Commentaries On Equity 3v5w6u

Certainty of Subject Matter II Required reading, commentary and questions: White v Shortall [2006] NSWSC 1379;  Hunter v Moss [1994] 1 WLR 452 is sometimes described as standing for the proposition that the rules on certainty of subject matter are different for intangible property (such as shares). See Harvard Securities (Holland v Newbury) [1997] 2 BCLC 369; [1997] EWHC Comm 371. Is the proposition sound?  White v Shortall arose out of a breakdown in a domestic relationship. Shortall was a prominent business-person whose firm had developed a new form of retractable syringe, which promised to enhance the safety of medical procedures. At the time of the breakup with his partner (White) Shortall was in the process of floating his firm Unitract. He was able to buy shares in Unitract at a significant discount. Simplifying the facts: apparently needing funds, Shortall asked White to write him a cheque for some $20,000. In the course of various discussions, Shortall said, in effect, that in consideration for this sum, he would hold 222,000 shares in Unitract on trust for her. The parties attended counselling, one upshot of which was the letter penned by Shortall that is reproduced at paragraph 61 of the judgment. One of the many issues in the case concerned whether this purported trust failed for want of certainty of subject matter.  What were the precise bases on which the NSW court declined to follow Hunter v Moss?  What was the solution arrived at by Campbell J? How does it differ from the decision in Hunter v Moss?  Why does Equity require certainty of subject matter? Is the rationale for this rule consistent with the outcome in White v Shortall? Lehman Bros Int’l (Europe) v Person et al. [2011] EWCA Civ 1544 at [62] – [72].  The practice that provoked the litigation in Harvard Securities – viz. the failure to segregate the securities belonging to various clients – is a simplified version of some of the behaviour by finance firms that contributed to the global financial crisis in 2007, the fallout from which has been the subject of much recent litigation. It was the common practice of some firms not to segregate securities: in part this was because so doing was istratively costly and because of the economies of scale in dealing with larger parcels; in addition, some firms engaged in complex transactions involving “bets” on the changing values of these securities (such as “selling” the securities to other firms, and then repurchasing equivalent securities) which transactions were facilitated by pooling clients’ assets. When the merry-go-round stopped, and creditors asserted their rights, these firms’ clients sought to claim proprietary interests in the financial assets these firms were meant to be holding on their behalf. The pooling of assets in this way directly implicates issues of certainty of subject matter. See, eg, Lehman Bros Int’l (Europe) (In istration) [2012] UKSC 6 and Lehman Bros Int’l (Europe) v

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Pearson et al. [2011] EWCA Civ 1544, in particular paragraphs [62] – [72] of the latter case (printed in these materials). The trial judge in Pearson v Lehman Bros has a useful discussion of basic trust principles, and a fuller analysis of subject matter certainty in the context of homogenous/fungible masses of property, here. See paragraphs [225]-[248].

Further readings:  Goldsworth "Certainty of Subject Matter" (2007) 13 Trusts and Trustees 613  Pearson & Ors v Lehman Brothers Finance SA & Ors[2010] EWHC 2914 (Ch) at [225]-[248] Revision questions  Is the reasoning in White v Shortall consistent with the decision in Re Goldcorp?  Are White and Lehman Brothers consistent?  Should courts treat Hunter v Moss as good law?

Certainty of Objects Required reading and questions: Mhail v Doulton (Re Baden’s Deed Trusts) [1971] AC 424;  What are the judges deciding in this case? What is the current law? What are the options they must choose between?  What are the considerations involved in deciding between the different options? Why is one preferable to another?  What does it mean for a trust to be istratively unworkable? In re Baden’s Deed Trusts (No 2) [1973] Ch 9;  What are the words and concepts that may be uncertain?  Why did the court think that there was certainty of object for these words and concepts?  Are the judges talking about conceptual or evidential uncertainty?  Is the reasoning of Sachs LJ in Re Baden’s Deed Trust (No 2) entirely consistent with the approach of Lord Wilberforce? What approach did Megaw LJ prefer? Saunders v Vautier (1841) Cr & Ph 240.  What does this case tell us about the nature of a beneficiary's rights to trust property? Commentary: Certainty of objects The third of the “certainties” identified in Knight v Knight is certainty of objects (or beneficiaries). The trustee must be able to identify what people are the beneficiaries of the trust so they can distribute the trust fund's income and capital to them according to the scheme of the trust deed. And the courts must be able to respond to breaches of trust brought to their attention by the beneficiaries. The basic principle we are dealing with is that set out in Morice v The Bishop of Durham - there must be someone in whose favour the court can decree performance. This can be easy; a trust deed might specify individuals by name and other identifying feature (address, relationship). What is harder is if the settlor wants to provide for a class of people that she does not wish to name individually; this brings the possibility of the trustee and court not knowing for certain who is a beneficiary or not. The rules vary depending on the type of trust or power that is at issue. Historically, all trusts required a complete list of beneficiaries to be drawn up. As time went on, courts became more generous, ruling that for certain kinds of trust all that was needed was that the class of beneficiary be certain, so that one did not need to produce a complete and exhaustive list of beneficiaries. However, there is still a distinction between the certainty requirements for fixed trusts and discretionary trusts and fiduciary powers. Accordingly, this topic often implicates a

