430 Trusts Contributors

This title was updated in Service 349 by G E Dal Pont LLM (Mich) LLD (Tas) CPA Professor, Faculty of Law, University of Tasmania

Original and Previous Contributors

J K Armitage BA(Syd) LLB(Hons)(Qld) Solicitor of the Supreme Court of New South Wales Consultant, Blake Dawson Waldron, Sydney G E Dal Pont LLM (Mich) LLD (Tas) CPA Professor, Faculty of Law, University of Tasmania AMBIT OF TITLE The title trusts states the law relating to trusts in Australia. It addresses the nature and creation of trusts (including both express and non-express trusts), together with the law relating to the status, duties, powers and rights of trustees, and the circumstances where a variation of trust is permissible. The title concludes with the topic of breach of trust, including the available remedies and defences. Related Titles taxation and revenue charities deeds and other instruments charities equity equity charities equity equity environment charities; perpetuities and accumulations charities charities taxation and revenue charities charities charities charities; religion exempt entities charitable purposes and charitable trusts construction of deeds cy-prs schemes equitable property interests equitable remedies failure of charitable trusts fiduciaries injunctions National Trust of Australia rules against remoteness schemes generally statutory provisions to validate certain trusts taxation of trusts termination of charitable trusts trusts for advancement of education trusts for relief of poverty trusts for religious purpose

charities equity charities succession PUBLISHERS ACKNOWLEDGMENT

trusts exclusively charitable unconscionable transactions war charities and collections wills

The publisher acknowledges the assistance of Mr David Bamford BA(Hons) LLB, Barrister of the Supreme Court of South Australia. Statement of Currency This title is based on information available as at 20 April 2012. Subsequent developments may be located by referring to the Australian Current Law Reporter and Legislation: for further details consult how to use in Volume 1 of Halsburys Laws of Australia.

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[Halsbury's Laws of Australia]

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I NATURE AND CREATION OF TRUSTS (1) INTRODUCTION

This chapter was updated by G E Dal Pont LLM (Mich) LLD (Tas) CPA Professor, Faculty of Law, University of Tasmania

(A) Defining Trust The paragraph below is current to 20 April 2012 [430-1] Meaning of trust A person who, either alone or jointly with another or others, has

property which he or she holds, or rights which he or she is bound to exercise, for or on behalf of a person or persons or for the accomplishment of some particular purpose or purposes,1 holds the property or rights in trust for that person or those persons or that purpose or those purposes and is called a trustee.2 Each person for whom property or rights are held in trust is called a beneficiary or cestui que trust.3 Inherent in the trust is that the trustee owes fiduciary duties to the beneficiaries.4 There is no trust where one person purports to be or to become at the same time sole trustee and sole beneficiary in respect of the same property,5 but this holds only where the legal and equitable estates are commensurate and coextensive.6 It follows that merely because a trustee is also a beneficiary of the trust is not fatal to its existence.7 In that description a trust is treated as a relationship, but an alternative approach has been to describe it as an obligation.8 The obligations of a trustee are equitable and are enforceable only in a court having equitable jurisdiction.9 Even though the trustees obligations are personal obligations they are also annexed to the trust property, so that the beneficiary has rights of a proprietary nature constituting an equitable estate in the property,10 which rights are enforceable against any subsequent holders of the property other than a purchaser for value of the legal interest without notice.11 Notes 1 Trusts for particular purposes include trusts for charitable purposes: see charities. The category also includes some trusts for non-charitable purposes, such as the maintenance of tombs and monuments or the care of particular animals, which have been held valid: see [430-275].2 For the meaning of the trust relationship see also Burgess v Wheate (1759) 1 Eden 177 at 240; 28 ER 652 per Henley, Lord Keeper; Dooby v Watson (1888) 39 Ch D 178 at 181 ; Re Barney; Barney v Barney [1892] 2 Ch 265 at 272 ; Re Williams; Williams v Williams [1897] 2 Ch 12 ; Re Scott (decd) [1948] SASR 193 at 196 ; DKLR Holding Co (No 2) Pty Ltd v Cmr of Stamp Duties (NSW) [1980] 1 NSWLR 510 at 518-20; (1980) 10 ATR 942; 80 ATC 4279 per Hope JA , CA(NSW); JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891; (1985) 9 ACLR 593 at 625-6 . For the meaning of trust in the Trustee Acts see [430-15].3 Beckford v Wade (1805) 17 Ves 87 at 95; 34 ER 34 per Grant MR , PC. As to the nature of a beneficiarys interest in and in relation to the trust property see [430-800].4 See [430-5].5 Re Cook; Beck v Grant [1948] Ch 212; [1948] 1 All ER 231 ; Re Heberley (decd) [1971] NZLR 325 at 333, 346 , CA(NZ); DKLR Holding Co (No 2) Pty Ltd v Cmr of Stamp Duties (NSW) (1982) 149 CLR 431 at 463; 40 ALR 1 at 25; [1982] HCA 14; BC8200057 per Aickin J ; Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639 at 648; 9 BPR 16,735; BC9807013 per Mason P .6 Brydges v Brydges; Philips v Brydges (1796) 3 Ves 120 at 126; 30 ER 926 at 929 ; Walsh Bay Developments Pty Ltd v FCT (1994) 29 ATR 311 at 319; 94 ATC 4682 at 4688; BC9400314 per Foster J . See [430-3015]. Whether there can be a trust where A and B hold as joint tenants in trust for A and B as tenants in common is not clear: see, for example,Re Selous; Thomson v Selous [1901] 1 Ch 921; (1901) 84 LT 318 ; Re Turkington; Owen v Benson [1937] 4 All ER 501; (1937) 81 Sol Jo 1041 . See further Walsh Bay Developments Pty Ltd v FCT, above.7 Saul v Lin [2004] NSWSC 307; BC200401985 at [7]-[13] per Palmer J . An exception is that in the case of a half-secret trust (where the terms of the trust do not appear in the will) (see [430-375]) the person taking as trustee on the face of the will cannot produce evidence to allow himself or herself to take as a beneficiary: Re Rees; Williams v Hopkins [1950] Ch 204; [1949] 2 All ER 1003 , CA; Re Karsten; Edwards v Moore [1953] NZLR 456 .8 Underhills Law of Trusts and Trustees, 14th ed, 1990 at p 3 describes a trust as an equitable obligation, binding a person (who is called a trustee) to deal with property over which he or she has control (which is called the trust property), for the benefit of persons (who are called the beneficiaries or cestuis que trust), of whom he or she may himself or herself be one, and any one of whom may enforce the obligation. This definition was accepted as adequate in Re Marshalls Will Trusts [1945] Ch 217 at 219; [1945] 1 All ER 550 at 551 per Cohen J ; Green v Russell [1959] 2 All ER 525 at 531 per Romer LJ , CA.9 Sturt v Mellish (1743) 2 Atk 611 at 612; 26 ER 765 at 766 per Lord Hardwicke LC ; Burgess v Wheate (1759) 1 Eden 177 at 223; 28 ER 652 at 670 per Lord

Mansfield CJ ; Re Williams; Williams v Williams [1897] 2 Ch 12 at 19 per Lindley LJ , CA.10 See DKLR Holding Co (No 2) Pty Ltd v Cmr of Stamp Duties (NSW) [1980] 1 NSWLR 510 at 518-20; (1980) 10 ATR 942; 80 ATC 4279 per Hope JA , CA(NSW). As to the separation of equitable interests from the legal estate see [430-20].11 Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669; [1996] 2 All ER 961 at 988; [1996] 2 WLR 802 per Lord Browne-Wilkinson . The paragraph below is current to 20 April 2012 [430-5] Trust involves fiduciary relationship It is an attribute of a trust that a fiduciary relationship exists between the trustee and the beneficiaries, so that the trustee must exercise his or her rights, duties and powers in a fiduciary capacity.1 Some of the inhibitions and constraints imposed by that fiduciary relationship apply to other fiduciaries as well as to trustees, and they apply to a trustee as a fiduciary rather than only as a trustee,2 and therefore fall outside the range of those trustee duties where non-compliance will constitute a breach of trust.3 For example, the restrictions relating to the purchase by a trustee on his or her own account of the trust property4 or of the interest of a beneficiary in the trust property,5 are disabilities arising from the wider fiduciary capacity of the trustee rather than duties pertaining exclusively to the trust relationship.6 On this basis, those purchase restrictions would not be subject to a statute relating to the limitation of actions expressed to apply (with some exceptions, not relevant here) in respect of breach of trust.7 Notes 1 Plowright v Lambert (1885) 52 LT 646 at 652 per Field J ; Re Williams; Williams v Williams [1897] 2 Ch 12 at 18, 19 per Lindley LJ , CA; DKLR Holding Co (No 2) Pty Ltd v Cmr of Stamp Duties (NSW) [1980] 1 NSWLR 510 at 518-20; (1980) 10 ATR 942; 80 ATC 4279 per Hope JA , CA(NSW). See also Barnes v Addy (1874) LR 9 Ch App 244 at 252; 43 LJ Ch 513 per Lord Selborne LC; Re Barney; Barney v Barney [1892] 2 Ch 265 ; Mara v Browne [1896] 1 Ch 199 at 209; (1895) 73 LT 638 per A L Smith LJ, CA; Tito v Waddell (No 2) [1977] Ch 106; [1977] 3 All ER 129; [1977] 2 WLR 496 at 616-22 per Megarry VC . See also [430-1]. As to fiduciary relationships generally see equity [185-660]-[185-820].2 Tito v Waddell (No 2) [1977] Ch 106 at 249; [1977] 3 All ER 129 at 248; [1977] 2 WLR 496 at 627 .3 Tito v Waddell (No 2) [1977] Ch 106 at 247-8; [1977] 3 All ER 129 at 246-7; [1977] 2 WLR 496 at 626 .4 See [430-4025]-[4304045].5 See [430-4080].6 Tito v Waddell (No 2) [1977] Ch 106 at 248-9; [1977] 3 All ER 129 at 247; [1977] 2 WLR 496 at 626 ; Chan v Zacharia (1984) 154 CLR 178; 53 ALR 417; 58 ALJR 353 .7 Tito v Waddell (No 2) [1977] Ch 106 at 249; [1977] 3 All ER 129 at 247-8; [1977] 2 WLR 496 at 627 . As to the limitations legislation as applicable to trusts see [430-5550], [430-5555]. The paragraph below is current to 20 April 2012 [430-10] Trust property The trust property or trust estate may be a legal estate, a legal right or an equitable interest (where the legal title is vested in some other person),1 but, whatever form it takes, it must be vested in the trustee.2 This explains why a trustee is, both upon appointment and in the course of trusteeship, under a duty to get in the trust property.3 Notes 1 Head v Lord Teynham (1783) 1 Cox, Eq Cas 57; 29 ER 1061 ; Poole v Pass (1839) 1 Beav 600; 48 ER 1074 ; Knight v Bowyer (1857) 23 Beav 609 at 635; 53 ER 239 at 250 per Romilly MR ; Public Curator of Queensland v Union Trustee Co of Australia Ltd (1922) 31 CLR 66; 28 ALR 438 ; Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614 at 621-2; [1937] VLR 15; [1936] ALR 198 at 200 per Dixon J ; Re Transphere Pty Ltd (1986) 5 NSWLR 309 at 311; 10 ACLR 776; 4 ACLC 426 . See [430-260]. See further equity [185-175]-[185-250].2 If there is more than one trustee the title to property must be vested in all of the trustees as joint

tenants: Swale v Swale (1856) 22 Beav 584; 52 ER 1233; Consterdine v Consterdine (1862) 31 Beav 330; 54 ER 1165; Lewis v Nobbs (1878) 8 Ch D 591 at 594; 47 LJ Ch 662; 26 WR 631 per Hall VC; Guazzini v Pateson (1918) 18 SR (NSW) 275 at 282; 35 WN (NSW) 106 .3 As to the trustees duty to get in the trust property see [430-4150]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-15] Statutory definitions of trust The Trustee Acts (the Acts) 1 in each jurisdiction do not contribute to the formulation of a general definition or description of a trust. The definitions of trust in the Acts2 are substantially the same and are designed to ensure that certain relationships and obligations are included3 in or excluded4 from the range of trusts to which the Acts apply, and they do not attempt to identify the nature or characteristics of a trust. A categorical definition of trust has been adopted for the purpose of applying in Australia the Convention of the Law applicable to Trusts and on their Recognition (the Convention).5 That Convention applies, so far as Australia is concerned, only to international trusts, that is, where there is a connection with two or more legal systems, including at least one which is not the legal system of an Australian State or Territory.6 Some legislation which establishes trusts as a vehicle to conduct public utilities, or to manage public lands, may use the term trust not in its technical legal sense, but do so interchangeably for public corporation or in some other way.7 Notes 1 (ACT) Trustee Act 1925 (NT) Trustee Act 1893 (NSW) Trustee Act 1925 (QLD) Trusts Act 1973 (SA) Trustee Act 1936 (TAS) Trustee Act 1898 (VIC) Trustee Act 1958 (WA) Trustees Act 1962. 2 (ACT) Trustee Act 1925 s 4 (NT) Trustee Act 1893 s 82 (NSW) Trustee Act 1925 s 5 (QLD) Trusts Act 1973 s 5 (SA) Trustee Act 1936 s 4 (TAS) Trustee Act 1898 s 4 (VIC) Trustee Act 1958 s 3

(WA) Trustees Act 1962 s 6. 3 See note 2 above. All jurisdictions specify for inclusion of implied and constructive trusts, cases where the trustee has a beneficial interest in the trust property, and the duties of personal representatives. Queensland also specifies resulting and bare trusts.4 See note 2 above. All jurisdictions specify for exclusion the duties incident to an estate conveyed by way of mortgage, and the Northern Territory and South Australia in addition specify the duties incident to the estate or interest of a mortgagee.5 Convention on the Law applicable to Trusts and on their Recognition (1 July 1985, The Hague; ATS 1992 No 0002) art 2. The Hague Convention was ratified by Australia on 17 October 1991 and was adopted by the (CTH) Trusts (Hague Convention) Act 1991.6 Ibid s 7.7 Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; 100 LGERA 383; 157 ALR 414 at 426-7; 72 ALJR 1470 , HC of A, Full Court; Wellington Harness Racing Club Inc v Hutt City Council [2004] 1 NZLR 82 at [58]-[67] per Hammond J , HC(NZ). See [430-60]. The paragraph below is current to 20 April 2012 [430-20] Legal title and equitable interest A person who holds the legal title to property and is also the beneficial owner of that property does not hold separate legal and equitable estates.1 The passing of ownership ordinarily carries with it both legal and beneficial rights unless there is something in the circumstances that leads equity to impose a trust.2 A legal and beneficial owner who purports to transfer only the legal estate to another person as trustee, with the intention of retaining in himself or herself the beneficial ownership, will, provided appropriate steps are taken to establish the trust, achieve the purpose of having the property instantly held by the trustee in trust for him or her.3 However, the correct analysis of what occurs is that the entire legal estate is transferred intact to the trustee, and the trustees obligations to the transferor as beneficiary, and the entitlement of the beneficiary (transferor) to the equitable ownership of the property, thereupon come into existence, being engrafted on to the legal estate, not carved out of it.4 Notes 1 DKLR Holding Co (No 2) Pty Ltd v Cmr of Stamp Duties (NSW) [1980] 1 NSWLR 510 at 51820; (1980) 10 ATR 942; 80 ATC 4279 per Hope and Glass JJA , CA(NSW) (affirmed DKLR Holding Co (No 2) Pty Ltd v Cmr of Stamp Duties (NSW) (1982) 149 CLR 431 at 442 per Gibbs CJ, at 463 per Aickin J, at 474 per Brennan J; 40 ALR 1 at 9 per Gibbs CJ, at 26 per Aickin J, at 35 per Brennan J; [1982] HCA 14; BC8200057 ; Re Transphere Pty Ltd (1986) 5 NSWLR 309 at 311; 10 ACLR 776; 4 ACLC 426 ; Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 706; [1996] 2 All ER 961 at 989; [1996] 2 WLR 802 at 830 , HL; Commissioner of State Revenue v Lam & Kym Pty Ltd (2004) 10 VR 420; 2004 ATC 5058; [2004] VSCA 204; BC200408032 at [32] per Nettle JA . See also Vandervell v IRC [1967] 2 AC 291 at 311, 317; [1967] 1 All ER 1 at 7, 11 per Lords Upjohn and Donovan respectively, HL. Compare Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 at 22; [1965] AC 694 at 712; [1964] 3 All ER 692; [1964] 3 WLR 963 , PC.2 Duggan v Governor of Full Sutton Prison [2004] 2 All ER 966; [2004] 1 WLR 1010 at [31] per Chadwick LJ .3 DKLR Holding Co (No 2) Pty Ltd v Cmr of Stamp Duties (NSW) (1982) 149 CLR 431 at 442 per Gibbs CJ, at 474 per Brennan J; 40 ALR 1 at 9 per Gibbs CJ, at 35 per Brennan J; [1982] HCA 14; BC8200057 ; Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 706; [1996] 2 All ER 961 at 989; [1996] 2 WLR 802 at 830 , HL.4 Re Transphere Pty Ltd (1986) 5 NSWLR 309 at 311; 10 ACLR 776; 4 ACLC 426 . See also DKLR Holding Co (No 2) Pty Ltd v Cmr of Stamp Duties (NSW) (1982) 149 CLR 431 at 474; 40 ALR 1; [1982] HCA 14; BC8200057 per Brennan J.

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[Halsbury's Laws of Australia]

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(B) Distinguishing the Trust from Other Concepts (I) Overview The paragraph below is current to 20 April 2012 [430-25] Distinguishing trust from other concepts Many of the concepts which need to be differentiated from that of a trust have one or more characteristics in common with a trust.1 In most cases, the other concept is distinguishable from a trust on the basis that no title to any relevant property is vested in the party corresponding to the trustee, there being no division between the parties of the title to or interest in such property.2 Sometimes a factor is present which causes there to be both a trust and another distinct relationship at the same time.3 The intervention of a particular factor can cause the trust to become converted or merged into the other relationship, or vice versa.4 Notes 1 See [430-35]-[430-90].2 See [430-30], [430-40], [430-50].3 See Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; [1968] 3 All ER 651; [1968] 3 WLR 1097 , HL (money was lent but they were held in trust pending fulfilment of the specific purpose (payment of a dividend) for which the loan was made). See [430-65]. As to relationships involving both trust and agency see [430-35].4 See Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; [1968] 3 All ER 651; [1968] 3 WLR 1097 , HL (when liquidation of the borrowing company made payment of a dividend impossible, the characteristics of a loan ceased to exist and there was a resulting trust in favour of the lender. If the dividend had been paid the trust would have ceased to apply, and only the loan relationship would have remained). See further [430-65]. The paragraph below is current to 20 April 2012 [430-30] Trust and other fiduciary relationships Though every trust involves a fiduciary relationship, there are many fiduciary relationships which do not involve, or result in, the existence of a trust:1 for example, executors,2 agents,3 receivers,4 bailees,5 partners6 and the promoters,7 directors8 and liquidators9 of companies, normally have fiduciary obligations but are not necessarily trustees. The distinction depends on whether or not there is any property vested in the fiduciary to which his or her fiduciary obligations relate.10 If there is, then he or she will be a trustee to that extent. Similarly, if he or she acquires property by reason of or through use of the fiduciary relationship he or she will be a constructive trustee of that property.11

In this context there is authority to the effect that all that is necessary to establish the relation of trustee and cestui que trust is to prove that the legal title was in one party and the equitable title in the other.12 However this statement must be qualified in two ways. First, there are situations where a person has rights relating to property enforceable in equity against the legal owner without the legal owner being a trustee.13 Secondly, the generality of that statement is also qualified in respect of a person who receives as a gift (or otherwise gratuitously) any property in which all or part of the beneficial interest belongs to another, but is unaware of that others ownership.14 Even though such a person does not (because he or she is not a purchaser) qualify as a bona fide purchaser for value without notice, and may find his or her claim to the property subject to the other persons rights, he or she is not (because he or she is innocent) to be treated as a trustee and exposed to personal remedies for breach of trust.15 Notes 1 See [430-1], [430-5].2 Vyse v Foster (1874) LR 7 HL 318; 31 LT 177; Re Diplock; Diplock v Wintle [1948] Ch 465; [1948] 2 All ER 318 , CA (affirmed Ministry of Health v Simpson [1951] AC 251; [1950] 2 All ER 1137 , HL); Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 at 22; [1965] AC 694 at 712; [1964] 3 All ER 692 at 699; [1964] 3 WLR 963 , PC; Re Stewart [2003] 1 NZLR 809 at 815-16 per Laurenson J , HC(NZ); Staub v Staub Estate (2003) 226 DLR (4th) 327, CA(Alberta). See [430-50].3 Kirkham v Peel (1880) 43 LT 171 at 172 ; New Zealand Netherlands Society Oranje Inc v Kuys [1973] 2 NZLR 163 at 166; [1973] 2 All ER 1222 at 1225; [1973] 1 WLR 1126 , PC. As to the similarities and distinctions between agency and trust see [430-35].4 Nugent v Nugent [1908] 1 Ch 546; (1908) 77 LJ Ch 271; 98 LT 354 , CA.5 Everingham v Everingham (1911) 12 SR (NSW) 5; 28 WN (NSW) 172 ; Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 2 All ER 552; [1976] 1 WLR 676 ; Clough Mill Ltd v Martin [1984] 3 All ER 982; [1985] 1 WLR 111; [1985] BCLC 64 , CA.6 Kingsmill v Lyne (1910) 13 CLR 292 ; Clegg v Edmondson (1857) 8 De GM & G 787; 44 ER 593 ; Thompsons Trustee in Bankruptcy v Heaton [1974] 1 All ER 1239; [1974] 1 WLR 605 ; Chan v Zacharia (1984) 154 CLR 178; 53 ALR 417; 58 ALJR 353 .7 Gluckstein v Barnes [1900] AC 240; (1900) 82 LT 393 , HL; Omnium Electric Palaces Ltd v Baines [1914] 1 Ch 332; (1913) 83 LJ Ch 372; 109 LT 964 ; Official receiver and liquidator of Jubilee Cotton Mills Ltd v Lewis [1924] AC 958 at 964; (1924) 131 LT 579 , HL; Hermann v Charney [1976] 1 NSWLR 261 ; Re Tropic Isle Ltd (in liq) [1967] Qd R 453 at 466 .8 Sinclair v Brougham [1914] AC 398; [1914-15] All ER Rep 622 ; Mills v Mills (1938) 60 CLR 150; 11 ALJ 527 ; Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134n; [1942] 1 All ER 378 at 381 , HL; Castlereagh Motels Ltd v DaviesRoe [1966] 2 NSWR 79; (1967) 67 SR (NSW) 279 .9 Knowles v Scott [1891] 1 Ch 717 ; Thomas Franklin & Sons Ltd v Cameron (1935) 36 SR (NSW) 286; 53 WN (NSW) 30 ; Re Dover Pty Ltd and the Companies Act 1961 (1981) 6 ACLR 307 at 310 .10 Mills v Mills (1938) 60 CLR 150; 11 ALJ 527 .11 Gordon v Gonda [1955] 2 All ER 762; [1955] 1 WLR 885 , CA. See [430-580]-[430-590].12 Hardoon v Belilios [1901] AC 118 at 123; (1900) 83 LT 573; 49 WR 209 , PC.13 Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 706, 707; [1996] 2 All ER 961 at 989, 990; [1996] 2 WLR 802 at 830 , HL. Compare Don King Productions Inc v Warren [1998] 2 All ER 608 at 630 .14 In such a case, the owner is entitled to claim the property, if it is intact, or a proportionate share of it if it is, or represents, his or her money which has been mixed with money of the innocent volunteer. However, the owner cannot resort to the personal remedies for breach of trust which would be available against the volunteer if he or she had received, or had mixed, the money with knowledge of the owners entitlement: Re Diplock; Diplock v Wintle [1948] Ch 465; [1948] 2 All ER 318 , CA (affirmed Ministry of Health v Simpson [1951] AC 251; [1950] 2 All ER 1137 , HL); Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 706-7; [1996] 2 All ER 961 at 989-90; [1996] 2 WLR 802 at 830 , HL. See also [430-5305].15 Sinclair v Brougham [1914] AC 398 at 442-3; [1914-15] All ER Rep 622 ; Re Diplock; Diplock v Wintle [1948] Ch 465; [1948] 2 All ER 318 , CA (affirmed Ministry of Health v Simpson [1951] AC 251; [1950] 2 All ER 1137 , HL); Re Montagus Settlement Trusts; Duke of Manchester v National Westminster Bank Ltd [1987] Ch 264; [1992] 4 All ER 308; [1987] 2 WLR 1192 ; Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at

706-7; [1996] 2 All ER 961 at 989-90; [1996] 2 WLR 802 at 830 , HL. In none of those cases was the statement in Hardoon v Belilios [1901] AC 118; (1900) 83 LT 573; 49 WR 209 referred to. As to personal remedies for breach of trust see [430-5330]-[430-5360]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-35] Agency and trust Agents and trustees hold powers which are to be exercised not for the furtherance of their own interests but for the benefit of other persons or the fulfilment of other purposes.1 Both agency and trust are therefore fiduciary relationships and, in addition to sharing some other attributes, can attract the equitable remedy of tracing.2 They are both also subject to the conflict of interest and duty rule, which precludes a fiduciary from making a profit from the relationship,3 and to the purchasing rule which restricts the purchase by the fiduciary of property with which the fiduciary relationship is concerned.4 Agency is based on agreement between principal and agent, whereas agreement between trustee (corresponding to agent) and beneficiary (corresponding to principal) is not a necessary element in the constitution of a trust.5 Agreement between settlor and trustee may be involved in the establishment of a trust, but unless the trust instrument so provides, the settlor does not normally have any role to play after creating the trust, or any rights in relation to the carrying out of the trust.6 An agency contract, like other contracts, can be altered by agreement between principal and agent, but the terms of a trust cannot be altered except as provided in the trust instrument,7 or by the trustee with the consent of all of the beneficiaries if they are all sui juris and have vested interests,8 or by the court under its inherent9 or statutory jurisdiction.10 An agency can be terminated in accordance with the terms of the contract or by agreement between principal and agent, and would normally terminate on the death of either party.11 A trust can be terminated in accordance with the terms of the trust instrument,12 or by the beneficiaries if they are all sui juris and have vested interests,13 but does not terminate on the death of the trustee,14 as the law makes provision for the filling of a vacant trusteeship. 15 An agent is able to bring a contract into existence between his or her principal and a third party, but does not incur personal liability under the contract except in special circumstances16 or unless he or she is also acting as a trustee in relation to the transaction and is liable in that capacity.17 A trustee is personally liable on any contract entered into for the purposes of the trust, because the trustee is unavoidably a party to the contract.18 The trust is not a legal entity and cannot contract and cannot be a principal on whose behalf the trustee contracts.19 The trustees personal liability cannot therefore be altogether excluded, for without it there would be no contract, but its impact may be offset by recourse to the trustees right of indemnity against the trust assets,20 and in some circumstances, against the beneficiaries personally.21 It is possible also for the trustees liability to be confined by a stipulation in the contract with the third party22 that the trustees liability is to be satisfied only out of trust assets as and when they are available, and that in no circumstances must there be any recourse to the personal assets of the trustee.23 Where the relationship between principal and agent is solely one of agency, the agent is accountable to the principal as a debtor to a creditor,24 which dictates that upon the insolvency of the agent the principal ranks as a mere creditor on the same basis as other creditors. However, there is authority that an agent holds a bribe or secret commission received in the course of the

agency on constructive trust for the principal,25 which in turn has the capacity to confer upon the principal priority in the context of the agents insolvency.26 Under a non-discretionary trust, the beneficiary has an equitable proprietary interest in the trust property,27 and so can, upon insolvency of the trustee, assert that proprietary interest and claim the trust property against creditors having only a personal claim on the trustee.28 It is an essential element of a trust that title to the relevant property is vested in the trustee.29 A contract of agency does not of itself constitute a trust because the creation of an agency does not require the vesting of any title to property in the agent.30 Where an agent has possession of, or authority to deal with, property of the principal, there is no trust unless title to the property is vested in the agent.31 In the special case of money received by an agent on account of his or her principal, the question whether the agent holds that money in trust for the principal or is merely a debtor of the principal is resolved by looking at the nature of the transaction, the particular provisions of the agreement between the parties and the whole of the circumstances attending the relationship between the parties.32 In the case of a single transaction, absent of other factors, the law will impute the intention that the agent will hold the proceeds of a sale, for example, in trust for the principal.33 If the agent is required (by law or by the express or implied terms of the arrangements with his or her principal) to keep the money separate from his or her own money, whether or not in a bank account, and to hand that money so kept as a separate fund to the person entitled to it, then he or she is a trustee of that money.34 The absence of such a requirement is a strong indicator that a trust is not intended, and that the money received on account of the principal may be mixed with the agents own money on the basis that the relationship of the agent and the principal is that of debtor and creditor.35 However, that indicator will not prevail if the intention to create a trust is expressly stated or otherwise established with sufficient certainty.36 The receipt by an agent of money for the purpose of investing it on behalf of the principal raises a strong implication that the agent is required to keep it separate from his or her own money.37 In many cases, where the function of an agent is to collect money on behalf of the principal and account to the principal for the balance of the amount collected, after the deduction of expenses and the agents remuneration, the agent would normally be merely a debtor of the principal,38 in the absence of special terms or circumstances indicating that he or she was intended to hold the money as a trustee.39 Where the title to property is vested in the agent in accordance with the contractual arrangements between principal and agent, the agent is a trustee of the property but can still be bound by those arrangements to follow the directions of the principal, in which case, the usual powers and discretions of a trustee are excluded or modified to the extent required for compatibility with the agency obligations.40 A trustee who is not an agent, on the other hand is not obliged to act in accordance with the directions of beneficiaries unless the trust instrument requires him or her to do so.41 Notes 1 Holman v Loynes (1854) 4 De GM & G 270 at 271-2; 43 ER 510 at 511-12 ; Austin v Chambers (1838) 6 Cl & Fin 1 at 37-8; 7 ER 598 at 611-12 ; Walden Properties Ltd v Beaver Properties Pty Ltd [1973] 2 NSWLR 815 at 829-30, 832-3 per Hope JA, CA(NSW).2 As to the availability of tracing, in cases of trust see [430-5305] and in other cases see equity [185-1700][185-1730].3 Bray v Ford [1896] AC 44 at 51; [1895-99] All ER Rep 1009 at 1011; (1895) 65 LJQB 213 per Lord Herschell, HL. See further [430-3930]-[430-4085] and equity [185-780].4 Holman v Loynes (1854) 4 De GM & G 270 at 271, 272; 43 ER 510 at 511-12 (solicitors acting

as agents to sell); De Bussche v Alt (1878) 8 Ch D 286; [1874-80] All ER Rep 1247 , CA (agent for sale); Beningfield v Baxter (1886) 12 App Cas 167; 56 LT 127 , PC (executor); Williams v Scott [1900] AC 499; (1900) 21 LR (NSW) Eq 148; 17 WN (NSW) 104 , PC (trustee); Haywood v Roadknight [1927] VLR 512; [1927] ALR 311 ; Lunghi v Sinclair [1966] WAR 172 (real estate agents). See further [430-4025]-[430-4085].5 Mallott v Wilson [1903] 2 Ch 494; [1900-3] All ER Rep 326 (the creation of the trust was not aborted by the trustee disclaiming upon becoming aware of his or her appointment, and the disclaimer merely operated to revest the property in the settlor but subject to the trust). As to the creation of a valid trust by a settlor declaring himself or herself trustee of the relevant property see [430-215].6 For example, the trust instrument may designate the settlor as the person in whom is vested the power to appoint new trustees, or may confer on the settlor the power to vary the terms of the trust.7 See [430-4995].8 Saunders v Vautier (1841) 4 Beav 115; 49 ER 282 (affirmed Saunders v Vautier (1841) Cr & Ph 240; [1835-42] All ER Rep 58; (1841) 10 LJ Ch 354; 41 ER 482 ); Wharton v Masterman [1895] AC 186; [1895-99] All ER Rep 687 ; Queen Street Hotels Pty Ltd v Byrne (1980) CLC 40-611. See also [430-2515], [430-5110], [430-5115].9 As to the courts (limited) inherent jurisdiction to vary a trust see [430-5115].10 As to the courts statutory jurisdiction to vary a trust see [430-5120]-[430-5200].11 Houston v Robertson (1816) 6 Taunt 448; 128 ER 1109; Farrow v Wilson (1869) LR 4 CP 744; [1861-73] All ER Rep 846 per Willes and Montague Smith JJ; Friend v Young [1897] 2 Ch 421 at 429 per Stirling J sub nom Re Friend (1897) 66 LJ Ch 737.12 See [430-2500].13 Saunders v Vautier (1841) 4 Beav 115; 49 ER 282 (affirmed Saunders v Vautier (1841) Cr & Ph 240; [1835-42] All ER Rep 58; (1841) 10 LJ Ch 354; 41 ER 482 ). See further [430-2515].14 Re Morrison; Wakefield v Falmouth (1967) 111 Sol Jo 758. There is a special exception where the trust instrument indicates that the creation of the trust depends upon a specified person being the trustee: Re Lysaght (decd); Hill v Royal College of Surgeons [1966] Ch 191 at 207; [1965] 2 All ER 888 at 896 .15 See [430-3235], [430-3240], [430-3290].16 For example, where the agent is acting for an undisclosed principal, is a del credere agent or is fraudulent: see generally agency [15-315], [15-320].17 R v Hopkins (1915) 20 CLR 464 at 475-6 per Isaacs and Gavan Duffy JJ. See also Lord Napier v Hunter [1993] AC 713 at 744; [1993] 1 All ER 385 at 402; [1993] 2 WLR 42 at 60 per Lord Goff, HL.18 Re Frith; Newton v Rolfe [1902] 1 Ch 342; (1902) 71 LJ Ch 199 ; Re Anderson; Ex parte Alexander (1927) 27 SR (NSW) 296; 44 WN (NSW) 69 ; Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319 at 324, 325; 19 ALJ 380; [1946] ALR 50 at 52 ; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367; 27 ALR 129 at 134; 54 ALJR 87; 4 ACLR 575 . As to the personal liability of trustees see [430-3720].19 Glennon v FCT (1972) 127 CLR 503; 46 ALJR 589 .20 As to the trustees right of indemnity see [430-3725]-[430-3800].21 See [430-3775], [430-3780].22 The argument that provisions of this nature are illegal, because they may detract from the trustees diligence by lessening his or her ultimate responsibility, was rejected in Parsons v Spooner (1846) 5 Hare 102; 67 ER 845 .23 See [430-3720].24 Henry v Hammond [1913] 2 KB 515 at 521; [1911-13] All ER Rep Ext 1478 ; Cohen v Cohen (1929) 42 CLR 91; [1929] ALR 204 ; Walker v Corboy (1990) 19 NSWLR 382 , CA(NSW).25 As to constructive trusts see [430-565][430-675].26 Attorney-General for Hong Kong v Reid [1994] 1 AC 324; [1994] 1 NZLR 1; [1994] 1 All ER 1; [1993] 3 WLR 1143 , PC (rejecting the view of the English Court of Appeal in Lister & Co Ltd v Stubbs (1890) 45 Ch D 1 that an agent who receives a profit in breach of her or his fiduciary duty otherwise than by use of the principals property does not hold that profit as a trustee for the principal, but only as a debtor); Grimaldi v Chameleon Mining NL (No 2) (2012) 287 ALR 22; [2012] FCAFC 6; BC201200621 at [569][584] per the court. But see Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd (in administrative receivership) [2011] 4 All ER 335; [2011] 2 BCLC 501; [2011] EWCA Civ 347 (where the English Court of Appeal opted to follow Lister & Co Ltd v Stubbs (1890) 45 Ch D 1 ).27 As to the nature of the beneficiarys interest in the trust property see [430-800].28 Re Clifton (1923) 26 WALR 41 ; (CTH) Bankruptcy Act 1966 s 116(2)(a).29 DKLR Holding Co (No 2) Pty Ltd v Cmr of Stamp Duties (NSW) [1980] 1 NSWLR 510; (1980) 10 ATR 942; 80 ATC 4279 , CA(NSW). See also [430-1], [430-20].30 Cave v MacKenzie (1877) 46 LJ Ch 564 at 567; 37 LT 218 per Jessel MR. See, for example, Lombe v Wagga Leagues Club Ltd (2006) 56 ACSR 387; [2006] NSWSC 3; BC200600157 (where a deed of company arrangement, which provided that the deed administrators shall hold the Deed Fund on trust for the benefit of the Administrators, Deed

Administrators and for those Creditors who become Participating Creditors in accordance with this Deed of Company Arrangement was held not to create a trust because the deed did not have the effect of causing the relevant property of the defendant club to be divested from it and vested in the deed administrators; instead the phrase on trust was interpreted as a vehicle to impose fiduciary duties upon the administrators as agents of the club in question in carrying out their function).31 R v Hopkins (1915) 20 CLR 464 at 475-6 per Isaacs and Gavan Duffy JJ.32 Walker v Corboy (1990) 19 NSWLR 382 at 385 per Priestley JA, at 389 per Clarke JA, at 397 per Meagher JA, CA(NSW).33 Burdick v Garrick (1870) LR 5 Ch App 233 at 243 per Giffard LJ, CA; Cohen v Cohen (1929) 42 CLR 91; [1929] ALR 204 ; Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1; [1937] ALR 432 ; Westpac Banking Corp v Savin [1985] 2 NZLR 41 . However, such decisions should not be regarded as establishing a prima facie rule of general application: Walker v Corboy (1990) 19 NSWLR 382 , CA(NSW).34 Henry v Hammond [1913] 2 KB 515 at 521; [1911-13] All ER Rep Ext 1478 per Channell J, Div Ct. Compare Walsh Bay Developments Pty Ltd v FCT (1994) 29 ATR 311 at 319; 94 ATC 4682; BC9400314 (affirmed Walsh Bay Developments Pty Ltd v FCT (1995) 130 ALR 415; 31 ATR 15 at 23 , Fed C of A, Full Court).35 Walker v Corboy (1990) 19 NSWLR 382 at 397 per Meagher JA, CA(NSW).36 Stephens Travel Service International Pty Ltd (recs and mgrs apptd) v Qantas Airways Ltd (1988) 13 NSWLR 331; BC8801851 , CA(NSW); Re Air Canada and M & L Travel Ltd (1994) 108 DLR (4th) 592.37 North American Land and Timber Co Ltd v Watkins [1904] 1 Ch 242 per Kekewich J (affirmed North American Land and Timber Co Ltd v Watkins [1904] 2 Ch 233 , CA).38 Henry v Hammond [1913] 2 KB 515; [1911-13] All ER Rep Ext 1478 , Div Ct; Walker v Corboy (1990) 19 NSWLR 382 , CA(NSW).39 Re Jones (decd); Ex parte Mayne (1953) 16 ABC 169 .40 See Heydon J D and Leeming M J, Jacobs Law of Trusts in Australia, LexisNexis Butterworths, Sydney, 2006, 7th ed, para [210] (referring to Scott and Fratcher, The Law of Trusts, 4th ed, Vol 1 p 95, but citing no case law).41 Re Brockbank (decd); Ward v Bates [1948] Ch 206; [1948] 1 All ER 287 ; Hespe v Surfers Paradise Forests Ltd (1985) 10 ACLR 182 at 190-2 . The paragraph below is current to 20 April 2012 [430-40] Bailment and trusts A bailment 1 can only exist in respect of a tangible chattel, 2 whereas any kind of property may be the subject of a trust.3 A bailee, like a trustee, has control over property of which he or she is not the full beneficial owner, however unlike a trustee, a bailee only has possession of the property, with no title to it, because the general property or ownership is retained by the bailor.4 A bailor therefore cannot, on disposal of the subject property subject to the terms of the bailment, pass a good title to another person,5 although legislation in some cases changes this rule.6 Under a trust the general property vests in the trustee even though the property is held for the benefit of the beneficiary.7 The trustee can pass full title, including beneficial ownership, even when breaching the trust, to a bona fide purchaser for value without notice.8 Although a bailment does not create a trust,9 a bailee may owe a fiduciary duty to the bailor in certain circumstances.10 Also, it is possible for a bailment-type relationship, by its terms, to create a trust over property or proceeds the subject of the bailment, provided that the requirements of a trust are established.11 Notes 1 For the meaning of bailment see bailment [40-1].2 See bailment [40-5]-[40-10].3 See [43010].4 See Compania Portorafti Commerciale SA v Ultramar Panama Inc (The Captain Gregos) (No 2) [1990] 2 Lloyds Rep 395 at 405 per Bingham LJ, CA; MCC Proceeds Inc v Lehman Bros Intl (Europe) [1998] 4 All ER 675 at 702 per Hobhouse LJ ; Cox v Walker [2009] SADC 74 at [74] per Nicholson J.5 MCC Proceeds Inc v Lehman Bros Intl (Europe) [1998] 4 All ER 675 at 688 per Mummery LJ . In such a case the bailee will be liable for conversion: see, for example,

Burns Philp & Co Ltd v Gillespie Bros Pty Ltd (1947) 74 CLR 148; 20 ALJ 490; [1947] ALR 117 . See also bailment [40-260].6 See sale of goods [375-1025].7 See [430-1].8 Re Goldcorp Exchange Ltd (in rec) [1995] 1 AC 74 at 97; [1994] 2 All ER 806 per Lord Mustill , PC. See [430-70].9 Davis v Hueber (1923) 31 CLR 583 ; Chapman v Verco (1933) 49 CLR 305.10 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 101, 105-6; 55 ALR 417; 58 ALJR 587; 1 Aust Const LR 29 per Mason J ; Cox v Walker [2009] SADC 74 at [80] per Nicholson J. As to fiduciary relationships generally see equity [185-660]-[185-820].11 Compare Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588; 171 ALR 568; [2000] HCA 25; BC200002277 at [33] per Gaudron, McHugh, Gummow and Hayne JJ (where such an attempt in the context of a retention of title clause proved ultimately ineffective) with Rondo Building Services Pty Ltd v Casaron Pty Ltd [2003] 2 Qd R 558; [2003] QCA 78; BC200300728 (where in equivalent circumstances it proved effective to create a trust). The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-45] Contract and trust The essential difference between contract and trust is that contract involves agreement between two or more parties, whereas an express trust derives from the clear manifestation of the settlors intention.1 The settlor and the trustee may in fact agree upon the establishment of the trust, and upon its terms, but that is not essential. A trust can be created by unilateral action of the settlor without the need for agreement or acceptance by any other person.2 This is the case, for example, where trusts are declared by a will, or where the settlor and the trustee are the same person. The consent, or even the knowledge, of the person designated as the initial trustee is not required for the effective constitution of a trust,3 although that person is entitled to disclaim the office upon becoming aware of the appointment.4 If a disclaimer occurs, the trustees title to the trust property revests in the settlor, who is obliged to hold it upon the terms of the trust and cannot deal with the property as if the trust had never been created.5 The settlor normally has no role to play once the trust has been duly constituted unless powers or rights in relation to the enforcement of the trust are expressly conferred on the settlor by the trust instrument, or arise from the arrangements under which the trust is established.6 An effective transfer of property by A to B to hold in trust for C, confers the equitable rights of a beneficiary on C, and C can take proceedings against B for the due administration of the trust.7 If A and B enter into a binding contract under which B promises to A for valuable consideration to confer a benefit on C, C is prevented by the doctrine of privity of contract from suing B for breach of his or her promise.8 If A sues B he or she is likely to obtain only nominal damages, except in special cases, because the performance of Bs promise would not have conferred any benefit on A and therefore the non-performance does not cause him or her any loss or damage.9 If it is established that, in obtaining a contractually binding promise from B, whether it is a promise to confer a benefit on A or a promise to confer a benefit on C (not a party to the contract), A was contracting as trustee for C, then A would be able, as trustee for C, to sue B and obtain full damages or specific performance or other equitable remedies as the case requires.10 If A refused or was unable to take those proceedings, C could sue in his or her own name and join A as a defendant.11 While it is clearly established that the rights under a contract can constitute trust property, so that the benefit of a contract between A and B can be held by A as trustee for C,12 the recognition of

the ability of C to rely on the existence of a trust to enforce the performance of Bs contractual obligations has involved the courts in the difficulty of determining, in a wide variety of fact situations, the appropriate balance between eroding the doctrine of privity of contract by affording a very easy way of circumventing its requirements, and, on the other hand, unduly restricting the application of equitable principles to avoid or modify, in appropriate cases, the rigid operation of that doctrine. The result has been that the strength of the tendency towards or away from a finding that a trust is involved has varied from time to time and from case to case, and there are a large number of decisions demonstrating inconsistent approaches to the problem.13 The divergence between the cases has to a large extent depended on whether or not a particular court has accepted the approach that the intention to constitute a trust must be affirmatively proved, rather than inferred, and that evidence of the intention to confer a benefit on the third party is not by itself sufficient to establish a trust relationship.14 The existence and characterisation of the relevant trust may also be influenced by whether it is being used as a vehicle to circumvent indefeasibility regarding Torrens system land.15 In Queensland and Western Australia there are statutory provisions giving a third party rights against a promisor without the need to rely on equitable principles to identify and enforce those rights.16 Notes 1 See [430-240], [430-245].2 Mallott v Wilson [1903] 2 Ch 494; [1900-3] All ER Rep 326 . See [430-215].3 As to the complete constitution of trusts see [430-300]-[430-315].4 See [430-3220].5 Mallott v Wilson [1903] 2 Ch 494; [1900-3] All ER Rep 326 .6 See Ku-ring-gai Municipal Council v A-G (1954) 55 SR (NSW) 65 ; Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491 at 501; 102 ALR 681 at 692 .7 See [430-1], [430-800].8 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107; 80 ALR 574; 62 ALJR 508 . As to earlier decisions see Tweddle v Atkinson (1861) 1 B & S 393; 121 ER 762 ; Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd [1915] AC 847; [1914-15] All ER Rep 333 , HL; Wilson v Darling Island Stevedoring & Lighterage Co Ltd (1956) 95 CLR 43; 29 ALJ 740; [1956] ALR 311 ; Scruttons Ltd v Midland Silicones Ltd [1962] AC 446; [1962] 1 All ER 1; [1962] 2 WLR 186 , HL; Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 All ER 571; [1980] 1 WLR 277 , HL. See further contract [110-3010]-[110-3048].9 West v Houghton (1879) 4 CPD 197 ; Viles v Viles [1939] SASR 164 ; Coulls v Bagots Executor and Trustee Co Ltd (1967) 119 CLR 460 at 501-2; [1967] ALR 385; (1967) 40 ALJR 471 per Windeyer J; The Albacruz v The Albazero [1977] AC 774; [1976] 3 All ER 129; [1976] 3 WLR 419 . See also Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 118-19 per Mason CJ and Wilson J, at 139 per Brennan J, at 173 per Gaudron J; 80 ALR 574 at 581 per Mason CJ and Wilson J, at 596 per Brennan J, at 621-2 per Gaudron J; 62 ALJR 508 .10 Tomlinson v Gill (1756) Amb 330; 27 ER 221 ; Lamb v Vice (1840) 6 M & W 467; 151 ER 495 ; Robertson v Waite (1853) 8 Exch 299; 155 ER 1360 ; Pugh v Stringfield (1858) 4 CBNS 364; 140 ER 1125 ; Lloyds v Harper (1880) 16 Ch D 290 , CA; Re Parkin; Hill v Schwarz [1892] 3 Ch 510 ; Prudential Staff Union v Hall [1947] KB 685 ; Darlington Borough Council v Wiltshier Northern Ltd [1995] 3 All ER 895; [1995] 1 WLR 68 .11 Royal Exchange Assurance v Hope [1928] Ch 179; [1927] All ER Rep 67 , CA; Vandepitte v Preferred Accident Insurance Corp of New York [1933] AC 70; [1932] All ER Rep 527 , PC; Harmer v Armstrong [1934] Ch 65; [1933] All ER Rep 778 , CA; Ryder v Taylor (1935) 36 SR (NSW) 31 at 47; 53 WN (NSW) 40 ; Birmingham v Renfrew (1937) 57 CLR 666; [1937] VLR 327; (1937) 11 ALJ 188; [1937] ALR 520 .12 See Gregory v Williams (1817) 3 Mer 582; 36 ER 224 ; Re DAngibau; Andrews v Andrews (1880) 15 Ch D 228; [1874-80] All ER Rep 1184 ; Re Empress Engineering Co (1880) 16 Ch D 125 , CA; Lloyds v Harper (1880) 16 Ch D 290 , CA; Re Flavell (decd); Murray v Flavell (1883) 25 Ch D 89; [1881-85] All ER Rep 267 , CA; Gandy v Gandy (1885) 30 Ch D 57; 53 LT 306 , CA; Les Affrteurs Runis SA v Leopold Walford (London) Ltd [1919] AC 801; (1919) LJKB 861 ; Re Schebsman (decd); Ex parte Official Receiver, Trustee v Cargo Superintendents (London) Ltd [1944] Ch 83; [1943] 2 All ER 768 , CA; Creamoata Ltd v Rice Equalization Assn Ltd (1953) 89 CLR 286 at 319; 27 ALJ 428 per Fullagar J; Wilson v Darling

Island Stevedoring & Lighterage Co Ltd (1956) 95 CLR 43; 29 ALJ 740; [1956] ALR 311 ; Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 120 per Mason CJ and Wilson J, at 146 per Deane J, at 156 per Dawson J; 80 ALR 574 at 581-2 per Mason CJ and Wilson J, at 602-3 per Deane J, at 609 per Dawson J; 62 ALJR 508 ; Bahr v Nicolay (No 2) (1988) 164 CLR 604; 78 ALR 1; [1988] HCA 16; BC8802595 ; Snowlong Pty Ltd v Choe (1991) 23 NSWLR 198 at 211-12; (1992) ANZ ConvR 144 per Wood J ; Dalton v Ellis; Estate of Bristow (2005) 65 NSWLR 134;[2005] NSWCA 1252; BC200510762 at [46]-[52] per Young CJ in Eq.13 As to there being found to be a trust: see, for example, Lloyds v Harper (1880) 16 Ch D 290 , CA; Re Flavell (decd); Murray v Flavell (1883) 25 Ch D 89; [1881-85] All ER Rep 267 , CA; Royal Exchange Assurance v Hope [1928] Ch 179; [1927] All ER Rep 67 ; Harmer v Armstrong [1934] Ch 65; [1933] All ER Rep 778 , CA; Birmingham v Renfrew (1937) 57 CLR 666; [1937] VLR 327; (1937) 11 ALJ 188; [1937] ALR 520 ; Bahr v Nicolay (No 2) (1988) 164 CLR 604; 78 ALR 1; [1988] HCA 16; BC8802595 (although the members of the High Court diverged according to whether the trust in question was an express trust or a constructive trust); Snowlong Pty Ltd v Choe (1991) 23 NSWLR 198 at 211-12; (1992) ANZ ConvR 144 per Wood J (favouring the express trust conclusion proffered by Mason CJ and Dawson J in Bahr v Nicolay); Re Emilco Pty Ltd (2002) 20 ACLC 388; [2001] NSWSC 1035; BC200107143 ; Dalton v Ellis; Estate of Bristow (2005) 65 NSWLR 134; [2005] NSWCA 1252; BC200510762 at [46]-[52] per Young CJ in Eq. As to there being found not to be a trust: see, for example, Colyear v Countess of Mulgrave (1836) 2 Keen 81; 48 ER 559; Foster v Genowlan Shale Co NL (1895) 16 LR (NSW) Eq 59; 11 WN (NSW) 182 ; Goodwin v Goodwin (1916) 16 SR (NSW) 503; 33 WN (NSW) 165 ; Vandepitte v Preferred Accident Insurance Corp of New York [1933] AC 70; [1932] All ER Rep 527 ; Re Stapleton-Bretherton [1941] Ch 482; [1941] 3 All ER 5; (1941) 166 LT 45 ; Re Schebsman (decd); Ex parte Official Receiver, Trustee v Cargo Superintendents (London) Ltd [1944] Ch 83; [1943] 2 All ER 768 , CA; Purves v Smith [1944] VLR 186; [1944] ALR 269 ; Green v Russell [1959] 2 All ER 525 ; Winterton Constructions Pty Ltd v Hambros Australia Ltd (1991) 101 ALR 363 ; News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410; 139 ALR 193 at 325-6; 21 ACSR 635; 35 IPR 446 ; Fed C of A, Full Court; Marks v CCH Australia Ltd [1999] 3 VR 513 at 532-3 per Mandie J .14 Re Engelbachs Estate; Tibbetts v Engelbach [1924] 2 Ch 348 at 353; [1923] All ER Rep 93 ; Vandepitte v Preferred Accident Insurance Corp of New York [1933] AC 70 at 79, 80; [1932] All ER Rep 527 ; Re Webb; Barclays Bank Ltd v Webb [1941] Ch 225 at 234 ; Re Schebsman (decd); Ex parte Official Receiver, Trustee v Cargo Superintendents (London) Ltd [1944] Ch 83 at 89 per Lord Greene MR, at 104 per du Parcq LJ; [1943] 2 All ER 768 , CA. See, however, Wilson v Darling Island Stevedoring & Lighterage Co Ltd (1956) 95 CLR 43 at 67; 29 ALJ 740; [1956] ALR 311 at 322 per Fullagar J ; Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 120-1 per Mason CJ and Wilson J, at 146-7 per Deane J; 80 ALR 574; 62 ALJR 508 ; Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 618-19; 78 ALR 1 at 9; [1988] HCA 16; BC8802595 per Mason CJ and Dawson J . As to the intention to constitute a trust being capable of being inferred from the circumstances of the contract see Moore v Darton (1851) 4 De G & Sm 517; 64 ER 938 ; Paterson v Murphy (1853) 11 Hare 88; 68 ER 1198; Royal Exchange Assurance v Hope [1928] Ch 179; [1927] All ER Rep 67 .15 Bahr v Nicolay (No 2) (1988) 164 CLR 604; 78 ALR 1; [1988] HCA 16; BC8802595 (Wilson, Toohey and Brennan JJ preferred to characterise the relevant trust as a constructive trust, premised upon fraud, so as to circumvent indefeasibility).16 (QLD) Property Law Act 1974 s 55 (WA) Property Law Act 1969 s 11(2), 11(3). In addition, in South Australia, Victoria and Western Australia a person may take an immediate or other interest in land or other property, or the benefit of any condition, right of entry, covenant or agreement concerning land or other property even if he or she is not named as a party to the conveyance or other instrument: (SA) Law of Property Act 1936 s 34 (VIC) Property Law Act 1958 s 56

(WA) Property Law Act 1969 s 11(1). There are no equivalent provisions in the other jurisdictions. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-50] Executorship and trust The functions of a legal personal representative are to get in the assets, pay the debts and legacies and distribute the estate.1 The function of a trustee is to hold the trust property and give effect to the proprietary interests of the beneficiaries and the terms of the trust.2 Personal representatives and trustees both have property vested in them for purposes other than their own benefit, and therefore owe fiduciary obligations.3 The personal representative is the full beneficial owner of the assets during the administration of the estate, at which stage there is no equitable proprietary interest vested in the beneficiaries.4 However, the personal representative is inhibited from the unrestricted exercise of the rights and powers of a full beneficial owner by his or her obligation to administer the estate, and by the fiduciary obligations arising in connection with that office.5 These obligations include the preservation of the assets, to deal properly with them, and to apply them in a due course of administration for the benefit of those interested according to that course, namely creditors, revenue authorities, legatees and residuary beneficiaries.6 Though the existence of those fiduciary obligations makes the relationship similar to a trust in significant respects, an unadministered estate is incapable of satisfying the requirement that there must be specific subjects identifiable as the trust property.7 The only right which the beneficiaries have during the administration of the estate is to require the estate to be duly administered.8 That right is a chose in action capable of being invoked for any purpose connected with the proper administration of the estate.9 Under a trust there is a corresponding right to due administration of the trust but the beneficiary may also have a proprietary interest in the trust property.10 Unlike a trustee, a personal representative is not obliged to be even-handed as between beneficiaries11 or, in determining the source from which debts are to be discharged or legacies paid, to have regard to the interests of beneficiaries interested in income as against the interests of those interested in capital.12 It appears that one of several personal representatives can act alone in some matters,13 whereas trustees must be unanimous in making decisions and must all be involved in any action in pursuance of the terms of the trust.14 A personal representative, while administering an estate, cannot retire or appoint a successor or substitute,15 whereas there is no prohibition against a trustee retiring, and there is provision in the trustee legislation facilitating the appointment of replacement trustees.16 Where, in accordance with a common practice, the same person is appointed by a testator as executor and trustee, that person acts as executor while the executorial functions are carried out, and thereafter holds as trustee any property still in his or her hands.17 At this time the precise equitable interest of a residuary beneficiary becomes vested, quantifiable and identifiable.18 The different functions and powers of executors and trustees also make it important to be able to determine when the executor has completed the administration function, which involves a careful assessment of the facts.19 An executor can become the trustee of different assets of the estate at different times, thereby acting in both capacities at the same time.20

An executor who, while still functioning in that capacity, sets aside in accordance with the testators will a fund to be held for beneficiaries, will thereafter hold that fund as trustee.21 The property comprised in that fund will then be isolated from the rest of the testators estate and, if any losses occur which are attributable to that fund, they must be borne by that fund and have no effect in relation to any other part of the estate.22 This result is in accordance with the broader proposition that an executors assent to a legacy constitutes him or her a trustee for the legatee.23 As the trustee legislation in each jurisdiction includes legal personal representative within its definition of trustee,24 the court is vested with a statutory power (and an inherent power) to remove both trustees and executors.25 In some jurisdictions legislation provides that, if a person appointed as both executor and trustee renounces probate, the renunciation will constitute also a disclaimer of the trusts of the will.26 As a personal representatives normal functions require a power of sale, statute generally confers such a power.27 However, as the functions of a trustee do not necessarily require a power of sale, none of the jurisdictions except Queensland and Western Australia has legislation conferring such a power on trustees generally.28 Where a personal representative is also designated as trustee, and the administration functions have been completed, the assets still held by the representative will have become assets held on the trusts of the will and the representative will have only such power of sale as he or she would have as a trustee.29 The personal representative needs to be clear as to his or her status when proposing to sell assets of the estate, but a purchaser is not obliged to require evidence that a person representing himself or herself as selling as personal representative is in fact acting in that capacity and not as trustee.30 If the purchaser is aware that the vendor is acting as a trustee, or of facts which compel that conclusion, the purchaser cannot assume that a personal representatives power of sale is being exercised.31 Under family provision legislation in all jurisdictions, the estate of the testator in relation to which an order can be made by the court refers to the assets which the testator might at his or her death dispose of and which have come or could come to the hands of the personal representative by reason of the grant of probate or letters of administration.32 While those assets are held by the personal representative it has no relevance for that legislation whether he or she holds them in that capacity or as trustee.33 Notes 1 Porteous v Rinehart (1998) 19 WAR 495 at 502 per White J; Juul v Northey [2010] NSWCA 211; BC201006158 at [196] per McColl JA. As to personal representatives generally see succession [395-4000]-[395-6035].2 See [430-4145].3 Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 at 22-3; [1965] AC 694 at 707; [1964] 3 All ER 692 at 696; [1964] 3 WLR 963 , PC; Mackenzie v Mackenzie (1998) 16 FRNZ 487 at 492-3. See also Vyse v Foster (1874) LR 7 HL 318; 31 LT 177; Re Thomson; Thomson v Allen [1930] 1 Ch 203; (1930) 99 LJ Ch 156 .4 Lord Sudeley v A-G [1897] AC 11; [1895-99] All ER Rep Ext 1904 ; Pagels v MacDonald (1936) 54 CLR 519 at 526; 10 ALJ 36; [1936] ALR 224 at 226-7 per Latham CJ ; Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 at 17-18, 22; [1965] AC 694 at 707, 712; [1964] 3 All ER 692 at 696-9; [1964] 3 WLR 963 , PC. See also Re Hayes Will Trusts; Pattinson v Hayes [1971] 2 All ER 341; [1971] 1 WLR 758 ; Cochrane v IRC (1974) 49 TC 299; Passant v Jackson [1986] STC 164, CA; Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 at 312-13; 96 ALR 327 at 330-1; 64 ALJR 651 .5 Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 at 17; [1965] AC 694 at 707; [1964] 3 All ER 692 at 696; [1964] 3 WLR 963 , PC; Re Hayes Will Trusts; Pattinson v Hayes [1971] 2 All ER 341; [1971] 1 WLR 758 ; Cochrane v IRC (1974) 49 TC 299; Re Stewart [2003] 1 NZLR 809 at 81516 per Laurenson J , HC(NZ); Staub v Staub Estate (2003) 226 DLR (4th) 327, CA(Alberta); Re

Estate of Trotter; Johnson v Trotter (2006) 12 BPR 23,339; [2006] NSWSC 67; BC200600661 at [23] per White J.6 Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 at 1718; [1965] AC 694 at 707; [1964] 3 All ER 692 at 696; [1964] 3 WLR 963 , PC. As to personal representatives generally see succession [395-4000]-[395-6035].7 Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 at 18; [1965] AC 694 at 707-8; [1964] 3 All ER 692 at 696; [1964] 3 WLR 963 , PC.8 Lord Sudeley v A-G [1897] AC 11; [1895-99] All ER Rep Ext 1904 ; Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 at 27; [1965] AC 694 at 717; [1964] 3 All ER 692 at 702; [1964] 3 WLR 963 , PC; Re Leighs Will Trusts; Handyside v Durbridge [1970] Ch 277; [1969] 3 All ER 432; [1969] 3 WLR 649 ; Passant v Jackson [1986] STC 164 at 167-8, CA; Silvia v Thomson (1989) 87 ALR 695 at 696 , Fed C of A. Compare Hawkins v Clayton (1986) 5 NSWLR 109 at 125 per Glass JA, CA(NSW).9 Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 at 27; [1965] AC 694 at 717; [1964] 3 All ER 692 at 702; [1964] 3 WLR 963 , PC; Re Leighs Will Trusts; Handyside v Durbridge [1970] Ch 277; [1969] 3 All ER 432; [1969] 3 WLR 649 ; Re Pevsner; Ex parte Trustee in Bankruptcy (1983) 68 FLR 254 ; Silvia v Thomson (1989) 87 ALR 695 , Fed C of A; Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 at 312-14; 96 ALR 327 at 330-2; 64 ALJR 651 ; Dwyer v Ross (1992) 34 FCR 463 at 466 .10 See [430-1], [430-800].11 Re Estate of Trotter; Johnson v Trotter (2006) 12 BPR 23,339; [2006] NSWSC 67; BC200600661 at [26]-[28] per White J. As to the trustees duty of impartiality see [430-4195].12 Re Charteris; Charteris v Biddulph [1917] 2 Ch 379; (1917) 86 LJ Ch 658; 117 LT 391 , CA; Re Hayes Will Trusts; Pattinson v Hayes [1971] 2 All ER 341; [1971] 1 WLR 758 .13 Astbury v Astbury [1898] 2 Ch 111 at 115; (1898) 67 LJ Ch 471; 78 LT 494 ; Re Houghton; Hawley v Blake [1904] 1 Ch 622; [1904-07] All ER Rep 486 ; Porteous v Rinehart (1998) 19 WAR 495 at 503 per White J ; Exception Holdings Pty Ltd (in liq) v Albarran (2005) 223 ALR 487; 23 ACLC 1270; [2005] NSWSC 677 at [20]-[26] per Young CJ in Eq; Re Estate of Trotter; Johnson v Trotter (2006) 12 BPR 23,339; [2006] NSWSC 67; BC200600661 at [21] per White J. See, however, Union Bank of Australia v Harrison, Jones and Devlin Ltd (1910) 11 CLR 492; 11 SR (NSW) 283; 16 ALR 553; 27 WN (NSW) 169 ; Colyton Investments Pty Ltd v McSorley (1962) 107 CLR 177; [1963] ALR 487; (1962) 36 ALJR 167 ; Beath v Kousal [2010] VSC 24; BC201000438 at [55] per Kaye J.14 See [430-4190].15 As to personal representatives generally see succession [3954000]-[395-6035].16 See [430-3610].17 George Attenborough & Son v Solomon [1913] AC 76 at 85; [1911-13] All ER Rep 155 at 159 ; Pagels v MacDonald (1936) 54 CLR 519 at 526; 10 ALJ 36; [1936] ALR 224 ; per Latham CJ; McCaughey v Cmr of Stamp Duties (1945) 46 SR (NSW) 192 at 209 per Jordan CJ; Porteous v Rinehart (1998) 19 WAR 495 at 503 per White J . In the Australian Capital Territory and New South Wales the trustee legislation provides that an executor may, upon the completion of his or her executorial duties, declare by registered instrument that he or she has ceased to hold the property as executor and now holds the property as trustee or as beneficiary, as the case may be: (ACT) Trustee Act 1925 s 11(1) (NSW) Trustee Act 1925 s 11(1). 18 Probert v Cmr of State Taxation (1998) 72 SASR 48 at 53; 199 LSJS 345; 40 ATR 261; 98 ATC 5176 per Olsson J .19 Re Matthews (1915) 17 WALR 61 ; Re Hird and Hickeys Contract; Hird v Hickey [1919] VLR 717; (1919) 25 ALR 419; 41 ALT 101 ; Re Perry; Smith v Public Trustee [1950] NZLR 530 ; Re Donkin (decd); Riechelmann v Donkin [1966] Qd R 96 ; H Stanke & Sons Pty Ltd v Von Stanke (2007) 250 LSJS 149; [2007] SASC 282; BC200705757 at [113] per Sulan J (varied on appeal without casting doubt on this point: Von Stanke v OMeara (2007) 251 LSJS 445; [2007] SASC 410; BC200710070 ).20 Porteous v Rinehart (1998) 19 WAR 495 at 503 per White J.21 Burke v Dawes (1938) 59 CLR 1 at 19; 11 ALJ 524; [1938] ALR 135 at 141 per Dixon J.22 Lord Brougham v Lord Poulet (1855) 19 Beav 119; 52 ER 294.23 Burke v Dawes (1938) 59 CLR 1 at 19; 11 ALJ 524; [1938] ALR 135 at 141 per Dixon J. As to the executors assent being informal or being inferred from conduct see Re Perry; Smith v Public Trustee [1950] NZLR 530 .24 (ACT) Trustee Act 1925 s 4 (NT) Trustee Act 1893 s 82

(NSW) Trustee Act 1925 s 5 (QLD) Trusts Act 1973 s 5 (SA) Trustee Act 1936 s 4 (TAS) Trustee Act 1898 s 4 (VIC) Trustee Act 1958 s 3 (WA) Trustees Act 1962 s 6. However, that does not serve to augment the scope of executorial authority, nor clothe the executor with the authority to invoke the assistance of the court in relation to matters that may be outside his or her province: Re Moran (decd) [1950] SASR 209 . 25 Porteous v Rinehart (1998) 19 WAR 495 at 506 per White J ; Gibbs v Gibbs [2004] WASC 132; BC200403720 at [6]-[8] per Sanderson M (affirmed Gibbs v Gibbs [2006] WASCA 224; BC200608867 ); Williams v Williams [2005] 1 Qd R 105; [2004] QSC 269; BC200405523 at [11] per Wilson J ; Colston v McMullen [2010] QSC 292; BC201005574 at [38][40] per White J. Compare McCaughey v Cmr of Stamp Duties (1945) 46 SR (NSW) 192 at 209 per Jordan CJ ; Monty Financial Services Ltd v Delmo [1996] 1 VR 65 at 77 per Ashley J . As to the removal of trustees by the court see [430-3635]-[430-3665]. However, in all jurisdictions except Victoria, the power to appoint new trustees does not include the power to appoint a new executor or administrator: (ACT) Trustee Act 1925 s 6(14) (NT) Trustee Act 1893 s 11(7) (NSW) Trustee Act 1925 s 6(12) (QLD) Trusts Act 1973 s 12(9) (SA) Trustee Act 1936 s 14(7) (TAS) Trustee Act 1898 s 13(6) (WA) Trustees Act 1962 s 7(9). 26 (ACT) Trustee Act 1925 s 10(1) (NSW) Trustee Act 1925 s 10(1) (QLD) Trusts Act 1973 s 18 (VIC) Trustee Act 1958 s 46 (WA) Trustees Act 1962 s 12. See further [430-3230]. 27 (ACT) Administration and Probate Act 1929 s 39 (NT) Administration and Probate Act 1969 s 52 (NSW) Probate and Administration Act 1898 s 46; (NSW) Conveyancing Act 1919 s 153

(SA) Administration and Probate Act 1919 s 46 (TAS) Administration and Probate Act 1935 s 39 (VIC) Administration and Probate Act 1958 s 44 (WA) Administration Act 1903 s 10. There are no equivalent provisions in Queensland. See generally succession [395-4450]-[395-4560]. 28 (QLD) Trusts Act 1973 s 32 (WA) Trustees Act 1962 s 27. See further [430-4710]. In the other jurisdictions a trustee does not, subject to some exceptions, have a power of sale unless it is expressly or impliedly conferred by the trust instrument: see [430-4680]-[430-4765]. 29 Colyton Investments Pty Ltd v McSorley (1962) 107 CLR 177 at 181; [1963] ALR 487 at 488; (1962) 36 ALJR 167 .30 Watkins v Cheek (1825) 2 Sim & St 199 at 205; 57 ER 321 at 324; Sawyers v Kyte (1869) 6 WW & AB (E) 61; Re Venn & Furzes Contract [1894] 2 Ch 101 ; Burke v Dawes (1938) 59 CLR 1 at 13 per Starke J, at 20-22 per Dixon J; 11 ALJ 524; [1938] ALR 135 .31 Re Hird and Hickeys Contract; Hird v Hickey [1919] VLR 717; (1919) 25 ALR 419; 41 ALT 101 . See also George Attenborough & Son v Solomon [1913] AC 76 at 85; [191113] All ER Rep 155 , HL. See the cases in note 30 above.32 See succession [395-7190]-[3957210].33 Easterbrook v Young (1977) 136 CLR 308; 13 ALR 351; 51 ALJR 456 (approving Re Keys and the Testators Family Maintenance Act (unreported, SC(NSW), Mahoney J, 6 June 1974); disapproving Public Trustee v Kidd [1931] NZLR 1 ). See also Re Donohue; Donohue v Public Trustee [1933] NZLR 477 ; Re Donkin (decd); Riechelmann v Donkin [1966] Qd R 96 ; Re McPhail (decd) [1971] VR 534 ; Re Whitta [1984] 2 Qd R 356 ; Re Burgess [1984] 2 Qd R 379 . The paragraph below is current to 20 April 2012 [430-55] Power and trust Where the donee of a power has a discretion not only as to the manner of exercising it, but also as to whether it is exercised at all, it is classified as a mere power.1 When a mere power is conferred on a donee in his or her capacity as a trustee, he or she does have an obligation to consider whether or not to exercise it.2 Where the donee of a power is obliged to exercise it, and could be ordered by the court to do so, no matter how uncontrolled a discretion he or she is given as to the manner of exercising it, the power is classified as a trust power, or a power in the nature of a trust.3 Whether a power of appointment is special,4 general5 or intermediate (hybrid) 6 it can be a mere power,7 but only a special power of appointment can be a trust power.8 The determination as to whether a particular power is a mere power or a trust power is a matter of construction and can involve a search for the intention of the donor of the power.9 There has been no formulation of a clear and definite presumption or rule of construction,10 but a number of different types of result have emerged.11 Usually a power is classified as a mere power where the property is given on trust for such one or more members of a specified class of potential beneficiaries as the donee of the power selects, and there is a gift over in the event of the power of selection not being exercised.12 Even without a gift over, the power of selection amongst specified objects can be a mere power if it is given in

terms which make it clear that it is also left entirely to the discretion of the donee of the power to determine whether any, or none, of the objects shall benefit.13 A power is a trust power where there is no gift over in the event of the power of selection not being exercised, and the language used is such that it imposes on the donee a clear duty to distribute the property at least to one or some of the specified class of potential beneficiaries, the donees discretion being merely as to selection.14 There is also a trust power where the property is given on trust for all or such one or more of the members of a specified class of beneficiaries as the donee of the power selects, the language used being such as to demonstrate that all potential beneficiaries are to benefit unless the donee selects one or more to the exclusion of the others.15 Even in the absence of language expressly creating the duty to distribute, a power of selection will be a trust power if there is a clear indication that the donor intended the power to be in the nature of a trust, so that the class of designated beneficiaries, or some of that class, should definitely take.16 However, the absence of a gift over in the event of the power not being exercised is not by itself sufficient to indicate that intention and the court may find that only a mere power has been given.17 On the other hand, if there is sufficient evidence of the intention to create a trust power, the court may decide that a trust for the objects in equal shares is implied if the power is not exercised18 or it may take other steps to give effect to the intentions of the settlor or testator.19 Whether a power is a mere power or a trust power, it must have the characteristic of conceptual certainty, that is, it must be possible to state of any proposed beneficiary that he or she is, or is not, a member of the designated class of beneficiaries.20 A trust power must also satisfy the requirement that the specified class of beneficiaries must not be so hopelessly wide as not to form anything like a class so that the trust is administratively unworkable.21 The classification of a power as a mere power or as a trust power can be significant for determining whether and in what manner the court can intervene in the event of the power not being exercised by the donee. If the intention of the donor of a power is to create a trust power, and the requirements for a valid trust power are not satisfied, it will not be treated by the court as a valid mere power.22 Notes 1 Brown v Higgs (1803) 8 Ves 561 at 570-1, 574; 32 ER 473 at 476, 478 ; Re Gestetner Settlement; Barnett v Blumka [1953] Ch 672 at 687; [1953] 1 All ER 1150 at 1155 per Harman J. The terms bare power and power collateral are also used.2 Re Gestetner Settlement; Barnett v Blumka [1953] Ch 672 at 688; [1953] 1 All ER 1150 at 1155 per Harman J; Whishaw v Stephens [1970] AC 508 at 518; [1968] 3 All ER 785 at 787; [1968] 3 WLR 1127 at 1130-1 per Lord Reid, HL; McPhail v Doulton [1971] AC 424 at 449, 456; [1970] 2 All ER 228 at 240, 247; [1970] 2 WLR 1110 at 1125, 1132 per Lord Wilberforce, HL. See also Gartside v IRC [1968] AC 553; [1968] 1 All ER 121; [1968] 2 WLR 277 ; Lutheran Church of Australia South Australia District Inc v Farmers Co-op Executors and Trustees Ltd (1970) 121 CLR 628 at 639, 652; [1970] ALR 545 at 551, 561; (1970) 44 ALJR 176 at 181, 186 per Barwick CJ and Windeyer J respectively; Re Hays Settlement Trusts; Greig v McGregor [1981] 3 All ER 786 at 792; [1982] 1 WLR 202 at 208-9 ; Breadner v Granville-Grossman [2001] Ch 523; [2000] 4 All ER 705 at 719-20 per Park J.3 Brown v Higgs (1803) 8 Ves 561 at 570-1, 574; 32 ER 473 at 476, 478 ; Breadner v Granville-Grossman [2001] Ch 523; [2000] 4 All ER 705 at 719-20 per Park J.4 A special power allows the donee to appoint in favour of some or all of the persons within a specified class of objects: National Trustees Executors & Agency Co of Australasia Ltd v Trainor [1974] VR 49 at 56-7 per Pape J . It follows that a special power, unlike a general power, is not equivalent to beneficial ownership: Nemesis Australia Pty Ltd v FCT (2005) 150 FCR 152; 225 ALR 576; [2005] FCA 1273; BC200506891 at [27]-[38] per Tamberlin J .5 Under a general power, the donee is entitled to appoint to any person he or she wishes including himself

or herself (Tatham v Huxtable (1950) 81 CLR 639 at 656; [1951] ALR 1 at 10; BC5000510 per Kitto J ; Trustees Executors and Agency Co Ltd v Margottini [1960] VR 417 at 420 per Dean J ; National Trustees Executors & Agency Co of Australasia Ltd v Trainor [1974] VR 49 at 56-7 per Pape J ; Gregory v Hudson (1997) 41 NSWLR 573 at 578-9; BC9701111 per Young J (affirmed Gregory v Hudson (1998) 45 NSWLR 300; BC9805959 )), and so a general power is equivalent to unencumbered title to the property: Pedley-Smith v Pedley-Smith (1953) 88 CLR 177 at 190; [1953] ALR 471 at 475; BC5300320 per Dixon CJ, Williams, Fullagar, Webb and Taylor JJ ; Re Nicholas Trust (1986) 70 ACTR 10; 85 FLR 188 at 193-4 per Kelly J ; Nemesis Australia Pty Ltd v FCT (2005) 150 FCR 152; 225 ALR 576; [2005] FCA 1273; BC200506891 at [27] per Tamberlin J . It follows that a donee of a general power can constitute a trust over the property the subject of the power: Commissioner of State Revenue v Lam & Kym Pty Ltd (2004) 10 VR 420; 2004 ATC 5058; [2004] VSCA 204; BC200408032 at [44], [45] per Nettle JA .6 A hybrid power permits the donee not only to appoint in favour of some or all of the persons within a specified class of objects but also allows the donee to exclude persons from the specified class: Perpetual Executor & Trustee Assn of Australia Ltd v Adams [1975] VR 462 ; Horan v James [1982] 2 NSWLR 376 .7 Re Manistys Settlement; Manisty v Manisty [1974] Ch 17 at 212; [1973] 2 All ER 1203 at 1206-7; [1973] 3 WLR 341 at 344-5 ; Re Hays Settlement Trusts; Greig v McGregor [1981] 3 All ER 786; [1982] 1 WLR 202 . See also Re Park; Public Trustee v Armstrong [1932] 1 Ch 580 ; Re Jones; Public Trustee v Jones [1945] Ch 105 ; Re Gestetner Settlement; Barnett v Blumka [1953] Ch 672; [1953] 1 All ER 1150 ; Re Triffitts Settlement; Hall v Hyde [1958] Ch 852; [1958] 2 All ER 299; [1958] 2 WLR 927 ; Re Abrahams Will Trusts; Caplan v Abrahams [1969] 1 Ch 463 at 474-6; [1967] 2 All ER 1175 at 1183-4; [1967] 3 WLR 1198 at 1208-9 ; Calcino v Fletcher [1969] Qd R 8 ; Re Lawrences Will Trusts; Public Trustee v Lawrence [1972] Ch 418 at 428; [1971] 3 All ER 433 at 440-1; [1971] 3 WLR 188 at 197 . Contrast Blausten v IRC [1972] Ch 256; [1972] 1 All ER 41; [1972] 2 WLR 376; Breadner v Granville-Grossman [2001] Ch 523; [2000] 4 All ER 705 at 719-20 per Park J .8 Re Hays Settlement Trusts; Greig v McGregor [1981] 3 All ER 786 at 792; [1982] 1 WLR 202 at 208-9 . Compare Horan v James [1982] 2 NSWLR 376, CA(NSW) (upheld the validity of a hybrid (intermediate) trust power; but Mahoney JA at 384 and Glass JA at 382 appear to have incorrectly understood Re Hays Settlement Trusts; Greig v McGregor [1981] 3 All ER 786; [1982] 1 WLR 202 to have decided that intermediate (hybrid) trust powers are valid).9 Whishaw v Stephens [1970] AC 508 at 525; [1968] 3 All ER 785 at 793; [1968] 3 WLR 1127 at 1139 per Lord Upjohn, HL; Lutheran Church of Australia South Australia District Inc v Farmers Co-op Executors and Trustees Ltd (1970) 121 CLR 628 at 651; [1970] ALR 545 at 560; (1970) 44 ALJR 176 at 186 per Windeyer J; Re Leek (decd); Darwen (Baron) v Leek [1967] Ch 1061 at 10745; [1967] 2 All ER 1160 at 1164-5; [1967] 3 WLR 576 at 584-5 . See also Perpetual Trustee Co Ltd v Tindal (1940) 63 CLR 232 at 261 per Dixon J.10 Perpetual Trustee Co Ltd v Tindal (1940) 63 CLR 232 at 262 per Dixon J. See also Re Weekes Settlement [1897] 1 Ch 289; (1897) 66 LJ Ch 179 . See also note 14 below.11 Re Leek (decd); Darwen (Baron) v Leek [1967] Ch 1061 at 1073-5; [1967] 2 All ER 1160 at 1164-5; [1967] 3 WLR 576 at 583-4 .12 Re Gestetner Settlement; Barnett v Blumka [1953] Ch 672; [1953] 1 All ER 1150 ; Re Leek (decd); Darwen (Baron) v Leek [1967] Ch 1061 at 1074; [1967] 2 All ER 1160 at 1164; [1967] 3 WLR 576 at 583 . Compare Antill-Pockley v Perpetual Trustee Co Ltd (1974) 132 CLR 140 at 145; 4 ALR 663 at 667; 48 ALJR 488 at 490 per Gibbs J.13 Re Sayer; MacGregor v Sayer [1957] Ch 423; [1956] 3 All ER 600; [1957] 2 WLR 261 (clause 4 of the deed considered); Re Leek (decd); Darwen (Baron) v Leek [1967] Ch 1061 at 1074; [1967] 2 All ER 1160 at 1164; [1967] 3 WLR 576 at 583 .14 Permanent Trustee Co v Redman (1916) 17 SR (NSW) 60 ; Re Ogden; Brydon v Samuel [1933] Ch 678; [1933] All ER Rep 720; (1933) 149 LT 162 ; Re Saxone Shoe Co Ltds Trust Deed; Re Abbotts Will Trusts [1962] 2 All ER 904 at 910-11; [1962] 1 WLR 943 at 950-1 ; Re Leek (decd); Darwen (Baron) v Leek [1967] Ch 1061 at 1074; [1967] 2 All ER 1160 at 1164; [1967] 3 WLR 576 at 584 .15 Re Himmelhoch (1928) 29 SR (NSW) 90 ; Inland Revenue Commissioners v Broadway Cottages Trust [1955] Ch 20; [1954] 3 All ER 120; [1954] 3 WLR 438 , CA; Re Leek (decd); Darwen (Baron) v Leek [1967] Ch 1061 at 1074; [1967] 2 All ER 1160 at 1164; [1967] 3 WLR 576 at 584 . See also Re Hains Settlement; Tooth v Hain [1961] 1 All ER 848; [1961] 1 WLR 440 , CA (assumed but not decided that the power was a trust power and not a mere power).16 Brown v Higgs (1803) 8 Ves 561 at 570-1, 574; 32 ER 473

at 476, 478 ; Burrough v Philcox (1840) 5 My & Cr 72; 41 ER 299 ; Re Brierley; Brierley v Brierley (1894) 12 R 55; 43 WR 36, CA; Re Weekes Settlement [1897] 1 Ch 289; (1897) 66 LJ Ch 179 ; Permanent Trustee Co v Redman (1916) 17 SR (NSW) 60 ; Re Hughes; Hughes v Footner [1921] 2 Ch 208 ; Re Llewellyns Settlement; Official Solicitor v Evans [1921] 2 Ch 281 ; Re Himmelhoch (1928) 29 SR (NSW) 90 ; Perpetual Trustee Co Ltd v Tindal (1940) 63 CLR 232 at 261-2 per Dixon J.17 Re Weekes Settlement [1897] 1 Ch 289; (1897) 66 LJ Ch 179 ; Re Combe; Combe v Combe [1925] Ch 210 ; Re Perowne; Perowne v Moss [1951] Ch 785 ; Re Dowsley (1958) 15 DLR (2d) 560; Re Leek (decd); Darwen (Baron) v Leek [1967] Ch 1061 at 1074-5; [1967] 2 All ER 1160 at 1164; [1967] 3 WLR 576 at 584 . Re Weekes Settlement [1897] 1 Ch 289; (1897) 66 LJ Ch 179 expressly rejected the proposition said to be based on Re Whites Trusts (1860) John 656; 70 ER 582 , and earlier cases (and later reflected in Farwell on Powers, 3rd ed, Stevens, London, 1916 at 529-30), that in all cases where there is not a gift over, and there is no contrary provision in the trust instrument, a presumption arises that the power is a trust power and a trust in favour of the objects equally is implied in the event of the power not being exercised. See also Perpetual Trustee Co Ltd v Tindal (1940) 63 CLR 232 at 261-2 per Dixon J; Queensland Trustees Ltd v Cmr of Stamp Duties (1952) 88 CLR 54 at 63; 26 ALJ 389; [1952] ALR 895 at 897-8 ; Lutheran Church of Australia South Australia District Inc v Farmers Co-op Executors and Trustees Ltd (1970) 121 CLR 628 at 643, 657; [1970] ALR 545 at 563-4; (1970) 44 ALJR 176 ; Gerhardy v South Australian Auxiliary to the British & Foreign Bible Society Inc (No 3) (1986) 44 SASR 195 ; Registrar of Accident Compensation Tribunal v Cmr of Taxation (Cth) (1993) 178 CLR 145 at 183; 117 ALR 27 at 52; 67 ALJR 922 per Brennan CJ, Dawson and McHugh JJ.18 See the cases referred to in note 14 above, other than Re Weekes Settlement [1897] 1 Ch 289; (1897) 66 LJ Ch 179 . See also Re OBrien; Public Trustee v McAuliffe [1929] SASR 420 ; Perpetual Trustee Co Ltd v Tindal (1940) 63 CLR 232 at 261-2 per Dixon J; Re Braddock [1947] SASR 329 ; Re Scarisbrick; Cockshott v Public Trustee [1951] Ch 622; [1951] 1 All ER 822 , Evershed MR, CA; Queensland Trustees Ltd v Cmr of Stamp Duties (1952) 88 CLR 54 at 63; 26 ALJ 389 at 390-1; [1952] ALR 895 at 897-8 ; Lutheran Church of Australia South Australia District Inc v Farmers Co-op Executors and Trustees Ltd (1970) 121 CLR 628 at 657; [1970] ALR 545 at 563-4; (1970) 44 ALJR 176 ; Gerhardy v South Australian Auxiliary to the British & Foreign Bible Society Inc (No 3) (1986) 44 SASR 195 ; Registrar of Accident Compensation Tribunal v Cmr of Taxation (Cth) (1993) 178 CLR 145 at 183; 117 ALR 27 at 52; 67 ALJR 922 per Brennan CJ, Dawson and McHugh JJ.19 McPhail v Doulton [1971] AC 424 at 456-7; [1970] 2 All ER 228 at 247; [1970] 2 WLR 1110 at 1132-3 per Lord Wilberforce, HL.20 Whishaw v Stephens [1970] AC 508; [1968] 3 All ER 785; [1968] 3 WLR 1127 , HL (mere powers); McPhail v Doulton [1971] AC 424; [1970] 2 All ER 228; [1970] 2 WLR 1110 , HL (trust powers). As to the applicability in Australia of the decision in McPhail v Doulton, above, see [430-4353] note 5. See also McCracken v A-G (Vic) [1995] 1 VR 67 at 70-1 . See further [430-280], [430-4353].21 McPhail v Doulton [1971] AC 424 at 457; [1970] 2 All ER 228 at 247; [1970] 2 WLR 1110 at 1133 per Lord Wilberforce, HL. See further [430-285].22 Inland Revenue Commissioners v Broadway Cottages Trust [1955] Ch 20 at 36; [1954] 3 All ER 120 at 128; [1954] 3 WLR 438 at 449-50 , CA; Re Shaw (decd); Public Trustee v Day [1957] 1 All ER 745 at 759; [1957] 1 WLR 729 at 746 ; Attorney-General (NSW) v Donnelly (1958) 98 CLR 538 at 579; [1958] ALR 257 at 279 per Kitto J ; Re Endacott (decd); Corpe v Endacott [1960] Ch 232; [1959] 3 All ER 562; [1959] 3 WLR 799 ; McPhail v Doulton [1971] AC 424 at 454; [1970] 2 All ER 228 at 244; [1970] 2 WLR 1110 at 1130 per Lord Wilberforce , HL. The paragraph below is current to 20 April 2012 [430-60] Public or governmental obligation and trust The Crown is capable of being a trustee in the private law sense.1 The intention of a statute may be that money paid to a designated person, who in other respects is a Crown servant or agent, is to be trust money in the ordinary sense held by that person as trustee for private individuals, so that no governmental interest or purpose is served by the functions associated with those trust obligations, being functions not performed for or on behalf of the Crown.2 However, when the term trust is used in relation to the Crown or government property, it does not usually refer to a trust of the kind

enforceable in a court with equitable jurisdiction but to a trust in the higher sense involving the discharge of duties or functions belonging to the prerogative and to the authority of the Crown.3 In public law in trust for may indicate, not the ordinary relationship of trustee and cestui que trust, but the imposition of a constitutional duty the sanction for which is political or administrative, not legal.4 Where in the public law context the term trust is not used at all, it is more difficult again to infer the existence of a trust in the private law sense.5 Where two or more distinct bodies, both emanations of the Crown, are carrying out the functions of the Crown, there is no place between them for one to be the settlor and the other the trustee, as for a private trust, in favour of the persons who stand to benefit from the exercise of those functions.6 The obligations of such bodies would be governed by administrative arrangements enforceable by the executive and not by the ordinary courts.7 Whilst the Crown, being capable of beneficially owning property, can be the beneficiary of a trust, property held by a minister or public servant on behalf of the Crown must be regarded as held by the Crown itself, and there is no intervening trust.8 Notes 1 Williams v A-G (NSW) (1913) 16 CLR 404; 13 SR (NSW) 539; 19 ALR 378; 30 WN (NSW) 114 ; Civilian War Claimants Assn Ltd v R [1932] AC 14 at 27; [1931] All ER Rep 432 per Lord Atkin, HL.2 Registrar of Accident Compensation Tribunal v Cmr of Taxation (Cth) (1993) 178 CLR 145; 117 ALR 27; 67 ALJR 922 . See Duggan v Governor of Full Sutton Prison [2004] 2 All ER 966; [2004] 1 WLR 1010 , CA (prisoners cash found not to be held on trust by the governor).3 Kinloch v Secretary of State for India in Council (1882) LR 7 App Cas 619 at 625-6; 47 LT 133 per Lord Selborne LC, HL; Tito v Waddell (No 2) [1977] Ch 106 at 210-24; [1977] 3 All ER 129 at 216-27; [1977] 2 WLR 496 at 591-604 ; Town Investments Ltd v Dept of the Environment [1978] AC 359 at 382; [1977] 1 All ER 813 at 819; [1977] 2 WLR 450 at 457 per Lord Diplock , HL; Aboriginal Development Commission v Treka Aboriginal Arts and Crafts Ltd [1984] 3 NSWLR 502 , CA(NSW); Wellington Harness Racing Club Inc v Hutt City Council [2004] 1 NZLR 82 at [58]-[68] per Hammond J , HC(NZ); Frevcourt Pty Ltd v Wingecarribee Shire Council (2005) 139 LGERA 140; [2005] NSWCA 107; BC200501970 at [25]-[37] per Beazley JA .4 Kinloch v Secretary of State for India in Council (1882) LR 7 App Cas 619 at 630; 47 LT 133 per Lord OHagan, HL; Te Teira Te Paea v Te Roera Tareha [1902] AC 56 , PC; Town Investments Ltd v Dept of the Environment [1978] AC 359 at 397; [1977] 1 All ER 813 at 831; [1977] 2 WLR 450 at 471 per Lord Simon , HL.5 Frevcourt Pty Ltd v Wingecarribee Shire Council (2005) 139 LGERA 140; [2005] NSWCA 107; BC200501970 at [25]-[37] per Beazley JA ; Re West End Networks Ltd (in liq); Secretary of State for Trade and Industry v Frid [2004] 2 All ER 1042; [2004] 2 AC 506; [2004] UKHL 24 ; Duggan v Governor of Full Sutton Prison [2004] 2 All ER 966; [2004] 1 WLR 1010 , CA.6 Aboriginal Development Commission v Treka Aboriginal Arts and Crafts Ltd [1984] 3 NSWLR 502 , CA(NSW).7 Kinloch v Secretary of State for India in Council (1882) LR 7 App Cas 619 at 625-6; 47 LT 133 per Lord Selborne LC, HL; Town Investments Ltd v Dept of the Environment [1978] AC 359 at 382; [1977] 1 All ER 813 at 819; [1977] 2 WLR 450 at 457 per Lord Diplock, HL; Aboriginal Development Commission v Treka Aboriginal Arts and Crafts Ltd [1984] 3 NSWLR 502 , CA(NSW).8 Town Investments Ltd v Dept of the Environment [1978] AC 359; [1977] 1 All ER 813; [1977] 2 WLR 450 , HL.

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(II) Specific Examples The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation

For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations

[430-65] Trust and unsecured debt It may be necessary to distinguish between a trust and an unsecured debt in order to determine, for example: (1) whether particular assets are held by a bankrupt or by an insolvent company in trust and therefore are not available to his or her creditors;1 (2) whether the equitable right of tracing is available to enable a claim in respect of money or property to be satisfied;2 or (3) which period for the limitation of actions is applicable.3 Where money is owed to a creditor on the basis that the debt is to be satisfied out of the general assets of the debtor, the relationship is one of debt only and cannot by itself amount to a trust, because there is no property set aside by the debtor which the creditor could require to be applied in satisfaction of the obligation owed to him or her.4

Where X receives money on the basis that it is to be kept separate from his or her own money and is to be available only to satisfy an obligation which he or she owes to Y , or some other claim which Y has in respect of that money, then X holds that money as trustee for Y .5 Where the existence of a trust is explicit, the absence of an express obligation to keep trust money separate does not deny

the trust.6 Absent the use of the word trust, though, provision for payment of funds into a nominated and agreed account without any prohibition on X intermixing of funds is a potentially strong indication that no trust of those payments was intended.7 If X receives money on the basis that he or she must on demand, or at some specified time, pay an equivalent amount to Y , but in the meantime is entitled to use the money as his or her own, X is merely a debtor.8 The same is usually the outcome where the money is agreed to be placed into a general operating account.9

Whether, in a particular case, there is a debt or a trust depends on the intention of the parties. That intention may be plainly indicated by the words they have used or may have to be deduced by considering also all of the circumstances relating to the transaction and to the relationship between the parties.10

It is possible for both loan and trust to be involved in the same transaction, as the existence of the debtor/creditor relationship does not preclude a coexisting relationship of trustee (debtor) and beneficiary (creditor being a third party and/or the settlor).11 Where money is lent by A to B with the mutual intention that it is not to be part of the assets of B, but is to be used exclusively for a specific purpose, there will be implied (in the absence of indication to the contrary) a stipulation that if the purpose fails the money will be repaid, and the arrangement will give rise to a fiduciary relationship or trust.12 This money can be lent upon trust to apply it for a specified purpose, such as payment of a dividend to shareholders,13 payment of creditors,14 subscription for shares in a company15 or acquisition of property.16

Although such a transaction has been explained via a two-trust mechanism a primary trust to carry out the lenders stipulation as to the specified purpose coupled with a secondary trust in favour of the lender taking effect if the primary trust fails17 modern case authority favours a single trust explanation, although whether that trust is an express trust18 or a resulting trusting19 remains to be conclusively determined. Either way, references in such cases to purpose do not involve an extension of the small category of those non-charitable purpose trusts which may be valid even though they are trusts for purposes and not for persons.20 Whether or not an express trust has been brought into existence needs to be determined by reference to intention, which would ordinarily be the intention of the settlor, but where the subject matter of the trust is contractual rights created between the settlor and the trustee for the purpose of benefiting a third party, it may be appropriate to refer to the mutual intention of the settlor and the trustee.21

The application of the above principle is not confined to situations where money is lent for the purpose of paying debts of the borrower.22 To the extent that the purpose cannot be carried out, or the money is not required for that purpose, the money is held by the borrower on trust for the lender, and is not available for the borrowers other creditors; but to the extent that the money is applied in carrying out the purpose, the borrowers obligations as trustee are discharged and he or she remains merely a debtor to the lender,23 although the latter may depend upon the terms upon which the money is advanced.24

A relationship which is, or would otherwise become, that of debtor and creditor can be established unilaterally by the debtor as a trust for the benefit of the creditor, without the creditor requiring it or even being aware of it.25 In such a case, payment by the debtor of the money due or to become due to the creditor into a separate bank account is not by itself sufficient evidence of the intention to create a trust of the money in that account, without other indications of the debtors intention to keep the creditors money separate from the debtors general assets.26 If the effect of establishing the

trust is to prevent those who pay money from becoming creditors by making them beneficiaries under a trust at the moment when payment is received from them, the question of the creation of the trust constituting a voidable preference between creditors does not arise, because, when the trust takes effect in respect of any beneficiary, that beneficiary has not been, and is not, a creditor.27

The relationship of debtor and creditor does not normally subsist between trustee and beneficiary28 except where:

(1) at the time when the trust is established, it is an intentional element in the arrangements;29 (2) something is done after the trust is established which, whether intentionally or not, has the effect of creating that relationship;30 or (3) the beneficiary acquires the rights of a creditor as a result of misappropriation, or of breach of trust intentionally committed, by the trustee.31

An acknowledgment by a trustee to a beneficiary that the trustee holds an amount of money to which that beneficiary is immediately entitled can constitute the trustee, even while remaining a trustee, also a debtor to the beneficiary for that amount, and the debt can be recovered by the beneficiary as money had and received.32 However, the fact that the beneficiaries could, in accordance with the principle of Saunders v Vautier,33 require a transfer of the trust property by the trustee is not alone sufficient to make the trustee a debtor.34

Where a trustee, acting in a manner authorised by the terms of the trust, deposits trust money with itself so as to become a mere debtor of the beneficiary, then, in the event of the trustees insolvency, the beneficiary ranks, in respect of that deposit, only as a creditor and has no right to trace the trust property into the assets of the trustee.35

Where trust property is misappropriated by the trustee or is dealt with by him or her in a manner not authorised by the terms of the trust and is lost, the debtor/creditor relationship which thereupon arises coexists with the continuing trustee/beneficiary relationship.36 In such a case the beneficiary, in amplification of his or her rights as creditor, has access to the remedies of an action for due administration of the trust estate, and if relevant, of tracing the trust property, and can claim it in priority to the trustees ordinary creditors.37 In those circumstances, if a payment is made to the beneficiary or to the trust estate by way of restoration or replacement of the trust property, the beneficiary is merely receiving that which is his or hers already.38 Therefore, even if the payment is made during the relation back period preceding the trustees insolvency, it cannot constitute a preference of one creditor over the others because it is received by the beneficiary not as creditor but as beneficial owner.39

If a payment made by a trustee does not constitute a restoration to the beneficiary or the trust estate of money or property wrongfully taken or diverted by the trustee, but represents compensation or damages for some other breach of trust, then the payment may be treated as a payment to the beneficiary as a creditor, and accordingly as a preference if made within the relevant relation back period.40

Notes 1 As to a bankrupt see Re Clifton (1923) 26 WALR 41; see also (CTH) Bankruptcy Act 1966 s 116. As to an insolvent company see Re Primary Producers Bank of Australia Ltd; Ex parte United Bank Officers Assn of Queensland [1932] QWN 23; Re Australian Home Finance Pty Ltd (in liq) [1956] VLR 1; [1956] ALR 247; Re Kayford Ltd (in liq) [1975] 1 All ER 604; [1975] 1 WLR 279. 2 See [430-5305] and equity [185-1700]-[185-1730]. 3 See [430-5550], [430-5555]. See generally limitation of actions. 4 Fitzgerald v Fitzgerald (No 1) (1910) 10 SR (NSW) 484 at 488; Cohen v Cohen (1929) 42 CLR 91; [1929] ALR 204; G & M Aldridge Pty Ltd v Walsh [1999] 3 VR 601; (1999) 169 ALR 710; 154 FLR 24; 33 ACSR 546 at 550 per Phillips JA, CA(Vic). 5 Henry v Hammond [1913] 2 KB 515 at 521; [1911-13] All ER Rep Ext 1478 at 1483 per Channel J; Cohen v Cohen (1929) 42 CLR 91 at 101; [1929] ALR 204 at 208 per Dixon J; Walker v Corboy (1990) 19 NSWLR 382 at 385 per Priestley JA, at 389 per Clarke JA, at 397-8 per Meagher JA; Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491 at 498; 102 ALR 681 at 689 per Gummow J; Walsh Bay Developments Pty Ltd v FCT (1994) 29 ATR 311 at 319; 94 ATC 4682 at 4688; BC9400314 per Foster J (affirmed Walsh Bay Developments Pty Ltd v FCT (1995) 130 ALR 415; 31 ATR 15, Fed C of A, Full Court); Jessup v Queensland Housing Commission [2002] 2 Qd R 270 at 274; [2001] QCA 312; BC200104671 per McPherson JA. 6 Stephens Travel Service International Pty Ltd (recs and mgrs apptd) v Qantas Airways Ltd (1988) 13 NSWLR 331 at 349; BC8801851 per Hope JA; Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588; 171 ALR 568 at 579; [2000] HCA 25; BC200002277 per Gaudron, McHugh, Gummow and Hayne JJ; Salvo v New Tel Ltd [2005] NSWCA 281; BC200506365. 7 Jessup v Queensland Housing Commission [2002] 2 Qd R 270 at 274-5; [2001] QCA 312; BC200104671 per McPherson JA; Compass Resources Ltd v Sherman [2010] WASC 41; BC201001100 at [67]-[78], [88]-[101] per Beech J. 8 Henry v Hammond [1913] 2 KB 515 at 521; [1911-13] All ER Rep Ext 1478 at 1483 per Channel J; Thiess Watkins White Ltd v Equiticorp Australia Ltd [1991] 1 Qd R 82; Grocers of Wyong v Retech Global [2004] NSWSC 488; BC200403295 at [24]-[32] per Campbell J; Compass Resources Ltd v Sherman [2010] WASC 41; BC201001100 at [67]-[78], [88]-[101] per Beech J. As to the situation where an agent holds money for a principal, compare Walker v Corboy (1990) 19 NSWLR 382 at 383-5 per Priestley JA, at 388-90 per Clarke JA, at 396-8 per Meagher JA, CA(NSW). Payment into a separate bank account can be an indicator of the intention that the money be held on trust, but it is by no means conclusive: Re Fada (Aust) Ltd; Ex parte Brown [1927] SASR 590; Re Kayford Ltd (in liq) [1975] 1 All ER 604; [1975] 1 WLR 279; Re Associated Securities Ltd and the Companies Act [1981] 1 NSWLR 742; Re Multi Guarantee Co Ltd [1987] BCLC 257; Educational Resources Pty Ltd (in liq) v Poteri (1996) 20 ACSR 628; BC9602313, SC(QLD). See also Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491 at 502; 102 ALR 681 at 689. 9 Peter Cox Investments Pty Ltd (in liq) v Intl Air Transport Assn (1999) 161 ALR 105; [1999] FCA

27; BC9900067; Gliderol International Pty Ltd v Hall (2001) 80 SASR 541 at 549; [2001] SASC 355; BC200106922 per Nyland J. 10 Morgan v Larivire (1875) LR 7 HL 423; Cohen v Cohen (1929) 42 CLR 91 at 101-2; [1929] ALR 204 per Dixon J; Re Intercontinental Development Corp Pty Ltd (No 2) (1975) 1 ACLR 327; Re Berkeley Applegate (Investment Consultants) Ltd (in liq); Harris v Conway [1989] Ch 32; [1988] 3 All ER 71; [1989] BCLC 28; Woodend Water Board v Hyan Enterprises Pty Ltd (unreported, SC(VIC), Fullagar J, 4352 of 1990, 15 November 1990); Salvo v New Tel Ltd [2005] NSWCA 281; BC200506365. 11 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; [1968] 3 All ER 651; [1968] 3 WLR 1097, HL (see also the cases referred to at (AC) 580, (All ER) 654-5, (WLR) 1103 per Lord Wilberforce); Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491 at 502; 102 ALR 681 at 693. In addition to the cases mentioned above in this note and in notes 9-19 below, other cases in which the principle represented by Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; [1968] 3 All ER 651; [1968] 3 WLR 1097 is supported include: Re Groom (a bankrupt); Ex parte the Bankrupt (1977) 16 ALR 278; 29 FLR 324; 7 ATR 774; 78 ATC 4530; Re Securitibank Ltd (in liq) [1978] 1 NZLR 97 at 161-4; Rose v Rose (1986) 7 NSWLR 679; Re Veli; Ex parte AE Developments Pty Ltd v Scott (1988) 18 FCR 204; Re Barrington and Assocs Pty Ltd (in liq) [1989] VR 940; Dines Construction Ltd v Perry Dines Corp Ltd (1989) 4 NZCLC 65,298; General Communications Ltd v Development Finance Corp of New Zealand Ltd [1990] 3 NZLR 406; Thiess Watkins White Ltd v Equiticorp Australia Ltd [1991] 1 Qd R 82; Quince v Varga [2009] 1 Qd R 359; [2008] QCA 376; BC200810690; Compass Resources Ltd v Sherman [2010] WASC 41; BC201001100. 12 Australasian Conference Assn Ltd v Mainline Constructions Pty Ltd (in liq) (1978) 141 CLR 335 at 353; 22 ALR 1 at 18; BC7800073 per Gibbs ACJ. 13 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; [1968] 3 All ER 651; [1968] 3 WLR 1097, HL. 14 Re Northern Developments Holdings Ltd (unreported, Ch D, Megarry VC, 6 October 1978); Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd [1985] Ch 207; [1985] 1 All ER 155; [1984] 3 WLR 1016; Re Miles; Ex Parte National Australia Bank Ltd v Official Receiver in Bankruptcy (1988) 20 FCR 194; 85 ALR 216, Fed C of A. See also note 17 below. 15 As to cases accepting the principle but finding it did not apply on the facts see Re Associated Securities Ltd and the Companies Act [1981] 1 NSWLR 742; Ausintel Investments Australia Pty Ltd v Lam (1990) 19 NSWLR 637. 16 Re EVTR Ltd; Gilbert v Barber [1987] BCLC 646. 17 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; [1968] 3 All ER 651; [1968] 3 WLR 1097, HL. 18 Australasian Conference Assn Ltd v Mainline Constructions Pty Ltd (in liq) (1978) 141 CLR 335 at 353; 22 ALR 1 at 18; BC7800073 per Gibbs ACJ; Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491; 102 ALR 681; George v Webb [2011] NSWSC 1608; BC201110449 at [195][210], [282] per Ward J. 19 Twinsectra Ltd v Yardley [2002] 2 All ER 377; [2002] 2 WLR 802; [2002] UKHL 12 per Lord Millett; Drakeford v Bromhead [2003] NSWSC 296; BC200301743; Frontier Touring Co Pty Ltd v Rodgers (2005) 223 ALR 433; [2005] NSWSC 668; BC200504878 at [34] per Barrett J. 20 Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491 at 502; 102 ALR 681 at 692-3; Compass Resources Ltd v Sherman [2010] WASC 41; BC201001100 at [72] per Beech J. See also Woodend Water Board v Hyan Enterprises Pty Ltd (unreported, SC(VIC), Fullagar J, 4352 of 1990, 15 November 1990). The trust identified in

Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; [1968] 3 All ER 651; [1968] 3 WLR 1097, HL related to a fund held by a trustee on certain terms for a class of ascertained beneficiaries with a limitation (whether as an express or resulting trust) back to the settlor in specified circumstances. The expression purpose was used to describe the end sought to be achieved by the settlor by means of those arrangements: Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491 at 502; 102 ALR 681 at 692-3. 21 Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491 at 502-3; 102 ALR 681 at 693, Fed C of A. See also Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 at 581; [1968] 3 All ER 651 at 655; [1968] 3 WLR 1097 at 1104 per Lord Wilberforce, HL. 22 Re Northern Developments Holdings Ltd (unreported, Ch D, Megarry VC, 6 October 1978); Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd [1985] Ch 207; [1985] 1 All ER 155; [1984] 3 WLR 1016; Re EVTR Ltd; Gilbert v Barber [1987] BCLC 646; Woodend Water Board v Hyan Enterprises Pty Ltd (unreported, SC(VIC), Fullagar J, No 4352 of 1990, 15 November 1990) at 26; Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491 at 503-4; 102 ALR 681 at 694, Fed C of A. Re Miles; Ex Parte National Australia Bank Ltd v Official Receiver in Bankruptcy (1988) 20 FCR 194; 85 ALR 216. 23 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 at 581; [1968] 3 All ER 651 at 655; [1968] 3 WLR 1097 at 1104 per Lord Wilberforce, HL. 24 Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588; 171 ALR 568 at 578; [2000] HCA 25; BC200002277 per Gaudron, McHugh, Gummow and Hayne JJ; Twinsectra Ltd v Yardley [2002] 2 All ER 377; [2002] 2 WLR 802 at 830; [2002] UKHL 12 per Lord Millett. 25 Re Kayford Ltd (in liq) [1975] 1 All ER 604; [1975] 1 WLR 279; OT Computers Ltd (in administration) v First National Tricity Finance Ltd [2003] EWHC 1010 (Ch). 26 Re Fada (Aust) Ltd; Ex parte Brown [1927] SASR 590; Re Kayford Ltd (in liq) [1975] 1 All ER 604; [1975] 1 WLR 279; Re Multi Guarantee Co Ltd [1987] BCLC 257; OT Computers Ltd (in administration) v First National Tricity Finance Ltd [2003] EWHC 1010 (Ch). 27 Re Kayford Ltd (in liq) [1975] 1 All ER 604 at 606; [1975] 1 WLR 279 at 281. For the view that the decision in Re Kayford Ltd (in liq), above, is incorrect and that, in the absence of prior stipulation or agreement by the creditor, the debtor cannot unilaterally prevent the establishment of the debtor/creditor relationship occurring before the trust is fully constituted (by the placing of the money in the trust account) and therefore cannot exclude the risk of creating a voidable preference, see Goodhart W and Jones G, The Infiltration of Equitable Doctrine into English Commercial Law (1980) 43 Mod LR 489 at 494-7. 28 Burns v Leda Holdings Pty Ltd [1988] 1 Qd R 214 at 230-3; (1987) 89 FLR 365. Compare Sharp v Jackson [1899] AC 419 at 426 per Lord Halsbury LC, HL; Re Blackpool Motor Car Co Ltd [1901] 1 Ch 77 at 85; Re Donovan; Ex parte ANZ Banking Group Ltd [1972-73] ALR 313; (1972) 20 FLR 50 at 68-9, Fed C of A. 29 See notes 10-27 above. 30 See notes 32-35 below. 31 See note 36 below. 32 Roper v Holland (1835) 3 Ad & El 99; 111 ER 351; Howard v Brownhill (1853) 23 LJQB 23; Phillipson v Downer (1904) SALR 128. Compare Bartlett v Dimond (1845) 14 M & W 49; 153 ER 385. 33 See [430-2515].

34 Re Bliss (1983) 3 DLR (4th) 425. 35 Space Investments Ltd v Canadian Imperial Bank of Commerce Trust Co (Bahamas) Ltd [1986] 3 All ER 75; [1986] 1 WLR 1072, PC. 36 Trustee of the property of New, Prance & Garrard v Hunting [1897] 2 QB 19, CA (affirmed Sharp v Jackson [1899] AC 419 at 426 per Lord Halsbury LC, HL); Re Blackpool Motor Car Co Ltd [1901] 1 Ch 77 at 85; Re Donovan; Ex parte ANZ Banking Group Ltd [1972-73] ALR 313; (1972) 20 FLR 50 at 68-9, Fed C of A; Burns v Leda Holdings Pty Ltd [1988] 1 Qd R 214 at 229-33; (1987) 89 FLR 365. As to doubts whether the debtor/creditor relationship arises at all between trustee and beneficiary in the absence of misappropriation or other unauthorised dealing with trust property see Sinclair v Wilson (1855) 20 Beav 322 at 330-1; 52 ER 627 at 630; Re Smith Fleming & Co; Ex parte Kelly & Co (1879) 11 Ch D 306, CA; Burns v Leda Holdings Pty Ltd [1988] 1 Qd R 214 at 230; (1987) 89 FLR 365. See further [430-5295]. 37 Re Blackpool Motor Car Co Ltd [1901] 1 Ch 77 at 85; Burns v Leda Holdings Pty Ltd [1988] 1 Qd R 214 at 233; (1987) 89 FLR 365; Bastion v Gideon Investments Pty Ltd (in liq) (2000) 35 ACSR 466 at 473; 18 ACLC 854 per Austin J, SC(NSW). 38 Burns v Leda Holdings Pty Ltd [1988] 1 Qd R 214 at 233; (1987) 89 FLR 365. 39 Burns v Leda Holdings Pty Ltd [1988] 1 Qd R 214 at 233; (1987) 89 FLR 365. 40 Burns v Leda Holdings Pty Ltd [1988] 1 Qd R 214 at 233; (1987) 89 FLR 365. The paragraph below is current to 20 April 2012

[430-70] Trust and equitable charge If a gift of property by X to Y is coupled with a stipulation as to the paying of money, or the performance of some other obligation, in favour of Z, it is necessary to construe the will or other instrument to determine whether the property is to be available for satisfaction of the obligation, and if so whether it is a trust or an equitable charge that has been created.1 If Xs intention is found to be that the residual benefit of the property be conferred on Y , subject to the benefit designated for Z, and that Zs benefit is to depend solely upon the property and that Y is not to be under any personal obligation in respect of it, then it is most likely that there is an equitable charge on the property, and not a trust.2 In that case Y holds the property as full beneficial owner subject only to the equitable charge and is not liable to account for the rents and profits from that property.3

For there to be a trust, there must be found an intention that the donee is to have a fiduciary obligation to apply the property for the specified purpose.4 Where the conferring of the benefit on Z is found to be the sole objective of the disposition, it is probable that a trust will be identified,5 and that, if any part of the property remains after the terms of the trust are carried out, there will be a resulting trust of that residue in favour of X or his or her estate.6 However, even where it is found that Y is intended to have fiduciary obligations in respect of the benefit designated for Z, so that a trust rather than a charge is identified, it is possible that there will also be discerned an intention to benefit Y by entitling him or her to any of the property remaining after the obligations in favour of Z have been discharged, in which case there will be no resulting trust and Y will be the full beneficial owner of the remaining property.7

Whilst the holder of property as trustee inevitably has fiduciary obligations, whereas the holder of property subject to a charge does not, in both cases the entitlement of the beneficiary or chargee is essentially in respect of the property, and in neither case is the holder responsible for the sufficiency of the property to satisfy that entitlement.8

The fact that either a charge or a trust attaches to the property means that the entitlement of the chargee or beneficiary is not defeated by the disclaimer, disability or death of the donee or trustee, nor, necessarily, by a transfer of the title to the property.9 However, as both the charge and the trust confer only equitable rights, either can be defeated by sale to a bona fide purchaser for value without notice.10

Notes 1 Compare American Law Institute, Restatement of the Law, Second, Trusts, 1959, Vol 1, para 10 (If the transferor shows an intention to impose a duty on the transferee to deal with the property for the benefit of a third person, and to give the third person a beneficial interest therein, a trust is created; but if he or she shows an intention not to impose such a duty on the transferee, but to give to the transferee the beneficial interest therein and to give a security interest to the third person, an equitable charge is created). For other possibilities see [430-75], [430-80]. See further [430-650] (equitable charges as alternative to constructive trust). 2 King v Denison (1813) 1 Ves & B 260 at 272-3, 279; 35 ER 102 at 106-7, 109; Cunningham v Foot (1878) LR 3 App Cas 974 at 992-3, 995 per Lord OHagan, HL; Re Kirk; Kirk v Kirk (1882) 21 Ch D 431, CA; Re Oliver; Newbald v Beckitt [1886-90] All ER Rep 810; (1890) 62 LT 533; Pearce v Wright (1926) 39 CLR 16; Countess of Bective v FCT (1932) 47 CLR 417 at 419-20; 6 ALJ 110; [1932] ALR 362; (1932) 2 ATD 80; Re Smith; Williams v Smith [1957] VR 683; Hogden v Hogden (1956) 57 SR (NSW) 269; 74 WN (NSW) 67; Kais v Turvey (1994) 11 WAR 357; 17 Fam LR 498 at 510; Cumming v Sands (2001) NSW ConvR 55-989 at 58,138; [2001] NSWSC 2; BC200101055 per Hamilton J. 3 King v Denison (1813) 1 Ves & B 260 at 272-3, 279; 35 ER 102 at 106-7, 109; Re Oliver; Newbald v Beckitt [1886-90] All ER Rep 810; (1890) 62 LT 533; Morris v Morris [1982] 1 NSWLR 61 at 63-4 per McLelland J. 4 Francis v Grover (1845) 5 Hare 39 at 51; 67 ER 818 at 823; Cunningham v Foot (1878) LR 3 App Cas 974 at 992-3, 995 per Lord OHagan, at 1004 per Lord Blackburn. 5 King v Denison (1813) 1 Ves & B 260 at 272-3; 35 ER 102 at 106-7; Re Frame; Edwards v Taylor [1939] Ch 700; [1939] 2 All ER 865; (1939) 160 LT 620; Re Rees; Williams v Hopkins [1950] Ch 204; [1949] 2 All ER 1003, CA; Re Karsten; Edwards v Moore [1953] NZLR 456; Hayes v National Heart Foundation of Australia, New South Wales Division [1976] 1 NSWLR 29. See also Re Pughs Will Trusts; Marten v Pugh [1967] 3 All ER 337; [1967] 1 WLR 1262 (intention to create a trust being identified, but the attempted disposition found to be void for uncertainty). Compare Re Foord; Foord v Conder [1922] 2 Ch 519; [1922] All ER Rep 166 (trust was identified even though the intention was found to be not to benefit only the primary object but also the donee). 6 King v Denison (1813) 1 Ves & B 260 at 272-3; 35 ER 102 at 106-7; Re West; George v Grose [1900] 1 Ch 84; Re Rees; Williams v Hopkins [1950] Ch 204; [1949] 2 All ER 1003, CA. 7 Re Foord; Foord v Conder [1922] 2 Ch 519; [1922] All ER Rep 166; Hourigan v Trustees Executors and Agency Co Ltd (1934) 51 CLR 619 at 626-7 per Rich J, at 646-8 per Dixon J; [1934] VLR 279; (1934) 8 ALJ 146; Armenian General Benevolent Union v Union Trustee Co of Australia Ltd (1952) 87 CLR 597 at 613-14; [1952] ALR 781 at 790.

8 Re Cowley; Souch v Cowley (1885) 53 LT 494. 9 Mallott v Wilson [1903] 2 Ch 494; [1900-3] All ER Rep 326. 10 Parker v Judkin [1931] 1 Ch 475; [1931] All ER Rep 222, CA. The paragraph below is current to 20 April 2012

[430-75] Trust and conditional gift A gift of property by X to Y may be made subject to a stipulation requiring the payment of money, or the performance of some other act, in favour of Z, but without explicit indication of the intended relationship between the obligation to Z and the property given to Y . In such a case it is necessary to interpret the will or other instrument, on a process of construction, to determine whether the stipulation is intended to operate strictly as the type of condition with which failure to comply can lead to forfeiture of the gift.1 Non-compliance with such a condition can result in the case of a condition precedent, in the personal obligation of Y to Z never arising, or, in the case of a condition subsequent, being extinguished.2 Z would also be deprived of the intended benefit if the stipulation were interpreted as being merely precatory or an indication of the donors motive for making the gift,3 or as being void for uncertainty.4 Alternative interpretations, which exclude that potential for the elimination of Zs benefit, are that the stipulation: (1) is a condition of the kind which, once the gift is accepted by Y , does not affect the relevant property, or Ys interest in it, but only gives rise to a personal equitable obligation owed by Y to Z;5 or (2) is intended to attach to the property and therefore takes effect as either a charge or a trust, independently of Ys acceptance or rejection of the gift.6 Where a stipulation for the benefit of a third party has been held to be a condition of the gift, but performance of the condition either was from the outset, or subsequently became, impossible, the third party will be deprived of the benefit either because the condition fails to operate and the donee takes the property absolutely,7 or because the condition and the gift both fail.8

The third party for whom the benefit is intended does not, where there is a true condition, have any means of enforcing compliance, and only the person or persons who would be entitled to the property upon non-compliance with the condition can re-enter or otherwise act to displace the original donee from ownership of the property.9 Because the prejudice to the interests of the third party that would result from non-compliance by the donee with a condition would be contrary to the apparent actual intention of the disponor, the courts have tended over a long period to identify a stipulation for a benefit in favour of a third party as an equitable charge or a trust rather than as a condition,10 even where the term condition has been used in the will or other instrument.11

The determination as to whether a stipulation in favour of a third party constitutes a condition, a charge or a trust, may have significance otherwise than in relation to the interests of the third party. For example, a finding that there is a conditional gift may enable the donee who has complied with a condition requiring specified payments of income to a third party to retain any surplus income as his or her own,12 whereas a trustee would not usually be entitled to any part of that surplus.13 Further, where donees are entitled to the property in unequal shares they are nevertheless equally subject to the personal obligation arising from a condition; whereas, if there is held to be a charge rather than a condition, the burden of the obligation to the third party will be borne in the same

proportions as their ownership of the property.14

Notes 1 See Wright v Wilkin (1860) 2 B & S 232; 121 ER 1060 (affirmed Wright v Wilkin (1862) 2 B & S 260; 121 ER 1070); Attorney-General v Wax Chandlers Co (Master, Wardens, etc) (1873) LR 6 HL 1; Re Oliver; Newbald v Beckitt [1886-90] All ER Rep 810 at 812; (1890) 62 LT 533 at 535; Re Hodge; Hodge v Griffiths [1940] Ch 260 at 264 per Farwell J; Re Gardiner (decd); Gardiner v Gardiner [1971] 2 NSWLR 494; Muschinski v Dodds (1985) 160 CLR 583 at 605-6; 62 ALR 429 at 444-5; BC8501051 per Brennan J. 2 See Wright v Wilkin (1860) 2 B & S 232 at 251; 121 ER 1060 at 1067 per Lord Cockburn CJ; Re Oliver; Newbald v Beckitt [1886-90] All ER Rep 810 at 812; (1890) 62 LT 533 at 535; Countess of Bective v FCT (1932) 47 CLR 417 at 418-19; 6 ALJ 110; [1932] ALR 362 at 363; (1932) 2 ATD 80. 3 Benson v Whittam (1831) 5 Sim 22 at 30; 58 ER 246 at 249; Thorp v Owen (1843) 2 Hare 607 at 616; 67 ER 250 at 254; Re Brace; Gurton v Clements [1954] 2 All ER 354; [1954] 1 WLR 955. Compare Re Richardson; Richardson v Richardson [1904] 2 Ch 777. See also [430-105], [430250]. 4 Re Brace; Gurton v Clements [1954] 2 All ER 354; [1954] 1 WLR 955; Hammond v Hammond (2007) 13 BPR 24,619; [2007] NSWSC 106; BC200700733 at [23] per Young CJ in Eq. 5 Muschinski v Dodds (1985) 160 CLR 583 at 605-6 per Brennan J, at 624-5 per Dawson J; 62 ALR 429 at 444-5 per Brennan J, at 459 per Dawson J; BC8501051; Re Boning [1997] 2 Qd R 12 at 22, 23; BC9605460 per White J. See [430-80]. 6 Re Oliver; Newbald v Beckitt [1886-90] All ER Rep 810 at 812; (1890) 62 LT 533 at 535; Re Potter [1970] VR 352. See also [430-70]. 7 Egerton v Earl Brownlow (1853) 4 HL Cas 1; [1843-60] All ER Rep 970; (1853) 10 ER 359. This result would follow if the condition were a condition subsequent, whether the property was realty or personalty. It would also follow if the condition were a condition precedent and either the property was realty (see Re Turton; Whittington v Turton [1926] Ch 96; [1925] All ER Rep 340), or the property was personalty and none of the circumstances referred to in note 8 below applied. 8 This result would follow where a gift of personalty by will was subject to a condition precedent which could not be satisfied because: (1) satisfaction of it had been made impossible by the testators conduct (see Darley v Langworthy (1774) 3 Bro Parl Cas 359; 1 ER 1369); (2) it was already impossible, to the testators knowledge, when it was imposed (see Re Wolffes Will Trusts; Shapley v Wolffe [1953] 2 All ER 697; [1953] 1 WLR 1211); or (3) when the will was made, it was impossible by operation of law (Re Thomass Will Trusts; Powell v Thomas [1930] 2 Ch 67; (1930) 144 LT 64). 9 Re Oliver; Newbald v Beckitt [1886-90] All ER Rep 810 at 812; (1890) 62 LT 533 at 535. See also Anon (1704) 2 Freem Ch 278; 22 ER 1209; Wright v Wilkin (1860) 2 B & S 232; 121 ER 1060

(affirmed Wright v Wilkin (1862) 2 B & S 260; 121 ER 1070). 10 Re Oliver; Newbald v Beckitt [1886-90] All ER Rep 810 at 812; (1890) 62 LT 533 at 535; Re Boning [1997] 2 Qd R 12 at 21, 22; BC9605460 per White J. As to trusts compared to equitable charges see [430-70]. 11 For example: upon the express condition construed as creating a trust (see Wright v Wilkin (1860) 2 B & S 232; 121 ER 1060 (affirmed Wright v Wilkin (1862) 2 B & S 260; 121 ER 1070)) and construed as creating a charge: Re Kirk; Kirk v Kirk (1882) 21 Ch D 431, CA. As to the words upon the condition that being construed as imposing a personal equitable obligation of the kind referred to in [430-80] see Re Boning [1997] 2 Qd R 12 at 21-2; BC9605460 per White J. As to the words upon this express condition being read as meaning upon these express terms see Wright v Wilkin (1860) 2 B & S 232; 121 ER 1060. As to an alternative approach see Anon (1704) 2 Freem Ch 278; 22 ER 1209; Wigg v Wigg (1739) 1 Atk 382 at 383; 26 ER 244 at 245; Re Kirk; Kirk v Kirk (1882) 21 Ch D 431 at 435-6 per Fry J. 12 Attorney-General v Cordwainers Co (1833) 3 My & K 534; 40 ER 203; Jack v Burnett (1846) 12 Cl & Fin 812; 8 ER 1632. 13 King v Denison (1813) 1 Ves & B 260 at 272-3, 279; 35 ER 102 at 106-7, 109; Re West; George v Grose [1900] 1 Ch 84. 14 Pearce v Wright (1926) 39 CLR 16. The paragraph below is current to 20 April 2012

[430-80] Trust and personal equitable obligation There can be a conditional gift of a kind that vests property in the donee on the basis of the assumption by the donee of a personal obligation to bestow specified benefits on a third party, but that is not classified as a trust1 or as an equitable charge2 or as a gift subject to a forfeiture condition.3 Where the gift is interpreted as giving rise to a personal equitable obligation of the donee that becomes binding upon the donees acceptance of the gift, the property vested in the donee is not burdened with the obligation to the third party; and so, if the obligation is not duly complied with by the donee, there is no forfeiture of the property given to him or her but the third party has an equitable claim enforceable against the donee personally.4 Where a personal equitable obligation is found to be imposed on the donee of property, the terms of the gift may also be interpreted as creating a charge over the property.5 This additional element makes the arrangement superficially very like a trust but there are still essential differences. One difference is that, to the extent that the property charged is insufficient, or if there is no charge on the property, the donee is personally liable to satisfy the third partys entitlement, whereas a trustee (assuming there has been no breach of trust) is not.6 The other principal difference is that, subject only to satisfaction of the charge, the full beneficial ownership of the property is vested in the donee,7 whereas a trustee is not usually given any interest in the surplus remaining after satisfaction of the beneficiarys entitlement.8

Notes 1 See [430-70], [430-75]. 2 See [430-70]. See also Re Lester; Lester v Lester [1942] Ch 324; [1942] 1 All ER 646. 3 Gill v Gill (1921) 21 SR (NSW) 400. As to forfeiture conditions see [430-75].

4 Messenger v Andrews (1828) 4 Russ 478 at 483; [1824-34] All ER Rep 651 at 652-3; (1828) 38 ER 885 at 887; Gregg v Coates (1856) 23 Beav 33 at 38-9; 53 ER 13 at 15; Rees v Engelback (1871) LR 12 Eq 225 at 237; 40 LJ Ch 382; 24 LT 417; Re Williames [1881-85] All ER Rep 1009; (1885) 54 LT 105, CA; Re Williams; Williams v Williams [1897] 2 Ch 12 at 19 per Lindley LJ, CA; Re McMahon; McMahon v McMahon [1901] 1 IR 489, CA(Ireland); Duffy v Duffy [1920] 1 IR 122, CA(Ireland); Gill v Gill (1921) 21 SR (NSW) 400 at 406-7; Jay v Jay [1924] 1 KB 826; (1924) 130 LT 667; Countess of Bective v FCT (1932) 47 CLR 417 at 418-19; 6 ALJ 110; [1932] ALR 362; (1932) 2 ATD 80; Re Hodge; Hodge v Griffiths [1940] Ch 260 at 264; Re Lester; Lester v Lester [1942] Ch 324; [1942] 1 All ER 646; Re Hyne; Queensland Trustees v Marsland [1958] Qd R 431 at 446; Muschinski v Dodds (1985) 160 CLR 583 at 605-6 per Brennan J, at 624-5 per Dawson J; 62 ALR 429 at 444-5 per Brennan J, at 459 per Dawson J; BC8501051; Williams v Legg (1993) 29 NSWLR 687, CA(NSW); Re Boning [1997] 2 Qd R 12 at 22; BC9605460; Clay v Clay (2001) 202 CLR 410 at 430-1; 178 ALR 193; [2001] HCA 9; BC200100262, Full Court; Hammond v Hammond (2007) 13 BPR 24,619; [2007] NSWSC 106; BC200700733; Evans v Evans [2011] NSWCA 92; BC201102303 at [117] per Campbell JA. 5 Welby v Rockcliffe (1830) 1 Russ & My 571; 39 ER 219. As to an example of express rejection of that interpretation see Re Lester; Lester v Lester [1942] Ch 324; [1942] 1 All ER 646. As to trusts compared with equitable charges see [430-70]. 6 Re Cowley; Souch v Cowley (1885) 53 LT 494. 7 Re Oliver; Newbald v Beckitt [1886-90] All ER Rep 810; (1890) 62 LT 533. 8 King v Denison (1813) 1 Ves & B 260 at 272-3, 279; 35 ER 102 at 106-7, 109; Re West; George v Grose [1900] 1 Ch 84. The paragraph below is current to 20 April 2012

[430-85] Trusts for statutory purposes An entity created by statute may be required to perform some of the functions of a trustee, as in the case of a corporation charged with the duty of investing superannuation fund money.1 Such an arrangement is not a trust for persons but for statutory purposes.2 The trust is to be ascertained from a construction of the statute.3 The important distinction to be made is that between an equitable obligation enforceable as such and circumstances in which the Crown administers property in the exercise of governmental functions.4 The duty of the individual corporators will vary according to the statute pursuant to which they hold office.5 The principal beneficiary under a statutory trust may be the Commonwealth or State government itself,6 in which case at no time will any person or body politic be absolutely entitled to the fund.7 Notes 1 Fouche v Superannuation Fund Board (1952) 88 CLR 609; 25 ALJ 778; Superannuation Fund Investment Trust v Cmr of Stamps (SA) (1979) 145 CLR 330; 26 ALR 99; 53 ALJR 614. 2 Fouche v Superannuation Fund Board (1952) 88 CLR 609 at 640; 25 ALJ 778; Harmer v FCT (1991) 173 CLR 264 at 274; 104 ALR 117 at 123; Andrew Garrett Wine Resorts Pty Ltd v National Australia Bank Ltd (No 7) (2005) 227 ALR 113; 243 LSJS 20; [2005] SASC 455; BC200510466 at [33] per Gray J. Compare the majority decision in Registrar of Accident Compensation Tribunal v Cmr of Taxation (Cth) (1993) 178 CLR 145; 117 ALR 27; 67 ALJR 922 that the compensation money in question was trust money in the ordinary sense and subject to the legislative provisions was to be administered in accordance with the general law of trusts. See also the minority opinion, (ALR) at 57, 58 per Brennan CJ, Dawson and McHugh JJ, that no fiduciary duty was involved, that the duty of the registrar to invest and to apply the compensation money was governed exhaustively by statute, and that there was no trust estate for income tax purposes.

