Term
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Definition
| TABOLs are also known as implied trusts. They can be resulting trusts or constructive trusts. |
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Term
| Difference between Presumed Resulting Trusts and Automatic Resulting Trusts |
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Definition
| A presumed resulting trust gives effect to the presumed intention of the settlor; an automatic resulting trust presumes that a settlor will intend that surplus money vested in a trust will revert back to their ownership. Both can be presumed by rebutting the presumption. |
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Term
| Westdeutsche Bank v Islington LBC 1996 facts |
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Definition
The Bank entered into a ten-year interest rate swap agreement with Islington LBC (the Council). The swap agreement commenced on 18 June 1987 and was based on a notional principal sum of £25m. Under the terms of the agreement, the Bank, as the fixed rate payer, paid the Council, as the floating rate payer, a lump sum of £2.5m.
At the same time as the swap agreement was concluded the Bank also entered into a parallel agreement with Morgan Greenfell as the fixed rate payer, under which £2.5m was payable to the bank.
The Council made three payments of ‘interest’ to the Bank totalling £1.35m. However, following the case of Hammersmith & Fulham interest rate swap transactions entered into by local authorities were held to be ultra vires. This had the effect that agreements made between the Bank and the Council were void and so the Council made no further payments to the Bank.
The Bank brought an action against the Council claiming £1.145m, which represented repayment of the balance of the £2.5m plus interest. |
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Term
| Westdeutsche Bank v Islington LBC 1996 outcome |
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Definition
| The Court of Appeal was of the unanimous view that the Council was liable to make restitution of the whole £2.5m sought. the Court based its decision on both Common Law and equitable principles, stating that the result inevitably flowed from the basic fact that, despite the expectations of the parties in 1987, there was no contract at all in existence and there had never been one. The judges advanced two alternative legal bases on which liability to repay was based: first, the avoidance of unjust enrichment of the Council, and secondly, the Council was under an equitable duty to repay the monies since they were held as a fiduciary under a resulting trust in favour of the bank. |
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Term
| Lord Browne-Wilkinson in Westdeutsche Bank |
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Definition
| Lord Browne Wilkinson made clear that a constructive trust only arose when a factor made it only unconscionable for someone to use it for themselves rather than somebody else. The council couldn’t be bound to hold it on constructive trust for the bank because at the time the council had knowledge of it, the money had gone. So long as a constructive trust was found to arise it will be created as soon as the person has done the unconscionable thing. |
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Term
| Megarry J in Re Vandervell's Trusts no. 2 |
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Definition
Type A is a presumed resulting trust: where “the presumption thus establishes both that B is to take on trust and what that trust is”
Type B is an automatic resulting trust: “the resulting trust here does not depend on any intentions or presumptions, but is the automatic consequence of A’s failure to dispose of what is vested in him… the resulting trust does not establish the trust but merely carries back to A the beneficial interest that has not been disposed of.” |
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Term
| Lord Browne-Wilkinson on Megarry J in Re Vandervell's Trusts |
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Definition
| “Both types of resulting trust are traditionally regarded as examples of trusts giving effect to the common intention of the parties. A resulting trust is not imposed by law against the intentions of the trustee (as is a constructive trust) but gives effect to his presumed intention. Megarry J in In re Vandervell's Trusts (No.2) suggests that a resulting trust of type (B) does not depend on intention but operates automatically. I am not convinced that this is right. If the settlor has expressly, or by necessary implication, abandoned any beneficial interest in the trust property, there is in my view no resulting trust: the undisposed-of equitable interest vests in the Crown as bona vacantia…” |
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Term
| Automatic (Failure to Dispose) Resulting Trusts |
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Definition
| Automatic resulting trusts can arise when the settlor tries to set up a trust for a third party, but there is an initial failure for want of objects; for example, by naming beneficiaries which cannot be defined, as in Morice v Bishop of Durham 1805 10 Ves 522, or when the objectives of the trust no longer become possible or relevant by the time of the transfer to the trustee, as in Re Gillingham Bus Disaster Fund [1958] Ch 300. |
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Term
| In re the Trusts of the Abbott Fund 1990 |
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Definition
| A fund had been created for two sisters who could neither hear nor speak. At their death, there was leftover money in the fund that had been created for them. The court held that the leftover money was held on a resulting trust for the contributors to the fund. In this case, as the money was paid into the fund by subscribers, it was easy to find and ascertain those who the money needed to revert back to; there was no intention to provide property to the Abbotts “absolutely”. |
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Term
| Air Jamaica v Charlton 1999 |
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Definition
Pension scheme for the employees of Air Jamaica was discontinued when the company was privatized. Instead, defined benefits were paid out to the employees. A surplus of $400m remained in the accounts. The company claimed the surplus, so did the employee contributors; so did the Crown (as employees had been paid their entitlements, the trust deed prevented the company from benefiting, so the Crown argued it was bona vacantia).
