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Law Notes Trusts and Equity Notes

Remedies For Breach Tracing And Defences Notes

Updated Remedies For Breach Tracing And Defences Notes

Trusts and Equity Notes

Trusts and Equity

Approximately 1016 pages

Equity notes fully updated for recent exams at Oxford and Cambridge. These notes cover all the LLB trusts cases and so are perfect for anyone doing an LLB in the UK or a great supplement for those doing LLBs abroad, whether that be in Ireland, Hong Kong or Malaysia (University of London).

These were the best Equity and Trusts Law notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LLB samples from outstanding law students with the highes...

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Remedies against trustees

Two kinds of legal duties:

  1. Primary duties set down the basic standards which the law expects us to meet: these duties are mirrored by primary rights.

    1. C may seek to enforce his primary rights through a primary claim.

  2. Secondary duties which arise upon the commission of wrongs: these duties are mirrored by secondary rights.

    1. C may seek to enforce his secondary rights through a secondary claim (i) compensation reflecting C’s losses caused by D’s breach, or (ii) disgorgement/restitution reflecting D’s gains made through his breach.

C will not always have a choice between these types of claim.

Claims for breach of trust:

  1. Primary claims

    1. Injunction

      1. Fox v Fox – An injunction was granted to prevent T from distributing the trust property improperly (contrary to the provisions in the testator’s will).

    2. Distribution

      1. Re Locker – Where discretionary Ts desire to repair their breach of duty, the court may exercise its own discretion to permit the Ts to repair their breach by distributing the trust property.

        1. The breach here was failing to distribute the trust property within a reasonable time (this will only be a breach where T’s duty to distribute is obligatory and not optional).

        2. The remedy of late distribution by Ts is still closer to S’s intentions than late distribution by the court.

      2. Smith v Bolden – T was withholding payment to B on the ground that he was holding the property for B’s own beneficiaries. The court held that T can only act as trustee for the Bs under his trust was ordered to distribute the trust property to B.

    3. Rescission

      1. Tito v Waddell (No 2) – When the trustee breaches the self-dealing or fair-dealing rules, the sale which constitutes the breach can be avoided by B.

        1. NB: For self-dealing, any B can void the sale. For fair-dealing, it is the B from whom T purchased the beneficial interest who can avoid the sale.

        2. NB: In Tito, the fair-dealing rule was held by Megarry VC to not be applicable on the facts obiter?

    4. Liability to account

      1. Enforcement of T’s primary duty to account for the value of the trust fund as it should be (as opposed to how it actually is).

      2. Unauthorised transactions:

        1. Essentially the idea that: ‘this unauthorised transaction must have actually come from T’s own funds – not the trust fund’

          1. E.g. invested in a gambling company which is prohibited by an ethical investment clause.

        2. Three stages:

          1. Require trustee to provide an account of what was done with the trust assets.

          2. Adjust the account to reflect what ought to have been done with the trust assets.

            1. Falsify: delete unauthorised items

            2. Adopt: accept unauthorised items, if they wish

            3. Surcharge: add items that ought to be there (e.g. bc a better investment should have been made)

          3. Require the trustee personally to pay for any shortfall.

      3. Breaches of fiduciary duty (e.g. making of unauthorised profits):

        1. T has entered into a specific transaction on behalf of the trust where they are in a conflict of interest, or have made unauthorised profits.

          1. E.g. invested in a company because they have received a bribe by the company to do so.

        2. B has a power to rescind the transaction and be compensated for loss, but also a right to an account of profits. Can require T to treat his personal profit as money he received for B, as opposed to money he received personally for his own benefit. It must be added to the account as a receipt, and thus added to the amount he must account for.

          1. In some situations, e.g. Boardman v Phipps, T has made a profit and has incurred expense in doing so but did so honestly, T can also include in the account expenses in making the profit to the trust.

          2. The logic of treating the receipt as receipt of trust property gives rise to a proprietary claim to that property (as in FHR v Mankarious Ltd)

  1. Secondary claims: equitable compensation

    1. Enforcement of T’s secondary duty to pay for loss caused by breach of duty.

      1. NB: It has been argued that the old conception of ‘account’ has been swallowed up by the new concept of equitable compensation.

      2. Causation of loss – B must show that but for the breach, T would have acted differently in accordance with their duties and the loss would not have occurred (Nestle v National Westminster Bank (1993)).

        1. Do the rules governing trustees’ DoC differ to ordinary DoC under negligence? No. Millett LJ in Bristol and West BS v Mothew (1996): “Although the remedy which equity makes available for breach of the equitable duty of skill and care is equitable compensation rather than damages, this is merely the product of history and in this context is in my opinion a distinction without a difference. Equitable compensation for breach of the duty of skill and care resembles common law damages in that it is awarded by way of compensation to the plaintiff for his loss. There is no reason in principle why the common law rules of causation, remoteness of damage and measure of damages should not be applied by analogy in such a case. It should not be confused with equitable compensation for breach of fiduciary duty, which may be awarded in lieu of rescission or specific restitution.” Thus, apply the CL rules of causation, remoteness and measure of damages to breach of a trustee’s duty of care.

        2. Swindle v Harrison (1997) = case involving breach of a fiduciary duty – solicitor offered to lend Mrs H money, but breach of fiduciary duty bc he failed to inform her of how this would result in a conflict of interest – Mrs H did not want to rescind, but instead equitable compensation bc she only entered a mortgage thinking she had the loan – BUT court held that even if the solicitors had explained the situation, she still would have taken out the loan and suffered the same loss.

          1. Evans LJ distinguished between two types of equitable compensation for breach of fiduciary duty:

            1. A very stringent measure which requires D to restore C to the position she was in before the breach. [causation of loss not relevant]

            2. A less stringent...

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