For example, did deserving mean poor journalism or did it mean good journalism.

In this case, similarly the test of deserving film critics will not be sufficiently certain because there is no criteria or definition to determine who a deserving film critic is. Therefore, this gift will fail because the gift has failed, a resulting trust will arise and the failed gift will form part of the residuary estate and pursuant to clause 2(d) is to be distributed to Alexander’s wife, Kimberly.

Clause 2(b) – gift of Oscar to William Bald – William is also one of the trustees of Alexander’s estate. So issue here is whether or not a trustee can also be a beneficiary. This also goes to certainty of objects of beneficiaries. A trustee may be a beneficiary provided that they are not the sole beneficiary. The reason for this is that in the creation of the trust you need the separation of the legal and equitable interest. So if the trustee is also the sole trustee and a beneficiary you have not go that separation between the legal and equitable interest which is necessary to create a trust.

Here, however there is a valid trust because although William is a trustee and the sole beneficiary of the Oscar he is not the sole trustee as Qld Trustee Ltd and William hold as joint tenants in relation to the trusteeship. Therefore, here there is no merging of that separation between the legal and beneficial title here which is necessary to create a trust. However, as William is of full age and capacity he can

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call for the trust to be terminated under the rule in Saunders v Vautier (1841) 41 ER at 482. Essentially the rule in Saunders states that the beneficiary of a fixed trust may if they all consent and are of full capacity terminate the trust by requesting the trustees to pay over their respective interests under the trust and thereby extinguishing the trust.

If this happens here William will take title to the Oscar absolutely. So he will have full legal and equitable title to the Oscar.

May also be able to raise certainty of subject matter. Namely, issue of what would happen if Alexander had more than one gold Oscar statue and somehow they were different or could be considered to be different. Issues arising from cases such as Hunter and Moss. On the facts here we do not know whether or not Alexander has more than one statue so we do not know whether that statue needed to be more particularly identified and whether or not the statues were different so we cannot draw a conclusion on this point.

Clause 2(c) and the gift of royalties from ‘To Catch a Thief’ to Bald Pty Ltd ATF the Bald Family Trust. First issue which arises is in relation to certainty of object. Once again, a corporation can be a beneficiary so the fact that the beneficiary to Bald Pty Ltd is not detrimental to this trust. The second issue is in relation to certainty of subject matter. Can royalties be considered to be future property. If they are future property they cannot be the subject of an immediate trust and future property can only be assigned or transferred in equity and only for value or consideration. Here, Bald Pty Ltd ATF the Bald Family Trust has not provided any consideration.

What we need to determine then is whether or not there is an assignment of the right, title and interest in and to the royalties. So whether or not there is an assignment of the tree which is valid or whether or not there is a transfer of assignment of the future royalty monies themselves, the fruit which is invalid as there has been no consideration here. See Shepherd v Commissioner of Taxation and Norman v the FTC.

In Shepherd’s case the fact that the promise or the royalty may not be fruitful, in that, for example, if the film does not make any royalties in the future, the beneficiaries will not receive any benefit by way of this gift, the fact that it may not be fruitful does not make the royalty or the promise incapable of assignment. Here, as the gift is in a will, a court will aim to construe it so that the gift is valid. So the court will aim to construe clause 2(c) so that it refers to an assignment of the present right to the royalties and the royalties themselves which will arise in the future. The court will construe this as being an assignment of the underlying interest in the royalties and not future property and therefore this gift will be valid.

Clause 2(d) – residuary gift to Alexander’s wife with $1K for Cruiser. The issue which arises here is in relation to certainty of intention. What needs to be considered is whether there is an intention to create a trust of the $1K for Cruiser or merely a moral obligation on Kimberley’s behalf to give Cruiser the money. See Masouri Bank and Raynor and Re Williams. The one most appropriate here is Masouri Bank’s case where the estate was given to the wife feeling confident that she would act justly to our children in dividing the same when no longer needed by her. It was held in that case that there was no legal obligation to hold the money on trust only a moral obligation. In relation to the precatory words which have been used here, namely that she is left the residue of the estate absolutely in the fullest confidence…. Etc whether or not those words amount to a moral obligation or a trust of those monies depends on a question of construction of the set laws or Alexander’s intention here that there be a binding obligation. If Masouri Bank’s case is followed, the words here are similar to that case and therefore it may be held that there is no trust to Cruiser, merely a request for a moral obligation on

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Kimberley’s part to give the money to Cruiser. If this is the case Kimberley would not be obliged to hold the money on trust or divest it to Cruiser in her will. Therefore, if she so wished she could take the full benefit of all of the residue of Alexander’s estate.

Direction to the solicitor

Need to consider whether the money is still part of his estate or whether a trust has been created in respect of it. Therefore, this firstly goes to the issue of an intention to create a trust and whether or not this is a trust or merely a revocable mandate. Need to consider Commissioner of Stamp Duties v Howard Smith where a residuary beneficiary to his deceased wife’s estate wrote a letter to a trustee company which was the executor and trustee of the wife’s will requesting the company to pay out of his interest in the estate as a residuary beneficiary the amount set out in the letter to the persons named therein. It was held in that case that the letter did not create a trust but was merely a mandate which was revocable at any time until the money was paid and which was also revocable by death.

Therefore, what Alexander needs to have done here is that he must make clear the intention that the trust is created in the property in favour of another, namely Hubbard, the Cats Home and his mother. A mere mandate, that is, an authority given to someone to perform a certain task from a principal to their agent requiring the agent to pay money to another gives no right or interest in the subject matter of the mandate. So it does not create a trust, it is merely an authority to do something.

Here, arguably what we have from Alexander is merely a revocable mandate, in that, it was no more than a mandate from Alexander to Hillary requesting that she pay out of the monies due to Alexander in her trust account the dispositions particularised in his letter. If the letter is merely a revocable mandate it will be cancelled by Alexander’s death and therefore the proceeds in the solicitors trust account will form part of Alexander’s estate and be distributed according to the residuary clause to his wife Kimberley.