preliminary question – viz the characterization of the duties or powers being exercised by the trustee. Another point to highlight at the beginning is that the analysis of the law and the reasons for choosing one test over another are quite difficult. They implicate questions of 'conceptual certainty' as to the hip of a class, which will perhaps remind you of the statutory interpretation problem of the 'greyness' of language – in the sense that some words name concepts that have core meanings surrounded by an area of uncertainty. When there is uncertainty of object, the trust is void. However, often trust deeds will contain a number of different trusts and powers, and will specify what to do with property that is left over ('in remainder'). If so, even if a trust or power is void, the rest of the trust will still be valid if it meets the certainty of objects requirements. Fixed trusts Begin with fixed trusts. As the name suggests, the entitlements of the beneficiaries are fixed: the trustee does not have the power or duty to choose who the beneficiary is or how much property they are to receive. An example would be: "$10,000 to T so that T shall distribute all of the sum equally to any of my grandchildren who have enrolled for a law degree at Victoria University of Wellington before 1 March 2014, with the power to retain the whole of that $10,000 for the remainder beneficiary." Other examples would be "to David for life, and then to Brenda", or "my Fisher and Paykel shares on trust equally between my children", or "my Fisher and Paykel shares on trust 2/3 for Jen and 1/3 for Petey". The problems in certainty of objects usually come when there is a class of people specified. Where there is a sharing out of the property between a number of people, we need to know how many there are to get the right 'share' to each person. If we don't know how many beneficiaries there are to divide the property between, then we don't know how much each beneficiary should get. Therefore, for a trust of this kind, a trustee must be able to name or identify each possible beneficiary or of the appropriate class. If the trustee cannot compile a complete list, the trust will be void. We might call this the 'fixed list' or 'complete list' test. (The relevant time for testing this is when the distributive obligation under the trust must be performed.) See also Re Beckbessinger [1993] 2 NZLR 362 (per Tipping J). Part of the conceptual background to the problem here is implicated by the so-called “rule in Saunders v Vautier”: why? There is also something known as a “bare” trust – which has only one beneficiary. That beneficiary must be identified; otherwise, the trust will fail for uncertainty.

Mere Powers Re Gulbenkian (Whishaw v Stephens) [1970] AC 508 was principally concerned with “fiduciary mere powers.” Powers are permissive – so, for example, a trustee might be empowered – but not obligated – to advance a certain sum to some person or people. No distribution needs to be made. For example: “T may advance $10,000 to X”. Usually there will be a 'gift over' that tells us where the property will go if the power is not exercised. The obligation of the trustee of this power was described in Re Hay’s ST [1981] 3 All ER 786, 791 as follows: “Normally, the trustee is not bound to exercise [the power] and the court will not compel him to do so. That, however, does not mean that he can simply fold his hands and ignore it, for normally he must from time to time consider whether or not to exercise the power, and the court may direct him to do this.” Re Gulbenkian adopted a test that could be described as the “is or is not” test. It held that the power was valid if it could be said with certainty that any individual was or was not in the class: “…the power is valid if it can be said with certainty whether any given individual is or is not a member of the class and does not fail simply because it is impossible to ascertain every member of the class.” Discretionary trusts (or 'trust powers') For what development in the law was Mhail v Doulton responsible? What arguments might be made against the approach adopted by Lord Wilberforce? (Note that the decision in this case split the House of Lords 3:2.) What does Lord Wilberforce say about the nature of the duties of trustees that justifies his decision to unify the tests for powers and discretionary trusts? (In New Zealand, most trusts are discretionary in nature, rather than fixed trusts. John Brown (ed) New Zealand Master Trusts Guide 32 (3ed 2011)). A trust will not be uncertain as to objects merely because there is not enough evidence to show whether a particular person is or is not within the class. As stated in Re Baden, this simply means that there is not enough evidence to show they are within the class, and so they will be excluded. As Tipping J observed in Re Beckbessinger, at 369, the distinction between conceptual and evidential uncertainty is that "If the class is conceptually uncertain the disposition is invalid. If it is conceptually certain but poses evidential difficulties it is not invalid. It has always been the law that in those circumstances, given conceptual certainty, evidential problems of determining whether a particular person does or does not qualify will not defeat the gift. They may defeat the particular claim but not the gift itself."

