EQUITY AND TRUST

1 INTRODUCTION......................................................................................................................................................
1.1 Equity’s Darling......................................................................................................................................................
1.2 Trust Definition......................................................................................................................................................
1.3 Private Express Trusts & Powers...........................................................................................................................
1.4 Rule in Saunders v Vautier.....................................................................................................................................
1.5 Renunciation of Interest in Trust.........................................................................................................................
1.6 Adverse Effect on Creditors.................................................................................................................................
1.7 Clean Hands.........................................................................................................................................................
2 THREE CERTAINTIES..............................................................................................................................................
2.1 Certainty of Intention..........................................................................................................................................
2.1A Self Declaration of Trusts..............................................................................................................................
2.1B Commercial Context; Separation of Property................................................................................................
2.2 Certainty of Subject Matter.................................................................................................................................
2.2A Range of Possible Subject Matters of Trusts.................................................................................................
2.2B Certainty of Division of Beneficial Share........................................................................................................
2.2C Unsegregated Assets.....................................................................................................................................
Alternative Construction.......................................................................................................................................
2.3 Certainty of Objects of Trust...............................................................................................................................
2.3A Fixed Trust.....................................................................................................................................................
2.3B Fixed Trusts Subject to a Condition...............................................................................................................
2.3C Discretionary Trusts.......................................................................................................................................
2.4 Administrative Unworkability..............................................................................................................................
2.5 Capriciousness.....................................................................................................................................................
3 NON-CHARITABLE PURPOSE TRUST......................................................................................................................
3.1 Beneficiary Principle............................................................................................................................................
3.2 Enforcer Principle as an alternative.....................................................................................................................
3.3 Quistclose Trusts.................................................................................................................................................
3.4 Anomalous Testamentary Purpose Trusts...........................................................................................................
3.5 Re Denley; Apparent Purpose Trusts Benefitting Persons...................................................................................
3.6 Trust Limited by Purpose; Absolute Gift with a Motive.......................................................................................
3.6A Dead v Living.................................................................................................................................................
3.6B Certainty of Purpose......................................................................................................................................
3.7 Gift to Companies................................................................................................................................................
3.8 Gifts to Unincorporated Associations..................................................................................................................
4 CHARITABLE PURPOSE TRUST...............................................................................................................................

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 4.1 Four Heads of Charity..........................................................................................................................................
4.2A Poverty..........................................................................................................................................................
4.2B Education......................................................................................................................................................
4.2C Religion..........................................................................................................................................................
4.2D Other Purpose Beneficial to Community.......................................................................................................
4.3 Public Benefit Requirement.................................................................................................................................
4.4 Exclusively Charitable..........................................................................................................................................
4.4A Partly Charitable and Partly Non-Charitable.................................................................................................
4.5 Preservation from Failure: Cy-Pres Doctrine.......................................................................................................
4.5A Initial Failure..................................................................................................................................................
4.5B Subsequent Failure........................................................................................................................................
5 CONSTITUTION OF TRUST AND FORMALITIES.......................................................................................................
5.1 Constitution of Trust; Imperfect Gift...................................................................................................................
5.1A Declaring Self as Trustee, Together with Another Co-Trustee......................................................................
5.1B Fortuitous Vesting.........................................................................................................................................
5.2 Perfecting an Imperfect Gift................................................................................................................................
5.2A Re Rose Principle...........................................................................................................................................
5.2B The rule in Strong v Bird................................................................................................................................
5.2C Donationes mortis causa...............................................................................................................................
5.3D Proprietary Estoppel.....................................................................................................................................
5.4 Sham Trusts.........................................................................................................................................................
6 TRUSTEES APPOINTMENT; TERMINATION; DUTIES...............................................................................................
6.1 General................................................................................................................................................................
6.1A Appointment of Trustees..............................................................................................................................
6.1B Disclaimer; Termination................................................................................................................................
6.1C Retirement and Removal...............................................................................................................................
6.2 Trustee Powers: General.....................................................................................................................................
6.2A Power of Delegation..................................................................................................................................
6.3 Void Exercise of Power;.......................................................................................................................................
6.3A Excessive Exercise of Power..........................................................................................................................
6.3B Bad Faith; Dishonesty; Fraud.........................................................................................................................
6.3C Improper Purposes; Fraud on Power.............................................................................................................
6.4 Voidable Exercise of Power; Re Hastings.............................................................................................................
6.5 Rescinding Voluntary Transactions made by Mistake.........................................................................................
6.6 Trusties Duties: General......................................................................................................................................
6.6A Duties on Accepting Trusteeship...................................................................................................................

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 Inspection of Trust Document...........................................................................................................................
Safeguarding Trust Assets.................................................................................................................................
Inquiries into Earlier Breaches...........................................................................................................................
6.6B Administration of Trust.................................................................................................................................
Duty of Notification of Beneficiaries..................................................................................................................
Duty to Obey Lawful Directions in Trust Deed...................................................................................................
Duty to Pay Correct Beneficiaries......................................................................................................................
Duty to Furnish Accounts to Beneficiaries.........................................................................................................
6.6C Beneficiaries’ Right to Information................................................................................................................
Outside Litigation..............................................................................................................................................
Within Litigation................................................................................................................................................
6.6D Duty of Care..................................................................................................................................................
6.6E Duty to Exercise Discretion............................................................................................................................
6.7 Investment Powers and Duties............................................................................................................................
6.7A Ethical Considerations...............................................................................................................................
7 RESULTING TRUST................................................................................................................................................
7.1 Presumed Resulting Trusts..................................................................................................................................
7.1A Essay..............................................................................................................................................................
7.1B Theoretical Basis............................................................................................................................................
Resulting trust and Unjust Enrichment..............................................................................................................
7.1C Presumption vs Resulting Trust.....................................................................................................................
7.1D Rebuttable Presumption...............................................................................................................................
7.1E Voluntarily Transfer PRT................................................................................................................................
Special Types of Property..................................................................................................................................
7.1F Purchase Contribution PRT............................................................................................................................
Types of Contribution........................................................................................................................................
7.1G Presumption of Advancement......................................................................................................................
7.2 Automatic Resulting Trusts..................................................................................................................................
7.2A Theoretical Basis; Imputed Intention vs Presumed Intention.......................................................................
7.2B Initial Failure of Trust....................................................................................................................................
7.2C Subsequent Failure of Trust...........................................................................................................................
Unincorporated Associations............................................................................................................................
Pension Trust Funds..........................................................................................................................................
7.3 Fiduciary Duties of a Resulting Trustee...............................................................................................................
7.4 Quistclose Trust...................................................................................................................................................
8 COMMON INTENTION CONSTRUCTIVE TRUST......................................................................................................

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 8.1 Essay; Introduction..............................................................................................................................................
8.2 CICT.....................................................................................................................................................................
8.2A Express; Inferred; Ambulatory Intention.......................................................................................................
8.2B Imputed Intention.........................................................................................................................................
8.2C Detrimental Reliance.....................................................................................................................................
8.3 Case Law..............................................................................................................................................................
8.4 CHAN YUEN LAN STEPS ****.............................................................................................................................
9 PALLANT V MORGAN EQUITY; JOINT VENTURE CONSTRUCTIVE TRUST................................................................
9A PROPRIETARY ESTOPPEL....................................................................................................................................
10 CONSTRUCTIVE TRUST........................................................................................................................................
10.1 Theoretical Foundations....................................................................................................................................
10.2 Institutional Constructive Trust.........................................................................................................................
10.2A Unconscionable Retention [Mistaken Payment Redux]..............................................................................
Consensual-Transfer; Fraudulent Misrep..........................................................................................................
Non-Consensual Transfer; Stealing or Theft......................................................................................................
Mistaken Payment.............................................................................................................................................
10.2B Statute of Frauds; Oral Declaration of Trusts..............................................................................................
10.2C Outside Statute of Frauds; Breach of Undertaking......................................................................................
10.2D Unlawful Killing...........................................................................................................................................
10.2E Voluntary Transactions made by Mistake....................................................................................................
10.2F De Facto Fiduciaries.....................................................................................................................................
10.2G Contract for Sale of Land.............................................................................................................................
10.2H Breach of Fiduciary Duty.............................................................................................................................
10.3 Remedial Constructive Trusts............................................................................................................................
10.3A Concerns over Remedial Constructive Trusts..............................................................................................
10.3B Unjust Enrichment.......................................................................................................................................
10.4 Fiduciary Duties of Constructive Trustees.........................................................................................................
11 FIDUCIARY DUTIES..............................................................................................................................................
11.1 Nature of Fiduciary Duties.................................................................................................................................
11.1A Strict Standards; Rationale..........................................................................................................................
11.1B Peculiarly Fiduciary Duties and Other Duties..............................................................................................
11.2 Fiduciary Relationships; Recognised and Adhoc................................................................................................
11.2A Arm’s Length Transactions..........................................................................................................................
11.2B Employer-Employee....................................................................................................................................
11.3 No Conflict Rule.................................................................................................................................................

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 11.3A Self-Dealing Rule; Transaction between Trustee and Trust; Company Dealing WITH
Director...............................................................................................................................................................
11.3B Fair-Dealing Rule; Transactions between Trustee and Beneficiary............................................................
11.3C Acting for more than 1 Principal................................................................................................................
11.4 No Profit Rule..................................................................................................................................................
11.4A Using Principal’s property to Save Money.................................................................................................
11.4B Indirect Profit; Self-Appointment by Trustee as Director..........................................................................
11.4C Exploitation of Opportunities....................................................................................................................
Strictly Liable...................................................................................................................................................
Resignation followed by Exploitation of the Opportunity...............................................................................
11.5 Remedies for Breach.......................................................................................................................................
12 LIABILITY FOR BREACH......................................................................................................................................
12.1 Trustee Liability...............................................................................................................................................
12.2 Locus Standi; Standing to Enforce Breach of Trust..........................................................................................
12.3 Exclusion; Ouster; No-Contest Clauses............................................................................................................
12.3A Exclusion of Liability..................................................................................................................................
Fundamental Duties........................................................................................................................................
Fault in Breach of Duty....................................................................................................................................
Fault; Negligence Liability................................................................................................................................
12.3B Ouster Clause............................................................................................................................................
12.3C No Contest Clause.....................................................................................................................................
12.4 Limitation Period.............................................................................................................................................
12.4A Statutory Limitation Period.......................................................................................................................
12.4B Laches........................................................................................................................................................
12.5 Defences..........................................................................................................................................................
12.5A Hardship....................................................................................................................................................
12.5B Clean Hands...............................................................................................................................................
12.5C Consent.....................................................................................................................................................
12.5D Ratification...................................................................................................................................................
12.5E Acquiescence................................................................................................................................................
12.5 Court’s Discretion to Grant Relief....................................................................................................................
12.6 Indemnification by a Beneficiary; Impoundment of Beneficiary’s Interest......................................................
13 PERSONAL LIABILITY OF 3PS.............................................................................................................................
13.1 Knowing Receipt..............................................................................................................................................
13.1A Beneficial Receipt of Property...................................................................................................................
13.1B Breach of Trust or Fiduciary Duty..............................................................................................................

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 13.1C Fault; Unconscionable Receipt..................................................................................................................
13.1D Misapplied Corporate Assets....................................................................................................................
13.1E Remedies...................................................................................................................................................
13.1F Defences....................................................................................................................................................
Bona Fide Purchase.........................................................................................................................................
Change of Position...........................................................................................................................................
13.1G Strict Liability............................................................................................................................................
13.2 Dishonest Assistance.......................................................................................................................................
13.2A Breach of Trust of Fiduciary Duty..............................................................................................................
13.2B Inducing, Encouraging or Assisting the Breach..........................................................................................
13.2C Dishonesty; Fault.......................................................................................................................................
13.2D Remedies..................................................................................................................................................

1 INTRODUCTION

 DEVOLUTION OF PROPERTY ON DEATH:

o Testamentary Disposition – By will upon death (fulfil the requirements of Wills Act)

o Intestacy – When the person dies without leaving a valid will (follow Intestate
Succession Act)

o Partial Intestacy – Where the will does not dispose entirely of all property (i.e.
‘residue’)

o Personal Representatives – comprise both (1) “Executors” of Will; and (2)

“Administrators” of estate when he dies intestate [appointed by the court, rather
than named in the will]

 BENEFICIARY’S INTEREST; WILL – Following the death of a testator, the

whole ownership interest in his assets passes to the executor by virtue of
his office without distinction as to the legal or equitable interest (Seah at
[19]). The beneficiary under the will only has a personal right to ensure that
the estate is administered, rather than a right that attaches to a specific
piece of property (Virgo, pg 64) Until the executor administers the estate
and executes the will with specific bequests, the beneficiary under the will
has no property interest in any of the assets of the deceased’s estate

 EQUITY GENERALLY – As opined by Rajah JA in Lau Siew Kim, equity is the body of principles
which has evolved progressively to mitigate the severity sometimes occasioned by the rigid
application of the rules of the common law. . Equity served to rectify the inadequacy and
injustice in the common law, in particular the generality of the law’s rules, and the law’s
inability to mould its rules to fit the circumstances of the particular case (at [24]). Equity
originated from the exercise of the residual discretionary power of the King by the
Chancellor to do justice among his subjects

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 o FEATURES OF EQUITY; FLEIXBILITY AND CONSCIENCE – Professor Virgo notes 2
fundamental features of Equity as a body of law – (1) it exists to modify the
harshness and rigidity of the Common Law; so equity is characterized by flexibility;
and (2) Equity was founded on reference to conscience. It is a jurisdiction that is
grounded on fairness, justice, and morality (Virgo at pg 4).

o EVOLVED TO BE MORE DISICPLINED – Though often mischaracterized as being

flexible and discretionary, the reality is that ‘Equity [has] become much more rule-
based and principled with identifiable doctrines being recognised’ (Virgo at pg 5). A
similar point was raised by the Court of Appeal in Lau Siew Kim, ‘[e]quity has
gradually metamorphosised from a jurisdiction of fluid, pragmatic, conscience-
based decision making to one founded primarily upon the application of
authoritative rules, maxims, principles and precedents’ inconsistency (at [25]).

 An apparent balance has thus been struck between uncertainty and judicial
law-making by way of “palm tree” justice on the one hand, and the
continuing need for equity’s creativity to mitigate the rigours of the law on
the other (at [28]).

o However, it is apposite to point out that equity is not ‘past childbearing’, but ‘its
progeny must be legitimate’ (Cowcher v Cowcher)

o AWARENESS OF EQUITY TO ADAPT – Rajah JA in Lau Siew Kim emphasised that the
the Courts must be mindful of the equal need for a legal system which reflects
contemporary societal values and caters to the modern community. Courts cannot
mechanically apply, in the same manner today, equitable principles which were
formulated to provide for circumstances prevalent and putatively relevant
centuries

1.1 Equity’s Darling

 EQUITY’S DARLING – Equity’s darling is a good faith purchaser who has given valuable
'consideration' for the legal interest of the property; and has no notice of the beneficiary’s
rights (Penner, pg 35).

o EFFECT; TAKE FREE OF INTEREST – Equity’s darling would take the property with
good legal title free from any encumbrances, including prior equitable claims
(Penner, pg 36). The beneficiary's interest in the property is extinguished-he cannot
assert that the bona fide purchaser's title is subject to his equitable interest
(Penner, pg 36)

o NOTICE – Notice encompasses (a) no 'actual' notice of the beneficiary's rights; (b)
no 'constructive' notice of the beneficiary rights (knowledge of those interests that
he would have acquired if he had made all usual and reasonable investigations when
purchasing that kind of property); and (c) 'imputed notice' (any agents working for
him in making the purchase have no actual or constructive notice) (Penner, pg 35).

o APPLIES TO CONTEST BETWEEN EQUITABLE AND LEGAL INTEREST – This rule only
applies to the case where the purchaser acquires a legal interest (Penner, pg 36) –
i.e. where there is a contest between a legal interest holder and an equitable
interest holder (Penner, pg 36). In a contest between two equitable interest holders

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 the general rule of equity is that the interest that was created first in time prevailed
(Penner, pg 36)

1.2 Trust Definition

 TRUST; DEFINITON – There is no all-embracing definition of trusts due to the variety of

types of trust (Virgo at pg 38); 'the term "trust" is not clear and unchanging like a crystal; it
is the skin round a living and growing concept (Grbich). However, there are certain core
characteristics is of the trust that distinguish trusts from other legal concepts – (1) a person
holds property rights for a person or purpose (‘property component’); and that person is
obliged in equity to exercise those rights for that person or purpose (‘obligation
component’). The trustee holds the legal title to the property but is obliged by the
trusteeship to ‘manage the property in the exclusive interest of the beneficiary’; Legal and
equitable title to the property is ‘split’ (Virgo, pg 40).

o Cf. GIFT – The typical gift involves two parties, where the donor transfers all rights
to property to the donee without any obligation attached. The donee consequently
receives the property that has been donated absolutely and beneficially.

o Cf. CANNOT USE TRUST TO SAVE GIFT – Prof Virog writes that, if there is an
intention to make a gift, but legal title to the property is not successfully
transferred, this transaction cannot be saved by treating it as a trust. This is because
an intention to make a gift involves an intention to transfer property absolutely
without intending to impose any obligations on the donor to hold the property for
someone else. Consequently, an intention to make a gift contradicts any intention
to declare a trust (Virgo, pg 76)

 THREE KINDS OF TRUST – (a) express; (b) resulting; and (c)constructive. Think of the 3 kinds
of trusts in term of:

(1) the different facts that trigger their creation;

(2) the duties imposed on the trustees

(3) the consequences they have for the subject matter of the trust

 FUNDAMENTAL PRINICPLES RELATING TO THE TRUST – In Westdeutsche Landesbank v

Islington LBC, Lord Browne-Wilkinson identified four fundamental principles relating to all
trusts that he considered to be uncontroversial:

(1) EQUITABLE PROPRIETARY INTEREST – The beneficiary has, in Equity, a proprietary

interest in the trust property. With this equitable interest, the beneficiary may bring
action against trustee and any dishonest assistant in respect of any fraud or breach
of trust to which the trustee was a party or privy to (Central Bank of Nigeria). This
proprietary interest will be enforceable in Equity against anybody who receives that
property or its identifiable substitute, other than a purchaser for value of the legal
interest or legal estate without notice of the equitable proprietary interest (Virgo
at pg 42)

(2) CONSCIENCE – Equity operates on the conscience of the owner of the legal
interest. Where express trust is concerned, it would be unconscionable for the legal
owner to fail to carry out the purposes for which the property was vested in them

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 (Virgo at pg 42). Where trust arises by operation of law, the law imposes a trust by
reason of the legal owner's unconscionable conduct (Virgo at pg 42)

(3) AWARENESS OF FACTS THAT AFFECT CONSCIENCE – The equitable jurisdiction to

enforce trusts depends upon the conscience of the holder of the legal interests
being affected. Therefore, he cannot be the trustee of the property if he is ignorant
of the facts alleged to affect his conscience (Westdeutsche Landesbank v Islington
LBC). Where a trust is established, the beneficiary has ‘in equity, a proprietary
interest in the trust property, which is enforceable in equity against any subsequent
holder of the property (whether the original property or substituted property into
which it can be traced), other than a purchaser for value of the legal interest without
notice’ (Westdeutsche Landesbank v Islington LBC)

(4) IDENTIFIABLE PROPERTY – There must be identifiable trust property that

constitutes the subject matter of the trust. A vital component of the trust that the
trustee is obliged to keep the trust property segregated from their own property, so
that the property is not available to the trustee as part of their own assets (Virgo at
pg 42)’

 FUNCTIONS OF A TRUST

(1) SEGREGATION OF ASSETS – Where the settlor becomes insolvent, he no longer has
any proprietary interest in the trust assets. The trust enables assets to be
segregated from those of the settlor, which protects them from the consequences
of the settlor's insolvency (Virgo at pg 43). Similarly, if the trustee becomes
insolvent, the trust assets will not be available for the trustee's creditors because
the assets belong to the beneficiaries in Equity (Virgo at pg 43)

(2) ASSET PARTITIONING – Asset partitioning refers to the ability to take an asset and to
create different rights in it (Virgo at pg 43) (e.g. Adam will have the benefit of the
property for his life, but, on his death, the property will then pass to Brenda)

(3) MANAGEMENT OF PROPERTY – Trustees may have ‘particular financial and

investment experience, or because the beneficiaries are too young to manage the
property themselves or cannot be trusted with the property, so that it is preferable
for somebody else to manage the property on their behalf’ (Virgo at pg 43).

(4) CONVENIENT PROPERTY-HOLDING – The trust might be a convenient way of holding

property for the mutual benefit of a group of people linked by a common interest
(Virgo at pg 43). For example, managing pension funds,29 under which the fund is
held by trustees for the benefit of employees

1.3 Private Express Trusts & Powers

 TYPES OF PRIVATE EXPRESS TRUST –

(1) FIXED TRUST – A fixed trust is a trust where ‘trustees are required to distribute the
trust property to the beneficiaries in the proportions identified by the trust
document’ (Virgo, pg 85). The trustee has no discretion as to which people are to
benefit from the trust, and in what proportions, as the objects of the trust are fixed
from the start (Virgo, pg 85).

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(2) DISCRETIONARY TRUST – The trustees of a discretionary trust are given a discretion
‘as to which objects are to be benefited by distribution of trust property and in what
proportion’ (Virgo, pg 89); the settlor defines the class of beneficiaries. This power
must be exercised by the trustees, failing which it will need to be exercised by the
court (Virgo, pg 89).

 The beneficiary does not have a current right to an ascertainable part of

the trust fund However, all the beneficiaries can come together to
unanimously terminate the trust]

 However, objects of a discretionary trust can claim against third parties

who have misappropriated trust asets, which is one characteristic of a
prorpeitary right (Virgo, pg 343). However, they can only seek the return of
the misappropriated property to the trust and cannot obtain the
misappropriated property for themselves, since the distribution of the
property will still be determined by the exercise of the trustee's discretion.

o Cf. MERE POWER OF APPOINTMENT – Under a power of appointment the donee

has a power (but not a duty) to distribute capital or income from the property to
potential objects Powers of appointment may be special (exercisable only in favour
of a limited class of objects); general (exercisable in favour of the whole world)

 DISTINCTION WITH DISCRETIONARY TRUSTEE – The distinction between

power of appointment and trust, under a discretionary trust, is that the
trustee must execute the trust.

 PERSONAL POWER – A done of a power of appointment does not have an

obligation to make appointments. Donee holds the power purely in a
personal capacity and is wholly unaccountable in the courts in respect of
the power’s exercise or non-exercise, so long as any exercise of the power is
only in favour of the authorized objects under the power. Otherwise, it is a
‘fraud upon the power’

 FIDUCAIRY DONEE OF POWER – If he is a fiduciary donee of power, he is

bound by fiduciary duties – e.g. independently and consciously consider
from time to time whether or not to exercise it in a fully informed fashion
(taking into account relevant factors); exercised for the proper purpose and
avoid any conflict of interest. However, ultimately, he need no actually
exercise the discretion

o CONTURE INTENTION TO ASCERTAIN IS POWR OF DISCRETIONARY TRUST –

Whether a power or a trust is created is a matter of interpretation of the trust
document to ascertain, objectively, the settlor’s intentions. If he intended that the
person who has the discretion to exercise, must exercise it, then it’s a trust. If he
intends that the person who has the discretion may or may not exercise, then it’s a
power of appointment.

 GIFT OVER AS DECISIVE – However, a decisive factor accepted by the Courts

is the presence of a gift over a default. In default of exercising the discretion,
if there is a gift over a default of a particular discretion exercised, it is a clear

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 indication that discretion need not be exercised. Therefore, it is likely to be
a power of appointment.

1.4 Rule in Saunders v Vautier

 RULE IN SAUNDERS V VAUTIER – The rule in Saunders v Vautier gives a power to the adult
beneficiaries of a trust who are not under disability, and who are between them absolutely
entitled to the beneficial interest in the trust property to terminate the trust, and to direct
the trustees to transfer the property to them provided that all the beneficiaries are of full
capacity and agree to the termination of the trust (Virgo, pg 373).

o The settlor may not oust this principle, even by express declaration.

o cf. ALL OR NOTHING POWER; NO POWER TO CONTROL OR APPOINT – However,

the Saunders v Vautier rule is an all-or-nothing power; it does not enable the
beneficiaries to interfere with the administration of the trust, whilst keeping the
trust on foot (Re Brockbank; Virgo, pg 373). This power does not enable the
beneficiaries either to control the exercise of the trustee’s power to appoint
trustees or enable the beneficiaries to replace a trustee with their own appointee
(Re Brockbank; Virgo, pg 373). If the beneficiaries wish to appoint new trustees,
they need to exercise the power under Saunders v Vautier to terminate the trust
and settle the property on new trusts for themselves with their nominated trustees

 DISCRETIONARY TRUST – The rule in Saunders v Vautier also applies to discretionary trusts,
as it ‘is possible to treat all of the objects as though they were one person, who are then
able to request the trustees to transfer property to them’(Virgo, pg 359). This requires ALL
OF THE BENEFICIARIES have capacity to do so, namely if they are adults and of sound mind,
and if they all agree (Virgo, pg 359).

 SEVER INTEREST – Where it is possible to sever the interest of 1 party without harming the
remainder, the rule can apply as regards to that individual’s interests only, since 1
beneficiary has an absolute right to that particular part of the trust assets (Virgo, pg 358)

 BENEFICIARIES ENTITLED IN SUCCESSION; LIFE TENANT AND REMAINDER – Where

beneficiaries are entitled in succession, with one being a life tenant and the other the
person entitled to the remainder, the rule can apply if both of them are full capacity and
both agree in the direction to the trustee that the trust fund be transferred to them. They
are treated to have an absolute right if their interest is treated together (Virgo, pg 358)

 EVALUATION; SHOWS EQUITABLE OWNER IS BENEFICIARY – Virgo opines that the rule in
Saunders v Vautier is of vital significance to the law of trust, since the rule acknowledges
that the property that is held on trust for the beneficiaries is THEIR PROPERTY in Equity.
Therefore, the beneficiaries, provided that they are of compos mentis and sui juris, should
be able to decide what they want to do with it (Virgo, pg 359), in so far as they can decide
to order the transfer of trust funds & terminate the trust.

o CRITCISM; CAN DEFEAT TESTATOR’S INTENTION -Notably, the argument against the
rule in Saunders v Vautier, is that the operation of the rule means that the settlor’s
intention may be defeated. In Saunders, the beneficiary obtained the benefit of the
trust property before he attained the age of 25, despite the intention of the settlor
being that that Vautier was to attain 25 years of age before receiving the shares.

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  Cf. VESTED INTEREST OR CONTINGENT INTEREST [i.e GIFT OVER] – However, the Saunders v
Vautier rule does not apply where the beneficiary has a mere contingent interest as opposed
to have an ‘absolute entitlement to the beneficial interest’. The trust document must be
CONSTRUED to determine whether the beneficiary’s interest is vested, as in Saunders v
Vautier itself, or is contingent upon a particular condition.

o Where it is contingent, the rule will not be applicable because, if the contingent
was not satisfied, somebody else would be entitled to the property and it would not
be appropriate for the person with the contingent interest to terminate the trust
and to obtain the benefit of the trust property absolutely. In Saunders v Vautier¸
there was no gift over, and the bequest to Vautier was considered to be an
immediate gift which vested on the death of the testator. [so, if the trust was
structured such that it was contingent on Vautier attaining the age of 25, with a gift
over to X, Vautier would have to attain the age of 25 first before receiving the
shares]

1.5 Renunciation of Interest in Trust

 RENOUNCING INTEREST IN TRUST – While the beneficiary need not agree to the creation of
a trust, he may disclaim / renounce his interest in it. A beneficiary may only renounce his
interest (i.e. ‘disclaim’ his interest) if he is in possession of the full facts and circumstances
of his actions (How Yew Kong at [37]).

1.6 Adverse Effect on Creditors

 ADVERSE EFFECTS ON CREDITORS – The fact that the beneficiary of such a trust has an
equitable proprietary interest in the trust property means that, where the trustee becomes
insolvent, the beneficiary’s claim to the trust property will rank above the claims of other
unsecured creditors of the trustee (Virgo, pg 272). Therefore, any imposition of trusts
should be imposed RESTRICTIVELY because of the adverse effect that they have on the
defendant’s creditor’s where the defendant is insolvent (Virgo, pg 279)

 This would have ‘unsettling effects on the rights of third parties and the security of
commercial transactions’ (Chan Yeun Lan at [48]).

1.7 Clean Hands

 CLEAN HANDS – The maxim that ‘those who come to equity must come with clean hands’
means that ‘equitable relief will be denied to a claimant whose conduct can be considered
to be improper in some way’ (Virgo, pg 32). This is based on the on the historical origins of
Equity as being founded on conscience

2 THREE CERTAINTIES

 PRIVATE EXPRESS TRUSTS – An ‘express trust’ is created by the actual / express intention of
the person in whom the property is vested (Virgo, pg 71).

 3 CERTAINTIES – There are 3 certainties required to establish a trust – (i) intent to create a
TRUST; (ii) SUBJECT MATTER of trust; and (iii) BENEFICIARIES of trust (Guy Neale at [51]).
The requirement for the three certainties is connected to the ownership of legal and
equitable rights under a trust, and serves broadly the purpose of enabling the trustee, or
the court in default, to execute the trustee’s duties (Snells Equity)

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 o PENNER’S RATIONALIZATION OF THE 3 CERTAINTIES – Certainty of intention
concerns whether the putative settlor actually meant to create a trust. The
‘secondary certainties’ of subject matter and beneficiaries concern the efficacy of
the settlor’s expression, or the workability of his intentions’ (Penner, pg 182)

2.1 Certainty of Intention

 CERTAINTY OF INTENT – To create an express trust, there must be certainty that the settlor
intended to create the trust and to subject the trust property to trust obligations (Guy
Neale at [52]). In the present case […]. An objective ascertainment shows that both parties
[clearly had or did not have] the intention of creating a trust

o Where there is uncertainty as to the intention to create a trust, no valid trust will
have been declared (Virgo, pg 79)

o NO TRUST; TAKES PROPERTY BENEFICIALLY – In cases where the property has been
transferred to a third party, that individual takes the gift absolutely, free of any
trust obligations (Penner, pg 212)

 PRE-REQUISITE; CAPACITY TO CREATE A TRUST – Prof Virgo writes that ‘[a]n intention will
be valid only if the settlor or testator had the capacity to create a trust’ (Virgo, pg 72)
Therefore, a settlement made by a child (before 18 th birthday) is voidable.

 GENERAL PRINICPLES –

(1) KEY ESSENTIALS; HOLD PROEPRTY FOR ANOTHER PERSON – Pertinently, the ‘key test … is to
consider whether the creator of the trust wanted somebody to hold property for the
benefit of another person’ (Virgo)

o SETLLOR DOESN’T HAVE TO UNDERSTAND – The ‘settlor need not even understand
that his words or conduct have created a trust if they have this effect on their
proper legal construction’ (Guy Neale at [52])

(2) SUBSTNANCE AND EFFECT – Equity looks to substance, not form. Therefore, the court
‘construes the substance and effect of the words used, against the background of any
relevant surrounding circumstances’ (Guy Neale at [53]).

o INFERRED INTENTION OF TRUST – The court can infer an intent to create a trust
from the circumstances of the case, the conduct of the parties, and careful
construction of any relevant document (Virgo, 73; Guy Neale at [53])).

o INFORMAL DECLARATIONS – Trusts may be created by means of an informal

declaration (Guy Neale at [53])

o NO NEED TO USE THE WORD TRUST – It is ‘unnecessary for the settlor to use the
word “trust” before such an intention can be found’ (Guy Neale; following Snell’s
Equity). See Paul v Constance for example.

o FAMILY CONTEXT – In a family context, it has been held that the Deeds / Documents
should not be interpreted with an excessive degree of formalism. The task of the
court was to resolve what the Settlor’s intention was, and to give effect to it
(Sheares Betty).

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 (3) OBJECTIVE ASSESSMENT – Whether a trust was intended is to be assessed objectively,
rather than subjectively (Virgo, pg 73; Brynes v Kendle). Therefore, the courts ascertain that
a reasonable person would conclude that the creator of the trust intended.

o FEATURES OF A TRUST; RIGIDITY – An intention to create a trust would be absent

where a structure created was not transparent or rigid (Compania at [138]).
Therefore, in Compania, the the fluidity in NEL’s assets and the absolute control
Robert Sr had over his assets, could not show an intention to create a trust, in the
legal sense of the word.

o WILLS; LEGAL TERMS GIVEN THEIR LEGAL MEANING – The Court of Appeal in Low
Ah Cheow held that ‘legal and technical words to be given their legal or technical
meaning unless it clearly appeared from the face of the will that they were intended
to bear some other meaning’ (at [19] and [20])

(4) AMBIGUITY; ADMIT EXTRINSIC EVIDENCE – In cases of ambiguity, the court will need to
make sense of the expressed intent (Virgo, 73) – i.e. the written word is interpreted in light
of any extrinsic evidence admissible for purpose of construction. For instance the
‘admissions and statements made in prior legal proceedings may be relevant in discerning
the intention of the settlor’ (Ho Yew Kong at [17]).

2.1A Self Declaration of Trusts

 SELF-DECLARATION OF TRUSTS; TRUST OR GIFT – There is an issue of whether there is

certainty of intent as to amount to a self-declaration of trust where X purports to hold
property for the benefit of Y. As Prof Penner observes, ‘it is difficult to tell whether someone
intended to declare a trust or merely stated an intention to make a future gift’ (Penner, pg
183)

o Courts are averse to ‘loose conversation [being] sufficient to declare a trust’ (Jones
v Lock per Lord Carnworth)

o However, Courts still prefer contextual approach that looks at all the circumstances
of the case (Paul v Constance)

 CASE LAW –

o JONES; FATHER’S DECLARATION; JUST TO PROVIDE FOR SON – In Jones v Lock, the
father’s placement of cheque in the baby’s hands and utterance of the words ‘I AM
GOING TO PUT IT AWAY FOR HIM’’ was not sufficient to evince an intention create a
trust. The Court viewed these acts as merely representing that the father intended
to provide for his son, rather than to create a proprietary interest in the cheque for
the child’(Virgo, pg 74). Lord Cranworth opined that ‘it would be dangerous if loose
conversation of this sort were sufficient to declare a trust’.

o PAUL V CONSTANCE; COUPLE – A more contextual approach was taken in Paul v

Constance which involved a couple. Scarman LJ opined that ‘we are dealing with
simple people, unaware of the subtleties of equity’. Therefore, ‘one should consider
the various things that were said and done by the plaintiff and the deceased during
their time together against their own background and in their own circumstances’.

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  The Court found that the evidence supported the conclusion that the money
was intended to be held on trust, particularly because, on a number of
occasions, the deceased had confirmed that the money was the claimant's
as much as it was his own (THE MONEY IS ‘OURS’). This also demonstrates
how the courts use an objective ascertainment of intention, as opposed to a
subjective one. [Note that there was no use of the ‘trust’]. Professor Penner
opines that this case shows that informal declrations of trust of personalty
are possible (Penner , 183)

o ROWE V PRANCE; COUPLE – Similarly in Rowe v Prance, the defendant and claimant
were having an extramarital affair for 14 years. The crucial finding of fact that the
defendant had described the boat as ‘ours’ led to the Court’s finding that the
defendant held the yacht on trust for them both in equal shares (Virgo, pg 75)

2.1B Commercial Context; Separation of Property

 COMMERCIAL CONTEXT; GENERAL RELUCTANCE – Prof Virgo notes that there is a general
reluctance to find a trust arising from a commercial relationship (Virgo pg 75). Indeed, the
Court of Appeal has emphasized that a business arrangement prima facie militates against
any imputation or inference of a trust (Hinckley). [However, where there is clear evidence of
the necessary intent, a trust will be found.]

o SIGNIFNCANT CONSEQUENCES; CREDITOR OR BENEFICIARY – Indeed, finding an

intention to create a trust is ‘significant in commercial disputes, especially those in
which a party is bankrupt or insolvent’ (Virgo pg 75). If one sends money to a
company for goods which are not yet delivered, one is merely a creditor of the
company, unless a trust has been created (Kayford at 282)

o NO TRUST; LOOK AT EXPECTATIONS – Where an agreement does not contain any

express term that reflects the intention to create a trust, whether such an intention
may nonetheless be inferred would depend on what may appropriately be taken to
be the expectations of the parties in the light of the commercial context (Westacre
at [56])

 TO CREATE A TRUST – (1) use express words; or (2) separate the property

 OBLIGATION TO SEPARATE PROPERTY – Watkins LJ in R v Clowes recognized that a

requirement to keep money separate is an indicator that a trust was intended (followed in
Hinckley). If mingling of money / property is contemplated, then that normally negatives the
intent to create a trust (Virgo pg 75)

o Cf. NOT CONCLUSIVE; OTHER FACTORS – The mere segregation of money into
separate bank accounts does not conclusively equate to the creation of a trust
(Vintage Bullion at [61]). What is further required is to establish that the Company
had the requisite certainty of intention for the funds to be held on trust (Vintage
Bullion at [61]).

o EXPRESS TERMS; NO SEPARATE ACCOUNT; NOT FATAL – Where there are clear
indicators of a trust such as express provisions create a trust, the fact that the
trustees are not expressly prohibited from mixing the funds was not fatal to the
trust (Hinckley (CA) at [39]). This accords with the emphasis on express terms of the
contractual relationship which will be given heed.

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  CASE LAW

 SEPARATE BANK ACCOUNTS; TRUST – In Re Kayford, the Company kept separate bank
accounts for its clients. The Court held that there was a sufficient manifestation of an
intention to create a trust. The whole purpose of setting a trust account at the bank was to
ensure that ‘the moneys remained in the beneficial ownership of those who sent them’ (at
282)

 NO SEPARATION BANK ACCOUNT; NO TRUST; COMMERCIAL RELATIONSHIP – In Hinckley,

the Respondent was insolvent; the concessionaire agreement between the parties did not
stipulate that proceeds of sale of goods was to be segregated. No trust. The Appellant
merely had a claim in debt against the Respondent, and it had to lodge its proof of debt in
the usual way

 UNUSUAL CASE; TRUST LIKE OBLIGATIONS IN CONTRACT; ON BASIS OF YUGOSLAV LAW;

NO TRUST – In Yugoimport, the Court found that even though the contract between the
parties had ‘elements that resemble a trust or terms that resemble “trust-like” obligations’,
there was no intention to create a trust. This was because, from a comprehensive analysis of
the facts, the Court found that the contract was entered into on the basis of Yugoslav law
which did not recognise the concept of a trust, and the parties did not have in their
contemplation the mechanism of a trust.

o This is an example of the Courts ascertaining the expectations of the parties in the
light of the commercial context (Westacre at [56])

o Clause 4 – The deposited amount shall be used exclusively for purchasing the raw
materials, parts, assemblies and other goods for the needs of the Manufacturers [ie,
the Other Parties]

2.2 Certainty of Subject Matter

 CERTAINTY – A declaration of an express trust can be valid only if the subject matter of the
trust has been described with sufficient clarity (Virgo, pg 80; Guy Neale at [59]). The
definition will be sufficiently certain if it enables the trustee or the court to execute the
trust according to the settlor’s intention (at [59]).

 CONSTRUING AMBIGUOUS WORDS; REASONABLE CONSTRUCTION – Prof Penner opines

that, generally, ‘courts try not to invalidate trusts if a reasonable construction can be placed
on the words that will make them valid’ (IRC v McMullen (1980) per Lord Hailsham) (Penner,
pg 200). The vagueness of the term simply requires the courts to ‘stipulate criteria for a
term's application to give a working definition that is precise enough for the task at hand’
(Penner, pg 198).

o Indeed, the Court of Appeal endorsed that courts will try to ‘make sense of’ a term
in the putative trust document (Bok v Bol at [134]).

o REASONABLE INCOME – For instance in re Golay’s, the term ‘reasonable income’

was held to be sufficiently certain as to the subject matter of the trust. The Court
applied an objective assessment to quantify the amount. Therefore, it was not the
direction in the will was not defeated by uncertainty. Prof Virgo notes that the court
was able to identify the criteria to determine what is a reasonable income, namely
by reference to the beneficiary’s previous standard of living (Virgo, pg 80)

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 SETTLED CATEGORIES:

 RESIDUE OF ADMINSITERED ESTATE; CERTAIN– A testamentary gift or trust of the residue

under a will not fail for uncertainty of subject matter (Penner; Sheares Betty). In the course
of executing the will, the executor will determine to the very penny the residue of the
estate. “That is certain which can readily be made certain”.

 BULK; NOT CERTAIN – In Palmer v Simmonds, a testator’s declaration that the ‘bulk’ of her
estate should be held on trust was not sufficiently certain (Virgo, pg 80). Prof Penner
observes that the words ‘'the bulk' meant more than half but that was still too imprecise to
establish the subject matter of the trust’ .

 PRESENT UNCERTAINTY CASES; WHATEVER IS LEFT TRUST – Prof Virgo notes that other
examples of testamentary gifts that have failed for uncertainty of subject matter include ‘the
remaining part of what is left’ (Sprange v Barnard); ‘such parts of my ... estate as she shall
not have sold’; ‘all my other houses’ (Boyce v Boyce); ‘such minimal part of my estate’.

o CASE LAW; REMAINING PART OF WHAT IS LEFT – In Sprange v Barnard, the testatrix
left the property to the husband, ‘and at his death, the remaining part of what is
left’ is to be distributed between the testatrix’s siblings. The Court held that there
was a lack of certainty as to subject matter; any purported trust for the testatrix’s
siblings would have been impossible to execute, since the husband could have
called for the whole sum for himself. The court granted that Husband was entitled
absolutely to the whole sum.

o Cf. FLOATING TRUST ANALYSIS; PRESENT UNCERTAINTY; FUTURE CERTAINTY –

However, more recently, the courts have used a ‘floating' or 'suspended' trust
analysis’ (Penner, pg 201; Ottaway v Norman). Therefore, a trust will not fail for
uncertainty as to subject matter merely because the subject matter is, at present,
uncertain, if the terms of the trust are sufficient to identify the subject matter in
the future (Virgo, pg 84). This floating trust crysalises upon the stipulated event in
the trust document (e.g. death of husband) (Virgo, pg 84)

 CASE LAW – In Ottoway, the testator left a house to the housekeeper for
life, and on her death, to be held on trust for the testator’s son. Brightman J
was content to assume was ‘in suspense’ during housekeeper’s lifetime;
trust attached to the property only upon her death.

 OTTOWAY; PREFERABLE ANALYSIS – Professor Penner suggests that a more

appropriate interpretation of the situation, that accords with traditional
trust principles: Transfer of the property to Housekeeper on trust for her
life, with the remainder to Children; furthermore, the Housekeeper had the
power to appoint capital, up to the entirety of the trust funds, during her
lifetime. In this way, the Housekeeper can have more than a mere income
interest by making use of the power, yet anything left will go to Children,
as he has the interest in remainder

 CONSEQUENCES; ABSENCE OF CERTAINTY OF SUBJECT MATTER – Where a trust is void for

uncertainty as to subject matter, there are various consequences depending on the nature
of the uncertainty (Virgo, pg 85)

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 o UNCERTAINTY IN THE DIVISION OF BENEFICIAL SHARES; RESULTING TRUST– Where
there is uncertainty as to the division of beneficial shares, all of the putative trust
property will be held on resulting trust for the putative settlor, because it is clear
the putative trustee was not intended to have any of that property beneficially
(Virgo, pg 85). [S – T – tells T to divide – no certainty – resulting trust for S]

o TRANSFER FOR PART TO BE HELD ON TRUST; RECEIVE ABSOLUTELY – Where the

identity of the subject matter is unclear, there is nothing to which any trust can
attach. Therefore, the recipient will take the property absolutely. Part of it cannot be
held on resulting trust for the ‘settlor’ because it is unclear which part was intended
to be held on(Virgo, pg 85). [S – T – tells T to hold 15 out of 100 bottles on trust for B
– no trust – T takes property absolutely]

2.2A Range of Possible Subject Matters of Trusts

 RANGE OF SUBJECT MATTER – Prof Virgo writes that trusts ‘can be declared over all kinds of
property, including land, money, shares, and chattels, and even intangible property, such as
a covenant or a debt’ (Virgo, pg 79). The scope of the trusts recognized in equity is
unlimited (Lord Strathcona Steamship).

o There can be a trust of a chattel or of a chose in action, or of a right or obligation

under an ordinary legal contract, just as much as a trust of land’. (Lord Strathcona
Steamship).

o This further includes non-assignable personal rights under a contract (Re Don King)

 DOES NOT INCLDUE UNREALISED PROFITS – However, this does NOT include unrealized
profits (Vintage Bullion). In Vintage Bullion the Court found that unrealised profits would
fluctuate from day to day, and it would be difficult to fathom how a proprietary interest can
arise over something that is nothing more than an accounting device.

 CASE LAW; NON-ASSIGNABLE CLAUSE; TRUST ALLOWED – In Re Don King, even though
there was an anti-assignment clause, the Court held that this did not prevent a trust from
being declared. Prof Virgo criticizes this, opining that the ‘prohibition on assignment could
be construed as intending to prohibit the creation of the trust as well, which would have had
the practical effect of transferring the benefit of the rights to the prohibition’.

o However, since the contracts referred only to a prohibition on assignment and did
not refer to a prohibition on creating a trust, the preferable construction is that it
did not prohibit the transfer of rights by trust, because assignment and trust are
functionally different. An assignment involves the transfer of an existing right and a
trust involved the creation of a new right – a new equitable proprietary right (pg
63).

2.2B Certainty of Division of Beneficial Share

 CERTAINY OF DIVISION OF BENEFICIAL SHARE – Certainty of subject matter requires

certainty both of the identity of the property that is to be held on trust, and of the
proportionate amount of each beneficiary’s share (Pearson v Lehman at [243]; Virgo, pg
84). Therefore, where an express trust is declared, but it is unclear what proportion of the
whole each of the beneficiaries has, the trust will be void for uncertainty (Virgo, pg 84;
Boyce v Boyce).

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 o SOLUTUIONS TO RESOLVE UNCERTAINTY; TRUSTEE DISCRETION OR EQUALITY –
Prof Virgo submits that it may be possible to resolve the uncertainte by giving he
trustee a ‘discretion to divide the beneficial shares as they consider appropriate’.
Alternatively, the court may apply the maxim that ‘Equity is equality’ and ‘so divide
the property equally between the beneficiaries’ (Virgo, pg 84; Burrough v Philcox)

 CASE LAW – In Boyce v Boyce, the Testator devised all his houses to trustees, in trust to
convey one of them (whichever Maria might think proper to choose) to his daughter Maria,
and to convey ALL THE OTHER of the houses, to his daughter Charlotte. Maria died in the
testator’s lifetime and consequently without having chosen any of the houses. The Court
held that the trust was void for uncertainty (Virgo, pg 84

2.2C Unsegregated Assets

 IDENFIABLE SUBJECT MATTER – Certainty of subject matter requires that the property be
identifiable – i.e. that it is specifically ascertained (Virgo, pg 80); ‘right in property cannot
exist in air, hovering over an UNDIFFERENTIATED mass of property’ (Re Goldcorp per Lord
Mustill). On the facts ... . [...] will not be able to point to any specific gold bars and claim that
he has beneficial proprietary interest over them. Therefore, it cannot be said which [...] was
the subject matter of a trust for [..] (Penner, pg 202)

o RELEVANT WHERE PART OF PROPERTY HELD ON TRUST – The question of identity

of property is significant where a defined part of the property is to be held on trust,
but it is unclear which part of the whole is subject to the trust (Virgo, pg 80).

o GENERAL ISSUE OF CASES – There is general problem that has recently arisen as an
important issue in the commercial context, that of identifying which specific things,
out of a larger class of things, are to be held as the subject matter of a trust (Penner,
pg 202)

o SALE OF GOODS ACT – Virgo notes that the particular result in these sale-of-goods
cases would now be different following the enactment of the Sale of Goods, which
provides that a purchaser of an unascertained part of a bulk of goods acquires
property rights in that bulk

o Cf. LOOK AT THE CHOOSING PROCESS; FUNGIBLE OR NOT – S Worthington argued

that ‘a specificially enforceable obligation to transfer 1000 bottles of wine out of an
identified bulk of 10,000 identically labelled bottles should also give rise to a
proprietary interest’. She reasoned ‘[a]lthough it is true that some of the bottles may
... differ ... this is not a feature which can be discovered by any party at the time of
transfer’. She contrasts this by stating that ‘the sale of one puppy out of an
identified litter of five is not the sale of part of a bulk. The litter is not comprised of
fungibles. The purchaser’s interests are dependent upon how the selection process
is effected’ which is itself a function of the parties’ intentions

 HUNTER V MOSS; TRUST DECLARED OVER 5% OF SHARES – However, in Hunter v Moss, the
Court declare valid a trust of 5% of the settlor’s 950 shares where there was no segregation.
Thus, Hunter successfully claimed a proportionate share of the proceeds from the sale of
share. Admittedly the law is INCONSISTENT IN THIS REGARD. However, academics have
identified that ... [distinction between tangible and intangible]

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 o DISTINCTION BETWEEN TANGIBLE AND INTANGIBLE PROPERTY – Virgo further
observes, from the holding in Hunter v Moss / Re Goldcorp / Re London, that there
seems to be a judicial distinction between trusts of tangible property and trusts of
intangibles, such as shares, ‘with a more benevolent approach to identification
applying to intangibles’ (Virgo, pg 82). Similarly, Penner observes that the English
Court of Appeal in Hunter appears to have distinguished London Wine on a
goods/intangibles distinction without further reasoned argument)(Penner, pg 203)

o CRITICISM – Virgo questions whether the distinction between chattels and

intangibles can be defended. Indeed, ‘[i]f all of the bottles look the same, surely it
should be sufficient that any 10 of them are held on trust for you’ (Virgo, pg 82).

 Cf. MAY HAVE DIFFERENCES; INTANGIBLES NO TRUE DIFFERENCES –

Hayton notes that this contention may be unsustainable where some
bottles are corked (Virgo, pg 82). Similarly, ‘if I declare that I hold 20 of my
100 sheep of the same breed on trust for you without identifying which
sheep will form the 20, they cannot all be treated as identical because, for
example, some may have a disease and others not’ (Virgo, pg 82). However,
intangibles of the same type will be exactly the same (e.g. same company,
same class of shares). Virgo notes that the same is true of money in a fund –
it does not matter which money credited to the fund is held on trust (Virgo,
pg 82)

o PRACTICAL IMPLICATIONS – Virgo notes that the decision in Hunter v Moss causes
practical difficulties, primarily because ‘it is not possible to identify any clear
rationale as to how the trust works in practice’ (Virgo, pg 82). E.g. if 500 shares sold,
whose shares are sold?

o DIFFERENT TYPES OF SHARE AS VOIDING CERTAINTY OF SUBJECT MATTER – In

Hunter v Moss, the shares were of a single class and in a single company. It was
recognised in Hunter v Moss that if the trust was over shares of 2 companies (or
shares of a different class) this would be void for uncertainty of subject matter,
because it would not be clear whether the settlor intended the shares in company A
or company B to be held on trust (Virgo, pg 81).

 CASE LAW:

 CASE LAW; WINES; NO SEGREGATION; UNIDENTIFIABLE ASSETS – In Re London, the wine

remained part of the general stock, without being allocated to particular sales contracts
(Virgo, pg 81) – i.e. there was no segregation of particular bottles of wine from the bulk.
Therefore, it could not be said with any certainty which wines were the subject matter of a
trust for any particular customer (Penner, pg 202)

 CASE LAW; GOLD BULLION; NO SEGREGATION; UDENTIFIABLE ASSETS – In Re Goldcorp,

there was no segregation of gold bullions from the bulk. Therefore, the bullion was not held
on trust because the customers could not identify their property in the bulk (Virgo, pg 81).

o Cf. Virgo notes that the claims of a few customers succeeded because their bullion
had been segregated from the bulk

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  CASE LAW; BREACH OF CONTRACT; NO SEGREGATION; UNIDENTIFIABLE ASSETS – In
MacJordan, in breach of contract, the developer failed to establish a separate back account
for moneys. The Court held that since the funds had not ben segregated, there were no
identifiable assets impressed with the trusts applicable to the retention fund.

Alternative Construction

 TRUSTEE / EXECUTOR AS ‘RESOLVING UNCERTAINTY’ AS TO IDENTITY – A possible

approach for the law to develop is that, where there is uncertainty as to the subject matter
in the property is not identifiable out of a bulk, the executor / putative trustee can resolve
the uncertainty.

o Virgo notes that in Hunter v Moss it was recognised that, if there had been a
declaration of trust of 5% of shares in a will, this would be valid, because the
executors would be able to resolve any uncertainty as to the identity of the subject
matter. It would be for the executor to choose any 5% of shares and transfer them
to the beneficiary (pg 90)

 TENANTS IN COMMON; PROPORTIONATE SHARES APPROACH – A possible approach to

resolve the uncertainty would be for the Courts to find an equitable co-ownership of the
property where [X] and [Y] hold [PROPERTY] as tenants in common with proportionate
shares (White v Shortall; Pearson). On the facts, .... Indeed, the Courts will find this is a more
attractive analysis ‘rather than in the conceptually much more difficult notion of seeking to
identify a particular part of that fund which the beneficiary owns outright’ (Pearson per
Briggs J; affirmed White v Shortall)

o ACCORDS TO SOGA – Notably, the proportionate shares approach (tenants in

common approach) accords with the amendment to the Sale of Goods Act s 20A(2)
(b) which holds that purchasers of unidentified goods from an identified bulk will
obtain title to the bulk as co-owners in shares proportionate to their purchases
(Penner, pg 204)

o LOSS IN VALUE SHARED BY BOTH BENEFICIARIES – A consequence of this beneficial

co-ownership analysis is that ‘any loss arising from a shortfall in the value of the
fund would be shared between the beneficiaries in proportion to their respective
interests in the fund’ (Pearson at [244])

o CASE LAW; WHITE V SHORTALL – This was adopted in White v Shortall where there
was a valid self-declaration of trust of 220k shares out of a holding of 1.5 million
shares. This was analysed as a trust of a fund consisting of all the shares, which were
held for two beneficiaries, namely the settlor and the other party. Consequently,
Virgo notes that it was not necessary for each beneficiary to be able to point to
particular shares to say that they had a proprietary interest in them; rather, each
had an interest in all of the shares (Virgo, pg 83)

o CASE LAW; PEARSON – The co-ownership analysis of the trust has been expressly
affirmed in Pearson by Briggs J, who opined that ‘such a trust works by creating a
beneficial co-ownership share in the identified fund, rather than in the
conceptually much more difficult notion of seeking to identify a particular part of
that fund which the beneficiary owns outright’

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2.3 Certainty of Objects of Trust

 CERTAINTY OF OBJECTS – A trust will be declared invalid if there is uncertainty as to the

objects of the trust. The rationale for this requirement is so that the Court can ascertain
those who have the standing to enforce the trust (Guy Neale at [60], following Snell’s
Equity). Crucially, conceptual certainty is mandated; it must be possible to define the
description of the class with sufficient clarity (Virgo, pg 91)

o QUOTE – Prof Penner writes that ‘[c]onceptual uncertainty concerns the problem of
vagueness in the language used by the testator’ (pg 196).

o CONSEQUENCE OF ABSENCE OF CERTAINTY – If there is uncertainty of objects, ie

there is no one the court is willing to hold to be beneficiaries or objects of a power,
the property is held on a resulting trust for the settlor (Penner, pg 212)

 TWO TYPES OF CERTAINTY:

o CONCEPTUAL CERTAINTY – The Courts would require conceptual certainty – whether

it is possible to define with sufficient certainty the description of the class of objects
(Penner, pg 196)

o EVIDENTIAL CERTAINTY – Evidential certainty is the ease of proving that somebody

is in fact an object. Evidential uncertainty would arise where it is unlikely or
impossible to find the evidence that will allow the trustees to carry out a settlor's, in
particular a testators, instructions’. Therefore, even if the definition of the objects is
certain, if it is not possible to prove who the objects are, the complete list test will
not be satisfied (Virgo, pg 86) [Example – beneficiary is school football team, but
school no longer has records of who played in the school team].

 POSSIBLE RESOLUTION OF UNCERTANTY BY OUTSIDE OPINION – Virgo notes that it has

been recognised that it is acceptable to resolve questions of uncertainty relating to the
identification of objects by referring the matter to a third party whom the settlor has made
an arbiter of the matter (Virgo, pg 99; Re Tuck’s). In fact, in Re Tuck’s, Eveleigh LJ’s reasoned
that the ‘the third party is not being used to resolve uncertainty in the definition of the
class, but forms PART OF THE DEFINITION of the class’ (Virgo, pg 99). [However, notably,
this are of the law is inconsistent; the Court in Re Coxen opined that an ‘opinion’ cannot
‘save’ a trust. This issue has not been litigated in Singaproe as of yet. However, it is argued
that this should not represent the law as it would bring the propsect of settlors subverting
the requirement of certinaty of objects by simply stipulating the the trustees themselves
should be the final arbiter]

o CASE LAW – Therefore, in Re Tuck’s, a condition that the wife must be of 'Jewish
blood' and worship 'according to the Jewish faith' where in the case of doubt the
decision of the Chief Rabbi in London was to be conclusive, was held to be
sufficiently certain. The ‘relevant concept is not objectively those people ofJewish
faith, but those people whom the chief rabbi considers to be of Jewish faith’ (Virgo,
pg 99

o SUGGESTION BY HUSDON; EMPIRICALLY DEMOSNTRABLE OR QUESTION OF LAW –

Alastair Hudson suggests that if the matter at issue are empirically demonstrable
facts (such as a person needing to be suffering from a particular disease) or a

22
 question of law, then there ought to be no objection in permitting their validity
because any uncertainty is removed by the decision of the specified expert. Where
the matter at issue is conceptually uncertain (e.g. ‘good friends’) – no one could
claim to be objectively an expert in such matters. Hence, the uncertainty is not
resolved by appointing a 3rd party arbiter.

 UP TO THE COURTS REALLY – Prof Penner opines that, generally, ‘courts try not to invalidate
trusts if a reasonable construction can be placed on the words that will make them valid’
(IRC v McMullen per Lord Hailsham; Penner, pg 200). However, Penner observes that
‘individual judges vary in their willingness to find a 'benignant' construction’, and ‘settlors
are faced with uncertainty about the extent to which a court will allow the determination of
a vague term’ (Penner, pg 200)

 CASE LAW

 PEOPLE WHO HAVE HELPED ME; UNCERTAIN – In Re Wright's, a trust for 'such people and
institutions as [my trustees] think have helped me or my late husband' failed for
uncertainty’. , Blackett-Ord VC at first instance observing that helping the testatrix 'could
mean anything from helping the testatrix across the road to saving her from death,
dishonour, or bankruptcy'. (Penner, pg 196)

 DEPENDNENTS AND RELATIVES; CERTAIN – In Re Baden's Deed Trusts (No 2), a turst for
‘relatives’ and ‘dependents’ were conceptually certain. ‘Dependents’ were defined as those
who are wholly of partly financially dependent on someone else (at 21 per Sachs LJ and 30
per Stamp LJ). ‘Relatives’ were defined by Sachs and Megaw LJJ as descendants from a
common ancestor (at 22) , whereas Stamp LJ defined them as next of kin or nearest blood
relations (at 29). Subsequently, in Re Barlow's Will Trusts, the normal meaning of ‘family’
was considered to be those related by blood.

 INHABITANT; CERTAIN – ‘An inhabitant of Wester Yorkshire has been considered to be

conceptually certain’ (R v District Auditor);

 JEWISH PARENTAGE AND FAITH; UNCERTAIN – A condition in a will that the daughter would
not marry a person ‘of the Jewish parentage and of faith’ was held to be void for
uncertainty. There was uncertainty as to the meaning of being a member of that faith;
there was no given percentage or proportion of Jewish blood that will satisfy the condition
that one is of Jewish parentage.

o Cf. RESOLVING UNCERTAINTY BY OUTSIDE OPINION – However, in Re Tuck’s, a

condition that the wife must be of 'Jewish blood' and worship 'according to the
Jewish faith' where in the case of doubt the decision of the Chief Rabbi in London
was to be conclusive, was held to be sufficiently certain

 FRIENDS – A fixed trust for the settlor's friends will be void for conceptual uncertainty,
because it is not possible to define clearly who is 'a friend (Virgo, pg 86) This is because
‘there are so many different degrees of friendship, ranging from intimacy to mere
acquaintance’.

o However, in Re Barlow's, Browne-Wilkinson J provided guidance as to the definition

of ‘a friend’ – the reasonable characteristics of friendship include a long-standing
relationship, which was social rather than business or professional, and in which the

23
 parties met frequently when they had the opportunity to do so (Virgo, pg 91). Virgo
further opines that, in light of this definition of the concept of friendship, there ‘is a
strong argument that the concept of 'a friend' is sufficiently certain even for a
discretionary trust’ [this has not been resolved by the courts].

 SOCIAL OR OTHER RELATIONSHIP – In Re Jones, the condition of the trust was that the
daughter would not have a social or other relationship with a named person. This was held
to be void as a relationship could encompass ‘the existence of a relative state of facts
between 2 people’, which might even ‘extend to two people standing next to each other in a
bus queue’ (Virgo, pg 87)

2.3A Fixed Trust

 COMPLETE LIST TEST – In a fixed trust, the complete list test’ is used, where the trustee
must be able to properly survey the whole field and identify every beneficiary at the time
when the trust property is to be distrusted (IRC v Broadway; Virgo, pg 86)

o NOT NEED FOR LIST TO BE DRAWN UP AT START – However, Prof Virgo notes that it
does not matter that a complete list cannot be drawn up when the trust is created –
E.g. a trust for Angela's grandchildren, including those born subsequently, will be
valid even though the names of all of the grandchildren cannot be listed when the
trust is created. Where it is not possible to draw up a complete list of objects at the
time of distribution, the trust will be void from the start (Virgo, pg 86).