3 Superannuation Fund Investment Trust v Cmr of Stamps (SA) (1979) 145 CLR 330 at 362; 26 ALR 99 at 122-3; 53 ALJR 614 per Aickin J; R v Toohey; Ex parte A-G (NT) (1980) 145 CLR 374 at 387; 28 ALR 27 at 36 per Stephen, Mason, Murphy and Aickin JJ. See also Tito v Waddell (No 2) [1977] Ch 106 at 216-17; [1977] 3 All ER 129 at 221; [1977] 2 WLR 496 at 597 per Megarry VC. 4 New South Wales v Commonwealth (Garnishee Case) (No 3) (1932) 46 CLR 246 at 260; 6 ALJ 41; Tito v Waddell (No 2) [1977] Ch 106 at 211; [1977] 3 All ER 129 at 216-17; [1977] 2 WLR 496 at 582. Compare Registrar of Accident Compensation Tribunal v Cmr of Taxation (Cth) (1993) 178 CLR 145; 117 ALR 27; 67 ALJR 922; Wellington Harness Racing Club Inc v Hutt City Council [2004] 1 NZLR 82 at [58]-[67] per Hammond J, HC(NZ). 5 See Fouche v Superannuation Fund Board (1952) 88 CLR 609 at 641; 25 ALJ 778 (it was not decided whether the corporators were to be regarded as trustees but it was held that their duty did not differ materially from that imposed upon trustees in relation to investment); Superannuation Fund Investment Trust v Cmr of Stamps (SA) (1979) 145 CLR 330 at 341-2; 26 ALR 99 at 106-7; 53 ALJR 614 per Stephen J (observation that the members of the Trust were given extremely wide investment powers which extend far beyond conventional trustee investments and that little importance could be attached to the use of the word Trust to describe the statutory corporation. Rather, there was no true analogy between that statutory trust and the position of a trustee in a privately constituted trust). 6 Superannuation Fund Investment Trust v Cmr of Stamps (SA) (1979) 145 CLR 330 at 354, 364; 26 ALR 99 at 116, 124; 53 ALJR 614 per Mason and Aickin JJ respectively. 7 Superannuation Fund Investment Trust v Cmr of Stamps (SA) (1979) 145 CLR 330 at 364; 26 ALR 99 at 124; 53 ALJR 614 per Aickin J. The paragraph below is current to 20 April 2012

[430-90] Trusts and body corporate A body corporate may, unless precluded by its constitution or by law, hold property on trust.1 However, the property vested in it for its corporate purposes is not held in trust for its members,2 and where its constitution restricts it to applying its property only for specified purposes it is fallacious to interpret a disposition of property to it as a disposition on trust for those purposes.3 Notes 1 As to powers of a corporation see generally corporations [120-3015]. 2 Short v Treasury Cmrs [1948] 1 KB 116 at 122; [1947] 2 All ER 298 at 301 per Evershed LJ, CA; Bank voor Handel en Scheepvaart NV v Slatford [1952] 1 All ER 314 (reversed on appeal on another point Bank voor Handel en Scheepvaart NV v Administrator of Hungarian Property [1954] AC 584; [1954] 1 All ER 969; [1954] 2 WLR 867); Charles v FCT (1954) 90 CLR 598 at 609; [1954] ALR 405; BC5400370; Liverpool and District Hospital for Diseases of the Heart v A-G [1981] Ch 193; [1981] 1 All ER 994; [1981] 2 WLR 379. 3 Bowman v Secular Society Ltd [1917] AC 406 at 440; [1916-17] All ER Rep 1 per Lord Parker; Re Pyke; Perpetual Executors and Trustees Assn of Australia Ltd v Pyke [1974] VR 788. See also Sydney Homoeopathic Hospital v Turner (1959) 102 CLR 188 at 220-1; 33 ALJR 27; [1959] ALR 782; Sir Moses Montefiore Jewish Home v Howell and Co (No 7) Pty Ltd [1984] 2 NSWLR 406.

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(C) Classification of Trusts The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-95] Express trusts and trusts arising by operation of law Trusts are either: (1) express trusts, being those created by the intentional act1 of the settlor or testator, or imposed by statute;2 or (2)

trusts arising by operation of law (other than those imposed by statute) sometimes referred to as implied trusts, and comprising resulting3 and constructive trusts.4 The distinction between express trusts, and resulting and constructive trusts remains important in relation to the formal requirements for the creation of interests in land which apply in respect of express trusts but not in respect of resulting and constructive trusts imposed by statute in each of the jurisdictions.5 That distinction, however, is not now, with the exception of South Australia, relevant as a basis for determining the application of limitation periods for the commencement of actions against trustees.6 Notes 1 As to the various ways in which the necessary intention may be manifested see [430-215].2 For example, the assets of a person dying intestate are expressly made subject to trust for the payment of debts and distribution to those entitled: (ACT) Administration and Probate Act 1929 s 45 (NT) Administration and Probate Act 1969 s 62 (QLD) Succession Act 1981 s 38 (limited to partial intestacy) (SA) Administration and Probate Act 1919 s 72C (VIC) Administration and Probate Act 1958 s 38 (WA) Administration Act 1903 s 13. There are no equivalent provisions in New South Wales and Tasmania. 3 As to resulting trusts see [430-500]-[430-560].4 As to constructive trusts see [430-565]-[430675].5 See [430-230].6 See [430-5550]. The paragraph below is current to 20 April 2012 [430-100] Executed and executory trusts Express trusts may be either executed or executory.1 When applied to trusts these terms refer to the manner in which a trust is constituted and not to the question whether a duly created trust has been, or is yet to be, performed.2 A trust is executed, in this sense, where the details of the respective interests which the beneficiaries are to take are specified in the instrument or declaration creating it,3 even if the creator has directed that a more formal settlement is to be prepared embodying those details.4 A trust is executory where the instrument or declaration does not specify fully or with precision the details of the interests it creates, and therefore requires the subsequent execution of an instrument defining those interests.5 The distinction has an important bearing on the interpretation of trusts. 6 In the case of an executed trust, technical words will be strictly construed.7 In the case of an executory trust the court considers the whole instrument in order to ascertain the real intention with which the trust was created, and need not give the words used their technical legal meaning.8 Notes 1 As an example of both see Re Beresford-Hope; Aldenham v Beresford-Hope [1917] 1 Ch 287 . As to an example of the difficulty of determining whether an intended trust is executed or executory see Jervoise v Duke of Northumberland (1820) 1 Jac & W 559; 37 ER 481.2 In some cases, while applying the term executory in this special sense, courts have recognised that in another sense every trust is executory, as it has to be executed or carried out by the trustee: Bellamy v Burrow (1735) Cas temp Talb 97 at 108; 25 ER 684 at 688 per Lord Talbot LC ;

Jervoise v Duke of Northumberland (1820) 1 Jac & W 559 at 570-1; 37 ER 481 at 485 per Lord Eldon LC; Egerton v Earl Brownlow (1853) 4 HL Cas 1 at 61, 210; [1843-60] All ER Rep 970; (1853) 10 ER 359 at 384, 442 per Lord St Leonards ; Sackville-West v Viscount Holmesdale (1870) LR 4 HL 543 at 571; 39 LJ Ch 505 per Lord Cairns.3 Lord Glenorchy v Bosville (1733) Cas temp Talb 3 at 19; 25 ER 628 at 634-5 per Lord Talbot LC. When the creator of a trust can be said to have been his or her own conveyancer in defining it, the trust will be classed as executed: Franks v Price (1840) 3 Beav 182; 49 ER 72; Egerton v Earl Brownlow (1853) 4 HL Cas 1 at 61, 210; [1843-60] All ER Rep 970; (1853) 10 ER 359 at 384, 442 per Lord St Leonards ; Doncaster v Doncaster (1856) 3 K & J 26; 69 ER 1007; Fullerton v Martin (1860) 1 Drew & Sm 31; 62 ER 290. A trust or bequest of personal estate to be enjoyed with and go with the title to a peerage is classed as executed: Re Johnston; Cockerell v Earl of Essex (1884) 26 Ch D 538 .4 Egerton v Earl Brownlow (1853) 4 HL Cas 1 at 61, 210; [1843-60] All ER Rep 970; (1853) 10 ER 359 at 384, 442 per Lord St Leonards .5 Lord Glenorchy v Bosville (1733) Cas temp Talb 3 at 19; 25 ER 628 at 634-5 per Lord Talbot LC; Bagshaw v Spencer (1748) 1 Wils 238; 95 ER 594; Sackville-West v Viscount Holmesdale (1870) LR 4 HL 543 at 571-3; 39 LJ Ch 505 per Lord Cairns; Miles v Harford (1879) 12 Ch D 691 at 699 ; Davis v Richards & Wallington Industries Ltd [1991] 2 All ER 563 at 588; [1990] 1 WLR 1511 at 1537 .6 See [430345].7 Sexton v Horton (1926) 38 CLR 240; 27 SR (NSW) 340; [1926] ALR 373 (following Re Bostocks Settlement; Norrish v Bostock [1921] 2 Ch 469; [1921] All ER Rep 125 CA, and overruling Hunt v Korn (1917) 24 CLR 1; 18 SR (NSW) 127; 24 ALR 45 ). Compare Re Lorking (1924) 25 SR (NSW) 46 at 50, 51 .8 The court is said to exercise a large authority in subordinating the language to the intent: Sackville-West v Viscount Holmesdale (1870) LR 4 HL 543 at 565; 39 LJ Ch 505 per Lord Westbury. See also [430-345] and Pass v Mills (1886) 7 LR (NSW) Eq 34 ; Hogarth v Hogarth (1894) 15 LR (NSW) Eq 93; Re Bostocks Settlement; Norrish v Bostock [1921] 2 Ch 469; [1921] All ER Rep 125 , CA; Sexton v Horton (1926) 38 CLR 240; 27 SR (NSW) 340; [1926] ALR 373 . The paragraph below is current to 20 April 2012 [430-105] Precatory trusts A precatory trust is a trust established by precatory words such as expressions of confidence, request, prayer or desire that particular property will be applied for the benefit of a definite person or object, where those words are construed as imperatively constituting a trust.1 Thus the term precatory trust merely refers to the nature of the language by which some trusts are created, and does not designate a separate category of trusts with special characteristics.2 The term has therefore been described as a misleading nickname,3 the real position being that the court in each case decides, by interpreting the precatory words in the context of the whole instrument, whether a gift which is in its terms absolute is in fact intended to create a trust.4 Since the late nineteenth century the courts have been reluctant to find that precatory words create a trust,5 but there have continued to be cases where it has been held that a trust was intended.6 Notes 1 Knight v Knight (1840) 3 Beav 148 at 171-5; 9 LJ Ch 354; 49 ER 58 at 67-9 .2 As to the significance of precatory words in determining whether a trust is created see generally [430250].3 Re Williams; Williams v Williams [1897] 2 Ch 12 at 27 per Rigby LJ , CA.4 Re Sanson; Sanson v Turner (1896) 12 TLR 142. See also [430-250].5 Re Oldfield; Oldfield v Oldfield [1904] 1 Ch 549 , CA; Strickland v Strickland (1907) 7 SR (NSW) 657; 24 WN (NSW) 163a ; Dean v Cole (1921) 30 CLR 1 ; Re Hill; Public Trustee v ODonnell [1923] 2 Ch 259 ; Re Johnson; Public Trustee v Calvert [1939] 2 All ER 458 ; McPhee v Saunders (1940) 57 WN (NSW) 101 ; Re Favell (1971) 2 SASR 246 . See also [430-250] note 4. For the earlier approach of the courts see [430-250] note 3.6 Comiskey v Bowring-Hanbury [1905] AC 84 , HL; Re Burley; Alexander v Burley [1910] 1 Ch 215 ; Gunther v Cmr of Stamp Duties (1932) 33 SR (NSW) 95 ; Re Stable (decd); Legacy Club of Brisbane v Marston [1957] St R Qd 90 ; Hayes v National Heart Foundation of Australia, New South Wales Division [1976] 1 NSWLR 29 ; Re Harding (decd); Gibbs v Harding [2007] 1 All ER 747; [2007] EWHC 3 (Ch) at [8]-[12] per Lewison J .

See also Re Steeles Will Trusts; National Provincial Bank Ltd v Steele [1948] Ch 603; [1948] 2 All ER 193 (decided in favour of there being a trust, on the basis that the language used in the instrument was identical with that in a case which had stood for many years, namely Shelley v Shelley (1868) LR 6 Eq 540; 37 LJ Ch 357). The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation [430-110] Secret trusts A secret trust is created where property passes to a person, under the will or upon the intestacy of another, apparently absolutely or upon an incompletely defined trust, but there has been an undertaking by that person, or an understanding between him or her and the deceased, not complying with the formalities required by statute for the establishment of an enforceable interest,1 that the property is to be held or applied for the benefit of some other person or object.2 Secret trusts have frequently been enforced notwithstanding non-compliance with statutory requirements and dependence on evidence which those requirements would exclude.3 The earlier judicial statements tended to indicate that secret trusts are upheld on the principle that equity does not allow a statute to be used as an instrument of fraud, but there are no definitive decided cases as to the nature of this fraud.4 The more recently favoured alternative approach of the courts appears to be that the trust flows not from the will itself but from the effect on the conscience of the person who has acquiesced,5 so that the trust operates outside the will, changing nothing that is written in it, and allowing it to operate according to its tenor but then fastening a trust on to the property in the hands of the recipient.6 There remains uncertainty as to whether secret trusts should be classified as express or constructive trusts.7 Notes 1 See [430-230].2 McCormick v Grogan (1869) LR 4 HL 82 at 88-9; 17 WR 961 per Lord Hatherley LC; Re Stead; Witham v Andrew [1900] 1 Ch 237 at 240-1 per Farwell J . As to intestacy see Re Gardner; Huey v Cunnington [1920] 2 Ch 523 , CA. As to secret trusts generally see [430-350]-[430-375].3 See [430-350], [430-355], [430-375].4 For a summary of the divergent views of commentators on these matters see Cope M, Constructive Trusts, LBC, Sydney, 1992 at 523.5. See also Blackwell v Blackwell [1929] AC 318 at 333-40; [1929] All ER Rep 71 per Lord Summer (rejection of the assumption that the fraud doctrine involves the premise that evidence as to the existence, or as to the terms, of a secret trust is admitted contrary to the provisions of the (UK) Wills Act 1837 s 9, and treated the doctrine of secret trusts as depending on communication of the testators purpose to the legatee, coupled with the acquiescence or promise of the legatee, and as being governed by the law of trusts and outside the ambit of the probate laws); Brown v Pourau [1995] 1 NZLR 352 at 368 per Hammond J , HC(NZ).5 Ledgerwood v Perpetual Trustee Co Ltd (1997) 41 NSWLR 532 at 536 . See also Cullen v A-G (Ireland) (1866) LR 1 HL 190 at 198 per Lord Westbury; Blackwell v Blackwell [1929] AC 318 at 339; [1929] All ER Rep 71 per Lord Summer ; Re Snowden (decd) [1979] Ch 528; [1979] 2 All ER 172; [1979] 2 WLR 654 .6 Re Snowden (decd) [1979] Ch 528 at 535; [1979] 2 All ER 172 at 177; [1979] 2 WLR 654 at 660 .7 The classification of secret trusts as express or constructive is significant as to the question whether writing is required for the creation of a trust in respect of land, as to which see [430-230], [430-375]. See also Re Baillie (1886) 2 TLR 660 (half-secret trust of land was classified as an express trust and held invalid for lack of writing); Ottaway v Norman [1972] Ch 698; [1971] 3 All ER 1325; [1972] 2 WLR 50 (a fully secret trust of land, without writing, was classified as a constructive trust and held valid). See also Stickland v Aldridge (1804) 9 Ves 516; 32 ER 703 ; Brown v Pourau [1995] 1 NZLR 352 at 368 ; Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; 100 LGERA 383; 157 ALR 414 at 424; 72 ALJR 1470 , HC of A, Full Court. Notwithstanding these decisions, most commentators reject the proposition that the classification of secret trusts as express or constructive should depend on whether a trust is fully secret or half-secret (see Cope M,

Constructive Trusts, LBC, Sydney, 1992, pp 523-5). As to the distinction between fully secret and half-secret trusts see [430-350], [430-375]. See also [430-660]. The paragraph below is current to 20 April 2012 [430-115] Voluntary trusts A voluntary trust is a trust created for no valuable consideration and is not enforceable unless it has been completely constituted.1 Generally, unless the consideration is plainly illusory,2 the court does not inquire into its adequacy and treats the trust as made for value.3 Marriage by itself, without any further consideration, can constitute a valuable consideration.4 Notes 1 See [430-310], [430-315].2 Kelson v Kelson (1853) 10 Hare 385; 68 ER 976 .3 Townend v Toker (1866) LR 1 Ch App 446; [1861-73] All ER Rep Ext 2221; (1866) 35 LJ Ch 608.4 Ex parte Marsh (1744) 1 Atk 158; 26 ER 102. As to the spouses and issue within the marriage consideration see Re Cooks Settlement Trusts; Royal Exchange Assurance v Cook [1965] Ch 902 at 915-17; [1964] 3 All ER 898 at 904-5; [1965] 2 WLR 179 at 185-7 per Buckley J .

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(D) Courts and Procedure Generally (I) Supreme Courts and Federal Court The paragraph below is current to 20 April 2012 [430-120] Jurisdiction Matters of trust (including costs) generally fall within the jurisdiction of the equity division, if any, of each State and Territory Supreme Court.1 Trust matters may, however, also arise incidentally in other (including Federal) jurisdictions, particularly in courts dealing to any extent in commercial matters. Trust matters arising incidentally in this way usually take the form of constructive or resulting trusts. Matters of trust may arise within the accrued jurisdiction of the Federal Court of Australia, General Division, for example, if they form part of a single justiciable controversy, an integral part of which falls within the courts expressed jurisdiction.2 Matters of trust can also be the subject of transfer between State and Territory Supreme Courts and the

Federal Court of Australia pursuant to cross-vesting legislation.3 Superior courts exercising the above equitable jurisdiction are able to exercise the powers conferred by the various State and Territory Trustee Acts such as those involving appointment and removal of trustees,4 payment in court,5 judicial advice,6 relief from liability, 7 administration proceedings,8 accounts and enquiries, and variation of trust9 and vesting orders.10 In addition to the jurisdiction conferred on it by statute in trust matters, a superior court has a limited inherent jurisdiction to alter the terms of trusts,11 and in exercise of its inherent jurisdiction may intervene in the management and administration of a trust where, for instance, there is no trustee to carry it on or the trustee refuses to act and, where expedient, the court may order the trust fund to be paid into court.12 Notes 1 Various provisions of the State and Territory Supreme Court Acts make differing provision for the concurrent administration of law and equity in those courts, the prevalence of equity over law and the enforceability of all relevant equitable rights and defences: see generally equity [185-15], courts and judicial system.2 Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261; 49 ALR 193; 57 ALJR 731; 1 IPR 193 per Mason, Brennan and Deane JJ ; Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR 457; 31 ALR 161; 54 ALJR 479 ; Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457; 33 ALR 465; 55 ALJR 120 ; Fencott v Muller (1983) 152 CLR 570; 46 ALR 41; 57 ALJR 317 ; Parsons v Martin (1984) 5 FCR 235; 58 ALR 395 at 400-1 . As to the Federal Court of Australia generally see courts and judicial system [125-1085]-[125-1195].3 The legislation is substantially identical in each Australian jurisdiction, and each Act bears the same title: see courts and judicial system [125185], [125-190].4 See [430-3360]-[430-3430] (appointment of trustees), [430-3635]-[430-3665] (removal of trustees).5 See [430-3840]-[430-3860].6 See [430-5055]-[430-5085].7 See [4305520]-[430-5545].8 See [430-5205].9 See [430-5110]-[430-5200].10 See [430-3485]-[4303550].11 See [430-5115].12 See [430-5215]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-125] Application under the Trustee Acts Procedures for applications to State or Territory Supreme Courts under the Trustee Acts vary slightly between jurisdictions. In most jurisdictions such applications are made by summons. In New South Wales and Tasmania special procedures are applicable to Trustee Act applications under the rules of court.1 In South Australia application to the Supreme Court under (SA) Trustee Act 1936 may be made by summons or petition and supported by evidence by affidavit or otherwise.2 In other jurisdictions where no specific procedure is prescribed, applicants should use the form required by the applicable court rules for applications to the court under statute.3 Notes 1 (NSW) Uniform Civil Procedure Rules 2005 Pt 55 (TAS) Supreme Court Rules 2000 r 90. 2 (SA) Trustee Act 1936 s 90(1).3 (ACT) Court Procedures Rules 2006 Pt 2.2 (NT) Supreme Court Rules r 4.05(b) (QLD) Uniform Civil Procedure Rules 1999 Ch 2 Pt 1

(VIC) Supreme Court (General Civil Procedure) Rules 2005 r 4.05(b) (WA) Rules of the Supreme Court O 5. English authority suggests that an application by summons is not the proper procedure for determining whether trustees ought to be excused under the Trustee Acts from a breach of trust if it is disputed whether the trustees have acted honestly and reasonably (see [430-5520]-[4305545]) and the beneficiaries object to the procedure: Re Doves Will Trusts; Hedley v Dove [1939] WN 230. Evidence may in general be given by affidavit: see evidence. As to service of originating process see practice and procedure [325-2030]-[325-2080]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-130] Determination of question without execution A trustee or a beneficiary may bring an action in the Supreme Court for the determination of any question or for any relief which could be determined or granted in an action for the execution of a trust under the courts direction, and a claim need not be made for the execution under the courts direction of the trust in connection with which the question arises or the relief is sought.1 The questions which may be so determined include any question:2 (1) arising in the execution of the trust; (2) as to the composition of any class of persons having a beneficial interest in any property subject to a trust; or (3) as to the rights or interests of a person claiming to be beneficially entitled under a trust. Questions such as the principles determining entitlement to distribution of a fund and associated issues of construction of the relevant instrument or instruments generally arise between the beneficiaries. However, proceedings can be instituted for relief against trustees, seeking orders directing a trustee to furnish or verify accounts, to pay funds of the trust into court or to do or abstain from doing any act. The courts jurisdiction under the relevant rule is still confined to what could have been obtained in an administration action.3 It does not extend to deciding questions against parties with adverse claims, except by consent of the beneficiaries.4 Under this rule a judge has jurisdiction to entertain an application by trustees to approve of and authorise an act which, apart from such approval and authority, would be a breach of trust, and an order made approving and authorising such an act cannot, except by appeal, be challenged on the ground that, the act being a breach of trust, the order is made without jurisdiction.5 Notes 1 (ACT) Court Procedures Rules 2006 r 35 (NT) Supreme Court Rules r 54.02 (SA) Supreme Court Civil Rules 2006 r 83

(TAS) Supreme Court Rules 2000 r 90 (VIC) Supreme Court (General Civil Procedure) Rules 2005 r 54.02 (WA) Rules of the Supreme Court O 58 r 2. There are no equivalent provisions in New South Wales and Queensland. In order to enable questions of law or construction to be dealt with expeditiously, proceedings are normally brought by an originating summons returnable in chambers. In some jurisdictions this procedure is expressly stated to extend to claims based on allegations of breach of trust, wilful default or other misconduct and hence fraud: (NT) Supreme Court Rules r 54.04 (TAS) Supreme Court Rules 2000 r 90 (VIC) Supreme Court (General Civil Procedure) Rules 2005 r 54.05. In New South Wales a claim based on an allegation of fraud must be commenced by statement of claim ((NSW) Uniform Civil Procedure Rules 2005 r 6.3) and particulars must be given: ibid r 15.3; Re 452 Green Lane Ilford; Gooding v Borland [1971] 1 All ER 315; [1971] 1 WLR 138. Where evidence of fraud emerges in the course of proceedings commenced by summons, the court may make an order under (NSW) Uniform Civil Procedure Rules 2005 r 6.6 that the proceedings continue on pleadings: Re Deadman; Smith v Garland [1971] 2 All ER 101; [1971] 1 WLR 426 . In the Australian Capital Territory, Queensland and Western Australia where no express provision is made for claims involving fraud or breach of trust the authorities applicable to (UK) Rules of the Supreme Court 1965 (repealed) O 55 r 1 suggest that in proceedings of a contentious nature (such as breach of trust) where the charge by the beneficiaries against the trustee can be specified with some precision and there is likely to be a substantial dispute of fact, the proceedings should be commenced by statement of claim so that the trustee will have available for him or her full machinery for discovering precisely the charges against him or her: Re Sir Lindsay Parkinson & Co Ltd Settlement Trusts; Bishop v Smith [1965] 1 All ER 609n; [1965] 1 WLR 372 (this principle may also be applicable if the procedure in the former Supreme Court Rules R 63.04 is used as an alternative to ibid R 103; compare the above (SA) Supreme Court Civil Rules 2006 r 83). See also Re IOOF Australia Trustees Ltd and Australian Tourist Property Trust (1999) 75 SASR 290 at 298; 206 LSJS 60; [1999] SASC 541; BC9908596 per Wicks J . The New South Wales Rules further provide that claims for relief based on any trust other than an express written trust must be commenced by statement of claim: (NSW) Uniform Civil Procedure Rules 2005 r 6.3. 2 Such questions include a dispute or doubt as to the persons entitled to receive payment of the whole or part of a trust fund: Augustus v Permanent Trustee Co (Canberra) Ltd (1971) 124 CLR 245 at 253-8; [1971] ALR 661 . See also Re Cambridge Corp Ltd (unreported, SC(NSW), Powell J, No 5602 of 1989, 29 May 1990); National Mutual Life Nominees Ltd v Equiticorp Financial Services Ltd (in liq) (1991) 3 ACSR 637 (construction of a debenture trust deed and other relevant documents to determine entitlements to distribution of a fund); Phillipson v Downer (1904) SALR 128; Re Stephensons Settled Estates (1906) 6 SR (NSW) 420 at 425; 23 WN (NSW) 153 ; Re Crago; Crago v Crago (1908) 8 SR (NSW) 269; 25 WN (NSW) 91 ; In the Will of Clinton (1910) 10 SR (NSW) 465 ; In the Will of Forrest; Forrest v McWhae [1913] VLR 425; (1913) 19 ALR 414; 35 ALT 73 ; Sanders v Sanders (1914) 15 SR (NSW) 21 ; Norman v Corrigan (1916) 16 SR (NSW) 225 at 231 ; McCarthy v McCarthy (1919) 19 SR (NSW) 122; 36 WN (NSW) 45 ; Templeton v Leviathan Pty Ltd (1921) 30 CLR 34; [1922] VLR 90; (1921) 28 ALR 95 ; Brown v Brown (1924) 24 SR (NSW) 495 ; Meredith v Davis (1933) 33 SR (NSW) 334; 50 WN (NSW) 127 ; Re Bullock; National Trustees, Executors & Agency Co of Australasia v Sanders [1945] VLR 111 . Solicitors may use this rule to obtain directions from the court in relation to trust funds which they hold where they suspect that their client has procured the funds

by fraud: Finers v Miro [1991] 1 All ER 182 .3 Re Davies; Davies v Davies (1888) 38 Ch D 210; 58 LT 312 ; Re Giles; Real and Personal Advance Co v Mitchell (1890) 43 Ch D 391 at 398 ; Hudson v Gray (1927) 39 CLR 473 at 502; 1 ALJ 126 ; Re King; Mellor v South Australian Land and Mortgage Agency Co [1907] 1 Ch 72 at 75 ; Evans v Evans (1910) 10 SR (NSW) 594; 27 WN (NSW) 1636 ; Wilcox v Poole [1974] 2 NSWLR 693 at 698 per Mahoney J . As to administration actions see [430-5205].4 Evans v Evans (1910) 10 SR (NSW) 594; 27 WN (NSW) 1636 ; Hudson v Gray (1927) 39 CLR 473 at 483, 501; 1 ALJ 126 .5 Templeton v Leviathan Pty Ltd (1921) 30 CLR 34; [1922] VLR 90; (1921) 28 ALR 95 per Knox CJ and Starke J ; Re New [1901] 2 Ch 534; [1900-3] All ER Rep 763 . The court may also give directions to trustees to litigate with beneficiaries under the trust: Re Moritz [1960] Ch 251 . Courts generally will not allow two or more sets of costs to successful defendants between whom no conflict of interest could arise in the presentation of their case: Statham v Shephard (No 2) (1974) 23 FLR 244 . A plaintiff wishing to name more interested parties as defendants should inform the various classes of defendants that the members of the class should retain the same solicitor and counsel, as more than one set of costs will be allowed only in exceptional circumstances. It may be appropriate for some defendants to seek a representative order. Costs in a valid application for administration or execution are allowed out of the estate (Trustees Executors and Agency Co Ltd v Hicks (No 2) (1895) 1 ALR 96; 17 ALT 91 ) and should be paid out of the residual estate, and not out of some particular asset of the estate. Costs for an appeal will usually follow the event: Re Barry (decd) [1971] VR 395 . Compare Re Pennington (decd) [1972] VR 869 . For provisions in the trustee legislation see: (NT) Trustee Act 1893 s 41 (NSW) Trustee Act 1925 s 93 (QLD) Trusts Act 1973 s 100 (SA) Trustee Act 1936 s 44 (TAS) Trustee Act 1898 ss 44, 63 (VIC) Trustee Act 1958 s 66 (WA) Trustees Act 1962 s 97. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-135] Application for administration In most jurisdictions a trustee or beneficiary may bring an action in the relevant Supreme Court for the execution of a trust under the courts direction.1 However, an order for the execution of a trust under the courts direction need not be made unless in the courts opinion the questions at issue between the parties cannot properly be determined otherwise than under such an order.2 Notes 1 (NT) Supreme Court Rules r 54.06 (SA) Supreme Court Civil Rules 2006 r 206 (TAS) Supreme Court Rules 2000 rr 90, 607 (VIC) Supreme Court (General Civil Procedure) Rules 2005 r 54.06

(WA) Rules of the Supreme Court O 58 rr 3, 6. 2 (ACT) Court Procedures Rules 2006 r 2700; Re Wilson; Alexander v Calder (1885) 28 Ch D 457; 54 LJ Ch 487 (NT) Supreme Court Rules r 54.06 (SA) Supreme Court Civil Rules 2006 r 206 (TAS) Supreme Court Rules 2000 rr 606, 609 (VIC) Supreme Court (General Civil Procedure) Rules 2005 r 54.06(1) (WA) Rules of the Supreme Court O 58 r 5; Re Blake; Jones v Blake (1885) 29 Ch D 913; 53 LT 302 ; Heydon v Gell (1900) 21 LR (NSW) Eq 265; 17 WN (NSW) 181 . The present rules nevertheless clearly envisage the making of an order for general administration in an appropriate case: Hyman v Permanent Trustee Co of New South Wales Ltd (1914) 14 SR (NSW) 348; 31 WN (NSW) 126 (recurrent difficulties of valuation in a trust for partition); Re Flavelle (decd); Moore v Flavelle [1969] 1 NSWR 361 (numerous long-standing breaches of trust); McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623; 9 ACLR 926 . The court will not embark upon particular enquiries unless it is necessary and proper to do so, whether or not a general order for administration has been made: Sanders v Sanders (1914) 15 SR (NSW) 21 ; Norman v Corrigan (1916) 16 SR (NSW) 225 at 231 . A case where the possible result would be that the whole fund would be spent in costs is not a proper case for an enquiry: Re Customs and Excise Officers Mutual Guarantee Fund; Robson v A-G [1917] 2 Ch 18 at 26-7; (1917) 116 LT 86 . See also Meredith v Davis (1933) 33 SR (NSW) 334; 50 WN (NSW) 127 . The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-140] Parties It is not obligatory for all the beneficiaries to be joined.1 All executors or trustees, however, as the case may be, must be joined either as plaintiffs, or, if they do not consent to being so joined, as defendants.2 Even if all beneficiaries are named as parties, the usual procedure where there are numerous members of the same interest and numerous interests is for orders to be obtained appointing representatives of each interest, with one set of costs being allowed for each interest. Where a trustee company3 would need to be heard in more than one interest and those interests are opposed, a senior officer of the company will usually be appointed to represent one of the interests. If there is no suitable representative for an interest (for example, because the existence of the interest is contingent on a decision on other interests), then the trustee may be asked to make submissions in pursuance of its duty to assist the court.4 Notes 1 (ACT) Court Procedures Rules 2006 r 256 (NT) Supreme Court Rules r 54.03 (NSW) Uniform Civil Procedure Rules 2005 r 7.12 (SA) Supreme Court Civil Rules 2006 r 83 (TAS) Supreme Court Rules 2000 r 605

(VIC) Supreme Court (General Civil Procedure) Rules 2005 r 54.03 (WA) Rules of the Supreme Court O 18 r 14. 2 (ACT) Court Procedures Rules 2006 rr 256-260 (NT) Supreme Court Rules r 54.03 (NSW) Uniform Civil Procedure Rules 2005 r 7.11 (SA) Supreme Court Civil Rules 2006 rr 83, 84 (TAS) Supreme Court Rules 2000 r 605 (VIC) Supreme Court (General Civil Procedure) Rules 2005 r 54.03 (WA) Rules of the Supreme Court O 18. 3 See [430-3085]-[430-3110].4 As to appointment of representatives ad litem for a deceased see Re Hart; Smith v Clarke [1963] NSWR 627 at 630-1; (1962) 80 WN (NSW) 1120 . As to provisions governing service on and orders against trustees and defendants who cannot be found see: (ACT) Trustee Act 1925 s 88 (NT) Trustee Act 1893 s 47 (NSW) Trustee Act 1925 ss 88, 91 (QLD) Trusts Act 1973 s 99 (SA) Trustee Act 1936 s 58 (TAS) Trustee Act 1898 s 51 (VIC) Trustee Act 1958 s 65 (WA) Trustees Act 1962 s 96. As to proceedings concerning persons where mental health questions may arise see: (NT) Trustee Act 1893 s 66 (NSW) Trustee Act 1925 s 89 (SA) Trustee Act 1936 s 85 (VIC) Trustee Act 1958 s 62. There are no equivalent provisions in the other jurisdictions. As to persons with standing to make application see: (ACT) Trustee Act 1925 s 42 (NT) Trustee Act 1893 s 77 (NSW) Trustee Act 1925 s 92

(QLD) Trusts Act 1973 s 98 (SA) Trustee Act 1936 s 90 (TAS) Trustee Act 1898 s 42 (VIC) Trustee Act 1958 s 64 (WA) Trustees Act 1962 s 93. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-145] Service out of the jurisdiction Service outside a State or Territory jurisdiction but within Australia is governed largely by the (CTH) Service and Execution of Process Act 1992.1 Service outside of Australia is covered by the rules of court of the various jurisdictions, and those rules generally require court approval for the service out of the jurisdiction of a writ or an originating summons.2 Notes 1 See practice and procedure [325-2215]. As to service outside a State or Territory jurisdiction but within Australia see generally conflict of laws [85-265]-[85-320], practice and procedure [3252185]-[325-2210]. As to the (CTH) Service and Execution of Process Act 1992 see conflict of laws [85-265]-[85295], practice and procedure [325-2190]-[325-2210]. 2 See practice and procedure [325-2230], conflict of laws [85-325]-[85-395]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-150] Representation In any proceedings in a State or Territory Supreme Court concerning property subject to a trust, the court may appoint one or more persons to represent any person (including an unborn person) or class who is or may be interested in or affected by the proceedings:1 (1) if that person or class or some member of the class cannot be ascertained or found; or (2) it appears expedient in all the circumstances to make the appointment for the purpose of saving expenses. Trustees may sue and be sued on behalf of or as representing the property of which they are trustees, without joining the beneficiaries, and they must, except in prescribed circumstances,2 be

considered as representing the beneficiaries.3 Notes 1 (ACT) Court Procedures Rules 2006 r 259 (NT) Supreme Court Rules r 16.01 (NSW) Uniform Civil Procedure Rules 2005 r 7.6 (SA) Supreme Court Civil Rules 2006 r 84 (TAS) Supreme Court Rules 2000 rr 303, 798 (VIC) Supreme Court (General Civil Procedure) Rules 2005 r 16.01 (WA) Rules of the Supreme Court O 18 r 13. See National Mutual Life Nominees Ltd v Equiticorp Financial Services Ltd (in liq) (1991) 3 ACSR 637 ; Wilcox v Poole [1974] 2 NSWLR 693 ; Templeton v Leviathan Pty Ltd (1921) 30 CLR 34; [1922] VLR 90; (1921) 28 ALR 95 . 2 See [430-5310] (standing to sue for breach of trust), [430-5315] (joining of beneficiaries in trustees action for breach of trust).3 (ACT) Court Procedures Rules 2006 r 256 (NT) Supreme Court Rules r 16.02 (NSW) Uniform Civil Procedure Rules 2005 r 7.9 (SA) Supreme Court Civil Rules 2006 r 83 (TAS) Supreme Court Rules 2000 r 305 (VIC) Supreme Court (General Civil Procedure) Rules 2005 r 16.02 (WA) Rules of the Supreme Court O 18 r 14.

Source

[Halsbury's Laws of Australia]

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(II) Inferior Courts The paragraph below is current to 20 April 2012 [430-155] Jurisdiction and procedure Inferior courts in Australian jurisdictions have limited jurisdiction in respect of equitable matters, including trusts.1 Notes 1 See generally courts and judicial system [125-30]-[125-40].

Source

[Halsbury's Laws of Australia]

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(2) EXPRESS TRUSTS

This chapter was updated by G E Dal Pont LLM (Mich) LLD (Tas) CPA Professor, Faculty of Law, University of Tasmania

(A) Constitution of an Express Trust (I) Creation of Trust The paragraph below is current to 20 April 2012 [430-210] Essentials of an express trust A trust may be created intentionally inter vivos or by will.1 Essentials for a trust to be so created are: (1) property or rights of a kind that can be the subject of a trust;2

(2) a declaration of trust over property or transfer of property on trust by a person legally competent to create a trust;3 (3) certainty of property and objects so that the trust is administratively workable;4 (4) compliance with requirements as to evidence;5 and (5) compliance with the rule against remoteness for preventing interests vesting outside the perpetuity period and compliance with the rule against inalienability of income for longer than the perpetuity period.6 The purported creation of a trust for an illegal purpose or otherwise contrary to public policy is void.7 Also, where the trust is created by transfer of property, the intending settlor must have taken the appropriate steps to effect the transfer so as to completely constitute the trust.8 If all requirements for the creation of a valid trust are satisfied, equity will not allow a trust to fail for lack of a trustee owing to disclaimer or death or another cause.9 Notes 1 Such a trust is an express trust, as to which see [430-95].2 See [430-260].3 As to capacity to create a trust see contract [110-2575]-[110-2940], real property [355-2245]-[355-2278], succession [395-175]-[395-225].4 See [430-280], [430-285]. Except for a limited group of trusts for animals, monuments and fox hunting (see [430-275]) trusts must be directly or indirectly for the benefit of natural or corporate persons who have locus standi to enforce the trust, or must be for charitable purposes so that the Attorney-General has locus standi to enforce the purposes: Re Denleys Trust Deed; Holman v HH Martyn & Co Ltd [1969] 1 Ch 373; [1968] 3 All ER 65; [1968] 3 WLR 457 . As to charitable trusts see charities [75-315]-[75-435].5 See [430-230].6 See [430435].7 See [430-380]-[430-445].8 See [430-225].9 See [430-300], [430-315]. The paragraph below is current to 20 April 2012 [430-215] Ways in which an express trust may be created Express trusts are created in one of two ways:1 (1) by declaration of trust, whereby the settlor (declarant) declares himself or herself to hold the property on trust for a beneficiary, beneficiaries or charitable purpose;2 or (2) by transfer of property by the settlor coupled with an intention to make the transferee the beneficial owner of that property (trust by transfer).3 Notes 1 Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614 at 621-2; [1937] VLR 15;

[1936] ALR 198 per Dixon J ; Commissioner of State Revenue v Lam & Kym Pty Ltd (2004) 10 VR 420; 2004 ATC 5058; [2004] VSCA 204; BC200408032 at [41] per Nettle JA .2 See [430220].3 See [430-225]. The paragraph below is current to 20 April 2012 [430-220] Declaration of trust without transfer of property A person or corporation may at any time create a trust by a declaration to the effect that specified property or an interest in it is or will be held in trust from then on for a specified person or object,1 provided that that person or corporation is capable of disposing of that property, or that interest, by way of trust, and provided that the declaration is made in the proper legal mode.2 As intention prevails over form, 3 a person who purports to declare himself or herself trustee of property may not necessarily have created a trust if he or she continues to exercise personal dominion over the property as if he or she were its beneficial owner.4 Notes 1 An effectual declaration of trust may be made by entries in books of account and memoranda: Stapleton v Stapleton (1844) 14 Sim 186; 60 ER 328 ; Vandenberg v Palmer (1858) 4 K & J 204; 169 ER 85 ; Evans v Jennings (1858) 4 Jur NS 551; Re Glover (1862) 2 John & H 186; 70 ER 1023; Brewster v Prior (1886) 55 LT 771; 3 TLR 205; Patrick v Simpson (1889) 24 QBD 128 ; Re Gompertz Estate; Parker v Gompertz (1910) 55 Sol Jo 76. Compare Morgan v Larivire (1875) LR 7 HL 423; Re Rowe; Jacobs v Hind (1889) 58 LJ Ch 703; 61 LT 581 , CA; Re Cozens; Green v Brisley [1913] 2 Ch 478 . A power of attorney may constitute a declaration of trust: Ex parte Pye; Ex parte Dubost (1811) 18 Ves 140 at 150; [1803-13] All ER Rep 96; (1811) 34 ER 271 at 274 ; Airey v Hall (1856) 3 Sm & G 315; 65 ER 675. Approval of an incomplete draft of a trust instrument does not create a binding trust: Re Sykess Trusts (1862) 2 John & H 415; 70 ER 1120 .2 Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614 at 621-3; [1937] VLR 15; [1936] ALR 198 per Dixon J; DKLR Holding Co (No 2) Pty Ltd v Cmr of Stamp Duties (NSW) (1982) 149 CLR 431; 40 ALR 1; [1982] HCA 14; BC8200057 . Communication to the beneficiary of the making of the declaration is not essential for due constitution of a trust: Middleton v Pollock; Ex parte Elliott (1876) 2 Ch D 104 ; Trustee of the property of New, Prance & Garrard v Hunting [1897] 2 QB 19 , CA. However, the absence of communication can raise a strong inference against the existence of the intention to make an irrevocable appropriation: Re Cozens; Green v Brisley [1913] 2 Ch 478 at 486 . If a person adds money of his or her own to a fund which he or she holds in trust and declares that he or she has done so, it is a valid declaration of trust of that money: Thorpe v Owen (1842) 5 Beav 24; 49 ER 563 ; Gray v Gray (1852) 2 Sim NS 273; 61 ER 345 . As to the proper legal mode of making a declaration see [430-230].3 See [430-240].4 Hughes v Stubbs (1842) 1 Hare 476 at 479; 66 ER 1119 at 1120 per Wigram VC; Hyhonie Holdings Pty Ltd v Leroy [2003] NSWSC 624; BC200303716 at [35], [36] per Young CJ in Eq (affirmed Hyhonie Holdings Pty Ltd v Leroy [2004] NSWCA 72; BC200401205 ). The paragraph below is current to 20 April 2012 [430-225] Creation of trust by transfer of property On a transfer of property, or of an interest in property, which would otherwise vest the full beneficial ownership of that property or that interest in the transferee, trusts may be imposed by the instrument of transfer or by another instrument taking effect at the same time as the transfer.1 A trust may be created by oral declaration by the transferee where the property is a legal interest in personalty, and probably where it is an equitable interest in personalty.2 Though an oral declaration is sufficient for the creation of a trust where the property is a legal or an equitable interest in land, in order to be enforceable such a trust must be manifested and proved by writing.3 Where written evidence is required for a trust to be enforceable, oral evidence, which might be taken into account in establishing that the declaration embodied the intention to create the trust, cannot be relied on to satisfy the statutory requirement of written evidence if the oral evidence augments rather than merely clarifies the

written evidence.4 Notes 1 Secretary, Dept of Social Security v James (1990) 20 ALD 5; 95 ALR 615 at 622 ; Hagan v Waterhouse (1991) 34 NSWLR 308 ; Di Pietro v Official Trustee in Bankruptcy (1995) 59 FCR 470 , Fed C of A, Full Court.2 See [430-230].3 See [430-230].4 Secretary, Dept of Social Security v James (1990) 20 ALD 5; 95 ALR 615 at 624 . The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-230] Statutory formalities for inter vivos trusts Statutory provisions precluding the creation or disposition of an interest in land otherwise than by writing signed by the person creating or disposing of that interest, by his or her agent lawfully authorised in writing, by operation of law or by will,1 cover equitable as well as legal interests in land, but not, it would appear, declarations of trust over land, to which different formality requirements, discussed below, apply.2 A trust of land or any interest in land can be validly constituted by oral declaration but, to be enforceable, is required by statute3 to be manifested and proved by some writing4 signed by a person who is able to declare the trust,5 or by his or her will. What this dictates is that if a trust of land or any interest in land is validly constituted by declaration, or otherwise, without writing, it will exist from that date but will not be enforceable until the required written evidence is in existence.6 It is immaterial when the writing comes into existence7 and it may even be made after bankruptcy provided the trust existed prior to bankruptcy.8 The writing must contain all the material terms of the trust, 9 and the court may uphold a trust on the terms actually contained in the writing even though they indicate a trust narrower in scope than the one claimed to have been created prior to the writing.10 Conversely, writing which predates the declaration and makes no reference to it cannot constitute evidence of declaration,11 whereas writing that postdates the declaration of agreement may be sufficient evidence.12 The statutory requirement that a disposition13 of an equitable interest or trust, whether in respect of realty or personalty,14 subsisting at the time of the disposition, 15 must be in writing signed by the person making the disposition or his or her lawfully authorised agent, or by will,16 seems likely not to affect a declaration of trust which creates such an interest in personalty, but the scope of that requirement has not been clearly determined.17 A trust of a legal interest in personalty (other than leasehold) inter vivos may be created orally18 by assignment or declaration or by any other sufficient indication19 of the intention to create a trust.20 A trust of land or an interest in land may be enforceable notwithstanding the lack of the required written evidence where: (1) it is a resulting, implied or constructive trust;21

(2) the equitable principle that a statute cannot be used as an instrument of fraud can be applied;22 (3) it may be possible to establish an equitable proprietary estoppel preventing the trustee from relying on the absence of written evidence;23 or (4) where a contract is involved, the doctrine of part performance enables the evidentiary requirements to be satisfied other than by the written evidence specified in the relevant statutes.24 Notes 1 (ACT) Civil Law (Property) Act 2006 s 201(1) (NT) Law of Property Act 2000 s 10(1)(a) (NSW) Conveyancing Act 1919 s 23C(1)(a) (QLD) Property Law Act 1974 s 11(1)(a) (SA) Law of Property Act 1936 s 29(1)(a) (TAS) Conveyancing and Law of Property Act 1884 s 60(1)(a) (VIC) Property Law Act 1958 s 53(1)(a) (WA) Property Law Act 1969 s 34(1)(a). 2 See Adamson v Hayes (1973) 130 CLR 276 at 292 per Menzies J, at 297 per Walsh J, at 304 per Gibbs J, at 319, 320 per Stephen J; [1972-73] ALR 1224 (differences in opinion were expressed in the High Court as to whether the provisions referred to in note 1 above apply to a declaration of trust of land or of an interest in land, but there was no decision on that point). Stephen J held that the provisions do not apply to declarations of trust over land, and there is case authority supportive of this approach: Secretary, Dept of Social Security v James (1990) 20 ALD 5; 95 ALR 615 at 622 ; Hagan v Waterhouse (1991) 34 NSWLR 308 at 385-6 per Kearney J ; Equuscorp Pty Ltd v Jimenez (2002) 220 LSJS 252; [2002] SASC 225; BC200204010 at [119] per Besanko J ; Khoury v Khouri (2006) 66 NSWLR 241; [2006] NSWCA 184; BC200605530 at [61] per Bryson JA ; S v P (2006) 198 FLR 1; 35 Fam LR 88; [2006] FamCA 150 at [65] , Full Court. See also Di Pietro v Official Trustee in Bankruptcy (1995) 59 FCR 470 , Fed C of A, Full Court; Forster v Hale (1798) 3 Ves 696 at 707; 30 ER 1226 at 1231-2 per Lord Alvanley (affirmed Forster v Hale (1800) 5 Ves 308 at 315; 31 ER 603 at 606) . This difficulty can be avoided if para (a) formality requirement (see note 1) is read to refer only to legal interests in land (see Baloglow v Konstantinitis (2001) 11 BPR 20,721; [2001] NSWCA 451; BC200107960 at [161]-[183] per Giles JA ; Khoury v Khouri (2006) 66 NSWLR 241; [2006] NSWCA 184; BC200605530 at [48]-[62] per Bryson JA ; see also Thompson v White (2006) 13 BPR 24,537; (2007) NSW ConvR 56-171; [2006] NSWCA 350; BC200610347 at [116][150] per Tobias JA ; Ciaglia v Ciaglia (2010) 269 ALR 175; 14 BPR 27,479; [2010] NSWSC 341; BC201002507 at [51][63] per White J), an approach that also has the merit of consistency with the general statutory provisions that make contracts for the sale of land unenforceable for lack of note or memorandum in writing: (ACT) Civil Law (Property) Act 2006 s 204

(NT) Law of Property Act 2000 s 62 (NSW) Conveyancing Act 1919 s 54A (QLD) Property Law Act 1974 s 59 (SA) Law of Property Act 1936 s 26 (TAS) Conveyancing and Law of Property Act 1884 s 36 (VIC) Instruments Act 1958 s 126 (WA) Law Reform (Statute of Frauds) Act 1962 ((IMP) Statute of Frauds 1677 s 4 approved in amended form). 3 (ACT) Civil Law (Property) Act 2006 s 201(2) (NT) Law of Property Act 2000 s 10(1)(b) (NSW) Conveyancing Act 1919 s 23C(1)(b) (QLD) Property Law Act 1974 s 11(1)(b) (SA) Law of Property Act 1936 s 29(1)(b) (TAS) Conveyancing and Law of Property Act 1884 s 60(1)(b) (VIC) Property Law Act 1958 s 53(1)(b) (WA) Property Law Act 1969 s 34(1)(b). See generally Riddle v Emerson (1682) 1 Vern 108; 23 ER 348; Willis v Willis (1740) 2 Atk 71; 26 ER 443; Addlington v Cann (1744) 3 Atk 141; 26 ER 885 ; Leman v Whitley (1828) 4 Russ 423; 38 ER 864; De Beil v Thomson (1841) 3 Beav 469; 49 ER 184 (affirmed Hammersley v Baron de Biel (1845) 12 Cl & Fin 45 at 63; 8 ER 1312 at 1321 , HL); Tierney v Wood (1854) 19 Beav 330; 2 WR 577; 52 ER 377 ; Kronheim v Johnson (1877) 7 Ch D 60 ; Dye v Dye (1884) 13 QBD 147; 53 LJQB 442; 51 LT 145 , CA; Re Cozens; Green v Brisley [1913] 2 Ch 478 ; Crichton v Crichton (1930) 43 CLR 536; 4 ALJ 170 ; Comptroller of Stamps (Vic) v HowardSmith (1936) 54 CLR 614 at 621-3; [1937] VLR 15; [1936] ALR 198 per Dixon J; Adamson v Hayes (1973) 130 CLR 276; [1972-73] ALR 1224 . See also Perpetual Executors and Trustees Assn of Australia Ltd v Wright (1917) 23 CLR 185; [1917] VLR 372; (1917) 23 ALR 177 ; Ryder v Taylor (1935) 36 SR (NSW) 31 at 51; 53 WN (NSW) 40 ; Wratten v Hunter [1978] 2 NSWLR 367 (voluntary oral declaration of trust made by a person after becoming owner of the land, and not as a condition of the land being transferred to him or her, held unenforceable in the absence of the required written evidence); Khoury v Khouri (2006) 66 NSWLR 241; [2006] NSWCA 184; BC200605530 ; Aileen Pty Ltd v One Hawker Holdings Pty Ltd [2006] VSC 135; BC200601897 at [42], [43] per Williams J (document containing an admission of the trust, signed by the transferee). 4 The required written evidence may comprise a combination of documents capable of being read together and may take a variety of forms: Hagan v Waterhouse (1991) 34 NSWLR 308 ; Secretary, Dept of Social Security v James (1990) 20 ALD 5; 95 ALR 615 at 622 ; Re Strathblaine Estates Ltd [1948] Ch 228 at 230; [1948] 1 All ER 162 at 164 (signed minutes of directors or shareholders meetings); McBlain v Cross (1871) 25 LT 804 (a telegram); Barkworth v Young (1856) 4 Drew 1; 62 ER 1 (an affidavit); Wilson v Dent (1830) 3 Sim 385; 57 ER 1042 (answers to interrogatories); Forster v Hale (1798) 3 Ves 696; 30 ER 1226 (letters).5 The beneficial owner of the relevant property at the time when the declaration is made is the person

able to declare the trust, and a signature by his or her agent will not suffice: Di Pietro v Official Trustee in Bankruptcy (1995) 59 FCR 470 , Fed C of A, Full Court. See also Tierney v Wood (1854) 19 Beav 330 at 336; 2 WR 577; 52 ER 377 at 379-80 ; Kronheim v Johnson (1877) 7 Ch D 60 at 66 ; Ryder v Taylor (1935) 36 SR (NSW) 31 at 51; 53 WN (NSW) 40 ; Grey v IRC [1958] Ch 690 at 709 , CA (affirmed Grey v IRC [1960] AC 1; [1959] 3 All ER 603 ). Compare Perpetual Trustees WA Ltd v Riverwest Pty Ltd [2004] WASC 81; BC200402496 at [178] per Barker J . The signature by the person receiving the property as trustee, where the trust has been established by transfer, is sufficient if the evidence is required for enforcement of the trust against that person: Forster v Hale (1800) 5 Ves 308 at 315; 31 ER 603 at 606 ; Rochefoucauld v Boustead [1897] 1 Ch 196 at 205, 206 , CA; Perpetual Executors and Trustees Assn of Australia Ltd v Wright (1917) 23 CLR 185; [1917] VLR 372; (1917) 23 ALR 177 , HC of A; Mountain v Styak [1922] NZLR 131 at 138; [1921] GLR 647 . The signature of only one of the persons able to declare the trust does not suffice: Equuscorp Pty Ltd v Jimenez (2002) 220 LSJS 252; [2002] SASC 225; BC200204010 at [123] per Besanko J .6 OHara v ONeill (1717) 7 Bro Parl Cas 227; 3 ER 148; Forster v Hale (1798) 3 Ves 696; 30 ER 1226 (affirmed Forster v Hale (1800) 5 Ves 308 at 315; 31 ER 603 at 606) ; Randall v Morgan (1805) 12 Ves 67 at 74; 33 ER 26 at 29; Morton v Tewart (1842) 2 Y & C Ch Cas 67; 63 ER 29 ; Dale v Hamilton (1846) 5 Hare 369 at 394; 67 ER 955 at 965 ; Perpetual Executors and Trustees Assn of Australia Ltd v Wright (1917) 23 CLR 185 at 194, 198; [1917] VLR 372; (1917) 23 ALR 177 ; Mountain v Styak [1922] NZLR 131; [1921] GLR 647 ; Kauter v Hilton (1953) 90 CLR 86 at 98; 27 ALJ 714 per Dixon CJ, Williams and Fullagar JJ ; Macary Manufacturing Pty Ltd v Chief Cmr of Land Tax (1998) 39 ATR 255 at 259-60; 98 ATC 4580 per Black AJ .7 Forster v Hale (1798) 3 Ves 696; 30 ER 1226 ; Rochefoucauld v Boustead [1897] 1 Ch 196 at 206 , CA; Mountain v Styak [1922] NZLR 131 at 138; [1921] GLR 647 ; Secretary, Dept of Social Security v James (1990) 20 ALD 5; 95 ALR 615 at 622 . However, the writing must come into existence not earlier than the acquisition of the land or interest in land (Permanent Trustee Co v Scales (1930) 30 SR (NSW) 391; 47 WN (NSW) 151 ) or the making of the declaration (Secretary, Dept of Social Security v James (1990) 20 ALD 5; 95 ALR 615 ).8 Gardner v Rowe (1828) 5 Russ 258; 38 ER 1024. See also Re Holland; Gregg v Holland [1902] 2 Ch 360 ; Perpetual Executors and Trustees Assn of Australia Ltd v Wright (1917) 23 CLR 185; [1917] VLR 372; (1917) 23 ALR 177 .9 Forster v Hale (1798) 3 Ves 696 at 707; 30 ER 1226 at 1231, 1232 (affirmed Forster v Hale (1800) 5 Ves 308; 31 ER 603 ); Morton v Tewart (1842) 2 Y & C Ch Cas 67 at 80; 63 ER 29 at 35 ; Smith v Matthews; Re Matthews Settlement (1861) 3 De GF & J 139 at 150-2; 30 LJ Ch 445; 4 LT 266; 45 ER 831 at 835-6 per Turner LJ ; Ryder v Taylor (1935) 36 SR (NSW) 31; 53 WN (NSW) 40 .10 Kauter v Hilton (1953) 90 CLR 86 at 98; 27 ALJ 714 .11 Benjamin v Leicher (1998) 45 NSWLR 389 at 400; BC9804629 per Cohen J .12 Barkworth v Young (1856) 4 Drew 1; 62 ER 1 ; Draper v Official Trustee in Bankruptcy (2006) 156 FCR 53; 236 ALR 499; [2006] FCAFC 157; BC200609063 at [39] per Mansfield J, at [159] per Besanko J .13 The term disposition in this context bears its ordinary meaning, having a meaning wider than the term grants: Crichton v Crichton (1930) 43 CLR 536 at 562; 4 ALJ 170 per Dixon J ; Grey v IRC [1960] AC 1 at 12-13, 15-16; [1959] 3 All ER 603 per Viscount Simonds and Lord Radcliffe respectively; Adamson v Hayes (1973) 130 CLR 276 at 304; [1972-73] ALR 1224 per Gibbs J ; PT Ltd v Maradona Pty Ltd (No 2) (1992) 27 NSWLR 241 at 249-50 per Giles J .14 See PT Ltd v Maradona Pty Ltd (No 2) (1992) 27 NSWLR 241 at 251-2 per Giles J; Warner v Hung, Re Bellpac Pty Ltd (recs and mgrs apptd) (in liq) (No 2) [2011] FCA 1123 at [129] per Emmett J.15 The requirement that the equitable interest or trust subsist at the time of its disposition dictates that an assignment by a beneficiary under a trust of her or his interest to another, and the release or surrender of an equitable interest, must be in writing as a condition of enforceability: Grey v IRC [1960] AC 1 at 12-13; [1959] 3 All ER 603 per Viscount Simonds . However, the formalities are not required where the legal and beneficial owner disposes of his or her beneficial ownership or intends to dispose of both his or her legal and beneficial ownership (Vandervell v IRC [1967] 2 AC 291 at 312, 317; [1967] 1 All ER 1 per Lords Upjohn and Donovan respectively), this being because the complete owner of property is not viewed as having separate legal and equitable estates in that property prior to disposition (see [430-20]), meaning that an equitable interest disposed in these circumstances is created by the disposition rather than pre-existing: Lowther v Kim [2003] 1 NZLR 327 at 332 per Randerson J , HC(NZ).16 (ACT) Civil Law (Property) Act

2006 s 201(3) (NT) Law of Property Act 2000 s 10(1)(c) (NSW) Conveyancing Act 1919 s 23C(1)(c) (QLD) Property Law Act 1974 s 11(1)(c) (does not require that the disposition be in writing but that it be manifested and proved by some writing signed by the person making the disposition or by will) (SA) Law of Property Act 1936 s 29(1)(c) (TAS) Conveyancing and Law of Property Act 1884 s 60(1)(c) (VIC) Property Law Act 1958 s 53(1)(c) (WA) Property Law Act 1969 s 34(1)(c). 17 This is said to be the more likely interpretation, although the contrary proposition is also arguable: Grey v IRC [1960] AC 1 at 16; [1959] 3 All ER 603 at 608 per Lord Radcliffe , HL.18 McFadden v Jenkyns (1842) 1 Ph 153 at 157; 41 ER 589 at 591 per Lord Lyndhurst LC; Milroy v Lord (1862) 4 De GF & J 264; [1861-73] All ER Rep 783; (1862) 45 ER 1185 ; Grey v IRC [1960] AC 1; [1959] 3 All ER 603 , HL; Re Vandervells Trusts (No 2); White v Vandervell Trustees Ltd [1974] Ch 269 at 320; [1974] 3 All ER 205 at 212 per Lord Denning MR , CA; Re Kayford Ltd (in liq) [1975] 1 All ER 604; [1975] 1 WLR 279 ; Paul v Constance [1977] 1 All ER 195; [1977] 1 WLR 527 , CA.19 Truesdale v Cmr of Taxation (Cth) (1970) 120 CLR 353; 1 ATR 667 ; Atwill v Cmr of Stamp Duties (NSW) (1970) 72 SR (NSW) 415 at 426 per Mason JA , CA(NSW). See also JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 925-6; (1985) 9 ACLR 593 at 626 .20 As to the language required to establish certainty of intention see [430-240].21 (ACT) Civil Law (Property) Act 2006 s 201(4)(a) (NT) Law of Property Act 2000 s 10(2) (NSW) Conveyancing Act 1919 s 23C(2) (QLD) Property Law Act 1974 s 11(2) (SA) Law of Property Act 1936 s 29(2) (TAS) Conveyancing and Law of Property Act 1884 s 60(2) (VIC) Property Law Act 1958 s 53(2) (WA) Property Law Act 1969 s 34(2). See Oughtred v IRC [1960] AC 206 at 230, 233, 241; [1959] 3 All ER 623 per Lords Cohen, Denning and Jenkins respectively . Compare Neville v Wilson [1997] Ch 144 at 157-8 , CA. As to resulting and constructive trusts see [430-500]-[430675]. 22 See [430-235].23 See estoppel [190-295], [190-300].24 The requirements as to writing are not to affect the operation of the law relating to part performance: (ACT) Civil Law (Property) Act 2006 s 203(1)(d) (NSW) Conveyancing Act 1919 s 23E (QLD) Property Law Act 1974 s 6(d) (SA) Law of Property Act 1936 s 31(d)

(TAS) Conveyancing and Law of Property Act 1884 s 60(5)(d) (VIC) Property Law Act 1958 s 55(d) (WA) Property Law Act 1969 s 36(d). There are no equivalent provisions in the Northern Territory. See real property [355-2160]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-232] Statutory formalities for testamentary trusts A trust of any property, whether realty or personalty, intended to be testamentary1 must be created by a duly executed will or codicil.2 Notes 1 Bird v Perpetual Executors and Trustees Assn of Australia Ltd (1946) 73 CLR 140; [1947] ALR 13 . Contrast Russell v Scott (1936) 55 CLR 440 at 448 per Starke J, at 454 per Dixon and Evatt JJ; [1936] ALR 375 (voluntary disposition which is consummated before the death of the donor being held not to be testamentary even though that death may affect the devolution of the property disposed of).2 (ACT) Wills Act 1968 s 9 (NT) Wills Act 2000 s 8 (NSW) Succession Act 2006 s 6 (QLD) Succession Act 1981 s 10 (SA) Wills Act 1936 s 8 (TAS) Wills Act 2008 s 8 (VIC) Wills Act 1997 s 7 (WA) Wills Act 1970 s 8. See also succession [395-280]-[395-385]. The paragraph below is current to 20 April 2012 [430-235] Statutory formalities as instrument of fraud The principle that equity will not permit a statute to be used as an instrument of fraud1 may be invoked when, notwithstanding the lack of the written evidence required by statute, enforcement is sought of an inter vivos trust of land or an interest in land.2 Where land is transferred to a person absolutely, but the transferee undertakes to hold it not as his or her own but on trust for another person, the beneficiary may prove the existence of the trust by parol evidence and obtain remedies requiring the trustee to give effect to the trust.3 The better view is that such a trust is not enforced as a constructive trust,4 but as an express trust which the beneficiary is permitted to prove by parol evidence because to do otherwise would enable the statute to be used as an instrument of fraud.5 For the principle to apply it is not necessary for fraud to be involved in the acquisition of the property by the person intended to be the trustee;

what constitutes the fraud is the attempt to rely on the absolute character of the conveyance and to use the statute to smother the proof of the agreement to hold on trust, but for which the transferor would not have parted with his or her interest in the property and there would have been no conveyance.6 There is no such fraud in a person doing no more than declining to perfect or acknowledge an assignment he or she has agreed to make,7 or in enabling a third party volunteer to enforce an oral trust in circumstances where there is clearly a resulting trust in favour of the person able to declare the trust.8 A beneficiary who was not a party to the transaction giving rise to the trust, and who has not given or been deprived of anything to procure the trustees undertaking to hold the property on trust for him or her, can enforce the trust in reliance on the instrument of fraud principle and will not be defeated by the statute: for example, where A transfers land to B who orally agrees to hold it on trust for C, C may enforce the trust as a volunteer beneficiary.9 The instrument of fraud principle extends to prevent non-compliance with the statutory requirement of written evidence being relied on by a volunteer, or a purchaser with notice, claiming under the person who made the commitment to hold the land on trust.10 Where a person acquires the full beneficial ownership of land without having induced the transfer to him or her by any prior promise or commitment regarding it, and afterwards orally declares himself or herself trustee of that land for a volunteer, the statute can be relied on to defeat the volunteers claim because, no breach of a bargain being involved, it cannot be said that such reliance is fraudulent.11 The bargain in relation to which the absolute conveyance is made need not include any express stipulation that the transferee is to hold the property as a trustee; it is enough that the bargain included a stipulation under which some sufficiently defined beneficial interest in the property was to be taken by a person other than the transferee.12 Notes 1 As to this principle generally see equity [185-50].2 Rochefoucauld v Boustead [1897] 1 Ch 196 , CA; Bannister v Bannister [1948] 2 All ER 133; [1948] WN 261 , CA; Last v Rosenfeld [1972] 2 NSWLR 923 ; Di Pietro v Official Trustee in Bankruptcy (1995) 59 FCR 470 , Fed C of A, Full Court. See also Hutchins v Lee (1737) 1 Atk 447; 26 ER 284 ; Lincoln v Wright (1859) 4 De G & J 16; 45 ER 6 ; Davies v Otty (No 2) (1865) 35 Beav 208; 55 ER 875 ; Haigh v Kaye (1872) LR 7 Ch App 469; 41 LJ Ch 567; Booth v Turle (1873) LR 16 Eq 182; Re Duke of Marlborough; Davis v Whitehead [1894] 2 Ch 133; [1891-94] All ER Rep Ext 1457; (1890) 70 LT 314 ; Cadd v Cadd (1909) 9 CLR 171 at 187; 15 ALR 502 , HC of A; Organ v Sandwell [1921] VLR 622; (1921) 28 ALR 1; 43 ALT 100 ; Allen v Snyder [1977] 2 NSWLR 685; (1979) FLC 90-656 , CA(NSW); Dalton v Christofis [1978] WAR 42 ; Avondale Printers & Stationers Ltd v Haggie [1979] 2 NZLR 124 ; Bloch v Bloch (1981) 180 CLR 390 at 402-3; 37 ALR 55; 55 ALJR 701 per Brennan J , HC of A; Equuscorp Pty Ltd v Jimenez (2002) 220 LSJS 252; [2002] SASC 225; BC200204010 at [128] per Besanko J ; Shi v Ou [2009] NSWSC 1471; BC200911900 at [64], [65] per Gzell J.3 Di Pietro v Official Trustee in Bankruptcy (1995) 59 FCR 470 , Fed C of A, Full Court. 4 Compare Bannister v Bannister [1948] 2 All ER 133; [1948] WN 261 , CA. See also White v Cabanas Pty Ltd (No 2) [1970] Qd R 395 , SC(QLD), Full Court; Avondale Printers & Stationers Ltd v Haggie [1979] 2 NZLR 124 at 161-5 . As to constructive trusts see [430-565]-[430-675].5 Di Pietro v Official Trustee in Bankruptcy (1995) 59 FCR 470 , Fed C of A, Full Court; Brown v Wylie (1980) 6 Fam LR 519 , SC(NSW); Dalton v Christofis [1978] WAR 42 ; Allen v Snyder [1977] 2 NSWLR 685; (1979) FLC 90-656 , CA(NSW).6 Organ v Sandwell [1921] VLR 622; (1921) 28 ALR 1; 43 ALT 100 ; Bannister v Bannister [1948] 2 All ER 133; [1948] WN 261 , CA; Last v Rosenfeld [1972] 2 NSWLR 923 ; Avondale Printers & Stationers Ltd v Haggie [1979] 2 NZLR 124 at 162, 163 . Fraud in this context has also been described in terms of unconscionable conduct: Jahnsen v Jahnsen [2002] NSWSC 995; BC200206366 at [32] per Bergin J .7 Parker v Glenninda Pty Ltd (1998) Q

ConvR 54-499 at 60,024; BC9705943 per Muir J.8 Equuscorp Pty Ltd v Jimenez (2002) 220 LSJS 252; [2002] SASC 225; BC200204010 at [134] per Besanko J . As to resulting trusts see [430-500]-[430-560].9 Di Pietro v Official Trustee in Bankruptcy (1995) 59 FCR 470 , Fed C of A, Full Court. Note, however, that in the cases cited by the Federal Court in support of this conclusion (other than Rochefoucauld v Boustead [1897] 1 Ch 196 , CA), and in all of the cases (other than Lincoln v Wright (1859) 4 De G & J 16; 45 ER 6 and Rochefoucauld v Boustead [1897] 1 Ch 196 ) usually cited in support of the wider proposition in notes 3, 4 above, the person seeking to enforce the trust was either the person (or one of the persons) who had transferred the property to the trustee or who had provided all or part of the consideration for the acquisition of the property by the trustee. In Lincoln v Wright (1859) 4 De G & J 16; 45 ER 6 and Rochefoucauld v Boustead [1897] 1 Ch 196 , the property was transferred to the trustee (not by A) to hold as security for the performance of an obligation by A, and then for A beneficially. Prior to the decision in Di Pietro v Official Trustee in Bankruptcy (1995) 59 FCR 470 , there had been substantial uncertainty as to whether in such cases only a beneficiary who had transferred the property to the trustee or had contributed funds for, or otherwise enabled, its acquisition by the trustee, could enforce the trust.10 Lincoln v Wright (1859) 4 De G & J 16; 45 ER 6 ; Hodgson v Marks [1971] Ch 892 at 908, 909; [1970] 3 All ER 513 at 521, 522; [1970] 3 WLR 956 at 968, 969 , Ch D.11 Wratten v Hunter [1978] 2 NSWLR 367 .12 Bannister v Bannister [1948] 2 All ER 133; [1948] WN 261 , CA; White v Cabanas Pty Ltd (No 2) [1970] Qd R 395 at 397, 398 , SC(QLD), Full Court.

Source

[Halsbury's Laws of Australia]

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(II) Certainty of Intention The paragraph below is current to 20 April 2012 [430-240] Language and intention A trust may be created by any language which is clear enough to show an intention to create it.1 That intention is to be inferred from the language employed and the court may look also to the nature of the transaction and the relevant circumstances attending the relationship between the parties.2 A trust will not be created where the language used expressly or clearly negates any intention to impose a trust3 or indicates the intention to establish a relationship other than a trust.4 When a trust is declared it is usual to employ a word such as trust or trustee, and its absence is to be noted but is not determinative.5 The usual words used are to X on trust, in which case it is

difficult for the court to conclude that the disponers intention was to make an outright gift.6 Similarly, where the parties agree that money is to be placed in a trust account, this carries the strong presumption that the money is subject to a trust.7 Yet technical language is not necessary and there are many other ways of expressing the required intention.8 Explicitly relevant words are not essential, and the required intention can be sufficiently indicated by conduct to constitute a declaration of trust.9 On the other hand, whilst words such as trust and trustee, particularly in a professionally drafted document, would normally indicate an intention to create an enforceable trust,10 they do not always do so,11 or such a word may be used in a way which causes it to apply to only part of the property involved,12 to deal with only part of the beneficial interest in that property,13 or simply to convey that fiduciary duties are to be attracted.14 Even though the creator may not be aware of the legal concept of the trust, the intention required to create a trust can be identified where it is manifested as an intention to establish, between a person or persons and property, a relationship having particular attributes and those attributes are such as to enable it to be identified as a trust15 or are such that the relationship cannot be legally effective otherwise than as a trust.16 This in turn explains judicial remarks citing the irrelevance of a settlors subjective intentions,17 and focusing instead the objective meaning attributed to the words and/or actions adopted.18 The onus of establishing that the intention to create a trust existed at the relevant time rests on the person alleging the trust.19 Where there is an unambiguous use of language establishing a trust, the onus then shifts to the other party to prove that the trust did not exist.20 Notes 1 Re Williams; Williams v Williams [1897] 2 Ch 12 at 18, 19 per Lindley LJ , CA; Re Armstrong (decd) [1960] VR 202 ; Tito v Waddell (No 2) [1977] Ch 106 at 211; [1977] 3 All ER 129 at 216; [1977] 2 WLR 496 at 592 ; Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 618-19; 78 ALR 1 at 9; [1988] HCA 16; BC8802595 per Mason CJ and Dawson J ; Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 147; 80 ALR 574 at 602; 62 ALJR 508 per Deane J ; Bulun Bulun v R & T Textiles Pty Ltd (1998) 86 FCR 244; 157 ALR 193 at 206; 41 IPR 513 per von Doussa J ; Herskope v Perpetual Trustees (WA) Ltd (2002) 41 ACSR 707 at 7235; [2002] NSWCA 153; BC200202834 per Sheller JA . See also [430-245].2 Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491 at 503; 102 ALR 681 at 693 per Gummow J , Fed C of A; Walsh Bay Developments Pty Ltd v FCT (1994) 29 ATR 311 at 316-19; 94 ATC 4682; BC9400314 per Foster J (affirmed Walsh Bay Developments Pty Ltd v FCT (1995) 130 ALR 415; 31 ATR 15 , Fed C of A, Full Court); Di Pietro v Official Trustee in Bankruptcy (1995) 59 FCR 470 at 484 , Fed C of A, Full Court; Salvo v New Tel Ltd [2005] NSWCA 281; BC200506365 at [32]-[35] per Spigelman CJ . For an example of that approach resulting in a finding that a trust had not been established see Walker v Corboy (1990) 19 NSWLR 382 , CA(NSW).3 Re Falkiner; Mead v Smith [1924] 1 Ch 88 ; Re Pitt Rivers; Scott v Pitt Rivers [1902] 1 Ch 403; (1902) 86 LT 6 , CA. As to uncertainty with regard to the trust property casting doubt upon the intention of the testator, by showing that he or she could not have intended his or her words of confidence to be imperative words, see Mussoorie Bank Ltd v Raynor (1882) LR 7 App Cas 321 at 331, PC.4 See [430-25]-[430-90].5 King v Denison (1813) 1 Ves & B 260 at 273; 35 ER 102 at 107 ; Viscount Hill v Dowager Viscountess Hill [1897] 1 QB 483 at 493 per Chitty LJ , CA; Re Armstrong (decd) [1960] VR 202 ; Re Potter [1970] VR 352 ; Re Kayford Ltd (in liq) [1975] 1 All ER 604; [1975] 1 WLR 279 ; Paul v Constance [1977] 1 All ER 195; [1977] 1 WLR 527 , CA; Tito v Waddell (No 2) [1977] Ch 106 at 211; [1977] 3 All ER 129 at 216; [1977] 2 WLR 496 at 592 ; Brisbane City Council v A-G (Qld) [1979] AC 411 at 421; (1978) 19 ALR 681 at 684-5 , PC; Registrar of Accident Compensation Tribunal v Cmr of Taxation (Cth) (1993) 178 CLR 145 at 165; 117 ALR 27 at 39; 67 ALJR 922 ; Staden v Jones [2008] 2 FLR 1931; [2008] EWCA Civ 936 .6 Stephens Travel Service International Pty Ltd (recs and mgrs apptd) v Qantas Airways Ltd (1988) 13 NSWLR 331 at 340-3; BC8801851 per Hope JA ; Ledgerwood v Perpetual Trustee Co Ltd (1997) 41

NSWLR 532 at 535 per Young J ; Harrison v Gibson [2006] 1 WLR 1212; [2005] EWHC 2957 (Ch) at [13]-[16] per Hart J ; Counsel v Estate of James Albert Counsel (decd) [2007] WASC 101; BC200703322 (affirmed La Housse v Counsel [2008] WASCA 207; BC200808813 ).7 Mercantile Mutual Insurance (Aust) Ltd v Farrington (1996) 44 NSWLR 634 at 642; 130 FLR 365 per Bryson J; Tonkin Thompson & Assocs Pty Ltd v Mayr (1998) 72 SASR 346 at 352 per Doyle CJ ; Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 at 605-6; 171 ALR 568; [2000] HCA 25; BC200002277 per Gaudron, McHugh, Gummow and Hayne JJ ; Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361; 204 ALR 353; 184 FLR 280; [2003] NSWSC 1008; BC200307101 at [19] per Campbell J .8 Ex parte Pye; Ex parte Dubost (1811) 18 Ves 140; [1803-13] All ER Rep 96; (1811) 34 ER 271 ; King v Denison (1813) 1 Ves & B 260 at 273; 35 ER 102 at 107 ; Rycroft v Christy (1840) 3 Beav 238; 49 ER 93; Crockett v Crockett (1848) 2 Ph 553; 41 ER 1057 ; Kekewich v Manning (1851) 1 De GM & G 176 at 194; 21 LJ Ch 577; 42 ER 519 at 526 ; Page v Cox (1852) 10 Hare 163 at 168, 169; 68 ER 882 at 884-5 ; Salusbury v Denton (1857) 3 K & J 529 at 535, 536; 69 ER 1219 at 1221-2 ; Jacquet v Jacquet (1859) 27 Beav 332; 54 ER 130; Grant v Grant (1865) 34 Beav 623 at 625-6; 55 ER 776 at 777 ; Gee v Liddell (No 1) (1866) 35 Beav 621 at 627-8; 55 ER 1038 at 1040, 1041 ; Richardson v Richardson (1867) LR 3 Eq 686; Morgan v Malleson (1870) LR 10 Eq 475; Armstrong v Timperon (1871) 24 LT 275; Baddeley v Baddeley (1878) 9 Ch D 113 ; Fox v Hawks (1879) 13 Ch D 822 ; Re Flavell (decd); Murray v Flavell (1883) 25 Ch D 89; [1881-85] All ER Rep 267 , CA; Brisbane City Council v A-G (Qld) [1979] AC 411 at 421; (1978) 19 ALR 681 at 684-5 ; Ryder v A-G (NSW) (2004) 62 NSWLR 38; [2004] NSWSC 1171; BC200408271 at [11] per Young CJ in Eq ; Body Corporate No 1/PS40911511E St James Apartments v Renaissance Assets Pty Ltd (2004) 11 VR 41; (2005) V ConvR 54-695; [2004] VSC 438; BC200407420 at [35], [36] per Mandie J (noting that the use of the word nominee in a sense more or less synonymous with trustee is not unusual). See also Re Endacott (decd); Corpe v Endacott [1960] Ch 232 at 241; [1959] 3 All ER 562 at 564; [1959] 3 WLR 799 , CA (in a gift by will the words for the purpose of providing some useful memorial to myself were considered to have been intended to impose an obligation in the nature of a trust). A mere direction to pay dividends may be sufficient to create a trust: Bentley v Mackay (1851) 15 Beav 12; 51 ER 440 .9 Lyell v Kennedy (1889) LR 14 App Cas 437 at 457; 59 LJQB 268; 62 LT 77 per Lord Selborne; Secretary, Dept of Social Security v James (1990) 20 ALD 5; 95 ALR 615 at 619-20 .10 Walsh Bay Developments Pty Ltd v FCT (1994) 29 ATR 311 at 316-19; 94 ATC 4682; BC9400314 per Foster J , Fed C of A (affirmed Walsh Bay Developments Pty Ltd v FCT (1995) 130 ALR 415; 31 ATR 15 , Fed C of A, Full Court); Ledgerwood v Perpetual Trustee Co Ltd (1997) 41 NSWLR 532 at 535 per Young J .11 Winter v Grady (1921) 21 SR (NSW) 686; 38 WN (NSW) 195 ; Starr v Starr [1935] SASR 263 ; Re McGuire; Roberts v McGuire (1937) 41 WALR 120; Teasdale v Webb (1940) 57 WN (NSW) 151 ; Lombe v Wagga Leagues Club Ltd (2006) 56 ACSR 387; [2006] NSWSC 3; BC200600157 . See also Williams v McIntosh (1909) 9 SR (NSW) 391; 26 WN (NSW) 76 ; Re Steele; Public Trustee v A-G (SA) [1925] SASR 272 ; Kauter v Hilton (1953) 90 CLR 86; 27 ALJ 714 .12 Longley v Longley (1871) LR 13 Eq 133; Re Lamshed (decd) [1970] SASR 224 .13 Re Stanford; University of Cambridge v A-G [1924] 1 Ch 73; [1923] All ER Rep 589 . Compare Hunter v Public Trustee [1924] NZLR 882 .14 See, for example, Lombe v Wagga Leagues Club Ltd (2006) 56 ACSR 387; [2006] NSWSC 3; BC200600157 (where a deed of company arrangement, which provided that the deed administrators shall hold the Deed Fund on trust for the benefit of the Administrators, Deed Administrators and for those Creditors who become Participating Creditors in accordance with this Deed of Company Arrangement was held not to create a trust because the deed did not have the effect of causing the relevant property of the defendant club to be divested from it and vested in the deed administrators; instead the phrase on trust was interpreted as a vehicle to impose fiduciary duties upon the administrators as agents of the club in question in carrying out their function).15 See Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 147; 80 ALR 574 at 602; 62 ALJR 508 per Deane J ; Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 618-19; 78 ALR 1 at 9; [1988] HCA 16; BC8802595 per Mason CJ and Dawson J ; Snowlong Pty Ltd v Choe (1991) 23 NSWLR 198 at 211-12; (1992) ANZ ConvR 144 per Wood J ; Twinsectra Ltd v Yardley [2002] 2 All ER 377; [2002] 2 WLR 802 at 822; [2002] UKHL 12 per Lord Millett ; Ryder v A-G (NSW) (2004) 62 NSWLR 38; [2004] NSWSC 1171; BC200408271

at [11] per Young CJ in Eq ; Anson v Anson (2004) 12 BPR 22,303; [2004] NSWSC 766; BC200406099 at [21] per Campbell J ; Re Howard (decd); Ex parte Public Trustee [2004] WASC 258; BC200408404 at [8] per Sanderson M ; Re an Application by Police Association of South Australia (2008) 102 SASR 215; 258 LSJS 325; [2008] SASC 299; BC200809780 at [93][99] per Doyle CJ . Compare Paul v Constance [1977] 1 All ER 195; [1977] 1 WLR 527 , CA.16 For example, where the intention indicated was to create successive interests in property: Re Armstrong (decd) [1960] VR 202 .17 See, for example, Twinsectra Ltd v Yardley [2002] 2 All ER 377; [2002] 2 WLR 802 at 831; [2002] UKHL 12 at [71] per Lord Millett.18 Byrnes v Kendle (2011) 243 CLR 253; 279 ALR 212; 85 ALJR 798; 4 ASTLR 260; [2011] HCA 26; BC201105711 at [53][59] per Gummow and Hayne JJ, at [113][117] per Heydon and Crennan JJ.19 Re Armstrong (decd) [1960] VR 202 at 206 per Herring CJ ; Herdegen v FCT (1988) 84 ALR 271; 20 ATR 24 , Fed C of A; Hyhonie Holdings Pty Ltd v Leroy [2004] NSWCA 72; BC200401205 at [45] per Hodgson JA . As to the evidence required in respect of the creation of a trust by a company see Re Vandervells Trusts (No 2); White v Vandervell Trustees Ltd [1974] Ch 269 at 323; [1974] 3 All ER 205 at 214 per Stephenson LJ , CA; JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891; (1985) 9 ACLR 593; .20 Stephens Travel Service International Pty Ltd (recs and mgrs apptd) v Qantas Airways Ltd (1988) 13 NSWLR 331 at 3403; BC8801851 per Hope JA , CA; Gliderol International Pty Ltd v Hall (2001) 80 SASR 541 at 544; [2001] SASC 355; BC200106922 per Nyland J . The paragraph below is current to 20 April 2012 [430-245] Nature of imperative declaration Where the person creating a trust is to be the trustee, any language will suffice if it is clear that the person recognises that he or she is undertaking a role with certain attributes and if those attributes are in fact such as would constitute him or her a trustee.1 If it is not clear that the intention is to create a trust, then a promise or statement of intention to transfer property, or words or acts indicating the intention to make a gift, not being all of the steps required to perfect the gift, will not be effectual as declarations of trust.2 The intention to create a trust, so that when it is declared the beneficiary acquires an immediate interest in the relevant property, is to be distinguished from the intention to make a revocable, ambulatory or testamentary disposition, which promises or authorises the vesting of the property in the beneficiary but is capable of being revoked by the grantor.3 Notes 1 See Paul v Constance [1977] 1 All ER 195; [1977] 1 WLR 527 , CA (a statement by a man to a woman that money in his deposit account was as much hers as his constituted an express declaration of trust). See also Dipple v Corles (1853) 11 Hare 183 at 184, 185; 68 ER 1239 at 1240 per Wood VC; Re Bankheads Trust (1856) 2 K & J 560; 69 ER 905; Re Kayford Ltd (in liq) [1975] 1 All ER 604; [1975] 1 WLR 279 ; Re Chelsea Cloisters Ltd (1980) 41 P & CR 98, CA; Re Goldcorp Exchange Ltd (in rec) [1995] 1 AC 74 at 100-1; [1994] 2 All ER 806 at 823-4 , PC.2 Dipple v Corles (1853) 11 Hare 183 at 184-86; 68 ER 1239 at 1240, 1241 ; Forbes v Forbes (1857) 3 Jur NS 1206; Milroy v Lord (1862) 4 De GF & J 264 at 274; [1861-73] All ER Rep 783 at 789; (1862) 45 ER 1185 at 1189 per Turner LJ ; Penfold v Mould (1867) LR 4 Eq 562; Richards v Delbridge (1874) LR 18 Eq 11 at 14, 15; Heartley v Nicholson (1875) LR 19 Eq 233; Re Stallon; Stallon v Stallon (1907) 51 Sol Jo 626.3 Towers v Hogan (1889) 23 LR Ir 53; Re Cozens; Green v Brisley [1913] 2 Ch 478 ; Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614; [1937] VLR 15; [1936] ALR 198 ; Rose v Rose (1986) 7 NSWLR 679 . See also Warriner v Rogers (1873) LR 16 Eq 340; Re McArdle; McArdle v McArdle [1951] Ch 667 at 669; [1951] 1 All ER 905 at 909 per Jenkins LJ , CA; Re Williams; Williams v Ball (1916) 115 LT 689; [1916-17] All ER Rep 354, CA; Williams v Lloyd; Re Williams (1934) 50 CLR 341; 7 ALJ 463; 7 ABC 138 ; Olsson v Dyson (1969) 120 CLR 365 at 386; [1969] ALR 443; BC6900350 . The paragraph below is current to 20 April 2012

[430-247] Admissibility of extrinsic evidence of intention Where the trust is created by way of a trust instrument, extrinsic evidence of the intention of the creator will be admitted where:1 (1) a written dispositive document could not reasonably be considered a complete statement of its makers intention, in which case parol evidence may be admissible to show that declarations were never intended to operate as binding declarations of trust; (2) writing is not required by law for a valid disposition,2 in which case a settlors intention to create a trust can be established by evidence of an oral agreement between the parties or can be inferred from his or her conduct;3 and (3) the terms of the trust are ambiguous,4 such that the court will inquire into the circumstances and facts known to the settlor or testator at the time the trust or will was drafted.5 Evidence of words or conduct of a person subsequent to the alleged creation of a trust is normally admissible only if it is against the interest of that person.6 The parol evidence rule7 does not function to exclude evidence that bears on the actual intention of the declarant at the time of the purported creation of the trust, and does not prevent evidence of subsequent conduct from being taken into account when determining whether a trust was validly declared.8 Otherwise, extrinsic evidence is inadmissible in the absence of grounds for rectification9 or rescission,10 such as fraud,11 duress12 or mistake.13 Notes 1 Starr v Starr [1935] SASR 263 .2 As to the circumstances where writing is required see [430230].3 Boccalatte v Bushelle [1980] Qd R 180; (1979) 5 Fam LN 23 .4 Auckland Medical Aid Trust v IRC [1979] 1 NZLR 382 at 396-7 ; Clay v Clay (unreported, SC(WA), Full Court, 27 March 1996, BC9601043) at 5-6; Harpur v Levy (2007) 16 VR 587; [2007] VSCA 128; BC200704757 at [58]-[71] per Neave JA .5 Re Beckbessinger [1993] 2 NZLR 362 at 367-8 ; Boranga v Flintoff (1997) 19 WAR 1 at 5-6 per Parker J ; Manukau City Council v Lawson [2001] 1 NZLR 599 at 604-5 per Paterson J.6 Bentley v Mackay (1851) 15 Beav 12 at 19; 51 ER 440 at 442-3 ; Shephard v Cartwright [1955] AC 431; [1954] 3 All ER 649 , HL; Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 364; 30 ALJ 273; BC5600370 ; Rose v Rose (1986) 7 NSWLR 679 at 684 per Hodgson J in Eq .7 See contract [110-2245]-[110-2335].8 Starr v Starr [1935] SASR 263 at 266 per Napier J ; B & M Property Enterprises Pty Ltd (in liq) v Pettingill [2001] SASC 75; BC200101130 at [122]-[126] per Perry J ; Owens v Lofthouse (2007) 5 ABC(NS) 465; [2007] FCA 1968; BC200710820 at [65]-[75] per Weinberg J ; Shortall v White (2008) DFC 95-411; [2007] NSWCA 372; BC200711458 at [24]-[29] per Handley AJA (with whom Hodgson and Santow JJA concurred).9 See equity [185-1620], [185-1625].10 See equity [185-1605]-[185-1615].11 See contract [110-5140]-[110-5155].12 See contract [1105665]-[110-5805].13 See contract [110-5380]-[110-5660]. The paragraph below is current to 20 April 2012 [430-250] Precatory words A trust may be imposed by precatory words, that is words indicating a request, entreaty, desire, hope or confidence as to the disposal of the property concerned.1 Precatory words are considered by the court normally in connection with some testamentary disposition, but may have to be considered in connection with a transaction or deed inter vivos.2 At one time the court treated precatory words as prima facie imposing a trust even when following

a gift in terms absolute.3 Towards the end of the nineteenth century, the tide of decisions flowed in the opposite direction.4 The question whether precatory words do or do not impose a trust is now to be decided having regard to the following rules of construction: (1) precatory words, such as request, which in their ordinary meaning are not imperative, are prima facie to be given their ordinary meaning;5 (2) the requisite intention to create a trust is missing if the evidence establishes no more than an expression of an intention of what might happen in the future;6 (3) in each case the court must be guided by the intention to be gathered from the particular instrument as a whole rather than by the particular words in which the request is expressed,7 but having regard to any surrounding circumstances which may legitimately be taken into consideration,8 notwithstanding that there may be a decision to the contrary effect upon words more or less similar;9 (4) a gift which is in terms absolute is not to be cut down to a trust estate or to a life estate with a trust for disposal thereafter by mere precatory words,10 unless the will read as a whole shows an intention to impose an obligation.11 The fact that by a codicil precatory words are attached to a gift made by a will in terms which confer an absolute interest on the donee may be a circumstance requiring the court to depart from the ordinary meaning of the precatory words;12 and (5) if the circumstances so require, the use of the word trust or an express declaration of trust in a will is construed as merely precatory or recommendatory.13 Notes 1 As to the nature of precatory trusts see [430-105]. See also Knight v Knight (1840) 3 Beav 148 at 171-5; 9 LJ Ch 354; 49 ER 58 at 67-9 .2 See Viscount Hill v Dowager Viscountess Hill [1897] 1 QB 483 at 487 per Lord Esher MR, CA (indicating the danger of giving an obligatory force to words in such circumstances as where the precatory words relied on were uttered orally in connection with the delivery of family jewels).3 Malim v Keighley (1795) 2 Ves 529; 30 ER 760; Gully v Cregoe (1857) 24 Beav 185; 53 ER 327 ; Curnick v Tucker (1874) LR 17 Eq 320; Knight v Boughton (1844) 11 Cl & Fin 513; 8 ER 1195 (the House of Lords approved the principle applied in Malim v Keighley (1795) 2 Ves 529; 30 ER 760 but reached a different conclusion on the facts).4 See Lambe v Eames (1871) LR 6 Ch App 597; Mussoorie Bank Ltd v Raynor (1882) LR 7 App Cas 321; Re Adams and Kensington Vestry (1884) 27 Ch D 394; 51 LT 382 , CA; Re Hamilton; Trench v Hamilton [1895] 2 Ch 370 , CA; Viscount Hill v Dowager Viscountess Hill [1897] 1 QB 483 , CA; Re Williams; Williams v Williams [1897] 2 Ch 12 , CA; Re Oldfield; Oldfield v Oldfield [1904] 1 Ch 549 , CA; Re Conolly; Conolly v Conolly [1910] 1 Ch 219 ; Dean v Cole (1921) 30 CLR 1 ; Re Johnson; Public Trustee v Calvert [1939] 2 All ER 458 .5 Viscount Hill v Dowager Viscountess Hill [1897] 1 QB 483 at 486 per Lord Esher MR , CA.6 In the Marriage of Cierpiatka (1999) 25 Fam LR 548 at 554; (1999) FLC 92-864; [1999] FamCA 1286 ; Atwell v Atwell [2002] TASSC 119; BC200207904 at [25] .7 Re Williams; Williams v Williams [1897] 2 Ch 12 at 14 per Romer J . In Re Steeles Will Trusts; National Provincial Bank

Ltd v Steele [1948] Ch 603; [1948] 2 All ER 193 , it was held that by using a form of words to which a particular effect had been attributed in Shelley v Shelley (1868) LR 6 Eq 540; 37 LJ Ch 357 (that case not having been overruled), the testatrix must be understood to have intended the same effect.8 Viscount Hill v Dowager Viscountess Hill [1897] 1 QB 483 at 493 per Chitty LJ, CA.9 Re Hamilton; Trench v Hamilton [1895] 2 Ch 370 at 373 per Lindley LJ , CA. Compare Re Oldfield; Oldfield v Oldfield [1904] 1 Ch 549 , CA.10 Re Conolly; Conolly v Conolly [1910] 1 Ch 219 at 221-2 . Compare Gunther v Cmr of Stamp Duties (1932) 33 SR (NSW) 95 . See note 4 above.11 Re Williams; Williams v All Souls, Hastings (Parochial Church Council) [1933] Ch 244 at 253 .12 Re Burley; Alexander v Burley [1910] 1 Ch 215 . See also Re Stirling; Union Bank of Scotland Ltd v Stirling [1954] 2 All ER 113; [1954] 1 WLR 763.13 Hughes v Evans (1843) 13 Sim 496; 60 ER 192; Quayle v Davidson (1858) 12 Moo PCC 268; 14 ER 913, PC; Clarke v Hilton (1866) LR 2 Eq 810; Irvine v Sullivan (1869) LR 8 Eq 673; 38 LJ Ch 365; 17 WR 1083; Te Teira Te Paea v Te Roera Tareha [1902] AC 56 , PC; Hunter v Public Trustee [1924] NZLR 882 . Compare Re Blackwood; Graham v Hampson [1953] NI 32, CA(NI). If the context requires, the express constitution of a person as trustee may be disregarded: Morrin v Morrin (1886) 19 LR Ir 37. The paragraph below is current to 20 April 2012 [430-255] Desire as to employment of a person A direction, desire or recommendation in a will that a particular person be employed as an agent or in some other capacity in connection with the testators estate does not by itself create a trust in his or her favour,1 but may do so if the settlors intention to create a trust of that kind is expressly indicated.2 Notes 1 Beckford v Beckford (1783) 4 Bro Parl Cas 38; 2 ER 26; Shaw v Lawless (1838) 5 Cl & Fin 129; 7 ER 353 , HL; Finden v Stephens (1846) 2 Ph 142; 41 ER 896 ; Foster v Elsley (1881) 19 Ch D 518; 51 LJ Ch 275; 30 WR 596 (direction in will appointing a person as solicitor to the trust); Re Larkin (1913) 13 SR (NSW) 691 . See also Public Curator of Queensland v Union Trustee Co of Australia Ltd (1922) 31 CLR 66 at 74-5; 28 ALR 438 ; Brunker v Perpetual Trustee Co (Ltd) (1937) 59 CLR 140; [1937] ALR 349 .2 Taylor v Lewis (1891) 12 LR (NSW) Eq 258. The paragraph below is current to 20 April 2012 [430-257] Intention stemming from statute Statute may prescribe, expressly or impliedly, that in a particular situation, money or property is to be held on trust. In some circumstances, statute will simply recognise what would in any event have been a trust at general law, such as the legislation in each jurisdiction that prescribes that money received by legal practitioners on behalf of another person is trust money.1 In other circumstances, the trust is imposed by statute for the purposes of providing additional protection for the money or property in issue, such as the statutory prescription that superannuation funds operate through the vehicle of a trust,2 and that responsible entities of managed investment schemes hold scheme property on trust.3 Notes 1 See legal practitioners [250-1815]-[250-2000]; Jalmoon Pty Ltd (in liq) v Bow [1997] 2 Qd R 62 at 72; (1996) 15 ACLC 233 per Pincus JA and Helman J (in the ordinary case in which a solicitor receives money on behalf of a client immediately upon receipt the relation between the solicitor and the client is that of trustee and beneficiary).2 See superannuation [400-1].3 See corporations [120-18810]-[120-18825].

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[Halsbury's Laws of Australia]

View Full Date/Time Thursday, October, 25, 2012, 12:46 EST 1 of 1 About LexisNexis | Terms & Conditions | My ID Copyright 2012 LexisNexis . All rights reserved. Back to Top

(III) Certainty of Subject Matter The paragraph below is current to 20 April 2012 [430-260] Property the subject of a trust A trust can only exist where there is property which is certain1 to which the trust can relate, and which is property capable of being held by the trustee. 2 There cannot be a presently existing trust of future property.3 Nor can a bank account in overdraft be trust property.4 As a general rule, any present property, real or personal, tangible or intangible, legal or equitable, which is capable of being transferred or assigned to a trustee at law or in equity may be the subject of a trust.5 Hence, the subject matter of a trust can constitute a beneficial interest in property, meaning that a trust may be created where the beneficial interest is held by a person in trust for other objects (termed a sub-trust), in which case the beneficial interest passes to the sub-trustee so that it can be held by the sub-trustee for the benefit of the ultimate beneficiaries.6 Exceptions to the general rule are where property is inalienable by nature, usually because it is intrinsically personal,7 or is made inalienable as a matter of public policy8 or by statute, or where in the case of land outside the jurisdiction the trust would not be recognised by the lex loci situs.9 An interest that is vested is still assignable, and capable of being the subject of a trust, even though enjoyment of that interest depends upon a future contingency.10 Trust property has been held to include the right to the income from shares,11 debts,12 an interest in a lottery ticket,13 a fishing licence,14 a milk quota, 15 a share in a partnership,16 a chose in action of beneficiaries in respect of an unadministered estate,17 a chose in action in the form of the benefit of a contractual promise,18 the benefit of a guarantee (but probably not the benefit of an estoppel)19 and the goodwill of a business. 20 Notes 1 See [430-265].2 Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614 at 621-2; [1937] VLR 15; [1936] ALR 198 .3 See [430-270].4 Fortex Group Ltd (in rec and liq) v MacIntosh [1998] 3 NZLR 171 at 174-5 per Gault, Keith and Tipping JJ , CA(NZ); Williams v Peters [2010] 1 Qd R 475; (2009) 72 ACSR 365; 232 FLR 98; [2009] QCA 180; BC200905394 at [5] per McMurdo P, at [31]-[44] per Muir JA .5 Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614 at 621; [1937] VLR 15; [1936] ALR 198 ; Lord Strathcona Steamship Co Ltd v Dominion Coal Co Ltd [1926] AC 108 at 124; [1925] All ER Rep 87 at 95 per Lord Shaw ;

Don King Productions Inc v Warren [1998] 2 All ER 608 at 630 . See also Caraher v Lloyd (Official Assignee) (1905) 2 CLR 480; 11 ALR 400 ; Specialised Transport Pty Ltd v Dominiak (1989) 16 NSWLR 657 (contract containing clause forbidding assignment).6 Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639; 9 BPR 16,735; BC9807013 per Mason P . Provided that the sub-trustee is not a bare trustee (see [430-3115]), there remain two trusts: Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639; 9 BPR 16,735; BC9807013 per Mason P .7 Re Dunsanys Settlement; Nott v Dunsany [1906] 1 Ch 578 (estate tail); Tasmanian Seafoods Pty Ltd v MacQueen [2005] TASSC 36; BC200502945 at [32]-[44] per Underwood CJ , Full Court (fishing quota units found to be inalienable under a contract and so not capable of being trust property). Compare Hendry v EF Hendry Pty Ltd (2003) 227 LSJS 486; [2003] SASC 157; BC200302998 at [34]-[45] per Burley J (fishing licence held to be alienable and thus capable of being trust property). As to the nonassignability of the benefit of a contract involving personal skill or confidence where the identity of the person to whom the obligation is owed could make a material difference to the person owing the obligation see Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660 at 668 per Collins MR , CA (as to the principle, but decision to the contrary, on the facts); Kemp v Baerselman [1906] 2 KB 604; (1906) 75 LJKB 873 , CA; Bruce v Tyley (1916) 21 CLR 277; 22 ALR 215 ; Moore v Collins [1937] SASR 195 ; Peters v General Accident and Life Assurance Corp Ltd [1937] 4 All ER 628; Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014; [1940] 3 All ER 549 . As to the express terms, rather than merely the nature of a contract, making the benefit of it personal to the relevant party see Wilson v Cmr of Probate Duties (Vic) (1978) 8 ATR 799 .8 For example, an equitable right to set aside a deed for fraud or undue influence: Prosser v Edmonds (1835) 1 Y & C Ex 481; 160 ER 196 . As to entitlement to salaries or pensions payable to enable persons to perform or to be available when required to perform public services see Davis v Duke of Marlborough (1818) 1 Swan 74; 36 ER 303. Compare Grenfell v Dean and Canons of Windsor (1840) 2 Beav 544; 48 ER 1292. As to equitable rights generally see equity.9 Martin v Martin (1831) 2 Russ & My 507; 39 ER 487 ; Earl Nelson v Lord Bridport (1846) 8 Beav 547; 50 ER 215; Re Pearses Settlement; Pearse v Pearse [1909] 1 Ch 304; (1908) 100 LT 48 .10 Peter v Shipway (1908) 7 CLR 232; 15 ALR 214; [1908] HCA 52 ; Buhlmann v Nilson (1921) 29 CLR 417 at 421-2; 27 ALR 318 at 321 per Knox CJ ; Public Curator of Queensland v Union Trustee Co of Australia Ltd (1922) 31 CLR 66 at 74-5; 28 ALR 438 at 441 per Higgins J ; Re Rallis Will Trusts; Re Rallis Marriage Settlement; Calvocoressi v Rodocanachi [1964] Ch 288; [1963] 3 All ER 940 ; Re Midletons Will Trusts; Whitehead v Earl Midleton [1969] 1 Ch 600 at 607; [1967] 2 All ER 834 at 837 per Stamp J.11 Tunley v FCT (1927) 39 CLR 528 (trustee held the shares upon trust for the life of the donor to give effect to the gift of the income from there).12 R v Brown (1912) 14 CLR 17; 18 ALR 111 (a debt owing by the Crown). See also Re Trust of Smyth [1970] ALR 919 .13 Van Rassel v Kroon (1953) 87 CLR 298; [1953] ALR 190; (1953) 27 ALJ 75 .14 Pennington v McGovern (1987) 45 SASR 27 , SC(SA), Full Court; Hendry v EF Hendry Pty Ltd (2003) 227 LSJS 486; [2003] SASC 157; BC200302998 at [34]-[45] per Burley J . Compare Tasmanian Seafoods Pty Ltd v MacQueen [2005] TASSC 36; BC200502945 at [32]-[44] per Underwood CJ (fishing quota units found to be inalienable under a contract and so not capable of being trust property).15 Swift v Dairywise Farms Ltd [2000] 1 All ER 320 .16 Federal Commissioner of Taxation v Everett (1980) 143 CLR 440; 28 ALR 179 .17 Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614; [1937] VLR 15; [1936] ALR 198 .18 See [430-45].19 Eslea Holdings Ltd (formerly IPEC Holdings Ltd) v Butts (1986) 6 NSWLR 175 , CA(NSW).20 JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891; (1985) 9 ACLR 593 . The paragraph below is current to 20 April 2012 [430-265] Certainty as to subject matter and its division between beneficiaries For a valid trust to be created, the property to be affected by the trust must be either expressly designated1 or so defined as to be capable of being ascertained.2 The certainty must exist when the trust is created, not merely at a future time when the deferred operation of the trust begins.3 A proportion of a quantity of identical items, or of an undivided mass of a commodity, not appropriated or identified as a discrete parcel, may lack sufficient certainty to be the subject of a trust,4 although

the position in relation to a part of the settlors holding of shares in a specified company may be different.5 Where a gift is in such terms as to be capable of being a gift to the donee absolutely, so that either expressly or by implication the donee is permitted to use up or dispose of the property given, a gift over on the death of the donee of the residue or whatever remains of the property given will usually be void and the primary donee will take an absolute interest.6 The result has sometimes been arrived at on the basis that the gift over does not sufficiently identify the property to which it applies and is void for uncertainty,7 and other times on the basis that the primary gift is not qualified or cut down in any way by the gift over, which is therefore repugnant to or inconsistent with it.8 In some cases the combined grounds of uncertainty and repugnancy have been relied on.9 Because of the presence of a gift over, some gifts have been interpreted as conferring only a life interest on the primary donee,10 so that the gift over will not be void for uncertainty or repugnancy. This is more likely to be the result where there is no express authority conferred on the primary donee to use up or dispose of the property given except in paying debts and testamentary expenses, and the residue can be interpreted as referring to what remains after those payments rather than to what remains at the death of the primary donee.11 Another possible basis for finding that a gift over of whatever remains is not void is that the primary donee takes a life interest coupled with a general power of appointment over the property given or perhaps a more restricted power to use up or dispose of part of the property.12 Where the primary donee dies before the testator, a gift over of whatever remains, which would otherwise have been void for uncertainty, will be valid because the subject matter of the gift over will then be the whole of the subject matter of the primary gift.13 A bequest to X to which is attached a direction or stipulation that whatever remains at Xs death of the property given is to be passed on in his or her will to Y will usually be treated as an absolute gift to X.14 However, where X has agreed with the testator to carry out his intention under a secret trust15 or by way of mutual wills, 16 it may be that on Xs death a trust will attach to whatever property of the testator X then has.17 In such a case X would, during his lifetime, be under a fiduciary obligation not to dispose of the testators property with wilful intent to prevent Y receiving the property.18 Where a fund is given as one part for an invalid object and as to the remainder for a valid object,19 the possibilities are: (1) if the amount applicable to the invalid object is not ascertainable, the whole gift is void;20 or (2) if the amount applicable to the invalid object is ascertainable, either (a) the valid gift applies to the balance remaining after deducting the amount applicable to the invalid gift,21 or (b) in cases where the invalid gift was to be applied in erecting or maintaining a family monument or tomb, or for some similar object, the valid gift applies to the whole fund.22

Where trustees are required by a will to hold several distinct items of property on trust, for A as to those items which he or she chooses, and for B as to the rest, and A has predeceased the testator, it is not possible at the testators death to identify the items to be held for B and the trust is void for uncertainty.23 Notes 1 Sprange v Barnard (1789) 2 Bro CC 585 at 587, 588; 29 ER 320 at 322; Eade v Eade (1820) 5 Madd 118; 56 ER 840; Curtis v Rippon (1820) 5 Madd 434; 56 ER 961 ; Sale v Moore (1827) 1 Sim 534; 57 ER 678 ; Hoy v Master (1834) 6 Sim 568; 58 ER 706; Bardswell v Bardswell (1838) 9 Sim 319; 59 ER 381; Pope v Pope (1839) 10 Sim 1; 59 ER 512; Knight v Knight (1840) 3 Beav 148; 9 LJ Ch 354; 49 ER 58 (affirmed sub nom Knight v Boughton (1844) 11 Cl & Fin 513; 8 ER 1195, HL); Cowman v Harrison (1852) 10 Hare 234; 68 ER 913; Green v Marsden (1853) 1 Drew 646; 61 ER 598 ; Palmer v Simmonds (1854) 2 Drew 221; 61 ER 704 ; Federal Commissioner of Taxation v Clarke (1927) 40 CLR 246 at 282-4 per Higgins J; Re Ferguson; Froomes v Ferguson [1957] VR 635; [1958] ALR 242 ; Re London Wine Co (Shippers) Ltd [1986] PCC 121 ; Perpetual Trustees WA Ltd v Riverwest Pty Ltd [2004] WASC 81; BC200402496 at [68]-[70] per Barker J . Compare Re Wait [1927] 1 Ch 606; [1926] All ER Rep 433 , CA; Re Goldcorp Exchange Ltd (in rec) [1995] 1 AC 74; [1994] 2 All ER 806 , PC; Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639; 9 BPR 16,735; BC9807013 per Mason P ; In the Marriage of Cierpiatka (1999) 25 Fam LR 548 at 554-5; (1999) FLC 92-864; [1999] FamCA 1286 , Full Court. As to shares in a company see note 5 below.2 Stead v Mellor (1877) 5 Ch D 225 ; Re Reis; Ex parte Clough [1904] 2 KB 769; (1904) 91 LT 592 , CA. See also Re Moore; Prior v Moore [1901] 1 Ch 936; [1900-3] All ER 140 (trust of dividends for a period incapable of being ascertained not held void) (distinguished Muir v IRC [1966] 3 All ER 38; [1966] 1 WLR 1269 , CA). Contrast Re Golay; Morris v Bridgewater [1965] 2 All ER 660; [1965] 1 WLR 969 (a bequest of a reasonable income was held sufficiently certain); Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588; 171 ALR 568 at 578; [2000] HCA 25; BC200002277 per Gaudron, McHugh, Gummow and Hayne JJ (subject matter of trust identified as proportion of proceeds received by the buyer of goods). 3 Re Beardmore [1952] 1 DLR 41 (trust inter vivos to take effect on settlors death at which time his net estate was to be held in specified proportions for the respective beneficiaries held void).4 See Re Wait [1927] 1 Ch 606; [1926] All ER Rep 433 , CA; Re London Wine Co (Shippers) Ltd [1986] PCC 121 ; Re Goldcorp Exchange Ltd (in rec) [1995] 1 AC 74; [1994] 2 All ER 806 , PC; Ying v Song [2010] NSWSC 1500; BC201010034 at [236] per Ward J.5 Hunter v Moss [1994] 3 All ER 215; [1994] 1 WLR 452 (followed in Re Harvard Securities Ltd (in liq); Holland v Newbury [1997] 2 BCLC 369 , as a binding authority in relation to the English shares, but reluctantly, having regard to the cases in note 4 above). As to criticism of Hunter v Moss [1994] 3 All ER 215; [1994] 1 WLR 452 see Hayton D, Uncertainty and Subject-Matter of Trusts (1994) 110 LQR 335. In Re Harvard Securities Ltd (in liq); Holland v Newbury [1997] 2 BCLC 369 it was held in relation to Australian shares that Hunter v Moss, above, did not apply and that none of those shares were held in trust for the former clients. Compare White v Shortall (2006) 68 NSWLR 650; 206 FLR 254; 60 ACSR 654; [2006] NSWSC 1379; BC200610509 (where Campbell J did not find the reasoning in Hunter v Moss as sufficiently persuasive (at [191]) , although his Honour accepted that [g]iven the nature of shares in a company, it is perfectly sensible to talk about an individual having a beneficial interest in 222,000 shares out of a parcel of 1.5 million, even if it is not possible to identify individual shares that are held on trust (at [212])) (affirmed Shortall v White (2008) DFC 95-411; [2007] NSWCA 372; BC200711458 ).6 Sprange v Barnard (1789) 2 Bro CC 585 at 587, 588; 29 ER 320 at 322; Cowman v Harrison (1852) 10 Hare 234; 68 ER 913; Henderson v Cross (1861) 29 Beav 216 at 220; 54 ER 610 at 611 ; Mussoorie Bank Ltd v Raynor (1882) LR 7 App Cas 321; Parnall v Parnall (1878) 9 Ch D 96 ; Re Jones; Richards v Jones [1898] 1 Ch 438; (1898) 78 LT 74 ; Wright v Wright [1913] VLR 358; (1913) 19 ALR 321 ; Re Warren; Perpetual Executors and Trustees Assn of Australia Ltd v Warren (1917) 23 ALR 266 ; Mowsar v Birrell (1929) 29 SR (NSW) 506; 46 WN (NSW) 173 ; Re Aspinall [1936] SASR 468 ; Re Hervey; Stephens v Marks [1936] St R Qd 217 ; Re Kipping; Shearer v Hill [1948] St R Qd 247 ; Re Ferguson; Froomes v Ferguson [1957] VR 635;

[1958] ALR 242 ; Re Murray (decd); Equity Trustees Executors and Agency Co Ltd v Murray [1958] VR 4; [1958] ALR 605 ; Ritchie v Magree (1964) 114 CLR 173; [1964] ALR 649 . See also Re Clark (1925) 28 WALR 27 .7 Mussoorie Bank Ltd v Raynor (1882) LR 7 App Cas 321 at 331; Wright v Wright [1913] VLR 358; (1913) 19 ALR 321 .8 Henderson v Cross (1861) 29 Beav 216 at 220; 54 ER 610 at 611 ; Re Wilcocks Settlement (1875) 1 Ch D 229 at 231 .9 Perry v Merritt (1874) LR 18 Eq 152 at 154; Rodger v Rodger (1893) 12 NZLR 392 at 395. The illogicality of that combination was referred to in Re Ferguson; Froomes v Ferguson [1957] VR 635 at 639, 640; [1958] ALR 242 at 247 .10 Re Last [1958] P 137; [1958] 1 All ER 316; [1958] 2 WLR 186 ; Brown v Brown (1886) 20 SALR 98 . Contrast Re Gangell (1912) 8 Tas LR 120 (a gift to A of a share of the testators personal estate was held to be an absolute gift, even though a later provision of the will directed that the income of that share be paid to A for life and that the corpus be then held for other named beneficiaries).11 Bull v Constable (1849) 3 De G & Sm 411; 64 ER 359 ; Re Brooks Will (1865) 2 Drew & Sm 362; 62 ER 659 ; Bunn v Kain (1892) 9 WN (NSW) 88 ; Re Ridgway; Sutherland v Ridgway (1900) 26 VLR 254; 6 ALR 93 ; Re Carless; Carless v Carless (1911) 11 SR (NSW) 388; 28 WN (NSW) 112 ; Re McNeight (decd); Lindsay v McClenaghan [1916] VLR 292; (1916) 22 ALR 140 ; In the Will of Ross (decd); Stewart v Stewart [1917] VLR 318; (1917) 38 ALT 181 ; Re Pryor; Woods v Pryor [1923] SASR 199 ; Public Trustee v Roberts [1966] SASR 269 . Cases of this type were distinguished in Re Ferguson; Froomes v Ferguson [1957] VR 635; [1958] ALR 242 , where there was no express authority or direction in the will to pay debts and funeral and testamentary expenses, and partly for that reason the residue was interpreted (notwithstanding the contrary conclusion in Re Sheldon and Kemble (1885) 53 LT 521) as referring to the amount remaining at the primary donees death and not, as in Re Brooks Will (1865) 2 Drew & Sm 362; 62 ER 659 , to the amount remaining after payment of debts and funeral and testamentary expenses.12 Re Pounder (1886) 56 LJ Ch 113 ; Taylor v Taylor (1896) 17 LR (NSW) Eq 43; Re Sanford; Sanford v Sanford [1901] 1 Ch 939 ; Re Room (1908) 4 Tas LR 18 ; In the Will of Comstock; Comstock v Worrall [1918] VLR 398; (1918) 24 ALR 164 ; Gilham v Walker [1919] St R Qd; [1919] QWN 5 ; Re McIntosh [1929] SASR 21 ; In the Estate of Ward (decd) [1957] SASR 125 ; Re Rollings (1974) 9 SASR 418 .13 Re Lowman; Devenish v Pester [1895] 2 Ch 348 (personal estate); Re Dunstan; Dunstan v Dunstan [1918] 2 Ch 304 (real estate).14 Compare Sprange v Barnard (1789) 2 Bro CC 585; 29 ER 320, and other cases referred to in note 6 above.15 As to secret trusts see [430-350]-[430-375].16 As to mutual wills see [430-655], succession [395-120].17 Birmingham v Renfrew (1937) 57 CLR 666; [1937] VLR 327; (1937) 11 ALJ 188; [1937] ALR 520 ; Re Cleaver (decd); Cleaver v Insley [1981] 2 All ER 1018; [1981] 1 WLR 939 (mutual wills). See also Ottaway v Norman [1972] Ch 698; [1971] 3 All ER 1325; [1972] 2 WLR 50 (secret trusts).18 Birmingham v Renfrew (1937) 57 CLR 666 at 690; [1937] VLR 327; (1937) 11 ALJ 188; [1937] ALR 520 at 528 per Dixon J (as explained in Re Cleaver (decd); Cleaver v Insley [1981] 2 All ER 1018 at 1024; [1981] 1 WLR 939 at 947) .19 See [4304353].20 Chapman v Brown (1801) 6 Ves 404; 31 ER 1115; Re Porter; Porter v Porter [1925] Ch 746; [1925] All ER Rep 179 ; Pooley v Royal Alexandra Hospital for Children (1932) 32 SR (NSW) 459; 49 WN (NSW) 156 ; Re Dalziel; Midland Bank Executor and Trustee Co Ltd v St Bartholomews Hospital [1943] Ch 277; [1943] 2 All ER 656 .21 Mitford v Reynolds (1848) 16 Sim 105; 60 ER 812; Champney v Davy (1879) 11 Ch D 949 at 954-5 ; Re Vaughan; Vaughan v Thomas (1886) 33 Ch D 187; 55 LT 547 ; Muir v Archdall (1918) 19 SR (NSW) 10; 36 WN (NSW) 4 ; Re Coxen; McCallum v Coxen [1948] Ch 747; [1948] 2 All ER 492 . See also Re Birkett (1878) 9 Ch D 576; [1874-80] All ER Rep 224 (Jessel MR agreed with the principle as applied in the above cases but followed the decisions in the first four cases in note 22 below as having established a precedent he should not disturb).22 Fisk v A-G (1867) LR 4 Eq 521; Hunter v Bullock (1872) LR 14 Eq 45; Dawson v Small (1874) LR 18 Eq 114; Re Williams (1877) 5 Ch D 735 ; Re Birkett (1878) 9 Ch D 576; [1874-80] All ER Rep 224 ; Re Rogerson; Bird v Lee [1901] 1 Ch 715; [1900-3] All ER Rep Ext 1552 .23 Boyce v Boyce (1849) 16 Sim 476; 60 ER 959 . The paragraph below is current to 20 April 2012 [430-270] No trust of future property There cannot be a present trust of future property1 (being

an expectancy or property not yet in existence or not yet the property of the person purporting or intending to create the trust) as that would be a trust of nothing at all.2 It is immaterial whether the settlor makes a purported voluntary assignment of future property to trustees on declared trusts,3 or whether he or she purports to declare that he or she is holding future property on specified trusts.4 If valuable consideration has been given for the purported creation of a trust, by assignment or by declaration, in respect of property which is to come into existence or be acquired in the future, immediately the property does come into existence or is acquired, but not before,5 equity, treating as done that which ought to be done, fastens upon the property, operating to transfer the beneficial interest to the beneficiary, so that the trust is completely constituted,6 but that result will only occur in relation to property which, on its coming into existence, is capable of being identified as being, or as being part of, the subject matter of the assignment or declaration.7 If the property assigned is income paid as money, it is only when the money reaches the hands of the assignor that equity seizes upon it and binds the conscience of the assignor to hold it for the assignee.8 Future property not capable of being the subject matter of a present trust, but which may be the subject of a trust enforceable in equity once the property has come into existence, if consideration has passed, includes: (1) the spes successionis or interest which a person potentially has under the will or intestacy of a living person,9 or pursuant to the administration of a deceased persons estate; 10 (2) an interest dependent on the exercise of a power of appointment;11 (3) copyright in works not yet created;12 (4) future royalties;13 (5) future book debts;14 (6) freight not yet earned;15 (7) dividends not yet declared;16 (8) the proceeds of any future sale of specific property;17 (9) damages which may be recovered in pending litigation;18 and

(10) rent to be received.19 It can be difficult to distinguish an expectancy from a present right to receive a future benefit,20 or to determine whether what purports to be assigned is, for example, a debt (that is, the present right to claim against the debtor) or the proceeds when payment of the debt is made.21 One distinction that has been established is between an equitable assignment for value carrying with it a right to income generated in the future, in which case the assignment takes effect at once, and an equitable assignment for value of mere future income, dissociated from the proprietary interest with which it is ordinarily associated, in which case the assignment takes effect when the entitlement to that income crystallises or when it is received, but not before.22 Existing vested or contingent rights to obtain property at some future time are present property, not expectancies.23 Notes 1 Re Ellenborough; Towry Law v Burne [1903] 1 Ch 697; (1903) 72 LJ Ch 218; 87 LT 714 .2 Collyer v Isaacs (1881) 19 Ch D 342 at 351; [1881-85] All ER Rep 828 per Jessel MR, CA.3 Re the Stamps Acts and Rules Settlement [1915] VLR 670; (1915) 21 ALR 499 ; Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84; 22 ALR 365 ; Re Brooks Settlement Trusts; Lloyds Bank Ltd v Tillard [1939] Ch 993; [1939] 3 All ER 920 ; Norman v FCT (1963) 109 CLR 9; [1964] ALR 131; BC6300080 ; Williams v IRC [1965] NZLR 395 .4 Brennan v Morphett (1908) 6 CLR 22 ; Permanent Trustee Co v Scales (1930) 30 SR (NSW) 391; 47 WN (NSW) 151 . Contrast Tunley v FCT (1927) 39 CLR 528 .5 Permanent Trustee Co v Scales (1930) 30 SR (NSW) 391; 47 WN (NSW) 151 .6 Holroyd v Marshall (1862) 10 HL Cas 191; [1861-73] All ER Rep 414; (1862) 11 ER 999 ; Re Clarke; Coombe v Carter (1887) 36 Ch D 348; 56 LJ Ch 981; 57 LT 823 ; Tailby v Official Receiver (Trustee of the property of HG Izon, a bankrupt) (1888) LR 13 App Cas 523; [1886-90] All ER Rep 486 , HL; Caraher v Lloyd (Official Assignee) (1905) 2 CLR 480; 11 ALR 400 ; Peter v Shipway (1908) 7 CLR 232; 15 ALR 214; [1908] HCA 52 ; Re Lind; Industrials Finance Syndicate Ltd v Lind [1915] 2 Ch 345 at 360 per Swinfen Eady LJ, at 365-6 per Phillimore LJ, at 373 per Bankes LJ; [1914-15] All ER Rep 527 at 531 per Swinfen Eady LJ, at 534 per Phillimore LJ, at 537-8 per Bankes LJ , CA; Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1 at 13 per Latham CJ, at 35 per McTiernan J; [1937] ALR 432 at 435 per Latham CJ, at 444 per McTiernan J ; Federal Commissioner of Taxation v Betro Harrison Constructions Pty Ltd (1978) 20 ALR 647; 37 FLR 154 ; Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 at 450; 28 ALR 179 at 185 (see also Federal Commissioner of Taxation v Everett (1978) 21 ALR 625 at 644; 38 FLR 26 per Deane J , Fed C of A, Full Court); Booth v FCT (1987) 164 CLR 159; 76 ALR 375; 62 ALJR 40; 19 ATR 514 ; Re Androma Pty Ltd [1987] 2 Qd R 134 , SC(QLD), Full Court; Deputy Commissioner of Taxation (NSW) v Donnelly (1989) 25 FCR 432; 89 ALR 232 at 255-7 per Hill J , Fed C of A, Full Court; Liedig v FCT (1994) 121 ALR 561 , Fed C of A. As to the effect of bankruptcy and subsequent discharge of the assignor on a purported assignment for value of future property see Collyer v Isaacs (1881) 19 Ch D 342; [1881-85] All ER Rep 828 ; Deputy Commissioner of Taxation v GIO (NSW) (1993) 45 FCR 284; 117 ALR 61 at 73-4 , Fed C of A, Full Court. Contrast Re Reis; Ex parte Clough [1904] 2 KB 769; (1904) 91 LT 592 (affirmed on a different point Clough v Samuel [1905] AC 442 , HL).7 Tailby v Official Receiver (Trustee of the property of HG Izon, a bankrupt) (1888) LR 13 App Cas 523; [1886-90] All ER Rep 486 , HL.8 Liedig v FCT (1994) 121 ALR 561 , Fed C of A.9 Re Parsons; Stockley v Parsons (1890) 45 Ch D 51 ; Re Mudge [1914] 1 Ch 115 , CA; Re Lind; Industrials Finance Syndicate Ltd v Lind [1915] 2 Ch 345; [1914-15] All ER Rep 527 , CA.10 Livingston v Cmr of Stamp Duties (Qld) (1960) 107 CLR 411; [1961] Qd R 118; [1961] ALR 534; (1960) 34 ALJR 425 (affirmed Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12; [1965] AC 694; [1964] 3 All ER 692; [1964] 3 WLR 963 , PC).11 Re the Stamps Acts and Rules Settlement [1915] VLR 670; (1915) 21 ALR 499 ; Re Brooks Settlement Trusts; Lloyds Bank Ltd v Tillard [1939] Ch 993; [1939] 3 All ER 920 .12 Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1 at 13 per Viscount Cave LC, at 32 per Lord Phillimore; [1923] All ER Rep Ext 794 , HL.13 Shepherd v

Cmr of Taxation (Cth) (1965) 113 CLR 385; [1966] ALR 969; (1965) 39 ALJR 351; 9 AITR 739 .14 Tailby v Official Receiver (Trustee of the property of HG Izon, a bankrupt) (1888) LR 13 App Cas 523; [1886-90] All ER Rep 486 , HL.15 Lindsay v Gibbs (1856) 22 Beav 522; 52 ER 1209.16 Norman v FCT (1963) 109 CLR 9; [1964] ALR 131; BC6300080 .17 Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1; [1937] ALR 432 .18 Glegg v Bromley [1912] 3 KB 474; [1911-13] All ER Rep 1138 , CA; Grovewood Holdings Plc v James Capel & Co Ltd [1995] Ch 80; [1994] 4 All ER 417; [1995] 2 WLR 70 .19 Booth v FCT (1987) 164 CLR 159; 76 ALR 375; 62 ALJR 40; 19 ATR 514 .20 Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1; [1937] ALR 432 ; Norman v FCT (1963) 109 CLR 9; [1964] ALR 131; BC6300080 , HC of A; Williams v IRC [1965] NZLR 395 , CA(NZ); Shepherd v Cmr of Taxation (Cth) (1965) 113 CLR 385; [1966] ALR 969; (1965) 39 ALJR 351; 9 AITR 739 , HC of A; Federal Commissioner of Taxation v Everett (1980) 143 CLR 440; 28 ALR 179 ; Booth v FCT (1987) 164 CLR 159; 76 ALR 375; 62 ALJR 40; 19 ATR 514 .21 Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1 at 13; [1937] ALR 432 at 435 per Latham CJ; Federal Commissioner of Taxation v Betro Harrison Constructions Pty Ltd (1978) 20 ALR 647; 37 FLR 154 , Fed C of A, Full Court. Compare Norman v FCT (1963) 109 CLR 9; [1964] ALR 131; BC6300080 ; Shepherd v Cmr of Taxation (Cth) (1965) 113 CLR 385; [1966] ALR 969; (1965) 39 ALJR 351; 9 AITR 739 , HC of A.22 Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 at 450, 451; 28 ALR 179 at 185 . See, however, Booth v FCT (1987) 164 CLR 159; 76 ALR 375; 62 ALJR 40; 19 ATR 514 , HC of A.23 Peter v Shipway (1908) 7 CLR 232; 15 ALR 214; [1908] HCA 52 ; Buhlmann v Nilson (1921) 29 CLR 417 at 421-2; 27 ALR 318 at 321 per Knox CJ ; Public Curator of Queensland v Union Trustee Co of Australia Ltd (1922) 31 CLR 66 at 74-5; 28 ALR 438 at 441 per Higgins J ; Re Rallis Will Trusts; Re Rallis Marriage Settlement; Calvocoressi v Rodocanachi [1964] Ch 288; [1963] 3 All ER 940 ; Re Midletons Will Trusts; Whitehead v Earl Midleton [1969] 1 Ch 600 at 607; [1967] 2 All ER 834 at 837.