Another issue arises here in relation to the monies payable to Beverley Cats Home Inc. The issue is in relation to the capacity of the beneficiary. All that needs to be said that if the Beverley Cats Home is an incorporated association then the gift will be valid because incorporated associations are capable of holding property. Also if the gift is for a charitable purpose it will also be valid due to the exception to the beneficiary principle.

$50K in bank account – Nicky Kidder – Alexander Bald trustee

Need to consider whether or not this is Alexander’s money or whether he is acting as a trustee for Nicky. Need to look at intention to create a trust. In forming this intention we must construe the language of the settlor to determine whether or not a trust is created and equity looks at the settlor’s intention and not the form necessarily. For example, Re Armstrong where there were no words on the account such as ‘trustee’ but the father’s intention in relation to those monies were sufficient to create the trust.

Here we do have the word “trustee” used in the title of the bank account. That prima facie would indicate due to Walker and Corboy that perhaps a trust was created. However, a trust cannot be created contrary to the true intentions of the settlor. So if there is evidence here that Alexander never intended the money to be held on trust even though he styled the account as trustee, there will be no trust. – see CSD v Joliffe and Caltier and Hilton. Here Nicky did not know of the account and did not have access to it and like in Re Armstrong considered the money to be his by declaring it on his tax return and unilaterally making arrangements to close the account prior to his death. Therefore, it is unlikely to be

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held that there is a trust in relation to the funds and therefore the funds will form part of the residuary estate and will be available for distribution to Alexander’s wife Kimberley under clause 2(d).

Money in Heidi’s account - $50k

Is this money held by Heidi as Alexander’s agent trust money or is it merely a debt owed by Heidi to Alexander. Once again, is there an intention to create a trust. – see Walker and Corboy and Cohen and Cohen. These cases highlight a number of factors which help in distinguishing trusts from debts, such as the intention of the parties, whether a separate account is used, the use of the word trust, the nature of the legal obligations imposed, i.e. is it an ongoing commercial transaction, whether the obligation is imposed by contract, what industry practices, whether or not any statute governs the situation and whether there is some general obligation to keep the money separate.

Arguably the monies here are not trust money and therefore a merely a debt forming part of Heidi’s assets when she goes bankrupt for distribution amongst her creditors. Therefore, Alexander’s estate must stand in line with Heidi’s creditors to recover the $50K for appearance fees and this probably will be lost depending on the amount available for distribution amongst the unsecured creditors of Heidi.

Conclusion

In relation to the assets in Alexander’s estate, arguably the money in the solicitors trust account is part of his estate and therefore will be distributed with the residue to Kimberley. It may not be possible that the $50K bank account titled Nicky Kidder is a trust account and therefore it will probably be part of the residue. In addition, the money in Heidi’s account is probably a debt and not a trust and therefore the estate must stand in line with the other unsecured creditors.

In relation to the gifts in the will, the money given to the film critics will fail as being uncertain and if it does it will go to the residue of the estate. The gift of the Oscar to William is valid. The gift of the royalties will also be okay if it is construed as an assignment of the underlying present right to the royalties and not the future royalty money itself. Finally, it is likely that the precatory words are not construed as creating a trust for Cruiser so Kimberley will probably take the residue including the $1K free of any obligation.

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Requirements of Writing and Form

Structure for Answering Questions

Identify property or interest which you are considering – personalty or realty – this goes towards the requirements of writing, in that, it gives you an indication of what sections to apply, either s.59 or s.11 of the PLA and in relation to the requirements of form it also highlights what rules should be applied.

Consider whether or not dealing with full ownership in the property or whether you are gifting or transferring only an equitable in the interest. You can only assign or transfer what interest in the property you have personally to someone else. – this goes towards to the writing requirements in that need to consider whether or not you are creating or disposing of an interest in property.

If dealing with an equitable interest it is particularly important to consider whether or not you are creating some new interest. It also goes to s. 11 or 59 to apply. Requirements of form – classifying whether or not you have full ownership or an equitable interest or whether you are dealing with legal property or equitable property will assist in determining whether you need to assign in law or in equity. For example, if you are dealing with legal property you need to consider whether or not an assignment at law is possible and if for some reason that assignment at law fails you then need to consider whether you have a valid assignment in equity. If you are dealing with equitable property you will not be assigning at law but will be assigning an interest in equity. Equitable assignments also deal with failed assignments at law and future assignments of property whether it is legal or equitable property and also assignments for consideration whether or not it is legal or equitable property.

Requirements of writing – set out in powerpoint

Requirements of form – i.e. if the property is capable of assignment, is there an intention to assign, is there an assignment at law and is there an assignment in equity.

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Week 5

Whether the Dalai Lama sees the benefit of the gifts will depend on whether the deed of gift effectively assigned each of the assets to the Society. If not, the gifts will form part of the estate and go to R & D’s daughter.

Definition of assignment – In Norman v FTC definition given that an assignment means the media transfer of an existing proprietary right vested or contingent from the assignor to the assignee.

(1) Gift of the dune buggy – if we consider whether or not the property here is personalty or realty – the car is a possession so it is therefore personalty. Requirements of writing – b/c it is personalty only s.11(1)(c) of the PLA can potentially apply here. If we consider whether or not we are dealing with full ownership in the vehicle or only an equitable interest – possession of the vehicle itself and of the key by R&D evidence ownership of them of the vehicle. Therefore, presumably full ownership is what R&D are assigning here.

S.11(1)(c) of the PLA provides for the disposition of an equitable interest or trust subsisting at the time of the disposition and says that that must be manifested and proved by some writing. Does this section apply to this gift? No. Because what we are dealing with here is not merely the equitable interest but we are transferring full ownership or absolute title – so legal and equitable interest in the property.