The Court held that there was a resulting trust in favour of the contributors (50% each to the workers and the company). |
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Term
| In re Gillingham Bus Disaster Fund 1958 |
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Definition
The fund was established to help the victims of the bus accident; defraying funeral expenses of the deceased and caring for the disabled and wounded. The fund could not be exhausted, mostly due to the successful common law actions brought by victims/families resulting in payouts.
The surplus was held on resulting trust for the contributors, even though the contributors were numerous and difficult to identify. |
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Term
| Re West Sussex Constabulary’s Widows, Children and Benevolent Fund 1930 |
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Definition
Automatic Resulting Trusts: Unincorporated Associations
• Unincorporated, non-charitable society establishes fund for widows and children of deceased members of the WS Constabulary. • Contributions were sourced from • (a) member subscriptions and raffles, sweepstakes • (b) collecting boxes • (c) donations, including legacies • Fund was wound up, when the WSC merged with other forces. • (a) and (b) went to the Crown as bona vacantia • (c) held on resulting trust for donors.
A fund to provide for widows and orphans.
Income came from several sources. Two police districts were being combined so the trust had to be wound up: |
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Term
| Re Bucks Constabulary Benevolent Fund [1978] |
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Definition
where there is an unincorporated association (group of persons whose association is set out in a contract), the surplus will be distributed to the members according to the terms of the contract, or else in equal shares.
Addendum to Re West Sussex Constabulary's Widows, Children and Benevolent Fund |
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Term
| Historical foundation of Presumed Resulting Trusts |
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Definition
The historical foundations of the presumed resulting trust doctrine is in the ‘norms’ of feudal land holding.
A would pay the purchase price (or part thereof) by A in property vested in B
B would hold the property on trust for A, or in the case of a joint purchase, by A and B in shares proportionate to their contributions (since altered by the PRA).
A presumed resulting trust gives effect to the presumed intention of the settlor; an automatic resulting trust presumes that a settlor will intend that surplus money vested in a trust will revert back to their ownership. Both can be presumed by rebutting the presumption. |
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Term
| Crampton-Smith v Crampton-Smith |
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Definition
In some relationships there is a counter presumption that a gift was intended. This is known as the presumption of advancement: e.g. husband to a wife, parent to a child.
The presumption of a resulting trust can be rebutted by proving that the transferor intended a different consequence, such as an outright gift or a loan. The onus is on the transfereeIn that case the Court of Appeal held that the sister had not produced sufficient evidence to rebut the presumption that she held the property on trust for her brother. He had provided the funds for the purchase of the land that was registered in her name. |
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Term
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Definition
Tinsley held legal title to a house as well as bank accounts she asserted were belonging to her and her lover Milligan. Milligan had contributed to the purchase price of the house, so it seems obvious that equity will aid her through a resulting trust.
However, the reason the house was kept in Tinsley’s name only was so that Milligan could defraud the social security authorities; should Milligan really be able to say in equity that she owns half the house on resulting trust, when the reason that her name was not on the title was the illegal/immoral purpose of benefit fraud?
Here, Miss Milligan claimed an interest in the house under a resulting trust, based not on contractual obligation but on a common intention, acted upon by the parties to their detriment. Where two parties bought a property conveyed into the name of only one of them, that party was presumed to hold the property on a resulting trust for both, in shares proportionate to their contributions.