Source

[Halsbury's Laws of Australia]

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Bottom of Form (IV) Certainty of Objects The paragraph below is current to 20 April 2012 [430-275] Persons and objects in whose favour trusts may be created A trust may be created either in favour of any person to whom a gift can legally be made,1 or for charitable

purposes.2 In general, equity would not recognise a trust which is not for charitable purposes or is not for the benefit of ascertained or ascertainable beneficiaries and capable of being enforced by the courts.3 In certain instances, however, purpose trusts have been held valid,4 subject to being restricted to a relevant perpetuity period,5 even though they were not charitable and there was no person who directly benefited from their performance.6 Decisions falling into this category have upheld trusts for the building or maintenance of monuments or tombs7 (even though not forming part of a church),8 for the promotion of fox-hunting, 9 and for the maintenance of particular animals,10 but these decisions are anomalous and exceptional and their scope is not to be extended.11 Notes 1 Burgess v Wheate (1759) 1 Eden 177 at 195; 28 ER 652 at 659 .2 For the meaning of charitable purposes see charities [75-1]-[75-20]. As to charitable trusts see charities [75-315][75-420]. As to the application of the rule against perpetuities in respect of charitable trusts see [430-435], charities [75-500]-[75-530], perpetuities and accumulations [310-290], [310-295]. As to the enforcement of charitable trusts see charities [75-1305].3 See Bowman v Secular Society Ltd [1917] AC 406 at 441; [1916-17] All ER Rep 1 at 18 per Lord Parker ; Re Hamilton-Grey; Perpetual Trustee Co Ltd v Melville (1938) 38 SR (NSW) 262 at 279-80; 55 WN (NSW) 45 ; Re Diplock; Wintle v Diplock [1941] Ch 253 at 259; [1941] 1 All ER 193 at 198 per Lord Greene MR , CA (affirmed Chichester Diocesan Fund and Board of Finance (Inc) v Simpson [1944] AC 341; [1944] 2 All ER 60 , HL); Public Trustee v Nolan (1943) 43 SR (NSW) 169 at 172; 60 WN (NSW) 84 ; Re Astors Settlement Trusts; Astor v Scholfield [1952] Ch 534 at 540-7; [1952] 1 All ER 1067 at 1070-4 ; Re Shaw (decd); Public Trustee v Day [1957] 1 All ER 745; [1957] 1 WLR 729 (compromised on appeal Re Shaw (decd); Public Trustee v Day [1958] 1 All ER 245n, CA); Leahy v A-G (NSW) (1959) 101 CLR 611; [1959] AC 457 at 478-9, 484; [1959] ALR 869 , PC; Re Endacott (decd); Corpe v Endacott [1960] Ch 232 at 245-6; [1959] 3 All ER 562 at 5678; [1959] 3 WLR 799 per Evershed MR , CA; Bacon v Pianta (1966) 114 CLR 634; [1966] ALR 1044; (1966) 40 ALJR 187; BC6600340 ; Re Spehr (decd) [1965] VR 770 ; Re Elmore (decd) [1968] VR 390 ; Re Grants Will Trusts; Harris v Anderson [1979] 3 All ER 359; [1980] 1 WLR 360; Lines v Lines (2003) 227 LSJS 456; [2003] SASC 173; BC200302858 at [25]-[28] per Besanko J ; Strathalbyn Show Jumping Club Inc v Mayes (2001) 79 SASR 54 at 63-4; (2001) 213 LSJS 1; [2001] SASC 73; BC200100967 per Bleby J . In Re Astors Settlement Trusts; Astor v Scholfield [1952] Ch 534; [1952] 1 All ER 1067 there was no person entitled, subject to the trust, to the trust fund through whom the court could have indirectly enforced the trust (compare note 6 below), and the absence of any such person was treated by the court as important in determining that the trusts were invalid. However, in Re Shaw (decd); Public Trustee v Day [1957] 1 All ER 745; [1957] 1 WLR 729 the existence of such persons was held not to enable the court to hold the trusts to be valid. As to the necessity for certainty in the objects of a trust see [430-280].4 There being no person who could enforce such a trust, it is classed as a trust of imperfect obligation, and is valid only in the sense that the trustee would be entitled to apply the trust property for the stated purpose: Re Dean; Cooper-Dean v Stevens (1889) 41 Ch D 552 at 557 . However, if the trustee does not so apply the trust property, the residuary beneficiary, the next of kin, or the settlor, as the case may be, may be able to apply to the court claiming the property on failure of the trust: Pettingall v Pettingall (1842) 11 LJ Ch 176 ; Re Dean; Cooper-Dean v Stevens (1889) 41 Ch D 552 ; Re Thompson; Public Trustee v Lloyd [1934] Ch 342 . As to non-charitable purposes see charities [75-260]-[75-310].5 See [430-435], charities [75-500]-[75-530], perpetuities and accumulations [310-270]-[310-285].6 Re Thompson; Public Trustee v Lloyd [1934] Ch 342 (trust for the furthering of fox-hunting an undertaking was given by the trustee to the court to carry out the trust, and liberty was given to the residuary legatee to apply in case this was not done) (following Pettingall v Pettingall (1842) 11 LJ Ch 176 ). The existence of these exceptional instances has been recognised by Australian courts: see, for example Pooley v Royal Alexandra Hospital for Children (1932) 32 SR (NSW) 459 at 463; 49 WN (NSW) 156 ; Public Trustee v Nolan (1943) 43 SR (NSW) 169 at 172; 60 WN (NSW) 84 ; Re Producers Defence Fund [1954] VLR 246 at 255; [1954] ALR 541 at 550 ; Re Carson

(decd); Carson v Presbyterian Church of Queensland [1956] St R Qd 466 at 474 ; AttorneyGeneral (NSW) v Donnelly (1958) 98 CLR 538 at 579; [1958] ALR 257 per Kitto J (affirmed on other grounds Leahy v A-G (NSW) (1959) 101 CLR 611; [1959] AC 457; [1959] ALR 869 , PC); Pedulla v Nasti (1990) 20 NSWLR 720 ; South Eastern Sydney Area Health Service v Wallace (2003) 59 NSWLR 259; [2003] NSWSC 1061; BC200307296 .7 Wiseman v Kildahl (1880) 6 VLR (E) 78 ; Pirbright v Salwey [1896] WN 86 ; Re Hooper; Parker v Ward [1932] 1 Ch 38 ; Re Dean; Cooper-Dean v Stevens (1889) 41 Ch D 552 at 557 ; Re Filshie; Raymond v Butcher [1939] NZLR 91 ; South Eastern Sydney Area Health Service v Wallace (2003) 59 NSWLR 259; [2003] NSWSC 1061; BC200307296 . As to limitations on this category see Re Endacott (decd); Corpe v Endacott [1960] Ch 232 at 245-6; [1959] 3 All ER 562 at 567-8; [1959] 3 WLR 799 per Evershed MR , CA; South Eastern Sydney Area Health Service v Wallace, above. See further charities [75-305], [75-310].8 Trusts for the repair of monuments in churches are charitable: see charities [75-170].9 Re Thompson; Public Trustee v Lloyd [1934] Ch 342 .10 Pettingall v Pettingall (1842) 11 LJ Ch 176 ; Mitford v Reynolds (1848) 16 Sim 105; 60 ER 812; Re Dean; Cooper-Dean v Stevens (1889) 41 Ch D 552 ; Re Haines; Johnson v Haines The Times, 7 November 1952. Compare Re Hegarty [2011] NSWSC 1194; BC201107941 (involving disclaimer of obligation to care for testators animals). As to the application of the law relating to perpetuities in respect of such trusts see perpetuities and accumulations [310-290]. A trust for the protection of animals generally is normally charitable: see charities [75-240].11 Public Trustee v Nolan (1943) 43 SR (NSW) 169 at 172; 60 WN (NSW) 84 ; Re Endacott (decd); Corpe v Endacott [1960] Ch 232 at 246; [1959] 3 All ER 562 at 568; [1959] 3 WLR 799 per Evershed MR , CA. The paragraph below is current to 20 April 2012 [430-280] Necessity for certainty of objects The objects or persons to be benefited by a trust must be expressly designated1 or so defined that they are capable of being ascertained, 2 except where the trust is for charitable purposes.3 Otherwise the trust is void for uncertainty,4 and there is a resulting trust.5 If a trust requires division between all the members of a class, whether in equal shares or on some other fixed basis, the rule is that it will be void for uncertainty if it is not possible to compile a complete list of the beneficiaries (known as the list certainty test), as the size of each share cannot be ascertained unless the exact number of beneficiaries is known.6 This rule may not be inflexible in view of Australian authority to the effect that, at least in the context of fixed trusts which contemplate distribution of the entire capital of the fund, the list certainty test can be met if within a reasonable time after the trust comes into effect, the court is satisfied on the balance of probabilities that the substantial majority of the beneficiaries have been ascertained and that no reasonable inquiries could be made which could improve the situation.7 Where a trust does not require division between all members of a class of beneficiaries,8 but confers on the trustee a discretion to select among those members (usually termed a discretionary trust), the trust will not fail merely because it may not be possible to draw up a list of every member of the class.9 Such a trust will be valid provided it can be predicated of any proposed beneficiary that he or she is or is not a member of the class10 (known as the criterion certainty or in/out test) and provided the class is not so hopelessly wide as not to form anything like a class so that the trust is administratively unworkable.11 Categories found to be capable of application with sufficient certainty include relatives and dependants of a particular person, and employees and ex-employees of a particular company.12 On the other hand, descriptions which have been held not to indicate sufficiently certain criteria include my old friends,13 friends who resided with me from overseas,14 persons to whom a moral obligation is owed,15 persons who have rendered services meriting consideration by the testator,16 and deserving journalists.17

If the designated category meets the criterion certainty test, it fulfils the requirements of what is termed conceptual (or linguistic) certainty, in which case the trust will not be invalid merely because there could be practical difficulties in obtaining or verifying the evidence required to determine whether or not a person is within that category or in ascertaining the whereabouts or continued existence of some of the relevant persons (evidential uncertainty).18 The trustees are not required to survey mankind from China to Peru,19 especially where the identity of the prime candidates for the exercise of the discretion is clear.20 The trustees may, if necessary, apply to the court for directions21 or pay a share into court.22 If a trust provides for an individual gift to each person qualifying under some condition precedent, then the trust is valid if one or more persons undoubtedly qualify, even though conceptual uncertainty makes it impossible to determine whether other persons qualify.23 It seems unlikely that the effects of conceptual uncertainty can be excluded by conferring on the trustee a residual power to determine conclusively any doubts as to who are members of the beneficiary class.24 Notes 1 Sprange v Barnard (1789) 2 Bro CC 585 at 587-8; 29 ER 320 at 322; Morice v Bishop of Durham (1805) 10 Ves 522 at 542-3; [1803-13] All ER Rep 451; (1805) 32 ER 947 at 954-5 ; Re Hetley; Hetley v Hetley [1902] 2 Ch 866 ; Tatham v Huxtable (1950) 81 CLR 639; [1951] ALR 1; BC5000510 ; Perpetual Trustee Co Ltd v John Fairfax & Sons Pty Ltd (1959) 76 WN (NSW) 226 ; Attorney-General v Cahill [1969] 1 NSWR 85 ; Re Stratton [1970] WAR 143 ; Public Trustee v Vodjdani (1988) 49 SASR 236 .2 Wright v Atkyns (1823) Turn & R 143 at 158-9; 37 ER 1051 at 1057 per Lord Eldon LC; Stead v Mellor (1877) 5 Ch D 225 ; Re Griffiths; Griffiths v Griffiths [1926] VLR 212; [1926] ALR 197; (1926) 47 ALT 171 ; Re Endacott (decd); Corpe v Endacott [1960] Ch 232; [1959] 3 All ER 562; [1959] 3 WLR 799 , CA; McPhail v Doulton [1971] AC 424; [1970] 2 All ER 228; [1970] 2 WLR 1110 , HL; Re Badens Deed Trusts (No 2) [1973] Ch 9; [1972] 2 All ER 1304; [1972] 3 WLR 250 , CA; Kinsela v Caldwell (1975) 132 CLR 458; 5 ALR 337 ; Re Barlows Will Trusts [1979] 1 All ER 296; [1979] 1 WLR 278 .3 See [430-275]. As to what are charitable purposes see charities [75-1]-[75-20].4 Morice v Bishop of Durham (1805) 10 Ves 522 at 543; [1803-13] All ER Rep 451; (1805) 32 ER 947 at 955 ; Re Hetley; Hetley v Hetley [1902] 2 Ch 866 ; Re Wood; Barton v Chilcott [1949] Ch 498; [1949] 1 All ER 1100 ; Re Astors Settlement Trusts; Astor v Scholfield [1952] Ch 534; [1952] 1 All ER 1067 ; Muir v IRC [1966] 3 All ER 38; [1966] 1 WLR 1269 , CA; Re Pughs Will Trusts; Marten v Pugh [1967] 3 All ER 337; [1967] 1 WLR 1262 . As to where the test for validity of trusts was less liberal than for powers, a valid power could not be spelt out of an invalid trust and similarly, a valid power to effect pure abstract non-charitable purposes could not be spelt out of an invalid trust for pure abstract non-charitable purposes: Inland Revenue Commissioners v Broadway Cottages Trust [1955] Ch 20 at 36; [1954] 3 All ER 120 at 128; [1954] 3 WLR 438 at 449, 450 per Jenkins LJ , CA; Re Shaw (decd); Public Trustee v Day [1957] 1 All ER 745 at 759; [1957] 1 WLR 729 at 746 per Harman J (compromised on appeal Re Shaw (decd); Public Trustee v Day [1958] 1 All ER 245n, CA); Re Endacott (decd); Corpe v Endacott [1960] Ch 232 at 246; [1959] 3 All ER 562 at 568; [1959] 3 WLR 799 , CA. As to statutory validation of some trusts for mixed charitable and non-charitable purposes see charities [75-390]-[75-420].5 Morice v Bishop of Durham (1805) 10 Ves 522 at 537, 543; [1803-13] All ER Rep 451; (1805) 32 ER 947 at 953, 955 per Lord Eldon LC; Inland Revenue Commissioners v Broadway Cottages Trust [1955] Ch 20; [1954] 3 All ER 120; [1954] 3 WLR 438 , CA; Re Sayer; MacGregor v Sayer [1957] Ch 423; [1956] 3 All ER 600; [1957] 2 WLR 261 ; Re Gillingham Bus Disaster Fund; Bowman v Official Solicitor [1959] Ch 62; [1958] 2 All ER 749; [1958] 3 WLR 325 , CA. As to a resulting trust arising on the failure of an express trust see [430-510].6 Inland Revenue Commissioners v Broadway Cottages Trust [1955] Ch 20 at 29; [1954] 3 All ER 120 at 124; [1954] 3 WLR 438 at 443-4 , CA; Whishaw v Stephens [1970] AC 508 at 524; [1968] 3 All ER 785 at 792; [1968] 3 WLR 1127 at 1137-8 per Lord Upjohn , HL; Re Barlows Will Trusts [1979] 1 All ER 296 at 299; [1979] 1 WLR 278 at 281-2 ; Commissioner of State Revenue v Viewbank Properties Pty Ltd

(2004) 55 ATR 501; 2004 ATC 4460; [2004] VSC 127; BC200402113 at [20] per Nettle J ; Prosper v Wojtowicz [2005] QSC 177; BC200504808 at [25] per Wilson J .7 West v Weston (1998) 44 NSWLR 657 at 664; 9 BPR 16,611 per Young J .8 Whishaw v Stephens [1970] AC 508 at 524; [1968] 3 All ER 785 at 792; [1968] 3 WLR 1127 at 1138 per Lord Upjohn , HL.9 McPhail v Doulton [1971] AC 424; [1970] 2 All ER 228; [1970] 2 WLR 1110 , HL; McFadden v Public Trustee for Victoria [1981] 1 NSWLR 15 at 31 per Holland J ; Commissioner of State Revenue v Viewbank Properties Pty Ltd (2004) 55 ATR 501; 2004 ATC 4460; [2004] VSC 127; BC200402113 at [20] per Nettle J .10 For difficulties in applying the is or is not test see Re Badens Deed Trusts (No 2) [1973] Ch 9; [1972] 2 All ER 1304; [1972] 3 WLR 250 , CA.11 See [430-285].12 Re Badens Deed Trusts (No 2) [1973] Ch 9; [1972] 2 All ER 1304; [1972] 3 WLR 250 , CA; Prosper v Wojtowicz [2005] QSC 177; BC200504808 at [40]-[42] per Wilson J (persons who were not related to the testator).13 Whishaw v Stephens [1970] AC 508 at 524; [1968] 3 All ER 785 at 792; [1968] 3 WLR 1127 at 1137-8 per Lord Upjohn , HL. See also Re Coates; Ramsden v Coates [1955] Ch 495 at 497-9; [1955] 1 All ER 26 at 27-9; [1954] 3 WLR 959 at 961-3 ; Re Gibbard; Public Trustee v Davis [1966] 1 All ER 273 at 274-5; [1967] 1 WLR 42 at 43-4 .14 Lempens v Reid (2009) 2 ASTLR 373; 264 LSJS 28; [2009] SASC 179; BC200905686 at [21]-[30] per Gray J .15 Re Badens Deed Trusts (No 2) [1973] Ch 9 at 20; [1972] 2 All ER 1304 at 1309; [1972] 3 WLR 250 at 255 per Sachs LJ , CA. Compare Re Leek (decd); Darwen (Baron) v Leek [1967] Ch 1061; [1967] 2 All ER 1160; [1967] 3 WLR 576 .16 Tatham v Huxtable (1950) 81 CLR 639; [1951] ALR 1; BC5000510 .17 Perpetual Trustee Co Ltd v John Fairfax & Sons Pty Ltd (1959) 76 WN (NSW) 226 .18 Whishaw v Stephens [1970] AC 508 at 524; [1968] 3 All ER 785 at 792; [1968] 3 WLR 1127 at 1138 per Lord Upjohn , HL. See also Re Sayer; MacGregor v Sayer [1957] Ch 423 at 431; [1956] 3 All ER 600 at 604; [1957] 2 WLR 261 at 266 ; McPhail v Doulton [1971] AC 424 at 457; [1970] 2 All ER 228 at 247; [1970] 2 WLR 1110 at 1133 per Lord Wilberforce , HL; Re Badens Deed Trusts (No 2) [1973] Ch 9 at 19-20; [1972] 2 All ER 1304 at 1309; [1972] 3 WLR 250 at 255 per Sachs LJ , CA; Re Beckbessinger [1993] 2 NZLR 362 at 368-70 . For criticism of the distinction between conceptual or linguistic uncertainty and evidential uncertainty see Re Tucks Settlement Trusts; Public Trustee v Tuck [1978] Ch 49 at 59; [1978] 1 All ER 1047 at 1051; [1978] 2 WLR 411 at 415-16 per Lord Denning MR , CA; McCracken v A-G (Vic) [1995] 1 VR 67 at 70-1 .19 Re Gestetner Settlement; Barnett v Blumka [1953] Ch 672 at 688-9; [1953] 1 All ER 1150 per Harman J .20 Schmidt v Rosewood Trust Ltd [2003] 2 AC 709; [2003] 3 All ER 76; [2003] 2 WLR 1442 at 1455; [2003] UKPC 26 per Lord Walker .21 See [430-5055]-[430-5085] (court intervention).22 See [430-3840]-[430-3860] (payment into court).23 Re Barlows Will Trusts [1979] 1 All ER 296; [1979] 1 WLR 278 (testatrix directed that any members of my family and any friends of mine be given the opportunity of purchasing certain paintings on an advantageous basis; held that the direction was valid as it was possible in the circumstances to say that at least one or more than one of the claimants qualified).24 Re Coxen; McCallum v Coxen [1948] Ch 747 at 761-2; [1948] 2 All ER 492 ; Re Jones; Midland Bank Executor and Trustee Co Ltd v Jones [1958] Ch 125; [1953] 1 All ER 357 . Contrast Re Tucks Settlement Trusts; Public Trustee v Tuck [1978] Ch 49; [1978] 1 All ER 1047; [1978] 2 WLR 411 , CA. The paragraph below is current to 20 April 2012 [430-285] Administrative workability Even if a conceptually certain1 class of beneficiaries is specified in a trust instrument, the trust is void if the definition of beneficiaries is so inordinately wide as not to form anything like a class, with the result that the trust would be administratively unworkable or one which could not be executed.2 Accordingly, a discretionary trust for everyone in the world except five named persons will be void,3 as, perhaps, would be one for all the residents of Greater London,4 whereas a trust for relatives would not fall within that category. 5 A power for the trustee with the previous written consent of the settlor to appoint anyone other than the settlor into a discretionary trust class of beneficiaries is valid because it is not a power to introduce anyone in the world but a power to introduce only persons proposed by the trustee and approved by the settlor.6 On that basis the power avoids the sort of uncertainty that results from a trustee being given a power so wide that it would be impossible for the court to say whether or not

he or she was properly exercising it and so wide that it would be impossible for the trustee to consider in any sensible manner how he or she should exercise it, if at all, from time to time.7 Notwithstanding that background, a power to add anyone in the world (except certain specified persons) to a class of beneficiaries,8 and a power to appoint to anyone in the world (except certain specified persons)9 have each been held to be valid. Notes 1 As to conceptual certainty see [430-280].2 See McPhail v Doulton [1971] AC 424 at 457; [1970] 2 All ER 228 at 247; [1970] 2 WLR 1110 at 1133 per Lord Wilberforce , HL.3 Yeap Cheah Neo v Ong Cheng Neo (1875) LR 6 PC 381; Re Park; Public Trustee v Armstrong [1932] 1 Ch 580 ; Re Pughs Will Trusts; Marten v Pugh [1967] 3 All ER 337; [1967] 1 WLR 1262 ; Blausten v IRC [1972] Ch 256; [1972] 1 All ER 41; [1972] 2 WLR 376, CA; Re Hays Settlement Trusts; Greig v McGregor [1981] 3 All ER 786; [1982] 1 WLR 202 ; Horan v James [1982] 2 NSWLR 376 at 383-4 per Mahoney JA , CA(NSW).4 McPhail v Doulton [1971] AC 424 at 457; [1970] 2 All ER 228 at 247; [1970] 2 WLR 1110 at 1133 per Lord Wilberforce , HL.5 McPhail v Doulton [1971] AC 424 at 457; [1970] 2 All ER 228 at 247; [1970] 2 WLR 1110 at 1133 per Lord Wilberforce , HL; Re Badens Deed Trusts (No 2) [1973] Ch 9 at 23; [1972] 2 All ER 1304 at 1312; [1972] 3 WLR 250 at 258 per Megaw LJ , CA. Compare Re Badens Deed Trusts (No 2), above (Ch) at 29-30, (All ER) at 1318, (WLR) at 264 per Stamp LJ.6 Blausten v IRC [1972] Ch 256 at 272; [1972] 1 All ER 41 at 50; [1972] 2 WLR 376 at 386 per Buckley LJ, CA.7 Blausten v IRC [1972] Ch 256 at 273; [1972] 1 All ER 41 at 50; [1972] 2 WLR 376 at 386 per Buckley LJ, CA.8 Re Manistys Settlement; Manisty v Manisty [1974] Ch 17; [1973] 2 All ER 1203; [1973] 3 WLR 341 .9 Re Hays Settlement Trusts; Greig v McGregor [1981] 3 All ER 786; [1982] 1 WLR 202 . The paragraph below is current to 20 April 2012 [430-290] Mixed charitable and non-charitable purpose trusts Without the intervention of statute, any inclusion in a purpose trust (other than one coming within one of the anomalous cases)1 of non-charitable purposes, either specifically or by the use of compendious expressions comprising both charitable and non-charitable purposes,2 will generally, with limited exceptions,3 mean that the trust will not be exclusively for charitable purposes and will therefore be invalid.4 A trust to apportion a fund between objects which are wholly charitable and objects which consist of or include non-charitable purposes is valid as regards the charitable objects provided the trust requires some allocation to be made to all objects, so that the whole fund could not be allocated to the objects comprising non-charitable purposes.5 If the trustee does not make an allocation the court will, if it can, apportion the fund, often equally, but sometimes unequally, between the specified objects.6 Whether the apportionment is made by the trustee or by the court, the trust in respect of the portion of the fund allocated to the objects comprising non-charitable purposes will be invalid.7 If the amount applicable to the non-charitable objects cannot be quantified the trust wholly fails, even as to the charitable objects, because no ascertainable part of the fund can be identified as dedicated solely to charitable purposes.8 However, if the gift for charitable objects is construed as a gift of the entire fund, subject to the payments out of it required to give effect to the non-charitable purposes, the invalidity of the non-charitable part of the gift leaves the entire fund applicable to the charitable objects.9 In all Australian jurisdictions except the Australian Capital Territory and the Northern Territory, however, there are statutory provisions which prevent a trust from being invalid merely by reason of the inclusion of non-charitable purposes and require such a trust to be construed as if application of the trust funds to any non-charitable and invalid purpose is not or is deemed not to have been directed or allowed.10 Notes

1 See [430-275].2 See charities [75-370].3 Exceptions are: (1) where a reference to charitable purposes is linked with an expression which could include non-charitable purposes in such a way as to require that the purposes to be pursued must be confined to those which are charitable as well as falling within the other category (see charities [75-370]); and (2) where there is a trust for purposes amongst which overriding charitable purposes predominate, but which include ancillary or peripheral non-charitable purposes (see charities [75-380]). 4 Morice v Bishop of Durham (1804) 9 Ves 399 at 406; 32 ER 656 at 659 (affirmed Morice v Bishop of Durham (1805) 10 Ves 522; [1803-13] All ER Rep 451; (1805) 32 ER 947 per Lord Eldon ).5 See charities [75-375].6 See charities [75-375].7 See charities [75-375].8 Re Birkett (1878) 9 Ch D 576 at 579-80; [1874-80] All ER Rep 224 per Jessel MR; Re Porter; Porter v Porter [1925] Ch 746; [1925] All ER Rep 179 ; Re Coxen; McCallum v Coxen [1948] Ch 747 at 752; [1948] 2 All ER 492 . See also Chapman v Brown (1801) 6 Ves 404; 31 ER 1115; Re Taylor; Martin v Freeman (1888) 58 LT 538; 4 TLR 302 ; Re Dalziel; Midland Bank Executor and Trustee Co Ltd v St Bartholomews Hospital [1943] Ch 277; [1943] 2 All ER 656 .9 Re Parnell; Ranks v Holmes [1944] Ch 107 .10 See charities [75-390]-[750-420]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-295] Trusts for unincorporated associations An unincorporated association, because it is not a legal person and is therefore not capable of having an interest in property, cannot as such be a beneficiary of a trust. A trust for the persons who are the members of an unincorporated association at the time when the gift takes effect, however, may be valid.1 Even a gift on trust for the present and future members may be valid provided the rules against remoteness of vesting and against inalienability are not contravened.2 A gift to a named unincorporated association, without reference to purposes, is capable of being interpreted as a valid absolute gift to those who are the members of the association at the time when the gift takes effect,3 albeit as persons contractually bound inter se by its constitution to apply the same for its general purposes,4 rather than invalid as imposing a trust on the members to apply the same for all the purposes of the association.5 The same interpretation may be applied where the gift is expressed to be to the association for its general purposes,6 or where what may appear to be a specified purpose is interpreted merely as indicating the motive of the donor in making a gift to the members.7 In such cases, the gift to the association may be construed as being either to the members as joint tenants, so that any member can sever his or her share and claim it or, more likely, to the members subject to their respective contractual rights and liabilities towards one another as members of the association.8 In the latter case a member cannot sever his or her share and it will accrue to the other members on his or her death or resignation. On the other hand, even though no purposes are specified, the terms or circumstances of the gift, or the rules of the association, may show that the subject property is to be held in trust for and applied for the purposes of the association in which case the gift will fail unless the association is a charitable body.9 This is more likely to be the conclusion where:

(1) the rules could preclude the members from terminating the association and dividing the property between them;10 (2) it is considered highly unlikely that the property would ever be distributed to the members;11 or (3) where the decisions to terminate and distribute lie not with the association itself but with another body.12 In England even a gift to an unincorporated association for specified purposes (not being exclusively charitable purposes), which might otherwise be invalid as a non-charitable purpose trust,13 may be valid if the purposes are not abstract or impersonal14 (for example, the abolition of vivisection15 or the furtherance of the views of a political party) 16 but are directly or indirectly for the benefit of persons intended to have locus standi to enforce the trust,17 whereas in Australia this form of trust has not received judicial endorsement.18 In any event, such a trust must not infringe the rule against remoteness of vesting and the rule against inalienability.19 In Queensland, the above issues are addressed by legislation, which provides gifts to an unincorporated association take effect in augmentation of the general funds of the association and must be applied in accordance with its constitution.20 The validity of the gift is not affected by the fact that a list of all the members of an association cannot be compiled at any one time.21 In the Northern Territory and Victoria similar legislation has been enacted, but because it is expressed not to apply to gifts to charitable unincorporated associations, the general law continues to apply to such gifts given in these jurisdictions.22 The difficulties that arise in the context of gifts to unincorporated associations can be avoided if the donee association is incorporated pursuant to the associations incorporation legislation.23 Notes 1 Bowman v Secular Society Ltd [1917] AC 406 at 441; [1916-17] All ER Rep 1 per Lord Parker , HL; Re Macaulays Estate; Macaulay v ODonnell [1943] Ch 435n ; Re Cain (decd); National Trustees, Executors and Agency Co of Australasia Ltd v Jeffrey [1950] VLR 382; [1950] ALR 796 ; Leahy v A-G (NSW) (1959) 101 CLR 611; [1959] AC 457; [1959] ALR 869 , PC; Neville Estates Ltd v Madden [1962] Ch 832 at 849; [1961] 3 All ER 769 at 778-9; [1961] 3 WLR 999 at 1010 ; Re Goodson (decd) [1971] VR 801 at 813 ; Public Trustee (NSW) v A-G (NSW) (unreported, Powell J, 11 December 1984); Radmanovich v Nedeljkovic (2001) 52 NSWLR 641 at 661-5; [2001] NSWSC 492; BC200103108 per Young CJ in Eq.2 Carne v Long (1860) 2 De GF & J 75; 45 ER 550 ; Re Macaulays Estate; Macaulay v ODonnell [1943] Ch 435n ; Re Producers Defence Fund [1954] VLR 246 at 265; [1954] ALR 541 at 550-1 ; Re Carson (decd); Carson v Presbyterian Church of Queensland [1956] St R Qd 466 at 474-5 . See also [430-435], perpetuities and accumulations [310-145]-[310-160].3 Bowman v Secular Society Ltd [1917] AC 406 at 442; [1916-17] All ER Rep 1 per Lord Parker; Re Ogden; Brydon v Samuel [1933] Ch 678; [1933] All ER Rep 720; (1933) 149 LT 162 ; Roman Catholic Archbishop of Melbourne v Lawlor (1934) 51 CLR 1; [1934] ALR 202 ; Re Cain (decd); National Trustees, Executors and Agency Co of Australasia Ltd v Jeffrey [1950] VLR 382; [1950] ALR 796 at 802-3 ; Leahy v A-G (NSW) (1959) 101 CLR 611 at 620; [1959] AC 457 at 478; [1959] ALR 869 ; Neville Estates Ltd v Madden [1962] Ch 832 at 849; [1961] 3 All ER 769 at 778-9; [1961] 3 WLR 999 at 1010 ; Bacon v Pianta (1966) 114 CLR 634 at 638; [1966] ALR 1044 at 1045; (1966) 40

ALJR 187; BC6600340 ; Re Goodson (decd) [1971] VR 801 at 813 ; Re De Vedas (decd) [1971] SASR 169 ; Re Rechers Will Trusts; National Westminster Bank Ltd v National AntiVivisection Society Ltd [1972] Ch 526; [1971] 3 All ER 401; [1971] 3 WLR 321 ; Re Lipinskis Will Trusts; Gosschalk v Levy [1976] Ch 235; [1977] 1 All ER 33; [1976] 3 WLR 522 ; Re Bucks Constabulary Widows and Orphans Fund Friendly Society; Thompson v Holdsworth (No 2) [1979] 1 All ER 623 at 626-8; [1979] 1 WLR 936 at 939-41 ; Re Grants Will Trusts; Harris v Anderson [1979] 3 All ER 359; [1980] 1 WLR 360; Public Trustee (NSW) v A-G (NSW) (unreported, Powell J, 11 December 1984).4 Re Ogden; Brydon v Samuel [1933] Ch 678 at 6812; [1933] All ER Rep 720 at 721; (1933) 149 LT 162 ; Neville Estates Ltd v Madden [1962] Ch 832 at 849; [1961] 3 All ER 769 at 770; [1961] 3 WLR 999 at 1010 ; Re Goodson (decd) [1971] VR 801 at 813 ; Re Horley Town Football Club; Hunt v McLaren [2006] EWHC 2386 (Ch).5 Leahy v A-G (NSW) (1959) 101 CLR 611; [1959] AC 457; [1959] ALR 869 , PC; Bacon v Pianta (1966) 114 CLR 634; [1966] ALR 1044; (1966) 40 ALJR 187; BC6600340 . See also Re Cain (decd); National Trustees, Executors and Agency Co of Australasia Ltd v Jeffrey [1950] VLR 382 at 389; [1950] ALR 796 at 803 . As to unincorporated associations generally see voluntary associations.6 Bowman v Secular Society Ltd [1917] AC 406 at 442; [1916-17] All ER Rep 1 per Lord Parker; Re Ogden; Brydon v Samuel [1933] Ch 678 at 681-2; [1933] All ER Rep 720; (1933) 149 LT 162 ; Re Cain (decd); National Trustees, Executors and Agency Co of Australasia Ltd v Jeffrey [1950] VLR 382; [1950] ALR 796 at 803 ; Leahy v A-G (NSW) (1959) 101 CLR 611 at 620; [1959] AC 457 at 478; [1959] ALR 869 at 875 , PC; Re Goodson (decd) [1971] VR 801 at 811-12 ; Re Rechers Will Trusts; National Westminster Bank Ltd v National Anti-Vivisection Society Ltd [1972] Ch 526 at 539-42; [1971] 3 All ER 401 at 408-10; [1971] 3 WLR 321 at 329-32 .7 Re Turkington; Owen v Benson [1937] 4 All ER 501; (1937) 81 Sol Jo 1041 ; Re Lipinskis Will Trusts; Gosschalk v Levy [1976] Ch 235 at 245; [1977] 1 All ER 33 at 41; [1976] 3 WLR 522 at 531 . See also Re Grants Will Trusts; Harris v Anderson [1979] 3 All ER 359 at 365-6; [1980] 1 WLR 360 at 367-8.8 Neville Estates Ltd v Madden [1962] Ch 832 at 849; [1961] 3 All ER 769 at 778-9; [1961] 3 WLR 999 at 1010 ; Radmanovich v Nedeljkovic (2001) 52 NSWLR 641 at 662; [2001] NSWSC 492; BC200103108 per Young CJ in Eq.9 Neville Estates Ltd v Madden [1962] Ch 832 at 849; [1961] 3 All ER 769 at 778-9; [1961] 3 WLR 999 at 1010 ; Bacon v Pianta (1966) 114 CLR 634; [1966] ALR 1044; (1966) 40 ALJR 187; BC6600340 .10 Neville Estates Ltd v Madden [1962] Ch 832 at 849; [1961] 3 All ER 769 at 778-9; [1961] 3 WLR 999 at 1010 .11 Re Grants Will Trusts; Harris v Anderson [1979] 3 All ER 359 at 366; [1980] 1 WLR 360 at 368.12 Re Grants Will Trusts; Harris v Anderson [1979] 3 All ER 359 at 371; [1980] 1 WLR 360 at 374.13 See [430-275].14 Re Cain (decd); National Trustees, Executors and Agency Co of Australasia Ltd v Jeffrey [1950] VLR 382 at 389-91; [1950] ALR 796 at 802-4 ; Leahy v A-G (NSW) (1959) 101 CLR 611; [1959] AC 457; [1959] ALR 869 , PC.15 National Anti-Vivisection Society v IRC [1948] AC 31; [1947] 2 All ER 217; (1946) 28 TC 311 , HL.16 Bacon v Pianta (1966) 114 CLR 634; [1966] ALR 1044; (1966) 40 ALJR 187; BC6600340 ; Re Grants Will Trusts; Harris v Anderson [1979] 3 All ER 359; [1980] 1 WLR 360; Public Trustee (NSW) v A-G (NSW) (unreported, Powell J, 11 December 1984). See also charities [75-290].17 Re Denleys Trust Deed; Holman v HH Martyn & Co Ltd [1969] 1 Ch 373; [1968] 3 All ER 65; [1968] 3 WLR 457 ; Re Lipinskis Will Trusts; Gosschalk v Levy [1976] Ch 235 at 246-8; [1977] 1 All ER 33 at 43-4; [1976] 3 WLR 522 at 533-4 . There is also support for this form of trust in some Canadian courts: see, for example, Peace Hills Trust Co v Canada Deposit Insurance Corp (2007) 288 DLR (4th) 237; [2010] WTLR 83; [2007] ABQB 364. Compare Ernst & Young Inc v Central Guaranty Trust Co (2004) 131 ACWS (3d) 1186; [2005] 3 WWR 97; 29 Alta LR (4th) 269 (where Re Re Denleys Trust Deed; Holman v HH Martyn & Co Ltd [1969] 1 Ch 373; [1968] 3 All ER 65; [1968] 3 WLR 457 , above, was distinguished).18 See Strathalbyn Show Jumping Club Inc v Mayes (2001) 79 SASR 54 at 65; (2001) 213 LSJS 1; [2001] SASC 73; BC200100967 per Bleby J (where Re Denleys Trust Deed, above, was criticised). Compare Tidex v Trustees Executors and Agency Co Ltd [1971] 2 NSWLR 453 (trust was not a purpose trust, but was for existing and ascertainable beneficiaries).19 See [430435], perpetuities and accumulations [310-1].20 (QLD) Succession Act 1981 s 33Q(1), 33Q(2). See, also Re Lovell [1985] 1 Qd R 209 (gift to trustees for the Tyrian Branch of the Masonic Lodge, Bundaberg for the general purposes of the Lodge in Bundaberg).21 (QLD) Succession Act 1981 s 33Q(4).22 (NT) Wills Act 2000 s 42

(VIC) Wills Act 1997 s 47. 23 (ACT) Associations Incorporation Act 1991 (NT) Associations Act 2003 (NSW) Associations Incorporation Act 2009 (QLD) Associations Incorporation Act 1981 (SA) Associations Incorporation Act 1985 (TAS) Associations Incorporation Act 1964 (VIC) Associations Incorporation Act 1981 (WA) Associations Incorporation Act 1987.

Source

[Halsbury's Laws of Australia]

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(V) Completeness and Valuable Consideration The paragraph below is current to 20 April 2012 [430-300] The requirement of complete constitution Where the owner of property declares a trust over it (declaration of trust)1 provided that any statutory formalities2 and the requisite certainties3 are met, the declaration is itself effective to create a trust. However, a mere promise by a person to declare herself or himself as trustee of property at some time in the future does not give rise to a trust and does not automatically arise once that time arrives; such a promise which is no more than a present intention to create a trust in the future should be distinguished from a present creation of a trust with a postponement of enjoyment by the beneficiaries, which has legal effect.4 In the case of trusts created by transfer of property,5 a further step is required to completely constitute the trust, namely that the intending settlor must have done all that only he or she could do, according to the nature of the property, to transfer the property to trustees, even though something remains to be done by the transferee or by a third person for the legal title to pass to

the transferee.6 When this occurs, the trust is viewed by the law as completely constituted, and it is enforceable whether or not consideration has been given.7 If a trust is not completely constituted, the arrangement may be enforceable in equity as an agreement to create a trust if the claimant has provided consideration.8 Notes 1 See [430-220].2 See [430-230].3 See [430-240]-[430-295].4 Levy v Harpur [2004] VSC 241; BC200404038 at [29][41] per Harper J (affirmed Harpur v Levy (2007) 16 VR 587; [2007] VSCA 128; BC200704757 at [39], [40], [56], [70], [71] per Neave JA, at [99]-[103] per Redlich JA ).5 See [430-225].6 Corin v Patton (1990) 169 CLR 540; 92 ALR 1; BC9002936 . See also Anning v Anning (1907) 4 CLR 1049; 13 ALR 709; BC0700026 ; Scoones v Galvin [1934] NZLR 1004 ; Brunker v Perpetual Trustee Co (Ltd) (1937) 57 CLR 555; [1937] ALR 349 ; Re Rose; Rose v IRC [1952] Ch 499; [1952] 1 All ER 1217 , CA; Norman v FCT (1963) 109 CLR 9; [1964] ALR 131; BC6300080 ; Cope v Keene (1968) 118 CLR 1 sub nom Re Keene (decd); Cope v Keene [1969] ALR 57; BC6800230 ; Olsson v Dyson (1969) 120 CLR 365; [1969] ALR 443; BC6900350 ; Taylor v DCT (Cth) (1969) 123 CLR 206; 43 ALJR 237 ; Noonan v Martin (1987) 10 NSWLR 402 ; Bluebird Investments Pty Ltd v Graf (1994) 13 ACSR 271 at 307-8; 12 ACLC 724; BC9402481 per Santow J . For other instances of property being held to be effectively transferred in equity see Tierney v Halfpenny (1883) 9 VLR (E) 152; ORegan v Cmr of Stamp Duties [1921] St R Qd 283 ; National Trustees, Executors and Agency Co of Australasia Ltd v Boyd (1926) 39 CLR 72; [1927] VLR 110 ; Public Trustee v Sullivan (1945) 46 SR (NSW) 149; 63 WN (NSW) 6 ; Re Donnelly [1946] QWN 13 ; Re Ward; Gillett v Ward [1968] WAR 33 ; Grey v Australian Motorists & General Insurance Co Pty Ltd [1976] 1 NSWLR 669 . For instances of property being held not to be effectively transferred in equity see Cope v Biddulph (1923) 23 SR (NSW) 390; 40 WN (NSW) 41 ; Interstate Investment Co Ltd v Mobbs (1928) 28 SR (NSW) 572; (1928) 45 WN (NSW) 176 ; Phillis v R (1941) 15 ALJR 191 ; Commissioner of Australian Federal Police v Cox (1986) 14 FCR 279; 70 ALR 509 ; Costin v Costin (1997) 7 BPR 15,167 ; Motor Auction Pty Ltd v John Joyce Wholesale Cars Pty Ltd (1997) 138 FLR 118; 23 ACSR 647; BC9701777 ; Marchesi v Apostolou [2007] FCA 986; BC200705126 at [56] [77] per Jessup J ; Marchesi v Apostoulou (2006) 235 ALR 136; [2006] FCA 1122; BC200606501 ; Public Trustee v Jones (2007) 251 LSJS 364; [2007] SASC 390; BC200709666 at [52]-[61] per Layton J; Catanzariti v Romano [2011] ACTSC 106 at [149] [155] per Harper M; Stone v Registrar of Titles [2012] WASC 21; BC201200152 at [113][133] per Simmonds J.7 See [430-310].8 See [430-315]. The paragraph below is current to 20 April 2012 [430-305] Omissions which do not prevent constitution of trust A trust may be completely constituted without communication of it to the trustee or to the beneficiary,1 which means that a beneficiary can disclaim after becoming aware of his or her interest under a trust.2 A trust created by will does not fail merely because no trustee is named, or because the trustee who is named either refuses or is unable, through death or otherwise, to act,3 except where it is clear that the creation of the trust is intended to be dependant on that person named being the trustee.4 An inter vivos trust remains effective even if the trustee disclaims upon becoming aware of his or her appointment.5 However, it would appear that an intended inter vivos trust would be incompletely constituted if based on a purported conveyance or transfer to trustees who are not named or otherwise identifiable, or who are already dead.6 The effective creation of a trust does not depend on the immediate existence in the trustee of a legal estate in the relevant property.7 If the creator of the trust transfers to the trustee all the interest in the trust property that at the time of the creation of the trust he or she is in a position to transfer, it is immaterial to the effectiveness of the trust that he or she does not transfer the legal

transfer, it is immaterial to the effectiveness of the trust that he or she does not transfer the legal estate which he or she subsequently gets in.8 A settlement of a policy of insurance is complete without notice9 to the insurer,10 and a settlement of an equitable interest in shares is complete without notice to the trustee holding the legal title to those shares.11 Notes 1 Fletcher v Fletcher (1844) 4 Hare 67; 67 ER 564 ; Tate v Leithead (1854) Kay 658; 69 ER 279; Armstrong v Timperon (1871) 24 LT 275; Middleton v Pollock; Ex parte Elliott (1876) 2 Ch D 104 ; Standing v Bowring (1885) 31 Ch D 282 at 290; [1881-85] All ER Rep 702 per Lindley LJ , CA; Trustee of the property of New, Prance & Garrard v Hunting [1897] 2 QB 19 , CA; Mallott v Wilson [1903] 2 Ch 494; [1900-3] All ER Rep 326 ; Re Levesley; Goodwin v Levesley (1915) 32 TLR 145; Radcliffe v Abbey Road and St Johns Wood Permanent Building Society (1918) 87 LJ Ch 557 ; Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614 at 622; [1937] VLR 15; [1936] ALR 198 per Dixon J; Federal Commissioner of Taxation v Cornell (1946) 73 CLR 394 at 401-2; 20 ALJ 318 ; Grey v Australian Motorists & General Insurance Co Pty Ltd [1976] 1 NSWLR 669 at 673 per Glass JA , CA(NSW); JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891; (1985) 9 ACLR 593 ; Rose v Rose (1986) 7 NSWLR 679 at 686 per Hodgson J in Eq; Vegners v FCT (1991) 21 ATR 1347 at 1349; 91 ATC 4213 at 4215 . The absence of communication is, however, a circumstance raising a strong inference against the settlors intention being to make an irrevocable declaration of trust: Re Cozens; Green v Brisley [1913] 2 Ch 478 at 486 per Neville J ; Radcliffe v Abbey Road and St Johns Wood Permanent Building Society (1918) 87 LJ Ch 557 at 559 ; Hyhonie Holdings Pty Ltd v Leroy [2003] NSWSC 624; BC200303716 at [42] per Young CJ in Eq (affirmed Hyhonie Holdings Pty Ltd v Leroy [2004] NSWCA 72; BC200401205 ).2 As to the beneficiarys right to disclaim see [430-810].3 Attorney-General v Downing (1767) Wilm 1 at 24; 97 ER 1 at 9 per Wilmot CJ ; Sonley v Clock-makers Co (1780) 1 Bro CC 81; 28 ER 998; Attorney-General v Stephens (1834) 3 My & K 347; 40 ER 132 ; Dodkin v Brunt (1868) LR 6 Eq 580; Re Smirthwaites Trust (1871) LR 11 Eq 251 .4 Harris v Skevington [1978] 1 NSWLR 176 . See also Re Lysaght (decd); Hill v Royal College of Surgeons [1966] Ch 191; [1965] 2 All ER 888 ; Re Armitage (decd); Ellam v Norwich Corp [1972] Ch 438 at 445; [1972] 1 All ER 708 at 712 .5 As to disclaimer generally and as to its effect on the trust property see [430-3220].6 See [430315].7 Attorney-General v Downing (1767) Wilm 1 at 24; 97 ER 1 at 9 per Wilmot CJ ; Siggers v Evans (1855) 5 El & Bl 367 at 380-2; 119 ER 518 at 523-4 per Lord Campbell CJ .8 Gilbert v Overton (1864) 2 Hem & M 110; 71 ER 402; Nanney v Morgan (1887) 37 Ch D 346 , CA; Re Rallis Will Trusts; Re Rallis Marriage Settlement; Calvocoressi v Rodocanachi [1964] Ch 288; [1963] 3 All ER 940 . Compare Re Northcliffe; Arnholz v Hudson [1925] Ch 651 .9 Notice to the insurer, although not necessary to complete the settlement, is necessary to complete the title of the trustee against the insurer and third persons: see generally insurance [235-885].10 Fortescue v Barnett (1834) 3 My & K 36; 40 ER 14 ; Pearson v Amicable Assurance Office (1859) 27 Beav 229; 54 ER 89; Re King; Sewell v King (1879) 14 Ch D 179 . Compare Ward v Audland (1845) 8 Beav 201; 50 ER 79.11 Donaldson v Donaldson (1854) Kay 711; [1843-60] All ER Rep 200; (1854) 69 ER 303 ; Voyle v Hughes (1854) 2 Sm & G 18; 65 ER 283; Re Ways Trusts (1864) 2 De GJ & Sm 365; 46 ER 416 (where the settlor retained the deed in his possession and subsequently destroyed it and made a will disposing of the property). The paragraph below is current to 20 April 2012 [430-310] Consideration not necessary where trust completely constituted A trust that has been completely constituted1 is enforceable whether or not there has been consideration for it.2 Where, for example, there is a voluntary covenant under seal by A with B to transfer property to B to hold in trust for C, it may be difficult to determine whether or not there is a completely constituted trust of the covenant itself. In principle, the answer should depend upon whether A intended to create an immediate trust of the benefit of the covenant, or only intended to create a

trust of the property if or when he or she actually transferred it to B.3 Where the covenant relates to transferring money, so creating a debt, and the deed containing the covenant would otherwise be wholly futile, the court may find an intention to create a trust of the covenant.4 Where, in addition to the voluntary covenant to transfer property, there is also a covenant for further assurance, the intention to create a completely constituted trust of both covenants is likely to be inferred.5 Where the covenant relates to after-acquired property, and is in a deed which is otherwise fully effective, the court may find an intention only to create a trust of the property if or when actually transferred to the trustees of the deed.6 Where the intention of the covenantor was only to create a trust of the property if or when transferred, and not a trust of the covenant, the potential beneficiary, being a volunteer and not being a party to the covenant, will be unable to take, or to require the trustee to take, any action against the covenantor.7 In such a case, where the trustee asks the court whether he or she is bound to sue on the covenant, the trustee will be directed not to sue, and not merely that he or she is not bound to do so.8 This is apparently done because the proceeds of the trustees action would be held on trust for the beneficiary,9 and to direct otherwise would therefore go against the maxim equity will not assist a volunteer.10 A volunteer who is a covenantee and a party to the deed can sue and obtain damages.11 Although the failure to perform a covenant to transfer property to a trustee does not cause loss to the trustee himself or herself, the damages awarded if the trustee sues successfully will not be nominal but the full value of the property which should have been transferred.12 Notes 1 See [430-300].2 Ex parte Pye; Ex parte Dubost (1811) 18 Ves 140 at 149; [1803-13] All ER Rep 96; (1811) 34 ER 271 at 274 ; Fortescue v Barnett (1834) 3 My & K 36; 40 ER 14 ; Jefferys v Jefferys (1841) Cr & Ph 138; [1835-42] All ER Rep 81; (1841) 41 ER 443 ; Reed v OBrien (1834) 7 Beav 32; 49 ER 974; Ward v Audland (1845) 8 Beav 201; 50 ER 79; Bentley v Mackay (1851) 15 Beav 12; 51 ER 440 ; Kekewich v Manning (1851) 1 De GM & G 176; 21 LJ Ch 577; 42 ER 519 ; Bridge v Bridge (1852) 16 Beav 315 at 321-2; 51 ER 800 at 803 per Romilly MR ; Parnell v Hingston (1856) 3 Sm & G 337; 65 ER 684; Milroy v Lord (1862) 4 De GF & J 264; [1861-73] All ER Rep 783; (1862) 45 ER 1185 ; Jones v Lock (1865) LR 1 Ch App 25 at 28; 13 LT 514 per Lord Cranworth LC; Gee v Liddell (No 1) (1866) 35 Beav 621; 55 ER 1038 ; Richardson v Richardson (1867) LR 3 Eq 686; Henry v Armstrong (1881) 18 Ch D 668 ; Paul v Paul (1882) 20 Ch D 742; 47 LT 210 , CA; Standing v Bowring (1885) 31 Ch D 282; [1881-85] All ER Rep 702 , CA; Mallott v Wilson [1903] 2 Ch 494; [1900-3] All ER Rep 326 ; Carter v Hungerford [1917] 1 Ch 260 ; Levy v Harpur [2004] VSC 241; BC200404038 at [20] per Harper J (affirmed Harpur v Levy (2007) 16 VR 587; [2007] VSCA 128; BC200704757 ).3 Intention to create a trust is fundamental to the constitution of a trust: see [430-240]-[430257].4 Fletcher v Fletcher (1844) 4 Hare 67; 67 ER 564 . See also Commissioner of Stamp Duties (Qld) v Hopkins (1945) 71 CLR 351 at 369; [1945] ALR 341 at 348 per Rich J .5 Cox v Barnard (1850) 8 Hare 310 at 312-3; 68 ER 379 at 379-80 ; Milroy v Lord (1862) 4 De GF & J 264 at 278; [1861-73] All ER Rep 783; (1862) 45 ER 1185 at 1191 ; Re Cavendish-Brownes Settlement Trust; Horner v Rawle (1916) 61 Sol Jo 27; [1916] WN 341.6 Re Plumptres Marriage Settlement; Underhill v Plumptre [1910] 1 Ch 609 ; Re Pryce; Nevill v Pryce [1917] 1 Ch 234 ; Perpetual Trustee Co Ltd v Willers (1955) 72 WN (NSW) 244 .7 Ellison v Ellison (1802) 6 Ves 656 at 662; 31 ER 1243 at 1246 per Lord Eldon LC; Paul v Paul (1882) 20 Ch D 742 at 744; 47 LT 210 ; Levy v Harpur [2004] VSC 241; BC200404038 at [34]-[44] per Harper J (affirmed Harpur v Levy (2007) 16 VR 587; [2007] VSCA 128; BC200704757 ).8 Re Kays Settlement; Broadbent v Macnab [1939] Ch 329; [1939] 1 All ER 245 ; Re Cooks Settlement Trusts; Royal Exchange Assurance v Cook [1965] Ch 902; [1964] 3 All ER 898; [1965] 2 WLR 179 ; Perpetual Trustee Co Ltd v Willers (1955) 72 WN (NSW) 244 .9 Cox v Barnard (1850) 8 Hare 310; 68 ER 379 ; Ward v Audland (1845) 8 Beav 201; 50 ER 79; Re Cavendish-Brownes Settlement Trust; Horner v Rawle (1916) 61 Sol Jo 27; [1916] WN 341 .10 Preventing the

trustee from suing on the covenant amounts to frustrating, rather than merely not assisting, a volunteer, which is something that equity traditionally does not do: Davenport v Bishopp (1843) 2 Y & C Ch Cas 451 at 460; 63 ER 201 at 206 ; Ward v Audland (1845) 8 Beav 201 at 211, 213; 50 ER 79 at 83; Milroy v Lord (1862) 4 De GF & J 264 at 273, 278; [1861-73] All ER Rep 783; (1862) 45 ER 1185 at 1189, 1191 . Accordingly the cases referred to in notes 6 and 8 above have been criticised: see, for example, Heydon J D and Leeming M J, Jacobs Law of Trusts in Australia, 7th ed, LexisNexis Butterworths, Sydney, 2006, paras [612]-[614].11 Cannon v Hartley [1949] Ch 213; [1949] 1 All ER 50 .12 Ward v Audland (1847) 16 M & W 862; 153 ER 1441 ; Re Cavendish-Brownes Settlement Trust; Horner v Rawle (1916) 61 Sol Jo 27; [1916] WN 341 . The paragraph below is current to 20 April 2012 [430-315] Incompletely constituted trusts Where the settlor has not effectively transferred property to trustees on certain trusts,1 the intended trust is not completely constituted.2 The court will compel the completion and execution of an incompletely constituted trust if it has been created for valuable consideration,3 but not if it is purely voluntary and without consideration. 4 The purported assignment by deed of an expectancy can only operate as an agreement to assign it when it materialises into property of the assignor, and therefore, if voluntary, cannot constitute an effective trust.5 Where, however, the trustees of a voluntary settlement of an expectancy have authority to receive it and give receipts for it, and trusts are declared of any money so received, those trusts will be effective in respect of sums actually so received by the trustees before their authority is revoked.6 If the trustees of a voluntary settlement containing a covenant to settle afteracquired property fortuitously receive such property in some other capacity, for example, as trustees of will trusts, it is not clear whether or not this alone will completely constitute the trust.7 Where after-acquired property is transferred to trustees in accordance with a covenant, it cannot be recovered even though the covenant was not enforceable.8 If the settlor of a voluntary settlement has not effectively transferred the property to the trustees, the court will not treat the attempted transfer as a declaration of trust by the settlor, because, by attempting to transfer the property, the settlor has shown an intention to divest himself or herself of it and not to hold it himself or herself as trustee.9 An incomplete trust for valuable consideration as regards some beneficiaries that is voluntary as regards other beneficiaries will not be enforced at the instigation of the volunteers,10 except where the interest of the volunteers is bound up with the interest of the other beneficiaries.11 However, upon a beneficiary who is not a volunteer procuring enforcement by the court of the incomplete trust, the trust becomes completely constituted and a volunteer beneficiary will then also be able to enforce his or her rights.12 Incompletely constituted trusts may have legal effect in the circumstances that constitute exceptions to the rule that equity will not assist a volunteer, namely in circumstances: (1) where the elements of the rule in Strong v Bird are fulfilled;13 (2) where the requirements of a gift in contemplation of death (donationes mortis causa) are fulfilled;14 (3) where the elements of an estoppel are met;15 or

(4) potentially, where it is otherwise unconscionable for the intended transferee to deny effect to the transfer.16 Notes 1 See [430-300].2 Bridge v Bridge (1852) 16 Beav 315; 51 ER 800 ; Milroy v Lord (1862) 4 De GF & J 264; [1861-73] All ER Rep 783; (1862) 45 ER 1185 ; Bizzey v Flight (1876) 3 Ch D 269 ; Re Earl of Lucan; Hardinge v Cobden (1890) 45 Ch D 470; 63 LT 538 .3 Donaldson v Donaldson (1854) Kay 711; [1843-60] All ER Rep 200; (1854) 69 ER 303 ; Lee v Lee (1876) 4 Ch D 175 ; Pullan v Koe [1913] 1 Ch 9 . There is valuable consideration where a party gives up something: Hewison v Negus (1853) 16 Beav 594; 51 ER 909; Teasdale v Braithwaite (1877) 5 Ch D 630 , CA; Re Foster and Lister (1877) 6 Ch D 87 at 89, 96 per Jessel MR ; Schreiber v Dinkel (1886) 54 LT 911 , CA. An assignment of leasehold is for valuable consideration if the result is to relieve the assignor of the liability: Price v Jenkins (1877) 5 Ch D 619 , CA; Harris v Tubb (1889) 42 Ch D 79 . As to marriage constituting consideration for a settlement and the parties within it see [430-115]. As to a womans children of a former marriage being volunteers in respect of a settlement in consideration of her subsequent marriage see National Trustees, Executors & Agency Co of Australasia Ltd v R (1893) 19 VLR 132; 14 ALT 267 . As to consideration generally see contract [110-545]-[110-805]. 4 Colman v Sarrel (1789) 1 Ves 50 at 55; 30 ER 225 at 227 ; Ellison v Ellison (1802) 6 Ves 656 at 662; 31 ER 1243 at 1246 per Lord Eldon LC ; Pulvertoft v Pulvertoft (1811) 18 Ves 84 at 99; 34 ER 249; Ex parte Pye; Ex parte Dubost (1811) 18 Ves 140 at 149; [1803-13] All ER Rep 96; (1811) 34 ER 271 at 274 ; Jefferys v Jefferys (1841) Cr & Ph 138; [1835-42] All ER Rep 81; (1841) 41 ER 443 ; Ward v Audland (1845) 8 Beav 201; 50 ER 79; Kekewich v Manning (1851) 1 De GM & G 176; 21 LJ Ch 577; 42 ER 519 ; Bentley v Mackay (1851) 15 Beav 12; 51 ER 440 ; Bridge v Bridge (1852) 16 Beav 315; 51 ER 800 ; Pownall v Anderson (1856) 2 Jur NS 857; 4 WR 407; Dening v Ware (1856) 22 Beav 184 at 190; 52 ER 1078 at 1081 per Romilly MR ; Wilkinson v Wilkinson (1857) 4 Jur NS 47; Walrond v Walrond (1858) John 18; 70 ER 322 ; Milroy v Lord (1862) 4 De GF & J 264; [1861-73] All ER Rep 783; (1862) 45 ER 1185 ; Lister v Hodgson (1867) LR 4 Eq 30; Stone v Stone (1869) LR 5 Ch App 74; 39 LJ Ch 196; 22 LT 182; Marler v Tommas (1873) LR 7 Eq 8; 43 LJ Ch 73; Re DAngibau; Andrews v Andrews (1880) 15 Ch D 228 at 242; [1874-80] All ER Rep 1184 at 1188 per Cotton LJ , CA; Harding v Harding (1886) 17 QBD 442 at 444; 55 LJQB 462 per Wills J , DC; Re Earl of Lucan; Hardinge v Cobden (1890) 45 Ch D 470; 63 LT 538 .5 Meek v Kettlewell (1843) 1 Ph 342; [1843-60] All ER Rep 1109; (1843) 41 ER 662 ; Re Ellenborough; Towry Law v Burne [1903] 1 Ch 697; (1903) 72 LJ Ch 218; 87 LT 714 . As to trusts of future property generally see [430-270].6 Re Bowden; Hulbert v Bowden [1936] Ch 71; [1935] All ER Rep 933 .7 The proposition is supported by Re Rallis Will Trusts; Re Rallis Marriage Settlement; Calvocoressi v Rodocanachi [1964] Ch 288; [1963] 3 All ER 940 . Compare Re Brooks Settlement Trusts; Lloyds Bank Ltd v Tillard [1939] Ch 993; [1939] 3 All ER 920 (which was not cited in Re Rallis Will Trusts; Re Rallis Marriage Settlement; Calvocoressi v Rodocanachi [1964] Ch 288; [1963] 3 All ER 940 ).8 Re Adlard; Taylor v Adlard [1954] Ch 29; [1953] 2 All ER 1437; [1953] 3 WLR 914 .9 Milroy v Lord (1862) 4 De GF & J 264 at 265; [1861-73] All ER Rep 783 at 789; (1862) 45 ER 1185 at 1186 ; Richards v Delbridge (1874) LR 18 Eq 11 at 15. The fact that a donor, having effectually parted with his beneficial interest, has become a constructive trustee for the donee, pending registration or other completion of the transfer of the legal title, does not conflict with Turner LJs statement in Milroy v Lord (1862) 4 De GF & J 264; [1861-73] All ER Rep 783; (1862) 45 ER 1185 , that if a settlement is intended to take effect by transfer, the court will not hold the intended transfer to operate as a declaration of trust: Re Rose; Rose v IRC [1952] Ch 499 at 510-11, 517-18; [1952] 1 All ER 1217 at 1222-3, 1227 per Evershed MR and Jenkins LJ , CA; Corin v Patton (1990) 169 CLR 540 at 559-60; 92 ALR 1 at 14; BC9002936 per Mason CJ and McHugh J . See also

Re Rose; Midland Bank Executor and Trustee Co Ltd v Rose [1949] Ch 78 at 89; [1948] 2 All ER 971 at 978 .10 Sutton v Chetwynd (1817) 2 Mer 249; 36 ER 96; Cormick v Trapaud (1818) 6 Dow 60; 3 ER 1399, HL; Johnson v Legard (1822) Turn & R 281 at 293; [1814-23] All ER Rep 119 at 123; (1822) 37 ER 1107 at 1112 per Lord Eldon LC; Re DAngibau; Andrews v Andrews (1880) 15 Ch D 228 at 242; [1874-80] All ER Rep 1184 at 1188 per Cotton LJ , CA; Re Cameron and Wells (1887) 37 Ch D 32; 57 LJ Ch 69 ; De Mestre v West [1891] AC 264; (1891) 60 LJPC 66 , PC.11 Jenkins v Keymis (1664) 1 Lev 150; 83 ER 343; Jenkins v Keymes (1668) 1 Lev 237; 83 ER 386 , Ch; Newstead v Searle (1737) West temp Hard 287; 25 ER 942 sub nom Newstead v Searles (1737) 1 Atk 265; 26 ER 169 ; Clayton v Earl of Wilton (1813) 6 M & S 67; 105 ER 1167 ; Davenport v Bishopp (1843) 2 Y & C Ch Cas 451; 63 ER 201 (affirmed Davenport v Bishopp (1846) 1 Ph 698; 41 ER 978 ); Price v Jenkins (1876) 4 Ch D 483 at 488 ; Mackie v Herbertson (1884) LR 9 App Cas 303, HL; De Mestre v West [1891] AC 264 at 270; (1891) 60 LJPC 66 , PC; Re Cooks Settlement Trusts; Royal Exchange Assurance v Cook [1965] Ch 902; [1964] 3 All ER 898; [1965] 2 WLR 179 .12 Davenport v Bishopp (1843) 2 Y & C Ch Cas 451; 63 ER 201 (affirmed Davenport v Bishopp (1846) 1 Ph 698; 41 ER 978 ). Compare Staib v Powell [1979] Qd R 151 at 156 .13 See equity [185-470].14 See equity [185-465].15 See estoppel.16 Pennington v Waine [2002] 4 All ER 215; [2002] 1 WLR 2075 at 2090-1 per Arden LJ, at 2105 per Clarke LJ . The paragraph below is current to 20 April 2012 [430-320] Promise to create trust where promisee not to be the trustee Where A agrees with X for valuable consideration that he or she will transfer property or money to B to hold in trust for C, the promise can be enforced by X but not by B.1 Notes 1 Colyear v Countess of Mulgrave (1836) 2 Keen 81; 48 ER 559. As to the rights and liabilities of third persons generally in relation to contracts see contract [110-3010]-[110-3100]. The paragraph below is current to 20 April 2012 [430-325] Position where settlor obtains possession of property A person who, after having made a settlement or other disposition of property which is complete in law, obtains possession of the property himself or herself holds it in trust upon the terms of the settlement or disposition and must account for it in equity accordingly.1 Notes 1 Fortescue v Barnett (1834) 3 My & K 36; 40 ER 14 ; Fletcher v Fletcher (1844) 4 Hare 67; 67 ER 564 ; Nanney v Morgan (1887) 37 Ch D 346 , CA; Re Patrick; Bills v Tatham [1891] 1 Ch 82; (1890) 63 LT 752; 7 TLR 124 , CA.

Source

[Halsbury's Laws of Australia]

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Copyright 2012 LexisNexis . All rights reserved.

(VI) Rectification, Duration, Revocation and Variation The paragraph below is current to 20 April 2012 [430-330] Rectification on account of error Where by mistake an instrument creating a trust does not express the creators actual intention, he or she can apply to the court to have it set aside1 (leaving him or her free to create a new trust if he or she so wishes) or to have it rectified to accord with his or her true intention.2 In relation to a voluntary transaction by which one party intends to confer a bounty on another, if the court is satisfied that through a mistake, whether of law or of fact, the disposer did not intend the transaction to have the effect which it did, it may be considered more appropriate to set aside the deed rather than rectify it, but the mistake must be as to the effect of the transaction itself and not merely as to its consequences or the advantages to be gained from entering into it.3 Rectification may be available where the absence of a usual term from an instrument was not brought to the settlors attention,4 but will not be granted to enable the insertion of a provision merely because it subsequently turns out that its inclusion would have been desirable.5 If an instrument as executed does not, through a mistake, contain a provision which had been in the draft approved by the settlor, the court may order that the instrument be set aside unless the persons interested in maintaining it accept rectification by insertion of the omitted provision.6 Rectification is a discretionary remedy and will only be granted on the basis of convincing evidence as to the actual intention of the settlor,7 and after careful assessment of the impact on all concerned of granting rectification.8 While the settlor is alive, rectification will usually only be granted if he or she initiates or approves the proceedings.9 However, rectification after the death of the settlor is possible,10 but the evidential requirements are stringent.11 Rectification may be available even if the trustees or other parties to the settlement did not share the settlors mistake,12 but is unlikely to be granted against reasonable opposition by a trustee who had accepted office on the basis that the terms of the settlement were as set out in the instrument, and in ignorance of the settlors mistake.13 The court may also order rectification where particular words were deliberately used in the instrument creating the trust but it was mistakenly considered that they bore a different meaning 14 or had a different legal effect.15 Notes 1 Phillipson v Kerry (1863) 32 Beav 628 at 637; 55 ER 247 at 250 . As to a settlement made when the settlor was apparently at the point of death, without the inclusion of a power of revocation, being set aside when the settlor recovered see Forshaw v Welsby (1860) 30 Beav 243; 54 ER 882.2 Thompson v Whitmore (1860) 1 John & H 268 at 273; 70 ER 748 at 750 per Wood VC ; Lister v Hodgson (1867) LR 4 Eq 30; Weir v Van Tromp (1900) 16 TLR 531 ; Re Freehouse Pty Ltd; Jordan v Avram (1997) 26 ACSR 662 at 682-4 per Gillard J (trust created pursuant to agreement where trust deed did not reflect the agreement). It is for the person claiming rectification to prove the existence of the circumstances justifying it: Pink v Lawrence (1977) 36 P & CR 98, CA. See generally as to rectification contract [110-5610]-[110-5620], equity [185-1620], [185-1625]. As to rectification of wills see succession [395-955].3 Gibbon v Mitchell [1990] 3 All ER 338 at 343; [1990] 1 WLR 1304 at 1309-10 .4 See James v Couchman (1885) 29 Ch D 212 .5 Bonhote v Henderson [1895] 1 Ch 742 (affirmed Bonhote v

Henderson [1895] 2 Ch 202 , CA); Constandinidi v Ralli [1935] Ch 427; (1935) 104 LJ Ch 249 .6 Attorney-General v Williams (1914) 33 NZLR 913 .7 Lister v Hodgson (1867) LR 4 Eq 30; Weir v Van Tromp (1900) 16 TLR 531 .8 Re Butlins Settlement Trusts; Butlin v Butlin [1976] Ch 251 at 263-4; [1976] 2 All ER 483 at 489-90; [1976] 2 WLR 547 at 555-6 (the deciding factor in favour of rectification was that the only party objecting to rectification failed to give any reasons for her objection).9 Lister v Hodgson (1867) LR 4 Eq 30.10 Lister v Hodgson (1867) LR 4 Eq 30; Stanfield v Groom (1892) 4 QLJ 134 ; Christie v Public Trustee (1921) 22 SR (NSW) 148; 38 WN (NSW) 259 ; Kent v Brown (1942) 43 SR (NSW) 124; 60 WN (NSW) 49 (affirmed Kent v Brown (1943) 66 CLR 670); Public Trustee v Smith [2008] NSWSC 397; BC200803098 at [71][77] per White J.11 Weir v Van Tromp (1900) 16 TLR 531 .12 Re Butlins Settlement Trusts; Butlin v Butlin [1976] Ch 251 at 262-3; [1976] 2 All ER 483 at 489; [1976] 2 WLR 547 at 554-5 .13 Re Butlins Settlement Trusts; Butlin v Butlin [1976] Ch 251 at 263-4; [1976] 2 All ER 483 at 489-90; [1976] 2 WLR 547 at 555-6 (the opposition of one trustee was disregarded because she gave no reason for her objection).14 Re Butlins Settlement Trusts; Butlin v Butlin [1976] Ch 251 at 260; [1976] 2 All ER 483 at 487; [1976] 2 WLR 547 at 553 (approved in Winks v WH Heck & Sons Pty Ltd [1986] 1 Qd R 226 at 234-5 per Kneipp J , and in Anfrank Nominees Pty Ltd v Connell (1989) 1 ACSR 365; 8 ACLC 319 ). Rectification will not be available to change words in a contract which were used deliberately even though their use was the result of a mistaken belief by the parties that they described the commodity in which they were intending to deal: Frederick E Rose (London) Ltd v William H Pim Jnr & Co Ltd [1953] 2 QB 450; [1953] 2 All ER 739; [1953] 3 WLR 497 , CA.15 Oates Properties Pty Ltd v Cmr of State Revenue (2003) 53 ATR 308; [2003] NSWSC 596; BC200303641 . The paragraph below is current to 20 April 2012 [430-335] Duration Certain limits on the duration of trusts are imposed by the rules directed against remoteness of vesting of interests in property and against creation of non-charitable trusts of perpetual and infinite duration where the income is rendered inalienable for longer than the perpetuity period, and by the statutory restrictions on accumulation of income.1 An express trust which has become operative is also subject to termination by the subsequent failure or satisfaction of the purposes of the trust,2 or by the action of the beneficiaries if they are all ascertained and sui juris.3 Notes 1 See [430-435], [430-440].2 Re Gillingham Bus Disaster Fund; Bowman v Official Solicitor [1959] Ch 62; [1958] 2 All ER 749; [1958] 3 WLR 325 , CA (where the objects, in so far as not void for uncertainty had been satisfied). See also Re Trusts of the Abbott Fund; Smith v Abbott [1900] 2 Ch 326 . As to the circumstances in which a resulting trust arises on a failure of purposes see [430-520].3 See [430-2515]. The paragraph below is current to 20 April 2012 [430-340] Revocation and variation Where an express trust is completely constituted,1 it is generally binding and irrevocable whether it was or was not constituted or declared for valuable consideration, unless a power of revocation is expressly reserved.2 A power of revocation must be exercised in accordance with the terms in which it is conferred.3 If a trust is revoked pursuant to an express power and is replaced by a new trust in respect of the same property, the revocation power needs to be considered carefully to determine whether, in order for it to continue to apply, it must be expressly incorporated in the terms of the new trust.4 Even in the absence of an express power of revocation, in certain circumstances a disposition of property in trust may be set aside by the court under statutory provisions relating to the avoidance of voluntary settlements in bankruptcy or to dispositions in fraud of creditors,5 or on the ground that the disposition was induced by fraud, duress or undue influence.6

The court has wide discretionary powers conferred on it by statute to dispense with strict compliance with the terms of trusts on the grounds of expediency7 and, in most jurisdictions, on behalf of incapable beneficiaries.8 The purported exercise by the trustee of a power of variation conferred by the trust instrument will be ineffective unless there has been strict compliance with any limitations on the scope of that power, and with any requirements as to the basis on which, or the circumstances in which, it may be exercised,9 and is in any case exercised bona fide for the benefit of the beneficiaries as a whole.10 Notes 1 See [430-300].2 Ellison v Ellison (1802) 6 Ves 656; 31 ER 1243 ; Pulvertoft v Pulvertoft (1811) 18 Ves 84 at 99; 34 ER 249 at 254; Bill v Cureton (1835) 2 My & K 503 at 511; 39 ER 1036 at 1039 ; Collinson v Pattrick (1838) 2 Keen 123 at 134; 48 ER 575 at 579 ; Paul v Paul (1882) 20 Ch D 742; 47 LT 210 , CA; Re Flavell (decd); Murray v Flavell (1883) 25 Ch D 89 at 102-3; [1881-85] All ER Rep 267 per Cotton LJ , CA; Standing v Bowring (1885) 31 Ch D 282; [1881-85] All ER Rep 702 , CA; Trustee of the property of New, Prance & Garrard v Hunting [1897] 2 QB 19 , CA; Radcliffe v Abbey Road and St Johns Wood Permanent Building Society (1918) 87 LJ Ch 557 . As to revocability of trust where property is transferred to trustee to be held for settlor and applied for his or her benefit at absolute discretion of the trustee see Beattie v Weine (1908) 9 SR (NSW) 36; 25 WN (NSW) 207 .3 Ellison v Ellison (1802) 6 Ves 656 at 6589, 663; 31 ER 1243 at 1247 . As to a power of revocation vested in two persons jointly ceasing to exist upon the death of one of them see Montegiore v Browne (1858) 7 HL Cas 241; 11 ER 96. As to a power to revoke the trusts of a settlement with the consent of a judge of a specified court being held invalid because a private individual cannot impose upon a judge the jurisdiction or duty to adjudicate on a matter see Re Hookers Settlement; Heron v Public Trustee [1955] Ch 55; [1954] 3 All ER 321; [1954] 3 WLR 606 . Compare Re Baker [1936] Ch 61 ; Re Hs Settlement; H v S [1939] WN 318 .4 Elders Trustee & Executor Co Ltd v Symon [1934] SASR 435 ; Re Gadsdens Settlements [1962] VR 522 at 526-9 ; Re Manifold Settlements [1965] VR 197 .5 See [430-425].6 Bester v Perpetual Trustee Co Ltd [1970] 3 NSWR 30 .7 See [4305120].8 See [430-5160]-[430-5195].9 Eagle Star Trustees Ltd v Heine Management Ltd (1990) 3 ACSR 232 .10 Gra-Ham Australia Pty Ltd v Perpetual Trustees WA Ltd (1989) 1 WAR 65 , SC(WA), Full Court.

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[Halsbury's Laws of Australia]

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(B) Executory Trusts The paragraph below is current to 20 April 2012 [430-345] Construction An executory trust, where the declaration of trust is in the form of a direction to create by a subsequent instrument trusts not defined with absolute precision by the disposer,1 is not construed according to the legal effect of the language used, as an executed trust would be,2 but is construed so as best to give effect to the apparent intention of the disposer.3 In creating the trusts as directed, equity will modify an inapt provision,4 or may direct the insertion of such ancillary trusts and powers as may be necessary to effect the disposers intention even though they may not have been expressly contemplated by him or her.5 Where the testators intention would be effectuated by a settlement under which the beneficiaries could deal with the capital and income of their shares as freely as if the capital had been paid to them absolutely, the court may dispense with the requirement that a settlement be executed and permit their shares to be paid to them direct.6 If, in the instrument creating the executory trust, the content of the intended trust is expressed to be subject to the approval of a person acting otherwise than in a fiduciary capacity, in executing the trust the court cannot dispense with that approval.7 Notes 1 As to the distinction between executed and executory trusts see generally [430-100].2 See [430-100].3 Leonard v Earl of Sussex (1705) 2 Vern 526; 23 ER 940; Papillon v Voice (1728) 2 P Wms 471; 24 ER 819; Lord Glenorchy v Bosville (1733) Cas temp Talb 3 at 19, 20; 25 ER 628 at 634-5; Wright v Pearson (1758) 1 Eden 119; 28 ER 629; Austen v Taylor (1759) 1 Eden 361 at 366; 28 ER 725 at 726; Blackburn v Stables (1814) 2 Ves & B 367; 35 ER 358; Stonor v Curwen (1832) 5 Sim 264; 58 ER 336; Sackville-West v Viscount Holmesdale (1870) LR 4 HL 543 at 565-6 per Lord Westbury, at 572-3 per Lord Cairns; 39 LJ Ch 505, HL; Cogan v Duffield (1876) 2 Ch D 44 , CA; Hastie v Hastie (1876) 2 Ch D 304 , CA; Re Parrott; Walter v Parrott (1886) 33 Ch D 274 ; Nash v Allen (1889) 42 Ch D 54 ; Re Ballance; Ballance v Lanphier (1889) 42 Ch D 62 . As to the testators intention as to the nature of the executory trusts being not ascertainable from the language of the will, so that the trusts could not be executed see Re Flavels Will Trusts; Coleman v Flavel [1969] 2 All ER 232; [1969] 1 WLR 444. The fact that limitations referred to by the disposer are not completely expressed in the declaration of trust is sufficient evidence of his or her intention that they be further developed, but where the limitations have been completely declared by the disposer, there is no authority for the court or the trustees to interfere and make them different: Austen v Taylor (1759) 1 Eden 361 at 368-9; 28 ER 725 at 727 per Lord Keeper Henley.4 Re Ballance; Ballance v Lanphier (1889) 42 Ch D 62 at 65 .5 Earl of Stamford v Hobart (1710) 3 Bro Parl Cas 31; 1 ER 1157; Horne v Barton (1815) 19 Ves 398; 34 ER 565; Brewster v Angell (1820) 1 Jac & W 625; 37 ER 506; Elton v Elton (No 2) (1860) 27 Beav 634; 54 ER 252.6 Pass v Mills (1886) 7 LR (NSW) Eq 34 ; Hogarth v Hogarth (1894) 15 LR (NSW) Eq 93.7 Davis v Richards & Wallington Industries Ltd [1991] 2 All ER 563 at 588-9; [1990] 1 WLR 1511 at 1537-8 .

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[Halsbury's Laws of Australia]

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About LexisNexis | Terms & Conditions | My ID Copyright 2012 LexisNexis . All rights reserved.

(C) Secret Trusts The paragraph below is current to 20 April 2012 [430-350] Creation and effect of secret trusts A secret trust 1 is a trust which a court of equity imposes on a person who has obtained title to property, usually by a gift by will,2 obliging him or her to hold it for the benefit of the objects for which he or she knew that it was given or allowed to pass to him or her even though they were not disclosed or not completely disclosed in the will or other instrument.3 A fully secret trust is created where a testator gives property to a person, apparently beneficially, but has communicated to that person certain trusts on which the property is to be held.4 There is a half-secret trust where the will indicates that the property is given to the legatee upon trust, without specifying the particulars of the trust, and those particulars have been communicated by the testator to the legatee.5 The doctrine of secret trusts is distinct from the probate doctrine of incorporation by reference, under which, if the will defines the trusts by reference to an earlier document, such as a letter, the trusts are treated as if set out in the will.6 In addition to the three certainties that are foundational to express trusts generally,7 for there to be a valid secret trust the testators intentions as to the donee taking the gift as a trustee, and as to the objects of the trust, must be communicated to the donee,8 and the donees acceptance of the trust must be indicated,9 whether expressly or by his or her silently acquiescing in the trust when it is communicated to him or her.10 For a fully secret trust, the communication to, and acceptance by, the donee must occur during the lifetime of the testator.11 It appears that the same requirement now applies in relation to half-secret trusts,12 although in some non-Australian jurisdictions the case law is still to the effect that for a half-secret trust the communication and acceptance must be prior to, or contemporaneous with, the making of the will.13 If a statutory provision relating generally to wills would normally make ineffective a benefit conferred by a will on an attesting witness of that will,14 that result would not apply where the attesting witness is a beneficiary under a secret trust because that benefit is derived from a trust arising outside the will.15 Where it is the secret trustee who is the attesting witness the same result is likely to follow in the case of a half-secret trust (although there is no judgment to that effect) because the qualifying legislation would not apply to a gift to a person who takes only as a trustee.16 Where a fully secret trustee is the attesting witness the disqualifying legislation is likely to apply to make the gift ineffective, because on the face of the will the secret trustee is the beneficial recipient of the gift. However, it might be possible for the principle that equity will not allow a statute to be used as an instrument of fraud17 to be invoked to justify the admission of evidence to prove the existence of the secret trust, but there is no decided case on either point. There is no direct decision as to the applicability to secret trusts of the rule that a gift will lapse if the legatee predeceases the testator,18 but general principles suggest that if the secret trustee predeceases the testator a gift subject to a secret trust will lapse if it is a fully secret trust19 but not if it is a half-secret trust.20 If it is the beneficiary of the secret trust who predeceases the testator,

general principles suggest that, whether the trust is fully or half-secret, the gift will lapse unless it is established that under the law of trusts it is possible to constitute a trust in favour of a dead person.21 Where a half-secret trust becomes fully constituted by the death of the testator, but the person designated as trustee disclaims and declines to act, it appears that the court will exercise its powers to appoint another trustee in the same way as for other trusts.22 In the case of a fully secret trust, the effect of disclaimer by the secret trustee, as legatee, is uncertain, and there are conflicting judicial statements as to whether the trust fails because the rules of probate law apply, causing the gift to lapse,23 or whether the court should apply trust law and intervene to prevent a trustee from frustrating a fully constituted trust by disclaiming after having agreed to act.24 Notes 1 As to the nature of secret trusts see [430-110]. See also succession [395-445]-[395-465].2 Although secret trusts usually have arisen in connection with gifts by will, they can also occur where gifts are made by settlement inter vivos or where the owner of property refrains from making a will and so allows the property to pass as on an intestacy: Re Gardner; Huey v Cunnington [1920] 2 Ch 523 ; Re Tylers Fund Trusts; Graves v King [1967] 3 All ER 389; [1967] 1 WLR 1269 (although Pennycuick J had doubts); Re Nichols (decd); Nichols v IRC [1973] 3 All ER 632; [1974] 1 WLR 296 (affirmed Nichols v IRC [1975] 2 All ER 120; [1975] 1 WLR 534 , CA). See also [430-365].3 See McCormick v Grogan (1869) LR 4 HL 82 at 88 per Lord Hatherley LC, at 97 per Lord Westbury; 17 WR 961; Re Fleetwood; Sidgreaves v Brewer (1880) 15 Ch D 594 at 607; 49 LJ Ch 514 per Hall VC ; Re Stead; Witham v Andrew [1900] 1 Ch 237 at 240-1 per Farwell J , CA; Re Huxtable; Huxtable v Crawfurd [1902] 2 Ch 793; [1900-3] All ER Rep 799 , CA; In the Will of Doig; Carter v Gramsch [1916] VLR 698; (1916) 23 ALR 5 ; Blackwell v Blackwell [1929] AC 318 at 325, 335, 341; [1929] All ER Rep 71 at 73, 77, 81 per Lord Buckmaster, Lord Summer and Lord Warrington respectively , HL; Re Young (decd); Young v Young [1951] Ch 344; [1950] 2 All ER 1245 ; Voges v Monaghan (1954) 94 CLR 231; BC5400060 ; Re Snowden (decd) [1979] Ch 528; [1979] 2 All ER 172; [1979] 2 WLR 654 . See also succession [395-445]-[395-465].4 French v French [1902] 1 IR 172 at 230 per Lord Davey , HL; Voges v Monaghan (1954) 94 CLR 231; BC5400060 ; Brown v Pourau [1995] 1 NZLR 352 , HC(NZ); Howell v Hyde (2003) 47 ACSR 230; [2003] NSWSC 732; BC200304478 . See also [430-355].5 Blackwell v Blackwell [1929] AC 318 at 341-2; [1929] All ER Rep 71 per Lord Warrington , HL (the legatee is expressly made a fiduciary, although there may be no question of him or her seeking to gain a personal benefit, it may be fraud on the testator for the legatee to refuse to carry out the trust, and the residuary legatees cannot take advantage of and make themselves parties to such a fraud). See also Johnson v Ball (1851) 5 De GJ & Sm 85; 64 ER 1029 ; Re Gardner; Huey v Cunningham [1923] 2 Ch 230 at 233 per Romer J; Re Keen; Evershed v Griffiths [1937] Ch 236; [1937] 1 All ER 452 , CA; Re Karsten; Edwards v Moore [1953] NZLR 456 ; Guest v Webb [1965] VR 427 ; Re Batemans Will Trusts; Brierley v Perry [1970] 3 All ER 817; [1970] 1 WLR 1463 ; Ledgerwood v Perpetual Trustee Co Ltd (1997) 41 NSWLR 532 . As to the circumstances in which half-secret trusts are enforceable see also [430375]. As to the establishment of the objects of the trust by extrinsic evidence see [430-355].6 In the Goods of Smart [1902] P 238; Re Edwards Will Trusts; Dalgleish v Leighton [1948] Ch 440; [1948] 1 All ER 821 , CA; Re Schintzs Will Trusts; Lloyds Bank Ltd v Moreton [1951] Ch 870; [1951] 1 All ER 1095 . See also succession [395-445]-[395-465].7 Margulies v Margulies [2008] WTLR 1853 (lack of specificity regarding the alleged trust property leading the English Court of Appeal to query whether there was a sufficiently imperative obligation intended to be imposed). As to the three certainties see [430-240]-[430-295].8 Lomax v Ripley (1855) 3 Sm & G 48; 65 ER 558; Wallgrave v Tebbs (1855) 2 K & J 313; 69 ER 800; Carter v Green (1857) 3 K & J 591; 69 ER 1245; Juniper v Batchellor (1868) 19 LT 200; McCormick v Grogan (1869) LR 4 HL 82; 17 WR 961; Littledale v Bickersteth (1876) 24 WR 507 ; Rowbotham v Dunnett (1878) 8 Ch D 430 at 439 sub nom Robotham v Dunnett (1878) 47 LJ Ch 449; 38 LT 278; 26 WR 529 per Malins VC; Scott v Brownrigg (1881) 9 LR Ir 246; Re Boyes; Boyes v Carritt (1884) 26 Ch D 531 ; Re Kings Estate (1888) 21 LR Ir 273 at 277; Voges v Monaghan (1954) 94 CLR 231;

BC5400060 ; Ottaway v Norman [1972] Ch 698; [1971] 3 All ER 1325; [1972] 2 WLR 50 . It is not sufficient that the testator has told the donee that the property is to be disposed of by the donee in accordance with written directions to be subsequently given, and has prepared such directions, if they are not conveyed to the donee until after the testators death: Re Boyes; Boyes v Carritt (1884) 26 Ch D 531 ; Le Page v Gardom (1915) 84 LJ Ch 749; 113 LT 475, HL; Re Jones; Jones v Jones [1942] Ch 328; [1942] 1 All ER 642 ; Re Jeffery; Jeffery v Elders Trustee and Executor Co Ltd [1951] SASR 237 .9 French v French [1902] 1 IR 172 at 230 per Lord Davey , HL; Voges v Monaghan (1954) 94 CLR 231; BC5400060 ; Brown v Pourau [1995] 1 NZLR 352 .10 Paine v Hall (1812) 18 Ves 475; 34 ER 397; Lomax v Ripley (1855) 3 Sm & G 48 at 73; 65 ER 558 per Stuart VC; Tee v Ferris (1856) 2 K & J 357 at 363-4; 69 ER 819; Jones v Badley (1868) LR 3 Ch App 362, CA; Springett v Jenings (1870) LR 10 Eq 488 (on appeal Springett v Jenings (1871) LR 6 Ch App 333); Rowbotham v Dunnett (1878) 8 Ch D 430 sub nom Robotham v Dunnett (1878) 47 LJ Ch 449; 38 LT 278; 26 WR 529; Re Kings Estate (1888) 21 LR Ir 273 at 277 per Monroe J; Ottaway v Norman [1972] Ch 698; [1971] 3 All ER 1325; [1972] 2 WLR 50 .11 See the cases in note 8 above.12 Ledgerwood v Perpetual Trustee Co Ltd (1997) 41 NSWLR 532 (where Young J expressly declined to follow Re Keen; Evershed v Griffiths [1937] Ch 236; [1937] 1 All ER 452 ; Re Batemans Will Trusts; Brierley v Perry [1970] 3 All ER 817; [1970] 1 WLR 1463 ; Re Karsten; Edwards v Moore [1953] NZLR 456 and followed Re Browne; Ward v Lawler [1944] Ir R 90; Re Prendiville; Prendiville v Prendiville (unreported, High Court of Ireland, Barron J, 5 December 1990)).13 Re Keen; Evershed v Griffiths [1937] Ch 236; [1937] 1 All ER 452 , CA; Re Batemans Will Trusts; Brierley v Perry [1970] 3 All ER 817; [1970] 1 WLR 1463 ; Jankowski v Pelek Estate (1996) 131 DLR (4th) 717 . Compare Blackwell v Blackwell [1929] AC 318; [1929] All ER Rep 71 , HL.14 See succession [395-380].15 Re Young (decd); Young v Young [1951] Ch 344; [1950] 2 All ER 1245 (half-secret trust). The same reasoning appears to be applicable in respect of fully secret trusts, although there is no decided case to that effect. As to the concept of a trust arising outside the will in relation to property disposed of by the will see [430-110].16 Cresswell v Cresswell (1868) LR 6 Eq 69; 37 LJ Ch 521; 18 LT 392.17 See [430-110], [430-235].18 See succession [395-465].19 Compare Re Maddock; Llewellyn v Washington [1902] 2 Ch 220 at 231 per Cozens-Hardy LJ , CA.20 Compare Mallott v Wilson [1903] 2 Ch 494; [1900-3] All ER Rep 326 .21 See Oakley A J, Constructive Trusts, 3rd ed, Sweet & Maxwell, London, 1987. Compare Re Gardner; Huey v Cunningham [1923] 2 Ch 230 .22 Compare Mallott v Wilson [1903] 2 Ch 494; [1900-3] All ER Rep 326 .23 Re Maddock; Llewellyn v Washington [1902] 2 Ch 220 per Cozens-Hardy LJ , CA.24 Blackwell v Blackwell [1929] AC 318 at 328 per Lord Buckmaster, at 341 per Lord Warrington; [1929] All ER Rep 71 , HL. The paragraph below is current to 20 April 2012 [430-355] Evidence of secret trusts The evidence of the existence of a secret trust must be clear and distinct,1 and while it may be circumstantial or comprised of admissions (express or by conduct) or a mixture of circumstantial evidence and admissions, it must be such as to prove to the reasonable satisfaction of the court that a secret trust has been established.2 Where the existence of a secret trust is admitted, the donee3 or even his or her solicitor4 may be compelled to give evidence of the trusts terms. A testator may make or leave unrevoked a devise or bequest on the faith of a promise, whether express or tacit, on the donees part that he or she will carry out the testators intentions. In such a case, even though the gift is on the face of it absolute, equity will admit evidence as to the testators intentions and as to the communication of them to, and the acceptance of them by, the donee, and will compel the donee, as a trustee, to carry out the testators intentions,5 unless they are such that it is not legally possible to give effect to them.6 Where it is not proved that an effective fully secret trust has been created, the donee is entitled beneficially.7 Where it appears from the face of a will that the donee was intended to take only as a trustee,8 extrinsic evidence of the objects of the trust is admissible.9 However, evidence to show that a

beneficial interest was intended to pass to the donee will not be admitted.10 Notes 1 McCormick v Grogan (1869) LR 4 HL 82; 17 WR 961. See also Re Snowden (decd) [1979] Ch 528 at 537; [1979] 2 All ER 172 at 179; [1979] 2 WLR 654 at 660 per Megarry VC (the standard of proof is the ordinary standard of proof in civil cases (not following Ottaway v Norman [1972] Ch 698 at 712; [1971] 3 All ER 1325 at 1330; [1972] 2 WLR 50 per Brightman J, where the higher standard applicable to rectification of deeds was suggested), although if personal fraud on the legatees part were involved a higher standard of proof would be required, as for civil claims based on fraud); Brown v Pourau [1995] 1 NZLR 352 at 369 per Hammond J , HC(NZ); Howell v Hyde (2003) 47 ACSR 230; [2003] NSWSC 732; BC200304478 at [46], [47] per Austin J .2 Voges v Monaghan (1954) 94 CLR 231 at 233; BC5400060 per Dixon CJ; Public Trustee v Gecker (unreported, SC(NSW), Young J, 1505 of 1986, BC9001689, 5 December 1990).3 Stickland v Aldridge (1804) 9 Ves 516; 32 ER 703 . Compare Muckleston v Brown (1801) 6 Ves 52; 31 ER 934 . See also note 5 below.4 Russell v Jackson (1851) 9 Hare 387; 68 ER 558 .5 Wallgrave v Tebbs (1855) 2 K & J 313; 69 ER 800; Moss v Cooper (1861) 1 John & H 352; 70 ER 782 ; Jones v Badley (1868) LR 3 Ch App 362, CA; McCormick v Grogan (1869) LR 4 HL 82; 17 WR 961.6 Muckleston v Brown (1801) 6 Ves 52; 31 ER 934 ; Stickland v Aldridge (1804) 9 Ves 516; 32 ER 703 ; Russell v Jackson (1852) 10 Hare 204; 68 ER 900 ; Tee v Ferris (1856) 2 K & J 357; 69 ER 819; Springett v Jenings (1871) LR 6 Ch App 333; Rowbotham v Dunnett (1878) 8 Ch D 430 sub nom Robotham v Dunnett (1878) 47 LJ Ch 449; 38 LT 278; 26 WR 529. As to trusts which cannot legally be created see [430-380]-[430-445].7 See [430-370].8 As to the circumstances in which undefined trusts are enforceable see [430375].9 Blackwell v Blackwell [1929] AC 318; [1929] All ER Rep 71 , HL. See also Re Fleetwood; Sidgreaves v Brewer (1880) 15 Ch D 594; 49 LJ Ch 514 ; Re Huxtable; Huxtable v Crawfurd [1902] 2 Ch 793; [1900-3] All ER Rep 799 , CA; Re Young (decd); Young v Young [1951] Ch 344; [1950] 2 All ER 1245 .10 Morice v Bishop of Durham (1805) 10 Ves 522 at 537; [1803-13] All ER Rep 451; (1805) 32 ER 947 at 953 per Lord Eldon LC; Re Karsten; Edwards v Moore [1953] NZLR 456 at 475 , CA(NZ). Compare Re Rees; Williams v Hopkins [1950] Ch 204; [1949] 2 All ER 1003 . See also [430-375]. The paragraph below is current to 20 April 2012 [430-360] Gifts to several persons on secret understanding with one of them The tacit or explicit acceptance of a trust by one of several tenants in common does not affect the others to whom no communication of the testators intention has been made.1 Where, however, there is a gift to two or more persons as joint tenants and the gift is made on the antecedent promise of one or some but not all of the donees, all are bound.2 Where a gift to two or more persons as joint tenants is left unrevoked on the faith of the subsequent promise of one or some but not all of the donees, only those who gave the promise are bound.3 Any indication in the will as to whether some or all of the donees must receive the communication must be complied with for a valid trust to be established.4 Notes 1 Tee v Ferris (1856) 2 K & J 357; 69 ER 819; Rowbotham v Dunnett (1878) 8 Ch D 430 at 437 sub nom Robotham v Dunnett (1878) 47 LJ Ch 449; 38 LT 278; 26 WR 529 per Malins VC; Re Stead; Witham v Andrew [1900] 1 Ch 237 at 241 per Farwell J . See also Geddis v Semple [1903] 1 IR 73. The reason is that otherwise one of those donees, by accepting a secret trust, could deprive the rest of their benefits: Tee v Ferris (1856) 2 K & J 357 at 368; 69 ER 819 at 824 per Sir W Pagewood VC; Re Stead; Witham v Andrew [1900] 1 Ch 237 at 241 per Farwell J .2 Russell v Jackson (1852) 10 Hare 204; 68 ER 900 ; Jones v Badley (1868) LR 3 Ch App 362, CA; Re Stead; Witham v Andrew [1900] 1 Ch 237 at 240-1 per Farwell J (the reason is that no person can claim an interest under a fraud committed by another).3 Burney v MacDonald (1845) 15 Sim 6; 60 ER 518 ; Moss v Cooper (1861) 1 John & H 352; 70 ER 782 ; Re Stead;

Witham v Andrew [1900] 1 Ch 237 at 241 per Farwell J (the reason is that the gift is not tainted with any fraud in procuring the execution of the will). It may be argued that the authorities can be construed so as to identify the sole test as being that B is bound by As promise to the testator only if that promise induced the testator to make the gift to B or to leave it unrevoked; and it may be further argued that on that basis it is of no significance whether the gift is to them as joint tenants or as tenants in common, except in so far as the inducement may be more difficult to prove in the case of tenants in common: Perrins B, Can You Keep Half a Secret? (1972) 88 LQR 225.4 Re Keen; Evershed v Griffiths [1937] Ch 236; [1937] 1 All ER 452 ; CA; Re Spence; Quick v Ackner [1949] WN 237. See also [430-375]. The paragraph below is current to 20 April 2012 [430-365] Secret trusts in relation to intestacies and powers of appointment If a potential testator refrains from making a will in reliance on a promise to deal with the potential testators property in accordance with the expressed wishes of the potential testator, given by a person who, at the date of the promise, would be entitled to that property if he or she survived the potential testator, that person and those claiming under him or her must give effect to those intentions.1 That person need only make such a promise prior to the testators death for the secret trust to be binding.2 There cannot be a valid declaration of trust of a mere hope of acquiring property in the future,3 and therefore a secret trust can only be completely constituted on the death of the intestate testator.4 Where a general power of appointment by the exercise of which a tenant for life could defeat the interests of certain remaindermen is reinstated, for example by revocation of a codicil, upon the promise of the donee of the power not to exercise it so as to defeat the interests of those remaindermen, an appointment by the donee which results in the defeat of those interests will not be allowed by the court to stand and is wholly invalid and inoperative.5 Notes 1 Re Gardner; Huey v Cunnington [1920] 2 Ch 523 , CA. See also Sellack v Harris (1708) 2 Eq Cas Abr 46; 22 ER 40; Stickland v Aldridge (1804) 9 Ves 516; 32 ER 703 ; Chester v Urwick (1856) 23 Beav 404; 53 ER 159. See further succession [395-445].2 Voges v Monaghan (1954) 94 CLR 231; BC5400060 ; Ottaway v Norman [1972] Ch 698; [1971] 3 All ER 1325; [1972] 2 WLR 50 . See also Brown v Pourau [1995] 1 NZLR 352 . See further succession [395-445].3 Norman v FCT (1963) 109 CLR 9; [1964] ALR 131; BC6300080 , HC of A; Shepherd v Cmr of Taxation (Cth) (1965) 113 CLR 385; [1966] ALR 969; (1965) 39 ALJR 351; 9 AITR 739 , HC of A. See also Re Ellenborough; Towry Law v Burne [1903] 1 Ch 697; (1903) 72 LJ Ch 218; 87 LT 714 ; Re Northcliffe; Arnholz v Hudson [1925] Ch 651 ; Williams v IRC [1965] NZLR 395 , CA(NZ). See also [430-270]. Compare Re Gardner; Huey v Cunningham [1923] 2 Ch 230 (a secret trust does not fail when the beneficiary predeceases the testator after the communication). The same reasoning could be applied where there is a gift by will and a beneficiary under the secret trust dies in the lifetime of the testator.4 On that basis the predeceasing beneficiarys interest should, in principle, lapse: see [430-335], succession [395-465].5 Tharp v Tharp [1916] 1 Ch 142 at 151-3 per Neville J (compromised on appeal Tharp v Tharp [1916] 2 Ch 205 , CA). The paragraph below is current to 20 April 2012 [430-370] Intended fully secret trusts where the donee takes absolutely Where, in the case of a gift which is on the face of it absolute, the intended secret trusts cannot take effect, or are not communicated to the donee, or are not assented to by him or her, the donee holds for his or her own benefit.1 Similarly, where the trusts relate to only part of the gift, the donee takes absolutely subject to the performance of the trusts, the benefits under the trusts being treated as legacies carrying interest from the first anniversary of the testators death.2

If a testator gives property to his or her executors with the request that they will dispose of it in accordance with any memorandum signed by him or her and directs that any such memorandum is not to form part of his or her will or to have any testamentary character and that the expression of his or her wishes, even if communicated in his or her lifetime, is not to create a trust or legal obligation, the executors take absolutely, the bargain between them and the testator being that they should so take.3 Notes 1 Wallgrave v Tebbs (1855) 2 K & J 313; 69 ER 800; Jones v Badley (1868) LR 3 Ch App 362, CA; McCormick v Grogan (1869) LR 4 HL 82; 17 WR 961; Re Downings Residuary Estate (1888) 60 LT 140. Compare Re Shields; Corbould-Ellis v Dales [1912] 1 Ch 591 . See also Lomax v Ripley (1855) 3 Sm & G 48; 65 ER 558; Baldwin v Baldwin (1852) 5 De G & Sm 319; 64 ER 1135; Wheeler v Smith (1860) 1 Giff 300; 65 ER 928. See succession [395-445].2 Irvine v Sullivan (1869) LR 8 Eq 673; 38 LJ Ch 365; 17 WR 1083; Re Tulley; Mackay v Jackson [1918] VLR 556; (1918) 25 ALR 6 . As to interest on legacies generally see succession [395-4695].3 Re Falkiner; Mead v Smith [1924] 1 Ch 88 ; Re Stirling; Union Bank of Scotland Ltd v Stirling [1954] 2 All ER 113; [1954] 1 WLR 763. See also Re Schar; Midland Bank Executor and Trustee Co Ltd v Damer [1951] Ch 280; [1950] 2 All ER 1069 . The paragraph below is current to 20 April 2012 [430-375] Half-secret trusts Where property is given by will to persons upon trusts which are referred to in, but undefined by, the will, the donees cannot take beneficially.1 If the trusts cannot be carried out, by reason of invalidity or uncertainty, a resulting trust arises in favour of the residuary legatees of the testator or the persons entitled on an intestacy, as the case may be.2 The question whether trusts not defined in a will are necessarily invalid or ineffective for noncompliance with statutory formalities has been the subject of conflicting decisions.3 Trusts referred to in, but not defined by, the will are enforceable4 provided that they are defined and communicated5 in accordance with the terms of the will and during the lifetime of the testator. 6 Oral evidence is not allowed to contradict the will, and therefore a legatee appearing as trustee on the face of the will cannot produce evidence to show that he or she was intended to take some of the legacy beneficially.7 Whereas there is authority that a fully secret trust of land is a constructive trust8 which, where inter vivos, is exempt from the requirement of writing,9 it seems that a half-secret trust of land is an express trust that must comply with the statutory formalities.10 Notes 1 Blackwell v Blackwell [1929] AC 318 at 328, 335; [1929] All ER Rep 71 at 74, 78 per Lords Buckmaster and Summer respectively , HL; Re Karsten; Edwards v Moore [1953] NZLR 456 ; Guest v Webb [1965] VR 427 ; Brown v Pourau [1995] 1 NZLR 352 at 368 per Hammond J . See also succession [395-450].2 Ommanney v Butcher (1823) Turn & R 260 at 270; 37 ER 1098 at 1101 per Sir Thomas Plumer MR ; Re Rees; Williams v Hopkins [1950] Ch 204; [1949] 2 All ER 1003 , CA; Guest v Webb [1965] VR 427 ; Re Pughs Will Trusts; Marten v Pugh [1967] 3 All ER 337; [1967] 1 WLR 1262 ; Brown v Pourau [1995] 1 NZLR 352 at 368-9 per Hammond J. As to resulting trusts arising on the failure of an express trust see [430-510].3 Those cases are reviewed in Re Fleetwood; Sidgreaves v Brewer (1880) 15 Ch D 594; 49 LJ Ch 514 . See also Blackwell v Blackwell [1929] AC 318 at 331-2, 342-3; [1929] All ER Rep 71 at 76, 81 per Lords Buckmaster and Warrington respectively , HL.4 Blackwell v Blackwell [1929] AC 318; [1929] All ER Rep 71 , HL (following Re Fleetwood; Sidgreaves v Brewer (1880) 15 Ch D 594; 49 LJ Ch 514 (as to the correctness of which Lords Dunedin and Parker in Le Page v Gardom (1915) 84 LJ Ch 749 at 752-3; 113 LT 475, HL and Warrington LJ in Re Gardner; Huey v Cunnington [1920]

2 Ch 523 at 532 , CA reserved their opinions)).5 Re Keen; Evershed v Griffiths [1937] Ch 236 at 248; [1937] 1 All ER 452 at 460 per Lord Wright MR , CA. Compare Re Gardom; Le Page v A-G [1914] 1 Ch 662 at 673 per Eve J . Communication must accord with the terms of the will so that for example, a gift to four persons to be dealt with in accordance with my wishes which I have made known to them does not create a half-secret trust unless the wishes were communicated to all four: Re Spence; Quick v Ackner [1949] WN 237 (distinguishing Re Keen; Evershed v Griffiths [1937] Ch 236; [1937] 1 All ER 452 , where the expression used was to them or either of them and it was held that communication to only one of the trustees established a valid trust).6 Ledgerwood v Perpetual Trustee Co Ltd (1997) 41 NSWLR 532 . See also [430335].7 Re Rees; Williams v Hopkins [1950] Ch 204; [1949] 2 All ER 1003 , CA.8 Ottaway v Norman [1972] Ch 698; [1971] 3 All ER 1325; [1972] 2 WLR 50 ; Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; 100 LGERA 383; 157 ALR 414 at 424; 72 ALJR 1470 , HC of A, Full Court. The constructive trust characterisation of a fully secret trust stems from its purported imposition to avoid the donee engaging in fraud in an equitable sense: Ottaway v Norman [1972] Ch 698 at 711-12; [1971] 3 All ER 1325; [1972] 2 WLR 50 per Brightman J ; Howell v Hyde (2003) 47 ACSR 230; [2003] NSWSC 732; BC200304478 at [42]-[45] per Austin J . As to constructive trusts see generally [430-565]-[430-675].9 See [430-230].10 Re Baillie (1886) 2 TLR 660 at 661 . However, although there may be no question of the trustee personally benefiting, it could still be said to be fraudulent if, despite his or her agreement to hold for the secret beneficiaries, the trustee claims to hold on a resulting trust. See also [430-285], [430-660].

Source

[Halsbury's Laws of Australia]

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(D) Illegality, Fraud and Dispositions Contrary to Public Policy The paragraph below is current to 20 April 2012 [430-380] Immoral and illegal trusts On the principle that equity follows the law, a trust cannot be enforced in equity if it is created for an object or purpose of such a kind that a direct gift or contract involving such an object or purpose cannot be enforced at law on the ground of being immoral or otherwise contrary to public policy or illegal.1 However, merely because the trustee commits illegal acts in executing the trust does not mean that the trust was created for an illegal purpose, provided that the trustee was not required by the terms of the trust to commit these acts.2

Notes 1 Hamilton v Duke of Esten (1820) 2 Bli 196 at 209; 4 ER 300, HL; Brown v Burdett (1882) 21 Ch D 667 ; Thompson v Thomas (1891) 27 LR Ir 457; Morley v Rennoldson [1895] 1 Ch 449 , CA; Phillips v Probyn [1899] 1 Ch 811; (1899) 68 LJ Ch 401; 80 LT 513 ; Maurice v Lyons [1969] 1 NSWR 307 at 312; (1969) 13 FLR 475 per Helsham J; Blathwayt v Baron Cawley [1976] AC 397; [1975] 3 All ER 625; [1975] 3 WLR 684 . See also Trustees of Church Property of the Diocese of Newcastle v Ebbeck (1960) 104 CLR 394; [1961] ALR 339 .2 Edmunds v Pickering (1999) 75 SASR 407 at 566 per Lander J (affirmed Pickering v Smoothpool Nominees Pty Ltd (2001) 81 SASR 175 at 193-4; [2001] SASC 387; BC200107893 per Gray J , Full Court). The paragraph below is current to 20 April 2012 [430-385] Attempts to alter rules of devolution on intestacy Where a trust confers an absolute equitable interest in real or personal property on a person, any provision for a gift over on the occurrence of a specified event is void for repugnancy to the gift of the absolute interest if it constitutes an attempt to interfere with the ordinary rules of devolution on intestacy1 or with other inherent ownership rights or attributes.2 Notes 1 Gulliver v Vaux (1746) 8 De GM & G 167n; 44 ER 353; Re Yalden (1851) 1 De GM & G 53; 42 ER 471; Holmes v Godson (1856) 8 De GM & G 152; 44 ER 347 ; Re Mortlocks Trust (1857) 3 K & J 456; 69 ER 1189; Barton v Barton (1857) 3 K & J 512; 69 ER 1212; Re Wilcocks Settlement (1875) 1 Ch D 229 ; Re Dixon; Dixon v Charlesworth [1903] 2 Ch 458 ; Re Patterson; Patterson v Trustees Executors and Agency Co Ltd [1939] VLR 66; [1939] ALR 113 . See also Re Ashton; Ballard v Ashton [1920] 2 Ch 481; (1920) 124 LT 374 .2 Watkins v Williams; Haverd v Church (1851) 3 Mac & G 622; 42 ER 400 ; Shaw v Ford (1877) 7 Ch D 669 ; Perry v Merritt (1874) LR 18 Eq 152; Re Dugdale; Dugdale v Dugdale (1888) 38 Ch D 176 . See also [430-440]. The paragraph below is current to 20 April 2012 [430-390] Restraints on alienation If property is given in trust absolutely for a beneficiary, any proviso or condition purporting to prohibit, or severely restrict,1 the alienation of that property, by causing the beneficiarys interest to be forfeited, or to become liable to be terminated, on attempted alienation, is void as being repugnant to the absolute equitable interest of the beneficiary.2 A condition which, while leaving the beneficiary free to alienate the property, operates as a substantial disincentive to alienation by requiring that a material amount be paid to other persons out of the proceeds, is also void.3 A partial restriction on alienation will not be void if it leaves the beneficiary with a considerable freedom to alienate.4 If the beneficiarys interest is not constituted or described as an absolute interest subject to termination or forfeiture, but is expressed to endure for the period ending when alienation occurs or is attempted5 the limitation will not be void as a restraint on alienation but will create a valid determinable interest.6 Provision for a gift over is not an essential element in the constitution of a valid determinable interest.7 Notes 1 For example, to a small number of specified relatives: Attwater v Attwater (1853) 18 Beav 330; 52 ER 131 ; Re Dunn; Dunn v McCowan [1927] St R Qd 265 ; Re Brown; District Bank Ltd v Brown [1954] Ch 39; [1953] 2 All ER 1342 ; Re Mavromates [1964] VR 612 . See also Re Rosher; Rosher v Rosher (1884) 26 Ch D 801; [1881-85] All ER Rep Ext 1301; (1884) 53 LJ Ch

722; 51 LT 785 ; Re McKay; McKay v McKay (1902) 22 NZLR 121 ; Re Cockerill; Mackaness v Percival [1929] 2 Ch 131 . Compare Grayson v Grayson [1922] St R Qd 155 . See also note 4 below. As to restriction on alienation applying only for a specified period see Re Rosher; Rosher v Rosher (1884) 26 Ch D 801; [1881-85] All ER Rep Ext 1301; (1884) 53 LJ Ch 722; 51 LT 785 ; In the Will of McKellar [1915] VLR 220 .2 Brandon v Robinson (1811) 18 Ves 429; 34 ER 379 ; Graves v Dolphin (1826) 1 Sim 66; 57 ER 503; Green v Spicer (1830) 1 Russ & My 395; 39 ER 153; Ware v Cann (1830) 10 B & C 433; 109 ER 511 ; Snowdon v Dales (1834) 6 Sim 524; [1824-34] All ER Rep 425; (1834) 3 LJ Ch 188; 58 ER 690 ; Attwater v Attwater (1853) 18 Beav 330; 52 ER 131 ; Hood v Oglander (1865) 34 Beav 513; 55 ER 733 ; Re Machu (1882) 21 Ch D 838 ; James v Gard (1887) 13 VLR 908; 9 ALT 111 ; Re Dugdale; Dugdale v Dugdale (1888) 38 Ch D 176 ; Metcalfe v Metcalfe (1889) 43 Ch D 633 at 639 ; Gazzard v Jobbins (1893) 14 LR (NSW) Eq 28; 9 WN (NSW) 106 ; Watson v Bodman (1896) 22 VLR 506; 3 ALR 7 ; Re Elmslie; Elmslie v Elmslie [1907] St R Qd 131 ; Palmer v Permanent Trustee Co (1915) 16 SR (NSW) 162; 33 WN (NSW) 40 ; Lucas v Goldie [1920] NZLR 28 ; Re Williams Settlement; Trustees Executors and Agency Co Ltd v James [1923] VLR 609; (1923) 29 ALR 440 ; Re Orr [1940] SASR 395 ; Re Goode (decd); Spiller v Kennedy [1960] VR 117 ; Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635; 116 ALR 26 at 33; 67 ALJR 739 per Brennan J; Caboche v Ramsay (1993) 119 ALR 215 at 226-8; 27 ATR 479 per Gummow J . For the view that restraints on alienation are invalid because they are inherently contrary to public policy, which covers cases where the repugnancy explanation would not be applicable, see Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635; 116 ALR 26; 67 ALJR 739 . A covenant not to alienate is not void for repugnancy to an absolute interest, because, if the covenant is breached, there may be a right to damages, but the validity of the alienation will not be affected, and if the attempted alienation is frustrated by an injunction there will be no termination or forfeiture of the intending disposers interest: Caldy Manor Estate Ltd v Farrell [1974] 3 All ER 753; [1974] 1 WLR 1303 , CA.3 Re Elliot; Kelly v Elliot [1896] 2 Ch 353 ; Re Patterson; Patterson v Trustees Executors and Agency Co Ltd [1939] VLR 66; [1939] ALR 113 ; Public Trustee v Ross (1972) 3 SASR 462 .4 Doe d Gill v Pearson (1805) 6 East 173; 102 ER 1253 ; Re Macleay (1875) LR 20 Eq 186; 44 LJ Ch 441; 32 LT 682. These cases were distinguished in the later cases in note 2 above, and the exception they establish was extensively criticised in Re Rosher; Rosher v Rosher (1884) 26 Ch D 801 at 813-19; [1881-85] All ER Rep Ext 1301; (1884) 53 LJ Ch 722; 51 LT 785 per Pearson J .5 As to alienation occurring by operation of law see Rochford v Hackman (1852) 9 Hare 475 at 484; 68 ER 597 at 601 per Sir G J Turner VC ; Craven v Brady (1869) LR 4 Ch App 296 at 298; Re Detmold; Detmold v Detmold (1889) 40 Ch D 585; 58 LJ Ch 495 . As to alienation resulting from exercise of a right vested in a person other than the beneficiary see Oliver v Oliver (1958) 99 CLR 20 .6 Caboche v Ramsay (1993) 119 ALR 215 at 226-8; 27 ATR 479 . See also Lockyer v Savage (1733) 2 Stra 947; 93 ER 959 ; Ex parte Hinton (1808) 14 Ves 598; 33 ER 650; Rochford v Hackman (1852) 9 Hare 475; 68 ER 597 ; Joel v Mills (1857) 3 K & J 458; 69 ER 1189; Oldham v Oldham (1867) LR 3 Eq 404; Hatton v May (1876) 3 Ch D 148 ; James v Gard (1887) 13 VLR 908; 9 ALT 111 ; Re Detmold; Detmold v Detmold (1889) 40 Ch D 585; 58 LJ Ch 495 ; Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635; 116 ALR 26 at 33; 67 ALJR 739 per Brennan J . As to a case where the restraint was held to be void but the possibility of its having been formulated as a valid determinable interest was expressly recognised see Brandon v Robinson (1811) 18 Ves 429 at 432-3; 34 ER 379 at 380-1 . For an example of one share (for a son) in a fund being subject to a void restraint on alienation and the other (equal) share (for a daughter) conferring only a limited interest see In the Will of Pattison (decd); McKinley v Parkinson (1903) 10 ALR 36; 25 ALT 186 . A valid determinable life interest may be established by giving property to A for life, with a proviso that on attempted alienation it goes to B: Hurst v Hurst (1882) 21 Ch D 278; [1881-85] All ER Rep 903 , CA; Nixon v Verry (1885) 29 Ch D 196; 53 LT 18 . See further [430-395].7 Dommett v Bedford (1796) 6 Term Rep 684; 101 ER 771; Rochford v Hackman (1852) 9 Hare 475 at 481-3; 68 ER 597 at 600-1 per Sir G J Turner VC; Joel v Mills (1857) 3 K & J 458 at 468; 69 ER 1189 at 1194 per Sir W Page Wood VC; Craven v Brady (1869) LR 4 Ch App 296. The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-395] Trusts to terminate on bankruptcy Where a trust gives a vested interest for life or in fee simple, subject to a condition subsequent that it will determine upon the bankruptcy of the life tenant, with a gift over to another person or on other trusts, the condition is void and the interest is unqualified.1 Also, if a person has a specific asset not subject to a deprivation provision, then a deprivation provision to which he or she subsequently agrees to make it subject is unenforceable in the event of insolvency.2 On the other hand, the intended effect of such a condition can be validly achieved if the qualification of the interest3 of the principal beneficiary is formulated not as a condition subsequent but as a limitation creating a determinable interest to exist only until bankruptcy occurs or some other specified form of alienation is effected or attempted.4 Such a determinable interest will not, however, be valid in so far as the property made subject to the trust was the principal beneficiarys own property,5 unless the determining event was alienation to a particular alienee rather than to the creditors generally or the trustee in bankruptcy.6 Distinctions of this kind are not, however, always easy to make, a point judicially noted on more than one occasion.7 If the principal beneficiarys life interest is determinable on other events as well as on bankruptcy, and it in fact determines validly prior to bankruptcy, and the gift over takes effect, there will no longer be a life interest capable of passing to the principal beneficiarys trustee in bankruptcy.8 Where a valid determinable interest is established, the gift over when the interest determines can either be outright or in the form of a discretionary trust.9 Under such a discretionary trust the trustee may be given a discretion to pay all or part of the income to the bankrupt principal beneficiary, but it appears that such a payment could not be made because it would have the effect of a payment to the principal beneficiarys trustee in bankruptcy who would not be one of the discretionary beneficiaries (known as a protective trust).10 However, the trustee could, if so authorised by the terms of the trust, apply income in payment for services supplied to, or otherwise for the benefit of, the bankrupt principal beneficiary, because that would not involve the passing of any property which could vest in the trustee in bankruptcy.11 The trustee legislation in all jurisdictions except the Northern Territory and South Australia12 makes provision for a discretionary trust on terms specified in the legislation to be incorporated in a trust instrument13 by directing that income is to be held on protective trusts for a person identified as the principal beneficiary for a trust period being that persons life or a specified lesser period.14 The legislation provides that the trust of income will fail or determine at the end of the trust period, or earlier if the principal beneficiary does or attempts to do or suffers any act or thing or if any event happens whereby, if the income were payable to the principal beneficiary absolutely, he or she would be deprived of the right to receive all or any part of it.15 Events that deprive a principal beneficiary of the right to receive an entitlement to income include an order in bankruptcy16 and an attempt to charge.17 But the mere granting of a Mareva order 18 against the principal beneficiary is not an event by which he or she might be wholly or partly deprived of the right to receive income.19 If the trust of income so fails or determines within the trust period the income during the remainder of that period will be held for application at the discretion of the trustee for the maintenance, support or otherwise for the benefit20 of all or any one or more of the principal beneficiary and specified categories of relatives.21 The legislation stipulates that any trusts implied by it may be set aside in any case where an express trust to the same effect might be set aside.22 The foregoing, in so far as bankruptcy is concerned, must be read against bankruptcy legislation which renders void a provision in a trust deed to the extent that it has the effect of:

(1) cancelling, reducing or qualifying a beneficiarys interest under a trust; or (2) allowing the trustee to exercise a discretion to the detriment of a beneficiarys interest, if the beneficiary becomes a bankrupt, commits an act of bankruptcy or executes a personal insolvency agreement under that legislation.23 Notes 1 Brandon v Robinson (1811) 18 Ves 429; 34 ER 379 ; Graves v Dolphin (1826) 1 Sim 66; 57 ER 503; Green v Spicer (1830) 1 Russ & My 395; 39 ER 153; Piercy v Roberts (1832) 1 My & K 4; 2 LJ Ch 17; 39 ER 582; Snowdon v Dales (1834) 6 Sim 524; [1824-34] All ER Rep 425; (1834) 3 LJ Ch 188; 58 ER 690 ; Younghusband v Gisborne (1844) 1 Coll 400; 63 ER 473 (affirmed Younghusband v Gisborne (1846) 15 LJ Ch 355). Compare Metcalfe v Metcalfe (1889) 43 Ch D 633 at 639 per Kekewich J ; Re Salom; Salom v Judell [1923] SASR 162 at 164 per Murray CJ ; Re Williams Settlement; Trustees Executors and Agency Co Ltd v James [1923] VLR 609; (1923) 29 ALR 440 ; Caboche v Ramsay (1993) 119 ALR 215 at 226-8; 27 ATR 479 per Gummow J ; Re Scientific Investment Pension Plan Trusts [1999] Ch 53 at 59; [1998] 3 All ER 154 per Rattee J .2 Money Markets International Stockbrokers Ltd (in liq) v London Stock Exchange Ltd [2001] 4 All ER 223 at 250; [2002] 1 WLR 1150 per Neuberger J .3 The principle may apply in respect of a fee simple as well as a life interest: Re Leach; Leach v Leach [1912] 2 Ch 422 . For criticism of that decision see Sweet, Restraints on Alienation (1917) 33 LQR 236; Harrison W N, Hall v Busst (1961) 35 ALJ 5.4 Brandon v Robinson (1811) 18 Ves 429; 34 ER 379 ; Higinbotham v Holme (1812) 19 Ves 88; 34 ER 451 ; Rochford v Hackman (1852) 9 Hare 475; 68 ER 597 ; Billson v Crofts (1873) LR 15 Eq 314; Re Aylwins Trusts (1873) LR 16 Eq 585; Re Detmold; Detmold v Detmold (1889) 40 Ch D 585; 58 LJ Ch 495 ; Caboche v Ramsay (1993) 119 ALR 215 at 226-8; 27 ATR 479 per Gummow J; Re Scientific Investment Pension Plan Trusts [1999] Ch 53 at 60-1; [1998] 3 All ER 154 per Rattee J ; Money Markets International Stockbrokers Ltd (in liq) v London Stock Exchange Ltd [2001] 4 All ER 223 at 247; [2002] 1 WLR 1150 per Neuberger J . Compare Re Solomon [1908] SALR 107 . As to the possibility of a determinable life interest taking effect in respect of bankruptcy or alienation preceding the settlement see West v Williams [1898] 1 Ch 488 ; Re Walker; Public Trustee v Walker [1939] Ch 974; [1939] 3 All ER 902 .5 Higinbotham v Holme (1812) 19 Ves 88; 34 ER 451 ; Re Pearson; Ex parte Stephens (1876) 3 Ch D 807 ; Mackintosh v Pogose [1895] 1 Ch 505; (1895) 72 LT 251 ; Re Brewers Settlement; Moreton v Blackmore [1896] 2 Ch 503 ; Re Holland; Gregg v Holland [1902] 2 Ch 360 ; Re Burroughs-Fowler; Trustee of the Property of Burroughs-Fowler v Burroughs-Fowler [1916] 2 Ch 251 . See also Wyld v Caldwell (1870) 9 SCR (NSW) Eq 62 at 68-9 . As to the determinable interest being invalid only in respect of property settled or contributed by the principal beneficiary, but valid in respect of property contributed by another, see Brooke v Pearson (1859) 27 Beav 181; 54 ER 70; Mackintosh v Pogose [1895] 1 Ch 505; (1895) 72 LT 251 ; Re Wombwell [1921] All ER Rep 483; (1921) 37 TLR 625. As to a settlement of property already jointly owned by the primary beneficiary and another not being a settlement of the primary beneficiarys own property see Re Ashby; Ex parte Wreford [1892] 1 QB 872 .6 Brooke v Pearson (1859) 27 Beav 181; 54 ER 70; Knight v Browne (1861) 7 Jur NS 894; 30 LJ Ch 649; Re Pearson; Ex parte Stephens (1876) 3 Ch D 807 ; Re Detmold; Detmold v Detmold (1889) 40 Ch D 585; 58 LJ Ch 495 .7 Re Scientific Investment Pension Plan Trusts [1999] Ch 53 at 59; [1998] 3 All ER 154 per Rattee J ; Money Markets International Stockbrokers Ltd (in liq) v London Stock Exchange Ltd [2001] 4 All ER 223 at 246, 255; [2002] 1 WLR 1150 per Neuberger J .8 Brooke v Pearson (1859) 27 Beav 181; 54 ER 70; Re Detmold; Detmold v Detmold (1889) 40 Ch D 585; 58 LJ Ch 495 .9 See Billson v Crofts (1873) LR 15 Eq 314; Re Aylwins Trusts (1873) LR 16 Eq 585; Re Bullock; Goode v Lickorish (1891) 64 LT 736; 7 TLR 402 .10 Re Bullock; Goode v Lickorish (1891) 64 LT 736; 7

TLR 402 . Compare Lord v Bunn (1843) 2 Y & C Ch Cas 98; 63 ER 43. See also Re Coleman; Henry v Strong (1888) 39 Ch D 443; 60 LT 127 , CA; Re Neil; Hemming v Neil (1890) 62 LT 649; Re Ashby; Ex parte Wreford [1892] 1 QB 872 at 877 per Vaughan Williams J .11 Re Bullock; Goode v Lickorish (1891) 64 LT 736; 7 TLR 402 . Compare Re Coleman; Henry v Strong (1888) 39 Ch D 443; 60 LT 127 , CA; Re Neil; Hemming v Neil (1890) 62 LT 649. As to a possible general limitation on the effectiveness of payments for the benefit of the bankrupt principal beneficiary see Re Ashby; Ex parte Wreford [1892] 1 QB 872 at 877 per Vaughan Williams J . As to a limitation arising from the terms of the trust instrument see Re AllenMeyricks Will Trusts; Mangnall v Allen-Meyrick [1966] 1 All ER 740 at 743; [1966] 1 WLR 499 at 502 per Buckley J .12 (ACT) Trustee Act 1925 s 45 (NSW) Trustee Act 1925 s 45 (QLD) Trusts Act 1973 s 64 (TAS) Trustee Act 1898 s 30 (VIC) Trustee Act 1958 s 39 (WA) Trustees Act 1962 s 61. 13 In Queensland and Victoria, the provisions referred to in note 12 above apply to every trust whether constituted or created before or after the commencement of the relevant Act: (QLD) Trusts Act 1973 s 4(1) (VIC) Trustee Act 1958 s 2(3). In other jurisdictions the provisions referred to in note 12 above do not apply to trusts created or coming into operation before the commencement of the relevant Act: (NSW) Trustee Act 1925 s 45(10) (TAS) Trustee Act 1898 s 30(2) (WA) Trustees Act 1962 s 61(4). 14 See Re Platt; Westminster Bank v Platt [1949] 1 CLC 10-917; Re Wittke (decd); Reynolds v King Edwards Hospital Fund for London and Custodian of Enemy Property [1944] Ch 166; [1944] 1 All ER 383 ; Re Wilcox; Wilcox v Wilcox [1978] Tas SR 82 at 84 .15 (ACT) Trustee Act 1925 s 45(3) (NSW) Trustee Act 1925 s 45(3) (QLD) Trusts Act 1973 s 64(1)(a) (TAS) Trustee Act 1898 s 30(1)(a) (VIC) Trustee Act 1958 s 39(1)(a) (WA) Trustees Act 1962 s 61(2). Deprivation of the right to receive the income is basic to the operation of the legislation: Permanent Trustee Co Ltd v University of Sydney [1983] 1 NSWLR 578 at 581 per Helsham CJ in Eq. As to difficulties of construction and of characterisation of the allegedly determining event see Lee W A, Trusts and Bankruptcy (1973) 47 ALJ 365 at 374, and for examples see Re Hamilton; FitzGeorge v FitzGeorge (1921) 124 LT 737, CA; McQuade v Morgan (1927) 39 CLR 222; 1 ALJ 61; [1927] ALR 258; BC2700028 ; Irwin v Tyson (1963) 110 CLR 592; [1966] ALR 117; (1963) 37 ALJR 311; BC6300610 .