According to the case of Vandervell v IRC if you satisfy the requirements to transfer the legal interest you do not need further writing to transfer the equitable interest. So there are no writing requirements required here. So what we have here is the assignment of a legal interest or legal property. We don’t have an assignment of equitable property. So therefore the only assignments we need to consider are assignments at law.

A chose in possession may be voluntarily assigned at law by the delivery of the property with the intention to give or by way of deed or gift – see Cocheran v Moore. Therefore, here as we have a deed of gift the assignment of the vehicle takes effect immediately notwithstanding that there has not been delivery of the car to the Dalai Lama. Therefore, there is a valid legal assignment of the property here and the vehicle is going to be owned by the Dalai Lama.

(2) Need to consider whether or not R&D have full ownership of the property or equitable interest – presumably they have full ownership and this is what they are transferring. As we are dealing with realty, the only section of the PLA which is applicable is s.11(1)(a). s.59 of the PLA will not apply because we do not have a contract for consideration.

In order to satisfy the requirements of s.11(1)(a) you need to show that the property is land, show that R&D have an interest – according to Adamson v Hayes includes both legal and equitable interest in the land. Here we are dealing with absolute ownership so this requirement is satisfied.

Finally, need to have a creation or disposition. Disposition is defined in s.3 of the PLA and includes a conveyance. According to Grey v IRC disposition is to be given its natural meaning. So here we have the beneficial interest in property being vested in someone else. So we have a change in ownership – i.e. the disposition of property. Therefore, to satisfy the elements of s.11(1)(a) we need to see what type of writing is required. The type of writing required by the section is actual writing, signed by the person creating or conveying the property or by their

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agent lawfully authorised in writing. The dispositions of the land here are in writing by the deed of gift and that deed of gift is signed by both R&D.

We are dealing with legal property so need to consider whether or not there has been an assignment at law. Pursuant to s.181-182 of the Land Title Act the legal interest in property does not pass until it is registered. Even though the transfer has been signed and an authority has been given to release the CT but the transfer has not itself been registered so therefore there has been no assignment of the property at law. Therefore need to consider whether property has been assigned at equity because it has failed at law.

We need to look the voluntary assignment in equity of legal present property where there has been no valid assignment at law. In order to effect an assignment in these circumstances in equity need to consider s.200 of the PLA and that states that a voluntary assignment of property shall be effective in equity if the donor has done everything required to be done by them necessary to transfer the property to the donee. Here the solicitor/agent has put all the necessary documents in the hands of the donee, the authority to the bank has been signed by R&D and so too has the transfer and that has been delivered to solicitors of the Dalai Lama Society.

Therefore, arguably R&D have done everything necessary to be done alone to transfer this property. See – Corin v Patton – it is relevant that R&D’s solicitor before their death had already sent the documents to the solicitor for the Dalai Lama Society. In Corin v Patton one of the issues was whether or not the solicitor was holding the transfer documents which were signed before Mrs Patton’s death as her agent or the solicitor holding the documents as agent for her brother. It is relevant because if the solicitor was holding the transfer on behalf of Mrs Patton as her agent, when she died the agency would be revoked so the solicitor would not have the authority to hand the documents over to the other side, therefore as the brother would not then have possession of the documents not everything required by Mrs Patton to be done would have be done at the time of her death.

In this case, because R&D solicitor have transferred the documents to the DL Society prior to their death we do not have the problem of the revocation of the authority. According to the common law authority of Noor{?] the reason or object of this rule is to give effect to the settlor or donor’s intentions. So if everything has been done by them which is necessary for them to have done to effect this transfer prior to their death, all they are doing to this rule is giving effect to their intentions.

There may be a question here as to whether or not the authority given by R&D to the bank to release the documents has been revoked by their death. Similar principles to this in Corrin v Patton. However, the transfer to the Dalai Lama will probably be effective here b/c of s.200 of the PLA and because R&D have done everything prior to their death to give effect to this transfer.

(3) Shares – shares are personalty and they are choses in action because they are an intangible right of property which is only enforceable by court proceedings.

Are we dealing with full ownership or an equitable interest. R&D are presumably the full owners of the shares. Therefore, we have an assignment of legal property as shares are also legal choses in action. When dealing with choses in action need to make the distinction as to

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whether or not they are legal or equitable choses in action. This is important because it will determine as to whether or not they will be assigned in law or in equity.

The distinction between a legal and equitable chose in action primarily is that legal choses in action were always and have been traditionally always recognised as being enforceable in common law courts whereas equitable chose in action were traditionally only enforced in the courts of equity. An example of a legal chose in action is shares or also debt. An example of an equitable chose in action might be the interest of a beneficiary under a trust, interest under a will, interest in partnership.

There are no writing requirements here and the reason why that is so is similar to the argument considered in relation to the vehicle.

As we are dealing with legal property here. We need to consider whether or not it has been validly assigned at law. Choses in action are assignable at law generally under s.199 of the PLA, however, some choses, including shares have their own method of assignment. The assignment of shares is governed by the company’s constitution and are generally subject to the corporations legislation. Generally no legal estate will pass until the shares are registered in the name of the donee. Therefore the shares are not validly assigned at law as although the transfer is signed and has been returned to the solicitors together with the share certificates necessary to effect the registration of the shares, no registration has in fact occurred prior to their death.

Need to consider whether shares have been validly assigned in equity. We are dealing with legal property where we have a voluntary assignment in equity of the legal present property where there has been no valid assignment at law. Therefore, in order to be effective as an assignment of equity, we need to comply with s.200 of the PLA. Remember that the test is that the donor must have done everything required by them necessary to transfer the property to the donee. Here R&D have signed the share transfers but the transfers and the shares certificates have not been given over to the DL Society or their solicitors before the car accident. Therefore, there has not been enough done by R&D in order to satisfy the requirements of s.200. See Corrin v Patton and their discussion of the principles of that case. Also refer to …&Noor.

