Automatic Resulting Trusts
- A failed gift will not result back to the grantor where it is made on absolute terms: Hancock v Watson
- Trust property will not automatically result back to the settlor if the settlor had expressed an intention to abandon all beneficial interest in the property: Westdeusche Landesbank Girozentrale v Islington London Borough Council
Surplus after fulfilment of purpose
- Subject to contrary intention, surplus will be held on resulting trust for settlor: Re Gillingham Bus Disaster Fund
- Contrary intention examples:
o Where the donee is not intended to become the absolute owner: Re Abbott Fund Trusts
o Where the property is transferred absolutely in consideration for something e.g. the release of a debt: Smith v Cooke, Re West Sussex Constabulary Widows Children & Benevolent Fund Trusts
o Where it is an out-and-out gift: Re West Sussex Constabulary Widows
o Where the donor is not intended to benefit: Re West Sussex Constabulary Widows
- Funds can pass to the crown bona vacantia where they can’t be applied cy-pres and there is no resulting trust: Re Producer’s Defence Fund
- The fact that donors are difficult to identify is not a bar to finding a resulting trust: Re Gillingham Bus Disaster
- Anonymous gifts could usually be characterised as out-and-out gifts – so could be applied cy-pres if trust was charitable, or bona vacantia if not: Re West Sussex Constabulary Widows
- Section 35B of Collections Act 1966 (Qld): surpluses of disaster relief funds vest in Public Trustee for other Disaster relief at discretion of Public Trustee
Quistclose/ purpose trusts
- Where A pays money to B with the mutual intention that the money be applied for a specific purpose and not form part of B’s general funds, then B holds the funds on trust for that purpose and if that purpose fails, on resulting trust for A: Barclays Bank v Quistclose
- On discharge of the purpose, the relationship between A and B becomes that of creditor and debtor: Barclays Bank v Quistclose
- Must enquire as to whether A intended money to be at free disposal of B, or not – A must retain beneficial interest until the purpose is discharged: Twinsectra v Yardley
- The enquiry in a commercial context is whether the circumstances give rise to a trust relationship, regardless of the context: Priestley Walker v Corboy
- Onus of proving a Quistclose trust lies with the person asserting it: Peter Cox Investments v International Air Transport Assn
- A gift could be advanced for a purpose but still unconditional – it doesn’t automatically give rise to a trust: Re Australian Elizabethan Theatre Trust
- A trust may be unilaterally created: Re Kayford; without the beneficiaries knowing: Lyell v Kennedy
- There are some factors which could be useful in pointing to whether a quistclose trust arises: Peter Cox Investments v International Air Transport Assn 1991
o Whether relationship is a normal commercial transaction/ routine transaction (courts reluctant to read in trust relationship: Meagher and Clarke in Walker v Corboy)
o Evidence pointing to mutual intention to create a trust
o Agreement or instructions as to how the moneys were to be held or applied
o Other objective indicators: e.g. how the recipient actually deals with the moneys, whether in a separate account (if funds are deposited into general account, this is an important factor which tends against the finding of a trust: Barrett J in Georges v Peter Wieland, Spigelman CJ in Mario Selvo)
o However, the deposit into a trust account useful: Re Kayford; but not conclusive: Re Fada
o Whether there is a separate obligation which requires the recipient to separately account for the moneys
o Use of words “only” or “exclusively”: Barclays Bank v Quistclose
- Where money deposited with 3rd party as a security for the performance of a contract, and the contract is performed, the security is no longer needed and the money will be held on trust for the depositor: Theiss Watkins White v Equiticorp Australia
- If a secured creditor releases part of a debt so that bankrupt can pay other creditors, and there is a surplus, there will be no resulting trust to secured creditor: Re Miles: NAB v Official Receiver
- Quistclose style arrangements DO create a trust – they are not merely contractual rights to stop moneys being applied for other purposes: Twinsectra v Yardley per Lord Millett
Presumptive resulting trust: purchase money situation
- If A purchases property in the name of B for no valuable consideration, there is a rebuttable presumption that B holds on resulting trust for A: Vandervell v IRC