117; (1963) 37 ALJR 311; BC6300610 . 16 Re Sartoris Estate [1892] 1 Ch 11 .17 Re Richardsons Will Trusts [1958] Ch 504 ; Permanent Trustee Co Ltd v University of Sydney [1983] 1 NSWLR 578 at 584-5 per Helsham CJ in Eq.18 As to Mareva orders see equity [185-1465]-[185-1480].19 Re Coram (1992) 36 FCR 250; 109 ALR 353 at 358, 360 per OLoughlin J , Fed C of A.20 In some jurisdictions, the reference is to maintenance, education, advancement or benefit: (QLD) Trusts Act 1973 s 64(1)(b) (VIC) Trustee Act 1958 s 39(1)(b) (WA) Trustees Act 1962 s 61(3). 21 (ACT) Trustee Act 1925 s 45(6) (NSW) Trustee Act 1925 s 45(6) (QLD) Trusts Act 1973 s 64(1)(b) (TAS) Trustee Act 1898 s 30(1)(b) (VIC) Trustee Act 1958 s 39(1)(b) (WA) Trustees Act 1962 s 61(3). 22 (ACT) Trustee Act 1925 s 45(8) (NSW) Trustee Act 1925 s 45(8) (QLD) Trusts Act 1973 s 64(2) (TAS) Trustee Act 1898 s 30(3) (VIC) Trustee Act 1958 s 39(2) (WA) Trustees Act 1962 s 61(5). 23 (CTH) Bankruptcy Act 1966 s 302B. The paragraph below is current to 20 April 2012 [430-400] Trusts in general restraint of marriage Where a beneficiarys interest under a trust is subject to forfeiture on breach of a condition in general restraint of marriage, the condition and any gift over intended to follow the forfeiture are prima facie void,1 but can be valid if the real object is not to prevent marriage.2 However, there is a valid trust where the beneficiarys interest is expressed, not to be subject to a forfeiture condition, but to be limited to endure until marriage, provided there is a gift over upon that event.3 Partial restraints, that is where the forfeiture condition is directed against marriage with, for example, a named person,4 or a person of a particular nationality5 or religion6 or occupation or class,7 are valid if the restraints are defined with sufficient certainty,8 and provided that, in the case of a trust of personalty, there is provision for a gift over upon breach of the condition9 or a clear intention that the gift be revoked.10 A partial restraint in the form of a condition that the beneficiary does not marry without a specified consent, with a gift over on breach, is valid.11 The principle that conditions in restraint of marriage are prima facie void does not apply in relation to the re-marriage of a spouse, and therefore where a gift is made upon trust for either a wife or husband by the other of them, or by a third party, subject to forfeiture on the re-marriage of

the donee, that condition is valid,12 provided there is a gift over on breach.13 Notes 1 Lloyd v Lloyd (1852) 2 Sim NS 255; 61 ER 338. See also Re Hartmann; Broomby v Wagstaff [1960] Tas SR 16 ; Leong v Lim Beng Chye [1955] AC 648 at 660; [1955] 2 All ER 903 at 906; [1955] 3 WLR 303 , PC; Carrodus v Carrodus [1913] VLR 1; (1912) 18 ALR 52 . The same result follows where the condition is in restraint of the resumption of an abandoned marriage: Re Thomson [1966] SASR 278 .2 Jones v Jones (1876) 1 QBD 279 . The real object may be to make provision for the beneficiarys children (Re Hewett; Eldridge v Iles [1918] 1 Ch 458 ) or to ensure that, if the beneficiary marries, the property is dealt with, after the beneficiarys death, in accordance with the donors wishes (Re Fentem; Cockerton v Fentem [1950] 2 All ER 1073 ). See also Re Lovell; Sparks v Southall [1920] 1 Ch 122 ; Re Myers; Perpetual Trustees, Estate and Agency Co of New Zealand Ltd v Myers [1947] NZLR 828 at 856-7 per Fleming J ; Re Michelhams Will Trusts [1964] Ch 550 at 559-60; [1963] 2 All ER 188 at 193; [1963] 2 WLR 1238 at 1246 per Buckley J.3 Morley v Rennoldson (1843) 2 Hare 570 at 579; 67 ER 235 at 239 per Sir James Wigram VC; Lloyd v Lloyd (1852) 2 Sim NS 255; 61 ER 338; Jones v Jones (1876) 1 QBD 279 at 283 per Blackburn J; Re Power (decd); OLeary v Power [1904] St R Qd 93 ; Re Lovell; Sparks v Southall [1920] 1 Ch 122 ; Leong v Lim Beng Chye [1955] AC 648; [1955] 2 All ER 903; [1955] 3 WLR 303 , PC. See also Allen v Jackson (1875) 1 Ch D 399 at 404 per James LJ, at 408 per Baggallay LJ, CA.4 Jenner v Turner (1880) 16 Ch D 188 ; In the Will of Neibel (1892) 13 LR (NSW) Eq 161; Re Bathe; Bathe v Public Trustee [1925] Ch 377 . See also Re Sharp; Canty v Sharp (1904) 4 SR (NSW) 155; 21 WN (NSW) 57 .5 Perrin v Lyon (1807) 9 East 170; 103 ER 538.6 Evans v Torpy (1898) 19 LR (NSW) Eq 91; 14 WN (NSW) 185 ; Re Benjamin; Trustees Executors and Agency Co Ltd v Benjamin [1917] VLR 615; (1917) 23 ALR 369 ; In the Will of Moss; Fox v Moss [1919] VLR 192; (1919) 25 ALR 81 ; Grayson v Grayson [1922] St R Qd 155 ; Re Found; Semmens v Loveday [1924] SASR 301 ; Re Rubin; Rubin v Rubin (1938) 40 WALR 1; Re Winzar (decd); Public Trustee (WA) v Winzar (1953) 55 WALR 35 ; Re Whiting (decd); Whiting v Equity Trustees Executors and Agency Co Ltd [1957] VR 400; [1957] ALR 1058 ; Re Kearny; Equity Trustees Executors and Agency Co Ltd v Kearny [1957] VR 56; [1957] ALR 363 ; Trustees of Church Property of the Diocese of Newcastle v Ebbeck (1960) 104 CLR 394; [1961] ALR 339 ; Blathwayt v Baron Cawley [1976] AC 397; [1975] 3 All ER 625; [1975] 3 WLR 684 .7 Jenner v Turner (1880) 16 Ch D 188 .8 Re Orr [1940] SASR 395 ; Clayton v Ramsden [1943] AC 320; [1943] 1 All ER 16 ; Perpetual Trustee Co Ltd v Wansey (1945) 46 SR (NSW) 226; 63 WN (NSW) 119 ; Re Ettelson; Ettelson v Webster [1946] VLR 217; [1946] ALR 291 ; Re Solomon; Solomon v Solomon [1946] VLR 115; [1946] ALR 195 ; Re Winzar (decd); Public Trustee (WA) v Winzar (1953) 55 WALR 35 . As to the nature of the certainty required see Trustees of Church Property of the Diocese of Newcastle v Ebbeck (1960) 104 CLR 394; [1961] ALR 339 ; Re Teppers Will Trusts; Kramer v Ruda [1987] 1 All ER 970; [1987] 2 WLR 729 .9 Leong v Lim Beng Chye [1955] AC 648 at 660; [1955] 2 All ER 903 at 906; [1955] 3 WLR 303 at 307 per Lord Radcliffe, PC (confirming also the fact that upon breach of the condition the property would go to the residuary beneficiaries does not satisfy the requirement of a gift over). As to a gift over being required so that the condition is not seen to be merely in terrorem see Leong v Lim Beng Chye [1955] AC 648 at 661-2; [1955] 2 All ER 903 at 907-8; [1955] 3 WLR 303 at 308 per Lord Radcliffe, PC.10 Re Hanlon; Heads v Hanlon [1933] Ch 254 . See also Trustees Executors and Agency Co Ltd v Foy (1884) 10 VLR (E) 267; 6 ALT 111 ; Leong v Lim Beng Chye [1955] AC 648 at 662; [1955] 2 All ER 903 at 908; [1955] 3 WLR 303 at 309 per Lord Radcliffe, PC.11 Dashwood v Lord Bulkeley (1804) 10 Ves 230; 32 ER 832 ; Lloyd v Branton (1817) 3 Mer 108; 36 ER 42 ; Re Whitings Settlement; Whiting v De Rutzen [1905] 1 Ch 96 , CA; Re Kozminsky [1966] VR 299 . As to conditions of this kind being regarded with disfavour by the courts, which have been ready to hold, on very slender evidence, that such a condition has been complied with, see cases referred to in Re Kozminsky [1966] VR 299 at 304 .12 Lloyd v Lloyd (1852) 2 Sim NS 255; 61 ER 338; Allen v Jackson (1875) 1 Ch D 399 , CA; Trustees Executors and Agency Co Ltd v Foy (1884) 10 VLR (E) 267; 6 ALT 111 .13 Leong v Lim Beng Chye [1955] AC 648; [1955] 2 All ER 903; [1955] 3 WLR 303 , PC; Re Heppner; Heppner v Heppner (1913) 14 SR (NSW) 173; 30 WN

(NSW) 220 . The paragraph below is current to 20 April 2012 [430-405] Trusts detracting from the sanctity of marriage Historically a trust was treated as void, for being contrary to public policy,1 if it exposed the parties to a marriage to a real temptation to terminate the marriage and was likely to produce that result,2 or if it interfered with the consortium of marriage by introducing a source of fundamental friction.3 A trust to take effect upon the future separation of spouses was likewise viewed as contrary to public policy and void, for providing an inducement to bring to an end a marital cohabitation which might otherwise continue.4 Nevertheless, a trust contemplating an immediate separation, already agreed upon, was valid,5 but would become void if the immediate separation did not occur. 6 In contrast, a trust would be valid if it could be regarded as tending primarily to encourage the continuing cohabitation of spouses, as where a trust was established by a husband in favour of his wife for so long as their cohabitation continued, even though there was a gift over to him upon its cessation.7 Even a trust for a wife to endure only while she is separated from her husband could be valid,8 for example, where the intention of the settlor or testator is able to be identified, not as being to cause separation to occur or continue, but to provide for the wife during the separation.9 Yet public policy is capable of changing.10 What needs to be determined in relation to a particular disposition or agreement which according to earlier authorities would have been treated as contrary to public policy is whether that disposition or agreement should still be considered as so contrary to the ideas prevailing in the community as to the conditions necessary for its welfare that the court should refuse to enforce it as contrary to public policy.11 There is authority to the effect that an entitlement to property that is triggered only upon divorce may not necessarily be contrary to public policy.12 In addition, the existence of legislation which recognises relationships of a particular kind and empowers the courts to enforce rights arising out of such relationships should preclude the courts from regarding the recognition of such relationships as contrary to public policy.13 Notes 1 The policy of the law (sometimes preferred to the expression public policy: Re Hope Johnstone; Hope Johnstone v Hope Johnstone [1904] 1 Ch 470 at 474 per Kekewich J; Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432 at 451; [1969] ALR 321 at 332; (1969) 43 ALJR 131 per Windeyer J) is to preserve intact and inviolate the marriage contract: H v W (1857) 3 K & J 382 at 387; 69 ER 1157 at 1159 per Sir W Page Wood VC.2 Fender v St JohnMildmay [1938] AC 1 at 13; [1937] 3 All ER 402 per Lord Atkin . Compare Re Caborne; Hodge v Smith [1943] Ch 224; [1943] 2 All ER 7 ; Re Johnsons Will Trusts; National Provincial Bank Ltd v Jeffrey [1967] Ch 387; [1967] 1 All ER 553; [1967] 2 WLR 152 . For the application of the same principle to produce the opposite result see Trustees of Church Property of the Diocese of Newcastle v Ebbeck (1960) 104 CLR 394 at 403 per Dixon CJ, at 408 per Kitto J; [1961] ALR 339 .3 Fender v St John-Mildmay [1938] AC 1 at 16; [1937] 3 All ER 402 per Lord Atkin ; Trustees of Church Property of the Diocese of Newcastle v Ebbeck (1960) 104 CLR 394 at 41516; [1961] ALR 339 per Windeyer J . Compare Re Kersey [1952] WN 541 ; Re Neeld; Carpenter v Inigo-Jones [1960] Ch 455 .4 Westmeath v Westmeath (1830) 1 Dow & Cl 519; 6 ER 619; Re Moore; Trafford v Macenochie (1888) 39 Ch D 116 , CA.5 Wilson v Wilson (1848) 1 HL Cas 538; 9 ER 870 (on appeal Wilson v Wilson (1854) 5 HL Cas 40; 10 ER 811 ). See also Jodrell v Jodrell (1841) 9 Beav 45; 50 ER 259 (on appeal Jodrell v Jodrell (1851) 14 Beav 397; 51 ER 339 ).6 Hindley v Westmeath (1827) 6 B & C 200; 108 ER 427 ; Westmeath v Westmeath (1830) 1 Dow & Cl 519; 6 ER 619. See also Bindley v Mulloney (1869) LR 7 Eq 343 (the separation deed was held to be void for total failure of consideration as no separation

actually occurred).7 Re Hope Johnstone; Hope Johnstone v Hope Johnstone [1904] 1 Ch 470 .8 Re Charleton [1911] WN 54 .9 Re Lovell; Sparks v Southall [1920] 1 Ch 122 (the wifes annuity was reduced, but not terminated if she resumed cohabitation or remarried).10 Evanturel v Evanturel (1874) LR 6 PC 1 at 29; Besant v Wood (1879) 12 Ch D 605 at 620 per Jessel MR ; Re Morris (decd) (1943) 43 SR (NSW) 352 at 356; 60 WN (NSW) 201 at 202 per Jordan CJ .11 Re Morris (decd) (1943) 43 SR (NSW) 352 at 355; 60 WN (NSW) 201 per Jordan CJ; Seidler v Schallhofer [1982] 2 NSWLR 80 at 89; (1982) 8 Fam LR 598 per Hope JA , CA(NSW); Hayward v Giordani [1983] NZLR 140 at 148 per Cooke J . As to the concept of public policy and legislation which ameliorates the consequences of extra marital associations see Seidler v Schallhofer [1982] 2 NSWLR 80; (1982) 8 Fam LR 598 .12 Seidler v Schallhofer [1982] 2 NSWLR 80 at 89; (1982) 8 Fam LR 598 per Hope JA , CA(NSW).13 Ramsay v Trustees Executors and Agency Co Ltd (1948) 77 CLR 321; [1949] VLR 309; [1949] ALR 105; BC4800390 ; Ellaway v Lawson [2006] QSC 170; BC200605353 . The paragraph below is current to 20 April 2012 [430-410] Trusts interfering with parent/child relationships A trust can be void as being contrary to public policy if it tends to operate against the proper performance of the duties of a parent in respect of a child by influencing a parent to make decisions based on the prospect of material gain (for the child) rather than on consideration of the childs welfare in other respects,1 or by imposing separation of parent and child with the tendency to have a prejudicial effect upon the child and upon the judgment that has to be exercised by the parent for its benefit.2 Notes 1 Re Borwick; Borwick v Borwick [1933] Ch 657; [1933] All ER Rep 737 (requirement that a child be or not be brought up in a specified religion) (followed Re Crane (decd) [1950] VLR 192; [1950] ALR 361 ; Perpetual Trustees Co v Hogg (1936) 36 SR (NSW) 61; 53 WN (NSW) 67 ; applied Re Cross; Law v Cross [1938] VLR 221; [1938] ALR 449 ); Re Tegg; Public Trustee v Bryant [1936] 2 All ER 878 (requirement that a child be or not be educated at a school affiliated with a specified religion). See also Blathwayt v Baron Cawley [1976] AC 397; [1975] 3 All ER 625 at 626; [1975] 3 WLR 684 , HL (even though such a stipulation may influence parental judgment, it will not necessarily be found to be contrary to public policy).2 Re Sandbrook; Noel v Sandbrook [1912] 2 Ch 471 ; Re Boulter; Capital and Counties Bank v Boulter [1922] 1 Ch 75; [1921] All ER Rep 167 (applied Re Bradley [1994] 2 Qd R 233; BC9404388 ). As to the irrelevance of the parents being already divorced when the trust takes effect see Re Piper; Dodd v Piper [1946] 2 All ER 503. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-415] Trusts for future ex-nuptial children Until affected by statute1 and other factors2 the long established rule of construction was that references to children would, in the absence of sufficient indication to the contrary, be treated as being only to legitimate children,3 and marriage would be regarded as the only criterion of paternity.4 Independently of those principles there has been a long-standing rule that, even where it is sufficiently clear that ex-nuptial children are being referred to or included, a trust, whether created by deed or by will, for future ex-nuptial children,5 would be void as being conducive to immorality6 and therefore contrary to public policy.7 Such a trust, if created by deed, would be void in respect of ex-nuptial children born after the date of the deed.8 Because, however, a will is revocable and does not become effective until the death of the testator, a trust created by will would not be void in so far as it is in favour of ex-nuptial children born between the date of the will and the death of the testator, provided that those children are so

described that they can be identified with certainty.9 The trust might also be valid in respect of an ex-nuptial child en ventre sa mere at the death of the testator, but would fail for uncertainty unless the child is identified solely by reference to its mother.10 In all Australian jurisdictions the rule has been abolished by statute,11 or by implication from statutory provisions relating to the interpretation of references to children or the basis for determining whether the parent and child relationship exists.12 Notes 1 See family law [205-1490], [205-1495], [205-1520]. See generally succession [395-6580].2 Harris v Ashdown (1985) 3 NSWLR 193 , CA(NSW). Compare Seidler v Schallhofer [1982] 2 NSWLR 80; (1982) 8 Fam LR 598 , CA(NSW).3 Dorin v Dorin (1875) LR 7 HL 568; [1874-80] All ER Rep 71 .4 Occleston v Fullalove (1874) LR 9 Ch App 147 at 164 per James LJ; Re Bolton; Brown v Bolton (1886) 31 Ch D 542 , CA; Re Shaw; Robinson v Shaw [1894] 2 Ch 573 ; Re Du Bochet; Mansell v Allen [1901] 2 Ch 441 . As to the matters which might be involved in proving the fact of paternity, but which the law does not permit to be inquired into, see Occleston v Fullalove (1874) LR 9 Ch App 147 at 163-4 per James LJ. An ex-nuptial child can, however, be sufficiently identified by reference to its mother: Re Hasties Trusts (1887) 35 Ch D 728 ; In the Estate of Frogley [1905] P 137; Re Loveland; Loveland v Loveland [1906] 1 Ch 542 .5 A child en ventre sa mere is, for this purpose, existing not future: Crook v Hill (1876) 3 Ch D 773 ; Ebbern v Fowler [1909] 1 Ch 578; [1908-10] All ER Rep 673 , CA. The time as at which it needs to be determined whether a child is existing in the case of an inter vivos settlement is the date when the deed becomes effective (Occleston v Fullalove (1874) LR 9 Ch App 147 at 162 per James LJ, at 171 per Mellish LJ, CA; Re Hasties Trusts (1887) 35 Ch D 728 at 734-5 per Stirling J; Ebbern v Fowler [1909] 1 Ch 578; [1908-10] All ER Rep 673 ) and in the case of a will is the date of death of the testator (Occleston v Fullalove (1874) LR 9 Ch App 147; Re Hasties Trusts (1887) 35 Ch D 728 ; Re Loveland; Loveland v Loveland [1906] 1 Ch 542 ).6 Not all provisions in respect of future ex-nuptial children will be held to be conducive to immorality: Re Wyld (1912) SALR 190.7 Blodwell v Edwards (1596) Cro Eliz 509; 78 ER 758 . See also Occleston v Fullalove (1874) LR 9 Ch App 147 at 171, 172 per Mellish LJ; Thompson v Thomas (1891) 27 LR Ir 457. See also Ebbern v Fowler [1909] 1 Ch 578; [1908-10] All ER Rep 673 , CA; Metham v Duke of Devon (1718) 1 P Wms 530; 24 ER 502; Medworth v Pope (1859) 27 Beav 71; 54 ER 28; Hill v Crook (1873) LR 6 HL 265; [1874-80] All ER Rep 62 ; Dorin v Dorin (1875) LR 7 HL 568; [1874-80] All ER Rep 71 ; Re Ayles Trusts (1875) 1 Ch D 282 ; Crook v Hill (1876) 3 Ch D 773 ; Re Bolton; Brown v Bolton (1886) 31 Ch D 542 , CA; Re Harrison; Harrison v Higson [1894] 1 Ch 561 ; Re Du Bochet; Mansell v Allen [1901] 2 Ch 441 .8 Blodwell v Edwards (1596) Cro Eliz 509; 78 ER 758 ; Thompson v Thomas (1891) 27 LR Ir 457. See also Ebbern v Fowler [1909] 1 Ch 578; [1908-10] All ER Rep 673 , CA.9 Occleston v Fullalove (1874) LR 9 Ch App 147, CA; Re Hasties Trusts (1887) 35 Ch D 728 ; In the Estate of Frogley [1905] P 137; Re Loveland; Loveland v Loveland [1906] 1 Ch 542 . The required certainty cannot be achieved by reference to paternity except where the child is referred to as the reputed child of the father. It seems that a child cannot be identified as a reputed child before it is born: Occleston v Fullalove (1874) LR 9 Ch App 147 at 158 per James LJ.10 Re Hasties Trusts (1887) 35 Ch D 728 ; In the Estate of Frogley [1905] P 137; Re Loveland; Loveland v Loveland [1906] 1 Ch 542 .11 (ACT) Parentage Act 2004 s 39(2) (NT) Status of Children Act 1978 s 4(2) (NSW) Status of Children Act 1996 s 6(4) (QLD) Status of Children Act 1978 s 6(2) (SA) Family Relationships Act 1975 s 6(2) (TAS) Status of Children Act 1974 s 3(2)

(VIC) Status of Children Act 1974 s 3(2) (WA) Wills Act 1970 s 30; (WA) Inheritance (Family and Dependants Provision) Act 1972 s 4 (definition of child); (WA) Property Law Act 1969 s 31A(7). See also succession [395-6580]. 12 See family law [205-1490], [205-1495], [205-1520]. The paragraph below is current to 20 April 2012 [430-420] Mixed illegal and legal objects Where a discretion to select between a range of objects, some legal and some illegal, is clearly conferred on the trustee,1 the trust is valid in respect of the legal objects, but exercise of the discretion in favour of any illegal object is invalid.2 Where a fund is given upon a non-discretionary trust for a mixture of legal and illegal objects, without the allocation between them being specified, the whole trust is invalid3 unless the amount applicable to the illegal objects is ascertainable, in which case the trust for the legal objects is valid in respect of the balance of the fund.4 Notes 1 Re Clark; Husband v Martin (1885) 54 LJ Ch 1080.2 Sorresby v Hollins (1740) 9 Mod Rep 221; 88 ER 410; Grimmett v Grimmett (1754) Amb 210; 27 ER 140; Faversham Corp v Ryder (1854) 5 De GM & G 350; 43 ER 905 ; London University v Yarrow (1857) 1 De G & J 72; 44 ER 649 ; Carter v Green (1857) 3 K & J 591; 69 ER 1245; Lewis v Allenby (1870) LR 10 Eq 668; Re Piercy; Whitham v Piercy [1898] 1 Ch 565 , CA (overruling both Johnston v Swann (1818) 3 Madd 457; 56 ER 573 and Baker v Sutton (1836) 1 Keen 224; 48 ER 292 so far as these cases are inconsistent with Lewis v Allenby (1870) LR 10 Eq 668). See also Edmunds v Pickering (1999) 75 SASR 407 at 566 per Lander J (affirmed Pickering v Smoothpool Nominees Pty Ltd (2001) 81 SASR 175 at 193-4; [2001] SASC 387; BC200107893 per Gray J , Full Court).3 Chapman v Brown (1801) 6 Ves 404; 31 ER 1115; Re Birkett (1878) 9 Ch D 576; [1874-80] All ER Rep 224 ; Re Mills Declaration of Trust [1950] 1 All ER 789 (affirmed Re Mills Declaration of Trust [1950] 2 All ER 292 , CA).4 Mitford v Reynolds (1842) 1 Ph 185; 41 ER 602 ; Fisk v A-G (1867) LR 4 Eq 521; Re Williams (1877) 5 Ch D 735 ; Re Birkett (1878) 9 Ch D 576; [1874-80] All ER Rep 224 . The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-425] Dispositions voidable for benefit of creditors Under legislation in each State and Territory, a trust, in so far as the trust property is derived from a disposition of property made with intent to defraud creditors of the settlor, is voidable at the instance of any party thereby prejudiced,1 unless it is a disposition to a purchaser in good faith without notice of the intent to defraud.2 It is not necessary for the operation of those provisions that the settlor be bankrupt. Under the (CTH) Bankruptcy Act 1966 (the Act), a transfer, made prior to the transferors bankruptcy, of property which would probably otherwise have been available to the transferors creditors, is voidable by the trustee in bankruptcy, subject to some exceptions, if the main purpose of the transferor was to prevent, hinder or delay the availability of that property for division amongst the transferors creditors.3 For the purposes of that provision a transfer of property includes the payment of money and is also defined in such a way as to be applicable to the making of a declaration of trust.4

Under section 120 of the Act, a transfer of property made in the period beginning five years before the commencement of the transferors bankruptcy and ending on the date of the bankruptcy, is voidable by the trustee in bankruptcy, subject to some exemptions, if the transferee gave no consideration for the transfer or gave consideration of less than the market value of the property.5 Such a transfer is not voidable if it took place more than two years (four years in the case of a transfer to a related entity of the transferor) before the commencement of the bankruptcy and the transferee proves that, at the time of the transfer, the transferor was solvent.6 For the purposes of this provision a transfer of property includes the payment of money and is also defined in such a way as to be applicable to the making of a declaration of trust.7 Where a transfer of property is made on or after the date which is subsequently identified as the date of the commencement of the transferors bankruptcy, then by virtue of the Act the title to the transferred property relates back so as to be vested in the trustee in bankruptcy as from the commencement of the bankruptcy.8 The subsequent occurrence of the bankruptcy therefore establishes that, at the time when the transfer was made the transferor had no title to the relevant property which he or she could pass to the transferee.9 Accordingly, where that transferee is the trustee of a trust or settlement, a purported subsequent transfer of the property by that trustee or by the beneficiaries of that trust or settlement will be ineffective even if the subsequent transferee takes as a purchaser in good faith and for valuable consideration.10 On the other hand, where the transfer to the trustee of the settlement was made before the commencement of the bankruptcy of the transferor, a purchaser in good faith and for valuable consideration from the trustee of the settlement or the beneficiaries could receive an effective title even if the purchase occurred after the commencement of the bankruptcy.11 Notes 1 (ACT) Civil Law (Property) Act 2006 s 239(1) (NT) Law of Property Act 2000 s 208(1) (NSW) Conveyancing Act 1919 s 37A(1) (QLD) Property Law Act 1974 s 228(1) (SA) Law of Property Act 1936 s 86(1) (TAS) Conveyancing and Law of Property Act 1884 s 40(1) (VIC) Property Law Act 1958 s 172(1) (WA) Property Law Act 1969 s 89(1). See bankruptcy [50-865]-[50-875]. 2 (ACT) Civil Law (Property) Act 2006 s 239(2) (NT) Law of Property Act 2000 s 208(3) (NSW) Conveyancing Act 1919 s 37A(3) (QLD) Property Law Act 1974 s 228(3) (SA) Law of Property Act 1936 s 86(2) (TAS) Conveyancing and Law of Property Act 1884 s 40(3)

(VIC) Property Law Act 1958 s 172(3) (WA) Property Law Act 1969 s 89(3). See bankruptcy [50-865]-[50-875]. 3 (CTH) Bankruptcy Act 1966 s 121. See also bankruptcy [50-325], [50-865]-[50-875].4 Ibid s 121(9).5 Ibid s 120. See also bankruptcy [50-325], [50-845]-[50-860].6 Ibid s 120(3). For this purpose, a rebuttable presumption arises that the transferor was insolvent at the time of the transfer if it is established that the transferor: (1) had not, in respect of that time, kept such books, accounts and records as are usual and proper in relation to the business carried on by the transferor and as sufficiently disclose the transferor's business transactions and financial position; or (2) having kept such books, accounts and records, has not preserved them: ibid s 120(3A). 7 Ibid s 120(7).8 Ibid ss 58, 115, 116. See also bankruptcy [50-810].9 Re Gunsbourg [1920] 2 KB 426 at 437-8; [1920] B & CR 50; (1920) 123 LT 353 per Lord Sterndale MR, CA.10 Re Gunsbourg [1920] 2 KB 426 at 446; [1920] B & CR 50; (1920) 123 LT 353 per Warrington LJ , CA.11 Re Hart; Ex parte Green [1912] 3 KB 6; (1912) 107 LT 368 . The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-430] Dispositions voidable for benefit of family members A court exercising jurisdiction in proceedings under the (CTH) Family Law Act 1975 (the Act) has the power to declare,1 and the power to alter,2 the rights and entitlements of beneficiaries under a trust. In any such proceedings the court also has power to set aside or restrain the making of an instrument or disposition made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.3 In proceedings under the Act the court may also make orders with respect to the application for the benefit of all or any of the parties to, and the children of, the marriage, of the whole or any part of the property dealt with by ante-nuptial or post-nuptial settlements made in relation to the marriage.4 There is legislation in each jurisdiction empowering the court to make orders overriding, in the interests of family members and dependants, the will of a testator and any trusts thereby established, or the statutory order of distribution of the estate of an intestate.5 Those powers are extensive but apply only in respect of property forming part of the deceaseds estate remaining after payment of debts and cannot, except in New South Wales, affect property disposed of by the deceased in such a way that the disposal takes effect prior to the death.6 The (NSW) Family Provision Act 1982 (repealed) (repealed by the (NSW) Succession Act 2006) introduced the concept of notional estate and conferred powers on the court which may result in the inclusion in the deceaseds estate for the purposes of that Act of a range of items which would not be included under the corresponding legislation of the other jurisdictions.7 Notes

1 (CTH) Family Law Act 1975 ss 78, 90SL. See family law [205-5010].2 Ibid ss 79, 90SM. See family law [205-5015].3 Ibid s 106B. See family law [205-5195].4 (CTH) Family Law Act 1975 s 85A. See family law [205-5205].5 (ACT) Family Provision Act 1969 (NT) Family Provision Act 1970 (NSW) Succession Act 2006 Ch 3 (QLD) Succession Act 1981 Pt 4 (SA) Inheritance (Family Provision) Act 1972 (TAS) Testators Family Maintenance Act 1912 (VIC) Administration and Probate Act 1958 Pt IV (WA) Inheritance (Family and Dependants Provision) Act 1972. As to family provision generally see succession [395-6500]-[395-7210]. 6 See succession [395-7190]-[395-7210].7 (NSW) Succession Act 2006 Pt 3.3. See succession [395-7205]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-435] Trusts infringing the rule against perpetuities Under the general law rule against remoteness of vesting, being the principal element in the rule against perpetuities, an interest in property created by way of a trust1 would be void unless it would be certain to vest,2 if at all, not later than 21 years after a relevant life or lives in being at the time of creation of the interest, plus a possible period of gestation.3 Except in South Australia, where that rule has been abolished, 4 it applies in all jurisdictions (but not to superannuation entities)5 but has been fundamentally modified by legislation.6 In those jurisdictions, the rule continues to apply unmodified to trusts taking effect prior to the respective dates specified in the relevant legislation.7 In South Australia the rule has been replaced by provisions giving the court power, if an interest in property has not vested 80 years after the disposition, to vary the terms of the disposition so that the interest vests immediately8 and power to vary the terms of a disposition of property so that interests that cannot vest, or are unlikely to vest, within 80 years after the disposition, will vest within that period.9 The statutory modifications to the rule against remoteness of vesting provide for a perpetuity period of 80 years from the date on which the disposition takes effect, which is mandatory in the Australian Capital Territory and New South Wales,10 but optional in the other jurisdictions.11 Other statutory modifications have introduced: (1) the wait and see principle which preserves the validity of a disposition until it becomes clear that the interest can only vest outside the applicable perpetuity period;12 (2) provision for the reduction of any age specified in an instrument to the extent necessary to

save a disposition from being void for remoteness;13 (3) provision for the exclusion from a class of beneficiaries of any persons being potential members of the class or unborn persons who at birth would become members or potential members of the class (a) in any case where their inclusion prevents the provision for reduction of age from operating to save a disposition from being void for remoteness,14 or (b) unless their exclusion would exhaust the class, in any other case where it is apparent or becomes apparent at a subsequent time that their inclusion would cause the distribution to be treated as void for remoteness.15 The modifying legislation also varies the rule against remoteness of vesting by providing that the creation of an interest which would not by itself be void for remoteness, will not be void by reason only that it is ulterior to and dependent upon an interest which is so void.16 The rule, sometimes referred to as the old rule against perpetuities,17 making void any further limitation of an interest in land, after a life interest to an unborn person, to the issue of that person, has been abolished by statute in all jurisdictions except the Australian Capital Territory and South Australia.18 Another element of the rule against perpetuities is the rule against perpetual trusts under which a trust for non-charitable purposes is void where the duration of the trust will or may exceed the perpetuity period19 or the trust property may be applied for the purposes of the trust after the end of the perpetuity period.20 At common law the applicable perpetuity period would be 21 years after life or lives in being at the creation of the trust or, if no such life were identified expressly or by implication in the instrument creating the trust then 21 years after the creation of the trust.21 However, in most jurisdictions statutory modifications authorise the application of the wait and see principle, which preserves the validity of the settlement until it becomes clear that the settlement must infringe the rule.22 Those statutory modifications also either impose a period of 80 years to the exclusion of the common law period23 or permit its selection as an alternative.24 It is uncertain whether the rule against perpetual trusts applies only to trusts for non-charitable purposes or extends to cases where the gift of income indefinitely is for the benefit of persons, including corporations which are not charities.25 Notes 1 As to the applicability of this principle to charitable trusts see charities [75-500]-[75-525].2 For the purposes of that rule vested means vested in interest not vested in possession: see, for example, Re Earl; Dobson v Earl [1948] NZLR 784 . See also perpetuities and accumulations [310-35].3 See generally perpetuities and accumulations [310-15].4 (SA) Law of Property Act 1936 s 61.5 (CTH) Superannuation Industry (Supervision) Act 1993 s 343. Absent such statutory intervention, the rule would impact upon superannuation funds: Air Jamaica Ltd v Charlton [1999] 1 WLR 1399 at 1408 , PC.6 (ACT) Perpetuities and Accumulations Act 1985 s 3 (in general affecting trusts taking effect on or after 19 December 1985)

(NT) Law of Property Act 2000 ss 4(2) (affecting settlements exercising, after commencement (1 August 1994), powers of appointment), 4(3) (wills executed before, but taking effect after, commencement), 184(1)-(3) (settlements taking effect before or after commencement) (NSW) Perpetuities Act 1984 s 4 (in general affecting settlements taking effect on or after 31 October 1984) (QLD) Property Law Act 1974 Pt 14, s 207 (in general affecting instruments taking effect on or after 1 December 1975); but see also (QLD) Perpetuities and Accumulations Act 1972 (repealed) s 18 (in general affecting instruments taking effect on or after 1 April 1973) (TAS) Perpetuities and Accumulations Act 1992 s 4 (in general affecting wills of persons dying on or after, and instruments executed on or after, 1 December 1992) (VIC) Perpetuities and Accumulations Act 1968 s 3 (in general affecting instruments, and dispositions made otherwise than by any instrument, on or after 10 December 1968) (WA) Property Law Act 1969 Pt XI, s 99 (in general affecting the wills of testators dying after, and other instruments executed after, 6 December 1962). 7 The applicable dates are those stated in note 6 above except that in the case of the (WA) Property Law Act 1969 the applicable date is 7 December 1962, not 6 December 1962.8 (SA) Law of Property Act 1936 s 62(1).9 Ibid s 62(2).10 (ACT) Perpetuities and Accumulations Act 1985 s 8 (NSW) Perpetuities Act 1984 s 7. 11 That is, a shorter period, or a life or lives in being plus 21 years, may be selected: (NT) Law of Property Act 2000 s 187 (if no perpetuity period is specified in the instrument affecting the disposition, the perpetuity period is 80 years) (QLD) Property Law Act 1974 s 209 (if there is no provision in the instrument specifying a perpetuity period or specifying a date on which the disposition must vest, then it appears, in the absence of any express provision in the statute, that the perpetuity period would be determined in accordance with the rule against perpetuities) (TAS) Perpetuities and Accumulations Act 1992 s 6 (if no period is specified in the instrument, the perpetuity period is to be determined by the rule against perpetuities) (VIC) Perpetuities and Accumulations Act 1968 s 5 (if there is no provision in the instrument specifying a perpetuity period or specifying a date on which the disposition must vest, then it appears, in the absence of any express provision in the statute, that the perpetuity period would be determined in accordance with the rule against perpetuities) (WA) Property Law Act 1969 s 101 (if no perpetuity period is specified in the instrument affecting the disposition, the perpetuity period is 80 years). 12 (ACT) Perpetuities and Accumulations Act 1985 s 9 (NT) Law of Property Act 2000 s 190 (NSW) Perpetuities Act 1984 s 8 (QLD) Property Law Act 1974 s 210 (see Nemesis Australia Pty Ltd v FCT (2005) 150 FCR 152; 225 ALR 576; [2005] FCA 1273; BC200506891 at [39]-[48] per Tamberlin J ; Yeomans v Yeomans [2006] 1 Qd R 390; [2005] QSC 85; BC200502239 at [22] per McMurdo J )

(TAS) Perpetuities and Accumulations Act 1992 s 6 (VIC) Perpetuities and Accumulations Act 1968 s 6 (WA) Property Law Act 1969 s 103. 13 (ACT) Perpetuities and Accumulations Act 1985 s 10(1) (NT) Law of Property Act 2000 ss 191(1)-(3), 192 (NSW) Perpetuities Act 1984 ss 9(1)-(3), 10 (QLD) Property Law Act 1974 s 213(1), 213(2) (TAS) Perpetuities and Accumulations Act 1992 s 11(1), 11(2) (VIC) Perpetuities and Accumulations Act 1968 s 9(1), 9(2) (WA) Property Law Act 1969 ss 105, 107(1). 14 (ACT) Perpetuities and Accumulations Act 1985 ss 10(3), 11 (NT) Law of Property Act 2000 ss 191(4), 192 (NSW) Perpetuities Act 1984 ss 9(4), 10 (QLD) Property Law Act 1974 s 213(4) (TAS) Perpetuities and Accumulations Act 1992 s 11(4) (VIC) Perpetuities and Accumulations Act 1968 s 9(4) (WA) Property Law Act 1969 ss 106, 107(2). 15 (ACT) Perpetuities and Accumulations Act 1985 s 10(3) (NT) Law of Property Act 2000 ss 191(4), 192 (NSW) Perpetuities Act 1984 ss 9(4), 10 (QLD) Property Law Act 1974 s 213(3) (TAS) Perpetuities and Accumulations Act 1992 s 11(3) (VIC) Perpetuities and Accumulations Act 1968 s 9(3) (WA) Property Law Act 1969 ss 106, 107(2). 16 (ACT) Perpetuities and Accumulations Act 1985 s 18 (NT) Law of Property Act 2000 s 199 (NSW) Perpetuities Act 1984 s 17 (QLD) Property Law Act 1974 s 215 (TAS) Perpetuities and Accumulations Act 1992 s 12 (VIC) Perpetuities and Accumulations Act 1968 s 11

(WA) Property Law Act 1969 s 109. 17 Also known as the rule in Whitby v Mitchell (1890) 44 Ch D 85; 62 LT 771 against double possibilities.18 (NT) Law of Property Act 2000 s 201 (NSW) Conveyancing Act 1919 s 23A (QLD) Property Law Act 1974 s 216 (TAS) Perpetuities and Accumulations Act 1992 s 21 (VIC) Perpetuities and Accumulations Act 1968 s 12 (WA) Property Law Act 1969 s 114. There are no equivalent provisions in the Australian Capital Territory and South Australia. 19 For the definition of the rule against perpetual trusts see: (ACT) Perpetuities and Accumulations Act 1985 s 2 (NT) Law of Property Act 2000 s 183(1). 20 For the description of the rule see: (QLD) Property Law Act 1974 s 221(1) (TAS) Perpetuities and Accumulations Act 1992 s 18(1) (VIC) Perpetuities and Accumulations Act 1968 s 18(1). 21 See Cadell v Palmer (1833) 1 Cl & Fin 372; 6 ER 956 , HL. See also perpetuities and accumulations [310-25], [310-45].22 (NT) Law of Property Act 2000 s 198(4) (NSW) Perpetuities Act 1984 s 16(3) (QLD) Property Law Act 1974 s 221(2) (TAS) Perpetuities and Accumulations Act 1992 s 18(2) (VIC) Perpetuities and Accumulations Act 1968 s 18(2). In the Australian Capital Territory, the (ACT) Perpetuities and Accumulations Act 1985 s 17(3) is to similar effect but applies only where the term of the trust is determined by reference to the occurrence or non-occurrence of a contingency or contingencies. In Western Australia, there is no express provision in (WA) Property Law Act 1969 Pt XI for modification of the rule against perpetual trusts by application of the wait and see principle (adopted by ibid s 103) and the terms of ibid s 103 leave substantial doubt as to whether they could apply in the circumstances in which that rule would operate. 23 (ACT) Perpetuities and Accumulations Act 1985 s 17(2) (NSW) Perpetuities Act 1984 s 16(2). 24 (NT) Law of Property Act 2000 ss 198(2), 198(3) (QLD) Property Law Act 1974 s 221(2) and as the rule

(TAS) Perpetuities and Accumulations Act 1992 s 18(2) (VIC) Perpetuities and Accumulations Act 1968 s 18(2). In Western Australia, there is no express provision in the (WA) Property Law Act 1969 making the alternative 80 year perpetuity period (provided for in ibid s 101) applicable in respect of perpetual trusts but ibid s 101 itself would appear to have that effect by providing that it is to apply in determining whether any limitation is invalid as infringing the rule against perpetuities. 25 In many cases that uncertainty would be of no significance because the rule of construction that a gift of income indefinitely (otherwise than for charitable purposes) constitutes also a gift of the capital would apply and the rule against perpetual trusts would be irrelevant. However, the question of the relevance of that rule would arise in those cases where the rule of construction is displaced by sufficient indications of the settlors or testators intention that the gift be a gift exclusively of the income. As to class gifts generally see perpetuities and accumulations [310145]-[310-190]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-440] Trusts for accumulation In all jurisdictions except South Australia, legislation1 provides that where property is disposed of in such a manner that the income may be, or is directed to be, accumulated wholly or in part, the power or direction to accumulate is valid if the disposition of the accumulated income is, or may be, valid, but not otherwise.2 The effect of those provisions is to limit the permissible accumulation period in relation to a trust to the period within which the interests under that trust must vest in order to satisfy the requirements of the applicable rule against perpetuities, as modified by statute.3 The current legislation in each of those jurisdictions provides that nothing in it is to affect any power of a person to terminate an accumulation,4 or any power of a court to maintain or advance out of accumulations, or any power of a trustee under any Act of that jurisdiction or under any instrument creating a trust or making a disposition.5 Earlier legislation applying in those jurisdictions6 has been abrogated or repealed7 and now applies only to trusts taking effect prior to the respective dates designated by the relevant replacement legislation.8 In South Australia, if a disposition provides for the accumulation, or partial accumulation, of income from property over a period that will or may terminate 80 years or more after the date of the disposition, the court may vary the terms of the disposition so that both capital and income will vest within 80 years from the date of the disposition.9 Notes 1 (ACT) Perpetuities and Accumulations Act 1985 s 3 (in general affecting trusts taking effect on or after 19 December 1985) (NT) Law of Property Act 2000 ss 4(2) (affecting settlements exercising, after that commencement (1 August 1994), powers of appointment), 4(3) (wills executed before, but taking effect after, that commencement), 184(1), 184(2), 184(3) (settlements taking effect before or after commencement) (NSW) Perpetuities Act 1984 ss 4, 19 (in general affecting settlements taking effect on or after 31 October 1984) (QLD) Property Law Act 1974 Pt 14, s 207 (in general affecting instruments taking effect on or after 1 December 1975); but see also (QLD) Perpetuities and Accumulations Act 1972

(repealed) s 18 (in general affecting instruments taking effect on or after 1 April 1973) (TAS) Perpetuities and Accumulations Act 1992 s 4 (in general affecting wills of persons dying on or after, and instruments executed on or after, 1 December 1992) (VIC) Perpetuities and Accumulations Act 1968 s 3 (in general affecting instruments, and dispositions made otherwise than by any instrument, on or after 10 December 1968) (WA) Property Law Act 1969 Pt XI, s 99 (in general affecting the wills of persons dying after, and other instruments executed after, 6 December 1962). 2 (ACT) Perpetuities and Accumulations Act 1985 s 19(1) (NT) Law of Property Act 2000 s 202(1) (NSW) Perpetuities Act 1984 s 18(1) (QLD) Property Law Act 1974 s 222(1) (TAS) Perpetuities and Accumulations Act 1992 s 22(1) (VIC) Perpetuities and Accumulations Act 1968 s 19(1) (WA) Property Law Act 1969 s 113(1). 3 See [430-435].4 For example, under the rule in Saunders v Vautier (1841) Cr & Ph 240; [183542] All ER Rep 58; (1841) 10 LJ Ch 354; 41 ER 482 . See [430-2515]. See also perpetuities and accumulations [310-300].5 (ACT) Perpetuities and Accumulations Act 1985 s 19(2) (NT) Law of Property Act 2000 s 202(2) (NSW) Perpetuities Act 1984 s 18(2) (QLD) Property Law Act 1974 s 222(2) (TAS) Perpetuities and Accumulations Act 1992 s 22(2) (VIC) Perpetuities and Accumulations Act 1968 s 19(2) (WA) Property Law Act 1969 s 113(2). 6 In the Australian Capital Territory, the Northern Territory, Queensland, Tasmania and Western Australia, the (IMP) Accumulations Act 1800 (39 & 40 Geo 3 c 98) (often referred to as the Thellusson Act as a result of the decision in Thellusson v Woodford (1799) 4 Ves 227; 31 ER 117 ) applied as an Imperial statute; provisions to similar effect were included in: (NSW) Conveyancing Act 1919 ss 31, 31A, 36 (repealed) (SA) Law of Property Act 1936 ss 60-62 (VIC) Property Law Act 1958 ss 164-166 (repealed). 7 (ACT) Perpetuities and Accumulations Act 1985 s 21 (repealed) (NT) Perpetuities Act 1994 (repealed) s 23 (NSW) Perpetuities Act 1984 s 19 (QLD) Perpetuities and Accumulations Act 1972 (repealed) s 18(3)

(TAS) Perpetuities and Accumulations Act 1992 s 27(1) (VIC) Perpetuities and Accumulations Act 1968 s 20 (WA) Property Law Act 1969 s 113. The corresponding provisions in (SA) Law of Property Act 1936 ss 60-62 have not been repealed. 8 The applicable dates and replacement legislation are those stated in note 1 above except that in the case of the (WA) Property Law Act 1969 the applicable date is 7 December 1962, not 6 December 1962.9 (SA) Law of Property Act 1936 s 62. The paragraph below is current to 20 April 2012 [430-445] Property put into anothers name for an illegal purpose Where X either transfers property to Y without consideration or pays for property which is purchased in the name of Y , with the intention that the beneficial ownership of the property must remain with, or vest in, X, that property is held by Y in trust for X. Even if that trust has not been constituted as an express trust,1 the circumstances will raise a presumption that a resulting trust exists,2 unless X is the husband or a parent3 of Y , or is in loco parentis to Y , in any of which cases there will be a presumption of a gift 4 to Y . Either of those presumptions is rebuttable by evidence of Xs actual intention. 5 If it was also the intention of X, whether or not shared with or known to Y , that either Ys apparent ownership of the property, or the concealment of Xs beneficial ownership, was to be used in association with or in furtherance of an illegal purpose, the trust will be tainted with illegality.6 Both at law and in equity a transaction, even though entered into for an illegal purpose, may have the effect of transferring or creating interests in property.7 That fact does not preclude the transferor from bringing an action to recover the property, but the basic principle is that no court will lend its aid to a person who founds his or her cause of action upon an immoral or an illegal act.8 There are specific exceptions9 to that principle such that a court will not refuse relief where: (1) the claimant was ignorant or mistaken as to the factual circumstances which render an agreement or arrangement illegal;10 (2) the statutory scheme rendering a contract or arrangement illegal was enacted for the benefit of a class of which the claimant is a member;11 (3) an illegal agreement or arrangement was induced by the defendants fraud, oppression or undue influence;12 or (4) the illegal purpose has not been wholly or partly carried into effect.13 Even if none of the specific exceptions applies, the consequence of the illegality of the trust will not necessarily be that the party claiming the beneficial ownership will be precluded from enforcing his or her rights: equity does not support an absolute proposition that the consequence of such illegality is that neither side may obtain relief, so that the matter lies where it falls.14 Furthermore, even the narrower proposition that illegality will preclude a claimant from recovering

the property if he or she needs to rely on the illegality in order to establish his or her claim does not apply to the enforcement of equitable rights.15 Accordingly, the enforceability of a trust affected by illegality does not depend on whether the claimant has the benefit of the presumption of a resulting trust (which could enable the claim to be established without evidence of the illegal purpose) or needs to rebut the presumption of advancement (which would probably not be possible without evidence of the illegal purpose).16 On the other hand, equity will not decide the matter on the basis of a broad judicial discretion to determine whether the granting of relief would affront the public conscience,17 but will apply principles calculated to avoid harsh extremes18 and disproportion between the seriousness of the illegality and the impact which the courts unwillingness to act would have upon the claimant.19 Where the illegality derives from contravention of public policy manifested by statute, the determination as to whether the claimants equitable rights will be recognised or enforced will require identification of the policy or scheme of the statute.20 If the statute discloses an intention to make the rights being claimed unenforceable, or to make unlawful an arrangement that defeats or evades the operation of the statute, there can be no enforceable resulting trust,21 but if such an intention is not disclosed22 the prima facie conclusion is that parliament intended the sanctions and remedies imposed by the statute to be sufficient to deter the conduct at which the statute is directed.23 On that basis the court should not refuse enforcement of the resulting trust unless refusal is essential for achievement of the policy or objects of the statute24 and may impose conditions to ensure that the demands of the underlying policy of the statute are satisfied.25 The impracticability in some instances of imposing appropriate conditions to adjust the claimants rights so as to avoid condoning the illegality may be a sufficient basis for declining to uphold and enforce the resulting trust.26 Notes 1 See [430-210]-[430-340].2 See [430-540].3 Nelson v Nelson (1995) 184 CLR 538; 132 ALR 133; 70 ALJR 47 . See also Brown v Brown (1993) 31 NSWLR 582 , CA(NSW).4 See [430555].5 See [430-550], [430-560].6 Haigh v Kaye (1872) LR 7 Ch App 469; 41 LJ Ch 567; Perpetual Executors and Trustees Assn of Australia Ltd v Wright (1917) 23 CLR 185; [1917] VLR 372; (1917) 23 ALR 177 ; Chettiar v Chettiar [1962] AC 294; [1962] 1 All ER 494; [1962] 2 WLR 548 , PC; Maurice v Lyons [1969] 1 NSWR 307; (1969) 13 FLR 475 ; Sykes v Stratton [1972] 1 NSWLR 145 ; Blackburn v YV Properties Pty Ltd [1980] VR 290; (1979) 44 LGRA 291 ; Tinsley v Milligan [1994] 1 AC 340; [1993] 3 All ER 65; [1993] 3 WLR 126 , HL; Tribe v Tribe [1996] Ch 107; [1995] 4 All ER 236; [1995] 3 WLR 913; (1996) ANZ ConvR 287 (Ext) , CA; Nelson v Nelson (1995) 184 CLR 538; 132 ALR 133; 70 ALJR 47 .7 Payne v McDonald (1908) 6 CLR 208 at 211; 14 ALR 366 per Griffith CJ; Perpetual Executors and Trustees Assn of Australia Ltd v Wright (1917) 23 CLR 185 at 193-4; [1917] VLR 372; (1917) 23 ALR 177 per Barton ACJ; Donaldson v Freeson (1934) 51 CLR 598 at 611 per Gavan Duffy CJ and Starke J, at 616-17 per McTiernan J; 34 SR (NSW) 336; 8 ALJ 65; [1934] ALR 250 ; Martin v Martin (1959) 110 CLR 297 at 305; 33 ALJR 362 . See also Symes v Hughes (1870) LR 9 Eq 475 at 479; 39 LJ Ch 304; 22 LT 462 ; Taylor v Bowers (1876) 1 QBD 291 at 295; [1874-86] All ER Rep 405 per Cockburn CJ ; Re Great Berlin Steamboat Co (1884) 26 Ch D 616 , CA; Tinsley v Milligan [1994] 1 AC 340 at 374; [1993] 3 All ER 65 at 89; [1993] 3 WLR 126 , HL; Tribe v Tribe [1996] Ch 107 at 124; [1995] 4 All ER 236 at 249, 250; [1995] 3 WLR 913 at 928; (1996) ANZ ConvR 287 (Ext) ; Nelson v Nelson (1995) 184 CLR 538 at 577; 132 ALR 133 at 164; 70 ALJR 47 per Dawson J .8 Holman v Johnson (1775) 1 Cowp 341 at 343; [1775-1802] All ER Rep 98; (1775) 98 ER 1120 at 1121 .9 Nelson v Nelson (1995) 184 CLR 538 at 604; 132 ALR 133 at 186; 70 ALJR 47 per McHugh J .10 Oom v Bruce (1810) 12 East 225; 104 ER 87 ; Cowan v Milbourn (1867) LR 2 Ex 230; 16 LT 290; Branigan v Saba [1924] NZLR 481 .11 Kiriri Cotton Co Ltd v Dewani [1960] AC 192; [1960] 1 All ER 177; [1960] 2 WLR 127 , PC. As to legislation being held to be directed to protection of the public generally and not to a particular class see South Australian Cold Stores Ltd v Electricity Trust of South Australia (1965) 115 CLR 247; [1966] ALR 685; (1965) 39 ALJR 332 .12 Clarke v Shee (1774) 1 Cowp 197; 98 ER 1041

; Smith v Cuff (1817) 6 M & S 160; 105 ER 1203 ; Williams v Bayley (1866) LR 1 HL 200; [1861-73] All ER Rep 227; (1866) 14 LT 802; Barclay v Pearson [1893] 2 Ch 154 at 167-8 ; Re Ferguson; Ex parte EN Thorne & Co Pty Ltd (in liq) [1970] ALR 177; (1969) 14 FLR 311 at 316 ; Goodfriend v Goodfriend [1972] SCR 640; (1971) 22 DLR (3d) 699 ; Weston v Beaufils (No 2) (1994) 50 FCR 476; 122 ALR 240 at 266 .13 Symes v Hughes (1870) LR 9 Eq 475; 39 LJ Ch 304; 22 LT 462 ; Taylor v Bowers (1876) 1 QBD 291; [1874-86] All ER Rep 405 ; Re Great Berlin Steamboat Co (1884) 26 Ch D 616 , CA; Hermann v Charlesworth [1905] 2 KB 123; (1905) 93 LT 284 , CA; Petherpermal Chetty v Muniandi Servai (1908) LR 35 Ind App 98; 24 TLR 462 , PC; Payne v McDonald (1908) 6 CLR 208; 14 ALR 366 ; Perpetual Executors and Trustees Assn of Australia Ltd v Wright (1917) 23 CLR 185; [1917] VLR 372; (1917) 23 ALR 177 ; Donaldson v Freeson (1934) 51 CLR 598 at 611 per Gavan Duffy CJ and Starke J, at 616-17 per McTiernan J; 34 SR (NSW) 336; 8 ALJ 65; [1934] ALR 250 ; Martin v Martin (1959) 110 CLR 297 at 305; 33 ALJR 362 ; Rowan v Dann (1991) 64 P & CR 202, CA; Tinsley v Milligan [1994] 1 AC 340 at 374; [1993] 3 All ER 65 at 89; [1993] 3 WLR 126 , HL; Tribe v Tribe [1996] Ch 107 at 124-7; [1995] 4 All ER 236 at 250-2; [1995] 3 WLR 913 at 931; (1996) ANZ ConvR 287 (Ext) ; Nelson v Nelson (1995) 184 CLR 538 at 577; 132 ALR 133 at 164; 70 ALJR 47 per Dawson J ; Leeson v Reichstein [2009] ACTSC 157; BC200910905 at [131], [132] per Harper M . It is a prerequisite for the application of this exception that the property claimed is still in existence in an identifiable form: Taylor v Bowers (1876) 1 QBD 291 at 295 per Cockburn CJ, at 300 per Mellish LJ; [1874-86] All ER Rep 405 ; Sykes v Stratton [1972] 1 NSWLR 145 .14 Nelson v Nelson (1995) 184 CLR 538 at 599 per Deane and Gummow JJ, at 608 per McHugh J; 132 ALR 133 at 149 per Deane and Gummow JJ, at 189 per McHugh J; 70 ALJR 47 .15 Nelson v Nelson (1995) 184 CLR 538 at 557-8 per Deane and Gummow JJ, at 608, 609 per McHugh J; 132 ALR 133 at 148 per Deane and Gummow JJ, at 189 per McHugh J; 70 ALJR 47 .16 Nelson v Nelson (1995) 184 CLR 538 at 557-9 per Deane and Gummow JJ, at 606-10 per McHugh J; 132 ALR 133 at 148-9 per Deane and Gummow JJ, at 187-91 per McHugh J; 70 ALJR 47 . As to the presumption of a resulting trust see [430-540] and as to the presumption of advancement see [430-555].17 Nelson v Nelson (1995) 184 CLR 538 at 611-12; 132 ALR 133 at 191-2; 70 ALJR 47 per McHugh J . For the approach favouring such a discretion see Tinsley v Milligan [1992] Ch 310 at 319, 320 per Nicholls LJ , CA. Compare as to contract law: Saunders v Edwards [1987] 2 All ER 651; [1987] 1 WLR 1116 , CA; Euro-Diam Ltd v Bathurst [1990] 1 QB 1; [1988] 2 All ER 23; [1988] 2 WLR 517 ; Howard v Shirlstar Container Transport Ltd [1990] 3 All ER 366; [1990] 1 WLR 1292 , CA. Compare as to tort law: Pitts v Hunt [1991] 1 QB 24; [1990] 3 All ER 344; [1990] 3 WLR 542 ; Brown v Dunsmuir [1994] 3 NZLR 485 . That approach was also rejected by both the majority and the minority in Tinsley v Milligan [1994] 1 AC 340; [1993] 3 All ER 65; [1993] 3 WLR 126 , HL.18 Nelson v Nelson (1995) 184 CLR 538 at 559 per Deane and Gummow JJ, at 612-13 per McHugh J; 132 ALR 133 at 149 per Deane and Gummow JJ, at 192-3 per McHugh J; 70 ALJR 47 .19 Nelson v Nelson (1995) 184 CLR 538 at 566-7 per Deane and Gummow JJ, at 612-13 per McHugh J; 132 ALR 133 at 155-6 per Deane and Gummow JJ, at 192 per McHugh J; 70 ALJR 47 . Compare Re Torrez 827 F 2d 1299 (1987) at 1301 (9th Cir).20 Nelson v Nelson (1995) 184 CLR 538 at 551-2 per Deane and Gummow JJ, at 613, 616 per McHugh J; 132 ALR 133 at 143-4 per Deane and Gummow JJ, at 193-5 per McHugh J; 70 ALJR 47 ; Koh v Chan (1997) 139 FLR 410 at 428-9 per Murray J , SC(WA). See also Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410; 21 ALR 585; 53 ALJR 1 ; Re Torrez 827 F 2d 1299 (1987) (9th Cir).21 Nelson v Nelson (1995) 184 CLR 538 at 564-5 per Deane and Gummow JJ, at 604 per McHugh J; 132 ALR 133 at 153-4 per Deane and Gummow JJ, at 185 per McHugh J; 70 ALJR 47 . See also Ex parte Yallop (1808) 15 Ves 60 at 66, 67; 33 ER 677 at 680 ; Ex parte Houghton (1810) 17 Ves 251; 34 ER 97 ; Garrett v LEstrange (1911) 13 CLR 430 at 435 ; Preston v Preston [1960] NZLR 385 at 404-5 ; Orr v Ford (1989) 167 CLR 316 at 328; 84 ALR 146; 63 ALJR 198 .22 Worthington v Curtis (1875) 1 Ch D 419 ; Re Torrez 827 F 2d 1299 (1987) at 1302 (9th Cir).23 Nelson v Nelson (1995) 184 CLR 538 at 564-7, 570-1 per Deane and Gummow JJ, at 616-18 per McHugh J; 132 ALR 133 at 154-6, 158-9 per Deane and Gummow JJ, at 194-6 per McHugh J; 70 ALJR 47 . See also Edmunds v Pickering (1999) 75 SASR 407 at 567 per Lander J (affirmed Pickering v Smoothpool Nominees Pty Ltd (2001) 81 SASR 175 at 197; [2001] SASC 387; BC200107893 per Gray J , Full Court); Ikeuchi v Liu (2001) 160 FLR 94 at 110; [2001] QSC

054; BC200100618 .24 Nelson v Nelson (1995) 184 CLR 538 at 616-17; 132 ALR 133 at 1956; 70 ALJR 47 per McHugh J .25 Nelson v Nelson (1995) 184 CLR 538 at 555-6, 571 per Deane and Gummow JJ, at 612-13 per McHugh J; 132 ALR 133 at 146, 159-60 per Deane and Gummow JJ, at 195-6 per McHugh J; 70 ALJR 47 .26 Nelson v Nelson (1995) 184 CLR 538 at 617; 132 ALR 133 at 196; 70 ALJR 47 per McHugh J . See also Chettiar v Chettiar [1962] AC 294; [1962] 1 All ER 494; [1962] 2 WLR 548 , PC.

Source

[Halsbury's Laws of Australia]

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(II) Automatic Resulting Trusts The paragraph below is current to 20 April 2012 [430-505] Circumstances in which automatic resulting trust may arise There are four principal circumstances in which an automatic resulting trust may arise: (1) where an express trust has failed;1 (2) where, in settling property on trust, the settlor fails to dispose of the entire beneficial interest;2 (3) where property is given on trust for a specific purpose which cannot be effected;3 and (4) where property given on trust for a certain purpose exceeds what is needed to fulfil that purpose.4 Notes 1 See [430-510].2 See [430-515].3 See [430-520].4 See [430-525]-[430-535].

The paragraph below is current to 20 April 2012 [430-510] Failure of express trust Upon the failure of an express trust, the appointed trustees hold the property the subject matter of the purported trust on resulting trust for the settlor, or, if the settlor is deceased, on resulting trust for the settlors personal representatives.1 Notwithstanding the presence of an intention to create a trust on behalf of the settlor,2 the express trust in question may fail because of uncertainty of subject matter,3 uncertainty of object, 4 illegality,5 incomplete constitution,6 non-compliance with statutory formalities7 or because the intended beneficiary dies prior to the trust taking effect8 or otherwise disclaims his or her beneficial interest.9 A resulting trust will not arise where an express trust which has failed is engrafted or imposed on an absolute gift, in which case, in the absence of contrary express provision in the instrument creating the express trust10 (most commonly a will), the absolute gift takes effect to the extent that the express trust has failed.11 It is necessary to look at the entirety of the terms of the express trust in order to ascertain whether or not the gift is absolute.12 This rule has been most commonly applied where the engrafted trust has been separated from the absolute gift, either by being placed in a separate clause or sentence, or by being introduced by words implying a contrast.13 If the settlor, by the trusts which follow the initial gift, has sought to provide for every eventuality by creating what are, prima facie, exhaustive trusts, it is more difficult to construe the initial gift as an absolute gift.14 Notes 1 Re Vandervells Trusts (No 2); White v Vandervell Trustees Ltd [1974] Ch 269 at 294; [1974] 3 All ER 205 per Megarry J .2 As to intention to create a trust see [430-240]-[430-257].3 As to uncertainty of subject matter see [430-265].4 As to uncertainty of objects see [430-280].5 As to trusts for illegal purposes see [430-380].6 As to the complete constitution of trusts see [430-300][430-315].7 As to statutory formalities for express trusts see [430-230].8 The beneficial interest in the trust property relating to a trust which purports to take effect after the death of its intended beneficiary results back to the settlor or his or her personal representatives, unless the terms of the trust indicate that beneficial ownership must be vested in the intended beneficiarys personal representatives: Mueller v Gair (1903) 29 VLR 263 at 267-9 per Hodges J . See further succession [395-465].9 Federal Commissioner of Taxation v Cornell (1946) 73 CLR 394 at 402; 20 ALJ 318 per Latham CJ . As to disclaimer by beneficiaries see [430-810].10 Russell v Perpetual Trustee Co Ltd (1956) 95 CLR 389 at 402-3; [1956] ALR 952 per Fullagar J (noting that the rule in Lassence v Tierney (1849) 1 Mac & G 551; 41 ER 1379 (see note 11 below) is only a rule of construction based on presumed intention and, as such, can be displaced by admissible evidence of actual intention).11 This is known as the rule in Lassence v Tierney (1849) 1 Mac & G 551; 41 ER 1379 . See Hancock v Watson [1902] AC 14 at 22; [1900-3] All ER Rep 87; [1901] WN 246 per Lord Davey ; Re Burtons Settlement Trusts; Public Trustee v Montefiore [1955] Ch 348 at 360 per Jenkins LJ , CA; Duncan v Cathels (1956) 98 CLR 625; 30 ALJ 649; [1956] ALR 1072 ; Re Atkinsons Will Trusts; Prescott v Child [1956] 3 All ER 738; Watson v Holland (Inspector of Taxes) [1985] 1 All ER 290 at 300 per Gibson J.12 Lassence v Tierney (1849) 1 Mac & G 551 at 562; 41 ER 1379 at 1383 per Lord Cottenham LC ; Hancock v Watson [1902] AC 14 at 22; [1900-3] All ER Rep 87; [1901] WN 246 per Lord Davey ; Russell v Perpetual Trustee Co Ltd (1956) 95 CLR 389 at 397; [1956] ALR 952 per Dixon CJ and Williams J .13 Such as, for example, a proviso or words such as but so that (Hancock v Watson [1902] AC 14; [1900-3] All ER Rep 87; [1901] WN 246 ; Attorney-General v Lloyds Bank Ltd [1935] AC 382 ; Re Litt; Parry v Cooper [1946] Ch 154 ) or subject as hereinafter provided (Russell v Perpetual Trustee Co Ltd (1956) 95 CLR 389; [1956] ALR 952 ). However, in an appropriate context the engrafted trusts may be introduced by the word and or the words and so that: Re Johnsons Settlement Trusts; McClure v Johnson [1943] Ch 341 ; Re Norton [1949] WN 23. Compare Duncan v Cathels (1956) 98 CLR 625 at 635; 30 ALJ 649; [1956] ALR 1072 per Fullagar J (gift in the first instance read as a gift subject only to such qualifications as do in fact follow and are in law capable of taking effect and in the absence of a qualification

capable of taking effect the initial gift takes effect without qualification).14 Lassence v Tierney (1849) 1 Mac & G 551 at 567; 41 ER 1379 at 1385 per Lord Cottenham LC ; Attorney-General v Lloyds Bank Ltd [1935] AC 382 at 395 per Lord Tomlin , HL. The paragraph below is current to 20 April 2012 [430-515] Failure to dispose of entire beneficial interest Where a settlor fails to dispose of the entire beneficial interest the subject of an express trust, the intended trustee holds the undisposed property on resulting trust for the settlor, or if the settlor is deceased, the settlors personal representatives.1 For example, where a man establishes a trust for the payment of an annuity to his widow for life but makes no provision in the trust instrument for the destination of the fund upon the widows death, the trustee of the express trust holds the remaining capital of the fund on resulting trust for the mans personal representatives.2 A resulting trust in this context does not arise where a contrary intention is expressed in or can be inferred from the terms of the disposition.3 Notes 1 Longley v Longley (1871) LR 13 Eq 133; Re Houston; Houston v Houston [1954] St R Qd 130 (transfer of land to A on trust without identifying the beneficial interest to be held on that land).2 Cunnack v Edwards [1896] 2 Ch 679 at 683 per AL Smith LJ .3 Cook v Hutchinson (1836) 1 Keen 42; 48 ER 222; Biddulph v Williams (1875) 1 Ch D 203 . The paragraph below is current to 20 April 2012 [430-520] Property given on trust for a specific purpose which cannot be effected Where money or property can be characterised as settled pursuant to an express trust for a specific purpose which cannot be effected because of the terms of the settlement, the beneficial interest in the trust money or property can be construed as being held by the intended trustee on resulting trust for the settlor, or if the settlor is deceased, the settlors personal representatives.1 This does not impact on the cy-prs doctrine, pursuant to which a court may apply money or property settled for a charitable purpose to another object as near as possible to the stated purpose where the money or property settled cannot, for specified reasons, effect the settlors original charitable purpose.2 Notes 1 Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669; [1996] 2 All ER 961 at 990; [1996] 2 WLR 802 per Lord Browne-Wilkinson , HL. The principal modern application of this principle is in the case of the insolvency of the intended trustee, where the settlor seeks priority in repayment ahead of the persons appointed as beneficiaries under the express trust: see [430-65].2 As to the cy-prs doctrine see charities [75-700]-[75-755]. The paragraph below is current to 20 April 2012 [430-525] Property given on trust exceeds that required to fulfil stated purpose The general principle is that where money or property is held upon an express trust, and the trust so declared does not exhaust the trust fund, the unexpended money or property will revert to the donor or settlor under a resulting trust.1 The reasoning for this is that it is presumed that the settlor or donor did not intend to part with his or her money or property absolutely but only to the extent that his or her wishes as declared by the declaration of trust are carried into effect.2 This form of resulting trust arises in two principal situations: (1) where the amount subscribed to a public appeal for donations for a specific purpose

exceeds that which is required for that purpose;3 and (2) where there is an undistributed surplus upon the dissolution of contributory fund.4 Notes 1 Re Gillingham Bus Disaster Fund; Bowman v Official Solicitor [1958] Ch 300 at 310; [1958] 1 All ER 37; [1957] 3 WLR 1069 per Harman J .2 Re Gillingham Bus Disaster Fund; Bowman v Official Solicitor [1958] Ch 300 at 310; [1958] 1 All ER 37; [1957] 3 WLR 1069 per Harman J .3 See [430-530].4 See [430-530]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-530] Surplus in public subscriptions Where the amount subscribed to a public appeal for donations for a specific purpose exceeds that which is required for that purpose, a resulting trust may operate pursuant to which the excess money is held on trust for the contributors in proportion to the quantum of each contributors contribution in respect of the entire fund.1 That the identification of the subscribers is difficult and time consuming is not of itself a bar to the existence of a resulting trust.2 No resulting trust in respect of a surplus in public subscriptions will arise in the following circumstances: (1) where the funds are subscribed for a charitable purpose,3 and it can be determined that the funds were provided with an overriding general charitable intention,4 this intention can be fulfilled by the surplus subscriptions to a purpose or purposes as near as possible (cyprs) to the original charitable purpose;5 (2) where statute dictates the destination of the excess subscriptions;6 (3) where it can be inferred from the evidence that the contributor intended to relinquish any right to the money subscribed,7 in which case the excess subscriptions pass to the Crown as ownerless goods (bona vacantia);8 or (4) where the rules of the subscription provide for the destination of any excess subscriptions.9 Notes 1 Re Trusts of the Abbott Fund; Smith v Abbott [1900] 2 Ch 326 (undistributed surplus of a fund established by subscription for the benefit of particular individuals held on resulting trust for the subscribers upon the death of its intended beneficiaries); Re British Red Cross Balkan Fund

[1914] 2 Ch 419 (unexpended funds raised through public subscription for assisting the sick and wounded in wartime held on resulting trust for the contributors at the conclusion of the war); Re Gillingham Bus Disaster Fund; Bowman v Official Solicitor [1958] Ch 300; [1958] 1 All ER 37; [1957] 3 WLR 1069 (unexpended funds from public subscription for memorial fund for marine cadets killed in road accident held on resulting trust for contributors); Re Hobourn Aero Components Ltds Air Raid Distress Fund; Ryan v Forrest [1946] Ch 194; [1946] 1 All ER 501 , CA; Re Ulverston and District New Hospital Building Trusts; Birkett v Barrow and Furness Hospital Management Committee [1956] Ch 622; [1956] 3 All ER 164; [1956] 3 WLR 559 ; Re West Sussex Constabularys Widows, Children and Benevolent (1930) Fund Trusts [1971] Ch 1 at 16; [1970] 1 All ER 544 per Goff J (donations, including legacies, given to fund established for the purpose of granting allowances to widows and dependants of deceased members of the constabulary, held on resulting trust for the donors or their estates on the winding up of the fund).2 Re Gillingham Bus Disaster Fund; Bowman v Official Solicitor [1958] Ch 300 at 314; [1958] 1 All ER 37; [1957] 3 WLR 1069 per Harman J .3 In this context, charitable purpose includes a noncharitable purpose that is validated pursuant to legislation which saves dispositions for mixed charitable and non-charitable purposes: Public Trustee v A-G (NSW) (1997) 42 NSWLR 600 . As to this legislation see charities [75-390]-[75-420]. As to charitable purposes see charities [7550]-[75-255].4 For the meaning of general charitable intention see charities [75-750].5 Re Buck; Bruty v Mackey [1896] 2 Ch 727; [1895-99] All ER Rep 366 ; Re Welsh Hospital (Netley) Fund; Thomas v A-G [1921] 1 Ch 655; [1921] All ER Rep 170 ; Re Hillier [1954] 2 All ER 59 , CA; Re Gillingham Bus Disaster Fund; Bowman v Official Solicitor [1958] Ch 300; [1958] 1 All ER 37; [1957] 3 WLR 1069 . As to the cy-prs doctrine see charities [75-700]-[75-755].6 A number of jurisdictions have passed specific legislation dealing with the application of surplus funds from public appeals: (NSW) Charitable Fundraising Act 1991 s 20 (although this is expressed not to prejudice the operation of any other law relating to the cy-prs application of trust money: ibid s 20(2)(b)) (QLD) Collections Act 1966 ss 3535D (SA) Collections for Charitable Purposes Act 1939 ss 16, 17 (WA) Charitable Collections Act 1946 ss 16, 17. The (VIC) Charities Act 1978 s 3 provides for distribution of the surplus cy-prs after advertisements and enquiries for the donors have been made. If the advertisement and enquiries are unsuccessful, there is a conclusive presumption that the property is given with a general charitable intention. The Tasmanian legislation provides likewise: (TAS) Variation of Trusts Act 1994 s 11. Specifically, in Tasmania and Victoria, the legislation provides that the proceeds of: (1) cash collections made by means not adapted for distinguishing one gift from another; and (2) any lottery, competition, entertainment, sale or similar money-raising activity, can be applied: (TAS) Variation of Trusts Act 1994 s 11(2) (VIC) Charities Act 1978 s 3(2). 7 Cunnack v Edwards [1896] 2 Ch 679 at 683 per A L Smith LJ (surplus in fund established by subscriptions to provide for widows of deceased members, on the death of the last widow, held

to be bona vacantia because it was never contemplated that the fund should come to an end, and, as such, the subscribers were presumed to have intended to abandon any interest in the subscription upon making the donation); Braithwaite v A-G [1909] 1 Ch 510 (surplus to be applied bona vacantia because subscribers held to have received all that they contracted for pursuant to the subscription); Re West Sussex Constabularys Widows, Children and Benevolent (1930) Fund Trusts [1971] Ch 1 at 11; [1970] 1 All ER 544 per Goff J (persons who contribute funds to a cause through raffles or sweepstakes presumed to have intended to have effected an unconditional gift); Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669; [1996] 2 All ER 961 at 991; [1996] 2 WLR 802 per Lord Browne-Wilkinson , HL. Compare Re Ulverston and District New Hospital Building Trusts; Birkett v Barrow and Furness Hospital Management Committee [1956] Ch 622 at 633; [1956] 3 All ER 164; [1956] 3 WLR 559 per Jenkins LJ (anonymous contributors generally presumed to have abandoned any interest in funds, except perhaps for contributors who, though anonymous, can prove a specific donation).8 Re Producers Defence Fund [1954] VLR 246; [1954] ALR 541 ; Beggs v Kirkpatrick [1961] VR 764 .9 Latimer v IRC [2002] 3 NZLR 195 at 212-13; (2002) 20 NZTC 17,737 per Blanchard J , CA. The rules of the fund may also provide evidence as to whether any excess is to be applied bona vacantia: Cunnack v Edwards [1896] 2 Ch 679 at 689 per Rigby LJ . The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-535] Undistributed surplus in dissolution of contributory fund Whether undistributed surpluses from the dissolution of contributory funds are the subject of a resulting trust will generally be determined by the rules of the association or body under which the fund was established.1 Where the funds constituting document makes provision for the destination of surplus funds, effect must be given to that provision.2 Where the trust deed makes no such provision, a presumption of resulting trust arises in favour of the contributors of the funds in question,3 which may be rebutted by express provision in the trust deed or by implication from the circumstances surrounding the trust deed.4 In this context, the presumption of resulting trust may be rebutted such that the surplus passes to the Crown as ownerless goods (bona vacantia) where, for example: (1) the trust deed does not permit distribution to the contributors to the fund (usually the company or its employees);5 (2) contributions to the fund were made pursuant to a contract under which the contributor has obtained all that he or she bargained for;6 or (3) the relevant legislative requirements governing the fund in question are inconsistent with imputing to the contributors an intention that any surplus is to be held for their benefit.7 In the context of superannuation trusts, legislation places controls on the destination of surplus funds.8 Notes

1 Re Sick and Funeral Society of St Johns Sunday School, Golcar [1973] Ch 51; [1972] 2 All ER 439 ; Rees v Dominion Insurance Co of Australia Ltd (in liq) (1981) 6 ACLR 71 at 78 per Waddell J , SC(NSW); Simes & Martin Pty Ltd (in liq) v Dupree (1990) 55 SASR 278 at 287 per Legoe J ; Re UEB Industries Ltd Pension Plan [1992] 1 NZLR 294 at 298 per Cooke P ; Amalgamated Metal Workers Union v Shell Refining (Aust) Pty Ltd (1993) 27 ATR 195 at 228, 249; 55 IR 385 per the Full Commission , AIRC; Thrells Ltd (in liq) v Lomas [1993] 2 All ER 546 .2 Re Sick and Funeral Society of St Johns Sunday School, Golcar [1973] Ch 51; [1972] 2 All ER 439 .3 Young v Curran (1909) 9 SR (NSW) 452; 26 WN (NSW) 94 ; Re Customs and Excise Officers Mutual Guarantee Fund; Robson v A-G [1917] 2 Ch 18; (1917) 116 LT 86 ; Jones v Williams (unreported, Knox J, 15 March 1988) at 17; Davis v Richards & Wallington Industries Ltd [1991] 2 All ER 563 at 592-3; [1990] 1 WLR 1511 per Scott J . Compare Re Courage Groups Pension Schemes; Ryan v Imperial Brewing and Leisure Ltd [1987] 1 All ER 528 at 545; [1987] 1 WLR 495 per Millett J , Ch D.4 Davis v Richards & Wallington Industries Ltd [1991] 2 All ER 563 at 592-3; [1990] 1 WLR 1511 per Scott J .5 Rees v Dominion Insurance Co of Australia Ltd (in liq) (1981) 6 ACLR 71 at 79 per Waddell J, SC(NSW). Compare Simes & Martin Pty Ltd (in liq) v Dupree (1990) 55 SASR 278 at 287 per Legoe J; Provincial Plasterers Benefit Trust Fund (Board of Trustees) v Provincial Plasterers Benefit Trust Fund (1990) 65 DLR (4th) 723 at 733 per Osborne J, HC(Ontario).6 Rees v Dominion Insurance Co of Australia Ltd (in liq) (1981) 6 ACLR 71 , SC(NSW) (contributions to the fund were made under contract under which the contributor had obtained all that he or she bargained for); Amalgamated Metal Workers Union v Shell Refining (Aust) Pty Ltd (1993) 27 ATR 195 at 228, 249; 55 IR 385 per the Full Commission , AIRC (employer/member interests in a fund must be recognised and given weight in any distributive balance). Compare Davis v Richards & Wallington Industries Ltd [1991] 2 All ER 563 at 593; [1990] 1 WLR 1511 per Scott J , Ch D.7 Davis v Richards & Wallington Industries Ltd [1991] 2 All ER 563 at 595; [1990] 1 WLR 1511 per Scott J .8 (CTH) Superannuation Industry (Supervision) Act 1993 s 117. See superannuation [400-865].

Source

[Halsbury's Laws of Australia]

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(III) Presumed Resulting Trusts The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations

[430-540] Circumstances in which presumed resulting trust may arise A presumption of resulting trust arises in favour of A where:1 (1) A voluntarily transfers property into the name of B or in their joint names, and B provides no consideration; or (2) A purchases property in the name of B or in their joint names. In this context, As equitable interest in the property under the resulting trust arises at the moment of the transfer or purchase.2 The presumption of resulting trust is rebuttable by evidence that B was intended to take a beneficial interest.3 No presumption of resulting trust arises if the relationship between A and B raises a presumption that the transfer or purchase was intended as a gift to B (the presumption of advancement).4 The presumption of resulting trust and the presumption of advancement do not limit the courts statutory power to alter property interests on the breakdown of relationships.5 Also, outside of the dissolution of a relationship (for example, for the purposes of insolvency or succession law), in the case of traditional matrimonial relationships, courts are reluctant to intervene through the doctrine of resulting trust to displace the incidents of parties registered title as joint tenants, at least in cases of long marriages.6 Although the presumption of resulting trust has been judicially criticised as being anachronistic and not reflective of modern societal practices,7 there are judicial statements to the effect that the presumption is too entrenched in the law to be easily discarded.8 Notes 1 Calverley v Green (1984) 155 CLR 242 at 246-7 per Gibbs CJ, at 266-7 per Deane J; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 ; Muschinski v Dodds (1985) 160 CLR 583 at 589-90; 62 ALR 429; BC8501051 per Gibbs CJ . See further Russell v Scott (1936) 55 CLR 440 at 449 per Starke J, at 451 per Dixon and Evatt JJ; [1936] ALR 375 ; Noack v Noack [1959] VR 137 at 139; [1959] ALR 389 at 391 per Dean J ; Napier v Public Trustee (WA) (1980) 32 ALR 153 at 158; 55 ALJR 1; 6 Fam LR 238 per Aickin J ; Brown v Wylie (1980) 6 Fam LR 519 at 523 per Powell J , SC(NSW); Bryson v Bryant (1992) 29 NSWLR 188 at 215 per Sheller JA, at 2267 per Samuels AJA; 16 Fam LR 112 , CA(NSW); Callaghan v Callaghan (1995) 64 SASR 396 at 404; BC9503167 per Perry J ; Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669; [1996] 2 All ER 961 at 990; [1996] 2 WLR 802 per Lord Browne-Wilkinson , HL; HCK China Investments Ltd v Solar Honest Ltd (1999) 165 ALR 680 at 727-8 per Hely J . As to the quantum of beneficial interest under a presumed resulting trust see [430-545].2 DKLR Holding Co (No 2) Pty Ltd v Cmr of Stamp Duties (NSW) (1982) 149 CLR 431 at 463-4; 40 ALR 1; [1982] HCA 14; BC8200057 per Aickin J ; Calverley v Green (1984) 155 CLR 242 at 252; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 per Gibbs CJ ; Bryson v Bryant (1992) 29 NSWLR 188 at 227; 16 Fam LR 112 per Samuels AJA , CA(NSW); Clark Drummie & Co v Ryan (1997) 146 DLR (4th) 311.3 Muschinski v Dodds (1985) 160 CLR 583 at 590; 62 ALR 429; BC8501051 per Gibbs CJ . As to the rebuttal of the presumption of resulting trust by evidence of contrary intention see [430-550].4 Muschinski v Dodds (1985) 160 CLR 583 at 590; 62 ALR 429; BC8501051 per Gibbs CJ . As to the presumption of advancement see [430-555]. It is unclear whether the presumption of resulting trust is rebutted or displaced by the presumption of advancement (see, for example, Dunbar v Dunbar [1909] 2 Ch 639 at 645 per Warrington J ; Calverley v Green (1984) 155 CLR 242 at 259; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 per Mason and Brennan JJ ; Westdeutsche Landesbank Girozentrale v Islington London Borough

Council [1996] AC 669; [1996] 2 All ER 961 at 990; [1996] 2 WLR 802 per Lord BrowneWilkinson , HL), or whether where there is a relationship which gives rise to the presumption of advancement, no presumption of resulting trust arises unless the presumption of advancement is rebutted (Napier v Public Trustee (WA) (1980) 32 ALR 153 at 158; 55 ALJR 1; 6 Fam LR 238 per Aicken J ; Calverley v Green (1984) 155 CLR 242 at 246 per Gibbs CJ, at 268 per Deane J; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 ; Muschinski v Dodds (1985) 160 CLR 583 at 589-90; 62 ALR 429; BC8501051 per Gibbs CJ ; Nelson v Nelson (1995) 184 CLR 538; 132 ALR 133 at 140; 70 ALJR 47 per Deane and Gummow JJ ). Compare Brown v Brown (1993) 31 NSWLR 582 at 589-90 per Gleeson CJ. As to the rebuttal of the presumption of advancement see [430560].5 These powers are conferred by (CTH) Family Law Act 1975 ss 79 (breakdown of marriage), 90SM (breakdown of de facto relationships). The absence of a referral of power to the Commonwealth as to de facto relationships in this context by South Australia and Western Australia dictates that the State legislation governing property allocation upon the breakdown of de facto relationships continues exclusive operation in these jurisdictions: (SA) Domestic Partners Property Act 1996 s 11 (WA) Family Court Act 1997 s 205ZG. See family law [205-6205]-[205-6350]. 6 Trustees of the Property of Cummins (a bankrupt) v Cummins (2006) 227 CLR 278; 224 ALR 280; [2006] HCA 6; BC200600981 , Full Court.7 Calverley v Green (1984) 155 CLR 242 at 264-5 per Murphy J, at 266, 270 per Deane J; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 ; Dullow v Dullow (1985) 3 NSWLR 531 at 535-6 per Hope JA, CA(NSW); Stivactas v Michaletos (No 2) (1993) NSW ConvR 55-683; Nelson v Nelson (1995) 184 CLR 538; 132 ALR 133 at 183-4; 70 ALJR 47 per McHugh J .8 Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 364; 30 ALJ 273; BC5600370 per Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ ; Calverley v Green (1984) 155 CLR 242 at 266; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 per Deane J ; Nelson v Nelson (1995) 184 CLR 538; 132 ALR 133 at 141 per Deane and Gummow JJ, at 169 per Toohey J; 70 ALJR 47 . The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-545] Quantum of beneficial interest under resulting trust The quantum of a persons beneficial interest under a resulting trust arising out of the purchase of property corresponds to that persons direct financial contribution to the purchase price as a proportion of the total purchase price of the property in question.1 For example, where two or more purchasers contribute to the purchase price of property which is conveyed to them as joint tenants, it is presumed that they hold the legal estate in trust for themselves as tenants in common in shares proportionate to their direct financial contributions2 (unless those contributions are equal, in which case, other than in New South Wales and Queensland,3 the purchasers are presumed to hold the beneficial interest as joint tenants).4 Any other contribution to the property or the relationship between the parties will not alter the quantum of the respective interests under a resulting trust,5 although it may, in an appropriate case, either influence the quantum of beneficial interests under a constructive trust,6 entitle a contributor to an equitable charge,7 or form the basis for an estoppel.8 For the purposes of determining beneficial interests under a resulting trust, the incurring of a legal liability to pay the purchase price, for example, by assuming liability under a mortgage taken out for the purchase of the property in question, constitutes a direct financial contribution to the

purchase price of the property.9 However, mortgage repayments are not, for this purpose, taken to be direct financial contributions to the purchase price of the property financed by the mortgage.10 Nor can money expended on improvements to the property alter the beneficial interest of contributors under a resulting trust.11 The preponderance of authority indicates that direct contributions to purchase price in this context include incidental costs of acquisition.12 For the purposes of identifying and quantifying contributions, precise accounting may not necessarily be required, and may on occasion justify a broad brush estimate to ensure that the onus of proof does not itself become an instrument of injustice.13 However, it remains necessary for the court to be in a position of being persuaded that, at the least, a certain amount of contributions were made by one particular party, and to be satisfied as to how those contributions relate to the contributions made by the other party.14 Notes 1 Calverley v Green (1984) 155 CLR 242 at 246 per Gibbs CJ, at 258 per Mason and Brennan JJ; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 ; Jenkins v Wynen [1992] 1 Qd R 40 at 46 per McPherson SPJ ; National Australia Bank Ltd v Maher [1995] 1 VR 318 at 321 per Fullagar J , CA(VIC).2 Calverley v Green (1984) 155 CLR 242 at 246 per Gibbs CJ, at 258 per Mason and Brennan JJ, at 266 per Deane J; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 . See also Keech v Keech (1938) 55 WN (NSW) 150 ; Ingram v Ingram [1941] VLR 95; [1941] ALR 120 ; Ward v Ward [1958] VR 68; [1958] ALR 216 ; Vedejs v Public Trustee [1985] VR 569 at 574-5 per Nicholson J; Stephenson Nominees Pty Ltd v Official Receiver on behalf of Official Trustee in Bankruptcy; Ex parte Roberts (1987) 16 FCR 536; 76 ALR 485 at 501 per Gummow J; Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449; 82 ALR 530 at 554 per Beaumont J ; Shepherd v Doolan [2005] NSWSC 42; BC200505692 at [20]-[29] per White J .3 In New South Wales and Queensland legislation provides that such purchasers will hold the beneficial interest as tenants in common: (NSW) Conveyancing Act 1919 s 26 (see Delehunt v Carmody (1986) 161 CLR 464 at 472; 68 ALR 253; 61 ALJR 54 per Gibbs CJ ) (QLD) Property Law Act 1974 s 35. 4 Notwithstanding equitys traditional tendency to favour the tenancy in common, in this context equity followed the law: Delehunt v Carmody (1986) 161 CLR 464 at 470-2; 68 ALR 253; 61 ALJR 54 per Gibbs CJ . See also Vedejs v Public Trustee [1985] VR 569 at 575 per Nicholson J.5 But see Midland Bank v Cooke [1995] 4 All ER 562 at 574 per Waite LJ ; Tracy v Bifield (1998) 23 Fam LR 260 at 265 per Tempelman J ; Thornton v Hyde (2004) 32 Fam LR 71; [2004] NSWSC 125; BC200400841 at [13]-[16] per Burchett AJ .6 Calverley v Green (1984) 155 CLR 242 at 263 per Mason and Brennan JJ; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 ; Bryson v Bryant (1992) 29 NSWLR 188 at 219 per Sheller JA, at 227 per Samuels AJA; 16 Fam LR 112 , CA(NSW); Anson v Anson (2004) 12 BPR 22,303; [2004] NSWSC 766; BC200406099 at [37] per Campbell J ; Silvester v Sands [2004] WASC 266; BC200408675 at [106]-[110] per Heenan J ; Sivritas v Sivritas [2008] VSC 374; BC200808514 at [127] per Kyrou J; Australian Building & Technical Solutions Pty Ltd v Boumelhem [2009] NSWSC 460; BC200904847 at [109] per Ward J. Compare Tracy v Bifield (1998) 23 Fam LR 260 at 263 per Tempelman J, SC(WA) . As to constructive trusts see [430-565]-[430-675].7 See [430-650].8 See [430-650].9 Calverley v Green (1984) 155 CLR 242 at 251-2 per Gibbs CJ, at 257-8 per Mason and Brennan JJ, at 267-8 per Deane J; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 ; Daniels v Purcell (2005) 2 DCLR (NSW) 61 .10 Calverley v Green (1984) 155 CLR 242 at 257; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 per Mason and Brennan JJ (purchase price is what is paid in order to acquire the property whereas mortgage instalments are paid to the lender of some or all of the purchase), at 267-8 per Deane J. Compare Bloch v Bloch (1981) 180 CLR 390; 37 ALR 55; 55 ALJR 701 (where the intention of the parties is to acquire the title to the land free of mortgage rather than subject to mortgage, the beneficial interests of the parties are

determined by including subsequent mortgage repayments); Bertei v Feher [2000] WASCA 165; BC200003406 at [43], [44] per Wheeler J (who suggested that if: (1) finance is raised that is plainly intended as bridging finance, it is artificial to say that it is the money raised under the mortgage for which, temporarily, both parties may be liable, rather than what is intended to be the ultimate source of funding (say, money from the sale of one partys home) which constitutes the payment of the purchase price; or (2) a relative of one of the parties provides the whole or some of the purchase price as a short term measure until that party is able to obtain funds from, for example, access to a fixed term investment, it seems incorrect to regard that relative as the person making the contribution to the purchase price; leading her Honour to opine that it may be that evidence of the purpose of the mortgage and the expectation which the parties have had about its early discharge from the means of one of them may affect the [legal] position); Chao v Chao (No 3) [2008] NSWSC 1166; BC200809712 at [23] per Brereton J; Sivritas v Sivritas [2008] VSC 374; BC200808514 at [161] per Kyrou J (who was willing to construe a housing commission terms contract as giving rise to two acquisitions, the second when the legal title is transferred to the purchaser, to which the resulting trust presumption could apply); Barrett v Barrett [2008] BPIR 817; [2009] WTLR 201; [2008] EWHC 1061 (Ch) at [24] per David Richards J (who remarked that contributions may be intended to confer a beneficial interest on the payer if they are referable to an agreement or arrangement made at the time of purchase that the payer should be responsible for the mortgage instalments either on terms that he should have a commensurate beneficial interest or in circumstances from which such an intention can be inferred). Mortgage repayments are, however, relevant for the purposes of equitable accounting between the parties: Calverley v Green (1984) 155 CLR 242 at 253 per Gibbs CJ, at 263 per Mason and Brennan JJ; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 . As to equitable accounting see equity [185-1630]. See also Stack v Dowden [2007] 2 AC 432; [2007] 2 All ER 929; [2007] 2 WLR 831; [2007] UKHL 17 at [34] per Walker LJ (Now that almost all houses and flats are bought with mortgage finance, and the average period of ownership of a residence is a great deal shorter than the contractual term of the mortgage secured on it, the process of buying a house does very often continue, in a real sense, throughout the period of its ownership. The law should recognise that by taking a wide view of what is capable of counting as a contribution towards the acquisition of a residence, while remaining sceptical of the value of alleged improvements that are really insignificant, or elaborate arguments (suggestive of creative accounting) as to how the family finances were arranged).11 Robinson v Robinson [1961] WAR 56 ; Pettitt v Pettitt [1970] AC 777; [1969] 2 All ER 385 , HL; Shepherd v Doolan [2005] NSWSC 42; BC200505692 at [29] per White J ; Scott v Scott [2009] NSWSC 567; BC200905702 at [43] per Ward J .12 Currie v Hamilton [1984] 1 NSWLR 687 at 691 per McLelland J ; Atilgan v Atilgan (unreported, SC(NSW), Austin J, 28 April 1999, BC9902055) at [111]; Black Uhlans Inc v New South Wales Crime Commission (2002) 12 BPR 22,421; [2002] NSWSC 1060; BC200206756 at [144] ; Ryan v Dries (2002) 10 BPR 19,497 at [53]; (2003) ANZ ConvR 47 at 52; [2002] NSWCA 3; BC200200137 per Hodgson JA ; Silvester v Sands [2004] WASC 266; BC200408675 at [40], [41] per Heenan J ; Martech Energy Systems Pty Ltd (in liq) v Bell [2005] VSC 198; BC200505064 at [8] per Hollingworth J ; Chao v Chao (No 3) [2008] NSWSC 1166; BC200809712 at [22] per Brereton J ; Anderson v McPherson (No 2) [2012] WASC 19; BC201200151 at [117] per Edelman J. Compare Little v Little (1988) 15 NSWLR 43 (the purchase price, not the incidental costs, fees, disbursements or the aggregate cost of acquisition, is the relevant amount); Pham v Doan (2005) 63 NSWLR 370; [2005] NSWSC 601; BC200504640 at [7] per Barrett J ; Sivritas v Sivritas [2008] VSC 374; BC200808514 at [126] per Kyrou J .13 Cetojevic v Cetojevic [2006] NSWSC 431; BC200603290 at [36] per Campbell J (affirmed Cetojevic v Cetojevic [2007] NSWCA 33; BC200701029 ).14 Cetojevic v Cetojevic [2006] NSWSC 431; BC200603290 at [36] per Campbell J (affirmed Cetojevic v Cetojevic [2007] NSWCA 33; BC200701029 ). The paragraph below is current to 20 April 2012 [430-550] Rebuttal of presumption of resulting trust by evidence of contrary intention The court will not give effect to a presumption of resulting trust if this is inconsistent with the true intention of the persons upon whose presumed purpose it must depend.1 Hence, the presumption of resulting trust may be rebutted by evidence that, in making a direct financial contribution to the

of resulting trust may be rebutted by evidence that, in making a direct financial contribution to the purchase price of property put into the name of another (or in joint names), a person (A) intended that the other (B) should take a beneficial interest.2 If both A and B have so contributed to the purchase price of the property, the intentions of both are material.3 The evidence admissible to establish this intention comprises the acts and declarations of the parties before or at the time of the purchase, or so immediately thereafter as to constitute a part of the transaction.4 Subsequent declarations are admissible only as evidence against the party who made them.5 Although this will commonly require the court to make reasonable inferences from the facts, the court cannot impute to the parties an intention that they did not have.6 Admissible evidence of an intention to gift or loan the property in question will rebut the presumption of resulting trust in relation to that property.7 The testimony of an agent of the parties involved in the purchase transaction may be relevant for this purpose.8 The presumption of resulting trust will also be rebutted by clear evidence of an intention to create an express trust,9 an express agreement inconsistent with the operation of the presumption,10 or documentary evidence that the transferor intended to divest himself or herself of the beneficial interest in the property.11 Proof of a promise amounting to consideration in respect of the property purchased or transferred may further serve to rebut the presumption.12 Although a party is not, as a general rule, permitted to rely upon his or her own fraud or illegality in order to rebut the presumption of resulting trust,13 this rule is not so rigid as to apply without exception.14 The presumption of resulting trust may be rebutted in part15 or conditionally.16 For example, the admissible evidence may show an intention for a resulting trust to operate until the occurrence of a specified event (such as the death of the transferor, or the transferee) in which case the property must be dealt with pursuant to the express or inferred intention.17 Notes 1 Russell v Scott (1936) 55 CLR 440 at 453-5; [1936] ALR 375 per Dixon and Evatt JJ ; Kauter v Hilton (1953) 90 CLR 86; 27 ALJ 714 ; Palmer v Bank of New South Wales (1975) 133 CLR 150; 7 ALR 671; 50 ALJR 320 ; Public Trustee v Gray-Masters [1977] VR 154 ; Napier v Public Trustee (WA) (1980) 32 ALR 153 at 154-5; 55 ALJR 1; 6 Fam LR 238 per Gibbs CJ; Brown v Wylie (1980) 6 Fam LR 519 at 523 per Powell J (where an express intention be found, there seems to be no room for the operation of the presumed intention which is the basis of cases dealing with a resulting trust); Calverley v Green (1984) 155 CLR 242 at 269; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 per Deane J ; Muschinski v Dodds (1985) 160 CLR 583 at 590 per Gibbs CJ, at 612 per Deane J; 62 ALR 429; BC8501051 ; Bryson v Bryant (1992) 29 NSWLR 188 at 215-16 per Sheller JA, at 227 per Samuels AJA; 16 Fam LR 112 , CA(NSW); Callaghan v Callaghan (1995) 64 SASR 396 at 405; BC9503167 per Perry J; Sorna Pty Ltd v Flint (2000) 21 WAR 563 at 574-5; [2000] WASCA 22; BC200000347 per Murray J ; Sillett v Meek [2009] WTLR 1065; [2007] EWHC 1169 (Ch) at [33]-[35] per Mr Michael Furness QC.2 Stewart Dawson and Co (Victoria) Pty Ltd v FCT (1933) 48 CLR 683 at 689-91 per Dixon J ; Carkeek v Tate-Jones [1971] VR 691 at 695-6 per McInerney J ; McMahon v McMahon [1979] VR 239 ; Muschinski v Dodds (1985) 160 CLR 583 at 590; 62 ALR 429; BC8501051 per Gibbs CJ ; Dullow v Dullow (1985) 3 NSWLR 531 ; Carville v Westbury (1990) 102 FLR 223 ; Killen v Rennie (2003) 48 ACSR 483; [2003] NSWSC 1154; BC200307586 at [16]-[22] per Austin J (reversed on another point Killen v Rennie [2005] NSWCA 392; BC200509758 ).3 Calverley v Green (1984) 155 CLR 242 at 251 per Gibbs CJ, at 258, 261 per Mason and Brennan JJ; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 ; Muschinski v Dodds (1985) 160 CLR 583 at 590; 62 ALR 429; BC8501051 per Gibbs CJ ; Miller v Dudman (2002) DFC 95-256; [2002] WASC 99; BC200202068 at [80] per Hasluck J; Neilson v Letch (No 2) [2006] NSWCA 254; BC200607595 at [30]-[38]per Mason P, with whom McColl and Basten JJA concurred ; Scott v Scott [2009] NSWSC 567; BC200905702 at [54], [55] per Ward J .4 Shephard v

Cartwright [1955] AC 431 at 445; [1954] 3 All ER 649 per Viscount Simonds , HL; Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 365; 30 ALJ 273; BC5600370 per Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ ; Pearson v Pearson [1961] VR 693 at 701 per Gavan Duffy, Sholl and Adam JJ ; Brophy v Brophy (1974) 3 ACTR 57 at 60 per Fox J , SC(ACT); Public Trustee v Gray-Masters [1977] VR 154 ; Chapman v Quinlan (1980) FLC 90836; Marcucci v Burns (1984) 9 Fam LR 599 ; Calverley v Green (1984) 155 CLR 242 at 251 per Gibbs CJ, at 262 per Mason and Brennan JJ, at 269-70 per Deane J; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 ; Muschinski v Dodds (1985) 160 CLR 583 at 590 per Gibbs CJ, at 612-13 per Deane J; 62 ALR 429; BC8501051 ; Bryson v Bryant (1992) 29 NSWLR 188 at 215; 16 Fam LR 112 per Sheller JA , CA(NSW); Kokotovich Constructions Pty Ltd v Wallington (1995) 17 ACSR 478 at 485; 13 ACLC 1113 per Kirby ACJ . Compare Little v Saunders [2004] NSWSC 655; BC200404771 at [32] per Campbell J . This restrictive rule has been relaxed in Canada: Pecore v Pecore (2007) 279 DLR (4th) 513, SC(Canada).5 Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 365; 30 ALJ 273; BC5600370 per Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ ; Glynn v Cmr of Stamp Duties [1977] 2 NSWLR 673 at 680 per Reynolds JA , CA(NSW); Muschinski v Dodds (1985) 160 CLR 583 at 590; 62 ALR 429; BC8501051 per Gibbs CJ ; Bryson v Bryant (1992) 29 NSWLR 188 at 215; 16 Fam LR 112 per Sheller JA , CA(NSW); Black Uhlans Inc v New South Wales Crime Commission (2002) 12 BPR 22,421; [2002] NSWSC 1060; BC200206756 at [138] per Campbell J .6 Brophy v Brophy (1974) 3 ACTR 57 at 60 per Fox J , SC(ACT); Allen v Snyder [1977] 2 NSWLR 685 at 694; (1979) FLC 90-656 per Glass JA , CA(NSW); Calverley v Green (1984) 155 CLR 242 at 2612; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 per Mason and Brennan JJ ; Bryson v Bryant (1992) 29 NSWLR 188 at 216; 16 Fam LR 112 per Sheller JA , CA(NSW); National Australia Bank Ltd v Maher [1995] 1 VR 318 at 321 per Fullagar J , CA(VIC).7 Re Hampton [1922] SASR 286 ; National Trustees, Executors & Agency Co of Australasia Ltd v Fenn [1924] SASR 470 ; Russell v Scott (1936) 55 CLR 440; [1936] ALR 375 ; Public Trustee v Gray-Masters [1977] VR 154 ; Brown v Wylie (1980) 6 Fam LR 519 at 523 per Powell J , SC(NSW); Yard v Yardoo Pty Ltd [2007] VSCA 35; BC200701544 at [76] per Nettle JA .8 Muschinski v Dodds (1985) 160 CLR 583 at 591-3 per Gibbs CJ, at 598-9 per Mason J, at 611-12 per Deane J; 62 ALR 429; BC8501051 (where the testimony of both a solicitor involved in the purchase and the parties themselves led the court to conclude that one party intended to confer an immediate and unconditional beneficial interest on the other party).9 Compare Crampton-Smith v CramptonSmith [2012] 1 NZLR 5; [2011] NZCA 308 at [44] per Randerson J (remarking that where there is evidence of an actual intention to create a trust, then there is generally no need to rely on any presumed intention and vice versa, but that in a case where the presumed intention coincides with the actual intention of the party contributing the funds, then, in our view, each may be considered as supporting the other).10 Gough v Fraser [1977] 1 NZLR 279 at 283 per Richmond P; Knezevic v Knezevic (1986) 3 BPR 9505 ; Brennan v Duncan [2006] NSWSC 674; BC200605590 at [22]-[30] per White J ; Sivritas v Sivritas [2008] VSC 374; BC200808514 at [147], [148] per Kyrou J.11 Valoutin Pty Ltd v Furst (1998) 154 ALR 119 at 132 per Finkelstein J .12 Re Bulankoff [1986] 1 Qd R 366 (promise to help work on a farm excluded the operation of the presumption of resulting trust in relation to the farm). See also Luke v Waite (1905) 2 CLR 252; 11 ALR 107 ; House v Caffyn [1922] VLR 67 per Cussen J ; Newcastle City Council v Kern Land Pty Ltd (1997) 42 NSWLR 273 at 280 per Windeyer J ; Valoutin Pty Ltd v Furst (1998) 154 ALR 119 at 132 per Finkelstein J .13 Tinsley v Milligan [1994] 1 AC 340; [1993] 3 All ER 65 at 82; [1993] 3 WLR 126 per Lord Jauncey , HL; Weston v Beaufils (No 2) (1994) 50 FCR 476; 122 ALR 240 at 261-6 per Hill J .14 The flexible approach was heralded by decision of the High Court of Australia in Nelson v Nelson (1995) 184 CLR 538; 132 ALR 133; 70 ALJR 47 : see [430-445].15 Russell v Scott (1936) 55 CLR 440; [1936] ALR 375 ; Re Kerrigan; Ex parte Jones (1946) 47 SR (NSW) 76 at 82-3 per Jordan CJ (but see Dullow v Dullow (1985) 3 NSWLR 531 at 540) ; Kauter v Hilton (1953) 90 CLR 86 at 100; 27 ALJ 714 per Dixon CJ, Williams and Fullagar JJ ; Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 367; 30 ALJ 273; BC5600370 per Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ ; Hann v Linton (unreported, SC(SA), Bray CJ, 24 July 1967) noted (1968) 42 ALJ 317; Napier v Public Trustee (WA) (1980) 32 ALR 153 at 158; 55 ALJR 1; 6 Fam LR 238 per Aickin J .16 Jobson v Beckingham (1983) 9 Fam LR 169 (the presumption of advancement

being conditional upon the marriage taking place, and as such, the presumption of resulting trust would operate if the marriage did not take place).17 Russell v Scott (1936) 55 CLR 440; [1936] ALR 375 ; Re Kerrigan; Ex parte Jones (1946) 47 SR (NSW) 76 (presumption rebutted as to a life interest but not in respect of the interest in remainder); Napier v Public Trustee (WA) (1980) 32 ALR 153 at 160; 55 ALJR 1; 6 Fam LR 238 per Aickin J (evidence established that the transfer by a man of property to his de facto spouse was on the understanding that the property was to revert to his estate upon the death of the spouse, held that the presumption of resulting trust was rebutted in respect of the life interest in the spouse).

Source

[Halsbury's Laws of Australia]

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(IV) The Presumption of Advancement The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-555] Presumption of advancement If the relationship between the parties to a transaction which would ordinarily give rise to the presumption of resulting trust1 is such that the transferor has a natural obligation to provide for the transferee, equity presumes that, subject to contrary intention,2 the transferor intended the transfer to operate by way of advancement or gift (the presumption of advancement).3 The presumption of advancement applies with respect to transfers from: (1) husband to wife4 (but not including de facto wife);5 (2) man to fiance;6 (3)

parent to child7 (including an illegitimate8 or adopted child,9 but not a step-child10 or the spouse of a child);11 (4) persons equity treats as being in loco parentis12 to the transferee.13 A transfer from wife to husband has not historically attracted the presumption of advancement on the basis of an absence of a natural obligation to provide,14 although this may be queried in modern society.15 There is no presumption of advancement where the purchaser acts as trustee of a discretionary trust the beneficiaries of which include the purchasers spouse or child,16 or where the purchase is in the name of a company controlled by a wife or child.17 The presumption of advancement does not limit the courts discretionary power to alter property interests on the breakdown of marriage or a de facto relationship.18 Although the presumption of advancement has been judicially criticised as anachronistic and not reflective of modern societal practices,19 there are judicial statements to the effect that the presumption is too entrenched in the law to be easily discarded.20 Notes 1 As to transactions which give rise to the presumption of resulting trust see [430-540].2 As to the rebuttal of the presumption of advancement by contrary intention see [430-550].3 Murless v Franklin (1818) 1 Swan 13 at 17; 36 ER 278 at 280 per Lord Eldon ; Sidmouth v Sidmouth (1840) 2 Beav 447 at 454; [1835-42] All ER Rep 339; (1840) 9 LJ Ch 282; 48 ER 1254 at 1257 per Lord Langdale MR; Bennet v Bennet (1879) 10 Ch D 474 at 476-8 per Jessel MR; Standing v Bowring (1885) 31 Ch D 282; [1881-85] All ER Rep 702 ; Dunbar v Dunbar [1909] 2 Ch 639 at 645 per Warrington J ; Scott v Pauly (1917) 24 CLR 274 at 282; 24 ALR 27 per Isaacs J; Crichton v Crichton (1930) 43 CLR 536; 4 ALJ 170 ; Drever v Drever [1936] ALR 446; (1936) 10 ALJ 207 ; Re Kerrigan; Ex parte Jones (1946) 47 SR (NSW) 76 ; Shephard v Cartwright [1955] AC 431; [1954] 3 All ER 649 ; Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 364; 30 ALJ 273; BC5600370 per Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ ; Glynn v Cmr of Stamp Duties [1977] 2 NSWLR 673 at 680 per Reynolds JA , CA(NSW); Napier v Public Trustee (WA) (1980) 32 ALR 153 at 158; 55 ALJR 1; 6 Fam LR 238 per Aickin J ; Calverley v Green (1984) 155 CLR 242 at 247-8 per Gibbs CJ, at 268 per Deane J; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 ; Muschinski v Dodds (1985) 160 CLR 583 at 58990; 62 ALR 429; BC8501051 per Gibbs CJ ; Brown v Brown (1993) 31 NSWLR 582 at 589-90 per Gleeson CJ ; Nelson v Nelson (1995) 184 CLR 538; 132 ALR 133 at 140 per Deane and Gummow JJ, at 182-3 per McHugh J; 70 ALJR 47 ; Callaghan v Callaghan (1995) 64 SASR 396 at 404; BC9503167 per Perry J . As to the relationship between the presumption of resulting trust and the presumption of advancement see Martin v Martin (1959) 110 CLR 297 at 303; 33 ALJR 362 (It is called a presumption of advancement but it is rather the absence of any reason for assuming that a trust arose); Calverley v Green (1984) 155 CLR 242 at 250; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 per Gibbs CJ (The presumption of advancement should be held to be raised when the relationship between the parties is such that it is more probable than not that a beneficial interest was intended to be conferred, whether or not the purchaser owed the other a legal or moral duty of support), at (CLR) 267 per Deane J (presumption of advancement is not strictly a presumption at all, but simply a recognition that there are certain relationships in which equity infers that any benefit has been provided by way of advancement); Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449; 82 ALR 530 at 554 per Beaumont J ; Nelson v Nelson (1995) 184 CLR 538; 132 ALR 133 at 140; 70 ALJR 47 per Deane and Gummow JJ ; Koh v Chan (1997) 139 FLR 410 at 422 per Murray J , SC(WA) (presumption of advancement is no more than a series of evidentiary assumptions or inferences).4 Sheppard v Penglase (1892) 18 VLR 180 ; Russell v Scott (1936) 55 CLR 440 at

451-3; [1936] ALR 375 per Dixon and Evatt JJ ; March v March (1945) 62 WN (NSW) 111 ; Moate v Moate [1948] 2 All ER 486 ; Schubert v Schubert (1949) 66 WN (NSW) 173 ; Wirth v Wirth (1956) 98 CLR 228 at 232 per Dixon CJ; Martin v Martin (1959) 110 CLR 297; 33 ALJR 362 ; Noack v Noack [1959] VR 137; [1959] ALR 389 ; Pearson v Pearson [1961] VR 693 ; Hepworth v Hepworth (1963) 110 CLR 309 at 318 per Windeyer J ; Doohan v Nelson [1973] 2 NSWLR 320 at 325 per Mahoney J ; Allen v Snyder [1977] 2 NSWLR 685; (1979) FLC 90-656 , CA(NSW); Calverley v Green (1984) 155 CLR 242 at 256; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 per Mason and Brennan JJ . The presumption of advancement will not be displaced simply because the marriage is subsequently dissolved, although a transfer occurring after separation will not attract the presumption: Blinkco v Blinkco [1964-65] NSWR 20; Wilson v Wilson [1963] 2 All ER 447 at 454 per Russell LJ . It cannot be assumed that the presumption of advancement will be easily applied in this respect to rebut any presumption of resulting trust in relation to household goods purchased for the use and enjoyment of both husband and wife (see Silver v Silver [1958] 1 All ER 523 at 528; [1958] 1 WLR 259 at 265 per Parker LJ ; Ebner v Official Trustee in Bankruptcy (2003) 126 FCR 281; 196 ALR 533 at 540; [2003] FCA 73; BC200300253 per Finkelstein J ), or in relation to goods purchased from funds in a credit card account established by the husband which the wife was authorised to use (see Ebner v Official Trustee in Bankruptcy, above at (ALR) 540-2 per Finkelstein J). The position may, however, be different where the wife uses funds from a joint bank account: Jones v Maynard [1951] Ch 572 at 575; [1951] 1 All ER 802 per Vaisey J ; Re Bishop [1965] Ch 450 at 456; [1965] 1 All ER 249 per Stamp J (applied In the matter of the bankrupt estate of Reid; Clark v Reid (1998) 85 FCR 452; BC9803695 ).5 Calverley v Green (1984) 155 CLR 242 at 259-61 per Mason and Brennan JJ, at 268-9 per Deane J; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 (on the basis that de facto parties cannot be assumed to have intended the same consequences as parties entering a formal marriage); Wirth v Wirth (1956) 98 CLR 228 at 231-2 per Dixon CJ ; Hepworth v Hepworth (1963) 110 CLR 309 at 317 per Windeyer J ; Cavalier v Cavalier (1971) 19 FLR 199 ; Carkeek v Tate-Jones [1971] VR 691 at 695-6 per McInerney J ; Allen v Snyder [1977] 2 NSWLR 685 at 690; (1979) FLC 90-656 per Glass JA , CA(NSW); Napier v Public Trustee (WA) (1980) 32 ALR 153 at 154 per Gibbs CJ, at 158 per Aickin J; 55 ALJR 1; 6 Fam LR 238 ; Atkinson v Burt (1989) 12 Fam LR 800 ; Jenkins v Wynen [1992] 1 Qd R 40 at 47 per McPherson SPJ ; Little v Saunders [2004] NSWSC 655; BC200404771 at [30] per Campbell J ; Silvester v Sands [2004] WASC 266; BC200408675 at [38] per Heenan J ; Vella v Mineo [2005] NSWSC 1149; BC200510247 at [103] per Hall J ; Brennan v Duncan [2006] NSWSC 674; BC200605590 at [10] per White J. The increasing acceptance of de facto relationships in society, evidenced in part by their legislative recognition in most jurisdictions (see family law), may see a change in this view in future: see, for example Calverley v Green (1984) 155 CLR 242 at 250-1; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 per Gibbs CJ (it seems natural to conclude that a man who puts property in the name of a woman with whom he or she is living in a de facto relationship does so because he or she intends her to have a beneficial interest, and that the presumption of advancement is raised). See also Murdock v Aherne (1878) 4 VLR (E) 244 at 249 ; Carkeek v Tate-Jones [1971] VR 691 at 695-6 per McInerney J .6 Moate v Moate [1948] 2 All ER 486 ; Wirth v Wirth (1956) 98 CLR 228 at 237-8 per Dixon CJ ; Jenkins v Wynen [1992] 1 Qd R 40 at 46-7 per McPherson SPJ ; Tayles v Davis (2009) 3 ASTLR 222; [2009] VSCA 304; BC200911421 at [40], [41] per Neave JA. A resulting trust arises if the marriage does not take place: Davies v Messner (1975) 12 SASR 333 ; Jobson v Beckingham (1983) 9 Fam LR 169 ; Jenkins v Wynen [1992] 1 Qd R 40 at 46-7 per McPherson SPJ ; Bertei v Feher [2000] WASCA 165; BC200003406 at [14] per Kennedy J ; Nguyen v Scheiff (2003) DFC 95-276; [2003] NSWSC 253; BC200301734 at [58], [59] per Berecry AM . An alternative analysis is that of the failure of a conditional gift if the condition is not fulfilled: Cohen v Sellar [1926] 1 KB 536 ; Kais v Turvey (1994) 11 WAR 357; 17 Fam LR 498 at 499-500 per Malcolm CJ, at 504 per Ipp J ; Bertei v Feher [2000] WASCA 165; BC200003406 at [14] .7 Historically the presumption of advancement was limited to transfers from father to child: Bennet v Bennet (1879) 10 Ch D 474 ; Cain v Watson (1890) 16 VLR 88 ; Cousins v Peters (1900) 17 WN (NSW) 61 ; Davies v National Trustees, Executors and Agency Co of Australasia Ltd [1912] VLR 397 ; Scott v Pauly (1917) 24 CLR 274 at 281-2; 24 ALR 27 per Isaacs J; Re Boag (1920) 16 Tas LR 1 ; Kerr v West Australian Trustee Executor & Agency Co Ltd (1937) 39

WALR 34 ; Schubert v Schubert (1949) 66 WN (NSW) 173 ; Shephard v Cartwright [1955] AC 431; [1954] 3 All ER 649 ; Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 364; 30 ALJ 273; BC5600370 per Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ . However, it now also applies with respect to transfers from mother to child: Brown v Brown (1993) 31 NSWLR 582 at 598-9 per Kirby P ; Nelson v Nelson (1995) 184 CLR 538; 132 ALR 133 at 141 per Deane and Gummow JJ, at 162-3 per Dawson J; 70 ALJR 47 (noting that the (CTH) Family Law Act 1975 imposes upon both parents the primary duty to maintain the child: ibid s 66A(2)(b)), (ALR) at 169-71 per Toohey J (also making reference to the (CTH) Family Law Act 1975), at (ALR) 183-4 per McHugh J; Tanumihardjo v FCT (1997) 36 ATR 400 at 403-4 per Heerey J. That the child is of age, has independent means or is otherwise self-supporting will not prevent the presumption of advancement from arising (Callaghan v Callaghan (1995) 64 SASR 396 at 405; BC9503167 per Perry J; Paulet v Stewart [2009] VSC 60; BC200900991 at [286] per Habersberger J ) although it has the capacity to reduce the weight to be accorded to it: Laksar v Laksar [2008] 1 WLR 2675 at [20] per Lord Neuberger . Conversely, the Supreme Court of Canada has ruled that the presumption of advancement should not apply in respect of adult children: Pecore v Pecore (2007) 279 DLR (4th) 513. The presumption of advancement also operates with respect to a transfer of property effected in the joint names of a child and a third party: Kilpin v Kilpin (1834) 1 My & K 520 at 542; 39 ER 777 at 786 per Brougham LC .8 Soar v Foster (1858) 4 K & J 152 at 160; 70 ER 64 at 67 per Page Wood VC ; Tucker v Burrow (1865) 2 Hem & M 515 at 525; 71 ER 563 at 567 per Page Wood VC ; National Trustees, Executors & Agency Co of Australasia Ltd v Fenn [1924] SASR 470 at 477 per Murray CJ . The status of children legislation in each jurisdiction (see family law), in recognising the rights of illegitimate children, supports the application of the presumption of advancement in these cases.9 This is supported by the adoption legislation in each jurisdiction which operates to treat adopted children as the child of the adopters: see family law.10 Re Bulankoff [1986] 1 Qd R 366 .11 Yoshino v Niddrie [2003] NSWSC 57; BC200300293 at [45] per Young CJ in Eq; Z v Z (2005) 34 Fam LR 296; (2005) FLC 93-241; [2005] FamCA 996 at [145] per Coleman and Boland JJ; Anderson v McPherson (No 2) [2012] WASC 19; BC201200151 at [143] per Edelman J.12 In loco parentis means in the place of a parent: Encyclopaedic Australian Legal Dictionary (definition of in loco parentis).13 Re Paradise Motor Co Ltd [1968] 2 All ER 625; [1968] 1 WLR 1125 at 1139-40 per Danckwerts LJ , CA; Calverley v Green (1984) 155 CLR 242 at 247; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 per Gibbs CJ .14 Mercier v Mercier [1903] 2 Ch 98 ; Moore v Whyte (No 2) (1922) 22 SR (NSW) 570; 39 WN (NSW) 194 ; March v March (1945) 62 WN (NSW) 111 ; Robinson v Robinson [1961] WAR 56 ; Brophy v Brophy (1974) 3 ACTR 57 at 60 per Fox J , SC(ACT); Brown v Wylie (1980) 6 Fam LR 519 at 523 per Powell J , SC(NSW); Muschinski v Dodds (1985) 160 CLR 583 at 590; 62 ALR 429; BC8501051 per Gibbs CJ ; Trustees of the Property of Cummins (a bankrupt) v Cummins (2006) 227 CLR 278; 224 ALR 280; [2006] HCA 6; BC200600981 at [44], [45] , Full Court; Scott v Scott [2009] NSWSC 567; BC200905702 at [44], [45] per Ward J .15 See Calverley v Green (1984) 155 CLR 242 at 268; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 per Deane J (where his Honour expressed concern that the presumption of advancement should be adjusted to reflect modern concepts of the equality in status and obligations of a wife vis--vis a husband).16 Andrew (as trustee for the estate of Ward (decd)) v Zant Pty Ltd (rec and mgr apptd) (2004) 213 ALR 812; [2004] FCA 1716; BC200409334 at [20] per Hill J .17 Peters v Lithgow Forge Pty Ltd [2011] NSWSC 1185; BC201107782 at [139], [141] per Slattery J.18 These powers are conferred by (CTH) Family Law Act 1975 ss 79 (breakdown of marriage), 90SM (breakdown of de facto relationships). The absence of a referral of power to the Commonwealth as to de facto relationships in this context by South Australia and Western Australia dictates that the State legislation governing property allocation upon the breakdown of de facto relationships continues exclusive operation in these jurisdictions: (SA) Domestic Partners Property Act 1996 s 11 (WA) Family Court Act 1997 s 205ZG. See family law [205-6205]-[205-6350].

19 Falconer v Falconer [1970] 1 WLR 1333 at 1336 per Lord Denning MR ; Pettitt v Pettitt [1970] AC 777 at 793 per Lord Reid, at 802 per Lord Morris, at 811 per Lord Hodson, at 823-4 per Lord Diplock; [1969] 2 All ER 385 ; Gissing v Gissing [1971] AC 886 at 907; [1970] 2 All ER 781 per Lord Diplock ; Calverley v Green (1984) 155 CLR 242 at 265 per Murphy J, at 266, 270 per Deane J; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 ; Dullow v Dullow (1985) 3 NSWLR 531 at 535-6 per Hope JA, CA(NSW); Stivactas v Michaletos (No 2) (1993) NSW ConvR 55683; Nelson v Nelson (1995) 184 CLR 538; 132 ALR 133 at 183-4; 70 ALJR 47 per McHugh J .20 Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 364; 30 ALJ 273; BC5600370 per Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ ; Calverley v Green (1984) 155 CLR 242 at 266; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 per Deane J ; Nelson v Nelson (1995) 184 CLR 538; 132 ALR 133 at 140 per Deane and Gummow JJ, at 169 per Toohey J; 70 ALJR 47 . The paragraph below is current to 20 April 2012 [430-560] Rebuttal of the presumption of advancement The presumption of advancement 1 may be rebutted (possibly partially)2 by admissible evidence that no gift was intended by the transferor.3 The onus of rebutting the presumption of advancement lies upon the person alleging the existence of a resulting (or express) trust.4 Admissible evidence for this purpose include the instrument pursuant to which title is transferred, and the acts and declarations of the parties before or at the time of the relevant transaction, or so immediately thereafter as to constitute a part of the transaction.5 Subsequent acts and declarations are only admissible as evidence against the party who made them.6 Although the general principle is that a party is not permitted to rely upon his or her own fraud or illegality in order to rebut the presumption of advancement,7 this principle is not so rigid as to apply without exception.8 Admissible evidence that the transferor has reserved a life interest in the property the subject of the purchase or transfer,9 that the transfer was motivated for reasons inconsistent with an intention to confer beneficial ownership,10 or that the transferee was intended to perform counterobligations in relation to the property transferred,11 will rebut the presumption of advancement. The mere retention of title documents to the property transferred by the transferor is not of itself sufficient to rebut the presumption of advancement because it can be motivated for reasons unrelated to an intention to retain beneficial ownership in the property transferred.12 If, in a given case, the presumption of advancement is rebutted, then the basic presumption of resulting trust applies.13 Notes 1 As to the presumption of advancement see [430-555].2 The balance of authority would appear to be against the proposition that the presumption of advancement can be rebutted partially (such as, for example, where the donor intends to retain a life interest): Forrest v Forrest (1865) 11 Jur NS 317; McKie v McKie (1898) 23 VLR 489 ; Callaghan v Callaghan (1995) 64 SASR 396 at 406; BC9503167 per Perry J. But see Re Kerrigan; Ex parte Jones (1946) 47 SR (NSW) 76 at 81-3 ; Hann v Linton (unreported, SC(SA), Bray CJ, 24 July 1967) noted (1968) 42 ALJ 317 (presumption of advancement of a one third interest in partnership property arose in favour of the wife against the mother but not the husband; rebutted by actual intention). Compare Wood v Wood [1956] VLR 478 at 486-7 per Smith J. Although it has been suggested that, in cases in which there has been a gift with a reservation of a life interest in the donor a species of estoppel may arise in recognition of the fact that it would be inequitable to allow the donee to take the benefit of the gift without acknowledging the reserved interest (see Baker v Baker (1993) 2 FLR 247, CA; Callaghan v Callaghan (1995) 64 SASR 396 at 406-7; BC9503167 per Perry J), it is more likely that Australian courts would deal with such an issue by the imposition of constructive trusteeship on the grounds of unconscionable conduct: see [430-620].3 Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 364-5; 30 ALJ 273; BC5600370 per Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ ; Calverley v Green (1984) 155 CLR 242 at 251; 56 ALR 483;

59 ALJR 111; 9 Fam LR 940 per Gibbs CJ ; Nelson v Nelson (1995) 184 CLR 538; 132 ALR 133 at 140 per Deane and Gummow JJ, at 161 per Dawson J, at 171 per Toohey J; 70 ALJR 47 ; Callaghan v Callaghan (1995) 64 SASR 396 at 405; BC9503167 per Perry J ; Singh v Singh (2004) 31 Fam LR 242; (2004) DFC 95-280; [2004] NSWSC 109; BC200400726 at [14] per Barrett J .4 Martin v Martin (1959) 110 CLR 297; 33 ALJR 362 ; Calverley v Green (1984) 155 CLR 242 at 252 per Gibbs CJ, at 262 per Mason and Brennan JJ, at 269-70 per Deane J; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 .5 Murless v Franklin (1818) 1 Swan 13 at 19; 36 ER 278 at 280 per Lord Eldon; Shephard v Cartwright [1955] AC 431 at 445-6; [1954] 3 All ER 649 per Viscount Simonds , HL; Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 365; 30 ALJ 273; BC5600370 per Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ ; Glynn v Cmr of Stamp Duties [1977] 2 NSWLR 673 at 680 per Reynolds JA, CA(NSW); Damberg v Damberg (2001) 52 NSWLR 492; [2001] NSWCA 87; BC200102714 at [36]-[92] per Heydon JA ; Singh v Singh (2004) 31 Fam LR 242; (2004) DFC 95-280; [2004] NSWSC 109; BC200400726 at [15] per Barrett J ; Wilkins v Wilkins [2007] VSC 100; BC200702483 at [15] per Kaye J . Compare Australian Building & Technical Solutions Pty Ltd v Boumelhem [2009] NSWSC 460; BC200904847 at [133] per Ward J .6 Shephard v Cartwright [1955] AC 431 at 445-6; [1954] 3 All ER 649 per Viscount Simonds, HL; Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 366; 30 ALJ 273; BC5600370 per Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ; Glynn v Cmr of Stamp Duties [1977] 2 NSWLR 673 at 680 per Reynolds JA , CA(NSW); Wilkins v Wilkins [2007] VSC 100; BC200702483 at [15] per Kaye J . For example, evidence of the donors change of mind subsequent to the transfer, or of the donors subsequent dealings with the property transferred which are inconsistent with the presumption of advancement are inadmissible to rebut the presumption: Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 365-6; 30 ALJ 273; BC5600370 per Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ ; Glynn v Cmr of Stamp Duties [1977] 2 NSWLR 673 .7 Tinsley v Milligan [1994] 1 AC 340; [1993] 3 All ER 65 at 82; [1993] 3 WLR 126 per Lord Jauncey , HL; Weston v Beaufils (No 2) (1994) 50 FCR 476; 122 ALR 240 at 261-6 per Hill J .8 The flexible approach was heralded by the decision of the High Court of Australia in Nelson v Nelson (1995) 184 CLR 538; 132 ALR 133; 70 ALJR 47 : see [430-445].9 McKie v McKie (1898) 23 VLR 489 ; Stuckey v Trustees Executors and Agency Co Ltd [1910] VLR 55 ; Millard v Lucas [1936] SASR 166 .10 Calverley v Green (1984) 155 CLR 242; 56 ALR 483; 59 ALJR 111; 9 Fam LR 940 ; Rix v Mahony [2009] NSWSC 675; BC200906592 .11 Smith v Smith [2007] NTSC 31; BC200705516 at [29] per Mildren J ; Peterson v Hottes [2012] QSC 50; BC201201408 at [65], [66] per Mullins J (presumption of advancement rebutted by evidence that the payment in question was in the nature of a conditional gift).12 The retention of title may be, for example, for the purpose of safe keeping, or it may be indicative of the transferors intention to grant the transferee a defeasible beneficial interest through the retention of the power of revocation: Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 366-7; 30 ALJ 273; BC5600370 per Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ .13 Brown v Brown (1993) 31 NSWLR 582 at 589 per Gleeson CJ ; Nelson v Nelson (1995) 184 CLR 538; 132 ALR 133 at 140; 70 ALJR 47 per Deane and Gummow JJ ; National Australia Bank Ltd v Maher [1995] 1 VR 318 at 321 per Fullagar J , CA(VIC).