The testator, IC Beckbessinger, was a bachelor who died in 1987 without leaving children, having made his will in 1974. At issue in Re Beckbessinger [1993] 2 NZLR 362 was whether the following trust was void for uncertainty: “Residue to be applied to benefit interests which [the testator] has particularly in Christchurch.” How would you decide? An important exception to the certainty of objects principle arises in the context of charitable trusts. We shall consider these later in the course. Read the following section of the Wills Act 2007. What problem does it address? 25 Disposition to unincorporated association of persons (1) This section applies when a will disposes of property— (a) to an unincorporated association of persons that is not a charity; or (b) to or on trust for the purposes of an unincorporated association of persons that is not a charity; or (c) to or on trust for the present and future of an unincorporated association of persons that is not a charity. (2) The will-maker's executor must do one of the following with the property that is the subject of the disposition: (a) transfer it to the association; or (b) pay it into the general funds of the association, if necessary after turning it into money. (3) The transfer of the property is an absolute discharge to the executor for the transfer of the property, if all the following apply: (a) the transfer is to 1 or more persons; and (b) the persons are designated in writing or electronically; and (c) the designation is by any 2 persons doing the duties of president, treasurer, or secretary of the association. (4) A receipt issued by a person doing the duties of treasurer of the association is an absolute discharge to the executor for the payment into the general funds of the association. (5) Subsections (3) and (4) do not apply as follows: (a) subsection (3) does not apply if the will makes it clear that the will-maker intended the transfer to be handled in some other way: (b) subsection (4) does not apply if the will makes it clear that the will-maker intended the payment to be handled in some other way. (6) The following are not objections to the effectiveness of a disposition to an unincorporated association of persons: (a) that a list cannot be compiled of the association's at the time when the will-maker died; or (b) that the association's have no power to divide the association's assets beneficially amongst themselves. (7) Section 61B of the Charitable Trusts Act 1957 overrides this section.

The New Zealand Law Commission, Succession Law: A Succession (Wills) Act 59 (NZLC R41, 1997) explained this provision as follows: “[The section] provides that a gift to an unincorporated association where the purpose is not charitable will have effect as “a disposition in augmentation of the general funds of the association”. There is no problem in relation to gifts to incorporated associations because they are notional persons and have a right to inherit. In relation to unincorporated associations, a gift has in the past failed unless the association is either a charity or it has a charitable function, in which case the gift may be saved by Charitable Trusts Act 1957 s 61B. There are unincorporated associations with no or only doubtful charitable status. Examples may include an iwi or hapuu of Māori, or an association formed for a purpose that is political. There seems to be no reason why in such cases a gift to an unincorporated society should not be treated as an augmentation of the general funds of the association so fulfilling the will-maker’s clear intentions.” Revision questions: The difference between a fiduciary power and a discretionary trust is that...; ix.In a fiduciary power the trustees need not consider whether they should exercise the power x.In a fiduciary power the trustees can choose anyone that they want xi.In a fiduciary power the beneficiaries have no right to be chosen xii.In a fiduciary power the trust property does not belong to the beneficiaries Who owns the property that was supposed to be the trust fund that did not eventuate due to uncertainty of object? What is this legal situation called? Write in simple a definition of what is required if a settlor is considering the objects of their trust, if they wish to include (a) a fixed trust; (b) a discretionary trust; (c) a fiduciary power. Connect the certainty of objects concept with the correct description. Conceptual uncertainty

It is not possible to identify the beneficiaries of the trust due to the indeterminacy or vagueness of the term used.

Evidential uncertainty

It is not possible to identify the beneficiaries of the trust because of a lack of information about the person.