If this presumption applied, the plaintiff did not have to rely on the illegality. |
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Term
| Quistclose Investments v Rolls Razor Ltd 1970 |
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Definition
Quistclose lent money to Rolls Razor Ltd. This was arranged by a director of R, to enable R to pay a declared dividend to shareholders. The money is paid into a designated account in B Bank. R goes into liquidation. The question was: what is the status of the money that was lent by Quistclose? Who has better rights to it? Quistclose or R’s creditors?
An arrangement for the payment of a person's creditors by a third party may give rise to a relationship of a fiduciary character or trust in favour, as a primary trust, of the creditors, and secondarily, if the primary trust fails, of the third party. The lender acquires an equitable right to see that the payment is applied for the primary designated purpose, and when this purpose has been carried out, the lender has his remedy against the borrower in debt; if the primary purpose cannot be carried out and a secondary purpose has been agreed, expressly or by implication, the remedies of equity may be invoked to give effect to it. |
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Term
| Twinsectra v Yardley facts |
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Definition
The borrower was seeking short term finance of £1m for the purchase of land, he approached his usual lender for the money but was worried that he would not be able to give him the money on time so he approached another lender.
The borrower’s original lender was able to give the money on time and B promptly used it to purchase the land. He carried on negotiations with the new lender for the money, he was owed GBP 1.5m by his solicitor under a previous transaction both had carried out and so he asked his solicitor to give a personal undertaking to repay the loan if he was unable to, the solicitor agreed.
The money was transferred to the solicitor with the stipulation that the money be utilised ‘solely for the acquisition of property on behalf of our client and for no other purpose’. And that ‘loan money will be retained by us until such time as they are applied in the acquisition of property on behalf of our client’. |
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Term
| Unique points of Twinsectra |
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Definition
| The difficulty surrounding ascertaining whether a Quistclose trust had been intended here was due to the party’s intention being wholly focused on ensuring the solicitor had given his consent to the personal undertaking, and no real regard or importance was ascribed to the specific purpose outside the contract.Lord Millett detracts from his prior position of a Quistclose trust being a bare trust with a mandate whereby the beneficial ownership resides with the transferor from the outset, instead he states that Quistclose trusts are resulting trusts which arise by operation of law deviating from what he previously maintained – ‘Quistclose trusts are intentional trusts, that is, trusts that arise on the basis of the genuine intentions of the parties involved’. |
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Term
| General Communications v DFC 1990 |
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Definition
Loan moneys advanced by DFC to the solicitors of a video company, with direction that moneys only be used for purchasing video equipment. Solicitors send letter to GC informing them of moneys held for this purpose, to satisfy GC’s requirement that VC show creditworthiness.
VC in financial difficulties, DFC wants money back, VC’s solicitors pay the money back.
GC sues under Quistclose analysis. |
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Term
| What is a constructive trust? |
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Definition
| In contrast, the law itself imposes constructive trusts in circumstances where it would be unconscionable for the owner of the property to not recognise someone else’s rights to the property. |
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Term
| Carl Zeiss Stiftung v Herbert Smith [1969] |
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Definition
| It has been said that the constructive trust’s “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” - the courts have been fond of unconscionability though. |
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Term
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Definition
where there’s been contributions by a person to property owned by another. No binding legal contract, it’s not a loan. It’s not the kind of contribution that will give rise to a resulting trust. It’s not a situation where a person originally owned the property and gave it up but failed or the person paid money towards the purchase price. Initially husband and wife had contributed to property but only one of the people had the legal title. That was the problem that the constructive trust doctrine was a solution to. Following the statutory claim (P(R)A) equity can no longer be used.
Are there informal property rights not declared on the legal title? Marriages/de facto relationships without a statutory regime. 1995: man and woman who both had serious relationships previously. They met and started a new relationship without marrying. It was relatively long, in the course of which they lived together, built a house, managed the two other flats that were all in the name of Lankow. Rose ends up with $30,000 of assets including $5000 of savings for a trip with Lankow. Lankow has $600,000 more of assets. That’s the legal position. Ms Rose made a claim based on a CT, not a RT.