Therefore, the gift of the shares will fail and form part of R&D’s estate and will therefore go to their daughter and not the Dalai Lama.

(4) Beneficial interest in Family Trust – is this personalty or realty. The beneficial interest is in personalty. They have a beneficial interest in the trust which holds interest bearing deposits which are personalty. As we are dealing with personalty only s.11(1)(c) of the PLA can apply. As to whether or not we are dealing with full ownership or equitable interest – R&D only have an equitable interest in this property as they are beneficiaries of the trust. Therefore, they are dealing with here an equitable chose in action.

Therefore, the form of this equitable interest which we are assignment or transferring here takes the form of a direction to trustees to hold the property for a third party. What R&D are trying to say that instead of the trustees of the Crowe FT holding the interest in the deposits for them that they are to hold it for the benefit of a third party.

Requirements of writing – s.11(1)(c) of the PLA requires that a disposition of an equitable interest or trust subsisting at the time of disposition must be manifested and proved by some

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writing. Therefore the elements of s.11(1)(c) is firstly disposition - this is defined in s.3 of the PLA and also defined in Gray v IRC and a disposition is to be given its natural meaning. We are dealing with a disposition, as the beneficial interest in this property is to be vested in someone else here. We have that direction to the trustee to vest R&D’s interest in the trust in the DL society.

We are also dealing with a equitable interest. We are also dealing with a subsisting interest as opposed to creating a new interest. We are not creating a new interest here as we are not disposing of part only of R&D’s equitable interest in the trust and also we are not creating an active sub-trust. We are therefore dealing with the assignment of an existing interest from one person to another, dealing with the substitution of a new beneficial owners according to Gray v IRC. Therefore we are dealing with a subsisting interest.

Therefore, we have fulfilled the requirements or the elements of s.11(1)(c) and now need to look at the requirements of writing. In these circumstances, the disposition must be manifested and proved by some writing signed by the person disposing of the interest or by their agent. What this section requires is not actual writing by evidential writing because the writing does not need to be contemporaneous and may be formed by the reading of several documents together – see DSS v James.

Therefore, here we have satisfied the writing requirements because the deed of gift has been signed by both R&D. We are dealing with equitable interests here, so we are dealing with equitable property and therefore we cannot assign this at law and need only consider whether this has been assigned at equity. This transaction involves the voluntary assignment in equity of purely equitable present property without consideration. Therefore, in order to assign equity all that is needed is evidence of an intention to assign – Commissioner of Stamp Duties v Howard Smith. Here this intention to assign has been manifested through the execution of the deed of gift by R&D.

In order for a valid assignment at equity also need to consider the possible application of s.199 of the PLA to assign an equitable chose in action. This generally applies to the assignment of legal choses in action but there has been some argument that this section applies to the assignment of equitable choses in action as well – see Commissioner of Taxation v Everett where the majority applied s.199 to assignments of equitable choses in action. It was held that an interest in a partnership in that case was assignable under s.199. The section itself mentions the giving of notice to a trustee. Therefore, it must contemplate the assignment of an equitable interest. Legal choses in action meant lawfully assignable choses in action which could include both legal and equitable choses in action.

In Everett’s case they were only assigning 6/13 of the partnership interest and therefore s.199 in the end was not applicable because that section does not apply to the assignment of part owners of a chose in action. However, it has been set out in study guide and in lectures that the better view is that this section does not apply to equitable choses in action.

In conclusion, there is a valid assignment or gift of the interest in the trust to the DL Society.

(5) Damages in defamation action – assignment or transfer of fruits of an action. This is personalty. It is also future property. Dealing with ownership here. There are no specific

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writing requirements. In relation to the assignment of this property we need to consider whether or not the property is capable of being assigned.

Traditionally, a right to litigate is not assignable and public policy grants against people being involved in litigation which they have no interest. Also because the assignment in those circumstances favoured … so to give someone … the assignment of a bare right to litigate in some circumstances is valid if it is to a party of a genuine and substantial interest. Defamation actions are personal and have never been capable of being assigned. What we are dealing with here is the assignment of transfer of the fruits of an action and they are assignable – see Glegg v Blamley.

However the fruits of a judgment are future property and therefore cannot be assigned at law and can only be assigned at equity for consideration. Therefore, the gift will fail here as there has been no consideration provided by the Dalai Lama.

Need to consider whether gift will form part of the residuary estate. In this circumstances the action will survive for the benefit of R&D’s estate because defamation actions are personal. Therefore, the action will die with R&D. Authority for proposition that the action will not survive the benefit of R&D’s estate is s.66(1) of the Queensland Succession Act.

Note: if the assignment here was for consideration (therefore was a valid assignment of future property in equity because it was for consideration) the fact that the defamation action is personal and therefore would die with R&D pursuant to s.66 of the Succession Act, this fact would not have invalidated the assignment – Shepherd v FCT the fact that a promise may not be fruitful will not invalidate an assignment of future property will mean that it is incapable of being assigned. The fact that the action has not yet reached trial or that it may never reach trial because it may be discontinued would not invalidate the assignment either.

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Week 6

* the loan to Mary

legal chose in action which is personalty and therefore only s.11(1)(c) of the PLA will apply. We are also dealing with full ownership of the right to have the debt repaid. Look at requirements of writing and in particular s.11(1)(c) of the PLA you will note that in order for that section to apply here you need to have three elements fufilled:

(a) need to have a disposition;(b) has to be in relation to an equitable interest;(c) needs to be a subsisting interest.

In relation to the requirement of disposition, the term disposition is defined in s.3 of the PLA and also in the case of Gray v IRC. This particular transaction is a disposition.

To decide whether or not we have an equitable interest Adamson v Hayes says that this requirement applies both to land and to personalty. Here we are dealing with full ownership.