Source

[Halsbury's Laws of Australia]

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(B) Constructive Trusts (I) Definition and Nature The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-565] Definition The expression constructive trust does not describe a concept of fixed meaning.1 It is used to designate the basis for granting forms of equitable relief which are to some degree equivalent or analogous to relief that would be available against an express trustee for breach of trust.2 These forms of relief may be proprietary, in the sense that the court will treat one party as having (or as having had) a beneficial interest in property held by the other, or personal, in the sense that the court will impose on one party a pecuniary liability in favour of the other.3 When awarded as a proprietary form of relief, the constructive trust constitutes the most extensive form of equitable relief, also serving to confer priority on the insolvency of the person upon whom constructive trusteeship is imposed.4 For this reason, the court will not impose constructive trusteeship as a remedy where it has a proprietary consequence if there is a remedy short of the constructive trust that will address the concerns of equity.5 The rationale for constructive trust relief is that, in the absence of such relief, a person may secure or maintain an interest in property or money that it is contrary to equitable principle for that person to obtain or retain.6 Constructive trust relief is appropriate where the court finds that a person could not in good conscience retain for himself or herself a benefit, or the proceeds of a benefit, he or she has appropriated in breach of his or her contractual or other legal or equitable obligations to another.7 To this end, the constructive trust arises by operation of law, regardless of actual or presumed intention.8 It can therefore be imposed even contrary to the intention of the parties in issue.9 The statutory formalities applicable to some express trusts10 do not apply to constructive trusts.11 Notes 1 Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143 at 152 per McLelland AJA , CA(NSW). See also Carl Zeiss Stiftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276 at 300; [1969] 2 All ER 367; [1969] 2 WLR 429 , CA ([The constructive trusts] boundaries have been left perhaps deliberately vague, so as not to restrict the court by technicalities in deciding what the justice of a particular case may demand); Grimaldi v Chameleon Mining NL (No 2) (2012) 287 ALR 22; [2012] FCAFC 6; BC201200621 at [667] per the court (referring to the latent ambiguity in the terminology constructive trustee).2 Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143 at 152-3 per McLelland AJA , CA(NSW). As to the relief available against an express trustee for breach of trust see [430-5330]-[430-5385].3 Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143 at 153 per McLelland AJA ,

CA(NSW). Constructive trusteeship arising out of strangers intermeddling in the trust (see [430600]) and strangers dishonestly assisting in a breach of trust (see [430-615]) are the main examples of personal liability.4 Re Sabri; Ex parte Brien v Australia & New Zealand Banking Group Ltd (1996) 21 Fam LR 213 .5 Australian Building & Technical Solutions Pty Ltd v Boumelhem [2009] NSWSC 460; BC200904847 at [151]-[174] per Ward J .6 Muschinski v Dodds (1985) 160 CLR 583 at 614; 62 ALR 429; BC8501051 per Deane J ; Carson v Wood (1994) 34 NSWLR 9 at 24 per Sheller JA , CA(NSW).7 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 125; 55 ALR 417; 58 ALJR 587; 1 Aust Const LR 29 per Deane J .8 Muschinski v Dodds (1985) 160 CLR 583 at 613-14; 62 ALR 429; BC8501051 per Deane J . Actual (that is express or inferred) intention forms the basis for an express trust: see [430-240]-[430-257]. Presumed intention forms the basis for a resulting trust: see [430-540]. However, there is a form of constructive trust based on common intention (known as the common intention constructive trust): see [430-640].9 Koh v Chan (1997) 139 FLR 410 at 421 per Murray J , SC(WA).10 As to the statutory formalities in respect of express trusts see [430-230].11 (ACT) Civil Law (Property) Act 2006 s 201(4)(a) (NT) Law of Property Act 2000 s 10(2) (NSW) Conveyancing Act 1919 s 23C(2) (QLD) Property Law Act 1974 s 11(2) (SA) Law of Property Act 1936 s 29(2) (TAS) Conveyancing and Law of Property Act 1884 s 60(2) (VIC) Property Law Act 1958 s 53(2) (WA) Property Law Act 1969 s 34(2). The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-570] Nature of constructive trust The constructive trust developed as a remedial relationship superimposed upon common law rights by order of the Chancery Court, and its rationale is still found essentially in its remedial function.1 The remedial function of the constructive trust explains the reference by judges to the imposition of a constructive trust by the court.2 However, the constructive trust can also be seen as an institution because: (1) the constructive trust shares some institutionalised features of express and implied trusts, namely subject matter,3 trustee,4 beneficiary5 (or purpose),6 and a personal obligation attaching to property;7 and (2) where a court retrospectively imposes a constructive trust by way of remedy, its availability as such a remedy provides the basis for, and governs the content of, its existence inter partes independently of any formal order declaring or enforcing it.8 The acknowledgment of the institutional character of the constructive trust does not involve a denial of its continued flexibility as a remedy.9 In particular, where competing common law or

equitable claims are or may be involved, a declaration of constructive trust by way of remedy can properly be so framed that the consequences of its imposition are operative only from the date of judgment or formal court order, or from some other specified date.10 The court will consider whether, in all of the circumstances of the case, justice requires that the equitable interest in property stemming from the imposition of a constructive trust should pre-date the courts order, an issue that is important in various contexts including insolvency,11 taxability,12 and in determining whether an interest sufficient to substantiate a caveat exists.13 The court will not impose or declare a constructive trust if, in the circumstances, it considers that:14 (1) the plaintiffs ordinary legal remedy provides adequate and appropriate relief; or (2) another form of equitable relief 15 will satisfy the demands of justice and good conscience. Notes 1 Muschinski v Dodds (1985) 160 CLR 583 at 613; 62 ALR 429; BC8501051 per Deane J . Compare Koh v Chan (1997) 139 FLR 410 at 420 per Murray J , SC(WA) (suggested remedial function of resulting trusts).2 Muschinski v Dodds (1985) 160 CLR 583 at 614; 62 ALR 429; BC8501051 per Deane J .3 Fortex Group Ltd (in rec and liq) v MacIntosh [1998] 3 NZLR 171 at 175 per Gault, Keith and Tipping JJ , CA(NZ). However, in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669; [1996] 2 All ER 961 at 988; [1996] 2 WLR 802 , Lord Browne-Wilkinson noted that, in the case of a constructive trust imposed on a person who dishonestly assists in a breach of trust (see [430-615]), that person may come under fiduciary duties even if he or she does not receive identifiable trust property. As to certainty of subject matter with respect to express trusts see [430-265].4 However, constructive trustees have powers and duties less precisely defined than those of an appointed trustee: Giumelli v Giumelli (1999) 196 CLR 101; 161 ALR 473 at 475; [1999] HCA 10; BC9901018 per Gleeson CJ, McHugh, Gummow and Callinan JJ . As to trustees of express trusts generally see [430-3000]-[430-4085].5 As to certainty of object with respect to express trusts see [430-280].6 College of Law (Properties) Pty Ltd v Willoughby Municipal Council (1978) 38 LGRA 81 at 88 per Rath J; Aboriginal Hostels Ltd v Darwin City Council (1985) 33 NTR 1; 55 LGRA 414 at 425; 75 FLR 197 per Nader J; Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; 100 LGERA 383; 157 ALR 414 at 424-6; 72 ALJR 1470 , HC of A, Full Court.7 Muschinski v Dodds (1985) 160 CLR 583 at 614; 62 ALR 429; BC8501051 per Deane J .8 Muschinski v Dodds (1985) 160 CLR 583 at 614; 62 ALR 429; BC8501051 per Deane J . See also College of Law (Properties) Pty Ltd v Willoughby Municipal Council (1978) 38 LGRA 81 at 88 per Rath J ; Giumelli v Giumelli (1999) 196 CLR 101; 161 ALR 473 at 475; [1999] HCA 10; BC9901018 per Gleeson CJ, McHugh, Gummow and Callinan JJ .9 Muschinski v Dodds (1985) 160 CLR 583 at 614; 62 ALR 429; BC8501051 per Deane J .10 Muschinski v Dodds (1985) 160 CLR 583 at 615; 62 ALR 429; BC8501051 per Deane J ; Chan v Zacharia (1984) 154 CLR 178 at 199; 53 ALR 417; 58 ALJR 353 per Deane J .11 Re Sabri; Ex parte Brien v Australia & New Zealand Banking Group Ltd (1996) 21 Fam LR 213 at 224-30 per Chisholm J . See also Re Jonton Pty Ltd [1992] 2 Qd R 105 ; Kidner v Secretary, Dept of Social Security (1993) 31 ALD 63 at 75-6 per Drummond J ; Lopatinsky v Official Trustee in Bankruptcy (2003) 31 Fam LR 267; [2003] FCA 1256; BC200306641 . Compare Re Osborn; Ex parte Trustee of Property of Osborn (a bankrupt) v Osborn (1989) 25 FCR 547; 91 ALR 135 at 141 per Pincus J ; Australian Building & Technical Solutions Pty Ltd v Boumelhem [2009] NSWSC 460; BC200904847 at [151]-[174] per Ward J ; Australian Receivables Ltd v Tekitu Pty Ltd (Subject to Deed of Company Arrangement) (Deed Admin Apptd) [2011] NSWSC 1306; BC201109588 at [126] [132] per Ward J. Contrast Tracy v Bifield (1998) 23 Fam LR 260 . So far as the issue of

insolvency in the context of spouses is concerned, (CTH) Bankruptcy Act 1966 s 59A, as from 18 September 2005, dictates that the statutory regime under which a bankrupts property vests in the trustee of the bankrupts estate (under ibid ss 58, 59) is subject to an order under (CTH) Family Law Act 1975 Pt VIII (specifically ibid ss 78, 79). As a result, if the trustee is required to transfer property to a spouse under the (CTH) Family Law Act 1975, that property will not be divisible amongst the bankrupts creditors. This presupposes that proceedings, whether or not between the parties, in a court exercising jurisdiction under the (CTH) Family Law Act 1975 are on foot: see definition of proceedings and court in ibid s 4.12 Zobory v Cmr of Taxation (1995) 64 FCR 86; 129 ALR 484 at 487 per Burchett J .13 The courts do not speak with one voice as to whether a claim for constructive trust relief over property is sufficient to provide grounds to lodge and maintain a caveat in respect of the property in question. It depends ultimately on the facts and, to a large extent, to whether or not the court is convinced of the applicants interest in the property. The issue has most frequently been addressed on an interlocutory application, and cases that have countenanced acceding to the application include: Hooper v Australia and New Zealand Banking Group Ltd (1996) 5 Tas R 398; (1996) ANZ ConvR 400; BC9601481 , SC(TAS); Ford v Marshall [2003] WASC 116; BC200303149 at [61] per Barker J ; Phillips v Ten Voorde [2004] SASC 17; BC200400198 ; Armstrong v Armstrong (2004) FLC 93-190; [2004] WASC 121; BC200403503 ; Jerambak Holdings Pty Ltd v Austral-Asean Pty Ltd (2005) 147 NTR 1; [2005] NTSC 38; BC200504885 ; Yardley v Favell Gordon (Aust) Pty Ltd [2005] WASC 212; BC200507281 ; Irons v Irons [2007] SADC 54; Dennis Hanger Pty Ltd v Brown [2007] VSC 495; BC200710356 ; Young v Young [2011] VSC 188; BC201102738 . Decisions that suggest a contrary approach include: Jedhar Pty Ltd v Grosse [2003] QSC 330; BC200305693 at [5] per McMurdo J ; Walter v Registrar of Titles [2003] VSCA 122; BC200304950 at [16]-[18] per Chernov JA ; Jones v McQuilkin [2006] NSWSC 628; BC200604629 ; Cook v Cook [2006] QSC 180; BC200605704 ; Westpac Banking Corp v Dimopoulos [2006] VSC 10; BC200600336 ; Powell v In De Braekt [2006] WASC 264; BC200609598 (injunction in place of caveat). A resulting trust interest in property, on the other hand, is clearly sufficient to substantiate a caveat in respect of the property in question: Warner v Andrews [2011] NSWSC 956; BC201106470 . As to resulting trusts see [430-500]-[430560].14 Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 at 379-80; 65 ALR 193; 60 ALJR 371 per Gibbs CJ ; Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; 100 LGERA 383; 157 ALR 414 at 424-6; 72 ALJR 1470 , HC of A, Full Court; Giumelli v Giumelli (1999) 196 CLR 101; 161 ALR 473 at 476; [1999] HCA 10; BC9901018 per Gleeson CJ, McHugh, Gummow and Callinan JJ; In the Marriage of Cierpiatka (1999) 25 Fam LR 548 at 556-7; (1999) FLC 92-864; [1999] FamCA 1286 , Full Court; Edmunds v Pickering (No 4) (2000) 77 SASR 381 at 402; [2000] SASC 267; BC200004540 (order for equitable compensation sufficient) (affirmed Pickering v Smoothpool Nominees Pty Ltd (2001) 81 SASR 175; [2001] SASC 387; BC200107893 ); Sorna Pty Ltd v Flint (2000) 21 WAR 563 at 567; [2000] WASCA 22; BC200000347 at [13] (respondents legitimate interests protected adequately by their contractual rights); Hancock Family Memorial Foundation Ltd v Porteous (2000) 22 WAR 198 at 220; 156 FLR 249; [2000] WASCA 29; BC200000343 , CA(WA), Full Court; John Alexanders Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; 266 ALR 462; 84 ALJR 446; 2 ASTLR 553; [2010] HCA 19; BC201003368 at [128], [129] per French CJ, Gummow, Hayne, Heydon and Kiefel JJ; Pennie v Pennie [2010] NSWSC 565; BC201003558 at [43][47] per Pembroke J. As to other forms of equitable relief see equity [185-1400]-[185-1730].15 For example, an equitable charge: see [430-650]. The paragraph below is current to 20 April 2012 [430-575] Circumstances in which constructive trust is imposed The main purposes for which constructive trusteeship is imposed are to: (1) render a defaulting fiduciary accountable for an improper profit from his or her fiduciary position;1

(2) attach liability to a stranger where, by reason of the strangers acts or omissions, equity dictates that he or she ought to be accountable as a constructive trustee;2 (3) prevent an unconscientious assertion of ownership of property by a person in respect of which another person has contributed;3 (4) enforce an agreement to execute mutual wills4 or a secret trust;5 and (5) impose obligations upon a person arising from the sale or purchase of land.6 In light of the predominantly remedial character of the constructive trust, the circumstances in which it may arise are not closed, but extend to any case where some principle of the law of equity calls for the imposition upon the legal owner of property of the obligation to hold or apply the property for the benefit of another.7 Notes 1 See [430-580]-[430-590].2 See [430-595]-[450-615].3 See [430-620]-[430-650].4 See [430655].5 See [430-660].6 See [430-665]-[430-675].7 Muschinski v Dodds (1985) 160 CLR 583 at 616-17; 62 ALR 429; BC8501051 per Deane J ; Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 at 378; 65 ALR 193; 60 ALJR 371 per Gibbs CJ; Yeomans Row Management Ltd v Cobbe [2009] 1 AC 453; [2008] 4 All ER 713; [2008] 1 WLR 1752; [2008] UKHL 55 at [30] per Lord Scott .

Source

[Halsbury's Laws of Australia]

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(II) Constructive Trust in Cases of Breach of Fiduciary Duty The paragraph below is current to 20 April 2012

[430-580] Constructive trust as a means of accounting for profits obtained in breach of fiduciary duty A fiduciary 1 must account for a profit or benefit if it was obtained either: 2 (1) when there was a conflict or possible conflict between his or her fiduciary duty and his or her personal interest; or (2) by reason of his or her fiduciary position, or by reason of his or her taking advantage of opportunity or knowledge derived from his or her fiduciary position. This accountability may be secured by means of an account of profits,3 or the imposition of constructive trusteeship on the errant fiduciary.4 As the imposition of constructive trusteeship is the most extensive form of relief available in equity, the court will not impose a constructive trust unless: (1) to do so is the only satisfactory means of ensuring that the fiduciary accounts for the entirety of the gain derived from his or her breach of fiduciary duty;5 and (2) there is a sufficient connection between the scope of the fiduciarys obligation and the property over which it is sought to establish a constructive trust.6 If the court decides that constructive trusteeship is the appropriate form of relief to impose, it must then determine the scope of the constructive trust.7 For example, where, in breach of fiduciary duty, a person engages in a business which competes with that of his or her principal, the court may either declare him or her liable to account as constructive trustee of the particular benefits flowing to him or her in breach of that duty, or hold the person accountable as constructive trustee of the entire business and its profits (due allowance being made for the time, energy, skill and financial contribution that he or she has expended or made).8 In each case the form of inquiry to be directed is that which will reflect as accurately as possible the true measure of the profit or benefit obtained by the fiduciary in breach of his or her duty.9 If, for instance, the errant fiduciary can satisfy the court that a certain asset or assets of the competing business has been contributed by the fiduciary rather than being generated by the business itself, the court may exclude that asset or assets from the scope of the constructive trust (or impose a constructive trust over only a proportion of the property in question).10 It is open to the court, where a constructive trustee has acted honestly and in a fashion that has benefited his or her principal, to award a constructive trustee allowances for the time, energy and skill he or she has displayed, and in so doing avoid the principal being unjustly enriched by the breach of duty.11 The liability to account as a constructive trustee will not arise where the person under the fiduciary duty has been duly authorised to act in the manner he or she has acted by:12 (1) the instrument or agreement creating the fiduciary duty; (2) the circumstances of his or her appointment; or

(3) the informed and effective assent of the persons to whom the obligation is owed.13 The right to constructive trust relief may also be lost by reason of the operation of other equitable doctrines, such as laches14 and equitable estoppel.15 Notes 1 As to fiduciaries see equity [185-660]-[185-820].2 Chan v Zacharia (1984) 154 CLR 178 at 199; 53 ALR 417; 58 ALJR 353 per Deane J ; Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 107; 55 ALR 417; 58 ALJR 587; 1 Aust Const LR 29 per Mason J ; Warman International Ltd v Dwyer (1995) 182 CLR 544 at 557; 128 ALR 201; BC9506414 per Mason CJ, Brennan, Deane, Dawson and Gaudron JJ ; Tweedvale Investments Pty Ltd v Thiran Pty Ltd (1995) 14 WAR 109 at 117 per Steytler J .3 As to the remedy of account of profits for breach of fiduciary duty see equity [185-815].4 Warman International Ltd v Dwyer (1995) 182 CLR 544 at 556; 128 ALR 201; BC9506414 per Mason CJ, Brennan, Deane, Dawson and Gaudron JJ .5 Timber Engineering Co Pty Ltd v Anderson [1980] 2 NSWLR 488 ; Our Ladys Mount Pty Ltd (as trustee) v Magnificat Meal Movement Intl Inc (1999) 33 ACSR 163 at 188-9; 18 ACLC 141; (2000) Q ConvR 54-537 per Muir J , SC(QLD).6 United States Surgical Corp v Hospital Products Intl Pty Ltd [1983] 2 NSWLR 157 at 236 , CA(NSW). See also Chan v Zacharia (1984) 154 CLR 178 at 195; 53 ALR 417; 58 ALJR 353 per Deane J (in determining whether a constructive trust of particular property has arisen as a consequence of the existence or breach of a fiduciary obligation, it is necessary to identify the nature of the particular fiduciary relationship and to define any relevant obligations which flowed from it).7 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 110; 55 ALR 417; 58 ALJR 587; 1 Aust Const LR 29 per Mason J .8 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 110; 55 ALR 417; 58 ALJR 587; 1 Aust Const LR 29 per Mason J . See also Boardman v Phipps [1967] 2 AC 46 at 104 per Lord Cohen, at 112 per Lord Hodson; [1966] 3 All ER 721; [1966] 3 WLR 1009 , HL (regarding liberal allowances in the case of an innocent breach of fiduciary duty which had benefited the trust).9 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 110; 55 ALR 417; 58 ALJR 587; 1 Aust Const LR 29 per Mason J .10 Timber Engineering Co Pty Ltd v Anderson [1980] 2 NSWLR 488 at 499 per Kearney J .11 See [430-4010].12 Chan v Zacharia (1984) 154 CLR 178 at 204; 53 ALR 417; 58 ALJR 353 per Deane J .13 Queensland Mines Ltd v Hudson (1978) 18 ALR 1; 52 ALJR 399; 3 ACLR 176 , PC.14 As to the doctrine of laches see equity [185-1835]-[185-1885].15 Chan v Zacharia (1984) 154 CLR 178 at 204; 53 ALR 417; 58 ALJR 353 per Deane J . As to equitable estoppel see estoppel [190-290]-[190-350]. The paragraph below is current to 20 April 2012 [430-585] Constructive trust with respect to property sold or purchased in breach of fiduciary duty Where there is a contract for the sale of property by A to B made in breach of fiduciary duty1 owed by B to A (or by C in whose breach B knowingly participated), 2 pursuant to which the legal title to the property has been transferred from A to B, the transaction is in equity voidable at the instance of A, who may obtain an order for rescission setting it aside.3 If A elects to rescind, equity will treat B as if he or she held the property on constructive trust for A ab initio.4 Where A has engaged B to negotiate or arrange the purchase of property by A, but B purchases the property himself or herself in breach of fiduciary duty owed to A, B holds the property on constructive trust for A.5 Notes 1 As to breaches of fiduciary duty see equity [185-775]-[185-795].2 As to constructive trusteeship for accessory liability see [430-615].3 Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143 at 153 per McLelland AJA , CA(NSW).4 Greater

Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143 at 153 per McLelland AJA , CA(NSW). See also Hancock Family Memorial Foundation Ltd v Porteous (1999) 32 ACSR 124; 151 FLR 191 at 209; [1999] WASC 55; BC9903035 per Anderson J (affirmed Hancock Family Memorial Foundation Ltd v Porteous (2000) 22 WAR 198; 156 FLR 249; [2000] WASCA 29; BC200000343 ).5 Soulos v Korkontzilas (1997) 146 DLR (4th) 214 , SC(Canada). The paragraph below is current to 20 April 2012 [430-590] Constructive trust as a remedy in the tracing process Where a plaintiff succeeds in equity in tracing1 his or her property into the hands of the defendant and proves that the property in issue is still in the ownership of the defendant, the court will treat the defendant as holding the property on a constructive trust for the plaintiff and will order the defendant to transfer it in specie to the plaintiff.2 If the property traced represents only part of the funds which in equity belong to the plaintiff, the plaintiffs entitlement can be secured by means of an equitable charge on the property.3 Notes 1 As to equitable tracing see equity [185-1700]-[185-1730].2 Re Halletts Estate; Knatchbull v Hallett (1880) 13 Ch D 696 at 709; [1874-80] All ER Rep 793 per Jessel MR , CA; Re Diplock; Diplock v Wintle [1948] Ch 465 at 521, 546; [1948] 2 All ER 318 , CA; El Ajou v Dollar Land Holdings Plc (No 2) [1995] 2 All ER 213 at 221, 223 per Robert Walker J ; Boscawen v Bajwa [1995] 4 All ER 769 at 777; [1996] 1 WLR 328 per Millett LJ , CA.3 Re Halletts Estate; Knatchbull v Hallett (1880) 13 Ch D 696 at 709; [1874-80] All ER Rep 793 per Jessel MR , CA; Re Diplock; Diplock v Wintle [1948] Ch 465 at 521, 546; [1948] 2 All ER 318 , CA; El Ajou v Dollar Land Holdings Plc (No 2) [1995] 2 All ER 213 at 221, 223 per Robert Walker J ; Boscawen v Bajwa [1995] 4 All ER 769 at 777; [1996] 1 WLR 328 per Millett LJ , CA. See further equity [185-1705].

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[Halsbury's Laws of Australia]

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(III) Constructive Trust with Respect to Strangers to the Trust

The paragraph below is current to 20 April 2012

[430-595] General In this context, the circumstances which attract constructive trusteeship are where:1 (1) a third party acts as trustee without appointment;2 (2) a stranger knowingly receives or deals with trust property inconsistently with the trust (recipient liability);3 or (3) a stranger assists a trustee or other fiduciary in a dishonest and fraudulent design (accessory liability).4 Notes 1 Barnes v Addy (1874) LR 9 Ch App 244 at 251-2; 43 LJ Ch 513 per Lord Selborne LC; Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 397; 5 ALR 231; BC7500014 per Gibbs J. 2 See [430-600]. 3 See [430-605], [430-610]. 4 See [430-615]. The paragraph below is current to 20 April 2012

[430-600] Strangers to the trust who act as trustee without appointment A person who, not being a trustee1 or having authority from a trustee,2 intermeddles with the trust or performs acts characteristic of the office of a trustee, may be declared to be a constructive trustee (in this case termed a trustee de son tort3 or a de facto trustee)4 so as to make him or her liable for any loss to the trust or any personal gain stemming from his or her conduct.5 There can be no trusteeship de son tort unless the stranger in question had possession or control6 of trust property.7 However a trustee de son tort need not, and commonly does not, have actual title to the trust property.8 Most commonly the persons who have been declared to be a trustee de son tort have been the agents or solicitors of the trust who have:9

(1) intermeddled with the performance of the trust;10 or (2) dealt with the trust property in a manner inconsistent with (a)

the terms of their agency or employment,11 or (b) the performance of the trusts of which they are aware.12

Notes 1 A person whose acts are referable to his or her appointment as a trustee is not deemed to be a constructive trustee in this context: Mara v Browne [1896] 1 Ch 199 at 207; (1895) 73 LT 638 per Herschell LJ, CA. 2 Acts done by a stranger to the trust with the authority of the trustee do not constitute intermeddling: Clay v Clay (1999) 20 WAR 427 at 438, SC(WA), Full Court. 3 As to trustee of his or her own wrong see: Encyclopaedic Australian Legal Dictionary (definition of trustee de son tort). 4 Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366; [2003] 1 All ER 97 at 130; [2002] 3 WLR 1913 per Lord Millett. 5 Barnes v Addy (1874) LR 9 Ch App 244 at 251-2; 43 LJ Ch 513 per Lord Selborne LC; Lyell v Kennedy (1889) LR 14 App Cas 437 at 459-60; 59 LJQB 268; 62 LT 77 per Earl of Selborne, HL; Re Barney; Barney v Barney [1892] 2 Ch 265; Mara v Browne [1896] 1 Ch 199 at 209; (1895) 73 LT 638 per AL Smith LJ, CA; Williams-Ashman v Price and Williams [1942] Ch 219; [1942] 1 All ER 310; National Trustees, Executors & Agency Co of Australasia Ltd v Biffin [1940] VLR 395 at 401-2 per Martin J; Selangor United Rubber Estates Ltd v Cradock (a bankrupt) (No 3) [1968] 2 All ER 1073 at 1095; [1968] 1 WLR 1555 at 1579 per Ungoed-Thomas J; Carl Zeiss Stiftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276; [1969] 2 All ER 367; [1969] 2 WLR 429, CA; DFC New Zealand Ltd v Goddard [1992] 2 NZLR 445, CA(NZ). 6 In this context, possession or control means the strangers power in respect of the trust property to be capable of disposing of it in any possible way, thereby justifying the imposition upon him or her of the liabilities equivalent to those of express trustees: Pearce v Pearce (1856) 25 LJ Ch 893; Re Barney; Barney v Barney [1892] 2 Ch 265 at 273 per Kekewich J. 7 DFC New Zealand Ltd v Goddard [1992] 2 NZLR 445 at 450 per Gault J, CA(NZ). 8 Ecurie Topgear SA v Kerr (1997) 11 PRNZ 127 at 131-2 per Salmon J. 9 See further [430-610]. 10 Myler v Fitzpatrick (1822) 6 Madd 360; 56 ER 1128; Hardy v Caley (1864) 33 Beav 365; 55 ER 408. 11 Morgan v Stephens (1861) 3 Giff 226; 66 ER 392; Lee v Sankey (1873) LR 15 Eq 204; Lyell v Kennedy (1889) LR 14 App Cas 437; 59 LJQB 268; 62 LT 77, HL. 12 Lee v Sankey (1873) LR 15 Eq 204 at 211 per Bacon VC. The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation

For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations

[430-605] Recipient liability A person1 is liable as a constructive trustee of property where the person receives possession, for his or her own benefit,2 of trust property,3 or an interest in trust property,4 transferred in breach of trust or breach of fiduciary duty5 either:6 (1) knowing that the transfer of trust property was in breach of trust (in which case liability to account arises from the moment he or she received the property); or (2) subsequently discovering that knowledge (in which case liability to account arises at the moment of acquiring the knowledge). The requisite knowledge includes actual knowledge,7 wilful shutting of the eyes to the obvious,8 a wilful and reckless failure to make inquiries that an honest and reasonable person would make9 or, according to the bulk of case authority, knowledge of circumstances that would indicate the facts to an honest and reasonable person (constructive knowledge).10 As such, proof of dishonesty is not a prerequisite for recipient liability.11 The knowledge requirement does not, however, extend to equitable constructive notice12 or encompass knowledge that a person has genuinely forgotten.13 The person receiving or dealing with the trust property carries the burden of negativing the presence of the required knowledge.14 Although some Australian judges have favoured an alternative approach to liability in this context based on strict liability for receipt of misapplied trust property, subject to defences such as change of position and bona fide purchaser for value without notice,15 the High Court has subsequently rejected this approach.16 Some statutory effect to this approach, though, is given by the trustee legislation in Queensland and Western Australia, which imposes strict liability on recipients of trust property wrongly distributed by a trustee, subject to a change of position defence.17

Although recipient liability is commonly expressed as generating proprietary relief, it is not so confined; the recipient can be required to pay compensation for loss arising from the misapplication of the trust property, or to account for gains made from it.18 Otherwise the availability of relief against a knowing recipient would be confined to where he or she retained any part of the property received (or its traceable proceeds) in his or her hands.19

Common examples which give rise to constructive trusteeship in the recipient liability context are:

(1) where the directors of a company, in breach of their fiduciary duty, misappropriate company funds or assets which then come into the hands of a stranger who receives them with knowledge of the breach, in which case the company can recover those funds or assets from the recipient;20 (2)

where a bank with knowledge that trust money has been paid into a running overdraft account in breach of trust, proceeds to apply that money to its own benefit, in which case the bank must account to the beneficiaries;21 or (3) where a bank seeks to set-off an account held by the trustee in the capacity of trustee against another held in his or her own capacity, the bank will hold the proceeds of the trust account on constructive trust for the beneficiaries of that account if it had knowledge that the account is held on trust.22

The trustee legislation in all jurisdictions except the Northern Territory and Tasmania provides that, in the absence of fraud, a trustee acting for the purposes of more than one trust or estate is not affected by notice of any instrument, matter, fact or thing in relation to any particular trust or estate if the trustee has obtained notice of it merely by reason of acting or having acted for the purposes of another trust or estate.23

Notes 1 Knowledge acquired by an agent is imputed to the principal where the agent is under a duty to communicate the knowledge to the principal: Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 658-9; 4 ALR 257; 48 ALJR 410 per Mason J. 2 Agip (Africa) Ltd v Jackson [1990] Ch 265 at 292; [1992] 4 All ER 385 per Millett J(affirmed Agip (Africa) Ltd v Jackson [1991] Ch 547; [1992] 4 All ER 451, CA). It follows that the mere fact that trust money is paid into a bank account does not establish receipt for this purpose if it is not shown that the account holder was aware of the receipt or received any benefit from the receipt, or that the money remained in the account: Heperu Pty Ltd v Morgan Brooks Pty Ltd (No 2) [2007] NSWSC 1438; BC200710862 at [127]-[130] per Palmer J; McNally v Harris [2008] NSWSC 659; BC200805099 at [84]-[88] per White J. 3 The term trust property usually refers to actual tangible property or funds, although where an errant fiduciary or trustee has obtained a non-financial advantage (such as confidential information or opportunity) by virtue of his or her fiduciary breach, that advantage may also constitute trust property: DPC Estates Pty Ltd v Grey [1974] 1 NSWLR 443 at 470 (reversed on another point Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; 5 ALR 231; BC7500014); Spangaro v Corporate Investment Australia Funds Management Ltd (2003) 47 ACSR 285; 54 ATR 241; [2003] FCA 1025; BC200305634 at [57] per Finkelstein J. The term also extends to property held or controlled subject to a fiduciary obligation, for instance, property subject to the control and the fiduciary responsibilities of a companys directors: Grimaldi v Chameleon Mining NL (No 2) (2012) 287 ALR 22; [2012] FCAFC 6; BC201200621 at [254] per the court. 4 Doneley v Doneley [1998] 1 Qd R 602 at 611 per de Jersey J. 5 Robb Evans of Robb Evans & Assocs v European Bank Ltd (2004) 61 NSWLR 75; [2004] NSWCA 82; BC200401304 at [160], [161] per Spigelman CJ; Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) (2008) 225 FLR 1; 70 ACSR 1; [2008] WASC 239; BC200809492 at [4776] per Owen J. 6 Agip (Africa) Ltd v Jackson [1990] Ch 265; [1992] 4 All ER 385 at 403-4 per Millett J (affirmed Agip (Africa) Ltd v Jackson [1991] Ch 547; [1992] 4 All ER 451, CA). 7 This includes an intentional omission to inquire for fear of discovering fraud: United States Surgical Corp v Hospital Products Intl Pty Ltd [1983] 2 NSWLR 157 at 254, CA(NSW).

8 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 398; 5 ALR 231; BC7500014 per Gibbs J (not just that a person who had full knowledge of all the facts could escape liability because his or her own moral obtuseness prevented him or her from recognising an impropriety that would have been apparent to an ordinary person). 9 Carl Zeiss Stiftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276 at 298; [1969] 2 All ER 367; [1969] 2 WLR 429 per Sachs LJ, CA; Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 398 per Gibbs J, at 410-12 per Stephen J; 5 ALR 231; BC7500014; Re Montagus Settlement Trusts; Duke of Manchester v National Westminster Bank Ltd [1987] Ch 264; [1992] 4 All ER 308; [1987] 2 WLR 1192; Polly Peck International Plc v Nadir (No 2) [1992] 4 All ER 769; [1992] 2 Lloyds Rep 238, CA. 10 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 398 per Gibbs J, at 412 per Stephen J; 5 ALR 231; BC7500014; United States Surgical Corp v Hospital Products Intl Pty Ltd [1983] 2 NSWLR 157 at 252-6, CA(NSW); Southern Cross Commodities Pty Ltd (in liq) v Ewing (1988) 91 FLR 271; 14 ACLR 39; 6 ACLC 647; Lord v Spinelly (1991) 4 WAR 158 at 173-5 per Commissioner T E OConnor QC; Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 at 103-6; 11 ACSR 642; 11 ACLC 952 per Kirby P, CA(NSW); Hancock Family Memorial Foundation Ltd v Belle Rosa Holdings Pty Ltd (1992) 8 WAR 435 at 439 per Master Adams; Doneley v Doneley [1998] 1 Qd R 602 at 611 per de Jersey J; Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] 3 VR 16 at 105; BC9702676 per Hansen J; Hancock Family Memorial Foundation Ltd v Porteous (1999) 32 ACSR 124 at 142; 151 FLR 191; [1999] WASC 55; BC9903035 per Anderson J; Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd (2001) 38 ACSR 404 at 527-8; 10 BPR 18,717; [2001] NSWSC 448; BC200102976; Tara Shire Council v Garner [2003] 1 Qd R 556 at 577-81; [2002] QCA 232; BC200203548 per Atkinson J; Spangaro v Corporate Investment Australia Funds Management Ltd (2003) 47 ACSR 285; 54 ATR 241; [2003] FCA 1025; BC200305634 at [58]-[60] per Finkelstein J; K & S Corp Ltd v Sportingbet Australia (2003) 86 SASR 312; 229 LSJS 405; [2003] SASC 96; BC200306118 at [26] per Besanko J. Compare Imobilari Pty Ltd v Opes Prime Stockbroking Ltd (2008) 252 ALR 41; 69 ACSR 235; [2008] FCA 1920; BC200811188 at [27]-[30] per Finkelstein J (querying the terminology adopted in levels of knowledge). Notwithstanding considerable authority in the United Kingdom, courts in that country have likewise yet to make a definitive statement on the issue of knowledge: see, for example Re Montagus Settlement Trusts; Duke of Manchester v National Westminster Bank Ltd [1987] Ch 264; [1992] 4 All ER 308 at 330; [1987] 2 WLR 1192 per Megarry VC; Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548; [1992] 4 All ER 512; [1991] 3 WLR 10; Polly Peck International Plc v Nadir (No 2) [1992] 4 All ER 769 at 777; [1992] 2 Lloyds Rep 238 per Scott LJ. Compare Belmont Finance Corp Ltd v Williams Furniture Ltd [1979] Ch 250 at 267; [1979] 1 All ER 118 per Buckley LJ; Agip (Africa) Ltd v Jackson [1990] Ch 265; [1992] 4 All ER 385 at 403-4 per Millett J (affirmed Agip (Africa) Ltd v Jackson [1991] Ch 547; [1992] 4 All ER 451, CA); Eagle Trust Plc v SBC Securities Ltd [1992] 4 All ER 488; [1991] BCLC 438. But see Bank of Credit and Commerce International (Overseas) Ltd (in liq) v Akindele [2001] Ch 437; [2000] 4 All ER 221; [2000] 3 WLR 1423 at 1439 per Nourse LJ, CA (test for knowledge is simply whether the defendants knowledge makes it unconscionable for him or her to retain the benefit of the receipt). 11 Say-Dee Pty Ltd v Farah Constructions Pty Ltd [2005] NSWCA 309; BC200507416 at [209], [225] per Tobias JA (Mason P and Giles JA concurring) (appeal allowed but without casting doubt on this point: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; 236 ALR 209; [2007] HCA 22; BC200703851); Re-Engine Pty Ltd (in liq) v Fergusson (2007) 209 FLR 1; [2007] VSC 57; BC200701426 at [105] per Dodds-Streeton J). 12 Belmont Finance Corp Ltd v Williams Furniture Ltd [1979] Ch 250 at 267-8; [1979] 1 All ER 118 per Buckley LJ; Re Montagus Settlement Trusts; Duke of Manchester v National Westminster Bank Ltd [1987] Ch 264; [1992] 4 All ER 308 at 330; [1987] 2 WLR 1192 per Megarry VC; Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] 3 VR 16 at 105; BC9702676 per Hansen J; Edmunds v Pickering (1999) 75 SASR 407 at 588 per Lander J; Hancock Family Memorial Foundation Ltd v Porteous (1999) 32 ACSR 124; 151 FLR 191 at 209;

[1999] WASC 55; BC9903035 per Anderson J (affirmed Hancock Family Memorial Foundation Ltd v Porteous (2000) 22 WAR 198; 156 FLR 249; [2000] WASCA 29; BC200000343); Robb Evans of Robb Evans & Assocs v European Bank Ltd (2004) 61 NSWLR 75; [2004] NSWCA 82; BC200401304 at [153] per Spigelman CJ; Grimaldi v Chameleon Mining NL (2012) 287 ALR 22; (No 2) [2012] FCAFC 6; BC201200621 at [263][270] per the court. Compare Twinsectra Ltd v Yardley [2002] 2 All ER 377; [2002] 2 WLR 802 at 831; [2002] UKHL 12 per Lord Millett in dissent. Equitable constructive notice includes notice of facts that could have been discovered by conducting the inquiries that a reasonably prudent person would conduct as a matter of course: DPC Estates Pty Ltd v Grey [1974] 1 NSWLR 443 at 459 per Jacobs P, CA(NSW); Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 398 per Gibbs J, at 412 per Stephen J; 5 ALR 231; BC7500014; Belmont Finance Corp Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 at 412 per Goff LJ. As such, it goes no higher than mere negligence: Tara Shire Council v Garner [2003] 1 Qd R 556 at 577; [2002] QCA 232; BC200203548 per Atkinson J. The requisite knowledge also cannot be equated to the notice that is relevant in the doctrine of purchaser for value without notice: Re Diplock; Diplock v Wintle [1948] Ch 465 at 478-9; [1948] 2 All ER 318, CA. 13 Re Montagus Settlement Trusts; Duke of Manchester v National Westminster Bank Ltd [1987] Ch 264; [1992] 4 All ER 308 at 330; [1987] 2 WLR 1192 per Megarry VC. 14 United States Surgical Corp v Hospital Products Intl Pty Ltd [1983] 2 NSWLR 157 at 240, CA(NSW). 15 Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] 3 VR 16 at 105; BC9702676 per Hansen J; K & S Corp Ltd v Sportingbet Australia (2003) 86 SASR 312; 229 LSJS 405; [2003] SASC 96; BC200306118 at [156], [157] per Besanko J; Say-Dee Pty Ltd v Farah Constructions Pty Ltd [2005] NSWCA 309; BC200507416 at [223], [226], [232] per Tobias JA (Mason P and Giles JA) concurring. 16 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; 236 ALR 209; [2007] HCA 22; BC200703851 at [130]-[158] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ. 17 (QLD) Trusts Act 1973 s 109 (WA) Trustees Act 1962 s 65.

See [430-5630].

18 Grimaldi v Chameleon Mining NL (No 2) (2012) 287 ALR 22; [2012] FCAFC 6; BC201200621 at [253] per the court. 19 Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638 (Ch) at [1577] per Lewison J. 20 Belmont Finance Corp Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393; Southern Cross Commodities Pty Ltd (in liq) v Ewing (1988) 91 FLR 271; 14 ACLR 39; 6 ACLC 647; Hancock Family Memorial Foundation Ltd v Belle Rosa Holdings Pty Ltd (1992) 8 WAR 435. 21 Neste Oy v Lloyds Bank Plc (The Tiiskeri, The Nestegas and The Enskeri) [1983] 2 Lloyds Rep 658; Westpac Banking Corp v Savin [1985] 2 NZLR 41, CA(NZ); Stephens Travel Service International Pty Ltd (recs and mgrs apptd) v Qantas Airways Ltd (1988) 13 NSWLR 331; BC8801851, CA(NSW); Citadel General Assurance Co v Lloyds Bank Canada (1998) 152 DLR (4th) 411; [1997] 3 SCR 805, SC(Canada). 22 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 at 582; [1968] 3 All ER 651;

[1968] 3 WLR 1097 per Lord Wilberforce, HL. See [430-65]. 23 (ACT) Trustee Act 1925 s 62 (NSW) Trustee Act 1925 s 62

(QLD) Trusts Act 1973 s 69

(SA) Trustee Act 1936 s 34A

(VIC) Trustee Act 1958 s 35

(WA) Trustees Act 1962 s 68.

The paragraph below is current to 20 April 2012

[430-610] Receipt of trust money by agents A solicitor or other agent who lawfully receives money from his or her principal which belongs at law or in equity to a third party is not accountable as a constructive trustee to that third party unless he or she has been guilty of:1 (1) knowingly participating in a breach of trust by his or her principal; (2) intermeddling with the trust property other than merely as an agent and thereby becoming a trustee de son tort;2 (3) receiving or dealing with the money knowing that his or her principal has no right to pay it over or to instruct him or her to deal with it in the manner indicated; or (4) some dishonest act relating to the money.3 As the law is reluctant to make a mere agent a constructive trustee,4 mere notice of a claim asserted by a third party is insufficient to render the agent a constructive trustee in dealing with property derived from his or her principal in accordance with the latters instructions unless the agent knows that the third partys claim is well founded and that the principal accordingly had no authority to give such instructions.5 Notes 1 Carl Zeiss Stiftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276 at 303-4; [1969] 2 All ER 367;

[1969] 2 WLR 429 per Edmund Davies LJ, CA. 2 As to trustees de son tort see [430-600]. 3 See further [430-615]. 4 Barnes v Addy (1874) LR 9 Ch App 244 at 251-2; 43 LJ Ch 513 per Lord Selborne LC; Carl Zeiss Stiftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276 at 304; [1969] 2 All ER 367; [1969] 2 WLR 429 per Edmund Davies LJ, CA; Spangaro v Corporate Investment Australia Funds Management Ltd (2003) 47 ACSR 285; 54 ATR 241; [2003] FCA 1025; BC200305634 at [56] per Finkelstein J. 5 Carl Zeiss Stiftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276 at 290 per Danckwerts LJ, at 304 per Edmund Davies LJ; [1969] 2 All ER 367; [1969] 2 WLR 429, CA. The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation

For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations

[430-615] Accessory liability Where a trustee or other fiduciary engages in a dishonest and fraudulent design1 and a third party knowingly assists in that design, the third party (accessory) may be treated as a constructive trustee even in the absence of a receipt of trust property. As constructive trusteeship in this context is not dependent upon the receipt of property by the stranger, the character of the relief can be said to be personal as opposed to proprietary.2 The use of the term constructive trust here is therefore as a vehicle to render a person accountable in the same manner as that of an express trustee,3 and for this reason it has been suggested that the term should be discarded in favour of accountable in equity.4 The relief that is awarded against a defaulting trustee or other fiduciary and an accessory to the breach will not necessarily coincide in either nature or quantum.5 For example, the claimant may seek compensation from the defaulting trustee or fiduciary (who made no profit from the default) and an account of profits from the accessory (who profited from his or her own misconduct).6 If an account of profits were to be sought against both the defaulting fiduciary and a knowing assistant, the two accounts would very likely differ.7

This form of constructive trusteeship may be effective, for example, to pierce the corporate veil so as to make a director or officer of a company liable for losses incurred by the company in breach of its trust or fiduciary duty.8 It may also be useful as a means of attaching liability to other persons, such as bankers and advisers, who act for trustees (or other fiduciaries), and to make persons or entities accountable for gains stemming from the exploitation of a corporate business opportunity in circumstances where the information relating to that opportunity was communicated in breach of fiduciary duty.9

The traditional approach, reflected in the formulation in the first sentence above and which retains sway in the High Court of Australia,10 focuses on the requisite knowledge, which includes

constructive knowledge but not constructive notice.11 Accordingly, the test is phrased in terms that the morally obtuse cannot escape liability by failure to recognise an impropriety that would have been apparent to an ordinary person applying the standards of such persons.12 The dishonesty criterion dictates that the impugned conduct must therefore be attended by circumstances that would attract a degree of opprobrium raising it above the level of a simple breach of trust or a breach of fiduciary duty.13 The modern English approach instead focuses on the dishonesty of the accessory rather than the dishonesty of the fiduciary.14

The trustee legislation in all jurisdictions provides that where a trustee commits a breach of trust at the instigation, request or with the written consent of a beneficiary, the court may, if it thinks fit, make an order as is just for impounding all or any part of the interest of the beneficiary in the trust estate by way of indemnity to the trustee or person claiming through the trustee.15

Notes 1 For this purpose, a dishonest and fraudulent design, though most commonly directed to a breach of fiduciary duty, can encompass a breach of the equitable duty of confidence: City of Sydney v Streetscape Projects (Australia) Pty Ltd (2011) 94 IPR 35; [2011] NSWSC 1214; BC201107922 at [485][491] per Einstein J. As to the equitable duty of confidence see equity [185-1260][1851345]. 2 Doneley v Doneley [1998] 1 Qd R 602 at 611-12 per de Jersey J; Giumelli v Giumelli (1999) 196 CLR 101 at 112; 161 ALR 473 at 475; [1999] HCA 10; BC9901018 per Gleeson CJ, McHugh, Gummow and Callinan JJ; Hraiki v Hraiki [2011] NSWSC 656; BC201104726 at [41][70] per White J. 3 Giumelli v Giumelli (1999) 196 CLR 101 at 112; 161 ALR 473 at 475; [1999] HCA 10; BC9901018 per Gleeson CJ, McHugh, Gummow and Callinan JJ. 4 Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366; [2003] 1 All ER 97; [2002] 3 WLR 1913 at [142] per Lord Millett. 5 Michael Wilson & Partners Ltd v Nicholls (2011) 282 ALR 685; 86 ALJR 14; [2011] HCA 48; BC201109206 at [106] per Gummow ACJ, Hayne, Crennan and Bell JJ. 6 Michael Wilson & Partners Ltd v Nicholls (2011) 282 ALR 685; 86 ALJR 14; [2011] HCA 48; BC201109206 at [106] per Gummow ACJ, Hayne, Crennan and Bell JJ. 7 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 3978; 5 ALR 231; BC7500014 per Gibbs J. 8 Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378; [1995] 3 All ER 97; [1995] 3 WLR 64; Humphris v Jenshol (1997) 160 ALR 107 at 120-1; 25 ACSR 212; Addstead Pty Ltd v Liddan Pty Ltd (1997) 70 SASR 21; 25 ACSR 175; 15 ACLC 1687. 9 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; 5 ALR 231; BC7500014; Westpac New Zealand Ltd v Map & Associates Ltd [2011] 3 NZLR 751; [2011] NZSC 89. Compare US International Marketing Ltd v National Bank of New Zealand Ltd [2004] 1 NZLR 589, CA(NZ). 10 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; 236 ALR 209; [2007] HCA 22; BC200703851 at [160]-[163] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ. 11 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; 236 ALR 209; [2007] HCA

22; BC200703851 at [171]-[178] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ. 12 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; 236 ALR 209; [2007] HCA 22; BC200703851 at [177] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ. 13 Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) (2008) 225 FLR 1; 70 ACSR 1; [2008] WASC 239; BC200809492 at [4727] per Owen J; George v Webb [2011] NSWSC 1608; BC201110449 at [260] per Ward J (speaking in terms of conduct that is morally reprehensible). 14 Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378; [1995] 3 All ER 97 at 101-6; [1995] 3 WLR 64 per Lord Nicholls, PC. 15 (ACT) Trustee Act 1925 s 86 (NT) Trustee Act 1893 s 50

(NSW) Trustee Act 1925 s 86

(QLD) Trusts Act 1973 s 77

(SA) Trustee Act 1936 s 57

(TAS) Trustee Act 1898 s 53

(VIC) Trustee Act 1958 s 68

(WA) Trustees Act 1962 s 76.

The legislation has merely extended the similar right existing at general law: Bolton v Curre [1895] 1 Ch 544 at 549; (1894) 71 LT 752 per Romer J; Chillingworth v Chambers [1896] 1 Ch 685 at 707-9; (1896) 74 LT 34 per AL Smith LJ. See [430-5620].

Source [Halsbury's Laws of Australia]

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(IV) Constructive Trust Arising from Contributions to Property or Relationship The paragraph below is current to 20 April 2012

[430-620] Constructive trust based on unconscionable denial of beneficial interest The constructive trust may be imposed upon a legal entitlement to property in order to prevent a person from asserting or exercising his or her legal right in respect of that property in circumstances where the particular assertion or exercise of it would constitute unconscionable conduct.1 Although constructive trusteeship based on unconscionable conduct has been most commonly imposed in the context of the breakdown2 of a de facto relationship in the event that the legal interests in property are not commensurate with the respective parties contributions to the property or relationship,3 the principle applies more generally. The circumstances giving rise to equitable intervention in this context are where the substratum of a joint relationship or endeavour is removed4 without attributable blame5 and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances where it would be unconscionable for that other party (or would have been in circumstances where that party is deceased or legally incapacitated) to retain a benefit with respect to the relevant property not commensurate with his or her contribution.6 The unconscionability criterion therefore dictates that a constructive trust may be imposed even if this is contrary to the express or implied intention of either or both of the parties.7

Although the basis of constructive trusteeship in this context is unconscionable conduct, the inherent flexibility of the constructive trust as a remedy entitles the court to recognise an actual entitlement to a beneficial interest under a constructive trust which predates the occurrence of the unconscionable conduct in question.8

Notes 1 Muschinski v Dodds (1985) 160 CLR 583 at 620, 623; 62 ALR 429; BC8501051 per Deane J; Baumgartner v Baumgartner (1987) 164 CLR 137 at 149-50; 76 ALR 75; 62 ALJR 29; 11 Fam LR 915 per Mason CJ, Wilson and Deane JJ; Hibberson v George (1989) 12 Fam LR 725 at 730-3 per Mahoney JA, CA(NSW); Bryson v Bryant (1992) 29 NSWLR 188 at 214-15; 16 Fam LR 112 per Sheller JA, CA(NSW). For the meaning and parameters of unconscionable conduct in this context see [430-635]. 2 The joint relationship of husband and wife (de facto or de jure) cannot be said to have failed or determined merely because certain assets said to be affected by the operation of a constructive trust were repossessed by a bank for the purpose of sale under a mortgage, especially where there is evidence that the parties are still living together in harmony and there is or was no other breakdown in their relationship: National Australia Bank Ltd v Maher [1995] 1 VR 318 at 335 per Ormiston J, CA(VIC). 3 Muschinski v Dodds (1985) 160 CLR 583; 62 ALR 429; BC8501051; Baumgartner v Baumgartner (1987) 164 CLR 137; 76 ALR 75; 62 ALJR 29; 11 Fam LR 915; Hibberson v George (1989) 12 Fam LR 725, CA(NSW); Booth v Beresford (1993) 61 SASR 475; 17 Fam LR 147; Kais v Turvey (1994) 11 WAR 357; 17 Fam LR 498, SC(WA), Full Court. 4 The substratum of a joint endeavour can end not only when the relationship that underscores the endeavour ends, but also for other reasons, such as the death of one of the parties (Cetojevic v Cetojevic [2006] NSWSC 431; BC200603290 (affirmed Cetojevic v Cetojevic [2007] NSWCA 33; BC200701029)) or, where relevant, the bankruptcy of one of them (Australian Building & Technical Solutions Pty Ltd v Boumelhem [2009] NSWSC 460; BC200904847 at [91]-[100] per Ward J). 5 It has been said that the concept of attributable blame should be understood and applies with some tolerance, and does not call for a judgment attributing blame among members of a family for the continuing relationship becoming intolerable, unless in particularly gross cases involving some criminality or similarly reprehensible behaviour: Bennett v Horgan (unreported, SC(NSW), Bryson J, 3 June 1994, BC9402569); Kriezis v Kriezis [2004] NSWSC 167; BC200401174 at [22], [23] per Burchett AJ; Krajovska v Krajovska [2011] NSWSC 903; BC201106257 at [51] per Black J; Peterson v Hottes [2012] QSC 50; BC201201408 at [69] per Mullins J (noting that the courts are slow in the family context in attributing blame to a particular party when a relationship that involves a joint household breaks down). It may, to this end, be that the concept of attributable blame is bound up in the question of unconscionable conduct, in that if the joint endeavour comes to an end due to some wrongful conduct of the party seeking the imposition of a constructive trust this might impact on whether it is unconscionable for the other party in those circumstances to retain the benefits of the joint endeavour: Australian Building & Technical Solutions Pty Ltd v Boumelhem [2009] NSWSC 460; BC200904847 at [99] per Ward J. 6 Muschinski v Dodds (1985) 160 CLR 583 at 620 per Deane J (see also at 599 per Mason J); 62 ALR 429; BC8501051; Baumgartner v Baumgartner (1987) 164 CLR 137 at 149-50; 76 ALR 75; 62 ALJR 29; 11 Fam LR 915 per Mason CJ, Wilson and Deane JJ; National Australia Bank Ltd v Maher [1995] 1 VR 318 at 321 per Fullagar J, CA(VIC); Australian Building & Technical Solutions Pty Ltd v Boumelhem [2009] NSWSC 460; BC200904847 at [107] per Ward J. 7 Koh v Chan (1997) 139 FLR 410 at 428-9 per Murray J, SC(WA). See, also Kais v Turvey (1994) 11 WAR 357; 17 Fam LR 498, SC(WA), Full Court.

8 Kidner v Secretary, Dept of Social Security (1993) 31 ALD 63 at 75-6 per Drummond J; Re Sabri; Ex parte Brien v Australia & New Zealand Banking Group Ltd (1996) 21 Fam LR 213 at 22830 per Chisholm J; Lopatinsky v Official Trustee in Bankruptcy (2003) 31 Fam LR 267; [2003] FCA 1256; BC200306641; Parianos v Meluish (Trustee) (2003) 30 Fam LR 524; (2003) FLC 93-130 at 78,217; [2003] FCA 190; BC200300854 per Jacobson J (the date of constructive trusteeship being important from the perspective of priorities in insolvency of a party to a relationship); Sui Mei Huen v Official Receiver (2008) 248 ALR 1; 39 Fam LR 355; [2008] FCAFC 117; BC200804944 at [70]-[81] per Ryan, Moore and Tamberlin JJ. Compare Ikeuchi v Liu (2001) 160 FLR 94 at 116; [2001] QSC 054; BC200100618; Lydon v Ryding [2002] WASC 308; BC200207693 at [20]; West v Mead (2003) 13 BPR 24,431; [2003] NSWSC 161; BC200301515 at [84]. The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation

For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations

[430-625] Relationship between constructive trusts, family law and de facto or domestic relationships legislation On the dissolution of marriage or, the breakdown of a de facto or domestic relationship, the scope of the courts power to alter property interests is determined by the relevant legislation rather than the principles of constructive trusts.1 Notes 1 The relevant statutory powers are conferred by (CTH) Family Law Act 1975 ss 79 (breakdown of marriage), 90SM (breakdown of de facto relationships). The absence of a referral of power to the Commonwealth as to de facto relationships in this context by South Australia and Western Australia dictates that the State legislation governing property allocation upon the breakdown of de facto relationships continues exclusive operation in these jurisdictions: (SA) Domestic Partners Property Act 1996 s 11

(WA) Family Court Act 1997 s 205ZG.

Compare Miller v Sutherland (1990) 14 Fam LR 416 at 426 per Cohen J, SC(NSW) (where his Honour noted that, on the facts before him, the outcome of the case would have been the same whether under the law of constructive trusts or under the de facto relationships legislation). See family law [205-6205]-[205-6350] (property rights under de facto or domestic relationships legislation).

The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation

For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations

[430-630] Contributions that give rise to entitlement under constructive trust The relevant contributions which the court may take into account in determining the scope of constructive trusteeship extend beyond financial contributions to the purchase price of the property in issue.1 To this end, the courts have entitled persons to an interest in property as a result of: (1) the pooling of financial resources for the purposes of their joint relationship, one of the purposes of that relationship being to secure accommodation for themselves;2 (2) a mutual arrangement between the parties under which the parties each spent money for the purpose of their joint relationship with the object that some or all of that money was to finance the purchase of the home, notwithstanding the absence of a physical pooling of resources;3 (3) the pooling of labour by or on behalf of both parties, even in the absence of the pooling of financial resources;4 and (4) contributions to family welfare by way of domestic assistance (such as homemaking and parenting).5 The contributions in question need not necessarily have been made directly to the acquisition or improvement of the property in issue,6 but it is not sufficient that one person has merely benefited from the contributions of another; those contributions must be linked, albeit indirectly, to the purchase, maintenance and improvement of the property.7 The constructive trust does not operate to convert contributions made to property entirely by one party in the absence of any relevant contribution by the other party to a proprietary interest in favour of that other party unless those contributions can be said to have been provided on express trust for that party.8 Nor do contributions made other than for the purposes of the joint relationship give rise to constructive trust liability.9

In and of itself, the fact that parties are living in a de facto or domestic relationship does not carry with it a presumption that any interest in property will be shared equally.10 In each case, the plaintiff must present appropriate evidence to quantify the contribution.11 A blanket claim by a plaintiff over all of the defendants property based solely on promises by the defendant to the plaintiff, without reference to contributions regarding specific assets, is not sufficient to raise in the plaintiff an equitable interest under a constructive trust.12 However, where there has been a pooling of financial resources for the purposes of the parties joint relationship for a substantial period, the quantum of each partys contribution is premised, at least as a starting point, on the basis that equity favours equality, and subsequently adjusted if the court is satisfied that an injustice would occur if account were not taken of any disparity between the quantum of the parties actual contributions.13 In making any such adjustment, the court adopts a broad brush approach, rather than being concerned with adjusting small amounts here and there,14 especially in the context of contributions

that do not have a ready or direct monetary value (such as domestic contributions).15

The court may take into account (or set off) the benefit derived by the claimant from living in the property (occupation rent) in discounting the claimants contribution to it,16 or any other material benefit the claimant has secured from the defendant.17 In assessing respective contributions, it may be appropriate for the court to apply guidelines established for the application of the (CTH) Family Law Act 197518 as a checklist for measuring the terms of any constructive trust which may be found to exist.19

Notes 1 These contributions form the basis for the allocation of beneficial interests under a presumed resulting trust (see [430-545]) and can in any event be upset by the imposition of a constructive trust by the court as a remedy on the grounds of unconscionable conduct: Baumgartner v Baumgartner (1987) 164 CLR 137; 76 ALR 75; 62 ALJR 29; 11 Fam LR 915; Anson v Anson (2004) 12 BPR 22,303; [2004] NSWSC 766; BC200406099 at [37] per Campbell J. 2 Baumgartner v Baumgartner (1987) 164 CLR 137 at 149 per Mason CJ, Wilson and Deane JJ, at 155-6 per Gaudron J; 76 ALR 75; 62 ALJR 29; 11 Fam LR 915; Silvester v Sands [2004] WASC 266; BC200408675. 3 Hibberson v George (1989) 12 Fam LR 725 at 742-3 per McHugh JA, CA(NSW). 4 Miller v Sutherland (1990) 14 Fam LR 416 at 424 per Cohen J, SC(NSW) (upon the breakdown of a de facto relationship pursuant to which a house had been purchased in the name of the man, the work done by the woman and her family in renovating the house justified the imposition of a constructive trust); Woodward v Johnston (1991) 14 Fam LR 828, SC(QLD); Robinson v Rouse [2005] TASSC 48; BC200503613 at [25] per Blow J. 5 Baumgartner v Baumgartner (1987) 164 CLR 137 at 155-6; 76 ALR 75; 62 ALJR 29; 11 Fam LR 915 per Gaudron J; Bryson v Bryant (1992) 29 NSWLR 188 at 203-4; 16 Fam LR 112 per Kirby P, CA(NSW); Stowe v Stowe (1995) 15 WAR 363; 127 FLR 25 at 35-6; BC9503617 per Ipp, Owen and White JJ,SC(WA), Full Court; Parij v Parij (1997) 72 SASR 153 at 162; 195 LSJS 340 per Debelle J; Taylor v Watson [2002] NZCA 189 at [14]-[17]; Lopatinsky v Official Trustee in Bankruptcy (2003) 31 Fam LR 267; [2003] FCA 1256; BC200306641; Read v Nicholls (2004) DFC 95-307; [2004] VSC 66; BC200402114; Robinson v Rouse [2005] TASSC 48; BC200503613 at [26] per Blow J. Compare W v G (1996) 20 Fam LR 49 at 61 per Hodgson J, SC(NSW) (unquantifiable contributions in looking after children held not to give rise to interest under a constructive trust); Engwirda v Engwirda (2004) DFC 95-285; [2000] QCA 61; BC200000921 at [23]-[30]; Lloyd v Tedesco (2002) 25 WAR 360 at 368; [2002] WASCA 63; BC200201296 per Murray J (there must be more than simply the performance by the plaintiff of the valuable role of the provision of love, care and support. The provision of such a contribution will be sufficient only if it is related in some factual way to the generation of wealth as part of a joint effort or endeavour to provide for the parties mutual material welfare and security). 6 Hibberson v George (1989) 12 Fam LR 725, CA(NSW); Green v Green (1989) 17 NSWLR 343 at 369; 13 Fam LR 336 per Mahoney JA, CA(NSW); Miller v Sutherland (1990) 14 Fam LR 416, SC(NSW); Re Sabri; Ex parte Brien v Australia & New Zealand Banking Group Ltd (1996) 21 Fam LR 213 at 223 per Chisholm J; Lloyd v Tedesco (2002) 25 WAR 360 at 364; [2002] WASCA 63; BC200201296 per Murray J. Compare Bryson v Bryant (1992) 29 NSWLR 188 at 231; 16 Fam LR 112 per Samuels AJA, CA(NSW) (provision of labour as opposed to the contribution of money should not be excluded from determining interests under a constructive trust, but with the qualification that the provision of labour must be linked to the acquisition, maintenance or improvement of the property which is in dispute).

7 Engwirda v Engwirda (2004) DFC 95-285; [2000] QCA 61; BC200000921 at [23]-[30]; Lloyd v Tedesco (2002) 25 WAR 360 at 365, 379-80; [2002] WASCA 63; BC200201296 per Murray J; Cressy v Johnson [2009] VSC 52; BC200900936 at [197]-[200] per Kaye J. 8 Arthur v Public Trustee (1988) 90 FLR 203 at 213 per Asche CJ, CA(NT). 9 Kais v Turvey (1994) 11 WAR 357; 17 Fam LR 498 at 509 per Ipp J, SC(WA), Full Court; Dinsdale bht Protective Commissioner v Arthur (2006) 12 BPR 23,509; [2006] NSWSC 809; BC200606198 at [15]-[17] per Brereton J. 10 Miller v Sutherland (1990) 14 Fam LR 416 at 423 per Cohen J, SC(NSW); Engwirda v Engwirda (2004) DFC 95-285; [2000] QCA 61; BC200000921 at [23]-[30] Barker v Linklater [2008] 1 Qd R 405; [2007] QCA 363; BC200709097 at [74]-[76] per Muir JA; Willis v Western Australia (No 3) (2010) 4 ASTLR 359; [2010] WASCA 56; BC201001859 at [72] per Buss JA. 11 Miller v Sutherland (1990) 14 Fam LR 416, SC(NSW); Booth v Beresford (1993) 61 SASR 475; 17 Fam LR 147; W v G (1996) 20 Fam LR 49 at 61 per Hodgson J, SC(NSW); Downham v McCallum [2008] TASSC 81; BC200811309 at [103]-[106] per Porter J. 12 Stowe v Stowe (1995) 15 WAR 363; 127 FLR 25 at 35; BC9503617 per Ipp, Owen and White JJ, SC(WA), Full Court. 13 Baumgartner v Baumgartner (1987) 164 CLR 137 at 149-50; 76 ALR 75; 62 ALJR 29; 11 Fam LR 915 per Mason CJ, Wilson and Deane JJ; Hibberson v George (1989) 12 Fam LR 725 at 743-4 per McHugh JA, CA(NSW); Read v Nicholls (2004) DFC 95-307; [2004] VSC 66; BC200402114 at [58]-[63] per Nettle J; Shepherd v Doolan [2005] NSWSC 42; BC200505692 at [42], [43] per White J; Robinson v Rouse [2005] TASSC 48; BC200503613 at [30] per Blow J; Cetojevic v Cetojevic [2006] NSWSC 431; BC200603290 at [43]-[45] per Campbell J (affirmed Cetojevic v Cetojevic [2007] NSWCA 33; BC200701029). Compare the position now in England to the division of property upon the breakdown of non-marital domestic relationships, to the effect that: (1) where parties place their home in joint names, the burden is on the one asserting his or her ownership of the property other than in equal shares to rebut the presumption of joint beneficial ownership that arises from the legal co-ownership; and (2) the court must have regard to all the circumstances that would throw light on their shared intentions and not just their financial contributions to the cost of acquiring the property: Stack v Dowden [2007] 2 AC 432; [2007] 2 All ER 929; [2007] 2 WLR 831; [2007] UKHL 17. See also the explanation of Stack v Dowden in Jones v Kernott [2012] 1 All ER 1265; [2011] 3 WLR 1121; [2011] UKSC 53. 14 Hardman v Hobman (2004) DFC 95-281; [2003] QCA 467; BC200306401 at [3]-[6] per Williams JA, at [25] per Mackenzie J; Anson v Anson (2004) 12 BPR 22,303; [2004] NSWSC 766; BC200406099 at [44]-[49] per Campbell J (at the level of broad impression: at [49]). 15 Hardman v Hobman (2004) DFC 95-281; [2003] QCA 467; BC200306401 at [25] per Mackenzie J; Anson v Anson (2004) 12 BPR 22,303; [2004] NSWSC 766; BC200406099 at [46] per Campbell J. 16 Tracy v Bifield (1998) 23 Fam LR 260 at 269-70 per Tempelman J; Stone v Owen [2001] 1 Qd R 419 at 424-5; [2000] QCA 56; BC200000750; Silvester v Sands [2004] WASC 266; BC200408675 at [131]-[148] per Heenan J; Hill v Hill [2005] NSWSC 863; BC200506545 at [45] per Campbell J; Dinsdale bht Protective Commissioner v Arthur (2006) 12 BPR 23,509; [2006] NSWSC 809; BC200606198 at [27]-[29] per Brereton J; Fathers v Cook [2006] WASC 129;

BC200604905. See also Brown v George (1998) 147 FLR 1; 24 Fam LR 58 at 69, 78-9 per Gallop J (as the claimants net asset position improved as a result of the relationship, there was no unconscionable conduct in denying her an equitable interest). 17 Hill v Hill [2005] NSWSC 863; BC200506545 at [47] per Campbell J (defendants guaranteeing of the debt of the claimants company taken into account in determining the appropriate contribution). 18 Under (CTH) Family Law Act 1975 s 79; see family law. These guidelines are that: (1) there is no presumption of equality of property even in a long marriage; (2) substantial as opposed to token regard must be had to the contribution of a partner who is a homemaker and caregiver; and (3) domestic activities of one partner may properly be regarded as contributing towards the acquisition of property by the other partner through her or his business activities: Parij v Parij (1997) 72 SASR 153 at 166-7; 195 LSJS 340 per Debelle J. 19 Parij v Parij (1997) 72 SASR 153 at 166; 195 LSJS 340 per Debelle J; Brown v George (1998) 147 FLR 1; 24 Fam LR 58 at 66 per Gallop J. See also Lankow v Rose [1995] 1 NZLR 277 at 290 per McKay J; compare at 286 per Hardie Boys J, at 295 per Tipping J. The paragraph below is current to 20 April 2012

[430-635] Unconscionable conduct in the context of constructive trusts The criterion of unconscionable conduct dictates that a constructive trust will not be imposed on the ground of mere fairness,1 although this is not to deny the relevance of notions of fairness and justice to the traditional equitable notion of unconscionable conduct.2 The unconscionability of a refusal to recognise an equitable interest can arise not merely from events occurring at the time of acquisition but from subsequent events.3 The substantiality of the contribution in question is an important factor the court considers in determining whether there has been unconscionable conduct.4 Where the parties have reached a concluded agreement regarding their respective contributions, in the absence of equitable grounds for avoiding that agreement (such as the operation of the doctrines of mistake,5 undue influence6 or unconscionable dealing),7 it will not generally be unconscionable for a party to rely on its terms, and the court will accordingly give effect to the agreement.8 Also, contributions made with the knowledge that they would confer no proprietary entitlement, or without any expectation or contemplation that they would generate a proprietary entitlement, do not make it unconscionable, in the ordinary case, to deny any such entitlement.9 Nor do contributions in a relationship not intended to exist for the parties common or joint benefit but for their own selfish (business) interests.10

Even if the parties pooled their resources for the purposes of their joint relationship, with the consequence that during their joint lives each enjoyed an equitable interest in the property in question, it is not unconscionable that one party retain the property on the dissolution of that relationship upon the death of the other party.11 Where the evidence shows that a particular transfer of property was clearly intended to be a gift, it may be difficult to see the donees refusal to return

the property in question as being unconscionable.12

Notes 1 Muschinski v Dodds (1985) 160 CLR 583 at 594-5 per Gibbs CJ, at 608 per Brennan J, at 61516 per Deane J; 62 ALR 429; BC8501051 (flexible remedy of the constructive trust is not so formless as to place proprietary rights in the discretionary disposition of a court acting according to vague notions of what is fair); Arthur v Public Trustee (1988) 90 FLR 203 at 213-14 per Asche CJ, CA(NT); Bryson v Bryant (1992) 29 NSWLR 188 at 196 per Kirby P, at 222 per Sheller JA, at 228 per Samuels AJA; 16 Fam LR 112, CA(NSW); Kokotovich Constructions Pty Ltd v Wallington (1995) 17 ACSR 478 at 486-7; 13 ACLC 1113 per Kirby ACJ, CA(NSW); Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] 3 VR 16 at 96-7; BC9702676 per Hansen J; Cetojevic v Cetojevic [2007] NSWCA 33; BC200701029 at [34] per Hodgson JA; Cressy v Johnson [2009] VSC 52; BC200900936 at [197] per Kaye J. See also Tracy v Bifield (1998) 23 Fam LR 260 at 263 per Tempelman J ([The] remedy of constructive trust is not a panacea to be applied in any case in which there have been unequal contributions in the acquisition of the relevant assets). 2 Muschinski v Dodds (1985) 160 CLR 583 at 616; 62 ALR 429; BC8501051 per Deane J; Carson v Wood (1994) 34 NSWLR 9 at 26 per Sheller JA, CA(NSW). 3 Green v Green (1989) 17 NSWLR 343 at 353, 355; 13 Fam LR 336 per Gleeson CJ, CA(NSW); Sui Mei Huen v Official Receiver (2008) 248 ALR 1; 39 Fam LR 355; [2008] FCAFC 117; BC200804944 at [70]-[81] per Ryan, Moore and Tamberlin JJ. 4 Lipman v Lipman (1989) 13 Fam LR 1, SC(NSW); Anson v Anson (2004) 12 BPR 22,303; [2004] NSWSC 766; BC200406099 at [43] per Campbell J; Robinson v Rouse [2005] TASSC 48; BC200503613 at [29] per Blow J (adding that factors such as needs, means, and earning capacity are not relevant to the question whether it would be unconscionable to deny a plaintiff an interest in property, nor in determining the quantum of a plaintiffs interest); McKay v McKay [2008] NSWSC 177; BC200801670 at [30]-[33] per Brereton J; Downham v McCallum [2008] TASSC 81; BC200811309 at [105] per Porter J. 5 As to the equitable doctrine of mistake see equity [185-935], [185-991]. 6 As to the equitable doctrine of undue influence see equity [185-970]-[185-985]. 7 As to the equitable doctrine of unconscionable dealing see equity [185-945]-[185-966]. 8 Harmer v Pearson (1993) 16 Fam LR 596 at 599 per Fitzgerald P and de Jersey J, at 600 per Pincus JA, CA(QLD); West v Mead (2003) 13 BPR 24,431; [2003] NSWSC 161; BC200301515 at [63]; Waterhouse v Power [2003] QCA 155; BC200301614 at [23], [24] per Williams JA; Anson v Anson (2004) 12 BPR 22,303; [2004] NSWSC 766; BC200406099 at [38] per Campbell J. Compare Dunne v Turner (unreported, CA(QLD), Pincus J, 196/95, 20 August 1996) at 6; Brennan v Duncan [2006] NSWSC 674; BC200605590 at [54]-[57] per White J; Phillips v Price [2007] WASC 54; BC200701429 at [133]-[139] per Hasluck J; WMJ Attractions Pty Ltd v Ireland [2008] QSC 140; BC200805057 at [42], [43] per Daubney J. 9 Windt v Carabelas (2002) 224 LSJS 124; [2002] SASC 418; BC200207629 at [92]; Paulet v Stewart [2009] VSC 60; BC200900991 at [280]-[282] per Habersberger J. 10 Clancy v Salienta Pty Ltd (2000) 11 BPR 20,425; [2000] NSWCA 248; BC200006442 at [199], [200] per Stein JA, CA(NSW). 11 Bryson v Bryant (1992) 29 NSWLR 188 at 222; 16 Fam LR 112 per Sheller JA, CA(NSW).

12 Ikeuchi v Liu (2001) 160 FLR 94 at 116; [2001] QSC 054; BC200100618. The paragraph below is current to 20 April 2012

[430-640] Constructive trust based on common intention Although the High Court of Australia has authoritatively stated that the basis of constructive trusteeship in cases of contributions to property or a relationship rests in unconscionable conduct,1 Australian courts continue to entertain arguments, usually as an alternative to the argument based on unconscionable conduct, based on the previous approach of imposing a constructive trust according to the actual or inferred (but not imputed) common intention of the parties.2 The relevant common intention may be derived from the evidence of express agreement or the making of admissions, or it can be inferred from, for example, the making of contributions to the cost of property, or meeting expenses in maintaining it.3 The latter highlights that a common intention constructive trust may arise from an agreement or common intention arising after acquisition of the relevant property.4 Of itself a promise of marriage or the existence of cohabitation does not carry with it a common intention that the parties will share equally in the beneficial interests of the property the subject of the relationship.5 Even with the proof of the requisite intention, equity will not intervene by means of constructive trusteeship in the absence of detriment or material disadvantage to the claimant such that it would be fraud on the claimant for the other party to assert that the claimant has no beneficial interest in the property.6 Conduct that is insufficient to establish a common intention as to the ownership of the property may be sufficient to constitute relevant actions to the plaintiffs detriment to establish a trust if the common intention is established otherwise.7 Disappointed expectation is not of itself sufficient to constitute detriment for this purpose.8 Nor will the decision to continue a normal pregnancy9 or the plaintiffs conduct in leaving a moribund marriage10 constitute detriment. Conversely, reliance by a person on a promise by his or her de facto spouse that they would become co-owners of property purchased in the name of the latter, by living in makeshift housing and assisting the latter in working and improving the property has been held to constitute sufficient detriment.11 The case law also reveals occasions where a promise to leave property by will, which is not subsequently reflected by the terms of the will, has been found to justify a constructive trust claim in circumstances where the promisee has suffered detriment in reliance on the promise.12

As the common intention constructive trust, at least in theory, is given effect by virtue of intentions expressed by the parties at an earlier (and often a significantly earlier) time, it provides a vehicle through which claims to property may secure priority ahead of later claims, especially in the context of insolvency, without any need to backdate the effect of the trust.13

The requirements of a common intention or a common assumption as to a state of affairs, and reliance upon that intention or assumption to ones detriment, serve to characterise this form of constructive trust as a form of proprietary estoppel.14

Notes 1 See [430-620]-[430-635]. 2 Green v Green (1989) 17 NSWLR 343; 13 Fam LR 336 per Gleeson CJ, CA(NSW); Hinson v Buenaventura (1994) 18 Fam LR 40, CA(QLD); Stowe v Stowe (1995) 15 WAR 363; 127 FLR 25 at 29-34; BC9503617 per Ipp, Owen and White JJ, SC(WA), Full Court; Carruthers v Manning [2001] NSWSC 1130; BC200108031 at [121]-[123]; Shepherd v Doolan [2005] NSWSC 42; BC200505692 at [33]-[54] per White J; Sivritas v Sivritas [2008] VSC 374; BC200808514 at [134]

per Kyrou J. Compare Brandling v Weir [2003] NSWSC 723; BC200304473 at [34] per Barrett J (who viewed the common intention approach as an example of or aspect of the application of a wider principle based on unconscionability). Australian case law applying the so called common intention constructive trust owes its origin to the approach of the English courts which, lacking the armoury of the remedial constructive trust, adopted a means whereby contributions to property based on the parties intentions could form the basis of a constructive trust (so characterised to avoid the formality requirements applicable to express trusts): see, for example Pettitt v Pettitt [1970] AC 777; [1969] 2 All ER 385, HL; Gissing v Gissing [1971] AC 886; [1970] 2 All ER 781, HL; Grant v Edwards [1986] Ch 638; [1986] 2 All ER 426; [1986] 3 WLR 114; Lloyds Bank Plc v Rosset [1991] AC 107 at 132-3 per Lord Bridge, HL. The principal problem with this approach is that a trust arising from actual or inferred intention is ordinarily an express trust (see [430-240]-[430-257]), and in any case an oral express trust of land may be enforced in circumstances where the statutory formalities would operate as an instrument of fraud: Jahnsen v Jahnsen [2002] NSWSC 995; BC200206366 at [32] per Bergin J. See [430-235]. In any case, though, the English House of Lords has now revised its approach to the division of property upon the breakdown of non-marital domestic relationships, to the effect that: (1) where parties place their home in joint names, the burden is on the one asserting his or her ownership of the property other than in equal shares to rebut the presumption of joint beneficial ownership that arises from the legal co-ownership; and (2) the court must have regard to all the circumstances that would throw light on their shared intentions and not just their financial contributions to the cost of acquiring the property: Stack v Dowden [2007] 2 AC 432; [2007] 2 All ER 929; [2007] 2 WLR 831; [2007] UKHL 17. 3 Allen v Snyder [1977] 2 NSWLR 685 at 690-1 per Glass JA, at 698 per Samuels JA; (1979) FLC 90-656, CA(NSW); Vedejs v Public Trustee [1985] VR 569 at 572-3 per Nicholson J; Shepherd v Doolan [2005] NSWSC 42; BC200505692 at [37], [38] per White J; Williams v Parris [2008] All ER (D) 235 (Oct); [2008] EWCA Civ 1147; Crafter v Crafter [2011] FamCA 122 at [82] per Murphy J (noting, however, that where domestic and business interests are intertwined, alleged common intention directed to the business interests should be punctuated by greater clarity). Compare Brandling v Weir [2003] NSWSC 723; BC200304473 at [32], [33] per Barrett J. 4 Director of Public Prosecutions v Ali (No 2) [2010] VSC 503; BC201008366 at [75] per Hargrave J. 5 Grant v Edwards [1986] Ch 638 at 648; [1986] 2 All ER 426; [1986] 3 WLR 114 per Nourse LJ, CA; Green v Green (1989) 17 NSWLR 343 at 353; 13 Fam LR 336 per Gleeson CJ, CA(NSW); Stowe v Stowe (1995) 15 WAR 363; 127 FLR 25 at 31-3; BC9503617 per Ipp, Owen and White JJ, SC(WA), Full Court; Brandling v Weir [2003] NSWSC 723; BC200304473 at [32] per Barrett J. 6 Ogilvie v Ryan [1976] 2 NSWLR 504; Hohol v Hohol [1981] VR 221 at 225; (1980) 6 Fam LR 49 per OBryan J; Cooke v Cooke [1987] VR 625; Higgins v Wingfield [1987] VR 689 at 694-6 per McGarvie J; Loone v Tasmanian Trustees Ltd 1987 Tas R 146; Green v Green (1989) 17 NSWLR 343 at 354-6; 13 Fam LR 336 per Gleeson CJ, CA(NSW); Hinson v Buenaventura (1994) 18 Fam LR 40. 7 Shepherd v Doolan [2005] NSWSC 42; BC200505692 at [40] per White J. 8 Higgins v Wingfield [1987] VR 689. 9 Cooke v Cooke [1987] VR 625. 10 Thwaites v Ryan [1984] VR 65.

11 Hohol v Hohol [1981] VR 221; (1980) 6 Fam LR 49. 12 See, for example, Saliba v Tarmo [2009] NSWSC 581; BC200905518. 13 Secretary, Dept of Social Security v Agnew (2000) 96 FCR 357 at 365-6; 31 AAR 42; [2000] FCA 59; BC200000114, Full Court. See also Parsons v McBain (2001) 109 FCR 120; 192 ALR 772; [2001] FCA 376; BC200101460, Full Court. 14 Grant v Edwards [1986] Ch 638 at 656-7; [1986] 2 All ER 426; [1986] 3 WLR 114 per BrowneWilkinson VC, CA; Higgins v Wingfield [1987] VR 689 at 695-6 per McGarvie J; Austin v Keele (1987) 10 NSWLR 283 at 290; 72 ALR 579; 61 ALJR 605 per Lord Oliver, PC; Yaxley v Gotts [2000] Ch 162; [2000] 1 All ER 711; [1999] 3 WLR 1217 at 1227, 1231 per Robert Walker LJ; Banner Homes Group Plc v Luff Developments Ltd [2000] Ch 372; [2000] 2 WLR 772 at 793 per Chadwick LJ; Oxley v Hiscock [2004] 3 All ER 703; [2004] EWCA Civ 546 at [66]-[71] per Chadwick LJ, with whom Mance and Scott Baker LJJ concurred; Australian Building & Technical Solutions Pty Ltd v Boumelhem [2009] NSWSC 460; BC200904847 at [111]-[118] per Ward J; Saliba v Tarmo [2009] NSWSC 581; BC200905518. Compare Stack v Dowden [2007] 2 AC 432; [2007] 2 All ER 929; [2007] 2 WLR 831; [2007] UKHL 17 at [37] per Lord Walker; Herbert v Doyle (2010) 13 ITELR 561; [2010] NPC 100; [2010] EWCA Civ 1095 at [54][57] per Arden LJ. As to proprietary estoppel see estoppel [190-295], [190-300]. The paragraph below is current to 20 April 2012

[430-645] Constructive trust based on unjust enrichment Although there are judicial comments in Australian courts that unjust enrichment may provide a basis or foundation for the imposition of constructive trusteeship in the context of contributions within a joint relationship or endeavour,1 and that plaintiffs continue to plead unjust enrichment as a cause of action in seeking constructive trust relief,2 the prevailing view remains one grounded in the concept of unconscionability.3 Notes 1 Baumgartner v Baumgartner (1987) 164 CLR 137 at 153; 76 ALR 75; 62 ALJR 29; 11 Fam LR 915 per Toohey J; Stephenson Nominees Pty Ltd v Official Receiver on behalf of Official Trustee in Bankruptcy; Ex parte Roberts (1987) 16 FCR 536; 76 ALR 485 at 503 per Gummow J; Bryson v Bryant (1992) 29 NSWLR 188 at 205; 16 Fam LR 112 per Kirby P, CA(NSW). Compare Muschinski v Dodds (1985) 160 CLR 583 at 617; 62 ALR 429; BC8501051 per Deane J (It may well be that the development of the law of this country on a case by case basis will eventually lead to the identification of some overall concept of unjust enrichment as an established principle constituting the basis of decision of past and future cases [H]owever, no such general principle is as yet established, as a basis of decision as distinct from an informative generic label for purposes of classification, in Australian law. The most that can be said at the present time is that unjust enrichment is a term commonly used to identify the notion underlying a variety of distinct categories of case in which the law has recognised an obligation on the part of a defendant to account for a benefit derived at the expense of a plaintiff). 2 Gazzola v Gazzola (1990) 92 ALR 45, HC of A; Stowe v Stowe (1995) 15 WAR 363; 127 FLR 25 at 39-40; BC9503617 per Ipp, Owen and White JJ, SC(WA), Full Court. 3 Muschinski v Dodds (1985) 160 CLR 583 at 598-9 per Mason J, at 619-23 per Deane J; 62 ALR 429; BC8501051; Baumgartner v Baumgartner (1987) 164 CLR 137 at 149-50; 76 ALR 75; 62 ALJR 29; 11 Fam LR 915 per Mason CJ, Wilson and Deane JJ; Bryson v Bryant (1992) 29 NSWLR 188 at 222-3; 16 Fam LR 112 per Sheller JA, CA(NSW). As to the concept of unconscionability see [430-635]. In Canada, the remedy of constructive trust has evolved by the application of the principles of unjust enrichment: Pettkus v Becker (1980) 117 DLR (3d) 257, SC(Canada); Peter v Beblow (1993) 101 DLR (4th) 621. Compare Soulos v Korkontzilas (1997) 146 DLR (4th) 214,

SC(Canada). The paragraph below is current to 20 April 2012

[430-650] Alternatives to constructive trusteeship Constructive trusteeship is not the only means courts have adopted to recognise beneficial interests in property arising from contributions to such property or the relationship within which the property is purchased or constructed. Informed by the basic equitable remedial principle of the minimum equity to do justice,1 other approaches include: (1) the imposition of an equitable charge or lien representing the quantum of the relevant contribution (for example, where a person has expended money on property in the belief that they would be able to live on the property);2 or (2) allowing a person to retain his or her interest in property on the condition that he or she pay specified compensation to the other party who made contributions in respect of the property.3 It is open to the court to make a finding of equitable estoppel where a party has made a representation to another party that the latter either has (or will have) an interest in property, upon which the representee relies to his or her detriment in circumstances in which resiling from the representation is unconscionable, and either enforce the representation (which can be done via a constructive trust) or award compensation in lieu.4

Notes 1 Sirtes v Pryer [2005] NSWSC 1082; BC200508898 at [12]-[14] per Burchett AJ. 2 Chalmers v Pardoe [1963] 3 All ER 552; [1963] 1 WLR 677 at 681-2 per Sir Terence Donovan, PC; Morris v Morris [1982] 1 NSWLR 61 at 63-4 per McLelland J; Plumb v Breen (unreported, SC(NSW), Young J, 13 December 1990); Kais v Turvey (1994) 11 WAR 357; 17 Fam LR 498 at 510 per Ipp J, SC(WA), Full Court; Knox v Knox (unreported, SC(NSW), Young J, 16 December 1994); Wright v Wright (1997) FLC 92-761; In the Marriage of Cierpiatka (1999) 25 Fam LR 548 at 557; (1999) FLC 92-864; [1999] FamCA 1286, Fam C of A, Full Court; Palinkas v Palinkas [2009] NSWSC 92; BC200901466; Australian Building & Technical Solutions Pty Ltd v Boumelhem [2009] NSWSC 460; BC200904847 at [172] per Ward J (lien). Compare Tracy v Bifield (1998) 23 Fam LR 260 at 268-70 per Tempelman J, SC(WA); Cumming v Sands (2001) NSW ConvR 55989; [2001] NSWSC 2; BC200101055 at [13]-[15]; Mohedo v Mohedo [2002] WASC 240; BC200206181 at [35]; Americana Leadership College v Coll [2003] NSWSC 295; BC200301693; Harris v Harris [2004] NSWSC 638; BC200404765; Sirtes v Pryer [2005] NSWSC 1082; BC200508898; Pennie v Pennie [2010] NSWSC 565; BC201003558. Where a monetary amount representing the relevant contribution does not adequately reflect the increase in value of the property in question the court may impose a constructive trust over a proportion of the property: see, for example, Kriezis v Kriezis [2004] NSWSC 167; BC200401174 at [25] per Burchett AJ. As to equitable charges see equity [185-245].

3 Muschinski v Dodds (1985) 160 CLR 583 at 605-6 per Brennan J, at 624-5 per Dawson J; 62 ALR 429; BC8501051; Kais v Turvey (1994) 11 WAR 357; 17 Fam LR 498 at 500-1 per Malcolm CJ, at 504-5 per Ipp J, SC(WA), Full Court; National Australia Bank Ltd v Maher [1995] 1 VR 318 at

321 per Fullagar J, CA(VIC). As to compensation in equity see equity [185-1580].

4 Stowe v Stowe (1995) 15 WAR 363; 127 FLR 25 at 40-7; BC9503617 per Ipp, Owen and White JJ, SC(WA), Full Court; Giumelli v Giumelli (1999) 196 CLR 101; 161 ALR 473; [1999] HCA 10; BC9901018. As to the doctrine of equitable estoppel see estoppel [190-290]-[190-350].

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(V) Enforcement of Mutual Wills and Secret Trusts by Constructive Trust

The paragraph below is current to 20 April 2012 [430-655] Mutual wills Where two people (usually a husband and wife)1 execute mutual wills under which the survivor takes under the will having agreed that he or she will not revoke his or her will, the law imposes upon the survivor an obligation which is specifically enforceable as a constructive trustee, the terms of which are those of the will which he or she undertook would be his or her last will.2 The trust does not arise under the will, or any previous will, of the surviving testator, but arises out of the agreement between the two testators not to revoke their wills, and takes effect in the sense that the survivor may only use the assets the subject of the agreement bona fide without any intention to defeat that agreement when the first of the two dies without having revoked his or her will.3 Revocation of the agreement by either party is permissible if communicated to the other party prior to the other partys death or mental incapacity,4 and hence the trust arises upon a partys death or mental incapacity.5 The underlying basis of the mutual wills doctrine is that a court of equity will not permit a person to whom property is transferred by way of gift, but on the faith of an agreement or clear understanding that it is to be dealt with in a particular way for the benefit of a third person, to deal with that property inconsistently with that agreement or understanding.6 The foregoing does not mean that the surviving testator is entirely precluded from disposing or dealing with the property the subject of the mutual wills agreement during his or her lifetime; rather, the law dictates that the surviving testator is not permitted fraudulently, in the sense used in equity, to render his or her promise nugatory by making substantial gifts during his or her lifetime.7 It is in this sense that it can be said that the common practical result of the mutual wills doctrine is that the survivor assumes a position akin to that of a life tenant rather than that of absolute owner of the property the subject of the agreement.8 The onus lies on the plaintiff to establish by clear evidence, on the balance of probabilities, the existence and terms of the alleged agreement.9 Nothing short of evidence of a definite express (or implied)10 agreement not to revoke the will sufficient to constitute a contract at law suffices to impose the constructive trust obligation.11 Though relevant, the fact that there are mutual wills to the same effect is in and of itself not sufficient evidence to prove the alleged agreement.12 All the surrounding circumstances, the history and the factual matrix, are to be taken into account in deciding whether there was such an agreement.13 Recitals may provide the requisite proof of mutual wills.14 There is, however, no requirement that the testators confer mutual benefits on each other under the agreement.15 Notes 1 Mutual wills generally arise between husband and wife although this is not necessarily the case: Lord Walpole v Lord Orford (1797) 3 Ves 402; 30 ER 1076 .2 Birmingham v Renfrew (1937) 57 CLR 666 at 682-3; [1937] VLR 327; (1937) 11 ALJ 188; [1937] ALR 520 per Dixon J; Bigg v Queensland Trustees Ltd [1990] 2 Qd R 11 at 14-16 per McPherson J; Re Newey (decd) [1994] 2 NZLR 590 at 593-4 per Hammond J; Low v Perpetual Trustees WA Ltd (1995) 14 WAR 35 at 38-9 per Adams M; Re Goodchild (decd); Goodchild v Goodchild [1997] 3 All ER 63 at 70-1, 75; [1997] 1 WLR 1216 at 1224-5, 1229 per Leggatt LJ and Morritt LJ respectively, CA; Olins v Walters [2009] Ch 212; [2009] 2 WLR 1; [2008] EWCA Civ 782 at [36]-[40] per Mummery LJ.3 Thomas and Agnes Carvel Foundation v Carvel [2008] Ch 395; [2007] 4 All ER 81; [2008] 2 WLR 1234; [2007] EWHC 1314 (Ch) at [27] per Lewison J; Russo v Russo [2009] VSC 491; BC200909768 at [31] per Hargrave J; Pridham v Pridham (2010) 270 LSJS 433; [2010] SASC 204; BC201004728 at [23][28] per Layton J.4 Dufour v Pereira (1769) 1 Dick 419 at 420-1; 21 ER 332 at 333 per Lord Camden LC; Stone v Hoskins [1905] P 194 ; Hudson v Gray (1927) 39 CLR 473 at 488; 1 ALJ 126 per Isaacs J; Birmingham v Renfrew (1937) 57 CLR 666 at 682; [1937] VLR 327; (1937) 11 ALJ 188; [1937] ALR 520 per Dixon J; Low v Perpetual Trustees WA Ltd (1995) 14 WAR 35 at 38-9 per Master Adams.5 Dufour v Pereira (1769) 1 Dick 419; 21 ER 332 ; Re Hagger; Freeman v Arscott [1930] 2 Ch 190 at 194;

(1930) 143 LT 610 per Clauson J; Birmingham v Renfrew (1937) 57 CLR 666; [1937] VLR 327; (1937) 11 ALJ 188; [1937] ALR 520 ; Bigg v Queensland Trustees Ltd [1990] 2 Qd R 11 at 16 per McPherson J. Compare Stone v Hoskins [1905] P 194 ; Re Oldham; Hadwen v Myles [1925] Ch 75; [1924] All ER Rep 288 (which suggest that the death of the first party serves to allow the survivor to disclaim the benefits under the will and to avoid the necessity of being bound by the agreement).6 Re Cleaver (decd); Cleaver v Insley [1981] 2 All ER 1018 at 1024; [1981] 1 WLR 939 at 947 per Nourse J; Re Newey (decd) [1994] 2 NZLR 590 at 593-4 per Hammond J; Olins v Walters [2009] Ch 212; [2009] 2 WLR 1; [2008] EWCA Civ 782 at [36][40] per Mummery LJ. This is also the basis for the doctrine of secret trusts: see [430-110].7 Fazari (as Executrix of Estate of Cosentino (decd)) v Cosentino [2010] WASC 40; BC201001099 at [32]-[51] per Le Miere J.8 Birmingham v Renfrew (1937) 57 CLR 666 at 689; [1937] VLR 327; (1937) 11 ALJ 188; [1937] ALR 520 per Dixon J.9 Birmingham v Renfrew (1937) 57 CLR 666 at 681; [1937] VLR 327; (1937) 11 ALJ 188; [1937] ALR 520 per Dixon J; Re Cleaver (decd); Cleaver v Insley [1981] 2 All ER 1018 at 1024; [1981] 1 WLR 939 at 947 per Nourse J; Low v Perpetual Trustees WA Ltd (1995) 14 WAR 35 at 39 per Master Adams; Osborne v Estate of Osborne [2001] VSCA 228; BC200107833 at [12] per Winneke P ; Lewis v Cotton [2001] 2 NZLR 21 at 30-32 per Blanchard J , CA.10 Bigg v Queensland Trustees Ltd [1990] 2 Qd R 11 at 13 per McPherson J; Pridham v Pridham (2010) 270 LSJS 433; [2010] SASC 204; BC201004728 at [23][28] per Layton J.11 Gray v Perpetual Trustee Co Ltd (1928) 40 CLR 558; [1928] AC 391 at 400; [1928] ALR 238; [1928] All ER Rep 758 at 762 per Viscount Haldane, PC; Re Cleaver (decd); Cleaver v Insley [1981] 2 All ER 1018 at 1023; [1981] 1 WLR 939 at 945 per Nourse J; Re Dale (decd); Proctor v Dale [1994] Ch 31; [1993] 4 All ER 129 at 142; [1993] 3 WLR 652 per Morritt J; Re Newey (decd) [1994] 2 NZLR 590 at 593-4 per Hammond J; Re Goodchild (decd); Goodchild v Goodchild [1997] 3 All ER 63 at 70-1, 75; [1997] 1 WLR 1216 at 1224-5, 1229 per Leggatt LJ and Morritt LJ respectively, CA; Sheslow v Kostin (1997) 11 BPR 21,043 at 21,048; BC9702183 per Young J , SC(NSW). Compare Osborne v Estate of Osborne [2001] VSCA 228; BC200107833 at [18] per Winneke P (Whether one calls it a contract, an agreement, an undertaking or legally enforceable promise is merely a matter of nomenclature); Lewis v Cotton [2001] 2 NZLR 21 at 32 per Blanchard J , CA.12 Re Oldham; Hadwen v Myles [1925] Ch 75; [1924] All ER Rep 288 ; Gray v Perpetual Trustee Co Ltd (1928) 40 CLR 558; [1928] AC 391; [1928] ALR 238; [1928] All ER Rep 758 , PC; Birmingham v Renfrew (1937) 57 CLR 666 at 674-5; [1937] VLR 327; (1937) 11 ALJ 188; [1937] ALR 520 per Latham CJ; Re Cleaver (decd); Cleaver v Insley [1981] 2 All ER 1018 at 1023; [1981] 1 WLR 939 at 945 per Nourse J; Re Newey (decd) [1994] 2 NZLR 590 at 595 per Hammond J; Baird v Smee [2000] NSWCA 253; BC200005399 at [6] per Mason P, at [27] per Handley JA, at [71] per Giles JA ; Osborne v Estate of Osborne [2001] VSCA 228; BC200107833 at [15] per Winneke P ; Lewis v Cotton [2001] 2 NZLR 21 at 31-2 per Blanchard J , CA.13 Re Newey (decd) [1994] 2 NZLR 590 at 595 per Hammond J.14 Re Green (decd); Lindner v Green [1951] Ch 148; [1950] 2 All ER 913 .15 Re Dale (decd); Proctor v Dale [1994] Ch 31; [1993] 4 All ER 129 at 137; [1993] 3 WLR 652 per Morritt J. The paragraph below is current to 20 April 2012 [430-660] Secret trusts Although there are judicial statements to the effect that a secret trust 1 is a variety of constructive trust,2 the better view would appear to be that a secret trust is a form of express trust.3 Notes 1 As to secret trusts see [430-110], [430-350]-[430-375].2 Dixon v White (unreported, SC(NSW), Holland J, 14 April 1982). Compare Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; 100 LGERA 383; 157 ALR 414 at 424; 72 ALJR 1470 , HC of A, Full Court.3 As to express trusts see [430-210]-[430-445]. In Brown v Pourau [1995] 1 NZLR 352 at 368 per Hammond J suggested that the express trust so created could be enforced by means of constructive trusteeship, but there is no need for a constructive trust to enforce a preexisting express trust .

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[Halsbury's Laws of Australia]

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(VI) Constructive Trust on Sale of Land The paragraph below is current to 20 April 2012 [430-665] Vendor of land as constructive trustee Where the vendor1 of property is contractually bound to dispose that property to a purchaser who has given value, unless the express terms of the contract of sale provide otherwise,2 the vendor holds the land as constructive trustee for the purchaser until the date on which the full purchase price is paid.3 This requires the vendor to preserve the property in its state at the time of the contract, so that the purchaser receives what he has acquired under the contract.4 This is not an ordinary trusteeship, as an uncompleted contract for the sale of land is not equivalent to an immediate, irrevocable declaration of trust in the land.5 The purchaser does not have unqualified beneficial ownership he or she has no right to enter upon the property, take possession of it, use it or receive income from it until completion6 but beneficial ownership is in a sense split between them on the provisional assumptions that specific performance is available and that the contract will in due course be completed.7 Rather, the purchasers equitable interest is contingent only; it is subject to the payment of the purchase money8 and continues to exist only so long as the contract remains specifically enforceable at the suit of the purchaser.9 In this context, specific performance is interpreted broadly to encompass all those remedies available to a purchaser in equity to protect the interest which he or she has acquired under the contract, including relief by way of injunction.10 Notes 1 Even if the title is not yet vested in the vendor, the vendors conscience and the property itself are bound upon the acquisition occurring: Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1 at 16-17 per Latham CJ, at 27 per Dixon J; [1937] ALR 432 ; Booth v FCT (1987) 164 CLR 159; 76 ALR 375; 62 ALJR 40; 19 ATR 514 .2 Lysaght v Edwards (1876) 2 Ch D 499 at 506; 45 LJ Ch 554; 34 LT 787 per Jessel MR; Stern v McArthur (1988) 165 CLR 489 at 522; 81 ALR 463; 62 ALJR 588 per Deane and Dawson JJ.3 Shaw v Foster (1872) LR 5 HL 321 at 349 per Lord OHagan, at 356 per Lord Hatherley LC; 42 LJ Ch 49; 27 LT 281 ; Lysaght v Edwards (1876) 2 Ch D 499 at 506, 510; 45 LJ Ch 554; 34 LT 787 per Jessel MR; Brunker v Perpetual

Trustee Co (Ltd) (1937) 57 CLR 555 at 581; [1937] ALR 349 per Latham CJ; Haque v Haque (No 2) (1965) 114 CLR 98 at 124-5; [1966] ALR 553; (1965) 39 ALJR 144 per Kitto J; Chang v Registrar of Titles (1976) 137 CLR 177 at 184-5 per Mason J, at 189-90 per Jacobs J; 8 ALR 285; 50 ALJR 404 ; Hewett v Court (1983) 149 CLR 639 at 653-4; 46 ALR 87; 57 ALJR 211 per Wilson and Dawson JJ; Legione v Hateley (1983) 152 CLR 406 at 423; 46 ALR 1; 57 ALJR 292 per Gibbs CJ and Murphy J; KLDE Pty Ltd (in vol liq) v Cmr of Stamp Duties (Qld) (1984) 155 CLR 288 at 296-7 per Gibbs CJ, Mason, Wilson and Dawson JJ, at 300-1 per Brennan J (in dissent); Stern v McArthur (1988) 165 CLR 489 at 521-3; 81 ALR 463; 62 ALJR 588 per Deane and Dawson JJ ; Valoutin Pty Ltd v Furst (1998) 154 ALR 119 at 131-2 per Finkelstein J ; Halloran v Minister Administering National Parks and Wildlife Act 1974 (1999) 105 LGERA 405 at 424-5; [1999] NSWLEC 268 per Talbot J , LEC(NSW).4 Englewood Properties Ltd v Patel [2005] 3 All ER 307; [2005] 1 WLR 1961 at [54], [58] per Lawrence Collins J .5 Jerome v Kelly (Inspector of Taxes) [2004] 2 All ER 835 [2004] 1 WLR 1409 at [32] per Lord Walker , HL.6 Road Australia Pty Ltd v Cmr of Stamp Duties [2001] 1 Qd R 327; (1999) 42 ATR 636 at 641-2; [1999] QCA 328; BC9905020 .7 Jerome v Kelly (Inspector of Taxes) [2004] 2 All ER 835 [2004] 1 WLR 1409 at [32] per Lord Walker , HL.8 KLDE Pty Ltd (in vol liq) v Cmr of Stamp Duties (Qld) (1984) 155 CLR 288 at 296-7 per Brennan J ; Carson v Wood (1994) 34 NSWLR 9 at 15 per Clarke JA , CA(NSW).9 Central Trust and Safe Deposit Co v Snider [1916] 1 AC 266 at 272; (1915) 114 LT 250 per Lord Parker, PC; Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84 at 96; 22 ALR 365 per Isaacs J; Kern Corp Ltd v Walter Reid Trading Pty Ltd (1987) 163 CLR 164 at 191; 71 ALR 417; 61 ALJR 314 per Deane J; Stern v McArthur (1988) 165 CLR 489 at 521-3; 81 ALR 463; 62 ALJR 588 per Deane and Dawson JJ; Carson v Wood (1994) 34 NSWLR 9 at 15 per Clarke JA, CA(NSW).10 Stern v McArthur (1988) 165 CLR 489 at 521-3; 81 ALR 463; 62 ALJR 588 per Deane and Dawson JJ. The proposition cited in the text would appear to reconcile two apparently competing views which have stemmed from the High Court of Australia: Brown v Heffer (1967) 116 CLR 344 at 349; [1968] ALR 89; (1967) 41 ALJR 195 per Barwick CJ, McTiernan, Kitto and Owen JJ (the purchasers equitable interest under a contract of sale is commensurate only with his or her ability to obtain specific performance of it). See also Howard v Miller [1915] AC 318; (1914) 112 LT 403 , PC; Central Trust and Safe Deposit Co v Snider [1916] 1 AC 266 at 272; (1915) 114 LT 250 per Lord Parker, PC. Compare Legione v Hateley (1983) 152 CLR 406 at 446; 46 ALR 1; 57 ALJR 292 per Mason and Deane JJ (the purchasers equitable interest under a contract of sale is commensurate with his or her ability to protect his or her interest under the contract by injunction or otherwise has much to commend it; by interpreting specific performance in the broad sense, any conflict is removed). As to specific performance of contracts for the sale of land see contract [110-11855]. As to injunctions see equity [185-1400]-[185-1568]. The paragraph below is current to 20 April 2012 [430-670] Undertaking to hold property subject to specified right A purchaser of property who has undertaken to hold title in the property subject to a third partys right of repurchase, and who subsequently repudiates that partys right, holds title to the property as a constructive trustee for the third party to the extent of the third partys interest.1 In this context, what attracts constructive trusteeship is the unconscionable attempt by the purchaser to deny the third partys interest inconsistently with the purchasers undertaking.2 Where two or more persons make an agreement that one of them is to purchase property on behalf of all of them, this pre-acquisition agreement colours the subsequent acquisition, leading the purchaser to be treated as a constructive trustee of the property purchased if he or she seeks to act inconsistently with the agreement.3 It is unnecessary that the agreement in question be contractually enforceable.4 What is essential to the trust being imposed is that the circumstances make it unconscionable for the acquiring party to retain the property himself or herself in a manner inconsistent with the agreement.5 Notes

1 Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 638 per Wilson and Toohey JJ, at 654-5 per Brennan J; 78 ALR 1; [1988] HCA 16; BC8802595 ; Ryan v Starr [2005] NSWSC 170; BC200501394 at [92]-[99] per White J . See also Timber Top Realty Pty Ltd v Mullens [1974] VR 312; (1973) 31 LGRA 82 ; Bunny Industries Ltd v FSW Enterprises Pty Ltd [1982] Qd R 712; (1982) ANZ ConvR 627 , SC(QLD), Full Court (sale by vendor to second purchaser before completion of first contract of sale). In Bahr v Nicolay (No 2) (1988) 164 CLR 604; 78 ALR 1; [1988] HCA 16; BC8802595 , Mason CJ and Dawson J characterised this trust as an express trust (as did Wood J in Snowlong Pty Ltd v Choe (1991) 23 NSWLR 198 at 211-12; (1992) ANZ ConvR 144 ): see [430-240]-[430-257].2 Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 654-5; 78 ALR 1; [1988] HCA 16; BC8802595 per Brennan J .3 Banner Homes Group Plc v Luff Developments Ltd [2000] Ch 372; [2000] 2 WLR 772 at 793 per Chadwick LJ . This could alternatively be seen as an illustration of the so called common intention constructive trust: see [430-640].4 Banner Homes Group Plc v Luff Developments Ltd [2000] Ch 372; [2000] 2 WLR 772 at 794 per Chadwick LJ.5 Banner Homes Group Plc v Luff Developments Ltd [2000] Ch 372; [2000] 2 WLR 772 at 795 per Chadwick LJ. The paragraph below is current to 20 April 2012 [430-675] Surplus money received from sale of mortgaged property Where a mortgagee, after selling the property mortgaged and applying the proceeds to satisfy the indebtedness secured by the mortgage, is left with a surplus in his or her hands, that surplus is impressed with a constructive trust in favour of any subsequent encumbrancer, and in the absence of any such encumbrancer, the mortgagor.1 Notes 1 Talbot v Frere (1878) 9 Ch D 568 at 572-4 per Jessel MR; Banner v Berridge (1881) 18 Ch D 254; 44 LT 680 ; Charles v Jones (1887) 35 Ch D 544 at 549; 56 LT 848 per Kay J; Re HE Thorne & Son Ltd [1914] 2 Ch 438 at 450-1 per Astbury J; National Westminster Bank Ltd v Halesowen Presswork & Assemblies Ltd [1972] AC 785 at 808 per Lord Simon, at 812 per Lord Cross, at 821 per Lord Kilbrandon; [1972] 1 All ER 641; [1972] 2 WLR 455 , HL; Lloyds Bank NZA Ltd v National Safety Council of Australia Victorian Division (in liq) [1993] 2 VR 506; (1993) 115 ALR 93 at 98-9; 10 ACSR 572 per Marks J (who suggested that the trust in question could, in light of modern authority, be better characterised as a resulting trust), at 102 per J D Phillips J, CA(VIC).

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[Halsbury's Laws of Australia]

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(4) THE TRUST ESTATE

This chapter was updated by G E Dal Pont LLM (Mich) LLD (Tas) CPA Professor, Faculty of Law, University of Tasmania

The paragraph below is current to 20 April 2012 [430-730] Presumption that no beneficial interest taken Property given to a person described as trustee of that property is presumed not to vest any beneficial interest in that person.1 This presumption stems from the nature of a trust, pursuant to which the trustee holds legal title to trust property for the benefit of those beneficially entitled to it, the beneficiaries.2 If the settlor fails to dispose of the entire beneficial interest the subject of an express trust, the intended trustee holds the undisposed property on resulting trust for the settlor or the settlors personal representatives.3 However, in the latter case, it may be expressed in or inferred from the terms of the instrument of disposition, that the person described as trustee is intended by the settlor to take the excess beneficially, even though subject to a condition.4 Extrinsic evidence, such as alleged oral statements of the testator, is not admissible to show that a person taking property as trustee pursuant to the express terms of the will is intended to take any excess beneficially,5 although it may be admissible in the context of an inter vivos disposition.6 It is easier to infer an intention that a sole trustee should take beneficially than that two or more trustees take beneficially, although this point is not of itself decisive on the issue of intention.7 If a gift is made to a person on trust to carry out one or more prescribed purposes, any excess remaining after the carrying out of that or those purposes, in the ordinary case,8 will be held for the benefit of the donor or settlor or his or her personal representatives on resulting trust.9 However, if that same disposition can be construed as a gift to a person conditional on that person carrying out those purposes,10 the donee takes beneficially once those purposes have been fulfilled.11 A gift made to a person for a trust or purpose which may or may not be performed at the discretion of the donee, pursuant to the terms of the gift, is construed as a beneficial gift to the donee,12 being akin to a general power over.13 Notes 1 Re West; George v Grose [1900] 1 Ch 84 at 87 per Kekewich J; Re Chapman; Hales v A-G [1922] 2 Ch 479 at 483-4 per Lord Sterndale MR, at 486-7 per Warrington LJ, at 489 per Younger LJ, CA; Re Foord; Foord v Conder [1922] 2 Ch 519 at 521; [1922] All ER Rep 166 per Sargant J; Re Pughs Will Trusts; Marten v Pugh [1967] 3 All ER 337; [1967] 1 WLR 1262 . As to the requirements of intention to create an express trust see [430-240]-[430-257].2 For the meaning of trust see [430-1].3 See [430-515].4 Croome v Croome (1889) 59 LT 582 at 584-5 per Cotton LJ, CA (affirmed Croome v Croome (1889) 61 LT 814, HL); Attorney-General v Jeffreys [1908] AC 411 , HL. Compare Re Foord; Foord v Conder [1922] 2 Ch 519 at 521-2; [1922] All ER Rep 166 per Sargant J.5 Re Rees; Williams v Hopkins [1950] Ch 204 at 208-10; [1949] 2 All ER 1003 per Evershed MR, CA.6 Re Tylers Fund Trusts; Graves v King [1967] 3 All ER 389 at 392; [1967] 1 WLR 1269 at 1275.7 Re Pughs Will Trusts; Marten v Pugh [1967] 3 All ER 337 at 341; [1967] 1 WLR 1262 per Pennycuick J.8 The ordinary rule does not apply in

the case of gifts for public subscriptions where: (1) the gift is made to a public subscription for a charitable purpose with an overriding general charitable intention, in which case the court may apply the excess to a purpose or purposes as near as possible (cy-prs) to the original charitable purpose (see charities [75-700]-[75-755]); (2) legislation dictates the destination of the excess subscriptions; (3) it can be inferred that the contributor intended to relinquish any right to the money subscribed, in which case the excess passes to the Crown as ownerless goods (bona vacantia); or (4) the rules of the subscription provide for the destination of any excess donations. As to surplus in public subscriptions see generally [430-530].9 See [430-525].10 As to the difference between a trust and a conditional gift see [430-75].11 Croome v Croome (1889) 59 LT 582, CA (affirmed Croome v Croome (1889) 61 LT 814, HL); Re Foord; Foord v Conder [1922] 2 Ch 519 at 521-2; [1922] All ER Rep 166 per Sargant J; Re Rees; Williams v Hopkins [1950] Ch 204; [1949] 2 All ER 1003 , CA.12 Re Bowes; Earl Strathmore v Vane [1896] 1 Ch 507; (1896) 65 LJ Ch 298 .13 As to the difference between trusts and powers see [430-55]. The paragraph below is current to 20 April 2012 [430-735] Possession of trust estate As the trustee and beneficiary are, as against strangers, regarded in equity as one person, the possession of trust property by the beneficiary is possession by the trustee,1 and vice versa.2 Where a trustee has no active duties to perform, a sole beneficiary who is of full age and mental capacity and absolutely entitled is entitled to the possession of the trust property together with its indicia of title.3 The recognition of a trust does not detract from the estate in possession enjoyed by the trustee at common law.4 The full enjoyment of that trust interest depends upon the trustees capacity to defend against third parties the plenitude of the legal estate vested in the trustee.5 The possession by a trustee of the legal ownership of trust property casts on the trustee the burdens and privileges incidental to that ownership6 such as expenses payable in respect of that property.7 The trustee is entitled to the custody of title deeds and documentation relating to the trust property,8 which the beneficiaries are entitled to inspect and copy.9 Notes 1 Parker v Carter (1845) 4 Hare 400 at 417; 67 ER 704 at 711 per Wigram VC.2 Parker v Carter (1845) 4 Hare 400 at 417; 67 ER 704 at 711 per Wigram VC.3 Turner v Noyes (1904) 20 WN (NSW) 266. See also [430-2515].4 Chief Commissioner of Land Tax v Macary Manufacturing Pty Ltd (1999) 48 NSWLR 299; 43 ATR 564 at 572; 2000 ATC 4001 per Mason P .5 Chief Commissioner of Land Tax v Macary Manufacturing Pty Ltd (1999) 48 NSWLR 299; 43 ATR 564 at 572; 2000 ATC 4001 per Mason P .6 Burgess v Wheate (1759) 1 Eden 177 at 251; 28 ER 652 per Henley, Lord Keeper .7 Expenses properly incurred by a trustee in carrying out the trust are the subject of the trustees right of indemnity: see [430-3720]-[430-3770].8 As to the trustees

duty to secure title documents to trust property see [430-4155].9 Clayton v Clayton [1930] 2 Ch 12 at 19 . The paragraph below is current to 20 April 2012 [430-740] Death of co-trustee and sole trustee Although the trustee legislation in each jurisdiction provides that a power vested jointly in two or more trustees may be exercised by their survivors,1 this does not disturb the general property law principle that property held as tenants in common confers no right of survivorship.2 In the case of the death of a sole trustee, the trustee legislation in Queensland, Tasmania, Victoria and Western Australia makes specific provision for filling the void in legal ownership.3 In the remaining jurisdictions and in the absence of clear direction in the trust instrument, the persons upon whom the trust assets devolve hold the assets upon a bare trust4 for the new trustee or trustees.5 Notes 1 See [430-3235].2 See [430-3235].3 See [430-3240].4 As to bare trusts see [430-3115].5 Robson v Flight (1865) 4 De GJ & Sm 608; 46 ER 1054. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-745] Effect of bankruptcy on trustee Property held by a person in trust does not, upon that persons bankruptcy, vest in the trustee in bankruptcy1 but remains vested in him or her upon the trusts to which it is subject.2 The same principle applies in the context of company liquidations.3 The bankruptcy of a trustee may present a ground for the removal of the trustee by the court.4 Notes 1 As to the trustee in bankruptcy see bankruptcy.2 (CTH) Bankruptcy Act 1966 s 116(2)(a). See bankruptcy.3 Re Australian Home Finance Pty Ltd (in liq) [1956] VLR 1; [1956] ALR 247 ; Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; [1968] 3 All ER 651; [1968] 3 WLR 1097 ; Re Kayford Ltd (in liq) [1975] 1 All ER 604; [1975] 1 WLR 279 ; Re Staff Benefits Pty Ltd and the Companies Act [1979] 1 NSWLR 207; (1979) 4 ACLR 54; (1979) CLC 40-531 . See [430-65].4 See [430-3655].

