Equity and Trusts PDF

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Notes from Summer Semester of Equity and Trusts...

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Su 20 Equity and Trusts

Christoph Equity Summer

CONTENTS Introduction to Equity......................................................................................................11 Nature of Equity....................................................................................................................11 The History of Equity.............................................................................................................11 Medieval Origins................................................................................................................11 History of Equity during the 14th & 15th Century...............................................................12 Relationship Between Law and Equity.........................................................................12 CONFLICT BETWEEN EQUITY AND THE COMMON LAW .........................................13 19th Century.......................................................................................................................13 Judicature Acts 1873-1875................................................................................................13 Who Where the Lord Chancellors?...................................................................................14 Lord Chancellors during Tudor and Stuart Period........................................................14 Fusion Fallacy........................................................................................................................14 Examples............................................................................................................................14 Equitable Jurisdiction in Australia.........................................................................................15 Maxims of Equity..............................................................................................................15 1. Equity will not suffer a wrong without a remedy.............................................................16 2. Equity follows the law.......................................................................................................16 3. He who seeks Equity must do Equity................................................................................16 4. He who come to Equity must come with clean hands.....................................................16 5. Equity Assists the diligent and not the Tardy....................................................................17 6. Equity is Equality...............................................................................................................17 7. Equity Looks to Intent Rather than Form..........................................................................17 8. Equity Regards as Done that Which Ought to have been done........................................17 9. Equity will not assist a volunteer......................................................................................18 10. Equity acts in personam..................................................................................................18 Fiduciary Duties................................................................................................................19 Distinguished from other Obligations...................................................................................19 Identification of a Fiduciary Relationship.............................................................................20 Determining if a particular relationship is Fiduciary.............................................................20 What criteria do we look for?............................................................................................20 Page 1 of 119

Scope.................................................................................................................................21 Characteristics of a Fiduciary Relationship...........................................................................21 ......................................................................................22 ......................................................................................22 (1) Trustee and Beneficiary..........................................................................................23 (2) Director and Company............................................................................................23 (3) Lawyer and Client...................................................................................................24 1) No Duty and Duty Conflict Application................................................................24 2) No profit duty application....................................................................................24 (4) Partners and Co-Partners........................................................................................24 (5) Agent and Principal.................................................................................................26 (6) Promoter and Company..........................................................................................26 (7) Guardian and Ward.................................................................................................26 Other Relationships..............................................................................................................27 Other Categories................................................................................................................27 (1) Joint Venturers........................................................................................................27 (2) Financial Adviser and Client....................................................................................28 (3) Banker and Customer.............................................................................................28 (5) Doctor and Patient..................................................................................................29 (6) Employer and Employee.........................................................................................29 Establishing a Fiduciary relationship (from Scratch).............................................................30 1) An Undertaking to Act...................................................................................................30 2) Vulnerability..................................................................................................................30 3) Reasonable Expectation................................................................................................30 Fiduciay Obligations..............................................................................................................30 Main Obligations...................................................................................................................31 Breach...................................................................................................................................31 (1) Conflict of Duty and Interest........................................................................................31 Examples......................................................................................................................32 (2) Conflict of Duty and Duty (Same Interest Conflict)......................................................33 Examples involving conflict of duty and duty by lawyers............................................33 (3) Conflict of Duty and Duty (Separate Matter Conflicts)................................................33 Page 2 of 119

(4) Taking Advantage of a Fiduciary Position.....................................................................34 Examples......................................................................................................................35 Strict Liability........................................................................................................................35 Secret Commissions and Bribes............................................................................................36 What is a Bribe?.................................................................................................................36 What a Fiduciary is Accountable For.................................................................................36 A Principle’s Remedies.......................................................................................................36 Defences................................................................................................................................37 Equitable Defences............................................................................................................37 (1) Fully Informed Consent...........................................................................................37 Whose Fully Informed COnsent...............................................................................37 (2) Laches.....................................................................................................................38 When Laches Operates as a Defence.......................................................................38 1) Length of the Delay..........................................................................................38 2) Reason for the Delay........................................................................................39 Examples of Justifiable delay:..........................................................................39 3) Prejudice Suffered by the Defendant...............................................................39 Examples of Prejudice......................................................................................39 4) Unconscionability on the Part of the Plaintiff in Delaying...............................40 5) Degree of Promptitude Expected in the Circumstances..................................40 Statutory Defences............................................................................................................40 Remedies...............................................................................................................................40 General Approach..............................................................................................................40 Personal Remedies............................................................................................................41 Account of Profits.........................................................................................................41 Equitable Compensation..............................................................................................41 Proprietary Remedies........................................................................................................42 3rd Party Liability....................................................................................................................42 1st Limb of Barns v Addy – Recipient Liability....................................................................42 1) Property held in trust / within the scope of fiduciary duty.....................................42 2) Assets disposed of in breach of trust/fiduciary duties............................................43