The interest must be subsisting at the time of the disposition. Here as we are dealing with full ownership we are not dealing with a subsisting interest. Here there is a creation instead of a new interest out of full ownership through a dealing by Belinda as the full owner. What we have here is a direct assignment by Belinda as owner to the trustee (who in this case is Penny) for the benefit of a third party (who is Mary). Therefore, this creates by creating this trust an equitable interest out of full ownership. Therefore we are creating a new interest and not dealing with a subsisting interest. Authority can be found in CSD v Livingstone. Therefore as we are creating a new interest here s. 11(1)(c) will not apply. Therefore we are not dealing with the assignment of a subsisting equitable interest and therefore no writing requirements are applicable in this case. Even if the writing requirement specified by s.11(1)(c) did apply here the writing requirement would have been satisfied by the letter which is signed by Belinda.

Requirements of form

Need to consider whether there is an assignment in law or equity and this will depend on whether or not the property is present property or whether it can be classified as future property. Cases such as … v FTC that a future property cannot be assigned except for in equity and then it can only be assigned in equity for consideration.

The case of …v FTC itself concerned the assignment of the interest on the loan payable at law. In that case a 3:2 majority held that it was future property because the loan was repayable at law and therefore there was no guarantee that the loan would continue and the interest would therefore be payable in the future. The assignment of the interest repayable on the loan therefore had the character of a right to come into existence rather than a right already in existence. And because the right to interest here is classified by the majority as a new expectancy it was held to be future property. The minority in that case held that the underlying loan gave rise to a contractural obligation to pay interest. Therefore in relation to the transaction you have two presently existing choses in action, namely the right to be repaid the loan and the right to be repaid interest on the loan for as long as the loan continued.

According to the minority because you are dealing with two presently existing interests you are dealing with present property. However, our case is distinguishable from …. V FTC as here the loan doesn’t

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appear to be repayable at law and secondly, we are transferring the loan itself here, so the underlying and presently existing right or the tree if classified according to Shepherd v FTC rather than transferring the interest on the loan so therefore we are dealing with present property.

As the property is present property and as we classified it before as a legal chose in action we need to firstly consider whether the property has been validly assigned at law. In order to assign the property at law we need to consider s.199 of the PLA which requires the satisfaction of five elements:

(a) intention to assign;(b) property must be sufficiently described;(c) the assignment must be absolute and not by way of charge;(d) the assignment must be in writing signed by the creditor;(e) written notice provided to the debtor (the debtor here is Mary)

Here, whilst the other requirements are satisfied, as an express notice in writing has not been given to the debtor Mary or the assignor Belinda or the assignee Eddie, the assignment is not valid under s.199 of the PLA at law. Authority Norman v FTC.

Therefore, as we have an invalid assignment at law we must consider further whether or not the property has been validly assigned in equity. Assignments in equity of legal present property which are capable of assignment at law and where there has been no valid assignment at law occur pursuant to s.200 of the PLA. In order to be effective pursuant to s.200 a voluntary assignment of property can be effective in property only if the donor has done everything required to be done by them necessary to transfer the property to the donee. Authority Corin v Patton.

Here as notice is not a requirement of an effective assignment in equity the assignment will be valid in equity here because the donor has done everything necessary to transfer the property here to Eddie. So therefore it will be a valid assignment in equity under s.200 of the PLA.

If we consider further the dealings by Belinda with the loan owing to her by Mary, you will notice that Belinda has also tried to assign further here this debt to Don. So need to consider whether the requirements of writing and form have been satisfied here also. Look at requirement for writing for the same reason as the transfer of debt to Eddie there are no requirements of writing here in s.11(1)(c) of the PLA.

We then go onto consider requirements of form and whether there has been a valid assignment here at law as once again the property is present property and there is a legal chose in action. Belinda is attempting to transfer half a chose in action to Don, i.e. half the right to be paid the $100K debt owed to her by Mary. Therefore, Belinda cannot assign this property under s.199 of the PLA because we are not dealing with an absolute assignment but an assignment of part of something. See FTC v Everatt, Re Steele & Co. Ltd and Shepherd v FTC. The reason why you cannot assignment part of a legal chose in action because the intention of s.199 was to allow the assignor to .. to sit him down and not have to join the assignor in any action on the assignment. So therefore if you are transferring any part of the property obviously you would need to join the assignor in any action you took as assignee so that is why you cannot assign part of the chose of action under s.199.

As there has been no valid assignment at law need to see whether or not the property has been validly assigned in equity. Here we have therefore a voluntary assignment of equity of legal present property where the property is unassignable at law (because cannot assign part of a chose in action at law under

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s.199). In these circumstances all that is required to effect a valid assignment in equity is a clear expression of an intention to assign. Shepherd v FTC.

Belinda’s statement here evidences an intention to assign half the right so that it is a valid assignment in equity. Whether or not assigning this right to the repayment of the debt to mary is future or present property, we concluded that it was for our purposes present property but even if it had been held to be future property in relation to the assignment of Don that assignment would be valid in equity because here Don is providing consideration for the assignment and the consideration he is providing is the money owing to him by Belinda. In order to have an assignment of future property it has to be assigned in equity for consideration and if it had been future property that requirement would have been satisfied.

We are now left with a situation where there are two valid assignments of the right to the repayment of this debt by Mary in equity. We have a valid equitable assignment of the whole of that right to Eddie and we also have a valid equitable assignment to that right to Don. We therefore have to consider the rule in Dearle v Hall which deals with the priority between contingent equitable assignments of personalty and that rule determines priorities in accordance with the person who gives notice first. In the situation of that rule a later assignee is entitled to priority over an earlier assignee prime time where requirements are satisfied. Firstly, the later assignee gave value for the assignment, secondly, at the time of consideration the later assignee had no notice of the earlier assignee’s interest, thirdly, the later assignee gave notice of the assignment to the debtor, and finally the debtor had no notice of the interest of the earlier assignee at the time of receipt of the later assignee’s notice.