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[Halsbury's Laws of Australia]

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(5) BENEFICIARIES UNDER THE TRUST

This chapter was updated by G E Dal Pont LLM (Mich) LLD (Tas) CPA Professor, Faculty of Law, University of Tasmania

(A) Estate of Beneficiaries The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-800] Extent of estate taken by beneficiaries A beneficiary of a fixed trust (including a unit trust) is entitled to a fixed proportion of the trust income and capital distributed to the beneficiaries in any given year, and therefore the beneficiarys interest is proprietary in nature. In the case of a unit trust, the unit will generally, subject to the terms of the trust deed, confer a proprietary interest in all of the property that for the time being is subject to the trust of the deed, and the extent of the unitholders beneficial interest at any given time is that proportion that his or her units bear to the total number of units issued.1 As a result, an interest under a fixed or unit trust is generally an interest that is distributable to the beneficiarys creditors on the beneficiarys insolvency2 and can ordinarily support the lodging of a caveat on trust property. 3 However, the scope of the beneficial interest may be restricted by the terms of the trust deed,4 and in any case do not amount to freehold ownership in possession for the purposes of a taxing statute.5 The interest of a beneficiary of a discretionary trust in the income or capital of the trust is a mere expectancy,6 which is not in the nature of a property interest 7 (although there is Australian case authority to the effect that, for the purposes of the statutory definition of property under the (CTH) Corporations Act 2001,8 and the concept of property and financial resources under the (CTH) Family Law Act 1975,9 a discretionary beneficiarys level of control over the trust property may be taken into account). As a result, a beneficiary of a discretionary trust has no interest in possession,10 no immediate entitlement to income as it accrues,11 and no entitlement to lodge a caveat on trust property.12 Unlike a beneficiary of a fixed trust, a beneficiary of a discretionary trust cannot call upon the trustee to make a distribution, but receives a vested interest only to the extent of the fund actually distributed to him or her.13 A beneficiary of a discretionary trust does, however, have a right to compel the trustee to consider whether or not to make a distribution to him or her, which is in the nature of an equitable chose in action.14 Beneficiaries, whether of fixed or discretionary trusts have rights to: (1)

prevent misappropriation by the trustees; (2) have the trustees act bona fide;15 (3) inspect trust documents;16 (4) enjoy any distribution made; and (5) have the trust properly administered.17 The latter right confers standing to enforce the trust by way of legal proceedings against the trustee for breach of trust,18 and the right to petition the court for the removal of a trustee. 19 Beneficiaries are not, however, entitled to receive the reasons for the exercise of a discretionary power vested in the trustee.20 A beneficiary is indefeasibly and absolutely entitled to:21 (1) a trust fund, or to an aliquot share of a trust fund; (2) terminate the trust so far as it concerns the trust fund or such aliquot share; and (3) call for an immediate payment to himself or herself of such fund or share or the transfer of investments representing the trust fund or aliquot share. The beneficiaries of a trust may, if they are all indefeasibly entitled, of full legal capacity and act unanimously, put an end to the trust by requesting the trustee to pay over their respective interests under the trust.22 Notes 1 Charles v FCT (1954) 90 CLR 598 at 609; [1954] ALR 405; BC5400370 per Dixon CJ, Kitto and Taylor JJ ; Read v Commonwealth (1988) 167 CLR 57 at 61-2, 65; 78 ALR 655; BC8802606 per Mason CJ, Deane and Gaudron JJ ; Trevisan v Cmr of Taxation (1991) 29 FCR 157 at 163; 101 ALR 26 ; Suncorp Insurance and Finance v Cmr of Stamp Duties [1998] 2 Qd R 285 at 301-2; 97 ATC 4826; BC9703367 per Fitzgerald P ; Re Flat Rock Forests Trust [2000] 3 NZLR 207 at 217 ; Kent v SS Maria Luisa (No 2) (2003) 130 FCR 12; [2003] FCAFC 93; BC200302365 at [48], [58] per Tamberlin and Hely JJ ; Bonini v Western Australian Real Estate Custodian Ltd [2001] WASC 258; BC200105710 at [13] per Pullin J ; CPT Manager Ltd v Chief Cmr of State Revenue (2006) 64 ATR 654; 2006 ATC 4787; [2006] NSWSC 1286; BC200610029 at [48]-[56] per Gzell J ; S & D International Pty Ltd (in liq); Malhotra v Tiwari [2006] VSC 51; BC200600697 at [22] per Gillard J .2 The interest of a beneficiary of a fixed trust forms part of the property divisible amongst creditors on his or her bankruptcy: (CTH) Bankruptcy Act 1966 s 116(1). See bankruptcy.3 Costa & Duppe Properties Pty Ltd v Duppe

[1986] VR 90; (1985) V ConvR 54-176 ; Bonini v Western Australian Real Estate Custodian Ltd [2001] WASC 258; BC200105710 at [13], [14], [23] per Pullin J ; Binningup Nominees Pty Ltd v Brogue Tableau Pty Ltd [2004] WASC 14; BC200400308 at [17]-[31] per Pullin J ; Schmidt v 28 Myola Street Pty Ltd (2006) 14 VR 447; (2007) ANZ ConvR 141; [2006] VSC 343; BC200607420 at [24]-[39] per Warren CJ ; Interview Holdings Pty Ltd v Registrar of Titles [2008] WASC 144; BC200806553 . The following cases, where unitholders were denied a caveatable interest, highlight that the issue depends on the terms of the interest created under each individual unit trust: Evindon Pty Ltd v Ambasax Pty Ltd (1996) ANZ ConvR 398; (1995) V ConvR 54-534, SC(VIC); Floriston Nominees Pty Ltd v Kingsley Brown Finance Pty Ltd [2005] VSC 467; BC200510282 ; Re S & D International Pty Ltd (No 4) (2010) 79 ACSR 595; [2010] VSC 388; BC201006365 at [127][148] per Robson J.4 Kent v SS Maria Luisa (No 2) (2003) 130 FCR 12; [2003] FCAFC 93; BC200302365 at [60] per Tamberlin and Hely JJ ; Lend Lease Funds Management Ltd v Cmr of State Revenue (2009) 77 ATR 374; 2009 ATC 20-126; [2009] VSC 360; BC200907755 at [47]-[56] per Mandie J (affirmed Commissioner of State Revenue v Lend Lease Funds Management Ltd [2011] VSCA 182; BC201104296 ). See also Halloran v Minister Administering National Parks and Wildlife Act 1974 (1999) 105 LGERA 405 at 416-19; [1999] NSWLEC 268 per Talbot J , LEC(NSW).5 CPT Custodian Pty Ltd v Cmr of State Revenue (2005) 224 CLR 98; 221 ALR 196; 79 ALJR 1724; 60 ATR 371; (2005) ATC 4925; [2005] HCA 53; BC200507253 (where it was held that even a sole unitholder did not have freehold ownership in possession so as to amount to an owner for the purposes of the (VIC) Land Tax Act 1958 (repealed) s 3).6 Gartside v IRC [1968] AC 553 at 607 per Lord Reid, at 615 per Lord Wilberforce; [1968] 1 All ER 121; [1968] 2 WLR 277 ; Pearson v IRC [1981] AC 753; [1980] 2 All ER 479; [1980] 2 WLR 872 ; Re Traffords Settlement; Moore v IRC [1985] Ch 32 at 40; [1984] 1 All ER 1108; [1984] 3 WLR 341 per Gibson J ; Hunt v Muollo [2003] 2 NZLR 322 at [11] per Tipping J , CA(NZ); Lygon Nominees Pty Ltd v Cmr of State Revenue (2007) 66 ATR 736; 2007 ATC 4628; [2007] VSCA 140; BC200705064 at [77], [78] per Redlich JA .7 Re the Stamps Acts and Rules Settlement [1915] VLR 670 at 674; (1915) 21 ALR 499 per Madden CJ ; Re Becketts Settlement; Re Beckett (decd); Eden v von Stutterheim [1940] Ch 279; (1940) 109 LJ Ch 81; 163 LT 78; 56 TLR 342 ; Attorney-General (Ceylon) v Chettiar (No 1) [1957] 1 AC 513 at 538-9 per Viscount Simonds; Re Goldsworthy (decd) [1969] VR 843 at 849 per Smith J; Johns v Johns [2004] 3 NZLR 202 at [31]-[33] per Tipping J , CA(NZ); Lygon Nominees Pty Ltd v Cmr of State Revenue (2007) 66 ATR 736; 2007 ATC 4628; [2007] VSCA 140; BC200705064 at [77], [78] per Redlich JA; Public Trustee v Smith [2008] NSWSC 397; BC200803098 at [107]-[139] per White J ; Commissioner of State Revenue v Serana Pty Ltd (2008) 36 WAR 251; 72 ATR 24; [2008] WASCA 82; BC200802580 at [48]-[53] per Martin CJ, at [121]-[127] per Buss JA . It has been noted that [t]he use of terms such as beneficial interest is apt to mislead when applied to beneficiaries interests under a discretionary trust: MSP Nominees Pty Ltd v Cmr of Stamps (SA) (1999) 198 CLR 494 at 509; 166 ALR 149; [1999] HCA 51; BC9906271 , Full Court. There are dicta to the effect that an expectancy can, in circumstances where the trustee has consistently exercised his or her discretion in favour of a specific beneficiary in a set amount, create a legitimate expectation in the beneficiary, entitling the beneficiary to an opportunity to persuade the trustee to continue that practice if the trustee plans to alter the distribution patterns: Scott v National Trust for Places of Historic Interest or Natural Beauty [1998] 2 All ER 705 at 718; [1998] 1 WLR 226 per Robert Walker J (cited with approval in Maciejewski v Telstra Super Pty Ltd (1998) 44 NSWLR 601 at 605 per Young J ).8 Re Australian Securities and Investments Commission; Richstar Enterprises Pty Ltd v Carey (No 6) (2006) 153 FCR 509; 233 ALR 475; [2006] FCA 814; BC200604846 at [29]-[45] per French J . Compare Public Trustee v Smith [2008] NSWSC 397; BC200803098 at [107]-[139] per White J .9 Stephens v Stephens (2007) 212 FLR 362; 38 Fam LR 149; (2007) FLC 93-336; [2007] FamCA 680 ; Kennon v Spry (2008) 238 CLR 366; 251 ALR 257; [2008] HCA 56; BC200810608 ; Simmons v Simmons (2008) 232 FLR 73; 40 Fam LR 520; [2008] FamCA 1088; BC200850239 . See family law [205-5020], [205-5075].10 Gartside v IRC [1968] AC 553 at 607; [1968] 1 All ER 121; [1968] 2 WLR 277 per Lord Reid; Pearson v IRC [1981] AC 753 at 775 per Viscount Dilhorne, at 778 per Lord Russell; [1980] 2 All ER 479; [1980] 2 WLR 872 (fact that an interest in possession is liable to defeasance by subsequent exercise of a power does not deny it that description when the benefit of it is thus subsequently taken away); Lygon

Nominees Pty Ltd v Cmr of State Revenue (2007) 66 ATR 736; 2007 ATC 4628; [2007] VSCA 140; BC200705064 at [78] per Redlich JA . Compare Leedale (Inspector of Taxes) v Lewis [1982] 3 All ER 808; [1982] 1 WLR 1319 at 1327 per Lord Fraser, at 1333-5 per Lord Scarman (where Gartside was distinguished on the ground that the statute in that case required the precise extent of the interests of the beneficiaries to be identified, whereas in the instant case the Inspector of Taxes was conferred a statutory discretion to levy capital gains tax based on justice and reasonableness to adjudge the respective values of interests under a discretionary trust).11 Queensland Trustees Ltd v Cmr of Stamp Duties (1952) 88 CLR 54 at 62-5; 26 ALJ 389; [1952] ALR 895 per Dixon CJ, McTiernan, Webb and Kitto JJ ; Re Goldsworthy (decd) [1969] VR 843 at 847-9 per Smith J; Pearson v IRC [1981] AC 753 at 786; [1980] 2 All ER 479; [1980] 2 WLR 872 per Lord Keith; Foreman v Kingstone [2004] 1 NZLR 841 at [41]-[48] per Potter J , HC(NZ). The interest of a discretionary beneficiary is analogous to that of a beneficiary of the residue of an unadministered estate: see [430-50].12 Walter v Registrar of Titles [2003] VSCA 122; BC200304950 at [15] per Chernov JA ; Szozda v NSW Trustee and Guardian [2012] NSWSC 194; BC201201286 at [31] per Nicholas J.13 Jackson v Cmr of Stamps [1903] AC 350 at 354 per Lord Macnaghten; Queensland Trustees Ltd v Cmr of Stamp Duties (1952) 88 CLR 54 at 64; 26 ALJ 389; [1952] ALR 895 per Dixon CJ, McTiernan, Webb and Kitto JJ . This has been said to place the trustee in a strong position in relation to the interests and prospective interests of those taking under the deed of settlement: Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226; 151 ALR 1 at 4; 72 ALJR 243 , HC of A, Full Court.14 Gartside v IRC [1968] AC 553 at 617-18; [1968] 1 All ER 121; [1968] 2 WLR 277 per Lord Wilberforce; Kennon v Spry (2008) 238 CLR 366; 251 ALR 257; [2008] HCA 56; BC200810608 at [82]-[85] per French CJ .15 See [430-4355].16 See [430-4230].17 McPhail v Doulton [1971] AC 424 at 456-7; [1970] 2 All ER 228 at 247; [1970] 2 WLR 1110 at 1132 , HL; R & I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd (1992) 10 WAR 59 at 63 per Rowland J, at 79 per Owen J; Johns v Johns [2004] 3 NZLR 202 at [34] per Tipping J , CA(NZ); Kennon v Spry (2008) 238 CLR 366; 251 ALR 257; [2008] HCA 56; BC200810608 at [82]-[85] per French CJ ; Elovalis v Elovalis [2008] WASCA 141; BC200805317 at [50] per Martin CJ .18 See [430-5310].19 As to the removal of trustees by the court see [430-3635][430-3665].20 See [430-4240].21 See [430-2505] (termination of trust by a sole beneficiary), [430-2510] (partial termination of trust by one of two or more beneficiaries).22 See [430-2515]. The paragraph below is current to 19 May 2010 [430-805] Dealing by beneficiary with interest in trust property A beneficiary who has the full equitable interest in the trust property1 may, by dealing with his or her equitable interest in various ways, create new trusts or otherwise affect the beneficial ownership of the property, for example: (1) the beneficiary may assign to a third person, by a sufficient expression in writing2 of immediate intention to do so, the beneficiarys equitable interest in the trust property or some lesser interest carved out of it;3 (2) the beneficiary may direct the trustee to hold the beneficiarys equitable interest, or a proportion of it, in trust for a third person, and as such a direction amounts to a disposition of a subsisting equitable interest,4 it must be in writing to be effective;5 (3) the beneficiary may declare that he or she holds his or her equitable interest on trust for a third party, although it has not been clearly determined whether such a declaration must be in writing;6 and

(4) the beneficiary, being absolutely entitled to the equitable interest in the trust property, may direct the trustee to transfer the legal title to a third person with the intention that that person shall hold the property beneficially, and, upon compliance with the direction by the trustee, the third person becomes full beneficial owner of the property, even though the direction has been given orally.7 Notes 1 As to the case of a transferor of property transferred in such manner or in such circumstances that the transferee is constituted not the absolute owner but a trustee of the property for the transferor see [430-20].2 See [430-230].3 Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614 at 622; [1937] VLR 15; [1936] ALR 198 .4 Grey v IRC [1960] AC 1; [1959] 3 All ER 603 . See also Rycroft v Christy (1840) 3 Beav 238; 49 ER 93.5 See the statutory provisions referred to in [430-230].6 See [430-230].7 Vandervell v IRC [1967] 2 AC 291; [1967] 1 All ER 1 , HL. The paragraph below is current to 20 April 2012 [430-810] Disclaimer of interest by beneficiary A beneficiary may disclaim his or her interest under a trust,1 the rationale being that no person can be compelled to accept a gift.2 An effective disclaimer must be intentional and show unequivocally that the beneficiary rejects the beneficial interest.3 The onus of establishing a disclaimer is on the party alleging it. 4 The right to disclaim is lost if the beneficiary has engaged in positive conduct indicating an acceptance of the interest.5 The right may also be lost if it is not exercised within a reasonable time, in that a beneficiary who remains silent beyond the time when he or she would be expected to disclaim the interest may be presumed to have accepted it.6 Though it is open for a beneficiary who has procured a trustee to declare a trust in his or her favour to disclaim the beneficial interest, this strengthens the inference that in the absence of conduct rejecting the interest the beneficiary has tacitly determined to accept it.7 However, a beneficiary who does not know of his or her interest in the trust cannot be said to accept that interest, and may therefore disclaim the interest upon discovering its existence.8 Similarly, a disclaimer may be retracted where it was made without full knowledge and full intention because in such a case there was no effective disclaimer in the first place.9 Yet there is also authority that the fact that the beneficiary was mistaken as to the nature, extent or implication of his or her trust interest does not prevent an assent to that interest being effective to deny any purported subsequent disclaimer.10 The case law indicates that courts are disinclined to find a disclaimer as effective to deny present entitlement for tax purposes.11 The consequence of an effective disclaimer by a beneficiary is that he or she becomes retrospectively disentitled to the beneficial interest under the trust, and is freed from all the burdens that would have gone with acceptance of the interest.12 Where one of two persons jointly entitled to a beneficial interest under a trust disclaims, the whole interest goes to the other person,13 although where that interest carries with it substantial burdens and the disclaimer is effected long after the trust was created, the court may decline to apply this principle.14 Notes 1 JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 930-6; (1985) 9 ACLR 593 per McGarvie J.2 Standing v Bowring (1885) 31 Ch D 282 at 286 per Lord Halsbury

LC, at 289-90 per Lindley LJ; [1881-85] All ER Rep 702 ; Re Gulbenkians Settlements (No 2); Stephens v Maun [1970] 1 Ch 408 at 418; [1969] 2 All ER 1173; [1969] 3 WLR 450 per Plowman J .3 Re Paradise Motor Co Ltd [1968] 2 All ER 625 at 630-2; [1968] 1 WLR 1125 at 1141-3 .4 Lady Naas v Westminster Bank Ltd [1940] AC 366 at 400; [1940] 1 All ER 485 per McGarvie J.5 Re Hodge; Hodge v Griffiths [1940] Ch 260 at 264-6 per Farwell J ; JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 931; (1985) 9 ACLR 593 per McGarvie J.6 Standing v Bowring (1885) 31 Ch D 282 at 290; [1881-85] All ER Rep 702 per Lindley LJ ; JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 931; (1985) 9 ACLR 593 per McGarvie J .7 JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 932; (1985) 9 ACLR 593 per McGarvie J .8 JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 932; (1985) 9 ACLR 593 per McGarvie J .9 Tantau v MacFarlane [2010] NSWSC 224; BC201001615 at [108][110] per Ward J.10 Pearson v FCT (2006) 232 ALR 55; 64 ATR 109; [2006] FCAFC 111; BC200605117 at [89], [90] .11 Vegners v FCT (1991) 21 ATR 1347; 91 ATC 4213 ; Federal Commissioner of Taxation v Ramsden (2005) 58 ATR 485; 2005 ATC 4136; [2005] FCAFC 39 ; Pearson v FCT (2005) 218 ALR 101; 58 ATR 502; [2005] FCA 250; BC200501218 at [89], [90] per Spender J (varied on appeal but not on this point: Pearson v FCT (2006) 232 ALR 55; 64 ATR 109; [2006] FCAFC 111; BC200605117 . Compare Federal Commissioner of Taxation v Cornell (1946) 73 CLR 394; 20 ALJ 318 . See taxation and revenue [405-18000]-[40520080]12 Mallott v Wilson [1903] 2 Ch 494 at 501; [1900-3] All ER Rep 326 ; JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 934; (1985) 9 ACLR 593 per McGarvie J; Probert v Cmr of State Taxation (1998) 72 SASR 48 at 54-5; 199 LSJS 345; 40 ATR 261; 98 ATC 5176 per Olsson J . Compare Re Strattons Deed of Disclaimer; Stratton v IRC [1958] Ch 42; [1957] 2 All ER 594 at 598-600 per Jenkins LJ . The interest disclaimed may be held on resulting trust for the settlor: Federal Commissioner of Taxation v Cornell (1946) 73 CLR 394 at 402; 20 ALJ 318 per Latham CJ .13 JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 935; (1985) 9 ACLR 593 per McGarvie J.14 JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 940; (1985) 9 ACLR 593 per McGarvie J.

Source

[Halsbury's Laws of Australia]

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(B) Capital and Income The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-865] Allocation of receipts Subject to the terms of the trust instrument, the trustee must ascertain which items of the trusts revenue are of a capital nature and must be allocated to the capital account, and which are of a revenue nature and must be allocated to the income account. The proceeds from the sale of a trust asset, being part of the capital of the trust, will generally be applied to the capital account for the benefit of the capital beneficiaries, whereas the income generated from the investment of these proceeds will accrue to the income account for the benefit of the income beneficiaries.1 Where the trust property consists of company shares, the general rule is that dividends from those shares are allocated to the income account,2 and although profit on the sale of the shares may often be viewed as accruing to capital, this need not necessarily be so depending on the circumstances and the terms of the trust instrument.3 Where the company declares a dividend on terms which practically compel a trustee shareholder acting in the best interests of the trust to return the money to the company in the form of new shares, the distribution may be added to the capital of the trust fund.4 A clear example of such a case is where a company declares a bonus dividend which the shareholders can apply towards the purchase of new shares on terms so that shareholders who failed to do so would suffer a considerable net loss.5 Income may be earned during the period of administration on amounts yet to be expended in payment of the testators debts, legacies and expenses. In South Australia and Tasmania, where legislation does not govern the area, the trust accounts must be adjusted to ensure that any income received by the life tenant that exceeds that which ought to have been paid is credited to the capital account and deducted from further income payments until the adjustment is reconciled.6 In the other jurisdictions legislation permits the life tenant to retain the excess amount received in the administration period, but receive a lesser amount each year for the remainder of the tenancy as a consequence of the slight reduction in the value of the capital.7 In the case of a compulsory purchase of a freehold reversion, the income account is entitled to the lesser of the income arising from the investment of the compensation money and the amount of rent received from the lease or the income arising from the investment.8 Notes 1 Clayton v Montgomery (1897) 18 LR (NSW) Eq 171; McKee v Ballarat Trustees Executors and Agency Co Ltd [1910] VLR 358 at 360 per Cussen J .2 Bouch v Sproule (1887) 12 App Cas 385 at 401-2 per Lord Watson ; Hill v Permanent Trustee Co of NSW Ltd [1930] AC 720; (1930) 31 SR (NSW) 32; 4 ALJ 342 ; Bakewell v Holme (1943) 44 SR (NSW) 150 at 154; 61 WN (NSW) 47 ; Manukau City Council v Lawson [2001] 1 NZLR 599 at 621-3 per Paterson J; Wong v Burt [2003] 3 NZLR 526 at 538-43 per Ronald Young J , HC(NZ) (affirmed on this point Wong v Burt [2005] 1 NZLR 91 at 101-3 per Hammond J , CA(NZ)).3 Orr v Wendt [2005] WASCA 199; BC200508859 at [27]-[48] per Wheeler JA , with whom Owen and Roberts-Smith JJA concurred (reversing Wendt v Orr [2004] WASC 28; BC200400808 where Commissioner Johnson QC had found the profit on the sale of shares to accrue to the capital account).4 Mitchell v Hart (1914) 19 CLR 33 at 41 per Isaacs and Gavan Duffy JJ.5 Hawkins v Hawkins (1920) 20 SR (NSW) 550 .6 This is known as the rule in Allhusen v Whittell (1867) LR 4 Eq 295. See also Re Hayward [1934] SASR 364 ; Re Gellibrands Will; Murdoch v Gellibrand (1939) 34 Tas LR 1; Hassell v Perpetual Executors Trustees & Agency Co (WA) Ltd (1952) 86 CLR 513 at 526; 26 ALJ 501 ; Princess Anne of Hesse v Field [1963] NSWR 998 at 1017 .7 (ACT) Administration and Probate Act 1929 s 41D (NT) Administration and Probate Act 1969 s 58

(NSW) Probate and Administration Act 1898 s 46D (QLD) Trusts Act 1973 s 78 (VIC) Trustee Act 1958 s 74 (WA) Trustees Act 1962 s 104. The application of these provisions has been judicially considered only once: Princess Anne of Hesse v Field [1963] NSWR 998 . 8 Re Sutherland (1910) 11 SR (NSW) 5 . The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation [430-870] Allocation of expenses and liabilities Except as otherwise provided in the trust instrument, the capital of the trust must bear the cost of: (1) administering and protecting the trust estate,1 including the costs of obtaining legal advice2 and instituting legal proceedings,3 unless the proceedings relate solely to income;4 (2) appointing new trustees;5 and (3) satisfying the capital of all charges and encumbrances on the trust property,6 including calls on shares.7 The income account bears the cost of all incidental current expenses,8 including the payment of insurance premiums in respect of trust property,9 and periodic losses in a trade or business carried on by the trust,10 unless the usual practice of the particular trade or business is to charge losses against capital.11 Whether the cost of repairs to trust property must be borne by capital or income depends upon the nature of the repair.12 Normally recurring repairs appertain more to the enjoyment of the income beneficiaries or tenant for life and which last only for a short time must be borne by the income account.13 Where structural repairs to trust property are very great or considerable they must be borne by the capital account, because the advantage obtained from them favours the capital beneficiaries or remainderpersons.14 The cost of repairs falling between these two extremes is to be borne in due proportion by the income and capital accounts according to an assessment made by the trustees.15 In South Australia the trustee legislation confers upon the trustee the discretion to source the cost of repairs from either capital or income, subject to contrary intention in the trust instrument.16 Where trust money has been lent on a security the realisation of which produces a loss, the proceeds of sale must be apportioned between the income account and the capital account in the proportions in which each such account has suffered loss.17 Similarly, where a loss is incurred upon the holding of an unauthorised asset,18 the total sum produced by that asset, namely, the proceeds of sale and income produced prior to sale, is set against the total sum which would

proceeds of sale and income produced prior to sale, is set against the total sum which would have been retained or acquired had the breach not occurred, and the capital and income accounts are adjusted proportionately.19 Where the trustee commits a breach of trust which clearly disadvantages the capital account as against the income account or vice versa, the court has a general jurisdiction to adjust the accounts.20 Notes 1 Stott v Milne (1884) 25 Ch D 710 ; Re Weall; Andrews v Weall (1889) 42 Ch D 674 at 680-1; 58 LJ Ch 713; 61 LT 238 . As to the trustees duty to protect the trust estate see [430-4155].2 Poole v Pass (1839) 1 Beav 600 at 604-5; 48 ER 1074 at 1076 per Lord Langdale MR. As to the trustees right of indemnity in respect of legal costs see [430-3750].3 Re Leslies Settlement Trusts (1876) 2 Ch D 185 at 190 per Bacon VC ; Stott v Milne (1884) 25 Ch D 710 .4 Re Smiths Trusts (1870) LR 9 Eq 374; Re Evans Trusts (1872) LR 7 Ch App 609. See also Close Trustees (Switzerland) SA v Castro [2008] EWHC 1267 (Ch) at [45]-[59] per Mark Herbert QC.5 See [430-3245].6 Allhusen v Whittell (1867) LR 4 Eq 295; Norton v Johnstone (1885) 30 Ch D 649 .7 Todd v Moorhouse (1874) LR 19 Eq 69; 32 LT 8. See also [430-4600].8 Shore v Shore (1859) 4 Drew 501; 62 ER 192.9 Re Waughs Trusts (1877) 25 WR 555 . As to the trustees power to insure trust property see [430-4660]-[430-4675].10 Upton v Brown (1884) 26 Ch D 588 .11 Gow v Forster (1884) 26 Ch D 672 .12 See [430-4865].13 Wilkie v Equity Trustees Executors and Agency Co Ltd [1909] VLR 277 at 281-2; (1909) 15 ALR 208; 30 ALT 211 per Madden CJ .14 Wilkie v Equity Trustees Executors and Agency Co Ltd [1909] VLR 277 at 2812; (1909) 15 ALR 208; 30 ALT 211 per Madden CJ .15 Wilkie v Equity Trustees Executors and Agency Co Ltd [1909] VLR 277 at 281-2; (1909) 15 ALR 208; 30 ALT 211 per Madden CJ .16 (SA) Trustee Act 1936 s 25A(1). See also [430-4870].17 This is known as the rule in Re Atkinson; Barbers Co v Grose-Smith [1904] 2 Ch 160 , CA; Re George Scarfe [1923] SASR 459 ; Re Knott; Trustees Executors & Agency Co Ltd v Knott [1937] VLR 244 ; Permanent Trustee Co of New South Wales Ltd v Macphillamy (1938) 38 SR (NSW) 541 .18 Namely, an asset which the trustee is not authorised to hold either by the terms of the trust or by the court: Re Bird; Dodd v Evans [1901] 1 Ch 916 .19 The life tenant would not be required to repay overpayments actually received: Re Bird; Dodd v Evans [1901] 1 Ch 916 .20 Church v Talbot (1901) 1 SR (NSW) Eq 13; 18 WN (NSW) 33 . As to breach of trust generally see [430-5270]-[430-5630]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation [430-875] Reversionary and wasting property Where residuary1 personalty2 is settled by will for the benefit of persons who are to enjoy it in succession, the trustee must, in the absence of a specific direction to this effect, convert that property into property of a permanent and incomebearing character if it is of a future or reversionary nature (in the interests of the tenant for life) or consists of wasting assets (in the interests of the persons interested in the remainder).3 Except in Western Australia, if this conversion does not occur within one year of the testators death, the law effects a notional conversion by assuming the conversion occurred at this time, determining the property to be income and to be capital at that moment, and the life tenant is not entitled to income earned during the period between the notional and actual conversions.4 In Western Australia, the trustee legislation provides that, subject to a contrary intention in the trust instrument, where, under a will, any real or personal property of a wasting, speculative or reversionary nature included in a residuary gift is settled by way of succession:5 (1) pending the sale or conversion of the property, the whole of the net income of the property is to be applied as income and no part of it is to be apportioned to capital; and (2)

on the sale or conversion of the property, no part of the proceeds of the sale or conversion is to be applied as past income. The terms of the will may, whether expressly or by inference, operate to negate the duty to convert.6 This may be the case where, for example: (1) the settlor makes the consent of the life tenant a condition precedent to conversion;7 (2) the duty to convert is expressly postponed;8 (3) a discretion is given to the trustee to retain the estate in its condition as at the date of the testators death;9 or (4) there is a direction that wasting property is to be enjoyed by a life tenant for life in specie.10 However, of itself, a power to postpone conversion does not negate the duty to convert.11 The testator may also negative the duty to make a notional conversion, usually by defining the fund from which the life tenant is to derive income as being unconverted for the time being.12 Notes 1 This principle does not apply to bequests which are specific rather than residuary: Re Van Straubenzee [1901] 2 Ch 779 at 782 .2 This principle does not apply to real estate: Re Woodhouse; Public Trustee v Woodhouse [1941] Ch 332; [1941] 2 All ER 265 .3 Michael v Callil (1945) 72 CLR 509 at 522 per Latham CJ. This is known as the rule in Howe v Earl of Dartmouth (1802) 7 Ves 137; [1775-1802] All ER Rep 24; (1802) 32 ER 56 .4 The law in this regard is very complex and is discussed in detail in Heydon J D and Leeming M J, Jacobs Law of Trusts in Australia, 7th ed, LexisNexis Butterworths, 2006, paras [1908]-[1925].5 (WA) Trustees Act 1962 s 105(1), 105(3).6 Re Charteris; Charteris v Biddulph [1917] 2 Ch 379 at 392; (1917) 86 LJ Ch 658; 117 LT 391 per Swinfen Eady LJ , CA; Michael v Callil (1945) 72 CLR 509 at 533 per Dixon J . See also (WA) Trustees Act 1962 s 105(3).7 Re Walker; Walker v Walker (1901) 1 SR (NSW) Eq 237 ; Re Rogers; Public Trustee v Rogers [1915] 2 Ch 437 .8 Re Meinck [1944] SASR 202 .9 Re Owens (decd); Public Trustee v Hedditch [1963] NSWR 1160 .10 Re Elford; Elford v Elford [1910] 1 Ch 814 ; Re Inman; Inman v Inman [1915] 1 Ch 187 ; Re Gough; Phillips v Simpson [1957] Ch 323; [1957] 2 All ER 193 .11 Re Wilcox [1940] SASR 217 ; Re Berry (decd); Lloyds Bank Ltd v Berry [1962] Ch 97.12 Re MacPherson (decd) (1913) SALR 207; Perpetual Trustee Co Ltd v Noyes (1925) 25 SR (NSW) 226; 42 WN (NSW) 56 ; Re Grant; Trustees Executors & Agency Co Ltd v Grant [1933] VLR 263 ; Michael v Callil (1945) 72 CLR 509 ; De Little v Byrne (1951) 84 CLR 532 at 545; 25 ALJ 562; [1951] ALR 922 , HC of A, Full Court; Hassell v Perpetual Executors Trustees & Agency Co (WA) Ltd (1952) 86 CLR 513 at 524; 26 ALJ 501 , HC of A, Full Court.

Source

[Halsbury's Laws of Australia]

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Date/Time Thursday, October, 25, 2012, 12:53 EST 1 of 1 About LexisNexis | Terms & Conditions | My ID Copyright 2012 LexisNexis . All rights reserved. Back to Top

(6) TERMINATION OF TRUST

This chapter was updated by

G E Dal Pont LLM (Mich) LLD (Tas) CPA

Professor, Faculty of Law, University of Tasmania

The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation

For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations

[430-2500] Termination by provision in the trust instrument The terms of the trust itself can provide that it is to end on a certain date or on the occurrence of a prescribed event.1 In the absence of such a prescription a trust generally terminates upon the distribution of the trust property to the beneficiaries pursuant to the terms of the trust. Private trusts, unlike charitable trusts,2 cannot continue in perpetuity.3

A trust will come to an end pursuant to the exercise by the donee4 of a power of revocation contained in the trust instrument. Where a trust is created for consideration (such as, for example, subject to a condition) and the consideration fails, the trust may be revoked.5 Also, if its creation is induced by fraud, duress, undue influence or mistake, the trust can be revoked at general law by the settlor.6

It is unusual for the settlor to be the donee of a power to revoke, not only because it runs counter to a dispositive intention which is generally necessary for the creation of an express trust, but also because in these circumstances the Federal Commissioner of Taxation is empowered to assess the settlor for income tax payable by the beneficiaries of the trust.7 Moreover, upon the bankruptcy of the settlor, his or her power to revoke vests in the trustee in bankruptcy.8

A power of revocation may be express, or it may be implied from the wording of the trust instrument,9 and its exercise may be premised on the occurrence of a prescribed event or be subject to specified conditions.10 The onus of establishing the power to revoke a trust is on the person alleging its existence.11 When the donee exercises the power to revoke, the revocation is final and irrevocable unless the donee reserves a further power to revoke.12

Notes 1 For example, a trust for maintenance and/or advancement of an infant may prescribe that the trust is to come to an end upon the infant attaining majority. As to powers of maintenance and advancement see [430-4905]-[430-4950]. 2 As to charitable trusts see charities. 3 As to perpetuities see perpetuities and accumulations. 4 The donee of a power of revocation may be the settlor, the trustee or a third party. Where the donee is the trustee, the power is fiduciary and must be exercised for the benefit of the trust as a whole: see [430-4340]. See also equity [185-795]. 5 Rose v Rose (1986) 7 NSWLR 679 at 685 per Hodgson J; Valoutin Pty Ltd v Furst (1998) 154 ALR 119 at 134 per Finkelstein J. 6 Valoutin Pty Ltd v Furst (1998) 154 ALR 119 at 133-4 per Finkelstein J. 7 (CTH) Income Tax Assessment Act 1936 s 102. See also taxation and revenue [405-18000]-[40518425]. 8 (CTH) Bankruptcy Act 1966 s 116(1)(b). See also bankruptcy [50-790]. 9 Elders Trustee & Executor Co Ltd v Symon [1934] SASR 435 at 438-9 per Napier J; Valoutin Pty Ltd v Furst (1998) 154 ALR 119 at 133-4 per Finkelstein J. A power to revoke the trust cannot, however, be necessarily implied from a power to amend the trust: Schmidt v Air Products of Canada Ltd (1994) 115 DLR (4th) 631 at 660; [1994] 8 WWR 305 per Cory J, SC(Canada); Markle v Toronto (City) (2002) 213 DLR (4th) 362 at 379-80 per Pepall J, SCJ(Ontario). 10 Re Watkins Settlements [1963] VR 502. 11 Elders Trustee & Executor Co Ltd v Symon [1934] SASR 435 at 439 per Napier J.

12 Saunders v Evans (1861) 8 HL Cas 721; 31 LJ Ch 233; 5 LT 129; 11 ER 611; Re Manifold Settlements [1965] VR 197 at 201 per Dean J. The paragraph below is current to 20 April 2012

[430-2505] Termination of trust by a sole beneficiary A beneficiary who is indefeasibly and absolutely entitled to a trust fund is entitled to terminate the trust so far as it concerns the whole trust fund, and to call for an immediate payment to himself or herself of the fund or the transfer of investments representing the same.1 Notes 1 Beattie v Weine (1908) 9 SR (NSW) 36; 25 WN (NSW) 207; Whakatane Paper Mills Ltd v Public Trustee (1939) 39 SR (NSW) 426 at 440; 56 WN (NSW) 177 per Long Innes J; Wilson v Wilson (1950) 51 SR (NSW) 91 at 94; 68 WN (NSW) 78 per Sugerman J; Trustees of Estate Mortgage Fighting Fund Trust v FCT (2000) 175 ALR 482 at 497; 45 ATR 7; 2000 ATC 4525 per Hill J. The paragraph below is current to 20 April 2012

[430-2510] Partial termination of trust by one of two or more beneficiaries A beneficiary who is indefeasibly and absolutely entitled to an aliquot share of a trust fund may, subject to contrary intention expressed in the trust instrument,1 be entitled to terminate the trust so far as it concerns that aliquot portion, and to call for an immediate payment to himself or herself of that portion, or the transfer of investments representing the same.2 Where the aliquot share consists of personalty, a court will not interfere with this entitlement even though its effect is to reduce the value of the undistributed shares, although the court may, in exceptional circumstances involving undue prejudice to the remaining beneficiaries, decline to order a trustee to carry out the requisite transfer.3 In the case of realty,4 however, one of several beneficiaries has no right to a transfer of his or her undivided share because otherwise the remaining undivided shares would not fetch their full proportion of the proceeds of sale of the entire estate, thereby causing the interests of the other beneficiaries to be prejudiced.5 The court, therefore, retains a discretion not to allow the transfer, despite the prima facie right to it, in circumstances where it may be inappropriate to permit transfer of a share or part of a share, such as where it requires the sale of an asset.6 If a beneficiary who seeks to terminate the trust in respect of his or her aliquot share of the trust fund is indebted to the trust estate, has been overpaid, or has been a party to a breach of trust, the trustee is entitled to refuse the beneficiarys request except to the extent that the amount distributed exceeds the amount of the liability.7 Hence, the trustee should deduct the quantum of the liability from the beneficiarys aliquot share prior to making the distribution.8 A trustee has the power to appropriate assets to a beneficiary in satisfaction of the beneficiarys share.9

Notes 1 A direction in the trust instrument that conversion be postponed evidences a contrary intention for these purposes: Macculloch v Anderson [1904] AC 55 at 62 per Lord Davey, HL; Wilson v Wilson (1950) 51 SR (NSW) 91 at 94; 68 WN (NSW) 78 per Sugerman J. 2 Re Holford; Holford v Holford [1894] 3 Ch 30 at 36; (1894) 63 LJ Ch 637; 70 LT 777; 42 WR 563 per Chitty J, CA; Re Marshall; Marshall v Marshall [1914] 1 Ch 192 at 199; [1911-13] All ER Rep 671; (1914) 83 LJ Ch 307; 109 LT 835 per Cozens-Hardy MR, CA; Whakatane Paper Mills Ltd v Public Trustee (1939) 39 SR (NSW) 426 at 440; 56 WN (NSW) 177 per Long Innes J; Manfred v Maddrell (1950) 51 SR (NSW) 95 at 97; 68 WN (NSW) 80 per Sugerman J; Re Weiners Will

Trusts; Wyner v Braithwaite [1956] 2 All ER 482; [1956] 1 WLR 579, Ch; Stephenson (Inspector of Taxes) v Barclays Bank Trust Co Ltd [1975] 1 All ER 625; [1975] 1 WLR 882 at 889 (applied Bourseguin v Stannard Bros Holdings Pty Ltd [1994] 1 Qd R 231); Crowe v Appleby (Inspector of Taxes) [1975] 3 All ER 529; [1975] 1 WLR 1539 (affirmed without reference to this point Pexton (Inspector of Taxes) v Bell [1976] 2 All ER 914; [1976] 1 WLR 885, CA); Quinton v Proctor [1998] 4 VR 469 at 471 per Kellam J; Trustees of Estate Mortgage Fighting Fund Trust v FCT (2000) 175 ALR 482 at 500-1; 45 ATR 7; 2000 ATC 4525 per Hill J. 3 Re Marshall; Marshall v Marshall [1914] 1 Ch 192 at 199; [1911-13] All ER Rep 671; (1914) 83 LJ Ch 307; 109 LT 835 per Cozens-Hardy MR, CA; Re Sandemans Will Trusts; Sandeman v Hayne [1937] 1 All ER 368 at 371; (1937) 81 Sol Jo 137 per Clauson J, Ch; Whakatane Paper Mills Ltd v Public Trustee (1939) 39 SR (NSW) 426 at 440-2; 56 WN (NSW) 177 per Long Innes J; Manfred v Maddrell (1950) 51 SR (NSW) 95 at 97; 68 WN (NSW) 80 per Sugerman J; Re Weiners Will Trusts; Wyner v Braithwaite [1956] 2 All ER 482; [1956] 1 WLR 579, Ch; Lloyds Bank Plc v Duker [1987] 3 All ER 193; [1987] 1 WLR 1324, Ch; Australian Olympic Committee Inc v Big Fights Inc (No 2) (2000) 176 ALR 124 at 132-3; 50 IPR 292; [2000] FCA 785; BC200003150 per Lindgren J. 4 The same principle applies to a mortgage debt that is not conveniently capable of being split into shares: Re Marshall; Marshall v Marshall [1914] 1 Ch 192 at 199; [1911-13] All ER Rep 671; (1914) 83 LJ Ch 307; 109 LT 835 per Cozens-Hardy MR, CA; Manfred v Maddrell (1950) 51 SR (NSW) 95 at 97; 68 WN (NSW) 80 per Sugerman J. See also Australian Olympic Committee Inc v Big Fights Inc (No 2) (2000) 176 ALR 124 at 132-3; 50 IPR 292; [2000] FCA 785; BC200003150 per Lindgren J (dealing with the rights to reprint and sell films, which were held not to be fungibles for this purpose). 5 Re Horsnaill; Womersley v Horsnaill [1909] 1 Ch 631; (1909) 78 LJ Ch 331; 100 LT 603; Hyman v Permanent Trustee Co of New South Wales Ltd (1914) 14 SR (NSW) 348; 31 WN (NSW) 126; Re Kipping; Kipping v Kipping [1914] 1 Ch 62; (1913) 83 LJ Ch 218; 109 LT 919, CA; Re Marshall; Marshall v Marshall [1914] 1 Ch 192 at 199; [1911-13] All ER Rep 671; (1914) 83 LJ Ch 307; 109 LT 835 per Cozens-Hardy MR, CA; Wilson v Wilson (1950) 51 SR (NSW) 91 at 94; 68 WN (NSW) 78 per Sugerman J; Manfred v Maddrell (1950) 51 SR (NSW) 95 at 97; 68 WN (NSW) 80 per Sugerman J; Lloyds Bank Plc v Duker [1987] 3 All ER 193; [1987] 1 WLR 1324. 6 Quinton v Proctor [1998] 4 VR 469 at 474 per Kellam J, but see Trustees of Estate Mortgage Fighting Fund Trust v FCT (2000) 175 ALR 482 at 501; 45 ATR 7; 2000 ATC 4525 per Hill J. 7 See [430-3875]. 8 Re Peruvian Railway Construction Co Ltd [1915] 2 Ch 144 at 150 per Sargant J, CA; Dodson v Sandhurst & Northern District Trustees Executors and Agency Co Ltd [1955] VLR 100 at 102; [1955] ALR 448 per Smith J. 9 See [430-4955]-[430-4970]. The paragraph below is current to 20 April 2012

[430-2515] Termination of trust by beneficiaries collectively The actual or possible beneficiaries of a fixed or discretionary1 trust may, if they are all indefeasibly entitled,2 of full legal capacity and act unanimously, put an end to the trust by requesting the trustee to pay over their respective interests under the trust (known as the rule in Saunders v Vautier).3 The beneficiaries may terminate the trust in this manner even though it would frustrate the settlors intention.4 A trustee cannot prevent the beneficiaries from exercising their collective right to terminate the trust by investing the trust property in a way which purports to enable him or her to perpetuate the trust.5 However, the above principles do not apply if the trustee has outstanding obligations under a contract held as a trust asset and has no power to transfer the trust asset to the beneficiaries.6 Nor do they apply in respect of a trust constituted by an order of a court.7

The effect of the above rule can be ousted by the creation of an intervening discretionary trust, by appointing a charity as a beneficiary,8 or by provision for gift over in the event of a contingency (such as the death of the donee) taking place.9

Notes 1 Re Nelson; Norris v Nelson [1928] Ch 920n; (1918) 97 LJ Ch 443n; 140 LT 371n; Re Smith; Public Trustee v Aspinall [1928] Ch 915; [1928] All ER Rep 520; (1928) 97 LJ Ch 441; 140 LT 369; Re Becketts Settlement; Re Beckett (decd); Eden v von Stutterheim [1940] Ch 279 at 285; (1940) 109 LJ Ch 81; 163 LT 78; 56 TLR 342 per Simonds J; Sir Moses Montefiore Jewish Home v Howell and Co (No 7) Pty Ltd [1984] 2 NSWLR 406 at 411 per Kearney J; Miskelly v Arnheim [2009] WTLR 1529; [2008] NSWSC 1075; BC200809167 at [37]-[40] per Hamilton J. Yet the requirement that all beneficiaries be of full capacity coupled with the difficulty in securing the consent of all beneficiaries, means that in practice the termination of a discretionary trust by this method can only occur if the beneficiaries are members of a fixed class that is closed: Schmidt v Rosewood Trust Ltd [2003] 2 AC 709; [2003] 3 All ER 76; [2003] 2 WLR 1442 at 1455; [2003] UKPC 26 per Lord Walker; Lygon Nominees Pty Ltd v Cmr of State Revenue (2005) 60 ATR 135; 2005 ATC 4619; [2005] VSC 247; BC200504943 at [60] per Hollingworth J; Australian Securities and Investments Commission, Re Richstar Enterprises Pty Ltd v Carey (No 6) (2006) 153 FCR 509; 233 ALR 475; [2006] FCA 814; BC200604846 at [25] per French J. 2 If the beneficiaries are not the only persons in whose favour alone the trust property might be applied, they are not collectively indefeasibly (or absolutely) entitled, and so the rule in Saunders v Vautier has no application: CPT Custodian Pty Ltd v Cmr of State Revenue (2005) 224 CLR 98; 221 ALR 196; 79 ALJR 1724; 60 ATR 371; 2005 ATC 4925; [2005] HCA 53; BC200507253 at [41] [52] per Gleeson CJ, McHugh, Gummow, Callinan and Heydon JJ. 3 Saunders v Vautier (1841) Cr & Ph 240; [1835-42] All ER Rep 58; (1841) 10 LJ Ch 354; 41 ER 482. See also Wharton v Masterman [1895] AC 186; [1895-99] All ER Rep 687, HL; Berry v Green [1938] AC 575 at 582; [1938] 2 All ER 362; (1938) 159 LT 122 per Maugham LC; Inland Revenue Commissioners v Hamilton-Russells Executors [1943] 1 All ER 474 sub nom Hamilton-Russell Executors v IRC (1943) 87 Sol Jo 255; Wilson v Wilson (1950) 51 SR (NSW) 91 at 94; 68 WN (NSW) 78 per Sugerman J; In the Estate of Cummings (decd) [1964] SASR 236 at 247 per Hogarth J; Stephenson (Inspector of Taxes) v Barclays Bank Trust Co Ltd [1975] 1 All ER 625 at 637; [1975] 1 WLR 882 at 889 per Walton J; Queen Street Hotels Pty Ltd v Byrne (1980) CLC 40611, CA(QLD); Perpetual Trustees WA Ltd v Walker [1982] WAR 224; Re Philips New Zealand Ltd [1997] 1 NZLR 93 at 101 per Baragwanath J; Hayman v Equity Trustees Ltd (2003) 8 VR 557; [2003] VSC 353; BC200305749 at [9] per Kellam J; CPT Custodian Pty Ltd v Cmr of State Revenue (2005) 224 CLR 98; 221 ALR 196; 79 ALJR 1724; 60 ATR 371; 2005 ATC 4925; [2005] HCA 53; BC200507253 at [41][52] per Gleeson CJ, McHugh, Gummow, Callinan and Heydon JJ. 4 For example, with the consent of the remainderpersons, a life tenants interest can be commuted to an absolute interest: Anson v Potter (1879) 13 Ch D 141; 41 LT 582; Re White; White v Edmond [1901] 1 Ch 570; Quinton v Proctor [1998] 4 VR 469 at 471 per Kellam J. The beneficiaries right to collectively terminate the trust can also be used to defeat a protective trust (Re Nelson; Norris v Nelson [1928] Ch 920n; (1918) 97 LJ Ch 443n; 140 LT 371n, CA; Re Smith; Public Trustee v Aspinall [1928] Ch 915; [1928] All ER Rep 520; (1928) 97 LJ Ch 441; 140 LT 369; Re Coppel [1950] VLR 328; [1950] ALR 723) or to override the intention of a testator designed to prevent the beneficiaries from taking their shares until they reach a certain age (Quinton v Proctor, above at 471 per Kellam J). See also Koompahtoo Local Aboriginal Land Council v KLALC Property & Investment Pty Ltd [2009] NSWSC 502; BC200905932 at [35]-[41] per Debelle AJ. 5 Queen Street Hotels Pty Ltd v Byrne (1980) CLC 40-611 at 34,109 per Hoare J, CA(QLD).

6 Don King Productions Inc v Warren [1998] 2 All ER 608 at 634 per Lightman J. 7 Perpetual Trustees WA Ltd v Naso (1999) 21 WAR 191 at 198 per Parker J. 8 As to charities see charities. 9 In the Estate of Lee; Perpetual Trustee Co (Canberra) Ltd v Rasker (1986) 84 FLR 268, SC(ACT). The paragraph below is current to 20 April 2012

[430-2520] Duties of trustee on termination On the termination of a trust, the persons absolutely entitled to the property of the trust may, upon furnishing the trustee with clear proof that his or her obligations as trustee have come to an end,1 require the trustee to transfer it to them at their expense.2 A trustee must, prior to the distribution of the trust property on the termination of trust, settle any claims outstanding against the trust estate, and this is most commonly effected by way of inquiries prescribed by statute, compliance with which confers upon the trustee the same protection as if the estate had been administered under an order of the court.3 A trustee should seek leave of the court to distribute trust property where there is a possibility of other beneficiaries coming into existence.4 When a trust is terminated by the exercise of a power to terminate, neither the trust nor the trustees powers are automatically brought to an end; the trust continues for a reasonable time during which the trustee has the power to perform such acts as are necessary to the winding up of the trust and the distribution of the trust property, and as are expressly given or reasonably implied from the trust instrument.5 A purpose of such powers is to enable the trustee to protect the trust property pending distribution.6 A trustee should retain a record of the termination of the trust so as to avoid the possibility of a future challenge as to whether it has in fact taken place.7

Notes 1 Holford v Phipps (1841) 3 Beav 434 at 440-1; 10 LJ Ch 209; 49 ER 170 per Lord Langdale MR; Warter v Anderson (1853) 11 Hare 301 at 303; 1 WR 493; 68 ER 1289 at 1290 per Wood VC. As to the trustees duty to hand over the trust property to the correct beneficiaries see [430-4200]. As to the trustees duty to act impartially between beneficiaries see [430-4195]. 2 Saunders v Vautier (1841) Cr & Ph 240; [1835-42] All ER Rep 58; (1841) 10 LJ Ch 354; 41 ER 482; Holford v Phipps (1841) 3 Beav 434; 10 LJ Ch 209; 49 ER 170; Re Knights Trusts (1859) 27 Beav 45; 28 LJ Ch 625; 54 ER 18. 3 Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226; 151 ALR 1 at 17; 72 ALJR 243, HC of A, Full Court. As to the relevant statutory provisions in this respect see [430-3815]-[4303835]. 4 See [430-5105]. 5 Morlea Professional Services Pty Ltd v Richard Walter Pty Ltd (in liq) (1999) 96 FCR 217; 169 ALR 419; 34 ACSR 371 at 386, Fed C of A, Full Court. 6 Morlea Professional Services Pty Ltd v Richard Walter Pty Ltd (in liq) (1999) 96 FCR 217; 169 ALR 419; 34 ACSR 371 at 386, Fed C of A, Full Court. As to the trustees duty to preserve and protect the trust property see [430-4155]. 7 Payne v Evens (1874) LR 18 Eq 356 at 367 per Sir James Bacon VC. As to a trustees right to a

release on the termination of a trust see [430-3870].

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II TRUSTEES (1) CAPACITY

This chapter was updated by G E Dal Pont LLM (Mich) LLD (Tas) CPA

Professor, Faculty of Law, University of Tasmania

The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3000] Capacity to act as trustee The general rule is that any person who has the legal capacity to take and hold title to property in his or her own right has the capacity to hold office as a trustee. A person cannot be a trustee until the property the subject of the trust is vested in him or her,1 or if he or she lacks the capacity to exercise the discretions which attach to the fiduciary office.2 In New South Wales, the appointment as trustee of a person under the age of 18 is void, but without prejudice to the power to appoint a new trustee to fill the vacancy.3 It is further provided that a person aged 18 years and over may become a trustee, with the powers attendant to that office.4 These provisions do not, however, preclude a minor who has received money that is the property of someone else, as a volunteer, from holding that money on a resulting or a constructive trust.5 A disqualified person is prohibited from being a trustee of a superannuation fund.6 Notes 1 Church of England Property Trust, Diocese of Goulburn v Rossi (1893) 14 LR (NSW) Eq 186 at 196; 10 WN (NSW) 1 per Owen CJ .2 As to the discretions that attach to the fiduciary office see Mettoy Pension Trustees Ltd v Evans [1991] 2 All ER 513 at 545-6; [1990] 1 WLR 1587 per Warner J . As to fiduciaries generally see equity [185-660]-[185-820].3 (NSW) Conveyancing Act 1919 s 151A.4 (NSW) Minors (Property and Contracts) Act 1970 s 10(1)(b), 10(2).5 SanofiAventis Australia Pty Ltd v Kartono [2006] NSWSC 1284; BC200609996 at [7] per Campbell J . As to resulting trusts see [430-500]-[430-560]. As to constructive trusts see [430-565]-[430-675].6 (CTH) Superannuation Industry (Supervision) Act 1993 s 126K. For the definition of disqualified person see ibid s 120. See further superannuation [400-165], [400-170]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3005] Body corporate as trustee A company may act as trustee, but where the companys constitution limits its objects, its capacity to act as trustee is limited to objects of the trust that are within the objects of the company.1 Foreign companies may also act as trustees.2 In most jurisdictions statute permits a company to be appointed as co-trustee with an individual.3 It is common to structure a business to operate through a discretionary trust with a corporate trustee, with the objective of combining the flexibility of the discretionary trust with limited liability protection of the company as a separate legal entity.4 Notes

1 Re Levin & Co Ltd [1936] NZLR 558 .2 Re McPhillamys Trusts (1909) 10 SR (NSW) 42 at 46-7; 26 WN (NSW) 188 per Simpson CJ ; Re Transfer of Land Act 1915 [1916] VLR 397 .3 (ACT) Civil Law (Property) Act 2006 s 209 (NSW) Conveyancing Act 1919 s 25 (QLD) Property Law Act 1974 s 34 (VIC) Property Law Act 1958 s 28 (WA) Property Law Act 1969 s 29. There are no equivalent provisions in the other jurisdictions. 4 In reality, however, lenders to a corporate trustee will usually require personal guarantees from the directors of the company or other guarantors: McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 641; 9 ACLR 926 per Young J . The paragraph below is current to 20 April 2012 [430-3010] Crown as trustee The Crown has the capacity to act as trustee although it cannot be compelled to do so.1 Clear words are required to establish that there was a necessary intention that the Crown be constituted as trustee.2 Where statutory corporations or governmental bodies carry out the functions of the Crown, the relationship, as between themselves, is governed by administrative arrangements enforceable by the executive and not by the courts.3 Notes 1 Williams v A-G (NSW) (1913) 16 CLR 404; 13 SR (NSW) 539; 19 ALR 378; 30 WN (NSW) 114 ; R v Mayor of Blenheim (1907) 28 NZLR 249 at 256 per Cooper J ; Aboriginal Development Commission v Treka Aboriginal Arts and Crafts Ltd [1984] 3 NSWLR 502 at 517 per Hutley JA, at 519 per Priestley JA .2 Kinloch v Secretary of State for India in Council (1882) LR 7 App Cas 619; 47 LT 133; Town Investments Ltd v Dept of the Environment [1978] AC 359 at 382; [1977] 1 All ER 813; [1977] 2 WLR 450 per Lord Diplock ; Aboriginal Development Commission v Treka Aboriginal Arts and Crafts Ltd [1984] 3 NSWLR 502 at 517 per Hutley JA, at 519 per Priestley JA .3 Aboriginal Development Commission v Treka Aboriginal Arts and Crafts Ltd [1984] 3 NSWLR 502 at 517 per Hutley JA. The paragraph below is current to 20 April 2012 [430-3015] Beneficiary as trustee Unless prohibited by the trust instrument, a trustee of a trust may also be a beneficiary of that trust. However, the distinction between legal and equitable ownership which forms the foundation for the existence of a trust1 dictates that a sole trustee cannot be the sole beneficiary of that trust; for, this causes the trust to be extinguished as the legal and equitable estates merge.2 On practical grounds, to appoint one of the beneficiaries (or a person who has close ties to one or more of the beneficiaries) as trustee may give rise to conflict between the appointees duty as trustee to administer the trust as a whole and his or her individual interest as a beneficiary.3 A trustee who is also a beneficiary under trust will be required to substantiate any claim to enjoyment of the trust property where title of the trust is contested.4 Notes 1 For the definition of a trust see [430-1].2 Re Douglas; Wood v Douglas (1884) 28 Ch D 327 at 331; 33 WR 390 per Pearson J ; Re Selous; Thomson v Selous [1901] 1 Ch 921; (1901) 84 LT 318 ; Re Turkington; Owen v Benson [1937] 4 All ER 501 at 504; (1937) 81 Sol Jo 1041 per

Luxmoore J , Ch; Re Cook; Beck v Grant [1948] Ch 212 at 214-15; [1948] 1 All ER 231 per Harman J ; Re Annett (decd); Annett v Taylor [1956] NZLR 929 ; Re Heberley (decd) [1971] NZLR 325 at 333 per Turner J ; DKLR Holding Co (No 2) Pty Ltd v Cmr of Stamp Duties (NSW) [1980] 1 NSWLR 510 at 519; (1980) 10 ATR 942; 80 ATC 4279 per Hope JA (varied on appeal on a separate point DKLR Holding Co (No 2) Pty Ltd v Cmr of Stamp Duties (NSW) (1982) 149 CLR 431; 40 ALR 1; [1982] HCA 14; BC8200057 ); Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639 at 648; 9 BPR 16,735; BC9807013 per Mason P . Merger will not occur where the trustee is merely one of a number of beneficiaries, or where the trustee holds the beneficial interest in a different capacity from the capacity in which the legal interest is held: Commissioner for ACT Revenue v Perpetual Trustee Co (Canberra) Ltd (1993) 118 ACTR 1 at 5; 31 ALD 523; 116 FLR 296; 27 ATR 439 per Higgins J . Nor will merger occur where liquidators of a corporate beneficiary are appointed trustees of the trust, the reason being that the liquidators are not and cannot be the same as the corporate beneficiary, whose affairs they control: Valofo Pty Ltd (admin apptd) v PILT Nominees Pty Ltd [2011] NSWSC 134; BC201103262 at [19] per Rein J. 3 Forster v Abraham (1874) LR 17 Eq 351; 22 WR 386; Saul v Lin (No 2) (2004) 60 NSWLR 275; [2004] NSWSC 332; BC200402088 . The court will not ordinarily appoint as trustee a person who has a conflict of interest: see [430-3410].4 Allen v Roughley (1955) 94 CLR 98 at 107; 29 ALJ 603; [1955] ALR 1017 per Dixon CJ . The paragraph below is current to 20 April 2012 [430-3020] Trust will not fail for want of trustee An attempt to vest property in a person who cannot legally hold it does not in itself invalidate the trust,1 because equity will not allow the settlors intention to create a trust to be frustrated simply for want of a trustee.2 The court has an inherent and a statutory jurisdiction to appoint a trustee where for any reason the trust would fail for want of a trustee appointed by the settlor.3 Notes 1 Sonley v Clock-makers Co (1780) 1 Bro CC 81; 28 ER 998; Tufnell v Constable (1838) 7 Ad & El 798; 112 ER 670; Attorney-General v Hickman (1732) Kel W 34; 25 ER 482.2 Sinnott v Hockin (1882) 8 VLR (E) 205 at 210; 4 ALT 10 per Molesworth J ; Raftland Pty Ltd v FCT (2006) 227 ALR 598; 62 ATR 49; [2006] FCA 109; BC200600893 at [66] per Kiefel J (affirmed Raftland Pty Ltd v FCT (2008) 238 CLR 516; 246 ALR 406; [2008] HCA 21; BC200803682 ).3 As to the courts jurisdiction in this respect see [430-3360]-[430-3430].

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[Halsbury's Laws of Australia]

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(2) KINDS OF TRUSTEES

This chapter was updated by G E Dal Pont LLM (Mich) LLD (Tas) CPA Professor, Faculty of Law, University of Tasmania

(A) Introduction The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3075] Different kinds of trustees The most common type of trustee is that appointed by the settlor of a private or charitable (public) trust.1 Trustees may also assume office pursuant to legislation, such as a trustee in bankruptcy,2 the Public Trustee3 and statutory trustee companies.4 Trustees may also be classified according to their role and responsibility, such as bare trustees,5 custodian trustees,6 advisory trustees7 and superannuation fund trustees.8 Trusteeship may also arise by implication of law, as in the case of resulting trusts,9 and by operation of law in the case of constructive trusts.10 Notes 1 As to trustees of charitable trusts generally see charities [75-835]-[75-885].2 As to the trustee in bankruptcy see (CTH) Bankruptcy Act 1966 Pt VIII. See further bankruptcy [50-120].3 As to the Public Trustee see [430-3080].4 As to trustee companies see [430-3085]-[430-3110].5 As to bare trustees see [430-3115].6 As to custodian trustees see [430-3120]-[430-3145].7 As to advisory trustees see [430-3150].8 Superannuation fund trustees are subject to the same legal principles as are applicable to other trustees: Cowan v Scargill [1985] Ch 270 at 290-1; [1984] 2 All ER 750 at 760-3; [1984] 3 WLR 501 per Megarry VC ; Boe v Alexander (1987) 41 DLR (4th) 520 at 526-7 per MacDonald JA , as modified by the obligations imposed by the (CTH) Superannuation Industry (Supervision) Act 1993. As to the (CTH) Superannuation Industry (Supervision) Act 1993 and superannuation trusts generally see superannuation [400-150]-[400-865]. 9 As to resulting trusts see [430-500]-[430-560].10 As to constructive trusts see [430-565]-[430675].

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(B) The Public Trustee The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3080] Public Trustee The Public Trustee (in New South Wales, the NSW Trustee and Guardian; in Victoria, the State Trustees) is a corporation1 which may act in statutorily prescribed capacities. Generally the Public Trustees specific statutory responsibilities are directed to the position where there is no adult person who has both the desire and the capacity to manage property. In this sense, the Public Trustee performs an important role in the public interest as the person who, in the last resort, cares for the property.2 The Public Trustee also fulfils a role in respect of property where it is necessary to have an impartial agency managing particular property.3 In all jurisdictions except the Australian Capital Territory the court may make an order granting the administration of a deceased estate to the Public Trustee in specified circumstances, most commonly where a person has died intestate or bankrupt.4 In all jurisdictions except Victoria a person may appoint the Public Trustee as executor of his or her will.5 In prescribed circumstances and where the court consents, the Public Trustee may act in place of executors or administrators of deceased estates.6 In all jurisdictions except Victoria the relevant legislation prescribes the requirements for the investment of funds held by the Public Trustee, in particular the maintenance of a common fund.7 In the Australian Capital Territory, the Northern Territory, Queensland and Tasmania the legislation further provides for the creation of a Public Trustee Investment Board to control the investment of money which is from time to time in the common fund.8 In all jurisdictions the legislation contains provisions dealing with what the Public Trustee is to do with unclaimed property.9 In South Australia, Tasmania and Western Australia the Public Trustee may be appointed as a custodian trustee,10 and in Queensland, Tasmania, Victoria and Western Australia the Public Trustee can act with advisory trustees.11 The Public Trustee is statutorily permitted to charge fees for its services,12 and in some jurisdictions is subject to statutorily prescribed accounting and reporting obligations.13 Notes

1 (ACT) Public Trustee Act 1985 s 8 (NT) Public Trustee Act 1979 s 9 (NSW) NSW Trustee and Guardian Act 2009 s 5 (QLD) Public Trustee Act 1978 s 8 (SA) Public Trustee Act 1995 s 4(4) (TAS) Public Trustee Act 1930 s 4 (VIC) State Trustees (State Owned Company) Act 1994 s 1 (WA) Public Trustee Act 1941 s 4(2). 2 Titterton v Oates (1998) 143 FLR 467 ; Mendelssohn v Centrepoint Community Growth Trust [1999] 2 NZLR 88 , CA(NZ).3 Slater v Global Finance Group Pty Ltd (1999) 150 FLR 264 at 269; 30 ACSR 519 per Wheeler J ; Saul v Lin (No 2) (2004) 60 NSWLR 275; [2004] NSWSC 332; BC200402088 at [54], [55] per Palmer J ; Trojan v Nest Egg Nominees Pty Ltd [2004] SASC 182; BC200403757 at [42], [43] per Nyland J ; Baldwin v Greenland [2005] QSC 386; BC200510959 at [23], [24] per Wilson J .4 (NT) Public Trustee Act 1979 s 34 (NSW) NSW Trustee and Guardian Act 2009 ss 22-24 (QLD) Public Trustee Act 1978 s 29 (SA) Public Trustee Act 1995 s 9 (TAS) Public Trustee Act 1930 ss 17-19 (VIC) State Trustees (State Owned Company) Act 1994 s 5 (WA) Public Trustee Act 1941 s 10. 5 (ACT) Public Trustee Act 1985 s 17 (NT) Public Trustee Act 1979 s 32 (NSW) NSW Trustee and Guardian Act 2009 s 11 (QLD) Public Trustee Act 1978 ss 27, 38 (SA) Public Trustee Act 1995 s 14 (TAS) Public Trustee Act 1930 s 12(1) (WA) Public Trustee Act 1941 ss 7, 8. There are no equivalent provisions in Victoria. However, (VIC) State Trustees (State Owned Company) Act 1994 s 4 provides for the executor to authorise the State Trustees to apply for the grant of probate, unless the testator had specified in the will that the office of executor may not be delegated or that the State Trustee must not act. 6 (ACT) Public Trustee Act 1985 s 15 (NT) Public Trustee Act 1979 ss 33, 45 (NSW) NSW Trustee and Guardian Act 2009 Ch 3

(QLD) Public Trustee Act 1978 ss 31, 42 (SA) Public Trustee Act 1995 s 15 (TAS) Public Trustee Act 1930 s 15 (VIC) State Trustees (State Owned Company) Act 1994 s 4 (courts consent not required) (WA) Public Trustee Act 1941 s 12. 7 (ACT) Public Trustee Act 1985 ss 55-65 (NT) Public Trustee Act 1979 ss 21-31 (NSW) NSW Trustee and Guardian Act 2009 ss 104-108 (QLD) Public Trustee Act 1978 s 19 (SA) Public Trustee Act 1995 ss 27, 29-31 (TAS) Public Trustee Act 1930 ss 38-41 (WA) Public Trustee Act 1941 ss 37, 40-44. 8 (ACT) Public Trustee Act 1985 ss 46-54D (NT) Public Trustee Act 1979 ss 12, 13 (QLD) Public Trustee Act 1978 s 21 (TAS) Public Trustee Act 1930 s 37 (Tasmanian Investment Committee advises the Board established under (TAS) Government Business Enterprises Act 1995 on the investment of money). 9 (ACT) Public Trustee Act 1985 ss 34-45 (NT) Public Trustee Act 1979 ss 58-67A (NSW) NSW Trustee and Guardian Act 2009 s 100 (QLD) Public Trustee Act 1978 Pt 8 (SA) Public Trustee Act 1995 ss 32-42 (TAS) Public Trustee Act 1930 ss 25, 36A, Pt VIA (WA) Public Trustee Act 1941 s 45. 10 (SA) Public Trustee Act 1995 s 17 (TAS) Public Trustee Act 1930 ss 23, 24 (WA) Public Trustee Act 1941 s 22. As to custodian trustees see [430-3120]-[430-3145]. 11 (QLD) Public Trustee Act 1978 s 41 (TAS) Public Trustee Act 1930 s 22

(VIC) State Trustees (State Owned Company) Act 1994 s 9 (WA) Public Trustee Act 1941 s 21. As to advisory trustees see [430-3150]. 12 (ACT) Public Trustee Act 1985 s 28 (NT) Public Trustee Act 1979 s 74 (NSW) NSW Trustee and Guardian Act 2009 Pt 6.1 (QLD) Public Trustee Act 1978 s 17 (SA) Public Trustee Act 1995 ss 44, 45 (TAS) Public Trustee Act 1930 s 11 (VIC) State Trustees (State Owned Company) Act 1994 ss 13, 14 (WA) Public Trustee Act 1941 s 38. 13 (NT) Public Trustee Act 1979 ss 14-20B (QLD) Public Trustee Act 1978 ss 24, 26 (SA) Public Trustee Act 1995 s 50 (WA) Public Trustee Act 1941 s 47.

Source

[Halsbury's Laws of Australia]

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(C) Trustee Companies The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation

For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3085] Roles In all jurisdictions companies may act in statutorily provided capacities.1 A trustee company may be named as executor of an estate, or may be authorised to so act by the executor.2 Where an appointor (including the court) has the power to appoint any person to act as trustee, receiver or guardian of the estate of a minor, a trustee company may be so appointed.3 Aside from the role of a trustee company in the management of estates, the principal modern role of a trustee company is the investment and management of funds on behalf of clients.4 Notes 1 (ACT) Trustee Companies Act 1947 (NT) Companies (Trustees and Personal Representatives) Act 1981 (NSW) Trustee Companies Act 1964 (QLD) Trustee Companies Act 1968 (SA) Trustee Companies Act 1988 (TAS) Trustee Companies Act 1953 (VIC) Trustee Companies Act 1984 (WA) Trustee Companies Act 1987. 2 (ACT) Trustee Companies Act 1947 ss 4-8A, 13, 14 (NT) Companies (Trustees and Personal Representatives) Act 1981 ss 14-18 (NSW) Trustee Companies Act 1964 ss 4-8, 15, 15A (QLD) Trustee Companies Act 1968 ss 4-12, 20 (SA) Trustee Companies Act 1988 s 4 (TAS) Trustee Companies Act 1953 ss 5-10A, 14, 15 (VIC) Trustee Companies Act 1984 ss 9-11A, 16, 17 (WA) Trustee Companies Act 1987 ss 5-11, 14. 3 (ACT) Trustee Companies Act 1947 s 11 (NT) Companies (Trustees and Personal Representatives) Act 1981 s 20 (NSW) Trustee Companies Act 1964 s 11 (QLD) Trustee Companies Act 1968 s 21 (SA) Trustee Companies Act 1988 ss 5, 6 (TAS) Trustee Companies Act 1953 s 7 (VIC) Trustee Companies Act 1984 s 14

(WA) Trustee Companies Act 1987 s 12. The Queensland, Victorian and Western Australian legislation also provides that a trustee company may be appointed as guarantor or surety: (QLD) Trustee Companies Act 1968 s 21 (VIC) Trustee Companies Act 1984 s 14 (WA) Trustee Companies Act 1987 s 12(1). The New South Wales and Queensland legislation permits a trustee company to act as committee of the estate of a mental patient: (NSW) Trustee Companies Act 1964 s 11(1)(c) (QLD) Trustee Companies Act 1968 s 21(1)(c). The Queensland legislation is unique in its provision entitling a trustee company to be appointed as a liquidator: (QLD) Trustee Companies Act 1968 s 21(8)(b). 4 As to investment and management of funds by trustees see [430-3100]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3090] Application of other legislation to trustee companies The ordinary trustee legislation applies to trustee companies to the extent that it does not contradict the provisions of the trustee companies legislation.1 However, as from 6 May 20102 the (CTH) Corporations Act 2001 was amended to address various aspects of the operation of trustee companies, to the exclusion of the State and Territory laws, which include laws that regulate the fees trustee companies can charge3 for traditional trustee company services4 and laws that deal with the provision of accounts5 in relation to traditional trustee company services.6 The (CTH) Corporations Act 2001 also lists the duties of officers and employees of trustee companies7 and restricts the ownership and voting power of persons in those companies.8 Notes 1 The trustee legislation in the Australian Capital Territory, New South Wales, Queensland, Tasmania and Western Australia explicitly states that the term trustee for the purposes of that legislation includes a trustee company: (ACT) Trustee Act 1925 s 2 Dictionary (NSW) Trustee Act 1925 s 5 (QLD) Trusts Act 1973 s 5 (TAS) Trustee Act 1898 s 4 (WA) Trustees Act 1962 s 6. In the remaining jurisdictions, though there is no such explicit provision, the term trustee is defined inclusively and is not stated to exclude trustee companies:

(NT) Trustee Act 1893 s 82 (SA) Trustee Act 1936 s 4 (VIC) Trustee Act 1958 s 3. 2 Being the date of the commencement of the (CTH) Corporations Act 2001 Ch 5D, inserted by the (CTH) Corporations Legislation Amendment (Financial Services Modernisation) Act 2009 .3 See [430-3095].4 Traditional trustee company services is defined in (CTH) Corporations Act 2001 s 601RAC.5 See [430-3105].6 Ibid s 601RAE.7 Ibid Pt 5D.4.8 Ibid Pt 5D.5. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3095] Remuneration The (CTH) Corporations Act 2001 regulates the charging by trustee companies of fees for traditional trustee company services.1 Trustee companies are subject to obligations relating to the publication and disclosure of their fees,2 as well as restrictions on the fees chargeable3 (although the latter do not preclude a trustee company from charging fees as agreed with a client).4 The court is, with limited exceptions,5 statutorily empowered to review, and reduce, the fees charged by a trustee company in respect of any estate if it considers these to be excessive.6 As trustee companies are entitled to charge fees for their services, high standards of trusteeship apply.7 Notes 1 (CTH) Corporations Act 2001 Pt 5D.3. Traditional trustee company services is defined in ibid s 601RAC. As to the remuneration of trustees generally see [430-3950]-[430-4020]. 2 Ibid ss 601TAA, 601TAB.3 Ibid Pt 5D.3 Div 3 (Fees otherwise than for being trustee or manager of a charitable trust), Pt 5D.3 Div 4 (Fees for being trustee or manager of a charitable trust).4 Ibid s 601TBB.5 Ibid s 601TEA(2).6 Ibid s 601TEA(1). In considering whether fees are excessive, the court may consider any or all of the matters listed in ibid s 601TEA(3). 7 National Trustees Co of Australasia Ltd v General Finance Co of Australasia Ltd [1905] AC 373 at 381; (1905) 11 ALR (CN) 58; 92 LT 736 per Sir Ford North , PC; Partridge v Equity Trustees Executors and Agency Co Ltd (1947) 75 CLR 149 at 165; 21 ALJ 321; [1947] ALR 552 per Starke, Dixon and Williams JJ ; Re Watermans Will Trusts; Lloyds Bank Ltd v Sutton [1952] 2 All ER 1054 at 1055; [1952] TLR 877 per Harman J ; Bartlett v Barclays Bank Trust Co Ltd (No 1) [1980] Ch 515; [1980] 1 All ER 139; [1980] 2 WLR 430 ; Steel v Wellcome Custodian Trustees Ltd [1988] 1 WLR 167 at 174; (1987) 131 Sol Jo 1589 per Hoffman J ; Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504; 133 ALR 1 at 18-9; 18 ACSR 459; 13 ACLC 1822 per Finn J ; Wilkinson v Feldworth Financial Services Pty Ltd (1998) 29 ACSR 642 at 693; 17 ACLC 220 per Rolfe J , SC(NSW). The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3100] Investment The (CTH) Corporations Act 2001 permits the establishment of common

funds, which are a vehicle through which trustee companies can conduct the business of investing the funds held by them on trust.1 At general law, trustees cannot mix the funds from two or more trusts.2 The legislation modifies the general law position by permitting trustee companies, for the purposes of investment, to pool together into a fund or funds money from two or more estates that are administered or managed by the trustee company in the performance of estate management functions (a common fund).3 A common fund may also include other money. 4 If a trustee company establishes more than one common fund, each must be allocated an appropriate distinguishing number.5 For each common fund, the trustee company must keep accounts showing at all times the current amount for the time being at credit in the fund on account of each estate.6 However, a trustee company must not put estate money into a common fund if doing so is contrary to an express provision of the conditions subject to which the estate money is held by the trustee company.7 Notes 1 (CTH) Corporations Act 2001 Pt 5D.2 Div 3.2 As to the proscription against mixing see [4304085].3 (CTH) Corporations Act 2001 s 601SCA(1), 601SCA(2). 4 Ibid s 601SCA(3).5 Ibid s 601SCB(1).6 Ibid s 601SCB(2).7 Ibid s 601SCB(3). The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3105] Duty to account A trustee company, when acting in relation to any estate of a deceased person, is not required to file, or file and pass, accounts relating to the estate unless the court so orders.1 On application by a person with a proper interest2 in an estate administered or managed by a trustee company, the trustee company must provide the person with an account of the prescribed matters pertaining to the estate.3 If a trustee company fails to provide a proper account, the court may make any order that it considers appropriate, including an order requiring the preparation and delivery of proper accounts.4 The court may, in addition to or in substitution for any account to be provided by a trustee company, order that a person named in the order must examine the accounts of the trustee company relating to the estate in respect of which the order is made.5 Notes 1 (CTH) Corporations Act 2001 s 601SBA.2 Proper interest is defined in ibid s 601RAD.3 Ibid s 601SBB(1) (the prescribed matters being: (a) the assets and liabilities of the estate; (b) the trustee companys administration or management of the estate; (c) any investment made from the estate; (d) any distribution made from the estate; and (e) any other expenditure (including fees and commissions) from the estate). As to a trustee's duty to account generally see [430-4210][430-4225].4 Ibid s 601SBB(4).5 Ibid s 601SBC. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3110] Directors and officers of trustee companies Unlike other company directors, directors of trustee companies are not concerned merely with the interests of shareholders, but also with the interests of the beneficiaries on whose behalf the company is administering trusts.1

Trustee companies may act under power of attorney by a manager, director of the company, secretary or any other officer authorised in writing under the company seal to exercise the powers of the company as an authority.2 A failure by any such officer to properly perform his or her duties will render the trustee company responsible.3 In addition, the managing officers of a trustee company are generally personally responsible for the due administration of the trust.4 Notes 1 Elders Trustee & Executor Co Ltd v Higgins (1963) 113 CLR 426 at 452-3; [1964] ALR 408; (1963) 37 ALJR 132 per Dixon CJ, McTiernan and Windeyer JJ .2 (ACT) Trustee Companies Act 1947 s 12 (NT) Companies (Trustees and Personal Representatives) Act 1981 s 19 (NSW) Trustee Companies Act 1964 s 13 (QLD) Trustee Companies Act 1968 s 22 (TAS) Trustee Companies Act 1953 s 13 (VIC) Trustee Companies Act 1984 s 15 (WA) Trustee Companies Act 1987 s 13. See also Elders Trustee & Executor Co Ltd v Higgins (1963) 113 CLR 426 at 452-3; [1964] ALR 408; (1963) 37 ALJR 132 per Dixon CJ, McTiernan and Windeyer JJ . 3 Elders Trustee & Executor Co Ltd v Higgins (1963) 113 CLR 426 at 452-3; [1964] ALR 408; (1963) 37 ALJR 132 per Dixon CJ, McTiernan and Windeyer JJ .4 (ACT) Trustee Companies Act 1947 ss 16, 17 (NT) Companies (Trustees and Personal Representatives) Act 1981 s 50 (NSW) Trustee Companies Act 1964 s 31 (QLD) Trustee Companies Act 1968 s 48 (TAS) Trustee Companies Act 1953 s 17 (VIC) Trustee Companies Act 1984 s 19 (WA) Trustee Companies Act 1987 s 16. Compare (SA) Trustee Companies Act 1988 s 23 (directors and managers individually and collectively responsible to the court).

Source

[Halsbury's Laws of Australia]

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Copyright 2012 LexisNexis . All rights reserved.

(D) Bare Trustees The paragraph below is current to 20 April 2012 [430-3115] Bare trustees A bare trustee is a person who holds property in trust for the absolute benefit and at the absolute disposal of beneficiaries who are of full age and sui juris in respect of that property, but who has no interest in the property other than that existing by reason of the office and the legal title as trustee, and has no duty or further duty to perform in respect of the property except to convey it upon demand to the beneficiaries or as directed by them.1 In order to determine whether a person is a bare trustee, it is therefore necessary to first identify what, if any, duties that person is subject to.2 Bare trusteeship most commonly arises in the context of trusts created by express declaration.3 Other examples of bare trustees include the assignor of future property upon acquiring title to the property,4 a person holding the title to property under a resulting trust flowing from the provision by the beneficiary of the purchase money for the property,5 and the vendor of land upon the purchaser paying the purchase money within the period prior to the transfer.6 The phrase bare trustee, when used in a statute, can also mean a trustee who is no more than a nominee or cipher if the context permits this meaning.7 A bare trustee cannot divest himself or herself of his or her legal duty to preserve the trust property so long as his or her trusteeship subsists.8 It is the active duties expressed by the settlor that the trustee is bare of.9 The interest of a bare trustee of Torrens system land is capable of being charged, and the interest so created may be sufficient to sustain a caveat.10 Notes 1 Christie v Ovington (1875) 1 Ch D 279 ; Lysaght v Edwards (1876) 2 Ch D 499 at 516-17; 45 LJ Ch 554; 34 LT 787 per Jessel MR ; Morgan v Swansea Urban Sanitary Authority (1878) 9 Ch D 582 ; Re Docwra; Docwra v Faith (1885) 29 Ch D 693 ; Re Cunningham and Frayling [1891] 2 Ch 567 at 571-2 per Stirling J ; Re Blandy Jenkins Estate; Blandy Jenkins v Walker [1917] 1 Ch 46 ; Schalit v Joseph Nadler Ltd [1933] 2 KB 79 at 81 per Goddard J ; Herdegen v FCT (1988) 84 ALR 271 at 281; 20 ATR 24 per Gummow J , Fed C of A; Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370 at 398; 5 ACSR 720; 10 ACLC 428 per Meagher JA , CA(NSW); Motor Vehicle Dealers Institute Inc v UDC Finance (1991) Ltd [1994] 1 NZLR 659 at 664 per McKay J , CA(NZ).2 Jessup v Lawyers Private Mortgages Ltd [2006] QSC 3; BC200600128 at [54] per Chesterman J (affirmed Jessup v Lawyers Private Mortgages Ltd [2006] QCA 432; BC200608849 ); Burns v Steel [2006] 1 NZLR 559 at [62] per Randerson J .3 Herdegen v FCT (1988) 84 ALR 271 at 281; 20 ATR 24 per Gummow J , Fed C of A.4 Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1 at 27; [1937] ALR 432 per Dixon J (affirming Krohn v Palette Shoes Pty Ltd (in liq) [1937] VLR 314 ). As to assignments in equity see equity [185-415]-[185-485].

5 Herdegen v FCT (1988) 84 ALR 271 at 281; 20 ATR 24 per Gummow J As to purchase money resulting trusts see [430-540], [430-545].

, Fed C of A.

6 McWilliam v McWilliams Wines Pty Ltd (1964) 114 CLR 656 at 660; 37 ALJR 435 per McTiernan and Taylor JJ .7 Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370 at 398; 5 ACSR 720; 10 ACLC 428 per Meagher JA , CA(NSW).8 Herdegen v FCT (1988) 84 ALR 271 at 281; 20 ATR 24 per Gummow J , Fed C of A; CGU Insurance Ltd v One.Tel Ltd (in liq) (2010) 242 CLR 174; 268 ALR 439; 84 ALJR 576; [2010] HCA 26; BC201005390 at [36] per French CJ, Heydon, Crennan, Kiefel and Bell JJ; Bruton Holdings Pty Ltd (in liq) v FCT (2011) 193 FCR 442; [2011] FCAFC 79; BC201104312 . As to a trustees general duty to preserve trust property see [430-4155]. 9 Herdegen v FCT (1988) 84 ALR 271 at 281; 20 ATR 24 per Gummow J , Fed C of A; Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639 at 648; 9 BPR 16,735; BC9807013 per Mason P . Compare Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370 at 398, CA(NSW); 5 ACSR 720; 10 ACLC 428 per Meagher JA , CA(NSW); Old Papas Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11; BC200300206 at [57] per McLure J ; Byrnes v Kendle (2011) 243 CLR 253; 279 ALR 212; 85 ALJR 798; 4 ASTLR 260; [2011] HCA 26; BC201105711 at [21], [22] per French CJ.10 Thorpe v Bristile Ltd (1996) 16 WAR 500 at 506 per Malcolm CJ .

Source

[Halsbury's Laws of Australia]

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(E) Custodian Trustees The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3120] Custodian trustees In most jurisdictions custodian trustees are permitted to hold trust property which is managed by the managing trustees.1 Custodian trustees are in a fiduciary relationship with the managing trustees and are accountable for unauthorised profits made out of

their position.2 Custodian trustees may also be appointed with respect to superannuation trusts.3 Notes 1 (QLD) Trusts Act 1973 s 19 (SA) Public Trustee Act 1995 s 17 (TAS) Public Trustee Act 1930 ss 23, 24; (TAS) Trustee Companies Act 1953 s 18B(c) (VIC) Trustee Act 1958 s 71 (WA) Trustees Act 1962 s 15(4)(b). There are no equivalent provisions in the Australian Capital Territory, the Northern Territory and New South Wales. 2 Re Brooke Bond & Co Ltds Trust Deed; Brooke v Brooke Bond & Co Ltd [1963] Ch 357; [1963] 1 All ER 454 . As to the general rule prohibiting a trustee from profiting from his or her position see [430-3940]. 3 (CTH) Superannuation Industry (Supervision) Act 1993 ss 122, 123. See further superannuation [400-170], [400-175]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3125] Identity of custodian trustee In South Australia the custodian trustee must be the Public Trustee.1 In Tasmania the custodian trustee must be the Public Trustee2 or a trustee company.3 In Victoria the custodian trustee may be either the State Trustees or an approved corporation.4 The term approved corporation means any body corporate which: 5 (1) has been formed for the purpose of (a) promoting art, science, religion, education, charity or any other useful object, or (b) acting as trustee in respect of any trusts for the benefit of any body which has for or amongst its principal objects the promotion of art, science, religion, education, charity or any other useful object; (2) applies its profits or other income in promoting all or any of such purposes; and (3) is approved by Order of the Governor-in-Council published in the Government Gazette as

is approved by Order of the Governor-in-Council published in the Government Gazette as a corporation which may be appointed custodian trustee pursuant to the legislation. In Queensland and Western Australia any corporation may be appointed as a custodian trustee.6 Notes 1 (SA) Public Trustee Act 1995 s 17(1). As to custodian trustees see [430-3120]. As to Public Trustee see [430-3080]. 2 (TAS) Public Trustee Act 1930 ss 23, 24.3 (TAS) Trustee Companies Act 1953 s 18B(c).4 (VIC) Trustee Act 1958 s 71(3), 71(4).5 Ibid s 71(2).6 (QLD) Trusts Act 1973 s 19(1) (WA) Trustees Act 1962 s 15(1). There is no legislation permitting custodian trustees in the Australian Capital Territory, the Northern Territory and New South Wales. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3130] Appointment of custodian trustee Upon appointment, trust property is to be vested in the custodian trustee.1 In South Australia, Tasmania and Victoria, the relevant legislation provides that the custodian trustee may be appointed under the trust instrument, by order of the court or by any person having the power to appoint a new trustee.2 Notes 1 (QLD) Trusts Act 1973 s 19(2)(a) (SA) Public Trustee Act 1995 s 17(3)(a) (TAS) Public Trustee Act 1930 s 24(a) (VIC) Trustee Act 1958 s 71(4)(a) (WA) Trustees Act 1962 s 15(2)(a). There is no legislation permitting custodian trustees in the other jurisdictions. 2 (SA) Public Trustee Act 1995 s 17(1) (TAS) Public Trustee Act 1930 s 23 (VIC) Trustee Act 1958 s 71(3). The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3135] Functions and duties of custodian trustees In Queensland, Tasmania and Western Australia the functions of the custodian trustee are:

(1) to hold trust property; (2) invest trust funds; and (3) dispose of trust assets as the managing trustees direct, and for this purpose to execute all documents and perform all such acts as the managing trustees direct.1 In South Australia and Victoria the custodian trustee must do all things necessary to enable the managing trustees to perform their functions and exercise their powers under the trust.2 In South Australia, Tasmania and Victoria the custodian trustee has custody of all securities and documents of title relating to the trust property, although the managing trustees are entitled to free access to them.3 The case law supports the proposition that the duties of a custodian trustee differ from those of an ordinary trustee. The exercise of powers or directions is a matter for the managing trustees, and the custodian trustee is bound to deal with the trust property so as to give effect to the decisions and actions taken by the managing trustees unless this action would be a breach of trust or would involve the custodian trustee in personal liability.4 Notes 1 (QLD) Trusts Act 1973 s 19(2)(c) (TAS) Public Trustee Act 1930 s 24(d) (WA) Trustees Act 1962 s 15(2)(c). 2 (SA) Public Trustee Act 1995 s 17(4) (custodian is not required to perform acts in breach of trust or involving personal liability) (VIC) Trustee Act 1958 s 71(4)(d) (custodian is not required to perform acts in breach of trust or involving personal liability). 3 (SA) Public Trustee Act 1995 s 17(3)(c) (TAS) Public Trustee Act 1930 s 24(c) (VIC) Trustee Act 1958 s 71(4)(c). There is no legislation permitting custodian trustees in the Australian Capital Territory, the Northern Territory and New South Wales. 4 Re Brooke Bond & Co Ltds Trust Deed; Brooke v Brooke Bond & Co Ltd [1963] Ch 357 at 363; [1963] 1 All ER 454 per Cross J, cited with approval in Coral Vista Pty Ltd v Halkeas [2010] QSC 449; BC201009097 at [46] per Margaret Wilson J. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation

For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3140] Liability Custodian trustees are not liable for any act or default of the managing trustees.1 In Queensland, Tasmania and Western Australia a person dealing with the custodian trustee need not be concerned to inquire as to any direction, concurrence or otherwise of the managing trustees or be affected by notice of the fact that the managing trustees have not concurred.2 Notes 1 (QLD) Trusts Act 1973 s 19(2)(f) (SA) Public Trustee Act 1995 s 17(6) (to which the trustee has consented) (TAS) Public Trustee Act 1930 s 24(g) (VIC) Trustee Act 1958 s 71(4)(e), 71(4)(k) (provided it is not concurring with managing trustees act or default or acting in good faith) (WA) Trustees Act 1962 s 15(2)(f). There is no legislation permitting custodian trustees in the Australian Capital Territory, the Northern Territory and New South Wales. 2 (QLD) Trusts Act 1973 s 19(2)(h) (TAS) Public Trustee Act 1930 s 24(i) (WA) Trustees Act 1962 s 15(2)(h). The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3145] Termination and remuneration The court may order that a custodian trusteeship be terminated upon an application by the custodian trustee, any of the managing trustees, or any beneficiary, on satisfactory proof that it is the wish of the beneficiaries or that termination is expedient on other grounds.1 Where the appointment of a custodian trustee to a position of a managing trustee is sought, the custodian trusteeship must first be terminated.2 In Queensland, Tasmania and Western Australia the court may prescribe the remuneration of the custodian trustee, although the courts jurisdiction in this respect is subject to the trust instrument.3 In South Australia the courts general jurisdiction in remuneration matters applies.4 Notes 1 (QLD) Trusts Act 1973 s 19(3) (SA) Public Trustee Act 1995 s 17(10) (TAS) Public Trustee Act 1930 s 24(k) (VIC) Trustee Act 1958 s 71(4)(m), 71(4)(n)

(WA) Trustees Act 1962 s 15(3). There is no legislation permitting custodian trustees in the Australian Capital Territory, the Northern Territory and New South Wales. 2 Re Squires Settlement [1946] WN 11.3 (QLD) Trusts Act 1973 s 101 (TAS) Public Trustee Act 1930 s 24(m) (WA) Trustees Act 1962 s 15(4). 4 As to the courts jurisdiction to award remuneration see [430-3980]-[430-4020].

Source

[Halsbury's Laws of Australia]

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(F) Advisory Trustees The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3150] Advisory trustees Advisory trustees may be appointed in Queensland and Tasmania to act with the Public Trustee, and in Victoria to act with the State Trustee,1 or with any trustee in Western Australia.2 Advisory trustees may be appointed by order of the court, by the trust instrument or by any person having the power to appoint new trustees.3 In Victoria an advisory trustee may also be appointed pursuant to an agreement between the State Trustee and any executor, administrator or trustee in which the executor, administrator or trustee agrees to give the State Trustee a power of attorney.4 The role of an advisory trustee is merely to give advice to the responsible trustees.5 An advisory trustee is neither vested with any of the trust property, nor possesses any powers of management or administration.6 A person dealing with the Public Trustee is not to be concerned to inquire as to or be affected by notice of the concurrence or otherwise of any advisory trustee.7 Subject to any

such provision in the trust instrument, the legislation in Queensland, Tasmania and Western Australia empowers the court to prescribe remuneration payable to an advisory trustee.8 In Victoria the courts general jurisdiction in this respect applies.9 Notes 1 (QLD) Public Trustee Act 1978 s 41 (TAS) Public Trustee Act 1930 s 22 (VIC) State Trustees (State Owned Company) Act 1994 s 9. 2 (WA) Trustees Act 1962 s 14.3 (QLD) Public Trustee Act 1978 s 41(2) (TAS) Public Trustee Act 1930 s 22(2) (VIC) State Trustees (State Owned Company) Act 1994 s 9(2) (WA) Trustees Act 1962 s 14(2). 4 (VIC) State Trustees (State Owned Company) Act 1994 s 9(2)(c).5 (QLD) Public Trustee Act 1978 s 41(3) (TAS) Public Trustee Act 1930 s 22(4) (VIC) State Trustees (State Owned Company) Act 1994 s 9(3)(c), 9(3)(d) (WA) Trustees Act 1962 s 14(3). 6 (QLD) Public Trustee Act 1978 s 41(3) (TAS) Public Trustee Act 1930 s 22(3) (VIC) State Trustees (State Owned Company) Act 1994 s 9(3)(a) (WA) Trustees Act 1962 s 14(3). 7 (QLD) Public Trustee Act 1978 s 41(5) (TAS) Public Trustee Act 1930 s 22(6) (VIC) State Trustees (State Owned Company) Act 1994 s 9(3)(f) (WA) Trustees Act 1962 s 14(4). 8 (QLD) Public Trustee Act 1978 s 41(8) (TAS) Public Trustee Act 1930 s 22(8) (WA) Trustees Act 1962 s 14(5). 9 There is no legislation in Victoria specifically empowering the court to prescribe remuneration payable to an advisory trustee. As to the courts jurisdiction to award remuneration see [430-3980]-[430-4020].

Source

[Halsbury's Laws of Australia]

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(3) APPOINTMENT OF TRUSTEES

This chapter was updated by G E Dal Pont LLM (Mich) LLD (Tas) CPA Professor, Faculty of Law, University of Tasmania

(A) Constitution and Devolution of Trusteeship (I) Assumption of Office The paragraph below is current to 20 April 2012 [430-3205] Modes in which trustees are constituted A person is legally constituted as a trustee of an express trust if he or she is originally designated as such by the trust instrument, or is duly appointed as trustee under a valid power of appointment, and he or she accepts the trust.1 An original trustee is usually appointed by the settlor of the trust either expressly or by implication.2 In the case of resulting trusts, trusteeship arises by virtue of a form of transaction which leads the court to presume the trust relationship, subject to evidence to the contrary.3 Constructive trusteeship is imposed by the court where equity dictates that a person should be accountable for a monetary sum or property to another person in circumstances where it is against conscience to retain that money or property.4 Notes 1 As to acceptance and disclaimer of trusteeship see [430-3215]-[430-3230].2 As to express trusts and certainty of intention see [430-210]-[430-340].3 As to resulting trusts see [430-500]-

[430-560].4 As to constructive trusts see [430-565]-[430-675]. The paragraph below is current to 20 April 2012 [430-3210] Failure of trustees If the settlor fails to effectually appoint a trustee, 1 or those trustees which are effectually appointed die or refuse to accept the trust prior to its commencement,2 equity deems the person in whom the trust property ultimately vests to be the trustee.3 In this event, a new trustee may be appointed pursuant to any procedure for appointment in the trust instrument,4 statutory provisions for appointment of new trustees, 5 or, if the preceding are insufficient, recourse to the courts jurisdiction to make an appointment where it is expedient that such appointment be made.6 Notes 1 Sonley v Clock-makers Co (1780) 1 Bro CC 81; 28 ER 998; Attorney-General v Stephens (1834) 3 My & K 347; 40 ER 132 .2 As to disclaimer of trusteeship see [430-3220]-[4303230].3 Mallott v Wilson [1903] 2 Ch 494 at 502-3; [1900-3] All ER Rep 326 at 330 per Byrne J (where the settlor was constituted as trustee).4 As to appointment provisions in the trust instrument see [430-3250].5 As to statutory powers of appointment see [430-3290].6 As to the courts jurisdiction to appoint new trustees see [430-3360].

Source

[Halsbury's Laws of Australia]

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(II) Acceptance of Office The paragraph below is current to 20 April 2012 [430-3215] Acceptance of office A person who is appointed as a trustee assumes the office upon his or her acceptance of the trust.1 The ability to disclaim the office of trustee is lost once that office is accepted,2 in which case the trustee may only leave the office by retirement.3 Acceptance can be effected expressly, such as by execution of the trust instrument or by other unequivocal written or oral statement.4 A person can also be found to have impliedly accepted the office of trustee where he or she acts as trustee without having expressly accepted the trust.5 This may be the case where the person allows proceedings relating to the trust property to be instituted6 or dealings with the trust property to be carried on7 in his or her own name. However,

the single act of retaining the trust document temporarily for safekeeping does not constitute implied acceptance of the trust.8 Notes 1 Thompson v Leach (1690) 2 Vent 198 at 199; 86 ER 391 ; Townson v Tickell (1819) 3 B & Ald 31; [1814-23] All ER Rep 164; (1819) 106 ER 575 .2 Re Sharmans Will Trusts; Public Trustee v Sharman [1942] Ch 311; [1942] 2 All ER 74 . As to disclaimer of office of trustee see [430-3220]-[430-3230]. 3 As to retirement of trustees see [430-3605]-[430-3630].4 Lord Montford v Lord Cadogan (1816) 19 Ves 635 at 638; 34 ER 651 at 652 per Lord Eldon LC ; Doe d Chidgey v Harris (1847) 16 M & W 517 at 519, 524; 153 ER 1294 at 1295, 1297-8 per Rolfe B and Parke B respectively; Bennett v Bennett (1875) 1 VLR (E) 280 .5 Doyle v Blake (1804) 2 Sch & Lef 231; 9 RR 76 ; White v Barton (1854) 18 Beav 192; 52 ER 76.6 Lord Montford v Lord Cadogan (1816) 19 Ves 635; 34 ER 651 ; Cook v Fryer (1842) 1 Hare 498; 66 ER 1128.7 James v Frearson (1842) 1 Y & C Ch Cas 370; 62 ER 929.8 Evans v John (1841) 4 Beav 35 at 36-7; 49 ER 250 per Langdale MR.

Source

[Halsbury's Laws of Australia]

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(III) Disclaimer of Office The paragraph below is current to 20 April 2012 [430-3220] Disclaimer of office A person appointed as a trustee may disclaim the trust office prior to doing any act in relation to the trust.1 The party who alleges the disclaimer bears the onus of proving it.2 A trustee may be likely to disclaim where his or her consent to the appointment was not sought.3 Although inaction by a purported trustee has been construed as a disclaimer, 4 in order to provide evidence of the fact, a disclaimer ought to be effected in writing.5 The disclaimer must be of the whole trust and not a part or parts of it only.6 The disclaimer operates to deny any benefit annexed to the office of trustee,7 but does not serve to preclude any independent benefit conferred by the trust instrument on the person disclaiming.8 A disclaimer is irreversible and a person who has disclaimed cannot subsequently act as trustee.9

The trust instrument may itself deal with the situation of a trustee who disclaims by granting a power of appointment of new trustees in place of trustees who refuse to act.10 In the case of multiple trustees, the trust property vests exclusively in the trustees who have not disclaimed.11 A disclaimer by a person appointed to act as sole trustee does not cause the trust to fail, for a court will not permit a trust to fail for want of a trustee.12 Pending the appointment, the trust property reinvests in the settlor.13 Notes 1 Re Birchall; Birchall v Ashton (1889) 40 Ch D 436 ; Lady Naas v Westminster Bank Ltd [1940] AC 366 at 401; [1940] 1 All ER 485 at 507 per Lord Wright . A beneficiary may disclaim his or her interest under the trust. However, a beneficiary will be held to have accepted the trust if he or she has remained silent for such a time that acceptance is the proper inference to be made: JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 931; (1985) 9 ACLR 593 per McGarvie J . See further [430-810]. 2 Lady Naas v Westminster Bank Ltd [1940] AC 366 at 400; [1940] 1 All ER 485 at 507 per Lord Wright ; JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 933; (1985) 9 ACLR 593 per McGarvie J .3 Sinnott v Hockin (1882) 8 VLR (E) 205; 4 ALT 10 .4 Re Gordon; Roberts v Gordon (1877) 6 Ch D 531 ; Re Birchall; Birchall v Ashton (1889) 40 Ch D 436 . See also Clay v Clay (1999) 20 WAR 427 at 467 , SC(WA), Full Court. The earlier decisions of Lugden LC in Re Uniacke (1844) 66 RR 220 and Re Needham (1844) 6 I Eq R 557, which held that a prolonged period of inaction fortifies the presumption of acceptance (rather than disclaimer) of the trust, would appear to be incorrectly decided. See also Re Clout and Frewers Contract [1924] 2 Ch 230; [1924] All ER Rep 798 .5 Nicolson v Wordsworth (1818) 2 Swan 365 at 370; 36 ER 655 at 657 per Eldon LC; Stacey v Elph (1833) 1 My & K 195 at 199; 39 ER 655 per Leach MR ; Begbie v Crook (1835) 2 Bing NC 70; 4 LJCP 264; 132 ER 28.6 Re Lord and Fullertons Contract [1896] 1 Ch 228 , CA.7 Slaney v Watney (1866) LR 2 Eq 418; Lewis v Mathews (1869) LR 8 Eq 277.8 Andrew v Trinity Hall, Cambridge (1804) 9 Ves 525 at 534; 32 ER 706 at 709 per Grant MR; Talbot v Earl of Radnor (1834) 3 My & K 252; 40 ER 96 ; Warren v Rudall; Ex parte Godfrey (1860) 1 John & H 1; 70 ER 637 .9 Re Birchall; Birchall v Ashton (1889) 40 Ch D 436 .10 In the Will of Wethers (decd) (1878) 12 SALR 32 .11 Re Birchall; Birchall v Ashton (1889) 40 Ch D 436 . Compare Bucknall v Botting (1878) 12 SALR 138 (appointment of two trustees, one disclaimed; court held that a new trustee must be appointed).12 Attorney-General v Stephens (1834) 3 My & K 347 at 352; 40 ER 132 ; Sinnott v Hockin (1882) 8 VLR (E) 205 at 210; 4 ALT 10 per Molesworth J . As to the courts jurisdiction to appoint trustees see [430-3360]-[430-3430]. 13 Mallott v Wilson [1903] 2 Ch 494 at 502-3; [1900-3] All ER Rep 326 at 330 per Byrne J The paragraph below is current to 20 April 2012 [430-3225] Costs of disclaiming trustee A trustee who disclaims is entitled to his or her costs of disclaiming out of the trust fund1 and the costs of any proceeding to which he or she is made a party on the basis of being a trustee.2 This entitlement does not extend to costs exceeding those incidental to effecting the disclaimer.3 Notes 1 Re Tryon (1844) 7 Beav 496; 49 ER 1158.2 Sherratt v Bentley (1830) 1 Russ & My 655; 39 ER 251; Norway v Norway (1834) 2 My & K 278; 39 ER 950; Bray v West (1838) 9 Sim 429; 59 ER 423; Benbow v Davies (1848) 11 Beav 369; 50 ER 859; Legg v Mackrell (1860) 2 De GF & J 551; 45 ER 735.3 Martin v Persse (1828) 1 Mol 146. .

The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3230] Renunciation of probate In most jurisdictions a person who, having been appointed by will as both executor and trustee, renounces probate (or fails to apply for probate after being duly cited) is deemed by statute to have disclaimed the trust contained in the will.1 In those jurisdictions that have no such provision, the court may appoint as trustee the person to whom probate of the will or administration with the will annexed is granted.2 Notes 1 (ACT) Trustee Act 1925 s 10(1) (NSW) Trustee Act 1925 s 10(1) (QLD) Trusts Act 1973 s 18 (VIC) Trustee Act 1958 s 46 (WA) Trustees Act 1962 s 12. There are no equivalent provisions in the Northern Territory, South Australia and Tasmania. Where probate is statutorily granted or transferred to a trustee company or the Public Trustee, the trustee company or Public Trustee is deemed to be appointed as trustee: (ACT) Trustee Act 1925 s 10(2)-(4) (NSW) Trustee Act 1925 s 10(2) (VIC) Trustee Act 1958 s 47 (limited to trustee companies) (WA) Trustees Act 1962 s 13. 2 Re Clouston [1904] QWN 65 ; Re Mina Gray [1951] QWN 22 .

Source

[Halsbury's Laws of Australia]

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(IV) Trusteeship by Devolution The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3235] Death of trustee In all jurisdictions the trustee legislation provides that a power vested jointly in two or more trustees may be exercised by the survivors of them.1 This does not disturb the general property law principle that property held as tenants in common does not give rise to a right of survivorship.2 Hence, if trustees hold trust property as tenants in common, a deceased trustees tenancy in common passes to his or her personal representatives. However, this does not serve to confer the office of trustee on the personal representatives, as a person cannot act as trustee unless properly appointed.3 This difficulty can be avoided by: (1) ensuring that trustees hold trust property as joint tenants, in which case a right of survivorship applies;4 or (2) express provision in the trust instrument to the effect that the office and powers of a deceased trustee vest in his or her personal representatives.5 Notes 1 (ACT) Trustee Act 1925 s 57(1) (NT) Trustee Act 1893 s 23(1) (NSW) Trustee Act 1925 s 57(1) (QLD) Trusts Act 1973 s 16(1) (SA) Trustee Act 1936 s 32(1) (TAS) Trustee Act 1898 s 25(1) (VIC) Trustee Act 1958 s 22(1) (WA) Trustees Act 1962 s 45(1). The equivalent English provision is found in the (UK) Trustee Act 1925 s 18. The proposition cited in the text reflects the general law position: Re Bacon; Toovey v Turner [1907] 1 Ch 475 . The Queensland provision applies whether or not a contrary intention is expressed in the trust instrument: (QLD) Trusts Act 1973 s 10. 2 As to the relevant principles in this context see succession [395-1650]-[395-1665].3 Re Crunden and Meuxs Contract [1909] 1 Ch 690 at 695; (1909) 100 LT 472 per Parker J.4 Compare (NSW) Trustee Companies Act 1964 s 12 (which provides that where property is vested jointly in a trustee company and another person in any fiduciary capacity or as

mortgagees, they are deemed to be joint tenants thereof and not tenants in common unless otherwise expressly provided).5 Re Morton and Hallett (1880) 15 Ch D 143 at 146-7 per Jessel MR, at 149 per James LJ, CA; Re Jordan; Hayward v Hamilton [1904] 1 Ch 260 at 262 ff per Byrne J; Re Waidanis; Rivers v Waidanis [1908] 1 Ch 123 , CA. As to the death of the last surviving or continuing trustee see [430-3240]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3240] Death of last surviving or continuing trustee In Tasmania, Victoria and Western Australia the legislation provides that unless a contrary intention is expressed in the trust instrument,1 until the appointment of new trustees, the personal representatives of the last surviving or continuing trustee may exercise or perform any power or trust given to the last surviving or continuing trustee.2 The personal representatives of a sole surviving trustee may be ousted by an appointment of new trustees made by the appointor.3 In Queensland the legislation deals with the vacancy in trusteeship caused by the death of the last surviving and continuing trustee by vesting the trust property in the Public Trustee pending the appointment of a new trustee,4 irrespective of contrary provision in the trust instrument. 5 In the other jurisdictions, which lack a statutory direction dealing with the vacancy in trusteeship, trust deeds ought to include a clause equivalent to the statutory provision in Tasmania, Victoria and Western Australia. In the absence of such a clause, the persons upon whom the trust assets devolve hold the assets upon a bare trust for the new trustees.6 Notes 1 (TAS) Conveyancing and Law of Property Act 1884 s 34(2) (VIC) Trustee Act 1958 s 2(3) (WA) Trustees Act 1962 s 5(2), 5(3). As to the meaning of the expression so far only as a contrary intention is not expressed in the instrument see [430-4370] (relationship between statutory powers and those conferred by the trust instrument). 2 (TAS) Conveyancing and Law of Property Act 1884 s 34(1) (VIC) Trustee Act 1958 s 22(2) (WA) Trustees Act 1962 s 45(2). As to the meaning of the expression the personal representatives of the last surviving or continuing trustee see [430-3325]. 3 Re Morton and Hallett (1880) 15 Ch D 143 at 149 per James LJ, CA; Re Jordan; Hayward v Hamilton [1904] 1 Ch 260 at 262 ff per Byrne J ; Re Routledges Trusts; Routledge v Saul [1909] 1 Ch 280 .4 (QLD) Trusts Act 1973 s 16(2). See also ibid s 16(3)-(8).5 Ibid s 10.6 Robson v Flight (1865) 4 De GJ & Sm 608; 46 ER 1054.

Source

[Halsbury's Laws of Australia]

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(B) Out of Court Appointment of Trustees (I) General The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3245] Mode of appointment The appointment of trustees to replace or augment the number of trustees may be effected out of court either: (1) under a power conferred by the express terms of the trust instrument;1 or (2) under the power conferred by the trustee legislation.2 The court also has a jurisdiction, both inherent and statutory, to appoint trustees.3 The costs of and incidental to the appointment of a new trustee are to be met from the capital of the trust property.4 In all jurisdictions except the Northern Territory and Tasmania the court may make a vesting order where a new trustee has been appointed out of court under any statutory or express power.5 Notes 1 As to appointment under the trust instrument see [430-3250]-[430-3285].2 As to appointment under statute see [430-3290]-[430-3355].3 As to appointment of trustees by the court see [4303360]-[430-3430].4 Carter v Sebright (1859) 26 Beav 374 at 376-7; 53 ER 942 per Romilly MR; Harvey v Olliver (1887) 57 LT 239 at 240-1 per Kay J.5 (ACT) Trustee Act 1925 s 71(2)(b) (NSW) Trustee Act 1925 s 71(2)(b)

(QLD) Trusts Act 1973 s 82(2)(b) (SA) Trustee Act 1936 ss 37(1)(a), 41(1)(a) (VIC) Trustee Act 1958 s 51(2)(b) (WA) Trustees Act 1962 s 78(2)(b). As to vesting orders generally see [430-3485]-[430-3550].

Source

[Halsbury's Laws of Australia]

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(II) Appointment Under the Trust Instrument The paragraph below is current to 20 April 2012 [430-3250] The appointor Trust instruments commonly include a provision governing the occasions and manner of appointment of new trustees.1 The donee of the power of appointment (the appointor) need not be one or more of the existing trustees, but can be any person whom the settlor prescribes may exercise the power to appoint new trustees.2 The appointor is usually the settlor or an existing trustee, but may also be a beneficiary3 or a third party. The power of an existing trustee to appoint a new trustee is not nullified by reason only that proceedings for removal are pending against the existing trustee.4 The costs of appointing new trustees pursuant to a power in the trust instrument are to be met out of the trust estate.5 Notes 1 In the Will of Wethers (decd) (1878) 12 SALR 32 (power to appoint new trustees in place of trustees who refuse to act); Dredge v Matheson (1879) 5 VLR (E) 266 (power for trustees or executor to appoint new trustees, augmenting or decreasing their number).2 In addition to appointing new and/or additional trustees, the appointor is usually conferred the power to remove any trustee for any reason whatsoever. This vests the appointor with considerable influence over the management of the trust, for he or she can appoint trustees who are most likely to manage the trust in the manner desired by the appointor.3 Raikes v Raikes (1863) 32 Beav 403; 55 ER 158; Hardaker v Moorhouse (1884) 26 Ch D 417.4 Re Whitehouse [1982] Qd R 196 .5 Harvey v

Olliver (1887) 57 LT 239 at 240 per Kay J. The paragraph below is current to 20 April 2012 [430-3255] Appointors discretion An express power of appointment contained in the trust instrument will be construed strictly in accordance with its terms, and the appointor must exercise that power bona fide in accordance with those terms and subject to any fiduciary constraint.1 As to the latter, courts have shown a willingness to construe the appointors discretion as conferred in a fiduciary capacity, and thus to be exercised for the benefit of the beneficiaries as a whole.2 Beyond this, where the power of appointment is unfettered and the appointor is not under any legal disability,3 the court will not interfere with its exercise in the absence of bad faith. 4 An undesirable appointment does not in itself justify the courts interference with a broad power of appointment.5 Where the court has undertaken the management of a trust as a result of an administration action,6 a power in the trust document to appoint new trustees cannot properly be exercised without the courts sanction.7 Although it may be sound practice for the trustee appointors to seek the views of beneficiaries prior to making an appointment,8 the beneficiaries cannot direct the appointors to make an appointment even if the beneficiaries are sui juris and collectively entitled to the entire beneficial interest.9 Nor can any other person control the appointor as to the exercise of his or her discretion.10 Notes 1 Re Campbell (1875) 1 VLR (IP & M) 32 ; Re Norris; Allen v Norris (1884) 27 Ch D 333 ; Re McPhillamys Trusts (1909) 10 SR (NSW) 42; 26 WN (NSW) 188 . See, also Re Mayne (decd) (1928) 28 SR (NSW) 157 at 159; 45 WN (NSW) 46 at 47 per Harvey CJ (a desire expressed by the testator that the number of his trustees should always be greater than three held to be mandatory in its operation). 2 Re Burton; Wily v Burton (1994) 126 ALR 557 at 55960; BC9405738 per Davies J; Hillcrest (Ilford) Pty Ltd v Kingsford (Ilford) Pty Ltd (No 2) (2010) 4 ASTLR 233; [2010] NSWSC 285; BC201002267 at [37][44] per Biscoe AJ; Rayner v NJ Sheaffe Pty Ltd [2010] NSWSC 810; BC201005176 at [150][152] per Lindgren AJ; Berger v Lysteron Pty Ltd [2012] VSC 95; BC201201346 at [67][85] per Habersberger J.3 For example, the court may be justified in interfering if the appointor is a minor: Re Parsons; Barnsdale and Smallman v Parsons [1940] Ch 973; [1940] 4 All ER 65 (a minor appointor will not be bound by an act which is imprudent or prejudicial to his or her interest).4 Green v Nicholson (1869) 6 WW & AB (E) 147, SC(VIC); Re Higginbottom [1892] 3 Ch 132; [1891-94] All ER Rep 1070; (1892) 67 LT 190 ; Re Brockbank (decd); Ward v Bates [1948] Ch 206; [1948] 1 All ER 287 ; Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566 at 595; [2001] FCA 1628; BC200107154 per Finkelstein J . This is simply an application of the principle that the court will not interfere with a discretionary decision of a trustee in the absence of bad faith, as to which see [430-4355]. 5 Re Coode; Coode v Foster (1913) 108 LT 94. Compare Re Cotter; Jennings v Nye [1915] 1 Ch 307 .6 As to administration actions see [430-5205].7 Mortimer v Braithwaite (1864) 1 WW & AB (E) 139, SC(VIC).8 OReilly v Alderson (1849) 8 Hare 101 at 102; 68 ER 289 at 291 per Wigram VC .9 Re Higginbottom [1892] 3 Ch 132; [1891-94] All ER Rep 1070; (1892) 67 LT 190 ; Re Brockbank (decd); Ward v Bates [1948] Ch 206; [1948] 1 All ER 287 .10 In the Estate of Dimond; Bickford v Bank of Australasia (1891) 13 ALT 18, SC(VIC). The paragraph below is current to 20 April 2012 [430-3260] Appointment of appointor as trustee An appointor may appoint himself or herself

as trustee if this is not proscribed on a proper construction of the trust instrument in question.1 If the terms of the power direct the appointment of some other persons or if the power is vested in the appointor by virtue of his or her fiduciary position in relation to the trust, the appointor may not appoint himself or herself as trustee.2 If the terms of power require that it not be exercised in favour of the person exercising the power, the proscription extends to persons or entities so associated with the appointor as to favour his or her interests.3 Even if the language is wide enough to permit the appointor to appoint himself or herself as trustee, the case law nonetheless contains various remarks indicating that it is a salutary that the power should only be exercised to that end in exceptional or special circumstances.4 Notes 1 Tempest v Lord Camoys (1888) 52 JP 532; 58 LT 221 ; Montefiore v Guedalla [1903] 2 Ch 723 at 725-6; [1900-3] All ER Rep 384 per Buckley J ; Re Brown (1921) 22 SR (NSW) 90; 38 WN (NSW) 245 at 245-6 per Street CJ ; Re Lawrence; Robertson v Lawrence [1943] Tas SR 33 at 56-7 per Morris CJ ; Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146; BC201105010 at [149] per Murphy JA and Hall J.2 Re Skeats Settlement; Skeats v Evans (1889) 42 Ch D 522; [1886-90] All ER Rep 989; (1889) 61 LT 500 ; Re Newen; Newen v Barnes [1894] 2 Ch 297; (1894) 70 LT 653 ; Re Sampson; Sampson v Sampson [1906] 1 Ch 435 . See also Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146; BC201105010 at [155] [169] per Murphy JA and Hall J. Under the statutory powers of appointment, an appointor may appoint himself or herself as trustee in all jurisdictions except the Northern Territory and Tasmania: see [430-3320]. 3 Austec Wagga Wagga Ltd v Rarebreed Wagga Pty Ltd [2012] NSWSC 343; BC201203337 at [49][72] per Stevenson J.4 Montefiore v Guedalla [1903] 2 Ch 723 at 725, 726; [1900-3] All ER Rep 384 per Buckley J; Re Brown (1921) 22 SR (NSW) 90; 38 WN (NSW) 245 at 2456 per Street CJ; Re Powers Settlement Trusts; Power v Power [1951] Ch 1074 at 1080 [1951] 2 All ER 513 per Evershed MR; Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146; BC201105010 at [145] per Murphy JA and Hall J. The paragraph below is current to 20 April 2012 [430-3265] Appointment in place of trustee who dies or disclaims A power to appoint new trustees authorises the appointor to appoint a trustee in place of a trustee who has died prior to the commencement of the trust,1 or who has effectively disclaimed the trust,2 unless the terms of the power indicate a contrary intention.3 Notes 1 For example, where a trustee predeceases the testator: Re Hadley; Ex parte Hadley (1851) 5 De G & Sm 67; 64 ER 1021; Nicholson v Wright (1857) 26 LJ Ch 312.2 Noble v Meymott (1851) 14 Beav 471 at 477; 51 ER 367 at 370 per Romilly MR . As to disclaimer of the office of trustee see [430-3220]. 3 Winter v Rudge (1847) 15 Sim 596; 60 ER 751. The paragraph below is current to 20 April 2012 [430-3270] Appointment outside the jurisdiction Although an appointment may be made outside the jurisdiction where this is not prohibited by the trust instrument,1 such appointment is not proper in the absence of exceptional circumstances.2 For practical reasons, the location of the trust property should be an influential factor in determining the trustees appointment.3 However, an appointment outside the jurisdiction may be appropriate where the beneficiaries

have settled permanently outside the jurisdiction,4 or where the trust property or a part of it is invested outside jurisdiction,5 and the donee proposes to appoint trustees in the jurisdiction in which the beneficiaries are so residing, or in which the property is so invested. An appointment outside the jurisdiction in the absence of exceptional circumstances may entitle the court to interfere at the instance of the beneficiaries.6 Notes 1 Green v Nicholson (1869) 6 WW & AB (E) 147; Re McPhillamys Trusts (1909) 10 SR (NSW) 42 at 46; 26 WN (NSW) 188 per Simpson CJ; Re Kay; MacKinnon v Stringer [1927] VLR 66; [1927] ALR 27 ; Re Baillie; Whiting v Cavendish [1928] VLR 171; [1928] ALR 12; (1928) 49 ALT 153 ; Re Whiteheads Will Trusts; Burke v Burke [1971] 2 All ER 1334 at 1337; [1971] 1 WLR 833 at 837 per Pennycuick VC .2 Re Whiteheads Will Trusts; Burke v Burke [1971] 2 All ER 1334 at 1337-8; [1971] 1 WLR 833 at 837-8 per Pennycuick VC .3 Re McPhillamys Trusts (1909) 10 SR (NSW) 42 at 46; 26 WN (NSW) 188 per Simpson CJ .4 Re Baillie; Whiting v Cavendish [1928] VLR 171 at 180; [1928] ALR 12 at 17; (1928) 49 ALT 153 per Mann J ; Re Whiteheads Will Trusts; Burke v Burke [1971] 2 All ER 1334 at 1337-8; [1971] 1 WLR 833 at 837-8 per Pennycuick VC .5 Re Mayne (decd) (1928) 28 SR (NSW) 157 at 159; 45 WN (NSW) 46 per Harvey CJ .6 Re Whiteheads Will Trusts; Burke v Burke [1971] 2 All ER 1334 at 1337; [1971] 1 WLR 833 at 837 per Pennycuick VC . The paragraph below is current to 20 April 2012 [430-3275] Status of new trustee A new trustee who is appointed pursuant to a power in the trust instrument is vested with the same powers as the existing trustees in the absence of contrary intention expressed in clear terms.1 Notes 1 Re Smith; Eastick v Smith [1904] 1 Ch 139 at 144; [1900-3] All ER Rep Ext 1056 J; Re Hampton; Public Trustee v Hampton (1918) 88 LJ Ch 103; 63 Sol Jo 68. per Farwell

The same case applies to appointments pursuant to the statutory power (see [430-3335]) and appointment by the court (see [430-3360]-[430-3430]). The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3280] Relationship of express power of appointment to statutory power In all jurisdictions except Queensland statutory powers of appointment apply only if, and as far as, a contrary intention is not expressed in the trust instrument, and have effect subject to the terms of that instrument.1 In Queensland the statutory power of appointment applies whether or not a contrary intention appears in the trust instrument.2 Notes 1 (ACT) Trustee Act 1925 ss 6(15), 7(8) (NT) Trustee Act 1893 s 11(5) (NSW) Trustee Act 1925 ss 6(13), 7(7) (SA) Trustee Act 1936 ss 14(5), 14B(4)

(TAS) Trustee Act 1898 s 13(5) (VIC) Trustee Act 1958 s 41(10) (WA) Trustees Act 1962 s 7(8). See Kendell v Sweeney [2005] QSC 64; BC200501690 at [41] per Muir J. As to the meaning of the expression contrary intention expressed in the trust instrument see [430-4370]. 2 (QLD) Trusts Act 1973 s 10. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3285] Number of trustees The original number of trustees need not be maintained on an appointment of new trustees1 unless the trust instrument so directs.2 In all jurisdictions except Queensland and Victoria there is no limit on the number of trustees that may be appointed pursuant to an express power of appointment.3 In Queensland and Victoria statute restricts to four the number of trustees who may be appointed to a private trust, although in Victoria the limitation applies only with respect to trustees of a settlement of land.4 There is no restriction on the number of trustees of charitable trusts in any jurisdiction.5 Notes 1 Emmet v Clark (1861) 3 Giff 32 at 35; 66 ER 310 at 312 per Stuart VC.2 Earl of Lonsdale v Beckett (1850) 4 De G & Sm 73; 64 ER 740; Re Cunningham and Bradleys Contract for Sale to Wilson [1877] WN 258; Re Mayne (decd) (1928) 28 SR (NSW) 157 at 159-60; 45 WN (NSW) 46 per Harvey CJ . Compare Cohen v Bayley-Worthington [1908] AC 97 , HL.3 In the Australian Capital Territory, New South Wales and Western Australia the statutory limitation on the number of trustees who may be appointed applies only to the statutory power of appointment, not an express power contained in the trust instrument: see [430-3295].4 (QLD) Trusts Act 1973 s 11 (VIC) Trustee Act 1958 s 40. 5 This is expressly provided for in the Queensland and Victorian legislation: (QLD) Trusts Act 1973 s 11(3)(a) (VIC) Trustee Act 1958 s 40(3)(a). As to charitable trustees see charities [75-835]-[75-885].

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[Halsbury's Laws of Australia]

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(III) Appointment under Statute The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3290] Statutory powers of appointment A new trustee may be appointed under general powers given by statute. Statute provides for both the circumstances in which a new trustee may be appointed in place of an existing trustee1 and the appointment of a trustee additional to existing trustees.2 The statutory power is more restricted than the power to appoint and remove trustees under the courts jurisdiction.3 In all jurisdictions except the Northern Territory and Tasmania the court may make a vesting order where a new trustee has been appointed out of court under any statutory or express power.4 As the statute confers upon the appointor a discretion to appoint, a retiring trustee is under no duty to act in the appointment by her or his co-trustee, the beneficiaries cannot control the exercise of the appointors discretion to appoint, and the court will not interfere with the exercise of that discretion in the absence of mala fides.5 If, however, the nominated appointor cannot be found, the court can appoint a new appointor in his or her place.6 In all jurisdictions except Queensland statutory powers of appointment apply only if, and as far as, a contrary intention is not expressed in the trust instrument, and have effect subject to the terms of that instrument.7 In Queensland the statutory power of appointment applies whether or not a contrary intention appears in the trust instrument.8 Notes 1 (ACT) Trustee Act 1925 s 6 (NT) Trustee Act 1893s 11, Pt IV (special provisions as to appointment of new trustees) (NSW) Trustee Act 1925 s 6 (QLD) Trusts Act 1973 s 12 (SA) Trustee Act 1936ss 14, 14A, Pt 5 (special provisions as to appointment of new trustees) (TAS) Trustee Act 1898 s 13 (VIC) Trustee Act 1958 ss 41, 42 (WA) Trustees Act 1962 s 7.

For further discussion on these provisions see [430-3300]-[430-3345]. 2 (ACT) Trustee Act 1925 s 7 (NSW) Trustee Act 1925 s 7 (QLD) Trusts Act 1973 s 12(5) (SA) Trustee Act 1936 s 14B (VIC) Trustee Act 1958 ss 41(6), 42 (WA) Trustees Act 1962 s 7(5). There are no equivalent provisions in the Northern Territory and Tasmania. For further discussion on these provisions see [430-3350]. 3 As to the jurisdiction of the court to appoint and remove trustees see [430-3360].4 (ACT) Trustee Act 1925 s 71(2)(b) (NSW) Trustee Act 1925 s 71(2)(b) (QLD) Trusts Act 1973 s 82(2)(b) (SA) Trustee Act 1936 ss 37(1)(a), 41(1)(a) (VIC) Trustee Act 1958 s 51(2)(b) (WA) Trustees Act 1962 s 78(2)(b). As to vesting orders generally see [430-3485]-[430-3550]. 5 Re Brockbank (decd); Ward v Bates [1948] Ch 206 at 210-11; [1948] 1 All ER 287 at 288-9 per Vaisey J .6 Kennedy v Kennedy [2011] NSWSC 1619; BC201110383 (appointment of a person independent of the trustees as appointor).7 (ACT) Trustee Act 1925 ss 6(15), 7(8) (NT) Trustee Act 1893s 11(5) (NSW) Trustee Act 1925 ss 6(13), 7(7) (SA) Trustee Act 1936 ss 14(5), 14B(4) (TAS) Trustee Act 1898 s 13(5) (VIC) Trustee Act 1958 s 41(10) (WA) Trustees Act 1962 s 7(8). See Kendell v Sweeney [2005] QSC 64; BC200501690 at [41] per Muir J. As to the meaning of the expression contrary intention expressed in the trust instrument see [430-4370]. 8 (QLD) Trusts Act 1973 s 10. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes

Annotations [430-3295] Number of trustees It is not obligatory to appoint more than one new trustee where only one trustee was originally appointed, or to fill up the original number of trustees where two or more trustees were originally appointed.1 In Tasmania and Western Australia the trustee legislation provides that a trustee company may be appointed the sole trustee unless this is forbidden by the trust instrument.2 In the Northern Territory, South Australia and Tasmania there is no limit on the number of trustees that may be appointed. In the other jurisdictions, only four trustees may be appointed to a private trust pursuant to the statutory jurisdiction, although in Victoria the limitation applies only with respect to trustees of a settlement of land.3 There is no restriction on the number of trustees of charitable trusts in any jurisdiction.4 Notes 1 (ACT) Trustee Act 1925 ss 6(5), 6(6)(f) (NT) Trustee Act 1893s 11(2)(c) (NSW) Trustee Act 1925 s 6(5)(f) (QLD) Trusts Act 1973 s 12(2)(c) (SA) Trustee Act 1936 s 14(2)(c) (TAS) Trustee Act 1898 s 13(2)(c) (VIC) Trustee Act 1958 s 42(1)(c) (WA) Trustees Act 1962s 7(2)(c). 2 (TAS) Trustee Act 1898 s 31 (WA) Trustees Act 1962 s 11. As to trustee companies see [430-3085]. 3 (ACT) Trustee Act 1925 ss 6(5), 6(6)(b) (NSW) Trustee Act 1925 s 6(5)(b) (QLD) Trusts Act 1973 s 11 (VIC) Trustee Act 1958 s 40 (WA) Trustees Act 1962 s 7(2)(a). The Queensland and Victorian provisions follow the English precedent ((UK) Trustee Act 1925 s 34) and also apply to express power of appointment (as to which see [430-3085]). 4 This is expressly provided for in the Queensland and Western Australian legislation: (QLD) Trusts Act 1973 s 11(3)(a) (VIC) Trustee Act 1958 s 40(3)(a). As to charitable trustees see charities [75-835]-[75-885].

