Trusts - 1980- 1984

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This page lists 17 cases, and was prepared on 27 February 2010.

Timber Engineering Co Pty Ltd -v- Anderson [1980] 2 NSWLR 488
1980 Kearney	Commonwealth, Trusts	Casemap 1 Citers
	The manager and a sales representative of TECO set up separate competing business. Anderson with his wife, began a new company Mallory Trading Pty Ltd which acted as a a fraud on TECO. On learning of each others acts, they joined forces and diverted business and profits from TECO. In July 1977 Toy resigned from TECO to work full time for Mallory Trading; and in November 1977 Anderson was dismissed, whereupon he, too, began to work full time for Mallory Trading. In February 1978 they incorporated another company, Mallory Timber Products Pty Ltd ("Mallory Timber") to which they transferred the business of Mallory Trading. TECO sought an account of profits and declaration of trust of the businesses of Mallory Trading and Mallory Timber and of the shares in both companies held by Anderson, Toy and their respective wives. Held: Kearney J approved this statement by Dr PD Finn in Fiduciary Relations: "The fiduciary's liability for gains is a liability as trustee and for trust property. It is, as will be seen, one which can give rise to personal actions against a fiduciary. It can give rise to actions in rem to recover extant trust property." Thethe trust property was extant: "It is clear that the business had its genesis in the resources and facilities of TECO which were available to Anderson and Toy. It is also clear that they did take advantage of such resources and facilities so as to cause life to be breathed into the mere shell of Mallory Trading, bearing in mind that the business of Mallory Trading was built upon cash flow and sales. The whole substance of Mallory Trading as a viable business enterprise stemmed from the resources of TECO which were utilized in Mallory Trading. The outstanding features of the nurturing of Mallory Trading are that its executives were being paid by TECO, its customers were TECO customers, and its products were significantly derived from TECO products…..the whole of the TECO business (including, not only physical facilities such as telephones, motor cars and expense accounts) were used; but also its intangible elements such as marketing methods, knowledge of customers and goodwill were also resorted to in building up Mallory Trading. Another significant feature is that the inevitable result of the defendants using TECO as the vehicle to establish Mallory Trading as a going concern was that TECO was gravely harmed. It not only lost the orders that were misappropriated, but this in turn led to the loss of customers and substantial damage to its goodwill…..There can be no doubt that the creation and development of Mallory Trading dealt a crippling blow to the business of TECO. Every opportunity which Mallory Trading has received is directly traceable to resources and benefits provided by TECO, even of time and efforts expended by Anderson and Toy for which TECO was paying. Every advance made by Mallory Trading was also due to the advantages of the tangible and intangible resources and facilities provided from TECO. In truth, the business of Mallory Trading was carved out of the business of TECO, and thus ought to be treated as being, as at July 1977, held on trust for TECO." July 1977 was the date when Toy resigned from TECO. Kearney J then dealt with a number of arguments relating to subsequent events. The real issue was whether the trust property represented by the business of Mallory Trading remained extant. The defendants' first submission was that the business of Mallory Timber was a fresh unrelated business free from any trust. The judge described that as "insupportable": "I regard the business carried on by Mallory Timber products as representing the trust property of which Mallory Trading was originally the trustee." The defendants submitted that if there was any liability after July 1977, the liability should be limited to an account of profits, and should not extend to a declaration that the business was itself held on trust; whatever the position might have been in July 1977, the continued carrying on of the business had been wholly due to the defendants' own efforts; and that any benefit attributable to the trust as it existed in July 1977 had been displaced. Kearney J dealt with this submission as follows: "The fact that the trustee carried on a business and improved it by its own exertions did not, in my view have the effect of extinguishing the trust property as so to terminate the trust. The business, as a trading enterprise, continued to subsist as an identifiable item of property. The fact that the business may have been enhanced through the efforts of the trustee cannot affect the continued existence of the trust." The defendants ' submitted that any account should be limited to former customers of TECO, and that the extent of sales to those customers could be readily ascertained from the accounts. Kearney J rejected that submission too. He said that this submission took: "too limited a view of the extent of the benefit represented by the existence of the business of Mallory Trading as a going concern. While its attributes included the connection with former TECO customers, it also had the inherent capacity as an established business to expand the range of its customers and products." He concluded: "It seems to me that the present case falls within the second example stated by Upjohn J [in Re Jarvis], namely that the Mallory companies are accountable as constructive trustees of the business. The contribution of skill and industry by all the defendants to the continued carrying on of the business can be adequately provided for by the making of proper allowances, as indicated by Upjohn J. I consider that, in determining the form of relief to be granted, not only is Upjohn J's first example inappropriate to the facts of the case, but also that justice can be done, in the circumstances of this case, by making the declaration of trust as to the business on the footing of all just allowances. . . . The trust property remains identifiable in the hands of the trustee, and TECO is entitled to have the benefit of it, subject to the efforts of the defendants being duly remunerated. Additionally, although there is no evidence at present, the defendants may be able to establish upon the taking of accounts of profits, that assets comprised in the business have been contributed by them from sources other than those generated by the business itself. If so, it may further be possible to show that consequently a proportionate interest in the business exists in favour of the defendants, or that they are entitled to a specific item of property, or to a charge upon the trust property as a whole."