Here, Don has given notice first and has provided consideration for the assignment and at no time has either Mary or Don known of Eddie’s interest in the debt by virtue of the earlier assignment therefore Don will get priority over half the land. Therefore in relation to the loan to mary and Belinda’s dealings with it you can conclude that the interest has been validly assigned, as to half to Don and as to half to Penny on trust for Eddie for life and after his death for …..

BMW

By virtue of Belinda’s statement to Eddie that she is going to hold her BMW on trust for him. Being a car it is personalty. Here we are dealing with presumably foreign ownership of the car. As regards to the requirements of writing, here we are dealing with a declaration of trust relating to personalty as Belinda is declaring herself as trustee here for a third party, Eddie – see Department of Social Security v James and Adamson v Hearns.

Because we are dealing with personalty the only possible writing requirement section which applies is s.11(1)(c) of the PLA. Once again the elements of the operation of that section are disposition, equitable interest and the equitable interest needs to be subsisting at the time of the disposition. As before the issue which arises here is whether or not this is a subsisting interest. Here this is not a subsisting interest but once again there is a creation of a new interest out of full ownership for a dealing with Belinda as full owner. Here her declaration of trust creates an equitable interest out of her full ownership. The authority is CSD v Livingstone and therefore s.11(1)(c) does not apply and there is no requirement of writing. Therefore there has been a valid declaration of trust in relation to the car even though it had only been evidenced orally by Belinda’s statement to Eddie.

Requirements of form – Belinda is declaring herself as trustee of this property. She is already the full owner of that property, so title is already vested in Belinda’s name. As trustee she will hold title so

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therefore there are no additional requirements of form necessary to give effect to this transaction. Therefore the car will be held on trust for Eddie by Belinda’s estate here because Belinda is now dead.

Farm at Beaudesert

Once again Belinda has stated to Eddie that she is going to hold the farm on trust to him. The farm is realty and once again we are dealing with full ownership of it. As regards the requirements of writing, as we have a declaration of trust relating to land as Belinda is declaring herself as trustee for a third party, Eddie, two possible sections of the PLA will apply, firstly s.11(1)(a) and potentially s.11(1)(b).

Consider s.11(1)(a) the elements required for that sections operation are that you must have an interest, that it must be in relation to land and that interest must be created or disposed of. In relation to the element interest, interest here includes both legal and equitable interest on the authority of Adamson v Hearnes. Here Belinda is the absolute owner so therefore that requirement is satisfied. The property here is land so all that needs to be considered here is whether or not there has been a creation or disposition of interest. Disposition is defined in s.3 of the PLA and includes the declaration of trust. Once again disposition is defined further in Gray v IRC which states that disposition is to be given its natural meaning, i.e. where the beneficial interest is vested in someone else or the ownership changes.

There has been some authority and discussion as to whether s.11(1)(a) and s.11(1)(b) in fact overlap. Adamason v Hearnes Justice Gibson and Justice Stephen thought that there was an overlap between ss (a) and (b) and that disposition included a declaration of trust. However, compare that to case of DSS v James Justice Lee says that there is no overlap between the two sections and that a declaration of trust should only be considered under ss.(b) which specifically deals with declarations of trust. The reasons for that was that if there was an overlap between ss(a) and (b) it to some extent made ss.(b) redundant in that why does ss (b) specifically provide for declarations of trust if they are also included in ss(a).

If we then go to look at s.11(1)(b) of the PLA in order for that section to operate we need a declaration of trust and that trust has to be in respect of land. If we have a declaration in respect of land that ss will apply. What that ss requires contrary to s.11(1)(a) is evidentiary writing and we know that evidentiary writing does not need to be contemporaneous with the actual transaction and may be formed by reading several documents together - see DSS v James. Here we do have evidentiary writing in the form of a covering letter written by Belinda on the following day. But we do not have actual writing which would be required if we applied s.(11)(1)(a). So the discussion as to whether or not there is an overlap of the authority between ss. (a) and (b) is important because if you did conclude that ss.(a) did apply then we do not have the requisite actual writing here. However, probably the better view is that ss(b) is the appropriate section and there is no overlap so therefore we do have the requisite writing here to make the assignment valid.

Requirements of form

Belinda is already the full owner here so title is vested in her name and all that she is doing here is declaring herself as holding the property as trustee for Eddie. Therefore we do not need to comply with any requirements in order for the legal title to be held in Belinda’s name as trustee because she is already the full owner of the property, so there are no requirements of form here.

In relation to Belinda’s dealing with the farm the better view is that there is no overlapping with s.11 so therefore s.11(1)(b) is satisfied here and the assignment will be valid and Belinda’s estate will therefore hold the Beaudesert farm on trust for Eddie.

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Proceeds of sale of Painting

The issue which arises here is one to do with the constitution of trusts, namely whether or not this is a trust or a promise. Question is whether or not Toni and/or Kayla can force the promise to hold the proceeds of sale of the paintings on trust for Kayla against the executor. If the promise or agreement which has been made by Belinda is enforceable against the executor then John’s entitlement to the residue of Belinda’s estate will be reduced and the proceeds of sale of these paintings will go to Toni Ivers on trust for Kayla.

In order to resolve this issue there are a number of steps. Need to classify the trust or type of trust which is going to be created here if the promise is carried out – what we are dealing is a trust post mortem, distinction between trust inter vivos and a trust post mortem is that the gift is intended by the creator of the trust to come into operation in their lifetime. However, if the death of the creator of the trust is intended to be a condition precedent to the operation of the trust, so if the trust is intended to be created by a will, it is a trust post mortem.

Therefore, Belinda here has purported to have created a trust post mortem because it is to take effect on her death and provision is to be made in her will. The next step is what we need for complete constitution of trust post mortem. A trust post mortem is generally created by a will under specific compliance with the formality prescribed by the wills legislation which in Qld is s.9 of the Succession Act 1991. S.9 here essentially provides that for a will to be valid, it must be in writing, signed by the testator in the present of two witnesses who must be both present together at the same time and who must attest the will in the presence of the testator or the person who is making the will. Therefore, these formalities have to be complied with in order to make a valid will and also in order to make a valid trust created by a will.