The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3300] Circumstances in which appointment may be made A new trustee may be appointed by registered deed in place of a trustee who:1 (1) is dead;2 (2) remains out of the jurisdiction for more than 12 months;3 (3) desires to be discharged from all or any of the trusts or powers reposed in or conferred on the trustee;4 (4) refuses5 or is unfit6 to act in such trusts or powers, or is incapable7 of acting, or is a minor; (5) is removed under a power contained in the instrument creating the trust; or (6) is a corporation that is dissolved. The latter two grounds for appointment do not apply in the Northern Territory, South Australia and Tasmania. In all jurisdictions, except the Northern Territory, South Australia and Tasmania the one year period of absence does not afford grounds for a new appointment where the trustee in question has properly delegated the execution of the trust.8 In the Australian Capital Territory and New South Wales it is further provided that, notwithstanding a proper delegation, a new trustee may be appointed where a trustee remains out of the jurisdiction for more than two years.9 Notes 1 (ACT) Trustee Act 1925 s 6(1), 6(2) (NT) Trustee Act 1893s 11 (NSW) Trustee Act 1925 s 6(1), 6(2) (QLD) Trusts Act 1973 s 12(1), 12(3) (SA) Trustee Act 1936 s 14 (TAS) Trustee Act 1898 s 13 (VIC) Trustee Act 1958 s 41(1), 41(2)

(WA) Trustees Act 1962 s 7(1), 7(3). 2 The statutory provisions relating to a trustee who is dead include the case of a person who is nominated trustee in a will but who dies before the testator: (ACT) Trustee Act 1925 s 6(10) (NT) Trustee Act 1893s 11(4) (NSW) Trustee Act 1925 s 6(9) (QLD) Trusts Act 1973 s 12(7) (SA) Trustee Act 1936 s 14(4) (TAS) Trustee Act 1898 s 13(4) (VIC) Trustee Act 1958 s 41(8) (WA) Trustees Act 1962 s 7(7). 3 As to a trustee who is outside the jurisdiction for more than 12 months see [430-3305].4 This provision applies where discharge is sought from some of a number of different trusts: Re Cockburns Will Trusts; Cockburn v Lewis [1957] Ch 438; [1957] 2 All ER 522; [1957] 3 WLR 212 .5 A trustee disclaiming the trust refuses to act for the purposes of the statutory power: Re Birchall; Birchall v Ashton (1889) 40 Ch D 436 . As to disclaimer of the office of trustee see [430-3220]. 6 As to the meaning of unfitness in this context see [430-3310].7 As to the meaning of incapacity in this context see [430-3315].8 As to delegation by a trustee see generally [430-4385]-[4304425].9 (ACT) Trustee Act 1925 s 6(2)(c) (NSW) Trustee Act 1925 s 6(2)(c). The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3305] Trustee outside the jurisdiction for more than 12 months A trustee who remains outside the jurisdiction for more than 12 months may be removed against his or her will.1 For the purposes of the statutory power to appoint a new trustee in such circumstances,2 the 12 month period has been construed strictly. The period does not run even if broken by a week.3 In all jurisdictions except the Northern Territory, South Australia and Tasmania the 12 month period of absence does not afford grounds for a new appointment where the trustee in question has properly delegated the execution of the trust.4 In the Australian Capital Territory and New South Wales, it is further provided that notwithstanding a proper delegation, a new trustee may be appointed where a trustee remains out of the jurisdiction for more than two years.5 Presumably the same strictness applies to the calculation of the two year time period as applies to the one year period. Notes 1 Re Stoneham Settlement Trusts; Popkiss v Stoneham [1953] Ch 59; [1952] 2 All ER 694 .2 As to the statutory power to approve a new trustee see [430-3300].3 Re Walker; Summers v Barrow

[1901] 1 Ch 259 .4 As to delegation by a trustee see generally [430-4385]-[430-4425].5 (ACT) Trustee Act 1925 s 6(2)(c) (NSW) Trustee Act 1925 s 6(2)(c). The paragraph below is current to 20 April 2012 [430-3310] Unfitness to act as trustee Trustees who have become bankrupt,1 have absconded,2 have committed a breach of trust or neglect of duty serious enough to endanger the confidence to be reposed in them,3 or who have engaged in a conflict of interest and duty, 4 have been held to be unfit to act for the purposes of the statutory power of appointment. The courts power to appoint new trustees has also been held to apply where an existing trustee is unfit to act.5 Notes 1 Re Barkers Trusts (1875) 1 Ch D 43 ; Re Adams Trust (1879) 12 Ch D 634 ; Re Wheeler and De Rochow [1896] 1 Ch 315 ; Chambers v Jones (1902) 2 SR (NSW) Eq 177; 19 WN (NSW) 248 ; Re Turner [1923] VLR 189 at 192; (1923) 29 ALR 131; 44 ALT 171 per Weigall J .2 Re Wheeler and De Rochow [1896] 1 Ch 315 at 322 per Kekewich J ; Re Sichels Settlements; Sichel v Sichel [1916] 1 Ch 358 .3 Willis v Stephens [1934] VLR 19 (executor unfit to act where continued default in payment of money due to beneficiaries); Dimos v Skaftouros (2004) 9 VR 584; [2004] VSCA 141; BC200405875 .4 Monty Financial Services Ltd v Delmo [1996] 1 VR 65 at 81-2 per Ashley J . If this is so, the courts jurisdiction to remove a trustee on the grounds of conflict of interest (as to which see [430-3650]) may be curtailed by the power conferred by statute on the appointors. 5 As to the courts power to appoint trustees see [430-3360]-[430-3430]. The paragraph below is current to 20 April 2012 [430-3315] Incapacity to act as trustee The words incapable of acting refer to personal incapacity.1 A person who is of unsound mind 2 or who suffers a serious prolonged illness3 is incapable of acting for the purposes of the statutory power. Appointors who cannot agree on an appointment have also been held to be incapable of acting.4 The courts power to appoint new trustees has also been held to cover the situation where an existing trustee is incapable of acting.5 Notes 1 Turner v Maule (1850) 16 LTOS 455; Re Wattss Settlement (1851) 9 Hare 106; 68 ER 434 ; Re Bignolds Settlement Trusts (1872) LR 7 Ch App 223.2 Re East; Re Bellwoods Will Trusts (1873) LR 8 Ch App 735; Re Lemanns Trusts (1883) 22 Ch D 633; 52 LJ Ch 560; 48 LT 389 .3 Re Westons Trusts (1898) 43 Sol Jo 29; [1898] WN 151.4 Re Sheppards Settlement Trusts [1888] WN 234. Compare Iffla v Beany (1861) 1 W & W (E) 110 (where Molesworth J held that an express power to appoint should a trustee become incapable of acting had been exercised incorrectly in circumstances where the appointment was made during the absence of a trustee in England: the term incapable did not mean a voluntary inability to act but rather an involuntary one).5 As to the courts power to appoint trustees see [430-3360]-[430-3430]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation [430-3320] Persons who may be appointed In all jurisdictions except the Northern Territory and Tasmania an appointor may appoint himself or herself as trustee.1 In the Northern Territory

and Tasmania the legislation provides that another person or other persons may be appointed,2 which serves to exclude the appointor.3 The persons who may be appointed are not limited to those persons who would have been appointed by the court.4 Notes 1 This is because the legislative provisions are not expressed to require another person or other persons to be appointed: Re Brown (1921) 22 SR (NSW) 90 at 94; 38 WN (NSW) 245 at 246 per Street CJ .2 (NT) Trustee Act 1893s 11(1) (TAS) Trustee Act 1898 s 13(1). 3 Re Skeats Settlement; Skeats v Evans (1889) 42 Ch D 522; [1886-90] All ER Rep 989; (1889) 61 LT 500 ; Re Powers Settlement Trusts; Power v Power [1951] Ch 1074; [1951] 2 All ER 513 .4 Hobkirk v Ritchie (1934) 29 Tas LR 14 at 46 per Nicholls CJ and Crisp J , SC(TAS), Full Court. As to the courts power to appoint trustees see [430-3360]-[430-3430]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3325] Persons who may appoint new trustees The legislation provides for an order of persons who may appoint pursuant to the statutory power. These are:1 (1) the persons nominated for the purpose of appointing new trustees by the trust instrument; or (2) if there is no such person, or no such person is able and willing to act2 (a) the surviving or continuing trustee or trustees for the time being, or (b) the legal representative of the last surviving or continuing trustee. The persons nominated for the purpose of appointing new trustees by the trust instrument are those persons nominated in the terms which are applicable to the exercise of the statutory power.3 Where the trust instrument confers a power of appointment in general terms without reference to a particular event, the persons upon whom that power is conferred are the persons nominated for the purpose of appointing new trustees.4 If two or more persons who hold a joint power of appointment cannot agree on the appointee, an appointment can be made by the surviving or continuing trustees on the ground that the persons nominated are unable or unwilling to act.5 The same applies where the appointor cannot be found6 or is of unsound mind. 7 The legislation provides that a continuing trustee includes a refusing or retiring trustee if willing to continue acting in the appointment8 (but this does not extend to a person who is not but may

become a trustee).9 Were this not so, there would be no continuing trustee where a single trustee wishes to retire.10 A continuing trustee is a trustee who continues to act after the completion of the intended appointment.11 A surviving or continuing trustee cannot by will appoint his or her successors in the office.12 The expression the personal representatives of the last surviving or continuing trustee refers to a deceased trustee who, immediately before his or her death, was the only trustee who had not ceased by reason of death or some other cause to hold office as trustee.13 This expression does not embrace trustees of a testamentary trust who predecease the testator14 or the liquidator of the last surviving or continuing trustee.15 On the appointment of trustees by the personal representatives of the last surviving or continuing trustee, the personal representatives are displaced.16 Notes 1 (ACT) Trustee Act 1925 s 6(4) (NT) Trustee Act 1893s 11(1) (NSW) Trustee Act 1925s 6(4) (QLD) Trusts Act 1973 s 12(1) (SA) Trustee Act 1936 s 14(1) (TAS) Trustee Act 1898 s 13(1) (VIC) Trustee Act 1958 s 41(1) (WA) Trustees Act 1962 s 7(1). 2 This has been interpreted as meaning no person having the power to appoint either solely or jointly was able and willing to act within a reasonable time: Katz v Grossman [2005] NSWSC 934; BC200507049 at [35], [36] per Smart AJ .3 Cecil v Langdon (1884) 28 Ch D 1; 51 LT 618 , CA.4 Re Walker and Hughes Contract (1883) 24 Ch D 698 .5 Re Sheppards Settlement Trusts [1888] WN 234.6 Cradock v Witham [1895] WN 75.7 Re Blake [1887] WN 173.8 (ACT) Trustee Act 1925 s 6(12) (NT) Trustee Act 1893s 11(4) (NSW) Trustee Act 1925 s 6(11) (QLD) Trusts Act 1973 s 12(7) (SA) Trustee Act 1936 s 14(4) (TAS) Trustee Act 1898 s 13(4) (VIC) Trustee Act 1958 s 41(8) (WA) Trustees Act 1962 s 7(7). 9 In the Will of Orloff (decd) (2010) 24VR 603; 3 ASTLR 260; [2010] VSC 48; BC201000774 at [27] per Robson J.10 Re Norris; Allen v Norris (1884) 27 Ch D 333 .11 Re Coates to Parsons (1886) 34 Ch D 370 .12 Re Parkers Trusts [1894] 1 Ch 707 .13 Re Geelong Waterworks and Sewerage Trust [1955] VLR 302 at 308 per Smith J .14 Church of England Property Trust, Diocese of Goulburn v Rossi (1893) 14 LR (NSW) Eq 186; 10 WN (NSW) 1 ; Nicholson v Field

[1893] 2 Ch 511; (1893) 69 LT 299 .15 This is because a liquidator is not a legal representative within the meaning of the statute. The expression legal representative is intended to denote an executor of the will or administrator of the estate of a deceased personal trustee, and does not extend to the liquidator of a corporate trustee: Sjoquist v Rock Eisteddfod Productions Pty Ltd (1996) 19 ACSR 339 at 342 per McLelland CJ , SC(NSW).16 Re Routledges Trusts; Routledge v Saul [1909] 1 Ch 280 . The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3330] Appointment of separate trustees In all jurisdictions, separate trustees may be appointed for any distinct part of trust property.1 The South Australian legislation, unlike that in other jurisdictions, devotes a discrete section to separate trustees and makes the criterion for their appointment one of expediency.2 Unless specifically provided for by statute, separate trustees may not be appointed for part of the trust property without the aid of the court.3 The court may appoint separate sets of trustees for different parts of the trust property pursuant to its statutory jurisdiction.4 Notes 1 (ACT) Trustee Act 1925 s 6(5), 6(6)(c) (NT) Trustee Act 1893s 11(2)(b) (NSW) Trustee Act 1925 s 6(5)(c) (QLD) Trusts Act 1973 s 12(2)(b) (SA) Trustee Act 1936 ss 14(2)(b), 14A (TAS) Trustee Act 1898 s 13(2)(b) (VIC) Trustee Act 1958 s 42(1)(b) (WA) Trustees Act 1962 s 7(2)(b). As to separate trusts see Roome v Edwards (Inspector of Taxes) [1982] AC 279; [1981] 1 All ER 736; [1981] 2 WLR 268 , HL; Bond (Inspector of Taxes) v Pickford [1983] STC 517, CA. 2 (SA) Trustee Act 1936 s 14A. For the meaning of expedient in this context see [430-3390].3 Re Mosss Trusts (1888) 37 Ch D 513; 58 LT 468 (explaining Savile v Couper (1887) 36 Ch D 520 ); Wilmot v Thorpe (1890) 16 VLR 85 at 87 per Webb J ; Re Pearse (1917) 34 WN (NSW) 97 .4 Re Hetheringtons Trusts (1886) 34 Ch D 211; 55 LT 806 . As to the courts jurisdiction to appoint separate trustees see [430-3370]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3335] Status of new trustee Every new trustee appointed under the legislation is vested

with the same powers, authorities and discretions, and may in all respects act as if he or she had been originally appointed a trustee by the trust instrument.1 In the Northern Territory and South Australia the new trustee is entitled to the same remuneration, if any, as if he or she had been originally appointed.2 On being appointed, a new trustee must first ensure that the property is brought under his or her control and vested in him or her.3 The trustees must also familiarise himself or herself with the terms of the trust and carry out his or her obligations dutifully.4 A new trustee is not affected by notice of things known only to the retiring trustee which are not discoverable by reference to the trust document.5 Notes 1 (ACT) Trustee Act 1925 s 6(9) (NT) Trustee Act 1893s 11(3) (NSW) Trustee Act 1925 s 6(8) (QLD) Trusts Act 1973 s 12(6) (SA) Trustee Act 1936 s 14(3) (TAS) Trustee Act 1898 s 13(3) (VIC) Trustee Act 1958 s 41(7) (WA) Trustees Act 1962 s 7(6). 2 (NT) Trustee Act 1893s 11(3) (SA) Trustee Act 1936 s 14(3). 3 Field v Field [1894] 1 Ch 425; (1893) 63 LJ Ch 233; 69 LT 826 . As to the initial duties of trustees see further [430-4140]-[430-4155]. 4 Harvey v Olliver (1887) 57 LT 239 at 241 per Kay J; Hallows v Lloyd (1888) 39 Ch D 686 at 691 per Kekewich J.5 Hallows v Lloyd (1888) 39 Ch D 686 . The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3340] Evidence as to vacancy In most jurisdictions a statement in an instrument appointing a new trustee as to how the vacancy in the office of trustee occurred is conclusive evidence, in favour of a subsequent purchaser in good faith, of the circumstances under which the vacancy occurred.1 This serves to provide protection for purchasers who in good faith rely on statements contained in registered deeds by which a new trustee is appointed under statute.2 Notes 1 (ACT) Trustee Act 1925 s 13 (NSW) Trustee Act 1925 s 13 (QLD) Trusts Act 1973 s 13

(VIC) Trustee Act 1958 s 43 (WA) Trustees Act 1962 s 8. There are no equivalent provisions in the Northern Territory, South Australia and Tasmania. 2 In the Australian Capital Territory and New South Wales, similar protection is extended to purchasers regarding statements contained in a registered instrument by which an executor declares that he or she holds any property as trustee or as beneficiary under the (ACT) Trustee Act 1925 s 11 or the (NSW) Trustee Act 1925 s 11: (ACT) Trustee Act 1925 s 13(2) (NSW) Trustee Act 1925 s 13(2). The paragraph below is current to 20 April 2012 [430-3345] Overlap between questions of appointment and removal of trustees As proceedings to appoint new trustees are frequently concurrent with efforts to remove a trustee, the statutory provisions as to replacement of trustees may be applied to remove a trustee. In all jurisdictions except Queensland this statutory power is subject to the terms of the trust instrument.1 The court may intervene to remove trustees pursuant to its inherent jurisdiction to administer trusts where it is satisfied that the removal is necessary for the welfare of the beneficiaries, or pursuant to its statutory jurisdiction.2 There is authority to the effect that the statutory power does not permit removal where the trustee is able to continue and opposes his or her removal,3 in which case the courts jurisdiction to remove trustees may be resorted to.4 Notes 1 As to statutory powers of appointment see [430-3290].2 As to the courts jurisdiction to remove trustees see [430-3635]-[430-3665].3 Monty Financial Services Ltd v Delmo [1996] 1 VR 65 at 77 per Ashley J . As to removal of a trustee against his or her will see [430-3660]. 4 As to the courts jurisdiction to remove trustees see [430-3635]-[430-3665]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3350] Appointment of additional trustees In all jurisdictions except the Northern Territory and Tasmania the trustee legislation provides for the appointment of a trustee additional to existing trustees.1 The appointment may be made by:2 (1) persons nominated for the purpose of appointing new trustees by the trust instrument; or (2) if there is no such person able and willing to act, the surviving or continuing trustee or trustees for the time being (and, in South Australia, the legal representative of the last surviving or continuing trustee).

Every new trustee appointed under the legislation is vested with the same powers, authorities and discretions, and may in all respects act as if the new trustee had been originally appointed a trustee by the trust instrument.3 In the Northern Territory and Tasmania the general law continues to apply, to the effect that an addition to the number of trustees where there is no vacancy may only be made by the court.4 Notes 1 (ACT) Trustee Act 1925 s 7 (NSW) Trustee Act 1925 s 7 (QLD) Trusts Act 1973 s 12(5) (SA) Trustee Act 1936 s 14B (VIC) Trustee Act 1958 ss 41(6), 42 (WA) Trustees Act 1962 s 7(5). 2 (ACT) Trustee Act 1925 s 7(4) (NSW) Trustee Act 1925s 7(4) (QLD) Trusts Act 1973 s 12(5) (SA) Trustee Act 1936 s 14B(1) (VIC) Trustee Act 1958 s 41(6) (WA) Trustees Act 1962 s 7(5). 3 (ACT) Trustee Act 1925 s 7(8) (NSW) Trustee Act 1925 s 7(7) (QLD) Trusts Act 1973 s 12(6) (SA) Trustee Act 1936 s 14B(2) (VIC) Trustee Act 1958 s 41(7) (WA) Trustees Act 1962 s 7(6). 4 Re Gregsons Trusts (1886) 34 Ch D 209; 56 LJ Ch 286 . The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3355] Persons who may be appointed In the Australian Capital Territory, New South Wales, Queensland and Western Australia a person who exercises the power to appoint trustees may himself or herself be appointed as an additional trustee.1 Similarly, the legislation in South Australia does not prohibit such an appointment.2 The Victorian legislation prohibits a person

who exercises the power of appointment from being appointed trustee.3 Notes 1 (ACT) Trustee Act 1925 s 7(3) (appointment requires approval of the court or majority of beneficiaries) (NSW) Trustee Act 1925 s 7(3) (appointment requires approval of the court or majority of beneficiaries) (QLD) Trusts Act 1973 s 12(5) (WA) Trustees Act 1962 s 7(5). 2 (SA) Trustee Act 1936s 14B.3 (VIC) Trustee Act 1958 s 41(6). The Victorian provision follows the English precedent: (UK) Trustee Act 1925s 36(6). See also Re Powers Settlement Trusts; Power v Power [1951] Ch 1074; [1951] 2 All ER 513 .

Source

[Halsbury's Laws of Australia]

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(C) Appointment of Trustees by the Court (I) Courts Jurisdiction The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3360] Courts jurisdiction The court has an inherent jurisdiction to appoint and remove trustees which arises from its general supervisory jurisdiction over trusts designed to ensure that trusts are properly executed.1 In all jurisdictions except the Australian Capital Territory and South Australia the court is also conferred a separate statutory jurisdiction which confers upon it the jurisdiction to appoint a new trustee whenever it is expedient,2 either in substitution for or in

addition to any existing trustees, and it is inexpedient, difficult or impracticable to do so without the assistance of the court.3 In particular and without prejudice to the generality of the statutory expediency jurisdiction, the court may make an order appointing a new trustee in substitution for a trustee who is convicted of a crime, is insane or is insolvent.4 In the Australian Capital Territory and South Australia the court may order the appointment, removal or replacement of one or more trustees of a trust if it is satisfied that this is desirable either in the interests of the persons who are to benefit from the trust, or to advance the purposes of the trust.5 There is no need for the court to find any fault or inadequacy on the part of the existing trustees before making such an order.6 An application for an order may be made by the Attorney-General, a trustee, a beneficiary, any other person who satisfies the court that he or she has a relevant interest7 in the trust or, in the Australian Capital Territory, specified persons in relation to trusts established completely or partly for charitable purposes.8 The statutory jurisdiction does not confer the power to make an appointment where no trust is contemplated or is in existence.9 However, a new trustee may be appointed by the court notwithstanding that the trustees have yet to have trust property vested in them.10 The statutory jurisdiction does not permit the removal of a trustee unless a new trustee is appointed in place of the trustee removed. Hence, where removal without consequent appointment is sought, recourse must be had to the courts inherent jurisdiction.11 The court is not deprived of its statutory jurisdiction to appoint merely because a power of appointment is vested in someone else.12 The statutory jurisdiction does not extend to allow retrospective appointments.13 Notes 1 Bucknall v Botting (1878) 12 SALR 138 ; Sinnott v Hockin (1882) 8 VLR (E) 205 at 210; 4 ALT 10 per Molesworth J ; Letterstedt v Broers (1884) LR 9 App Cas 371 at 386; [1881-85] All ER Rep 882 per Lord Blackburn, HL.2 For the meaning of the term expedient in this context see [430-3390].3 (NT) Trustee Act 1893s 27(1) (NSW) Trustee Act 1925 s 70(1), 70(2) (QLD) Trusts Act 1973 s 80(1) (TAS) Trustee Act 1898 s 32(1) (VIC) Trustee Act 1958 s 48(1) (WA) Trustees Act 1962 s 77(1). 4 (NT) Trustee Act 1893s 27(1) (NSW) Trustee Act 1925s 70(3) (QLD) Trusts Act 1973 s 80(2) (also provides for appointment replacing a trustee who for any other reason whatsoever appears to the court to be undesirable as trustee) (TAS) Trustee Act 1898 s 32(1) (VIC) Trustee Act 1958 s 48(1) (WA) Trustees Act 1962 s 77(2) (also provides for appointment where a trustee desires to be discharged or has been held by the court to have misconducted himself or herself in the administration of the trust; for this purpose the question of misconduct is not a matter that necessarily carries an implication of fault or deliberate misconduct, but a term that may be applied to a trustee who has failed to understand what are the obligations properly imposed upon

him or her in the administration of the trust: Smith v Smith [2006] WASC 166; BC200606221 at [9] per Murray J ; Elovalis v Elovalis [2008] WASCA 141; BC200805317 at [40] per Martin CJ ). 5 (ACT) Trustee Act 1925 s 70(1), 70(3) (SA) Trustee Act 1936 s 36(1), 36(1a). See also Trojan v Nest Egg Nominees Pty Ltd [2004] SASC 182; BC200403757 at [40], [41] per Nyland J . 6 (ACT) Trustee Act 1925 s 70(4) (SA) Trustee Act 1936 s 36(1b). 7 In this context interest means a legal, equitable or financial interest. It does not extend to an interest merely as a person who is morally concerned about the affairs of the trust: Thorn v Bettens [2006] SASC 59; BC200601853 at [12] per Lunn J (ruling that, where trust beneficiaries were infant children, their grandmother, who was not a beneficiary of the trust or the guardian of the children, lacked a proper interest in the trust under the statute).8 (ACT) Trustee Act 1925 s 70(5) (SA) Trustee Act 1936 s 36(1c). 9 In the Goods of Smith (decd) (1876) 10 SALR 178 ; Re Excell (1906) 2 Tas LR 16 ; Re Watters [1936] SASR 62 at 63 per Murray CJ ; Re McDowell (decd) [1968] QWN 20 , SC(QLD). The court will not exercise its discretion to appoint a replacement trustee where the alleged trustee is dead and the only evidence of the existence of the trust consists of ex parte statements uncorroborated by any document signed by the person alleged to have been trustee: Re Ethell [1908] VLR 271 at 272 per aBeckett J. 10 Re Boyce; Re Blackwoods Trusts (1864) 4 De GJ & Sm 205; 9 LT 670; 46 ER 896 ; Crowle Foundation Ltd v NSW Trustee & Guardian [2010] NSWSC 647; BC201004353 at [41] per Ball J.11 Re Harrisons Settlement Trusts; Morris v Harrison-Sleap [1965] 3 All ER 795 at 799; [1965] 1 WLR 1492 .12 Pope v DRP Nominees Pty Ltd (1999) 74 SASR 78 at 88 per Bleby J ; Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146; BC201105010 at [172] per Murphy JA and Hall J (adding that where the court decrees that some proper person be appointed as trustee, the decree does not take away from the appointor the power of nominating for appointment new trustees, but after the decree that power may only be exercised subject to the supervision of the court: at [176]).13 NSW Masonic Youth Property Trust v A-G (NSW) [2010] NSWSC 333; BC201002504 at [77] per Hall J. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3365] No jurisdiction to appoint executor or administrator The statutory jurisdiction of the court to appoint and remove trustees does not confer the power to appoint an executor or administrator.1 However, where an executor has cleared the estate and has assented to a settled legacy, the court may appoint a new trustee to act jointly with the executor or in the executors place.2 The same is the case where an administrator has cleared the estate and holds property in trust for the persons entitled on intestacy.3

Notes 1 (ACT) Trustee Act 1925 s 70(8) (NT) Trustee Act 1893s 27(3) (NSW) Trustee Act 1925 s 70(9) (QLD) Trusts Act 1973 s 80(4) (SA) Trustee Act 1936 s 36(3) (TAS) Trustee Act 1898 s 32(3) (VIC) Trustee Act 1958 s 48(2) (WA) Trustees Act 1962 s 77(4). See also Monty Financial Services Ltd v Delmo [1996] 1 VR 65 at 76 per Ashley J.

2 Re Ponder; Ponder v Ponder [1921] 2 Ch 59; [1921] All ER Rep 164; (1921) 125 LT 568 .3 Re Yerburgh; Yerburgh v Yerburgh [1928] WN 208 ; Re Cockburns Will Trusts; Cockburn v Lewis [1957] Ch 438; [1957] 2 All ER 522; [1957] 3 WLR 212 . The paragraph below is current to 20 April 2012 [430-3370] Appointment as to part of trust If it is expedient to do so, the court may allow a trustee to retire from a part of the trust and appoint a new trustee of that part without appointing a new trustee of the residue.1 Notes 1 Re Cotterills Trusts [1869] WN 183 ; Re Cunards Trusts (1878) 48 LJ Ch 192 ; Re Hetheringtons Trusts (1886) 34 Ch D 211; 55 LT 806 ; Re Mosss Trusts (1888) 37 Ch D 513; 58 LT 468; Re Astons Trusts (1890) 25 LR Ir 96. As to the statutory power to appoint separate trustees vested in appointors see [430-3330]. The paragraph below is current to 20 April 2012 [430-3375] Relationship between courts jurisdiction and out of court appointments Trustees may be appointed out of court under the provisions of the trust instrument1 or in the situations prescribed by statute.2 In practice, therefore, the courts jurisdiction to appoint trustees is only resorted to where the trust instrument and statutory provisions are exhausted.3 Generally, the court will not make an appointment if there is a person who is able and willing to appoint new trustees out of court, whether pursuant to the trust instrument or by statute.4 To this end, though the jurisdiction is a remedial one, because it interferes with the appointments, by deed ordinarily, by the parties, it will be exercised cautiously and only where the court is satisfied that there is a clear need for the appointment to be made.5 However, if the applicant has pursued court action for other reasons, the court may make an appointment in order to save expense and give complete relief even though there may be persons able and willing to appoint.6 The court will not upset an out of court appointment which is within the power of the appointor to effect merely on the ground that the court would not have made such an appointment.7 Out of court appointments are not subject to the same constraints which apply to appointments by the court.8

Notes 1 As to the appointment of trustees pursuant to the trust instrument see [430-3250]-[430-3285].2 As to the appointment of trustees pursuant to statute see [430-3290]-[430-3355].3 An example in this context is where the trust document contains no power to appoint new trustees and no trustee named in it is alive at the time the trust commences operation: Re Orde (1883) 24 Ch D 271; 49 LT 430 , CA; Re Lightbodys Trusts (1884) 52 LT 40; 33 WR 452 ; Re Amblers Trusts (1888) 59 LT 210; Nicholson v Field [1893] 2 Ch 511; (1893) 69 LT 299 .4 Re Soulbys Trusts (1873) 21 WR 256; Re Gibbons Trusts (1882) 45 LT 756; Re Sutton [1885] WN 122; Re Higginbottom [1892] 3 Ch 132; [1891-94] All ER Rep 1070; (1892) 67 LT 190 ; Pughe and Queensland Trustees Ltd v Brodribb [1921] St R Qd 163 at 170-1 per Chubb J .5 Smith v Smith [2006] WASC 166; BC200606221 at [4] per Murray J .6 In the Will of Tunstall [1921] VLR 559 at 562 per Mann J .7 Tempest v Lord Camoys (1888) 52 JP 532; 58 LT 221 at 223 per Chitty J; Re McPhillamys Trusts (1909) 10 SR (NSW) 42 at 46; 26 WN (NSW) 188 per Simpson CJ; Hobkirk v Ritchie (1934) 29 Tas LR 14 at 46-7 per Nicholls CJ and Crisp J , SC(TAS), Full Court. As to the courts reticence to interfere with the exercise of a discretionary power see [430-4355]. 8 Hobkirk v Ritchie (1934) 29 Tas LR 14 at 46 per Nicholls CJ and Crisp J Court. , SC(TAS), Full

As to the constraints on appointments by the court: see [430-3400]-[430-3420]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3380] Persons who may apply An order for the appointment of a new trustee may be made on the application of any person interested in the property, whether under disability or not, or of any person duly appointed trustee of it.1 In all jurisdictions except the Australian Capital Territory and New South Wales the statutory provision confers standing on persons beneficially interested in the trust property.2 However, the phrase beneficially interested has been interpreted broadly. For example, the following persons have been held to be beneficially interested in the trust property: (1) a person contingently entitled to a beneficial interest;3 (2) a purchaser of the property;4 and (3) creditors in an administration action.5 Notes 1 (ACT) Trustee Act 1925 s 92 (NT) Trustee Act 1893s 39 (NSW) Trustee Act 1925 s 92

(QLD) Trusts Act 1973 s 98 (SA) Trustee Act 1936 s 42 (TAS) Trustee Act 1898 s 42 (VIC) Trustee Act 1958 s 64 (WA) Trustees Act 1962 s 93. 2 (NT) Trustee Act 1893s 39 (QLD) Trusts Act 1973 s 98 (SA) Trustee Act 1936 s 42 (TAS) Trustee Act 1898s 42 (VIC) Trustee Act 1958 s 64 (WA) Trustees Act 1962 s 93. 3 Re Sheppards Trusts (1862) 4 De GF & J 423; 45 ER 1247.4 Ayles v Cox (1853) 17 Beav 584; 51 ER 1161.5 Re Wragg (1863) 1 De GJ & Sm 356; 46 ER 143. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3385] Costs of proceeding for appointment In all jurisdictions except the Australian Capital Territory the court has a general discretion as to the award of costs on any application or any order made under the trustee legislation.1 In exercising its discretion, the court will take into account the conduct of the applicant and other parties to the proceeding. Where the application in question holds little or no merit, having little or no chance of success, the court may decline to burden the trust with the costs of the application.2 However, the mere fact that a trustees application fails is not of itself a reason for denying an indemnity from the trust estate.3 Notes 1 (NT) Trustee Act 1893 s 41 (NSW) Trustee Act 1925 s 93 (QLD) Trusts Act 1973 s 100 (SA) Trustee Act 1936 s 44 (TAS) Trustee Act 1898 ss 44, 63 (VIC) Trustee Act 1958 s 66 (WA) Trustees Act 1962 s 97. In any event, the Supreme Court of each jurisdiction has power to award costs in civil proceedings at its discretion: see practice and procedure [325-9400]-[325-9730]. See also [430-

3665] (costs of removal applications). 2 Re Estate of Roberts (1983) 20 NTR 13 at 19; 70 FLR 158 at 163 .3 Re Harrisons Settlement Trusts; Morris v Harrison-Sleap [1965] 3 All ER 795 at 800; [1965] 1 WLR 1492 . The paragraph below is current to 20 April 2012 [430-3390] Meaning of expedient The term expedient is of wide meaning, defined to mean conducive to, or fit or proper or suitable having regard to, the interests of the beneficiaries, the security of the trust property, the sufficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee.1 An order for the substitution of an existing trustee may be made even though it cannot be said that the existing trustees performance of his or her duties has in any way been unsatisfactory; the criterion is simply one of expediency.2 Examples of situations which the courts have found to justify an appointment and corresponding removal of the current trustee on the grounds of expediency include where: (1) there is no trustee appointed or capable of acting;3 (2) the trustee is under a legal disability or is otherwise incapable;4 (3) there is animosity, friction, lack of trust or a breakdown in the relationship between the trustees so as to impinge on the proper administration of the trust;5 (4) the current trustee is in (provisional) liquidation, and the interests of the beneficiaries would be better served by another trustee;6 (5) an executor or administrator, who, having fully administered the estate and therefore having become a trustee7 wishes to retire;8 and (6) a trustee has illegitimately used trust property for his or her own benefit.9 A court will not appoint a new trustee where the only substantive complaint against the existing trustee is that he or she refuses to alter the status quo,10 or merely on the ground that the applicant prefers to have someone else appointed other than the nominee of the person who has the power to appoint.11 Notes 1 Re Estate of Roberts (1983) 20 NTR 13 at 17; 70 FLR 158 at 162 per OLeary J . See also Pope v DRP Nominees Pty Ltd (1999) 74 SASR 78 at 86 per Bleby J ; Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146; BC201105010 at [173] per Murphy JA and Hall J.2 Re Estate of Roberts (1983) 20 NTR 13 at 17; 70 FLR 158 at 161-2 per OLeary J ; Smith v Smith [2006] WASC 166; BC200606221 at [9] per Murray J ; Elovalis v Elovalis [2008] WASCA 141;

BC200805317 at [40] per Martin CJ .3 Re Lemanns Trusts (1883) 22 Ch D 633; 52 LJ Ch 560; 48 LT 389 (incapable through age and infirmity); Re Williams Trusts (1887) 36 Ch D 231; 56 LJ Ch 1088; 56 LT 884 ; Re Rogers [1921] NZLR 245 ; Re Shepherds Trusts [1955] NZLR 585 ; Pope v DRP Nominees Pty Ltd (1999) 74 SASR 78 at 86 per Bleby J ; Trustees of the Daughters of Our Lady of the Sacred Heart v Registrar-General (2008) 22 NTLR 150; [2008] NTSC 13 (trustees all deceased); Kennedy v Kennedy [2011] NSWSC 1619; BC201110383 (trustee unable to be found). Note that the statutory power conferred upon trustees to appoint provides for the appointment of new trustees where an existing trustee is unfit, unable or incapable of acting: see [430-3300], [430-3310], [430-3315]. 4 Re Shelmerdine (1864) 33 LJ Ch 474; 11 LT 106; Saul v Lin [2004] NSWSC 307; BC200401985 .5 Letterstedt v Broers (1884) LR 9 App Cas 371; [1881-85] All ER Rep 882, PC; Re Henderson; Henderson v Henderson [1940] Ch 764; [1940] 3 All ER 295 ; Trojan v Nest Egg Nominees Pty Ltd [2004] SASC 182; BC200403757 ; Bratovic v SBM Argentinian Bar and Grill Pty Ltd (2005) 242 LSJS 445; [2005] SASC 431; BC200509895 ; Smith v Smith [2006] WASC 166; BC200606221 at [13]-[18] per Murray J ; Burns v Burns [2008] QSC 173; BC200807215 at [57], [58] per Chesterman J (deadlock between the trustees); Watson v Vaughan [2011] TASSC 17; BC201102451 at [19] per Tennent J; Deutsch v Deutsch [2011] VSC 345; BC201105533 at [13], [14] per Dixon J; Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146; BC201105010 at [189][191] per Murphy JA and Hall J.6 Global Funds Management (NSW) Ltd v Burns Philp Trustee Co Ltd (in prov liq) (1990) 3 ACSR 183 at 185 per Rolfe J , SC(NSW); Austec Wagga Wagga Ltd v Rarebreed Wagga Pty Ltd [2012] NSWSC 343; BC201203337 at [90][98] per Stevenson J. This does not mean that the court will replace a corporate trustee in liquidation as a matter of course; in each case the court will exercise its discretion in determining where the balance of interest lies: Wells v Wily (2004) 50 ACSR 103; 183 FLR 284; [2004] NSWSC 607; BC200404252 at [24]-[38] per Austin J .7 Re Ponder; Ponder v Ponder [1921] 2 Ch 59; [1921] All ER Rep 164; (1921) 125 LT 568 .8 In the Estate of Dunn (decd) [1963] VR 165 ; Re Whitchurch [1990] VR 719 .9 Bailey v Bailey [2009] NSWSC 1018; BC200909085 .10 Re Construction Labour Relations and Sheet Metal Workers International Assn, Local No 8 (1994) 111 DLR (4th) 569 at 576 per Lefsrud J, QB(Alberta).11 Pope v DRP Nominees Pty Ltd (1999) 74 SASR 78 at 87 per Bleby J . The paragraph below is current to 20 April 2012 [430-3395] Number of trustees fixed by the settlor In making an appointment, whether pursuant to its statutory or inherent jurisdiction, the court is not bound to maintain the same number of trustees as fixed by the settlor.1 However, the court is reticent to appoint a sole trustee where originally there were multiple trustees.2 Where there are two or more continuing trustees, there are instances in which the court has authorised the continuing trustees to carry on the trust without appointing a new trustee to act with them.3 Notes 1 Re Welch (1838) 3 My & Cr 292; 40 ER 937; Birch v Cropper (1848) 2 De G & Sm 255; 64 ER 115; Re Tunstalls Will; Ex parte Tunstall (1851) 4 De G & Sm 421; 64 ER 896; Plenty v West (1853) 16 Beav 356; 51 ER 816 ; Re Boyce; Re Blackwoods Trusts (1864) 4 De GJ & Sm 205; 9 LT 670; 46 ER 896 ; Re Marriotts Settlement (1868) 18 LT 749; Re Fowlers Trusts (1886) 55 LT 546; Re Lees Settlement Trusts [1896] 2 Ch 508; (1896) 75 LT 261 ; Re Leslies Hassop Estate [1911] 1 Ch 611 .2 Re Dickinsons Trusts (1855) 1 Jur NS 724; Re Ellisons Trust (1856) 2 Jur NS 62 . Compare Re Leslies Hassop Estate [1911] 1 Ch 611 .3 Re Leon [1892] 1 Ch 348 , CA; Re Price [1894] WN 169; Dugmore v Suffield [1896] WN 50; Re Lees Settlement Trusts [1896] 2 Ch 508; (1896) 75 LT 261 ; Re Fitzherberts Settlement Trusts [1898] WN 58.

Source

[Halsbury's Laws of Australia]

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(II) Welfare of the Beneficiaries The paragraph below is current to 20 April 2012 [430-3400] Welfare of the beneficiaries In making an order appointing a new trustee or removing an existing trustee, whether pursuant to its statutory or inherent jurisdiction, the welfare of the beneficiaries is the courts dominant and prime consideration.1 In determining whether an appointment is in the interests of the beneficiaries, the court will inquire as to whether:2 (1) the settlor has furnished any indication as to who he or she wishes to act as trustee;3 (2) the new trustee represents the interests of all the beneficiaries;4 and (3) the appointment will promote rather than impede the execution of the trust.5 Notes 1 Letterstedt v Broers (1884) LR 9 App Cas 371 at 386; [1881-85] All ER Rep 882 per Lord Blackburn, PC; Re Wrightson; Wrightson v Cooke [1908] 1 Ch 789 at 803; [1908-10] All ER Rep Ext 1399; (1908) 98 LT 799 per Warrington J; Miller v Cameron (1936) 54 CLR 572 at 579; 10 ALJ 35; [1936] ALR 301 per Starke J; Elovalis v Elovalis [2008] WASCA 141; BC200805317 at [29]-[48] per Martin CJ .2 Re Tempest (1866) LR 1 Ch App 485 at 487-8; 14 LT 688 per Turner LJ; Saul v Lin (No 2) (2004) 60 NSWLR 275; [2004] NSWSC 332; BC200402088 at [48][53] per Palmer J ; Wells v Wily (2004) 50 ACSR 103; 183 FLR 284; [2004] NSWSC 607; BC200404252 at [21] per Austin J ; Northwest Capital Management v Westate Capital Ltd [2012] WASC 121; BC201202016 at [283] per Edelman J.3 As to the wishes of the settlor see [430-3405].4 As to the representation of the interests of all beneficiaries see [430-3410].5 As to an appointment that promotes the execution of the trust see [430-3415]. The paragraph below is current to 20 April 2012

[430-3405] Wishes of the settlor In determining whether to make the appointment sought, the court will inquire whether the settlor has furnished any indication as to who he or she wishes to act as trustee.1 The court will accord significant weight to the wishes of the settlor, for the settlors selection of trustee should not lightly be set aside.2 To this end, it has been said that the court will not appoint a person or the nominee of a person whom the settlor intended to exclude from all interest or connection with the trust property.3 However, because the security of the trust property and the interests of the beneficiaries is the courts principal concern, strictly speaking it is not bound by any prohibition in the trust instrument on the appointment of a certain type of trustee.4 Notes 1 Re Tempest (1866) LR 1 Ch App 485 at 487; 14 LT 688 per Turner LJ.2 Re Wilson (decd) [1923] VLR 277 at 279 per Macfarlan J ; Monty Financial Services Ltd v Delmo [1996] 1 VR 65 at 75 per Ashley J ; Titterton v Oates (1998) 143 FLR 467 at 478 per Crispin J , SC(ACT); Mendelssohn v Centrepoint Community Growth Trust [1999] 2 NZLR 88 at 97 per Tipping J , CA;Telford v Telford [2003] VSC 8; BC200300187 at [16] per Ashley J ; Dimos v Skaftouros (2004) 9 VR 584; [2004] VSCA 141; BC200405875 at [13] per Winneke P ; Baldwin v Greenland [2007] 1 Qd R 117; [2006] QCA 293; BC200606166 at [44] per Jerrard JA (with whom McMurdo P and Helman J concurred).3 Re Tempest (1866) LR 1 Ch App 485 at 487-8; 14 LT 688 per Turner LJ.4 Re Wilson (decd) [1923] VLR 277 (where Macfarlan J appointed a trustee company as trustee notwithstanding an express prohibition to this end contained in the trust instrument. His Honour was influenced by the fact that the relevant prohibition was annexed to a power to appoint granted 40 years prior, at which time the position of trustee companies was not so well established as at the time of the case); Titterton v Oates (1998) 143 FLR 467 at 47883 per Crispin J , SC(ACT) (where the evidence showed that the relevant circumstances had changed since the death of the settlor which added to the conflict of interest inherent in the original appointment, and that there had been a prolonged dereliction of duty by the trustee, thereby justifying the appointment of the Public Trustee); Mendelssohn v Centrepoint Community Growth Trust [1999] 2 NZLR 88 at 97-8 per Tipping J , CA(NZ) (where the court upheld the temporary caretaker appointment of the Public Trustee as trustee of a religious charitable trust crippled by dissention as to who was validly appointed as trustee, even though it could be inferred that the creator of the trust envisaged that the trustee would be a member of the religious group in question); Baldwin v Greenland [2007] 1 Qd R 117; [2006] QCA 293; BC200606166 at [44], [45] per Jerrard JA (with whom McMurdo P and Helman J concurred). As to trustee companies see [430-3085]-[430-3110]. The paragraph below is current to 20 April 2012 [430-3410] Representation of the interests of all beneficiaries The court will only appoint a trustee who represents the interests of all the beneficiaries.1 The court will not, therefore, appoint persons who are likely to exhibit bias in favour of or against one or more of the beneficiaries.2 This means that the court is reticent to appoint as trustee a beneficiary or a near relative or spouse of a beneficiary,3 even if that person is of the highest character or has the support of a majority of the other beneficiaries.4 However, the appointment of beneficiaries or their near relatives as trustees may be unavoidable, particularly where a suitable independent person cannot be found, the only alternative is to appoint a complete stranger5 or the trust estate is small and likely to be depleted by the appointment of the Public Trustee or a trustee company.6 To this end, there are several instances in which the court has appointed beneficiaries as trustees.7 In such cases the court may require from the appointee an undertaking that if he or she becomes a sole trustee, the appointee will use every endeavour to obtain the appointment of a co-trustee.8 In the absence of special circumstances, the court will decline to appoint as trustee a life tenant of the trust property9 or the solicitor of the life tenant. 10

Notes 1 Re Tempest (1866) LR 1 Ch App 485 at 487; 14 LT 688 per Turner LJ.2 Wallace v Wallace (No 2) (1899) 24 VLR 893 at 894-5 per Hood J ; Hobkirk v Ritchie (1934) 29 Tas LR 14 at 48 per Nicholls CJ and Crisp J , SC(TAS), Full Court; Re Parsons; Barnsdale and Smallman v Parsons [1940] Ch 973; [1940] 4 All ER 65 ; Australian Olympic Committee Inc v Big Fights Inc (No 2) (2000) 176 ALR 124 at 134; 50 IPR 292; [2000] FCA 785; BC200003150 per Lindgren J .3 Wilding v Bolder (1855) 21 Beav 222; 52 ER 845 ; Forster v Abraham (1874) LR 17 Eq 351; 22 WR 386; Re Ferretts Trusts (1894) 6 QLJR 183; Johnstone v Johnstone (1902) 2 SR (NSW) Eq 90 ; Hobkirk v Ritchie (1934) 29 Tas LR 14 at 45-6 per Nicholls CJ and Crisp J , SC(TAS), Full Court; Re Shepherds Trusts [1955] NZLR 585 ; Re Estate of Roberts (1983) 20 NTR 13 at 18; 70 FLR 158 at 162-3 per OLeary J ; Saul v Lin (No 2) (2004) 60 NSWLR 275; [2004] NSWSC 332; BC200402088 at [9]-[19] per Palmer J ; Nicholls v Nelson [2006] NSWSC 813; BC200606430 at [8]-[13] per Brereton J .4 Johnstone v Johnstone (1902) 2 SR (NSW) Eq 90 ; Re Friends Trust (1904) 21 WN (NSW) 166 at 167 per Simpson CJ .5 Ex parte Conybeares Settlement (1853) 1 WR 458 ; Waddell v Patterson (1865) 2 WW & AB (E) 36.6 McLauchlan v Prince [2002] WASC 274; BC200207057 at [38]-[40] per Hasluck J ; Telford v Telford [2003] VSC 8; BC200300187 at [17] ; Longworth v Allen [2005] SASC 469; BC200511060 at [74] per Anderson J .7 Re Ferretts Trusts (1894) 6 QLJR 183; Re Simmonds [1954] QWN 3 ; Re Neeve [1956] QWN 21 ; Re Paroz [1956] QWN 37 ; Kennedy v Kennedy [2011] NSWSC 1619; BC201110383 (where the beneficiaries were a small family group, the administration of the trust was uncomplicated and the trust property was a single piece of unimproved real estate). See also Re Grace [1955] QWN 81 (appointment of parents of beneficiaries as trustees); Re Greenfield (No 2) (1909) 12 GLR 22 (appointment of spouses of beneficiaries as trustees).8 Re Hattatts Trusts (1870) 21 LT 781; 18 WR 416; Re Burgess Trusts [1877] WN 87; Re Lightbodys Trusts (1884) 52 LT 40; 33 WR 452 .9 Re Cunninghams Settled Estates (1909) 27 WN (NSW) 28 ; In the Will of Benjamin [1920] VLR 393 .10 Re Kemps Settled Estates (1883) 24 Ch D 485 , CA; Re Earl of Stamford; Payne v Stamford [1896] 1 Ch 288 at 298 ff per Stirling J ; Re Spencers Settled Estates [1903] 1 Ch 75 . However, such an appointment may be made if the alternative is inconvenient: Re Brentnalls Trusts [1872] WN 77; Re Marquis of Ailesbury and Lord Iveagh [1893] 2 Ch 345 at 359-60 per Stirling J ; Re Spencers Settled Estates [1903] 1 Ch 75 at 82 per Byrne J . See also Re Simmonds [1954] QWN 3 (a tenant for life was appointed as trustee for her husbands estate jointly with another where the executors and trustees under the will had disclaimed and the Public Trustee appeared on the application as a guardian for the infant remainderpersons). The paragraph below is current to 20 April 2012 [430-3415] Appointment that promotes execution of trust In appointing a trustee, the court will make an appointment that will promote rather than impede the execution of the trust.1 Relevant considerations to this end include: (1) the financial stability of the current trustee;2 (2) the prospective trustees connection with other trustees;3 (3) whether the trustee has been removed as trustee in respect of other trusts formerly administered by him or her;4 and (4)

whether the appointment gives rise to potential conflicts of interest.5 It is not every conflict of duty and interest that necessarily results in the appointment of a new trustee and the removal of an existing trustee. The trust instrument may itself show that the settlor was aware that his or her trustee would face a potential conflict of duty and interest, in which case it would not be right, without more, to remove the trustee.6 Friction between the appointed trustee and the beneficiaries, or lack of business experience in the appointed trustee, does not in itself mandate the appointment of an additional trustee.7 However, friction between trustees or directors of a corporate trustee may justify the appointment of one or more new trustees where it seriously impinges upon the ability to properly conduct the operation of the trust.8 Notes 1 Re Tempest (1866) LR 1 Ch App 485 at 488; 14 LT 688 per Turner LJ; Hobkirk v Ritchie (1934) 29 Tas LR 14 at 45-6 per Nicholls CJ and Crisp J , SC(TAS), Full Court.2 Sapio v Carter [1959] NZLR 848 ; Global Funds Management (NSW) Ltd v Burns Philp Trustee Co Ltd (in prov liq) (1990) 3 ACSR 183 at 185 per Rolfe J , SC(NSW).3 Re Whitehouse [1982] Qd R 196 . The court will not, as a general rule, appoint as a new trustee the solicitor to an existing trustee: Re Norris; Allen v Norris (1884) 27 Ch D 333 at 340 per Pearson J .4 Global Funds Management (NSW) Ltd v Burns Philp Trustee Co Ltd (in prov liq) (1990) 3 ACSR 183 at 185 per Rolfe J , SC(NSW); Baldwin v Greenland [2005] QSC 386; BC200510959 at [21] per Wilson J .5 Hunter v Hunter [1938] NZLR 520 ; Global Funds Management (NSW) Ltd v Burns Philp Trustee Co Ltd (in prov liq) (1990) 3 ACSR 183 at 185 per Rolfe J , SC(NSW); Monty Financial Services Ltd v Delmo [1996] 1 VR 65 at 82 per Ashley J ; Saul v Lin (No 2) (2004) 60 NSWLR 275; [2004] NSWSC 332; BC200402088 at [52] per Palmer J ; Nicholls v Nelson [2006] NSWSC 813; BC200606430 at [10], [11] per Brereton J .6 Monty Financial Services Ltd v Delmo [1996] 1 VR 65 at 83 per Ashley J .7 Telford v Telford [2003] VSC 8; BC200300187 at [18]-[21] per Ashley J . As to friction as a cause for a trustees removal see [430-3645].8 Letterstedt v Broers (1884) LR 9 App Cas 371; [1881-85] All ER Rep 882, PC; Re Henderson; Henderson v Henderson [1940] Ch 764; [1940] 3 All ER 295 ; Trojan v Nest Egg Nominees Pty Ltd [2004] SASC 182; BC200403757 ; Bratovic v SBM Argentinian Bar and Grill Pty Ltd (2005) 242 LSJS 445; [2005] SASC 431; BC200509895 . The paragraph below is current to 20 April 2012 [430-3420] Appointment outside the jurisdiction The court will not usually appoint a trustee who resides outside the jurisdiction in which the trust property is situated, because trustees ought to be amenable to the jurisdiction of the court which administers the trust.1 An appointment outside the jurisdiction can only be justified in exceptional circumstances.2 Such exceptional circumstances include where the beneficiaries have settled permanently outside the jurisdiction3 or where the trust property, or a part of it, is invested outside the jurisdiction4 and trustees are sought to be appointed in the jurisdiction in which the beneficiaries are so residing or in which the property is so invested. Notes 1 Re Guiberts Trust Estate (1852) 16 Jur 852; Re Drewes Settlement Trusts [1876] WN 168 per Malins VC; Re Lady Mitchells Trust Estate (1879) 5 VLR (E) 42 ; Re Freemans Settlement Trusts (1887) 37 Ch D 148; 57 LJ Ch 160; 57 LT 798 ; Re JS Mitchells Trusts (1900) 17 WN (NSW) 164 at 165; Re McPhillamys Trusts (1909) 10 SR (NSW) 42 at 46; 26 WN (NSW) 188 per Simpson CJ ; Re Jackson (decd) [1926] NZLR 499 ; Re Kay; MacKinnon v Stringer [1927] VLR 66 at 69; [1927] ALR 27 ; Sapio v Carter [1959] NZLR 848 ; Re Seales Marriage Settlement [1961] Ch 574 at 580; [1961] 3 All ER 136 at 140 ; Re Estate of Roberts (1983) 20

NTR 13 at 18-19; 70 FLR 158 at 163 per OLeary J .2 Re Freemans Settlement Trusts (1887) 37 Ch D 148; 57 LJ Ch 160; 57 LT 798 ; Re Whiteheads Will Trusts; Burke v Burke [1971] 2 All ER 1334 at 1337; [1971] 1 WLR 833 at 837 per Pennycuick VC ; Re Estate of Roberts (1983) 20 NTR 13 at 18-19; 70 FLR 158 at 163 per OLeary J .3 Re Drewes Settlement Trusts [1876] WN 168; Re Freemans Settlement Trusts (1887) 37 Ch D 148; 57 LJ Ch 160; 57 LT 798 ; Re Hawkes (1900) 3 GLR 33; Re Kissock (1910) 7 Tas LR 21 ; Re Kay; MacKinnon v Stringer [1927] VLR 66; [1927] ALR 27 ; Re Baillie; Whiting v Cavendish [1928] VLR 171 at 180; [1928] ALR 12 at 17; (1928) 49 ALT 153 per Mann J ; Re Renshaws Trust Deed [1928] NZLR 460 ; Re Windeatts Will Trusts [1969] 2 All ER 324; [1969] 1 WLR 692; Re Westons Settlements; Weston v Weston [1969] 1 Ch 223; [1968] 3 All ER 338 , CA; Re Whiteheads Will Trusts; Burke v Burke [1971] 2 All ER 1334 at 1337; [1971] 1 WLR 833 at 837 per Pennycuick VC .4 Re Mayne (decd) (1928) 28 SR (NSW) 157 at 159; 45 WN (NSW) 46 per Harvey CJ , SC(NSW).

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[Halsbury's Laws of Australia]

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(III) Vesting Trust Property in New Trustees The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3425] Vesting of property by vesting declaration The trustee legislation in all jurisdictions provides that, except as otherwise statutorily provided,1 in the case of an appointment of a new trustee, the execution and registration of a deed of appointment vests the trust property in the persons who become and are the trustees as joint tenants without any conveyance, transfer or assignment.2 As the legislation deals with the position where a trustee is appointed to perform any trust, where an estate or interest is vested in the existing trustee in some other capacity, the estate or interest cannot be brought within the words of the legislation simply by reason of the fact that in that other capacity the trustee has become bound to transfer the estate or interest to the trustees of the trust.3 The title which the legislation vests in the new trustee remains subject to the rights of any person existing in the property at the time.4 Therefore, the interest which vests pursuant to the statute will be postponed to prior equitable interests.5

Notes 1 These exceptions are generally concerned with the transfer of interests in land: (ACT) Trustee Act 1925 s 9(3)-(7) (NT) Trustee Act 1893ss 13(3), 57 (NSW) Trustee Act 1925 s 9(3)-(6) (QLD) Trusts Act 1973 s 15(3) (SA) Trustee Act 1936 ss 16(3), 76 (TAS) Trustee Act 1898 s 15(3) (VIC) Trustee Act 1958 s 45(3), 45(4) (WA) Trustees Act 1962 s 10(3), 10(4). 2 (ACT) Trustee Act 1925 s 9(1) (NT) Trustee Act 1893 ss 13(1), 57 (NSW) Trustee Act 1925 s 9(1) (QLD) Trusts Act 1973 s 15(1) (SA) Trustee Act 1936 ss 16(1), 76 (TAS) Trustee Act 1898 s 15(1) (VIC) Trustee Act 1958 s 45(1) (WA) Trustees Act 1962 s 10(1). 3 Re Kings Will Trusts; Assheton v Boyne [1964] 1 All ER 833 at 837 per Pennycuik J.4 Xebec Pty Ltd (in liq) v Enthe Pty Ltd (1987) 18 ATR 893 at 895, 898-9 per Derrington J, SC(QLD).5 Xebec Pty Ltd (in liq) v Enthe Pty Ltd (1987) 18 ATR 893 at 895, 898-9 per Derrington J, SC(QLD). As to priorities between equitable interests see equity [185-255]-[185-320]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3430] Effect of vesting property in new trustee The court may make a vesting order on its appointment of a new trustee.1 A vesting order does not deprive the previous trustee of his or her right of indemnity unless that right has been lost by virtue of the conduct which prompted his or her removal.2 The lien can be protected by the court making an appropriate order or the proffering of appropriate undertakings to ensure that the trust assets from which the indemnity is to be satisfied are not diminished (or trust liabilities increased) other than in carrying on the ordinary business of the trust.3 An appointment made by the court pursuant to its statutory jurisdiction, and any consequential

vesting order or conveyance, does not function as a discharge to any former or continuing trustee any further than an appointment of new trustees under any power for that purpose contained in any instrument would have operated.4 Every trustee appointed by the court is vested with the same powers, authorities and discretions, and may in all respects act as if he or she had been originally appointed a trustee by the trust instrument.5 Notes 1 (ACT) Trustee Act 1925 s 71(2)(a) (NT) Trustee Act 1893 ss 28(I), 37(1)(I) (NSW) Trustee Act 1925 s 71(2)(a) (QLD) Trusts Act 1973 s 82(2)(a) (SA) Trustee Act 1936 ss 37(1)(a), 41(1)(a) (TAS) Trustee Act 1898 ss 33(1)(a), 34(1)(a) (VIC) Trustee Act 1958 s 51(2)(a) (WA) Trustees Act 1962 s 78(2)(a). As to vesting orders generally see [430-3485]-[430-3550]. 2 Global Funds Management (NSW) Ltd v Burns Philp Trustee Co Ltd (in prov liq) (1990) 3 ACSR 183 at 186 per Rolfe J , SC(NSW). As to the loss of a trustees right to indemnity see [430-3790]-[430-3800]. 3 Global Funds Management (NSW) Ltd v Burns Philp Trustee Co Ltd (in prov liq) (1990) 3 ACSR 183 at 186 per Rolfe J , SC(NSW). As to a trustees right to indemnity generally see [430-3720]-[430-3800]. 4 (ACT) Trustee Act 1925 s 70(6) (NT) Trustee Act 1893 s 27(2) (NSW) Trustee Act 1925 s 70(6) (QLD) Trusts Act 1973 s 80(3) (SA) Trustee Act 1936 s 36(2) (TAS) Trustee Act 1898 s 32(2) (VIC) Trustee Act 1958 s 49 (WA) Trustees Act 1962 s 77(3). 5 (ACT) Trustee Act 1925s 70(7) (NT) Trustee Act 1893 s 40 (NSW) Trustee Act 1925 s 70(8) (QLD) Trusts Act 1973 s 81

(SA) Trustee Act 1936 s 43 (TAS) Trustee Act 1898 s 43 (VIC) Trustee Act 1958 s 50 (WA) Trustees Act 1962 s 77(5).

Source

[Halsbury's Laws of Australia]

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(4) VESTING ORDERS

This chapter was updated by G E Dal Pont LLM (Mich) LLD (Tas) CPA Professor, Faculty of Law, University of Tasmania

(A) General The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3485] Statutory scheme The Northern Territory and South Australia follow the English precedent1 by the separation of the statutory provisions applicable to vesting orders relating to land from those applicable to vesting orders pertaining to choses in action, and in limiting the courts power to make vesting orders with respect to property in the nature of land, stocks and choses in action.2 In Tasmania the legislation also contains separate provisions, however these apply to stock and other choses in action, and property (excluding stock and choses in action).3 In

the remaining jurisdictions the legislation confers upon the court the power to make vesting orders with respect to property generally.4 Notes 1 (UK) Trustee Act 1925 ss 44 (land), 51 (stock and other things in action).2 (NT) Trustee Act 1893 ss 28 (land), 37 (stock and other choses in action) (SA) Trustee Act 1936 ss 37 (land), 41 (stock and other choses in action). As to choses in action generally see mortgages and securities [295-5845]. As to assignments of choses in action see equity [185-430], personal property [315-435]-[315-460]. 3 (TAS) Trustee Act 1898 ss 33 (property excluding stock and choses in action), 34 (stock and other choses in action). See also ibid s 4 (definition of property).4 (ACT) Trustee Act 1925 s 71 (property) (NSW) Trustee Act 1925 s 71 (property) (QLD) Trusts Act 1973 ss 82, 83 (property) (TAS) Trustee Act 1898 ss 33 (property, excluding stock and choses in action), 34 (VIC) Trustee Act 1958 ss 51, 52 (property) (WA) Trustees Act 1962 ss 78, 79 (property). The paragraph below is current to 20 April 2012 [430-3490] Nature of vesting orders The underlying purpose of the vesting provisions is to ensure that a trust can achieve the purpose for which it was created and that those persons entitled to an interest pursuant to or as a result of a trust can receive the benefit or interest to which they are so entitled.1 A vesting order is a summary procedure for clear cases in which it is inexpedient, difficult or impractical for other steps to be taken.2 The court will not use its jurisdiction to make a vesting order to facilitate or to be a substitute for ordinary conveyancing practice.3 In order for the court to exercise its power to make a vesting order, a trust must exist.4 At the same time, the courts approach vesting applications with the principles of practicality, flexibility and expediency in mind, and the statutory provisions are exhaustive of the courts jurisdiction.5 Notes 1 Re Purkiss [1999] 3 VR 223 at 228; [1999] VSC 386; BC9906718 per Warren J ; Re Estate of McCready (2004) 12 BPR 22,327; [2004] NSWSC 887; BC200406366 at [17] per Barrett J .2 Dotter v Evans [1969] VR 41 ; Rizos v Rizos [1970] VR 150 ; Chang v Registrar of Titles (1976) 137 CLR 177 at 186; 8 ALR 285; 50 ALJR 404 per Mason J; Brice v Mackay [1983] 2 Qd R 543 ; Re Purkiss [1999] 3 VR 223 at 229; [1999] VSC 386; BC9906718 per Warren J; Director of Housing v Zeldas Place Collective [2003] VSC 118; BC200301890 at [14], [15] per Balmford J; Bloomingdale Holdings Pty Ltd v 87 Stevedore Street Pty Ltd [2010] VSC 268; BC201005015 at [26] per Warren CJ.3 Re Nairns Application [1961] VR 26 ; Re Harrisons Settlement Trusts; Morris v Harrison-Sleap [1965] 3 All ER 795; [1965] 1 WLR 1492 , Ch; Dotter v Evans [1969] VR 41 ; Brice v Mackay [1983] 2 Qd R 543 ; Hillig as Administrator of Darkinjung Local Aboriginal Land Council v Darkinjung Pty Ltd (2006) 205 FLR 450; [2006] NSWSC 1371; BC200610299 at [16] per Barrett J .4 Re McDowell (decd) [1968] QWN 20 , SC(QLD).5 Bloomingdale Holdings Pty Ltd v 87 Stevedore Street Pty Ltd [2010] VSC 268; BC201005015 at [26] per Warren CJ.

The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3495] Application for vesting order applicants and costs An order concerning any property subject to a trust may be made on the application of any person interested in the property, whether under disability or not, or on the application of any person duly appointed trustee.1 The court may order the costs, charges and expenses of and incidental to the said application to be paid or raised by sale or mortgage out of the trust property or the income from it, or to be borne and paid in such manner and by such persons as may seem just to the court.2 Notes 1 (ACT) Trustee Act 1925 s 92 (NT) Trustee Act 1893 s 39 (NSW) Trustee Act 1925 s 92 (QLD) Trusts Act 1973 s 98 (SA) Trustee Act 1936 s 42 (TAS) Trustee Act 1898 s 42 (VIC) Trustee Act 1958 s 64 (WA) Trustees Act 1962 s 93. As to the meaning of interested see [430-3380]. 2 (NT) Trustee Act 1893 s 41 (NSW) Trustee Act 1925 s 93(2) (QLD) Trusts Act 1973 s 100 (SA) Trustee Act 1936 s 44 (TAS) Trustee Act 1898 s 44 (VIC) Trustee Act 1958 s 66 (WA) Trustees Act 1962 s 97. There are no equivalent provisions in the Australian Capital Territory. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3500] Effect of vesting order In all jurisdictions except Queensland the trustee legislation distinguishes between vesting orders consequential upon the appointment of a trustee (and, in

the Australian Capital Territory, New South Wales, Victoria and Western Australia, the retirement of a trustee) and vesting orders in other cases. In the case of the appointment or retirement of a trustee, the vesting order has the same effect as if the persons who were the trustees before the appointment or retirement had duly executed all proper conveyances of the property for such estate or interest as the court directs or, if there is no such person, or no such person of full capacity, then as if such person had existed and been of full capacity, and had duly executed all proper conveyances of the property for such estate or interest as the court directs.1 In every other case, the vesting order has the same effect as if the trustee (or other persons to whose rights or supposed rights the provisions of the legislation relate) had been an ascertained and existing person of full capacity, and had executed a conveyance or release to the effect intended by the order.2 In Queensland a vesting order vests the property to which it relates in the persons named in the order as trustees without any conveyance, transfer or assignment,3 and such property vests in the persons named as trustees or otherwise as appears from the order.4 A vesting order vests ownership by operation of law, and therefore operates as a transmission, not a transfer.5 In Queensland, Victoria and Western Australia the court may make declarations and give directions concerning the manner in which the right to transfer any stock or thing in action vested under the legislation is to be exercised.6 Notes 1 (ACT) Trustee Act 1925 s 78(1) (NT) Trustee Act 1893 s 35 (NSW) Trustee Act 1925 s 78(1) (SA) Trustee Act 1936 s 39(a) (TAS) Trustee Act 1898 s 40 (VIC) Trustee Act 1958 s 58(1) (WA) Trustees Act 1962 s 85(1). As to the nature of a vesting order see [430-3490]. 2 (ACT) Trustee Act 1925 s 78(2) (NT) Trustee Act 1893 s 35 (NSW) Trustee Act 1925 s 78(2) (SA) Trustee Act 1936 s 39(b) (TAS) Trustee Act 1898 s 40 (VIC) Trustee Act 1958 s 58(2) (WA) Trustees Act 1962 s 85(2). 3 (QLD) Trusts Act 1973 s 90(1).4 Ibid s 90(1A).5 Andco Nominees Pty Ltd v Lestato Pty Ltd (1995) 17 ACSR 239 at 256-7; 13 ACLC 835; BC9504568 per Santow J , SC(NSW).6 (QLD) Trusts Act 1973 s 91 (VIC) Trustee Act 1958 s 59

(WA) Trustees Act 1962 s 86. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3505] Application to charity trustees The powers conferred by the trustee legislation as to vesting orders may be exercised for vesting any property in any trustee of a charity or society over which the court would have jurisdiction in proceedings duly instituted, whether the appointment of the trustee was made by instrument under a power or by the court under its general or statutory jurisdiction.1 Notes 1 (ACT) Trustee Act 1925 s 80 (NT) Trustee Act 1893 s 42 (NSW) Trustee Act 1925 s 80 (QLD) Trusts Act 1973 s 93 (SA) Trustee Act 1936 s 45 (TAS) Trustee Act 1898 s 45 (VIC) Trustee Act 1958 s 61 (WA) Trustees Act 1962 s 88. As to the nature of vesting orders see [430-3490]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3510] Appointment of person to convey In all cases where a vesting order may be made, the court may, if it is more convenient, appoint a person to convey the property or release any contingent right.1 A conveyance or release by that person in conformity with the order has the same effect as an order under the appropriate provision.2 The vesting order procedure is usually more advantageous than the appointment of a third person to convey, and is generally the more convenient procedure.3 Notes 1 The expression contingent right, as applied to land, includes a contingent or executory interest, a possibility coupled with an interest, whether the object of the gift or limitation of the interest or possibility is or is not ascertained, and also includes a right of entry, whether immediate or future, and whether vested or contingent: (ACT) Trustee Act 1925 s 2 Dictionary

(NT) Trustee Act 1893 s 82 (NSW) Trustee Act 1925 s 5 (QLD) Trusts Act 1973 s 5 (SA) Trustee Act 1936 s 4 (TAS) Trustee Act 1898 s 4 (VIC) Trustee Act 1958 s 3 (WA) Trustees Act 1962 s 6. As to the nature of a vesting order see [430-3490]. 2 (ACT) Trustee Act 1925 s 79 (NT) Trustee Act 1893 s 36 (NSW) Trustee Act 1925 s 79 (QLD) Trusts Act 1973 s 92 (SA) Trustee Act 1936 s 40 (TAS) Trustee Act 1898 s 41 (VIC) Trustee Act 1958 s 60 (WA) Trustees Act 1962 s 87. The English equivalent is found in the (UK) Trustee Act 1925 s 50. For examples of the application of these provisions see Treacy v Watson (1884) 10 VLR (E) 96 ; Borough of Burwood v Freehill (1906) 23 WN (NSW) 213; Re Jenkin [1932] VLR 314 ; Re Fraser [1941] QWN 18 , SC(QLD); MacDonald v MacDonald (No 2) [1956] QWN 25 , SC(QLD); Gardiner v Fitzgerald [1962] Qd R 29 ; Meier v Dorzan Pty Ltd [2010] NSWSC 664; BC201004277 . 3 Jones v Davies (1940) 84 Sol Jo 334; [1940] 1 WN 174.

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[Halsbury's Laws of Australia]

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(B) Orders on the Appointment of Trustees The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3515] Circumstances in which vesting orders may be made The following are common instances prescribed by the trustee legislation for the making of a vesting order: (1) where the court appoints or has appointed a new trustee;1 (2) where the trustee is under a disability,2 out of the jurisdiction of the court 3 or cannot be found;4 (3) where it is uncertain who is the survivor of two or more trustees jointly entitled to or possessed of any property;5 (4) where it is uncertain whether the last trustee known to be possessed of any property is living or dead;6 (5) where there is no legal representative, or uncertainty as to the existence, of a trustee who was entitled to or possessed any property;7 or (6) where any person neglects or refuses to convey any property8 in accordance with the direction of the person absolutely entitled to it or in accordance with the terms of an order of the court.9 The trustee legislation in the Australian Capital Territory, New South Wales, Queensland, Victoria and Western Australia further provides that the court may make a vesting order where: (1) the trustee has retired;10 (2)

the trustee is a corporation which has been dissolved;11 or (3) where the property is vested in a trustee and it appears to the court to be expedient to make a vesting order.12 The provision referred to in list item (3) above is intended to overcome circumstances where a transaction or transfer cannot be effected and it is necessary that an order be made to remedy an otherwise unjust and uncertain set of circumstances.13 Notes 1 (ACT) Trustee Act 1925 s 71(2)(a) (NT) Trustee Act 1893 ss 28(I), 37(1)(I) (NSW) Trustee Act 1925 s 71(2)(a) (QLD) Trusts Act 1973 s 82(2)(a) (SA) Trustee Act 1936 ss 37(1)(a), 41(1)(a) (TAS) Trustee Act 1898 ss 33(1)(a), 34(1)(a) (VIC) Trustee Act 1958 s 51(2)(a) (WA) Trustees Act 1962 s 78(2)(a). As to the appointment of new trustees by the court see [430-3360]-[430-3430]. 2 (ACT) Trustee Act 1925 s 71(2)(d), 71(2)(e) (NT) Trustee Act 1893 ss 28(II)(a), 28(II)(b), 37(1)(II)(a) (NSW) Trustee Act 1925 s 71(2)(d), 71(2)(e) (QLD) Trusts Act 1973 s 82(2)(d) (SA) Trustee Act 1936 ss 37(1)(b)(i), 37(1)(b)(ii), 41(1)(b)(i) (TAS) Trustee Act 1898 ss 33(1)(b)(i), 33(1)(b)(ii), 34(1)(b)(i), 34(1)(b)(ii) (VIC) Trustee Act 1958 s 51(2)(d) (WA) Trustees Act 1962 s 78(2)(d). Minors and persons suffering mental disorders have been held to be under disability: see, for example, Gardner v Cowles (1876) 3 Ch D 304 (minor); Re Harwood (infants) (1882) 20 Ch D 536 (minor); Re Findlay (an infant) (1886) 32 Ch D 221 (minor); Re Barnetts Estate; Foster v Barnett [1889] WN 216 (minor); Re Dehaynin (infants) [1910] 1 Ch 223 , CA (minor); Re Harrisons Settlement Trusts; Morris v Harrison-Sleap [1965] 3 All ER 795; [1965] 1 WLR 1492 , Ch (mental disorder). 3 (ACT) Trustee Act 1925 s 71(2)(f) (NT) Trustee Act 1893 ss 28(II)(c), 37(1)(II)(b) (NSW) Trustee Act 1925 s 71(2)(f)

(QLD) Trusts Act 1973 s 82(2)(e) (SA) Trustee Act 1936 ss 37(1)(b)(iii), 41(1)(b)(ii) (TAS) Trustee Act 1898 ss 33(1)(b)(iii), 34(1)(b)(iii) (VIC) Trustee Act 1958 s 51(2)(f) (WA) Trustees Act 1962 s 78(2)(e). For examples of the application of the equivalent provision in the English legislation see Re Skitters Mortgage Trust (1856) 4 WR 791; Hooper v Strutton (1864) 12 WR 367; Re ODonnells Trusts (1871) 19 WR 522; Re Keeleys Trusts (1885) 53 LT 487. 4 (ACT) Trustee Act 1925 s 71(2)(g) (NT) Trustee Act 1893 ss 28(II)(d), 37(1)(II)(c) (NSW) Trustee Act 1925 s 71(2)(g) (QLD) Trusts Act 1973 s 82(2)(f) (SA) Trustee Act 1936 ss 37(1)(b)(iv), 41(1)(b)(iii) (TAS) Trustee Act 1898 ss 33(1)(b)(iv), 34(1)(b)(iv) (VIC) Trustee Act 1958 s 51(2)(g) (WA) Trustees Act 1962 s 78(2)(f). For examples of the application of these provisions see Theobald v Theobald [1966] QWN 24 , SC(QLD); Re McCarter (1962) 35 ALJR 348n, SC(NSW); Ex parte CRA Exploration Pty Ltd [1983] 1 Qd R 310 . As to the appointment of a new trustee in place of a trustee that cannot be found see [430-3300]. 5 (ACT) Trustee Act 1925 s 71(2)(j) (NT) Trustee Act 1893 ss 28(III), 37(1)(III) (NSW) Trustee Act 1925 s 71(2)(j) (QLD) Trusts Act 1973 s 82(2)(i) (SA) Trustee Act 1936 ss 37(1)(c), 41(1)(c) (TAS) Trustee Act 1898 ss 33(1)(c), 34(1)(c) (VIC) Trustee Act 1958 s 51(2)(j) (WA) Trustees Act 1962 s 78(2)(i). 6 (ACT) Trustee Act 1925 s 71(2)(k) (NT) Trustee Act 1893 s 28(IV) (NSW) Trustee Act 1925 s 71(2)(k) (QLD) Trusts Act 1973 s 82(2)(j)

(SA) Trustee Act 1936 s 37(1)(d) (TAS) Trustee Act 1898 ss 33(1)(d), 34(1)(d) (VIC) Trustee Act 1958 s 51(2)(k) (WA) Trustees Act 1962 s 78(2)(j). For examples of the application of these provisions see Re Fink [1910] VLR 337 ; In the Will of Tunstall [1921] VLR 559 . 7 (ACT) Trustee Act 1925 s 71(2)(l) (NT) Trustee Act 1893 s 28(V) (NSW) Trustee Act 1925 s 71(2)(l) (QLD) Trusts Act 1973 s 82(2)(k) (SA) Trustee Act 1936 s 37(1)(e) (TAS) Trustee Act 1898 s 33(1)(e) (VIC) Trustee Act 1958 s 51(2)(l) (WA) Trustees Act 1962 s 78(2)(k). For an example of the application of these provisions see Ex parte CRA Exploration Pty Ltd [1983] 1 Qd R 310 . This uncertainty may arise from a delay in probate if the will is contested: Re Cooks Mortgage [1895] 1 Ch 700 . 8 A trustee who is unable to convey the property, or who has a reasonable excuse for not doing so, will not be held to neglect or refuse to do so: Partridge v Partridge [1894] 1 Ch 351 ; Re Edwards; Lloyd v Boyes [1910] 1 Ch 541 ; Re Quinin Dick; Lord Cloncurry v Fenton [1926] Ch 992 . A trustee who has unjustifiably neglected or refused to convey property may be ordered to pay costs: Re Knoxs Trusts [1895] 2 Ch 483 , CA. See also Brice v Mackay [1983] 2 Qd R 543 at 546 (the words in accordance with the terms of an order of the court qualify each of the enumerated circumstances, meaning that the power is a power to make a vesting order where a person refuses to convey any property in accordance with the terms of an order of the court). See also Chang v Registrar of Titles (1976) 137 CLR 177 at 185; 8 ALR 285; 50 ALJR 404 per Mason J (the court can exercise its power to make a vesting order when the vendor of real estate, who has been paid the purchase money, refuses or declines to execute a transfer or is disabled from so doing). See also (CLR) at 189-90 per Jacobs J (an application for a vesting order is not the appropriate method through which a purchaser should obtain the legal title to land unless the purchaser has done all that he or she can do to effect the purchase and the vendor is joined as a party); Casella v Casella [1969] VR 49 (where a husband refused to obey an order to transfer a house to his wife, the court refused to make a vesting order until it was satisfied that every other means of securing the production of the duplicate certificates of title had been exhausted); Re Bennett (decd) [1954] QWN 52 , SC(QLD); Rizos v Rizos [1970] VR 150 . In the Northern Territory, South Australia and Tasmania, following the English precedent, the neglect or refusal must be wilful where the matter relates to land. It has been held that a refusal is not wilful for the purposes of this sub-section if the title of the person requesting conveyance is disputed, and the trustee maintains a bona fide doubt as to it: Re Mills Trusts (1888) 40 Ch D 14 , CA.

The terms convey or conveyance are defined in each jurisdiction: (ACT) Trustee Act 1925 s 2 Dictionary (NT) Trustee Act 1893 s 82 (NSW) Trustee Act 1925 s 5 (QLD) Trusts Act 1973 s 5 (SA) Trustee Act 1936 s 4 (TAS) Trustee Act 1898 s 4 (VIC) Trustee Act 1958 s 3 (WA) Trustees Act 1962 s 6. 9 (ACT) Trustee Act 1925 s 71(2)(i), 71(2)(m) (NT) Trustee Act 1893 ss 28(VI), 37(1)(II)(d), 37(1)(II)(e) (NSW) Trustee Act 1925 s 71(2)(i), 71(2)(m) (QLD) Trusts Act 1973 s 82(2)(h), 82(2)(l) (SA) Trustee Act 1936 ss 37(1)(f), 41(1)(b)(iv), 41(1)(b)(v) (TAS) Trustee Act 1898 ss 33(1)(f), 34(1)(b)(v), 34(1)(b)(vi) (VIC) Trustee Act 1958 s 51(2)(i), 51(2)(m) (WA) Trustees Act 1962 s 78(2)(h), 78(2)(l). For examples of the application of these provisions see Re Knoxs Trusts [1895] 2 Ch 483 , CA; Re Price (1902) 19 WN (NSW) 15 ; Re Castlemaine Brewery and Wood Bros & Co, Newcastle, NSW, Ltd (in liq) (1921) 38 WN (NSW) 45; Chang v Registrar of Titles (1976) 137 CLR 177; 8 ALR 285; 50 ALJR 404 . As to grant of a vesting order consequential on judgment for specific performance see [4303550]. 10 (ACT) Trustee Act 1925 s 71(2)(c) (NSW) Trustee Act 1925 s 71(2)(c) (QLD) Trusts Act 1973 s 82(2)(c) (VIC) Trustee Act 1958 s 51(2)(c) (WA) Trustees Act 1962 s 78(2)(c). For examples of the application of these provisions see Re Price (1902) 19 WN (NSW) 15 ; Re Moores Will; Moore v Willis (1901) 1 SR (NSW) Eq 148 ; Re Eggleston; Equity Trustees Executors and Agency Co Ltd v Eggleston [1940] VLR 474 . As to the retirement of trustees see [430-3605]-[430-3630]. 11 (ACT) Trustee Act 1925 s 71(2)(h)

(NSW) Trustee Act 1925 s 71(2)(h) (QLD) Trusts Act 1973 s 82(2)(g) (VIC) Trustee Act 1958 s 51(2)(h) (WA) Trustees Act 1962 s 78(2)(g). 12 (ACT) Trustee Act 1925 s 71(2)(o) (NSW) Trustee Act 1925 s 71(2)(o) (QLD) Trusts Act 1973 s 82(2)(n) (VIC) Trustee Act 1958 s 51(2)(o) (WA) Trustees Act 1962 s 78(2)(n). For examples of the application of these provisions see Sayer v McHugh (1985) 1 NSWLR 440 ; Perpetual Trustees WA Ltd v Kelly (1993) 8 WAR 480 at 484-5 per Anderson J (whilst it may be accepted that the expediency is not to be found on one side only (namely the side of the beneficiary), the effect of a vesting order upon the interests of the beneficiary is a very important consideration); Re Purkiss [1999] 3 VR 223; [1999] VSC 386; BC9906718 ; Commonwealth Bank of Australia v Nabi [2010] NSWSC 1425; BC201009748 . As to whether the Registrar of Titles is an appropriate party to proceedings in which a beneficiary seeks a vesting order see Chang v Registrar of Titles (1976) 137 CLR 177; 8 ALR 285; 50 ALJR 404 ; Ex parte CRA Exploration Pty Ltd [1983] 1 Qd R 310 . As to the meaning of the term expedient in this context see [430-3390]. 13 Re Purkiss [1999] 3 VR 223 at 228; [1999] VSC 386; BC9906718 The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3520] Estate which vests order In Western Australia a vesting order may vest the property in such person, in such manner and for such estate or interest, or release or dispose of any contingent right1 to such person, as the court may direct.2 The same is the case in the Australian Capital Territory, New South Wales, Queensland and Victoria,3 except where the vesting order is consequential on the appointment of a new trustee, in which case the property is vested in the persons who on the appointment become the trustees.4 The Northern Territory, South Australian and Tasmanian legislation provides likewise regarding a vesting order consequential on the appointment of a new trustee.5 In the Australian Capital Territory, New South Wales, Queensland and Victoria, the legislation states that where the vesting order is consequential upon the retirement of one or more of a number of trustees, the property may be vested in the continuing trustees alone.6 Notes 1 The expression contingent right, as applied to land, includes a contingent or executory interest, a possibility coupled with an interest, whether the object of the gift or limitation of the interest or possibility is or is not ascertained, and also includes a right of entry, whether immediate or future, and whether vested or contingent: per Warren J.

(ACT) Trustee Act 1925 s 2 Dictionary (NT) Trustee Act 1893 s 82 (NSW) Trustee Act 1925 s 5 (QLD) Trusts Act 1973 s 5 (SA) Trustee Act 1936 s 4 (TAS) Trustee Act 1898 s 4 (VIC) Trustee Act 1958 s 3 (WA) Trustees Act 1962 s 6. As to the nature of vesting orders see [430-3490]. 2 (WA) Trustees Act 1962 s 79(1).3 (ACT) Trustee Act 1925 s 71(6) (NSW) Trustee Act 1925 s 71(6) (QLD) Trusts Act 1973 s 83(3) (VIC) Trustee Act 1958 s 52(3). 4 (ACT) Trustee Act 1925 s 71(4) (NSW) Trustee Act 1925 s 71(4) (QLD) Trusts Act 1973 s 83(1) (VIC) Trustee Act 1958 s 52(1). 5 (NT) Trustee Act 1893 ss 28 proviso (a), 37(1) proviso (a) (SA) Trustee Act 1936 ss 37(2)(a), 41(1a)(a) (TAS) Trustee Act 1898 ss 33(2)(a), 34(2)(a). 6 (ACT) Trustee Act 1925 s 71(5) (NSW) Trustee Act 1925 s 71(5) (QLD) Trusts Act 1973 s 83(2) (VIC) Trustee Act 1958 s 52(2).

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[Halsbury's Laws of Australia]

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(C) Other Vesting Orders The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3525] Orders as to contingent rights of unborn persons Where any property is subject to a contingent right1 in an unborn person or a class of unborn persons who, on coming into existence, would become entitled to or possessed of the property on any trust, the court may make a vesting order releasing the property from the contingent right, or vesting in any person the estate or interest to or of which the unborn person or class of unborn persons would, on coming into existence, be entitled or possessed in the property.2 Such orders are not to be construed as a species of independent variation of trust provision as it does not allow the court to extinguish the rights of unborn persons except as may be necessary or desirable to carry into effect some separately existing requirement of equity.3 It does not create a jurisdiction equivalent to that which exists by statute in Queensland, South Australia, Tasmania, Victoria and Western Australia, under which the court may vary the entitlement interests of the beneficiaries under the trust and to give consent on behalf of infants, unborn and incompetent persons.4 Notes 1 As to the meaning of the expression contingent right see [430-3520].2 (ACT) Trustee Act 1925 s 72 (NT) Trustee Act 1893 s 29 (limited to land) (NSW) Trustee Act 1925 s 72 (QLD) Trusts Act 1973 s 84 (SA) Trustee Act 1936 s 38 (limited to land) (TAS) Trustee Act 1898 s 35 (VIC) Trustee Act 1958 s 53 (WA) Trustees Act 1962 s 80. As to the nature of a vesting order see [430-3490]. 3 Re Estate of McCready (2004) 12 BPR 22,327; [2004] NSWSC 887; BC200406366 at [27]

per Barrett J .4 Re Estate of McCready (2004) 12 BPR 22,327; [2004] NSWSC 887; BC200406366 at [30] per Barrett J . As to this jurisdiction see [430-5160]-[430-5195]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3530] Infant beneficiary At general law, the court could charge real estate to which an infant was entitled in fee simple, but not an infants reversionary interest in real estate, with the expenses of the infants maintenance.1 To overcome this difficulty, the trustee legislation in the Australian Capital Territory, Queensland, Victoria and Western Australia provides that where a minor is beneficially entitled to any property, with a view to the application2 of the capital or income of the property for the maintenance, education, advancement or benefit3 of the minor, the court may make an order:4 (1) appointing a person to convey such property; or (2) in the case of choses in action, vesting in any person the right to transfer, or call for a transfer of the chose in action or to receive the income therefrom, or to sue for or recover the chose in action, upon such terms as the court thinks fit. The Queensland legislation further provides that an act done in accordance with the legislation is as effectual and binding as if the infant had been a person of full age and mental capacity and had himself or herself done that act.5 The following conditions must be satisfied before an order may be made:6 (1) some application of the capital or income of the property must be in contemplation; (2) it must be an application for the benefit of the infant owner; (3) the courts purpose, or one of its purposes, in making the order must be to cause or enable that application to be made; and (4) the circumstances must be such that the court considers it desirable for the discretionary power conferred by the legislation to be exercised. It has been held that the court has jurisdiction under the legislation to appoint a person to convey the estate tail of the infant concerned.7 However, the legislation does not permit the appointment of a trustee with general powers of sale, conversion and reinvestment of capital of the infants estate.8

In New South Wales, where a minor is beneficially entitled to property, if it appears to the court to be for the benefit of the minor, on such terms as it thinks fit, the court may make orders authorising a person to:9 (1) make any disposition of the property; (2) receive the proceeds of disposition of the property; (3) call for a disposition of the property to the person so authorised or as he or she directs; (4) receive the income of the property; (5) sue for and recover any chose in action comprised in the property; (6) invest the property; or (7) apply the capital or income of the property for the benefit of the minor. There is no jurisdiction in the court at general law to deal with an infants interest and to alter trusts merely because it is for the benefit of an infant.10 However, most jurisdictions the legislation confers upon the court the discretion to vary the entitlement interests of the beneficiaries under the trust and to give consent on behalf of infants and unborn and incompetent persons.11 Notes 1 Re Hamilton (infants) (1886) 31 Ch D 291, CA; Cadman v Cadman (1886) 33 Ch D 397 , CA; Re Badger; Badger v Badger [1913] 1 Ch 385 , CA.2 The word application is to be construed widely: Re White [1959] VR 661 at 665; [1959] ALR 1177 per Smith J ; Rubery v Rubery [2003] WASC 164; BC200304955 at [24] per Barker J . The phrase a view to the application has been held to be equivalent to for the purpose of applying: Re Heyworths Settlements [1956] 2 All ER 21 at 23 per Upjohn J , Ch (which concerned a proposed sale for cash to a tenant for life of an infants reversionary interest which was contingent on the infant surviving the tenant for life. The bargain was beneficial to the infant, for the price she would have received would have been substantially in excess of the actuarial value of her reversion and substantially in excess of the sum which would have been receivable by the reversioner at the death of the life tenant, unless there were some wholly unexpected change in rates of estate duty. There was, however, no present need of the cash for the infant. In these circumstances Upjohn J reached the conclusion that the proposed sale was not with a view to the application of, or for the purpose of applying, any capital or income of the infant for her benefit).3 The word benefit is to be construed widely: Re White [1959] VR 661; [1959] ALR 1177 at 665 per Smith J ; Rubery v Rubery [2003] WASC 164; BC200304955 at [24] per Barker J .4 (ACT) Trustee Act 1925 s 73 (QLD) Trusts Act 1973 s 87(1)

(VIC) Trustee Act 1958 s 55 (WA) Trustees Act 1962 s 82. For examples of the application of these provisions see Re Newton (1936) 53 WN (NSW) 117 ; Re Lansdownes Will Trusts; Marquis of Lansdowne v Earl of Shelburne [1967] 1 All ER 888, Ch; Rubery v Rubery [2003] WASC 164; BC200304955 . 5 (QLD) Trusts Act 1973 s 87(2).6 Re White [1959] VR 661 at 665; [1959] ALR 1177 per Smith J.7 Re Gowers Settlement [1934] Ch 365 .8 Rubery v Rubery [2003] WASC 164; BC200304955 at [33] per Barker J .9 (NSW) Minors (Property and Contracts) Act 1970 s 50.10 Chapman v Chapman [1954] AC 429; [1954] 1 All ER 798; [1954] 2 WLR 723 , HL.11 (QLD) Trusts Act 1973 s 95 (SA) Trustee Act 1936 s 59C (TAS) Variation of Trusts Act 1994 ss 13, 14 (VIC) Trustee Act 1958 s 63A (WA) Trustees Act 1962 s 90. There are no equivalent provisions in the Australian Capital Territory, the Northern Territory and New South Wales. As to these provisions see [430-5160]-[430-5195]. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3535] Minor or insane mortgagee Where any person entitled to or possessed of property by way of mortgage is a minor, an insane or incapable person or of unsound mind, the court may make a vesting order vesting or releasing or disposing of the property, with the right to transfer or call for a transfer of property, or to receive the dividends or income from it, or to sue for or recover property or any interest in respect of it, in like manner as in the case of a trustee being a minor, or insane or incapable person, or person of unsound mind.1 Notes 1 (ACT) Trustee Act 1925 s 74 (NT) Trustee Act 1893 ss 30 (land), 38 (stock) (NSW) Trustee Act 1925 s 74 (QLD) Trusts Act 1973 s 85 (SA) Law of Property Act 1936 s 18 (TAS) Trustee Act 1898 s 36 (VIC) Trustee Act 1958 s 54 (WA) Trustees Act 1962 s 81.

As to the making of vesting orders in the case of a trustee being a minor or an insane or incapable person or a person of unsound mind see [430-3515] note 2. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3540] Deceased mortgagee The trustee legislation in all jurisdictions except Queensland, Victoria and Western Australia permits the court to make a vesting order:1 (1) where a mortgagee of land has died; (2) where the mortgagee did not enter into possession, and the money due in respect of the mortgage has been paid to a person entitled to receive the same; or (3) where the latter consents to any order for the reconveyance of the land. Notes 1 (ACT) Trustee Act 1925 s 75 (NT) Trustee Act 1893 ss 31, 43 (NSW) Trustee Act 1925 s 75 (SA) Trustee Act 1936 s 46 (TAS) Trustee Act 1898 ss 37, 46 (applies to property generally, which is defined in ibid s 4 to include real and personal property, any debt or thing in action and any other right or interest). The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3545] Sale or mortgage of land Where an order is made by the court directing the sale or mortgage of any land the court may,1 if it thinks expedient, 2 make an order vesting the land or any part of it for such estate as the court thinks fit, in the purchaser or mortgagee or in any other person.3 For the purposes of this provision, every person who is entitled to or possessed of the land, or entitled to a contingent right4 in it, and is a party to the proceedings in which the order is made or is otherwise bound by the order, is deemed to be so entitled or possessed as a trustee within the meaning of the trustee legislation. In the Northern Territory, the legislation further provides that where: (1)

a person who has contracted to sell land dies without having conveyed the land; (2) the consideration for the sale has been paid or satisfied; (3) there is no dispute as to the making of the contract or as to the right of the purchaser to demand specific performance of such contract; and (4) the court is satisfied that the only impediment to the performance of the contract arises because the land has been vested in the personal representative of the deceased vendor who is either an infant or of unsound mind, the court may make an order declaring the personal representative of the deceased vendor to be a trustee of the land in question, and the court may order that the land vest in the purchaser in such manner and for such estate as the court may direct.5 Notes 1 May in this context has been interpreted in its ordinary sense to vest in the court a discretion whether or not to make the order: Pennie v Pennie [2010] NSWSC 1070; BC201007982 at [10] per Hammerschlag J.2 As to the meaning of the term expedient in this context see [4303390].3 (ACT) Trustee Act 1925 s 76 (NT) Trustee Act 1893 s 32 (NSW) Trustee Act 1925 s 76 (QLD) Trusts Act 1973 s 88 (TAS) Trustee Act 1898 s 38 (VIC) Trustee Act 1958 s 56 (WA) Trustees Act 1962 s 83. There are no equivalent provisions in South Australia. See also Rizos v Rizos [1970] VR 150 . 4 As to the meaning of the expression contingent right see [430-3520].5 (NT) Trustee Act 1893 s 33. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3550] Vesting order consequential on judgment for specific performance The court may make a vesting order where it makes an order for: (1)

the specific performance of a contract concerning any land; (2) the partition or sale in lieu of partition of any land; (3) the exchange of any land; or (4) the conveyance of any land, either in cases arising out of the doctrine of election1 or otherwise; for this purpose the court may declare: (1) that any of the parties to the suit or other proceedings are trustees of the land or any part of it within the meaning of the legislation; or (2) that the interests of unborn persons who might claim under any party to the proceedings, or under the will or voluntary settlement of any person deceased, who was during his or her lifetime a party to the contract or transactions concerning which the order is made, are the interests of persons who on coming into existence would be trustees within the meaning of the trustee legislation,2 and the vesting order may be made with respect to the rights of those persons born and unborn as if they had been trustees.3 In enacting the legislative provision above, the respective legislatures of each jurisdiction recognised the established equitable doctrine that a vendor under a valid contract for the sale of land holds the land as trustee for the purchaser,4 and conferred upon the beneficial owner the added advantage of having the vendor declared by the court as a trustee under the provisions of the trustee legislation with the statutory consequences flowing from there.5 One of the advantages so gained is that the court is empowered to make a vesting order where any person neglects or refuses to convey any property in accordance with the terms of the order of the court, or where property is vested in a trustee and it appears to the court that it is expedient to make a vesting order.6 However, a vesting order is not a substitute for an action for specific performance.7 Under the legislative provision above, the court declares the vendor as trustee of the land for the purchaser, but the actual vesting order for that purpose is made under the general vesting order provision dealing with neglect or refusal to convey property.8 Notes 1 As to the doctrine of election see equity [185-1115]-[185-1135]. As to the nature of a vesting order see [430-3490].2 For the general meaning of trustee for the purpose of the trustee legislation see (ACT) Trustee Act 1925 s 2 Dictionary (NT) Trustee Act 1893 s 82 (NSW) Trustee Act 1925 s 5

(QLD) Trusts Act 1973 s 5 (SA) Trustee Act 1936 s 4 (TAS) Trustee Act 1898 s 4 (VIC) Trustee Act 1958 s 3 (WA) Trustees Act 1962 s 6. 3 (ACT) Trustee Act 1925 s 77 (NT) Trustee Act 1893 s 34 (NSW) Trustee Act 1925 s 77 (QLD) Trusts Act 1973 s 89 (SA) Law of Property Act 1936 s 19 (TAS) Trustee Act 1898 s 39 (VIC) Trustee Act 1958 s 57 (WA) Trustees Act 1962 s 84. These provisions do not operate to allow land to be vested in the purchasers as trustees for themselves: Brice v Mackay [1983] 2 Qd R 543 at 546 per Demack J . 4 Lysaght v Edwards (1876) 2 Ch D 499; 45 LJ Ch 554; 34 LT 787 ; Palmer v Carey (1926) 37 CLR 545 at 548; [1926] AC 703; [1927] ALR 1; [1926] All ER Rep 650 , PC; Brunker v Perpetual Trustee Co (Ltd) (1937) 57 CLR 555 at 581; [1937] ALR 349 per Latham CJ ; Haque v Haque (No 2) (1965) 114 CLR 98 at 124-5; [1966] ALR 553; (1965) 39 ALJR 144 per Kitto J ; Chang v Registrar of Titles (1976) 137 CLR 177 at 184-5 per Mason J, at 189-90 per Jacobs J; 8 ALR 285; 50 ALJR 404 ; Hewett v Court (1983) 149 CLR 639 at 653-4; 46 ALR 87; 57 ALJR 211 per Wilson and Dawson JJ ; Legione v Hateley (1983) 152 CLR 406 at 423; 46 ALR 1; 57 ALJR 292 per Gibbs CJ and Murphy J ; KLDE Pty Ltd (in vol liq) v Cmr of Stamp Duties (Qld) (1984) 155 CLR 288 at 296-7 per Gibbs CJ, Mason, Wilson and Dawson JJ, at 300-1 per Brennan J (dissenting); Stern v McArthur (1988) 165 CLR 489 at 521-3; 81 ALR 463; 62 ALJR 588 per Deane and Dawson JJ . As to vendor of land as constructive trustee see [430-665].5 Dotter v Evans [1969] VR 41 at 44-5 per Gillard J .6 Dotter v Evans [1969] VR 41 at 44-5 per Gillard J . As to expedience see [430-3390]. 7 Chang v Registrar of Titles (1976) 137 CLR 177 at 189; 8 ALR 285; 50 ALJR 404 per Jacobs J .8 Chang v Registrar of Titles (1976) 137 CLR 177 at 189; 8 ALR 285; 50 ALJR 404 per Jacobs J ; Brice v Mackay [1983] 2 Qd R 543 at 545-6 per Demack J . The general vesting order provisions dealing with neglect or refusal to convey property are: (ACT) Trustee Act 1925 s 71(2)(m) (NT) Trustee Act 1893 ss 28(VI), 37(1)(II)(e) (NSW) Trustee Act 1925 s 71(2)(m) (QLD) Trusts Act 1973 s 82(2)(l)

(SA) Trustee Act 1936 ss 37(1)(f), 41(1)(b)(v) (TAS) Trustee Act 1898 ss 33(1)(f), 34(1)(b)(vi) (VIC) Trustee Act 1958 s 51(2)(m) (WA) Trustees Act 1962 s 78(2)(l).

Source

[Halsbury's Laws of Australia]

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Bottom of Form (5) VACATION OF OFFICE

This chapter was updated by G E Dal Pont LLM (Mich) LLD (Tas) CPA Professor, Faculty of Law, University of Tasmania

(A) Retirement of Trustees The paragraph below is current to 20 April 2012 [430-3605] In general A person cannot be compelled to remain as trustee, 1 although there is early English authority to the effect that a trustee who has accepted a trust cannot abandon the trust at the beneficiaries expense on a mere caprice or other trivial cause.2 A trustee may retire from a trust: (1) under retirement provisions (if any) in the trust instrument, which will be strictly construed;3

(2) under the trustee legislation in each jurisdiction, which permits retirement in specified circumstances;4 (3) pursuant to the consent of all beneficiaries, each being of full legal capacity;5 or (4) by the consent of the court.6 A trustee who is justified in retiring is not liable to meet any costs incurred by the trust by virtue of his or her retirement, although whether the retiring trustee is to be allowed his or her own costs in the matter depends on the circumstances of the case.7 However, the court may deny a retiring trustee his or her commission where the trust has been put to some expense as a result of the trustee first undertaking the position and then, within a short time thereafter, desiring to be relieved of it.8 Where a sole trustee retires, the trustee must produce to his or her successors the documents relating to the administration of the trust.9 A trustee who validly retires from the trust cannot thereafter resume his or her former trusteeship without being formally reappointed.10 Notes 1 Forshaw v Higginson (1855) 20 Beav 485 at 487; 52 ER 690 at 691 per Romilly MR; General Investment Pty Ltd (in liq) v Tyson [1967] Tas SR 96 at 98 per Crawford J .2 Howard v Rhodes (1837) 1 Keen 581; 48 ER 431 ; Courtenay v Courtenay (1846) 3 Jo & Lat 519 at 529 per Sugden LC; Forshaw v Higginson (1855) 20 Beav 485 at 486 ff; 52 ER 690 at 691 ff per Romilly MR.3 General Investment Pty Ltd (in liq) v Tyson [1967] Tas SR 96 ; Custodial Ltd v Greig [2005] 2 Qd R 115; [2004] QSC 452; BC200408801 .4 As to retirement pursuant to trustee legislation see [430-3610].5 Though the beneficiaries may permit a trustee to retire, this does not entitle them to direct the appointor in the appointment of a replacement trustee: Re Higginbottom [1892] 3 Ch 132; [1891-94] All ER Rep 1070; (1892) 67 LT 190 ; Re Brockbank (decd); Ward v Bates [1948] Ch 206; [1948] 1 All ER 287 . The retirement of a sole trustee pursuant to the consent of the beneficiaries effectively causes the trust to terminate. As to termination of a trust see [430-2500]-[430-2520]. 6 As to retirement with the consent of the court see [430-3620].7 Attorney-General (UK) v Murdoch (1856) 2 K & J 571 at 573; 69 ER 910 at 910-11 per Wood VC . As to the general rule that a trustee must not be deprived of his or her costs of proceedings unless he or she has acted unreasonably see [430-3750]. 8 In the Will of Phillips (1879) 5 VLR (E) 274 at 275 per Molesworth J . As to the courts power to award remuneration to trustees see [430-3980]-[430-4020]. 9 Tiger v Barclays Bank Ltd [1952] 1 All ER 85, CA.10 Lancashire v Lancashire (1848) 2 Ph 657; 41 ER 1097, PC. As to the appointment of trustees see [430-3245]-[430-3430]. The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3610] Retirement pursuant to trustee legislation A trustee may retire from the trust without any new trustee being appointed in his or her place, provided that the co-trustees (and any appointor) consent, and there will be at least two continuing trustees left after the retirement.1 In all jurisdictions except the Northern Territory and South Australia retirement is also permitted where the sole remaining trustee is a trustee company (and, in the Australian Capital Territory, the Public Trustee, in New South Wales, the New South Wales Trustee).2 In the Australian Capital Territory, the Northern Territory, New South Wales, South Australia and Tasmania the retirement must be effected by deed,3 whereas in the remaining jurisdictions, writing is sufficient. In all jurisdictions except in Queensland, the statutory provision for the retirement of trustees applies only if and as far as a contrary intention is not expressed in the trust instrument, and has effect subject to the terms of that instrument.4 In Queensland, the provision applies whether or not a contrary intention appears in the trust instrument.5 Notes 1 (ACT) Trustee Act 1925 s 8(1), 8(2) (NT) Trustee Act 1893 s 12(1) (NSW) Trustee Act 1925 s 8(1), 8(2) (QLD) Trusts Act 1973 s 14(1) (SA) Trustee Act 1936 s 15(1) (TAS) Trustee Act 1898 s 14(1) (VIC) Trustee Act 1958 s 44(1) (WA) Trustees Act 1962 s 9(1). 2 (ACT) Trustee Act 1925 s 8(2) (NSW) Trustee Act 1925s 8(2) (QLD) Trusts Act 1973 s 14(1) (TAS) Trustee Act 1898 ss 14(1), 31 (VIC) Trustee Act 1958 s 44(1) (WA) Trustees Act 1962 s 9(1). 3 In the Australian Capital Territory and New South Wales the retirement must be effected by registered deed: (ACT) Trustee Act 1925 s 8(2) (NSW) Trustee Act 1925 s 8(2). 4 (ACT) Trustee Act 1925 s 8(8) (NT) Trustee Act 1893 s 12(3)

(NSW) Trustee Act 1925 s 8(8) (SA) Trustee Act 1936 s 15(3) (TAS) Trustee Act 1898 s 14(3) (VIC) Trustee Act 1958 s 2(3) (WA) Trustees Act 1962 s 9(4). As to the meaning of the expression contrary intention in the trust instrument see [430-4370]. 5 (QLD) Trusts Act 1973 s 10. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3615] Vesting on retirement Where a trustee retires pursuant to the statutory retirement provisions, the execution (and, in the Australian Capital Territory and New South Wales, registration) of the instrument of discharge without any conveyance vests in the continuing trustees alone as joint tenants all the trust property which is jointly vested in the continuing trustees and the retiring trustee.1 In some jurisdictions a vesting order consequential upon the retirement of a trustee has the same effect as if the persons who were the trustees before the retirement had duly executed all proper conveyances of the property for such estate or interest as the court directs, or if there is no such person, or no such person of full capacity, then as if such person had existed and been of full capacity, and had duly executed all proper conveyances of the property for such estate or interest as the court directs.2 Notes 1 (ACT) Trustee Act 1925 s 9(2) (NT) Trustee Act 1893s 13(2) (NSW) Trustee Act 1925 s 9(2) (QLD) Trusts Act 1973 s 15(2) (SA) Trustee Act 1936 s 16(2) (TAS) Trustee Act 1898 s 15(2) (VIC) Trustee Act 1958 s 45(2) (WA) Trustees Act 1962 s 10(2). 2 (ACT) Trustee Act 1925 s 78(1) (NSW) Trustee Act 1925 s 78(1) (VIC) Trustee Act 1958 s 58(1) (WA) Trustees Act 1962 s 85(1).

There are no equivalent provisions in the other jurisdictions. As to the nature of a vesting order see [430-3490]. The paragraph below is current to 20 April 2012 [430-3620] Retirement with courts consent A trustee who is unable to effect retirement under the provisions of the trust instrument,1 statute2 or with the consent of the beneficiaries, 3 may seek the consent of the court to retire.4 Courts have allowed trustees to retire on the grounds of sickness5 and infancy.6 A trustee who was carrying on the testators business at a loss has also been allowed to retire.7 Although there is early Australian authority to the effect that a trustee who is leaving the jurisdiction will not necessarily be permitted to retire,8 the fact that the courts will as a general rule refrain from making appointments outside the jurisdiction9 suggests that modern courts would adopt a more lenient approach. Notes 1 As to retirement under the trust instrument generally see [430-3605].2 As to retirement pursuant to trustee legislation see [430-3610].3 As to retirement with the beneficiaries consent see [4303605].4 General Investment Pty Ltd (in liq) v Tyson [1967] Tas SR 96 at 98-101 per Crawford J .5 In the Will of Phillips (1879) 5 VLR (E) 274 .6 In the Will of Phillips (1879) 5 VLR (E) 274 .7 Farrell v Evans (1872) 3 AJR 71, SC(VIC).8 In the Will of Butchart (1874) 5 AJR 4 , SC(VIC) (where an application to retire by a trustee who sought to return to England was refused).9 As to appointment outside the jurisdiction see [430-3420]. The paragraph below is current to 20 April 2012 [430-3625] Corrupt retirement A trustee who retires in favour of another person in consideration for a sum of money paid by that person will be liable to account to the beneficiaries for that sum1 and may be treated as a constructive trustee of the sum.2 The court will declare the appointment to be void.3 Notes 1 This is a result of the general rule that a fiduciary (trustee) is liable to his or her principal (the beneficiaries) for profits derived by reason of either or both the opportunity and the knowledge acquired through the fiduciary position: Costa Rica Railway Co Ltd v Forwood [1901] 1 Ch 746 at 761; (1901) 84 LT 279 per Vaughan Williams LJ , CA; Re Taylor; Howitt v Union Trustee Co of Aust Ltd [1950] VLR 476 at 479; [1950] ALR 984 per Herring CJ ; Boardman v Phipps [1967] 2 AC 46 at 105; [1966] 3 All ER 721; [1966] 3 WLR 1009 per Lord Hodson , HL; Green and Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1 at 5; (1982) 1 ACLC 1 per Burt CJ , SC(WA), Full Court.2 Attorney-General for Hong Kong v Reid [1994] 1 AC 324; [1994] 1 NZLR 1; [1994] 1 All ER 1; [1993] 3 WLR 1143 , PC.3 Sugden v Crossland (1856) 3 Sm & G 192; 65 ER 620 . The paragraph below is current to 20 April 2012 [430-3630] Retirement in contemplation of breach of trust A trustee who retires with the knowledge or suspicion that a breach of trust will be committed subsequent to his or her retirement is liable for any loss occasioned by that breach.1 No such liability will attach for a breach of trust different from that which the retiring trustee contemplated.2 A trustee who allows a co-trustee in which he or she has no confidence to appoint a new trustee in his or her place assumes a risk of liability for subsequent misconduct by the co-trustee and the new trustee.3 A trustee who retires for the purpose of committing what would be a breach of trust had he or she remained a trustee, such as a transaction between himself or herself and the trust, will be liable for any profit derived from that conduct on the basis that the opportunity for deriving that profit

arose by virtue of his or her trusteeship.4 Notes 1 Webster v Le Hunt (1861) 4 LT 723; 9 WR 918, PC; Palairet v Carew (1863) 32 Beav 564 at 567-8; 55 ER 222 at 223 per Romilly MR ; Clark v Hoskins (1868) 37 LJ Ch 561 at 566; 19 LT 331 per Wood LJ, CA; Head v Gould [1898] 2 Ch 250 at 273-4; (1898) 67 LJ Ch 480; 78 LT 739 per Kekewich J . As to a trustees liability for the acts of co-trustees see [430-5275]. As to the limitation of a trustees liability for the trustees own defaults see [430-5440]. 2 Clark v Hoskins (1868) 37 LJ Ch 561 at 567; 19 LT 331 per Wood LJ, CA; Head v Gould [1898] 2 Ch 250 at 273-4; (1898) 67 LJ Ch 480; 78 LT 739 per Kekewich J .3 Forshaw v Higginson (1855) 20 Beav 485 at 487; 52 ER 690 at 691 per Romilly MR.4 Gould v OCarroll [1964] NSWR 803 at 805; (1963) 81 WN (Pt 1) (NSW) 170 at 172 per Jacobs J . As to the prohibition against purchase of trust property by a trustee see [430-4025]-[430-4045].

Source

[Halsbury's Laws of Australia]

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(B) Removal of Trustees The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3635] In general As proceedings to appoint new trustees are frequently collateral with efforts to remove a trustee, questions of the appointment and removal of trustees overlap.1 Like the matter of appointment, a trustee may be removed pursuant to: (1) an express power contained in the trust instrument which will be strictly construed;2

(2) the statutory power to appoint new trustees in place of existing trustees;3 or (3) the courts inherent and statutory jurisdiction to appoint replacement trustees,4 including trustees of a foreign trust.5 The courts jurisdiction to remove trustees is ancillary to its principal duty to see that trusts are properly executed.6 Trustee companies are subject to the same control and are liable to be removed in the same manner as natural persons who act in an equivalent capacity.7 The Australian Prudential Regulation Authority (APRA) is statutorily empowered to suspend or remove a trustee of a superannuation trust in specified circumstances,8 to appoint an acting trustee in his or her place,9 and to make vesting orders to this end.10 In the absence of some reason for their non-joinder, the general rule is that all persons interested in a trust estate should be joined as parties to, or at the very least be given notice of, any proceedings to remove the trustee or to appoint a new trustee.11 Delay can prove a bar to an action to remove trustee, although it is usually a factor to be kept in mind rather than being decisive in itself.12 Notes 1 Re Estate of Roberts (1983) 20 NTR 13 at 17; 70 FLR 158 at 161-2 per OLeary J .2 Werner v Boehm (1890) 16 VLR 73 ; Equitable Group Ltd v Pendal Nominees Pty Ltd (1984) 3 ACLC 546, SC(NSW); Khyentse v Hope [2007] 1 NZLR 645; [2006] NZCA 117 at [41]-[47] per ORegan J , delivering the judgment of the court.3 (ACT) Trustee Act 1925 s 6 (NT) Trustee Act 1893 s 11, Pt IV (special provisions as to appointment of new trustees) (NSW) Trustee Act 1925 s 6 (QLD) Trusts Act 1973 s 12 (SA) Trustee Act 1936 ss 14, 14A, Pt 5 (special provisions as to appointment of new trustees) (TAS) Trustee Act 1898 s 13 (VIC) Trustee Act 1958 ss 41, 42 (WA) Trustees Act 1962 s 7. As to the appointment of a new trustee in place of an existing trustee see [430-3300]-[430-3345]. 4 As to the inherent power see Sinnott v Hockin (1882) 8 VLR (E) 205 at 210; 4 ALT 10 per Molesworth J ; Letterstedt v Broers (1884) LR 9 App Cas 371 at 386; [1881-85] All ER Rep 882 per Lord Blackburn, PC; Re Estate of Roberts (1983) 20 NTR 13 at 17; 70 FLR 158 at 161-2 per OLeary J; Benzija v Adriatic Fisheries Pty Ltd (1984) 37 SASR 545 at 555-6 per Bollen J ; Re Matheson; Ex parte Worrell v Matheson (1994) 49 FCR 454; 121 ALR 605 at 612 per Spender J ; Monty Financial Services Ltd v Delmo [1996] 1 VR 65 at 76 per Ashley J . As to the statutory power see (ACT) Trustee Act 1925 s 70

(NT) Trustee Act 1893 s 27 (NSW) Trustee Act 1925 s 70 (QLD) Trusts Act 1973 s 80 (SA) Trustee Act 1936 s 36 (TAS) Trustee Act 1898 s 32 (VIC) Trustee Act 1958 s 48 (WA) Trustees Act 1962 s 77. As to the appointment of trustees by the court see [430-3360]-[430-3430]. As to the principles relating to the courts removal of a trustee see [430-3635]-[430-3665]. 5 Chellaram v Chellaram [1985] Ch 409; [1985] 1 All ER 1043 .6 Letterstedt v Broers (1884) LR 9 App Cas 371 at 386; [1881-85] All ER Rep 882 per Lord Blackburn, PC.7 (ACT) Trustee Companies Act 1947 s 20 (NT) Companies (Trustees and Personal Representatives) Act 1981 s 52 (NSW) Trustee Companies Act 1964 s 20 (QLD) Trustee Companies Act 1968 s 49 (SA) Trustee Companies Act 1988 s 24 (TAS) Trustee Companies Act 1953 s 19 (VIC) Trustee Companies Act 1984 s 26 (WA) Trustee Companies Act 1987 s 17. As to trustee companies see [430-3085]-[430-3110]. 8 (CTH) Superannuation Industry (Supervision) Act 1993 s 133. See further superannuation [400-190]. 9 Ibid ss 134, 135. See further superannuation [400-195].10 Ibid s 138. See further superannuation [400-195]. As to vesting orders generally see [430-3485]-[430-3510]. 11 Allinson v Permanent Trustee Australia Ltd (unreported, SC(NSW), Powell J, 8 September 1988, BC8801515) at [29].12 Porteous v Rinehart (1998) 19 WAR 495 at 516-17 per White J As to delay in equity see equity [185-1835]. The paragraph below is current to 20 April 2012 [430-3640] Welfare of beneficiaries The courts jurisdiction to remove a trustee, whether statutory or inherent,1 is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trust and a faithful and sound exercise of the powers conferred upon the trustee.2 It is a jurisdiction which will be exercised cautiously and only in exceptional circumstances.3 The expression welfare of the beneficiaries is a broad principle incapable of precise definition, and must depend on the facts .

of the case in issue.4 The court forms a judgment based upon numerous and varied considerations which combine to determine whether the welfare of all the beneficiaries and the trust as a whole is or is not opposed to the trustees continued occupation of the office.5 As such a judgment is largely discretionary, an appellate court will attach special weight to the decision of the judge at first instance.6 Notes 1 Re Matheson; Ex parte Worrell v Matheson (1994) 49 FCR 454; 121 ALR 605 at 613 per Spender J . As to the courts jurisdiction to remove a trustee generally see [430-3635]. 2 Letterstedt v Broers (1884) LR 9 App Cas 371 at 386; [1881-85] All ER Rep 882 per Lord Blackburn, PC; Miller v Cameron (1936) 54 CLR 572 at 580-1; 10 ALJ 35; [1936] ALR 301 per Dixon J ; Dimos v Skaftouros (2004) 9 VR 584; [2004] VSCA 141; BC200405875 at [13] per Winneke P .3 Porteous v Rinehart (1998) 19 WAR 495 at 507, 518 per White J; Quinton v Proctor [1998] 4 VR 469 at 475 per Kellam J .4 Letterstedt v Broers (1884) LR 9 App Cas 371 at 386; [1881-85] All ER Rep 882 per Lord Blackburn, PC.5 Guazzini v Pateson (1918) 18 SR (NSW) 275 at 293; 35 WN (NSW) 106 per Street CJ ; Pughe and Queensland Trustees Ltd v Brodribb [1921] St R Qd 163 at 170-1 per Chubb J ; Miller v Cameron (1936) 54 CLR 572 at 580-1; 10 ALJ 35; [1936] ALR 301 per Dixon J ; Hunter v Hunter [1938] NZLR 520 at 529-31 per Myers CJ, at 552-3 per Callan J , CA(NZ); Re Whitehouse [1982] Qd R 196 at 205-7 per Macrossan J ; Re Estate of Roberts (1983) 20 NTR 13 at 17; 70 FLR 158 at 161-2 per OLeary ; Benzija v Adriatic Fisheries Pty Ltd (1984) 37 SASR 545 at 559-61 per Bollen J; Bathgate v National Hockey League Pension Society (1994) 110 DLR (4th) 609 at 625-6 , CA(Ontario); Craven-Sands v Koch (2000) 34 ACSR 341 at 369; [2000] NSWSC 374; BC200002740 per Bergin J .6 Miller v Cameron (1936) 54 CLR 572 at 580-1; 10 ALJ 35; [1936] ALR 301 per Dixon J . The paragraph below is current to 20 April 2012 [430-3645] Impact of breach of trust or friction in trust administration on removal A breach of trust that impacts negatively on the welfare of the beneficiaries, such as a breach that is likely to jeopardise the security of trust property1 or that evidences the likelihood that the trust will not be properly executed in the interests of the beneficiaries,2 will justify the removal of the offending trustee. The issue of the welfare of the beneficiaries, however, is not necessarily coexistent with any question of breach of trust, and so a breach of trust does not automatically justify the court removing a trustee.3 A trustee will not, for instance, be removed merely for making a mistake or taking into account irrelevant considerations if this was a bona fide and the court is satisfied that there is no reason in future why the trustee should not comply with his or her duties.4 On the other hand, a court may remove a trustee who has not committed a breach of trust, such as where the hostility between the trustees obstructs the administration of the trust leaving no prospect of improvement in the future.5 However, the court is unlikely to order removal where there is mere friction between the trustees, unless there is evidence that this endangers the welfare of the beneficiaries.6 The court will be reticent to remove trustees where friction in carrying out the trust is caused by the beneficiaries and cannot be said to be the fault of the trustees, for this could effectively allow beneficiaries to prompt the removal of a trustee simply by raising a dispute with him or her,7 a proposition that is inconsistent with the principle that beneficiaries (who are not appointors) cannot direct the appointment or removal of trustees.8 The position is likely to be otherwise where it is the trustees actions that created the dispute that generated the litigation.9 Notes

1 Attorney-General (NSW) v Elliott (1868) 6 SCR (NSW) Eq 85; Letterstedt v Broers (1884) LR 9 App Cas 371 at 385-6; [1881-85] All ER Rep 882 per Lord Blackburn, PC; Swanson v Dungey (1892) 25 SALR 87 ; Symes v Weedow (1892) 14 ALT 197; Falkingham v Harbison (1899) 21 ALR 254 at 256; 21 ALT 116, SC(VIC), Full Court; Benzija v Adriatic Fisheries Pty Ltd (1984) 37 SASR 545 ; Bathgate v National Hockey League Pension Society (1994) 110 DLR (4th) 609 at 626 , CA(Ontario); Garrett v Yiasemides [2004] NSWSC 828; BC200406197 at [27] per Campbell J ; Williams v Williams [2005] 1 Qd R 105; [2004] QSC 269; BC200405523 at [45][48] per Wilson J ; Bailey v Bailey [2009] NSWSC 1018; BC200909085 .2 Attorney-General (NSW) v Elliott (1868) 6 SCR (NSW) Eq 85; Letterstedt v Broers (1884) LR 9 App Cas 371 at 386; [1881-85] All ER Rep 882 per Lord Blackburn, PC; Symes v Weedow (1892) 14 ALT 197; Re Wrightson; Wrightson v Cooke [1908] 1 Ch 789 at 803; [1908-10] All ER Rep Ext 1399; (1908) 98 LT 799 per Warrington J ; Hobkirk v Ritchie (1934) 29 Tas LR 14 , SC(TAS), Full Court; Re Whitehouse [1982] Qd R 196 ; Longworth v Allen [2005] SASC 469; BC200511060 at [72]-[74] per Anderson J ; Oxer v Astec Paints Australia Pty Ltd (No 3) [2007] SASC 146; BC200703065 at [16]-[18] per Lunn J; Rosenberg v Fifteenth Eestin Nominees Pty Ltd [2007] VSC 101; BC200703028 at [170]-[183] per Habersberger J .3 Phelan v Eaton (1872) 3 VR (E) 13; McKenna v Lowe (1878) 1 SCR (NS) (NSW) Eq 10; Symes v Weedow (1892) 14 ALT 197; Re Wrightson; Wrightson v Cooke [1908] 1 Ch 789; [1908-10] All ER Rep Ext 1399; (1908) 98 LT 799 ; Re McPhillamys Trusts (1909) 10 SR (NSW) 42; 26 WN (NSW) 188 ; Hobkirk v Ritchie (1934) 29 Tas LR 14 , SC(TAS), Full Court; Hunter v Hunter [1938] NZLR 520 , CA(NZ); Princess Anne of Hesse v Field [1963] NSWR 998 at 1019 per Jacobs J ; Re Consiglio Trusts (No 1) (1973) 36 DLR (3d) 658 at 660 per the court; Whitton v ACN 003 266 886 Pty Ltd (controller apptd) (in liq) (1996) 42 NSWLR 123; 14 ACLC 1799 at 1825 per Bryson J ; Quinton v Proctor [1998] 4 VR 469 at 475 per Kellam J ; Sampson (as Executor of the Estate of Nimmo) v Sampson [2007] WASC 85; BC200702508 .4 Quinton v Proctor [1998] 4 VR 469 at 475 per Kellam J (who refused to remove a trustee in these circumstances even though the trustee defended the proceedings against the other co-trustees as plaintiffs); Sampson (as Executor of the Estate of Nimmo) v Sampson [2007] WASC 85; BC200702508 .5 Hunter v Hunter [1937] NZLR 794 at 798 per Smith J, SC(NZ) (affirmed Hunter v Hunter [1938] NZLR 520 at 536-7 per Myers CJ, at 553-4 per Callan J , CA(NZ)); Re Consiglio Trusts (No 1) (1973) 36 DLR (3d) 658 at 660; Re Whitehouse [1982] Qd R 196 at 206-7 per Macrossan J ; Titterton v Oates (1998) 143 FLR 467 at 480-2 per Crispin J, SC(ACT); Thomas and Agnes Carvel Foundation v Carvel [2008] Ch 395; [2007] 4 All ER 81; [2008] 2 WLR 1234; [2007] EWHC 1314 (Ch) at [51]-[55] per Lewison J .6 Forster v Davies (1861) 4 De GF & J 133 at 139; 45 ER 1134 at 1136 per Turner LJ ; Letterstedt v Broers (1884) LR 9 App Cas 371 at 389; [1881-85] All ER Rep 882 per Lord Blackburn, PC; Guazzini v Pateson (1918) 18 SR (NSW) 275 at 294; 35 WN (NSW) 106 per Street CJ ; Hunter v Hunter [1938] NZLR 520 at 530-1 per Myers CJ ; TS by his tutor PS v Malouf [2010] NSWSC 630; BC201003977 ; Montevento Holdings Pty Ltd v Scaffidi Holdings Pty Ltd (No 2) [2010] WASC 180; BC201005198 .7 Forster v Davies (1861) 4 De GF & J 133; 45 ER 1134 ; Gibbs v Gibbs [2004] WASC 132; BC200403720 at [10]-[12] per Sanderson M (affirmed Gibbs v Gibbs [2006] WASCA 224; BC200608867 ). Compare Attorney-General v Hardy (1851) 1 Sim NS 338 at 357; 61 ER 131 at 138.8 Re Higginbottom [1892] 3 Ch 132; [1891-94] All ER Rep 1070; (1892) 67 LT 190 ; Re McPhillamys Trusts (1909) 10 SR (NSW) 42 at 47-8; 26 WN (NSW) 188 per Simpson CJ ; Re Brockbank (decd); Ward v Bates [1948] Ch 206; [1948] 1 All ER 287 .9 Wendt v Orr [2004] WASC 28; BC200400808 at [255] per Commissioner Johnson QC (reversed on appeal but without casting doubt on this statement of law Orr v Wendt [2005] WASCA 199; BC200508859 ); Longworth v Allen [2005] SASC 469; BC200511060 at [72]-[74] per Anderson J ; Thomas and Agnes Carvel Foundation v Carvel [2008] Ch 395; [2007] 4 All ER 81; [2008] 2 WLR 1234; [2007] EWHC 1314 (Ch) at [51][55] per Lewison J . The paragraph below is current to 20 April 2012 [430-3650] Removal for conflict of interest Where the welfare of the beneficiaries is imperilled as a result of a trustee being placed in a position of conflict between his or her own interest and his or her duty as a trustee the court will remove the trustee.1 Instances in which the courts have

ordered removal include cases where: (1) a trustee-beneficiary mortgaged his or her beneficial interest under the trust;2 (2) a trustee took an assignment of a security given by persons owing rent to the trust estate;3 and (3) one of the trustees acted as manager of the business the subject of the trust at a salary.4 A trustee who fails to recognise that he or she is in a position of potential conflict between interest and duty, or omits to take steps to ensure that such interest does not prevail as against his or her duty, may be removed on the ground that such conduct amounts to a breach of trust.5 However, a court is unlikely to remove a trustee where it is evident that the conflict of interest inherent in appointing that person as trustee was contemplated by the settlor or testator, unless to allow that person to continue as trustee endangers the security of the trust property.6 Notes 1 Passingham v Sherborn (1846) 9 Beav 424 at 430; 50 ER 407 per Lord Cottenham LC ; Hobkirk v Ritchie (1934) 29 Tas LR 14 at 47 per Nicholls CJ and Crisp J , SC(TAS), Full Court; Hunter v Hunter [1937] NZLR 794 at 797 per Smith J , SC (affirmed Hunter v Hunter [1938] NZLR 520 , CA); Fysh v Coote [2000] VSCA 150; BC200005175 at [21] per Ormiston JA ; Miorada v Miorada [2005] WASC 105; BC200503703 at [194], [195] per Commissioner McKerracher QC . Compare Princess Anne of Hesse v Field [1963] NSWR 998 at 1019 per Jacobs J ; Porteous v Rinehart (1998) 19 WAR 495 at 514 per White J ; Thomas and Agnes Carvel Foundation v Carvel [2008] Ch 395; [2007] 4 All ER 81; [2008] 2 WLR 1234; [2007] EWHC 1314 (Ch) at [51]-[55] per Lewison J. As to a trustees general duty to avoid positions of conflict of interest and duty see [430-3935]. 2 Hobkirk v Ritchie (1934) 29 Tas LR 14 , SC(TAS), Full Court.3 Officer v Haynes (1877) 3 VLR (E) 115 .4 Nissen v Grunden (1912) 14 CLR 297; 18 ALR 254 .5 Hunter v Hunter [1938] NZLR 520 at 530 per Myers CJ , CA(NZ).6 Porteous v Rinehart (1998) 19 WAR 495 at 518 per White J ; Waterhouse v Waterhouse (1998) 46 NSWLR 449 at 500-1; 148 FLR 312 per Windeyer J (trust deed authorised positions of conflict being held, but this held not to prevent the removal of the trustees where the positions of conflict would reduce the value of the trust assets); Fysh v Coote [2000] VSCA 150; BC200005175 at [25] per Ormiston JA ; Morgan v MacRae [2001] NSWSC 1017; BC200106936 at [24]-[26] per Young CJ in Eq; Sleiman v Alwan [2009] NSWSC 484; BC200904849 at [24] per Young JA . The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3655] Removal for refusal to execute the trust, unfitness or incapacity The court has an inherent jurisdiction to remove trustees by reason of: (1)

incapacity, such as where a trustee has disappeared,1 is absent for a prolonged period2 or is affected by drunkenness;3 (2) unfitness, such as where a trustee becomes bankrupt (or is in liquidation);4 or (3) refusal to execute the trust,5 or execution of the trust in a fashion showing gross misunderstanding of the nature and effect of the role of trusteeship6 or disregard for the timely and efficient conduct of their duties.7 The similar jurisdiction conferred on the appointor by statute in each jurisdiction8 means that the courts inherent jurisdiction is supplementary in function. Notes 1 Re Streeter (1905) 11 ALR 99; 26 ALT 171 , SC(VIC); Re Rogers [1921] NZLR 245 , SC(NZ); Re Graham (1938) 55 WN (NSW) 168 .2 Knox v Postlethwaite (1864) 1 WW & AB (E) 62 (where the trustees permanent absence from the jurisdiction resulted in loss of income to the trust); York v Fraser (1894) 11 WN (NSW) 12 (where a trustee had long been absent from the jurisdiction and little remained for the trustees to do).3 Hackett v Hackett [1922] NZLR 242 , SC(NZ).4 Re Barkers Trusts (1875) 1 Ch D 43 ; Re Malouf [1934] St R Qd 82 ; Miller v Cameron (1936) 54 CLR 572; 10 ALJ 35; [1936] ALR 301 ; Whitton v ACN 003 266 886 Pty Ltd (controller apptd) (in liq) (1996) 42 NSWLR 123; 14 ACLC 1799 at 1825 per Bryson J; Andrew Garrett Wines Resorts Pty Ltd v National Australia Bank Ltd [2006] SASC 381; BC200610589 at [21], [22] per Anderson J ; Dreiberg v Bettles as liquidators of Corindi Beach Developments Pty Ltd [2007] NSWSC 1204; BC200709261 . Compare OBrien (a bankrupt) (formerly trustee of the Estate of Grapsas) v Grapsas (2004) 207 ALR 275; 181 FLR 314; [2004] FMCA 212; BC200402498 at [107], [108] per McInnis FM .5 Palairet v Carew (1863) 32 Beav 564; 55 ER 222 ; Luke v South Kensington Hotel Co (1879) 11 Ch D 121 at 127; [1874-80] All ER Rep 1293; (1879) 40 LT 638 per Jessel MR , CA; Macpherson v Sutherland (1885) 6 LR (NSW) Eq 46 at 58 per Manning PJ; Mansour v Mansour [2009] VSC 177; BC200903832 at [53] per Hansen J .6 Mansour v Mansour [2009] VSC 177; BC200903832 at [53] per Hansen J .7 Craven-Sands v Koch (2000) 34 ACSR 341 at 369; [2000] NSWSC 374; BC200002740 per Bergin J ; Fysh v Coote [2000] VSCA 150; BC200005175 at [25] per Ormiston JA ; Baldwin v Greenland [2005] QSC 386; BC200510959 at [21] per Wilson J .8 (ACT) Trustee Act 1925 s 6(2)(e) (NT) Trustee Act 1893 s 11(1) (NSW) Trustee Act 1925 s 6(2)(e) (QLD) Trusts Act 1973 s 12(1)(d)-(f) (SA) Trustee Act 1936 s 14(1) (TAS) Trustee Act 1898 s 13(1) (VIC) Trustee Act 1958 s 41(1) (WA) Trustees Act 1962 s 7(1)(d)-(f). As to persons who may appoint new trustees see [430-3325]. The paragraph below is current to 20 April 2012

[430-3660] Removal against trustees will There is authority to the effect that the court cannot use its statutory jurisdiction to remove a trustee who is able to continue and opposes her or his removal.1 The court must therefore resort to its inherent jurisdiction in cases of this kind, for the inherent jurisdiction is available even though the trustee in question opposes the order sought.2 However, the correctness of the foregoing must be queried in light of opposing authority to the effect that the court may, pursuant to its statutory jurisdiction, remove a trustee against his or her will.3 Notes 1 Re Hodgsons Settlement (1851) 20 LJ Ch 551; Re Blanchard (1861) 3 De GF & J 131; 45 ER 828 ; Re Combs (1884) 51 LT 45 . Compare Irvine v Australian Sharetrading and Underwriting Ltd (in liq) (1996) 22 ACSR 765 at 781 per Mandie J , SC(VIC).2 Monty Financial Services Ltd v Delmo [1996] 1 VR 65 at 76 per Ashley J ; Titterton v Oates (1998) 143 FLR 467 at 475-6 per Crispin J , SC(ACT).3 Re Henderson; Henderson v Henderson [1940] Ch 764; [1940] 3 All ER 295 ; Re a Solicitor [1952] 1 All ER 133 at 137 per Roxburgh J; Re Estate of Roberts (1983) 20 NTR 13 at 17; 70 FLR 158 at 161-2 per OLeary J ; Benzija v Adriatic Fisheries Pty Ltd (1984) 37 SASR 545 at 554-7 per Bollen J ; Crowle Foundation Ltd v NSW Trustee & Guardian [2010] NSWSC 647; BC201004353 at [31][35] per Ball J. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3665] Costs of removal The court has a general discretion as to the award of costs on any application or any order made under the trustee legislation.1 As a general rule, when a trustee is removed, this discretion will be exercised against the trustee, who will be ordered to pay the costs of the removal.2 This will invariably be the case in the event of misconduct on the part of the trustee3 or the misappropriation of trust funds. 4 However, the court retains a discretion as to the award of costs, and may allow costs out of the trust estate to a trustee whose conduct, though mistaken, has been honest.5 A person interested in the trust fund who properly institutes proceedings for removal will be awarded costs from the fund.6 Notes 1 In all jurisdictions except the Australian Capital Territory this discretion is conferred by the trustee legislation: (NT) Trustee Act 1893 s 41 (NSW) Trustee Act 1925 s 93 (QLD) Trusts Act 1973 s 100 (SA) Trustee Act 1936 s 44 (TAS) Trustee Act 1898 ss 44, 63 (VIC) Trustee Act 1958 s 66 (WA) Trustees Act 1962 s 97. In any event, the Supreme Court of each jurisdiction has power to award costs in civil

proceedings at its discretion: see practice and procedure [325-9420]. 2 Attorney-General (UK) v Murdoch (1856) 2 K & J 571 at 573; 69 ER 910 at 911 per Wood VC ; Palairet v Carew (1863) 32 Beav 564; 55 ER 222 ; Pope v Pope [2001] SASC 26; BC200100306 at [26], [42] per Bleby J , Full Court; Garrett v Yiasemides [2004] NSWSC 828; BC200406197 at [31]-[33] per Campbell J .3 Miller v Cameron (1936) 54 CLR 572 at 579; 10 ALJ 35; [1936] ALR 301 per Latham CJ.4 Swanson v Dungey (1892) 25 SALR 87 .5 Guazzini v Pateson (1918) 18 SR (NSW) 275 at 295; 35 WN (NSW) 106 per Street CJ ; Miller v Cameron (1936) 54 CLR 572 at 578; 10 ALJ 35; [1936] ALR 301 per Latham CJ .6 Perkins v Williams (1905) 22 WN (NSW) 107 .