2.3B Fixed Trusts Subject to a Condition

 FIXED TRUSTS SUBJECT TO CONDITION – Where the trustee are obliged to distribute trust
property to beneficiaries subject to whether or not a particular condition has been satisfied

 TEST – In a fixed trust subject to a condition, the condition must be certain. The test of
certainty varies depending on whether the condition is a condition precedent or condition
subsequent.

 CONDITION SUBSEQUENT; CONCEPTUAL CERTAINTY AS TO THE EVENT – A condition

subsequent will be valid only where ‘it can be known with certainty from the start the exact
event that will result in the defeat of the beneficiary's interest’ (Virgo, pg 87). Where the
certainty cannot be established the condition will be void (Clayton).

o NOT OF JEWISH PARENTAGE OR FAITH; UNCERTAIN – In Clayton, the condition was

that the daughter would not marry a person ‘not of Jewish parentage and of the
Jewish faith. The was held to be uncertain (see above)

o SOCIAL OR OTHER RELATIONSHIP – In Re Jones, the condition of the trust was that
the daughter would not have a social or other relationship with a named person.
This was held to be void as a relationship could encompass ‘the existence of a
relative state of facts between 2 people’, which might even ‘extend to two people
standing next to each other in a bus queue’ (Virgo, pg 87)

o RELAXATON OF THE LAW – However, Virgo notes that recent cases ‘indicate that
the courts appear now to be more concerned with' respecting the wishes of the
settlor or testator by upholding the condition subsequent if they can’. Therefore,
the condition of (1) the beneficiary marrying outside the Jewish faith (Re Tepper's

24
 Will); and (2) the beneficiary becoming a Roman Catholic (Blathwayt) was held to
be sufficiently certain (Virgo, pg 88). Scott J, following Eveleigh LJ, held that Re
Tuck's established the admissibility of evidence to elucidate the meaning of terms
such as 'the Jewish faith' (Penner, pg 200)

 Cf. RESOLVING UNCERTAINTY BY OUTSIDE OPINION – In Re Tuck’s, a

condition that the wife must be of 'Jewish blood' and worship 'according to
the Jewish faith' where in the case of doubt the decision of the Chief Rabbi
in London was to be conclusive, was held to be sufficiently certain

 CONDITION PRECEDENT – A condition precedent, which must be satisfied before property

can be distributed, will be valid if it can be said with sufficient certainty of just one person
that they satisfy the condition (Virgo, pg 88; Re Barlow).

o GIFT SUBJECT TO CONDITION PRECEDENT – In Re Barlow, the testator instructed

her executor ‘to allow any member of my family and any friends of mine who may
wish to do so to purchase’. ‘Friends’ was a conceptually uncertain term for the
purposes of discretionary trust / fiduciary powers. However, the arrangement was
interpreted as the ‘settlor’ making a series of individual gifts to persons answering
the description of blood relatives or friends – i.e. this case involved a GIFT SUBJECT
TO A CONDITION PRECEDENT, where, apparently, a lower standard for certainty is
required (Penner, pg 198)

 Therefore, in this particular context, it was sufficient that 1 person

undoubtedly fulfilled the condition and it did not matter that it was difficult
to say whether or not anybody else did (Virgo, pg 88). Consequently,
‘friends’ was sufficiently certain as a description for a condition precedent
because there would be some people, with whom the testatrix was so close
that ‘ANYBODY would characterize them as friends’ (Virgo, pg 88)

o PROF VIRGO ENDORSES THIS APPROACH; BETTER CHARACTERISED AS AN OPTION

TO PURCHASE – Prof Virgo supports this approach and explains that‘[t]he fact that
the concept might be uncertain so that others could not meet the threshold should
not prevent those who can show that they do from obtaining the property and so
giving effect to the settlor's intent’ (Virgo, pg 88). Where the object is able to show
that he satisfies the condition, ‘the trustee will be obliged to transfer the property to
that object’ (Virgo, pg 88).

 Prof Virgo observes that the direction in the will ‘created an option for
friends of the testatrix to purchase pictures form her collection; it did not
create a class of objects’.

2.3C Discretionary Trusts

 THE ESSENTIAL TEST OF CERTAINTY – In a discretionary trust, the ‘is or is not’ test must be
fulfilled (McPhail v Doulton) – it must be possible to say with certainty that any given
individual is or is not within the class of objects, and it was not necessary to ascertain
every possible object (per lord wilberforce at 454).

 APPLICATION OF IS OR IS NOT TEST – However, the three judges of the court of appeal used
different interpretations of the is or is not test to reach the conclusion that the discretionary
trust was certain

25
 o Stamp LJ’s approach was that the ‘is or is not’ test did not require a complete list of
objects to be drawn up. Rather, it would be enough to show of anybody who might
potentially be an object that they were or were not an object (Virgo, pg 92) If there
were uncertainty about any one person as to whether or not they were within the
class, the trust would fail. [MOST FAITHFUL]

 STAMP LJ’S APPROACH MOST CONSISTENT WITH LORD WILBERFORCE –

Virgo writes Stamp LJ’s approach is the most consistent with the test
propounded by Lord Wilberforce (Virgo, pg 92) This is because, according to
Lord Wilberforce’s approach (1) it is not necessary to ascertain the whole of
the class; (2) it must be possible to say or any given person that they were
or were not within the class. (Virgo, pg 92)

o Sachs LJ’s interpretation of the test was that if it cannot be shown that X is in the
class, X must be treated as being out of the class (evidential burden of proof). His
view was that once the meaning of the class was clear, it was simply a question of
fact whether a person fell within that class.

o Megaw LJ’s interpretation of the test was that ‘it was enough that it could be
shown of a substantial number of objects that were within the class’ (Virgo, pg 92).

 HISTORY; COMPLETE LIST TEST ABANDONED – Initially, the ‘complete list test’ was used for
discretionary trusts (IRC v Broadway). However, the complete list tests poses difficulties for
discretionary trusts than for fixed trust, as discretionary trusts often involved many more
objects’ (Virgo, pg 90). As a result, the House of Lords in McPhail v Doulton decided 3:2 to
adopted the ‘is or is not’ test for certainty of objects for discretionary trusts

o DON’T NEED COMPLETE LIST TEST BEFORE NO NEED FOR EQUAL DIVISION – One of
the historical basis of the ‘complete list test’ was to allow the Courts opt for equal
division where the trustee fails to exercise his power of disposition; this was thought
to be in line with ‘Equity is Equality’. However, Lord Wilberforce opined that the
maxim rarely accords with the intention of the settlor (Mc Phail at 451).
Furthermore, Lord Wilberforce recognised that an equal division may be beneficial
to nobody given that the trust assets would be disbursed so thinly as to be
essentially worthless (noted in Virgo, pg 90). Therefore, there is simply no need for
‘complete list’ of objects to be drawn up

 UNLIKELY TO BE RELIGATED – Prof Penner opines that that this line of cases is unlikely to be
re-litigated. McPhail-like trusts were created by magnanimous industrialists to provide a
kind of pension benefit to their employees, their employees' dependents, and so on, before
the introduction of statutory pension schemes (Penner, pg 86)

2.4 Administrative Unworkability

 ADMINISTRATIVE UNWORKABILITY – A trust may also be invalidated based on the ground

of “Administrative unworkability”, where the class of objects is so hopelessly wide as not to
form ‘anything like a class’ (Re Gulbenkian's Settlements). This area of the law is inherent
uncertain

o As Virgo observes, it has been recognised that a class of hundreds of thousands is

not inherent defective (Re Baden per Sachs LJ).

26
 o Lord Wilberforce in McPhail v Doulton tentatively suggested that a discretionary
trust for the benefit of ‘all the residents of Greater London’ would be
administratively unworkable and so void.

o In West Yorkshire, a trust for all of the inhabitants of the county of West Yorkshire,
which amounted to 2.5 million objects amounted to an administratively
unworkable (Virgo, pg 93)

 SHORT VERSION; JUSTIFICATIONS – Virgo provides several justifications to the voiding of

trusts on ground of administrative unworkability – (1) the trustee will not be able to
perform their duty to ascertain the range of objects; (2) if trustees fail to exercise their
discretion, the court would not be able to execute a trust with a very large class of objects
(Virgo, pg 94)

 APPLICABLE TO DISCRETIONARY TRUSTS ONLY; POWERS OKAY – Virgo opines that a

fiduciary power cannot be struck down for being administratively unworkable simply
because of the breadth of the class (Virgo, pg 95; Re Hay’s). The essence of a fiduciary
power is that the fiduciary only needs to consider its exercise, the fact that a class is very
broad does not prevent the trustee from fulfilling their duty (Virgo, pg 95). A discretionary
trust can be considered to be different, because the power of distribution must be
exercised.

 Virgo’s response to justifications of administrative unworkability:

(1) The trustee will not be able to perform their duty to ascertain the range of object, if the size
of the class is so large that it cannot be treated as anything like a class (Virgo, pg 94).
However, Virgo notes that it was recognised by Sachs LJ in Re Baden (No. 2), that the size of
the class can be infinitely variable, and that the trustees need only to be aware of the
width of the field so that they can adapt their method of selecting objects. This, Virgo
writes, suggests that trustees are able to exercise their discretion even if the class is very
large (Virgo, pg 94)

(2) Furthermore, if trustees fail to exercise their discretion, the court would not be able to
execute a trust with a very large class of objects (Virgo, pg 94). However, Virgo notes that
there are ‘alternative mechanisms available to the court other than judicial execution of the
trust, such as appointing replacement trustees or determining a scheme of arrangement’
(Virgo, pg 94)

(3) There is no criterion for the exercise of the discretion where the class is large, so it is not
possible to ascertain what the settlor’s intention is (Virgo, pg 94). However, Virgo observes
that many discretionary trusts lack such a reference point, regardless of the size of the class
(Virgo, pg 94)

(4) The principle of administrative workability might reflect a policy against excessive
delegation o the trustees by the settlor or testator who are expected to describe the objects
with sufficient clarity (Virgo, pg 4)

 CONCLUSION – Virgo opines that, since no consistent rationale for the size of the class rule
can be identified, and because it is inconsistent with the fundamental principle of
respecting the settlor’s or testator’s intention in creating the trust, this rule should be
rejected (Virgo, pg 94). Virgo writes that the issues instead should be examined when
considering the test of evidential certainty – if an object cannot be proved to be within a

27
 class, they should be considered to be outside it (Sachs LJ approach). Virgo opines that this
is a sufficient filter to deal with the administrative workability problem.

2.5 Capriciousness

 DISCRETIONARY; CAPRICIOUSNESS – A discretionary trust may be void on the ground of

capriciousness, where “reasons [for the trust] could be said to be irrational, perverse or
irrelevant to any sensible expectation of the settlor” (Re Manisty’s). For instance, where the
beneficiares are ‘an accidental conglomeration of persons who have no discernible link with
the settlor’ (Re Manisty per Templeman J)

o LOOK AT CONNECTION; MUST HAVE REASON TO BENEFIT – Virgo opines that the
connection between the settlor and the chosen objects is a significant factor in
determining whether a trust may be void on ground of capriciousness (Virgo, pg 95).
In West Yorkshire Metropolitan, the settlor was the county council for that area,
which was consequently especially interested in the needs of those living there,
therefore a trust benefitting the inhabitants of West Yorkshire was not found to be
capricious (but it was administratively unworkable ) (Virgo, pg 95).

 Therefore, if a settlor chooses to establish at trust for the residents of an

area with which they had no connection and who they had no reason to
benefit (as in Re Manisty), this could be considered to be a capricious motive
(Virgo, pg 95).

 Prof Virgo writes that ‘[c]onsideration should be given to the nature for the
class to determine, whether the settle had a good reason to benefit that
particular class; if it is arbitrary, the trust is likely to be void’ (Virgo, pg 95).

o GREATER LONDON – Templeman J in Re Manisty’s Settlement [1974] Ch 17

suggested that a power given to trustees to benefit the ‘residents of Greater
London’ or to benefit persons of certain height would be capricious because the
terms of the power negatives any sensible intention on part of the settlor (Virgo, pg
95)

 FIXED TRUST; CAPRICIOUSNESS – Virgo submits that the question of whether the settlor’s or
testator’s intent is capricious is not of any relevance to the validity of a fixed trust. Virgo
opines that ‘if the settlor or testator has chosen the objects by reference to a description
that cannot be described as sensible, this will not invalidate the trust’ (Virgo, pg 86).
[However, this is not the law, the law currently states that capiriciousness applies to
discretionary trust, but is unclear of whether it is a ground that applies to fixed trust]

o So, for example, there is nothing inherently wrong with a settlor creating a trust of
£1,000 to be divided equally amongst those members of his cricket club who have
ginger hair. [However, this is not the law, the law currently states that
capiriciousness applies to discretionary trust, but is unclear of whether it is a ground
that applies to fixed trust]

3 NON-CHARITABLE PURPOSE TRUST

3.1 Beneficiary Principle

28
 BENEFICIARY PRINCIPLE; NO PRIVATE PURPOSE TRUSTS – The trust […] will not be valid as it
offends the beneficiary principle which requires trusts to be ‘for the benefit of ascertainable
individuals, i.e., specific beneficiaries’ (Penner at 236). The rationale for this rule is that
someone (i.e. the equitable owner) must have ‘standing to bring the trustees to court to
enforce the trust obligations’ (Morice per William Grant MR). The necessary corollary of this
is that, barring charitable purpose trusts, ‘equity will not recognise a trust to carry out a
purpose, since the benefits of carrying out a purpose cannot be localized to specific
individuals’ (Penner, pg 236); there are generally no ‘private purpose trusts’. On the facts
[…]. The trust will not be valid as it offends the beneficiary principle. Moreover, since the
purposes stated are not charitable purposes, and hence cannot be upheld as a Charitable
Purpose Trust.

o Cf. CHARITABLE PURPOSE TRUSTS (trusts for purposes 'beneficial to the public' as
defined by the law of charities) is an exception to the beneficiary principle as the
Attorney-General can sue to enforce it (Penner, pg 240)

o LONG QUOTE; ESSAY – Penner further opines that ‘[t]he very existence of a trust
turns on there being a trust obligation to someone who, in consequence, has
equitable ownership of the trust property … If there is no such person, then not
only is there no person to enforce the obligations against the trustee, but more
fundamentally, there are no trust obligations to enforce, for the legal owner owns it
for his own benefit absolutely’ (Re Astors per Roxburgh J; Penner, pg 238).

 COROLLARY OF CERTAINTY OF OBJECTS – The beneficiary principle can be regarded as a

corollary of the certainty of objects requirement’ (Penner, pg 237). If a trust is expressed in
terms of a purpose, then it will be impossible to determine any definite objects of the trust,
and therefore, there are no persons at whose insistence and for whose benefit the court
can order the trustee to carry out the trust (Penner, pg 237)

 EFFECT; RESULTING TRUST – Where the settlor intended to create a trust by transferring
the property to a trustee, the trustee cannot keep the property for himself and an
automatic resulting trust arises, because the settlor has failed effectively to dispose of the
beneficial interest in the property (Penner, pg 238)

 CASE LAW – Therefore, in Re Astor’s, a trust for the maintenance of good understanding
between nations was NOT a valid trust.

 Cf. DOES NOT APPLY TO POWERS FOR PURPOSES – The beneficiary principles apply to
trusts, not powers of appointment (Penner, pg 241). This is because (1) there is no
obligation to exercise powers, and thus there is no similar problem of finding a true
beneficiary to enforce their exercise; and (2) those who take in default of appointment are
the beneficial owners of the property, so a power for a purpose does not generate any
ownerless property in equity (Penner, pg 241). Therefore, the Court generally are willing to
uphold powers to devote property to purposes [Really depends on the construction of
document as to whether it was a trust or power].

o In Re Douglas, the court was willing to uphold a power to appoint money to 'such
charities, societies, and institutions' as the power holder should select.

 Cf. ISSUE OF WHETHER IT APPLIES TO FIDUCIARY POWERS; BENEFICIARY IN DEFAULT OF

APPOINTMENT CAN STILL ENFORCE – Fiduciary power holders owe fiduciary obligations

29
 both to those who take in default of appointment, and to the objects of the power.
However, there are no objects of the power where the power is to carry out a purpose.
Therefore, any proposed positive fiduciary duty, say to consider exercising the power from
time to time, has no corresponding right holder, no human object. On the other hand, a
power holder clearly has duties not to misuse the power, a duty that can be enforced by
those who take in default of appointment (Penner, pg 242). Therefore, Penner opines that
fiduciary obligations binding the power holder concern wrongful acts which affect the
interests of those who take in default of appointment, then such duties can be enforced
(Penner, pg 242)

3.2 Enforcer Principle as an alternative

 AN ENFORCER PRINCIPLE PERHAPS? – Hayton argues that cases should be read to reveal
not a beneficiary principle, but rather an enforcer principle – which would allow a settlor to
create private purpose trust so long as the trust has a person / class of persons who could
enforce the trust against the trustees (Penner, pg 243). [READ THIS IF GOT MORE TIME]

o This was expressly forbidden by Millet LJ in Armitage v Nurse where he opined that
‘[i]f the beneficiaries have no rights enforceable against the trustees there are no
trusts’

 CRITICISMS – Penner opines that while this theory is ‘attractive’, there are ‘severe
difficulties’ in so far as it can be genuinely treated as the creation of a true private purpose
trust (Penner, pg 243).

o ENFORCER AND TRUSTEE COLLUDING TO SPLIT THE MONEY – If the enforcer has no
interest in seeing the purpose carried out, he is perfectly entitled at law to cut a
deal with the trustee to split the money between themselves. This is possible given
that ‘no one else, no third party or the court, has any independent right to enforce
any duties against the trustee’. (Penner, pg 243). Moreover, it doesn’t help to
appoint a person ‘A’ to enforce the duty of the enforcer, since it would require
another 3P to enforce the duty against the person A, ad infinitum.

o BENEFICIAL INTEREST IS THUS SPLIT BETWEEN TRUSTEE AND ENFORCER, REALLY –

Therefore, Penner stance is that, in such trusts with an ‘enforcer’, the beneficial
interest in the trust property does not ‘go to the purpose’ (Penner, pg 243). Rather,
it is distributed between the trustee and the ‘enforcer’, who has the corresponding
power to enforce the duty against him.

o NOT REALLY PURPOSE TRUST; JUST A POWER – As a result, Hayton describes the
‘purpose trust with enforcer’ mechanism does not deliver a true purpose trust, but
rather enable the settlor to give his trustee a power to apply the property to
purpose and a power to another to make him exercise that power (Penner, pg 243)

 NO TRUST RELATIONSHIP CREATED; ONLY CONTRACTUAL; PERSONAL RIGHTS; SETTLOR

DOESN’T HAVE ABIOLITY TO BIND PROPERTY WITH PERSONAL RIGHTS; NON-BINDING ON
TRUSTEES IN SUCCESSORS – Furthermore, the arrangement can hardly be said to be a trust
arrangement; it resembles a contractual arrangement which brings greater difficulties in
relation to binding successor trustees. The enforcer has no interest in the trust property,
and has only a power to enforce the obligation the trustee undertakes to carry out the
purpose. Therefore, Matthews further contends that such a right-duty relationship between

30
 the enforcer and trustee can be only personal between them – i.e. it must be seen as
contractual and not a trust relationship. Moreover, ‘a settlor has no power to bind property
merely with personal rights that do not give an interest in the property itself’ (Penner, pg
244) – i.e he cannot create personal rights that run with the property. Therefore, while the
initial ‘trust’ arrangement between settlor, trustee, and enforcer can create personal rights
and duties as a matter of contract, the enforcer’s rights do not 'run' with the trust property.
The enforcer can require the original trustee to carry out the purpose by bringing an action
for breach of contract, but his enforcement rights could not bind successor trustees, much
less third-party recipients of the trust property transferred in breach of trust (Penner, pg
244). Penner thus concludes that ‘here is no basis in English law for a true private purpose
trust’ (Penner, pg 244)

3.3 Quistclose Trusts

3.4 Anomalous Testamentary Purpose Trusts

 ANOTHER EXCEPTION TO THE ‘NO PURPOSE TRUSTS’ RULE – Another exception to the
beneficiary principle are anomalous testamentary purpose trusts (Bermuda Trust at [6]).
These trusts are sometimes called ‘trusts of imperfect obligation’ as ‘there are no
beneficiaries of these trusts and .... no obligations owed to any persons to carry out the
purpose by the legatee [trustee] of the gift’ (Penner, pg 241).

o RECOGNISED CATEGORIES – These are trusts for the maintenance of particular

animals owned by the testator (a horse, Pettingall v Pettingall; horses and hounds,
Re Dean); for the construction and maintenance of graves and funeral monuments
(Re Hooper), for the saying of private masses for the repose of the testator's
relatives' souls (Bourne v Keane); the performance of Sin Chew rites and ceremonies
(Re Khoo); Chin Shong rites for ancestral worship (Phan Kin Thin); Reading Koran at
testator’s grave (Re Alsagoff).

o Cf. MEMORIAL TO MYSELF – In Re Endacott a testator left his entire residuary

estate, which amounted to more than £20,000, 'to the North Tawton Devon Parish
Council for the purpose of providing some useful memorial to myself'

 ENFORCEABLE – These testamentary purpose trusts are upheld through a ‘Pettingall’ order
by the court. If the trustees fail to carry out the purpose, the person entitled to the trust
property on failure of the purpose trust will be able to claim. The ‘interested parties’ (those
persons who would take if the trust were to fail and who will take any funds surplus to the
requirements of carrying out the purpose) are given leave to apply to the court if the
trustee breaches his duties and applies the property outside of the intended purpose
(Penner, pg 241). Thus the 'enforcement' of these 'trusts' is essentially identical to the
enforcement of powers of appointment.

 REQUIRES FOR PURPOSES TO STILL BE PRACTICABLE – However, even an anomalous

purpose trust may fail where it was either impossible or impracticable to execute its
purposes (Bermuda Trust per Prakash J).

o Therefore, in Bermuda Trust, Prakash J held that the purpose trust for ‘observance
of Sinchew rites’ was invalid as the testator’s descendants were all practising
Christians who would find the performance of such rites repugnant to their beliefs.

31
 It was highly unlikely that any amongst them would one day be willing to perform
such rites

3.5 Re Denley; Apparent Purpose Trusts Benefitting Persons

 RE DENLEY TRUSTS – However, […] will be valid as the trust is ‘expressed as a purpose ...
directly or indirectly for the benefit of an individual or individuals’ (Re Denley per Goff J). On
the facts [… X gains a tangible benefit from the trust]. Such a trust (‘Re Denley trust’) has
been recognised as falling ‘outside the mischief of the beneficiary principle’ as it is not for a
‘abstract or impersonal’ purpose but ‘for the benefit of an individual or individuals’ (Re
Denley per Goff J).

o ACCEPTED AS AUTHORITY – While suffering from certain conceptual uncertainties

which has yet to be resolved (e.g., the applicability of Saunder v Vautiers; see Penner
pg 238), the Re Denley Trust has been recognised as being being ‘in accord with
authority and with common sense’ (Re Lipinski per Oliver J). Therefore, it is likely
that [...]

o Presumably the benefitted individuals who possess sufficient locus standi to enforce
it

 ISSUES IDENTIFIED BY PENNER – Penner notices several issues with Goff J’s holding in Re
Denley’s Trust Deed – (1) what is the effect of a trust for individuals framed in terms of a
purpose; (2) how do the benefitted individuals enforce the trust; (3) can they enforce the
trust only in order to make the trustees carry out the purpose or can they combine to defeat
the purpose under the principle in Saunders v Vautier. Moreover, the is an issue as to
whether this is an exception to the beneficiary principle

 RE DENELY’S CASE LAW – Therefore, in Re Denley, Goff J recognised that a trust for the
purpose of a recreation or sports ground primarily for the benefit of the employees of the
company was valid.

o BENEFICIARY PRINCIPLE AFFIRMED – In Re Denley, Goff J affirmed the beneficiary

principle, opining that ‘there may be a purpose or object trust, the carrying out of
which would benefit an individual or individuals, where the benefit is so indirect or
intangible ... as not to give those persons any locus standi to apply to the court to
enforce the trust, in which case the beneficiary Principe would ... apply to invalidate
the trust.’

o HOWEVER, BENEFITING INDIVIDUAL OR INIDIVUDALS IS OUTSIDE BENEFICIARY

PRINCIPLE – However, Goff J opined that the present trust was not ‘of that
character’ and ‘the trust deed expressly states that, subject to any rules and
regulations made by the trustees, the employees of the company shall be entitled
to the use and enjoyment of the land’. ‘The beneficiary principle of Re Astor is
confined to purpose or object trusts which are abstract or impersonal. Where,
then, the trust, though expressed as a purpose, is directly or indirectly for the
benefit of an individual or individuals, it seems to me that it is in general outside
the mischief of the beneficiary principle’.

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 o Penner opines that Goff J in Re Denley’s appeared to ‘narrow the ‘no purpose trust’
rule considerably, while at the same time arguing that he was not diminishing the
effect of the beneficiary principle’ (pg 238).

 Cf. JUST A DISCRETIONARY TRUST – Moreover, a Re Denley trust may be recharacterized as

a discretionary trust (Re Grant's per Vinelott J).

o Vinelott J did not see any difference between the Re Denley trust and the usual
discretionary trust for persons (e.g the trust in McPhail v Doulton (benefit
employees)) – no difference between (1) a trust to permit a class defined by
reference to employment to sue and enjoy land in accordance with rules to be
made at the discretion of trustees; and (2) a trust to distribute income at the
discretion of trustees among a class, defined by reference to, for example,
relationship to the settlor

o Cf. DISTINCITON PRESENT; NO DISCRETION TO DECIDE WHO CAN BENEFIT; Penner

opines that it is not clear where there is really ‘no distinction’ between the two
classes of cases. In the discretionary trust analysis, the employee’s individual shares
are entirely at the trustees’ discretion. In contrast, in the Re Denley case, the power
of the trustees to make rules governing the enjoyment of the land does not
amount to a discretion over who, and in what proportion the beneficiaries may
benefit from the property. This is a mere ADMINISTRATIVE DISCRETION, to ensure
that ALL THE EMPLOYEES may enjoy the sports ground as much as possible; the
trustees would be in breach if they framed rules governing the use of the land that
intentionally excluded a particular group of employees (pg 240)

o IF NO DISTINCTION; THEN SAUNDIERS V VAUNTIER APPLIES; DEFEAT INTENTION –

However, If Vinelott J’s comments are taken to represent the law, and there are
indeed no difference between the Re Denely trust and the usual discretionary trust
in McPhail v Doulton, it appears that beneficiaries would be able to wind up the
trust per Saunders v Vautier However, if that were so, it would defeat the settlor’s
intention when establishing the trust.

 Cf. GIFT WITH ADDED PURPOSE – In Re Lipinski’s, a gift to an unincorporated association for
the purpose of constructing buildings was held to be valid as a gift to the individual members
of the UA.

o Oliver J opined that thee was no difference between treating the gift as a (1)
‘purpose trust’; or (2) an absolute gift with a superadded direction; (3) as a gift
where the trustees and the beneficiaries are the same persons. Penner opines that
opines that in the latter 2 treatments of the gift, the testator’s expressed purpose
may be entirely ignored, either because as a ‘'superadded direction' it merely
expresses a motive for the gift’, or, on the basis that, the trustees and the
beneficiaries being the same persons, ie the members of the club, the property is
absolutely owned, and thus on Saunders v Vautier principles the
beneficiary/trustees may do with the property what they like. This is at odds with
the impression Goff J clearly gives that the trustees are to carry out he purpose.

 CRITICIMS OF SUBSEQUENT CASES – Penner opines that both ‘Vinelott J’s [in Re Grant's Will
Trusts] and Oliver J's [in Re Lipinski’s Will Trusts] interpretations appear to be killing Re

33
 Denley with kindness’. While they agree that Re Denley trust was valid, they effectively gut
the decision, at least in so far as it expanded the scope of valid purpose trust.

 CASE LAW – The case concerned an inter vivas trust of a piece of land to be maintained and
used as and for the purpose of a recreation or sports ground primarily for the benefit of the
employees of the company and secondarily for the benefit of such other person or persons
(if any) as the trustees may allow to use the same

3.6 Trust Limited by Purpose; Absolute Gift with a Motive

 ISSUE – The issue in the present case is whether […] is construed by the courts as (i) a trust
that is limited by purpose; or (ii) an absolute gift with a mere motive. This would ultimately
turn on the intention of the ‘settlor’ – whether he intended for the whole property to go to
the beneficiary absolutely. On the fact […]. It is unlikely to be construed as an absolute gift
with a mere motive as [… did not intend for the whole property to go to the beneficiary
absolutely].

 TRUSTS LIMITED BY A PURPOSE – Rather, […] will likely be valid as a trust that is limited by
purpose – i.e. is a ‘trust in which the subject matter is apportioned to the beneficiaries in
reference to the costs of carrying out a well-defined purpose’ (Penner, pg 245).

o VALID AS A TRUST – Notably, a trust limited by purpose, which Penner cautions are
not purpose trusts (pg 245), are enforceable by the beneficiaries who can demand
expenses / costs if they conduct an activity which fall within the defined purpose
(Penner, pg 246); the beneficiary principle (which requires the trust to be for the
benefit of ascertainable individuals) is not offended. The trust is likely valid.

o EXAMPLE – Indeed, the courts in the 19th Century enforced trusts of this kind, in
particular trusts to pay for the maintenance, education, and advancement of
children (Penner, pg 246)

 Cf. GIFT WITH A MOTIVE*** – The disposition of property can be construed as an outright
transfer (i.e. a gift), with the purpose is merely a motive; the purpose is not a legal limitation
on the beneficiary. This is a matter of construction of the trust deed asking in particular
whether the testator intended for the whole property to go to the beneficiary absolutely

o ISSUE; APPEAL CASES – Penner further observes that the problem of inferring the
settlor’s intention has been particularly acute in cases where an ‘appeal’ has been
made to raise funds to provide for individuals who have suffered some misfortunate.
It is a ‘vexed task’ to ascertain whether an ‘amorphous group of often anonymous
contributors’ has a particular intention, or the other (Penner, pg 247)

 THEORETICAL STUFF:

 REMAINING PROPERTY; RESULTING TRUST OR RESIDUARY LEGATEES – Any property left

when the purpose is accomplished will result either to the settlor or, in the case of a will, to
the testator's residuary legatees, unless a specific gift over of the remainder is made.

 NOT REPLACING HUMAN OBJECT WITH PURPOSE – Penner emphasizes that the purpose in
these trusts it not to be regarded as the replacement of the human object of the trust with
a purpose. Rather, the purpose is part of the formula that DEFINES the subject matter of the
trust for a particular object (Penner, pg 245) [SMART]

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  ENFORCEABLE – The individual beneficiaries are able to insist that trustees comply with the
settlor’s direction as to distribution of trust property to persons carrying out the well-
defined purpose (Penner, pg 249). This limits the trustee’s discretion through the
enforcement of the settlor's intentions by the people who are appropriately entitled to do
so, ie the beneficiaries.

 Cf. DISCRETIONARY TRUST; BENEFICAIRIES UNDER TRUST LIMITED BY PURPOSE FULLY

ENTITLED – Penner opines that such beneficiaries under a trust for persons limited by
purpose are ‘not to be regarded as beneficiaries of discretionary trusts, in which the
trustees, at their discretion, may or may not spend the money on the particular purposes’.
For a trust limited by purpose, the beneficiaries are fully entitled to demand the requisite
payments to meet the costs or expenses specified by the trust.

3.6A Dead v Living

 DISTINCITON BETWEEN DEAD AND LIVING – The issue in the present case is whether […] is
construed by the courts as (i) a trust that is limited by purpose; or (ii) an absolute gift with a
mere motive. Meggary VC draws a distinction in cases where the beneficiaries have died
and cases where they are still living – if the beneficiary is dead, there will be a resulting
trust for the purpose of the trust comes to an end; if the beneficiary is alive, the ‘the major
purpose of providing help and benefit for the beneficiaries can still be carried out even after
the stated means have all been accomplished’.

o CRITICISM; NEED TO FOCUS ON TESTATOR’S INTENTION AT OUTSET; Penner opines

that Meggary VC takes a ‘dangerously ex post view of the interpretation of
testamentary gifts’ (Penner, pg 248). Indeed, ‘any interpretative strategy should be
primarily devoted to figuring out the testator’s intention from the outset’, as
opposed to being dependent on the living status of the beneficiaries. Therefore, the
preferable view is that …

 CASE LAW:

 CASE LAW; MAINTENANCE OF DISABLED BROTHER; DEAD; TRUST– In Re Sanderson’s Trust,

the testator left property to pay for the ‘maintenance, attendance, and comfort' of his
mentally disabled brother for the remainder of his life. On the brother’s death, the issue
was whether the unexpended funds go (i) to the brother's estate (by finding a gift with a
motive); or (ii) held on trust for the residuary legatees under the testator's estate (by finding
a trust limited by purpose). On the facts, the Court found a trust limited by purpose – the
brother was only entitled to such part of the fund as was necessary for the purposes stated
therein the will. The unexpanded monies should go to the residuary legatee

 CASE LAW; APPEAL CASES; DEAD; TRUST LIMITED BY PURPOSE; RESULTING TRUST – In Re
Abbott, the community raised funds for the maintenance of 2 disabled ladies. Stirling J held
that the fund was not intended to be the absolute property of the ladies. Rather, there was
a trust limited by the purpose of maintenance of the ladies. Since the ladies had passed
away, there was a resulting trust of the remaining unapplied money for the benefit of the
subscribers to the Abbott fund.

 Cf. FOR EDUCATION; ALIVE – In Re Osoba, the testator left property for the education of her
daughter. Meggary VC opined that this was an absolute gift with a motive and the daughter
was entitled to the remaining money absolutely. He reasoned that view it otherwise would

35
 see the surplus go on resulting trust to those who would take on intestacy, which is not an
intention one would normally ascribe to a testator (Penner, pg 249).

3.6B Certainty of Purpose

 ISSUE OF CERTAINTY OF SUBJCT MATTER; CERTAINTY OF THE PURPOSE – However, as with

all trusts, there need to be certainty of subject matter. For such trust limited by purpose,
the certainty of subject matter is determined by the how well-defined the purpose is.
Penner opines that where the ‘purpose’ does not provide a well-defined or reasonably
workable determination of the expenses, which defines the share that the beneficiary is to
receive, then the testator has not defined with sufficient precision the subject matter of the
trust in that beneficiary’s favour (Penner pg 246)

o Since the subject matter is defined via the cost of carrying out a purpose, Penner
opines that the ‘IS OR NOT TEST will apply’

3.7 Gift to Companies

 Company is a separate legal entity and able to hold property in its own right. Therefore, the
beneficiary principle is not offended by the mere fact that the beneficiary is a company (Goi
Wang Firn)

3.8 Gifts to Unincorporated Associations

 DEFINITON; UNINCORPROATED ASSOCAITIONS – An unincorporated association is a

collective body of individuals which does not have its own legal personality of its own
(Penner, pg 256); this body of individuals are bound together by mutual undertakings, each
having mutual duties and obligations (Burrell)

 ISSUE (1); IS IT A GIFT TO ASSOCIATION ABSOLUTELY OR A PURPOSE TRUST – The issue is

distinguishing between (1) a settlor giving a property on trust to carry out a purpose; and (2)
a settlor giving he property to the association absolutely, in the hope that they will spend it
as he wishes. Penner opines ‘[g]ifts of the latter kind are perfectly valid, while those of
those former are invalid, as purpose trusts’ (Penner, pg 257). If it is interpreted as a non-
charitable purpose, the beneficiary principle will apply and the attempted gift will fail,
unless, following the approach in Re Denley’s, the gift can be seen as in fact for specific
individuals who benefit from the fulfilment of the purpose.

o CASE LAW; NO INTENTION FOR FUNDS TO BE MADE PART OF GENERAL FUNDS;

PRIVATE PURPOSE TRUST; FAIL; RESULTING TRUST – In Re Andrews, the settlor left
property on a putative trust for a UA. The trust deed (i) prevented the members
from dividing the property between themselves; (ii) prevented members from
amending the trust deed without consent from the church. The Court held that this
made it was not intended for the land to become part of the general funds of the
club. Rather, it was intended to be held separately as an endowment to generate
income for expenditure or to be held perpetually for members’ use. This was a
private purpose trust, the gift fails and funds are held on resulting trust for settlor

o CASE LAW; PRECISE WORDING SHOWS IT WAS A GIFT WITH SUPERADDED

DIRECTION; VALID – In Re Lipinski, the testator left property for a UA ‘to be used
solely in the work of constructing the new buildings for the Association and/or
improvements to the said buildings’. The Court held that this was an absolute gift

36
 that accrued to the funds of the association according to the terms of the contract
between the members (Virgo, pg 213). The precise wording of the bequest, testator
intended that association take control of the capital completely – an outright gift
(with a superadded direction). In particular, the wording was such that ‘the done
body is itself the beneficiary of the prescribed purpose’.

 ISSUE (2); IF GIFT; WHAT IS THE MECHANISM

 INTER VIVOS GIFT TO UNINCORPORATED ASSOCIATIONS – Where settlor makes an inter

vivos gift to a UA, he keeps the beneficial ownership of the funds, but give the treasurer a
mandate to add that money to the general funds of the association and spend it
accordingly. The mandate is irrevocable and the settlor has the right to restrain the
misapplication of the funds. Consistently with the beneficiary principle, ownership remains
with the donor (at least at the initial stage until the mandate was exercised) (Burrell)

o The mandate analysis works does not work NOT for testamentary gifts, since no
agency could be established between a testator at his death and his agent. Hence,
another conceptual framework is required.

 TESTAMENTARY GIFT TO UNINCORPORATED ASSOCIATIONS; CONTRACT HOLDING THEORY

– Where there is a testamentary gift to an unincorporated association, the contract-holding
theory articulated by Cross J in Neville Estates is preferred as it best gives effect to the
settlor’s intention. The gift is an accretion to the funds which are the subject-matter of the
contract which the members have made inter se (Re Recher’s); the usage of the funds will be
subject to the respective contractual rights and liabilities between the members (Neville
Estates). The contract-holding analysis is, as described by Brightman LJ, as the ‘easy answer’
to the problem of validating a gift to an unincorporated body.

o NOT A TRUST – The Courts do not analyse this as a trust but a gift as the donation is
often ‘not accompanied by any words which purport to impose a trust.” (Brightman
J in Re Recher’s)

o Hence, members may unanimously alter their rules so as to provide that the gift be
applied for some new purpose or even distributed amongst members for own
benefit

 THE CONTRACT HOLDING CONCEPTION CANNOT APPLY IF:

(1) NO CONTRACT – The contract holding theory depends on finding a contractual link
between all the members so that they are subject to mutual rights and duties
(Hayton & Mitchell, 5-082). Therefore, it does not apply where it is impossible to
find any express or implied contract that binds all the members (Burrell).

 In Burell, there was a gift made to the Central Office for the Conservative
Party. However the Party includes both members of local constituency
associations and members of Parliament and there was no contractual link
between those members

(2) NO POWER TO END RESTRICTIONS AND DIVIDE PROPERTY – The contract holding
theory does not apply where the members of the body, acting together, do NOT
have the power to end any restrictions on the use of the body’s property and to
divide that property amongst themselves (Re Grant’s). In the absence of such a

37
 power, it is impossible to find that a gift to the members subject to the contract
interse has been made (Hayton & Mitchell, 5-092)

 In Re Grant’s, there was a gift made for the benefit of a local constituency
party of the Labour Club, but its members did not have full control of the
property, as the constituency party rules were capable of being altered by
an outside body

 DISSOLUTION – In the absence of any rule of term to the contrary, a term will be implied
into the contract of the members inter se that the society’s surplus funds should, on
dissolution, belong to the then existing members of the society. Each remaining member
will be entitled to equal shares of the surplus funds (Re Bucks)

o Re Bucks Constabulary Widows’ and Orphans’ Fund Friendly Society; [1979] 1 WLR
936 – The member/constables of the Bucks fund were entitled to it in equal shares
on dissolution of the association

 Cf. PENNER’S ANALYSIS – Penner opines that the ‘contract holding theory’ analysis is better
analyzed as a bare trust with mandate mechanism – the treasurer of the association hold
the association’s funds on bare trust for the members of the association, to deal with the
funds according the contract of the members inter se. This explains how unincorporated
associations may receive gifts that they can devote to their purposes, without such gifts
being purpose gifts.

o The trust of the association's property is for the members for the time being. As
members leave and join, they are added to or deleted from the class of
beneficiaries under an explicit or implicit power of the trustees or members to add
or delete members, ie beneficiaries (Penner, pg 259). The members are fully entitled
to exercise their Saunders v Vautier rights and collapse the trust (and therefore the
trust is not perpetual, because the rights are always currently fully vested)

o Cf. GIFT SUBJECT TO CONTRACTUAL RIGHTS NOT ALLOWED?; BUT THIS IS A

TRANSFER OF PROPERTY TO TREASURER TO HOLD PROPERTY UNDER EXISTING
TRUST; Critics have argued that a person cannot give a gift subject to another’s
contract rights (Matthews, Garner; noted in Penner, pg 258). However, Penner
opines that ‘that is not what the donor does here’. Rather, the donor is making a
gift that goes to the treasurer-trustee of the association to hold the property under
the same trusts as he holds all the other property of the association; the settlor
simply defines the trust he imposes by reference to a trust that already exists
(Penner, pg 259).

4 CHARITABLE PURPOSE TRUST

 CHARITABLE TRUSTS – Charitable purposes are (1) purposes that benefit the public, which
(2) on the authority of statute and common law are ‘charitable’ (Penner, pg 430).

o NOT SUBJECT TO CERTAIN OF OBJECTS OR BENEFICIARY PRINCIPLE; ATTORNEY

GENERAL ENFORCES – Charitable trusts are ‘not subject to the requirement of
certainty of objects’ and the the beneficial principle (Penner, pg 430). Rather,
charitable trusts are enforced by the Attorney General.

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 o PUBLIC NOT BENEFICIAL OWNERS However, the fact that a charitable trust must be
for public benefit in order to be valid does not thereby mean that the public is the
beneficial owner of the trust property. Rather, the beneficial interest in a charitable
purpose trust is simply “in suspense” and not extant (Zhao Hui Fang). In place of
the concepts of interest and ownership, the focus is on the CONTROL AND
SUPERVISION of the charitable trustees by the Commissioner of Charities and
Attorney General

 FISCAL BENEFITS – Penner observes that Charities are generally exempt from income tax,
capital gains tax, corporation tax, and stamp duty (Penner, pg 430). Charities are also not
taxed on the profits they earn from trading so long as the profits are applied to charitable
purposes and the trading carries out the purpose of the charity

 REQUIREMENTS OF CHARITABLE STATUES – In order for a purpose to be charitable:

(1) CHARITABLE HEAD – the CHARACTER of the purpose must be charitable, that is, the
charitable organisation must have a recognised charitable purpose (Pemsel 4 Heads
of Charity)

(2) BENEFIT SECTION OF PUBLIC – the purpose must benefit a section of the public, not
a collection of private individuals or an artificially restricted class;

(3) EXCLUSIVELY CHARITABLE – the purpose must be exclusively charitable,

 And in particular, the purpose must NOT BE POLITICAL

 The purpose must not include making a FINANCIAL PROFIT, not in the sense
that a charity like a university cannot make an operating profit in any one
year, but in the sense that a charity may not distribute profits to investors in
the way a private business can. (Penner)

4.1 Four Heads of Charity

 4 PEMSEL HEADS – For a purpose to be classified as charitable, it must fall within one of the
four heads of charity enunciated by Lord Macnaghten in Pamsel: (1) trusts for the relief of
poverty; (2) trusts for the advancement of education; (3) trusts for the advancement of
religion; and (4) trusts for other purposes beneficial to the community (Koh Lau Keow at
[18] per Tay J)

 Notably, this corresponds with the heads of charities listed on the Singapore Charities
portal. Under (4) other purposes include: Promotion of health; Advancement of citizenship
or community development; Advancement of arts, heritage or science; Advancement of
environmental protection or improvement; Relief of those in need by reason of youth, age,
ill-health, disability, financial hardship or other disadvantages; Advancement of animal
welfare; and Advancement of sport, where the sport promotes health through physical skill
and exertion.

4.2A Poverty

 Relief of Poverty – A trust for the relief of poverty must be exclusive, that is, the purpose of
the trust must only be to help poor people (Re Gwyon). Poverty does not mean destitution
(Penner, pg 436); trusts for poverty are for those who would other have to ‘go short’ (Re
Coulthurst).

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  EXCLUSIVELY FOR POOR; NOT EXCLUSIVELY CHARITABLE –

o The fact, that those more likely to reside in the “Sanctuary” are poor, does NOT
render the trust charitable (Koh Lau Keow)

o A trust providing clothing to boys aged 10-15 years in a certain district was held to
be invalid, since eligibility was not restricted to the poor (Re Gwyon) (Penner, pg
436).

 NO NEED FOR SECTION OF PUBLIC – There is no need to show public benefit for this head.
Instead, the charity can be limited to particular classes so long as it does not name
individuals, nor include those who might not be poor (Penner, pg 436). Therefore, a trust for
poor relatives (In Re Scarisbrick) and poor employees (Dingle v Turner) have been upheld.

 EXAMPLES; POOR – Trusts for ‘ladies of limited means’ (Re Gardom) and for ‘decayed’
actors (Spiller Maude) have been held to be valid. Trusts for poor employees (Dingle v
Turner), or an individual's poor relations (Re Scarisbrick) have been held to be valid.

o Cf. BENEFITTING WOKRING CLASSHowever, a trust ‘benefiting the working classes

was not because being a member of the working class did not necessarily entail
poverty’ (Re Sander’s Will Trust).

 CASE LAW – In Koh Lau Keow, the Singapore Court of Appeal held that trust was not for the
relief of property as (i) the trustees were given “absolute and uncontrolled discretion” to
select the persons who could reside in the Property; (ii) the property was used as a private
residence rather than as an institution or place of refuge for needy individuals; (iii) the
phrase ‘home and sanctuary’ in the trust deed was in reference to a residence for religious
individuals who would practise their faith in the course of their stay. Thus, Purpose B did
not require the trustees to allow only homeless or needy people to stay on the Property,
and could not be said to be charitable on the basis that it relieved poverty (at [29]).

4.2B Education

 TRUSTS FOR ADVANCEMENT OF EDUCATION – This head of trust includes ‘conventional

education and training: thus trusts for schools, colleges, universities, and other institutions
of learning are valid’ (Penner, pg 436). Education of the young must also be taken in a
broader sense than mere classroom learning (Penner, pg 437). Thus, in McMullen (1980) a
trust for the provision of facilities to play association football or other sports in schools or
universities was held valid

o EXAMPLES – this head extends to cover research, artistic and aesthetic education
(Royal Choral Society), museums (British Museum Trustees), sport facilities provided
for the young at school (Re Mariette), student unions (London Hospital Medical
College), and professional bodies so long as they advance education (Royal College
of Surgeons of England) (Penner, pg 437)

 DISSEMINATION OF USEFUL KNOWLEDGE, INCLUDING CULTURE – The education head also

covers the dissemination of useful knowledge. Thus, the production of the Law Reports was
a charitable advancement of education (Incorporated Council of Law Reporting v AG). It
further covers the promotion of culture; a charity to promote the music of Delius was valid
(In re Delius)

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  RESEARCH – Carrying out useful research is also charitable under the education head
(Penner, pg 437). This requires (1) the subject matter of the proposed research is a useful
subject of study; (2) for the knowledge to be disseminated to others; (3) the trust is for the
benefit of the public, or a sufficiently important section of the public (McGovern v AG per
Slade J), so as to improve the sum of communicable knowledge in an area which education
might cover

o PUBLIC BENEFIT PRESENT – In Re Hopkins, a gift to the Francis Bacon Society to

finding evidence that Francis Bacon wrote the works attributed to Shakespeare, was
valid under the education head, on the basis that such a discovery would be of
immense importance (Penner, pg 437). Such a revelation would probably contribute
decisively to a solution of the authorship problem and might lead to improvements
in the text and to more accurate dating, thus improving ‘literary heritage’.

o Cf. NO PUBLIC BENEFIT – In Re Shaw, George Bernard Shaw's testamentary gift of

funds to be devoted to research into a 40-letter alphabet for English and the
translation of one of his works into the new alphabet was held to be not charitable.
Penner opines that this was a narrow decision since the gift did not contemplate
education or teaching (Penner, pg 437)

 Cf. NOT POLITICS – However, courts are careful to ensure that this head is not used to
provide charitable status for political purposes masquerading as education or research
(Penner, pg 437). Indeed, political propaganda ... masquerading as education is not
education within the statute of Elizabeth' (Re Hopkinson per Vaisey J)

 Cf. NO IDENTIFIABLE BENEFIT; NO EDUCATIONAL VALUE – In In re Pinion, the Testator gave

his studio and the contents, which included paintings by himself and others, furniture,
china, glass etc to his trustees and directed that his residuary estate be used to endow the
studio as a museum for the display of his collection. The Court held that the trust was not
valid as an ‘art collection’ had no educational value at all; it was a ‘mass of junk’.

o Cf. NOTABLE COMPOSER – Notably, this case can be distinguished from In Re Delius,
where the advancement of Frederek Delius’ musical works was held to be valid, on
the basis the Delius was a reputable and renowned composer.

 ELEMENT OF SELF BENEFIT; DOESN’T PRECLUDE – In In Re Delisu, the Wife of composer

Frederick Delius gave her residuary estate to her trustees on trusts for the advancement of
her husband’s musical works. The Court held that the trust was valid as a charitable trust.
The purpose of the trust was to spread the knowledge and appreciation of Delius’ work
throughout the world. Thus, an element of self-benefit won’t necessarily preclude the trust
from being recognised as a valid charitable trust, as long as there remains a charitable
purpose – in this case, it was to promote the music of Delius. The fact that pleasure was an
incident of that appreciation or that the effect of the trust was also to enhance the
reputation of Delius did not prevent it from being a valid charitable trust

4.2C Religion

 DEFINITION OF RELIGION; NOT ETHICS – Religious purposes for charitable trusts ‘required a
spiritual belief or faith in some higher unseen power, and some worship or veneration of
that higher power; the consequence was that promoting morality or particular ethical ways
of life did not count as a religious purpose’ (Penner, pg 438). Indeed, it was opined that

41
 ‘Religion… is concerned with man’s relations with God, and ethics are concerned with
man’s relations with man.” (Re South Place per Dillon J)

o WIDENING OF DEFINTION OF RELIGION – Notably, as observed by Penner, s 3(2)(a)

of the Charities Act (United Kingdom) ‘widens the definition of religion to ensure
that multi-deity faiths (such as Hinduism) or nondeity faiths (such as some types of
Buddhism) now also clearly qualify’ as under the head of religion (pg 438). In
Singapore, this is likely to apply to given that ...

o EXAMPLE – In Re South Place, the trust in question was one for the study and
dissemination of ethical principles and the cultivation of a rational religious
sentiment. It was held not to be charitable under the religion head, but was as a
trust for the advancement of education as well as under the 4th head contributing
to moral improvement (Penner, pg 438).

 BENEFIT TO PUBLIC REQUIRED – It is trite law that for a trust that purports to advance
religion to be considered charitable, there must be a sufficient element of public benefit
(Koh Lau Keow at [30]). Religious purpose would be charitable where the religious service
tends directly or indirectly towards the instruction or edification of the public

o Cf. NO PUBLIC BENEFIT – Gifts in favour of individuals conducting private religious

worship did not satisfy the public benefit requirement.

o PRIVATE WORSHIP – In Gilmour v Coates, a trust for a contemplative order of nuns

who did not leave their cloisters nor allow the public into them; the nuns were
solely concerned with prayer and meditation. The trust was not recognised as a
charitable trust

o DID NOT BENEFIT PUBLIC – In Koh Lau Keow, even if Purpose B could be said to
advance religion in the sense that the women selected to live on the Property
would benefit from “passive advancement”, it did not benefit the public. The fact
that Purpose B was restricted to Buddhist Chinese female vegetarians did not ipso
facto strip it of public benefit. The real reason why the Trust failed the public
benefit requirement was that Purpose B only benefited the handful of Buddhist
Chinese vegetarian women, who need not be poor, chosen in the absolute
discretion of the trustees to live on the Property. Those women were, in fact, simply
Koh’s close friends and relatives

 GENERAL EQUAL TREATMENT OF RELIGION – Generally, the law of charities assumes that
any religion is better than none but, as between religion, stands neutral (Nevile Estates per
Cross J). Courts do not descend into deciding whether the religious is meritorious. Court will
not prefer one religion or sect over another, unless shown that the doctrines were adverse
to the very foundation of all religion and subversive of all morality

o In In re Watson Testatrix left money for the continuation of work of God as

maintained by Mr HG Hobbs and herself since 1942 by God’s enabling in the
propagating the truth as given in the Holy Bible. Expert evidence was adduced to
show that there was no intrinsic worth of Hobb’s work. The Court held that,
nonetheless, the trust was charitable for the advancement of religion.

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 o In Thornton v Howe, the Trust for publication of the works of one Joanna Southcott
was held charitable. JS was a woman of the 19th century who claimed that she was
with child by the Holy Ghost and would give birth to a second Messiah. While the
religion was doubtful theology, the trust was held to be charitable

4.2D Other Purpose Beneficial to Community

 GROWTH BY ANALOGY – In Scottish Burial Reform, the House of Lord decided that ‘if [the
courts] could find an analogy between an object already held to be charitable and the new
object claimed to be charitable’ (Penner, pg 435). The question is whether the trust is
within the spirit and intendment of the preamble (Re South Place Ethical Society)

o TERM OF ART – Where the trust instrument states that the trust was for ‘other
purposes beneficial to the … community’, the Courts will recognise the trust as a
valid charitable trust as the settlor has used a ‘term of art to which the law attaches
meaning’ (Lam Joon Shu at [26])

o SG CHARITIES PORTAL; ‘OTHER PURPOSE BENEFICIAL TO COMMUNITY’ INCLUDES –

Promotion of health; Advancement of citizenship or community development;
Advancement of arts, heritage or science; Advancement of environmental
protection or improvement; Relief of those in need by reason of youth, age, ill-
health, disability, financial hardship or other disadvantages; Advancement of animal
welfare; and Advancement of sport, where the sport promotes health through
physical skill and exertion.

o Cf. OUTDATED – Penner observes that this ‘extension by analogy’ approach to the
identification of new charitable purposes has at times been regarded as out of date
(Incorporated Council of Law Reporting for England and Wales per Russell LJ).

 In ICLR v AG, Russell LJ preferred to abandon the traditional analogy in

favour of the Court simply asking if the purpose is beneficial to the
community and of general public utility. If so, it would prima facie be
charitable in law

 Notably, in the UK, by virtue of the 2011 Act, the use of analogy to extend
the scope of charitable purposes has now been given a statutory footing
(Penner, pg 435)

 PUBLIC BENEFIT REQUIRED – There appears to be a stricter threshold of public benefit

required for trusts falling under ‘Other Purposes Beneficial to the Community’. Penner
observes that ‘[s]imply because the gift is beneficial to a particular community is entirely
insufficient’ (pg 439). The trust will not clear the public benefit test if it restricts access to
something of a general utility only to a selected body of public (IRC v Raddeley), such as a
class within a class

o Viscount Simmonds in IRC v Baddeley opined that ‘a form of relief accorded to a

selected few out of a larger number’ would not qualify as a charitable trust under
the fourth class. In particular, ‘a trust cannot qualify as a charity within the fourth
class ... if the beneficiaries are a class of persons not only confined to a particular
area but selected within it by reference to a particular creed’ . He cautioned that
there was ‘danger of conceding the quality of charity to a purpose which is not a
public purpose’ (ref in Penner pg 440)

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 o NOT A CLASS WITHIN A CLASS? – In Williams' Trustees v IRC, there was a gift on
trust to establish and maintain an institute, to be known as the 'London Welsh
Association: the purposes of which included maintaining an institute for the benefit
of Welsh people in London, and promoting their language and culture. The various
activities of the institute included lectures, dances, games, and provision of facilities
for dubs. These purposes and activities not being exclusively charitable, the trust
failed

o NOT A CLASS WITHIN A CLASS? – In IRC v Baddeley (1955) a trust to be administered

by Methodist leaders for the promotion of religious, social, and physical well-being
of persons resident in West Ham and Leyton, by the provision of facilities for
religious services and instruction and for the social and physical training and
recreation of persons, who for the time being were or were likely to become
members of the Methodist Church who had insufficient means to otherwise enjoy
these advantages, was held not charitable by the HL.

o Cf. CONTRADICTORY SINGAPORE CASE – However, it is noted that in AG v Lim Poh

Neo, it was held that a trust benefitting all persons of the “Yeo” clan and who are of
the Hokkien tribe, was a valid charitable purpose trust; they were not considered to
be a group of PRIVATE individuals

4.3 Public Benefit Requirement

 2 REQUIREMENTS FOR PUBLIC BENEFIT – The law concerning public benefit requirements
requires that (1) the purpose be beneficial to the public, not of no value, or detrimental;
and (2) the purpose must be of benefit to the public as opposed to some private group or
artificially restricted section of the public (Independent Schools Council; Penner, pg 443)

 MUST BE BENEFICIAL; A DETRIMENTAL PURPOSE CANNOT BE CHARITABLE – The courts

make decisions about the ultimate benefits of certain purposes (Penner, pg 443).

o SUPPRESSION OF VIVISECTION NOT BENEFICIAL – In National Anti-Vivisection, the

purpose was a political purpose, and the trust was not found to be charitable. The
House of Lords further weighed the ‘conflicting moral and material utilities of, on
the one hand, the advancement of morals and education that would result from a
suppression of vivisection and, on the other, the benefits to medical science and
research vivisection afforded’ (Penner, pg 442). The House of Lords concluded that,
on balance, the suppression of vivisection was not beneficial to the public (Penner,
pg 442). In Re Hummeltenberg (1923) a gift for the training of spiritual mediums
was held to provide no public benefit (Penner, pg 442)

o Cf. RELIGION RELAXED TEST – However, Penner observes that, in the case of
religion, ‘the court appears to allow charities that it regards as having no benefit
whatsoever’ (such as in Thorton v Howe). Notably, the Courts have been highly
averse to Scientology constituting a charitable purpose. Lord Denning said that
Scientology was 'dangerous material; and it was described by Goff J as 'pernicious
nonsense' in Church of Scientology v Kaufman (1973) (Penner, pg 443)

 A SECTION OF THE PUBLIC MUST BENEFIT –

44
 EDUCATION; MUST HAVE NO PERSONAL NEXUS – Trusts for the education of residents of
specific localities, or for the children of members of various professions are valid (Penner, pg
444). Regard the requirement that a section of the public must benefit, Lord Simmons in In
Oppenheim, employed the ‘personal nexus’ test (Penner, pg 444). Under this test, identified
2 characteristics would render a class of beneficiaries as a ‘section of the public’ – (1) a
number of beneficiares that is NOT numerically negligible; (2) an absence of a common
personal nexus among the beneficiaries – that is, the trust does not depend on their
relationship to a particular individual.

o CASE LAW; IDENTIFIED BY CONTRACTUAL RELATIONSHIP; INVALID – In Oppenheim

, a trust for the education of children of employees or former employees of the
British-American Tobacco Company, the employees of which numbered over
110,000, was held to be not charitable by the HL, on the ground of insufficient
public benefit (Penner, pg 444). In Oppenheim, even though the number of
employees and ex-employees form a huge class of some 110k persons, they are not
a section of the public because they are identified by their personal contractual
relationship with the employer. Therefore, the trust was invalid as a charitable
purpose trust (Slides). The children's connection with their parent's employer stands
on the same footing as one's connection with a relation. Therefore, the trust was
invalid as a charitable purpose trust

o Cf. CRITICISMS OF PERSONAL NEXUS TEST; CONSIDER ALL CIRCUMSTANCES

However, in some circumstances, strict application of the rule will result in
anomalous results. In his dissenting opinion, Lord Macdemott ‘rejected the test and
said that the court must consider all the circumstances of the case, and would have
held the gift charitable’ (Penner, pg 444).

 Lord Macdermott raised a question – whether there should be a difference

between a trust for the child of coalminers before all the pits were
nationalised (which would be charitable, since the coalminers would not be
linked by a common employer) and one for the same children afterwards,
which would fail since they would all be joined by employment nexus to the
National Coal Board [i.e. they are all employed by the National Coal Board].