These requirements here have not been complied with as the will which is left here by Belinda does not mention the gift of the proceeds of the sale of these paintings for Kayla to be held on trust by Toni. Therefore this trust is not completely constituted here.

Need to consider therefore what is the effect of complete constitution and conversely what is the effect here of this trust not being completely constituted. If a trust is completely constituted then equity will enforce it at the suit of the beneficiary even if they are volunteers because the settlor then has demonstrated the fulfillment of their intention. Authority can be found in [Ellison v Ellison and Paul v ..]. so if a trust is completely constituted the end effect is that the beneficiaries will enforce the trust, so enforce it so that the promise is carried out.

If the trust is not completely constituted it cannot be enforced by a volunteer because if it has not been completely constituted it can only take effect as an agreement to create a trust. Because it can only take effect as an agreement to create a trust, as an agreement it must be accompanied by consideration to be enforceable in equity because equity will not assist a volunteer. So if a trust has not been completely constituted the only way via which it can be specifically enforceable is if the beneficiary has provided consideration – Re Plumpter’s. So as our trust has not been completely constituted here we need to look at whether Kayla has provided consideration.

If the beneficiary or the trustee on behalf of the beneficiary has supplied valuable consideration then specific performance is prima facie available to compel that law to make good his promise by requiring that the trust be completely constituted. If specific performance is not ordered the beneficiary may obtain damages in lieu. In equity, to amount to consideration it must be valuable consideration and in this respect valuable consideration has the same meaning in equity as in law. However, in equity a

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deed under seal will not be sufficient consideration. However, in equity valuable consideration may be provided by marriage consideration.

So although we have an agreement and although the agreement here takes the form of a deed under seal valuable consideration has not been given by Kayla and therefore Kayla is a volunteer and in addition valuable consideration has not been given by the trustee on Kayla’s behalf either. So if Kayla is a volunteer she cannot enforce the promise to create the trust in equity so we must now turn to the common law.

So the issue that arises here is whether or not Kayla has the right to sue Belinda for damages for breach of promise and that is an action at common law. Although Kayla here has no entitlement to specific performance in equity because she is a volunteer, the agreement was by way of deed under seal and therefore there may be a right to sue for damages for breach of a promise at common law. However, for this right to accrue the beneficiary must be a party to the deed and if the beneficiary is a party to the deed the agreement will be enforceable by them at common law – Cannon v Heartley. Here the agreement is made between Belinda and Toni, so Kayla is not a party to this agreement or deed. Therefore she cannot sue in her own name at common law for damages for breach of promise.

We must then go onto consider whether Toni as trustee can sue for damages and in order to resolve this issue we must consider whether there has been a trust or a promise created. If there is a completely constituted trust of a promise then the trustee is under a duty to sue and recover damages which are held on trust for the beneficiary. If the trustee does not sue the beneficiary can enforce her to do so. A trust or a promise is essentially an intention of the settlor to create an immediate trust of the promise under seal to transfer property to the trustee for the benefit of the beneficiary. So it is the trust of that promise which is to be created immediately pending the actual transfer of that property to the trustee. The trust of a promise takes the form of a chose in action to sue at law for damages for breach of that contract under seal. – see Fletcher v Fletcher¸ Re Price, Re Cook

A completed trust of a promise was found in Fletcher v Fletcher however there is much authority for a view contrary to Fletcher v Fletcher. In Re Price failed to recognise the validity of the concept of a trust of the promise and therefore is in conflict with Fletcher. Re Price has been considered in Re Cook Settlements Trusts which appears to reconcile the cases on the basis of whether the property is present or future. We all know that future property cannot be the subject matter of an immediate trust and Re Cook Settlement picks up on this by saying if you can’t have a trust created in relation to future property therefore you cannot have the trust of a promise created if it relates to future property.

However, Re Cooks Settlement case has been criticised at first as incorrectly classifying the subject matter in question as future property. Arguably in relation to the trust of the promise the trust property is the promise itself or that chose in action and therefore that promise is present property. Therefore if the trust property in relation to the trust of the property is the promise itself and not the property which will be obtained by the promises performance it does not matter how we classify that property which is obtained by the promisor’s performance. Therefore, it is arguable that a promise to pay a sum to be ascertained in the future is just as good a chose as a promise to pay a specified sum and it creates legal property of value. If Re Cooks Settlement Trust does not operate therefore to reconcile the cases as to where the trust of a promise has and has not been found to arise by classifying the property as either present or future perhaps the cases can be reconciled on the basis of whether there was an intention to create a trust.

In Fletcher v Fletcher the covenant was with respect to the payment of a specified sum which was already in existence and the obligation to pay was immediately on the settlor’s death in the event of his

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son surviving him. However, in Re Price on the other hand the covenant was to settle after acquired property and the obligation was contingent on that property being later acquired. So therefore the question we are dealing with here may be phrased as follows – “was there an intention to create an immediate trust of a chose in action as opposed to the creation of a trust when the money was settled?”

If you find that first intention then you can say that you have a trust of a promise in relation to the cases. The courts have traditionally been reluctant to infer an intention to create a trust. However, recent cases suggest that the court may be more willing to do so if by inferring intention to create a trust it is the best way of giving effect to the settlor’s intention – see Bar v Nicolay

In conclusion whether there is any right for Toni to sue John as executor of Belinda’s estate for damages in respect of the breach of the trust of a promise depends on the following factors:

whether or not a trust of a promise is a theoretical possibility – see Re Price, Fletcher v Fletcher whether the promise relates to future property – in this case it is arguable that it does relate to

future property on the authority of Re Cooks case and therefore there is no trust of a promise although as discussed this classification has been criticised

whether or not there is an intention to create a trust of a promise. Here it is arguable that Belinda did intend to create an immediate trust of the chose in action for the right to sue for promises not fulfilled as opposed to creating a trust only when the money was settled. As discussed courts are known well now to infer this type of intention.