25/294: person required to yield beneficial interest: equity will ensure the legal owner of the estate should not deny the beneficial owner that interest. |
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Term
| When, according to Lankow v Rose, does a constructive trust arise? |
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Definition
•Contributions, direct or indirect, to the property in question
•Reasonable expectation of an interest in the property
•Defendant should reasonably expect to yield an interest to the claimant |
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Term
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Definition
| Mr Beveridge was living in a unit for free owned by Dr Byrd. Dr Byrd died and the executor of his estate Ms Harvey asked Mr Beveridge to vacate the property. Mr Beveridge argued that he was in lawful possession of the unit as the beneficiary of a constructive trust based on the common intention between himself and that of Dr Byrd, the owner. Dr Byrd had taken no steps during his lifetime to perfect the gift under a will. The two men met through mutual employment place, the University of Canterbury. Dr B actually stated to Mr B that the apartment was his, that he was the owner. He offered to pay rent but this was refused. He never inspected the property like a landlord would. Mr B even made improvements to the property. When Dr B went into hospital, Mr B visited him daily and undertook all the help he needed, and helped renovate his home to suit the needs of a paraplegic. Mr B organised all insurance claims concerning his house after the Christchurch earthquakes. Dr B arranged for Mr B to have the use of a car, which he was clear was to remain his (Dr B’s property). Dr B never revoked his intention that Mr B was the owner of the unit. After Dr B’s death they searched his property for a more recent will, but never found one. |
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Term
| Harvey v Beveridge Judge summarises ingredients of a “common intention” constructive trust. |
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Definition
1) Intention common to claimant and legal owner
2) Actual subjective/objective by the courts
3) Existed at time of acquisition (possible after also)
4) Usually de facto relationships but can be other non-intimate relationships
5) Acted in reliance on common intention
6) Current circumstances may be the circumstances to which the parties intended their common intention to apply |
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Term
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Definition
| A child had inherited the lease on Romford Market near London. Mr Sandford was entrusted to look after this property until the child matured. But before then, the lease expired. The landlord had told Mr Sandford that he did not want the child to have the renewed lease. There was clear evidence of the refusal to renew for the benefit of the infant. Yet the landlord was happy (apparently) to give Mr Sandford the opportunity of the lease instead. Mr Sandford took it. When the child (now Mr Keech) grew up, he sued Mr Sandford for the profit that he had been making by getting the market's lease. |
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Term
| Regal (Hastings) v Gulliver |
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Definition
Breach of fiduciary duty.
Regal owned a cinema in Hastings. They took out leases on two more, through a new subsidiary, to make the whole lot an attractive sale package. However, the landlord first wanted them to give personal guarantees. They did not want to do that. Instead the landlord said they could up share capital to £5,000. Regal itself put in £2,000, but could not afford more (though it could have got a loan). Four directors each put in £500, the Chairman, Mr Gulliver, got outside subscribers to put in £500 and the board asked the company solicitor, Mr Garten, to put in the last £500. They sold the business and made a profit of nearly £3 per share. But then the buyers brought an action against the directors, saying that this profit was in breach of their fiduciary duty to the company. They had not gained fully informed consent from the shareholders. |
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Term
| Regal (Hastings) v Gulliver outcome |
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Definition
| The House of Lords, reversing the High Court and the Court of Appeal, held that the defendants had made their profits “by reason of the fact that they were directors of Regal and in the course of the execution of that office”. They therefore had to account for their profits to the company. |
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Term
| Lord Russell of Killowen in Regal (Hastings) v Gulliver |
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Definition
| “The rule of equity which insists on those who by use of a fiduciary position make a profit, being liable to account for that profit, in no way depends on fraud, or absence of bona fides; or upon questions or considerations as whether the property would or should otherwise have gone to the plaintiff, or whether he took a risk or acted as he did for the benefit of the plaintiff, or whether the plaintiff has in fact been damaged or benefited by his action. The liability arises from the mere fact of a profit having in the stated circumstances been made.” |
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Term
Chirnside v Fay: fiduciary duties in Joint Ventures
Facts |
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Definition
Worked together on feasibility calculations
· Joint negotiations to purchase Speights Building
· Working together with architects, council, and other advisors
· Mr Fay liaises with Harvey Norman
· Mr Chirnside introduced Mr Fay as a principal in the development |
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Term
| Why is there a fiduciary obligation in Chirnside? |
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Definition
“We cannot accept Mr Whiteside’s submission that the parties had not reached sufficient agreement or understanding on key issues to move this transaction from one of antagonism to one of collaboration.” [86]
Certain kinds of joint venture relationships will get to a point where fiduciary obligations will arise. No need for legal contract. If it’s a purely contractual relationship no fiduciary obligations, no further obligations than those set out in the contract – could say a joint venture scenario has that kind of relationship.