In re Sharpe (a bankrupt) [1980] 1 WLR 219
1980 ChD Browne-Wilkinson J	Land, Trusts	Casemap 1 Citers
	Monies advanced by way of loan are not, on this basis alone to be treated as contributions to the purchase price of property so that the lender acquires a beneficial interest in that property as a result.

Re Grant's Will Trusts [1980] 1 WLR 360
1980 ChD Vinelott J	Trusts, Wills and Probate	Casemap 1 Citers
	The deceased left property to the Labour Party property committee. Held: A trust created by making a gift to the members of an unincorporated assoication as at the date of the gift can be wound up only if under the rules, the members could, at any time, resolve to terminate the trust and distribute the fund to themselves. The gift therefore failed. It could not be construed as a gift to existing members (i.e. it did not fall within category (1) of Neville Estates Ltd v Madden), and that in order to fall within category (2) it was essential that the members of the association for the time being should be free to dispose of it in any way they thought fit, including distributing it amongst themselves.

Bartlett -v- Barclays Bank Trust Co Ltd (Nos 1 and 2) [1980] Ch 515
1980 ChD Brightman J	Costs, Trusts	Casemap
	A claim was made against a trustee for compensation for losses invurred during the administration of the trust. Held: For a court to order an account by a trustee on the bssis of wilful default, and make the defendant liable not only for assets which have come to their hands but also in respect of assets which ought to have come to their hands, the claimant must plead and prove at least one act of wilful default. Higher standards may be expected of professional trustees. Brightman J considered the nature of the remedy of restitution: "the so-called restitution which the [trustee] must now make to the plaintiffs . . is in reality compensation for loss suffered by the plaintiffs . . not readily distinguishable from damages except with the aid of a powerful legal microscope." and "The trustee's obligation is to restore to the trust estate the assets of which he has deprived it". and “The bank, as trustee, was bound to act in relation to the shares and to the controlling position which they conferred, in the same manner as a prudent man of business. The prudent man of business will act in such manner as is necessary to safeguard his investment. He will do this in two ways. If facts come to his knowledge which tell him that the company’s affairs are not being conducted as they should be, or which put him on enquiry, he will take appropriate action. Appropriate action will no doubt consist in the first instance of enquiry of and consultation with the directors, and in the last but most unlikely resort, the convening of a general meeting to replace one or more directors. What the prudent man of business will not do is to content himself with the receipt of such information on the affairs of the company as a shareholder ordinarily receives at annual general meetings. Since he has the power to do so, he will go further and see that he has sufficient information to enable him to make a responsible decision from time to time either to let matters proceed as they are proceeding, or to intervene if he is dissatisfied." The normal order in hostile litigation is for costs to be taxed on a standard basis. A proper rate of interest to be awarded, in the absence of special circumstances, to compensate beneficiaries and trust funds for non-receipt from a trustee of money that ought to have been received was that allowed from time to time on the Short Term Investment Account, a rate which may be taken to be not more favourable than base rate less 0.5 per cent.

Clark Taylor & Company -v- Quality Site Development (Edinburgh) Limited 1981 SC 111
1981	Scotland, Trusts	Casemap 1 Citers
	It was claimed that a trust had come into being in circumstances where the alleged truster and the alleged trustee were the same person. Held: It was competent for the claimant to be both truster and trustee.

Re: Gibson's Settlement Trusts; Mellor -v- Gibson [1981] Ch 179; [1981] 2 WLR 1; [1981] 1 All ER 233
1981 Megarry J VC	Trusts, Costs	1 Citers
	Settlement trustees undertook to execte a deed appointing trust moneys to the settlor's children. The beneficiaries were not content with the proposed deed, and the trustees sought directions. Held: The undertaking was invalid as a fetter on the trustees' discretion. As to the costs of the application, the costs of the trustees incurred before the dismssal were payable from the trust.

