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16 Cards in this Set

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In questions involving breach of trust, breach of fiduciary duty, you should look at both (unless q expressly asks you to consider only certain aspects)

Usally best to look at each aspect separately

Best to look first at person liability of Ts, as more straightforward

Consider the possibility of personal claims against third parties --> dishonest assistance and knowing receipt

Lord Millet says don't call them constructive trustees --? people are accountable in equity --> personal claim against third parties as opposed to proprietary claims

Also consider proprietary claims if you use tracing

If a proprietary claim is possible, it will usually better to use this rather than Knowing receipt

Knowing receipt is harder to prove --> depends on showing that it would have been "unconscionable" for the knowing receiver not to account for what they had received--> looking for the person's state of mind --> not an easy standard to apply

Proprietary claim was someone holding trust property will be liable even if entirely innocent --. e.g. Re Diplock (they were innocent and lacked any blame but they had to restore the money to the rightful beneficiaries)

ONLY DEFENCE IS BONA FIDE PURCHASER FOR VALUE --> only defence is if they have said I have actually bought this property in good faith --> here, the person who they bought it from has money, so it may be possible to trace into sale proceeds --> but effectively the equitable claim has gone from the property to the sale proceeds

Prop claim gives claimant any increased value --> Foskett v McKeown

Knowing receipt will tend to be relevant if someone has knowingly received trust property but no longer has it

Also if they still have property but it has decreased in value --> if they receive 10k and buy a car, you can trace and follow to the car but car is probs worth less

Does this all mean that a claimant can get their money more than once?

NO --> sometimes a prop claim can be topped up by a claim in KR --> e.g. buying something that decreases in value

Claim asset as a prop claim and claim the remainder in KR --> you will get the asset and KR claim as a personal claim runs the risk of being scaled back if the receiver is bankrupt

Sometimes you have a goof personal claim, but a prop claim gives one the chance of getting a profit e.g. Foskett v McKeown

In the Monte Carlo Grand Hotel case, they wanted the claim to be proprietary so they could then trace and follow the commission to see the holdings who had received the dolla

The claim against the first defender, if it was only a personal claim for the secret commission, the person responsible would not have been able to pay

Re Hallett and Re Oatway

Re Hallett is essentially saying T is to be given the benefit of the doubt and be presumed to be honest - is withdrawing his own money first

In Re Oatway

Solicitor misappropriated trust money and put it in his account --> withdrew money and invested it --> money left in account got dissipated and disappeared --> when Bs tried to claim against S, he tried to say, applying Re Hallet he was okay --> court said you can't get away with that --> the case essentially says, once you have mixed the money, the Bs can recover it wherever they can find it --> you cannot take advantage of the technical argument of Re Hallet to get around this

Turner v Jacob (2006)

Suggests Re Hallett is the primary route and Oatway is a back up --> a B can't opt for Re Oatway just because it would be to his benefit

Shalson v Rosso (2003) suggests that if T mixes trust assets with his own, which appreciates in value, B can claim a share of the mixed fund

In Sinclair v Versailles --> seemed to be in favour of this idEA

Hanbury and Martin also prefers this --> but also a debate of discussion


T withdraws 10k of trust money improperly and pays it into her own bank account which already has 20k --> mixed fund

She takes out 10k and invests in shares --> shares now worth 16k and there is still 20k in bank account

Turner v Jacob would say in applying Re Hallett, the bank is enough to satisfy the B's claims so all they get is the 10k --> she invested her own money--> no claim to the extra 6k which has been made --> hence Re Oatway is irrelevant

Shalson v Russo suggests on the other hand that because the trust money has become part of the mixed fund, B should be entitles to pro rata to the gain, they should get a third of profit (extra 2k) and so 12k --> in 30k bank acount (a third was theirs, 10k)

Sinclair said that if the wrongdoer deliberately acts as a "maelstrom", he can't complain if the court lets B trace into any part of the mixture, putting the onus on wrongdoer to prove what part of the fund is his

When money can b transferred around the world instantaneously, the idea that one has to be able to locate the value seems outdated

Especially when it is easy to manipulate transfers so that they involve payment into an overdrawn account or something is bought with a credit card --> if you pay into an overdrawn account, money satisfies debt and disappears --> not realistic --> some business carry on with an agreed overdraft with their bank --> why should this prevent there being tracing --> is an overdrawn account that different from an account with credit

Relfo v Versani cast doubt on the courts to allow backwards tracing as they looked for a transactional link rather than direct substitution

Brazil v Durant (UKPC) goes further and accepted backwards tracing and preferred to look for "co-ordinated scheme"

Rejects "lowest intermediate balance rule" --> though UKPC, Relfo is probs good enough to say we DO accept backwards tracing

The courts are keen to allow flexibility to allow them to crack down on bribery and money laundering

On the other hand, the essence of tracing is proprietary and this is potentially undermined if one completely re-writes the rules




If a private purpose trust fails the tests to be a charitable trust, it will be a private purpose trust and they are generally invalid --> Re Astor, Re Pinion, Re Shaw)

One may get round this y construing what appears to be a PPT as a trust for identifiable Bs (e.g. Re Denley)

A bit of a tendency to disregard purposes if necessary --> Re Osoba, Re Andrews, Re Lipinski, Neville Estates v Madden

Case law however evolved 3 exceptions:

Trusts for:

maintenance of specified animals

upkeep of tombs and monument

For private religious ceremonies

Is a trust Charitable Trust?

S 3(1) Charities Act 2011: A)-L) --> 12 specified grounds

Also includes anything recognised under previous law (,)(i)

Purposes analogous to (a) - (l) or previous law

Purposes analogous to above

In all cases, consider whether the objects satisfy the public benefit test --> CA 2011 s 4

Note R (ISC) v Charity Comm

On balance for public benefit

For benefit of public generally or an identifiable and sufficient nummerous section of it