Equitable Property Equitable Ownership Issue Rule Authority Case Facts Notes and page of TB

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1 Equitable Property Equitable Ownership Duality of common law and equity The absolute owner of property does not own two estates, one legal and one equitable. Only holds the legal interest in the property. DKLR Holding Co (No 2) Pty Ltd v Cmr of Stamp Duties [1980] 1 NSWLR 510 Legal owner: owns the land outright if there is no equitable right. If there was a trust (equitable right), legal owner has the rights to it at law, but must use the land in the way equity (the trust) imposes Company A wants to give land to Company B and asked the 2 nd company to act as trustee. However, the transfer was not in registrable form not in law not successful. p. 125 [8.6] Propriety Right Security interests For it to be a right affecting property, it must be definable, identifiable by 3 rd parties, be capable in nature of assumption by 3 rd parties and have some degree of permanence or stability Securities lending contracts are not mortages or charges National Provincial Bank v Ainsworth [1965] AC 1175: In this case the wife s rights were none covered by the list The list provided is only some of the characteristics another can be Assignability (can you assign it to someone else) Beconwood Securities v ANZ [2008] FCA 594 The securities lending contract between Opes Prime and its clients did not have the effect of conferring any equity of redemption or other equitable estate or equitable interest, including a charge, in the securities or equivalent securities. Instead, the contract passed Husband s loans were due and he had no money so he told bank to mortgage the house instead. However, he defaulted on payment and bank foreclosed and tried to kick wife out of the house. Wife claimed that she had a right for roof over her head (claimed it was a proprietary right). BW needed money and so BW told ANZ that they would give shares for money and when it paid the money back, it would give back equivalent shares. BW used Opes in a securities lending arrangement to give money to ANZ. Opes went bankrupt and shares went up BW can t get them back from Opes so they tried to get them

2 unencumbered title in the securities on delivery of the securities. back from ANZ. Fiduciary Obligations No-Profit Rule The fiduciary s obligation not to make a profit at the expense of the beneficiary A trustee must not appropriate trust property for their personal benefit or exploit a business opportunity which should have been offered to the beneficiary. p. 163 [10.26] Fiduciaries acted in bona fide good intention No-profit rule is strict and applies to this issue Beneficiaries suffered no loss from the breach and No-profit rule is strict and applies the trust profits would not have been obtained by the to this issue beneficiaries Non conflict Rule Fiduciary must not borrow from the client for own interest without full disclosure to the client Keech v Sandford (1726) Sel Cas T King 61 It was irrelevant that the landlord had encouraged him to take the renewal and that the trustee had acted in good faith in taking the renewal. Boardman v Phipps [1967] 2 AC 46: A fiduciary acts in breach of obligation if there is the slightest possibility of conflict between selfinterest and the duty owed to beneficiaries. Daly v Sydney Stock Exchange (1986) 160 CLR 371 A trustee who renewed the lease, being trust property, in his own name rather than as trustee (as beneficiary was an infant), held the lease on constructive trust for the beneficiary. B&P made a purchase had a majority shareholding, which they used to sell off loss-making assets and reorganise the company ultimately making it profitable. However, B&P did not obtain the trustee s consent to their course of action. Plaintiffs Husband sought investment advice from firm of stockbrokers who advised him to invest in the firm without knowing the firm was facing financial difficulties. p. 166 [10.33] p. 167 [10.34] p [5.10]