'Whereabouts' uncertainty

It is not possible to give effect to a distribution because the beneficiary cannot be found.

istrative Unworkability

It is not possible to give effect to a distribution because the class of beneficiaries is so large that actions cannot be done for their individual benefit.

Which of these is name the same idea: conceptual certainty; evidential certainty; linguistic certainty; istrative workability. What kind of power/trust is this: m. $20k to my son Peter to be distributed to his siblings as he sees fit to do so.

n. $20k to my son Peter to be distributed equally to his siblings. o. $20k to my son Peter to be distributed to his siblings if he sees fit to do so. p. $20k to my son Peter that he must invest and then distribute the income to his siblings in such amounts and at such times as he in his discretion chooses, with the power to accumulate income if he chooses not to make a distribution. q. $20k to my son Peter that he must invest and then distribute the income to his siblings in such amounts and at such times as he in his discretion chooses, with the power to not make any distribution if he chooses not to do so. r. $20k to my son Peter that he must invest and then from time to time consider whether to distribute the income to his siblings in such amounts he chooses. Further readings:  Garrow and Kelly: paragraphs [4.72]-[4.119]  CT Emery "The Most Hallowed Principle – Certainty of Beneficiaries of Trusts and Powers of Appointment" (1982) 978 LQR 551.  IRC v Broadway Cottages [1955] Ch 20.  Re Beckbessinger [1993] 2 NZLR 362.

Constitution of Trust Property Required reading and questions: Milroy v Lord;  What are the ways in which property can be effectively transferred according to this decision?  Why is it so important that the court should not give effect to an imperfect gift by interpreting it as the donor declaring a trust?  Consider Hackney's rhetorical questions: "If we are seeking intention, the obvious economic intention here is to be rid of the property, and one might ask how conscionable it truly is for the would-be transferor to retain the benefit, and if not, why his successors (who are the normal parties to the cases) should be in a better position. One might also ask what this kind of incompetent settlor would prefer: to see the gift fail as attempted, or to have it rescued as something else. It may be that in this highly practitioner-based area, we are expecting intentions of benefactors to be far too refined, and we may be expecting them to make distinctions they not only had never dreamt of, but might not even understand if they were explained" Jeffrey Hackney Understanding Equity and Trusts (Fontana, London, 1987) at 93. Re Rose  Is Re Rose really a case about trusts (although it is frequently assumed to be relevant to the proper constitution of trust settlements)? Assume that Mr Rose has not died (yet); he did everything required of him to effect the gift, but the registration of the transfer (or some other act on which a transfer might be conditioned) did not occur. The company then declares a very large dividend. Mr Rose decides to keep the dividend for himself. In the interests of verisimilitude, assume that the relationship between the couple has broken down. May he do so? If your answer is “no”, explain why. (Companies legislation is typically concerned with legal title to shares: equitable interests may not be ed.)  Is Re Rose consistent with Milroy v Lord (many of the key ages in the latter case are reproduced in the former)? Choithram v Pagarani  Jeffrey Hackney observes that "I can informally transfer to you my economic advantages in chattels of huge value by a few significantly chosen words. No other device in this legal system approaches the massive power of these spoken words in Equity: 'I declare myself trustee of this for you'." Hackney at 109  What was Mr Pagarani intending to do? Why did those who would have taken the property if it was not held by the trusts argue that the transfers were invalid?  Why could Pagarani's statement that "I give to the trustees of the foundation" the relevant property not constitute the trust property through the mechanism of a transfer of legal title?  What about the rule in Re Rose? Could it be used here?

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On what basis can we say that the various trustees of the foundation have the trust property 'in their hands'? In other words, how did the Privy Council say that in equity the property was in the hands of the trustees? Does this case give effect to the concerns noted above in the Hackney quotation?

