Lecture 5

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Sample Question

Sample Question: 

Sample Question Joanne and some others have inherited some kind of interest in freehold farm land located in Victoria, from a billionaire named Howard who recently died. Howard picked their names at random out of the telephone book. All of Howard's relatives had died except for a daughter named Ingrid who is studying in Japan but with whom he had no contact. In his will Howard has disposed of only the land to Joanne and the others. All his other property in Victoria, including a collection of tractors, was not disposed of by the will, which Howard wrote himself. The terms of his gift were - " ... to Joanne for her own use and enjoyment for life, ... and then to Kenneth for his own use and enjoyment for life, ... and then, if before she reaches the age of 25 years she wins the Goulburn Valley Tractor Pull, to Lefki for her own use and enjoyment absolutely."

Sample Question: 

Sample Question i) What interests do Joanne and Kenneth have in the land? ii) What interest does Lefki have in the land? Why? iii) Lefki secretly hates tractors. What will happen to the land if Lefki does not win the Goulburn Valley Tractor Pull before she turns 25 and why? iv) In view of the pointlessness of looking after the land for Lefki, Joanne proposes to cut down all the timber on the land and sell it while prices are high and keep the proceeds. Kenneth will not agree. Can Joanne cut and sell the timber anyway? Can she keep the proceeds?

Trusts: 

Trusts Express Trusts Resulting Trusts Constructive Trusts Estates and Interests (which would generally be Legal Created by Equity

Express Trusts: 

Express Trusts First – A trust is a set of obligations imposed by Equity on someone (the Trustee) to deal with property in a certain way, for the benefit of other people (the Beneficiaries) An Express Trust is a trust which is deliberately created Three categories of Express Trust Declarations Settlements Testamentary Trusts Declarations and Settlements are generally made inter vivios (during life), Testamentary Trusts are always created by will (take effect on death)

Creating an Express Trust: 

Creating an Express Trust s53 of the Property Law Act 1958 – requires generally that the creation and disposal of equitable interests be made in writing Trusts should be made in the form of a deed and not in a plain contract A deed is a special form of agreement that requires a ‘seal’ and are common in property transactions. A normal contract generally requires some form of ‘consideration’ (payment), and not usually associated with ‘gifts’ as deeds are

Declaration of Trust: 

Declaration of Trust A person who owns land declares that he or she holds the land as trustee or on trust for specified ascertainable beneficiaries After the declaration, the beneficiary acquires an equitable interest in the land This equitable interest might be fully vested or might be a future contingent interest in equity (see discussion on future property) If the beneficiary wished to protect their equitable interest, they would lodge a caveat at the Land Titles Office

Settlement: 

Settlement A settlement is created by a Settlor transferring land to a Trustee to be held on trust for specified ascertainable beneficiaries This is the most usual way of creating trusts with Corporate Trustees Corporate Trustees usually have the task of managing the trust property and will engage different professionals to perform different tasks in relation to it It is difficult to ascertain who has specific interests in Settled land Eg. Settlements were the basis of apartment developments before stratum title was introduced The land and building were owned by the Trustee company Each individual apartment was owned in equity by the beneficiaries

Testamentary Trusts: 

Testamentary Trusts Simply – trusts created by will, taking effect upon death Property is assigned by the will to the executor immediately after death After executor has administered the whole estate, any express trust of a particular property would be transferred to the beneficiary As with all property, the interest may be vested in more than one person, so the estate may be transferred to A for life, and when the life tenant dies, to B etc.

