LAW 317: Equity and Trusts

Final Examination
43434002


Question 1

Part A

An issue arises as to whether Boardman has an interest in the loan given by Alfred Hastings
(Hastings) to Heavy Mineral Resources Ltd (HMR).

As per Barclays Bank Ltd v Quistclose Investment Ltd
1
a trust can be created which satisfies
the common intention and sole purpose between parties. A mutual intention and sole
purpose can be inferred by the words of the contract, nature of transaction and the partys
relationship.
2
In Salvo v New Tel Ltd
3
mutual intention is strengthened by the conduct of
segregating the funds from general accounts to enforce the sole purpose. Here, HMR
opened a new bank account and deposit the cheque from Hastings, however, it is not stated
whether this is a special bank account assigned to the payment of creditors, nor are we
aware of whether HMR have deposited additional funds general to the business.
Nonetheless, it is to be assumed that HMR have not mixed general transactions and the
bank is aware that account is for the purpose of paying creditors. The sole purpose of the
loan is derived from the terms of the agreement clause (c), which states, it must be used for
the purpose of discharging HMR indebtedness to its two major creditors. The use of the
word must may imply an actual intention for the sole purpose of paying the two major
creditors. Since HMR have agreed to the terms of the loan, mutual intention is evidenced.
HMR entered into liquidation and did not breach the sole purpose. Accordingly, the funds of
$100,000 will be held on primary trust for the payment of the two major creditors.

In conclusion, Boardman will not receive an interest in the loan of $100,000 from Hastings to
HMR as the amount will be held on primary trust for the sole payment of the two major
creditors.

Part B

An issue relates to whether there has been a valid assignment of Hastings interest in the
loan to Boardman.

Hastings has a legal interest of chose in action, being the right of repayment of debt
($100,000) by HMR. As a result, Hastings must satisfy the requirements under section 12 of
the Conveyancing Act 1919 (NSW) for the assignment of the interest to Boardman to be
valid. The first element of clear intention; immediate and irrevocable, is evidenced in the
phone call which states I hereby immediately and irrevocably assign to you!. The
assignment must be absolute, Hastings states that he is to assign all my interest in the loan
of $100,000 thus constituting his absolute interest. Section 23C(1)(a)
4
states that no interest
in land can be disposed of without writing and signed by the assignor, Hastings has not
written or signed this assignment, he has merely orally stated it on the telephone, as such
parol evidence is not sufficient to dispose of the interest. Accordingly, the assignment of
Hastings interest to Boardman is not valid in law.

In equity, Milroy v Lord
5
adopts a two-limb test whereby an assignor is to do all that is
necessary and beyond recall to assign their interest. The first limb is shown in Anning v

1
(1970) AC 567.
2
Re Australian Elizabeth Theatre; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491.
3
(2005) NSWCA 281, 79.
4
Conveyancing Act 1919 (NSW).
5
(1862) 45 ER 1185.


LAW 317: Equity and Trusts
Final Examination
43434002


Anning
6
whereby the assignor must have done all that is necessary to be done to transfer
the property; this involves satisfying all elements relating to the assignor under section 12 of
the Conveyancing Act 1919 (NSW). Vandervell v IRC
7
states that writing requirements under
section 23C(1)(c)
8
does not apply to personal property therefore oral direction is sufficient.
As per above, Hastings failed the tests in section 12
9
as assignment was not executed in
writing, Hastings interest is personal hence allowing for the telephone direction between
himself and Boardman to be sufficient in satisfying this requirement. Although, the second
limb of Milroy v Lord
10
provides that the assignor must have done all beyond the assignors
recall. Hastings has failed to assign the interest beyond his recall as he can merely notify
Boardman that he no longer wishes to assign the interests.

In conclusion, Hastings has failed to assign his interest of right to repayment to Boardman in
both law and equity; the interest remains in Hasting and upon liquidation will be paid
$100,000.


Question 2

Issue 1

An issue arises as to whether Charles has breached confidential information of History
Books Ltd (HB Ltd) by forming his new publishing company Crime Fiction Pty Ltd (CF
P/L).

Megarry J in Coco v A N Clark (Engineers) Ltd
11
provides that information must be
confidential in nature, requiring three elements to be analysed. First, the rule of Smith Kline
& French Laboratories (Aust) Ltd v Secretary, Department of Community Services &
Health
12
states that information which is confidential must be identified with specificity and
not merely with global terms. Here, Charles is employed by HB Ltd; duties are meeting with
history academic staff to submit manuscripts to HB Ltd for publication. Accordingly, Charles
would be in close interactions with academic colleagues and professionals, which could
provide him with confidential information of client contacts and literature material. This
information is not part of the public domain as HB Ltd is considering publication, thus
satisfying a characteristic of confidential information.
13
Secondly, the court adopted a three-
tiered classification of employment information in Faccenda Chicken Ltd v Fowler
14
,
information that lacks detail or is common knowledge will not warrant duties of confidential
information.
15
Prima facie, Charles has received employee know-how which involves
information on the running of the business and industry skills, however this information is
permitted to be used after termination of employment to create his own business. Although,
Del Casale v Artedomus (Aust) Pty Ltd
16
looks at confidential information of trade-secrets;
highly confidential and protected after employment is terminated. Here, Charles received the
contact details of George whilst employed at HB Ltd, this is highly confidential as it sets the
basis for deriving profit for HB Ltd and a competitive edge. Further, George has material in