 In Dingle v Turner Lord MacDermott's criticism of the personal nexus test

was accepted by the HL, although as obiter, as the gift in that case was a gift
to relieve poverty, in respect of which there are no similar tests on the
extent of the class. Under this flexible approach, the question of whether a
trust is a private or public trust, is a matter of degree to be decided in the
light of the facts of the particular case

 POVERTY – Penner observes that ‘in respect of trusts to relieve poverty, it appears that the
public benefit test means no more than that the trusts cannot be for named individuals’
(Penner, pg 444). Therefore, a gift for one’s poor relations is perfectly valid (Re Scarisbrick).
Moreover, a trust to pay pensions to poor employees have been upheld (Dingle v Turner)

 RELIGION – Penner opines that ‘[i]n the case of trusts for the advancement of religion, the
requirement that a section of the public benefits is elusive’ (Penner, pg 445).

o In Neville Estates a gift to the Catford synagogue was good, because the court is
entitled to assume that some benefit accrues to the public from the attendance at

45
 places of worship of persons who live in this world and mix with their fellow
citizens (Penner, pg 445)

o In Gilmour v Coats, the House of Lords held that a gift to a contemplative order of
nuns was not charitable, reasoning that intercessory prayer on behalf of members
of the public was not a sufficient public benefit. There must be a degree of
engagement with the public (Penner, pg 445). In contrast, in Re Heatherington, a gift
for the saying of masses for the repose of the donor’s husband and relations was
chartiable on the basis that the masses were said in public (Penner, pg 445)

 OTHER PURPOSES – Purposes will fail if the benefit appears to be unnecessarily or artificially
restricted (Penner, pg 445)

4.4 Exclusively Charitable

 EXCLUSIVELY CHARITABLE – Generally, for a charitable trust to be valid, it has to be

exclusively charitable. However, since the enactment of s 64 if the Trustees Act, ....

o Cf. BENEVOLENT PURPOSES – Therefore, trusts have failed for being of ‘charitable
or benevolent purposes’ (Morice v Bishop of Durham); ‘for worthy causes’; and ‘for
the public good’ (Wahr-Hansen). While “benevolent purposes” are for the public
good/ public general utility, it is not necessarily charitable.

o However, charitable trusts may engage in subsidiary purposes or activities that are
not themselves charitable, such as fund-raising, which contribute to the fulfilment
of their main purposes

 INCIDENTAL BENEFITS ALLOWED – Notably, charitable trusts remain valid even though ‘as
an INCIDENTAL CONSEQUENCE of the trustees' activities, there may enure to private
individuals benefits of a non-charitable nature’ (per Slade J in McGovern v A-G). Thereofre,
in Incorporated Council of Law Reporting the Court of Appeal rejected contentions that the
Council of Law Reporting was a non-charitable body merely because publication of the law
reports supplied members of the legal profession with the tools of their trade – this was
merely an incidental consequence to its charitable activities, did not make it lose its
charitable status

 CHARITY MUST BE NON-PROFIT DISTRIBUTING – While Charitable trusts may engage in

activities to raise funds, including charging fees for their services (Re Resch's Will Trusts),
they must absolutely not distribute profits (Penner, pg 449)

 TRUSTS FOR POLITICAL PURPOSES; LIKELY NOT RECOGNISED – Trusts that attempt to
change the law by legislation or attempts to influence local or national government’s home
or foreign policy, is generally not charitable because Courts have no means for judging
whether a proposed change in the law would or would not be for the public benefit; and
because the law could stultify itself by holding that it is for the public benefit that the law
itself should be changed.

o Therefore, in National Anti-Vivisection Society (1948), it was held that a Society

promoting legislation to outlaw vivisection is not charitable

o CF. AUSTRALIA & NEW ZEALAND; PUBLIC DEBATE – In Aid/Watch Incorporated

(2010) the High Court of Australia, the court held that a trust with the purpose of

46
 reviewing the efficacy of various aid programmes and to generate discussion of
their findings, with the understanding that this might influence government policy.,
was a charitable purpose trust. The majority of the Court said ‘in Australia there is
no general doctrine which excludes from charitable purposes 'political objects’. The
qualification of a purpose as charitable will ‘be by reason of the particular ends and
means involved, not disqualification of the purpose by application of a broadly
expressed 'political objects' doctrine’ (Penner, pg 448)

o Disapproval of the 'political objects' doctrine was also expressed in the New
Zealand Supreme Court cases of Re Greenpeace of New Zealand Inc. The Court
‘doubted that all advocacy for legislative change should be excluded from being
recognised as charitable’ (Penner, pg 448). The Court futher noted that ‘there is no
satisfactory basis for a distinction between general promotion of views (which is
permitted) within society and advocacy of law change’ (Penner, pg 448). Indeed, ‘[a]
conclusion that a purpose is 'political' or 'advocacy' obscures proper focus on
whether a purpose is charitable within the sense used by law’ (Penner, pg 448). The
majority also said that a strict exclusion 'risks rigidity in an area of law which should
be responsive to the way society works. In sum, the Couurt concluded that ‘[t]he
better approach is not a doctrine of exclusion of 'political' purpose but acceptance
that an object which entails advocacy for change in the Law is 'simply one facet of
whether a purpose advances the public benefit’ (Penner, pg 449)

4.4A Partly Charitable and Partly Non-Charitable

 AS LONG AS NON-CHARTIABLE PURPOSE IS WHOLLY SUBSIDAIRY TO MAIN PURPOSE – If,

consistent with the terms of the trusts, the funds may be used for purposes which are non-
charitable, then it is a non-charitable trust, even though its funds may simultaneously be
applied towards charitable purposes. However, a Trust may be charitable if some
expenditure is permitted on non-charitable purposes, provide that they are wholly
subsidiary to the main charitable purposes, by virtue of s 64 of the Trustees Act.

o As opined by Slade J in McGovern v A-G, the distinction is ... one between (a) those
non-charitable activities authorised by the trust instrument and which are merely
SUBSIDIARY or incidental to a charitable purpose, and (b) those non-charitable
activities so authorised which in themselves form part of the trust purpose. In the
latter but not the former case, the reference to non-charitable activities will
deprive the trust of its charitable status (Penner, pg 446)

 WILL BE SAVED STATUTE; Section 64 Trustees Act – (1) No trust shall be held to be invalid
by reason that some non-charitable and invalid purpose as well as some charitable purpose
is or could be deemed to be included in any of the purposes to or for which an application
of the trust funds or any part thereof is by such trust directed or allowed. [Prof says s 64
probably won’t be given literal effect]

o (2) Any such trust shall be construed and given effect to in the same manner in all
respects as if no application of the trust funds or any part thereof to or for any such
non-charitable and invalid purpose had been or could be deemed to have been so
directed or allowed.

o (3) This section shall not apply to any trust declared before or to the will of any
testator dying before 14th July 1967.

47
  CASE LAW – In Leahy v AG, a trust for ‘such order of the Catholic Church or Christian
Brothers as my executors or trustees shall select’ was held to be a valid charitable trust.
While the trust was not fully charitable per se, as purely contemplative orders are not
charitable in law, the charitable intention on part of the testator can be assumed and given
effect to, given the that gift is for an object that is predominantly charitable.

o Held – The Court held that the gift was saved from invalidity by s 37D of the
Conveyancing Act (in pari materia to s 64 Trustees Act). That section applied not
only where a testator has expressly indicated alternative purpose, one charitable
and the other non-charitable, but applied where the gift was for a purpose
described in a composite expression embracing both charitable and non-charitable
purposes. Both orders of nuns – the charitable and non-charitable – active and
contemplative – the valid and invalid – were embraced in the single phrase ‘order
of nuns’. This section also applied where the gift was for an object so predominantly
charitable – such as an Order of Nuns – that a charitable intention on the part of
the testator could be fairly assumed, or for (say) benevolent purposes, which
connoted charitable as well as non-charitable purposes.

o Cf. In Lawlor, a trust for a catholic daily newspaper could not be saved as a
charitable trust, because it was intended to be regular newspaper containing
ordinary reports, while containing some religious columns. Resort to statute will
alter the trust terms so that the character of the newspaper is entirely changed and
this defeats testator’s intentions

4.5 Preservation from Failure: Cy-Pres Doctrine

 CY-PRES DOCTRINE – Where a charitable purpose would fail because the means chosen by
a testator for its implementation are either impractical or impossible to carry out, the cy-
pres doctrine, in ss 21 & 22 Charities Act, can be applied so that it will not fail (Penner, pg
450). The cy-pres power of the courts allows it to direct that the trust property be applied to
a purpose as close as possible to the one intended by the settlor.

o OUTSET OR SUBSEQUENT FAILURE – Cy-Pres can save charitable trusts from failure
at the outset, or from subsequently failure when carrying out the purpose becomes
impossible or impractical (Penner, pg 450)

o ONLY APPLIES TO PURPOSE THAT IS ALREADY CHARITABLE – Importantly, this

doctrine only applies to a purpose that already counts as a charitable purpose; the
courts do not have the power to transform a non-charitable purpose to a charitable
purpose (Penner, pg 450).

 NO FAILURE; WHEN CHARITY MERGED WITH OTHER CHARITIES; AMALGATION – Where a

gift is made to particular named charities that no longer exist in their own right, but the
purposes of which are continued by other charities (i.e. where there is of charities), the gift
will be valid (Penner, pg 451).

o In Re Faraker, there was a testamentary gift to 'Mrs Bayley's Charity, Rotherhithe;

which had, with other local charities, been consolidated into a trust for the poor in
Rotherhithe. The Court of Appeal held that the gift should go to the consolidated
charity because it continued the name charity. Penner opines that this is not strictly
an example of cy-pres, because the gift is regarded as being successfully made to

48
 the intended charity. This is so despite the change in circumstances where, as in
Faraker, the continuing charity had a SUBSTANTIALLY DIFFERENT OVERALL
purposes. The original charity was for poor widows, and the consolidated charity
was for the poor generally, so that there was no guarantee that any of the gift
actually went to poor widows (Penner, pg 451).

4.5A Initial Failure

 INITIAL FAILURE; PRESERVATION FROM FAILURE AT THE OUTSET – The cy-pres doctrine can
save a charitable trust from failure at the outside where the charitable purpose is
impractical or impossible to carry out (Penner, pg 450).

 GENERAL INTENITON MUST BE ASCERTAINABLE – In order for the court to redirect money
intended for a charitable purpose that fails by applying the cy-pres doctrine, the court must
find that the donor manifested a GENERAL OR PARAMOUNT charitable intention. This
means that the donor must have had ‘an intention to give the money to charitable
purposes of which the particular gift was but a specification’ (Penner, pg 450).

o GIVE TO SPECIFIC CHARITY; FAILS – As a corollary, if the intention was to give only
to the specific charity or charitable purpose, and the charity is defunct or the
purpose impossible to carry out, the gift fails (Penner, pg 450).

o Cf. SPECIFIC INTENTION – A particular charitable intention exists ‘where the donor
means his charitable disposition to take effect if it can be carried into effect in a
particular specified way’ (Re Lysaght per Buckley J)

 GIFT TO PARTICULAR CHARITY VS GIFT TO CHARITY THAT NEVER EXISTED – Penner

observes that Re Harwood established a general rule that a gift to a particular charity that
once existed but is now defunct, is interpreted, unless there are indications to the contrary,
as a gift intended for that body alone, disclosing no general charitable intention. In
converse, in the case of a gift to a named charity that never existed it is much easier to find
a general charitable intention (Penner, pg 452).

o Megarry VC in Re Spence opined that ‘[i]f a particular institution or purpose is

specified, then it is that institution or purpose, and no other; that is to be the object
of the benefaction’ (Penner, pg 452)

 NO FAILIURE; GIFT TO INCORPORATED ASSOCATIONS; VS UNINCORPORATED

ASSOCATIONS – Transfers to unincorporated charities (such as unincorporated associations
or purpose trusts) will generally constitute a purpose trust and be capable of being applied
CY-PRÈS (unless there is something positive to show that the continued existence of the
donee was essential to the gift). In contrast, a transfer to an incorporated entity (e.g.
company) will not necessarily constitute a general charitable intention. Therefore, ‘[w]here
a legacy has been bequeathed to a specified charitable institution the first step is to identify
the institution. For if it exists, well and good; but if it does not, a cy-près problem arises’
(Re Will of Samuel Emily per Tay JC). Specficially, this distinction between a gift to a
charitable purpose and a gift to an institution is influenced by whether the intended
recipient of the gift is an unincorporated or an incorporated charity (Virgo, pg 191)

o RATIONALE; GIFT TO INCORPORATED ASSOCIATIONS TAKEN AS A GIFT

BENEFICALLY – Buckley J in Re Vernons Will Trusts reasoned that a ‘bequest to a

49
 corporate body ... takes effect simply as a gift to that body beneficially, unless there
are circumstances which show that the recipient is to take the gift as a trustee’.

o Cf. DISTINCTION IS QUITE ARBITRARY – Penner opines that this reasoning is

‘inventive but unpersuasive’ (Penner, pg 451). This is because (1) most testators do
not know whether the institutions to which they give are unincorporated or not; (2)
most testator do not register a distinction between a gift to a charitable body as an
accretion to its funds or a gift for the charitable purposes it carries out. Therefore,
such a distinction cannot be used to discern the testator’s intention (Penner, pg
451). Nonetheless, the distinction is accepted as good law (Penner, pg 451)

o WHEN PARTICULAR CHARITABLE INSTITUTION NO LONGER EXISTS; COURT FINDS

ANOTHER TRUSTEE; ONLY FOR UNINCORPORATED ASSOCIATIONS – where the
particular charitable institution named to be the recipient of the gift no longer
exists, the gift will not fail if on a true construction of the testator's intentions he
intended to create a charitable purpose trust and merely indicated this institution
to serve as the trustee (Penner, pg 451). Penner further opines that this is not a true
example of cy-pres, since a trust will not fail for want of a trustee; the court will
find another trustee to carry out the charitable purpose (Penner, pg 451).

 CASE LAW – In Re Finger's Will Trusts, in which a testatrix left her estate to eleven charities.
One of these was the National Radium Commission, which was an UNINCORPORATED
charity, and another was the National Council for Maternity and Child Welfare, which was
an INCORPORATED charity. Before the testatrix's death, both of these charities ceased to
exist. The Court held that the gift to the unincorporated association was valid as a charitable
purpose trust, whereas the gift to the incorporated charity failed (Virgo, pg 191). The
reason for this distinction is that an unincorporated charity does not have a separate legal
identity so a gift to such a charity must be a gift for a charitable purpose rather than to the
institution (Virgo, pg 191). If that purpose can still be fulfilled, then there has been no initial
failure, unless the continued existence of the institution was essential to the gift (Virgo, pg
191)

 CASE LAW; NO GENERAL INTENTION; DOESN’T APPLY WHERE GIFT MADE TO PARTICULAR
ORGANISATION – In Re Rymer the gift could not be saved by application of the cy-pres
doctrine, but since the court found that the gift was made to the particular seminary only,
there was no general charitable intention, so cy-pres could not be applied.

 CASE LAW; GENERAL INTENTION PRESENT; CHARITY NEVER EXISTED; CASE LAW – In Re
Spence’s Will Trusts, a gift was made to “Blind Home at Scott Street”, where no institution
with such name existed. Cy-pres doctrine was applied to achieve testatrix’s general
charitable purpose and money given to another Blind Association, but confining its use to
the patients for the time being at the Scott Street home.

 CASE LAW – PARTICUALR INTENTION PRESENT; CHARITY CLOSED DOWN; CASE LAW – In Re
Spence’s Will Trusts, a gift was made to “Old People’s Home at Hillworth Lodge”, but this
home just closed down 1 year before testatrix’s death. Held that gift was for the benefit of
the patients at the particular home – no general charitable intention. Cy-pres not applicable

4.5B Subsequent Failure

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  PRESERVATION FROM SUBSEQUENT FAILURE – If an effective charitable trust subsequently
becomes impracticable or impossible, then the trustee property will be applied cy-pres
IRRESPECTIVE of the question of general intention. The court may even modify the
purposes, on the basis that they are giving effect to the settlor's intention to give property
'out and out' to charity (Penner, pg 452).

o The settlor (and his estate and residuary legatee) are forever excluded, once the
property has been effectively dedicated to charity absolutely

 CASE LAW – In Hwa Soo Chin, the Pf founded creche to take care of children of poverty-
stricken parents whilst parents were at work. In 1964, the creche ceased operation and
property (trust premises) was leased to Lambert Driving School. Pf received rental for her
own use. The Court held that the Pf was in breach of trust for putting a charitable trust
property to non-charitable use and collecting rent in her name. If the original charity
ceased to exist, the property should be applied cy-pres

o However, under s [43] of the Trustees Act (Cap 337, 1985 Rev Ed), the court also had
inherent jurisdiction to remunerate trustees. In view of the fact that the
constructive trustee did not deliberately put herself into a position where her
interests conflicted with her fiduciary duty and that the beneficiaries did not suffer,
the trustee was allowed to keep the rental collected

5 CONSTITUTION OF TRUST AND FORMALITIES

5.1 Constitution of Trust; Imperfect Gift

 CONSTITUTION OF TRUST – A trust is fully constituted, only when the property is in the
hands of a person who is properly bound to be a trustee (Penner, pg 213). In the present
case [...]

o FORMALITIES – Pursuant to s 7(1) Civil Law Act, a declaration of trust (or

disposition) of immovable property must be in writing and signed by settlor (or
trustee). Failure to satisfy this will mean that the trust ‘cannot be enforced by the
beneficiary’ (Virgo, pg 116). Notably, Penner and Virgo both emphasise that the
trust is not void, but simply unenforceable in a Court of Law (i.e. the beneficiaries
cannot sue the trustee to enforce the trust).

 RATIONALE – These formalities are required as a safeguard against fraud

and abuse of trust, to ensure that the settlor is aware that they want a trust
to be declared, and as a means of standardizing transactions (Virgo, pg 116).

 NON-CONTEMPORANEOUS – The written evidence need not be

contemporaneous with the declaration of trust (Rochefoucauld; Virgo, pg
116). Similarly, Penner argues that the court should entertain a post-
declaration writing by the settlor in order to allow proof of the trust (Penner
pg 154).

 ONCE ORALLY DECLARED; VALID; NO LONGER SETTLOR’S BENEFICIALLY –

Further Penner argues that the writing must be 'signed by some person able
to declare such trust' (s 7(1) Civil Law Act). However, once the trust is orally
declared, it is a perfectly valid trust; s 7(1) Civil Law Act is a 'proof', not a

51
 'validity', formality. Therefore, once a trust has been orally declared, the ‘the
property is no longer beneficially his (the settlor)’ (Penner pg 154).

 In Ong Jane Rebecca the UKCA held that a letter written by the
settlor, two and half years after a trust of a house was supposedly
declared, a letter in which the settlor purported to 'cancel' the trust,
was sufficient to satisfy the formality requirements (Penner, pg
155)

 Cf. However, the fundamental purpose of the written formality

requirement is to evince an intention to create a trust. If one is
trying to supercede his earlier declaration of trust through
subsequent evidence, the issue remains as to whether the earlier
oral declaration of trust would then be enforceable by this
subsequent evidence.

o GIFT; SUBJECT MATTER MUST BE TRANSFERRED TO DONEE – In the case of an

outright gift, the gift is complete when (a) there is an intention to gift; and (2) the
subject matter is transferred into the hands of the donee via the proper mode. A
gift is defined as any transaction that benefits an individual who has not given
consideration; such an individual is called a ‘volunteer’ (Penner, pg 213)

 For land, the mode of transfer is the execution and registration of an

instrument of transfer in the proper form.

 For shares, the mode of transfer is the execution and registration of a share
transform form

 For a moveably property, common transfer is by delivery

 3 WAYS TO MAKE A GIFT – Turner LJ in Milroy v Lord laid down 3 modes of making a gift –

(1) An OUTRIGHT TRANSFER OF THE LEGAL TITLE of the property (or the outright
assignment of an already existing equitable interest);

(2) A transfer of the legal title of the property to a trustee to hold ON TRUST; and

(3) A self-declaration of trust, that is, the settlor himself holds property on trust for the
settlement

 EQUITY WILL NOT ENFORCE GRATUITOUS PROMISES – As a corollary from the maxim
‘Equity will not assist a volunteer’, one cannot ‘sue for presents in equity’ (Hackney).
Therefore, if A promises B that he will gift him Blackacre / put Blackacre in trust for him, and
A refuses to deliver on his promises, equity will not enforce the promise at B’s request
(Penner, pg 214)

 EQUITY WILL NOT ASSIST A VOLUNTEER TO CONSTITUE A TRUST*** – A trust is fully

constituted, only when the property is in the hands of a person who is properly bound to
be a trustee (Penner, pg 213). In the present case, [... intended to declare a trust by XXX.
However...] Moreover, as a corollary from the maxim ‘equity will not assist a volunteer’,
equity will not perfect an imperfect gift (Penner, pg 214). Therefore, ‘if the [gift] is intended
to be effectuated [specifically] by one of the modes, the court will not give effect to it by

52
 applying another of those modes’ (Milroy v Lord per Turner LJ). Since [....], the court will not
perfect the gift by [...]

o EXCLUSIVE – The ‘three modes of conferring a gift/trust are three mutually

exclusive modes (Penner, pg 214)‘Equity will not assist volunteers TO BECOME
donees or beneficiaries under a trust’ (Penner, pg 215; Paul v Paul).

o TRASNFER TO TRUSTEEE; WILL NOT TREAT IT AS SELF-DECLARATION – Equity will

not perfect an ineffective transfer of the legal title of property to an intended
trustee, by treating the intended settlor as having made a valid self-declaration of
trust. Therefore, if the property fails to get into the hands of the intended trustee,
there is no trust (Penner, pg 214)

o GIFT; WILL NOT TREAT IT AS SELF-DECLARATION – Where the property fails to pass
from donor to the donee, Equity will not treat the intentions of a donor to make an
outright gift as a self-declaration of trust (Penner, pg 214). Otherwise, this will
potentially perfect every mode of gift.

 Cf. VOLUNTEERS WHO ARE BENEFICIARIES CAN STILL ENFORCE – However, Equity is not in
the business of dismantling effectively transferred gifts, or dismantling effectively
constituted trusts (Penner, pg 215). Therefore, volunteers who are already beneficiaries
under a fully constituted trust will have equitable proprietary rights in the trust property,
giving rise to the right to sue and enforce the trust (Penner, pg 215). It does not matter that
the beneficiaries have given no consideration (BTB v BTD at [28])). [AT THIS POINT, DOESN’T
MATTER IF THEY ARE VOLUNTEERS]

 Cf. NON-VOLUNTEERS; CONSIDERATION PROVIDED; MAY RELY ON EQUITY – Penner writes

that the intended non-volunteer beneficiary of a trust, one who has given consideration,
may rely on the eager assistance of equity to constitute the trust (Penner, pg 215) A 'donee'
who has given consideration is not a donee: he is a buyer under a contract of sale. He will
therefore have common law legal rights for damages if the seller refuses to perform, and in
the case of land and unique chattels, equity will not only order specific performance if the
seller refuses to transfer the property, the seller will be regarded as holding the title to the
property under a 'vendor-purchaser' constructive trust from the moment the date of
completion of the contract arrives.

 CASE LAW:

o NO TRANSFER OF LEGAL TITLE TO TRUSTEE; FAILURE OF CONSTITUTION – In Milroy

v Lord, the putative settlor transferred physical possession of share certificates to
his Mr Lord to hold on trust for his niece. He did not pass legal title of shares,
resulting in the failure of constitution of trust. Mr Lord had the power of attorney to
transfer legal title, but he failed to do so before he died (which extinguished the
POA).

o TRUST FAILED; OUTRIGHT TRANSFER FAILED; FAILED GIFT – In Jones v Lock, the
father intended to make provision for the infant. He placed the cheque in the baby’s
hand, intending to give it to him. However (1) the court found that there was no
self-declaration of trust and the Court would not give aid to one claiming to benefit
of an imperfect gift (Penner, pg 214); and (2) there was no outright transfer as the
father failed to sign the cheque. Hence, it is a failed gift

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 o NO TRASNFER OF LEGAL TITLE; GIFT FAILED; CANNOT CONSTRUE AS SELF-
DELCARATION OF TRUST – In Richards v Delbridge, Mr. Richards intended to make a
gift by endorsing on the lease a short memo – ‘stated ‘this deed [of leasehold] and
all thereto belonging I give to Edward’. The Court held that the this indicated an
intention to make an outright gift. The gift failed as there was no effective legal
assignment of the lease. The Court also rejected giving effect to it by construing it as
being held on trust. The Court opined '‘it is not at liberty to construe words
otherwise than according to their proper meaning’.

o Cf. SELF DECLARATION OF TRUST; WORDS CONSTRUED AS INTENTION TO CREATE

TRUST PRESENT – In Constance v Paul, the bank account was in Constance’s sole
name, but he said that “the money is as much yours as mine’. The Court held that
‘the money is as much yours as mine’ often repeated to the plaintiff and the things
done together (ie the circumstances) constituted a clear declaration of trust by
Constance for the benefit of Constance and the plaintiff, Ms Paul

5.1A Declaring Self as Trustee, Together with Another Co-Trustee

 Cf. DECLARING SELF AS TRUSTEE, TOGETHER WITH ANOTHER CO-TRUSTEE; SETTLOR AS

ONE OF THE TRUSTEES – However, the courts may possible construe the facts as a self-
declaration of trust. As long as one trustee has legal title to the property, the trust can be
considered to have been constituted (Choithram). This also applies where there is a self-
declaration of trust such that the settlor and that one trustee were the same person so that
there was no transfer of title to anybody (Choithram; Virgo, pg 137).

o However, in Choithram, the Privy Council generously construed the words of the
testator and held that there was a valid self-declaration of trust. The deceased had
executed a deed of trust establishing a charitable foundation; the deed stated that
he was the settlor, and appointed seven trustees, of which he was one. He then
orally stated that he was giving all his wealth to the foundation. He died before
executing any share transfers to the foundation. The Court construed his word as a
valid self-declaration of trust.

o Held – the words ‘I give to the foundation’ can only mean ‘I give to the trustees of
the foundation trust deed to be held by them on the trust of the foundation trust
deed’

5.1B Fortuitous Vesting

 FORTUITOUS CIRCUMSTANCES; EXECUTOR AND TRUSTEE SAME PERSON – The Courts have
recognised a valid constitution of trust where, by fortuitous circumstance, the legal title is
transferred to the executor under a will who was simultaneously also intended to be the
trustee of a settlement (re Ralli’s per Buckley J). In such circumstnaces, the legal title vests in
the trustee, though in his capacity as an executor. However, the means by which he became
the legal owner will not void a valid constitution of trust

o What is sufficient is that legal title vests in the trustee; it did not matter how such a
legal title came about.

 CASE LAW – In Re Ralli, a wife declared a trust the property, but she never assigned the
property to the any of the trustees. She died, and as it turned out, the sole remaining trustee

54
 was also the executor of her will. Therefore, he became legal owner of the property. The
Court held that although there had been no intentional transfer of the property to the Pf in
his capacity as trustee of the marriage settlement, the fact that he had received it in his
capacity as executor of the will is sufficient to constitute the trust. It does not matter how
the trustee had come to receive the legal title to the trust title – it is sufficient that the title
had vested in him

5.2 Perfecting an Imperfect Gift

 In Pennington v Waine, Arden LJ suggested 3 possible routes to avoid the rigorous of

application that ‘equity will not assist a volunteer’

(1) By a benevolent construction, an implied declaration of trust may be teased out of

the words

(2) Some detrimental reliance by the donee upon an apparent although ineffective gift
may so bind the conscience of the donor to justify the imposition of a constructive
trust [LIKELY ESTOPPEL]

(3) Donor has done everything necessary to enable to donee to enforce a beneficial
claim without further assistance from the donor (Re Rose doctrine)

5.2A Re Rose Principle

 SAVING INCOMPLETELY CONSTITUTED TRUSTS / GIFTS – The general rule is that a trust (or
gift) is fully constituted only when the property is in the hands of a person who is properly
bound to be a trustee (or donee) (Penner, pg 213). In the present case [...], this imperfect
gift can be perfected by the Re Rose principle – where the settlor (or donor) has done
everything in his power to effect the transfer of title to the trustee (or donee), but this has
not happened for reasons outside the control of the settlor (or donor), Equity will assume
that the title has passed to the trustee or donee (Re Rose; Virgo, pg 139; BTB v BTD AT [19]
per Thean J). On the facts [...], there was a clear intention ot make the gift / trust (BTB v BTD
at [24] per Thean J)

o GIFT – In the case of a gift, the donee will have the equitable title. Virgo further
opines that since this arises by an operation of law, it is properly analyzed as a
constructive trust (Virgo, pg 140).

o TRUST – According to Virgo’s analysis, in the case of a declaration of a trust, the that
legal title remains in the settlor, and equitable title will be in the intended trustee.
The beneficiary of this trust, namely the intended trustee, can then seek the
transfer of the property to them. Once the legal title has been transferred, the
trustee will then subsequently hold it on trust for the intended beneficiary. Virgo
further opines that since this arises by an operation of law, it is properly analyzed as
a constructive trust (Virgo, pg 140).

o RE-REQUISITE; CLEAR INTENTION – In Re Rose, the testator demonstrated clear

intent to make the gifts that they did, signing all necessary documents (at [24]). The
court in Choithram similarly found that the donor in that case possessed “an
intention to make an immediate, unconditional gift to [the donee]” (at [24])

 CASE LAW;

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 o GIFT; DONE EVERYTHING HE COULD; DIRECTORS LEFT TO APPROVE; VALID – In Re
Rose (1949), Rose had done everything in his power to divest his shares to Hook –
what is left is for the directors to approve it (discretion of directors). The Court held
that the transfer was valid and Hook took the shares by virtue of the transfer

 Held – Whilst it was acknowledged that an intention to make a gift could

not be interpreted as an intention to declare a trust, this referred to an
express trust and did not prevent the court from recognizing that the shares
were held on a constructive trust by the transferor for the transferees.

o GIFT; DONE EVERYTHING HE COULD; DIRECTORS LEFT TO APPROVE; VALID – In Re

Rose (1952), Mr Rose properly executed a share transfer form and delivered it, with
the appropriate share certificate, to his wife. The company directors could refuse to
register share transfers. The Court held that, in equity, such a gift is valid from the
time that the donor does everything he is obliged to do to transfer the shares (Re
Rose principle)

 Cf. MILROY V LORD DISTINGUSIHED; NEVER DO EVERYTHING HE COULD –

The Court of Appeal distinguished Milroy v Lord on the basis that, in that
case, the uncle had not done everything in law that he was required to do to
transfer his title. Under this principle, after the donor has done everything
he himself is required to do to pass title, and until such time as the shares
are registered in the donee’s name, the donor holds the shares on trust for
the donee.

 EXPANSION OF RE ROSE PRINCIPLE*** – The Re Rose principle has been extended to apply
even where the settlor or donor had not done everything necessary to effect a transfer of
title where any attempt to deny the validity of the transfer by the settlor or donor (or his
personal representative) would be considered to be unconscionable (Pennington; Virgo, pg
142)

o DIDN’T DO EVERYTHING; SHARES TO AUDITOR – In Pennington, the shareholder

properly completed a share transfer form in favour of her nephew, but instead of
passing this to the company for registration, delivered it to one of the company's
auditors.

 Penner observes that in this case, unlike Re Rose, the transferor had not
done ‘everything in her power’ to secure the share transfer (Penner, pg
217). Nonetheless, the Court of Appeal held that the shares were held on
trust for the nephew, on the basis that ‘all that is required for the rule to
operate is the execution of the transfer form with the INTENTION that the
transfer is to have immediate practical effect in circumstances whee it
would be ‘UNCONSCIONABLE’ for the transferor to renege on the
transaction’ (Penner, pg 217). The judgement emphasised that it was it is
“unconscionable” for the transferor (the auditor) to renege on the promise.

 UNCONSCIOABLE FOR PERSONAL REPRESENTATIVE TO DENY – On the facts

of the case, these considerations that rendered it unconscionable included
that the donor intended to make an immediate gift and did so of her own
free will; she had informed her nephew of the gift; her agent had told the
nephew that he did not need to take any action to register the shares; and

56
 the nephew had agreed to become director of the company, which
required the shares to be transferred to him. This was sufficient to make
any attempt of the personal representatives of the donor to revoke the gift
to be unconscionable.

 CRITICISM; HARD TO RECONCILE WITH CASE LAW; VAGUE; UNCERTAIN – Penner criticises
this ‘unconscionability’ requirement that the Courts elucidated in Pennington due to the
difficulty of reconciling this requirement with case law; it throws case law into a flux. In Re
Rose, there was no unconscionability whatsoever (Penner, pg 217). In Mascall which
succeeded on the Re Rose principle, it was not ‘unconscionable for the father to change his
mind about making a gift of land to his son(Penner, pg 217). Penner opines that Pennington
makes the Re Rose principle very uncertain, and that ‘all kinds of imperfect transactions
[would] reach the courts on the basis that it would be unconscionable if they were not
perfected’ (Penner, pg 217)Similarly, Virgo opines that there are ‘genuine concerns about
lack of certainty and principle’ (Virgo, pg 142)

o BETTER TO ANALYSE AS CONSTRUCTIVE TRUST – Virgo opines that the preferable

analysis of the trust in Pennington is that of Arden LJ, who treated the trust as
constructive. This is consistent with the recognition of the principle of
unconscionability, which is regarded as one of the events that triggers the
recognition of constructive trusts. This also does not undermine the principle that
Equity will not save a gift by finding an express declaration of trust, because
constructive trusts arise by operation of law and do not depend on intent, so that
they do not require there to be any declaration of trust (Virgo, pg 143)

5.2B The rule in Strong v Bird

 STRONG V BIRD [FOR GIFTS] – Even though the donor (or settlor) had not formally
transferred legal title to the donor (), the transfer of title can be perfected by means of the
rule in Strong v Bird (Virgo, pg 152). The 3 requirements are that – the donee (or settlor) (1)
did not complete the planned transfer during her life; (2) appointed the planned donee (or
trustee) as an executor of her estate; (3) had an intention to make the transfer on trust
continued until her death so that she had at the time “a present intention of giving”. In such
cases, the ‘vesting of the property in the executor at the testator's death completes the
imperfect gift made in the lifetime’ (Neville J in Re Stewart)

o UNSURE OF STATUS – Notably, the House of Lord have never affirmed it and Penne
opines that UKSC should overrule it the first chance it gets.

o TRANSFER TO ANOTHER TO HOLD AS TRUSTEE; APPLIES TO UNCONSTITUTED

TRUST ALSO – Penner observes that in Re Ralli’s Will Trusts, Buckley J made
reference to Strong v Bird, and found that a trust was constituted when the
property fortuitously came into the hands of the trustee. Therefore, it appears that
Strong v Bird rule applies to perfect not only imperfect gift, but unconstituted trusts
where the deceased’s exectuor is also the intended trustee. The deceased must
have maintained the continuing belief or ‘intention’ that he had constituted the
trust, although in fact the transfer to the trustee was ineffective (Penner, pg 220)

 Cf. SHOULD BE OVERTURNED; CRITICISED BY PENNER; UNPRINICPLED LOTTERY – Penner

further opines that the rule in Strong v Bird itself, creates an unprincipled lottery AND
OUGHT TO BE REJECTED. One cannot suppose that the appointment of a person to be one’s

57
 executor indicates anything about the testator’s intentions to perfect imperfect gifts. The
rationale for perfecting the gift is that the gift was intended for the donor’s executor, as if a
donor’s appointment of someone to be his executor has special significance in this regard

o Penner opines that, while one may presume that a testator’s faith in the
trustworthiness and competence of his chosen executors, it is fanciful to believe
that many, or indeed, any, testators pick their executors in the knowledge that in
doing so they will perfect any invalid gifts or release of personal debt made to them
during their lifetime. This rule seems to work purely on the basis of the ‘fortuitous’
vesting of the property in the hands of the executors – equity will perfect the
imperfect gift just because it gets into the hands of the person it was intended for
(Penner, pg 219)

o Therefore, there could be nothing but a lottery in which some individuals will have
imperfect gifts perfected, and others not, purely on the basis of who end up as the
personal representative of the deceased (Penner, pg 219).

o Penner that ‘it should be understood that with this extension equity is now
positively assisting a volunteer’ (Penner, pg 218).

 EXPANSION TO ADMINISTRATORS – In Re James, this rule was extended to imperfect gifts

made to someone, who on the intestacy of the donor, is appointed administrators of the
deceased estate. This extension was subsequently doubted in Re Gonin by Walton J. Walton
J reasoned that the application of the Strong v Bird rule should be restricted to executors,
because they are chosen by the testator, while administrators are chosen by the court
(Penner, pg 220). Penner opines that extending the rule to administrators turned the rule
into ‘something in the nature of a lottery’ (Penner, pg 220)

 REQUIRES CERTAINTY – Penner opines that the rule in Strong v Bird requires that the
property of a gift to be perfected is specific and identifiable as subject matter that might
have been previously transferred in accordance with the deceased’s beliefs / intention.
Thus, ineffective gifts of or promises to give future property or sums of money cannot be
perfected by the rule (Penner, pg 220)

5.2C Donationes mortis causa

 Donationes mortis causa (‘DMC’) are gifts that are made inter vivos, but which are
conditional, only taking effect on death (Penner, pg 220) This is an exception to the rule that
Equity will not assist a volunteer.

o RATIONALE – The intervention of equity is necessary to perfect gifts of things such

as money in a bank balance or shares, which cannot simply be handed over on one’s
deathbed, but require more to transfer title (Penner, pg 220)

 The 3 essential requirements for a valid DMC are as follows (Koh Cheong at [13] per Prakash
J):

(1) The gift must be in contemplation of impending death. (Penner, pg 220)

o Penner observes that all reported cases deal with a donor suffering from
illness, but, for example, going into battle or attempting to climb the
Matterhorn should do.

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 (2) There must have been delivery of the subject matter of the gift, or of something
representing it, which the donee accepts. When the donor delivers the property, he
must intended to part with dominion over it, rather than with mere physical
possession

o What this amount to turns on the nature of the property.

o For a chattel, the donee must take possession or acquire the means to do so
(e.g. the key to a box in which it is held).

o Receiving some clear token of the property will suffice (Woodard v

Woodard, where receiving the keys to a car).

o For a bank account balance, some ‘indicia of title’ must be transferred, such
as the deposit book. For shares, the delivery of share certificates has been
held to work (Dufficy v Mollica).

o In Koh Cheong, Prakash J observed that the delivery of a key (that could
open a box containing title deeds) was held to be sufficient for a donatio
mortis causa of unregistered land (Sen v Headley)

(3) The gift was to be absolute and complete only on the Donor’s death, so as to be
revocable before then – i.e. it is a defeasible gift (Penner, pg 221).

 A DMC was held valid where the donor died from pneumonia rather than
from the incurable disease in contemplation of which the gift was made
(Wilkes v Allington). Thus, it does not matter whether the testator dies in
the particular way he expected (Penner, pg 221)

 PROCESS OF REVOCATION – pursuant to a donatio mortis causa, the donee obtains full
equitable (and sometimes legal) title to the subject matter, but this gift remains defeasible
until the death of the donor.

o REVOKE; LEGAL TITLE NOT VESTED – Where legal title is not vested in the donee,
the donor has the power to revoke the donatio mortis causa either expressly (by the
donor’s acts) or automatically through his recovery from illness

o REVOKE; LEGAL TITLE VESTED; REMEDIAL CONSTRUCTIVE TRUST – Where legal title
has been vested in the donee, the donor has likewise has the power to revoke.
Where he does so, the donee is regarded as a trustee for the donor (Koh Cheong at
[42]; following Borkowski). Prakash J held that a remedial constructive trust in
favour of the donor (“RCT”) arises upon revocation (at [43]) [Prof – this case
involves equity NOT intervening to perfect a gift; the gift was already perfect]

 REMEDIAL TRUST APPROACH – Under the RCT approach, the court enjoys the discretion to
determine whether or not a proprietary remedy should be awarded. If the court exercises
its discretion to award a constructive trust, the resulting beneficial entitlement can be said
to have been “imposed” by the court, which does not merely recognise a preexisting
proprietary interest (at [42])

o While there is a fear that the RCT would result in wide-ranging general judicial
discretion to declare property rights (at [46]), the conditions required for a valid
donatio mortis causa are stringent, and there is no fear that adopting RCT analysis

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 ‘would result in the widespread uncertainty feared by English judges’ (at [46] per
Prakash j)

5.3D Proprietary Estoppel

5.4 Sham Trusts

 DEFINTION – Sham trusts are equitable property transactions where there was a common
intention to create a different set of rights and obligations (Virgo, pg 80) intended to
disguise the fact that beneficial ownership actually remains vested in the settlor. A sham
involves an intent to deceive third parties, in particular to the extent of one’s assets
(Penner, pg 186; Midland Bank v Wyatt), in order to mislead creditors or tax autohrities or
to hide assets from a divorced spouse (Virgo, pg 80). This is a 'sham trust', which is void and
unenforceable (Midland Bank v Wyatt).

o PRESUMPTION OF PROPER TRUST; BURDEN OF PROOF – If language is used that

clearly suffices to create a trust, it will be strongly presumed to create a proper trust
(A v A). The onus of proving that a document which appears to create a proper trust
is actually a sham is on the person making the allegation (A v A).

 REQUIREMNET; COMMON INTENTION TO MISLEAD – There must be a common subjective

intention by the settlor and trustee to create a false or misleading appearance that a trust
has been created and to deceive third parties or the court (Hitch v Stone per Arden LJ; Virgo,
80). In ascertaining whether there was a common intention to mislead, the court looks
beyond the objective intentions as demonstrated by the document, and determines the
parties’ subjective intentions (Chng Bee Kheng).

o SELF-DECLARATION OF TRUST; SETTLOR INTENTION – In a situation where there is a

self-declaration of trust by the settlor, ‘it is only necessary to consider the intention
of the settlor to mislead’ (Painter v Hutchison; Virgo, pg 82).

o FACTORS which might support the finding of a sham trust include (a) unusually low
fees for the value of the trust fund; (b) lack of paperwork to reveal the trustee
exercising independent discretion; (c) letters or email indicating the trustee feels
bound to do whatever the settlor wants; and (d) keeping the trust secret from
beneficiaries (Midland Bank v Wyatt; Minwalla v Minwalla); (e) artificiality of the
transaction; (f) the extent to which the settlor can control the trustee's decision-
making powers or treat the trust fund as their own to do with as they wish; (g) the
trustee does not truly have the power to administer the property as their own and
the settlor continues to exercise real control over it (Virgo, pg 83).

o LOOK AT DEGREE OF POWER THAT REMAINED IN SETTLOR – It is a question of

degree whether or not the settlor retains such power over the property that the
trust is treated as a sham (Conaglen; Virgo, pg 83). The more powers the settlor
retains for themself, the more likely it is that the trust is a sham (Virgo, pg 83).

 Cf. NO COMMON INTENTION – In a situation where the settlor purports to declare a trust
with somebody else as a trustee, the trust ‘will be treated as a sham only if both the settlor
and the trustee intend it to be so’ (Hitch v Stone; Virgo, pg 82). Therefore, where the settlor
lacks the intention to create a trust, but the trustee does not share this intention, the trust
will still be valid (Virgo, pg 82).

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 o HIGH THRESHOLD – However, Conaglen argues that there is a high threshold must
be met to ensure that apparent trusts are not upset too readily, so as to maintain
the security of transactions. This threshold is met where there is ‘conspiracy
between the settlor and trustee to mislead’ (Virgo, pg 82)

o WHERE UNILATERAL INTENTION EXISTS; TRUSTEE CAN IGNORE DEMANDS OF

SETTLOR; Rimer J in Shalson v Russo opines that, in a situation where the trustee
does not share the intention to mislead, he is entitled to ‘IGNORE ANY DEMANDS
FROM THE SETTLOR as to how to deal with them’.

 CASE LAW; In Midland Bank v Wyatt, Wyatt signed trust deed saying he held his beneficial
share in the family home on trust for his wife and 2 children. The trust document had been
hidden in a safe, the wife and daughter were unaware of the declaration of trust, and Mr
Wyatt and his wife had continued to act as absolute owners of the property, for example by
mortgaging it. This was held to be a sham trust as Wyett had no real intention to set up a
trust, but did it to protect his interest in the home from execution by a creditor.

 INITIAL TRUST NOT SHAM; CANNOT BE MADE INTO SHAM SUBSEQUENTLY – Virgo
observes a trust that was not a sham when create cannot be made a sham subsequently (A
v A; Virgo pg 82). The rationale is that, ‘once a trust has been properly constituted and
executed, there is a valid trust which determines what should happen to the trust
property’ (Virgo, pg 83). Once a trustee has accepted office in good faith, they cannot
divest themselves of their fiduciary obligations by improper acts (A v A per Munby J). In
such a situation where the trustee subsequently purports to treat the trust as a sham, there
is a valid trust, but they could be liable for a breach of trust. A settlor who subsequently
agrees that the trust should be treated as a sham may be liable for dishonestly assisting a
breach of trust (Virgo, pg 83).

6 TRUSTEES APPOINTMENT; TERMINATION; DUTIES

 TRUSTEE SUBJECT TO ONEROUS DUTIES – A trustee holds an office that involves significant
responsibility and onerous duties. In Knight v Earl of Plymouth, Lod Hardwicke recognised
that ‘a trust is an office necessary in the concerns between man and man .... attended with
no small degree of trouble and anxiety’. Indeed, it is an ‘an act of GREAT KINDNESS in any
one to accept it’ (Virgo, pg 363)

o ESSENTIAL FEATURE; HOLDING PROPERTY FOR ANOTHER – Trustees have the

primary rights of ownership in trust property, but they, being trustees, are not able
to exploit the beneficial incidents of this ownership for themselves, since the very
essence of trusteeship is holding the property for other people or particular
purposes (Virgo, pg 363).

 DUTIES AND POWERS GENERALLY – Trustees are responsible for the administration of the
trust and are subject to certain key duties, which must be performed, and trustees have a
number of key powers, which may be performed. Duties or powers can be MODIFIED,
EXPANDED OR EVEN EXCLUDED by the trust instruments (Virgo, pg 398). The creator of a
trust – whether a settlor or testator – has a great deal of discretion as to the nature and
extent of the trustee’s administrative duties and powers (Virgo¸ pg 398). Breach of any of
the administrative duties of a trustee or improper exercise of this administrative powers
may involve liability for breach of trust.

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6.1 General

6.1A Appointment of Trustees

 APPOINTMENT – Trustees may be appointed by the (1) settlor; (2) pursuant to express
provision in trust settlement; (3) under the Trustees Act section 37; (4) By the Court under
Trustees Act section 42 or its inherent jurisdiction

 SETTLOR/TESTATOR – The settlor can choose anybody whom they like to be a trustee,
including himself, except that a child cannot act as trustee of any trust (Virgo, pg 371). Once
the settlor has appointed trustees on creating the trust, they cannot determine subsequent
appointments of trustees, save where the settlor has reserved the power in the trust
instrument to make such appointments (Virgo, pg 371)

o MAXIMUM OF FOUR – For settlements and dispositions on trust of property,

whether movable or immovable, for non-charitable purposes, the maximum
number of trustees is limited to four. If the settlor purports to appoint more than 4
trustees, the first 4 named, who are able and willing to act, shall alone by the
trustees (section 36(1) Trustees Act)

 EXPRESS PROVISION IN TRUST SETTLEMENT; BY PEOPLE WITH THE POWER TO APPOINT –

The express provisions in the trust instrument may give an express power to a particular
person or people to appoint new trustees. Alternatively, the trust settlement may give the
power of appointment to other trustees.

o COURT CAN INTERVENE – This is a fiduciary power and the trustee may pay due
regard to the interests of the trust. The Court will intervene to prevent the power
from being exercised improperly. Beneficiaries under a trust may impugn the
nomination of trustees where it is proved that the trustee DID NOT ACT IN GOOD
FAITH in making the nomination or where the nominees are NOT FIT AND PROPER
persons to hold office as trustees (Yusof at [31]). The Court will also have regard to
the INTENTION OF THE SETTLOR, evinced in the terms of the trust, with regard to
the appointment of new trustees (as seen in Yusof at [65])

 SECTION 37(1); POWER OF APPOINTING NEW TRUSTEES IN PLACE OF EXISTING TRUSTEES

(SUBSTITUTION); PERSON WITH POWER OR EXISTING TRUSTEE – Under section 37(1)
Trustees, Act, where a trustee is (a) dead; (b) remains out of Singapore for more than 12
months; (c) desires to be discharged from all or any of the trusts or powers reposed in or
conferred on him; (d) refuses or is unfit to act therein; (e) is incapable of acting therein; or
(f) is an infant,

o then (i) the person person(s) nominated for the purpose of appointing new
trustees by the instrument; (ii) or if there is no such person, or no such person able
and willing to act, then the surviving or continuing trustees or trustee for the time
being; or (iii) the personal representatives of the last surviving or continuing trustee
[in this order] can appoint new trustee(s) in place of the trustee.

 SECTION 37(6); POWER OF APPOINTING ADDITIONAL TRUSTEES; WITH EXISTING TRUSTEE

OR PEROSN WITH POWER – In any trust in which there are no more than three trustees, the
person with the general power to appoint trustees who is willing to act or, if there is no
such person, the other trustees can appoint additional trustees, but the total number of

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 trustees must not exceed four and the person with the power of appointment cannot
appoint themselves (s 37(6) Trustees Acts)

o CAN APPOINT THEMSELVES – The people exercising the statutory power of

appointment have a free choice as to whom they can appoint. They can usually even
appoint themselves (Virgo, pg 372)

 SECTION 42; BY THE COURT; WHERE NO OTHER AUTHORISED PEROSN WILLING AND ABLE
– Virgo opines that it is a fundamental principle of the law of trusts that a trust will not fail
for want of a trustee. Where trustees / people with power to appoint a trustee fail to do so,
the court will intervene and appoint a trustee (Virgo, pg 374). Therefore, under section 42(1)
Trustees Act, the court may, whenever it is expedient to appoint a new trustee or new
trustees, and it is difficult or impracticable to do so without the assistance of the court,
make an order appointing a new trustee or new trustees either in substitution for or in
addition to any existing trustee or trustees. Importantly, this power is only relevant where
there is no other authorized person who is willing and able to make an appointment (Re
Gibbon’s Trusts)

o CIRCUMSTANCES TO GIVE RISE TO SUBSTITUTION OF EXISTING TRUSTEE – The

court may make an order appointing a new trustee in substitution for a trustee who
is (a) sentenced to a term of imprisonment; (b) found to lack capacity (within the
meaning of the Mental Capacity Act 2008) to exercise his functions as trustee; (c) a
bankrupt; or (d) a corporation which is in liquidation or has been dissolved (section
42(2) Trustee’s Act)

o NOTE; NO CONTRARY INTENTION – these powers may be excluded by the

expression of contrary intention in the trust instrument (section 2(2) Trustees Act)

 TRUSTEES DE SON TORT / DE FACTO TRUSTEES – Involves third parties who are not
properly trustees but who take it upon themselves to act as such. The Court treats the
person as an express trustee on the basis that he has acted as such (Mara v Browne per
Smith LJ)

6.1B Disclaimer; Termination

 DISCLAIMER; VOLUNTARY ASSUMPTION OF RESPONSIBILITY – It is generally not possible to

impose trusteeship on a person without their consent; the trustee must accept the
demands of the office voluntarily (Virgo, pg 364). Both the office the office of trustee may
be disclaimed by deed or conduct tantamount to a disclaimer.

o REASONABLE PERIOD OF TIME – The disclaimer should be made within a

reasonable period, having regard to the circumstances of the particular case. Part
of a trust cannot be disclaimed if other parts be accepted (Rajabali Jumabhoy per
Prakash J). There is a prima facie presumption of acceptance. However, a long
period of inactivity will rebut a presumption of acceptance (Rajabali Jumabhoy per
Prakash J). A signature on the deed of appointment can be construed as an
acceptance of his appointment (Rajabali Jumabhoy per Prakash J at [120])

o NO TRUSTEE; COURT MAKES APPOINTMENT – If no trustee accepts the

appointment, the trust will not fail for want of a trustee and the court will make an
appropriate appointment, unless the settlor or testator made the validity of the

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 trust dependent on the acceptance of appointment by a particular trustee (Virgo,
pg 365)

 DEATH – Under Trustees Act Section 20(1), where a power or trust is given to 2 or more
trustees jointly and 1 trustee passes away, the power or trust may be exercised by the
survivors or survivor for the time being. Under Trustees Act Section 20(2), until the
appointment of new trustees, the personal representative of the last surviving trustee, is
capable of exercising the power or trust

6.1C Retirement and Removal

 RETIREMENT & REMOVAL

(1) BY THE CONSENT OF THE BENEFICIARIES – The trustee may also retire by the consent of all
beneficiaries who are compos mentis and sui juris

(2) Pursuant to Express Provision in Trust Instrument – The trust instrument may provide for a
power of removal of a trustee. Where such a power to remove has been exercised, the
trustee will be treated as having died, so that either a person with the power to appoint
trustees or the remaining trustees may appoint a new trustee (s 37(2) Trustees Act). A
trustee may retire under a power of retirement contained in the trust instrument

(3) RETIREMENT OF TRUSTEE; with new trustee appointed to fill vacancy, under the provisions
of Trustees Act section 37 [see above]

(4) RETIREMENT OF TRUSTEE; WITHOUT NEW TRUSTEE APPOINTED TO FILL VACANCY, under
the provisions of section 40 – A trustee can voluntarily retire from the trust by deed if, after
the retirement, there are still two people or 1 trust corporation to act as trustees, and the
co-trustees and any person who has the power to appoint trustees consent to the discharge
of the trustee and the vesting of trust property in the co-trustees (s 40(1) Trustees Act)

(5) By the court under its inherent jurisdiction – The court also has an inherent jurisdiction to
remove a trustee from the trust, but only where cogent grounds are established (Re
Edwards' Will Trusts per Buckley J). The fundamental principle concerns the welfare of the
beneficiaries and the preservation of the trust property. Consequently, a trustee might be
removed where they have abused the trust by acts or omissions that endangered the trust
property, or where they have exhibited dishonesty, incapacity, or want of reasonable fidelity
(Virgo, pg 377)

(6) DISCHARGE BY PAYMENT INTO COURT – Under section 62 Trustees Act, the trustees or the
majority of trustees, having in their hands or under their control money or securities
belonging to a trust, may pay the same into court. This will be the shall be a sufficient
discharge to trustees for the money or securities so paid into court (s 40 Trustees Act)

6.2 Trustee Powers: General

 POWERS; SOURCE IS TRUST INSTRUMENT OR STATUTE – Trustees typically have a number

of powers that they may exercise relating to the administration of the trust or the
disposition of the trust estate to beneficiaries. A trustee’s powers may find its roots in the
express terms of the trust instrument or in statute – the Trustees Act. The Court will carry
out a construction of the trust to determine the trustee’s powers (as in In re Wragg per PO
Lawrence J)

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 o In re Wragg [1919] Ch 58 – Whether particular investment in real estate is
authorised, depends on construction of the trust settlement.

 STATUTORY POWERS – Statutory powers are in addition to the powers conferred by the
trust instrument. Moreover, they are applicable insofar as no contrary contention is
expressed in the trust instrument (s 2(2) Trustees Act)

o General power of investment (s 4)

o Power of sale (s 13)

o Power to give receipts in writing (s 15)

o Power to compound liabilities (s 16)

o Power to insure (s 21)

o Power of maintenance of minors (s 33)

o Power of advancement (s 34)

o Power to reimbursement for costs and expenses (s 41S)

 EXERCISE OF POWERS; UNANIMITY OF DECISION-MAKING – The trustees must be

unanimous in exercising any powers vested in them and a decision of a majority binds
neither the minority nor the trust estate (Luke v South; Virgo, pg 386). Only trustees of
charities can act by a majority. For trusts other than charitable trusts, A majority decision
will be effective only if it is expressly authorised by the trust instrument (Virgo, pg 386)

o CRITICISED – Prof Virgo opines that the fact that trustees of most private trusts must
make their decisions unanimously, whereas trustees of charitable trusts are bound
by a majority decision, is inconsistent and difficult to justify. Moreover, this may be
undesirable in certain circumstances (e.g. where it is found 1 of the trustees is
unreliable or untrustworthy but 1 other trustee out of the remaining trustees don’t
agree). The better view therefore is that the majority rule that applies to charitable
and pension trusts should be extended to all trusts (Virgo, pg 387).

6.2A Power of Delegation

 POWER OF DELEGATION – Originally, a trustee was expected to perform all of their duties
personally. This is impracticable, especially in the modern context where the size of trust
funds has increased drastically (Virgo, pg 422). Presently, it is possible for trustees to
delegate certain functions to other people via provisions of the Trustees Act. Virgo
observes that there are 2 reasons why a trustee may wish to delegate their powers – (1) the
trustee may be incapable of discharging their duties for a limited period of time; (2) they
lack the expertise to discharge the particular responsibility and prefer an expert to do so
instead (Virgo, pg 423)

o AGENT – Trustees may authorize one or more of their number to exercise delegable
functions as an agent on behalf of all of the trustees, but they cannot appoint a
beneficiary as an agent even if the beneficiary is also a trustee.

o NOMINEES & CUSTODIANS – Trustees also have the power to appoint a nominee in
respect of particular trust assets, such as shares, which are then vested in the

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 nominated person, or to appoint a custodian of particular trust assets. A custodian
undertakes the safe custody of trust assets, or documents, or records relating to
those assets. Where a nominee is appointed, the trust property will be vested in the
nominee, who then acquires legal title to it. But this is for the better administration
of the trust and is therefore an appropriate power, especially because the trustee
remains responsible for reviewing the arrangements and can therefore be regarded
as retaining some control over the property

(1) Delegation of trustee’s functions by power of attorney – Under s 27 Trustees Act, a

trustee(s) may by power of attorney, delegate the execution or exercise of all or any trusts,
powers and discretion vested in him/them as trustee(s)

(2) Implied indemnity of trustees – s 32(b) Trustees Act provides for an implied indemnity of
trustees; Therefore, Trustees are not liable for any acts or omissions of agents, nominees,
or custodians, except if the trustee has failed to comply with the statutory duty of care
when entering into the arrangements or reviewing the arrangements (Virgo, pg 425) or
where the loss happens through the trustees ‘own wilful default’ (s 32(b) TA). As such, if
the trustees have exercised such skill and care as is reasonable in the circumstances, they
will not be vicariously liable if the agent has caused loss by acting negligently (Virgo, pg 426)

(3) Appointment & Liability of Agents, Nominees and Custodians – Trustees Act, ss 41A – 41O.

6.3 Void Exercise of Power;

 INVALID EXERCISE; (1) WITHIN SCOPE OF POWER REQUIREMENT AND (2) GOOD FAITH; (3)
PROPER PURPOSES – Where the trustees have agreed to the exercise of a discretionary
power, the courts will not interfere as long as the power is (1) exercised in good faith (Virgo,
pg 390); and (2) within the limits with which it has been given to them; (3) for proper
purposes (Gisborne v Gisborne; Virgo, pg 390).

6.3A Excessive Exercise of Power

 (1) OUTSIDE SCOPE OF POWER; EXCESSIVE EXERCISE OF POWER; VOID – Where the act
done by the trustees in the exercise of their discretion is not within the scope of power,
the power will not be considered to have been exercised at all and transaction will be void
(Virgo, pg 390).

o EXAMPLE; BENEFIT SOMEONE WHO IS NOT AN OBJECT – A power of appointment

or advancement is ‘excessively exercised’ where where the trustees purport to use
trust funds to benefit an object of the power in a way that is not provided for by
the power (Penner, pg 87). Whether an exercise of a power is excessive often turns
on the words with which the power is expressed (Penner, pg 87)

o Example – The word ‘appoint’ has been construed as not allowing a trustee to
appoint trust property on new discretionary trusts for objects within the power,
because the power to appoint is a power to transfer FIXED INTERESTS to persons
within the class, not to delegate that decision to the discretionary trustee under a
trust (Re Hay’s Settlement Trusts; Penner, pg 87)

6.3B Bad Faith; Dishonesty; Fraud

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  (2) BAD FAITH; VOID – Where a power is exercised in bad faith, the exercise will be VOID
(Virgo, pg 392). A finding of bad faith has been requires a high threshold of equitable fraud
and dishonesty (Armitage v Nurse per Millet LJ). This is to be determined by reference to the
subjective state of mind the trustee, in particular their awareness of the consequences for
the beneficiary of exercising the power (Virgo, pg 392).

o DISHONEST; RECKLESS; KNOWING IT WAS CONTRARY TO BEST INTEREST –

Dishonest may be established where a trustee intended to pursue a course of
action knowing it was contrary to the best interests of the beneficiaries or being
recklessly indifferent to their interests, regardless of whether the trustee intended
to benefit from the conduct (Virgo, pg 391).

o GENERALLY SUBJECTIVE; BUT OBJECTIVE FOR PROFESSIONALS – A trustee would

not be acting in bad faith if they were to believe themselves to be acting in the best
interests of the beneficiaries, even if the exercise of the power had adverse
consequences for the beneficiaries. If, however, the trustee is a professional
trustee, they would be considered to have acted dishonestly even if they were to
have considered that the exercise of the power was in the best interests of the
beneficiaries, if the belief was so unreasonable that no reasonable trustee in that
profession would have shared that belief (Walker v Stones).

6.3C Improper Purposes; Fraud on Power

 (3) IMPROPER PURPOSES; FRAUD ON POWER – Where the power is exercised for an
IMPROPER PURPOSE, it will be invalid by virtue of the doctrine of fraud on the power (Balls
v Strutt; Virgo, pg 392). The basis for fraud on a power is that a trustee must act ‘with an
entire and single view to the real purpose and object of the power’ (Lord Westbury LC in
Portland v Topham (pg 1251).

o COLLTERAL PURPOSE; WANTON; CAPRICIOUS – Virgo observes that an improper

purpose encompasses an exercise of the power for collateral purpose (Hillsdown
Holdings), or wantonly, or capriciously (Pilkington v IRC).

o Cf. EXCESSIVE EXERCISE OF POWER – Fraud on the power is not concerned with an
excess of power but is an ‘abuse of power, by doing acts which are within its scope
but done for an improper reason’ (Eclairs Group per Lord Sumption)

o CAPRICIOUS; IRRATIONAL; IRRELEVANT – In Re Manisty, Templeman J described a

‘capricious decision’ as one that is ‘irrational, perverse or irrelevant to any sensible
expectation of the settlor’. Virgo observes that since trustees are not required to
give reasons for the exercise of their discretion, where they are exercising a
dispositive power, it will be difficult to show that the exercise was capricious (Virgo,
pg 392)

o NO NEED FOR DISHONESTY – Virgo opines that ‘fraud on the power’ does not
require conduct to be ‘dishonest or immoral’, but simply involves the power being
exercised for a purpose that is either beyond the scope of the trust instrument or
not justified by the trust instrument (Vatcher v Paull; Virgo, pg 392; Penner pg 87)

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  EXAMPLE; SECURING BENEFIT FOR THEMSELVES; 3P – It is fraud on the power where the
trustee’s purpose in exercising the power is to secure a benefit for themselves, or a third
party who is not an object of the power (Re Dick; Virgo, pg 392).