3 Fiduciary obligations in partnerships Fiduciary cannot profit from the fiduciary position even if the partnership has resolved. Chan v Zacharia (1984) 154 CLR 178 The partnership in a medical clinic was wound up. Dr Chan, decided to exercise the option * Equity presumes that any benefit to renew the lease or gain made by a fiduciary was independently. Dr Zacharia, made from the opportunity or sought a declaration that Dr knowledge made available from Chan is bound to account for his fiduciary position. any profit he receives under the new lease p. 170 [10.35] Fiduciary relationships Concurrent contractual and fiduciary relationships Are doctor patient relationships fiduciary? In a fiduciary relationship if it is to exist at all must accommodate itself to the terms of the K so it is consistent with them A claim that someone is acting in the interest of another fails if the contract between the parties excludes the existence of fiduciary obligations The relationship, if it exists, would cover diagnosis, advice and treatment however there is no fiduciary duty concerning access to medical records John Alexander s Clubs Pty Limited v White City Tennis Club Ltd (2010) Trustees act in the interest of the beneficiaries and in compliance to the terms of a contract ASIC v Citigroup (No.4) 241 ALR 705 Court found that there was no fiduciary duty, because the scope of the relationship was a contractual relationship and NOT a fiduciary relationship Unsuccessful attempt to establish that contractual relationships were fiduciary for the purposing of claiming profits from what was otherwise a breach of contract The day before a takeover bid was publicly announced an employee of the bank purchased shares in the company on bank s behalf. ASIC argued that Citigroup acted in a fiduciary capacity in advising of the takeover bid and that it had a committed a breach of fiduciary obligation by permitting the shares to be purchased P.14 Footnote 36 P [10.16] Breen v Williams (1996) 186 CLR 71 Access to medical records has no conflict of interest and no Breen wanted access to her medical records to join a suit in the USA. Dr Williams refused. Breen states he owed her a unauthorised profit thus existence fiduciary duty to release them. of the relationship depends on the potential for breach of duty

4 What defines a fiduciary obligation Kirby J in Dissent: Chartered accountants who accept the reporting function owe a duty of selfless loyalty to the client which commissions the report. Pilmer v Duke Group Limited (2001) Pilmer s obligation was to act solely in the interests of Kia Ora was compromised by and in substantial conflict with their personal and commercial loyalty to Kia Ora wanted to take over Western United Ltd and needed a report stating it was being offered at a fair price. Pilmer (an accountant) said it was a fair price charging 20 mil extra. Kira ora goes insolvent because of all the $$ spent argue pilmer owed obligation to Kia Ora certain of the directors of Kia Ora Express Trusts Certainty Requirements What kind of intention is required to create a trust? The intention to create a trust can be Byrnes v Kendle (2011) 243 CLR as a result of an express or an 253 implied creation How far along into the process of finalising a transaction will a court recognise that the donee has acquired an equitable interest? In order to recongise a gift the donor must have done everything necessary to be done in order to transfer the property and render the gift binding. Corin v Patton (1990) 169 CLR 540 Mrs P did not do all that was necessary it was not enough that she declared her intention. She needed to register the transfer legally. Kendle and Byrnes were married. K had a deed that declared he held ½ of his property on trust for B. The 2 split and when K sold the property and B sued him for her share of the proceeds based on the trust. Mr & Mrs Patton were joint 136, 249 tenants of land. Mrs P sought to prevent Mr P becoming the sole owner of the land at her death so she transferred her interest to another party, Mr Corin who was to be her trustee but she died before the transfer was registered.

5 Whether the words of a trust declaration alone can Choithram International SA v A settlor executed a trust deed 249 constitute intention? Pagarini (2001) 1 WLR 1 PC to est. a charity which appeared to indicate the settlors intention to make outright gifts to the trustees. Creating an express trust Whether there was a Fid. Relationship between the P & D that entitles the the P to claim money. Is there sufficient certainty of subject matter. Romalpa Clauses: The supplier has a fiduciary right to be paid the proceeds of sale for the products. On the facts, however, the trust is not enforceable in equity This is because the plaintiffs cannot establish as a matter of evidence that the payments received by the buyer were actually related to the purchase of steel supplied by the seller They needed to establish that: - B sold the steel to a third party B had received money - That money had been received by B as proceeds of the sale of steel supplied to it by S, such as to activate the clause Aluminium Industrie Vaasen BV v Romalpa Aluminium [1976] 1 WLR 676 ( Associated Alloys v ACN (2000) 202 CLR 588 Romalpa sold aluminium foil the K stated that Romalpa will retain title to the products until they are paid back in full. The defendant went intio liquidation with debts over 100,000 pounds and with more than 30 in the bank. Romalpa sought a charge over the funds and to trace the proceeds of sales made with their aluminium AA sold steel to CAN between 221, Under agreement AA retained ownership of the goods until they were fully paid for & if the goods used in manufacturing or supplied to 3 rd party they were to be held in trust for AA.