6
(1907) 4 CLR 1049.
7
(1967) 2 AC 291
8
Conveyancing Act 1919 (NSW).
9
Ibid.
10
(1862) 45 ER 1185.
11
(1969) RPC 41, 47.
12
(1990) 22 FCR 73.
13
Saltman Engineering Co Ltd v Campbell Engineering Co (1948) 65 RPC 203, 215.
14
(1985) 1 All ER 724.
15
Amway Corportation v Eurway Internation Ltd (1974) RPC 82.
16
(2007) 73 IPR 326.


LAW 317: Equity and Trusts
Final Examination
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publishable form, it is of Charles duties to notify HB Ltd of material to be considered for
publication, thus such information is of trade-secrets. Thirdly, information must be obtained
in confidence, as per Hivac Ltd v Park Royal Scientific Instruments Ltd
17
relationships of
employer and employee may warrant duties of confidence. Charles is an employee of HB
Ltd during his day-to-day activities he would have encountered confidential information in
which Charles would have the knowledge of such confidentiality. Accordingly, Charles has a
duty of confidential information owed to HB Ltd.

In order to establish a breach, there must be an actual or threatened misuse of confidential
information without consent to the detriment.
18
Here, Charles used the confidential
information of HB Ltds client contact details to start up his own business CF P/L. This is is to
the detriment of HB Ltd as a profit gained from the client is lost. There are no defences,
equitable damages can be awarded to compensate HB Ltd for the potential profit gained.


Issue 2

The second issue pertains to whether Charles is in breach of fiduciary duties (FD) owed to
George.

Equity is reluctant to intervene commercial relationships, however if theres a relationship of
trust which has been used unconscionably, equity will step-in.
19
Here, George wouldve
placed a high degree of trust in Charles, being the owner of CF P/L and representing
Georges published works, accordingly there may be a fiduciary relationship. In Chan v
Zacharia
20
a breach of FD will occur if a fiduciary is acting within scope and derives a profit,
which should have gone to the person owed FD. Here, Charles has acted within the scope
of relationship and in doing so derived a profit of $50,000 of which is required to be given to
George, prima facie, Charles has used these funds for a holiday which is in breach of the FD
interests and duties owed. There are no defences, equitable remedy is equitable damages
as the funds have been spent by Charles.


Question 3

Issue 1

An issue arises as to whether Enzos interest in the property at Hunter Valley is held on
resulting trust (RT).

Calverly v Green
21
stated that where two or more persons contribute to the purchase of
property, in unequal proportions and registered the property in joint names, equity presumes
that the legal title is held on resulting trust for the purchasers as tenants in common,
proportionate to their contributions. Further, presumption of RT will be valid in voluntary gifts
of realty, with regards to the intention of the partys.
22
In addition, Sivritas v Sivritas
23
states

17
(1946) 1 All.
18
Smith Kline & French Laboratories (Aust) Ltd v Secretary, Department of Community Services &
Health (1990) 22 FCR 73.
19
LAC Mineral Ltd v International Corona Resources Ltd (1989) 2 SCR 574, 597.
20
(1984) 154 CLR 178.
21
(1984) 155 CLR 242.
22
House v Caffyn (1922) VLR 67.
23
(2008) 23 VR 349, 127.


LAW 317: Equity and Trusts
Final Examination
43434002


that upgrades and maintenance will not be considered as contributions unless there was a
common intention between the parties that is enforceable.

In applying these rules, Enzo and Maria have purchased a property in Hunter Valley under
joint names as tenants-in-common with equal shares. Although, Enzo has voluntarily
received this property since Maria has contributed the whole purchase price of $120,000,
nonetheless equity will still recognise a voluntary interest in real property. However, under
Marias suggestion and agreement, Enzo has made upgrades to the shed, which forms part
of the property to the sum of $20,000. This constitutes a common intention between Maria
and Enzo thus $20,000 can form part of the contribution price of the property. Accordingly,
Maria has contributed $120,000 resulting in equitable interest of approximately 85%
(120,000/140,000), whilst Enzo has contributed $20,000 amounting to an equitable interest
of 15% (20,000/140,000) of the Hunter Valley property.

As per section 23C(2) of the Conveyancing Act 1919 (NSW) resulting trusts do not have to
comply with the formalities of writing. In conclusion, a valid resulting trust has been created.

Issue 2

Since Enzo and Marie hold interest in the Hunter Valley estate on resulting trust, the issue
relates to whether Hunter Valley Antivivsection Association have an interest in the property.