 EXAMPLE; SUBVERT TERMS OF THE WILL – It will be a fraud on the powr where the power
of appointment is exercised as part of a ‘deliberate scheme to subvert the terms of the will’
(Wong v Burt; Penner, pg 88).

 EXAMPLE; COLLATERAL PURPOSE; MOTIVATED BY ANGER – In Klug v Klug, one of the

trustees refused to exercise the power was motivated by anger that her beneficiary
(daughter) had married without her consent. The Court held that this was an inappropriate
reason for the trustee's decision to refuse to exercise the power; The court effectively
discounted the mother's vote and ordered the power to be exercised (Virgo, pg 392) [YOU
SEE THERE’S NO DISHONESTY]

 Cf. INDIRECT BENEFIT; NO INTENTION TO BENEFIT – However, it is not a fraud on the power
that the trustee or a third-party benefit indirectly from the exercise of the power (Virgo, pg
393). If a father exercises a power of appointment in favour of his infant child and that child
dies before attaining the age of majority, the father will receive the property as next of kin,
but this will not invalidate the exercise of the power, except if the trustee intended when
exercising the power to benefit from the appointment (Cloutte v Storey)

 SHOULD BE VOIDABLE RATHER THAN VOID – Virgo opines that an unfortunate

consequence of the doctrine rendering the execise of power void is that a good faith 3Ps
may suffer from this doctrine (Virgo, pg 393). Therefore, it is preferable for the doctrine as
rendering the transaction voidable rather than void, such that it would be valid until it had
been rescinded (Virgo, pg 393). This would prevent the disposition from being set aside
where a good faith 3P has acquired rights under it for value.

6.4 Voidable Exercise of Power; Re Hastings

 RE HASTINGS RULE – Per the rule in Re Hastings-Bass (as understood in Pitt v Holt), where
trustees make a decision that has an adverse effect on the trust or the beneficiaries, the
decision set aside on the ground that (1) the trustee had taken into account an irrelevant
consideration or ignored a relevant consideration; AND (2) the trustee had breached their
duty (Pitt v Holt). This result in the disposition being voidable (Virgo, pg 394).

o FIDUCAIRY DUTY NOT NEEDED LIKELY – Notably, Walker referred to the requisite
breach of duty as a breach of ‘fiduciary duty’ rather than a breach of trust; this has
led to some CONFUSION. However, academics such as Virgo (pg 397) and Penner (pg
77) a general breach of duty (non-fiduciary included) is likely to suffice, since a
fiduciary duty was not even engaged on the facts in Pitt v Holt.

o RATIONALE; BENEFICIARIES DON’T SUFFER – Virgo opines that the essence of the
rule in Hastings Bass is to ensure that beneficiaries do not suffer from the
inappropriate, but authorised, exercise of power by the trustees.

o VOIDABLE – Whether the exercise of the power will be voided will be subject to the
discretion of the court and to the equitable bars of recission (e.g. delay in seeking
to avoid the transaction or that property which has been transferred has been
received by a bona fide purchaser for value) (Virgo, pg 395)

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 o GENERAL NO BREACH WHERE TOOK REASONABLE ADVICE – Trustees generally
have not breached their duties when they act on the advice given by professional
advisors who have been selected with reasonable care (Pitt v Holt)

 NO BREACH OF DUTY; SUE ADVISOR – Where there has been no breach of fiduciary duty,
the court will not interfere with the trustee’s exercise of their discretionary powers.
However, the beneficiary will not necessarily be without a remedy because the trustee may
have a claim in tort against the negligent advisors (Virgo, pg 396). Virgo opines that this is
the ‘most satisfactory route to redress: the error was made by the advisers, so those
advisers should bear the loss.’ (Virgo, pg 396).

 DUTY OF CARE GREATER WHERE PROFESSIOANL TRUSTEE – In determining whether the

trustee has taken sufficient care to, it is relevant to consider the commercial experience of
the trustees; the more experienced and sophisticated they are, the less likely it will be that
the simple reliance on professional advice will be considered to be reasonable (Virgo, pg
396)

 GENERAL HISTORY; AVOID TAX; UKSC TOOK CORRECTIVE ACTION – Before Pitt v Holt, this
rule as often invoked by trustees to rescind trustees’ discretionary dispositions of trust
property, in a series of cases to escape the unforeseen tax consequences of the
transactions they had entered, where there was negligent advice received from their tax
advisors (Hayton & Mitchell, 9.240). It was said that the Hastings-Bass rule applied to allow
‘Doctor Equity [to] administer a magical morning-after pill to trustees suffering from post-
transaction remorse, but not to anyone else’ (Lord Neuberger). Therefore, in Pitt v Holt, the
UKSC took CORRECTIVE ACTION to limit the scope of the rule in Re-Hastings Bass by
insisting that there must be a breach of duty on part of the trustee

o Virgo opines that the balance now is struck at a more appropriate level where
beneficiaries continue to be protected where the trustees breach their duties
(Virgo, pg 396).

o VOID VS VOIDABLE; EXPLANATION – The Supreme Court of UK in Pitt v Holt drew a

fundamental distinction between an exercise of discretionary power that is void for
invalid exercise (on the basis of bad faith / fraud on power) and the exercise of a
discretionary power that is voidable because, although acting within the scope of
their power, the trustees breached their duty in exercising it. In the former,
trustees NEVER HAD THE AUTHORITY to do what they did. However, in the latter,
the disposition made was an AUTHORIZED ACT of the trustees, so it should be
treated as voidable at the instance of a beneficiary (Virgo, pg 395). Whether the
exercise of the power will be voided will be subject to the discretion of the court
and to the equitable bars of recission (e.g. delay in seeking to avoid the transaction
or that property which has been transferred has been received by a bona fide
purchaser for value) (Virgo, pg 395)

6.5 Rescinding Voluntary Transactions made by Mistake

 GROUNDS OF MISTAKE; CONSTRUCTIVE TRUST – [...] can invoke the Court’s equitable
jurisdiction to set aside GIFTS / VOLUNTARY DISPOSITION on grounds of mistake. This
requires (a) a CAUSATIVE MISTAKE, as to either the legal character or nature of the
transaction or a matter of fact or law that was BASIC to the transactions; and (b) the
mistake was of such GRAVITY that it would be UNCONSCIONABLE to refuse relief (Pitt v Holt

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 per Lord Walker). Since this jurisdiction is triggered by unconscionability, the trust is
properly characterized as constructive trust (Virgo, pg 281)

o MISTAKE AS TO TAX CONSEQUENCES – A mistake about the tax consequences of a

transaction can be a relevant mistake (Van der Merwe at [26])

 (1) MISTAKE; DOES NOT ENCOMPASS IGNORANCE – The claimant must have had an
incorrect conscious belief or acted on an incorrect assumption as to fact or law for the
claimant to be considered to be mistaken (Pitt v Holt per Lord Walker; Virgo, pg 282).
However, if the claimant had no idea about the possible existence of a fact, this suggests
ignorance rather than mistake, unless a tacit assumption about the fact can be inferred (Pitt
v Holt per Lord Walker; Virgo, pg 282).

o DIFFICULTY IN DISTINGUSHING – Lord Walker accepted that it might be difficult to

distinguish between beliefs, assumptions, and ignorance, he emphasized that the
court should not shrink from drawing an 'inference of conscious belief or tacit
assumption when there is evidence to support such an inference'.

 IGNROANCE OR FORGETFULNESS – Forgetfulness, inadvertence or

ignorance are not a mistake (Van der Merwe at [26])

 CARELESSNESS – It does not matter if the mistake is due to carelessness on

the part of the person making the voluntary disposition unless the
circumstances are such as to show that he deliberately ran the risk or must
be taken to have run the risk of being wrong

o SHOULD CONFINE TO CONSCIOUS BELIEF ONLY – Virgo seems to support confining

mistake to an incorrect conscious belief since it would be more ‘straightforward’
(Virgo, pg 282). Virgo opines that the recognition that an incorrect tacit assumption
constitutes a mistake potentially expands the notion of mistake SIGNIFICANTLY
(Virgo, pg 282). The line between an assumption and ignorance is unclear.
Moreover, this stance has support from case law (which pre-dates Pitt v Holt); in
Great Peace Shipping, albeit a contract case, Lord Phillips MR described a mistake as
an 'erroneous belief'. Virgo opines that it would follow that forgetfulness or
ignorance about particular facts would not constitute a mistake, because they do
not involve belief (Virgo, pg 282)

 (2) BASIC TO TRANSACTION – Virgo opines that a mistake as to the tax consequences of the
disposition might be relevant if sufficiently serious, which is likely to be if the mistake results
in a LARGE and avoidable tax liability (Virgo, pg 283)

 (3) MISTAKE SUFFCIENTLY GRAVE; UNCONSCIOABILITY – Moreover, the assertion of the

donee’s rights must be objectively unjust or unconscionable which would render the
mistake of sufficient gravity to rescind the disposition (Pitt v Holt per Lord Walker; Virgo, pg
283).

o SEVERAL FACTORS TO CONSIDER – The Court is to consider the (1) seriousness of

the mistake’s consequences; (2) the circumstances of the mistake; (3) whether the
Dfs had changed their positions, and make an evaluative judgement whether it
would be unconscionable or unjust to leave the mistake uncorrected (Pitt v Holt;
Virgo, pg 283).

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  MIGHT NOT APPLY TO TAINTED HANDS – The ground of setting aside a voluntary disposition
on ground of mistake is unlikely to apply where the Trustee does not approach to court with
‘clean hands’ (Virgo, pg 284; Futter v Futter).

o In Futter v Futter, Lord Walkter, in obiter, rejected setting aside the disposition on
ground of mistake, since the trustees engaged in a tax avoidance scheme. Lord
Walker described such schemes as constituting 'a social evil', and emphasized that
the court might refuse to award equitable relief to rescind a voluntary disposition
on the ground of public policy. It does not appear to be unconscionable for the
Revenue to keep tax paid as part of an artificial avoidance scheme entered into by
mistake (Virgo, pg 284)

 CASE LAW; PITT V HOLT; MISTAKE AS TO TAX CONSEQUENCES – In Pitt v Holt, Lord Walker
considered that Mrs Pitt either had an incorrect conscious belief as regards the tax
consequences of the settlement, or a tacit assumption that it would not result in adverse
tax consequences (Virgo, pg 282). This mistake as to the tax consequences of the disposition
to the trust was sufficiently serious and grave to trigger the equitable jurisdiction to rescind
the disposition for mistake.

o A matter of particular significance was the fact that the disposition did not form part
of an artificial or abusive tax avoidance scheme (Cf. Futter) and also that it had been
authorized by the Court of Protection.

 CASE LAW; NOT A CAUSATIVE MISTAKE – IN BMM v BMN, the Court refused to set aside the
disposition on grounds of mistake as the Court found that, even Y was aware of the mistake,
he would still have transferred the property due to their considerably close and loving
relationship between them. Therefore, the mistake was not causative.

 CASE LAW; SUFFICIENTLY SERIOUS; MISREPRETATION; SET ASIDE – In BOM v BOK, the
husband south to set aside the trust on grounds of mistake. The mistake harboured by the
Husband as to the effect of the DOT was engendered by the Wife’s Misrepresentation, and
the gravity of the mistake is also sufficiently serious as to make it unjust for the court to
refuse relief

 CRITICISM; ARBITARY – Virgo criticises that the determination of whether a voluntary

disposition should be rescinded in Equity appears to involve the exercise of ‘arbitrary
judicial choice rather than the exercise of a principled discretion’ (Virgo, pg 284).

6.6 Trusties Duties: General

 2 TYPES OF DUTIES – Fiduciary and Non-fiduciary duties. Fiduciary duties must be clearly
distinguished from the other duties which trustees and other fiduciaries can owe. A breach
of a fiduciary duty attracts different legal consequences from those consequent upon the
breach of other duties

 RANGE OF DUTIES – Virgo observes that trustees are subject to a number of specific duties.
Lord Toulson in AIB Group recognised that these duties can be considered to fall within the 3
broad categories:

o A CUSTODIAL STEWARDSHIP duty to preserve the trust assets, save to the extent
that the trust instrument permits the trustee to do otherwise;

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 o A MANAGEMENT STEWARDSHIP duty to manage the trust assets with proper care;
and

o A duty of UNDIVIDED LOYALTY, which prohibits the trustee from taking advantage
of their position without the fully informed consent of the beneficiaries (AIB Group at
[51]; Virgo, pg 399)

6.6A Duties on Accepting Trusteeship

Inspection of Trust Document

 INSPECTION OF TRUST DOCUMENT – Upon accepting trusteeship, a new trustee should

ascertain the terms of the trust. New trustees must therefore inquire into what the trust
properties consist of; trust documents and papers and matters affecting the trust (Hallows v
Llyod per Kekewich J)

Safeguarding Trust Assets

 GETTING IN AND SAFEGUARDING TRUST PROPERTY – Trustees are responsible for

safeguarding the trust assets for the benefit of the beneficiaries (Virgo, pg 403). This means
that, for example, on appointment, a trustee must ensure that the trust funds are properly
invested and that the trust assets, such as securities and chattels, are kept securely.

o NO SAFEGUARD OF PROPERTY; ALLOW TRUST PROPERTY TO BE IN CO-TRUSTEE’S

POSSESION – In Lewis v Nobbs, the testator instructed the trustees to invest the trust
funds in stocks or funds. Each of the trustee retained possession of a portion of the
bonds held in trust. Bonds were transferred without the concurrence of the other
trustee. The Court held that it was a breach of trust by allowing each co-trustee to
retain possession of half of the bonds, which enabled the co-trustee to improperly
deal with them. The trustees should have placed the bonds in joint ownership, such
that both party’s concurrence is needed for any transfer. [Clement Lim]

Inquiries into Earlier Breaches

 INQUIRIES INTO EARLIER POSSIBLE BREACHES OF TRUSTS – A person who is appointed as a

new trustee of an existing trust must investigate any suspicious circumstances which
suggest that a breach of trust may have occurred prior to her appointment, so that action
can be taken to recoup the trust fund if necessary (Hayton v Mitchell; re Strahan). A new
appointed trustee is generally not liable for breach of trust by previous trustees.

o In Re Lucking’s, L had breached his duties as trustees to conduct the business of the
trust with the same care that an ordinary prudent business would apply to his own
business affairs. L knew of D’s withdrawal of funds from the company (in which the
trust had a majority shareholding) but failed to supervise him .

6.6B Administration of Trust

 Usually, the trust deed grants trustees the power to “carry on all necessary business of the
trust”. The scope of the power depends on the context of the kind of business the trust is
engaged in.

Duty of Notification of Beneficiaries

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  DUTY OF NOTIFICATION OF BENEFICIARES; TAKE REASONABLE – To give substance to a
beneficiary’s core right to performance of the trust, a sui juris beneficiary may have the
right to be told that she is a beneficiary and the trustees may owe a concomitant duty to
notify her of this fact (Hayton & Mitchell, 9.084). The trustee’s duty of notification is a duty
to take reasonable steps in all the circumstances.

o The beneficiary may also have a right to be told the name and address of the
trustee and to inspect the accounts of the trust.

 WHERE 2 BENEFICIARIES OF OPPOSING INTERESTS; INFORM BOTH GROUPS – Where the

interests of the beneficiaries are opposed to each other (where they were the respective
objects of a special power and a gift over), then the due accountability of the trustee may
require some of each group to be notified of their status. To notify only 1 party and leave
all the powers of enforcement in, say, the beneficiary of a gift over might not be sufficient
to ensure the donee was effectively accountable in respect of his distinctive duties to the
objects of the power (Hayton & Mitchell, 9.084)

Duty to Obey Lawful Directions in Trust Deed

 DUTY TO OBEY LAWFUL DIRECTION IN THE TRUST DEED – There is a duty to obey lawful
directions in the trust deed. For instance, in Fry v Fry, the trustee was required to sell the
property as soon as convenient after the death of the testator. However, the trustee
refused an offer lower than the advertised amount. The prices dropped further. The trust
was liable for resulting loss for not selling at proper time (reason they are liable is that they
didn’t sell at the stipulated time – ‘convenient time’; while the result may be objectionable, it
remains that they didn’t obey the directions)

Duty to Pay Correct Beneficiaries

 DUTY TO PAY CORRECT BENEFICIARIES – There is also a duty to pay the trust property to the
correct beneficiaries. In Eaves v Hickson, the Trustees paid trust money to the wrong
persons because they are misled by a forged marriage certificate. Trustees were liable to
top up the trust fund.

 STRICT LIABILITY; DOESN’T MATTER IF REASONABLE CARE TAKEN – In Eaves v Hickson, the
Court held that even thought the forgery by the fraudster would have deceived anyone who
was not looking for forgery or fraud, it was held that the trustee is liable. While the duty of
a trustee is to take reasonable care, that only arises where he acts within the scope of his
power. However, giving the estate to unauthorised prosns is in excessive of his powers and
the trustee is strictly liable for his acts of misapplication of the trust property

o In Eaves the court gave weight to both principles in the form of its order: the
illegitimate children (who received the trust property; they were not beneficiaries)
were liable to repay what they received with interest; and to the extent they could
not repay the whole, then their fraudster father must pay the balance; only to the
extent there was then any deficiency, would the trustee be liable (Penner, pg 327)

Duty to Furnish Accounts to Beneficiaries

 DUTY FOR THE PROVISION OF TRUST ACCOUNTS – A beneficiary has the right, exercisable
at reasonable intervals, to inspect accounts prepared by the trustees explaining the current
whereabouts of the trust property and the history of their dealings with it (Hayton v

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 Mitchell, 9.085). Therefore, trustees must keep accounts of the trust and are required to
disclose them to beneficiaries if they so request (Virgo, pg 425; Foo Jee Seng per Chao JA). It
is the fiduciary relationship that provides the basis for this duty to account (Lakshmi at [29])

o There are 2 theoretical bases – (1) the informative purpose of allowing the
beneficiaries to know the status of the fund and what transformations it has
undergone; (2) a “substantive purpose… [to ensure] that any personal liability a
custodial fiduciary may have arising out of maladministration is ascertained and
determined (Snell’s Equity; Lalwani per Aedit Abdullah)

o DISCRETIOANRY TRUSTS; NAMED BENEFICIARIES HAVE RIHT TO ACCOUNT – In

Lakshmi, the Singapore High Court differentiated 2 types of discretionary trusts – (1)
a discretionary trust that involves named beneficiaries; (2) a discretionary trust that
involves persons who are only possible beneficiaries of a discretionary trust, where
there is a large number of such possible beneficiaries (at [30]). Wei J opined that a
beneficiary falling into the former category should be entitled to accounts. On the
other hand, a possible beneficiary belonging in the latter category would have no
such right (at [31]).

 A person in the former category has an identifiable interest in the estate

regardless of the manner in which the trustee’s discretion is exercised, and
therefore has a corresponding right to an account. A person in the latter
category does not have an identifiable interest in the estate until it is
decided that he will be a beneficiary (at [31])

 NO NEED FOR BREACH OF DUTY – Importantly, there is no necessity to allege any breach of
fiduciary duties on part of the trustees. Nonetheless, where there is such a breach, ‘they
would all the more be entitled to an account and if the trust were to suffer any loss on
account of such breach, the trustees would be obliged to make good the same’ (Foo Jee
Seng per Chao JA at [87]))

 ALL BENEFICIARIES; EVEN FUTURE INTERESTS – Every beneficiary is entitled to see the trust
accounts. Any beneficiary with a future interest, including a person who is merely the likely
object of a discretionary trust or power which may never actually be exercised in his
favour, has the means to discover a breach of trust which he may taken action to redress
(Hayton & Mitchell, 09.085)

 LIMITS TO PROVISION OF ACCOUNTS; OPPRESSIVE – However, there are limits to the

trustee’s continuing duty to furnish account on demand (at [21]). The Court may decline to
make an order for taking of account sin a case where it would be oppressive to require to
the trustee to so account such as where the demands are made without a reasonable
interval between them, or without reasonable time for the trustee to furnish the
necessary information (at [21]).

6.6C Beneficiaries’ Right to Information

Outside Litigation

 NOT AVAILABLE; TRUSTEE MEETINGS; LETTER OF WISHES; REASONS – Generally, trustees

are not bound to disclose (1) the agenda and all other document prepared for, and the
minutes of trustee meetings; (2) letter of wishes of the settlor, due to an implied obligation
of confidentiality between settlor and trustee; and crucially, (3) trustees are not required to

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 give reasons to the beneficiaries for their decisions as to whether or not to exercise a
power or discretion, where the power relates to the disposition of trust assets to
beneficiaries (Re Londonderry's; Virgo, pg 387)

o NO NEED TO GIVE REASONS; RATIONALE; EFFECTIVE ADMINSITRATION – This rule

is meant to avoid opening the door to unnecessary litigation about the rationality of
the trustee’s discretion (Hartigan Nominees). Further, it is to ensure that the
effective administration of the trust would not undermined where the trustees are
subject to excessive investigation by the beneficiaries (Lewis v Tamplin).

o CASE LAW; NO REASONS – In Re Londonderry’s Settlement, the beneficiary was not

satisfied with trustee’s exercise of power. The Court held that the trustees were not
bound to disclose to their beneficiaries their reasons for exercising a discretionary
power

 AVAILABLE; TRUST DOCUMENTS – Beneficiaries are to monitor the trustee’s performance

of their duties, and it is important that they have access to documents relating to the
management and administration of the trust and the powers of the trustee to distribute
trust assets (Virgo, pg 341). Therefore, the court has a discretion to disclose trust documents
to the beneficiaries; this discretion flows from an inherent jurisdiction to ensure that trusts
were properly supervised and enforced (Schmidt v Rosewood; Virgo, pg 344)

o GENERALLY, BOUND WHERE INFORMATION IS NATURE AND VALUE OF TRUST

PORPERTY – A trustee is generally bound to allow the beneficiaries access
information as to the as the nature and value of the trust property, the amount of
trust income, and how the trustees had been investing and distributing the
property (Murphy v Murphy; In re Rabaiotti; Virgo, pg 345).

o Cf. CONFIDENTIALITY – The Court reserves the right to refuse a claim by an object
for information in certain circumstances such as when issues arise as to personal or
commercial confidentiality.

o COURT CAN REFUSE WHERE NOT IN BEST INTEREST OF ALL BENEFICIARIES –

However, there was a discretion in the court to refuse disclosure to a beneficiary
where it was satisfied that that would not be in the best interests of beneficiaries as
a whole (In re Rabaiotti)

o CONFLICTING INTERESTS; BALANCE – Where there are issues as to personal or

commercial confidentiality, the court has to balance competing interests of different
beneficiaries, the trustees themselves and third parties (Vadim Schmidt)

o APPLICATION FOR DISCLOUSURE OF TRUST DOCUMENTS – Upon application for

disclosure, the court has a discretion (a) whether the object should be granted relief
at all; (b) what class of documents should be disclosed completely or in redacted
form; and (c) what safeguards should be imposed to limit the use of documents or
information disclosed (these safeguards include undertakings made to the court,
arrangements for professional inspection or otherwise); (d) where there are issues of
personal or commercial confidentiality, the court may have to balance the
competing interests of different beneficiaries, the trustees, and third parties when
determining whether to disclose documents (Virgo, pg 342)

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  DISCRETIONARY TRUST; PARTICULAR PRINCIPLES; LESS LIKELY TO DISCLOSE
– However, the court will be less likely to exercise its discretion to disclose
trust documents in favour of an object under a discretionary trust since the
objects have only a theoretical possibility of benefiting under the trust
(Virgo, pg 344). Moreover, where a discretionary trust is concerned, since
the reasons for exercise of discretion need not be disclosed, it follows that
the court should not compel disclosure of trust documents that reveal why
the trustees exercised their discretion as they did (Re Londonderry's
Settlement; Virgo pg 344). [Cf. Letter of wishes]

 CRITCISM FOR NOT GIVING REASONS FOR EXERCISE OF DISCLOSURE – The

principle that trustees are not required to give reasons for the exercise of
their discretion has been criticized on the grounds that it is not especially
onerous for them to give reasons, especially where they are professional
trustees, and that providing reasons for a decision may avoid problems from
arising in the future (Hartigan Nominees v Rydge; Virgo pg 344)

 LETTER OF WISHES – Generally, letter of wishes of settlor need not be shown to the
beneficiary. There is an implied obligation of confidentiality between settlor and trustee
which would prevent the trustees from being obliged to disclose any such information (Re
Londonderry’s)

o DEFINTIION – A ‘letter of wishes’ contains nonbinding requests for the trustees to

take certain matters into account when exercising their discretionary powers. This
letter of wishes enables the settlor to express views about the objects of the trust
that might be prejudicial and hurtful if they were to be revealed in the trust
document (Virgo, pg 344)

o Cf. COURT STILL HAVE DISCRETION – The Court in Breakspear affirmed that the court
could compel for the letter to be disclosed if it were considered to be in the best
interests of the beneficiaries and the administration of the trust to do so (Virgo pg
345). The key question in exercising this discretion was what the objective
consequences of disclosure might be, rather than the subjective purpose for which
disclosure was sought.

 TRUSTEES ASK COURT TO SANCTION SCHEME; BENEFICIARIES NEED TO

ADDRESS THE COURT – On the facts, it was in the best interest of the
beneficiaries and the due administration of the trust, on the facts of that
case, for disclosure of the letter of wishes to be ordered. Trustees had
intended to seek Court’s sanction for a scheme of distribution of the trust
fund, where the letter was a key document needed to be taken into account.
This was relevant because, in seeking this approval, the trustees would have
surrendered the protection of confidentiality of the letter of intent. The
claimants also ought to be given proper opportunity to address the court on
the matter and this need outweighed the risk of family division occasioned
by disclosure.

o CONCLUSION – The decision whether to release the letter of wishes to the objects
involves a finely balanced exercise of judicial discretion. On the one hand, disclosure
of the letter might be considered to infringe the trustees' right to confidentiality in

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 decision-making, which is reflected in the principle that they are not required to
disclose reasons for their decisions. On the other hand, disclosure might be
considered to be crucial to enable the objects to monitor the administration of the
trust by the trustees (Virgo, pg 345)

Within Litigation

 DECISION DIRECTLY ATTAKCKED IN PROCEEDINGS – If a decision taken by trustees is

directly attacked in legal proceedings, the trustees may be compelled either legally
(through discovery or subpoena) or practically (in order to avoid adverse inferences being
drawn) to disclose the substance of the reasons for their decision (Scott v National Trust)

o PROPERLY PARTICULARISED CLAIM – This requires the beneficiary to make out a

properly particularized claim (not one that is a “fishing expedition” to see if
material can be found to support a claim) then this triggers ‘disclosure’ of
documents; this power of the Court is provided for under Order 24 of the Rules of
Court

6.6D Duty of Care

 DUTY OF CARE – Trustees are required to perform their administrative responsibilities

diligently, and are subject to a duty to comply with the standard of skill and care (Virgo, pg
400); this has been statutory codified in s 3A Trustees Act. In the present case ... [...] is likely
liable for a breach of the duty to exercise care and skill as in reasonable in the circumstance
[...]

o VARIABLE STANDARD OF CARE – The Trustees Act adopts what Virgo terms as a
qualified objective test – where a trustee is judged against the standard of the
reasonable person, the standard of skill and care expected will be higher depending
on what skills, experience or knowledge the trustee has, or held out to have (Virgo,
pg 400)

 MINIMUM / THRESHOLD STANDARD OF CARE – Given the adoption of an objective test, all
trustees have to comply with a minimum standard of the reasonable trustee, even those
trustees who are plainly incompetent and unsuited to the task. This is the threshold
standard of care. Virgo opines that the defendant’s circumstances, such as his lack of skill
or experience, should not be taken into account to reduce the standard of care below that
of a reasonable trustee (Virgo, pg 402). Every trustee who has assumed the office of the
trustee should be expected to comply at least with the threshold standard of objective
reasonableness (Virgo, pg 402).

o [Eval – This brings certainty to the law, in so far as there is no need to determine
intermediate standards of reasonableness; More it abides by the policy consideration
of encouraging trustees to conduct their due diligence – if they are not competent for
the task, they ought not to voluntarily assume the office of the trusteeship].

6.6E Duty to Exercise Discretion

 DUTY TO EXERCISE DISCRETION – In a discretionary trust, the trustee owes a duty to

distribute capital/income under the trust (make appointments) based on his own discretion
(discretionary ‘dispositive power’).

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 o CONSIDER THE INTERESTS AND NEEDS OF BENEFICAIRIES – While the beneficiaries
cannot dictate the way in which a trustee should exercises his discretion, this is not
to say that the beneficiaries wishes, their objective needs and interests, could be
completely disregarded by the trustee in making his decision (Foo Jee Seng at [54])

o IF TRUSTEES DON’T EXERCISE DISCRETIONARY POWER OR IMPROPERLY EXERCISED

– This duty has to be exercised properly and the court cannot intervene unless the
discretion is either improperly exercised or not exercised at all (Foo Jee Seng at
[52]). In sum, a testator is NOT given absolute discretion to the trustee; his decision
can be challenged in a court of law (at [64])

 CONSEQUENCES – In such a scenario, the Court will execute the trust

power in the manner best calculated to give effect to the settlor’s or
testator’s intentions. It may do so by appointing new trustees, or by
authorising or directing representatives of the classes of beneficiaries to
prepare a scheme of distribution, or even, should the proper basis of
distribution appear by itself directing the trustees so to distribute (Hayton
& Mitchell, 9.250)

o CASE LAW – In Foo Jee Seng, the trust document stated that the trustees could
exercise their discretionary power ‘in their absolute discretion think fit’, the court....

 Cf. FIDUCIARY POWER – The donee of power has the power, but not a duty, to make an
appointment and distribute capital/income from the trust fund in favour of the objects of
the power. A power need not be exercised. However, there is a duty to (i) consider
periodically whether or not he should exercise the power; (ii) to consider the range of
objects of the power; (iii) to consider the appropriateness of individual appointments. The
Court will only intervene if the trustee exceed their powers and possibly if they are proved
to have exercised in capriciously (Re Hay’s Settlement Trusts)

 CASE LAW; COURTS HAVE THE SUPERVISORY JURISDICTION TO DIRECT PERFORMANCE OF

TRUSTS – For instance in Klug v Klug the court ordered a payment to be made to a
beneficiary despite the improper refusal of one trustee to concur in the decision. In Bridge
Trustees Ltd v Noel Penny Turbines Pule, QC felt able to invoke the court’s inherent
jurisdiction to replace an ex-trustee of a pension trust for failure to exercise a fiduciary
power to distribute surplus assets vested in him under the terms of the pension scheme.

 CASE LAW; ACTING TO DETRIMENT OF BENEFICIAIRES; BREACH OF FIDUCIARY DUTY;

COURT DIRECTED SALE – The Court’s flexible jurisdiction to direct a discretionary trustee in
the exercise of his power is illustrated in Foo Jee Seng; The Court of Appeal directed the
trustee to exercise his discretionary power to sell the property where (1) the trustees’s
decision withhold sale of the Property indefinitely to the detriment of the beneficiaries
went against the testator’s intention which was for the property to be sold at an
appropriate moment so that maximum benefit could be obtained for the beneficiaries; (2)
he was acting in breach of his fiduciary duty to ‘to act, and to exercise his discretionary
powers, in the best interests of the beneficiaries’ (at [80]); and (3) he was acting
unreasonably in refusing to sell the proper after 30 years since the testator’s death (at [65]).
In sum, it seems that the courts are willing to ascertain the testator’s intention from the
relevant instrument; where the discretionary trustee deviates from the settlor’s intention,
the Court may intervene.

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6.7 Investment Powers and Duties

 POWER TO INVEST – Investment is generally defined as the application of money in the

purchase of some property from which interest or profit is expected, and which property is
purchased in order to be held for the sake of the income which it will yield (Re Wragg per
Lawrence J). Under s 4 Trustees Act, a trustee has the general power to invest the trust
property. This general power of investment can be expanded, restricted or excluded by the
trust instrument (s 2(2) Trustees Act)

 CONTRADICTING PRINCIPLES – Virgo observes that there are 2 contradictory principles that
arise from the duty / power to invest

o Safeguarding the fund – Trustees must naturally safeguard the trust fund for the
benefit of the beneficiaries, present and future. The trustees must therefore at least
preserve the capital value for the trust fund. This principle encourages trustees to
adopt a conservative investment policy, which seeks to avoid taking significant risks
with the investment by speculating with trust funds (Virgo, pg 405)

o Maximising the Fund – On the other hand, a modern approach to investment policy
is to recognise that trustees must maximise returns for the benefit of the
beneficiaries. This principle encourages trustees to speculate the trust fund, so as to
obtain a good income from investments and to ensure that the capital value of the
fund increases (Virgo, pg 405)

 DUTIES – The trustee is under duties in relation to the exercise of the power of investment
– (1) duty to invest only in authorised investments; (2) duty to consider investment criteria;
(3) duty to seek advice; (4) duty to obtain the best price without influence by ethical or
moral considerations; (5) duty of care

 (1) DUTY TO INVEST ONLY IN AUTHORISED INVESTMENTS – However, where the power to
invest is exercised, there is a duty to invest only in authorised investments (Virgo, pg 410;
Speight v Gaunt per Lord Blackburn). This is further bolstered by s 2(2) Trustees Act that
which provides that the power to invest apply in so far as a contrary intention is not
expressed in the trust instrument.

o NOT REQUIRED TO CONSULT BENEFICAIRIES; BUT TAKE INTO ACCOUNT COMMENTS

– Virgo opines that, trustees are generally not required to consult the beneficiaries
on the selection of investments, unless this is required by the trust instrument.
Trustees are also not bound to act on the wishes of the beneficiaries when selecting
investments, but they should consider the comments of the beneficiaries and take
them into account as approrpaite (X v A per Arden LJ; Virgo, pg 410)

o TAKE INTO ACCOUNT ALL BENEFICAIRIES; PRESENT AND FUTURE– The trustee, when
exercising the power of investment, must ensure that they have regard not only to
the interests of those who are presently entitled to the income (e.g., life interest),
but also to the interests of those who will take in the future (e.g., those who are
entitled to the remainder). The trustees have a duty to exercise their investment
powers in the best interests of present and future beneficiaries and should hold the
scales impartially between the different classes of beneficiaries (Virgo, pg 410)

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 (2) DUTY TO CONSIDER INVESTMENT CRITERIA – In exercising the general power of
investment or any power of investment (e.g. one created by the trust instrument) the
trustee is under a statutory duty to (a) have regard to ‘standard investment criteria’; and (b)
view the investments from time to time and consider whether they should be varied,
having regard to the standard investment criteria (s 5 Trustees Act).

o The standard investment criteria are (a) the suitability to the trust for the particular
investment; and (b) the need for diversification of the investment of the trust (s 5(3)
TA)

o SUITABILITY – Whether an investment is suitable or not requires the trustee to

consider various factors, in particular (1) the size of trust fund; (2) the anticipated
length of the trust; (3) the degree of risk attaching to the investment. The smaller the
fund & shorter the anticipated life of the trust, the appropriate it will be to make
short-term investment, and vice versa. It is also not appropriate for the trustees to
take unacceptable risks with investments (Virgo, pg 407).

 Overall, trustees should avoid investments that are particularly risky. Virgo
opines that the key aim is to obtain the best return for the beneficiaries
having regard to the risk of the investment, and the prospects of income
yield and capital appreciation (Cowan v Scargill; Virgo, pg 410)

o DIVERSIFICATION – This requires the trustee to consider the relative risk of loss and
gain, and to ensure that the trustees invest in competing sectors, so that if one sector
is doing less well, another sector might do better and give a better return (Virgo, pg
407). In sum, the investments should be diversified, so that the trustees do not, for
example, invest all of the funds in one account or the shares of one particular
company

 (3) DUTY TO SEEK ADVICE – Before exercising any power of investment or when reviewing
any trust investments, a trustee is under a duty to obtain and consider proper advice about
how the power should be exercised in the light of the standard investment criteria (s 6(1) &
s 6(2) TA).

o PROPER – The advice is considered to be ‘proper’ where the trustee reasonably

believes that the person is qualified to give advice by virtue of their ability or
practical experience of financial matters relating to the proposed investment (s 6(4)
TA)

o UNLESS REASONABLE CONCLUSION THAT NO ADVICE IS NEEDED – This duty does

not apply where the trustee reasonably concludes that it is not necessary or
appropriate to obtain advice (e.g. where fund is small, so that the cost of obtaining
advice might be more than the value of investment, or where the trustee is a
professional investment advisor) (s 6(3) TA)

 (4) DUTY TO OBTAIN THE BEST PRICE – When trustees are buying and selling trust property,
they are under a duty to obtain the best price and must not be influenced by ethical or
moral considerations (Virgo, pg 409). Virgo opines that the best way of satisfying this duty
is by stirring up competition (Virgo, pg 409). Naturally, if the market is strong, a reasonable
trustee would more likely hold out for a better offer, but where the market is weak, it will

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 be more reasonable to accept an offer that might be considered to be relatively low (Virgo,
pg 409)

o DUTY TO GAZUMP – Moreover, where the trustees have accepted an offer to sell
the property, if they subsequently receive a better offer, trustees should renege on
the prior offer and accept the better offer (Virgo, pg 409). This is the ‘duty to
gazump’ (Virgo, pg 409). In this respect, Virgo opines that this is an example where a
trustee has to ‘act dishonourably for the benefit of the trust’ (Cowan v Scargill per
Megarry VC); morality is thus an irrelevant consideration. This stems from the
overriding duty to obtain the best price they can for their beneficiaries (Buttle v
Saunders per Wynn Parry J).

 (5) DUTY OF CARE – The duty of a trustee is not to take such care only as a prudent man
would take if he had only himself to consider. When exercising powers of investment, The
standard of care and skill is that an ordinary prudent person would adopt when acting for
the benefit of other people for whom they ‘felt morally bound to provide’ (Re Whiteley per
Lindley LJ). Virgo opines that this might be interpreted to mean that even greater care is
expected of the trustee than in managing one’s own private or business affairs (Virgo, pg
400)

o This would naturally encompass reviewing the portfolio of investments regularly and
if lacking investment knowledge, seeking professional advice and considering such
advice before acting upon it (Hayton & Mitchell, 9.117). Notably, a prudent person
might reasonably select some speculative investments for herself that she should
avoid if investing for the benefit of another person who depends on the trust fund
as a safe basis for securing her future (Hayton & Mitchell, 9.117).

o GENERAL TENSION; DON’T WANT TO ENCOURAGE LACK OF CARE; HONEST

TRUSTEES – Lindley LJ in In re Whiteley opined that, on one hand, the Court ought
not to encourage laxity and want of care, but on the other hand, the Court ought
not to prevent people from becoming trustees by converting honest trustees into
insurers of the moneys committed to their care. Therefore, the court will generally
not affix liability upon a trustee who has committed no more than an error of
judgement from which no business man, however prudent care be expected to be
immune. As long as the trustee acts ‘reasonable care, prudence and
circumspection” he will not be liable (In re Chapman per Lopes LJ)

o VARYING STANDARD OF CARE; LIABLE TO INCREASE – If the trustee is a person

professing particular expertise in the management of trusts, and he has been
appointed for that reason, his conduct will be judged by the standards he professes.
A professional person, a trust corporation, held out as an expert, will be expected to
display the degree of skill and care and diligence such an expert would have.
(Hayton & Mitchell, 9.118)

 DUTY OF CARE IN RESPECT OF TRUST-HELD COMPANY SHARES – Where trustees own

sufficient shares in a company to give them a controlling interest, they will be subject to
additional obligations to safeguard the trust’s investment in the company because, through
the majority control, they are able to become actively involved in the management of the
company (Bartlett; Virgo, pg 415); the trustee should not be content to receive the same
information at the annual general meeting as any ordinary shareholder would have received

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 (Bartlett; Virgo, pg 415). Therefore, the trustee ought to, at the very least, intervene with
managerial decisions where the decisions were ‘imprudent, hazardous, and wholly
unsuitable as an investment vehicle for a trust’ (Bartlett; Virgo, pg 415). Trustees should
therefore ensure that there are able to make an informed decision as to whether any action
was necessary for the protection of the trust’s investment (Bartlett; Virgo, pg 415). This may
require consultation with directors / placing a nominee director of the trustee / the trustee
himself assuming a directorial position (Bartlett; Virgo, pg 415)

6.7A Ethical Considerations

 ETHICAL CONSIDERATIONS – A trustee should not factor in his personal ethical

considerations when exercising his power of investment. Trustees have to pursue financially
beneficial investments even where they personally disagree with the proposed investment
from a moral point of view.

o MUST BE YIELDED FOR BEST PROFITS – The power of investment must be exercised
to yield the best return for the beneficiaries, having regard to the risk of investment,
but without regard to ethical considerations

o QUOTE – In the words of Lord Murray in Martin v City of Edinburgh, a trustee ‘should
recognise that he has [political, moral or religious] preferences and do his best to
exercise fair and impartial judgment on the issues before him. If he cannot then he
should abstain from participating in deciding the issue or, in an extreme case, resign
as trustee.’

o CASE LAW – In Cowan v Scargill, the Court held that the trustees had committed a
breach of trust by taking into account ethnical consideration when considering the
investment plan. Virgo opines that the decision in Cowan v Scargill is the recognition
of the principle that trustees should put aside their personal interests and views
when selecting investments. This approach is consistent with the general duty to
safeguard assets, under which the trustees must put aside moral considerations.
(Virgo, pg 412)

 EXCEPTION; BENEFICAIRIES ALL ADULT OR INVESTMENT EXCLUDED IN TRUST INSTRUMENT

– However, the general principle in favour of ignoring ethnical and non-financial
consideration when selecting investments is qualified in certain circumstances. (1) where all
the beneficiaries are adults with full legal capacity (sui juris and compos mentis) and who
are absolutely entitled to the trust property, it is legitimate for the trustees to have regard
to ethical considerations when selecting if all of beneficiaries have strict views on such
matters (Cowan v Scargill; Virgo, pg 412). Virgo opines that this effectively involves an
application of the principle in Saunders v Vautier, not to terminate the trust but to qualify
the normal rules on selecting investments; (2) a certain investment is excluded on moral
grounds in the trust instrument (Virgo, pg 413)

 EXCEPTION; CHARITIES – Virgo opines that there is greater scope for trustees of charitable
purpose trusts to have regard to ethical considerations (Virgo, pg 413). In Harries v Church,
Nicholls VC that generally, trustees have a duty to further the purpose of the trust and
should seek to obtain the maximum return by income that is consistent with commercial
prudence. However, exceptionally, where choosing certain types of investment will conflict
with aims of the charity, the trustees should not invest in such investments, even if it
would result in significant financial detriment to the charity (Virgo, pg 413). Moreover,

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 investments that conflict with the aims of the charity might hamper the charity’s work and
alienate donors / make beneficiaries unwilling to be helped because of the source of the
funding (e.g. charity of cancer relief investing in tobacco companies).

o CASE LAW – In Harries v Church, there was a charitable purpose trust to promote the
Christian faith through the Church of England where the Church Commissioners were
the trustees. The Commissioners had a policy of not investing in companies the main
business of which involved armaments, gambling, alcohol, or tobacco. There was a
significant body of opinion within the members of the Church of England that was
opposed to such businesses on religious or moral grounds, and, crucially, there were
alternative investments that the Commissioners could make to obtain an equivalent
financial return. This was held to be legitimate. The Commissioners also had a policy
of not investing in newspapers, because many newspapers were associated with
particular political parties or political views, investment in which might compromise
the neutrality of the Commissioners. This was also held to be a legitimate policy to
adopt

7 RESULTING TRUST

 ALTERNATIVE CLASSIFCATION – Following Lord Browne-Wilkinson’s classification in

Westdeutsche, there are 2 types of resulting trust

(1) PRESUMED RESULTING TRUST; TYPE A – Where A makes (1) voluntary payment to B
or; (2) pays (wholly or in part) for the purchase of property which is vested either in
B alone or in the joint names of A & B (‘Type A’ Resulting trust). This corresponds with
Megarry J’s terminology of an presumed resulting trust.

a. In such circumstances, there’s a presumption that A did not intend to make a gift
to B: the money or property is held on resulting trust for A (if he is the sole
provider of the money) or in the case of a joint purchase by A and B in shares
proportionate to their contributions

(2) AUTOMATIC RESULTING TRUST; TYPE B – Where A transfers property to B on

express trust, but the trusts declared do not exhaust the whole beneficial interest
(‘Type B’ Resulting Trust) (Lau Siew Kim at [34]). This corresponds with Megarry J’s
terminology of an automatic resulting trust.

 DISTINCTION; NATURE OF TRUST; WHEN IT ARISES; WHAT HAPPENS – Megarry J in in Re

Vandervell opined that the distinction lay in the nature of each resulting trust.

o PRT – In PRT cases, both the existence and content of the trust needs to be
established (by proving the A contributed to the purchase price of the property). The
presumption is that the recipient B, holds as trustee for the transferor or in the case
of a purchase contribution PRT, the extent of A’s interest.

o ART – In contrast, where the ART is concerned, the trust ‘does not depend on any
intentions or presumptions, but is the automatic consequence of A’s failure to
dispose of what vested in him ... the trust doesn’t does establish the trust but merely
carries back to A the beneficial interest that has not been disposed of’ (noted in
Penner, pg 131). In the case of the ART, B is already the trustee – the question is for
whom he holds the property on trust; what needs to be shown is that what was
thought to be an effective disposition by the settlor fails.

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  Cf. JOINT TENANT – In a joint-tenancy, there are no shares in that each joint tenant does not
hold any specific or distinct share himself, but each is invested with the totality of the co-
owned interest. (Gray & Gray; Goh Teh Lee)

o The interest of each joint tenant is identical and lies in the whole and every part of
the land, and none of that land is held by one joint tenant to the exclusion of the rest

7.1 Presumed Resulting Trusts

 PRESUMED RESULTING TRUSTS (or type A resulting trust per Lord Browne-Wilkinson in
Westdeutsche) arises where (1) A makes voluntary payment to B in the absence of
consideration; or (2) A pays (wholly or in part) for the purchase of property which is vested
either in B alone or in the joint names of A & B in the absence of consideration.

 GENERAL BASIS; EQUITY PRESUMED BARGAINS NOT GIFT; COMMON SENSE – Equity, with
its superbly realistic grasp of human motivations, “assumes bargains, and not gifts”
(Goodfriend). Therefore, Equity makes a ‘traditional commonsense presumption’ that a
person who contributes to purchase price of a property or makes a voluntary transfer
intends to obtain an equivalent equitable interest in the property acquired (Lau Siew Kim at
[37] per Rajah JA). This is ‘derived from common experience and understanding of how
ordinary sane human beings would usually behave and conduct themselves’ (Kelvin Lim at
[127] per Chan J)

o REBUTTABLE – However, since a PRT is ‘no more than a long stop to provide the
answer when the relevant facts and circumstances fail to yield a solution’ (Lord
Upjohn in Vandervell), the recipient can seek to rebut it by adducing evidence to
show the it was intended to benefit or to make a gift to the transferee (Virgo, pg
233)

 Cf. UK; ABOLISHED RESULTING TRUST IN DOMESTIC CONTEXT – The majority opinion of the
Supreme Court (UK) in Stack v Dowden abolished the presumption of resulting trusts in
domestic property disputes. Lady Hale opined the law of trusts has moved from ‘crude
factors of money contribution’ to ‘more subtle factors of intentional bargain (which are the
foundational premise of the constructive trust)’ (at [60]). Therefore, the CICT has replaced
the RT as the means of dealing with the proprietary consequences of a relationship
breakdown (Virgo, pg 303).

o SINGAPORE; LORD NEUBERGER’S APPROACH – The Singapore Court of Appeal has

endorsed Lord Neuberger’s dissenting approach in Stack, which is a principled
approach and consistent with fundamental principles of the law of trusts (Law Siew
Kim). This is to ensure conformity with establish case law and trust principles, plus
the fact that the UK’s approach largely relied on purchase price as a decisive factor
anyway.

 PRESUMPTIONS NOT RELEVANT WHEN THERE IS DIRECT EVIDENCE REVEAL TRUE

INTENTION – The presumption of resulting trust (and advancement) will NOT be not called
in aid when there is direct evidence before the court that clearly reveals the true intention
of the transferor (Su Emmanuel at [79]). Therefore, where there is a CLEAR intention proved
by direct evidence to benefit the recipient, there is no need to draw the inference of a lack
of intention to benefit the recipient (at [79]; Chan Yuen Lan at [52])

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 o The Court in Mocowik opined that ‘Presumptions may be looked on as the bats of
the law, flitting in the twilight but disappearing in the sunshine of actual facts’ (Lau
Siew Kim)

 FACTS MAY ALSO LEAD TO FINDING COMMON INTENTION CONSTRUCTIVE TRUST – Penner
observes that when evidence of a case may not only confirm / rebut the presumption of
resulting trust or advancement, but may even be sufficient for the court to determine the
parties’ actual intentions and find their respective interests to be determined by a
[COMMON INTENTION] CONSTRUCTIVE trust (Penner, pg 145)

7.1A Essay

 FORMALITIES; INFORMAL ARRANGEMENT; EQUITY AND TRUSTS INTERVENE – There are

various formality requirements relating to property. For example, wills must be witness and
written, and the creation of express trusts of land must be evidenced by signed writing to be
enforceable (Civil Law Act, Section 7). There may be situations in which parties have not
complied with the formality requirements and instead enter into informal, typically oral,
arrangements relating to property (Virgo, pg 299). Therefore, the issue is whether the
transaction has been rendered effective DESPITE the informality of the arrangement. In this
regard, Equity plays an important role in rendering such informal arrangements effective
through the recognition of resulting, constructive or implied trust, as well as the doctrine of
proprietary estoppel (Virgo, pg 299)

 JOINT OWNERSHIP PARAGRAPH; MODERN SOCIETY; NEED FOR CLEAR PRT PRINCIPLES – As
observed by Rajah JA in Lau Siew Kim, modern society sees a greater number of properties
are being held in joint names. This has been engendered by a variety of factors including
rising property prices, joint-income families, and gender equality. With this comes an
increasing number of disputes as to the ownership of the property, particularly between
spouses.

o Equity does not look favourably on joint tenancies due to the operation of the rule
of survivorship, which is viewed as draconian and unfair, given that it
disproportionately divests the deceased joint tenant of his share of a property,
vesting it in the surviving tenant (Neo Hui Ling at [14]).

o Therefore, ‘a clear articulation and understanding of the law governing the

proprietary rights of co-owners is now more relevant than ever before’ (at [1]). The
law of implied trusts was conceived to validate and facilitate the recognition of
equitable interests whenever fairness required that formal title ownership be
adjusted to reflect the real interests of the parties in a property (at [1])

 GENERAL BASIS; EQUITY PRESUMED BARGAINS NOT GIFT – Equity, with its superbly
realistic grasp of human motivations, “assumes bargains, and not gifts” (Goodfriend v
Goodfriend). Therefore, V K Rajah JA in Lau Siew Kim observed that Equity makes a
‘traditional commonsense presumption’ that a person who contributes to purchase price of
a property or makes a voluntary transfer intends to obtain an equivalent equitable interest
in the property acquired. The presumption of resulting trust is an inference or even an
estimate as to what a party’s intention is likely to be (at [37])

 GENERAL ESSAY INTORDUCTION – As opined by Rajah JA in Lau Siew Kim, the law of implied
trusts was conceived to validate and facilitate the recognition of equitable interests

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 whenever fairness required that formal title ownership be adjusted to reflect the real
interests of the parties in a property (at [1]). Equity therefore presumes a resulting trust
where the transferee has not given full consideration or is a fiduciary or is under an
obligation to return the property to the transferor (at [2]). A countervailing presumption is
the presumption of advancement that applies to certain close relationships where it might
be logically surmised that the transferor intended to make a gift to the transferee (at [2])
Where a spousal relationship is present, the competing and diametrically opposite
presumptions of resulting trust and advancement take centre stage. The presumptions are,
in the final analysis, no more than evidential guidelines distilled from contemporary norms
(at [2]). Both presumptions can be refuted by evidence of the real objective of the
transferor

o PRINCIPALED AND PRACTICAL – In Lau Siew Kim, Rajah JA affirmed that Equitable
doctrines must be approached and applied in a practical and principled manner.

 EQUITABLE PRINCIPLES MSUT REFLECT CONTEMPORARY SOCIETAL VALUES – The Court of

Appeal in Lau Siew Kim emphasised that equitable principles should be developed to reflect
contemporary societal values (at [38]). Presumptions (of resulting trust & advancement)
must remain dynamic in order to remain relevant and functional. Current community
attitudes and societal trends must be taken into account to a close scrutiny and study of the
presumption of RT and presumption of advancement (at [3])

 CALLS FOR ABOLISHMENT OF RESULTING TRUST; UNCERTAIN; BLANKET PRESUMPTIONS;

ARCHAIC; In Lau Siew Kim, Rajah JA noted that within many common law jurisdictions, the
presumption of resulting trust has been subjected to strident criticism. It has been regarded
as archaic and anachronistic, and the presumption appears to enshrine outdated values (at
[47]) In Australia, concerns have been made the injection of uncertainty in property
transactions within the Torrens system of titles – where the register is meant to reflect the
interests of the parties (at [49]). Moreover, the danger of BLANKET PRESUMPTIONS
premised upon assumptions based on certain familial relations was particularly dangerous,
given the ‘increasing diversity and decreasing homogeneity of societies’ (at [50]).

 A MORE MODERATE APPROACH; STRENGTH VARIES BASED ON FACTS OF CASE; CONTEXT-

SPECIFIC; In Lau Siew Kim, the Court of Appeal took the view that, in place of a complete and
radical abolishment of the presumption of resulting trust, a more moderate and nuanced
approach is preferable. A nuanced approach will align the presumption of resulting trust
with modern expectations and practices (at [52]). Therefore, the STRENGTH of the
presumption of the resulting trust would VARY according to the different factual matrices; it
is not meant to be an immutable rule to be applied blindly and rigidly in the same manner
to all cases. As a corollary to this, the evidence required to rebut the presumption in each
case should, in turn, vary with the strength of the presumption (at [52]) This pragmatic
approach affords the courts considerable flexibility in shaping and applying the
presumption of resulting trust so as to dovetail with the present-day circumstances (at
[55]).

7.1B Theoretical Basis

 SINGAPORE’S POSITON – The Court of Appeal in Chan Yuen Lan endorsed Prof Robert
Chambers’ analysis that the resulting trust is a response to a LACK OF INTENTION to benefit
the recipient (at [38]). The court commented that the lack-of-intention analysis provides a

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 more sensible basis for the principled yet pragmatic development of this equitable doctrine
(at [44])

o ACKNOWLEDGEMENT OF CRITCISM; EXPAND SCOPE; UNJUST ENRICHMENT – The

Court of Appeal acknowledged that the lack-of-intention analysis has been criticised
as expanding the scope of resulting trusts beyond acceptable bounds (at [39]) by
blurring the distinction between unjust enrcihmetn and resulting trust. Indeed,
Chamber’s analysis portends converting a ‘well-established personal claim to
restore value to the claimant into a proprietary claim’. (Virgo, pg 266). This would
have ‘unsettling effects on the rights of third parties and the security of commercial
transactions’ (at [48]). For instance, where the defendant is insolvent, the claimant's
claim will rank above the defendant's unsecured creditors (pg 266).

 VIRGO’S SUBMISSION; REJECT CHAMBER’S THEORY; UNDERLYING BASIS IS

IMPUTED OR PRESUMED INTENTION – It is for this reason that Virgo has
REJECTED Chamber’s absence-of-intent theory on the basis that it is
unprincipled and unacceptable for policy reasons in expanding potential
proprietary claims. Rather, Virgo argues that the resulting trust responds to
the transferor’s imputed or presumed intention that the property should
be held on trust.

o INTENTION FOR RESULTING TRUST INTERPRETED MORE NARROWLY THAN UNJUST

ENRICHMENT – The Court of Appeal was not prepared to approved Chambers’
wider theory of resulting trusts as a tool that reverses unjust enrichment. The Court
of Appeal then tentatively adopted Prof Virgo’s position that it is VITAL to define the
notion of the vitiation of the claimant’s intent more restrictively than that in
ground of restitution for unjust enrichment (at [48]; The Principles of the Law of
Restitution). Therefore, just because the claimant’s intention to benefit the
defendant has been vitiated for the purposes of identifying a ground of restitution
for unjust enrichment, it does not necessarily mean that the claimant’s intention to
benefit the defendant has been vitiated for the purposes of identifying a resulting
trust.

 THEORIES OF PRTS – A great deal of controversy surrounding presumption trust is ‘what is

the ‘content’ of the presumption of resulting trust?’ (Penner, pg 139). There are generally
three alternatives to analysing the presumption of resulting trust

(1) PRESUMED INTENTION TO CREATE TRUST – The resulting trust responds to a presumed
intention to create a trust – i.e. the court presumes that the transferor made an express
declaration of trust in favour of himself (Swadling). DOES NOT EXPLAIN CASES – To this
theory, Penner responds that there are too many cases which are inexplicable if this is the
presumption (Penner, pg 139). For instance, in Re Vinogradoff, the resulting trust arose even
though an effective declaration of trust was clearly impossible on the facts, since the
resulting trustee was four years old (Penner, pg 139). Moreover, in cases of purchase price
contribution PRTs, it cannot be realistically argued that the presumption which gives rise to
a resulting trust was that the contributor made an effective declaration of trust, given that
there is often no discussion between the parties of any kind as to the beneficial interest of
the trust, and thus no declaration of trust by the contributor (Penner, pg 139)

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 (2) ABSENCE OF INTENTION TO BENEFIT – The resulting trust responds to an ABSENCE OF
INTENTION on the part of the transferor to pass a beneficial interest to (1) the transferee
or; (2) recipient of property purchased where A contributed to the purchase price
(Chambers). EXPLAIN CASES – Penner observes that the reason why this formulation is
attractive is that it applies to cases where the transferor/contributor enters the transaction
without actually settling their own intentions, as in Dullow v Dullow where the plaintiff was
basically confused about what she thought her property transaction amounted to (Penner,
pg 140)

a. CRITICISM – Penner argues that, if a person transfers property he must

NECESSARILY have intentions as to who is to benefit from the property transferred.
And, if he has those intentions, why on earth should the court, in the absence of
evidence, act on a presumption as to what was absent from his mind rather than
what was positively there? This sort of consideration favours the POSITIVE
INTENTION formulation in (3).

(3) POSITIVE INTENTION TO NOT BENEFIT – The resulting trust responds to the fact that the
transferor has a positive intention that the transferee SHOULD NOT take the property FOR
HIS OWN BENEFIT (John Mee / James Penner).

Resulting trust and Unjust Enrichment

 FUNCTION – Unjust enrichment establishes that the claimant's intention to transfer the
enrichment to the defendant can be regarded as absent or defective in some way. This may
be because the claimant made a mistake, or was compelled to transfer the enrichment, or
was unduly influenced by the defendant, or transferred the enrichment expecting to
receive something in return and nothing was forthcoming, known as 'total failure of basis or
consideration'.

 CHAMBER’S THOERY OF LACK OF INTENTION FOR RESULTING TRUST; UNJUST

ENRICHMENT – Chambers has argued that from this vitiation of intention in the law of
unjust enrichment, in many cases of unjust enrichment, the enrichment received by the
defendant should be held on resulting trust for the claimant (Virgo, pg 266). This is because
the resulting trust arises whenever the claimant lacked the intent to benefit the defendant.

o VIRGO’S SUBMISSION; REJECT CHAMBER’S THEORY; UNDERLYING BASIS IS

IMPUTED OR PRESUMED INTENTION – It is for this reason that Virgo has REJECTED
Chamber’s absence-of-intent theory on the basis that it is unprincipled and
unacceptable for policy reasons in expanding potential proprietary claims. Rather,
Virgo argues that the resulting trust can arise only in circumstances where it falls
within one of the recognised circumstances of a presumed resulting trust, or where
an express trust fails. In both situations, the underlying trigger for the resulting trust
is MOSTLY appropriately considered to be the transferor’s imputed or presumed
intention that the property should be held on trust for the.

 SEE ABOVE FOR SINGAPORE’S POSITION

7.1C Presumption vs Resulting Trust

 DISTINCITON BETWEEN PRT AND RT ITSELF – As observed by Rajah JA in Lau Siew Kim, an
important distinction between the presumption of resulting trust and the resulting trust
itself is to be noted – the presumption is an inference of a fact drawn from the existence of

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 other facts, whereas the resulting trust is the equitable response to those facts, proved or
presumed (at [35])

o PRESUMPTION RT GENERALLY – The facts which give rise to the presumption of

resulting trust are (i) a transfer of property to another, (ii) for which the recipient
does not provide the whole of the consideration

o RESULTING TRUST ITSELF; NO NEED FOR LACK OF CONSDIERATION – The resulting

trust can be proven (that is, arise independent of a presumption) where there (i) a
transfer of property to another, (ii) in circumstances in which the provider does not
intend to benefit the recipient (following Robert Chambers) (at [35]). The lack of
consideration required for the presumption is not a requirement for the resulting
trust (at [35]).

 CONCLUSION; CAN ARISE INDEPENDENTLY – Therefore, a resulting trust may arise

independently of the presumption of resulting trust so long as it can be shown that the
transfer was not intended to benefit the recipient (Chan Yuen Lan at [43]).