In this joint venture something different has occurred. These guys were in it together. Acting jointly to pursue a particular project, idea they would share the profits. Because of these the things the two parties did, SC said this is analogous to a partnership |
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Term
| Fiduciary Obligations and relationships |
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Definition
· Particular concern of equity
· Breach of fiduciary obligations can trigger equitable remedies
· Constructive trusts are one of these remedies
· A constructive trust may be imposed on unauthorised profits made by a fiduciary
· If so, such profits (and any increases) will be, in equity, beneficially the property of the beneficiary of the fiduciary relationship
· Also a personal liability to account if the proceeds of profits are not traceable
Proprietary claim is something that is added to the personal claim |
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Term
| Situations in which no general FD was found |
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Definition
Amaltal Corporation Ltd v Maruha Corporation[2006]
ommercial fishing ‘joint venture’, set up under joint company – Amaltal through its accountant conceals tax deduction, to its benefit (higher payment from Maruha – General relationship not fiduciary; former partnership was replaced with company – BUT Amaltal was a fiduciary for Maruha in respect of accounting and tax returns, which it had undertaken for the joint company |
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Term
| Amaltal Corporation Ltd v Maruha Corporation[2006] |
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Definition
| It is “well settled that, even in a commercial relationship of a generally non-fiduciary kind, there may be aspects which engage fiduciary obligations of loyalty. That is because in the nature of that particular aspect of the relationship one party is entitled to rely upon the other, not just for adherence to contractual arrangements between them, but also for loyal performance of some function which the latter has either agreed to perform for the other or for both or has, perhaps less formally, even by conduct, assumed.” |
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Term
| Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZSC |
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Definition
| “To style a contractual relationship as a joint venture may be apt to distract. It is a term to be applied with caution. When parties have formed a contract the correct approach is first to decide exactly what they have agreed upon. Only then should the Court consider whether any particular aspect of their agreement gives rise to a relationship which can properly be characterised as fiduciary, imposing an obligation of loyalty on one or both parties, which supplements the express or implied contractual terms. … A fiduciary relationship will be found when one party is entitled to repose and does repose trust and confidence in the other. The existence of an agreement, express or implied, to act on behalf of another and thus to put the interests of the other before one’s own is a frequent manifestation of a situation in which fiduciary obligations are owed.” |
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Term
| general indicators of fiduciary relationships |
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Definition
1) Relationships of trust and confidence
a. One party undertakes to act in the interest of another, or where she places herself in a position in which she is obliged to act in the interests of another
b. Key obligation = loyalty
i. To avoid conflict between personal interest and duty/divided loyalties (e.g. self-dealing)
ii. Not to make unauthorised personal gains/profits
2) Relationship of vulnerability
a. One person exercises power over another
b. Concerned with preventing abuse of the vulnerable
c. Key obligation: not to exploit the fiduciary’s influence he may have over another for his or her own benefit
3) Relationships involving confidentiality
a. Can arise in a variety of contexts:
i. Contractual or equitable
ii. From the circumstances in which information was imparted
iii. where it is obvious that the information is confidential
KEY OBLIGATION: not to use the confidential information for one’s own benefit |
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Term
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Definition
Based on human nature, might be a danger of abusing position you are in, for your own benefit. Inflexible positive rule that can’t be gotten around.