Comments Constituting the Trust Property Recap: So far, we have considered certainty of intentions; certainty of subject; and certainty of objects. Additionally, for there to be a valid trust, the settlor must dispose of his property—that is, make and effective disposition ('transfer') of his or her trust property and/or make an effective declaration of trust. Think of the trust triangle of settlor, trustee, and beneficiary; we are concerned with how the property gets from the hands of the settlor to and into the hands of the trustee. For example, an ordinary chattel must be delivered to the donee with an intention of gifting it, or can be gifted by deed. Once a trust has been constituted, it cannot be revoked unless such a power is included in the trust deed. The settlor has disposed of their absolute ownership of the property, and they only have rights to it if they are also a beneficiary of the trust. The trustee is required to hold the property exclusively for the benefit of the beneficiaries, who can sue to enforce the provisions of the trust. If this has not happened, then the trust is not valid and cannot be given effect to. The person who would have benefitted from the trust cannot enforce it, as they are merely a volunteer – someone who has not provided consideration in return for a promise or gift. The trust is not binding, even if 'declared', until the property is in the hands of the trustee. We might say that this rule ensures that the putative settlor is serious about creating legal relations, and that it ensures that the trustee has the power (through having legal title to the property) to undertake her obligations to the beneficiaries. The two obvious ways of getting the property into the hands of the trustee are (a) properly transferring the property to the trustee according to whatever legal rules regulate how such transfer is effected, and (b) where the settlor is herself going to be the trustee, the property is already in her hands so nothing further need be done. Milroy v Lord concerned inter alia the validity of a voluntary settlement of shares that (according to the governing law) required to be ed before the transfer was effective. Read the analysis of Lord Turner. On what basis/bases did he decide that this was an imperfect voluntary gift? The difficulty faced in Milroy v Lord was that the court will not give effect to a transfer that is imperfect according to its own requirements through interpreting it as a different kind of transfer: an imperfect gift (transfer of legal title to a volunteer) will not be made effective

through interpreting the situation as the donor (giver) declaring that they hold the property on trust for the donee. That seems to be the rule in Milroy v Lord. As is explained by Doggett: "It is often stated that equity will not perfect an imperfect gift: failed donative intent will not be construed as a declaration of trust… The justification, as recognised by Maitland (Lectures on Equity,p. 74), arises from the fundamental difference between donors and trustees. The donor divests himself of all responsibility regarding the property he gives whilst the trustee often assumes onerous fiduciary duties over property. Thus to impose trusteeship upon a would-be donor is to impose an outcome that results in far greater responsibility than the donor anticipated." (Abigail Doggett " Explaining Re Rose: the search goes on?" (2003) 62 CLJ 263 at 263-264). However, in recent years there has been a relaxation of the stringency of Milroy v Lord, and so there are other ways to get the property into the hands of the trustee. There is a third way of getting the property into the hands of the trustee, identified in the Re Rose decision. Note that the rules in Re Rose and subsequent cases are also applicable to situations where a trust was not intended, and instead of looking for a way of getting the trust property into the hands of the trustee, we are looking for a way of getting an equitable property right into the hands of a person who was meant to take legal title through gift. As in Re Rose itself, it seems that Milroy v Lord is being avoided to some extent (depending, of course, on how one reads Milroy). Section 84 of the Companies Act 1993 provides in material part: 84 Transfer of shares (1) Subject to the constitution of the company, shares in a company may be transferred by entry of the name of the transferee on the share . (2) For the purpose of transferring shares, a form of transfer signed by the present holder of the shares or by his or her personal representative must be delivered to— (a) the company; or (b) an agent of the company who maintains the share under section 87(3). (3) The form of transfer must be signed by the transferee if registration as holder of the shares imposes a liability to the company on the transferee. See also the recent discussion of this area in the context of share transfers in Curtis v Pullbrook [2011] EWHC 167 (Ch): Miss Angus very properly treated me to a full citation of the two most recent authorities bearing upon this question, namely Pennington v. Waine [2002] 1 WLR 2075 and Zeital v. Kaye [2010] EWCA Civ 159. In Pennington v. Waine, Arden LJ (with whom Schiemann LJ agreed) identified three routes by which, in the context of a defective voluntarily transfer of shares, the court might avoid the rigorous application of the principle that equity will not compel the