Island Holdings Ltd -v- Birchington Engineering Co Ltd Unreported, 7 July 1981
7 Jul 1981 Goulding J	Land, Contract, Trusts	Casemap 1 Citers
	Two prospectively separate purchasers in a later "subject to contract" arrangement between them had replaced their earlier concluded agreement as to how a property, if acquired, would be dealt with. Held: Effect was to be given to the agreement by way of constructive trust, not to the "subject to contract" arrangement but simply to the notion that the two parties should be obliged to share.

Re GKN Bolts & Nuts Ltd etc Works Sports and Social Club [1982] 1 WLR
1982	Trusts, Company	Casemap 1 Citers
	The court considered the status of associate members of a club, who obtained that status merely by signing a vistors book. Held: The rules did not make such associate members members properly.

Bernard -v- Josephs [1982] 1 Ch 391; [1982] 3 All ER 162; [1982] 2 WLR 1052
30 Mar 1982 CA Griffiths LJ, Lord Denning MR, Kerr LJ	Trusts	1 Cites 1 Citers
	The court considered the division of proceeds of sale of a house bought by an unmarried couple. Held: 'the fact that one party paid the mortgage may indicate that it was recognised by the couple that that party was solely responsible for providing the purchase price and therefore to be regarded as the sole beneficial owner'. And 'When the proceeds of sale are realised there will have to be equitable accounting between the parties before the money is distributed. If the woman has left, she is entitled to receive an occupation rent, but if the man has kept up all the mortgage payments, he is entitled to credit for her share of the payments:if he has spent money on recent redecoration which results in a much better sale price, he should have credit for that, not as an altered share, but by repayment of the whole or a part of the money he has spent. These are but examples of the way in which the balance is to be struck.' and 'It might in exceptional circumstances be inferred that the parties agreed to alter their beneficial interests after the house was bought; an example would be if the man bought the house in the first place and the woman years later used a legacy to build an extra floor to make more room for the children. In such circumstances the obvious inference would be that the parties agreed that the woman should acquire a share in the greatly increased value of the house produced by her money. But this depends on the court being able to infer an intention to alter the share in which the beneficial interest was previously held; the mere fact that one party has spent time and money on improving the property will not normally be sufficient to draw such an inference.' Where the trusts for which a property was purchased have been concluded, the house should be sold.
	Link[s] omitted

Harris -v- Goddard [1983] 3 All ER 242; [1983] 1 WLR 1203
1983 Lawton LJ	Land, Trusts
	In a divorce petition, the petitioner sought to sever the joint tenancy in the family home. The respondent died in a car crash before the hearing. Held: The mere inclusion of such a prayer did not itself operate to sever the joint tenancy. The desire to sever must be immediate. A prayer in a petition was an invitation to a court at some future time to sever the interests, and was not immediate. The joint tenancy had not been severed and the petitioner took the entire property.

Multinational Gas and Petrochemical Co Ltd -v- Multinational Gas and Petrochemical Services Ltd [1983] Ch 258
1983 Dillon LJ	Company, Trusts	Casemap 1 Citers
	The court considered the way that the duty of a director to his company arose: "The directors indeed stand in a fiduciary relationship to the company, as they are appointed to manage the affairs of the company and they owe fiduciary duties to the company though not to the creditors, present or future, or to individual shareholders."

Walker -v- Hall [1984] FLR 126
1984 CA Lord Justice Lawton, Lord Justice Dillon, Lord Justice Kerr	Trusts, Family	Casemap 1 Cites 1 Citers
	The court considered the way of distributing property purchased by an unmarried couple: "When such a relationship comes to an end, just as with many divorced couples, there are likely to be disputes about the distribution of shared property. How are such disputes to be decided? They cannot be decided in the same way as similar disputes are decided when there has been a divorce. The courts have no jurisdiction to do so. They have to be decided in accordance with the law relating to property . . . There is no special law relating to property shared by cohabitees any more than there is any special law relating to property used in common by partners or members of a club. The principles of law to be applied are clear, though sometimes their application to particular facts are difficult. In circumstances such as arose in this case the appropriate law is that of resulting trusts. If there is a resulting trust (and there was one in this case) the beneficiaries acquire by operation of law interests in the trust property. An interest in property which is the consequence of a legal process must be identifiable. It must be more than expectations which at some later date require to be valued by a court. . . ." Dillon LJ: '. . . the law of trusts has concentrated on how the purchase money has been provided and it has consistently been held that where the purchase money for the property acquired by two or more persons in their joint names has been provided by those persons in unequal amounts, they will be beneficially entitled as between themselves in the proportions in which they provided the purchase money. This is the basic doctrine of the resulting trust and it is conveniently and cogently expounded by Lord Upjohn in Pettitt v Petitt [1970] AC 777 at p 814' and '. . . it is not open to this court, in my judgment, in the absence of specific evidence of the parties' intention, to hold that 33 Foxberry Road belongs beneficially to Mr Hall and Mrs Walker in equal shares, notwithstanding their unequal contributions to the purchase price, simply because it was bought to be their family home and they intended that their relationship should last for life. Equally it is not open to this court to 'top up' Mrs Walker's share, beyond what it would be on the mere basis of her financial contribution, on some broad notion of what would be fair simply because the house was bought as the family home; the court could no doubt do this in an appropriate case in proceedings under s.24 of the 1973 Act but the discretion under that section is not available in the present case.'
	Matrimonial Proceedings and Property Act 1970 - Matrimonial Causes Act 1973