So if there is a trust of a promise Toni should sue John as executor for damages for Belinda’s breach of her promise. However, if there is no trust of a promise found as the action would be futile and damages award would be held on trust for the settlor’s estate and they would go to John as residuary beneficiary.

Real Property to Penny Pincher

Assuming here that the real property in question is property other than the farm at Beaudesert. The issue here is whether or not Penny is obliged to hold the real estate on trust for Eddie. The question raises the issue as to whether there has been some sort of secret trust of the property created here. Secret trusts can be divided into two trusts, either fully secret trusts and half secret trusts. Here we have a half secret trust because on the face of the will Penny takes the property as trustee.

Half secret trust occurs where there is some indication in the instrument itself that the donee or the recipient of the property is not to hold the property beneficially but as trustee. However, it is not stated in the terms of the trust what the trusts are. So if there is an intention in the document that the donee is not to hold the property as beneficiary but as trustee but that instrument does not set out the terms of the trust it will be a half secret trust.

In the case of a fully secret trust it is created where it is not created on the face of the instrument itself that any type of trust is created in relation to the gift. In relation to the onus and standard of proof in relation to proving the existence of a secret trust, the onus is on the person alleging that the trust exists and the standard of proof is generally the ordinary civil standard on the balance of probability – see Re Snowden

In order to create a valid secret trust there are three elements you need to establish and these apply equally to establish both half and fully secret trusts and it was essentially only in relation to the time of the communication that the requirements differ: as to what requirements are see generally Blackwell v Blackwell which has been accepted in Voges v Monaghan and are:

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an intention on the part of the donor to create a trust – here it does not seem to be any dispute as to whether or not Belinda intended to create a trust – the intention is arguably inferred from Belinda’s discussions

communication of the intention to create a trust to the trustee – in the case of a half secret trust the testator must have communicated to the secret trustee the fact of the trust and informed that it was their intention that the property to be left to the trustee by will was to be held on trust. Communicate the terms of that trust to the trustee and those things need to be done or before the date of the will

A half secret trustee can never take the property beneficially because it is apparent on the face of the will that they are intended only to take as trustee so if terms of the trust are not communicated the property falls to the residue and resulting trust

Here there has been a general discussion between Penny and Belinda that the property is to be transferred to a trust for Eddie but there is no mention that that trust is to take effect by a transfer via will. Therefore if the terms of the trust itself have not been sufficiently communicated John may take the real estate as it falls into the residue

acceptance of the trust by the trustee and this acceptance can either be expressly conveyed or it can be conveyed via acqueisance or remaining silent when the terms of the trust or the trust itself is communicated – see Paine v Hall

In this case, Penny has accepted the obligation as trustee. It is then just a case of establishing that the deposition of will is in the terms of the trust communicated to her. Therefore if it is arguable that there has been a communication of the terms of the trust before the date of the will to Penny and acceptance by her of the terms of the trust the real estate will be held on a secret trust by Penny for Eddie.

The last issue which arises is the effect of Eddie (who is a secret beneficiary) witnessing the will. Effect of this depends on the theoretical basis of secret trusts which is still a matter of some debate. The old view of the theoretical basis are that half secret and fully secret trusts are testamentary in nature and are enforced on the basis that equity would not allow the wills act which in Qld is s.9 of the Succession Act to be used as an instrument of fraud.

Under s.15 of the Succession Act a legatee or deivsee under a will who witnesses the will cannot take the legacy as the gift is invalid. However, as secret trusts arise outside the will it would be okay for a secret beneficiary to still take if he or she witnesses the will as the interest arises under the will not the trust – Re Young. Secret trusts operate outside the will and therefore okay.

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Week 8

Discretionary Trusts and Powers

Question 2

Identify what we are dealing with – creation of a powers of appointment by a will – Warren has here by will given powers of appointment to Annette and Shirley. A power of appointment is a right or authority given to some person (the donee) by the absolute owner (the donor) to deal with or dispose of (appoint) beneficial ownership of property which belongs to the testator or settlor to persons who may or may not include themselves who are called the objects of the power.

In Qld, s.64 of the Succession Act provides that a power of appointment conferred by a will is valid if it would have valid in a deed inter vivos. As long as this power of appointment created it would have been valid if it were a deed inter vivos, it will be a valid power of appointment by virtue of the will. The position is different in jurisdictions other than Qld where the rule of non-delegation of will making powers do exist. This rule is spoken about in Tatham v Huxtable and has recently been considered in the NSW decision of Gregory v Hudson. In reading Tatham you will find that whether or not powers of appointment in relation to jurisdictions other than Qld will be void due to the rule of non-delegation of will making powers depends on what type of power it is, so whether it is a general, special or hybrid power.

Need to look at whether or not the clauses in the will containing the powers of appointment are valid. So s.64 of the Succession Act allows us to create powers of appointment by a will as long as those powers would have been valid in a deed inter vivos. So are these powers valid – need to look at each clause in turn.

Clause 2(a) – need to firstly identify what the power of appointment is and who it is given to. Here there is a power of appointment to Annette to appoint Warren’s real estate to his parents, grandparents, siblings or the children of his siblings. Here we are dealing with a special power of appointment as it is to be exercised in favour of a limited class only. In addition, as it is given to Annette as trustee she would not be able to use this power in her own favour and therefore this is a another reason why it cannot be a general power of appointment. – see Tatham v Huxtable and in particular Kitto J at p.654

As we have classified the power as a special power of appointment we need to go on further to distinguish whether it is a mere power or a trust power. So in relation to powers of appointment which are not classified as general powers of appointment you need to go on and distinguish whether or not it is a mere power or a trust power.

A mere power involves a non-obligatory power to

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