- Subject to evidence of contrary intention or presumption of advancement: Napier v Public Trustee
- Statutory position is different in QLD - in a voluntary conveyance… a resulting trust for the grantor shall not be implied merely by reason that the property is not expressed to be conveyed for the use or benefit of the grantee’: Property Law Act 1974 (Qld) section 7(3)
- Where there is unequal contribution in purchase moneys, then the parties hold for themselves on resulting trust in those proportions: Calverley v Green
- Where 2 people advance money in equal shares, equity will follow the law in its present state, and therefore it could be a joint tenancy or a tenancy in common depending upon the presumption at law: Delehunt v Carmody
- In QLD, they will acquire as tenants in common: Property Law Act 1974 (Qld) section 33(2)
- Contributions mean direct contributions to the purchase price, not payment of outgoings or payments toward securing the release of a debt: Calverley v Green
- A person who makes no cash contribution to a purchase but is a joint mortgagor will be deemed to have made a contribution: Ingram v Ingram, Calverley v Green
- Look at intention of who is to contribute money and who is to take beneficially at the time of the transfer: Calverley v Green, Muschinski v Dodds
- Contributions to capital costs of acquisition e.g. stamp duty will be deemed as contributions to the purchase price, where expenditure on household costs etc will not: Currie v Hamilton
- Money expended on improvements will not give rise to beneficial interest in favour of the paying party unless common intention or estoppel: Pettitt v Pettitt; or unconscionable for one to retain the full beneficial interest in a benefit conferred by another: Muschinski v Dodds
- Court can alter the property settlement under Sections 79 – 80 Family Court Act 1975 (Cth)
Evidence of contrary intention
- The presumptive resulting trust may be rebutted if there is evidence of contrary intention at the time of purchase: Calverley v Green, Muschinski v Dodds
- If there is a common intention that contributions should take into account mortgage repayments (what is sought is the unencumbered property), then there is a common intention that rebuts the presumption of a resulting trust: Bloch v Bloch
Presumption of Advancement
- Where it applies, it is presumed that the grantor intended the property to be a gift: Calverley v Green
- Traditionally applies husband to wife and father (or loco parentis) to children: Calverley v Green
- Does not apply in defacto relationships: Calverley v Green
- Can apply from mother to children: Nelson v Nelson
- Perhaps it does not apply from wife to husband: National Australia Bank v Maher; but the better view is that it can, by the reasoning in Nelson v Nelson
- Presumption of advancement can be rebutted by evidence of contrary intention: Calverley v Green, Nelson v Nelson
Constructive Trust
- Muschinski v Dodds: For a constructive trust, there must be:
o Joint venture
§ Contributions to different aspects of a property or business plan: Muschinski v Dodds
§ Defacto relationship with pooled expenses to pay mortgage, furniture and household expenses: Baumgartner v Baumgartner
§ Granny flat situation: Swettenham v Wild
o Premature failure of basis
§ Failure of joint venture: Muschinski v Dodds
§ Relationship breakdown: Baumgartner v Baumgartner
§ Death is probably not a premature failure of basis: Bryson v Bryant
o It would be unconscionable to allow the parties
- Assess whether the constructive trust is imposed for the purpose of splitting up beneficial interest, or getting contributions back – but in practice probably not that much of a different result:
o Muschinski v Dodds: the beneficial interest was half-half, the trust was imposed to get back the contributions
o Baumgartner v Baumgartner: the woman claimed beneficial interest of 45%
- If to get back original contributions, assess how the surplus would be split up:
o Surplus divided into proportions of contribution vis-à-vis the total amount of contributions: Swettenham v Wild
o Surplus divided equally, because it would not be unconscionable to retain given other contributions e.g. labour: Muschinski v Dodds
- Constructive trust is a flexible remedy: Nichols v Nichols
Breach of duty
Duty to “get in” the trust property
- New trustees have a duty to make sure they have been properly appointed: Harvey v Olliver
- Trustees should investigate the trust documents and look at encumbrances affecting the trust property: Hallows v Lloyd
- Trustees must ensure trust property is duly transferred into their name: Westmoreland v Holland