Turner -v- Turner [1984] Ch 100
1984 ChD	Trusts	Casemap 1 Citers
	The trustees for many years signed every document placed before them by their solicitors (including appointments) without understanding that they had any discretion to exercise. Held: What might first appear to have been a decision of trustees may prove on questioning not to have been a decision.

Burns -v- Burns [1984] 1 All ER 244
1984 CA	Family, Trusts	Casemap 1 Cites
	The parties lived together but were not married. The woman took the man's name, but beyond taking on usual household duties, she made no direct financial contribution to the house. She brought up their two children over 17 years. Latterly she went to work, but her earnings went on normal household expenses. Held: She had acquired no interest in the family home. There was no express agreement to qualify the fact that the house was bought in the man's sole name. Some substantial contribution was required before an intention that she was to take a share could be imputed.

Swales -v- Inland Revenue Commissioners [1984] 3 All ER 16
1984 Nicholls J	Trusts	Casemap 1 Citers
	Nicholls J said: "It is trite law that trustees cannot fetter the exercise by them at a future date of a discretion possessed by them as trustees."

Young -v- Young [1984] FLR 375
1984	Trusts, Family	Casemap 1 Citers

Cowan -v- Scargill and Others [1985] Ch 270; (1984) 128 SJ 550; [1984] IRLR 260; [1984] 3 WLR 501; [1984] 2 All ER 750
13 Apr 1984 ChD Sir Robert Megarry VC	Trusts, Financial Services	Casemap 1 Cites 1 Citers
	Within the National Coal Board Pension scheme, the trustees appointed by the NCB were concerned at the activities of the trustees of the miners, and sought directions from the court. The defendants refused to allow any funds to be invested abroad. Held: The same principles applied to pension funds as applied to other trusts. The NUM trustees were attempting to impose the prohibitions in order to carry out union policy; and mere assertions that their sole consideration was the benefit of the beneficiaries do not alter that conclusion, and the defendant had misrepresented the effect of the legal advice upon which he purported to act. Sir Robert Megarry VC said: "The starting point is the duty of trustees to exercise their powers in the best interests of the present and future beneficiaries of the trust, holding the scales impartially between different classes of beneficiaries. This duty of the trustees towards their beneficiaries is paramount. They must, of course, obey the law; but subject to that, they must put the interests of their beneficiaries first. When the purpose of the trust is to provide financial benefits for the beneficiaries, as is usually the case, the best interests of the beneficiaries are normally their best financial interests. In the case of a power of investment, as in the present case, the power must be exercised so as to yield the best return for the beneficiaries, judged in relation to the risks of the investments in question; and the prospects of the yield of income and capital appreciation both have to be considered in judging the return from the investment." If trustees for social or ethical reasons fail to make an investement which would produce a better result, the would be subject to criticism. "In considering what investments to make trustees must put on one side their own personal interests and views. Trustees may have strongly held social or political views. They may be firmly opposed to any investment in South Africa or other countries, or they may object to any form of investment in companies concerned with alcohol, tobacco, armaments or many other things. In the conduct of their own affairs, of course, they are free to abstain from making any such investments. Yet under a trust, if investments of this type would be more beneficial to the beneficiaries than other investments, the trustees must not refrain from making the investments by reason of the views that they hold." however: "If trustees make a decision upon wholly wrong grounds, and yet it subsequently appears, from matters which they did not express or refer to, that there are in fact good and sufficient reasons for supporting their decision, then I do not think that they would incur any liability for having decided the matter upon erroneous grounds; for the decision itself was right."
	Coal Industry Nationalisation Act 1946 37