7.1D Rebuttable Presumption

 REBUTTABLE PRESUMPTION – Crucially, the recognition of trusts by Equity does not serve
‘to defeat the intentions of donors or settlors’ (Standing v Bowring per Lindley LJ).
Conversely, trusts are ‘created or implied ... in order to carry out and give effect to their true
intentions, expressed or implied’ (Lau Siew Kim at [37]). The recipient can seek to rebut it by
adducing evidence to show the it was intended to benefit or to make a gift to the
transferee (Virgo, pg 233)

o LONG STOP TO PROVIDE ANSWER – As opined by Lord Upjohn in Vandervell, the

presumption of a resulting trust is no more than a long stop to provide the answer
when the relevant facts and circumstances fail to yield a solution.

o STRENGTH AS VARYING – The STRENGTH of the presumption of the resulting trust

would VARY according to the different factual matrices; it is not meant to be an
immutable rule to be applied blindly and rigidly in the same manner to all cases. As
a corollary to this, the evidence required to rebut the presumption in each case
should, in turn, vary with the strength of the presumption (Lau Siew Kim at [52])

 MUST PROVE PRESENCE OF INTENTION TO MAKE GIFT; NOT ABSENCE OF INTENTION TO

RETAIN INTEREST – Since the Singapore Court of Appeal has adopted Chamber’s ‘lack of
intention analysis’, in rebutting the PRT, what needs to be proved is that THE TRANSFEROR
INTENDED TO BENEFIT OR TO MAKE A GIFT TO THE TRANSFEREE, NOT that the transferor
did not have an intention to retain a beneficial interest, but (Chia Kok Weng at [48] per
Prakash JA)

o USUALLY NO PRACTICAL DIFFERENCE; BUT EXCEPTIONAL FACTS; WENG DID NOT

DIRECT HIS MIND TO BENEFCIAL INTEREST; CANNOT REBUT SINCE YEO HAS TO
PROVE PRESENCE OF POSTIVE INTENTION TO BENEFIT – Judith Prakash JA opined
that IN MOST CASES, there is NO practical difference between the two. However, on
the unique facts of Chia Kok Weng the the distinction was material as one Weng, the
transferor of his share in the property, DID NOT APPLY HIS MIND TO HIS BENEFICIAL
INTEREST in the property when he transferred his shares to his brother.

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 o Judith Prakash JA opined that if, to rebut the presumption, it had to be proven that
Weng did NOT intend to retain the beneficial interest, then this burden was
arguably discharged since, ‘Weng did not specifically direct his mind to whether he
intended to retain a beneficial interest when made the transfer’. Conversely, if to
rebut the presumption Yeo must prove that Weng intended to make a gift to Yeo
when he effected the 1984 Transfer, then that burden would not be discharged as
he did not address his mind at all to whether he was making a gift to Yeo. In sum,
since there was a need for a POSITIVE INTENTION to rebut the presumption (under
a ‘lack of intention’), the presumption could not be rebutted since Weng DID not
apply his mind to his beneficial share of the property – and cannot be said to have
any intention insofar as his beneficial share was concerned.

 WAYS OF REBUTTING PRESUMPTON – The presumption will be rebutted by actual evidence

of any intention which is inconsistent with the presumption (Penner, pg 142).

o A paid the money to B to discharge a contractual obligation (Westdeutsche

Landesbank)

o A made an express declaration of trust which determines the beneficial interests

(Pettitt v Pettitt)

o In the case of purchase money contribution, that A loaned the money to B (Re
Sharpe)

7.1E Voluntarily Transfer PRT

 Voluntarily Transfer PRT – A presumption of resulting trust (or type A resulting trust per
Lord Browne-Wilkinson in Westdeutsche) arises where – (i) there is a voluntary transfer of
property to another (ii) for which the recipient does not provide the whole of the
consideration (Lau at [35] per Rajah JA).

o GENERAL BASIS; EQUITY PRESUMED BARGAINS NOT GIFT; COMMON SENSE –

Equity, with its superbly realistic grasp of human motivations, “assumes bargains,
and not gifts” (Goodfriend). Therefore, Equity makes a ‘traditional commonsense
presumption’ that a person who contributes to purchase price of a property or
makes a voluntary transfer intends to obtain an equivalent equitable interest in the
property acquired (Lau Siew Kim at [37] per Rajah JA).

o ENFORCEABLE – Crucially, this trust will be enforceable as resulting trusts are

exempted from formality requirements under the Civil Law Act (s 7(3))

 REBUTTABLE – However, since a PRT is ‘no more than a long stop to provide the answer
when the relevant facts and circumstances fail to yield a solution’ (Lord Upjohn in
Vandervell), the recipient can seek to rebut it by adducing evidence to show the it was
intended to benefit or to make a gift to the transferee (Virgo, pg 233)

Special Types of Property

 LIMIT ON VOLUNTARY TRANSFER PRTS – The limit as to what kind of personalty the
purchase contribution or voluntary transfer PRT applies to depends on the broader theory
of the resulting trust that one subscribes to (Penner, pg 135).

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 (1) SHARES – Resulting trusts can also arise over shares (Re Vinogradoff [1935] W.N 68; Tan
Yok Koon in Singapore)

 (2) JOINT BACK ACCOUNTS – The Court have accepted the applicability of a resulting trust
analysis in a joint bank account (see Lim Chen Yeow) The question as to whether the
surviving volunteer holds the funds in the joint bank account on resulting trust for the joint
tenant’s estate turns on the intention of the depositor (Penner, pg 135). In Singapore, it has
been affirmed that bank documents including the survivorship clause is to be regarded as
one aspect of the overall evidence in the court’s determination of the intention of the
deceased with respect to the beneficial interest in the moneys that the deceased had
contributed (Lim Chen Yeow at [117])

o EVAL – It is argued that such an approach is supported as...

o BUT THEY PROVIDE A GOOD STARTING POINT – However, bank documents provide
a ‘good starting point for any evidential search for the intention of the deceased’
(Lim Chen Yeow at [118]), especially where the documents stipulate how the legal
and beneficial interests are to be dealt with on the death of 1 joint account holder
and when the parties are made aware of these terms (at [118])

o CASE LAW – In Lim Chen Yeow, the Court found that there was an intention to
benefit the surivivng volunteer. The clause stated “the amount standing to the credit
of the joint account shall be held for the benefit and to the order of the survivor”.
These underlined words in the bank’s terms and conditions, which both the
defendant and Bee Bee agreed to, constituted very strong evidence of what Bee
Bee’s true intentions were, namely that he, the defendant, was to have the money
beneficially if he survived her.

 GENERAL SCENARIO – Penner writes that joint bank accounts are ‘a troubled example of
how the PRT has been applied to personalty’ (pg 135). The typical situation is where courts
are faced with determining the entitlement to funds in a joint bank account, where there are
2 parties – (1) the depositor of funds who dies before the other joint account holder; (2) and
a volunteer who contributes to funds to the account. The personal representatives of the
estate of the deceased depositor will often argue that a resulting trust arises, while the
volunteer will argue that he has taken funds will be subject to the right of survivorship, and
he is thus beneficially entitled to them (Penner, pg 135).

 CANADA; BANK DOCUMENTS IS LEGAL TITLE – This flexible approach that takes into
account all the circumstances of the case to ascertain the depositor’s intention is supported
by the Canadian cases which characterised bank documents setting up a joint account as
agreements between the account holders and the bank regarding the legal title, not
evidence of an agreement between the account holders as to beneficial title (Penner, pg
135).

 Cf. UK APPROACH; DETERMINATIVE ALMOST – However, in the recent Privy Council case of
Whitlock v Moree, the Majority in a 3-2 decision, the majority held that the clause in the
account opening agreement that dealt with the beneficial ownership of the joint account,
‘on its true construction’, provided for ‘any balance on the account to be the beneficial
property of the survivor ... regardless who contributed the money’ (at [50]). In essence, the
presence of the clause was determinative of the depositor’s intention as to the beneficial
ownership of the account (Penner, pg 136). With the presence of this clause, there was no

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 need to invoke the ‘ordinary equitable toolbox’ (at [59]) and ‘conduct an open-ended
factual analysis as to the subjective intention’ of the depositor’ (at [50]).

o Cf. CRTICISM; MOST PEOPLE DON’T READ THE FORMS; AGREEMENT IS REGARDING
LEGAL TITLE –

o PEOPLE DONT READ CLAUSES – Penner opines that the ‘obvious objection’ to the
majority’s view in Whitlock v Moree is that parties who sign an agreement that
expressly set out their beneficial interests often do not read the agreements they
sign and have no idea what they are signing (pg 136). Indeed, this objection formed
the basis for Lord Carnwath’s dissent (with whom Lord Wilson agreed) in Whitlock v
Moree. Lord Carnwath opined that the clause was ‘part of a standard form prepared
by the bank, with no input from the customers’.

o CLASUE NOT DEALING WITH BENEFICIAL INTEREST – Moreover, the clause was
‘designed to deal with matters [that] the bank was concerned [with]’ – i.e. ‘legal not
beneficial interests’ (at [88]). There was no reason for the bank to ‘use its standard
terms to dictate to its customers how to dispose of the beneficial interests in funds
held in its accounts’ (at [88] following Rand J in Niles v Lake). On the other side, from
the customer’s point of view, ‘the primary purpose of a bank account is as a
mechanism to hold and handle money’, and it is ‘not the sort of instrument one
would expect to be used to make a very generous gift ... to a personal friend’ (at
[88]) [in Whitlock, the fund was some $190k)

7.1F Purchase Contribution PRT

 PURCHASE CONTRIBUTION PRT – A purchase contribution presumption of resulting trust (or

type A resulting trust per Lord Browne-Wilkinson in Westdeutsche) will likely arise since (1)
[...] paid (wholly or in part) for the purchase of property; (2) which vested either in B alone
or in the joint names of A & B in the absence of consideration (Westdeutsche per Lord
Browne-Wilkinson)

o GENERAL BASIS; EQUITY PRESUMED BARGAINS NOT GIFT; COMMON SENSE –

Equity, with its superbly realistic grasp of human motivations, “assumes bargains,
and not gifts” (Goodfriend). Therefore, Equity makes a ‘traditional commonsense
presumption’ that a person who contributes to purchase price of a property or
makes a voluntary transfer intends to obtain an equivalent equitable interest in the
property acquired (Lau Siew Kim at [37] per Rajah JA).

o ENFORCEABLE – Crucially, this trust will be enforceable as resulting trusts are

exempted from formality requirements under the Civil Law Act (s 7(3))

o REBUTTABLE – However, since a PRT is ‘no more than a long stop to provide the
answer when the relevant facts and circumstances fail to yield a solution’ (Lord
Upjohn in Vandervell), the recipient can seek to rebut it by adducing evidence to
show the it was intended to be an outright transfer by way of gift (Virgo, pg 233)

 NOT REBUTTED BY MERE PRESENCE OF SURVIVORSHIP CLAUSE; BOTH PARTIES ALIVE – In

Neo Hui Ling, 2 parties held the property as joint tenants where 1 party contributed the full
purchase price. The Court rejected the presence of a survivorship clause as conclusive
evidence of the contributor’s intention to benefit the other party when both parties are

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 alive. Lai J opined that such a clause merely ‘discloses is an intention that on the death of
either party, the other should automatically obtain ownership of the whole property’ (at
[37]). Crucially, the clause ‘say[s] nothing whatsoever about what should happen while both
tenants are alive’, and consequently, the rule ‘sheds no light on the tenants’ intentions as
to their beneficial interests in the property while both are alive’ (at [39])’.

 LAND; PURCHASE CONTRIBUTION PRTs OF PARTICULAR IMPORTANCE; HARD TO

ESTABLISH EXPRESS TRUST – Penner observes that the purchase contribution PRTs has
been applied regularly and ‘is of particular importance where the property in question is
LAND’. This is because it is difficult to establish informally expressed trusts of land since s 7
Civil Law requires WRITTEN PROOF of such an express trust; a resulting trust is not subject
to this requirement.

 Cf. MORE STRAIGHTFORWARD THAN CICT – In case of cohabiting couples, the PRT ‘allows
one to make a MORE STRAIGHTFORWARD claim than if one were trying to establish a
common intention constructive trust’ (Penner, pg 133). This is because, a CICT requires
‘proof of some understanding between the parties and proof of some detrimental reliance’,
while the PRT requires ‘evidence that one contributed to the purchase price of property’.
Upon proving this, the onus is on the other party to prove that no beneficial interest in the
property was intended (Penner, pg 133)

 Cf DOESN’T OPERATE IN THE UK – In the UK, following Stack v Dowden, the purchase
contribution PRT no longer operates in the family home context (Penner, pg 133). Therefore,
contribution of purchase price will be treated as one of perhaps many factors that together
determine the beneficial interests of the parties

Types of Contribution

 RESULTING TRUST CRYSTALISES AT TIME OF ACQUISITION – In Lau Siew Kim, the Court
affirmed that (a) a resulting trust crystallised at the time of acquisition of property; and (b)
as a result, strict orthodoxy required the quantification of the beneficial interest to be
determined by reference to each parties’ respective ‘direct’ financial contributions to the
purchase price of the property at the time the property was acquired (at [112]).

 MORTGAGE; NEED TO HAVE AGREEMENT – Payment of mortgage instalments pursuant to

the agreement between the parties will be “direct” contributions to the purchase price and
will give rise to a resulting trust (Lau Siew Kim at [116]).

o NOT JUST LIABILTIY; LOOK AT OPERATING AGREEMENT; SUBSEQUENT CONDUCT

MAY BE RELEVANT – Menon CJ in Su Emmanuel opined the focus should not lie
exclusively on who took on liability for the mortgage as against the bank. The
question will turn on what the operating agreement was between the co-owning
parties at the time the loan was taken out (at [90]).

 NO AGREEMENT; LOOK AT LIABILITY – In a case where there is no evidence

of what the operating agreement was between the parties as to who would
repay the mortgage, then each party may be attributed a portion of the
loan amount in accordance with the liability assumed to the bank (at [90];
following Curley v Parkes)

o Cf. NO AGREEMENT; NO PRT – However, actual repayments that are not referable
to the parties’ agreement as to how they intend to service the mortgage will not

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 give rise to any beneficial interest by way of a resulting trust (Lau Siew Kim at [117]).
Menon CJ opined that to hold otherwise would mean ‘parties’ interests under the
resulting trust are in a state of flux’ increasing or decreasing as the case may be
when one party makes repayment of the mortgage. This is ‘wrong in principle’ (at
[92])

o EQUITABLE ACCOUNT – However, where one had made mortgage payments that do
not give rise to any beneficial interest by way of a resulting trust, one may still
invoke the remedy of equity accounting (unless the payor had the intention to
benefit the other co-owner) (Su Emmanuel at [105]). This remedy is said to be “the
process by which the financial burdens and benefits of land shared by co-owners
are adjusted between them” (at [96]; following Snell’s Equity). The remedy of
materialise through (1) recovering the mortgage payments made in respect of the
property (Su Emmanuel at [3]) or; (2) invoked ‘as a possible mechanism for
retrospectively adjusting ... the parties’ respective shares of the beneficial interest
in the property’ (OBITER in Chan Yuen Lan at [56])

 RENOVATION AT TIME OF ACQUISITON – Contributions to the cost of repairs or renovation

of a property closely after its purchase which have increased the value of the property are
relevant when computing a party’s contribution to the purchase price of property for the
purposes of a presumption of resulting trust (Lau Siew Kim at [117]).

o ENDORSED BY PENNER – Penner endorses this, opining that this ‘makes perfect
sense’ as ‘when a couple buy a residential property it hardly makes sense for them
to trouble about who is paying for the property and who is paying the builders-both’
(Penner, pg 133)

o EQUITABLE ACCOUNTING – However, where there were renovation costs paid by a

co-owner of a property that (i) that were not conducted closely after its purchase;
and (ii) went towards enhancing the value of the property, the claimant may seek
the remedy of equitable accounting (Chia Kok Weng)

 The extent to which the remedy of equitable accounting would be applied

would depend on all the facts of each case, including (a) when the
renovation works were done; (b) whether these were in the nature of
works done to enhance the capital value or merely to attend to necessary
repairs; (c) whether the resale value of the property had in fact been
enhanced as a result of the expenditure; and (d) whether the works done
had already been enjoyed by a party in occupation so as to warrant no
further remedy or to limit it (Chia Kok Weng).

 Cf. HOUSEHOLD EXPENSES – Contributions towards household expenses will not be taken
into account for the purposes of calculating the parties’ beneficial interest (Neo Hui Ling at
[18]);

 Cf. MATRIMONIAL HOME – some people think it’s unfair that we focus solely on the direct
cash contribution; disenfranchises women

7.1G Presumption of Advancement

 PRESUMPTION OF ADVANCEMENT – Where (i) a person voluntarily transfers property /

contributes to the purchase price of a property; and (ii) there is a pre-existing relationship

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 between the parties recognised by Equity, the law presumes that a gift was intended (Lau at
[56]) via operation of the presumption of advancement. In such circumstances, the legal
title of the property will be presumed to reflect the beneficial interests of the parties

o There are 2 traditionally recognised relationships with attract the presumption of

advancement – (1) husband to wife; (2) father to child (at [60])

 RATIONALE – The presumption of advancement is an antidote to the rigid injustice

periodically occasioned by the mechanical application of the presumption of resulting
trust. (Lau at [56]). It generally arises when there is a pre-existing relationship between
parties where the transferor/contributor is regarded as morally obliged to provide for the
person benefiting (Lau at [58]).

o QUOTE – The beauty of the presumption of advancement lay in its assistance in

presuming the donative intent necessary for a gift (Neo Hui Ling at [44] per Lai J).

o RELATIONSHIP BETWEEN POA AND PRT – The presumption of advancement may be

understood and historically and conceptually dependent upon the existence of the
presumption of resulting trust – i.e. it serves as, what Penner calls, a ‘second step’
exception to the general presumption of resulting trust which first applies to a case
where contributes are made to a purchase in the name of another (Penner, pg 142).

 STRENGTH OF PRESUMPTION AS VARYING – The strength of presumption of advancement

varies according to the facts of the case (Lau at [68]). In particular the Court of Appeal
scrutinises 2 key elements – (1) the nature of the relationship between the parties (for
example, the obligation that one party has towards another or the dependency between
the parties); (2) the state of the relationship (for example, whether the relationship is a
close and caring one or one of formal convenience) (at [78]).

o GREATER NUMBER OF CHILDREN – For instance, V K Rajah opined that the more the
number of children the parent has – ceteris paribus, the greater the number of
children one has, the less likely that a transfer of property of substantial value to a
single child without similar provision for the other children would be intended as a
pure gift to that child (Lau at [68])

 RECOGNISED RELATIONSHIP – There are 2 traditionally recognised relationships with

attract the presumption of advancement – (1) husband to wife; (2) father to child (at [60])

o Cf. POA SHOULD BE ASSESSED WITH CONTMEPORARY NORMS; EXTENSION MAY

BE NEEDED – However, Rajah JA observes that these categories of relationships
were established in a markedly different social context from the present (at [60]).
Rajah JA pointed out that the application of the POA should instead be assessed in
accordance with contemporary norms to cater to the myriad matrices that prevail in
today’s society (at [60]).

o Cf. MOTHER TO CHILD – Rajah JA noted Equity’s rejection of the POA in the context
of a mother-child is a ‘curious anomaly’ based on historical archaic patriarchal
concepts of family – where there is no obligation for a mother to provide for her
child (per Jessel MR in Bennet; Lau Siew Kim at [63]). However, in the modern social
context, mothers must almost invariably share the responsibility to provide for
their children (at [63]). This distinction between a mother and father has been

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 criticised as ‘hopelessly out of touch with the egalitarian nature of contemporary
society’ (Gray & Gray at 10.30). Australian Courts have recognised that the
presumption of advancement should indeed operate between a mother and her
child (Nelson).

 The presumption of advancement is ‘based on the thought that in certain

pre-existing relationships, the transferor was morally obliged, or naturally
obliged, to provide for the recipient’ (Neo Hui Ling at [46]). Lai J noted that
in Singapore, in accordance with the Maintenance of Parents Act, children
are ‘under a legal obligation to provide for their parents’, hinting that the
presumption of advancement may apply in a child-parent situation (where
an adult child transfers property to her mother) (at [46])

o Cf. FIANCE-FIANCEE – The Court of Appeal in Lau Siew Kim observed that the
husband-wife relationship which attracts the presumption of advancement has
been subsequently extended to a fiancé-fiancée relationship (Moate v Moate).
Again, the courts are willing to modify and extend the established categories of
relationships to which the presumption of advancement applies, to accommodate
the contemporary social climate and the particular circumstances in the cases which
come before the court (at [72]).

o Cf COHABITERS; NO – In Kelvin Lim, Chan J rejected expanding the established

categories of relationships where a presumption of advancement would apply to
include cohabiters (at [123]). Therefore, although Bee Bee were for ‘all intents and
purposes’ living together as husband and wife for 4 years, nevertheless they were
not legally married. Thus, the presumption of advancement did not arise (at [123]).

 REBUTTABLE – The presumption of advancement is ‘no more than a long stop to provide
the answer when the relevant facts and circumstances fail to yield a solution’ (Lord Upjohn
in Vandervell). Therefore, the presumption may be rebutted by evidence that reveal the
actual intention of the parties (at [59]).

7.2 Automatic Resulting Trusts

 AUTOMATIC RESULTING TRUSTS – The automatic resulting trust (or type B resulting trust
per Lord Browne-Wilkinson’s classificaton in Westdeutsche) arises by operation of law
where property had been transferred on an express trust to the trustee which leave some or
all of the beneficial interest undisposed of’ (Re Vandervell's per Meggary J) – i.e. the whole
of the beneficial interest is not exhausted (Westdeutsche per Lord Browne-Wilkinson).

o THEORETICAL BASIS – While there are varying justifications for the ART, in light of
Re Vandervell’s Trusts, it is likely that the theoretical justification is that Equity
intervenes to impute an intention that the property that has been transferred to
the trustees should be held on resulting trust for the settlor (Virgo, pg 245)

o ENFORCEABLE – Crucially, this trust will be enforceable as resulting trusts are

exempted from formality requirements under the Civil Law Act (s 7(3))

o PRIORITY OVER CREDITORS – A resulting trust will mean that the settlor has a
proprietary interest and the settlor’s claim would take priority over other
unsecured creditors (Virgo, pg 244)

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 o Cf. INTENTION TO NOT RETAIN BENEFICLAL OWNERSHIP IS NOT FATAL TO ART –
Re Vandervell’s shows that simply having a positive intention NOT to retain any
beneficial ownership in property transferred to another will NOT prevent the
transferor form ending up with the beneficial title under an ART.

 2 SCENARIOS; WHEN IT ARISES; INITIAL FAILURE OR SUBSEQUENT FAILURE – ARTs

essentially arise when the express trust fails; this may be (1) an initial failure, where all of
the requirements for an express trust have not been satisfied; or (2) a subsequent failure,
where an express trust that was created effectively terminates for some reason, leaving
surplus assets (Virgo, pg 244)

 Cf. CHARITABLE PURPOSE TRUST; CY PRES; THEN RESULTING TRUST – Where property is
transferred to trustees for a charitable purpose that fails from the outset, the property may
be applied cy-près for other charitable purposes if a general charitable intention can be
identified (Virgo, pg 247). If such an intention cannot be identified, the property will be held
on resulting trust for the settlor (Virgo, pg 247) [NOTE – IF NOT CHARTIABLE PURPOSE FROM
START, THEN RESULTING TRUST; CY PRES WILL NOT SAVE NON-CHARTIABLE TRUSTS]

7.2A Theoretical Basis; Imputed Intention vs Presumed Intention

 JUSTIFICATIONS FOR THE AUTOMATIC RESULTING TRUST – There has been various
justifications that have been suggested for the resulting trust arising where an express trust
has failed.

 (1) RETENTION OF BENEFICIAL INTEREST; REJECTED; DOES NOT EXPLAIN SUBSEQUENT

FAILURE – Where the settlor purports to create an express trust, but fails to do so
effectively, legal title will typically pass to the trustee, but the settlor will retain the
beneficial interest in the property, so that the trustee holds the property on trust for the
settlor. Howevr, this theory does NOT explain subsequent failure of an express trust
because the settlor will not have retained any beneficial interest once the trust has been
operating effectively (Virgo, pg 245)

 (2) IMPUTED INTENTION; LIKELY REFLECTS THE LAW IN LIGHT OF Re Vandervell’s Trusts –
ART may arise because, where an express trust fails, Equity intervenes to impute an
intention that the property that has been transferred to the trustees should be held on
resulting trust for the settlor (Virgo, pg 245). This is a rule of law that will be given effect to
even if there was a positive intention NOT to retain any beneficial ownership in property
transferred (because it would have been detrimental to the claimant's interests) (Virgo, pg
249; Re Vandervell’s Trusts) (e.g. where the settlor had to pay taxes)

o Cf. INTENTION TO NOT RETAIN BENEFICLAL OWNERSHIP IS NOT FATAL TO ART – Re

Vandervell’s shows that simply having a positive intention NOT to retain any
beneficial ownership in property transferred to another will NOT prevent the
transferor form ending up with the beneficial title under an ART.

o SUPPORTED BY CASE LAW – This is also supported by the overall holding in Re

Vandervell’s Trusts where an automatic resulting trust was found even though a
resulting trust was the ‘very last thing’ that Vandervell wanted because his
beneficial interest in the option meant that he was liable to pay tax (Virgo, pg 249).
Indeed, Lord Wilberforce, who suggests that there was an IRREBUTABLE IMPUTED

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 INTENT THAT THE OPTION BE HELD ON TRUST FOR VANDERVELL, even though it
may have been detrimental to his interests (Virgo, pg 249)

 COMMENTARY – The approach of the judges in Vandervell v IRC ‘clearly

reflects’ an approach involving an imputed intention, given that
Vandervell’s OVERT intention to not retain any beneficial interest in the
shares for tax reasons did not turn the case – i.e. it did not render
Vendervell not having any beneficial interest in the option.

 Cf. OBITER THAT INDICATES ARTS ARE BASED ON REBUTTABLE PRESUMED

INTENTION – However, this is inconsistent with the latest obiter dictum of
Lord Browne-Wilkinson in Westdeutsche that, even the resulting trust
arising from rising from a failed express trust operates by virtue of a
presumed intention that can be rebutted if the settlor intended to transfer
the property absolutely (Virgo, pg 250).

o SINGAPORE – This analysis of automatic resulting trusts conforms to obiter by the

Singapore Courts. In Lau Siew Kim seemed to endorse that ARTs – which are trusts
that perate to “fill the gap” in the beneficial ownership of property where an express
trust fails – are not concerned with PRESUMPTIONS (at [34]))

 (3) PRESUMED INTENTION; ENDORSED BY VIRGO; NOT SURE ABOUT KELRY – The intention
could alternatively be treated as a presumed intention, which could be rebutted
exceptionally by contrary evidence (Virgo, pg 246). For example, if he settlor had given
thought to the possibility of the trust failing and intended that the trustee should receive
the property beneficially, this could be used to rebut the presumed intention of a resulting
trust. Indeed, as Scott J recognised in Davis v Richards, where ‘the intention of a contributor
that a resulting trust should not apply is the proper conclusion, it would not be right ... for
the law to contradict that intention’.

o ENDORSED BY VIRGO – Virgo concludes that the preferable approach to analysing

the automatic resulting trust is that ARTs should be treated as responding to the
settlor’s PRESUMED intention that he property will be held on resulting trust,
meaning that this presumption of intention can be rebutted, albeit that the intention
should only exceptionally be rebutted by clear evidence to the contrary (Virgo, pg
246)

 This would mean that had Vandervell been able to rebut the presumption of
resulting trust, he would not have been liable to pay tax on the dividends,
but instead the tax liability would have been borne by the children's
settlement (Virgo, pg 250)

o ENDORSED BY PENENR – Penner also endorses the rebuttable presumed

presumption approach. He argues that an ART should not arise where the settlor did
actually intend to abandon any interest in the trust property if the trust failed.
Under such circumstances, the court treats the undisposed of trust property as bona
vacantia. Therefore, ART is not wholly ‘intention-independent’ in that it may be
displaced by a settlor’s actual intentions to abandon to the Crown all interest in the
trust property that might otherwise result to him (Penner, pg 146)

7.2B Initial Failure of Trust

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 (1) EXPRESS TRUST FAILS – Where an express trust is intended, but fails to be established
(i.e. void), property that has been transferred to the putative trustee will be held on an
automatic resulting trust for the settlor (Virgo, pg 247).

o THEORETICAL BASIS – While there are varying justifications for the ART, in light of Re
Vandervell’s Trusts, it is likely that the theoretical justification is that Equity
intervenes to impute an intention that the property that has been transferred to the
trustees should be held on resulting trust for the settlor (Virgo, pg 245)

o CASE LAW; RE VANDERVELLS; LACK OF OBJECTS; VOID – In Re Vandervell’s, the Court

held that the express trust was void for want of objects and failed. Therefore, as a
result of the automatic resulting trust, Vandervell had the beneficial interest in the
shares and was liable to pay tax on the dividends (Virgo, pg 249)

o NO INTENITON TO RETAIN BENEFICIAL INTEREST; NOT FATAL – In Re Vandervell’s, a

resulting trust was the ‘very last thing’ that Vandervell wanted because his
beneficial interest in the option meant that he was liable to pay tax (Virgo, pg 249).
Therefore, simply having the positive intention not to retain any beneficial
ownership in property transferred to another, as Mr Vandervell had, does not
prevent the transferor from ending up with the beneficial interest under an
automatic resulting trust where the trust failed (for lack of objects). Therefore it
seems that there was an IRREBUTABLE IMPUTED INTENT THAT THE OPTION BE HELD
ON TRUST FOR VANDERVELL (Virgo, pg 249)

 (2) CONDITION CONTEMPLATED FOR EXPRESS TRUST; FAIL – Where an express trust is
settled ‘in consideration and contemplation’ of a particular condition / fact (e.g. valid
marriage), and that condition / fact is not fulfilled, the express trust would fail from the
outset (i.e an initial failure of trust) and there will be an automatic resulting trust in favour
of the putative settlor (Re Ames)

o CASE LAW; TRUST SET UP ON CONSIDERATION OF MARRIAGE; VOID; FAILURE

FROM START – In Re Ames, the husband’s father set up a trust for his son and
daughter in law on the BASIS that there was a valid marriage. Later, the marriage
was declared void ab initio. The Court held that the trust was settled in consideration
and contemplation of a valid marriage. Since the marriage was treated as void from
the start, the money had been transferred to the estate on a basis that never
existed, so it was to be returned to the settlor’s estate (Virgo, pg 247). The money
was only parted with by the testator on a consideration that was expressed but which
in fact had completely failed.

 (3) LACK OF FORMALITIES; ORAL EXPRESS TRUST UNENFORCEABLE – An automatic

resulting trust also arises where an attempted express trust fails through the failure to
comply with the relevant formalities for establishing a such a trust (Virgo, pg 247; Hodgson
v Marks).

o ORAL DECLARATION –Therefore, an oral declaration of a trust which was not

effective, by reason of the statutory requirement for such a declaration of trust to be
in writing, would give rise to an automatic resulting trust for the settlor (Hodgson v
Marks per Russsell J).

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 o Cf. CRTICISM; ORAL TRUST STILL VALID; JUST NOT ENFROCEABLE; PREFERABLE TO
FIND ORAL TRUST THAT WAS ENFORCEABLE BECAUSE OF POLICY REASONS – Virgo
rebuts this, saying that an oral trust of land is STILL a valid trust, but it is simply a
trust that CANNOT be enforced because of the absence of writing. Virgo opines that
the result of this case is preferably achieved by concluding that Evans could not be
allowed to use a statute as an instrument of fraud to deny that Evans held the
property as trustee rather than absolutely, so that the EXPRESS trust was
enforceable (Virgo, pg 248)

 CASE LAW – In Re Vandervell’s Trusts (No 2) the Trust Company exercised the option to buy
the shares.

 APPEAL; On appeal, the Court held that although the option had been held on resulting
trust for Vandervell, the shares were not held on resulting trust for him (Virgo, pg 251).
Lord Denning MR decided that the shares were instead held on an express trust for the
children’s settlements due to an intention, by Vandervell, that the trust company should
hold the shares on express trust for the children's settlement. Lord Denning identified the
intention because Vandervell had assented to (1) the trust company using money from the
children’s settlement to exercise the option; and (2) the company writing to the Inland
Revenue declaring that the shares were held for the children & the dividends from the
shares had been paid to the settlement.

 CRITICISM; TRANSFER OF EQUITABLE INTEREST; REQURIES WRITING – Virgo criticises Lod

Denning’s analysis; since the House of Lords previously concluded that Vandervell had an
equitable interest in the option, and, in this case, recognised that the children had the
equitable interest in the shares, the only way of analysing this is that there was a TRANSFER
of one equitable interest from Vandervell to the children. However, such a disposition of an
equitable interest can only be valid only if it effected by writing (UK: s 53(1)(c) Law of
Property Act; SG: s 7(2) Civil Law Act).

 COUNTER; NO TRANSFER BUT CREATION OF EQUITABLE INTEREST – Lord Denning MR did

sidestep this objection by concluding that Vandervell's equitable interest in the option had
been destroyed when the option had been exercised by the trust company; the children's
equitable interest in the shares was then CREATED, and the creation of a new interest in
personalty does not require writing (pg 320). Therefore, when the express trust was created
in favour of the children, there was no ‘gap in the beneficial ownership of property’, and
the equitable interest under the automatic resulting trust will be automatically destroyed
(Virgo, pg 251)

 CRITICISM; SHARES AND OPTION SHOULD BE CONSIDERED TOGETHER; NO NEW CREATION

OF EQUITABLE INTEREST; DISPOSTION OF EXISITNG INTEREST; WRITING REQUIRED – Virgo
criticises this, opining that the option and shares should NOT be considered to be 2 distinct
pieces of property. The option was a limited right that was carved out of the bundle of
rights inherent in the shares. The trust company, as trustee of the option, never had the
right to exercise the option for its own benefit. Both the option and the shares were held on
resulting trust for Vandervell, until his beneficial interest was displaced by the valid
creation of a new trust. The valid creation of new trust could only be effected by WRITING
since it would involve a DISPOSTION of an EXISTING equitable interest (namely interest
arising under the resulting trust), as opposed to the creation of a NEW INTEREST (as
identified by Lord Denning). Therefore, since this was not done, Vandervell should be

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 considered to have retained a beneficial interest in the shares, so that his estate remained
liable to pay tax on any dividends paid in respect of the shares (Virgo, pg 252)

7.2C Subsequent Failure of Trust

 AUTOMATIC RESULTING TRUSTS – The automatic resulting trust arises by operation of law
where property had been transferred on an express trust to the trustee which leave some or
all of the beneficial interest undisposed of’ (Re Vandervell's per Meggary J) – i.e., the whole
of the beneficial interest is not exhausted (Westdeutsche per Lord Browne-Wilkinson). [...]
This would constitute a subsequent failure of an express trust that renders the unexhausted
trust property being held on resulting trust for the original settlor.

o PRIORITY OVER CREDITORS – A resulting trust will mean that the settlor has a
proprietary interest and the settlor’s claim would take priority over other
unsecured creditors (Virgo, pg 244)

o THEORETICAL BASIS – While there are varying justifications for the ART, in light of
Re Vandervell’s Trusts, it is likely that the theoretical justification is that Equity
intervenes to impute an intention that the property that has been transferred to
the trustees should be held on resulting trust for the settlor (Virgo, pg 245)

o Cf. INTENTION TO NOT RETAIN BENEFICLAL OWNERSHIP IS NOT FATAL TO ART –

Re Vandervell’s shows that simply having a positive intention NOT to retain any
beneficial ownership in property transferred to another will NOT prevent the
transferor form ending up with the beneficial title under an ART.

 NON-CHARITABLE PURPOSE TRUSTS – This would occur where the non-purpose charitable
trust becomes impossible to continue to perform (Virgo, pg 252). This applies IF the trust
makes no provision as to what will happen to the surplus trust property in such
circumstances (Virgo, pg 252).

 FAILURE OF EXPRESS TRUST LIMITED BY PURPOSE –

o CASE LAW; TRUST LIMITED BY PURPOSE; SISTERS DIED; RESULTING TRUST – In Re

Abbot, there was an automatic resulting trust in favour of the donors of a fund
supporting two disabled sisters who had passed. Stirling J opined that it was never
the donors’ intention that the funds should become the absolute property of the
Abbott sisters. This was an expess trust limited by persons. On their deaths, as the
Abbott sisters no longer required maintenance, and the surplus of funds were held
on resulting trust for the contributors to the fund.

 DOES NOT APPLY TO CHARITABLE PURPOSE TRUST WHERE CY PRES APPLIES – Where the
trust is a charitable purpose trust that subsequently fails, the surplus fund will automatically
be applied cy-pres. Therefore, a charitable purpose trust, one in which a general intention
can be identified, will not fail (Virgo, pg 252)

Unincorporated Associations

 TERMINATION OF UNINCORPORATED ASSETS – When an unincorporated association is

terminated, it may have surplus assets that derive from the members through the payment
of subscriptions, or from gifts from members or third parties. The issue is what should
happen to the assets. There are 3 possibilities

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 (1) RESULTING TRUST – the assets may be returned to the people who provided them
in the first place by a resulting trust

 RE DENLEY KIND OF PURPOSE TRUST – Resulting trust analysis is relevant

where the assets are held by the association as trustee for purposes. if it is
found that this purpose trust is valid by reason of the decision in Re Denley,
on dissolution, the purpose trust will fail. A resulting trust will then a rise for
the contributors to the surplus.

(2) CROWN – The assets may be transferred to the Crown on the ground that nobody
owns them that is, they become bona vacantia; or

(3) CONTRACT – Contributions are considered accretion to the funds which are the
subject matter of the contract. Members hold the funds as beneficial joint tenants.
The assets may be transferred to the members at the time of the dissolution,
according to the terms of the contract between them (Virgo, pg 217)

o Cf. EXPRESS TRUST FOR MEMBERS THEMSELVES; CONTINUES – If property has

been held on trust for the members at the time the property was transferred, the
dissolution of the unincorporated association will have no effect on the trust, since
the validity of the trust does not depend on the unincorporated association
continuing (Virgo, pg 217)

 TERMINATION OF EXPRESS TRUST OF UA – The effect of the dissolution of the association is

to TERMINATE the express trust, what is to happen to the surplus funds is of controversy.

(1) CONTRACT BENEFITS CASES – There is authority that the property transferred will
not be held to be on resulting trust for the transferors where the transferers can be
considered to have DIVESTED themselves of their rights to the property in return
for contractual benefits (Cunnack; Re West Sussex Virgo, pg 217).

o The reasoning has been doubted on the ground that property can be held
on resulting trust even though the contributor had received all of the
expected contractual benefits (Virgo, pg 218)

(2) CONTRACT HOLDING THEORY – However, Virgo argues that the analysis should be
adapted in light of judicial recognition of the ‘contract-holding theory’, as had been
done in Hanchett-Stamford. According to this theory, members hold the funds,
which is the subject matter of the contract, as beneficial joint tenants. The contract
will either (i) expressly provide what is to happen to the surplus of funds upon
dissolution; or (ii) have an implied term that the surplus should be distributed
equally between the members at the time of the dissolution (Virgo, pg 219).
Therefore, in the absence of an express term to the contrary, surplus funds would
be distributed amongst the members at the time of the dissolution. There is no
need for a resulting trust analysis as the funds are distributed according to the
terms of the contract (Virgo, pg 253; Hanchett-Stamford).

o SINGLE MEMBER LEFT – Where the UA has dwindled to a single member, the
contractual restrictions will cease and the remaining member is entitled to the
assets FREE from contractual restrictions (Hanchett-Stamford) Therefore, the last
surviving member was entitled to all of the assets (Virgo, pg 220). There was no
resulting trust for the contributors

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  EVALUATION; SINGLE MEMBER – In Hanchett-Stamford, the Appellant
received a massive windfall as he was the last surviving member of the UA.
However, this is an intuitively unsatisfactory position of the law, since
funds that were contributed for the activities of the UA would could be
seized absolutely by the last surviving member. This betrays the intention of
the donors to the UA. A more just position can be gleaned from Walton J’s
obiter in re Bucks Widows' where he opined that where ‘a society is reduced
to a single member’, he is not ‘entitled solely to its fund’

 CASE LAW; EXHAUST CONTRACTUAL BENEFITS; NO RESULTING TRUST – In Cunnacks v

Edwards, the surviving members of the UA could not claim the surplus funds by means of a
resulting trust. This was because they had ‘parted outright with their subscription funds
when they had paid them in return for contractual benefits, namely that their windows
would be provided for once the members had died’ (Virgo, pg 217). This was a business-like
arrangement, and each contributor received what he bargained for.

o CONTRACT HOLDING THEORY NOT CONSIDERED; In this case, the CA did not
consider whether the assets of the friendly society were held subject to contract
between the members inter se (naturally, given that this case was decided in 1896,
before the popularization of the contract-holding theory).

 CASE LAW; EXHAUST CONTRACTUAL BENEFITS; NO RESULTING TRUST – In Re West Sussex,

there was a dissolution of a trust for widows & children of deceased members of the police
force. Goff J held that the members could not recover their subscriptions, because they had
put their money on a ‘contractual basis’, and had gotten all they had contracted for (Virgo,
pg 218) [CONTRACT HOLDING THEORY NOT CONSIDERED]

o DONATIONS FOR SPECIFIC PURPOSES OF FUNDS HELD ON RESULTING TRUST –

However, money paid by identified donors or testators for the specific purposes of
the fund was held on resulting trust for them or their estates once the fund was
dissolved. Goff J said that he could not distinguish this apart of the case form Re
Abbott

 Cf. CASE LAW; RESULTING TRUST; REGARDLESS OF CONTRACTUAL BENEFIT – In Air Jamaica
v Charlton, the Court held that surplus funds arising from the discontinuance of a pension
was held on resulting trust for the employer and employees who had contributed to the
fund, in proportion to their contributions and regardless of any benefit that they had
received from the fund. Virgo opines that this is the better view; the fact that a member had
received contractual benefits from the association should not prevent a resulting trust
from arising (Virgo, pg 217)

Pension Trust Funds

 PENSION FUNDS – Under a funded occupational pension scheme, the employee and the
employer will generally both make contributions to the investment fund.

o CONTRACTUAL BENEFIT NOT DECISIVE – Scott J in Davis opined that the fact that
the fact that a party has received all that he bargained for is not necessarily a
decisive argument against a resulting trust

 IN ABSENCE OF ANY EXPRESS PROVISION; GO TO CROWN – In Davis v Richards, Scott J

concluded that where a pension fund is wound up, in the absence of any provision in trust

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 document to the contrary, the surplus would likely be paid to the Crown as bona vacantia
(Virgo, pg 254)

o RATIONALE – This is because It would not have been possible to impute an intention
to the employees that ANY surplus should be held on resulting trust for them, given
that it would not have been practicable to apportion the surplus with reference to
the value of the benefit that each member had received. Scott J refused to impute
an intention that would lead to an UNWORKABLE result (Virgo, pg 254)

o CRITCISM – Virgo opines that this analysis id DIFFICULT to defend, an imputed

intention is one IMPOSED by equity to reflect what the contributors would have
intended had the considered the matter. Such an intention should not be defeated
by impracticability in implementing the trust. Rather, the surplus should be
apportioned in proportion to the contributors' contributions to the fund and
without regard to any benefits that they had received (Virgo, pg 254).

 ADOPTED BY AIR JAMAICA – This was the solution that was adopted in
apportioning the surplus of a dissolved pension fund in Air Jamaica Ltd v
Charlton. This is also consistent with the essence of the resulting trust; to
the extent that the claimant has contributed to an express trust that has
failed, the amount of that contribution should be held on resulting trust for
the claimant (Virgo, pg 254)

 EXPRESS TERM IN TRUST; ONLY WENT TO EMPLOYEES; PRECLUDES RESULTING TRUST In

Davis v Richards, which concerned the winding up of a pension fund, Scott J opined that the
fact that the fact that a party has received all that he bargained for is not necessarily a
decisive argument against a resulting trust.

o EXPRESS PROVISION IN TRUST DOCUMENT; PRECLUDED RESULTING TRUST FROM

ARISING – An express provision in the trust document can preclude a resulting trust
in favour of the employees from arising (Davis v Richards). Therefore, in Davis an
express provision excluded a resulting trust in favour of the employees. Thus the
EMPLOYER alone was entitled to the surplus

7.3 Fiduciary Duties of a Resulting Trustee

 ISSUES OF RESULTING TRUSTEE AND FIDUCIARY DUTIES – As opined by Prof Chambers in

Resulting Trusts, implied trusts ‘create a problem for the imposition of fiduciary
obligations’. This is because, ‘fiduciary obligations are voluntarily undertaken’ (Tan Yook
Koon at [194] per Phang JA). Therefore, ‘the idea that a fiduciary relationship is possible sits
uncomfortably with the fact of a resulting trust’ since a resulting trust is imposed by law (at
[196]).

o QUOTE – Indeed, Lord Millet, writing extrajudicially, observes that ‘[n]o one can be
compelled to enter into a fiduciary relationship or to accept fiduciary obligations’
(Restitution and Constructive Trusts)

o CIRCUMSTNACES MAY SHOW UNDERTAKING BY A TRUSTEE – Nonetheless, there

may be certain facts and circumstances leading to the imposition of a resulting trust
may also disclose an undertaking by the trustee (express / implied) to act a certain
way (at [196])

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 o REQUIREMENT OF KNOWLEDGE OF NON-ENTITLEMENT TO INTEREST – A necessary
pre-requisite for the imposition of fiduciary duties is that trustee’s knowledge that
he is not entitled to the beneficial interest. With such knowledge, the trustees
conscience is affected such that the Equitable jurisdiction can be invoked to impose
fiduciary duties on him (at [198] per Phang JA)

o Generally, a resulting trustee will be burdened with only those fiduciary duties
which she expressly or implicitly assumes (Lim Ah Leh at [140] per Vinodh J).

 PRESUMED RESULTING TRUSTS – [...] is highly unlike to owe fiduciary obligations to [...] due
to the lack of any express or implied undertaking of any fiduciary obligations (Lim Ah Leh at
[140]). Phang JA in Tan Yook Koon emphasised that ‘fiduciary obligations are voluntarily
undertaken’ (at [194]). For presumed resulting trusts, which arise ‘in the absence of any pre-
existing fiduciary relationship’, the obligation is simply to ‘to respect the provider’s
proprietary right’. In the absence of any undertaking on the resulting trustee’s part, ‘[t]here
is no reason to involve the strict duties of loyalty applicable to an express trustee’
(Chambers at 196; Tan Yok Koon at [200]).

o ACADEMIC SUPPORT – Indeed, Penner concurs with this, writing that PRTs are are
bare trusts, in that the legal title holder has only has 1 duty – ‘to hold the property
for the resulting beneficiary (or his successors)’ (Penner, pg 150). There is no reason
to impose fiduciary duties on the trustee because the trustee has not voluntarily
assumed the position of trustee (Virgo, pg 448)

o PRE-REQUISITE OF KNOWLEDGE – Moreover, Phang JA emphasised that, in any

event, a necessary pre-requisite for the imposition of fiduciary duties is that
trustee’s knowledge that he is not entitled to the beneficial interest. With such
knowledge, the trustee’s conscience is affected such that the Equitable jurisdiction
can be invoked to impose fiduciary duties on him (Tan Yook Koon at [198] per Phang
JA). In the present case...

 AUTOMATIC RESULTING TRUSTS – [...] is likely to owe fiduciary obligation to [...] since he
was an existing fiduciary in respect of the express trust that failed. This issue of whether
resulting trustees are subject to fiduciary obligations was addressed by Phang JA in Tan Yook
Koon. He emphasised that that ‘fiduciary obligations are voluntarily undertaken’ (at [194]).
In the case of an automatic resulting trust, the trustee is already in a fiduciary relationship
(albeit w/ the beneficiaries of the express trust and not the settlor). These obligations do not
cease ‘when the express trust fails’ and his fiduciary obligations as a resulting trustee would
‘involve the same duties of loyalty and care’ he previously consented to observe (at 196; Tan
Yok Koon at [200])

o SUPPORTED BY ACADEMIC OPINION – Indeed, Phang JA’s approach is supported by

academic opinion – Edelman has argued that a trustee should only be considered to
be subject to fiduciary duties if they voluntarily assumed the position of trustee
(endorsed by Virgo, pg 448). Therefore, where the resulting trust arises
automatically from the failure of an express trust, it would be appropriate to treat
the trustee as a fiduciary since the he would already owe fiduciary duties under the
express trust that would have been voluntarily assumed (Virgo, pg 448)

o LIKELY NARROWER THAN EXPRESS TRUST – However, Phang stated that the precise
obligations which are owed to the settlor-beneficiary in a resulting trust are likely

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 ‘invariably narrower than’ those owed in respect of the beneficiaries in an express
trust.

o CAN REBUT – Moreover, in a case of a pre-existing fiduciary relationship, the facts

and circumstances of the case may ‘rebut’ the presumption of an established
fiduciary relationship that gives rise to fiduciary duties (at [210])

 CASE LAW; IMPLIED UNDERTAKING TO ACT HONESTLY AND IN GOOD FAITH – In Tan Yok
Koon, the Court found the resulting trustee (under PRT) had impliedly undertaken to act
honestly and in good faith in dealing with the trust property. Focusing on her knowledge of
the circumstances, the court found that she knew that the beneficial ownership of the
shares vested not in her but in her four siblings

 CASE LAW; PRESUMED RESULTING TRUST; IMPLIED UNDERTAKING – In Lim Ah Leh,

although the resulting trust in the present case is a presumed resulting trust, it is not the
type of presumed resulting trust which leaves property in the hands of a resulting trustee in
the absence of any preexisting fiduciary relationship and without her knowledge or consent.
There are three principal pieces of evidence which support this conclusion:

(1) The parties had an ongoing arrangement pursuant to which the defendant
undertook to assist the plaintiff in managing and investing the money which he paid
her. the point here is that the plaintiff voluntarily undertook an ongoing
arrangement with the defendant to manage and invest his money. Part of that
arrangement permitted her to exercise a degree of discretion in managing and
investing his money;

(2) This follows naturally from the previous strand of evidence, the plaintiff clearly
reposed a high degree of trust in the defendant to manage and invest his money.
equity affected the defendant’s conscience from the outset;

(3) Between 1993 and 2007, the defendant updated the plaintiff on the status of his
investments whenever he asked her for information. Further, the fact that she
retained the records at all implies that she acknowledged a duty to retain them, at
least for some time.

7.4 Quistclose Trust

 QUISTCLOSE TRUST – In the present case, the requirements for a Quistclose trust are
fulfilled – Under these circumstances, the recipient of that property must use it for that
purpose, and will hold it on a Quistclose trust for the transferor if the purpose fails (Virgo,
pg 255).

 REQUIREMENTS – The requirements for a Quistclose trust are: (1) the property that is
transferred must be intended to be used for a PARTICULAR purpose ; and (2) the property
that has been transferred is NOT at the FREE DISPOSAL of the recipient – i.e. that it was to
be used EXCLUSIVELY for the stated purpose; (3) the identified purpose of the property has
FAILED (Quistclose Investments; (Virgo, pg 257) [the identified purpose failing encompasses
cases where the money has been misapplied for an unauthorised purpose (see Twinsectra
where the Solicitor misapplied the money)]

o BRIEFLY – Where the property has been on transferred for a specific purpose, such
as where money has been lent to a borrow to be used in a particular way, the

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 recipient of that property must use it for that purpose, and will hold it on a
Quistclose trust for the transferor if the purpose fails (Virgo, pg 255).

o CASE LAW; NOT AT FREE DISPOSAL – In Belllis v Challinor, a Quistclose trust was not
recognized because the terms of the transfer left the money transferred at the free
disposal of the recipient with no restriction on its use for a particular purpose (Virgo,
pg 257)

o SEPARATION OF MONEY; SUPPORT EXCLUSIVE USE – Related, Lord Millet also

recognised that where the recipient of the money is OBLIGED to keep the money
separate, this will be objective evidence that the payer and the recipient did NOT
intend the money to be at the free disposal for the recipient (Twinsectra at [95]).
However, this is NOT a requirement for the recognition of a Quistclose trust (see
Twinsectra; Virgo, pg 258); it is merely a factor of STRONG evidential significance
that the property was not at the free disposal of the recipient (Virgo, pg 258)

o PURPOE CARRIED OUT; DEBTOR – Where the purpose had been carried out, the
party would would have a simple claim for repayment of debt (Virgo, pg 256).

 PRIORITY OVER UNSECURED CREDITORS – Virgo observes that the Quistclose trust is of real
commercial significance, since it will mean that the debt owed by the borrower (trustee) will
be converted into a trust, which gives the lender a proprietary interest in the money, and so
priority over the borrower’s unsecured creditors if the borrowers become insolvent (Virgo,
pg 255)

 Cf. GENERAL DISINCLINATION TO APPLY TO COMMERCIAL CONTEXTS – However, this

conflict with the idea that courts have a general disinclination to see the intricacies and
doctrines connected with trusts introduced into the non-familial context (AHPETC at [118]).
Indeed, commercial life would be impossible if payments ordinarily create a trust
(Twinsectra per Millet LJ)

 CHARACTERISATION OF QUISTCLOSE TRUST – The characterisation of the Quistclose trust

remains a difficult question to ANSWER. The ‘the nature of the trust and the location of the
beneficial interest remain elusive and continue to be debated’ (The Quistclose Trust: Critical
Essays)

o TWO TRUST ANALYSIS – Lord Wilberforce in Barclays recognised that there was a
PRIMARY TRUST in favour of the creditors, and if that purpose failed, there was a
SECONDARY trust in favour of Quistclose (two trust analysis) (Virgo, pg 256).

 DOES COVER ALL CASES SUCH AS MONEY FOR AN ABSTRACT PURPOSE –

This analysis of the Quistclose trust is NOT satisfactory as it does not cover
cases where primary trust is not for identifiable beneficiaries, but for an
ABSTRACT PURPOSE without beneficiaries (e.g. purchase of property or
assets) (Virgo, pg 259), in which case, the trust will be void. Moreover, the
trust is for intended beneficiaries (e.g. for creditors as in Barclays), the adult
beneficiaries of sound mind, may unanimously terminate the trust and
request for the transfer of the property to themselves, REGARDLESS of
whether the purpose had been satisfied or not.

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 o RESULTING TRUST – Lord Millet in Twinsectra departed from this and held that
there was ONE trust which he identified as a ‘orthodox example of ... resulting
trust’. The lender ‘does not part with the entire beneficial interest in the money’
since the money is transferred on terms which do not leave it at the free disposal of
the recipient but is to be used for an exclusive purpose (Virgo, pg 261). When the
purpose fails, the money is returnable by a resulting trust (pg 830).

 Cf. EXPRESS TRUST – In Twinsectra, Lord Hoffmann, with whom Lords Slynn,
Steyn, and Hutton agreed, recognized that the money was held on an
express trust.

 CRITICISM; CANNOT BE PRESUMED OR AUTOMATIC- However, as James

Penner points out, the Quistclose trust can neither be a presumed resulting
trust or an automatic resulting trust. First, it is not a presumed resulting
trust because, as observed by Briggs LJ in Challinor v Bellis, the Quistclose
trust is not NOT presumed to exist; the transferor must have specifically
intended for the money/property to be exclusively used for a particular
purpose (Virgo, pg 261). Second, an automatic resulting trust requires an
identification of an existing express trust that had failed; Lord Millet’s was
deficient as he had not identified any when he characterised the Quistclose
as a resulting trust.

 VIRGO’S FORMUALTIONS OF THE QUSITCLOSE TRUST; EXPRESS TRUST (NON-CHARTIABLE

PURPSOE TRUST); AUTOMATIC RESULTING TRUST – Virgo opines that the Quistclose trust is
not a ‘unique form of trust’ and can be explained ‘very simply and consistently with
fundamental principles of the law of resulting trusts’ (Virgo, pg 262).

o RE DENLEY TRUST; NON-CHARTIABLE PURPOSE TRUST; FAILS; AUTOMATIC

RESULTING TRUST – Where property is transferred exclusively for a particular
purpose to benefit PARTICULAR individuals (e.g creditors), this would be VALID by
virtue of Re Denleys Trusts. This creates an express non-charitable purpose trust.
An express trust will be intended because the payer will not intend the money to be
at the free disposal of the recipient (Virgo, pg 262) Where money is paid for a
particular purpose that fails, that money can be held on an automatic resulting
trust for the lender. This is a more principled analysis of the Quistclose trust that
draws inspiration from Lord Wilberforce’s primary-secondary trust analysis in
Barclays while adhering to orthodox trust principles.

o TRUST FOR ABSTRACT PURPOSE; VOID; AUTOMATIC RESULTING TRUST; POWER

TO APPLY TO PURPOSE – Where property is transferred exclusively for a particular
purpose where the purpose was ABSTRACT (e.g. ensure that the company did not
collapse or purchasing property), this trust will be void for offending the beneficiary
principle. An automatic resulting trust will arise in favour of the transferor but
subject to a POWER to apply the money for the agreed purpose.

 If the power is exercised, this would not be a breach of trust since it was
authorised, and it would have EXHAUSTED the resulting trust such that the
he transferor's beneficial interest would have been EXTINGUSIHED (Virgo,
pg 262)

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  If the power is NOT exercised due to a failure of purpose, that money can be
held on an automatic resulting trust for the lender

 This is a more principled analysis of the Quistclose trust that draws

inspiration from Lord Wilberforce’s primary-secondary trust analysis in
Barclays while adhering to orthodox trust principles.

 VIRGO’S ANALYSIS OF QUISTCLOSE; EXPRESS TRUST FOR NON-CHARTAIBLE PURPOSE;

FAILS AFTER COMPANY GOES INSOLVENT; RESULTING TRUST – In Quistclose, the money
lent to the borrower was intended to be held on an express trust because the money was
not at the free disposal of the borrower (Virgo, pg 262). This can be regarded as a non-
charitable purpose trust, the purpose of which could be (1) to pay dividends to the
creditors; or (2) to ensure that the company did not collapse (Virgo, pg 263). If the purpose
was (2), this would be an invalid purpose trust, since the purpose was abstract. The trust
would fail initially and an automatic resulting trust with a power for the borrower to use
the money to pay the dividend would arise (i.e. same situation as Twinsectra). If the purpose
was (1), which was the purpose identified by Lord Wilberorce, the express purpose trust,
which benefitted PARTICULAR individuals (i.e. creditors), would be VALID by virtue of Re
Denleys Trusts (the indirect benefit to individuals meant that the beneficiary principle would
be satisfied). Subsequently, once the company became insolvent, the purpose trust failed
because a company cannot pay dividends once it has gone into liquidation. The money
would therefore be held on resulting trust for the lender. The lender could not have any
beneficial interest in the money once the express trust was up and running, but that would
not prevent a beneficial interest SPRINGING BACK to the lender once the trust had failed
subsequently (Virgo, pg 263). This analysis is CONSISTENT with the structure of Lord
Wilberforce’s analysis in Quistclose (primary & second trust; although he regarded the
express trust as being one for persons rather than purposes, but this would have meant that
the express trust would not have failed). (Virgo, pg 263)

 VIRGO’S ANALYSIS OF TWINSECTRA; EXPRESS TRUST FOR NON-CHARITABLE PURPOSE;

FAILS FOR LACK OF BENEFICIARIES; RESULTING TRUST; POWER TO APPLY MONEY FOR
AGREED PURPOSE – In Twinsectra Ltd v Yardley, property was transferred to the solicitor on
an express trust that was ‘not at Sims's free disposal because it was to be applied for a
particular purpose’ (Virgo, pg 262). However, since the trust was for an abstract purpose of
purchasing property (non-charitable purpose trust), the trust was VOID because of the
absence of any beneficiaries (Virgo, pg 262). Consequently, the trust failed and the money
was held on resulting trust for Twinsectra. Virgo opines that the solicitor had a POWER to
apply the money for the agreed purpose; if he had done so, this would not be a breach of
trust since it was authorised, and it would have EXHAUSTED the resulting trust such that
the he transferor's beneficial interest would have been EXTINGUSIHED (Virgo, pg 262).
Moreover, until the power was exercised, it could be REVOKED by Twinsectra, and it was so
revoked once the money had been misapplied.

 CASE LAW; BARCLAYS – In Barclays, the House of Lords held that the common intention of
the company and Quistclose Investments was such that the money was held on trust unless
and until it was applied for the intended purpose of payment of the dividend, in which
event Quistclose Investments would become merely an unsecured creditor. However, since
the purpose was never accomplished the money remained trust property beyond the reach
of the bank

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  CASE LAW; TWINSECTRA – In Twinsectra, the House of Lords held that since the money had
been lent for the exclusive purpose of buying property and had been applied for a different
purpose, it followed that the money was held by Sims on resulting trust for Twinsectra, but
subject to a power for the money to be used by Yardley in accordance with the undertaking.
Therefore, the money was held on a Quistclose trust for Twinsectra, and there was a breach
of trust when the monies was applied to an unauthorised purpose. Twinsectra sued Leach,
the other solicitor who paid themoney out, for DISHONEST ASSSITANCE

 CASE LAW; AHPTIC – Loh J in AHPTC opined that, there is nothing in principle that prevents
the constitution of an express trust that operates in the same manner as a resulting
Quistclose trust (at [111]). For an express Quistclose trust, the settlor-donor must intend to
constitute the recipient as a trustee, and confer a power or duty on the recipient-trustee to
apply the money exclusively in accordance with the stated purpose (at [114])For a resulting
Quistclose trust to arise, the donor must have a lack of intention to part with the entire
beneficial interest in the transferred money. The recipient must not have free disposal of
the money (Twinsectra at [73]) and must be under a power or duty to apply the money
exclusively in accordance with the stated purpose (at [114])

o Cf. CRITICISED – In MSP4GE, Andrew Ang SJ opined that it was ‘somewhat curious
that Loh J referred to an “express” Quistclose trust’; ‘Perhaps what he meant to
refer to was an express “Quistclose-type” trust’ (at [110])

8 COMMON INTENTION CONSTRUCTIVE TRUST

8.1 Essay; Introduction

 NEED TO LAY OUT CLEAR RULES FOR DOMESTIC PROPERTY DISPUTES – The Court of Appeal
in Chan Yuen Lan emphasised the ‘importance of identifying the correct default legal
regime to apply to property disputes, especially in the domestic context’ (at [99]). The
identification of a clear, applicable regime will allow the parties to the share each party has
in equity; help distinguish relevant from irrelevant evidence; and ultimately avoid
unnecessary litigation which ‘is often … paid for out of the shrinking sale proceeds of the
parties’ former home’ (at [99])

 COURT NO FLEXIBILITY WHERE BREAKDOWN OF NON-MARRIED COUPLE; STACK V

DOWDEN – Before Stack v Dowden, in the breakdown of relationship of a cohabiting non-
married couple, the Courts lack the flexibly discretionary power accorded under statute to
determine property rights according what is just and fair on the facts of the case. The result
is that the property rights would often be determined by the respective purchase price
contributions via the operation of a presumed resulting trust. This is contrasted with the
breakdown of relationship a married couple where the court has wide discretionary powers
to grant ancillary relief under matrimonial legislation. Therefore, the CICT was developed
to mitigate the arithmetic rigour of the resulting trust when ascertaining property rights
upon the breakdown of a relationship in the domestic context (Chan Yuen Lan at [95]) by
allowing the common intention of the parties to take precedence in regards to the beneficial
interest of the property.