Resulting Trusts: 

Resulting Trusts Different from Express Trusts Express Trusts are voluntary, Resulting Trusts do not arise voluntarily Most common examples of a Resulting Trust Purchase in the name of another person Transfer to a volunteer Failure to exhaust an equitable interest under an Express Trust

Resulting Trusts – practical situations: 

Resulting Trusts – practical situations If A provides all the money for the purchase of a property, but the property is registered in the name of B, then equity will assume (without further documentary evidence) that B is registered as proprietor as trustee for A A therefore holds an equitable interest in the land as a beneficiary A can lodge a caveat to protect that interest Because of the Torrens System, if A does not lodge a caveat and B transacts in relation to the property in a way not in A’s interest, then A risks losing if contested in court

Resulting Trusts – practical situations: 

Resulting Trusts – practical situations What if A intends to transfer the property to B without creating a Resulting Trust (eg an inheritance to a child)? It is necessary to take an additional step in the transaction to show that A intended to make a gift of the purchase price to B and that no trust relationship was intended A deed of gift will do this

Calverly v Green (1984): 

Calverly v Green (1984) An example of a Resulting Trust Mr C and Ms G were in a de facto relationship They bought some land as Joint Proprietors (as opposed to Tenants in Common) in 1973 Property cost $27,250 – Mr C paid $9250 and the rest was borrowed They purchased as Joint Proprietors to satisfy the lending company Mr C and Ms G separated in 1978

Calverly v Green (1984): 

Calverly v Green (1984) High Court held that when a title is registered in one person’s name but the money was provided by another, the title is held on a Resulting Trust for the person who provided the money This is cancelled out when children and de jure married partners are involved (‘presumption of advancement’) Does not apply to de facto relationships Where 2 people contribute in unequal shares, without a clear arrangement, and they are both registered on title, then they hold the title on resulting trusts for heach other in the proportion to their actual contributions

Constructive Trusts: 

Constructive Trusts Arise in a wider range of circumstances This range of circumstances has been left deliberately wide by courts General view: A constructive trust is implied where a person holding the legal title to land is under an obligation of conscience to deal with it in a moral way with regard to the interests of another person So, the legal title holder will be regarded as a constructive trustee and the person morally entitled to an interest in the land will be regarded as a beneficiary with an equitable interest (protect by caveat) in the property

Constructive Trusts – Fiduciary Relationships: 

Constructive Trusts – Fiduciary Relationships The clearest example of a constructive trust A fiduciary duty is the highest standard of care imposed at either equity or law A fiduciary is expected to be extremely loyal to the person to whom they owe the duty (and often involves an imbalance of power) In equity law generally, some examples of fiduciary relationships are teacher-pupil, lawyer-client, doctor-patient, parent-child etc Trustee-beneficiary is an example of a fiduciary relationship

Fiduciary Duty – Keech v Sandford or The Rumford Market Case: 

Fiduciary Duty – Keech v Sandford or The Rumford Market Case Involved a trustee who held a lease of the Rumford Market on trust for an infant The lease was about to expire, so the trustee sought to renew it on behalf of the infant The renewal was not obtained Later the trustee obtained the renewal in his own name and on his own behalf He thought he could take the profits personally The infant (not personally!) took an action to have the lease assigned to him and to obtain an account of the profits Held that the lease was held as a Constructive Trust for the infant It was not possible for the trustee to take the lease (or profits) without express permission from the infant (breach of fiduciary duty)

Boardman v Phipps: 

Boardman v Phipps Agent-Principle is another example of fiduciary relationship An agent acting for some trustees acquired important information about a company He used this information for his own profit Court held that the information was obtained and held on trust The agent had to account to the trustees for the profits he made Although this did not involve land, the same would apply to known information about land

Constructive Trusts – Unconscionable dealings with legal title: 

Constructive Trusts – Unconscionable dealings with legal title Difficult area of law – involves things like fraud and morally reprehensible behaviour (with respect to title) Now, we have legislation to deal with this more satisfactorily s79 Family Law Act (matrimonial property) Part IX of the Property Law Act (de facto marriage) For situations that do not ‘fit’ the situations envisaged in the legislation, the following still applies (not just domestic situations for example)

Hohol v Hohol: 

Hohol v Hohol Parties met in Nazi Germany and they commenced co-habitation in 1945 They never married but Mrs Hohol adopted the man’s name and had 4 children They started with no assets In 1961 they bought a ‘family’ property They lived in a garage and improved the property for the benefit of the family The money that Mr Hohol earned was applied to the purchase and legal title was registered in his name Mr and Mrs Hohol separated

Hohol v Hohol: 

