Tutorial exercises

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Requirements of form
Belinda is already the full owner here so title is vested in her name and all that she is doing here is declaring herself as holding the property as trustee for Eddie. Therefore we do not need to comply with any requirements in order for the legal title to be held in Belinda’s name as trustee because she is already the full owner of the property, so there are no requirements of form here.
In relation to Belinda’s dealing with the farm the better view is that there is no overlapping with s.11 so therefore s.11(1)(b) is satisfied here and the assignment will be valid and Belinda’s estate will therefore hold the Beaudesert farm on trust for Eddie.
Proceeds of sale of Painting
The issue which arises here is one to do with the constitution of trusts, namely whether or not this is a trust or a promise. Question is whether or not Toni and/or Kayla can force the promise to hold the proceeds of sale of the paintings on trust for Kayla against the executor. If the promise or agreement which has been made by Belinda is enforceable against the executor then John’s entitlement to the residue of Belinda’s estate will be reduced and the proceeds of sale of these paintings will go to Toni Ivers on trust for Kayla.
In order to resolve this issue there are a number of steps. Need to classify the trust or type of trust which is going to be created here if the promise is carried out – what we are dealing is a trust post mortem, distinction between trust inter vivos and a trust post mortem is that the gift is intended by the creator of the trust to come into operation in their lifetime. However, if the death of the creator of the trust is intended to be a condition precedent to the operation of the trust, so if the trust is intended to be created by a will, it is a trust post mortem.
Therefore, Belinda here has purported to have created a trust post mortem because it is to take effect on her death and provision is to be made in her will. The next step is what we need for complete constitution of trust post mortem. A trust post mortem is generally created by a will under specific compliance with the formality prescribed by the wills legislation which in Qld is s.9 of the Succession Act 1991. S.9 here essentially provides that for a will to be valid, it must be in writing, signed by the testator in the present of two witnesses who must be both present together at the same time and who must attest the will in the presence of the testator or the person who is making the will. Therefore, these formalities have to be complied with in order to make a valid will and also in order to make a valid trust created by a will.
These requirements here have not been complied with as the will which is left here by Belinda does not mention the gift of the proceeds of the sale of these paintings for Kayla to be held on trust by Toni. Therefore this trust is not completely constituted here.
Need to consider therefore what is the effect of complete constitution and conversely what is the effect here of this trust not being completely constituted. If a trust is completely constituted then equity will enforce it at the suit of the beneficiary even if they are volunteers because the settlor then has demonstrated the fulfillment of their intention. Authority can be found in [Ellison v Ellison and Paul v ..]. so if a trust is completely constituted the end effect is that the beneficiaries will enforce the trust, so enforce it so that the promise is carried out.
If the trust is not completely constituted it cannot be enforced by a volunteer because if it has not been completely constituted it can only take effect as an agreement to create a trust. Because it can only take effect as an agreement to create a trust, as an agreement it must be accompanied by consideration to be enforceable in equity because equity will not assist a volunteer. So if a trust has not been completely constituted the only way via which it can be specifically enforceable is if the beneficiary has provided consideration – Re Plumpter’s. So as our trust has not been completely constituted here we need to look at whether Kayla has provided consideration.
If the beneficiary or the trustee on behalf of the beneficiary has supplied valuable consideration then specific performance is prima facie available to compel that law to make good his promise by requiring that the trust be completely constituted. If specific performance is not ordered the beneficiary may obtain damages in lieu. In equity, to amount to consideration it must be valuable consideration and in this respect valuable consideration has the same meaning in equity as in law. However, in equity a deed under seal will not be sufficient consideration. However, in equity valuable consideration may be provided by marriage consideration.

So although we have an agreement and although the agreement here takes the form of a deed under seal valuable consideration has not been given by Kayla and therefore Kayla is a volunteer and in addition valuable consideration has not been given by the trustee on Kayla’s behalf either. So if Kayla is a volunteer she cannot enforce the promise to create the trust in equity so we must now turn to the common law.