completion of an imperfect gift, in the absence of a valid declaration of trust. She described all three as methods whereby a court of equity might temper the wind to the shorn lamb. The first is where the donor has done everything necessary to enable the donee to enforce a beneficial claim without further assistance from the donor: see paragraphs 55 to 56 and Rose v. Inland Revenue Commissioners [1952] Ch 499. The second is where some detrimental reliance by the donee upon an apparent although ineffective gift may so bind the conscience of the donor to justify the imposition of a constructive trust: see paragraph 59. The third is where by a benevolent construction an effective gift or implied declaration of trust may be teased out of the words used: see paragraphs 60 to 61, apparently based upon Choithram International SA v. Pagarani[2001] 1 WLR 1. On its facts, Pennington v. Waine appears to have been an example of a sufficient detrimental reliance by the donee, who had agreed to become a director of the subject company upon an assumption that he had received an effective gift of qualifying shares in it […]. In the present case, as in Zeital v. Kaye, no amount of benevolence in construction would lead to the conclusion that Mr Pulbrook intended to declare himself a trustee. On the contrary he did his incompetent best to transfer both legal and beneficial title to the shares. Nor do the difficulties in identifying a perfect gift stem from any lack of clarity of intention that there should be an immediate gift, capable of being resolved by a benevolent construction. Again, on the contrary, Mr Pulbrook did his best, but without success, to effect an immediate and outright transfer of his beneficial interest. As in Zeital v. Kaye, the difficulty arises from Henry Pulbrook's failure to take the necessary steps sufficient to enable his wife and daughter to obtain a transfer of the 300 and the 14 shares without further recourse to assistance from him. In fact, he failed to send either of them the share certificate of his own from which he intended that the gifts should be carved out, and he failed to send either of them the executed stock transfer forms. While it appears that he did send his relevant share certificates to the company, in the sense that they duly turned up among the documents which he sent to solicitors for safekeeping in October, he did not send the stock transfer forms to the company, but kept them himself. All that his wife and daughter received were documents purporting to be new share certificates in their names which Mr Pulbrook had created without FRN's authority. The result was that, without his assistance in making available the duly completed stock transfer forms, neither his wife nor his daughter could perfect the intended gifts without further assistance from Mr Pulbrook. The evidence does not show any acts or omissions by either Anucha or Alice Pulbrook in reliance (let alone detrimental reliance) upon having received an apparent gift of shares, so that there is no basis upon which Mr Pulbrook could be treated as a constructive trustee. It follows that none of the methods of tempering the wind to the shorn lamb identified by Arden LJ in Pennington v. Waine avail either of them.

I reach that conclusion without any great comfort that the existing rules about the circumstances when equity will and will not perfect an apparently imperfect gift of shares serve any clearly identifiable or rational policy objective. […] [T]here was no lack of intention to make a gift on Mr Pulbrook's part and it is clearly not a case in which any policy of permitting donors to change their minds (per Arden LJ in Pennington v. Waine at paragraph 62) has any application to the present case where, no doubt, Mr Pulbrook would be only too pleased to provide any assistance now, were it not for the intervention in the meantime of the interim charging order. Apart from the considerations arising from section 423 (which, as Arden LJ points out, have nothing to do with the policy behind the purely equitable rules) I might have been straining to find a way in which to give effect to the attempted gifts in the present case. Nonetheless, I have been unable to do so, within the constraints of the equitable rules as laid down in the two most recent authorities to which I have referred. It follows that there was not an effective gift of Mr Pulbrook's beneficial interest either in the 14 or in the 300 shares which he attempted to give respectively to his daughter and to his wife so that, in the result, there is nothing to prevent the charging order being made final in relation to all of them. […] Further readings:  Rickett 'Completely Constituting an Inter Vivos Trust: Property Rules' [2001] Conv 515 (discussing Choithram v Pagarani). Revision questions  What are the ways of constituting the trust property?  How does constitution of trust property relate to declaring a trust?  What is the main reason for the decision in Re Rose? . Equity will not perfect an imperfect gift. a. In order to transfer equitable title to property, the donor must do everything that is necessary to be done, in accordance with the nature of the property, to transfer the legal title. b. If there is nothing left that a donor needs to do in order to transfer the legal title to a type of property, equity will give effect to the transfer. c. If a donor does everything that is necessary to transfer the legal title to a type of property, equity will deem the donor to have self-declared a trust over that property. d. In order to transfer equitable title to property, a donor must intend to benefit the donee and deliver the property.

What is meant by the equitable maxim 'equity will not perfect an imperfect gift'? A. When the legal requirements for transferring legal title to another person have not been carried out, equity will not step in to complete the transfer. B. If a donor has done all that they need to do to transfer property, the property will be transferred in equity. C. The gift has not been purchased by the recipient correctly. D. Equity will sometimes look at what the parties intended to do with their property and 'look at the substance rather than the form' of the transaction. If the parties intended to give another person the legal title equity will make sure that this is carried out. E. The person making the gift does not have the legal power to do this and equity will stop them giving property away.  Does Choithram provide another way of constituting trust property, or should it be read as merely clarifying one of the existing ways of doing this?  What might have a dissenting judgment in Choithram said?