Source

[Halsbury's Laws of Australia]

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(6) RIGHTS OF TRUSTEES

This chapter was updated by G E Dal Pont LLM (Mich) LLD (Tas) CPA Professor, Faculty of Law, University of Tasmania

(A) Reimbursement and Indemnity (I) General The paragraph below is current to 20 April 2012 [430-3720] Trustees personal liability and its exclusion As the legal owner of the trust property, since a trust itself is not a separate legal entity,1 a trustee is personally liable for any debts that he or she incurs in the course of carrying out the trust,2 unless he or she incurs the debt on the basis that only trust assets will be available for the payment of the debt.3 The latter may be the case where by express agreement with a creditor, the trustee specifies that his or her liability to the creditor is not personally undertaken but only to the extent of the trust assets.4 In the

absence of an express agreement serving to limit a trustees personal liability, the issue of that liability is determined on a process of construction of the documents in question.5 For this purpose, reference must be had to all the circumstances of the case including the nature of the contract, the subject matter on which it is to operate, the capacity and duty of the parties to make the contract in one form or another, the precise words used and all those matters which, as a proper matter of construction, are indicia of the intention of the parties to the contract as to whether or not the personal liability of the trustees should be excluded.6 Depending on the circumstances, a debt incurred or guarantee given as trustee may be interpreted to mean that only the assets of the trust and not those of the trustee are liable to meet the obligation,7 whereas in other circumstances it can be construed as reflecting the basic proposition that a trustee is personally liable for the debts of the trust.8 A debt incurred by a trustee as beneficial owner has been interpreted as the assumption of personal liability by the trustee, to the exclusion of trust property.9 Notes 1 Commissioner of State Taxation (WA) v Merifield Cooksey Holdings Pty Ltd (1994) 30 ATR 21; 94 ATC 4774 at 4785 per Kennedy J , SC(WA), Full Court.2 Labouchere v Tupper (1857) 11 Moo PCC 198; 14 ER 670 ; Ex parte Garland (1804) 10 Ves 110; 32 ER 786 ; Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319 at 324; 19 ALJ 380; [1946] ALR 50 per Latham CJ ; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367; 27 ALR 129; 54 ALJR 87; 4 ACLR 575 per Stephen, Mason, Aickin and Wilson JJ ; Re Enhill Pty Ltd [1983] 1 VR 561 at 567; (1982) 7 ACLR 8; 1 ACLC 415 per Lush J , SC(VIC), Full Court; General Credits Ltd v Tawilla Pty Ltd [1984] 1 Qd R 388 at 389 per McPherson J ; Kemtron Industries Pty Ltd v Cmr of Stamp Duties (Qld) [1984] 1 Qd R 576 at 584 per McPherson J , SC(QLD), Full Court; JA Pty Ltd v Jonco Holdings Pty Ltd (2000) 33 ACSR 691 at 705; [2000] NSWSC 147; BC200001022 per Santow J ; Deancrest Nominees Pty Ltd v Nixon (2007) 25 ACLC 1681; [2007] WASC 304; BC200711091 at [36]-[39] per Newnes J .3 General Credits Ltd v Tawilla Pty Ltd [1984] 1 Qd R 388 at 389 per McPherson J .4 Lumsden v Buchanan (1865) 13 LT 174 at 175; 4 Macq 950 at 955 per Westbury LC , HL; Muir v City of Glasgow Bank and Liquidators (1879) LR 4 App Cas 337 at 355; [1874-80] All ER Rep 1017; (1879) 40 LT 339 per Cairns LC, HL; Re Anderson; Ex parte Alexander (1927) 27 SR (NSW) 296 at 300; 44 WN (NSW) 69 per Long Innes J .5 Helvetic Investment Corp Pty Ltd v Knight (1982) 7 ACLR 225 at 229 per Yeldham J, SC(NSW). Compare Re Anderson; Ex parte Alexander (1927) 27 SR (NSW) 296 at 300; 44 WN (NSW) 69 per Long Innes J (who considered that the trustees personal liability could be excluded only by express stipulation); Deancrest Nominees Pty Ltd v Nixon (2007) 25 ACLC 1681; [2007] WASC 304; BC200711091 at [36]-[39] per Newnes J 6 Helvetic Investment Corp Pty Ltd v Knight (1982) 7 ACLR 225 at 229 per Yeldham J , SC(NSW).7 For examples of cases in which the trustees personal liability has been successfully excluded see Gordon v Campbell (1842) 1 Bell, Sc App 428, HL (qua trustees only); Re Robinsons Settlement; Gant v Hobbs [1912] 1 Ch 717 at 729 per Buckley LJ (as such trustees but not otherwise); Helvetic Investment Corp Pty Ltd v Knight (1982) 7 ACLR 225 , SC(NSW) (guarantee given as The John Knight Family Trust; J C Knight, Trustee, described as a rare instance in General Credits Ltd v Tawilla Pty Ltd [1984] 1 Qd R 388 at 389 per McPherson J ).8 Re Anderson; Ex parte Alexander (1927) 27 SR (NSW) 296 at 300; 44 WN (NSW) 69 per Long Innes J (where a debt contracted as managing trustee was held not to exclude the trustees personal liability); Astram Financial Services Pty Ltd v Bank of Queensland Ltd [2010] FCA 1010; BC201006750 at [359][370] per Buchanan J; Moran v Robertson [2012] FCA 371; BC201202149 .9 Corozo Pty Ltd v Total Australia Ltd [1988] 2 Qd R 366 at 371 per Andrews CJ , SC(QLD), Full Court. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations

[430-3725] Reimbursement and indemnity in respect of expenses and liabilities At general law and under the trustee legislation,1 a trustee2 may reimburse himself or herself (the right to indemnity)3 or pay or discharge out of the trust property (the right to exoneration) 4 all expenses properly incurred5 or expended in or about execution of the trustees trusts or powers. The basis of the rights of indemnity and exoneration is that it would be unjust to throw burdens upon trustees without at the same time enabling them to be reimbursed or exonerated out of the trust property.6 The right contained in the trustee legislation is a statutory recognition of the trustees general law entitlement, as of right, to recoup everything that he or she has expended properly in his or her character as trustee.7 The trust instrument may contain a clause providing for the trustees indemnity in terms which are broader than the general law or statutory indemnity.8 For example, the trust instrument may extend the right of indemnity to the trustees remuneration.9 However, it is unlikely that a court would give effect to a clause conferring a right of indemnity on trustees who act without due care and diligence.10 A trustee may be allowed interest on sums advanced by him or her for the benefit of the trust.11 Notes 1 (ACT) Trustee Act 1925 s 59(4) (NT) Trustee Act 1893 s 26 (NSW) Trustee Act 1925 s 59(4) (QLD) Trusts Act 1973 s 72 (SA) Trustee Act 1936 s 35(2) (TAS) Trustee Act 1898 s 27(2) (VIC) Trustee Act 1958 s 36(2) (WA) Trustees Act 1962 s 71. 2 The trustee legislation defines trustee to include legal personal representative or executor, and also trustees of implied and constructive trusts: (ACT) Trustee Act 1925 ss 2, 94F Dictionary (legal representative) (NT) Trustee Act 1893 s 82 (representative) (NSW) Trustee Act 1925 s 5 (legal representative) (QLD) Trusts Act 1973 s 5 (personal representative) (SA) Trustee Act 1936 s 4 (personal representative) (TAS) Trustee Act 1898 s 4 (personal representative) (VIC) Trustee Act 1958 s 3 (personal representative) (WA) Trustees Act 1962 s 6 (representative of the deceased). The right of an executor to have recourse to the estate for costs incurred in the administration of the estate is also recognised at general law: National Trustees, Executors & Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268 14 ALJ 432; [1941] ALR 58; ; Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319 at 324-5 per Latham CJ, at 332 per Starke J, at 335 per Dixon J, at 343 per McTiernan J; 19 ALJ 380; [1946] ALR 50 .

The right of indemnity extends to resulting trustees (Iscorp Investments Pty Ltd v Yohana [2011] NSWSC 1387; BC201108961 at [39] per Rein J) and constructive trustees (Mansard Developments Pty Ltd v Tilley Consultants Pty Ltd [1982] WAR 161 , SC(WA), Full Court). 3 Worrall v Harford (1802) 8 Ves 4 at 8; 32 ER 250 at 251-2 per Eldon LC ; Ex parte Garland (1804) 10 Ves 110; 32 ER 786 ; Walters v Woodbridge (1878) 7 Ch D 504 at 510 per Jessel MR , CA; Jeffray v Webster (1895) 1 ALR 65 ; Daly v Union Trustee Co of Australia Ltd (1898) 24 VLR 460 at 469 per aBeckett J , SC(VIC), Full Court; National Trustees, Executors & Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268 at 277; 14 ALJ 432; [1941] ALR 58 per Williams J ; Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319 at 324-5 per Latham CJ, at 335-6 per Dixon J; 19 ALJ 380; [1946] ALR 50 ; Trautwein v Richardson [1946] ALR 129 at 134-5 per Dixon J , HC of A, Full Court; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367, 370; 27 ALR 129; 54 ALJR 87; 4 ACLR 575 per Stephen, Mason, Aickin and Wilson JJ ; Re Enhill Pty Ltd [1983] 1 VR 561 at 568-9; (1982) 7 ACLR 8; 1 ACLC 415 per Lush J , SC(VIC), Full Court; Perpetual Trustees WA Ltd v Kelly (1993) 8 WAR 480 at 486 per Anderson J ; Alsop Wilkinson (a firm) v Neary [1995] 1 All ER 431 at 434-5; [1996] 1 WLR 1220 per Lightman J ; JA Pty Ltd v Jonco Holdings Pty Ltd (2000) 33 ACSR 691 at 705; [2000] NSWSC 147; BC200001022 per Santow J ; Belar Pty Ltd (in liq) v Mahaffey [2000] 1 Qd R 477 at 487 , CA(QLD); Hayman v Equity Trustees Ltd (2003) 8 VR 557; [2003] VSC 353; BC200305749 at [62]-[64] per Kellam J . Although there is authority to the effect that the general law entitlement to an indemnity stems from an implied term to that effect in the contract between the trustee and the settlor of the trust (Darke v Williamson (1858) 25 Beav 622 at 626; 53 ER 774 at 776 per Romilly MR ; Cotterell v Stratton (1872) LR 8 Ch App 295 at 302; 42 LJ Ch 417; 28 LT 218 per Selborne LC; Turner v Hancock (1882) 20 Ch D 303 at 305; 46 LT 750; 30 WR 480 per Jessel MR , CA; Corrigan v Farrelly (1896) 7 QLJ 105 at 111 per Griffith CJ , SC(QLD), Full Court; Re Grimthorpe (decd) [1958] Ch 615 at 623; [1958] 1 All ER 765 at 769 per Danckwerts J; Re Spurlings Will Trusts; Philpot v Philpot [1966] 1 All ER 745 at 754-5; [1966] 1 WLR 920 at 930-1 per Ungoed-Thomas J ), the better view is that the right of indemnity is an equitable rather than a contractual right: Re Duke of Norfolks Settlement Trusts; Earl of Perth v Fitzalan-Howard [1982] Ch 61; [1981] 3 All ER 220 , CA.4 Johnston v Salvage Assn (1887) 19 QBD 458 at 460 per Lindley LJ, CA; Holden v Black (1905) 2 CLR 768; [1905] VLR 326; (1905) 11 ALR 393 ; Savage v Union Bank of Australia Ltd (1906) 3 CLR 1170 at 1197 sub nom Union Bank of Australia Ltd v Whitelaw [1906] VLR 711 sub nom Whitelaw v Union Bank of Australia Ltd (1906) 12 ALR 285 per OConnor J ; Grime Carter & Co Pty Ltd v Whytes Furniture (Dubbo) Pty Ltd [1983] 1 NSWLR 158; (1983) 7 ACLR 540 at 541-2; 1 ACLC 739 per McClelland J , SC(NSW); Re Suco Gold Pty Ltd (in liq) (1983) 33 SASR 99; 7 ACLR 873 at 878; 1 ACLC 895 per King CJ , SC(SA); Trim Perfect Australia Pty Ltd (in liq) v Albrook Constructions Pty Ltd [2006] NSWSC 153; BC200601996 at [20], [21] per Austin J .5 The trustees right of indemnity extends to liabilities which are incurred but not yet paid: Jennings v Mather [1901] 1 QB 108 (affirmed Jennings v Mather [1902] 1 KB 1; (1901) 85 LT 396; 50 WR 52 ); Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 371; 27 ALR 129; 54 ALJR 87; 4 ACLR 575 per Stephen, Mason, Aickin and Wilson JJ . As to expenses that have been held to be properly incurred see [430-3745]. 6 RWG Management Ltd v Cmr for Corporate Affairs [1985] VR 385 at 395 per Brooking J .7 Re Jones; Christmas v Jones [1897] 2 Ch 190 at 197; [1895-99] All ER Rep 1084 per Kekewich J ; National Trustees, Executors & Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268 at 274; 14 ALJ 432; [1941] ALR 58 per Starke J ; RWG Management Ltd v Cmr for Corporate Affairs [1985] VR 385 at 394 per Brooking J .8 RWG Management Ltd v Cmr for Corporate Affairs [1985] VR 385 at 399 per Brooking J . As to the restriction or exclusion of the trustees right of indemnity by the trust instrument see [430-3795]. 9 Perpetual Trustees WA Ltd v Kelly (1993) 8 WAR 480 at 486-7 per Anderson J .10 RWG

Management Ltd v Cmr for Corporate Affairs [1985] VR 385 at 399 per Brooking J .11 Re Beulah Park Estate; Sargoods Claim (1872) LR 15 Eq 43; Finch v Pescott (1874) LR 17 Eq 554. The paragraph below is current to 20 April 2012 [430-3730] Nature of right to indemnity The trustees right of indemnity constitutes an equitable proprietary right in the nature of a first charge or a right of lien over trust assets.1 Even though the right of indemnity is satisfied out of capital funds,2 the charge or lien is upon income as well as capital.3 As the charge arises by operation of law, and it is implied that the trustees powers to manage the trust property4 continue to apply even where the lien has arisen. In the latter case the trustee, when deciding what investments to make, can take into account its own interest by virtue of the lien, although in so doing must act impartially as between itself and the other beneficiaries.5 In that the right indemnity confers an equitable proprietary right upon the trustee, the trustee has, in addition to the legal interest, a beneficial interest in the trust assets according to the quantum of his or her unsatisfied indemnity with priority over any claims of the beneficiaries of the trust.6 The beneficiaries beneficial interest is reduced to the extent of the trustees proprietary interest represented by the quantum of the unsatisfied indemnity.7 This does not mean that the trustees beneficial interest is of the same character as the beneficiaries beneficial interest, so as to effect a merger of legal and beneficial interest to the extent of the unsatisfied indemnity; the trustees right of lien that substantiates the beneficial interest is directed merely at securing priority ahead of the beneficiaries interest.8 The trustee is entitled to retain possession of that trust property for the purpose of satisfying his or her right of indemnity, including in relation to both actual and contingent liabilities (which in the latter case presupposes that the prospect of liability is real and not fanciful),9 and the beneficiaries cannot call for delivery of that property.10 The trustee has the right to take proceedings in equity to enforce his or her right of indemnity and is not required to wait until the trust property has been converted into money,11 and may even sell trust property in order to satisfy his or her charge if there is a power of sale in the trust instrument.12 The proprietary aspect of the trustees claim is not barred by limitation, whereas a personal claim could be barred by analogy to the statutory limitation period.13 The proprietary nature of the trustees right of indemnity also means that it is a caveatable interest.14 It further dictates that the trustees agents15 and creditors16 may be subrogated to the trustees right where a claim against the trustee would be fruitless,17 thereby achieving priority over the claims of beneficiaries,18 and that the right passes to the trustee in bankruptcy or liquidator of an insolvent trustee.19 Importantly, if the trustees right of indemnity is denied or reduced, the creditors right of subrogation will likewise be restricted, as will the right of the trustee in bankruptcy or liquidator of an insolvent trustee.20 Moreover, an assignee of a beneficiarys interest with notice of the trustees unsatisfied indemnity takes that interest subject to the trustees unsatisfied charge.21 Notes 1 Stott v Milne (1884) 25 Ch D 710 at 715 per Selborne LC, CA; Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319; 19 ALJ 380; [1946] ALR 50 ; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367; 27 ALR 129; 54 ALJR 87; 4 ACLR 575 per Stephen, Mason, Aickin and Wilson JJ ; Xebec Pty Ltd (in liq) v Enthe Pty Ltd (1987) 18 ATR 893 at 896 per Derrington J , SC(QLD); Commissioner of Australian Federal Police v Cornwell (1990) 98 ALR 677 at 6812 per Burchett J ; Perpetual Trustees WA Ltd v Kelly (1993) 8 WAR 480 at 486 per Anderson J; Belar Pty Ltd (in liq) v Mahaffey [2000] 1 Qd R 477 at 487 , CA(QLD); Hayman v Equity

Trustees Ltd (2003) 8 VR 557; [2003] VSC 353; BC200305749 at [62] per Kellam J .2 Re Woods Trusts (1870) LR 11 Eq 155; Re Bennett [1896] 1 Ch 778 ; Re Bullocks Settled Estates; Lofthouse v Haggard (1904) 91 LT 651, Ch.3 Stott v Milne (1884) 25 Ch D 710 , CA; Staniar v Evans (1886) 34 Ch D 470 at 477 per North J; Re Spurlings Will Trusts; Philpot v Philpot [1966] 1 All ER 745; [1966] 1 WLR 920 , Ch; Commissioner of State Taxation (WA) v Merifield Cooksey Holdings Pty Ltd (1994) 30 ATR 21; 94 ATC 4774 at 4785 per Kennedy J , SC(WA), Full Court.4 As to trustees powers generally see [430-4335]-[430-5000].5 X v A [2000] 1 All ER 490 at 494-5 per Arden J .6 Re Exhall Coal Co Ltd; Re Bleckley (1866) 35 Beav 449 at 453; 55 ER 970 at 971 per Romilly MR; Dowse v Gorton [1891] AC 190 at 199; [1891-94] All ER Rep 1230; (1891) 64 LT 809 per Lord Herschell, HL; Daly v Union Trustee Co of Australia Ltd (1898) 24 VLR 460 at 469 per aBeckett J, SC(VIC), Full Court; Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319 at 324; 19 ALJ 380; [1946] ALR 50 per Latham CJ; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367; 27 ALR 129; 54 ALJR 87; 4 ACLR 575 per Stephen, Mason, Aickin and Wilson JJ ; Kemtron Industries Pty Ltd v Cmr of Stamp Duties (Qld) [1984] 1 Qd R 576 at 585 per McPherson JA , SC(QLD), Full Court; Burns v Leda Holdings Pty Ltd [1988] 1 Qd R 214 at 223; (1987) 89 FLR 365 per Dowsett J ; Perpetual Trustees WA Ltd v Kelly (1993) 8 WAR 480 at 486 per Anderson J ; Alsop Wilkinson (a firm) v Neary [1995] 1 All ER 431 at 434-5; [1996] 1 WLR 1220 per Lightman J ; Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226; 151 ALR 1 at 13-14; 72 ALJR 243 , HC of A, Full Court.7 Re Enhill Pty Ltd [1983] 1 VR 561 at 568; (1982) 7 ACLR 8; 1 ACLC 415 per Lush J , SC(VIC), Full Court; Kemtron Industries Pty Ltd v Cmr of Stamp Duties (Qld) [1984] 1 Qd R 576 at 587 per McPherson J , SC(QLD), Full Court; Perpetual Trustees WA Ltd v Kelly (1993) 8 WAR 480 at 486 per Anderson J ; Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226; 151 ALR 1 at 13-14; 72 ALJR 243 , HC of A, Full Court; Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639; 9 BPR 16,735; BC9807013 per Mason P.8 Nolan v Collie (2003) 7 VR 287; [2003] VSCA 39; BC200301883 at [61] per Ormiston JA ; Arjon Pty Ltd v Cmr of State Revenue (2003) 8 VR 502; 56 ATR 446; [2003] VSCA 213; BC200308024 at [58], [62] per Phillips JA . See also Commissioner of State Taxation (WA) v Merifield Cooksey Holdings Pty Ltd (1994) 30 ATR 21; 94 ATC 4774 at 4785 per Kennedy J , SC(WA), Full Court.9 Hayman v Equity Trustees Ltd (2003) 8 VR 557; [2003] VSC 353; BC200305749 ; Agusta Pty Ltd as trustees for Cavallino Unit Trust v Official Trustee in Bankruptcy as trustee of bankrupt Estates of Ferella [2008] NSWSC 685; BC200805311 at [63] per Nicholas J (reversed on appeal but without casting doubt on this point: Agusta Pty Ltd v Official Trustee in Bankruptcy as Trustee of Estates of Ferella [2009] NSWCA 129; BC200904796 ); Close Trustees (Switzerland) SA v Castro [2008] EWHC 1267 (Ch) at [24][28] per Mark Herbert QC (including withholding income).10 Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 369-70; 27 ALR 129; 54 ALJR 87; 4 ACLR 575 per Stephen, Mason, Aickin and Wilson JJ . Compare Hayman v Equity Trustees Ltd (2003) 8 VR 557; [2003] VSC 353; BC200305749 at [65] per Kellam J (a trustee would have no right to resist distribution of all trust assets to those absolutely entitled in circumstances where the value of the assets vastly exceeded the likely costs the subject of the claimed indemnity).11 Re Pumfrey (decd); Worcester City and County Banking Co v Blick (1882) 22 Ch D 255 at 261-2 .12 Re Exhall Coal Co Ltd; Re Bleckley (1866) 35 Beav 449; 55 ER 970 ; Stott v Milne (1884) 25 Ch D 710 ; Trautwein v Richardson [1946] ALR 129 , HC of A, Full Court; Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226; 151 ALR 1 at 13-14; 72 ALJR 243 , HC of A, Full Court; Apostolou v VA Corp Aust Pty Ltd (2010) 77 ACSR 84; 4 ASTLR 94; [2010] FCA 64; BC201000453 at [40][46] per Finkelstein J . Where the assets in question are held by third parties the trustee must first obtain control of them, if necessary by invoking the assistance of the court: ANZ Banking Group Ltd v Intagro Projects Pty Ltd [2004] NSWSC 1054; BC200407578 at [15] per White J .13 Stilbo Pty Ltd v MCC Pty Ltd (in liq) (2003) 11 Tas R 63; [2003] TASSC 6; BC200300791 . As to the barring of claims by analogy to the statutory limitation period see equity [185-1890], [185-1895].14 Custom Credit Corp Pty Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 at 53 per Owen J (with whom Malcolm CJ and Walsh J agreed); Amberley Aerospace Park Pty Ltd v Heartwood Architectural Timber & Joinery Pty Ltd [2009] QSC 44; BC200901356 at [12] per Wilson J; Zen Ridgeway Pty Ltd v Adams [2009] QSC 117; BC200904202 at [10] per Wilson J .15 Re Raybould; Raybould v Turner [1900] 1 Ch 199; (1899) 82 LT 46; 48 WR 301 .16 Ex parte

Garland (1804) 10 Ves 110 at 120; 32 ER 786 at 789 per Eldon LC ; Ex parte Edmonds (1862) 4 De GF & J 488 at 498; 45 ER 1273 at 1277 per Knight Bruce LJ ; Re Evans; Evans v Evans (1887) 34 Ch D 597 at 601 per Cotton LJ , CA; Re Blundell; Blundell v Blundell (1890) 44 Ch D 1 at 11 per Lindley LJ, CA; Dowse v Gorton [1891] AC 190 at 203-4; [1891-94] All ER Rep 1230; (1891) 64 LT 809 per Lord Macnaghten , HL; Re Anderson; Ex parte Alexander (1927) 27 SR (NSW) 296 at 299; 44 WN (NSW) 69 per Long Innes J ; Re Geary; Sandford v Geary [1939] NI 152 at 157 per Andrew LCJ; Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319 at 324, 328 per Latham CJ, at 335-6 per Dixon J; 19 ALJ 380; [1946] ALR 50 ; Re Coastline Distributors Pty Ltd (1978) 3 ACLR 861 (affirmed Re Coastline Distributors Pty Ltd (1979) 4 ACLR 203 , SC(QLD), Full Court); Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367, 370-1; 27 ALR 129; 54 ALJR 87; 4 ACLR 575 per Stephen, Mason, Aickin and Wilson JJ; Re Staff Benefits Pty Ltd and the Companies Act [1979] 1 NSWLR 207 at 213; (1979) 4 ACLR 54; (1979) CLC 40-531 per Needham J; Re Enhill Pty Ltd [1983] 1 VR 561 at 568; (1982) 7 ACLR 8; 1 ACLC 415 per Lush J, SC(VIC), Full Court; McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 640; 9 ACLR 926 per Young J; RWG Management Ltd v Cmr for Corporate Affairs [1985] VR 385 at 401 per Brooking J; Burns v Leda Holdings Pty Ltd [1988] 1 Qd R 214 at 223; (1987) 89 FLR 365 per Dowsett J; Ron Kingham Real Estate Pty Ltd v Edgar [1999] 2 Qd R 439 at 443 per McPherson JA. At common law a judgment against a trustee for a debt cannot be enforced by execution levied upon trust assets, meaning that a creditor has no direct recourse against the trust assets: Worrall v Harford (1802) 8 Ves 4 at 8; 32 ER 250 at 252 per Lord Eldon; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 370; 27 ALR 129; 54 ALJR 87; 4 ACLR 575 per Stephen, Mason, Aickin and Wilson JJ; General Credits Ltd v Tawilla Pty Ltd [1984] 1 Qd R 388 at 389-90 per McPherson J; Agusta Pty Ltd v Provident Capital Ltd [2012] NSWCA 26; BC201201168 at [46][75] per Barrett JA. Equity provided relief for creditors of trusts through the doctrine of subrogation pursuant to which the creditors could be put in the place of the trustee so as to enforce the trustees right of indemnity. As to the equitable doctrine of subrogation see equity [185-490]-[185-540] 17 Owen v Delamere (1872) LR 15 Eq 134; Re Wilson; Kerr v Wilson [1942] VLR 177 at 183 per OBryan J; Deancrest Nominees Pty Ltd v Nixon (2007) 25 ACLC 1681; [2007] WASC 304; BC200711091 at [49] per Newnes J; Zen Ridgeway Pty Ltd v Adams [2009] QSC 117; BC200904202 at [13]-[16] per Wilson J. This does not require the creditor to have pursued his or her common law rights to judgment; a demand followed by a failure to receive payment from the trustee is sufficient to lead to the conclusion that a judgment, if obtained, would be fruitless: Kerr v Wilson [1942] VLR 177 at 183 per OBryan J.18 Re Exhall Coal Co Ltd; Re Bleckley (1866) 35 Beav 449 at 452-3; 55 ER 970 at 971 per Romilly MR; Re Holden (1887) 20 QBD 43; 58 LT 118 ; Re Pain; Gustavson v Haviland [1919] 1 Ch 38 at 46; (1918) 87 LJ Ch 550; 119 LT 647 per Younger J; Re Staff Benefits Pty Ltd and the Companies Act [1979] 1 NSWLR 207 at 213; (1979) 4 ACLR 54; (1979) CLC 40-531 per Needham J; Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226; 151 ALR 1 at 13-14; 72 ALJR 243 , HC of A, Full Court; JA Pty Ltd v Jonco Holdings Pty Ltd (2000) 33 ACSR 691 at 706; [2000] NSWSC 147; BC200001022 per Santow J. If, in an administration action (see [430-5205]), it appears probable that the trust fund will be insufficient for the full recoupment of the trustee, the trustee is entitled to the insertion in the order for administration of a direction that there be payment in the appropriate order of priority: Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226; 151 ALR 1 at 13; 72 ALJR 243 .19 Jennings v Mather [1901] 1 QB 108 (affirmed Jennings v Mather [1902] 1 KB 1; (1901) 85 LT 396; 50 WR 52 ); Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 370; 27 ALR 129; 54 ALJR 87; 4 ACLR 575 per Stephen, Mason, Aickin and Wilson JJ; Re Enhill Pty Ltd [1983] 1 VR 561 at 569; (1982) 7 ACLR 8; 1 ACLC 415 per Lush J, SC(VIC), Full Court; Re Suco Gold Pty Ltd (in liq) (1983) 33 SASR 99; 7 ACLR 873 at 877; 1 ACLC 895 per King CJ, SC(SA).20 Re Johnson; Shearman v Robinson (1880) 15 Ch D 548 at 552 per Jessel MR; Re Evans; Evans v Evans (1887) 34 Ch D 597 at 601 per Cotton LJ, CA; Re British Power Traction and Lighting Co Ltd; Halifax Joint Stock Banking Co Ltd v British Power Traction and Lighting Co Ltd [1910] 2 Ch 470 ; Re Geary; Sandford v Geary

[1939] NI 152 at 157 per Andrew LCJ; Marginson v Ian Potter & Co (1976) 136 CLR 161; 11 ALR 64 at 75 per Jacobs J; Re Staff Benefits Pty Ltd and the Companies Act [1979] 1 NSWLR 207 at 214; (1979) 4 ACLR 54; (1979) CLC 40-531 per Needham J.21 Re Knapman; Knapman v Wreford (1881) 18 Ch D 300 , CA; Re Jones; Christmas v Jones [1897] 2 Ch 190; [1895-99] All ER Rep 1084 ; Re Pain; Gustavson v Haviland [1919] 1 Ch 38; (1918) 87 LJ Ch 550; 119 LT 647 ; Cock v Aitken (1912) 15 CLR 373 at 384 per Isaacs J; National Trustees, Executors & Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268 at 276 per Starke J, at 280 per Williams J; 14 ALJ 432; [1941] ALR 58 ; Xebec Pty Ltd (in liq) v Enthe Pty Ltd (1987) 18 ATR 893 at 898-9 per Derrington J, SC(QLD). The paragraph below is current to 20 April 2012 [430-3732] Indemnity upon change of trustee A trustees right of indemnity survives the retirement of the trustee, or other change in trustees, and so is available to former trustees in respect of expenses properly incurred in the course of their trusteeship.1 Where there is a change of trustee, with the trust assets being vested in the new trustee, the former trustee no longer has direct access to those assets, and so can make the necessary claim for indemnity against the trustee who represents the trust.2 As such, the new trustee takes the trust property subject to the right of indemnity of the predecessor trustee,3 and the latters right is enforceable by proceedings to which the new trustee is a necessary respondent.4 Otherwise, the retiring trustee is arguably entitled to retain possession of the trust property, subject to a court order to the contrary, until it is paid what it is due or until it sells the property.5 The foregoing presupposes that there are no grounds for denying or reducing the trustees right of indemnity.6 Notes 1 Coates v McInerney (1992) 7 WAR 537; 6 ACSR 748 ; Dimos v Dikeakos Nominees Pty Ltd (1996) 149 ALR 113 at 114 per Jenkinson J, at 117 per Heerey J ; Rothmore Farms Pty Ltd v Belgravia Pty Ltd [1999] FCA 745; BC9903015 at [37], [42] ; Belar Pty Ltd (in liq) v Mahaffey [2000] 1 Qd R 477 at 488 , CA(QLD); Nolan v Collie (2003) 7 VR 287; [2003] VSCA 39; BC200301883 at [66] per Ormiston JA ; Trim Perfect Australia Pty Ltd (in liq) v Albrook Constructions Pty Ltd [2006] NSWSC 153; BC200601996 at [23]-[27] per Austin J; Arkmill Pty Ltd v Tippers & Co Pty Ltd (2006) 58 ACSR 616; [2006] QSC 248; BC200606991 ; Ronori Pty Ltd v ACN 101 071 998 Pty Ltd [2008] NSWSC 246; BC200801990 at [15]-[18] per Barrett J; Australian Capital Territory Commissioner for Revenue v Slaven (2009) 178 FCR 334; [2009] FCA 744; BC200906276 at [52] per Rares J; Apostolou v VA Corp Aust Pty Ltd (2010) 77 ACSR 84; 4 ASTLR 94; [2010] FCA 64; BC201000453 at [49] per Finkelstein J; Brisconnections Management Co Ltd v Dalewon Pty Ltd (in liq) (2010) 79 ACSR 530; [2010] QSC 311; BC201006177 at [8] per McMurdo J. As to the retirement of trustees see [4303605]-[439-3630].2 Re Indopal Pty Ltd (1987) 12 ACLR 54; 5 ACLC 278 ; Belar Pty Ltd (in liq) v Mahaffey [2000] 1 Qd R 477 at 487-9 , CA(QLD); Ronori Pty Ltd v ACN 101 071 998 Pty Ltd [2008] NSWSC 246; BC200801990 at [15]-[18] per Barrett J; Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 1 ASTLR 225; [2008] NSWSC 1344; BC200811095 at [31], [35] per Brereton J; Hillig as Administrator of Darkinjung Local Aboriginal Land Council v Darkinjung Pty Ltd (2006) 205 FLR 450; [2006] NSWSC 1371; BC200610299 at [18] per Barrett J (refusal to make vesting order because, inter alia, it would imperil the trustees security for the right of indemnity); Rosenberg v Fifteenth Eestin Nominees Pty Ltd (No 2) [2010] VSC 38; BC201001008 at [51] per Habersberger J (right of lien to be satisfied before the making of any vesting order in the new trustee in relation to the trusts assets).3 Collie v Merlaw Nominees Pty Ltd (in liq) (2001) 37 ACSR 361 at 370; [2001] VSC 39; BC200100663 (affirmed Nolan v Collie (2003) 7 VR 287; [2003] VSCA 39; BC200301883 ); Rosenberg v Fifteenth Eestin Nominees Pty Ltd (No 2) [2010] VSC 38; BC201001008 at [51] per Habersberger J.4 Arkmill Pty Ltd v Tippers & Co Pty Ltd (2006) 58 ACSR 616; [2006] QSC 248; BC200606991 at [10] per McMurdo J.5 Apostolou v VA Corp Aust Pty Ltd (2010) 77 ACSR 84; 4 ASTLR 94; [2010] FCA 64; BC201000453 at [50], [51] per Finkelstein J. Contrast Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 1 ASTLR 225; [2008] NSWSC 1344; BC200811095

at [46]-[50] per Brereton J.6 As to the grounds for denying or reducing the trustees right of indemnity see [430-3790]-[430-3800]. The paragraph below is current to 20 April 2012 [430-3735] Impartiality in satisfaction of right of indemnity The trustees indemnity must be given effect to in such a way as to make the burden fall upon the beneficiaries equitably having regard to the circumstances under which the costs, charges and expenses were incurred.1 Notes 1 National Trustees, Executors & Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268 at 279; 14 ALJ 432; [1941] ALR 58 per Williams J (where as the costs were incurred as a result of nine out of the 37 beneficiaries, it was held that the shares of those nine beneficiaries should be exhausted before any part of the burden was placed on the shares of the remaining 28); Iscorp Investments Pty Ltd v Yohana [2011] NSWSC 1387; BC201108961 at [40] per Rein J. Compare Fay v Moramba Services Pty Ltd [2010] NSWSC 725; BC201004657 at [18] per Brereton J (noting that the approach stated in the text is not readily capable of application to a discretionary trust because the burden is necessarily borne by the trust fund before distribution). As to the nature of the right to indemnity see [430-3730]. The paragraph below is current to 20 April 2012 [430-3740] Application of proceeds of trustees right of indemnity on insolvency of trustee The issue of whether the proceeds of the trustees right of indemnity are available only to satisfy the claims of trust creditors or the claims of the trustees creditors generally is the subject of conflicting authority.1 The balance of authority supports the latter view on the basis that, although creditors of the trust business may be subrogated to the trustees right of indemnity,2 they cannot thereby obtain any greater right than that possessed by the trustee, meaning that when the trustees estate is separated from the trust estate by bankruptcy they rank with the general creditors of the bankrupt trustee.3 However, the foregoing does not apply where the indemnity is sought by way of exoneration because the right of exoneration entitles the trustee to resort to the trust property only for the purpose of discharging the liability.4 Where a corporate trustee is in liquidation and the trustee has no assets other than those held on trust, the liquidator may apply the assets of the trust in paying and discharging the costs and expenses of the liquidation, including the liquidators own remuneration.5 The relevant costs and expenses are those reasonably incurred in identifying, recovering, realising, protecting or distributing trust assets or attempting to do so.6 The reason for this is that the liquidator in conducting the winding up is carrying on the trustees duty of managing the business of the trust, for which an indemnity would have accrued to the trustee. If the corporate trustee is a trustee of more than one trust, these costs and expenses are apportioned in accordance with the work and expenses attributable to each trust.7 Where the company did not act solely as trustee or at least did not act in that capacity to a significant extent, the liquidator must estimate those of his or her costs that are attributable to the administration of trust property and only those costs will be charged against the trust assets.8 Those costs that could not be fairly characterised as incurred in administering the trust cannot be recovered by way of the trustees indemnity.9 Notes 1 For authority favouring the view that the proceeds of the trustees right of indemnity are available only to satisfy the claims of trust creditors see Re Byrne Australia Pty Ltd [1981] 1 NSWLR 394; (1981) 5 ACLR 475 . For authority favouring the view that the proceeds of the trustees right of indemnity are available to satisfy the claims of the trustees creditors generally see Re Coastline Distributors Pty Ltd (1979) 4 ACLR 203 at 207 , SC(QLD), Full Court; Re

Enhill Pty Ltd [1983] 1 VR 561 at 564-5 per Young CJ, at 570-1 per Lush J; (1982) 7 ACLR 8; 1 ACLC 415 , SC(VIC), Full Court; Grime Carter & Co Pty Ltd v Whytes Furniture (Dubbo) Pty Ltd [1983] 1 NSWLR 158; (1983) 7 ACLR 540 at 542-3; 1 ACLC 739 per McLelland J , SC(NSW); RWG Management Ltd v Cmr for Corporate Affairs [1985] VR 385 at 400 per Brooking J ; Young v Murphy [1996] 1 VR 279; (1994) 13 ACSR 722 at 748; 12 ACLC 558 per Phillips J , SC(VIC), Full Court.2 As to the nature of the right to indemnity see [430-3730].3 Re Enhill Pty Ltd [1983] 1 VR 561 at 564-5; (1982) 7 ACLR 8; 1 ACLC 415 per Lush J , SC(VIC), Full Court.4 Re Suco Gold Pty Ltd (in liq) (1983) 33 SASR 99 at 107-8 per King CJ, at 115 per Jacobs J; 7 ACLR 873; 1 ACLC 895 , SC(SA), Full Court; Re Matheson; Ex parte Worrell v Matheson (1994) 49 FCR 454; 121 ALR 605 at 615-17 per Spender J . As to the right of exoneration see [430-3725] note 4. 5 Re Enhill Pty Ltd [1983] 1 VR 561; (1982) 7 ACLR 8; 1 ACLC 415 , SC(VIC), Full Court; Re Suco Gold Pty Ltd (in liq) (1983) 33 SASR 99; 7 ACLR 873; 1 ACLC 895 , SC(SA), Full Court; Grime Carter & Co Pty Ltd v Whytes Furniture (Dubbo) Pty Ltd [1983] 1 NSWLR 158; (1983) 7 ACLR 540; 1 ACLC 739 , SC(NSW); Re ADM Franchise Pty Ltd (1983) 1 ACLC 987 , SC(NSW). Compare Re Byrne Australia Pty Ltd and the Companies Act (No 2) [1981] 2 NSWLR 364; (1981) 6 ACLR 222 ; Re Gradfan Pty Ltd (in liq); Nilant v Miling Nominees Pty Ltd (1996) 20 ACSR 689 at 700 per Steytler J , SC(WA); Irvine v Australian Sharetrading and Underwriting Ltd (in liq) (1996) 22 ACSR 765 at 784-5 per Mandie J , SC(VIC); Bastion v Gideon Investments Pty Ltd (in liq) (2000) 35 ACSR 466 at 480; 18 ACLC 854 per Austin J , SC(NSW); Australian Securities and Investments Commission v Rowena Nominees Pty Ltd (2003) 45 ACSR 424; 21 ACLC 1447; [2003] WASC 112; BC200302950 at [84]-[87] per Pullin J ; Shannon v JMA Accounting Pty Ltd [2005] QSC 240; BC200506420 ; Brisconnections Management Co Ltd v Dalewon Pty Ltd (in liq) (2010) 79 ACSR 530; [2010] QSC 311; BC201006177 at [8][12] per McMurdo J.6 Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq) (1999) 30 ACSR 377 at 385; 17 ACLC 500 per Finkelstein J . See also Bastion v Gideon Investments Pty Ltd (in liq) (2000) 35 ACSR 466 at 480; 18 ACLC 854 per Austin J , SC (NSW).7 Re Suco Gold Pty Ltd (in liq) (1983) 33 SASR 99 at 110; 7 ACLR 873; 1 ACLC 895 per King CJ, at 113-15 per Jacobs J, SC(SA), Full Court; Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq) (1999) 30 ACSR 377 at 386; 17 ACLC 500 per Finkelstein J . Where a corporate trustee which is in liquidation has no trust debts, the company as trustee holds no right of indemnity over the trust assets. In such a case, the petitioning creditors costs and the liquidators remuneration are not therefore covered by the trustees right of indemnity: Re Thomas Dawn Nominees Pty Ltd (1984) 2 ACLC 459 at 464 per Beach J , SC(VIC); Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq) (1999) 30 ACSR 377 at 385-6; 17 ACLC 500 .8 Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq) (1999) 30 ACSR 377 at 385; 17 ACLC 500 per Finkelstein J ; Brisconnections Management Co Ltd v Dalewon Pty Ltd (in liq) (2010) 79 ACSR 530; [2010] QSC 311; BC201006177 at [15][20] per McMurdo J.9 Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361; 204 ALR 353; 184 FLR 280; [2003] NSWSC 1008; BC200307101 at [211]-[217] per Campbell J .

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[Halsbury's Laws of Australia]

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(II) Subject of the Right of Indemnity The paragraph below is current to 20 April 2012 [430-3745] Expenses the subject of trustees indemnity The trustees right of indemnity extends to expenses and liabilities that are properly incurred,1 as from such time as those expenses and liabilities were incurred.2 The indemnity does not extend to expenses incurred unnecessarily3 or improperly,4 or otherwise unconnected with the role of trustee, 5 although there is an exception in respect of a liability that the trustee cannot establish was properly incurred but has nonetheless benefited the trust.6 Expenditure that has been held to be properly incurred includes: (1) general outgoings associated with land properly held in trust, such as rates and taxes; (2) expenses incurred in the preservation of the trust property, such as insurance premiums;7 (3) expenses of carrying on a business where this is authorised;8 (4) expenses incurred for the improvement of the trust estate;9 (5) legal costs that are reasonable and stem from proceedings that were properly instituted and conducted;10 or otherwise arise out of reasonable grounds to take legal advice; 11 (6) the cost of employing agents where such employment is appropriate;12 (7) calls on shares the trustee is obliged to pay;13 (8) liability in tort incurred by the trustee in the course of administering the trust if he or she in so doing fulfilled the standard of the reasonable prudent business person;14 (9)

statute barred debts paid by the trustee;15 and (10) liabilities incurred in good faith that are beneficial to the trust but are not yet authorised by the trust instrument.16 It is possible for a trustee to be entitled to an indemnity in respect of one set of expenses and not another; to determine whether a trustee is entitled to be indemnified in respect of the two claims, the circumstances giving rise to each liability must be investigated separately.17 No right of indemnity exists as a matter of general law in respect of a trustees remuneration, although it may be conferred by express provision in the trust instrument.18 The test for an equity of reimbursement or exoneration does not depend upon whether the trustee in incurring the liability disclosed that he or she was incurring the debt in the capacity of trustee.19 Nor does it make any difference that the trustee might secretly have reserved an intention that the trust assets not be affected by the transaction if the transaction does relevantly relate to the carrying on of the trusts business.20 The trustees right of indemnity may be improved by the terms of the trust; for instance, a provision authorising a trustee to recover expenses incurred in respect of unauthorised transactions, provided they have been entered into honestly or in good faith.21 Notes 1 Turner v Hancock (1882) 20 Ch D 303 at 305; 46 LT 750; 30 WR 480 per Jessel MR, CA; Stott v Milne (1884) 25 Ch D 710 at 715 per Selborne LC , CA; Re Beddoe; Downes v Cottam [1893] 1 Ch 547 at 558; (1892) 62 LJ Ch 233; 68 LT 595 per Lindley LJ , CA; St Thomass Hospital Governors v Richardson [1910] 1 KB 271 at 283 per Farwell LJ , CA; National Trustees, Executors & Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268 at 277-9; 14 ALJ 432; [1941] ALR 58 at 61-3 per Williams J ; Re Grimthorpe (decd) [1958] Ch 615 at 623; [1958] 1 All ER 765 at 769 per Danckwerts J ; Holding and Management Ltd v Property Holding and Investment Trust Plc [1990] 1 All ER 938; [1989] 1 WLR 1313 , CA; Re ODonoghue [1998] 1 NZLR 116 at 121 per Hammond J ; Nolan v Collie (2003) 7 VR 287; [2003] VSCA 39; BC200301883 at [44]-[50] per Ormiston JA . Statements in Gatsios Holdings Pty Ltd v Nick Kritharas Holdings Pty Ltd (in liq) (2002) ATPR 41-864; [2002] NSWCA 29; BC200200853 that appear to cast doubt on the requirement that expenses be properly incurred to be the subject of the indemnity should be viewed in the context of tortious liability rather than an indication of any change in the law: Nolan v Collie (2003) 7 VR 287; [2003] VSCA 39; BC200301883 at [44]-[50] .2 Hayman v Equity Trustees Ltd (2003) 8 VR 557; [2003] VSC 353; BC200305749 at [63] per Kellam J .3 Malcolm v OCallaghan (1837) 3 My & Cr 52 at 62; 40 ER 844 at 848 , CA; Re ODonoghue [1998] 1 NZLR 116 at 121-2 per Hammond J .4 Leedham v Chawner (1858) 4 K & J 458; 70 ER 191 ; Hosegood v Pedler (1896) 66 LJQB 18; Re ODonoghue [1998] 1 NZLR 116 at 121 per Hammond J ; Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566 at 606; [2001] FCA 1628; BC200107154 (affirmed Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) [2002] FCAFC 285; BC200206793 ); Rosenberg v Fifteenth Eestin Nominees Pty Ltd (No 2) [2010] VSC 38; BC201001008 at [43] per Habersberger J ; Australian Securities and Investments Commission v Letten (No 17) (2011) 286 ALR 346; 87 ACSR 155; [2011] FCA 1420; BC201109904 at [14][18] per Gordon J.5 Amberley Aerospace Park Pty Ltd v Heartwood Architectural Timber & Joinery Pty Ltd [2009] QSC 44; BC200901356 at [15], [16] per Wilson J (trustee cannot charge a trust asset with a non-trust liability); Rosenberg v Fifteenth Eestin Nominees Pty Ltd (No 2) [2010] VSC 38; BC201001008 at [36] per Habersberger J (who denied a right of indemnity over interest agreed by a former trustee to be paid on an outstanding debt to a third party because, inter alia, the agreement arose after the trustee had ceased to be the trustee, having voluntarily incurred the obligation to pay a penalty rate of interest for reasons not connected with its former role as trustee).6 RWG Management Ltd v Cmr for

Corporate Affairs [1985] VR 385 at 396 per Brooking J ; Nolan v Collie (2003) 7 VR 287; [2003] VSCA 39; BC200301883 at [58] per Ormiston JA ; Beath v Kousal [2010] VSC 24; BC201000438 at [24]-[45] per Kaye J (remarking that there must be some sensible measure of the benefit accruing to the trust estate which, as a matter of equity, might be thus recouped by the trustee, notwithstanding that the liability was not properly incurred on behalf of the estate: at [43] ).7 Clack v Holland (1854) 19 Beav 262 at 273, 276-7; 52 ER 350 at 354-5, 377 per Romilly MR; Re Leslie; Leslie v French (1883) 23 Ch D 552 at 560 per Pearson J ; Re Earl of Winchilseas Policy Trusts (1888) 39 Ch D 168 ; Re Jewells Settlement; Watts v Public Trustee [1919] 2 Ch 161 . As to a trustees duty to preserve trust property see [430-4155]. As to the duty to insure see [4304665]. 8 Ex parte Garland (1804) 10 Ves 110; 32 ER 786 ; Re Johnson; Shearman v Robinson (1880) 15 Ch D 548 ; Strickland v Symons (1884) 26 Ch D 245 at 248 per Selborne LC , CA; Langley v Langley (1887) 13 VLR 668 ; Re Evans; Evans v Evans (1887) 34 Ch D 597 , CA; Re Blundell; Blundell v Blundell (1890) 44 Ch D 1, CA; Dowse v Gorton [1891] AC 190 at 203; [1891-94] All ER Rep 1230; (1891) 64 LT 809 per Lord Macnaghten , HL; Savage v Union Bank of Australia Ltd (1906) 3 CLR 1170 sub nom Union Bank of Australia Ltd v Whitelaw [1906] VLR 711 sub nom Whitelaw v Union Bank of Australia Ltd (1906) 12 ALR 285 ; Re Miller (decd) [1916] GLR 360; Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319 at 324; 19 ALJ 380; [1946] ALR 50 per Latham CJ ; RWG Management Ltd v Cmr for Corporate Affairs [1985] VR 385 at 393-400 per Brooking J ; Canada Deposit Insurance Corp v Canadian Commercial Bank (1987) 46 DLR (4th) 37 at 43 per Wachowich J, QB(Alberta). A liquidator of an insolvent corporate trustee is entitled to be indemnified out of the trust property for the costs and expenses of liquidation because, in effecting the liquidation, he or she is carrying on the trustees duty of managing the business: Re Suco Gold Pty Ltd (in liq) (1983) 33 SASR 99; 7 ACLR 873; 1 ACLC 895 , SC(SA), Full Court.9 Sichel v OShanassy (1877) 3 VLR (E) 208 ; Re Walder; Townsend v Walder (1903) 3 SR (NSW) 375 . As to a trustees power to effect repairs and improvements to trust property see [430-4855]-[4304875]. 10 Re Chennell; Jones v Chennell (1878) 8 Ch D 492 , CA; Turner v Hancock (1882) 20 Ch D 303; 46 LT 750; 30 WR 480 , CA; Re Love; Hill v Spurgeon (1885) 29 Ch D 348; 54 LJ Ch 816; 52 LT 398 , CA; Budgett v Budgett [1895] 1 Ch 202 ; Merry v Pownall [1898] 1 Ch 306 ; Nissen v Grunden (1912) 14 CLR 297; 18 ALR 254 ; National Trustees, Executors & Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268; 14 ALJ 432; [1941] ALR 58 ; Re Robertson (decd); Public Trustee v Robertson [1949] 1 All ER 1042 , Ch; Re Harrisons Settlement Trusts; Morris v Harrison-Sleap [1965] 3 All ER 795; [1965] 1 WLR 1492 , Ch; Re Stanhill Development Finance Ltd (in liq) [1966] VR 499 ; Re Spurlings Will Trusts; Philpot v Philpot [1966] 1 All ER 745; [1966] 1 WLR 920 , Ch; Alsop Wilkinson (a firm) v Neary [1995] 1 All ER 431 at 434-5; [1996] 1 WLR 1220 per Lightman J . As to the indemnity for legal costs see [430-3750]. 11 Hatch v Harlekin Pty Ltd [2008] WASC 167; BC200807277 .12 As to the cost of employing agents see [430-3755].13 Fraser v Murdoch (1881) LR 6 App Cas 855 at 866; 45 LT 417 per Selborne LC, HL; Hughes-Hallett v Indian Mammoth Gold Mines Co (1882) 22 Ch D 561 at 564 per Fry J .14 Benett v Wyndham (1862) 4 De GF & J 259; 45 ER 1183; Re Raybould; Raybould v Turner [1900] 1 Ch 199; (1899) 82 LT 46; 48 WR 301 . As to a trustees duty of care see [430-4165]. 15 Budgett v Budgett [1895] 1 Ch 202 ; Re Dallas (1910) 6 Tas LR 65 at 67 per McIntyre J .16 Vyse v Foster (1872) LR 8 Ch App 309; [1874-80] All ER Rep Ext 2037; (1872) 27 LT 774; Jesse v Lloyd (1883) 48 LT 656 , Ch; Daly v Union Trustee Co of Australia Ltd (1898) 24 VLR 460 ,

SC(VIC), Full Court; Re Walder; Townsend v Walder (1903) 3 SR (NSW) 375 ; Re Jones; Hockings v Queensland Trustees Ltd [1917] St R Qd 74 , SC(QLD), Full Court; RWG Management Ltd v Cmr for Corporate Affairs [1985] VR 385 at 396 per Brooking J .17 Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566 at 604; [2001] FCA 1628; BC200107154 at [41] (affirmed Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) [2002] FCAFC 285; BC200206793 ).18 Perpetual Trustees WA Ltd v Kelly (1993) 8 WAR 480 at 486-7 per Anderson J ; Re Matheson; Ex parte Worrell v Matheson (1994) 49 FCR 454; 121 ALR 605 at 615 per Spender J. Compare Southern Wine Corp Pty Ltd (in liq) v Frankland River Olive Co Ltd (2005) 31 WAR 162; [2005] WASCA 236; BC200510710 at [45]-[47] per McLure JA (Wheeler JA concurring).19 JA Pty Ltd v Jonco Holdings Pty Ltd (2000) 33 ACSR 691 at 706; [2000] NSWSC 147; BC200001022 per Santow J .20 JA Pty Ltd v Jonco Holdings Pty Ltd (2000) 33 ACSR 691 at 706; [2000] NSWSC 147; BC200001022 per Santow J .21 Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566 at 606; [2001] FCA 1628; BC200107154 . The paragraph below is current to 20 April 2012 [430-3750] Legal costs Legal costs that are reasonable and that stem from proceedings that were properly instituted and conducted are properly the subject of the trustees indemnity.1 For example, legal costs incurred for the purpose of protecting the trust property,2 successfully defending an action for breach of trust3 or removal from trusteeship,4 and successfully petitioning for the courts sanction of a transaction5 have been held to be properly incurred. Costs ordered in favour of a trustee amount to a full indemnity.6 A trustee who brings proceedings before a court must do all that is reasonably within his or her power to reduce costs.7 A trustee will not be allowed to charge against the trust property the costs of proceedings which are unnecessary8 or which are unnecessarily elaborate.9 Hence, a trustee who incurs excessive or unnecessary costs on behalf of the trust is deprived of his or her costs10 and may be held to be personally liable to pay the costs of the proceedings to the extent that they are excessive or unnecessary.11 As a general rule, a trustee is also personally liable for the costs of legal proceedings occasioned by his or her own misconduct12 or neglect of duty, 13 or incurred in defending the proceedings in his or her own interests.14 Where a suit was properly instituted, legal costs properly incurred by a trustee for the purposes of the suit may be the subject of his or her right of indemnity even if the action fails.15 Conversely, where the application in question holds little or no merit, having little or no chance of success, the trustee may be denied his or her right of indemnity in respect of costs incurred in bringing the action.16 Nor can a trustee who incurs legal costs without regard to the wishes of the beneficiaries assume that he or she will automatically be entitled to an indemnity for those costs out of the trust fund.17 A trustee who is in doubt as to whether and how proceedings are to be instituted should seek directions of the court in this respect18 and, provided that the trustee makes full disclosure to the court of the strengths and weaknesses of the case, the right of indemnity and lien will ordinarily extend to the costs of such an application.19 A failure to make this application may disentitle the trustee to an indemnity for costs incurred unless it was proper to bring or defend the proceedings,20 although there is authority for the proposition that in the event of doubt concerning whether the costs have been properly incurred, the trustee is entitled to the benefit of that doubt.21 A beneficiary is not entitled to complain of the omission of his or her trustee to institute legal proceedings for the beneficiarys benefit where the beneficiary has omitted to offer to indemnify the trustee against the costs of such proceedings.22 A trustee may retain funds for costs where the beneficiaries have not undertaken to meet the same.23 Notes

1 Re Chennell; Jones v Chennell (1878) 8 Ch D 492 , CA; Turner v Hancock (1882) 20 Ch D 303; 46 LT 750; 30 WR 480 , CA; Re Love; Hill v Spurgeon (1885) 29 Ch D 348; 54 LJ Ch 816; 52 LT 398 , CA; Re Beddoe; Downes v Cottam [1893] 1 Ch 547; (1892) 62 LJ Ch 233; 68 LT 595 , CA; Budgett v Budgett [1895] 1 Ch 202 ; Merry v Pownall [1898] 1 Ch 306 ; Nissen v Grunden (1912) 14 CLR 297; 18 ALR 254 ; National Trustees, Executors & Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268; 14 ALJ 432; [1941] ALR 58 ; Re Robertson (decd); Public Trustee v Robertson [1949] 1 All ER 1042 ; Re Harrisons Settlement Trusts; Morris v Harrison-Sleap [1965] 3 All ER 795; [1965] 1 WLR 1492 ; Re Stanhill Development Finance Ltd (in liq) [1966] VR 499 ; Re Spurlings Will Trusts; Philpot v Philpot [1966] 1 All ER 745; [1966] 1 WLR 920 , Ch; Alsop Wilkinson (a firm) v Neary [1995] 1 All ER 431 at 434-5; [1996] 1 WLR 1220 per Lightman J ; Hayman v Equity Trustees Ltd (2003) 8 VR 557; [2003] VSC 353; BC200305749 . The rules of court in most jurisdictions provide that a party to litigation in the capacity of a trustee will be entitled to the costs of the proceedings, insofar as they are not recoverable from or payable by another party, out of the trust fund held by the trustee: see practice and procedure [325-9445]. As to the nature of the right to indemnity see [430-3730]. 2 Attorney-General (Vic) v Huon (1881) 7 VLR (E) 30 . As to a trustees duty to protect the trust property see [430-4155]. 3 Nissen v Grunden (1912) 14 CLR 297; 18 ALR 254 ; National Trustees, Executors & Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268; 14 ALJ 432; [1941] ALR 58 ; Armitage v Nurse [1998] Ch 241; [1997] 2 All ER 705; [1997] 3 WLR 1046 at 1064 per Millett LJ , CA; Grizonic v Suttor [2011] NSWSC 471; BC201103427 at [57], [58] per Brereton J.4 Metropolitan Petar v Mitreski [2012] NSWSC 16; BC201203549 at [109][114] per Brereton J. 5 Re Berrys Trusts (1893) 7 QLJ 63 , SC(QLD), Full Court.6 Re Beddoe; Downes v Cottam [1893] 1 Ch 547 at 558; (1892) 62 LJ Ch 233 at 237; 68 LT 595 at 599 per Lindley J , CA; Adsett v Berlouis (1992) 37 FCR 201 at 208-11; 109 ALR 100 at 108-10 .7 Read v Chown (1929) 46 WN (NSW) 154 ; Re Price; Price v Church of England Property Trust Diocese of Goulburn (1935) 35 SR (NSW) 444; 52 WN (NSW) 139 .8 Smith v Bolden (1863) 33 Beav 262; 55 ER 368; Re Culls Trusts (1875) LR 20 Eq 561; Trustees Executors & Agency Co Ltd v Jope (1902) 27 VLR 706 at 709-10; 8 ALR (CN) 21 at 22; 24 ALT 30 per aBeckett J ; Re Englands Settlement Trusts; Dobb v England [1918] 1 Ch 24 ; National Trustees, Executors & Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268; 14 ALJ 432; [1941] ALR 58 ; Cape v Redarb Pty Ltd (rec and mgr apptd) (1992) 107 FLR 362 at 385; 8 ACSR 67 at 91; 10 ACLC 1272 at 1289 per Higgins J , SC(ACT).9 Thomas v Walker (1854) 18 Beav 521; 52 ER 205 ; Wells v Malbon (1862) 31 Beav 48; 54 ER 1055 .10 Re Knights Will (1884) 26 Ch D 82 , CA.11 Patterson v Wooler (1876) 2 Ch D 586 ; Re Cabburn; Gage v Rutland (1882) 46 LT 848, Ch; Re Chapman; Freeman v Parker (1894) 72 LT 66; 11 TLR 177, CA; Re Holtons Settlement Trusts; Holton v Holton (1918) 88 LJ Ch 444; 119 LT 304.12 Re Weall; Andrews v Weall (1889) 42 Ch D 674; 58 LJ Ch 713; 61 LT 238 ; Re Hodgkinson; Hodgkinson v Hodgkinson [1895] 2 Ch 190; [1895-9] All ER Rep Ext 2136; (1895) 64 LJ Ch 663 , CA; Re Knoxs Trusts [1895] 2 Ch 483 , CA; Barnett v Rogers (1914) SALR 138; Re Spurlings Will Trusts; Philpot v Philpot [1966] 1 All ER 745 at 755, 758; [1966] 1 WLR 920 per Ungoed-Thomas J, Ch; Armitage v Nurse [1998] Ch 241; [1997] 2 All ER 705; [1997] 3 WLR 1046 at 1064 per Millett LJ , CA. As to breaches of trust denying the right to the trustees indemnity see [430-3790]. 13 Cotterell v Stratton (1872) LR 8 Ch App 295 at 302; 42 LJ Ch 417; 28 LT 218 per Lord Selborne; In the Will of Field; Ballarat Trustees, Executors and Agency Co Ltd v Field [1931] VLR 37 , SC(VIC), Full Court.14 Nowell v Palmer (1993) 32 NSWLR 574 at 581-2 per Mahoney JA; Armitage v Nurse [1998] Ch 241; [1997] 2 All ER 705; [1997] 3 WLR 1046 at 1064 per Millett J; Quinton v Proctor [1998] 4 VR 469 at 476 per Kellam J ; OKeeffe v Hayes Knight GTO Pty Ltd (2005) 218 ALR 604; [2005] FCA 389; BC200501896 at [14]-[17] per Nicholson J .15 National Trustees, Executors & Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268 at

279; 14 ALJ 432; [1941] ALR 58 per Williams J ; Re Harrisons Settlement Trusts; Morris v Harrison-Sleap [1965] 3 All ER 795 at 800; [1965] 1 WLR 1492 per Cross J , Ch.16 Re Estate of Roberts (1983) 20 NTR 13 at 19; 70 FLR 158 at 163 per OLeary J .17 Holding and Management Ltd v Property Holding and Investment Trust Plc [1990] 1 All ER 938 at 948; [1989] 1 WLR 1313 per Nicholls LJ , CA.18 As to the right of a trustee to seek advice and directions from the court see [430-5055]-[430-5085].19 Re Beddoe; Downes v Cottam [1893] 1 Ch 547 at 557; (1892) 62 LJ Ch 233; 68 LT 595 per Lindley LJ , CA; Chettiar v Chettiar (No 2) [1962] 2 All ER 238 at 245; [1962] 1 WLR 279 at 290 per the Council, PC; Re Atkinson (decd) [1971] VR 612 at 615-16 per Gillard J; Re Dallaway (decd) [1982] 3 All ER 118; [1982] 1 WLR 756 , Ch; Alsop Wilkinson (a firm) v Neary [1995] 1 All ER 431 at 434-5; [1996] 1 WLR 1220 per Lightman J ; McDonald v Horn [1995] 1 All ER 961 at 970 per Hoffman LJ , CA. This form of the application is a separate action to which all the beneficiaries are parties (either in person or by a representative defendant): Alsop Wilkinson (a firm) v Neary [1995] 1 All ER 431 at 435; [1996] 1 WLR 1220 per Lightman J , Ch. The Australian practice follows the English procedure in that whilst the beneficiaries are served with a claim, neither the beneficiary against whom the trustees propose to litigate, nor those representing the beneficiary, are normally allowed to be present when the merits of the main action are discussed between the trustees counsel and the judge, because they might hear something that they should not, given that it is about the strength or weakness of the trustees case. Whilst the beneficiary and his or her counsel are allowed into the hearing to address any arguments they may wish, they must then withdraw while the matter is discussed between the trustees counsel and the judge. The beneficiarys counsel is then readmitted, and informed of the courts decision. The basic principles of natural justice mean that material placed before the judge should be kept to a minimum: Salmi v Sinivuori [2008] QSC 321; BC200810933 at [15] per Lyons J .20 Re Beddoe; Downes v Cottam [1893] 1 Ch 547; (1892) 62 LJ Ch 233; 68 LT 595 , CA; Alcock v Public Trustee (1936) 53 WN (NSW) 192 ; Re Atkinson (decd) [1971] VR 612 at 615-16 per Gillard J; Dagnell v JL Freedman & Co (a firm) [1993] 2 All ER 161 at 168-9; [1993] 1 WLR 388 at 396-7 per Lord Browne-Wilkinson , HL. Where counsel has advised that there is a good cause of action but time limits preclude the trustees seeking the directions of the court, it can, as a general rule, be said that it was proper to bring or defend the proceeding, and as such the trustees are not deprived of their indemnity: Dagnell v JL Freedman & Co (a firm) [1993] 2 All ER 161 at 169; [1993] 1 WLR 388 at 397 per Lord Browne-Wilkinson , HL. However, the mere fact that the trustees acted on the advice of counsel does not necessarily and of itself demonstrate that they acted reasonably: Re Beddoe; Downes v Cottam [1893] 1 Ch 547; (1892) 62 LJ Ch 233; 68 LT 595 , CA. Conversely, a failure to seek such advice does not prophylactically disentitle a trustee from resorting to the trust funds if such resort is otherwise proper: Fay v Moramba Services Pty Ltd [2010] NSWSC 725; BC201004657 at [29] per Brereton J; Grizonic v Suttor [2011] NSWSC 471; BC201103427 at [60] per Brereton J.21 Easton v Landor (1892) 62 LJ Ch 164 at 165; 67 LT 833 at 833; 2 R 176 at 177 per Lindley LJ, CA.22 Erskine v Pettit (1901) 1 SR (NSW) Eq 204 at 207-8; 18 WN (NSW) 215 per Simpson CJ; Re Atkinson (decd) [1971] VR 612 at 616 per Gillard J .23 Longhurst v Waite (1920) SALR 407 at 419 per Poole J. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3755] Cost of employing agents Where the trustee properly employs an agent for the purposes of the trust,1 the remuneration or commission of the agent can be met out of the trust property, a right which is recognised both at general law2 and under statute.3 In the Northern Territory, South Australia and Victoria there is specific statutory provision to the effect that where a trustee properly takes advice with respect to the investment of trust funds, the reasonable costs of obtaining the advice is payable out of trust funds.4

Notes 1 As to the circumstances where a trustee may legitimately appoint an agent see [430-4430][430-4485].2 Re Weall; Andrews v Weall (1889) 42 Ch D 674 at 677-8; 58 LJ Ch 713; 61 LT 238 per Kekewich J; Re Beddoe; Downes v Cottam [1893] 1 Ch 547; (1892) 62 LJ Ch 233; 68 LT 595 , CA; Swanson v Emmerton [1909] VLR 387 at 391; (1909) 15 ALR 368; 31 ALT 28 per Cussen J ; In the Estate of Purton (1935) 53 WN (NSW) 148 at 149-50 per Nicholas J .3 (ACT) Trustee Act 1925 s 53(2) (NSW) Trustee Act 1925 s 53(2) (QLD) Trusts Act 1973 s 54(1) (VIC) Trustee Act 1958 s 28(1) (WA) Trustees Act 1962 s 53(1). As to the position in the other jurisdictions see note 4 below. The trustee legislation in most jurisdictions provides so specifically in the context of the employment of auditors of trust accounts: (ACT) Trustee Act 1925 s 51(2), 51(3) (NSW) Trustee Act 1925 s 51(2), 51(3) (QLD) Trusts Act 1973 s 52(2) (VIC) Trustee Act 1958 s 27(2), 27(3) (WA) Trustees Act 1962 s 51(2). There are no equivalent provisions in the other jurisdictions. 4 (NT) Trustee Act 1893 ss 7(3), 8(2)(b) (SA) Trustee Act 1936 ss 8(3), 9(2)(b) (VIC) Trustee Act 1958 ss 7(4), 8(2)(b). The paragraph below is current to 20 April 2012 [430-3760] Action for account or administration A trustee must personally bear the costs of an action against him or her by a beneficiary for an account or for the administration of the trust to the extent that those proceedings have been occasioned by the trustees own default or neglect1 and may be ordered to pay the beneficiarys costs.2 A finding that the trustees conduct has been honest and correct, even if mistaken,3 entitles the trustee to receive costs out of the trust estate. 4 If the court finds that the beneficiary has instituted the proceedings wrongfully or too hastily, the beneficiary or the beneficiarys solicitor5 may be ordered to bear the costs personally.6 Notes 1 Simpson v Bathurst; Shepherd v Bathurst (1869) LR 5 Ch App 193 at 202; 23 LT 29 per Hatherley LC; Payne v Evens (1874) LR 18 Eq 356; Re Page; Jones v Morgan [1893] 1 Ch 304; (1892) 62 LJ Ch 592; 41 WR 357 . As to an action for administration see [430-5205].

2 Hilliard v Fulford (1876) 4 Ch D 389 at 394; [1874-80] All ER Rep 247; (1876) 46 LJ Ch 43 per Jessel MR; Re Hayter; Re Wallett; Hayter v Wells (1883) 32 WR 25; Re Knoxs Trusts [1895] 2 Ch 483 , CA; Re Skinner; Cooper v Skinner [1904] 1 Ch 289; (1903) 73 LJ Ch 94; 89 LT 663 ; Re Holtons Settlement Trusts; Holton v Holton (1918) 88 LJ Ch 444; 119 LT 304.3 Bullock v Lloyds Bank Ltd [1955] Ch 317; [1954] 3 All ER 726; [1955] 2 WLR 1 .4 Ottley v Gilby (1845) 8 Beav 602; 50 ER 237 ; Thompson v Clive (1848) 11 Beav 475; 50 ER 901; Re Andrews; Edwards v Dewar (1885) 30 Ch D 159 .5 The court has jurisdiction to make a costs order against a solicitor personally, both inherent or pursuant to legislation or court rules: see practice and procedure [325-9455].6 Fane v Fane (1879) 13 Ch D 228 ; Re Andrews; Edwards v Dewar (1885) 30 Ch D 159 ; Re Dartnall; Sawyer v Goddard [1895] 1 Ch 474; [1895-99] All ER Rep 890; (1895) 72 LT 404 , CA. The paragraph below is current to 20 April 2012 [430-3765] Joinder of several trustees As part of a trustees duty to act unanimously, 1 he or she must institute or defend proceedings jointly,2 and is therefore generally only allowed one set of costs.3 However, trustees costs may be severed where there are reasonable grounds to do so,4 such as where:5 (1) one of several trustees has a personal interest which conflicts with his or her duty as trustee; (2) one trustee can admit facts which the others believe not to be true; or (3) allegations of fraud or improper conduct are made against one trustee but not the others. Notes 1 As to trustees duty to act unanimously see [430-4190].2 Gaunt v Taylor (1840) 2 Beav 346 at 347; 48 ER 1215 at 1215 per Lord Langdale MR; Re Spurlings Will Trusts; Philpot v Philpot [1966] 1 All ER 745 at 750; [1966] 1 WLR 920 at 925 per Ungoed-Thomas J , Ch.3 Gaunt v Taylor (1840) 2 Beav 346 at 347; 48 ER 1215 at 1215 per Lord Langdale MR; Gompertz v Kensit (1872) LR 13 Eq 369 at 381 per Bacon VC; Hosegood v Pedler (1896) 66 LJQB 18; Re Isaac; Cronbach v Isaac [1897] 1 Ch 251 at 255-6 , CA.4 Re Spurlings Will Trusts; Philpot v Philpot [1966] 1 All ER 745 at 750-1; [1966] 1 WLR 920 at 925-6 per Ungoed-Thomas J , Ch.5 Gaunt v Taylor (1840) 2 Beav 346 at 347; 48 ER 1215 at 1215 per Lord Langdale MR; Bruty v Edmundson [1917] 2 Ch 285 at 295 per Eve J ; Re Spurlings Will Trusts; Philpot v Philpot [1966] 1 All ER 745 at 750-1; [1966] 1 WLR 920 at 925-6 per Ungoed-Thomas J , Ch. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3770] Trustees costs of inquiring regarding beneficiaries In Queensland and Western Australia the trustee legislation specifically provide that the costs, expenses and charges of the trustee in respect of any inquiries made by the trustee to ascertain the existence or whereabouts of any persons entitled to any interest in the trust property are to be paid out of that interest in the absence of contrary intention in the trust instrument.1 As these expenses are properly incurred in

carrying out the execution of the trust, the general law right of indemnity would in any event confer a similar power in other jurisdictions.2 Notes 1 (QLD) Trusts Act 1973 s 111 (WA) Trustees Act 1962 s 108. 2 As to expenses that are properly incurred see [430-3745]-[430-3755].

Source

[Halsbury's Laws of Australia]

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(III) Enforceability of Indemnity against Beneficiaries The paragraph below is current to 20 April 2012 [430-3775] Recoupment from beneficiaries Where the trust property is insufficient to meet the quantum of the trustees right of indemnity, the trustee is entitled to enforce his or her right of indemnity for liabilities properly incurred in carrying out the trust against beneficiaries who are of full legal capacity and absolutely entitled.1 The basis of the principle is that the beneficiaries who derive the benefit of the trust should bear its burdens unless they can show some good reason why the trustee should bear those burdens.2 The trustees right to enforce his or her right of indemnity against the beneficiaries can also be exercised by a creditor or trustee in bankruptcy or a liquidator of the trustee by means of subrogation,3 and against an assignee of a beneficiary. 4 The same entitlement arises in respect of a former trustee, albeit premised on proof of the existence and identity of the trust property,5 although this appears to misconceive the nature of the action, which is a personal action against beneficiaries, not a proprietary action.6 The beneficiaries respective liability to indemnify the trustee lies in proportion to their shares in the beneficial interest,7 which proportion is not increased by the fact that one or more beneficiaries are not liable to indemnify, having successfully disclaimed their interest,8 or due to insolvency.9 Any resultant deficiency is borne by the trustee, on the basis that a trustee who accepts a trust knowing that his or her right to personal indemnity from a beneficiary is only as good as the ability of the beneficiary to pay it, suffers no injustice if the beneficiary is unable to

pay.10 Notes 1 Jervis v Wolferstan (1874) LR 18 Eq 18 at 24; [1874-80] All ER Rep Ext 1933; (1874) 30 LT 452 per Jessel MR ; Fraser v Murdoch (1881) LR 6 App Cas 855 at 872; 45 LT 417 per Lord Blackburn, HL; Hardoon v Belilios [1901] AC 118; (1900) 83 LT 573; 49 WR 209 , PC; Trautwein v Richardson [1946] ALR 129 at 134-5 per Dixon J , HC of A, Full Court; Kemtron Industries Pty Ltd v Cmr of Stamp Duties (Qld) [1984] 1 Qd R 576 at 584 per McPherson J , SC(QLD), Full Court; JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 936-40; (1985) 9 ACLR 593 per McGarvie J; Bayer v Balkin (1995) 31 ATR 295 at 298300; 95 ATC 4609; BC9505375 per Cohen J , SC(NSW) (affirmed Balkin v Peck (1998) 43 NSWLR 706; 40 ATR 15 at 19-22; 98 ATC 4842; BC9803370 per Mason P , CA); Strachan v Marriott [1995] 3 NZLR 272 at 278 per Hardie-Boys J , CA; Countryside (No 3) v Best [2001] NSWSC 1152; BC200108033 at [38], [39] ; Toyama Pty Ltd v Landmark Building Developments Pty Ltd (No 2) [2007] NSWSC 55; BC200700496 at [26]-[28] per White J ; Grizonic v Suttor [2011] NSWSC 471; BC201103427 at [62][68] per Brereton J.2 Hardoon v Belilios [1901] AC 118 at 123; (1900) 83 LT 573; 49 WR 209 per Lord Lindley, PC; JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 936; (1985) 9 ACLR 593 per McGarvie J ; Balkin v Peck (1998) 43 NSWLR 706; 40 ATR 15 at 20; 98 ATC 4842; BC9803370 per Mason P , CA(NSW).3 JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 936-40; (1985) 9 ACLR 593 per McGarvie J . As to the exercise of a trustees right of indemnity by subrogation see [430-3730]. 4 Hardoon v Belilios [1901] AC 118 at 124; (1900) 83 LT 573; 49 WR 209 per Lord Lindley, PC; Trautwein v Richardson [1946] ALR 129 at 134 per Dixon J , HC of A, Full Court.5 Belar Pty Ltd (in liq) v Mahaffey [2000] 1 Qd R 477 at 487-9 , CA(QLD).6 Compare Ron Kingham Real Estate Pty Ltd v Edgar [1999] 2 Qd R 439 .7 JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 929-40; (1985) 9 ACLR 593 per McGarvie J .8 As to disclaimer by a beneficiary of his or her interest under a trust see [430-810].9 JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 939-40; (1985) 9 ACLR 593 per McGarvie J . Compare MSP Nominees Pty Ltd v Cmr of Stamps (1996) 34 ATR 360 at 364 per Debelle J , SC(SA). Where beneficiaries hold a beneficial interest as joint tenants, if one of the beneficiaries is not liable to indemnify, the remaining joint tenants bear the full liability to indemnify unless the court considers that this outcome would be unjust: JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 940; (1985) 9 ACLR 593 per McGarvie J . 10 JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 939; (1985) 9 ACLR 593 per McGarvie J . The paragraph below is current to 20 April 2012 [430-3780] Circumstances in which right of indemnity can be enforced against beneficiaries The beneficiary will suffer the burden of the equitable personal obligation to indemnify the trustee where: (1) there is a single beneficiary who is of full legal capacity and absolutely entitled, even though that beneficiary did not request the trustee to incur the liability;1 or (2) two or more beneficiaries who are all of full legal capacity and absolutely entitled have

requested a person to become trustee for them.2 That the beneficiaries did not request the payment giving rise to the indemnity in no way undermines the trustees entitlement provided the payment represents an expense properly incurred in the administration of the trust.3 That the trustee carried on a business established for the beneficiaries benefit may be sufficient.4 Notes 1 Hardoon v Belilios [1901] AC 118 at 124; (1900) 83 LT 573; 49 WR 209 per Lord Lindley , PC; JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 936-7; (1985) 9 ACLR 593 per McGarvie J .2 Matthews v Ruggles-Brise [1911] 1 Ch 194; (1910) 80 LJ Ch 42; 103 LT 491 ; Buchan v Ayre [1915] 2 Ch 474 at 477-8 per Sargant J; JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 937; (1985) 9 ACLR 593 per McGarvie J; Balkin v Peck (1998) 43 NSWLR 706 at 713; 40 ATR 15; 98 ATC 4842; BC9803370 per Mason P .3 Balkin v Peck (1998) 43 NSWLR 706 at 713-14; 40 ATR 15; 98 ATC 4842; BC9803370 per Mason P . As to expenses that are properly incurred see [4303745].4 Countryside (No 3) v Best [2001] NSWSC 1152; BC200108033 at [38] . The paragraph below is current to 20 April 2012 [430-3782] Denial or reduction of the right of indemnity against beneficiaries The right to seek an indemnity from a beneficiary will be denied or reduced in the case of: (1) a beneficiary who is not of full legal capacity or not absolutely entitled;1 (2) a beneficiary who successfully disclaims his or her beneficial interest under the trust;2 (3) trustees of unincorporated clubs, trade unions, churches and other non-profit making clubs;3 (4) a provision in the trust instrument to this effect;4 (5) an expenditure that is not properly incurred in the execution of the trust;5 and (6) the court concluding it would be unjust to give effect to it (whether in part or in its entirety).6 Notes 1 Hence, no obligation to indemnify the trustee lies on persons who are beneficiaries or objects of a discretionary trust, or beneficiaries who are minors or insane: JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 936-7; (1985) 9 ACLR 593 per McGarvie J .2 JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891 at 930-6; (1985) 9 ACLR 593 per McGarvie J .3 Wise v Perpetual Trustee Co Ltd [1903] AC 139; (1903) 72 LJPC 31; 87 LT 569 , PC.4 Gillan v Morrison (1847) 1 De G & Sm 421; 63 ER 1131; Hardoon v

Belilios [1901] AC 118 at 127; (1900) 83 LT 573; 49 WR 209 per Lord Lindley , PC; RWG Management Ltd v Cmr for Corporate Affairs [1985] VR 385 at 394-5 per Brooking J ; McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 640-1; 9 ACLR 926 per Young J ; Ron Kingham Real Estate Pty Ltd v Edgar [1999] 2 Qd R 439 at 442 per McPherson JA ; ANZ Banking Group Ltd v Intagro Projects Pty Ltd [2004] NSWSC 1054; BC200407578 at [9]-[17] per White J ; Tindon Pty Ltd v Adams [2006] VSC 172; BC200603669 at [34]-[37], [41] per Hargrave J ; Adams v Zen 28 Pty Ltd [2010] QSC 36; BC201000608 at [35], [36] per Daubney J.5 Belar Pty Ltd (in liq) v Mahaffey [2000] 1 Qd R 477 at 487 , CA(QLD).6 Countryside (No 3) v Best [2001] NSWSC 1152; BC200108033 at [39] . See, also JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891; (1985) 9 ACLR 593 (where McGarvie J considered that it was unjust to impose upon a husband the full liability to indemnify the trustee in circumstances where his spouse, with whom he held units in the trust as joint tenant, had successfully disclaimed her interest); Countryside (No 3) v Best [2001] NSWSC 1152; BC200108033 at [44] (it cannot be assumed that persons who subscribed units after a debt was incurred should necessarily be held to indemnify the trustee for that debt in the event of the trustees insolvency).

Source

[Halsbury's Laws of Australia]

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(IV) Enforceability of Indemnity against the Settlor The paragraph below is current to 20 April 2012 [430-3785] Recoupment from settlor In the absence of special circumstances, a trustee cannot generally enforce his or her right of indemnity against the settlor because a trust is an alienation of property by the settlor.1 Special circumstances that may justify a departure from the general rule include where: (1) the trust instrument or contract permits a trustee to recoup from the settlor; (2) by virtue of the settlor retaining a wide power to direct the trustee, the relationship between settlor and trustee may be characterised as one of principal and agent;2 or

(3) the settlor is a beneficiary (or an assignee of a beneficiary).3 Notes 1 Fraser v Murdoch (1881) LR 6 App Cas 855 at 872; 45 LT 417 per Lord Blackburn, HL. As to the nature of the right to indemnity see [430-3730]. 2 A person can be both a trustee and agent: R v Hopkins (1915) 20 CLR 464 at 475-6 per Isaacs and Gavan Duffy JJ .3 As to the enforceability of indemnity against beneficiaries see [4303775]-[430-3782].

Source

[Halsbury's Laws of Australia]

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(V) Denial or Reduction of Right to Indemnity The paragraph below is current to 20 April 2012

[430-3790] Breach of trust A trustees right to indemnity and reimbursement may be denied or reduced where the trustee has committed a breach of trust relating to the subject matter of the indemnity.1 For example, it will be denied in respect of trust assets which the trust instrument does not authorise the trustee to use for the purposes of carrying on the activity for which the debt was incurred.2 The trustee must provide compensation to the trust for that breach prior to being entitled to exercise his or her right of indemnity in relation to it,3 unless the quantum of the indemnity exceeds the compensation, in which case the trustee can directly recover the excess from the trust estate.4 Conversely, the right to indemnity and reimbursement may not necessarily be reduced or denied where the breach represented a mere oversight or error of judgment with no hint of dishonesty,5 or where the beneficiaries adopt a transaction effected by the trustee in breach of trust.6

The priority over the beneficiaries interest which the trustees charge or lien ordinarily carries will be lost where the trustee has mixed his or her own money with trust money,7 or has expended his or her own money together with trust money in the purchase or improvement of trust property.8

Notes 1 Benett v Wyndham (1862) 4 De GF & J 259; 45 ER 1183; Re Johnson; Shearman v Robinson (1880) 15 Ch D 548 at 552 per Jessel MR; Re Raybould; Raybould v Turner [1900] 1 Ch 199; (1899) 82 LT 46; 48 WR 301; Ecclesiastical Commissioners v Pinney [1900] 2 Ch 736 at 742-3 per Rigby LJ, CA; Re Spurlings Will Trusts; Philpot v Philpot [1966] 1 All ER 745 at 755, 758; [1966] 1 WLR 920 per Ungoed-Thomas J, Ch; Re Staff Benefits Pty Ltd and the Companies Act [1979] 1 NSWLR 207 at 214; (1979) 4 ACLR 54; (1979) CLC 40-531 per Needham J; RWG Management Ltd v Cmr for Corporate Affairs [1985] VR 385 at 396-7 per Brooking J; Strachan v Marriott [1995] 3 NZLR 272 at 278 per Hardie-Boys J, CA(NZ). 2 Strickland v Symons (1884) 26 Ch D 245 at 248 per Lord Selborne LC, CA; Dowse v Gorton [1891] AC 190; [1891-94] All ER Rep 1230; (1891) 64 LT 809; Re Anderson; Ex parte Alexander (1927) 27 SR (NSW) 296 at 299; 44 WN (NSW) 69 per Long Innes J; Re Geary; Sandford v Geary [1939] NI 152 at 157 per Andrew LCJ. 3 Lewis v Trask (1882) 21 Ch D 862; Re Basham; Hannay v Basham (1883) 23 Ch D 195; McEwan v Crombie (1883) 25 Ch D 175; Re Knott; Bax v Palmer (1887) 56 LJ Ch 318; Doering v Doering (1889) 42 Ch D 203; Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319 at 336; 19 ALJ 380; [1946] ALR 50 per Dixon J; RWG Management Ltd v Cmr for Corporate Affairs [1985] VR 385 at 397 per Brooking J; Holli Managed Investments Pty Ltd v Australian Securities Commission (1998) 90 FCR 341; 160 ALR 409; 30 ACSR 113 at 124 per Finkelstein J; Australian Securities and Investments Commission v Letten (No 17) (2011) 286 ALR 346; 87 ACSR 155; [2011] FCA 1420; BC201109904 at [19], [20] per Gordon J (terming this the clear accounts rule). 4 Re Evans; Evans v Evans (1887) 34 Ch D 597 at 602 per Cotton LJ, CA; Re Kidd; Kidd v Kidd (1894) 70 LT 648 at 649; 42 WR 571 per Kekewich J; Re Dacre; Whitaker v Dacre [1916] 1 Ch 344 at 348 per Phillimore LJ, CA; RWG Management Ltd v Cmr for Corporate Affairs [1985] VR 385 at 397-8 per Brooking J. 5 Nolan v Collie (2003) 7 VR 287; [2003] VSCA 39; BC200301883 at [53]-[58] per Ormiston JA; Australian Securities and Investments Commission v Letten (No 17) (2011) 286 ALR 346; 87 ACSR 155; [2011] FCA 1420; BC201109904 at [17], [18] per Gordon J (distinguishing between core duties and duties relating to the day-to-day management of the trust). 6 Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566 at 609; [2001] FCA 1628; BC200107154 (affirmed Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) [2002] FCAFC 285; BC200206793). 7 Re Halletts Estate; Knatchbull v Hallett (1880) 13 Ch D 696; [1874-80] All ER Rep 793, CA; Re Oatway; Hertslet v Oatway [1903] 2 Ch 356; (1903) 88 LT 622; James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62; [1914-15] All ER Rep Ext 1735; Re Tilleys Will Trusts; Burgin v Croad [1967] Ch 1179; [1967] 2 All ER 303; [1967] 2 WLR 1533; Australian Receivables Ltd v Tekitu Pty Ltd (Subject to Deed of Co Arrangement) (Deed Admin Apptd) [2011] NSWSC 1306; BC201109588 at [144][162] per Ward J. As to following trust property see [430-5305].

8 Re Pumfrey (decd); Worcester City and County Banking Co v Blick (1882) 22 Ch D 255. The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation

For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations

[430-3795] Provision in the trust instrument It appears that the trustees right to indemnity and reimbursement cannot be ousted by the terms of the trust instrument. This is made explicit by the Queensland legislation, which states that the statutory right of indemnity applies irrespective of anything to the contrary in the trust instrument,1 and in the Northern Territory legislation, which is amenable to a construction that the statutory right of indemnity applies without prejudice to the terms of the trust instrument.2 In the remaining jurisdictions, that the statutory right is not explicitly made subject to the trust instrument suggests that it cannot be excluded by it.3 Notes 1 (QLD) Trusts Act 1973 s 65. See also Kemtron Industries Pty Ltd v Cmr of Stamp Duties (Qld) [1984] 1 Qd R 576 at 585 per McPherson J, SC(QLD), Full Court; Jessup v Queensland Housing Commission [2002] 2 Qd R 270 at 275; [2001] QCA 312; BC200104671 per McPherson JA. 2 (NT) Trustee Act 1893 s 26. 3 See Moyes v J & L Developments Pty Ltd (No 2) (2007) 250 LSJS 61; [2007] SASC 261; BC200705377 at [40] per Debelle J; JA Pty Ltd v Jonco Holdings Pty Ltd (2000) 33 ACSR 691 at 706, 71314; [2000] NSWSC 147; BC200001022 per Santow J; Agusta Pty Ltd v Provident Capital Ltd [2012] NSWCA 26; BC201201168 at [39] per Barrett JA. Compare McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 640-1; 9 ACLR 926 per Young J; RWG Management Ltd v Cmr for Corporate Affairs [1985] VR 385 at 395 per Brooking J; Swart v Carr [2006] NSWSC 1302; BC200609963 at [60] per Palmer J; Tindon Pty Ltd v Adams [2006] VSC 172; BC200603669 at [34]-[37], [41] per Hargrave J. The paragraph below is current to 20 April 2012

[430-3800] Overpayment A trustee who overpays some beneficiaries is not entitled to recoup from the trust estate any shortfall due to the remaining beneficiaries met out of his or her own pocket.1 Distributions to beneficiaries entitle a trustee to a receipt, not an indemnity.2 However, a trustee who is induced by a beneficiary to prematurely hand over that beneficiarys entitlement under the trust may be entitled to an indemnity.3 Notes 1 Re Aspinall; Stephenson v Anderson (1913) 30 WN (NSW) 215. 2 Moody v Simpson (1895) 21 VLR 244 at 248 per Madden CJ. 3 Moody v Simpson (1895) 21 VLR 244 at 248 per Madden CJ.

Source [Halsbury's Laws of Australia]

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(B) Protection Against Liability (I) Protection against Liability in respect of Rents and Covenants The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3805] Protection against liability in respect of rents and covenants after distribution An executor who enters into possession of leasehold properties is, by virtue of privity of estate,

rendered personally liable for the covenants contained in the leases.1 At general law, protection from this liability was afforded by the practice of the court to order a sum to be set aside against any claims which might be made against the executors.2 In all jurisdictions except the Northern Territory and Tasmania, where a leasehold or freehold estate in land is trust property, and the trustee properly assigns or conveys that property, the trustee is protected against contingent liabilities in relation to rents and covenants contained in the lease or prior conveyance.3 If a trustee, including an executor or personal representative, who is liable as such4 in respect of rents, covenants or agreements contained in a lease, 5 has satisfied all present liabilities relating to it and has set aside an amount sufficient to meet any future claim that may be made in respect of the lease, he or she may distribute those assets of the estate remaining in his or her hands among the parties entitled without appropriating any further part to meet any future liability thereunder and without personal liability in respect of any subsequent claim under the lease. The Queensland, South Australian, Victorian and Western Australian provisions are expressed to apply irrespective of anything to the contrary in the will or trust instrument.6 It would appear that the same is the case in the Australian Capital Territory and New South Wales.7 Notes 1 Re Owers; Public Trustee v Death [1941] Ch 389 at 390; [1941] 2 All ER 589 at 590; (1941) 110 LJ Ch 157 per Simonds J . As to covenants in leases see leases and tenancies [245-3000]-[245-3010]. 2 Re Owers; Public Trustee v Death [1941] Ch 389 at 390; [1941] 2 All ER 589 at 590; (1941) 110 LJ Ch 157 per Simonds J .3 (ACT) Trustee Act 1925 s 61; (ACT) Administration and Probate Act 1929 s 66 (NSW) Trustee Act 1925 s 61; (NSW) Probate and Administration Act 1898 s 94 (QLD) Trusts Act 1973 s 66 (SA) Trustee Act 1936 s 30 (VIC) Trustee Act 1958 s 32 (WA) Trustees Act 1962 s 62. 4 With the exception of Queensland, the legislative protection is confined to personal representatives or trustees who are liable as such, that is, liable in their capacity as personal representatives or trustees. A personal representative who enters into possession of the deceaseds leaseholds incurs, in addition to his or her liability as a personal representative, the liability of an assignee of the term. The legislation does not purport to provide protection against the personal representatives personal liability for the obligations contained in the lease arising from the privity of estate thereby created. In this situation, the court will order that a sum be set aside for the protection of executors against any claims which might be made against them in that respect: Re Owers; Public Trustee v Death [1941] Ch 389 at 391; [1941] 2 All ER 589; (1941) 110 LJ Ch 157 per Simonds J ; Re Bennett; Midland Bank Executor and Trustee Co Ltd v Fletcher [1943] 1 All ER 467 , Ch. As to leaseholds generally see leases and tenancies. The Queensland provision, instead of referring to liability as such, adopts the phrase for any reason liable. Hence, the foregoing limitation does not apply in Queensland, meaning that the protection for personal representatives is more extensive in that jurisdiction.

5 For the purposes of the statutory protection, the term lease includes an under-lease and an agreement for lease: (ACT) Administration and Probate Act 1929 s 66 (NSW) Probate and Administration Act 1898 s 94 (QLD) Trusts Act 1973 s 66(3) (SA) Trustee Act 1936 s 30(5) (VIC) Trustee Act 1958 s 32(3) (WA) Trustees Act 1962 s 62(4). As to rent see leases and tenancies [245-3065]-[245-3160]. As to agreements for lease see leases and tenancies [245-165]-[245-180]. 6 (QLD) Trusts Act 1973 s 65 (SA) Trustee Act 1936 s 30(3) (VIC) Trustee Act 1958 s 32(2) (WA) Trustees Act 1962 s 62(3). 7 The Australian Capital Territory and New South Wales provisions are not made subject to the trust instrument, and, in light of the numerous provisions in those jurisdictions which are expressly made subject to the trust instrument, its absence in this context can support the inference that the protection cannot be excluded by the trust instrument: (ACT) Administration and Probate Act 1929 s 66 (NSW) Probate and Administration Act 1898 s 94. The paragraph below is current to 20 April 2012 To update legislation see ACL Legislation For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations [430-3810] No prejudice to right to trace The legislative protection conferred on personal representatives and trustees in respect of rents and covenants after distribution does not prejudice the right of the lessor and the persons deriving title under the lessor to follow the trust property into the hands of the persons to whom the property has been distributed.1 Notes 1 (ACT) Trustee Act 1925 s 61(2) (NSW) Trustee Act 1925 s 61(2) (QLD) Trusts Act 1973 s 66(2) (SA) Trustee Act 1936 s 30(2)(a) (VIC) Trustee Act 1958 s 32(2)

(WA) Trustees Act 1962 s 62(3). There are no equivalent provisions in the Northern Territory and Tasmania.

Source

[Halsbury's Laws of Australia]

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(II) Protection by Means of Advertisements The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation

For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations

[430-3815] General Where a trustee1 intends to convey or distribute any property to or among the persons entitled to that property, the trustee may advertise in the prescribed manner and form2 the intention so to convey or distribute the property. At the expiration of the time fixed by the advertisement the trustee may convey or distribute the property to or among the persons entitled to it, having regard only to the claims of which he or she then had notice. Where the requisite procedure is followed, the trustee is not liable in respect of the property conveyed or distributed to any person of whose claim the trustee did not have notice3 at the time of the conveyance or distribution.4 A trustee who has followed the prescribed procedure is in the same position as if he or she had administered the estate under a decree of the court.5 However, an advertisement in the prescribed form will not protect a trustee who disregards a notice disputing the validity of the will on the grounds that he or she believes that the claim against its validity is unfounded,6 nor will it protect a trustee from liabilities of which he or she has notice even though no claim has been received in

respect of it.7 The foregoing protection applies notwithstanding anything to the contrary in the trust instrument.8 Notes 1 For the purposes of the trustee legislation the term trustee includes a legal personal representative or executor: (ACT) Trustee Act 1925 s 5 (legal representative)

(NT) Trustee Act 1893 s 82 (representative)

(NSW) Trustee Act 1925 s 5 (legal representative)

(QLD) Trusts Act 1973 s 5 (personal representative)

(SA) Trustee Act 1936 s 4 (personal representative)

(TAS) Trustee Act 1898 s 4 (personal representative)

(VIC) Trustee Act 1958 s 3 (personal representative)

(WA) Trustees Act 1962 s 6 (representative of the deceased).

This does not, however, function so as to augment the scope of executorial authority, or to confer upon an executor the authority to invoke the assistance of the court in relation to matters that may be outside his or her province: Re Moran (decd) [1950] SASR 209 at 213 per Mayo J.

2 In Queensland, Tasmania, Victoria and Western Australia the trustee legislation contains the prescribed manner and form of the advertisement: (QLD) Trusts Act 1973 s 67(1)

(TAS) Trustee Act 1898 s 25A(2)-(4)

(VIC) Trustee Act 1958 s 33(1), 33(2)

(WA) Trustees Act 1962 s 63(1), 63(4), 63(5), Sch 2.

In the Australian Capital Territory a trustee must publish a notice in the prescribed form in order to comply with the (ACT) Administration and Probate Act 1929 s 64: (ACT) Trustee Act 1925 s 60(2), 60(3).

In the Northern Territory and South Australia the trustee must give such notices as would have been given by the court in an administration suit:

(NT) Trustee Act 1893 s 22(1)

(SA) Trustee Act 1936 s 29(1).

In New South Wales the form of the advertisement is prescribed by the rules of court: (NSW) Trustee Act 1925 s 60(1), 60(8); (NSW) Supreme Court Rules Pt 78 r 91.

3 In this context notice is to be distinguished from knowledge, and so it is possible that a trustee who lacks actual knowledge of a claim may nonetheless not receive statutory protection: see, for example, MCP Pension Trustees Ltd v Aon Pension Trustees Ltd [2010] 2 WLR 268; [2009] PLR 247; [2009] EWHC 1351 (Ch) (where it was held that a trustee who forgot a fact of which he or she had notice at a prior time would not have the effect of negating notice of it for the purposes of the statutory provisions) (affirmed MCP Pension Trustees Ltd v Aon Pension Trustees Ltd [2012] Ch 1; [2011] 3 WLR 455; [2010] EWCA Civ 377). 4 (ACT) Trustee Act 1925 s 60 (NT) Trustee Act 1893 s 22

(NSW) Trustee Act 1925 s 60

(QLD) Trusts Act 1973 s 67

(SA) Trustee Act 1936 s 29 (see Re IOOF Australia Trustees Ltd and Australian Tourist Property Trust (1999) 75 SASR 290 at 296-7; 206 LSJS 60; [1999] SASC 541; BC9908596 per Wicks J)

(TAS) Trustee Act 1898 s 25A

(VIC) Trustee Act 1958 s 33

(WA) Trustees Act 1962 s 63.

As to protection for trustee companies see [430-3830].

5 Clegg v Rowland (1866) LR 3 Eq 368; Hunter v Young (1879) 4 Ex D 256, CA. 6 Guardian Trust and Executors Co of New Zealand Ltd v Public Trustee of New Zealand [1942] AC 115; [1942] 1 All ER 598, PC. 7 Re Land Credit Co of Ireland (Markwells Case) (1872) 21 WR 135. 8 (QLD) Trusts Act 1973 s 60 (TAS) Trustee Act 1898 s 25A(8)

(VIC) Trustee Act 1958 s 33(4)

(WA) Trustees Act 1962 s 63(8).

Although there is no express provision to this effect in the remaining jurisdictions, the absence of a provision to the contrary dictates that the position in those jurisdictions is likewise.

The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation

For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations

[430-3820] No prejudice to right to trace or relief from searches The legislative protection afforded to trustees by means of advertisements does not prejudice the right of any person to follow the trust property into the hands of the persons to whom the property has been distributed.1 In Queensland, Tasmania and Victoria it is further provided that such protection does not relieve trustees of any obligation to make searches or obtain certificates of search similar to those which an intending purchaser would be advised to make or obtain.2

Notes 1 (ACT) Trustee Act 1925 s 60(6) (NT) Trustee Act 1893 s 22(3)

(NSW) Trustee Act 1925 s 60(6)

(QLD) Trusts Act 1973 s 67(4)(a)

(SA) Trustee Act 1936 s 29(3)

(TAS) Trustee Act 1898 s 25A(7)

(VIC) Trustee Act 1958 s 33(3)(a)

(WA) Trustees Act 1962 s 63(2).

As to protection by means of advertisement generally see [430-3815]. As to protection for trustee companies see [430-3830].

2 (QLD) Trusts Act 1973 s 67(4)(b) (TAS) Trustee Act 1898 s 25A(7)

(VIC) Trustee Act 1958 s 33(3)(b).

The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation

For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations

[430-3825] Disputed claims Where a personal representative (or trustee in all jurisdictions except the Australian Capital Territory, New South Wales and Victoria) receives a notice of claim against the estate of a deceased person or against a trust property which he or she disputes, the personal representative or trustee may give to the claimant a notice in writing requiring the claimant either to withdraw the claim or to institute proceedings to enforce it within a specified period of the date of service of the latter notice.1 If the claim is not withdrawn or prosecuted, the personal representative or trustee may apply to the court for an order that the claim be absolutely barred.2 Notes 1 The specified period is three months in New South Wales, Victoria and Western Australia, and six months in the remaining jurisdictions. 2 (ACT) Administration and Probate Act 1929 s 65 (NSW) Probate and Administration Act 1898 s 93

(NT) Trustee Act 1893 s 22(2)

(QLD) Trusts Act 1973 s 68

(SA) Trustee Act 1936 s 29(2)

(TAS) Trustee Act 1898 s 25A(5), 25A(6)

(VIC) Administration and Probate Act 1958 s 30

(WA) Trustees Act 1962 s 64.

See Re Barber [1924] VLR 123; In the Will of Walker (1943) 43 SR (NSW) 305.

The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation

For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations

[430-3830] Protection for trustee companies The trustee companies1 legislation in Queensland, Tasmania and Victoria provides that where: (1) a trustee company has been granted probate of a will or administration of an estate; (2) the trustee company has been informed of the existence at any time of a person who, if the person had survived the testator or intestate, would have been entitled to a legacy under the will or to the whole or a distributive share of the estate; and (3) neither the person referred to in list point (2) nor any person claiming through that person or as one of that persons issue has made a claim in respect of such legacy estate or share within three years after the grant of probate or administration, the trustee company may, after advertising as prescribed by the section, without being under any liability to the person or to any person claiming through the person or to the persons issue, distribute the estate as if such first mentioned person had predeceased the testator or intestate without issue.2 In Queensland and Tasmania, the trustee company must, prior to making the said distribution, submit a report to a judge setting out the material facts relating to the matter and obtain a direction from the judge as to the number, location, form and frequency of advertisements.3

In Victoria there is no obligation on the trustee company to submit such a report or seek such directions, although it may do so.4

The foregoing does not prejudice the right of any person to follow the assets into the hands of the persons who have received the same.5

Notes 1 As to trustee companies generally see [430-3085]-[430-3105]. 2 (QLD) Trustee Companies Act 1968 s 33 (TAS) Trustee Companies Act 1953 s 27

(VIC) Trustee Companies Act 1984 s 44.

3 (QLD) Trustee Companies Act 1968 s 33(2) (TAS) Trustee Companies Act 1953 s 27(2).

4 (VIC) Trustee Companies Act 1984 s 44(2). 5 (QLD) Trustee Companies Act 1968 s 33(3) (TAS) Trustee Companies Act 1953 s 27(3)

(VIC) Trustee Companies Act 1984 s 44(4).

There are no equivalent provisions in the other jurisdictions.

The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation

[430-3835] Distribution of shares of missing beneficiaries Where an executor or administrator seeks to distribute an estate but it is not known whether a particular beneficiary has survived the testator, the court may make an order enabling the executor to make such distribution on the premise that the missing beneficiary has predeceased the testator, without prejudice to the rights of that beneficiary or his or her family, should it later prove that the premise was incorrect.1 The Western Australian trustee legislation contains a detailed statutory equivalent of the foregoing jurisdiction2 in prescribing a procedure for the protection of the trustee against possible claimants who remain unknown or unfound at the time of distribution despite advertisement and due inquiries, but not against claimants who are then known to the trustee, whether as a result of advertisement or otherwise.3 Where distribution cannot be made because it is not known to the trustees:

(1) whether any person or class of persons who is or may be entitled is in existence, or has ever been in existence; or (2) whether any person or member of any class is alive or dead, or where such person is, the trustee may advertise for every such person to send in his or her claim within a specified time not less than two months from the date of the advertisement.4

A trustee who receives a claim which he or she believes is not valid may serve a notice requiring the claimant to take legal proceedings to enforce the claim within a period of three months from the date of service of the notice; otherwise his or her claim may be disregarded and application made to the court for an order authorising the distribution of the property.5 Upon proof of the making and results of the advertisements and inquiries, and of the action (if any) that claimants have taken to

enforce their claims, the court may order that the trustee be at liberty to distribute the property as if every person specified in the order is not in existence or never existed or has died before a date or event specified in the order, subject to such conditions as the court may impose.6

Notes 1 This order is termed a Benjamin order after the case of Re Benjamin; Neville v Benjamin [1902] 1 Ch 723 (followed Re Philpotts Trusts [1940] QWN 23, SC(QLD)); In the Will of Walker (1943) 43 SR (NSW) 305; Re Watkinson (decd) [1952] VLR 123; [1952] ALR 361; Re Dolling (decd) [1956] VLR 535; Lempens v Reid [2009] SASC 179; BC200905686 at [32], [33] per Gray J. 2 (WA) Trustees Act 1962 s 66. 3 Re Sheridan (decd) [1959] NZLR 1069 at 1074-6 per Cleary J, CA(NZ); Nolan as Administratrix of Estate of Nolan (decd) v Nolan [2011] WASC 224; BC201106769. 4 (WA) Trustees Act 1962 s 66(1). 5 Ibid s 66(3). 6 Ibid s 66(4).

Source [Halsbury's Laws of Australia]

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(C) Payment into Court The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation

For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations

[430-3840] Payment into court Where the trustees1 or the majority of trustees have in their hands or under their control money or securities belonging to a trust, they may pay the same into court.2 Where any money or securities are vested in any persons as trustees, and the majority wish to pay the same into court but the concurrence of the others cannot be obtained, the court may order the payment into court to be made by the majority without the concurrence of the others.3 Where any such money or securities are deposited with any financial institution, broker or other depositary, the court may order the transfer, payment or delivery of the money or securities to the majority of the trustees for the purpose of payment into court,4 which takes effect as if the order had been made by or on the authority of the persons entitled to the money or securities in question.5 Payment into court should be made into a separate account.6 If the court cannot be satisfied that there is no other claimant to the money paid into court, or alternatively that all other possible claimants have been notified and have not come in, the court will ordinarily refer the matter to the master to make such inquiries as he or she considers appropriate.7 Such an inquiry may be dispensed with where the court is under no such apprehension.8

Notes 1 The payment into court procedure cannot be resorted to by persons or bodies holding money otherwise than as trustees (see Matthew v Northern Assurance Co (1878) 9 Ch D 80), such as bankers (see Re Thakeham Sequestration Moneys (1871) LR 12 Eq 494; Re Suttons Trusts (1879) 12 Ch D 175) and purchasers from trustees: Re Buckleys Trust (1853) 17 Beav 110; 51 ER 974. 2 (ACT) Trustee Act 1925 s 95(1) (NT) Trustee Act 1893 s 44(1)

(NSW) Trustee Act 1925 s 95(1)

(QLD) Trusts Act 1973 s 102(1)

(SA) Trustee Act 1936 s 47(1)

(TAS) Trustee Act 1898 s 48(1)

(VIC) Trustee Act 1958 s 69(1)

(WA) Trustees Act 1962 s 99(1).

In this context, the Northern Territory and South Australian legislation applies also to mortgagees. Any reference to payment into court in relation to stocks and securities includes the deposit or transfer of the same in or into court:

(ACT) Trustee Act 1925 ss 2, 94F Dictionary

(NT) Trustee Act 1893 s 82

(NSW) Trustee Act 1925 s 5

(QLD) Trusts Act 1973 s 5

(SA) Trustee Act 1936 s 4

(TAS) Trustee Act 1898 s 4

(VIC) Trustee Act 1958 s 3

(WA) Trustees Act 1962 s 6.

3 (ACT) Trustee Act 1925 s 95(2) (NT) Trustee Act 1893 s 44(3)

(NSW) Trustee Act 1925 s 95(2)

(QLD) Trusts Act 1973 s 102(3)

(SA) Trustee Act 1936 s 47(4)

(TAS) Trustee Act 1898 s 48(3)

(VIC) Trustee Act 1958 s 69(3)

(WA) Trustees Act 1962 s 99(3).

4 (ACT) Trustee Act 1925 s 95(3) (NT) Trustee Act 1893 s 44(3)

(NSW) Trustee Act 1925 s 95(3)

(QLD) Trusts Act 1973 s 102(4)

(SA) Trustee Act 1936 s 47(4)

(TAS) Trustee Act 1898 s 48(3)

(VIC) Trustee Act 1958 s 69(4)

(WA) Trustees Act 1962 s 99(4).

5 (ACT) Trustee Act 1925 s 95(4) (NT) Trustee Act 1893 s 44(3)

(NSW) Trustee Act 1925 s 95(4)

(QLD) Trusts Act 1973 s 102(5)

(SA) Trustee Act 1936 s 47(4)

(TAS) Trustee Act 1898 s 48(3)

(VIC) Trustee Act 1958 s 69(5)

(WA) Trustees Act 1962 s 99(5).

6 Re Josephs Will (1850) 11 Beav 625; 50 ER 958; Re Everett (1850) 12 Beav 485; 50 ER 1146. 7 AVCO Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679 at 681 per Young J. 8 AVCO Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679 at 681 per Young J. The paragraph below is current to 20 April 2012

[430-3845] Circumstances where payment into court is appropriate In view of the comparative ease with which trustees can generally retire either pursuant to the trust instrument or statute,1 payment into court is a last resort. Prior to paying money into court, the trustees should consider whether an originating summons to determine the point may be more prudent.2 Payment into court may be justifiable where: (1) there is a real doubt as to the person entitled;3 (2) there are conflicting claims to the money;4 or (3)

the trustee cannot obtain a discharge,5 such as in the case of a beneficiary who is an infant,6 is incapable7 or unable to be found.8 A trustee is not justified in paying money into court:

(1) in order to avoid a threatened action against him or her9 or avoid a liability that he or she has undertaken to perform;10 (2) where the existence and location of the person entitled is not in doubt;11 (3) where the beneficiaries have declined to execute a release;12 or (4) on the basis of claims that are clearly unfounded.13

A trustee who pays money into court without justification may be refused his or her costs in connection with it and may be ordered to pay the costs of the proceedings for obtaining the payment of the money out of court.14

The court itself has an inherent power to order that a trust fund be paid into court where it is necessary or expedient for the preservation of the trust estate or the due performance of the trust.15 This may be the case where, for example, the trustees are unable to agree on issues pertaining to the performance of the trust.16

Notes 1 As to the retirement of trustees see [430-3605]-[430-3630]. 2 Re Giles (1886) 55 LJ Ch 695. As to the originating summons procedure see [430-5090].

3 Re Wyllys Trust (1860) 28 Beav 458; 54 ER 442; Re Brocklesby (1861) 29 Beav 652; 54 ER 781; Re Metcalfes Trusts (1864) 2 De GJ & Sm 122; 46 ER 321; Hockey v Western [1898] 1 Ch 350, CA; Re Davies Trusts (1914) 59 Sol Jo 234; Lake v Bayliss [1974] 2 All ER 1114; [1974] 1 WLR 1073, Ch. 4 Re Headingtons Trust (1857) 27 LJ Ch 175; Re Davies Trusts (1914) 59 Sol Jo 234; Harmer v FCT (1991) 173 CLR 264; 104 ALR 117; Andrew Garrett Wine Resorts Pty Ltd v National Australia Bank Ltd (No 7) (2005) 227 ALR 113; 243 LSJS 20; [2005] SASC 455; BC200510466. 5 As to the discharge of trustees see [430-3870].

6 Re Hodges (1855) 4 De GM & G 491; 43 ER 599. 7 Re Biddulphs Trusts (1852) 5 De G & Sm 469; 64 ER 1202; Re Parkers Will (1888) 39 Ch D 303, CA. 8 Re Elliots Trusts (1873) LR 15 Eq 194 at 197 per Malins VC. 9 Re Faggs Trust (1850) 19 LJ Ch 175; Re Waring (1852) 16 Jur 652; 21 LJ Ch 784; Re Macleans Trusts (1874) LR 19 Eq 274 at 282 per Jessel MR. 10 Re Leakes Trusts (1863) 32 Beav 135; 55 ER 53; Re Elliots Trusts (1873) LR 15 Eq 194. 11 Re Elliots Trusts (1873) LR 15 Eq 194. 12 Re Roberts Trusts (1869) 38 LJ Ch 708; Re Fortunes Trusts; Ex parte Brennan (1870) IR 4 Eq 351; Re Hoskins Trusts (1877) 5 Ch D 229. 13 Re Thakeham Sequestration Moneys (1871) LR 12 Eq 494. 14 Re Faggs Trust (1850) 19 LJ Ch 175; Re Bendyshe (1857) 3 Jur NS 727 at 728; 26 LJ Ch 814 at 816 per Kindersley VC; Re Leakes Trusts (1863) 32 Beav 135; 55 ER 53; Re Culls Trusts (1875) LR 20 Eq 561 at 564 per Jessel MR. 15 Symonds v Jenkins (1876) 34 LT 277; 24 WR 512, Ch; Porrett v White (1885) 31 Ch D 52; 53 LT 514, CA (but see Re Wright; Kirke v North [1895] 2 Ch 747; (1895) 73 LT 396); Re Carrs Trusts; Carr v Carr [1904] 1 Ch 792, CA. 16 In the Estate of Just (decd) (No 1) (1973) 7 SASR 508 at 514 per Jacobs J. The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation

For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations

[430-3850] Effect of payment into court The payment of money or securities into court must, subject to the rules of court, be dealt with according to the orders of the court,1 and the receipt or certificate of a registrar of the proper officer of the court is a sufficient discharge to any trustee for money or securities paid into court.2 The foregoing has been described as a type of interpleader procedure whereby a trustee can discharge its liability to the beneficiaries of the trust by paying the money into court where there is some uncertainty or difficulty about the payment of those monies to the rightful beneficiaries.3 Accordingly, payment into court relieves a trustee as against claimants on the fund so paid.4 However, payment into court does not relieve a trustee from liability for trust account defalcations5 or other breaches of trust.6 Notes 1 (ACT) Trustee Act 1925 s 98(1), 98(3) (NT) Trustee Act 1893 s 44(1)

(NSW) Trustee Act 1925 s 98(1), 98(3)

(QLD) Trusts Act 1973 s 102(1)

(SA) Trustee Act 1936 s 47(2)

(TAS) Trustee Act 1898 s 48(1)

(VIC) Trustee Act 1958 s 69(1)

(WA) Trustees Act 1962 s 99(1).

See In the Estate of Lyon (1900) 21 LR (NSW) Eq 262 (court may declare rights of all parties on motion for payment into court).

2 (ACT) Trustee Act 1925 s 98(2) (NT) Trustee Act 1893 s 44(2)

(NSW) Trustee Act 1925 s 98(2)

(QLD) Trusts Act 1973 s 102(2)

(SA) Trustee Act 1936 s 47(3)

(TAS) Trustee Act 1898 s 48(2)

(VIC) Trustee Act 1958 s 69(2)

(WA) Trustees Act 1962 s 99(2).

3 Blake v Leondiou (No 2) [2011] SASC 152; BC201107363 at [9] per Lunn J. 4 Re Jephson (1859) 1 LT 5. 5 Goode v West (1851) 9 Hare 378; 68 ER 554; Beaty v Curson (1868) LR 7 Eq 194. 6 Re Waring (1852) 16 Jur 652; 21 LJ Ch 784; Thorp v Thorp (1855) 1 K & J 438; 69 ER 530; Attorney-General v Alford (1855) 4 De GM & G 843; 43 ER 737, HL. The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation

For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations

[430-3855] Payment into court of money of certain persons under disability In the Australian Capital Territory, New South Wales and Tasmania where a minor or person of unsound mind is entitled to any money payable in discharge of any property conveyed under the trustee legislation, the person by whom the money is payable may pay the money into court.1 Notes 1 (ACT) Trustee Act 1925 s 96 (NSW) Trustee Act 1925 s 96

(TAS) Trustee Act 1898 s 49.

The paragraph below is current to 20 April 2012

To update legislation see ACL Legislation

For information on (CTH), (NSW), (QLD) and (VIC) Acts cited in this paragraph see Statutes Annotations

[430-3860] Payment into court by board of directors of life assurance company New South Wales In New South Wales, trustee legislation specifically permits the board of directors of a life assurance company1 to pay into court money payable by that company under a life policy2 in respect of which no sufficient discharge can otherwise be obtained.3 If the court considers that such payment was made without reasonable grounds, it may order all resulting costs to be paid by the company.4

Notes 1 For the purposes of the section, life assurance company means any corporation, company, or society carrying on the business of life assurance, not being a friendly society: (NSW) Trustee Act 1925 s 97(3). 2 For the purposes of the section, life policy includes any policy not foreign to the business of life assurance: ibid s 97(3). 3 Ibid s 97(1). 4 Ibid s 97(2).

Source [Halsbury's Laws of Australia]

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(D) Proceedings to Enforce Rights of Trust The paragraph below is current to 20 April 2012

[430-3865] Right of trustee to sue in tort or breach of contract As a general rule, it is the trustee, and (except as regards breaches of trust)1 the trustee alone, who must take any appropriate proceedings to protect the trust estate and enforce rights belonging to it.2 Accordingly, if a third person commits a tort with respect to trust property, it is in general the trustee who maintains an action.3 The trustee can maintain such an action as if he or she were the beneficial owner of the property,4 and the beneficiaries may not be joined as parties.5 However, a beneficiary in possession of trust property may bring an action in tort that is available to a person in possession,6 and a beneficiary who is a life tenant of property may sue for recovery of possession of that property without joining the trustee.7 A trustee holding a contract in trust can maintain such actions on it as he or she could maintain if the contract was held free of the trust.8 As a general rule, the beneficiaries are not necessary parties to the trustees action,9 and beneficiaries cannot sue on a contract held in trust.10 A right of action in tort or contract held by a trustee is capable of passing to, and so becoming enforceable by, his or her successor.11

Notes 1 As to the standing of beneficiaries in this respect see [430-5310]. 2 Lee v Sankey (1873) LR 15 Eq 204; Dean v A-G (Qld) [1971] Qd R 391; Young v Murphy [1996] 1 VR 279; (1994) 13 ACSR 722 at 735; 12 ACLC 558 per Brooking J, SC(VIC), Full Court. 3 Young v Murphy [1996] 1 VR 279; (1994) 13 ACSR 722 at 734; 12 ACLC 558 per Brooking J, SC(VIC), Full Court. 4 Underwood v Pennington (1877) 37 LT 320, PC; Loxton v Moir (1914) 18 CLR 360 at 376; 31 WN (NSW) 108 per Isaacs J; Bushell v Borchard (1917) 17 SR (NSW) 370 at 374; 34 WN (NSW) 158 per Gordon J; Young v Murphy [1996] 1 VR 279; (1994) 13 ACSR 722 at 734; 12 ACLC 558 per Brooking J, SC(VIC), Full Court. 5 Young v Murphy [1996] 1 VR 279; (1994) 13 ACSR 722 at 734; 12 ACLC 558 per Brooking J, SC(VIC), Full Court. 6 Young v Murphy [1996] 1 VR 279; (1994) 13 ACSR 722 at 734; 12 ACLC 558 per Brooking J, SC(VIC), Full Court. 7 Ex parte Middleton [1983] Qd R 170. 8 Potts v Thames Haven Dock and Railway Co (1851) 15 Jur 1004; Porteous v Reynar (1887) LR 13 App Cas 120 at 128; Young v Murphy [1996] 1 VR 279; (1994) 13 ACSR 722 at 734; 12 ACLC 558 per Brooking J, SC(VIC), Full Court. 9 Potts v Thames Haven Dock and Railway Co (1851) 15 Jur 1004; Young v Murphy [1996] 1 VR 279; (1994) 13 ACSR 722 at 734; 12 ACLC 558 per Brooking J, SC(VIC), Full Court. 10 Young v Murphy [1996] 1 VR 279; (1994) 13 ACSR 722 at 734; 12 ACLC 558 per Brooking J, SC(VIC), Full Court. However, if it can be established that the trustee contracted as trustee for a

beneficiary, the beneficiary can enforce the contract: Vandepitte v Preferred Accident Insurance Corp of New York [1933] AC 70 at 79; [1932] All ER Rep 527 at 532-3 per Lord Wright, PC. As to a trust of a contractual promise see Cathels v Cmr of Stamp Duties [1962] SR (NSW) 455, SC(NSW), Full Court; Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107; 80 ALR 574; 62 ALJR 508 at 525-6 per Deane J.

As to contracts and covenants for the benefit of third persons see [430-45].

11 Young v Murphy [1996] 1 VR 279; (1994) 13 ACSR 722 at 735; 12 ACLC 558 per Brooking J, SC(VIC), Full Court. It is for this reason that a new trustee is subject to a duty to get in all the money and property which represents the property of the trust: see [430-4150].

Source [Halsbury's Laws of Australia]

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Top of Form (E) Discharge on Termination of Trust The paragraph below is current to 20 April 2012 [430-3870] Trustees right of release A trustee who has paid the income and capital of the trust strictly in accordance with the terms of the trust instrument may, on the termination of his or her trusteeship, require an acknowledgment that the accounts are settled,1 but is not entitled as of right to a release by deed.2 However, a trustee under an oral trust or a trustee who has been directed to deal with the trust property in a manner not authorised by the trust instrument is entitled to a release by deed.3 In all cases a trustee is entitled to have his or her costs settled prior to the termination of the trust and the distribution of the trust property.4 Notes 1 Chadwick v Heatley (1845) 2 Coll 137; 63 ER 671 ; Re Wrights Trusts (1857) 3 K & J 419; 69 ER 1173 . If such an acknowledgment is refused, the trustee may require the account taken by the court: Chadwick v Heatley (1845) 2 Coll 137; 63 ER 671 . As to termination of a trust see [430-2500]-[430-2520]. 2 King v Mullins (1852) 1 Drew 308 at 311; 61 ER 469 at 471 per Kindersley VC ; Warter v Anderson (1853) 11 Hare 301 at 303; 1 WR 493; 68 ER 1289 at 1290 per Wood VC.3 King v Mullins (1852) 1 Drew 308 at 311; 61 ER 469 at 471 per Kindersley VC . As to releases in respect of breaches of trust see [430-5515]. 4 Re Spurlings Will Trusts; Philpot v Philpot [1966] 1 All ER 745 at 759; [1966] 1 WLR 920 per Ungoed-Thomas J , Ch.

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[Halsbury's Laws of Australia]

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Bottom of Form Top of Form Bottom of Form (F) Retention of Trust Property Against Beneficiaries The paragraph below is current to 20 April 2012 [430-3875] Retainer as against beneficiaries Where a beneficiary: (1) is indebted to the trust estate1 (or to the trustee2 or persons claiming through the trustee);3 (2) has been overpaid;4 or (3) has been a party to a breach of trust,5 the trustee may retain from capital or income of the trust an amount sufficient to satisfy the liability.6 In such a case, the trustee may treat any money in hand forming part of the beneficiarys share as having been notionally paid to the beneficiary on account of the share up to the amount of the debt payable, and as having then been notionally paid back by the beneficiary in discharge pro tanto of the debt.7 The trustee may, therefore, obtain payment of the debt without the assistance of the court by the appointment of a receiver or otherwise.8 A trustee may not, however, retain a beneficiarys share to meet a future debt9 or a debt due to another trust of which he or she is trustee.10 Nor can a trustee exercise this right where he or she has no trust money in hand, although it may be exercised from time to time in respect of income of the share as such income comes to hand.11 Notes 1 Re Akerman; Akerman v Akerman [1891] 3 Ch 212 ; Re Taylor; Taylor v Wade [1894] 1 Ch 671 ; Re Weston; Davies v Tagart [1900] 2 Ch 164 ; Re Wheeler; Hankinson v Hayter [1904] 2 Ch 66 at 71 per Warrington J ; Re Rhodesia Goldfields Ltd; Partridge v Rhodesia Goldfields Ltd [1910] 1 Ch 239 ; Re Towndrow; Gratton v Machen [1911] 1 Ch 662; (1911) 80 LJ Ch 378; 104 LT 534 ; Re Melton; Milk v Towers [1918] 1 Ch 37 at 58; (1917) 117 LT 679 per Scrutton LJ, CA; Re Savage; Clull v Howard [1918] 2 Ch 146 at 148 per Sargant J ; Dodson v Sandhurst & Northern District Trustees Executors and Agency Co Ltd [1955] VLR 100 at 104; [1955] ALR 448 , SC(VIC), Full Court. Compare Re Allison (1900) 1 N & S 169 (where McIntyre J held that a person who owes money to the estate cannot claim an aliquot share in the estate without first making the contribution which completes it). As to the liability of a trustee on overpayment of a beneficiary see [430-4200] (payment of income and corpus) and [430-4205] (recovery by underpaid beneficiaries). 2 Priddy v Rose (1817) 3 Mer 86; 36 ER 33; Smith v Smith (1835) 1 Y & C Ex 338; 160 ER 137; Re Weston; Davies v Tagart [1900] 2 Ch 164 .3 Hallett v Hallett (1879) 13 Ch D 232 at 234 per Fry J ; Re Weston; Davies v Tagart [1900] 2 Ch 164 .4 Downes v Bullock (1858) 25 Beav 54 at 62; 53 ER 556 at 559 per Romilly MR (affirmed Bullock v Downes (1860) 9 HL Cas 1; 11 ER

627 , HL).5 Hallett v Hallett (1879) 13 Ch D 232 ; Re Brown; Dixon v Brown (1886) 32 Ch D 597 ; Doering v Doering (1889) 42 Ch D 203 ; Re Eyton; Bartlett v Charles (1890) 45 Ch D 458; 63 LT 336 ; Re Dacre; Whitaker v Dacre [1916] 1 Ch 344 , CA; In the Estate of Tolley (decd) (1972) 5 SASR 466 at 472 per Walters J .6 This issue may arise where a beneficiary seeks to terminate the trust in respect of his or her aliquot share in the trust fund: see [430-2500][430-2520].7 Re Melton; Milk v Towers [1918] 1 Ch 37; (1917) 117 LT 679 , CA; Re Savage; Clull v Howard [1918] 2 Ch 146 at 148 per Sargant J ; Dodson v Sandhurst & Northern District Trustees Executors and Agency Co Ltd [1955] VLR 100 at 104; [1955] ALR 448 , SC(VIC), Full Court.8 Dodson v Sandhurst & Northern District Trustees Executors and Agency Co Ltd [1955] VLR 100 at 104; [1955] ALR 448 per the court, SC(VIC), Full Court.9 Re Abrahams; Abrahams v Abrahams [1908] 2 Ch 69 .10 Re Bruce; Lawford v Bruce [1908] 2 Ch 682 , CA.11 Re Taylor; Taylor v Wade [1894] 1 Ch 671 ; Re Rhodesia Goldfields Ltd; Partridge v Rhodesia Goldfields Ltd [1910] 1 Ch 239 ; Re Jewells Settlement; Watts v Public Trustee [1919] 2 Ch 161 at 173 ff per Younger J ; Dodson v Sandhurst & Northern District Trustees Executors and Agency Co Ltd [1955] VLR 100 at 104; [1955] ALR 448 , SC(VIC), Full Court.

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[Halsbury's Laws of Australia]

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