So the issue that arises here is whether or not Kayla has the right to sue Belinda for damages for breach of promise and that is an action at common law. Although Kayla here has no entitlement to specific performance in equity because she is a volunteer, the agreement was by way of deed under seal and therefore there may be a right to sue for damages for breach of a promise at common law. However, for this right to accrue the beneficiary must be a party to the deed and if the beneficiary is a party to the deed the agreement will be enforceable by them at common law – Cannon v Heartley. Here the agreement is made between Belinda and Toni, so Kayla is not a party to this agreement or deed. Therefore she cannot sue in her own name at common law for damages for breach of promise.
We must then go onto consider whether Toni as trustee can sue for damages and in order to resolve this issue we must consider whether there has been a trust or a promise created. If there is a completely constituted trust of a promise then the trustee is under a duty to sue and recover damages which are held on trust for the beneficiary. If the trustee does not sue the beneficiary can enforce her to do so. A trust or a promise is essentially an intention of the settlor to create an immediate trust of the promise under seal to transfer property to the trustee for the benefit of the beneficiary. So it is the trust of that promise which is to be created immediately pending the actual transfer of that property to the trustee. The trust of a promise takes the form of a chose in action to sue at law for damages for breach of that contract under seal. – see Fletcher v Fletcher¸ Re Price, Re Cook
A completed trust of a promise was found in Fletcher v Fletcher however there is much authority for a view contrary to Fletcher v Fletcher. In Re Price failed to recognise the validity of the concept of a trust of the promise and therefore is in conflict with Fletcher. Re Price has been considered in Re Cook Settlements Trusts which appears to reconcile the cases on the basis of whether the property is present or future. We all know that future property cannot be the subject matter of an immediate trust and Re Cook Settlement picks up on this by saying if you can’t have a trust created in relation to future property therefore you cannot have the trust of a promise created if it relates to future property.
However, Re Cooks Settlement case has been criticised at first as incorrectly classifying the subject matter in question as future property. Arguably in relation to the trust of the promise the trust property is the promise itself or that chose in action and therefore that promise is present property. Therefore if the trust property in relation to the trust of the property is the promise itself and not the property which will be obtained by the promises performance it does not matter how we classify that property which is obtained by the promisor’s performance. Therefore, it is arguable that a promise to pay a sum to be ascertained in the future is just as good a chose as a promise to pay a specified sum and it creates legal property of value. If Re Cooks Settlement Trust does not operate therefore to reconcile the cases as to where the trust of a promise has and has not been found to arise by classifying the property as either present or future perhaps the cases can be reconciled on the basis of whether there was an intention to create a trust.
In Fletcher v Fletcher the covenant was with respect to the payment of a specified sum which was already in existence and the obligation to pay was immediately on the settlor’s death in the event of his son surviving him. However, in Re Price on the other hand the covenant was to settle after acquired property and the obligation was contingent on that property being later acquired. So therefore the question we are dealing with here may be phrased as follows – “was there an intention to create an immediate trust of a chose in action as opposed to the creation of a trust when the money was settled?”
If you find that first intention then you can say that you have a trust of a promise in relation to the cases. The courts have traditionally been reluctant to infer an intention to create a trust. However, recent cases suggest that the court may be more willing to do so if by inferring intention to create a trust it is the best way of giving effect to the settlor’s intention – see Bar v Nicolay
In conclusion whether there is any right for Toni to sue John as executor of Belinda’s estate for damages in respect of the breach of the trust of a promise depends on the following factors:

  • whether or not a trust of a promise is a theoretical possibility – see Re Price, Fletcher v Fletcher

  • whether the promise relates to future property – in this case it is arguable that it does relate to future property on the authority of Re Cooks case and therefore there is no trust of a promise although as discussed this classification has been criticised

  • whether or not there is an intention to create a trust of a promise. Here it is arguable that Belinda did intend to create an immediate trust of the chose in action for the right to sue for promises not fulfilled as opposed to creating a trust only when the money was settled. As discussed courts are known well now to infer this type of intention.

So if there is a trust of a promise Toni should sue John as executor for damages for Belinda’s breach of her promise. However, if there is no trust of a promise found as the action would be futile and damages award would be held on trust for the settlor’s estate and they would go to John as residuary beneficiary.

Real Property to Penny Pincher
Assuming here that the real property in question is property other than the farm at Beaudesert. The issue here is whether or not Penny is obliged to hold the real estate on trust for Eddie. The question raises the issue as to whether there has been some sort of secret trust of the property created here. Secret trusts can be divided into two trusts, either fully secret trusts and half secret trusts. Here we have a half secret trust because on the face of the will Penny takes the property as trustee.
Half secret trust occurs where there is some indication in the instrument itself that the donee or the recipient of the property is not to hold the property beneficially but as trustee. However, it is not stated in the terms of the trust what the trusts are. So if there is an intention in the document that the donee is not to hold the property as beneficiary but as trustee but that instrument does not set out the terms of the trust it will be a half secret trust.
In the case of a fully secret trust it is created where it is not created on the face of the instrument itself that any type of trust is created in relation to the gift. In relation to the onus and standard of proof in relation to proving the existence of a secret trust, the onus is on the person alleging that the trust exists and the standard of proof is generally the ordinary civil standard on the balance of probability – see Re Snowden
In order to create a valid secret trust there are three elements you need to establish and these apply equally to establish both half and fully secret trusts and it was essentially only in relation to the time of the communication that the requirements differ: as to what requirements are see generally Blackwell v Blackwell which has been accepted in Voges v Monaghan and are:

  • an intention on the part of the donor to create a trust – here it does not seem to be any dispute as to whether or not Belinda intended to create a trust – the intention is arguably inferred from Belinda’s discussions

  • communication of the intention to create a trust to the trustee – in the case of a half secret trust the testator must have communicated to the secret trustee the fact of the trust and informed that it was their intention that the property to be left to the trustee by will was to be held on trust. Communicate the terms of that trust to the trustee and those things need to be done or before the date of the will

A half secret trustee can never take the property beneficially because it is apparent on the face of the will that they are intended only to take as trustee so if terms of the trust are not communicated the property falls to the residue and resulting trust

Here there has been a general discussion between Penny and Belinda that the property is to be transferred to a trust for Eddie but there is no mention that that trust is to take effect by a transfer via will. Therefore if the terms of the trust itself have not been sufficiently communicated John may take the real estate as it falls into the residue

  • acceptance of the trust by the trustee and this acceptance can either be expressly conveyed or it can be conveyed via acqueisance or remaining silent when the terms of the trust or the trust itself is communicated – see Paine v Hall

In this case, Penny has accepted the obligation as trustee. It is then just a case of establishing that the deposition of will is in the terms of the trust communicated to her. Therefore if it is arguable that there has been a communication of the terms of the trust before the date of the will to Penny and acceptance by her of the terms of the trust the real estate will be held on a secret trust by Penny for Eddie.

The last issue which arises is the effect of Eddie (who is a secret beneficiary) witnessing the will. Effect of this depends on the theoretical basis of secret trusts which is still a matter of some debate. The old view of the theoretical basis are that half secret and fully secret trusts are testamentary in nature and are enforced on the basis that equity would not allow the wills act which in Qld is s.9 of the Succession Act to be used as an instrument of fraud.
Under s.15 of the Succession Act a legatee or deivsee under a will who witnesses the will cannot take the legacy as the gift is invalid. However, as secret trusts arise outside the will it would be okay for a secret beneficiary to still take if he or she witnesses the will as the interest arises under the will not the trust – Re Young. Secret trusts operate outside the will and therefore okay.

Week 8
Discretionary Trusts and Powers

Question 2
Identify what we are dealing with – creation of a powers of appointment by a will – Warren has here by will given powers of appointment to Annette and Shirley. A power of appointment is a right or authority given to some person (the donee) by the absolute owner (the donor) to deal with or dispose of (appoint) beneficial ownership of property which belongs to the testator or settlor to persons who may or may not include themselves who are called the objects of the power.
In Qld, s.64 of the Succession Act provides that a power of appointment conferred by a will is valid if it would have valid in a deed inter vivos. As long as this power of appointment created it would have been valid if it were a deed inter vivos, it will be a valid power of appointment by virtue of the will. The position is different in jurisdictions other than Qld where the rule of non-delegation of will making powers do exist. This rule is spoken about in Tatham v Huxtable and has recently been considered in the NSW decision of Gregory v Hudson. In reading Tatham you will find that whether or not powers of appointment in relation to jurisdictions other than Qld will be void due to the rule of non-delegation of will making powers depends on what type of power it is, so whether it is a general, special or hybrid power.
Need to look at whether or not the clauses in the will containing the powers of appointment are valid. So s.64 of the Succession Act allows us to create powers of appointment by a will as long as those powers would have been valid in a deed inter vivos. So are these powers valid – need to look at each clause in turn.
Clause 2(a) – need to firstly identify what the power of appointment is and who it is given to. Here there is a power of appointment to Annette to appoint Warren’s real estate to his parents, grandparents, siblings or the children of his siblings. Here we are dealing with a special power of appointment as it is to be exercised in favour of a limited class only. In addition, as it is given to Annette as trustee she would not be able to use this power in her own favour and therefore this is a another reason why it cannot be a general power of appointment. – see Tatham v Huxtable and in particular Kitto J at p.654
As we have classified the power as a special power of appointment we need to go on further to distinguish whether it is a mere power or a trust power. So in relation to powers of appointment which are not classified as general powers of appointment you need to go on and distinguish whether or not it is a mere power or a trust power.
A mere power involves a non-obligatory power to
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