 HISTORY; SOCIO-ECONOMIC DRIVERS; LACK OF RESPONSE FROM PARLIAMENT – Rajah JA

in Chan Yuen Lan observed that the CICT was in response to the consequence of changing
economic and social conditions in England including (i) the rise in property prices in
England; (ii) dramatic increase in the number of unmarried couples living (at [127]).

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 Attempts at legislative reform concerning the apportionment of property rights for persons
outside the reach of matrimonial legislation in the UK had also been unsuccessful (at [128]).
In response to Parliament’s general lacklustre way of dealing with proprietary interests, the
English Judiciary was of the view that the evolution of the law of property’ will have to come
from the courts rather than Parliament’ (Stack v Dowden)

o CRITCISM OF RESULTING TRUST AS ANOTHER DRIVER – Moreover, a further driver

for the approach in Stack and Jones was the growing view amongst English judges
that the assumptions underlying the resulting trust approach to domestic property
disputes are no longer appropriate (at [131]). ‘[S]ubtle factors of intentional
bargain’ were favoured over ‘crude factors of monetary contribution’ (Gray & Gray).

 THE RECEPTION TO STACK AND JONES IN ENGLAND; SUBJECTIVE; UNCERTAINTY; INCREASE

IN LITIGATION – The reception in England to the new approach to domestic property
disputes heralded by Stack has “range[d] from qualified enthusiasm … to almost unqualified
disapprobation” (per Lord Walker and Baroness Hale JJSC in Jones at [94]).

o INCREASE IN LITIGATION – V K Rajah observed that, aside from doctrinal problems,

the Stack and Jones approach has been criticised for being a “litigation-generator”
because of the large degree of subjectivity and uncertainty. Martin Dixon observes
that, while it was said that the enquiry into the common intention of the parties
was ‘not be lightly embarked on’ (thus recognising the need for certainty in this
area of the law), Lady Hale’s non-exhaustive list of factors which the court can
consider in apportioning the beneficial interest was the ‘property lawyers’
equivalent of Pandora’s Box’ – which would lead to an INCREASE IN LITGATION
(noted in Chan Yuen Lan at [136]).

o DESPITE WIDE RANGE OF FACTORS, COURT STILL TAKE REFERENCE FROM

FINANCIAL CONTRIBUTIONS – Virgo observes there was this apparent move, led by
Lady Hale in Stack v Dowden, to consider a wide range of factors to displace the
presumption that the beneficial interest follows the legal interest where the
property jointly registered. However, in practice, the focus of the Courts remains
largely focussed on the respective financial contributions of the parties, which
brings the common intention constructive trust much closer to the resulting trust,
in so far as the result rather than the nature of the analysis is concerned (Virgo, pg
320)

 Ironically, in the aftermath of the abolition of resulting trusts in domestic

property disputes, much weight CONTINUES to be given to the financial
contributions made by each party (Chan Yuen Lan at [139]). For many of the
cases adjudicated using the approach in Stack v Dowden, a similar result
would have been achieved had the presumption of resulting trust been
applied (Virgo, pg 312)

o PRESUMPTION EASILY REBUTTED – The Court of Appeal in Chan Yuen Lan further
took the view that, while ‘much was made’ of the Judges’ view that the
circumstances needed to be ‘exceptional’ to find a common intention, the facts in
Stack were ‘relatively unexceptional facts’ (at [137]). In otherwards, the starting
presumption that parties’ equitable position followed their legal position was EASILY
rebutted.

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8.2 CICT

 FUNCTION OF CICT; BREAKDOWN OF NON-MARRIED COUPLE – The CICT is an important

equitable tool for quantifying each party’s share of the beneficial interest in domestic
property disputes of a cohabiting couple (Chan Yuen Lan at [101]). Such a trust arises from
an UNWRITTEN agreement between the parties as to the identification and quantification
of beneficial interest (Virgo, pg 300).

 COMMON INTENTION RESULTING TRUST – [...] is likely to established that there was a
common intention constructive trust (‘CICT’). The common intention constructive trust is
applied where there is a common intention (express or inferred) among the parties as to
how their beneficial interests are to be held (Chan Yuen Lan at [158]). [...] Furthermore,
detrimental reliance is also made out as [...]

o [ELABORATE ON EXPRESS OR INFERRED INTENTION & WHETHER COMMON

INTENTION AT ACQUISITON OR COMMON INTENITON SUBSEQUNET TO VARY THE
BENEFIICAL INTEREST]

o SUFFICIENT EVIDENCE – There must be sufficient and compelling evidence of the

express or inferred common intention (Chan Yuen Lan at [160])

o NOT WHAT IS FAIR – Virgo emphasises that the FOCUS of the inquiry is what the
parties did, in fact, INTEND, or MUST be taken to have intended, as opposed to the
Court’s identification of a result that it considers to be FAIR (Virgo, pg 307)

o MITIGATE RIGOURS OF RESULTING TRUST – V K Rajah JA in Chan Yuen Lan

recognised that the common intention constructive trust was developed to ‘mitigate
the arithmetic rigour of the resulting trust when ascertaining property rights upon
the breakdown of a relationship in the domestic context’ (at [95])

o HIGH THRESHOLD; VERY UNUSUAL; CERTAINTY – Since the court is dealing with the
allocation of property rights, an area where certainty in the law was a PRINCIPAL
CONSIDERATION (Chan Yeun Lan at [106]), showing a common intention to hold the
beneficial interest in a particular proportion was “not a task to be lightly embarked
upon” (at [106]).

 SINGAPORE; LORD NEUBERGER’S APPROACH – The Singapore Court of Appeal has endorsed
Lord Neuberger’s dissenting approach in Stack, which is a principled approach and
consistent with fundamental principles of the law of trusts (Virgo, pg 311). Therefore,
deviating from the majority in Stack, under Singapore law – (1) the resulting trust to have a
significant role to play in the analysis; and (2) the common intention CANNOT be imputed
(Virgo, pg 312; Chan Yuen Lan).

o REASONS – (1) PRT SHOULD STILL APPLY TO DOMESTIC – Rajah JA endorsed that
there is no policy reason why the presumption of resulting trust in a commercial
context cannot be rebutted by the common intention of the parties (Chan Yuen Lan
at [157]); (2) NO IMPUTED INTENTION (see below); (3) CONSISTNET WITH
RESULTING TRUST LACK OF INTENTION ANALYSIS – Moreover, the use of the
resulting trust as the default analytical tool in the absence of any evidence of a
common intention between the parties as to how the beneficial interest in the
property concerned is to be held is also consistent with the lack-of-intention
analysis of the resulting trust (at [158]) – i.e. that the presumption of resulting trust

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 represents a default position where the parties ‘lacked intention’, and where this
presumption can be displaced with the presence of positive actual intention.

o PRESUMPTION OF RESULTING TRUST – Where parties have made unequal financial

contributions to the purchase price, their beneficial interests should be presumed
to be held in the same proportions as their financial contributions through the
application of the presumed resulting trust (Chan Yuen Lan at [110]; see Virgo, pg
311).

o COMMON AGREEMENT; CICT – However, where the court might be able to deduce
an agreement or understanding amounting to a common intention as to how the
beneficial interest in the property would be held (Chan Yuen Lan at [110]), the
presumption of resulting trust will be rebutted. The property would then be held on
a constructive trust according to that common intention (Virgo, pg 311).

 Cf. UK; IMPUTABLE INTENTION AS TO PROPORTION OF INTEREST – In the UK, the Court can
impute an intention that each party is entitled to the particular share of the beneficial
interest which the court considers to be fair having regard to the whole course of dealing
between them in relation to the property (Virgo, p 313) – i.e. Lady Hale’s majority
judgement in Stack v Dowden allows for an imputation of intention as to the quantification
of beneficial interest.

 Cf. UK; ABOLISHED RESULTING TRUST IN DOMESTIC CONTEXT – The majority opinion of the
Supreme Court (UK) in Stack v Dowden abolished the presumption of resulting trusts in
domestic property disputes. Lady hale opined the law of trusts has moved from ‘crude
factors of money contribution’ to ‘more subtle factors of intentional bargain (which are the
foundational premise of the constructive trust)’ (at [60]; Lady Hale citing with approval Gray
& Gray). Therefore, the common intention constructive trust has replaced the resulting
trust as the means of dealing with the proprietary consequences of a relationship
breakdown (Virgo, pg 303).

 APPLICATION BEYOND COHABITANTS – The common intention constructive trust can also
be used to determine the beneficial interests in contexts beyond that of a cohabiting couple
(per Stack v Dowden). The trusts has been extended to other personal relationships e.g. (a)
mother-son (Adekunle v Ritchie); and (2) two close male friends (Gallarotti v Sebastianelli)
(as noted in Virgo, pg 315).

 INSTITUTIONAL CONSTRUCTIVE TRUST; SINGAPORE – In Singapore, the common intention

constructive trust is regarded as an INSTITUIONAL trust, meaning it arises out of the
operation of law from the facts, and not as the result of the exercise of judicial discretion as
in the case of the remedial constructive trust (Aedit Abdullah JC in Sumoi). The function of
the court is merely to declare that such trust has arisen in the past (Westdeutsche per Lord
Browne-Wilkinson).

8.2A Express; Inferred; Ambulatory Intention

 EXPRESSS COMMON INTENTION – Where it can be shown that the parties had an EXPRESS
understanding or agreement as to the apportionment of the beneficial interest in the
property, the Court will recognise this form of common intention as to the nature of the
beneficial interest. This ACTUAL EXPRESS common intention will be established without the
need to consider the factors identified by Lady Hale (Virgo, pg 308)

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 INFERRED COMMON INTENTION; RELEVANT FACTORS – In the absence of an express
understanding or agreement, the Court will consider whether ‘an intention can be
objectively inferred’ in the light of their actions and statements (Stack at [126] per Lord
Neuberger).

o ONLY RELATING TO PROPERTY – Per Lord Neuberger’s approach in Stack, a

restrictive approach is preferred and the conduct of the parties is only relevant in
so far as it relates to evincing what the parties intended their respective shares of
the beneficial interest in the property to be (Chan Yuen Lan at [113])

 VARYING BENEFICIAL INTEREST; ABUMULATORY INTENTION – The Court of Appeal has

accepted that the common intention of the parties as to the allocation of the beneficial
interests might change subsequent to the acquisition of property (Chan Yuen Lan at [114])
However, compelling evidence will be required to establish a subsequent change in the
beneficial ownership (Virgo, pg 310). EXAMPLES:

(1) SIGNIFICANT IMPROVEMENTS; RENOVATION – It possible to infer a common

intention to alter a party’s share of the beneficial interest if that party carried out
“significant improvements to the home” (at [139]; noted in Chan Yuen Lan at [114]).

(2) SEPARATION BETWEEN PARTIES – The separation of the parties over a substantial
period of time (Virgo, pg 310; Jones);

(3) SUBSEQUENT AGREEMENT – Evidence may also include ‘discussions, statements or

actions, subsequent to the acquisition, from which an agreement or common
understanding as to such a change can properly be inferred’ (Virgo, pg 310);

o WOULD HAVE TO FIRST ACQUIRE AN INTEREST FIRST – In Geok Hong Co, the
Respondents argued that a common intention to vary the beneficial interest may be
inferred if the party claiming the beneficial interest has carried out “significant
improvements” to the home (see Chan Yuen Lan at [114]). Steven Chong JA rejected
this, as the opposition from Lord Neuberger ‘applies only to a change or an
alteration of the parties’ shares in the beneficial interest of the property’ (at [83]). A
party would first have to acquire a beneficial interest, either by way of an express
common intention or generally a direct financial contribution to the purchase
price. Only thereafter would undertaking significant improvements to the property
result in an alteration of the proportion of that beneficial interest (at [83]).
However, where an INDIVIDUAL undertakes renovation works without more, ‘it
cannot be said that there is a common intention for that person to ACQUIRE a
beneficial interest in the property’ (at [85] per Chong JA).

 MAJORITY IN STACK V DOWDEN – Lady Hale in Stack v Dowden introduced a ‘wider variety
of factors can be considered to identify the parties' intentions’ (Virgo, pg 307)

(i) ADVICE OR DISCUSSIONS at the time of the purchase that cast light on the parties'
intentions;

(ii) consideration of the REASONS why the house was acquired in their joint names or
in the name of one of them;

(iii) the PURPOSE for which the house was acquired;

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 (iv) the NATURE of their relationship;

(v) whether they had CHILDREN for whom they shared a responsibility to provide a
home [Virgo says that is unclear how this is relevant to deducing a common
intention relating to beneficial interests. Crucially, Virgo observes that this gives off
the impression that the CICT may be a ‘smokescreen behind which the court can
exercise its discretion’ and to allocate the beneficial interest in a way that is FAIR
AND JUST (Virgo, pg 308)];

(vi) how the purchase was FINANCED, initially and subsequently;

(vii) how they ARRANGED their finances;

(viii) how they discharged their OUTGOINGS on the property and other
HOUSEHOLD EXPENSES; and

(ix) their characters and personalities.

 Cf. FACTORS CRITICISED BY LORD NEUBERGER; DO NOT GO TOWARDS ACQUISITON OF

PARTIES – Lord Neuberger took the view that, most of the factors cited by Baroness Hale
provided the MERE BACKGROUND against which any alleged discussion, statement or
action concerning the parties’ common intention was to be assessed (Chan Yuen Lan at
[113]) To Lord Neuberger, a restrictive approach was preferred and the conduct of the
parties was only relevant in so far as it threw light on the question of what the parties
intended their respective shares of the beneficial interest in the property to be.

o Therefore, Lord Neuberger viewed that how the parties conducted their day-to-day
living and finances could not be considered to be a reliable guide to their intentions
in relation to the beneficial ownership of the property (at [125]; Virgo, pg 311)

8.2B Imputed Intention

 IMPUTED INTENTION involves the attribution of an intention which the court considers that
parties would have agreed to had they thought about the allocation of the beneficial
interest (Virgo, pg 308).

 SINGAPORE; NO IMPUTED INTENTION – Under Singapore law, the common could not be
imputed by the Court (Chan Yuen Lan following Lord Neuberger in Stack). In following Lord
Neuberger in Stack, Rajah JA opined that this prevents the court from foisting upon the
parties an intention which they never had in order to achieve a “fair” result; The common
intention constructive trust is thus PRECLUDED from being invoked as a smokescreen for
the courts to effect “palm tree” justice in an unprincipled and arbitrary manner (at [156]).
Crucially, that ‘subjective fairness’ was not ‘the most appropriate yardstick to apply in
resolving property disputes’. Each party’s beneficial share in the property ‘ought to be
determined in a principled and fairly PREDICTABLE manner’ (at [159]). An imputation of
intention is antithetical to this as it would ‘involve a judge in an exercise which was difficult,
subjective and uncertain’ (Stack at [126]).

 IMPUTED COMMON INTENITON; COURT DESCENDING INTO WHATS JUST AND FAIR – Lady
Hale’s analysis of common intention in Stack v Dowden attracted significant controversy
when she accepted that intention as to the quantification of the beneficial interest might
be IMPUTED (Virgo, pg 308). Imputed intention does not involve proving an ACTUAL
intention (express / inferred), but rather, involves the ATTRIBUTION of an intention which

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 the court considers that parties would have agreed to had they thought about the allocation
of the beneficial interest (Virgo, pg 308). Virgo, rightly opines recognising imputed intention
would cause the CICT to ‘disintegrate into a determination of an allocation of the beneficial
interest that the court considers to be fair’ (Virgo, pg 308). In a similar vein, Etherton opines
that there is ‘a hair's breadth between the [common intention constructive trust] ... and a
remedial constructive trust’.

o FACTORS GENERALLY – In imputing an intention to the parties, the Courts will

consider WHAT IS FAIR having regard to the whole course of dealing in respect of
the property (at [51]), include the financial contributions made by the parties, AND
other factors, including those identified by Lady Hale in Stack v Dowden.

o Cf. IMPUTATION VS INFERENCE – Imputation involves concluding what the parties

would have intended, whereas inference involves concluding what they did intend
(at [126] per Lord Neuberger).

o Note – It only applies where it was not possible to determine a common intention
as to the proportions in which the interest was to be shared (Virgo, pg 309)

 LORD NEUBERGER; CRTICISM – Lord Neuberer in Stack v Dowden criticised the imputation
of intention as being wrong in principle and as requiring the judge to engage in a difficult,
uncertain, and subjective exercise in construing an intention that does not exist (Virgo, pg
309). Lord Neuberger’s approach prevents the court from imputing to the parties an
intention which they never had vis-à-vis the quantification of their respective shares of the
beneficial interest in the property concerned.

 VIRGO; CRITCISM – Virgo’s view is that that an imputed common intention cannot be
justified doctrinally and should be rejected (Virgo, pg 319). The continued relevance of
imputed intention ‘makes a mockery of the purported aim of seeking out the common
intention of the parties. There is a real danger of the courts, under the smokescreen of
finding an ‘imputed intention’, seek to redistribute the beneficial interests in property to
achieve a just result, but without any reference to clear principles (Virgo, pg 320

8.2C Detrimental Reliance

 DETRIMENTAL RELIANCE – While Stack and Jones did not explicitly discuss detrimental
reliance, Chong JA in Geok Hong accepted that detrimental reliance was a requirement for
establishing a CICT (at [91]; ‘we do not regard either the renovation works done to the
Property or the withdrawal of the HDB flat application to be sufficient to constitute
detriment for the purposes of the common intention constructive trust’). This is in line with
cases prior to Stack and Jones which had emphasised the requirement of detrimental
reliance, in addition to the common intention (Curran v Collins)

 A possible explanation for lack of discussion of detrimental reliance in Stack and Jones is
that in the circumstances of a marriage or co-habitation, there would almost always be
detrimental reliance

8.3 Case Law

 STACK V DOWDEN – In Stack v Dowden, the family home was conveyed into the joint names
of both parties. The UK Supreme Court held that this was an exceptional case in which the
proportion of the beneficial interest was different from the legal interest, so that the

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 claimant had a 65 per cent interest and the defendant 35 per cent. Lady Hale concluded that
the parties had not intended their shares of beneficial interest to be equal, because (1) the
claimant had contributed substantially more of the purchase price than the defendant and
(2) the parties had not pooled their resources for the common good (Virgo, pg 314).
Moreover, for a particular property, the parties ‘undertook separate responsibility for that
part of the expenditure which each had agreed to pay’; this was not a case where each
party “would do what they could”. The intention as to the QUANTIFICATION of the
beneficial interest was INFERRED (Jones v Kernott at [30] per Lady Hale and Lord Walker
commenting on Stack v Dowden)

o Virgo observes that the same result could have been achieved by the
straightforward application of the presumption of resulting trust, which was how
Lord Neuberger affirmed the result, but by a different route (Virgo, pg 314) Lord
Neuberger, in his dissent, opined that ‘most cases would end up with a de facto
resulting trust apportionment’

 JONES V KERNOTT – In Jones v Kernott, the couple purchased a home in their joint names on
a mortgage. It was accepted that, at that time of separation, they held the property
BENEFICIALLY IN EQUAL SHARES. The claimant then continued to lvie in the house and
assumed sole responsibility for paying the mortgage. The issue was whether each party’s
share of the beneficial interest had changed over time.

o INFERRED COMMON INTENTION TO CHANGE BENEFICIAL INTEREST; The Supreme

Court held that after the parties separated, there was an inferred common
intention of the parties to change the extent of their beneficial interest. This was
supported by the fact that the defendant no longer contributed to the purchase of
the property but had acquired a new property for himself (Virgo, pg 314). The court
held that the property should be divided between them as to 88 per cent for the
claimant and 12 per cent for the defendant

 SU EMMANUEL; NO COMMON INTENTION – In Su Emmanuel, the Court found there was

NO basis to find a subsequent common intention to vary the beneficial interests in the
Property from the proportions held by the parties when Priya entered the picture in 2004 (at
[84]). For a common intention constructive trust to be found, the intention to vary the
beneficial interest must in fact be common to all the parties involved. However, it is CLEAR
that Su never intended to reduce her interest in the Property from that which vested in her
in 2004. Su had wished to retain her 50% interest in the Property in the belief that she
would, as a result of this, be in a position to block any intended sale

8.4 CHAN YUEN LAN STEPS ****

 In Singapore, Lord Neuberger’s minority decision in Stack v Dowden is adopted (Chan Yuen
Lan at [159])

 SINGAPORE PROCESS – The Court of Appeal in Chan Yuen Lan laid out the framework for
property disputes (at [160]):

(1) PRESUMPTION RESULTING TRUST – First, the Court will ascertain the parties’ respective
financial contributions to the purchase price of the property. Where there are unequal
contributions, the PRT will arise that the parties are presumed to hold the beneficial interest
in the property in proportion to their respective contributions to the purchase price.

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(2) COMMON INTENTION TRUST DISPLACE PRT – Second, the Court ascertains whether there is
an express or an inferred common intention that the parties should hold the beneficial
interest in the property in a PARTICULAR proportion. This will DISPLACE the presumption of
resulting trust.

o NO IMPUTING OF INTENTION – The court may not impute a common intention to

the parties where one did not in fact exist

(3) NONE OF THE ABOVE; SAME AS LEGAL POSITION – Third, where there is no evidence of the
parties’ respective financial contributions AND no evidence of the parties’ common
intention, the parties will hold the beneficial interest in the property in the same manner as
the manner in which they hold the legal interest

(4) NO CICT; ASCERTAIN IF PRT REBUTTED – Fourth, where there no CICT found, but the PRT
arises, the Court enquires whether the PRT can be rebutted by the presence of an intention
on part of the person who paid a large purchase price to benefit the other party (i.e., make a
gift)

(5) NO CICT; PRESUMPTION OF ADVANCEMENT; PRT REBUTTED – Fifth, where no CICT found,
but the PRT arises, the Court enquires whether the presumption of advancement arises to
rebut the presumption of resulting trust

o If the presumption of advancement rebuts that of resulting trust, then (i) there will
be no resulting trust on the facts where the property is registered in Y’s sole name
(ie, Y will be entitled to the property absolutely); and (ii) the parties will hold the
beneficial interest in the property jointly where the property is registered in their
joint names

(6) COMMON INTENTION TO CHANGE BENEFICIAL INTEREST – Lastly, the Court enquires
whether there is evidence of a subsequent common intention that the parties should hold
the beneficial interest in a proportion which is different from that in which the beneficial
interest was held at the time of acquisition of the property.

 CRITICISM – Chan Yuen Lan is a laudable attempt at systemisation; but the framework may
be more complicated than it first appears

o PROVING RESULTING TRUST WITHOUT PRESUMPTION – Step (a) contemplates the

applicability of the presumption of resulting trust. What if a party manages to
prove a resulting trust without the aid of the presumption? (ie. where there is
direct evidence)

o PROPRIETARY ESTOPPEL – Where does proprietary estoppel and/or the Pallant v

Morgan equity fit into this? Is the framework meant to be exhaustive? As noted by
Aedit Abdullah J in Sumoi, proprietary estoppel was not raised in Chan Yuen Lan,
and was thus not part of the framework laid out. However, the possible overlap
between a common intention constructive trust and proprietary estoppel is
apparent alternative claims may be made (at [32])).

o RESULTING TRUST OFTEN THE BACKDROP – Moreover, Aedit Abdullah J in Ng So

Hang noted that, in practice, in practice the foremost claim that is put forward is
usually the common intention constructive trust, with an alternative basis relied

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 upon of a proprietary estoppel; the resulting trust is often the backstop claim (at
[24])) [i.e. why go through the trouble of establishing a RESULTING TRUST]

9 PALLANT V MORGAN EQUITY; JOINT VENTURE CONSTRUCTIVE TRUST

 GENERAL; JOINT VENTURE CONSTRUCTIVE TRUST – Where the claimant and defendant
have entered into an arrangement involving the acquisition of property by one of them, the
property will be on CONSTRUCTIVE TRUST (also known as the Pallant v Morgan equity) for
both of them if it can be considered to be unconscionable for the party acquiring the
property to deny subsequently that the other has any beneficial interest in the property
(Virgo, pg 322; Banner v Home pg 397).

o QUOTE – Chadwick LJ opined that where such an arrangement exists, the defendant
thereby constitutes ‘himself trustee on the basis that "equity looks on that as done
which ought to be done’ (at 397)

 THREE REQUIREMENTS –The requirements for a joint venture constructive trust (i.e. the
‘Pallant v Morgan equity’) are (1) an agreement that the Df will take steps to acquire the
target property on the basis that the Pf will acquire a proprietary interest in it; (2) the Pf
must have relied upon the arrangement; (3) the Df must have acted inconsistently with the
arrangement or understanding (Virgo, pg 324; Ong Heng Chuan per Ang JC). Under such
circumstances Equity will regard defendant’s conduct in ignoring the arrangement as
unconscionable; Equity intervenes to give effect to the underlying arrangement via a
constructive trust (Virgo, pg 322; Banner v Home pg 397).

o ON THE AGREEMENT – The certainty of the agreement needs, minimally, to

instruct the courts as to the agreed conduct of the parties subsequent to the
defendant’s acquisition of the property in question (Virgo, pg 324)

o ON RELIANCE – Reliance may be found by doing something or omitting to do

something that (1) either confers an advantage on the defendant in respect of the
acquisition of the property; or (2) is detrimental to the ability of the claimant to
acquire the property on equal terms (Virgo, pg 324). Virgo observes that the fact
that the claimant’s reliance on the joint venture need not be detrimental is one
factor that distinguishes the joint venture constructive trust from proprietary
estoppel (Virgo, pg 324)

o ON ACTING INCONSISTENTLY – It is the act of acting inconsistently with the

understanding that was relied upon by the claimant, that renders the defendant’s
conduct unconscionable and which triggers the constructive trust (Virgo, pg 324).

 Cf. WHERE PARTIES EXPECT A CONTRACT; NO JVCT ARISES – A constructive trust based on a
Pallant v Morgan equity would not arise where the claimant ‘had expected to acquire an
interest in the property under a legally enforceable contract’. Under such circumstances,
the Pf will not have been relying on the oral agreement or understanding, but will by
relying on the contract, which was anticipated (Virgo, pg 326)

o Therefore, the JVJC will only be recognised where the parties assumed that the oral
agreement or understanding between them was sufficient and they were NOT
anticipating a contract would be made in the future (Virgo, pg 326).

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  Cf. CICT SHOULD NOT BE EXPANDED IN COMMERCIAL CONTEXT – However, it is argued
that the Pallant v Morgan equity should NOT be liberalised in the commercial context.
Where there are arm’s length commercial dealings, parties should be expected to formalise
their dealings in contract. The intervention of Equity via doctrine of trusts is uncalled for.
This accords with the Court’s general disinclination to see the intricacies and doctrines
connected with trusts introduced into the non-familial context (AHPETC at [118]). Indeed,
commercial life would be impossible if payments ordinarily create a trust (Twinsectra per
Millet LJ)

 SHOULD BE CHARACTERISED AS A INSTITUTIONAL CONSTRUCTIVE TRUST – Virgo opines

that, since the JVCT is a trust that responds to the defendant’s unconscionability, it follows
that the trust should properly be characterised as an institutional constructive trust (Virgo,
pg 323).

 CASE LAW

 In Pallant v Morgan, there was an agreement that Pf would refrain from bidding in an
auction so that the Df would obtain the land and divide it between them. The Df then denied
the Pf had any interest in the property. The Court held that the defendant held the property
on TRUST for both of them in equal shares, because the claimant had been kept out of the
bidding process by a promise that, if the claimant did not bid, an agreement as to the
division of the property would reach (Virgo, pg 322).

9A PROPRIETARY ESTOPPEL

 PRINCIPLE OF PROPRIETARY ESTOPPEL – The elements required to establish proprietary

estoopel are (1) a representation or assurance made to the claimant that have, creates, or
encouraged him in the belief that he had some right or interest in land; (2) the reliance on it
by the claimant; and (3) detriment to the claimant in consequence of his (reasonable)
reliance. (Thorner per Lord Walker; Chiam Heng Luan)

o Where an owner of land permits the claimant to have, or encourages him in his
belief that he has, some right or interest in the land, and the claimant acts on this
belief to his detriment then the owner of the land cannot insist on his strict legal
rights if that would be inconsistent with the claimant’s belief, as it would be
inequitable for him to do so having regard to the dealings which have taken place
between the parties. The claimant may have an equity based on estoppel (Hong
Leong; Crabb v Arun). The estoppel doctrine works in 2 stages. First, the claimant
who will have to satisfy the elements of proprietary estoppel, and an inchoate
equity arises in the favour of the claimant. Second, once the court has successfully
invoked the court’s jurisdiction to estop the legal owner, the court will then have a
wide discretion todecide what remedy is appropriate in the circumstances to satisfy
the equity raised (Low Heng Leon And; Gray & Gray)

 REMEDIAL DISCRETION – Upon the inchoate equity arising, the court will, having regard to
all circumstances, exercise its equitable jurisdiction to decide its value and how it should be
satisfied. The court’s exercise of its discretion being ultimately guided by the twin lodestars
of achieving proportionality between the expectation, the detriment and the remedy, as
well as doing the minimum required to satisfy the maximum extent of the equity and do
justice between the parties. (Low Heng Leon Andy per Phang JA).

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  Cf. PROPRIETARY ESTOPPEL AND CICT – Proprietary estoppel has a different juridical basis
from the CICT. Proprietary Estoppel does not attach to the property immediately and the
discretion of the court may be exercised to create a remedy that more appropriately
addresses third party rights or other circumstances of the case

o However, they significantly overlap. For instance, in Thorner v Major, Lord Scott
preferred to decide this case on the grounds of CICT, but the majority adopted the
proprietary estoppel analysis.

10 CONSTRUCTIVE TRUST

 CONSTRUCTIVE TRUST; TRUE TRUST – While Birk and Swadling have argued that all
constructive trusts fictions (e.g. Swadling argues that the constructive trust label is simply a
remedy for particular grievances), Virgo opines that a constructive trust is a TRUE TRUST like
any other, where the constructive trustee has legal title to identifiable property that is held
for the benefit of the beneficiaries (Virgo, pg 271). The ICT deliberate attempt by Equity to
recognize a real trust in certain well-defined circumstances; there is no fiction. CRUCIALLY,
the fact that the beneficiary of such a trust has an equitable proprietary interest in the trust
property means that, where the trustee becomes insolvent, the beneficiary’s claim to the
trust property will rank above the claims of other unsecured creditors of the trustee (Virgo,
pg 272)

 INSTITUTIONAL CONSTRUCTIVE TRUST – The institutional constructive trust arises by

operation of law on the occurrence of a certain event, under which a constructive trust has
previously been recognised (Virgo, pg 272). The function of the Courts is merely to declare
that such trust has arisen in the past. The effects of such a trust are determined by rules of
the law, and not subject to the discretion of the judge (Westdeutsche per Lord Browne-
Wilkinson)

 REMEDIAL CONSTRUCTIVE TRUST – A remedial constructive trust is ‘a remedy that can be

awarded where a judge, in the exercise of their discretion, considers that it is appropriate
that the defendant should hold property on trust for the claimant’ (Virgo, pg 273). This is an
exercise of judicial discretion that gives rise to an equitable proprietary interest. The
remedial constructive trust is recognized in Australia, Canada, and New Zealand, but it has
been rejected in England.

 CLASS 1 AND CLASS 2 CONSTRUCTIVE TRUSTS – Lord Millett in Paragon Finance categorized
constructive trusts and constructive trustee into 2 categories:

(1) ORIGINAL TRUSTEE – The constructive trustee has assumed the duties of a trustee
by a lawful transaction. He receives the trust property by a transaction by which
both parties intend to create a trust from the outset. His possession of the property
is coloured by trust and confidence. His subsequent appropriation of that property
to his own use is a breach of that trust A breach of director’s duties falls under class
1 constructive trusts (Yong Kheng Leong at [43])

(2) FRAUDULENT CONDUCT – A wrongdoer who fraudulently acquires property over

which he had never previously been impressed with any trust obligations, may, by
virtue of his fraudulent conduct, be held liable in equity to account as if he were a
constructive trustee. This is not a case of someone who had ever in reality been a

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 trustee of that property; and it is only by virtue of equity’s reach that such a person
is regarded as a Class 2 constructive trustee (Yong Kheng Leong at [46])

10.1 Theoretical Foundations

 THEORETICAL BASIS; WITHOUT REGARD FOR INTENTION; GENERALLY, UNCONSCIOABILITY

– The constructive trust arises by law WITHOUT regard to the INTENTION of the parties (Air
Jamaica per Lord Millet), save for the sui generis common intention constructive trust. While
the theoretical foundations of a constructive trust are a matter of general controversy,
generally, ‘[a] constructive trust arises by operation of law whenever the circumstances are
such that it would be unconscionable for the owner of property to deny the beneficial
interest of another’ (Paragon Finance)’.

o PARTICUALR CIRCUMSTANCES – Nonetheless, it has been said that the ‘search for
an acceptable ... principle for the establishment of a constructive trust ... will
certainly prove elusive’ (Etherton). Therefore, Virgo opines that the focus should be
placed on recognizing PARTICULAR factual circumstances under which the
constructive trust is invoked.

 UNCONSCIOABILITY – Virgo distinguishes a narrow form of unconscionability form a wide

form of unconscionability. The narrow sense of unconscionability narrows in on the
conscience of the defendant and involves a subjective test relating to the defendant's
knowledge or suspicion of the circumstances of receipt (Virgo, pg 292). An example of
narrow unconscionability is the unconscionable retention of property. A wider form of
unconscionability takes on an element of objectivity, in which Equity intervenes by
recognizing a constructive trust to ensure that the defendant does not profit from what is
considered to amount to unconscionable conduct. An example of this wider form of
unconscionability is where the defendant might renege on an undertaking to the claimant,
or where the defendant fiduciary has profited from breach of their fiduciary duty, or where
the defendant retains a profit following rescission of the underlying transaction (Virgo, pg
292) This wider form of unconscionability has also been recognised in the context of
MISTAKEN voluntary transfers (Virgo, pg 292)

o Cf. CICT AND CONTRACTS FOR SALE OF LAND – However, unconscionability does
not explain the constructive trust that arises from a contract of a sale of land. It also
does not explain the requirements of a common intention constructive trust. Virgo
opines that these 2 trusts are better characterized as implied or imputed trusts,
rather than constructive trusts, because they do not respond to the defendant's
unconscionable conduct (Virgo, pg 292)

 VIRGO’S CONCLUSION; GENERALLY, UNCONSCIOABLE – Virgo observes that is it ‘not

possible to identify one single unifying principle to explain all of the situations in which an
institutional constructive trust is recognized’. However, there is a common theme that runs
through almost all of the recognised heads of institutional trusts – the constructive trusts is
a response to the defendant’s actual or potential unconscionable conduct (Virgo, pg 292)

10.2 Institutional Constructive Trust

 INSTITUTIONAL CONSTRUCTIVE TRUST – The institutional constructive trust arises by

operation of law on the occurrence of a certain event, under which a constructive trust has
previously been recognised (Virgo, pg 272). The function of the Courts is merely to declare

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 that such trust has arisen in the past. The effects of such a trust are determined by rules of
the law, and not subject to the discretion of the judge (Westdeutsche per Lord Browne-
Wilkinson)

10.2A Unconscionable Retention [Mistaken Payment Redux]

 UNCONSCIAOBLE RETENTION OF PROPERTY – A category of institutional constructive trusts

arises where it is unconscionable for the defendant to retain property received from the
claimant (Virgo, pg 275). Unconscionability is at the heart of this category and is determined
with specific regard to the fault of the defendant in receiving and retaining property from
the claimant (Virgo, pg 275).

 FALLS UNDER CLASS 2 CONSTRUCTIVE TRUST – This situation would seem to fall under a
class 2 constructive trust which arises ‘a wrongdoer who fraudulently acquires property
over which he had never previously been impressed with any trust obligations, may, by
virtue of his fraudulent conduct, be held liable in equity to account as if he were a
constructive trustee’ (Yong Kheng Leong at [46])

Consensual-Transfer; Fraudulent Misrepresentation

 CONSENSUAL TRANSFER; RECISSION OF CONTRACT – [...] can seek to void the transaction,
with the result that [...] will hold the property on an institutional constructive trust given
that he procured the property through fraudulent conduct (misrepresentation or undue
influence) (Virgo, pg 280). Under such circumstances, it is is unconscionable for the
defendant to retain property received from the claimant (Virgo, pg 275). The fraudulent
transaction will be voidable, upon which the fraudster will hold on constructive trust any
traceable proceeds of the money he was paid by the defrauded party (Penner, pg 124;
Shalson) [IF THERE ARE NO MORE IDENTIFIABLE ASSETS; NO CONSTRUCTIVE TRUST]

o ONLY AFTER COURT ORDER – The fraudster does not hold what he receives under
the fraudulent contract immediately on constructive trust when he receives it, but
only upon a successful rescission of a vitiated contact (Lonhro at 12) Until the
transaction is rescinded pursuant to an order of the court, the claimant ONLY HAS A
MERE EQUITY to seek the recission of the transaction (Virgo, pg 281).

o UPON RECISSION; ELABORATION – Upon rescission of a contract for fraudulent

misrepresentation, the beneficial title which passed to the representor under the
contract revests in the representee. The representee then enjoys a sufficient
proprietary title to enable him to trace, follow and recover what, by virtue of such
revesting, can be regarded as having always been in equity his own property
(Shalson at [122])

o CASE LAW – In The National Crime, Etherton C recognised that, when a transaction
induced by fraudulent misrepresentation is rescinded, the property which was
transferred pursuant to the transaction will be held on constructive trust for the
transferor.

 BARS TO RECISION – Recission is a discretionary equitable remedy that is subject to the

usual bars of recission.

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 o GOOD FAITH 3P – If it the property is disposed of to a good faith purchaser, that
purchaser will obtain a title which will be unimpeachable after any rescission
(Shalson)

o LIQUIDATION************* – Similarly, if the representor goes into liquidation

before rescission, its assets would cease to be beneficially part of its property and
become subject to the statutory scheme in favour of creditors (Shalson)

o ACQUIESCENCE – In Lonhro, Millet J held that Lonhro not entitled to rescind

because it had acted in a way that was inconsistent with rescission. In particular, he
acquiescence and stood by without protest and allow Fayed to bid for the
outstanding shares of Fraser.

 NO FIDUCIARY DUTIES; JUST RETURN PORPERTY – Lord Millet J in Lonhro (a consensual

transfer; fraudulent conduct case) opined that it is a ‘mistake’ to suppose a constructive
trustee is subject to all the fiduciary obligations and disabilities of an express trustee. His
obligation would not extend beyond the property actually obtained by the contract and
liable to be returned (at 13)

 Cf. MISTAKE INDENTITY CASES; FRAUDULENT; NON-CONSENSUAL TRANSFER ANALYSIS –

However, in Collings v Lee where there was (1) a pre-existing agent-principal relationship;
and (2) fraudulent misrepresentation as to the identity of the contracting parties, the Court
treated that the transferor never intended that the whole legal and beneficial ownership in
the property should pass to the transferee. The transferor retained an equitable interest in
the property which constituted an overriding interest (Collings). The Court held that such a
case differed from those in which the transfer was made pursuant to a contract since, in
those cases, the transferor had intended that such ownership should pass to the transferee
notwithstanding that the transfer had been obtained by fraudulent misrepresentation. In
the instant case, Mr and Mrs C had not intended to transfer the property to L or to transfer
it for no consideration.

o NO OVERRIDING INTEREST OF SUCH IN SINGAPORE – Notably, in the case of

Collings v Lee, the Plaintiff’s equitable interest constituted an OVERRIDING INTEEST
under s 70(1)(g) of the Land Registration 1925 Act which provides that the ‘rights of
every person in actual occupation of the land’ is an overriding interest to which any
registered interests is subject to. THERE IS NO EQUIVALENT OF s 70(1)(g) in OUR
LAND TITLES ACT.

Non-Consensual Transfer; Stealing or Theft

 STEALING; THEFT – In Westdeutsche, Lord Browne-Wilkinson recognised that a thief who

stole a bag of coins would hold the property on a constructive trust, because of the thief’s
unconscionable conduct in committing theft and retaining the stolen property (at 716;
Virgo, pg 276). In Twinsectra (1999), Potter LJ seemed to characterize ‘theft’ cases under the
category of ‘non-consensual transfers; the constructive trust arises immediately at moment
of theft at [99]);

o REALLY JUST FOR MORE GENEROUS REMEDY – This may be viewed as the Court’s
desperation for a generous remedy in theft cases. As observed by Virgo, the
advantage of relying on equitable property right is that remedies in Equity to
vindicate property rights are much more extensive than at Law and that the

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 claimant is able to make a claim to recover the stolen property or its proceeds even
though it has become mixed with other property (Virgo, pg 279)

 CONCEPTUAL DIFFICULTIES; ISSUE AS TO WHAT HAPPENS TO THE LEGAL TITLE – However,

Lord Browne-Wilkinson’s analysis suffers from conceptual deficiencies as to the division of
legal and equitable title. It is a fundamental principle of the law of trusts, including the law
of constructive trusts, that the trustee has legal title and the beneficiary has an equitable
interest in the trust property (Virgo, pg 278). However, this causes serious problems where
the property is stolen. The claimant's legal title to the property will not have passed to the
defendant. If the legal title is not passed, how can the thief hold the property on
constructive trust for the claimant?

o CRITCISED BY RIMER J IN SHALSON – Indeed, Rimer J in Shalson opined that a thief

ordinarily acquires no property in what he steals and cannot give a title to it even
to a good faith purchaser. Since, the thief has no title to the property and cannot
be a trustee of it for the true owner, who retains the legal and beneficial title.

 Cf. POSSESSORY RIGHTS; RESIDUARY LEGAL TITLE – Tarrant argues that the thief holds the
rights to possess the stolen property on trust for the victims (Virgo, pg 279). The victim of
theft has BOTH a residuary legal title in the stolen property and also an equitable
proprietary interest in the thief’s possessory title, by virtue of the thief’s unconscionable
retention (Virgo, pg 279). The victim can choose to rely on their legal property rights or
assert a claim founded on equitable rights, against the thief. Similarly, Penner the thief
acquires a possessor's title to the property he steals. This ‘thief’s title’ is good against
anyone but the true owner of the property. Where the thief sells the stolen property to a a
good faith 3P gets good title to the money and the title of the victim of the theft is
extinguished (Penner, pg 124). Therefore, contrary to Rimer J in Shalson, a thief DOES have
a title to the goods or money he steals.

Mistaken Payment

 MISTAKEN PAYMENT; RESULTING TRUST ANALYSIS UNLIKLEY TO BE ACCEPTED IN

SINGAPROE – The local position with regards to mistaken payment is relatively
conservative. The Courts seem unwilling to accept that mistaken payments will
automatically result in proprietary restitution under a resulting trust analysis (Chan Yuen
Lan at [39])

 MISTAKNE PAYMENT; AWRENESS; CONSTRUCTIVE TRUST – In cases of mistaken payment,

the transferor would have an equitable proprietary interest via a constructive trust once the
transferee becomes AWARE that the transferor had paid money to it by mistake
(Westdeutsche per Lord Browne-Wilkinson commenting on Chase Manhattan; Virgo, pg 276

o QUOTE – As opined by Lord Browne Wilkinson, ‘[a]lthough the mere receipt of the
moneys, in ignorance of the mistake, gives rise to no trust, the retention of the
moneys after the recipient bank learned of the mistake may well have given rise to
a constructive trust’ (at 715).

 DEFENDANT’S KNOWLEDGE OF MISTAKEN PAYMENT GENERATES THE CONSTRUCTIVE

TRUST – Virgo opines that Lord Browne-Wilkinson in Westdeutsche analysed Chase
Manhatten Bank in the following way: the fact that the defendant has been unjustly
enriched at the expense of the claimant by virtue of the receipt of a mistaken payment is

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 NOT sufficient reason to trigger a constructive trust. However, the constructive trust arose
when the defendant became AWARE that the claimant had paid money to it by mistake
(Virgo, pg 276).

 ACTUAL KNOWLEDGE OR SUSPICION – Virgo opines that the defendant’s actual knowledge
OR suspicion of the mistake / invalidity of the transactions will be sufficient to characterise
them as acting unconscionably (Virgo, pg 279)

o Cf. NO CONSTRUCTIVE KNOWLEDGE – However, Virgo argues that constructive

trusts do not arise where the defendant OUGT TO HAVE KNOWN of the mistake of
invalidity of the transaction. Virgo elaborates that the imposition of constructive
trusts should be imposed RESTRICTIVELY, which is in line with the policy of the law
to restrict claims to recover property, particular because of the adverse effect that
they have on the defendant’s creditor’s where the defendant is insolvent (Virgo, pg
279)

 LIMIT; WHERE PROPERTY NON-IDENTIFIABLE – However, if the claimant’s property ceases

to be identifiable according to the following and tracing rules, a constructive trust CANNOT
be imposed because there will be no identifiable funds to which the trust can attach (Virgo,
pg 280; Westdeutsche). This is the reason why a constructive trust was not recognized on
the facts of Westdeutsche – when the defendant learned that the transaction was void, the
claimant's money had ceased to be identifiable

o Virgo opines that this is the ‘natural limit’ to the period during which we should
consider whether the defendant's conscience has been affected – once the
defendant has lost the property that they had received from the claimant, or the
proceeds of, or substitute for, that property (Virgo, pg 280; Westdeutsche)

10.2B Statute of Frauds; Oral Declaration of Trusts

 ORAL EXPRESS TRUST UNENFORCEABLE – The trust must be proved by writing that is signed
by the person declaring the trust to be enforceable (s 7(1) Civil Law Act). Where this
statutory requirement is not fulfilled, the express trust is unenforceable (rather than
void/invalid) (Virgo, pg 116).

 ORAL CONTRACT UNEFNORCEABLE TRUST – The Contract must be proved by writing that is
signed by the person declaring the trust to be enforceable (s 6(1) Civil Law Act). Where this
statutory requirement is not fulfilled, the express trust is unenforceable (rather than
void/invalid) (Virgo, pg 116).

 EQUITY WILL NOT PERMIT STATUTE TO BE USED AS FRAUD – However, where a purchaser
of property has given an oral undertaking (e.g., oral trust / oral contract) to respect the
property rights of another and the purchaser’s attempt to renege on the undertaking is
founded on the informality of the undertaking that does not comply with statutory
formalities, the property will be held on a constructive trust (Virgo, pg 286; Lyus).
Moreover, following Banister, there likely needs to be (1) detrimental reliance; and (2) an
unfair advantage gained (Hayton & Mitchell at 15-037). Under such circumstances, the
purchaser will be prevented from reneging on the undertaking by virtue of the principle that
Equity will not permit a statute to be used as an instrument of fraud. On the facts In the
present case [...] Since a constructive trust are exempted from statutory formality

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 requirements (s 7(3) Civil Law Act), the Courts can give effect to it notwithstanding the lack
of formalities (Koh Kim Eng at [13])

o DETRIMENTAL RELIANCE – In Bannister, the detrimental reliance was the the

vendor’s decision to sell the cottages [AT A LOWER PRICE!] to the purchaser

o UNFAIR ADVANTAGE – In Bannister, it would have been unconscionable for the

purchaser to be free to use his legal rights in the land as he wished, given that
those rights were acquired, in part, because of a promise to use those rights in a
particular way (Hayton & Mitchell at 15-040)

o NO NEED FOR FRAUD – It did not matter that the purchaser had no fraudulent
intent when the property was transferred; the fraud consist of relying upon the
absence of writing when the claimant tries to enforce her beneficial interest
(Penner, pg 155).

 CLASS 1 CONSTRUCTIVE TRUSTEE – Lee Meng J in Koh Kim Eng characterised these kinds of
trusts as falling within Class 1 constructive trusts under the categorisations of constructive
trusts by Millet LJ in Paragon Finance. Class 1 constructive trusts are cases where ‘the
constructive trustee really is a trustee’ as he receives the property ‘by a transaction by
which both parties intend to create a trust’. The trustee’s possession of the property is
‘coloured’ from the transaction and ‘his subsequent appropriation of the property to his
own use is a breach of that trust’ (at [33] following Paragon Finance at 409)

 CASE LAW; LYUS; DF SOUGHT TO RELY ON STATUTORY PROVISIONS; FRAUDULENT – In

Lyus v Prowsa, land was bought expressly subject to the claimant's contractual rights, but
the defendants sought to defeat those rights by relying on the provisions of the Land
Registration Act 1925, by virtue of which the rights were not enforceable at Law because
they had not been registered. The Court held that the defendant held the land on
constructive trust for the claimant because the defendant was acting fraudulently in relying
on its statutory rights rather than complying with the undertaking (Virgo, pg 286)

 CASE LAW; BANNISTER V BANNISTER; ORAL CONTRACT – In Bannister, there was an oral
agreement between A and B to allow B to live in the house rent free. There court held that B
was acting fraudulently by setting up the absolute character of the conveyance to defeat
A's life interest and so the property was held on trust by B for A to occupy for as long as she
wished (Virgo, pg 118). Scott LJ described the trust arising as a constructive trust rather than
an oral express trust which was enforceable (as in Rochefoucauld).

 CASE LAW; ROCHEFOUCAULD – In Rochefoucauld, B agreed to bid for mortgaged lands at

the auction and hold it on trust for R. B reneged on this. R sued – claiming that Boustead
held the lands on trust for her.

o Cf. CHARACTERISATION OF TRUST – The trust in Rochefoucauld was recognised as

an express trust. In effect, the Court of Appeal ‘enforced the oral express trust
despite the statutory formality provision’ (Swadling; Penner, pg 155). However,
subsequent cases have characterised the trust as being constructive (Bannister),
because it operates to prevent the transferee of the property from benefiting from
fraud. Mc Farlene considers that the constructive trust arises to prevent the
recipient of the property from reneging on the understanding subject to which the

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 property was received. This would be consistent with some other situations in
which a constructive trust is recognized (Penner, pg 119).

o EXPRESS TRUST; ISSUE AS TO WHO DECLARED THE TRUST – In addition, if the trust
in Rochefoucauld was recognised as an express trust, an issue arises – WHO
declared the trust? Ying Khai Liew argues that, in that case ‘none of the parties
could possibly have acted as settlor’ as there was no declaration by any party who
had a power to declare a trust (Hayton & Mitchell, 15-034). First, the Comtesse
could not have declared the trust as the title to the land was held BY THE
MORTGAGEES. Second, there was no evidence that the mortgagee also did not set
up a trust in favour of the Comtesse when transferring the land to Boustead. Third,
Boustead himself could not have declared a trust as he had immediately
mortgaged the land to the mortgagees who sold it to him (Hayton & Mitchell, 15-
035). Therefore the 3 parties involved could not have declared an express trust.
Since the court in Rochefoucauld focussed on the agreement between the parties,
which occurred BEFORE any receipt of land by the latter, a constructive trust
analysis that focusses on preventing the fraud on B’s part is preferred

o CONSTRUCTIVE TRUST PREFERRED – While the Court in Rochefoucauld

characterised such a trust as an express trust, Penner observes that academics
favour the constructive trust classification as it gives an identical result as
recognising an oral express trust that was enforceable. This analysis does not
disregard the statute requiring express trusts to be in writing and signed; instead,
the analysis relies upon the fact that constructive trusts are specifically exempted
from formality requirements (Penner, pg 155).

10.2C Outside Statute of Frauds; Breach of Undertaking

 BREACH OF UNDERTAKING – Where the Df receives property and breaches an undertaking

to deal with the property for the benefit of a particular person, Equity will intervene and
require the Df to hold the property on constructive trust for the person whom the Df had
agreed to benefit (Virgo, pg 285; Binions; Ho Kon Kim). The constructive trust here is
triggered by the defendant’s unconscionable conduct in reneging on the undertaking, on
the basis of which the [3P] had relied by transferring the property to the defendant (Virgo,
pg 286).

o Applies where there is no statute relevant / no declaration of trust / 3P to contract

involved

 CASE LAW; BINIONS – In Binions, the purchaser bought property from the Df’s husband’s
estate subject to the Df’s right to continue to live in the cottage for the rest of her life. Lord
Denning MR held that the claimant had taken the property subject to a constructive trust
for the defendant. This was affirmed by the court in Ashburn, where the Court emphasised
the significance of the purchaser's express undertaking to respect the rights of the third
party, for only then will the conscience of the purchaser be affected if they seek to ignore
the third party's rights (Virgo, pg 286).

 ISSUE; LICENCE GIVING RISE TO EQUITABLE PROPRIETARY INTEREST – Notably there has
been some criticism over this kind of institutional constructive trust. Hayton and Mitchell
opine that the difficulty in this analysis is that the claimant would previously have a licence.
A licence to occupy land gives the licensor only a personal right against the licensee.

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 Therefore, it does not cohere that a trust giving the beneficiary an equitable interest in
land should arise where the purchaser has simply promised to allow an existing licence to
continue (Hayton & Mitchell at 15-043). Overall, the language of trusts is misleading if the
right that the recipient has promised to confer does not amount to a beneficial interest
under a trust (i.e. only amounts to a license).

 ISSUE; SHOULD CONSTRUCTIVE TRUSTS BE RECOGNISED AS DEFEATING INDEFEASIBLITY OF

TITLE – An interesting question is whether the trust exception under s 46(2) includes
constructive trust claims; constructive trust, in a proprietary sense, means that the Df is
declared constructively by the court to be the trustee of the property for the Df. Chan Chan
CJ in Bebe said that ‘the language of this subsection seems to apply only to express trusts
and not constructive trusts’. TSY says that the Bebe approach to constructive trust is too
narrow and limits the law’s capacity to fashion appropriate remedial responses in respect
of many areas in the law of obligations to meet the changing social circumstances; she raises
the fact that only constructive trust can be used in a situation of a fiduciary who accepts
bribes and uses the bribes to buy the land.

10.2D Unlawful Killing

 UNLAWFUL KILLING – Hayton and Mitchell opine that there is a clear public policy in
preventing one who has unlawfully killed another from enjoying the benefit of property
that they would otherwise have gained as a result of that death. Therefore, where property
is held by two joint tenants, and one murders the other, it has been held that survivorship
still operates to mean that the murderer is solely entitled at law, but that a constructive
trust arises, under which a half share of the beneficial interest is held by the next of kin of
the victim (Re Pechar; Hayton & Mitchell at 15-194)

10.2E Voluntary Transactions made by Mistake

 See above

10.2F De Facto Fiduciaries

 DE FACTO FIDUCIARIES – Where a person who has not been properly appointed either as a
trustee, or an executor, or any other type of fiduciary does acts that are characteristic of
the fiduciary office (i.e. voluntarily undertakes to act for the trust) (Edelman) /
intermeddles with the trust (Boardman per Lord Denning at 1018), that person will be
treated as a ‘de facto fiduciary’. As ‘de facto fiduciaries’, such persons will be treated as
though they have been properly appointed to the respective office and so will be subject to
fiduciary duties in the ordinary way (Virgo, pg 285). They will also hold will hold any
property obtained by intermeddling on constructive trust for the principal,.

 CASE LAW – In James v Williams, a mother of three children had died intestate. The family
home was to be held on a statutory trust for the children equally. Although the son, William,
was meant to be the administrator of the estate, he took possession of the property as if it
were his own, even though it was established that he was aware that he was not solely
entitled to the property. It was held that, by virtue of his knowledge, he was a de facto
executor, and so he held the property on constructive trust for himself and his two siblings.
Here, the constructive trust was clearly triggered by William's unconscionable conduct in
treating the property as his own.

10.2G Contract for Sale of Land

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  SALE OF LAND – Another category of institutionalised constructive trusts is recognised in
the context of CONTRACTS FOR THE SALE OF LAND. Where the purchaser has entered into a
specifically enforceable contract for the sale of land, the vendor will hold that land on
constructive trust for the purchaser (Virgo, pg 290). This is justified equitable maxim of
'Equity treats as done that which ought to be done’ (Virgo, pg 290; Lysaght v Edwards)

 NOT BASED ON UNCONSCIONABILITY – Virgo opines that this head of institutional

constructive trusts is not explained by reference to the defendant’s unconscionable
conduct, as the constructive trust arises EVEN IF the defendant wishes with carry out the
agreement (Virgo, pg 290)

10.2H Breach of Fiduciary Duty

 PROFIT FROM FIDUCIARY POSITION – Where a fiduciary, including a trustee, has profited
from their fiduciary position, they hold the profit on constructive trust for their principal.

(1) MISAPPROPRAITION – Where this profit has been derived directly from interference with
the principal's property, such as misappropriation of the principal's money or by exploiting
an opportunity which should have been available to the principal, the constructive trust is
justifiable on the ground that the profits properly belong to the principal (Virgo, pg 291)

(2) APPLIES TO BRIBES FROM 3P – Moreover, the UK Supreme Court in FHR European Ventures
LLP further held that wherever a fiduciary is liable to account for profits made as a result of
a breach of fiduciary duty, they will be held on constructive trust for the principal, even
though those profits did not derive from interference with the principal's property or from
the exploitation of an opportunity which should have been exploited for the principal. In
other words, where a fiduciary receives a bribe in breach of fiduciary duty, that bribe will be
held on constructive trust (Virgo, pg 292)

10.3 Remedial Constructive Trusts

 REMEDIAL CONSTRUCTIVE TRUSTS – The remedial constructive trust arises through the
exercise of the judge's discretion whenever the Court considers it just to recognize that the
claimant has an equitable proprietary interest (Virgo, pg 293).

o USALLY WHERE WANT TO AVOID PERIOD OF LIMITATIONS – This will often be

resorted to when a claimant is precluded from a personal / contractual remedy due
to the statutory period of limitations. Crucially, s 22(1) of the Limitation Act provides
NO PERIOD OF LIMITATION to an action by a beneficiary under a trust to recover
the trust property / proceeds of trust (at [33])

 SINGAPORE POSTION; CONSCIENCE MUST BE AFFECTED – L P Thean JA in Ching Mun Fong

endorsed that the court has the judicial discretion to impose a constructive trust on
property, which are not subject to any preexisting trust, as a means of granting equitable
relief in a case where it considers just that restitution should be made (at [34]; following
Metall). Crucially, an RCT is founded on fault and the trustee’s conscience must have been
affected (Anna Wee at [182] per Phang JA) [The extent to which a constructive trust can
properly be treated as a remedy is far from clearly defined in the authorities (Ching Mun
Fong at [34])]

o Cf. BACKTRACKING – However, Phang JA in cautioned that where the courts decide
solely on ‘fairness and justice’, this would give the court carte blanche to do

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 whatever it likes without reference to case law or to any legal principle or doctrine’
(at [170]). Crucially, that ‘vague notions of fairness or justice’ were not decisive
‘yardsticks in the exercise of the court’s discretion’ (at [170])

 Phang JA noted that the ‘novel invocation’ of the RCT in Koh Cheong Heng
as adopted within the limited confines of the donatio mortis causa
situation (Anna Wee at [172])

o PHANG’S COMMENTS – Phang JA in Anna Wee held that an unjust enrichment claim
+ the recipient’s conscience being affect can give rise and RCT (this is not different
from mistaken payment + kwowledge mentioned in Westdeutsche?)

 Cf. MIXING OF MONIES; NO CONSTRUCTIVE TRUST CAN ARISE; NO IDENTIFIABLE FUND

FOR TRUST TO BITE; If, as in Westdeutsche, the payee learns of the mistake only after the
moneys have got mixed with other funds or dissipated, no constructive trust in respect of
these moneys can (at [36]). This is because there would no longer be an identifiable fund
for the trust to bite (at [36]).

10.3A Concerns over Remedial Constructive Trusts

 Cf. CONCERRNS OVER REMEDIAL CONSTRUCTIVE TRUSTS – Lord Neuberger, extra judicially,
has expressed his concerns about the remedial constructive trusts. He views that the
remedial constructive trust would (i) render the law unpredictable; (ii) be an affront to the
common law view of property rights and interests; and (iii) involve the courts usurping the
role of the legislature: the creation of new property rights should be left to Parliament.
Birks has also described the remedial constructive trust as a remedy that is 'ugly, repugnant
alike to legal certainty, the sanctity of property and the rule of law' (noted in Virgo, pg 294)

 SIGNIFICANT IMPACT; JUSTICE OF THE CASE; UNCERTAIN – Virgo opines that the
recognition of a remedial constructive trust has profound effect on the law, since it would
enable judges to create equitable proprietary interests where it was felt that the justice of
the case demanded it.

 STATUTORY CONCERNS; INSOLVENCY – Virgo opines that this reflects a concern about use
of the remedial constructive trust to undermine priorities on insolvency as identified by
statute. The creation of an equitable proprietary right by a judge, through a constructive
remedial trust would exclude assets from distribution to the unsecured creditors of the
defendant (Virgo, pg 294).