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3) Defendant beneficially received assets that belong to / traceable from the Claiment.......................................................................................................................43 4) Knowledge................................................................................................................43 Alternative Claim – Volunteer – Inconsistent Dealing..................................................43 Remedies for Knowing Receipt..........................................................................................43 2nd Limb of Barns v Addy – Accessorial Liability................................................................44 (I) Assistance.................................................................................................................44 (II) A Dishonest or fraudulent Design on Behalf of the Trustee/Fiduciary...................44 (III) 3rd Party had Knowledge of the Dishonest and Fraudulent Design.......................44 Remedies for Knowing Assistance.....................................................................................45 Trustee de son Tort............................................................................................................45 Elements.......................................................................................................................45 Confidential Information..................................................................................................46 Jurisdiction............................................................................................................................46 Elements...............................................................................................................................47 1. Information is Confidential............................................................................................47 Loss of Confidential nature..........................................................................................47 Types of Information Protected...................................................................................48 (a) Commercial or Trade Secrets..............................................................................48 Trade Secrets........................................................................................................48 Commercial Information......................................................................................49 Information Gained During Employment.........................................................50 (b) Personal..............................................................................................................50 (d) Government Information....................................................................................51 Information Not in The Public Domain........................................................................51 Springboard Doctrine (Exception to the Public Domain Rule).................................51 Loss of Confidentiality..................................................................................................52 2. Obligation of Confidence...............................................................................................52 (1) Agreement..............................................................................................................52 (2) Relationship Between the Parties...........................................................................53 Professional and Client.............................................................................................53 Employer and Employee..........................................................................................53 Page 4 of 119

Relationships of Mutual Trust and Understanding..................................................54 Fiduciary Relationships.............................................................................................54 3. By Subject Matter and Circumstances of the Communication......................................54 If There is No Relationship...........................................................................................55 Information Obtained by Reprehensible Means..........................................................55 Breach...................................................................................................................................55 Detriment..........................................................................................................................56 Defences................................................................................................................................57 (1) Plaintiff’s Lack of Locus Standi (Privity)........................................................................57 (2) Consent Either Express or Implied of the Confider......................................................57 (3) Change of Position.......................................................................................................57 (4) Disclosure Under Compulsion of Law.........................................................................57 (5) Disclosure of an Iniquity..............................................................................................57 (6) Disclosure in the Confidant’s Interest..........................................................................58 (7) Disclosure in the Public Interest.................................................................................58 Remedies...............................................................................................................................59 1) Injunction.......................................................................................................................59 2) Account of Profits..........................................................................................................60 3) Equitable Compensation...............................................................................................60 4) Constructive Trust..........................................................................................................61 5) Orders for Delivery-Up and Destruction........................................................................61 3rd Party Liability....................................................................................................................61 Government Information......................................................................................................62 Undue Influence...............................................................................................................63 Types of Undue Influence.....................................................................................................63 (1) Actual Undue Influence................................................................................................63 (2) Presumed Undue Influence..........................................................................................64 Classes of Relationships of Presumed Undue Influence..............................................65 (1) Presumed Relationships......................................................................................65 (2) Special Relationship based on the Facts.............................................................65 Particular Relationships (NOT Necessarily Included)...........................................66 Rebutting the Presumption...................................................................................................67 Page 5 of 119

1) Righteousness of the Transaction.................................................................................67 2) Improvident Provisions in a Deed Settlement...............................................................67 3) Adequacy of Considerations..........................................................................................67 4) Full Disclosure by the Dominant Party to the Subservient Party..................................68 5) Independent Advice......................................................................................................68 6) Clear Intention to Enter Transaction.............................................................................68 Defences................................................................................................................................69 Laches................................................................................................................................69 3rd Party Liability....................................................................................................................69 Remedies...............................................................................................................................70 Unconscionable Bargains..................................................................................................71 Elements of Unco...