- Trustees must ensure debts are collected in a timely manner: Re Brogden, Billing v Brogden
- The overriding duty is to get in the trust property, even where there is a power to postpone: Partridge v Equity Trustees Executors and Agency
- The duty/ power to recover or postpone debt to get in the trust property must be exercised in the way most likely to ensure the repayment of the debt: Partridge v Equity Trustees Executors and Agency
- If the trustee has a duty to take court action to enforce the repayment of debts and refuses to do so, then they bear the onus of proving that the action would fail/ that they had a well founded belief that the action would fail: Re Brogden, Billing v Brogden
Duty to insure
- There is a statutory power to insure: Section 47
- No general common law duty to insure the trust property – trustee would not be liable for loss arising from a failure to insure: Re McEacharn
- But this might be different if settlor expressed intention that there should be a duty to insure: Davjoyda Estates v National Insurance Co of NZ
- Failure to insure might be a breach of duty of care and skill where:
o A reasonable and prudent person would insure their own property: Pateman v Heyen
o There are reasonable terms and money to pay premiums can be found: SA Perpetual Forests Ltd 1964 Trust Deed
- Not reasonable to expect trustee to insure where there is no money to pay premiums: Pateman v Heyen
- Could be required to insure for full replacement value or for present value: Pateman v Heyen
Duty to maintain the trust assets
- Power to invest in anything: Section 21
- Trustee must review the individual and collective performance of investments yearly: Section 22(3)
- Trustee must take into account a range of matters when exercising a power of investment: Section 24(1)
- Trustee may seek advice regarding If trust property is not invested, the trustee will have to compensate the beneficiaries for the amount that would have accrued had the money been invested safely with a reasonable rate of return: Adamson v Reid
- investment: Section 22(2)
- Court may assess whole portfolio or strategy of investment when assessing for breach of trust in relation to investment: Section 30B
- Court can set off gains and losses against each other: Section 30C
- Definition of investment – apply money in the purchase of some property from which profit or interest expected and the property is held for the sake of this income: Re Wragg, Public Trustee v Brown
- There is a common law duty to invest the trust property: Adamson v Reid
- A trustee must not invest speculatively or hazardously – gambling with the trust moneys is not OK: Sidley v Huntly
- There is a duty to consider diversification of investments: Cowan v Scargill; Section 24(1)(b)
- Sometimes there is a duty for a trustee to acquire more property under the trust to maintain the trust assets – the test is not whether the trust can afford to buy new property, but whether it could afford to not buy something which was needed to preserve the value of the main asset of the estate: Elders Trustee and Executor Co Ltd v Higgins
- Trustees’ decisions re investment must not be judged retrospectively, but on the basis of the circumstances at the time of the decision – not concerned with results, but with exercise of due care at the time of investment: Nestle v National Westminster Bank
- There is a duty to maintain the monetary value of the trust, but not the real value – no prophecy is needed: Nestle v National Westminster Bank
- The interests of income and capital beneficiaries must be balanced: Re Mulligan, Bethell v Abraham
Duty to account to beneficiary
- Trustee has duty to keep accounts and supply them to the beneficiary: Kemp v Burn
- Trustee has duty to provide beneficiaries with details and evidence of investments (Walker v Symonds) and details of legal advice sought in respect of administration of the trust (Hawkesley v May)
- Trustee has duty to inform beneficiary of rights under the trust: Hawkesley v May
- No duty to disclose working papers of trustee to beneficiary: Re Fairbairn
- Trustee has duty to keep beneficiary informed of administration of trust:
o Beneficiary may have proprietary right in trust documents which are in the possession of trustees and contain information pertaining to the trust, subject to trustee’s right to not disclose reasons for decisions: Re Londonderry’s Settlement, Hartigan Nominees v Rydge, McDonald v Ellis
o Trustee’s duty to account to beneficiaries is a fiduciary duty and the court can regulate with its power to supervise the administration of trusts: Schmidt v Rosewood, Silkman v Shakespeare Honey Securities