 Cf. SOME JUDICAL SUPPORT – Notably, in England, there has been judicial pronouncements
that advocate for the recognition of a constructive trust. For instance, Etherton J in Polly
Peck advocated the judiciary having a discretion to fashion such a remedy by analogy with
the discretion to fashion the remedy in respect of proprietary estoppel (Virgo, pg 295)

10.3B Unjust Enrichment

 RCT IS NOT AN APPROPRIATE REMEDY FOR UNJUST ENRICHMENT; DIFFERENT BASES –

Phang JA in Anna Wee observed that the basis of RCT is founded on fault. On the other
hand, the basis of unjust enrichment is not fault. A RCT is predicated on a state of
knowledge which renders it unconscionable for the recipient to keep the moneys. Imposing
an RCT for unjust enrichment, a cause of action founded on a different basis from that
which the RCT is meant to remedy is, to our mind, wholly inappropriate (at [172]). The court

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 concluded that it was not appropriate to apply an RCT to an unjust enrichment claim given
that an RCT is a remedy awarded in response to fault whereas a claim in unjust enrichment
is a claim in strict liability and is not fault-based (at [182])

 ELEMENT OF FAULT REQURIED IN CONSTRUCTIVE TRUST – There is a further element of

fault which may exist in the context of RCT but which is not an inherent part/requirement
in the unjust enrichment claim. Prima facie, the courts would be hesitant to impose an RCT
as a remedy for an unjust enrichment claim without more (at [182]). The fact giving rise to
the court’s discretion to impose an RCT was not the fact of unjust enrichment, but THE
KNOWING RETENTION OF THE MONEYS IN A WAY THAT AFFECTS THE RECIPIENT’S
CONSCIENCE (at [184]; following dicta in Lord Browne-Wilkinson in Westdeutsche). This
arises separately from a strict liability claim in unjust enrichment, although the facts giving
rise to an RCT may arise subsequent to or concurrently with this aforementioned claim.

10.4 Fiduciary Duties of Constructive Trustees

 NO FIDUCIARY DUTIES; JUST RETURN PORPERTY – Generally, a constructive trustee will

have legal title to property that is held on trust for the benefit of others and will be obliged
to convey the trust property to the beneficiary. The fiduciary will not be subject to the
fiduciary obligations and disabilities of an express trustee (Lonhro per Millet J). Virgo
supports this, arguing that a constructive trustee would not be considered to be a fiduciary,
because there is no voluntary assumption of the position of trustee; the trustee has not
knowingly subjected themselves to fiduciary obligations (Virgo, pg 448).

11 FIDUCIARY DUTIES

11.1 Nature of Fiduciary Duties

 SIGNIFICANT BUT FRAUGHT WITH UNCERTAINTIES; (1) IDENTIFICATION; (2) CONTENT –

The law on fiduciary is a significant contribution of Equity to the modern law, particularly
with regard to commercial transactions and company law (Virgo, pg 445). However, the law
remains fraught with controversy and uncertainty, as regards both (1) the identification of
fiduciary relationships; and (2) the content of fiduciary duties (Virgo, pg 445)

 CORE OF FIDUCIARY RELATIONSHIP; ACT IN THE INTEREST; LOYALTY; VULNERABILITY – As

opined by V K Rajah JA in Ng Eng Ghee, the raison d’être of fiduciary obligations is that an
agent who has undertaken to act in the interests of another person (the principal) should
not be permitted to act against his principal’s interest (at [110]). In other words, the
principal is entitled to the single-minded loyalty of the fiduciary (Virgo, pg 446). Moreover,
a distinguishing characteristic of recognised fiduciary relationships is the peculiar
vulnerability of a party to be affected by an abuse of a power or duty that has been
entrusted to another (at [110]).

o RATIONALE; CONSTRAIN THE EXERCISE OF DISCRETIONARY POWER – The primary

function of the fiduciary duty is to constrain the exercise of discretionary powers
(Varity Corp per Justice Breyer). Fiduciary duties are grounded in a ‘somewhat
cynical view of human nature’, and a concession that there is ‘danger of the person
holding a fiduciary position being swayed by interest rather than duty, and thus
prejudicing those whom he was bound to protect’ (Paul Finn in Fiduciary
Obligations).

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 o TWO DISTINCT DUTIES; NO PROFIT AND NO CONFLICT RULE – Flowing from this
umbrella of the obligation of loyalty are 2 fundamental duties – (1) that the
fiduciary is ‘not ... entitled to make [an unauthorised] profit’ – i.e. the ‘not profit
rule’; and (2) the fiduciary is ‘not allowed to put himself in a position where his
[personal] interest and duty conflict’ – i.e. the ‘no conflict rule’ (Bray v Ford per Lord
Herchell)

o QUOTE; CANNOT EXPLOIT – The ‘common thread to the fiduciary obligations to

which these different fiduciary relationships give rise … is the principle that a man
must not exploit the relationship for his own benefit’ (Millet LJ in Equity’s Place in
the Law of Commerce).

 PROSCRIPTIVE AND PROPHYLACTIC – It is often said that fiduciary duties are proscriptive
and prophylactic, and seek to avert breaches of non-fiduciary duties (Tan Yok Koon at [192]
per Phang JA)

(i) PROSCRIPTIVE DUTIES – Fiduciary duties do not operate positively, or prescriptively, by

requiring the fiduciary to do particular things (Virgo, pg 452). Rather, fiduciary duties are
generally considered to be proscriptive in effect, in that the duties identify what fiduciaries
should not do on the basis that, if a fiduciary were to act in a prohibited way, this would be
disloyal to the principal (Virgo, pg 452).

a. Nonetheless, while fiduciary duties are proscriptive, they may require the Fiduciary
to take certain positive steps to avoid liability (e.g. obtaining fully informed consent
of the beneficiary)

(ii) PROPHYLATIC NATURE OF FIDUCAIRY DUTIES; INDEPENDENT OF STATE OF MIND;

AUTOMATIC BREACH – Fiduciary duties are also prophylactic in that they exist to prevent
any act of ‘disloyalty by imposing the most severe duty of loyalty’ (Virgo, pg 458). They are
imposed to ensure that the fiduciary remains personally disinterested throughout the time
during which they are working for the principal; this is assessed independently of the
fiduciary’s state of mind. Where an act of disloyalty is found, there will be an automatic
breach of fiduciary duty regardless of the reasons why the fiduciary placed themself in that
position (Virgo, pg 458).

 TERMIANTION OF RELATIONSHIP – While the general rule is that a fiduciary obligation does
not continue after the termination of the fiduciary relationship, there are exceptional
circumstances in which fiduciary obligations continue after the relationship has been
terminated (Virgo, pg 454).

o RESIGN TO PURUSE CORPORATE OPPORTUNITY – Where the fiduciary resigns in

order to exploit an opportunity that they discovered whilst acting as a fiduciary, the
exploitation of the opportunity will constitute a breach of fiduciary duty (Virgo, pg
454), in view of the disloyalty in resigning in order to exploit the opportunity.
However, if the fiduciary resigns for legitimate reasons. and then exploits the
opportunity, this will not constitute a breach of fiduciary duty (Virgo, pg 454)

 Cf. BREACH OF CONFIDENCE – Where the fiduciary / employee uses information imparted
to him in confidence whilst the fiduciary relationship subsists, the fiduciary / employee may
be liable for breach of confidence. Notably, the obligation to maintain confidence is

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 unrelated to the fiduciary continuing to be employed and so the obligation continues even
after the relationship has been terminated (Virgo, pg 454)

11.1A Strict Standards; Rationale

 STRICT LIABILITY; EVEN IF ACTING HONESTLY; MADE PROFITS FROM TRANSACTION

BENEFICIAL– Therefore, fiduciary duties are interpreted very strictly and the fiduciary will
be liable even where the fiduciary (1) was ‘acting honestly and to the best of their ability,
without fraud or bad faith’ (Regal Hastings); or (2) made profits from a transaction that was
beneficial to the principal, and the profits could not have been obtained by the principal
(Boardman v Phipps); or where the principal did not suffer any loss (Neptune per Lightman J)

o INTENTIONAL ACT REQUIRED – However, an intentional act is required (Bristol and

West Building Society at 19); an unconscious omission which happens to benefit one
principal at the expense of the other does not constitute a breach of fiduciary duty,
though it may constitute a breach of the duty of skill and care (at 19).

 SEE BELOW ON EXPLOTATION OF CORPROATE OPPORTUNIY

 RATIONALE –

(a) MORALITY; EVIDENTIAL COMPLEXITY – The strict standards of fiduciary duties have been
said to be imposed for ‘reasons of morality’ (Virgo, pg 456). According to this theory,
fiduciary duties are imposed to protect vulnerable principals. Alternatively, the strictness of
the fiduciary duties make it ‘evidentially more straightforward to establish liability for
breach of duty’ (at pg 456).

(b) CONTROL DISCRETION; PREVENT FIDUCAIRY FROM BEING SWAYED – Lord Hershell in Bray
v Ford opined that fiduciary duties exist because of the danger of the fiduciary being swayed
by personal interest rather than duty and thus prejudicing those whom they were bound to
protect (Virgo, pg 456).

(c) PROPER PERFORMANCE OF NON-FIDUCIARY DUTIES*** – Congalen further justifies that

fiduciary duties are interpreted strictly to increase the chance that their non-fiduciary duties
will be properly performed (Virgo, pg 456) According to this, fiduciary duties are
consequently subsidiary, since it seeks to enhance the performance of non-fiduciary duties,
and that it exists to remove or neutralize incentives that might tempt the fiduciary not to
perform properly their non-fiduciary duties (Virgo, pg 456) (e.g. duty to act in best interest;
reasonable standard of care and skill)

 ISSUES; SHOULD HIGH STANDARDS BE LOWERED – The strict approach has been heavily
criticised for being punitive and disincentivizes people from assuming a fiduciary position.
Langbein has argued that the strict prohibition of conflicts between personal interest and
duty should be relaxed where the fiduciary has acted in the best interests of the principal
(Virgo, pg 458); this would permit transactions that are beneficial to the principal. Indeed,
the strict interpretation of fiduciary duties may result in unjust results where the acts of the
fiduciary have actually benefited the principal or acted honestly, but the fiduciary is still
held liable for breach of fiduciary duty [BRING IN REGAL HASTINGS]

o CRITICISM; DUTIES ARE NOT ABSOLUTE; OBTAIN FULLY INFORMED CONSENT OR

TRUST AUTHORISATION – Virgo opines that criticisms of the strict standards of
Fiduciary duties ignores one vital feature of the law of fiduciary duties, which is that

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 these duties are not absolute (Virgo, pg 458). The fiduciary is not prevented from
entering into a transaction that conflicts with their duty to the principal or from
profiting from their position as fiduciary, as long as the fiduciary has obtained prior
authorization for their actions where (1) the authorisation is provided for in the
trust instrument or equivalent document; or (2) fully informed consent of the
principal is obtained in advance (Virgo, pg 458)

11.1B Peculiarly Fiduciary Duties and Other Duties

 DISTINCTION BETWEEN FIDUCIARY AND NON-FIDUCIARY DUTIES – Not every breach of

duty by a fiduciary is a breach of fiduciary duty (Bristol and West Building Society at 16). The
expression 'fiduciary duty' is properly confined to those duties which are peculiar to
fiduciaries and the breach of which attracts legal consequences differing from those
consequent upon the breach of other duties.

 REMEDIES; DISTINCTION BETWEEN PERCULIARLY FIDUCIARY AND NON-FIDUCIARY DUTIES

– A fiduciary is subject to both the fiduciary duties (no-conflict and the no-profit duties) and
other duties (e.g the obligation to use proper skill and care in the discharge of their duties).
Crucially, not every breach of duty by a fiduciary is a breach of fiduciary duty (Bristol and
West Building Society at 16). The expression 'fiduciary duty' is properly confined to those
duties which are peculiar to fiduciaries and the breach of which attracts legal consequences
differing from those consequent upon the breach of other duties.

o DIFFERING REMEDIES – full disgorgement of profits (account of profits or

constructive trust) is the typical remedy for breaches of fiduciary duty while
equitable compensation or damages is the remedy for breach of nonfiduciary
duties, e.g. breach of duty of care and skill (Virgo, pg 452)

Peculiarly Fiduciary Duties Non-Fiduciary Duties

No-conflict rule Duties of care and skill
No-profit rule Duty to perform the task undertaken
Duty to act bona fide in the Duty to act bona fide in the beneficiary’s best
beneficiary’s best interests (? Tan interests
Yok Koon) Duty to act for proper purposes
Breach of confidence
 ****DUTY TO ACT BONA FIDE IN BENEFICIARY’S BEST INTEREST – However, Phang JA in
Tan Yok Koon observed that the duty to perform the trust honestly and in good faith for
the benefit of the beneficiaries is considered to be a fiduciary duty and as constituting a
subset of the obligation of loyalty (at [191] & [194]); this duty is ‘part of the irreducible core
obligation of a trust’ (at [191])

 DUTY TO PERFORM TASK UNDERTAKEN – The trustee has a fundamental duty to

administer trust in accordance with trust instrument and the law. This is not strictly a
fiduciary duty and this obligation to perform a task undertaken arises in any relationship
(e.g., contract). This obligation does not arise because trustee is a fiduciary but because
trustee has undertaken responsibility to administer trust

 DUTY OF GOOD FAITH – A trustee also has a duty to act in good faith, which is part of the
‘irreducible core’ of a trustee’s obligations (Armitage). Professors Yip Man and Goh Yi Han
further explain that the duty to act in good faith form the “core and minimum content of a

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 fiduciary relationship” and is the fundamental touchstone of the principle of single-minded
loyalty (Breach of Fiduciary Duty).

o Notably, this applies to relationships that are not fiduciary; this is not a peculiarly
fiduciary duty. Courts often recognize duty requiring contractual discretions to be
exercised in good faith – (a) Insurer’s control of litigation involving insured; (b)
Mortgagee's contractual power to alter interest rate; (c) Mortgagee’s power of sale
[and this is not regarded as a fiduciary duty

 DUTY TO ACT BONA FIDE IN THE BENEFICIARY’S BEST INTERESTS – The duty to act bona fide
in the beneficiary’s best interest is not a strict duty and it can be deemed a composite of
non-fiduciary duties (i.e., duty of good faith, due care and skill and to act for proper
purpose). Therefore, this is not a peculiarly fiduciary duty. This duty is crucial in corporate
law because of difficulty in defining the fundamental duty (duty to perform the task
undertaken) for directors. Director have extremely broad management powers provided in
Companies Act (s 157A)

 DUTY TO ACT FOR PROPER PURPOSES – A duty to act for proper purposes is not peculiar
because it is nothing more than a duty to exercise power within the power afforded by the
trust instrument, thus constraining the trustee’s discretionary powers, and not for a
purpose ‘foreign’ to the power. This is often considered a fiduciary duty in company law;
this may be a by-product of court’s export of trustee’s duties to directors by analogy

 BREACH OF CONFIDENCE – Obligations of confidence can be owed in non-fiduciary

relationships. Its function is to protect information from disclosure – distinct from function
of no-conflict and no-profit rules. This obligation survives after fiduciary relationship has
ended. The classification as duty distinct from fiduciary duties good for clarity

11.2 Fiduciary Relationships; Recognised and Adhoc

 NO FIXED DEFINITON; COURT ANALYSE – As observed by Virgo, there is no fixed legal

definition of when somebody can be considered to be a fiduciary (at pg 447). Where the
person does not fall within any of the recognized categories of fiduciary relationships, the
Court will analyse the factual circumstances to determine whether there are sufficient
hallmarks of a fiduciary relationship to enable the court to conclude that the relationship is
indeed fiduciary (Virgo, pg 447)

o At its core, a fiduciary is someone who is expected to act in the best interests of the
principal / beneficiary, to the exclusion of the fiduciary’s own interest (Virgo, pg
447).

 RECOGNIZED CATEGORIES OF FIDUCAIRY RELATIONSHIPS – includes (1) solicitors; (2)

agents; (3) company directors, including de facto directors; (4) trustee; and (5) partners

o UNCERTAINTY FOR NON-EXPRESS TRUSTEES – While the relationship of express

trustee and beneficiary is a recognized category of fiduciary relationship, there
remains uncertainty as to whether all trustees (resulting and constructive trustees)
can be considered to be in a fiduciary relationship. [SEE ABOVE FOR WHETHER
CONSTRUCTIVE AND RESULTING TRUSTEES ARE SUBJECT TO FIDUCIARY DUTIES]

o DIRECTORS – Persons formally appointed as directors (de jure directors) owe

directors' fiduciary duties to the company (Ultraframe (UK) Ltd). Directors are

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 regarded as trustees "of money which comes to their hands or which is actually
under their control" (per Lindley LJ at p. 631); or "they are only trustees qua the
particular property which is put into their hands or under their control" (per Kay LJ
at p. 639).”

 ADHOC FIDUCIARY RELATIONSHIPS; NOT CLOSED – The classes of fiduciary relationship are
not closed and new categories of fiduciary relationship may be recognized (English v
Dedham; Virgo, pg 448).

11.2A Arm’s Length Transactions

 COMMERCIAL TRANSACTIONS; ARMS LENGTH; UNLIKELY TO BE FIDUCIARY – The courts

have generally refused to recognize that a commercial relationship that has been entered
into at arm's length and on an equal footing is a fiduciary relationship, since it lacks the
hallmarks of trust and confidence (Virgo, pg 449) and parties are expected to ‘look after
their own interests’ (Re Goldcorp per Lord Millet J) through the confines of a contractual
relationship

o Indeed, care must be taken to delineate between contractual obligations and

fiduciary obligations as the latter is far more onerous (Clearlab per Lee J)

o Indeed, finding a fiduciary relationship in commercial transactions has profound

consequences on the risks inherent in such relationships (fiduciary will bear the risks
of things going wrong).

11.2B Employer-Employee

 MUST ACT SOLELY IN THE INTEREST OF EMPLOYER; THREE FACTORS – [...] is likely to be a
fiduciary of [...] and owe a fiduciary obligation to [...]. Generally, the the imposition of an
additional fiduciary duty on an employee, is the exception rather than the norm (Clearlab
at [272] per Lee J) For the court to regard that an employee is also a fiduciary, the employee
has to be placed in a position where he must act solely in the interests of his employer (at
[272]; following Fishel at 1493) to the exclusion of other interests, including his own
(Lonmar Global Risks at [152]). In this respect, three factors are to be considered:

(i) The fiduciary has scope for the exercise of some discretion or power.

(ii) The fiduciary can unilaterally exercise that power or discretion so as to affect the
beneficiary’s legal or practical interests

(iii) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding
the discretion or power (at [275]; following Susilawati at [41]). These factors go to
deciding if one party does owe specific obligations to solely act in another’s interest
at all times (at [275])

o GENERAL DISINCLINATION – The Courts have said ‘care must be taken to delineate
between contractual obligations and fiduciary obligations’ as ‘the latter is far more
onerous’ (Clearlab at [274] per Lee J)

 FINDING OF FIDUCIARY RELATIONSHIP DOES NOT TRANSFORM CONTRACT INTO

FIDUCAIRY; LOOK AT KIND OF FIDUCIARY DUTY – However, the fact that there existed a

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 fiduciary relationship also does not ‘automatically transmute [the employer’s] contractual
obligations into fiduciary ones’ (at [278]). It must be examined the kind of fiduciary duty (i.e.
the scope and content of the fiduciary duty) that arises (at [273]).

o NO WHOLE SALE IMPORTATION – Lee J emphasised that there is no wholesale

importation of every kind of fiduciary duty as this disregards the particular aspect
of the employee’s situation that makes him a fiduciary (at [273]). The kind of
fiduciary duty (i.e. the scope and content of the fiduciary duty) that arises must be
determined by the employment contract (at [273])

 CASE LAW; CLEAR LAB – In Clearlab, the employee was considered a fiduciary by virtue of (i)
his access Clearlab’s confidential information and being involved in top secret R&D
projects; (ii) having managerial responsibilities to apply confidential info for Clearlab’s
benefit (the employee was also 3rd in command in the company, possessing the power to
hire and fire employees); (iii) there was an element of vulnerability Clearlab depended on
Ting to use its confidential information only for its benefit and not use it for a third party (at
[282]). [SUMMARY – Due to this, it was held that the employee owed a fiduciary obligation
NOT TO EXPLOIT CLEARLAB’S CONFIDENTIAL INFORMATION made available to him by
reason of his position in Clearlab]

o Given the existence of a fiduciary duty, the Court then examined whether the
specific acts engaged the particular fiduciary relationship that arose:

(i) MOONLIGHTING; NO BREACH – In respect of working for Aquilus while being

employed by Clearlab, this was held to not be a breach of fiduciary duty. This was
because none of the 3 factors (above) arose in the situation where an employee
moonlighted on company’s time for a competitor company. The contractual
obligation not to moonlight should should NOT be elevated into a fiduciary duty (at
[280]).

(ii) FAILING TO INFORM CLEARLAB OF COMPETITOR; AQUILUS; NO BREACH – The

Court held that the Employer was not even under a contractual obligation to
disclose the existence of a competitor, much less a fiduciary one.

(iii) BREACHED A FIDUCIARY DUTY NOT TO EXPLOIT ANY OPPORTUNITY OR

CONFIDENTIAL INFORMATION – Lee J opined that the nub of Ting’s wrongdoing was
that he misappropriated Clearlab’s confidential information for use at Aquilus. Ting
had come by Clearlab’s confidential information in his position as the head of
engineering and technology development in Clearlab. He was entrusted with
managerial responsibilities to apply the confidential information for Clearlab’s
benefit (at [282]). There was an element of vulnerability as Clearlab depended on
Ting to use its confidential information only for its benefit and not use it for a third
party. Therefore, the employee owed a fiduciary obligation not to exploit Clearlab’s
confidential information made available to him by reason of his position in
Clearlab. It was breached when Ting took advantage of his position in Clearlab to
further Aquilus’ interest, ie, by copying and retaining Clearlab’s confidential
documents with the intention of benefiting Aquilus, as well as omitting to disclose
such wrongdoing or the existence of Aquilus as the beneficiary of such wrongdoing

11.3 No Conflict Rule

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 NO CONFLICT RULE – The no-conflict rule means that fiduciaries are not to be allowed to ‘to
enter into engagements in which he has ... a personal interest conflicting, or which may
possibly conflict, with the interests of [his fiduciary]’ (Aberdeen Railway per Lord
Cranworth). There are 2 applications:

o APPLIES TO POTENTIAL CONFLICT – Rajah JA in Ng Eng Ghee opined that as it is

virtually impossible to know what considerations have gone into an act or a
decision of the fiduciary, the law sensibly does not require proof of an actual
conflict of interest where such an allegation is made (at [138]). Thus, the no-conflict
rule targets ‘potential, and not merely actual conflicts’ (Ng Eng Ghee at [138]).

o KINDS OF INTEREST – An ‘interest’ may be constituted by the presence of ‘personal

concern of ... pecuniary value’ in a transaction effected by the fiduciary; ‘interest’
includes the ‘prospective, or possible saving, or a diminution of a personal liability’.
It may also be an interest which is not fully realised yet (at [147]).

o MUST DISCLOSE INTEREST; INTEREST IS PERCUNIARY GENERALLY; Flowing from the

no-conflict rule, the Fiduciary must disclose the personal interest as soon as a
possible conflict arises, or as soon after as practicable (at [147] per V K Rajah JA).

(1) PERSONAL INTEREST AND DUTY TO PRINCIPAL CONFLICT – [...] is likely to have breached
the no-conflict rule – a peculiarly fiduciary duty – as he placed himself in a position where
[his personal interest does conflict (i.e. actual conflcit) OR there is a ‘mere possibility’ (Ng
Eng Ghee at [142]) that his personal interest conflicts with his duty to the principal (Virgo, pg
459).

o RATIONALE – This rule is as aspect of the fiduciary obligations which are

‘proscriptive and prophylactic’ in nature (Tan Yok Koon per Phang JA) and seek to
ensure that the principal has the ‘single-minded loyalty of the fiduciary’ (Virgo, pg
446) [SEE SELF DEALING RULE IF APPLICABLE]

o In the present case, there is a [actual / ‘mere possibility’ of conflict] between (1) the
trustee's personal interest in [...]; and (2) their duty to the beneficiaries to [...]
(Virgo, pg 461)

o STRICTLY LAIBLE – Further, it is irrelevant that [...] Fiduciary duties are interpreted
very strictly and the fiduciary will be liable even where the fiduciary (1) was ‘acting
honestly and to the best of their ability, without fraud or bad faith’ (Regal
Hastings); or (2) made profits from a transaction that was beneficial to the principal,
and the profits could not have been obtained by the principal (Boardman v Phipps);
or (3) where the principal did not suffer any loss (Neptune per Lightman J); (4) the
principal could not have obtained / REJECTED the benefit for themselves
(Boardman v Phipps) (Virgo, pg 466).

o CONSIDER DEFENCES & REMEDIES

(2) 2 PRINCIPALS; CONFLICT – [...] is likely to have breached the no-conflict rule – a peculiarly
fiduciary duty – as he placed himself in a position where his duty to one principal [actually
conflicts / has a ‘mere possibility’ of conflict (Ng Eng Ghee at [142])] with their duty to
another principal. [Note – Duty refers to the fiduciary’s non-fiduciary duty, such as the duty
to act in the principal's best interests and in good faith]

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 o RATIONALE – This rule is as aspect of the fiduciary obligations which are
‘proscriptive and prophylactic’ in nature (Tan Yok Koon per Phang JA) and seek to
ensure that the principal has the ‘single-minded loyalty of the fiduciary’ (Virgo, pg
446).

o STRICTLY LAIBLE – Further, it is irrelevant that [...] Fiduciary duties are interpreted
very strictly and the fiduciary will be liable even where the fiduciary (1) was ‘acting
honestly and to the best of their ability, without fraud or bad faith’ (Regal
Hastings); or (2) made profits from a transaction that was beneficial to the principal,
and the profits could not have been obtained by the principal (Boardman v Phipps);
or (3) where the principal did not suffer any loss (Neptune per Lightman J); (4) the
principal could not have obtained / REJECTED the benefit for themselves
(Boardman v Phipps) (Virgo, pg 466).

o CONSIDER DEFENCES & REMEDIES

 LIKELY TO BE MERE POSSIBILITY TEST – While it is noted that English Lower Courts
generally use the ‘real sensibility possibility test’ articulated by Lord Upjohn in his
dissenting judgement in Boardman, the Singapore Court of Appeal has, in obiter dicta,
indicated its preference for the stricter threshold of ‘mere possibility’ of conflict (Ng Eng
Ghee at [142]) as this would support the need to ‘extinguish all possibility of temptation
and to deter fiduciaries who may be tempted to abuse their positions’ (at [142])

 DEALING RULES – The fair-dealing and self-dealing rules were developed by equity to
resolve conflict that may arise between the duty of the trustee to the beneficiaries and
their personal interest where the trustee might wish to purchase either the trust property
itself or a beneficiary's interest under the trust (Virgo, pg 460). These rules are ‘applications
of the no-conflict rule’ (Virgo, pg 460).

11.3A Self-Dealing Rule; Transaction between Trustee and Trust; Company Dealing WITH Director

 [A trustee cannot sell trust property to themselves; neither can the trustee sell their own
property to the trust].

 SELF-DEALING RULE; VOIDABLE – In such a situation there is a real danger of conflict

between (1) the trustee's personal interest in getting the cheapest price and; (2) their duty
to the beneficiaries to obtain the highest price for the property (Virgo, pg 461) .... Such a
breach can also be termed as a breach of the self-dealing rule (which is considered an
application of the no-conflict rule) which provides that a fiduciary is barred from dealing on
behalf of themself and the principal in the same transaction (Virgo, pg 461). In the present
case [....], the self-dealing rule is clearly breached as [...] ‘essentially [acted] on behalf of
both parties in such a transaction’ (Nordic International at [55])

o REMEDY; VOIDABLE; ACCOUNT OF PROFITS – Under such circumstances, the

transaction will be voidable and the principal can seek rescission. Moreover, once
the transaction has been rescinded, the fiduciary is liable to account to the principal
for any profits that were made from the transaction (Virgo, pg 460). However,
recission of the transaction will NOT be possible if any of the usual bars apply, such
as affirmation of the transaction by the principal

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  DOES NOT APPLY WITH FULL INFORMED CONSENT – The transaction will be effective where
the fiduciary has obtained the consent of the court or the fully informed consent of the
principal to the transaction (Virgo, pg 461); clear evidence would need to be adduced in
court to prove this. The fairness of the transaction may then be relevant when assessing
whether the consent was indeed fully informed.

 DOES NOT APPLY WHERE AUTHORISED BY TRUST INSTRUMENT – The self-dealing rule can
be excluded by the relevant instrument that governs the fiduciary relationship (Sargeant v
National Westminster Bank)

11.3B Fair-Dealing Rule; Transactions between Trustee and Beneficiary

 FAIR DEALING RULE; FAIRNESS OF TRANSACTION – The fair-dealing rule provides that,
where a fiduciary personally transacts with the principal, the transaction is voidable save
where the fiduciary can show that (1) they took no advantage of their fiduciary position, (2)
that they made full disclosure to the principal, and (3) that the transaction was fair and
honest (Tito v Waddell per Meggary VC; Virgo at pg 463). The no-conflict rule is involved as
the fiduciary will be tempted by their personal interest to obtain the cheapest price when
dealing with the principal in circumstances under which the fiduciary should be loyal to the
principal and ensure that the best price is obtained (Virgo, pg 463)

 ESTABLISH FAIRNESS TO MAKE TRANSACTION VALID; MORE FLEXIBLE THAN SELF-DEALING

RULE; 2 PARTIES – Virgo opines that the fair-dealing rule is not applied as stringently as the
self-dealing rule because the fiduciary may establish the fairness of the transaction and
showing that they had not taken advantage of the principal. The more flexible nature of
this rule is justified by the fact that there are genuinely two parties to the transaction, the
fiduciary and the principal, whereas the self-dealing rule involves the fiduciary dealing with
them self (Virgo, pg 463).

 REMEDY; RECISSION; ACCOUNT OF PROFITS – If the fair dealing rule is breached, any
transaction into which the fiduciary has entered is liable to be rescinded on the application
of the principal and the fiduciary is liable to account for any profits that they made from the
transaction. Rescission will be barred if any of the usual bars apply, such as affirmation or
lapse of time before the principal seeks rescission (Virgo, pg 463).

11.3C Acting for more than 1 Principal

 2 PRINCIPALS; CONFLICT – [...] is likely to have breached the no-conflict rule – a peculiarly
fiduciary duty – as he placed himself in a position where his duty to one principal [actually
conflicts / has a ‘mere possibility’ of conflict (Ng Eng Ghee at [142])] with their duty to
another principal. [Note – Duty refers to the fiduciary’s non-fiduciary duty, such as the duty
to act in the principal's best interests and in good faith]

o TWO PRINCIPALS – Notably, a fiduciary is NOT prevented from acting for more than
one principal; however, a fiduciary is liable for breaching the no-conflict rule where
the fiduciary acts for more than one principal AND there is a conflict between their
duty owed to both principals (Clarke Boyce v Mouat; Virgo at 464). The liability
arises due to the fact that the ‘fiduciary is not able to provide undivided loyalty to
each [principal]’ (Virgo, pg 464). In the present case, [X]’s duty with a has a ‘mere
possibility of conflict’ with [....] as ....

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 o LIKELY TO BE MERE POSSIBILITY TEST – While it is noted that English Courts
generally use the ‘real sensibility possibility test’ articulated by Lord Upjohn in his
dissenting judgement in Boardman, the Singapore Court of Appeal has, in obiter
dicta, indicated its preference for the stricter threshold of ‘mere possibility’ of
conflict (Ng Eng Ghee at [142]) as this would supporting the need to ‘extinguish all
possibility of temptation and to deter fiduciaries who may be tempted to abuse
their positions’ (at [142])

o CONFIDENTIAL INFORMATION – A fiduciary will be liable for breach of his fiduciary

duty to P2 in failing to make full disclosure of confidential information belonging to
P1, even though such disclosure might have breached the fiduciary duty owed to P2
because it would mean that the fiduciary is not acting in P2’s best interest (Virgo, pg
465; Hilton v Barker)

 STRICTNESS OF FIDUCAIRY DUTIES; FAILURE TO DISCLOSE CONFIDENTIAL INFORMATION –

The strictness of fiduciary duties can be gleaned from liability arising from serving to
principals where both the failure to disclose confidential information AND the positive act
of disclosing confidential information will constitute a breach of the no-conflict rule (Hilton
v Barker Booth). There if F, a fiduciary, serves principals A & B, and he obtains confidential
information from principal A that may be beneficial to principal B, and he chooses not to
disclosure confidential information to not breach his duty to A, F will still be in breach of the
no-conflict rule in respect of the fiduciary’s duty to B. Under such circumstances, in any
course of action F takes, he will be in breach of his duty.

o Virgo opines that it is of NO defence that the disclosure of the information to B

would’ve constituted a breach of the fiduciary’s duty to A. Rather, the it is the fact
that the fiduciary has got themself into a position in which the duties owed to
different principals inevitably conflict that constitutes the breach of fiduciary duty.
As recognised by Lord Walker in Hilton, ‘the fact that he has chosen to put himself in
an impossible position does not exonerate him from liability’ (Virgo, pg 464).

 EXCEPTIONS – Where the fiduciary does act for two principals so that there is a conflict of
duties owed to each one, the fiduciary will not be liable for breach of fiduciary duty in two
circumstances.

(1) FULLY INFORMED CONSENT – Where both principals have given their fully
informed consent to the fiduciary acting for the other principal, the fiduciary
cannot be liable where the interests of the two principals conflict (Virgo, pg 465).
Fully informed refers to the state where the principal is aware of the relevant
material factors giving rise to the conflict.

o IMPLIED CONSENT; KNOWLEDGE – This consent may be implied where the

principal was aware that the fiduciary was acting for another principal
(Virgo, pg 465).

(2) CONTRACTUAL TERM – Liability for a conflict of duties owed to different principals
can also be avoided by a term in the contract of appointment that allows the
fiduciary to act for other principals (Virgo, pg 465)

 REMEDY; VOIDABLE; ACCOUNT OF PROFITS; EQUITABLE COMPENSATION – Where this

occurs, any transaction entered into by the fiduciary on behalf of one or both of the

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 principals will be voidable and the fiduciary will be liable to account for any profit made or
compensate for any loss suffered from the transaction (Virgo, pg 464)

11.4 No Profit Rule

 NO-PROFIT RULE – [...] is likely to have breached the no-profit rule for making an
unauthorised profit from [xxx]. As a fiduciary, [...] is bound by the no-profit rule prohibits
fiduciaries from obtaining an unauthorised benefit by virtue of their position as fiduciary
either for themselves or for a third party (Virgo, pg 466). This rule is as aspect of the
fiduciary obligations which are ‘proscriptive and prophylactic’ in nature (Tan Yok Koon per
Phang JA) and seek to ensure that the principal has the ‘single-minded loyalty of the
fiduciary’ (Virgo, pg 446).

o In the present case [...] made a profit by using an opportunity or knowledge that
they obtained by virtue of their position as a fiduciary. Under such circumstances, ...
the trustee's liability was founded on his breach of fiduciary duty since he obtained
the opportunity to profit from his capacity as trustee (Virgo, pg 468)

o STRICTLY LAIBLE – Further, it is irrelevant that [...] Fiduciary duties are interpreted
very strictly and the fiduciary will be liable even where the fiduciary (1) was ‘acting
honestly and to the best of their ability, without fraud or bad faith’ (Regal
Hastings); or (2) made profits from a transaction that was beneficial to the principal,
and the profits could not have been obtained by the principal (Boardman v Phipps);
or (3) where the principal did not suffer any loss (Neptune per Lightman J); (4) the
principal could not have obtained / REJECTED the benefit for themselves
(Boardman v Phipps) (Virgo, pg 466).

 EXCEPTIONS; (1) CONSENT; (2) AUTHORISED BY TRUST INSTRUMENT– The real concern of
the no-profit rule is to ensure he fiduciary does not make an unauthorized or secret profit
from their positions. Therefore, the no-profit rule does not apply where (1) the principal has
given their fully informed consent to the fiduciary obtaining the profit following full and
frank disclosure by the fiduciary, or (2) where the profit is otherwise authorized, for
example by the trust instrument (or director’s remuneration) (Virgo, pg 464)

 RELATIONSHIP WITH NO-CONFLICT RULE – Virgo observes that the no-profit rule has been
said to be a component of the wider no-conflict rule (see Bray v Ford per Lord Herschell).
Indeed, in Guy Neale, the Court of Appeal opined that an agent must not make a profit out
of his trust. This is part of the wider rule that an agent must not place himself in a position in
which his duty and his interest may conflict’. However, Virgo opines that it is preferable to
consider the rules as being distinctly. This is because they have different requirements and
there will be circumstances under which one rule operates and not the other (Virgo, pg
467).

o REMEDY DIFFERENT; NO-PROFIT RULE; DISGORGEMENT OF PROFITS; NO-CONFLICT

RULE WHERE NO PROFIT; COMPENSATORY – Moreover, separate application of
each rule is also useful when determining the appropriate remedy that should be
awarded; a breach of the no-profit rule will engage a liability for the defendant to
disgorge the profit to the principal, whereas the remedy for breach of the no-
conflict rule that does not involve the fiduciary obtaining a profit will be
compensatory (if have profit, can disgorge) (Virgo, pg 467)

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 o NO-PROFIT RULE BREACHED; NO NEED TO ESTABLISH NO-CONFLICT – However,
where the fiduciary is alleged to have made a profit in breach of fiduciary duty, it
should not be necessary to establish that this also involved a conflict of interest as
the unauthorised profit is sufficient to impose liability (Virgo, pg 467).

o Example – Director personally pursues a public call for a tender, knowing that their
company is pursuing the same tender. This is a contravention of the no-conflict rule
but not a breach of the no-profit rule as the director did not obtain the profit as a
result of their fiduciary position, since the offer was a public offer available to all and
not to the fiduciary because of their fiduciary position.

o Example – Another situation in which the no-conflict rule can be breached without
infringing the no-profit rule is where the fiduciary starts up a business in competition
with that of the principal. The fiduciary will be liable to disgorge any profit made
because of the conflict of personal interest and duty to the fiduciary even though
this profit did not arise from the exploitation of the fiduciary's position as a fiduciary

 CASE LAW; KEECH – In Keech v Sandford, the trustee obtained a lease, that was previously
held by the beneficiary. The lease was due to expire and the beneficiary was incapable of
renewing the lease. The Court held that the trustee had breached his fiduciary duty and the
beneficiary succeeded in getting the the lease assigned and also recovered the profits
obtained by the trustee. Virgo opines that the trustee's liability was founded on his breach
of fiduciary duty since he obtained the opportunity to profit from the renewal of the lease
in his capacity as trustee (Virgo, pg 468) King LC recognized that he should have let the lease
expire rather than obtain it himself. It was recognised that ‘the trustee is the only person of
all mankind who might not have the lease’ (at [62])

11.4A Using Principal’s property to Save Money

 USAGE OF PRINCIPAL’S PROPERTY; USE INTEREST – The fiduciary will also be liable for
breach of fiduciary duty where they save money by using the principal's property without
permission to do so (Virgo, pg 468).

o Brown v IRC [1965] AC 244 – the defendant solicitor received clients' money, which
he deposited in a bank account. The defendant then used the interest from this
account for his own purposes. This constituted a breach of the no-profit rule
because the defendant had used income that belonged to the clients for himself and
without the authority of the clients.

11.4B Indirect Profit; Self-Appointment by Trustee as Director

 INDIRECT PROFIT (I.E. NOT FROM TRUST) – The no-profit rule can be breached where the
profit obtained by the fiduciary arises indirectly from their fiduciary position (i.e. profit not
arising directly from the trust – misappropriation) (Virgo, pg 469).

 SELF-APPOINTMENT OF DIRECTORSHIP BY TRUSTEE; LIABLE TO ACCOUNT FOR

REMUNERATION – Therefore, where (i) trustees appointed themselves as directors of a
company in which the trust owned shares; and (ii) and the trust document did NOT
authorise the trustees to appoint themselves, the trustees will be in breach of the no-profit
rule and will be liable to account for their directorial remuneration. This is so even though

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 the profit did not come directly from the trust and was earned for their work as directors,
because they had acquired their position as directors by virtue of their position as trustees.

o CONFLICT OF INTEREST – There may be also a conflict of interest where the trustees
appoint themselves as directors in an unauthorised manner as – (1) it is the trustee’s
duty to give the estate the benefit of their unfettered advice in choosing people to
act as directors of the company; and (ii) as potential recipients of the remuneration
of directors, it was in their interest to choose themselves for the job (Virgo, pg 469).

 UNLESS LEGITIMATELY APPOINTED DIRECTOR; AUTHORISED OR APPOINT INDEPENDENTLY

– Where, however, the trustees are legitimately appointed as directors of the company,
they can keep any remuneration that they are paid as directors. This occurs where the
appointment is (a) authorized by the trust settlement (Re Keeler's Settlement Trusts); (b) the
trustees were appointed as directors independently of the votes from the trust's shares (Re
Gee); (c) the directors had already been appointed before becoming trustees (Re Orwell's
Will Trusts) (Virgo, pg 469)

11.4C Exploitation of Opportunities

 (1) EXPLOTATION OF OPPORTUNITY ARISING BY VIRTUE OF FIDUCIARY POSITON – [...] is

likely to have breached the no-profit rule for exploitation a corporate opportunity to make
an unauthorised profit where the opportunity came to the Df in their capacity as a fiduciary
(Virgo, pg 470). As a fiduciary, [...] is bound by the no-profit rule prohibits fiduciaries from
obtaining a benefit by virtue of their position as fiduciary either for themselves or for a third
party (Virgo, pg 466). This rule is as aspect of the fiduciary obligations which are ‘proscriptive
and prophylactic’ in nature (Tan Yok Koon per Phang JA) and seek to ensure that the
principal has the ‘single-minded loyalty of the fiduciary’ (Virgo, pg 446).

o Therefore, a director is not allowed to make use of information obtained while he

was a director of the company in question or to exploit a maturing business
opportunity of the company for his own personal purposes and profit (Swiss
Butchery at [10] per Woo J). In the present case [...]. He made a profit by using an
opportunity or knowledge that he obtained by virtue of their position as a fiduciary.
Under such circumstances, ... the trustee's liability was founded on his breach of
fiduciary duty since he obtained the opportunity to profit from his capacity as
trustee (Virgo, pg 468).

o STRICTLY LAIBLE – Further, it is irrelevant that [...] Fiduciary duties are interpreted
very strictly and the fiduciary will be liable even where the fiduciary (1) was ‘acting
honestly and to the best of their ability, without fraud or bad faith’ (Regal
Hastings); or (2) made profits from a transaction that was beneficial to the principal,
and the profits could not have been obtained by the principal (Boardman v Phipps);
or (3) where the principal did not suffer any loss (Neptune per Lightman J); (4) the
principal could not have obtained / REJECTED the benefit for themselves
(Boardman v Phipps) (Virgo, pg 466).

o EXAMPLE – where the fiduciary discovers the opportunity whilst acting as a fiduciary
or exploits the opportunity for themself whilst negotiating with a third party on
behalf of the principal (Virgo, pg 471).

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 o CASE LAW – In Williams v Barton, the trustee persuaded the other-trustee to
employ him to value the testator’s securities. It was held that he had breached his
fiduciary duty and was liable to account to the trust for the commission that he had
received

 (2) EXPLOTATION OF OPPORTUNITY WHERE FIDUCIARY DISCOVERED THE OPPORTUNITY IN

A DIFFERENT CAPACITY – [...] is likely to have breached the no-profit rule for exploitation a
corporate opportunity to make an unauthorised profit where the opportunity came to the Df
in their personal capacity. (Virgo, pg 470). As a fiduciary, [...] is bound by the no-profit rule
prohibits fiduciaries from obtaining a benefit by virtue of their position as fiduciary either
for themselves or for a third party (Virgo, pg 466). This rule is as aspect of the fiduciary
obligations which are ‘prophylactic and prophylactic’ in nature (Tan Yok Koon per Phang JA)
and seek to ensure that the principal has the ‘single-minded loyalty of the fiduciary’ (Virgo,
pg 446) by mandating that the ‘fiduciary remains personally disinterested throughout the
time during which they are working for the principal’ (Virgo, pg 458). Therefore, a director
cannot exploit business opportunity of the company for his own personal purposes and
profit (Swiss Butchery at [10] per Woo J). EVEN WHERE where the fiduciary discovered the
opportunity in a different capacity (e.g. in his personal capacity) (Virgo, pg 472; IDC v Cooley)

o CASE LAW – In Bhullar v Bullar, the director of a company was held liable to the
company for the profits that he obtained from the acquisition of a property that
was located next to that of the company, even though the director discovered the
property as a passer-by rather than as director. The director's liability was founded
on his failure to inform the company of the opportunity and his subsequent
exploitation of it.

 EXCEPTION; CONSENT – Liability will be attracted unless the principal has given their fully
informed consent.

 CONSTRUCTIVE TRUST – Any profit so obtained will be subject to a constructive trust in

favour of the company (Swiss Butchery at [12] per Woo J)

 VIRGO’S CRTICISM; TOO WIDE; RECOMMENDATION – Since the fiduciary is prevented from
exploding an opportunity even if the principal was NOT actively pursuing, Virgo observes
that the ambit of fiduciary law may be too wide in this respect. Virgo recommends that an
opportunity for these purposes should be defined as a business opportunity in which the
principal already has an interest, or in the fruition of which the principal has a real and
almost certain expectancy (Virgo, pg 471).

Strictly Liable

 DISGORGE ANY PROFITS; LIABILITY ATTRACTED REGARDLESS – The fiduciary will be liable to
disgorge to the principal any profits obtained by such a breach of duty, regardless of the
fact that the defendant acted where (a) the fiduciary had acted honestly and in the
principal’s best interests (Regal Hastings; Boardman v Phipps); (b) the principal actually
benefited from the transaction (Boardman v Phipps); or that (c) the principal could not have
obtained / REJECTED the profit for themselves (Regal Hastings; Boardman v Phipps) (Virgo,
pg 466).

o JUSTIFICATION – Virgo opines that the strict application of the no-profit rule can be
justified for two reasons – (1) for the interests of efficiency, as the principal may

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 not be able to monitor easily the fiduciary's actions on a daily basis; (2) to provide
an incentive to all fiduciaries to resist the temptation to conduct themselves
improperly; to ensure the fiduciary’s SINGLE-MINDED LOYALTY (Virgo, pg 475).

 CASE LAW; DISGORGE OF PROFITS EVEN THOUGH DEFENDANTS ACTED HONESTYLY; TRUST
COULD NOT HAVE PURHCASED SHARES; BOARDMAN V PHIPPS – In Boardman v Phipps, the
Df trustees had bought shares in the company (in which the trust held shares) and
reorganised the business to the financial benefit of themselves and the trust. The House of
Lords held by a majority of 3:2 that the Dfs had breached their fiduciary duty to the trust
since they had made a personal profit by by exploiting information that they had obtained
whilst acting as fiduciaries and were liable to account to the trust for the profit. (Virgo, pg
473).

o PRIVATE COMPANY; INFORMATION OF SHARES CAME TO IN THEIR CAPACITY – It

was consequent that the Company was a PRIVATE company and that there was no
public market for the shares; the information that the defendants obtained and the
ability to purchase shares in the company came to them in a fiduciary capacity
(Virgo, pg 473)

o EQUITABLE ALLOWANCE; STRICTNESS OF RESULT MITIGATED – Virgo observes that

the strictness of the result in Boardman v Phipps was further mitigated by the fact
that the solicitor was awarded an equitable allowance to reflect the value of his
services in managing the company to make it profitable (Virgo, pg 474).

o CASE CRITICISED – Virgo observes that the result in Boardman has criticized as
producing an unjust result. This is because the defendants had acted honestly and
reasonably; there was NOTHING to suggest they had abused their relationship of
trust and confidence. Moreover, the trust had not been in a position to buy more
shares as there was no trust money available to buy shares, so there was no
possibility of the fiduciaries competing with the trust (Virgo, pg 474). Yet, there
were still liable to account to the trust for the profit that they had obtained.

 CASE LAW; DISGORGEMENT OF PROFITS EVEN THOUGH PRINCIPAL COULD NOT PURUSE;
ACTED IN BEST INTEREST OF COMPANY; REGAL HASTINGS – In Regal, the Directors of the
company purchased shares in A Ltd and enabled the company to obtain leases that it would
not have been able to do had the shares in A Ltd not been fully subscribed. The Court held
that the directors had breached the no-profit rule as the opportunity to purchase shares
had come to them in their capacity as fiduciaries even though they had acted in good faith
and for the benefit of the principal. Lord Russell in obiter opined that if the defendant
directors had wished to protect themselves they could have ratified the breach by a vote at
the general meeting

 Cf. FLEXIBLE APPROACH – In Murad v Al-Saraj, Arden LJ acknowledged that the Court ‘the
court should revisit the operation of the inflexible rule of equity in harsh circumstances’
such as where the trustee has acted in ‘perfect good faith and without any deception or
concealment, and in the belief that he was acting in the best interests of the beneficiary’.

 Cf. ADOPTED IN SEVERAL CASES; WHERE OPPORTUNITY DECLINED *** – The flexible
approach was adopted in Peso-Silver Mines Ltd where it was held that an account of profits
would not be awarded where the fiduciary had exploited an opportunity after it had been
declined by the principal (Virgo, pg 477). In this case, the decision to reject the opportunity

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 had been taken in good faith and for sound business reasons in the interest of Peso.
Principally, there was was no thought or intent on his part to profit himself at the expense
of the company. . The opportunity had ceased to be a corporate opportunity once the
company had rejected the opportunity

o EVAL; MAY BE FAIRER – This approach seems fairer in some situations where
particular contract could not have been awarded to the company because of some
independent factor such as the inability to obtain a necessary licence or where the
other contracting party refuses to contract with the company. There is less
justification, in these cases, to prohibit the directors from taking the opportunity
for themselves.

o Cf. DECISION TO REJECT CORPORATE OPPORTUNITY MAY BE TAINTED – However,

the relaxation of the law brings another difficulty – there is a risk that the director’s
rejection of the corporate opportunity, on belhaf of the company, will be infected by
self-interest (i.e. where a director wishes to personally take up the opportunity). This
is a reason to maintain an absolute rule.

 CRITCISIM; MAY UNDERMINE STRICTNESS – Virgo opines that the recognition of such a
defence to liability for breach of the no-profit rule where the fiduciary had failed to obtain
the prior authorization of the principal might be considered to undermine unacceptably the
strict expectations of absolute loyalty from the fiduciary (Virgo, pg 477)

 EVALUATION; STRICTER APPROACH – It is submitted that this stricter position is preferable.

The ‘flexiblity’ of the law sought by Arden LJ already applies to breach of fiduciary duty as
the fiduciary is able to profit from their position IF THEY OBTAIN the fully informed consent
of the principal before doing so (Virgo, pg 476). An honest director who has, on behalf of
the company, rejected the corporate opportunity in good faith for sound commercial
reasons, as in Peso, is able to seek approval from the shareholders to ensure that no liability
falls on him. Where this has occurred and the principal has then declined the possibility of
exploiting the opportunity, there is no reason why the fiduciary should be prevented from
retaining the profit that they make from the exploitation of the opportunity (Virgo, pg
476). Thus, properly framed, the no-profit rule prohibits unauthorized profit-making, rather
than profit making simpliciter. A prudent and honest director need not fear liability if he
does his due diligence and seeks approval before (or after) taking the corporate opportunity.
In light of this, the strictness of the no-profit rule is legitimate and defensible

Resignation followed by Exploitation of the Opportunity

 EXPLOTATION OF OPPORTUNITY ARISING BY VIRTUE OF FIDUCIARY POSITON – [...] is likely

to have breached the no-profit rule for exploitation a corporate opportunity to make an
unauthorised profit where the opportunity came to the Df in their capacity as a fiduciary
(Virgo, pg 470). As a fiduciary, [...] is bound by the no-profit rule prohibits fiduciaries from
obtaining a benefit by virtue of their position as fiduciary either for themselves or for a third
party (Virgo, pg 466). This rule is as aspect of the fiduciary obligations which are
‘prophylactic and prophylactic’ in nature (Tan Yok Koon per Phang JA) and seek to ensure
that the principal has the ‘single-minded loyalty of the fiduciary’ (Virgo, pg 446)

o Even after resignation, a director is not allowed to make use of information

obtained while he was a director of the company in question or to exploit a
maturing business opportunity of the company for his own personal purposes and

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 profit (Swiss Butchery at [10] per Woo J). In the present case [...]. He made a profit
by using an opportunity or knowledge that he obtained by virtue of their position as
a fiduciary. Under such circumstances, ... the trustee's liability was founded on his
breach of fiduciary duty since he obtained the opportunity to profit from his
capacity as trustee (Virgo, pg 468).

 UNDERLYING BASIS; PROPERTY OF COMPANY – The underlying basis for

liability is that the opportunity is to be treated as if it were property of the
company and by seeking to exploit the opportunity after resignation, the
fiduciary is appropriating the property for himself (Swiss Butchery at [11] per
Woo J).

o STRICTLY LAIBLE – Further, it is irrelevant that [...] Fiduciary duties are interpreted
very strictly and the fiduciary will be liable even where the fiduciary (1) was ‘acting
honestly and to the best of their ability, without fraud or bad faith’ (Regal
Hastings); or (2) made profits from a transaction that was beneficial to the principal,
and the profits could not have been obtained by the principal (Boardman v Phipps);
or (3) where the principal did not suffer any loss (Neptune per Lightman J); (4) the
principal could not have obtained / REJECT the benefit for themselves (Boardman v
Phipps; IDC v Cooley) (Virgo, pg 466).

o BAD FAITH RESIGNATION – The fact that [...] had resigned with the purpose of
exploiting [...] to compete with [...] further supports finding him in breach of his
fiduciary duty. In IDC v Cooley, the Df resigned from the Company, falsely
representing that he was ill, to accept a contract that was offered to him by the gas
board. The gas board had refused to contract with the Company. The key
justification for imposing liability was that the fiduciary had not acted in good faith
by resigning with a false reason in order to obtain the opportunity for himself (Virgo,
pg 476).

o RESIGNING IN ORDER TO EXPLOIT – There will be a breach of the no-profit rule

where the fiduciary resigns in order to exploit an opportunity that they discovered
whilst acting as a fiduciary, there will be a breach of fiduciary duty. (Virgo, pg 453).

o BECOME CONSTRUCTIVE TRUSTEE – The director becomes a constructive trustee of

the fruits of his abuse of the company’s property, which he has acquired in
circumstances where he knowingly had a conflict of interest and exploited it by
resigning from the company (Swiss Butchery at [11] per Woo J).)

 APPLIES EVEN WHERE COMPANY CANNOT OBTAIN OPPORTUNITY – Crucially, the Director
cannot resign to exploit a corporate opportunity that could not have been obtained by the
Company (IDC v Cooley)

 FACT-SPECIFIC – Whether a fiduciary who resigns and then exploits an opportunity will
have breached their fiduciary duty will turn on careful consideration of the facts (Virgo, pg
475). The courts adopt a pragmatic and flexible approach to liability in such circumstances
that is based on common sense and the merits of the case (Virgo, pg 475).

o TWO EXTREMES – At one extreme, there will be no breach where a fiduciary resigns
for legitimate reasons and subsequently obtains the opportunity to compete with
the principal, which they exploit. There will be no breach of fiduciary duty in such

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 circumstances, because there is no evidence of any disloyalty. However, where the
fiduciary has planned their resignation in order to exploit a business opportunity,
there will be a breach of fiduciary duty (Virgo, pg 475).

 CASE LAW – In IDC v Cooley, the Df resigned from the Company, falsely representing that he
was ill, to accept a contract that was offered to him by the gas board. The gas board had
refused to contract with the Company. The Court held that the Df was liable to account for
profits. It was held to be (i) irrelevant that the information about the contract with the gas
board came to him in a private capacity; and (ii) irrelevant that the decision whether or not
to contract with the company lay with the gas board and not the defendant. The key
justification for imposing liability was that this was the type of opportunity that the
company relied on the defendant to obtain and he had not acted in good faith by resigning
with a false reason in order to obtain the opportunity for himself (Virgo, pg 476).

11.4D Receipt of Bribes and Secret Commission

 RECEIVING BRIBE; BREACH OF BOTH RULES – A fiduciary receiving a bribe to induce them
to act against the interests of the principal breaches both the no-conflict and the no-profit
principles (Virgo, pg 477). It would be in breach of the no-profit rule as the fiduciary has
obtained a benefit by virtue of their position as fiduciary. It would simultaneously be a
breach of the no-conflict rule as the fiduciary would have preferred his personal interest
over that of the beneficiary, amounting to actual conflict of interests.

o RATIONALE – Liability for breach of fiduciary duty in such cases is justified simply on
the ground that fiduciaries should be deterred from accepting bribes, and so being
influenced to act against the best interests of the principal (Virgo, pg 477)

 NOT AVAIALBLE WHERE PRINCIPAL AWARE – Virgo opines that liability for breach of
fiduciary duty will not, however, extend to where the principal is aware that the fiduciary
will be receiving a commission but is not aware of the actual amount. The commission in
these circumstances is not 'secret' and the fiduciary is under no duty to inform the principal
of the amount of the commission (Virgo, pg 478)

11.5 Remedies for Breach

 SELF-HELP REMEDIES – The fiduciary may resort to ‘self-help remedies’ such as sacking the
fiduciary, although this will only prevent harm from occurring in the future and will not
resolve the harm that has already occurred (Virgo, pg 478)

 REMEDIES FOR BREACH OF FIDUCIARY DUTY; RECISSION AND DISGORGEMENT AND

EQUITABLE COMPENSATION – The remedies for a breach of a fiduciary duty are:

(1) RECISSION – Where a transaction has been entered into as a result of a breach of
either the no-conflict or the no-profit rule, it will be voidable so that the principal
can seek its rescission if the transaction is made with the fiduciary

 The normal bars to recission apply – (1) where it is not possible to return
the parties to their original position; (2) if property has been transferred
under the transaction to a bona fide purchaser for value (innocent 3P); (3) if
the principal has affirmed the transaction; (4) too much time has elapsed
before the principal has sought to rescind (Virgo, pg 479)

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 (2) PERSONAL LIABILITY; DISGORGE PROFITS – The fiduciary will be liable to disgorge
to the principal any profit made from the breach of duty – i.e. an account of profits
(Virgo, pg 446). However, this will be subject to equitable allowance ;

(3) PERSONAL LIABILITY; EQUITALBE COMPENSAITON – Moreover, Equitable

compensation permits the beneficiary to require the fiduciary to compensate the
principal for any loss suffered as a result of the breach of fiduciary duty (Virgo, pg
446); this is a compensatory remedy.

(4) CONSTRUCTIVE TRUST – Further, even though the present case is a case of secret
bribes / commission, [...] is entitled to all the unauthorised profits acquired by a
fiduciary in the course of the fiduciary acting in breach of the duties which he owes
to his principal (Guy Neale at [130])

(5) Cf. EQUITABLE ALLOWANCE – However, the defendant can claim an equitable
allowance ‘in respect of those profits that were earned by virtue of the defendant's
own efforts’ (Virgo, pg 563).

 UNLIKELY TO BE AWARDED WHERE BAD FAITH; DELIBERATE ABUSE –

Further, equitable allowance is unlikely to be awarded given that this
remedy is influenced by ‘the good faith of the defendant’ and whether there
‘there is an abuse of the fiduciary relationship’ (Virgo, pg 563).

 ELECT BETWEEN COMPENSATORY AND DISGORGEMENT; NOT DOUBLE RECOVERY –

Account of profits and equitable compensation are alternative remedies and the principal
will need to choose between them to avoid double recovery (Tang Man Sit; Virgo, pg 479).
The principal / beneficiary must elect based on the relative degree of loss

11.5A Proprietary Claim

 PROPRIETARY CLAIM – Where the fiduciary has profited from the breach of fiduciary duty it
has been a matter of some controversy as to whether these profits should be held on
constructive trust for the principal (Virgo, pg 479). After AG v Reid (Privy Council), FHR (UK
Supreme Court) and Guy Neale (Singapore Court of Appeal), all unauthorised profits
including (i) interference with the principal's property; (ii) exploitation of an opportunity
which should have been exploited for the principal (FHR (UK Supreme Court); Virgo, pg
482); and (iii) bribes and secret commissions are held on an institutional constructive trust
for the beneficiary. Therefore, a principal is entitled to all the unauthorised profits
acquired by a fiduciary in the course of the fiduciary acting in breach of the duties which
he owes to his principal (Guy Neale at [130])

 [IMPT]; CONSEQUENCES OF RECOGNISING CONSTRUCTIVE TRUST OVER UNAUTHORISED

PROFITS; 3 ADVANTAGES – The recognition of constructive trust over unauthorised profits is
commercial significant; where the fiduciary is insolvent, the principal will gain priority over
the Df’s general creditors if the profits are held on a constructive trust (Virgo, pg 479).
Moreover, if the profits increase in value, such as where it has been purposefully invested
and the value of the investment has increased, the principal will obtain the benefit of the
increase in value. Furthermore, the principal can assert proprietary rights over the profit
against third parties who have received the profits or their traceable substitute (Virgo, pg
479) (save a bona fide purchaser for value). Lastly, the relevant of constructive trusteeship is
also of practical significance as regards limitation periods since the 6 year limitation period

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 under the Limitation Act will NOT apply to recover property from a constructive trustee (s
22(1)(b) Limitation Act; Virgo, pg 515)

 (1) MISAPPROPRIATION OF TRUST PROPERTY; CONSTRUCTIVE TRUST – Where the fiduciary

has misappropriated an asset from the principal in breach of the no-profit rule, the asset
will be held on a constructive trust for the principal. Virgo opines that the recognition of a
constructive trust in such circumstances is defensible because the profits made by the
defendant can be considered to represent the fruits of the claimant's property (Virgo, pg
479). Therefore [...] will have an equitable proprietary claim in [...]

o INSTITUTIONAL TRUST – This will be an institutional constructive trust as it arises

when there is an abuse of fiduciary position and the principle underlying the
imposition of such a trust is that a person must not use his position to gain a benefit
for himself when he owes obligations of the utmost good faith and loyalty to
another (Guy Neale at [126])

o HAVE TO ELECT – [...] will thereby have a proprietary remedy in addition to his
personal remedy (equitable compensation / disgorgement of profits) against the
fiduciary, and [...] can elect between the two remedies (at [129]).