“It is an inflexible rule of a Court of Equity that a person in a fiduciary position, such as the respondent's, is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict. It does not appear to me that this rule is, as has been said, founded upon principles of morality. I regard it rather as based on the consideration that, human nature being what it is, there is danger, in such circumstances, of the person holding a fiduciary position being swayed by interest rather than by duty, and thus prejudicing those whom he was bound to protect. It has, therefore, been deemed expedient to lay down this positive rule.” |
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Term
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Definition
B, solicitor for family trust learns of the business of a private company the trust is minority shareholder in
· This information is gained because of B’s position as a fiduciary, which allows him to attend private company meetings
· B makes a plan to create huge profits for company (and thereby the trust). This required taking majority shareholding. The other trustees were not willing to purchase more shares
· B purchases shares himself using his own money, restructures business, and makes huge profits for company and shareholders (now including himself)
· HL holds by majority 3:2, that B hold profits on CT for beneficiaries of the original express trust. All 5 agree that purpose of this rule was to prevent conflicts of interest. Can’t be COI between personal position and what they are required to do as a fiduciary
· Earned profits for which he had no authorisation |
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Term
| Warman in Boardman v Phipps |
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Definition
: “ the solicitor (in Boardman v Phipps) was held accountable for the profit he made, in spite that he acted bona fide and in the interests of the trust and that the opportunity would have not have been availed of but for his skill and knowledge.”
Conflict of interest when you were deciding to buy shares, you made a profit and as soon as that happens it will be held on trust for the beneficiaries. Despite that he was looking out for the trust and made profits for them, still has to pay profits back to trust. Shows strict rule. Even if completely honest and open, he hasn’t got any authorisation to do what he did. |
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Term
| Attorney-General for Hong Kong v Reid 1994 |
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Definition
Mr Charles Warwick Reid was a New Zealand national and the Hong Kong Deputy Crown Prosecutor and then Acting Director of Public Prosecutions, so in a fiduciary relationship with the Hong Kong government. He took bribes to obstruct prosecution of some criminals, and used the money to buy land in New Zealand. Some was kept by Mr Reid and his wife, Mrs Judith Margaret Reid, some conveyed to Reid’s solicitor. The Hong Kong government argued the land was held on trust for them.
The Privy Council advised the bribe money received by Reid, and the land acquired after, was held on constructive trust for the Hong Kong government. This meant that the land bought by Reid and his wife was held on trust, and had to be given over to the Hong Kong government. This was held to be necessary to ensure that people in positions of trust could in no way profit from their wrongdoing. If the property was badly invested, the fiduciary in breach would still be under a duty to make good the shortfall. |
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Term
| Sinclair v Versailles [2011] EWCA 347 |
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Definition
• Ponzi scheme makes business seem more valuable and shares are sold for huge profit
• Principal claims proprietary rights in proceeds of share sale, as profits were gained in breach of FD
• EWCA reviews authority and principle, concluding [89] that there is no proprietary right to assets obtained in breach of FD unless (1) obtained through funds previously owned by principal or (2) derived from opportunities of the principalFHR v Cedar Capital
• Agent for purchaser takes commission from vendor
• Possible rules – see arguments in [10]-[11] and [30]-[31]; authorities divided [13]-[28]; big academic debate [29]
• Is the distinction going to be about whether property should have been obtained for the principal by the agent/fiduciary? [34], [10] |
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Term
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Definition
| In December 2004, FHR European Ventures LLP purchased the issued share capital of Monte Carlo Grand Hotel SAM (which owned a long leasehold interest in the Monte Carlo Grand Hotel, located in Monte Carlo, Monaco) from Monte Carlo Grand Hotel Ltd ("the Vendor") for €211.5m. Cedar Capital Partners LLC provided consultancy services to the hotel industry, and it had acted as the FHR's agent in negotiating the purchase. In September 2004, Cedar had also entered into an agreement with the Vendor which provided for the payment to Cedar of a €10m fee following a successful conclusion of the sale and purchase of the issued share capital of Monte Carlo Grand Hotel SAM. The Vendor paid Cedar €10m in January 2005. In November 2009 the claimants commenced an action for recovery of the sum of €10m from Cedar and other parties, claiming that because Cedar owed a fiduciary duty, it was not allowed to make a secret commission. Accordingly, FHR claimed that all profits were held on constructive trust. |
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