Formalities and Secret Trusts Required Reading and Questions: In re Young [1951] Ch 344;  What is the "rather interesting" point about one of the legacies in the will? Why might the person who was given the property not be able to take the property?  Why did the court say that he was able to take the property? Page v Page [2002] NZFLR 689.  Who was making the trust claim here? Why was there no trust according to the normal rules about creating a testamentary trust?  What requirements for a secret trust do we find in this case?  Why was there no secret trust in this case?

Commentary: 1. What is the effect of the failure to create a completely constituted trust? Some of the implications are suggested by the analysis of Briggs J in Curtis v Pullbrook [2011] EWHC 167 (Ch) (extracted in the previous reading assignment above). At the most extreme the purported transferee is a volunteer, and, without more, equity does not assist a volunteer. On the other hand, as Professor Nicky Richardson explains (Nevill’s Law of Trusts, Wills and istration 35 (9th (ed) 2004, Lexis/Nexis), the position is different if the purported transferee has given consideration for the creation of the trust, in which case the party can sue for breach of an agreement to create a trust. In some instances, the position of the beneficiary would be covered by s 4 of the Contracts (Privity) Act 1982. 2. In part of the In re Young case not reproduced here, Dankwerts J held that the widow was entitled to a life interest in the whole of the testator’s property, both real and personal. In In re Young, why was it important to establish that the trust arose “outside the will”? In Page v Page, why did the secret trust claim fail? Relationship property law is a distinct branch of property (and family) law – and we won’t be discussing it in detail. (Later in the class, we shall consider its relevance to succession law. But if you are interested in following up on the relationship property aspects, Sydney v Sydney [2012] NZFC 2685 offers an interesting comparison.) Further readings:  Garrow and Kelly paragraphs 5.32-5.102  Pawlowski "Intention and Obligation in Secret Trusts – Some Practical Implications" (2002) 8 Trusts & Trustees (2002) 7.  Stubbins "Secret trusts—time for rationalisation?." Trusts & Trustees (2015) Revision Questions:  How do we know that a secret trust exists?

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Why would someone want to create a secret trust? What are the dangers of creating such a trust? Does a secret trust essentially constitute an avoidance of the Wills Act requirements for testamentary dispositions? Is the explanation of why this is not the case in Re Young convincing? Come up with scenarios where a half or fully secret trust would be held to be valid. What facts could be altered to make the secret trust invalid?

Charitable trusts Required readings  Morice v Bishop of Durham  Statute of Elizabeth  Pemsel  CDC Trustees' Duties Required readings Trustee Act 1956; Spencer v Spencer [2013] NZCA 449

Comments/Questions: 1. This class will be an overview of the obligations and powers of trustees. We shall return to aspects of this topic when we consider the concept of “fiduciary duties” a little later in this course. 2. Why were the trustees in Spencer liable, despite their conviction that their behaviour was acceptable? 3. A general statement of the law on the duties of trustees is set forth by the Law Commission (2012) as follows: Current law 3.3 The duties of trustees are not set out in the Trustee Act 1956 or any other Act. They are found in centuries of case law. It is generally accepted that there are some fundamental duties which if excluded mean that the relationship does not constitute a trust. There are some duties which do not apply to every trust as trust deeds may alter the trustees’ obligations by explicitly including some duties and excluding others. 3.4 The mandatory “irreducible core” of trustees’ duties was described in the English Court of Appeal by Millett LJ in the case of Armitage v Nurse as being to act honestly and in good faith for the benefit of the beneficiaries. Millett LJ described this as the minimum obligation necessary to give substance to a trust. 3.5 The courts have held that trustees are subject to a duty of care. Trustees are obliged to take the care of an ordinary prudent person of business in the circumstances of the trust. A professional trustee, that is, one who is paid to act as a trustee, is expected to exercise a higher standard of diligence and knowledge than an unpaid trustee, while a professional corporate trustee is expected to use the special skill and care which it professed itself to have in its

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Recent cases discussing/applying the law: The Great Christchurch Buildings Trust v Church Property Trustees [2012] NZHC 3045 (15 November 2012) Church Property Trustees v Attorney-General [2013] NZHC 678 (8 April 2013) Further reading A good basic and practical discussion of trustees' duties is found on the LexisNexis New Zealand database, "Law of Trusts" (in the list of resources on the right hand side of the home page) Chapter 4, section 4.12 onwards.