Hohol v Hohol Mr Hohol denied that Mrs Hohol had any interest in the land Court held that they had acquired the land with a common intention that they would both be beneficially interested in it If the legal title holder (Mr Hohol) had made Mrs Hohol believe that she did not have an interest, he could not deny the interest In this case, Mrs Hohol had made great sacrifices for her family and Mr Hohol had given her little more than food and clothes It would be a fraud (by him) to assert his legal title against her equitable interest Conclusion – Mr Hohol held the legal title on trust for them both as tenants in common in equal shares

Fraud and Transferring Property: 

Fraud and Transferring Property s43 of the Transfer of Land Act: in the absence of fraud, a purchaser can defeat equitable interests of which they have no notice In Hohol there was fraud Even if Mr Hohol transferred the property to someone else, Mrs Hohol would still have an interest in the land (even though the innocent purchaser had no idea)

More Unconscionable Dealings: 

More Unconscionable Dealings Great sacrifices such as in Hohol are nor necessary to acquire an equitable interest in property Elements of an Unconscionability Constructive Trust: Pooling of resources in pursuit of a joint endeavour Failure of the substratum of the relationship for no attributable (legal) fault Unconscionable denial by the party holding the legal title of an interest held by the other party in the jointly acquired assets Don’t get too caught up in legalese here – it’s a complex area of law which is not clearly definable

Estates and Interests Generally created At Law: 

Estates and Interests Generally created At Law Estates or interests which can be created at law can also be created in equity We have seen equitable interests in the fee simple, equitable life estates and equitable leases Same is true for other estates or interests It is possible to create an equitable easement, an equitable mortgage and others Note though, there are restrictions on the length of time for which equitable future interests can be created

Estoppel: 

Estoppel Estoppel essentially means ‘to prevent’ If someone tries to use their ‘legal’ interest or estate in land in an unconscionable way (to the detriment of someone else), then they can be estopped (prevented) from acting this way by someone with an equitable interest There are categories of estoppel (difficult to distinguish) I’ll look at 2 cases, but it is a difficult area to distinguish from a Constructive Trust

Inwards v Baker: 

Inwards v Baker Land was owned by old Mr Baker His son Jack wished to build a home Old Mr Baker proposed that if the son built the land on his land, he could build a bigger home for the same money and live in it for as long as he wanted Jack built a home and lived in it Old Mr Baker remarried and when he died, it was found that he left everything to his second wife Jack continued to live in his home during her life She died and left everything to her biological children (including the legal title to the land under the house that Jack built) The children took action to eject Jack

Inwards v Baker: 

Inwards v Baker Court held: …if the owner of land requests another, or indeed allows another, to expend money on the land under an expectation that he will be able to remain there, that raises an equity in the licensee such as to entitle him to stay. He has a licence coupled with an equity The equity was best satisfied by the son being to permitted to remain there for as long as he wanted to live there Although this was old English law, the same would apply to Torrens land Even if Old Mr Baker’s second wife and children obtained registration of their inherited estates, they did so by way of a gift of land against the equitable interests that the original donor (Old Mr Baker) made

Walton Stores (Interstate) v Maher: 

Walton Stores (Interstate) v Maher In Sept 1983, Waltons negotiated with Mr and Mrs Maher (owners of the land) and agreed to demolish existing buildings and erect one to Waltons specifications Waltons would then lease the land from the Mahers Mahers’ solicitor prepared a lease and sent it to Waltons for execution Waltons agreed with some of the points, redrafted it and returned it Mahers executed the new lease and it was returned ‘by way of exchange’ Mahers commenced demolition on their land Waltons had second thoughts and found that the documents had not, in fact, been exchanged Waltons instructed it’s solicitor to ‘go slow’ Construction commenced (Waltons knew about this) When the building was 40% complete, Waltons announced that it would not proceed with the agreement

Walton Stores (Interstate) v Maher: 

Walton Stores (Interstate) v Maher Court held that if one party allows another to proceed to its detriment on the basis of a misunderstanding, which is the acknowledged state of affairs, that party will be estopped from denying the state of affairs or assumption Mahers were entitled to treat the lease as executed and enforceable

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