Interests of tenants-in-common do not possess the rights of survivorship as each party holds
their interest in property separate to the other party.
24
In Murless v Franklin
25
interests under
resulting trust come into existence at the date of the circumstances that give rise to the
presumption. Here, interests came into existence at date of purchase since a presumption of
resulting trusts arises on the intention of the parties, shown through the joint names
registrations as tenants-in-common, therefore before Marias death. According upon Marias
death her interest of 85% will be held in her estate to form part of her will. Enzo will hold the
remainder 15% interest on resulting trust. Since, the estate forms part of the estate of the
late Maria, Hunter Valley Antivivsection Association receives this interest, thus holding 85%
of the property in Hunter Valley.

In conclusion, Enzo holds 15% of his interests on resulting trusts and Marias interests of
85% are held in her estate, which is transferred to Hunter Valley Antivivsection Association
as per her will.


Question 4

Part A

An issue arises as to whether there is a valid assignment of Julies interest in the property at
Petersham to Elvis.

At law Breskvar v Wall
26
states that for a valid assignment of legal property in Torrens
system there must be an executed memorandum of transfer, in possession of Certificate of
Title, and registration of the new owners as per section 41 of the Real Property Act 1900
(NSW). Here, Julie has duly executed a memorandum of transfer which transfers her
interest in the house at Petersham to her broth Elvis. However, Elvis was unable to obtain

24
The Trustees of the Property of John Daniel Cummins, A Bankrupt v Cummins (2006) HCA 6.
25
(1818) 36 ER 278.
26
(1971) 126 CLR 376.


LAW 317: Equity and Trusts
Final Examination
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the Certificate of Title from Perry & Mason, being the solicitors for Julie and in the
possession of the Certificate of Title. Further, Elvis is not registered as the new owner,
accordingly at law; assignment of Julies interest to Elvis is invalid.

However, in equity Milroy v Lord
27
adopts a two-limb test to determine the validity for the
voluntary assignment of real property in equity. The first limb is shown in Anning v Anning
28

whereby the assignor must have done all that is necessary to be done to transfer the
property; this involves satisfying all elements relating to the assignor under section 12 of the
Conveyancing Act 1919 (NSW). Here, Julie has duly executed a memorandum of transfer to
Elvis, this shows her clear intention which is immediate and irrevocable. The assignment is
absolute since Julie is assigning her whole interest in the house, she has also complied with
the writing and signature requirements in duly executing the memorandum.
29
Therefore,
Julie has satisfied the first limb Milroy v Lord.
30


The second limb involves the assignor to do all that is necessary, beyond recall to render the
assignment binding upon the assignor.
31
Here, Julie sent a letter directing Perry & Mason to
release the Certificate of Title to Elvis, however since Perry & Mason are Julies solicitor they
are in an agent relationship. This means that Julie can merely instruct Perry & Mason to not
issue the Certificate of Title for example by making a phone call. Accordingly, Julie has not
done all that is necessary that is beyond her recall to render the assignment binding upon
herself. As a result, assignment of Julies interest to Elvis is invalid at equity.

In conclusion, the assignment at both law and equity are invalid and Warren receives Julies
interest in the Petersham property due to the rule of survivorship of joint-tenancy.
32


Part B

An issue arises as to whether Andrew and Belinda have the right to extinguish the trust.

In the case of Saunders v Vautier
33
a beneficiary is able to extinguish the trust provided they
are legally capable and have a vested and indefeasible interest in the trust. Here, Andrew
and Belinda are stated as beneficiaries to $200,000 under clause 6 of Jacks will, Ringo is
appointed trustee. This interest is a personal chose in action. Prima facie, as of todays date,
Andrew is 21 years of age and Belinda is 14. Andrew therefore has the sufficient legal
capacity (over the age of 18 years) to extinguish the trust however Belinda does not.

In Whakatane Paper Mills Ltd v Public Trustee
34
provides two conditions that must be
satisfied where there are multiple beneficiaries of differing legal capacity. The first is the
condition that the trust property must be divisible. Clause 6 of Jacks will expressly states the
amount of funds being $200,000 which is to be held in equal shares by Andrew and Belinda,
although interest is accumulated funds remain in the account. Accordingly, the amounts will
be readily divisible 50% to each child. The second condition requires that the proposed
division not be to the detrimental effect on the remaining beneficial interest.
35
The division of
$200,000 (subject to additional interest) equally will not be to the detriment of Belinda as her

27
(1862) 45 ER 1185.
28
(1907) 4 CLR 1049.
29
Conveyancing Act 1919 (NSW) s 23C(1)(c).
30
(1862) 45 ER 1185.
31
Costin v Costin (1997) NSW Conv R 55.
32
Conveyancing Act 1919 (NSW) s 35.
33
(1841) 49 ER 282.
34
(1939) SR (NSW) 426.
35
Re Harsnail; Womersley v Horsnail (1909) Ch 631.


LAW 317: Equity and Trusts
Final Examination
43434002


$100,000 will remain in the bank to accumulate further interest. However, funds may be
generating lower rates of interest due to the lower capital, nonetheless this is a nominal
detriment.

In conclusion, Andrew has a valid right to extinguish the trust and receive $100,000 (subject
to additional interest) whilst Belindas $100,000 will remain on trust until she either reaches
legal capacity or 25 years.