Principles of Equity and Trusts

Chapter 1

What does ‘clean hands’ mean?

A remedy in equity will not be available to the claimant who has not behaved in good conscience (legally rather than morally)

What happens when a trust is created?

i) trustees are given control of the trust property

ii) equity recognises that the trustees hold the legal title or interest in the trust property

iii) the beneficiaries have the benefit of the property.

What is ‘equity’s darling’?

A bona fide purchaser for value who has no notice of the beneficiaries’ rights

Where a purchaser acts in good faith, gives full valuable consideration and has no knowledge of the trust’s existence - takes the purchased property free from the beneficiaries’ interests.

What is a resulting trust?

When a person has monetarily contributed to the purchase of an asset which is registered in the name of some other party - held on resulting trust for the contributor

What is a constructive trust?

Constructive trusts arise in certain circumstances when it would be unconscionable for the legal owner of property to deny the claimant an equitable interest - e.g. contribute to purchase price and were promised a place to stay.

What is a fixed trust?

When the terms of the trust define the share of the trust property which the beneficiary will receive.

What is the life tenant entitled to?

INCOME - recurring receipts from trust property and shares etc.

When the LT dies - trust property is transferred to remainder man = ‘trust capital’

What is a ‘bare trust’?

When trustees hold on trust for a sole adult beneficiary possessing full mental capacity absolutely (with no limitations or conditions attached) - can be ended through Saunders v Vautier

What is an interest in possession?

When the beneficiary can enjoy their interest immediately

What is an interest in remainder?

When the beneficiary cannot enjoy it immediately but instead have to wait until some other beneficiary’s right of use and enjoyment expires - ‘postponed’

What is a limited interest?

An interest which is limited to only the income (recurring payments) generated by investing the capital held in the trust.

What is an absolute interest?

An interest in the capital (one-off payments) of the trust, or in both income and capital.

What is the rule in SvV?

A sole adult beneficiary of sound mind with a vested interest in the trust property can bring the trust to an end by asking the trustees to hand the whole trust fund over to them personally or to other trustees (has been extended to multiple trustees):

i) 18 or older

ii) sound mind

iii) absolutely entitled to the trust

What is the remedy available in relation to trusts under common law?

DAMAGES.

What are the equitable remedies available for breach of trust? (i.e. at discretion of court)

i) injunctions - compel/stop a party doing something - either interim or on a final basis

ii) specific performance - compels a D to act under the contract - often used when dealing with land.

iii) rectification - court will agree to order the correction of an executed written document which does not accurately reflect what the parties intended - mistake can be common or unilateral

iv) recission - brings contract to an end - used when undue influence, misrep, unconscionable conduct (bars to recission include unclean hands, undue delay, affirmation)