 (2) APPROPRIATE OF CORPORATE OPPORTUNITY THAT COULD HAVE BEEN OBTAINED BY

THE PRINCIPAL; CONSTRUCTIVE TRUST – [...] is likely to hold the profits from the
exploitation of corporate opportunity on constructive trust for [...]. The Singapore Court of
Appeal has endorsed that where a fiduciary acquires an unauthorised profit which came to
him as a result of his fiduciary position, the equitable rule is that he is to be treated as
having acquired the benefit on unauthorised profit of his principal such that it is beneficially
owned by the principal (Guy Neale at [129]).

 OBTAINED PROFITS FROM KNOWLEDGE – Therefore, where the fiduciary

has obtained property profited from knowledge arising from his fiduciary
position, the profits will be held on constructive trust for the beneficiary
(Boardman v Phipps; Virgo, pg 479).

 EXPLOTATION – Therefore, where the fiduciary has obtained property

profited from an exploitation of a corporate opportunity – in breach of the
no-profit rule – the profits will be held on constructive trust for the
beneficiary (Virgo, pg 479).

 COMPANY COULD HAVE OBTAINED – Further, it is justifiable that the

fiduciary should hold unauthorised profits on a constructive trust for the
principle where the consequence of the breach of fiduciary duty is that the
fiduciary obtains property which the principal would have obtained had the
fiduciary not breached their duty (Virgo, pg 480)

o INSTITUTIONAL TRUST – This will be an institutional constructive trust as it arises

when there is an abuse of fiduciary position and the principle underlying the
imposition of such a trust is that a person must not use his position to gain a benefit
for himself when he owes obligations of the utmost good faith and loyalty to
another (Guy Neale at [126])

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 o HAVE TO ELECT – [...] will thereby have a proprietary remedy in addition to his
personal remedy (equitable compensation / disgorgement of profits) against the
fiduciary, and [...] can elect between the two remedies (at [129]).

o CASE LAW – In Cook v Deeks, the directors diverted a corporate opportunity from
the company to themselves. The profits were held the profits they had made on
constructive trust for the company. This can be justified because, had the
defendants not breached their duty, the company would have obtained the
contract, so the defendants' gain could be presumed to have been made on behalf
of the company.

 (3) BRIBES AND SECRET PROFITS – Further, following FHR (UK Supreme Court) and Reid
(Privy Counci), unauthorised profits in the form of secret bribes or commission will also be
held held on constructive trust, even though the profit was not derived from interference
with the principal's property or from the exploitation of an opportunity which should have
been exploited for the principal (following in Guy Neale; Virgo, pg 482)

 Notably, it is arguable that the law should return to its position in Lister v
Stubbs and a personal remedy of account of profits ought to be awarded
instead. This is because (i) unlike other kinds of unauthorised profits, secret
bribes do not involve any interference with the principal’s property and
therefore should not give rise to a proprietary claim; and (ii) there is no
principled reason as to why the principal should gain an advantage over
unsecured creditors or innocent third parties (who receive the unauthorised
profit) ‘merely because the obligation that was breached was a fiduciary
one’ (Penner, pg 418).

o CONTROVERSIAL – Where the fiduciary has obtained a benefit from a third party
(e.g., bribe or secret profits) rather than deprived the beneficiary of the
opportunity to make a profit / misappropriation of assets, it is controversial as to
whether a constructive trust arises (Virgo, pg 480). The orthodox view is that only
the personal remedy of an account of profits was available, and not a proprietary
constructive trust (Virgo, pg 480; Lister v Stubbs).

o PRIVCY COUNCIL; UK SUPREME COURT – However, the Privy Council in AG v Reid

and the UK Supreme Court in FHR endorsed that whenever a fiduciary receives a
bribe or secret commission in breach of fiduciary duty, that bribe or secret
commission will be held on constructive trust, even though the profit was not
derived from interference with the principal's property or from the exploitation of
an opportunity which should have been exploited for the principal (FHR (UK
Supreme Court); Virgo, pg 482).

o SINGAPORE – This was later endorsed by the Singapore Court of Appeal in Guy
Neale. Therefore, the equitable rule that where a fiduciary acquires a benefit which
came to him as a result of his fiduciary position he is treated as having acquired the
benefit on behalf of his principal extends to all unauthorised benefits which an
agent received, including bribes and secret commissions (at [130]).

 Therefore, a principal is entitled to all the benefits acquired by a fiduciary in

the course of the fiduciary acting in breach of the duties which he owes to
his principal (at [130])

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 o CASE LAW; DISHONEST ASSISTANCE; 3P RECEIVED BRIBES; CONSTRUCTIVE TRUST –
In Thakir, the Court of Appeal held that the Appellant, a 3P who assisted the breach
of fiduciary duty, by reason of her complicity and involvement in the transfer of
secret bribes, also became a constructive trustee of the secret bribes when she
became the sole owner of the secret bribes. Alternatively, it can be rationalised on
the basis that ... has an equitable proprietary claim in the profits and that this claim
does not extinguish since [...] is not a good faith purchase for value of the profits.

 POLICY; FIDUCIARY SHOULD NOT RETAIN INCREASE IN VALUE – Lord Neuberger in FHR
justified this on the basis that equity did not permit an agent to rely on his own wrong to
retain a benefit. Notably, if a constructive trust is not Imposed, where the profits increase in
value, such as where it has been it has been invested and the value of the investment has
increased, the principal will obtain the benefit of the increase in value. Therefore, a
constructive trust was recognised as a matter of policy as it would not be appropriate for
the fiduciary to retain any increase in the value of the bribe because of the principle that
wrongdoers should not profit from their wrong (Virgo, pg 481). The rationale of the
argument just laid out appears to be disgorgement based – the fiduciary must be
accountable for the entire profit, and not just the original bribe.

o Reid is consistent with Boardman v Phipps where the shares which were purchased
in breach of fiduciary duty were held on constructive trust even though there had
been no interference with the claimant's property rights

 ISSUE; WHY CANNOT BE PERSONALLY LIABLE; WHY MUST CONSTRUCITVE TRUST –

However, the issue is that, if the policy is that the fiduciary should not retain the benefit of
the increase in value of profits, why can’t the fiduciary be personally liable for the whole
profit (i.e. original profit + any increase in value). A trust solution would mean that
unsecured creditors of the fiduciary would be deprived of their right to share in the money
if the fiduciary were to become insolvent. There does not seem to be a principled reason
why the principal should benefit over the creditors of the fiduciary in case of secret bribes –
i.e. profits obtained from a 3P.

o FHR; APPELLANT’S CONTENTIONS – Indeed, the Appellants in FHR European argued

that bribes or secret commissions from 3Ps should not be held on trust as such a
benefit is different in quality from profit made from misappropriation of trust
money / misappropriation of corporate opportunities. The latter can be said to be
benefits which the agent should have obtained for the principal whereas the same
cannot be said about a bribe or secret commission which the agent receives from a
third party.

 INSTITUTIONAL CONSTRUCTIVE TRUST; REMEDIAL CONSTRUCTIVE TRUST PREFERRED –

Virgo opines the trust imposed should not be an institutional trust arising by operation of
law. Rather, it should be a remedial constructive trust that can be modified through the
exercise of judicial discretion (Virgo, pg 483), such that not all the proprietary benefits are
available to be beneficiary in every circumstance. In particular, the proprietary claim cannot
be asserted over (1) unsecured creditors where the fiduciary is insolvent; and (2) innocent
third parties.

(1) CREDITORS; CONSTRUCTIVE TRUST MODIFIED; BENEFICIARY AND TRUSTEE

RANKED EQUALLY – Notably, in dicta, the Supreme Court recognized that concern

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 about the position of unsecured creditors of the defendant fiduciary has
considerable force. This might evince a willingness of the Court to modify the
constructive trust to ensure that, whilst the fiduciary does not benefit from the
profit, the relative positions of the principal and unsecured creditors are treated
equally (Virgo, pg 483). Therefore, Virgo argues that the constructive trust should be
modified to ensure that the principal's claim to the profits ranks equally with that of
the fiduciary's unsecured creditors (Virgo, pg 483)

(2) THIRD PARTIES; CONSTRUCTIVE TRUST MODIFEID; INNOCENT 3P RIGHT

PROTECTED – An institutional constructive trust allows that principal to assert a
proprietary restitutionary claim against a third-party volunteer recipient of the
property (not a good faith 3P purchaser for value) to recover the property / its
traceable substitutes. This is difficult to justify where the 3P is innocent of any
wrongdoing and does not have any knowledge of the breach of fiduciary duty.
Therefore, Virgo argues that the constructive trust should be modified so that the
principal and third-party volunteer share the property equally.

 UNLESS UNCONSCIONABLE – Of course, where the third party's receipt can

be considered to be unconscionable, because the third party knew or
suspected that the fiduciary had obtained the profit in breach of fiduciary
duty, it is appropriate to enable the principal to assert their equitable
proprietary rights against the third party, whose conscience has been
tainted (Virgo, pg 484).

12 LIABILITY FOR BREACH

12.1 Trustee Liability

 REQUIRMEENT FOR BREACH OF EQUITABLE DUTY – just because the trust or the principal
suffers a loss, it does not follow automatically that there will be liability; the loss must arise
from an equitable breach of duty (Virgo, pg 500)

(1) BREACH OF FIDUCIARY DUTY – A breach of fiduciary duty involves a breach of those
negative duties that arise from the fundamental obligation of loyalty to the principal,
namely the no-conflict and the no profit rules (Virgo, pg 500).

(2) BREACH OF TRUST – Breaches of trust are the ‘violation of any duty which the trustee owes
as trustee to the beneficiaries’ (Tito v Wadell per Megarry VC). These duties relate to the
administration of the trust and the exercise of powers of appointment (Virgo, pg 501).
Breach of trust may take the 2 distinct forms:

o UNAUTHORISED ACTION – Trustees will be liable for breach of trust where they do
what they should not do, so that their actions could be described as ultra vires
(Virgo, pg 501). Liability for this type of breach of trust is strict.

o INADEQUATE ACTION – Trustees will be liable for acting badly, or failing to act when
he ought to (Virgo, pg 501) – i.e. breach of duty of care. Liability for this type of
breach of trust requires proof of fault in the form of negligence.

PECULIARLY FIDUCIARY DUTIES NON-FIDUCIARY DUTIES

 No-conflict rule  Duties of care and skill

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  No-profit rule  Duty to perform the task undertaken

 Duty to act in good faith (?)

 Duty to act bona fide in the beneficiary’s best

interests (?)

 Duty to act for proper purposes

 Breach of confidence

 UNANIMITY PRINCIPLE – Trustees must act unanimously, unless (a) trust deed provides
otherwise; or (b) trust duties and powers are delegable (Re Thompson's Settlement)

 PERSONAL LIABILITY OF TRUSTEES – The liability of trustees to compensate the trust for
loss suffered arising from a breach of trust is personal and not vicarious. Consequently, a
trustee is not liable for the acts of their co-trustees (Virgo, pg 523).

 BOTH RESPONSIBLE FOR BREACH; JOINT AND SEVERALLY LIABILITY – Trustees are jointly
and severally liable if they acted together.

o SLEEPING OR PASSIVE TRUSTEE – However, a trustee would be jointly and severally

liable for breaches of his co-trustees to the extent that he was negligent in
monitoring his co-trustees’ behaviour (Bahin v Hughes). The Court will apportion
the share of liability according to their relative individual responsibilities for the loss.

o INDEMNIFIED – In certain occasions, a trustee can be indemnified by his co-trustee.

These includes when one trustee had got trust money into his own hands and made
use of it; or if the co-trustee is a solicitor who exercised a controlling influence over
the conduct of the trust

 LIABILITY FOR BREACH OF TRUST BEFORE APPOINTMENT – A trustee will not be liable for
breach of trust where the breach occurred before the trustee was appointed. On
appointment, if a trustee discovers that a breach of trust has occurred, they should
commence proceedings against the former trustee; if the new trustee fails to do so, they
may be liable for this breach of trust in their own right (Virgo, pg 528)

 LIABILITY FOR BREACH OF TRUST AFTER RETIREMENT – A trustee remains liable for
breaches of trust committed whilst they were a trustee even though they had retired from
the trust (Virgo, pg 528)

o Successor trustee not liable for breaches committed by original trustees

12.2 Locus Standi; Standing to Enforce Breach of Trust

 FIDUCIARY BREACH; BENEFICARY OR CO-TRUSTEE CAN SUE – Where a fiduciary has

breached their fiduciary duty, the principal to whom the fiduciary duties were owed will
sue and will benefit from the remedy that is awarded. The other trustees who are not
responsible for the breach of trust will also have standing to sue on behalf of the trust
(Virgo, pg 534).

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 THIRD PARTY BREACH – Beneficiaries have standing to sue third parties for knowing receipt,
dishonest assistance

 ALL BENEFICIARIES CAN SUE NO MATTER HOW REMOTE THEIR INTEREST IS – Where a
trustee has breached the trust, the claimants will normally be the beneficiaries, no matter
how remote their interest. So, for example, a beneficiary with a life interest or with an
interest in remainder will have standing to sue for breach (Virgo)

 REMEDY MAY BE TO TOP UP TRUST FUND; DOES NOT GO DIRECTLY TO BENEFICIARES –

Where a trustee is sued for a breach of trust, an account will be taken and the trustee in
breach will be liable to pay into the trust fund the identified shortfall (beneficiary does not
directly benefit from the remedy awarded unless trust comes to an end, then trustee is
liable to pay the shortfall to beneficiaries) (Virgo, pg 534)

 DERIVATIVE ACTION

 USUALLY TRUSTEE SUE; RATIONALE – Ordinarily, the proper party to obtain a remedy on
behalf of of the trust is the trustee. The purpose of confining the right of action to the
executor or trustee is (i) to avoid multiplicity of suits and to control unilateral actions by
beneficiaries; and (ii) avoids vexing third parties with multiple suits; (iii) avoids trustee
ABDICATING responsibilities to beneficiaries (Carolyn Fong at [7] per Chong JA)

 SPECIAL CIRCUMSTANCES – However, in ‘special circumstances’, such as [...] the court will
permit an action to be brought by a beneficiary on behalf of the trust (Carolyn Fong at [8]).
These special circumstances include:

o BREACH OF TRUST OR CONFLICT OF INTEREST; BENEFICIARY CAN SUE 3P – Where

the trustee’s position has been ‘compromised in some way’ (e.g. a breach of trust or
is involved in a conflict of interest and duty), the beneficiary would be able to sue
on behalf of the trust (at [8]) (e.g. sue a 3P). This includes (i) fraud on part of the
trustee; (ii) collusion between the trustee and the 3P

o UNWILLLINGNESS OR INAIBLITY TO SUE; MERITS OF CASE; POTENTIAL LOSS TO

BENEFICIARIES – The Courts will consider a cognisance of factors such as (i) the
trustee’s unwillingness (whether collusively or bona fide) or inability to sue; (ii) the
merits of the case; (iii) and the potential loss to the beneficiaries, that is the
consequences of refusing a derivative claim (e.g., where assets of estate or trust
would be risk of being disposed of or dissipated by a 3P) (Carolyn Fong at [9]); (iv)
insolvency of trustee (Roberts v Gill)

o TRUSTEE’S AGREEMENT WOULD HELP – Once the trustee’s agreement has been
obtained, the predominant mischief behind the locus standi requirement – namely,
to control unilateral actions by beneficiaries – would no longer be in play (at [19]).

o Cf. DOES NOT APPLY WHERE TRUSTEE / EXECUTOR WILLING TO SUE – However, as
long as the trustee is ready and willing to take the proper proceedings against the
third person, the beneficiaries cannot maintain a suit against him (Carolyn Fong at
[14]). In these cases, the ‘rationale of avoiding multiplicity of suits [is] clearly
engaged’ (AT [16])

 A derivative action is brought in representative form. Hence, the trustee needs to be joined
into the action. This ensures that the trustee is bound by any judgement

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  CASE LAW; CAROLYN FONG – In Carolyn Fong, there were were SPECIAL circumstances
justifying Ms Fong in making the application – (i) URGENCY; Ms Fong was of the view that
the application had to be brought urgently within a short span of time in view of the
upcoming AGM. Yet HSBC was only in a position to write to Ms Kao and could not take
further steps given the short notice; (ii) HSBC was NOT FAMILIAR WITH THE FACTS giving
rise to the application because it was a professional trustee without first-hand knowledge
of the material background concerning the trust shares and with limited sources of
documentary information; (iii) MERITS; (iv) PREJUDICE TO THE ESTATE; PROLONG
PROCEEDINGS; COST

12.3 Exclusion; Ouster; No-Contest Clauses

 EXEMPTION CLAUSES; GENERALLY – The liability of trustees for breach of trust might be
excluded or limited by the trust instrument. They take different forms; they may purport to
exclude liability for breach of trust or they may purport to modify the duties owed by
trustees so that liability does not arise in the first place (Virgo, pg 502). The policy issue
engaged is whether ‘it is appropriate to enable the trustee's liability to be excluded or
modified in any way to the prejudice of the beneficiaries or objects’ (Virgo, pg 502).

 COMPANY LAW; ANY EXCLUSION IS VOID – Companies Act that states that any clause
exempting an officer from liability ‘in connection with any negligence, default, breach of
duty or breach of trust in relation to the company is void.’ However, companies can obtain
insurance to indemnify directors for breach

12.3A Exclusion of Liability

 ISSUE IS FOR FIDUCIARY DUTIES; WHETHER FAULT RELEVANT – The issue is the extent to
which such clauses can

(1) exclude or qualify liability for a trustee's breach of fiduciary duties and

(2) whether they can exclude liability for breach of trust regardless of the nature of
the breach particularly whether the trustee's fault in committing the breach is
relevant.

 IRREDUCIBLE CORE; FUNDAMENTAL DUTIES – Millet LJ in Armitage Nurse recognised that

trustees owe an irreducible core of obligations to the beneficiaries that are fundamental to
the concept of the trust that liability cannot be excluded (Virgo, pg 503). He identified ...
[see below]

o FAULT; INCLUDES DUTY TO ACT HONESTY; GOOD FAITH – Fundamental duties

include the duty to perform the trust honestly and in good faith for the benefit of
the beneficiaries. Breach of these duties equates to acting fraudulently and
dishonestly, and so such liability cannot be excluded, because a trustee who acts in
such a way strikes at the very core of the trust obligation (Virgo, pg 503; Armitage)

o Virgo opines that this decision is of PROFOUND significance as it tells us a ‘great deal
about the essential nature of the trust and the duties of trustees. There seems to be
2 distinct tests – one concerns the nature of the duty breached and whether it is
fundamental or not; the other concerns the circumstances in which the duty was
breached, having regard to the defendant's fault, if any (Virgo, pg 504).

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Fundamental Duties

 IRREDUCIBLE CORE OF OBLIGATIONS; PARAGRAPH – [...] is unlikely to rely on the

exemption clause in respect of the breach of [no-conflict rule / no-profit rule]. Such clauses
engaged the policy issue engaged is whether ‘it is appropriate to enable the trustee's
liability to be excluded or modified in any way to the prejudice of the beneficiaries or
objects’ (Virgo, pg 502). In Armitage Nurse, Millet LJ recognised that trustees owe an
irreducible core of obligations to the beneficiaries that are fundamental to the concept of
the trust that liability cannot be excluded (Virgo, pg 503). Generally, this includes [...].
These duties are considered fundamental because being fiduciary duties, they are founded
on the need to act in the best interests of the beneficiaries and not disloyally (Virgo, pg
504), and so such liability cannot be excluded, because a trustee who acts in such a way
strikes at the very core of the trust obligation (Virgo, pg 503; Armitage)

o DUTIES – Generally, this includes the fiduciary ‘fair dealing principle’ (at 252), the
self-dealing rule, the no-conflict principle generally, and the no-profit principle
(Virgo, pg 504). These duties are considered fundamental because being fiduciary
duties, they are founded on the need to act in the best interests of the beneficiaries
and not disloyally (Virgo, pg 504).

o NO BAD FAITH – In the present case, it is noted that the trustee, though having
breached [the duty], acted in good faith in that he [had not deliberately or
consciously acted in a way which he knew to be wrong]. There is authority to the
effect that where a trustee acts in good faith, the exclusion clause will effective,
notwithstanding a breach of fiduciary duty (Barnsley v Noble). Virgo emphatically
criticises that, opining that this suggests that fiduciary duties are not necessarily
considered now to be so vital to the trustee-beneficiary relationship that it is
possible to exclude liability for their breach. This is unfortunate and inconsistent
with the strict interpretation of these duties (Virgo, pg 504)

o CASE LAW; BARNSLEY – In Barnsley v Noble, it was held that that a clause which
exonerated the trustee from liability for breach of the self-dealing rule, where the
trustee had transacted in a personal capacity with the trust, was effective to exclude
the trustee's liability for any loss caused to the trust by breach of fiduciary duty
provided that the trustee acted in good faith. Therefore, Barnsley v Noble narrowed
down liability of conduct incapable of being excluded to ‘wilful and individual fraud
or wrongdoing’ (Virgo, pg 504)

 NOT LIMITED TO FIDUCIARY DUTIES; ALSO INCLUDES DUTY TO INFORM BENEFICIARES AND
TO DISTRIBUTE ASSETS – Virgo opines that fundamental duties are not limited to fiduciary
duties and includes the duty to inform beneficiaries of their status as such and the duty to
distribute assets to beneficiaries (Virgo, pg 504)

 Cf. COMMERCIAL TRUSTS – Where a breach of trust does involve a breach of a fundamental
duty has proved particularly controversial in the context of commercial trusts (Virgo, pg
505). Generally, Courts are reluctant to upset specific commercial arrangements reached by
sophisticated parties in the context of the highly specialised securitisation business (Citibank
NA). In Citibank, it was held that a surrender of discretion to a 3P was not a breach of a
trustee’s fundamental duty and liability (for loss arising from the trustee following these
instructions) could therefore be excluded.

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 o SURRENDER OF DISCRETION; VALID – In Citibank, the trust deed stated that
trustees would not be liable for breach of trust if they followed the guarantor’s
instructions. The Court held that the clause effectively excluded liability for breach
of trust as the note-holders knowingly took their commercial interests subject to
guarantor’s powers. However, Virgo opines that the obligation of a trustee to
exercise their discretion for the benefit of the beneficiaries and not for the benefit
of a third party is a fundamental duty. the surrender of the trustee's discretion in
Citibank is inconsistent with the fundamental obligations of a trustee and liability
for doing so should not have been validly excluded (Virgo, pg 505).

Fault in Breach of Duty

 BAD FAILT OR FRAUD; PARAGRAPH – [...] is unlikely to rely on the exemption clause in
respect of the breach of trust due to the presence of [bad faith / dishonesty / fraud] on the
trustee’s part. Such clauses engaged the policy issue engaged is whether ‘it is appropriate to
enable the trustee's liability to be excluded or modified in any way to the prejudice of the
beneficiaries or objects’ (Virgo, pg 502). In Armitage Nurse, Millet LJ recognised that trustees
owe an irreducible core of obligations to the beneficiaries that are fundamental to the
concept of the trust that liability cannot be excluded (Virgo, pg 503). This includes the duty
to perform the trust honestly and in good faith for the benefit of the beneficiaries.
Therefore, if a trustee acted fraudulently or dishonestly or in bad faith, their liability cannot
be excluded (Armitage v Nurse per Millet LJ; Virgo, pg 505). Fraud is defined as [...] In the
present case, ... Breach of the duty to act HONESTLY equates to acting fraudulently and
dishonestly, and so such liability cannot be excluded, because a trustee who acts in such a
way strikes at the very core of the trust obligation (Virgo, pg 503; Armitage)

o FRAUD; DISHONESTY; BAD FAITH; SUBJECTIVE – [Dishonesty or fraud] is defined as

‘an intention on the part of the trustee to pursue a particular course of action,
either knowing that it is contrary to the interests of the beneficiaries or being
recklessly indifferent whether it is contrary to their interests or not’ (at 251 per
Millet LJ). This is a This creates a subjective test of fault (Virgo, pg 505).

o Cf. OBJECTIVE TEST FOR PROFESSIONAL TRUSTEES – However, the Courts have
applied the object test of dishonesty where the trustee was a PROFESSIONAL
TRUSTEE as ‘higher standards of conduct’ are expected (Walker v Stone; Virgo, pg
506). According to this test, the dishonesty of the defendant's conduct is assessed
objectively, by considering whether the reasonable person would consider the
defendant's conduct to be dishonest, albeit in the light of the facts known by the
defendant.

 The objective tests of dishonesty applied elsewhere, such as in assisting in a

breach of fiduciary duty or test (Virgo, pg 506).

 Cf. DELBIERATE BREACH BUT BEST INTEREST – Dishonesty is not established if the trustee
breached the trust in the honest belief that this was in the best interests of the
beneficiaries (Armitage v Nurse).

Fault; Negligence Liability

 DUTIES OF CARE SKILL AND DILIGENCE NOT INCLUDED – The duties of skill and care,
prudence, and diligence are not part of the ‘irreducible core of obligations’ as they involve

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 negligence (including gross negligence) and not fraud, and so liability for them can be
excluded (Virgo, pg 503; Armitage). Therefore, following Millet LJ in Armitage, ...

o Cf. CRITCISIES – However, Virgo criticises this holding in Armitage as its effect would
be that if a trustee fails to comply with the standard of care reasonably to be
expected of a trustee, an exemption clause will be effective to exclude the liability
and the beneficiaries will not be compensated for any loss suffered (Virgo, pg 506).

 SUPERVISORY JURISDICTION OF EQUITY – Virgo elaborates while the settlor

should have ‘the ‘freedom of trust’, an exclusion for negligence undermines
the fundamental purpose of Equity to protect beneficiaries. Equity’s general
supervisory jurisdiction should not be excluded easily by the inclusion of an
exemption clause (Virgo, pg 507)

 SHOULD NOT APPLY FOR PROFESSIONAL TRUSTEES – Moreover, while this

may be acceptable where the trustee is an amateur, this IS, as a matter of
policy, NOT defensible where the trustee is a professional and paid for his
services. Moreover, it is common for professional to be shielded by
insurance and it is ‘unclear why they need the additional protection of
exemption clauses, which have the effect of the beneficiaries bearing
losses arising from the breach of trust’ (Virgo, pg 507).

 Cf. OBITER; CANNOT EXCLUDE NEGLGIENCE – Notably, Lord Clarke sitting on the Privy
Council in Spread Trustee considered that liability for ordinary negligence should not be
excluded because it is an essential obligation of the trustee not to act negligently (at [79];
Virgo, pg 506).

 Cf. COURTS HAVE BEEN WILLING TO INTERPRET SUCH CLAUSES RESTRICTIVELY; RED HAND
RULE – Court have also interpreted exclusion clauses restrictively rather than being rejected
out of hand. Therefore, in Bogg v Raper, the English Court of Appeal recognized that a
solicitor trustee, who had included an exemption clause in a testamentary trust, could rely
on it, but only if he had drawn the testator's attention to the clause and explained its effect
[i.e. the ‘red handle rule’].

 UCTA; INVALIDATING CLAUSES BASED ON UNREASONABLNESS – Presently, the section 2(2)

UCTA, which invalidates exemption clauses that exclude liability for loss arising from
negligence if the exclusion is unreasonable, DOES NOT apply to trust contexts (Virgo, pg
508). Virgo has argued that the UCTA can be extended to cover exemption clauses in trust
deed, thus invalidating unreasonable exemption clauses. In fact, the case for invalidity of
such clauses might even be considered to be stronger because the beneficiary will typically
not have been involved in the negotiation of the clause, but the clause will have a direct
effect on the trustee's liability to the beneficiaries (Virgo, pg 509).

12.3B Ouster Clause

 OUSTER CLAUSE – An ouster clause ousts any duty in the first place so that there can be no
breach of duty. While there is case law to the effect that trustee duties can be ousted
(Hayim v Citibank SA; Penner, pg 326), the preferable view is that the irreducible core of
obligations, as identified by Millet LJ in Armitage v Nurse, cannot be ousted (Penner, pg 326)
[see above].

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 o Without these ‘irreducible core’ of fundamental duties, the 'trust' may not actually
be valid as a trust, leading to the rather drastic result the whole trust fails, as not
being an effective disposition on trust (Penner, pg 326).

 OUSTING ANY DUTY TO TAKE CARE; INVALID – Penner opines that it is unlikely that a court
would treat a clause ousting entirely any duty to take care in the administration of a trust
as an effective provision of a valid trust (Penner, pg 326)

 CASE LAW – In Hayim v Citibank SA, Citibank was appointed executor of the testator’s
American will on terms that the executor “shall have no responsibility or duty with respect
to” a Hong Kong house until the deaths of the testator’s elderly brother and sister who
resided in the house. This clause was held to be valid

 BENEFICIARY CAN STILL REMOVE TRUSTEE – Even if there is an ouster clause, the
beneficiary can go to court to ask the trustee to direct him to do something. Alternatively,
you can ask the court to REMOVE HIM as a trustee, he’s not fit to be a trustee anymore;
replace him

12.3C No Contest Clause

 NO-CONTEST CLAUSE; INTERPRED RESTRICTLVELY; VALID FOR UNJUSTIFIABLE CHALLEGES

ONLY – Some provisions stipulate that anyone who contest the validity of the deed and the
trust created by it would cease to be a beneficiary under the trust.

o No-Contest clause are interpreted restrictively; they are valid in respect of

‘unjustifiable challenges’ only (Barclays Private Bank Trust per Smellie CJ).
Therefore, a no-contest clause could not be validly construed so as to entirely shut
out challenges that were based on probable cause or good faith or which were not
taken merely frivolously or vexatiously or without good reason

12.4 Limitation Period

 STATUTROY AND LACHES – Limitation in for trust liability can take the form of (1) the
statutory limitation period; (2) residual equitable doctrine, known as laches, which gives the
court discretion to bar an equitable claim if it is brought too long after the events that gave
rise to the claim (Virgo, pg 513)

 RATIOANLE FOR LIMITATION PERIOD – There are 2 reasons why claims generally need to
be subject to a limitation period – (1) the longer the time between the cause of action
accruing and the claim being pursued, the more likely it is that the evidence will become
stale and unreliable; (2) there will be uncertainty on the part of defendants as to whether
or not a claim might be pursued against them, which can cause hardship (Virgo, pg 513)

12.4A Statutory Limitation Period

 SIX YEARS; INCLUDE IMPLIED TRUSTS – The limitation period for claims brought by a
beneficiary, or by a trustee on behalf of a beneficiary to recover trust property or for any
breach of trust is similarly six years from when the cause of action accrued (s 22(2)
Limitation Act) (includes implied and constructive trustees (s 3 Trustee Act))

 QUALFICATION; FRAUDULENT BREACH OF TRUST – The six-year limitation period does not
apply to claims brought by a beneficiary under a trust in respect of any fraud or fraudulent
breach of trust to which the trustee was party (s 22(1)(a) Limitation Act).

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 o Virgo opines that fraud is to be interpreted in the same way as it is in the context of
exemption clauses, and so it encompasses dishonesty interpreted subjectively and,
presumably, objectively where the trustee is a professional, and will not be
established simply by showing that the breach of trust was deliberate (Virgo, pg514)

o Cf. DOES NOT APPLY TO DISHONEST ASSISTANCE OR KNOWING RECEIPT – 6 years

still applies (but POSTPONEMENT see below]

 QUALFICATION; FUTURE INTEREST – However, where a beneficiary is entitled to a future

interest, the cause of action will not accrue until that interest has fallen into possession (s
22(3) Limitation Act). Once the interest becomes a present interest, the beneficiary will
have six years to bring the claim for breach of trust and this may be a long time after the
original breach

 QUALFICATION; TRUST PROPERTY IN TRUSTEE’S POSSESSION – No time limit is prescribed

by the statute for claims to recover trust property or the proceeds of such property that is in
the possession of a trustee, or property that has been previously received by the trustee
and has been converted to their own use (s 22(1)(b) Limitation Act; Virgo, pg 515)

 POSTPONEMENT OF STATUTORY LIMITATION PERIOD – The statutory limitation period will

be postponed where

(1) the action is based on the defendant’s fraud;

(2) the defendant deliberately concealed from the claimant any fact relevant to the
right of action; and

(3) where the action is for relief form the consequence of mistake (s 29(1) Limitation
Act).

o DOES NOT BEGIN UNTIL DISCOVERY –In each case, the period of limitation does
not begin until the beneficiary has discovered the fraud or the mistake, as the case
may be, or could with reasonable diligence have discovered it (s 29(1) Limitation
Act).

o REASONABLE DILIGENCE – Virgo opines that, in determining what amounts to

‘reasonable diligence’, the court should have regard to what a person would have
done if they had carried on a business of the relevant kind with adequate staff and
resources and motivated with a reasonable sense of urgency (Virgo, pg 518)

12.4B Laches

 APPLICABLE WHERE STATUE DOESN’T APPLY – Laches will apply where the Limitation Act
states that there is no prescribed period of limitation under the Act, such as where the
trustee is sued for a fraudulent breach of trust or where the claimant seeks to recover trust
property (s 22(1) Limitation Act).

 LACHES – Laches is a judge-made doctrine that defeats any claim in Equity where there has
been an unreasonable delay before the claim is commenced (Virgo, pg 518). The rationale
behind the doctrine of Laches is that Equity will not assist a claimant who has failed to
exercise reasonable diligence in commencing proceedings (Erlanger per Lord Blackburn)

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  TEST; UNCONSCIOABLE – Courts generally examine all circumstances and the the key test is
whether the lapse of tim ze in commencing proceedings is such that it would be
unconscionable for the claimant to assert their beneficial right (Virgo, pg 519).

o FACTORS – Several factors are to be considered – (1) the period of delay; (2) the
extent to which the defendant's position had been prejudiced by the delay; (3) the
extent to which that prejudice was caused by the claimant actions; and (4) the
claimant's knowledge that delay would cause prejudice to the defendant (Nelson v
Rye; Virgo, pg 519)

12.5 Defences

12.5A Hardship

 HARDSHIP – Hardship to 3P is common defence for non-monetary orders such as specific

performance and injunction where the remedy could cause unnecessary hardship or to a
third party.

o Hardship to Df is more of a consideration in the weighing of equities in the remedy

of proprietary estoppel.

 Thorner v Major [2009] 1 WLR 776 – Representor fell very ill and needed to sell farm to pay
medical costs. Pf’s equity from working on farm in reliance on representation cannot
intervene to bar representor from selling farm. Change of circumstances allows representor
to go back on representation without paying equitable compensation

12.5B Clean Hands

 CLEAN HANDS – Equitable maxim that ‘he who comes to equity must come with clean
hands’ can bar a claim for breach of trust or breach of fiduciary duty where the claimant’s
conduct can be considered to be improper (Virgo, pg 32). The conduct complained of must
have an immediate and necessary relation to the equity sued for, and it must be a depravity
in the legal as well as moral sense (E C Investment at [92]).

o TWO SPECIFIC CIRCUMSTANCES; MISLED OR DISHONEST PURPOSE – (1) cases

where the applicant has materially misled the court or abused its process, or has
attempted to do so (an example given by the author is the conscious making to the
court of a material statement which is untrue); (2) cases where the grant of specific
performance would enable the applicant to achieve a dishonest purpose and
would, in all the circumstances, be inequitable (E C Investment at [93])

12.5C Consent

 CONSENT – Where a beneficiary has consented to a breach of trust or fiduciary duty, they
will be barred from suing the defendant (Holder v Holder per Harman LJ; Virgo, pg 521).
Consent operates to authorize the breach so that there is no breach of trust in respect of
which the claimant can make a claim (Pettigrew v Edwards)

o REQUIREMENTS – (1) from a person of full age and sound mind; (2) be freely given
and must not be induced by duress or undue influence; (3) be fully informed, which
means that the claimant must know of all of the key facts and also the surrounding
circumstances, but it is not necessary to show that the claimant knew that they
were concurring in a breach of trust (Virgo, pg 521)

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  DOES NOT AFFECT OTHER CLAIMANTS – Consent of 1 claimant will not affect the rights of
other claimants who did not consent to the defendant's actions (Virgo, pg 521).

 CASE LAW; DID NOT KNOW OF INTEREST; ENCOURAGED BREACH; CONSENT – In Evans v
Benyon, the claimant actively encouraged the trustee to make a distribution from a trust
fund. He subsequently discovered that he was a beneficiary under the trust and the
distribution had been in breach of trust. His encouragement of the distribution barred his
claim for equitable relief, even though he was not aware that he had an interest in the trust

12.5D Ratification

 TRUST – The principal may consent to the defendant's breach of the no-conflict or no-profit
rules after the breach of fiduciary duty has occurred, but only if the defendant had made
full and frank disclosure of all relevant material factors relating to the breach. In the present
case ...

o WHERE OTHERS RATIFY BUT BENEFICIARY WANTS TO SUE – However, I would

advise that ratification by [the remaining beneficiaries] does not necessarily
preclude [...] from suing [the trustee] for a breach of trust. Indeed, in a director-
shareholder relationship, it is recognised that ratification by the shareholder is not
effective where it prejudices to minority shareholders. (Cook v Deeks). Moreover, it
was recognised locally that where a director misappropriates company property, all
shareholders have to unanimously ratify for the breach to be excused (Raffles Town
Club). Therefore, in the present case, ratification by [...] is unlikely to be prohibit [...]
from suing [the trustee] for [breach of duty].

 COMPANY LAW RATIFICATION; RELIEF FROM LIABILITY FOR BREACH OF DUTY FROM THE
COMPANY – Since the fiduciary obligations is owed to the company, the company can
release the director from such obligation. Thus, it is possible for a majority of members of a
company to ratify an action of a director that would otherwise be a breach of duty by the
director (Ho Kang Peng at [59]).

o Cf. UNANIMOUS RATIFICATION REQUIRED – MISAPPROPRIATION OF ASSETS;

RATIFICATION BY ALL SHAREHOLDERS – However, ratification will not be recognised
if it is prejudicial to minority shareholders (Cook v Deeks). The Court of Appeal in
Raffles Town Club suggests that if company property is taken by the directors for
their own personal benefit (i.e. misappropriated), and all the shareholders properly
ratify the act, then the breach will be excused.

12.5E Acquiescence

 ACQUIESCENCE – The Courts will bar a claim in Equity for breach of trust / duty where the
claimant, ‘knowing of their rights, has stood by and allowed them to be interfered with by
the defendant’ – i.e., where he acquiesced (Virgo, pg 520; s 32 Limitation Act). In doing this,
the ‘claimant's consent to the defendant's acts can reasonably be inferred, so that the
claimant cannot then complain of the defendant's actions’ (De Bussche per Thesiger LJ;
Virgo, pg 520). Essentially, acquiescence a form of estoppel by conduct. All circumstances of
the case should be considered to determine whether it was just that the claimant should be
considered to have acquiesced (Holder v Holder).

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 o APPLIES WHERE BENEFICIARY HAS KNOWLEDGE – Notably, acquiescence will
[generally] arise only where the claimant knows, or ought to know, of their rights
against the defendant (Virgo, pg 520; Re Pauling's Settlement).

 Cf. NO NEED TO KNOW OF LEGAL RIGHT; CONSIDER CIRCUMSTNACES –

However, there is no absolute rule that ignorance of a legal right meant
that the claimant could not have acquiesced. All circumstances of the case
should be considered to determine whether it was just that the claimant
should be considered to have acquiesced (Holder v Holder).

 Therefore, in Holder v Holder, both the claimant and the defendant had
thought that the defendant had renounced his executorship, but this had
been unsuccessful. The defendant argued that the claimant had acquiesced
in any breach of trust because he had failed to rescind the transaction, but
the claimant argued that, since he was unaware that the defendant
continued to be acting as a fiduciary, he was unaware of the breach of
fiduciary duty and his right to rescind the purchase transaction.
Acquiescence found on facts [see below]

o FOR COMPANY – IT IS THE SHAREHOLDER’S ACQUIESNCE THAT MATTERS

 QUOTE ON ACQUIESCENCE – Acquiescence has been described as involving ‘calculated (i.e.

deliberate and informed) inaction or standing by, which encouraged another to reasonably
believe that his assertion of rights and consequent actions were accepted or not opposed’
(Orr v Ford).

 Cf. CONSENT – Acquiescence is passive and can be contrasted with the separate defence of
consent where the claimant has actively concurred in the breach (Virgo, pg 520)

 Cf. LACHES – The doctrine of acquiescence is closely related to laches, but is distinct. It does
not depend on there being a delay in commencing proceedings, but evidence of delay may
well indicate that the claimant has acquiesced in the defendant's infringement of the
claimant's rights (Virgo, pg 520)

 CASE LAW – In Holder, it was held that the the doctrine of acquiescence would have applied
because, with full knowledge of the facts, the claimant had affirmed the sale, he had
accepted part of the purchase price, and he had caused the defendant to incur liabilities
that he could not recover, so it would not have been possible to return the parties to their
original positions. He had $2,000 as a result (accepted part of the purchase price).

12.5 Court’s Discretion to Grant Relief

 COURT’S DISCRETION TO EXCUSE BREACH OF TRUST – Section 60 of the Trustees Act (or s
391 Companies Act) gives the Court the discretion to relieve a trustee wholly or partly from
personal liability for breach of trust where the trustee 'acted honestly and reasonably, and
ought fairly to be excused for the breach of trust (Virgo, pg 510).

o RATIONALE – Virgo opines that the jurisdiction to relieve the trustee of liability is
defensible as a way of tempering the trustee’s strict liability (Virgo, pg 510).

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 PARAGRAPH – Moreover, it is unlikely that [...] can seek the court’s discretion under s 60
Trustees Act to relieve him of liability as he [did not act honestly / reasonable / it is not fair
in the cirucumstances to relieve the trustee of liability]. Rather, [see below for definitions]

o RARELY EXERCISE – As observed by Virgo, this power has been RARELY USED (Virgo,
pg 513) as it will undermine the expectations of a trustee. Moreover, the Court
bears in mind that ‘mercy lies not in the free gift of the court’; it comes at the price
of the beneficiaries being denied of a remedy (Santander; Virgo, pg 510)

o FIDUCIARY DUTY UNLIKELY TO APPLY – Generally, the Courts wil not relief liability
for a brief of a fiduciary duty as this would be inconsistent with the strict application
of the no-profit / no-conflict rule. Indeed, Virgo opines that it will be difficult to
show that it is fair to relieve the trustee of liability where there has been a breach
of a fiduciary duty, because of ‘the prophylactic policy of ensuring that trustees
avoid a situation in which their personal interest and duty conflict, or in which they
profit from their fiduciary position’ (Virgo, pg 513).

(1) HONESTY – Virgo opines that the appropriate test should depend on whether or not the
trustee is a professional, with an objective standard of honesty applied to professionals
and a subjective standard for other trustees (Virgo, pg 511)

o If the trustee is a professional and no reasonable professional trustee would have

held that belief, the trustee should be considered to be dishonest. If the trustee is a
non-professional, their belief that they were benefiting the beneficiaries would
mean that the trustee was acting honestly, even if this belief was unreasonable
(Virgo, pg 511)

(2) REASONABLENESS – Where, however, a trustee falls below the expected standard of
prudence, and this can be considered to have materially increased the risk of loss being
suffered by the trust, they will generally not be relieved of liability (Virgo, pg 511

o LOWER STANDARD FOR NON-PROFESSIONAL TRUSTEES – There is generally a

lower standard of care expected for non-professional trustees (Re Smith).
Therefore, in Re Smith, the trustee was not a professional trustee and who had
committed what might be considered to be a morally innocent breach of trust. She
was excused

o Therefore, when a professional trustee departs from best practices established in

an industry, his conduct is not reasonable (Santander).

(3) FAIRNESS – In most cases, where the trustees are considered to have acted reasonably,
their liability will be relieved because it is fair to do so (Virgo, pg 512). When assessing
fairness, the Courts are cognisant of the consequences of the exercise of the discretion for
the beneficiaries, this includes considering whether the beneficiaries were insured against
loss (Virgo, pg 512)

 CASE LAW; BOTH AT FAULT; PARTIALLY OF LIABILITY – In JSI Shipping, the responded was
partially relieved from liability as the 3 elements of honesty, reasonableness and fairness
were present The fault was attributed equally to both the respondent and directors of the
appellant, as they were just as negligent and had not discharged their responsibilities
according to good corporate governance.

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12.6 Indemnification by a Beneficiary; Impoundment of Beneficiary’s Interest

 INDEMNIFICATION; IMPOUNDMENT OF BENEFICIARY’S INTEREST – Under s 61 of the

Trustees Act, where a trustee who breaches a trust at the instigation or request or with the
written consent of a beneficiary, the court has a discretion to impound all or part of the
beneficiary's interest in the trust estate in order to indemnify the trustee or any person
claiming through the trustee (Virgo, pg 522).

o ONLY WHERE ACTIVE ENCOURAGMENT – This will only occur where the beneficiary
actively encouraged the action or omission that constituted the breach of trust,
knowing of the circumstances that would amount to the breach (Virgo, pg 523)

o VALUE UP TO BNEEFICIARY’S SHARE – Where the beneficiary's interest is

impounded, the effect is that compensation for the breach of trust will be provided
out of the beneficiary's share of the trust fund rather than be paid by the trustee,
but only up to the value of the beneficiary's interest (can’t touch beneficiary’s
personal assets).

13 PERSONAL LIABILITY OF 3PS

 SUING THIRD PARTIES; RATIONALE – Where the trustee has breached their duty, the
beneficiary may wish to sue the 3P instead because the trustee (a) may be insolvent; or (b)
may be able to rely on an exemption clause; or (c) may be relieved from liability (Virgo, pg
649)

o TRUSTEE INSOLVENT; BENEFICARY RANKS WITH CREDITORS Where trustee is

bankrupt and there is no property in the trustee’s possession into which the
beneficiaries can trace the value of the trust property that was misappropriated, the
beneficiary will rank with the trustee’s general creditors.

 TRUSTEE BREACH OF TRUST/DUTY; 3P LIABILITY – Third party liability is concerned with the
liability of parties OTHER than the trustee, where there has been a breach of trust / fiduciary
duty (Virgo, pg 624).

(1) PERSONAL LIABILITY – The 3P may be held personally liable through the claims of
(1) dishonest assistance; or (2) Knowing Receipt. Unlike proprietary liability, a
personal liability does not identify any asset that the trustee has title to that
belongs to the trust.

(2) PROPRIETARY LIABILITY – The 3P may also be bound by the beneficiary’s

proprietary interest in the property. Equity allows the beneficiaries to ‘follow’ their
property where it falls into the hands of a 3P and trace its substitutes (Penner, pg
294). Where the property falls into the hands of an innocent volunteer, he will take
the property subject to the Pf’s equitable interest. However, where the property
falls into the hands of a bona fide purchaser for value of a legal proprietary interest
without notice (includes constructive notice), he will take the property free of any
prior equitable interest.

o BONA FIDE PRUCHASER; DOUBLE BACK – Penner writes that essentially, when you
run up against the bona fide purchaser, you must 'double back’ as it were, bouncing
your claim from the trust property back onto the proceeds of the exchange (Penner,
pg 294)

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 THIRD PARTY LIABILITY RULES IMPORTANT; NEEDS TO BE CLEAR AND PREDICTABLE – Virgo
observes that 3P liability for receipt of property or as an accessory is of practical significance
especially as regards commercial and corporate fraud. (Virgo, pg 625). For instance,
directors may misappropriate company funds and transfer such funds to 3Ps, with the
ultimate aim that they money is received by the directors themselves. In such circumstances,
especially where the directors have become insolvent / disappeared, the Company may wish
to pursue claims against 3Ps, in particular, the recipients of the misappropriated funds or
persons who have assisted the breach of fiduciary duty (e.g. solicitor, accountants, financial
advisors). It is therefore important that the nature of the liability is clear and predictable.
Virgo opines that, regretfully, the lack of clarity of the law is a major weakness of third-
party personal liability

 FAULT OR STRICT LIABILITY; DEGREE OF FAULT – A controversial issue present in the law
relating to 3P personal liability is whether the third party's liability should be strict or, and
fault-based if so, what degree of fault is required to establish liability (Virgo, pg 626). The
Court have referred to the Baden classification of fault when assessing the appropriate level
of fault. In Baden, 5 different types of knowledge were identified:

(a) actual knowledge;

(b) wilfully shutting one's eyes to the obvious (sometimes known as 'wilful blindness' or
'Nelsonian blindness; since it involves the defendant turning a blind eye to the
obvious);

(c) wilfully and recklessly failing to make such inquiries as an honest and reasonable
person would have made;

(d) knowledge of circumstances that would indicate the facts to an honest and
reasonable person;

(e) knowledge of circumstances that would put an honest and reasonable person on
inquiry.

o Nourse LJ in Akindelete the first three Baden categories constituted or ought to be

taken to constitute actual knowledge, while the latter two were instances of
constructive knowledge.

o CRITICISM OF BADEN CLASSIFCATION; OTHER CONCEPTS OF FAULT; DISTINCTION

DIFFICULT TO DRAW IN PRACTICE; Virgo opines that the Baden classification must
be treated with ‘significant caution’ (Virgo, pg 626). While the classification refers
only to knowledge, other concepts of fault have been recognised by the courts in
respect of third-party personal liability, such as unconscionability and dishonesty
(Virgo, pg 626) More importantly, the distinction between the 5 categories of
knowledge are difficult to draw in practice and so may be too refined (Virgo, pg
626). Their relevance is simply to identify a hierarchy of potential fault
requirements ranging from what the defendant actually knew, at one end of the
spectrum, to knowledge of circumstances that would have prompted a reasonable
person to make further inquiries, which constitutes a form of negligence, at the
other end (Virgo, pg 626)

 NATURE OF THE REMEDY; PERSONAL; NOT AS CONSTRUCITVE TRUSTEE; MISLEADING;

LIMITATION ACT APPLIES – Traditionally, where a third party is personally liable for

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 knowing receipt of trust property or dishonestly assisting a breach of trust / fiduciary duties,
the Courts will state that the third party will be liable to account as if they were a
constructive trustee (Westdeutsche at 705). This reference to constructive trusteeship is
misleadingly suggests that that the third party holds property on constructive trust for the
claimant. However, where a cause of action of knowing receipt is invoked, the 3P will no
longer have the property that had been transferred (Virgo, pg 627). Moreover, in cases of
dishonest assistance, liability does not depend on the third party having received any
property. Therefore, Virgo’s view is that the use of the language of constructive trusteeship
should be avoided because of its proprietary connotations; the liability is personal in
nature. The 3P does not assume the position of trustee as regards the beneficiaries (Virgo,
pg 627).

 LIMITATION PERIOD – Notably, a knowing recipient and dishonest assistance will be subject
to a limitation period of six years (Penner, pg 361)

 RECEIPT BASED AND ACCESSORIAL LIABILITY CLAIMS; BASED ON SAME FAULT ELEMENT IN
SUBSTANCE – Therefore, Virgo argues that the unconscionability and dishonesty are
different terms for the same fault requirement, one which involves conduct objectively
assessed in the light of the defendant's own knowledge or suspicion of the facts (Virgo, pg
662). This would embody ALL aspects of the Baden test, since, in the light of the defendant's
knowledge (which should encompass belief and suspicion) the question is whether the
defendant's behaviour was appropriate, which will be assessed objectively with reference to
what the reasonable person would have done (Virgo, pg 662)

13.1 Knowing Receipt

 RECEIPT-BASED LIABILITY; UNCONSCIOABILITY – [...] is likely liable for knowing receipt. As

held by the Court of Appeal in George Raymond, the elements required to establish
knowing receipt are (1) a disposal of the plaintiff’s assets in breach of fiduciary duty [OR
BREACH OF TRUST (Virgo, pg 632); (2) the beneficial receipt by the defendant of assets
which are traceable as representing the assets of the plaintiff; and (3) there recipient’s state
of knowledge of the circumstance relating to the breach of trust / fiduciary duty must be
such as to make it unconscionable for him to retain the benefit of the receipt (George
Raymond at [23]; following Akindele)

o RELEVANT WHERE 3P NO PROPERTY OR TRACEABLE SUBSTITUTES – Where the 3P

has retained the property or its substitute from a breach of trust or fiduciary duty, a
beneficiary would likely seek a proprietary remedy (Virgo, pg 624). The personal
liability of the 3P is relevant where the property has been received and then
dissipated without obtaining an identifiable substitute (Virgo, pg 624)

 VINDICATION OF PROPERTY RIGHTS – However, Virgo opines that the receipt-based claims
are founded on the vindication of the claimant's property rights, even where the defendant
has dissipated the property, so that the claimant can only bring a personal claim (Virgo, pg
628). Therefor,e liability will arise if the third party ‘he knowingly deals with the property as
his own, ie inconsistently with the beneficiaries' equitable title to it’ (Penner, pg 355).

o If so, the third party will be ‘liable to dig into his own pocket and restore to the
beneficiaries the money value of the property he spends as if it were his own’
(Penner, pg 355).

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13.1A Beneficial Receipt of Property

 RECEIVED EQUITABLE PROPERTY INTEREST – The defendant must have beneficially

received property in which the beneficiary or principal has an equitable proprietary
interest. This is established by applying the equitable following and tracing rules (Virgo, pg
632). [This links to the claim to be treated as grounded on the vindication of property rights]

o BENEFICIALLY NOT MINISTERIALLY – The property must be received by the

defendant for their own use and benefit rather than ministerially (Agip; Virgo, pg
634).

 NOT CONFIDENTIAL INFORMATION – The receipt of confidential information is not

regarded as the receipt of property as it lacks the characteristics of property (Virgo, pg 632;
Clearlab per Lee J).

o POLICY REASONS – Lee J opined that there are wide ramifications for allowing
knowing receipt in respect of information. For instance, if a fiduciary publishes
confidential information in a newspaper, anyone who reads the newspaper is
regarded as a knowing recipient. In turn, an unlimited number of defendants may
be called upon to personally account for the information that was received (at
[309])

o REQUIRES DISPOSAL AND BENEFIICAL RECEIPT – Lee J further opined that there
must be a disposal of the plaintiff’s assets and a corresponding beneficial receipt by
the Df. This does not apply to INFORMATION as the confidential information which
is received by a defendant is not necessarily put beyond the reach of a plaintiff (at
[308]). Being capable of infinite replication, the confidential information need not
leave the possession of the plaintiff when the copies passed into the hands of the
defendant (at [308])

 NO CONTRACTUAL RIGHTS OR CONFIDENTIAL INFORMATION – Property does not include

contractual rights arising under an executory contract (Virgo, pg 632).

 RECEIVED BY COMPANY; SEPARATE PERSONALITY; COMPANY THAT RECEIVED – Where

property has been received by a company, the Company can be liable for unconscionable
receipt in its own right (given that it is a separate legal personality) but it will be necessary to
attribute the relevant fault to the company from the fault of the person who is the directing
mind and will of the company (Virgo, pg 632)

o Cf. WHERE VEIL IS PIERCED; CAN SUE CONTROLLER – Alternatively, receipt by a

company may be attributed to the controller of it where the recipient company was
acting as agent for the controller or where the veil of incorporation can be pierced,
such as where the company has been used as an artificial device to conceal the true
facts (Virgo, pg 632)

 Cf. RECEIVE AS AGENT CANNOT – Therefore, where the 3rd party did not receive the money
for his own benefit and held it and then paid it to someone else (i.e. acting as an agent), a
claim cannot be brought under knowing receipt. (Uzinterimpex JSC), unless the 3P
subsequently misappropriates the property for their own use [HOWEVER, THE DEFENDANT
MAY STILL BE LIABLE FOR DISHONEST ASSISTANCE]

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  BANK; MINISTERIAL RECEIPT – The orthodox view is that where money is transferred to a
bank in breach of trust, it cannot be liable for unconscionable receipt, even though the
bank might know of the breach of trust, because it will not have received the money for
itself, but ministerially for its customer (Virgo, pg 634)

o Cf. OVERDRAWN ACCOUNT – An exception has been recognized where the money
was paid into an overdrawn account, which has the effect of discharging a debt
owed by the customer, so that then the bank will have received the money
beneficially rather than ministerially (Virgo, pg 634)

o Cf. BANK HAS BENEFIT – However, Moore-Bick LJ in obiter in Uzinterimpex JSC

suggested that since a bank has the benefit of its customers' money until it is called
upon to repay, it should follow that a bank could be liable for unconscionable
receipt when money is credited to a customer's bank account (Virgo, pg 634).
However, Virgo reminds that the bank still requires the requisite fault element

13.1B Breach of Trust or Fiduciary Duty

 BREACH OF TRUSTOR FIDUCIARY DUTY – The transfer of property to the defendant must
have arisen from a breach of trust or fiduciary duty (Virgo, pg 632). The nature of the
breach of trust or fiduciary duty is irrelevant (pg 632); it need not be a fraudulent breach
(Agip).

o BREACH OF TRUST – Breach of trust encompasses breach of administrative and

dispositive duties and powers of trustees (Virgo, pg 632). Therefore, the action of
unconscionable receipt (knowing receipt) will still be available.

13.1C Fault; Unconscionable Receipt

 UNCONSCIOABLE RECEIPT – There recipient’s state of knowledge of the circumstance

relating to the breach of trust / fiduciary duty must be such as to make it unconscionable
for him to retain the benefit of the receipt (George Raymond at [23]; following Akindele)

 CONTROVERSY AS TO LEVEL OF FAULT – Virgo opines it has been a ‘matter of controversy ...
as to what should be the appropriate level of fault for equitable receipt-based liability’
(Virgo, pg 635). Similarly, Penner observes that past authorities do not indicate a uniform
standard of cognisance that will fix a recipient of trust property with liability (Penner, pg
357)

o CONSTRUCITVE OR JUST ACTUAL – Cases have either held that (1) an objective test
of fault applies, sometimes described as 'constructive knowledge', so that it is
sufficient that the defendant had failed to make such inquiries as a reasonable
person would have made as to whether property had been transferred in breach of
trust or breach of fiduciary duty; or that (2) constructive fault is not sufficient and
that a subjective test applies, so it must be established that the defendant actually
knew or suspected that the property had been received in breach of trust or breach
of fiduciary duty (Virgo, pg 635)

 HISTORY; REJECTION OF BADEN CATEGORIES; UNCONSCIOABILITY – Prior to Akindele, there

was confusion as to whether actual knowledge or constructive notice sufficed to ground
liability for knowing receipt. Nourse LJ in Akindele called for a rejection of the Baden
categories and replacing this with the single touchstone of unconscionability – whether the

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 defendant's knowledge of the circumstances relating to the breach of trust or fiduciary
duty made it unconscionable for them to retain the benefit of the property that had been
received (Akindele at 455; Virgo at pg 635)

 PRINCIPLES FOR UNCONSCIONABILITY –

(1) NO NEED FOR ACTUAL KNOWLEDGE – The Court of Appeal in George Raymond emphasised
the actual knowledge is not ‘invariably necessary’ to a finding of unconscionability for the
purposes of knowing receipt (at [32]). Therefore, courts adopt a fact-specific inquiry and
possible in some cases for constructive knowledge to be sufficient if ‘all the prevailing
circumstances warrant it’; merchants and businesses have a general obligation in law to
conduct their businesses with probity (at [39])

(2) SO UNUSUAL; SO CONTARY TO COMMECIAL PRACTICE – Even in the absence of actual

knowledge, where there are circumstances in a particular transaction that are ‘so unusual,
or so contrary to accepted commercial practice, that it would be unconscionable to allow a
defendant to retain the benefit of receipt’, knowing receipt will be made out (at [32])

o NO BASIS FOR PAYMENT WITH AUTHORITY – The courts have had ‘no difficulty in
imposing liability’ where ‘no clear basis for believing that the payment has been
made with authority from the principal’ (at [37]).

(3) MALLEABLE; FACT SPECIFIC; DEPENDS ON TRANSACTION – The Court of Appeal in George
Raymond endorsed that the test of unconscionability should be kept flexible and be fact
centric (at [32]), meaning that the actions and knowledge are assessed in the context of the
particular commercial relationship between parties (Criterion (CA); Virgo, pg 636).

o The recipient of the property is only expected to act reasonably, given the
exigencies and the customary practices of particular commercial relationship (at
[31]). Where there is no settled practice of making routine enquiries, clear
evidence of the degree of knowledge and fault must be adduced (at [32]).

o LAND DEALINGS VS SALE OF GOODS – Where land dealings are concerned, there is
a ‘a recognised procedure for investigating the mortgagor’s title which the creditor
ignores at his peril’. Outside land transactions inquiries need not be made as a
matter of routine. In commercial dealings such as SALE OF GOODS where
‘possession is everything’ and there is no time to investigate title,’ constructive
notice will usually have no application (at [31]). . A commercial recipient may only
be put on inquiry if the facts immediately known to him make it glaringly obvious
that some impropriety is afoot (at [31]))

i. In a similar vein, Penner opines that the inquiry that an individual is

expected to undertake ‘must be adapted to the particular circumstances of
dealing’. Therefore ‘notice, as it applies to land transfers because of the
standard practices of inquiry, should not apply to transactions for which
there is no such practice’ (Penner, pg 357)

o CASE LAW; RAYMOND GEORGE – The Court in George Raymond emphasised that it
was NOT the usual practice for jewellers and retailers in general, to ask their clients
searching questions about the source of their funds (at [46]). This is contrasted with
real estate transactions that might involve lengthy investigations into title and the

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 existence of conflicting interests do not set normative standards in transactions for
the sale and purchase of goods.

(4) LOOK AT COMMERCIAL PRACTICE; MAY NOT NEED TO MAKE SEARCHING INQUIRIES – In
the absence of established commercial practices or obviously questionable conduct on the
part of a counter-party, merchants are not ordinarily expected to make searching inquiries
into their customers’ source of funds. To demand such diligence in the course of ordinary
commercial transactions would unduly constrict trading activities (Raymond Zage at [52]
per V K Rajah).

(5) FAILURE TO INFER AS CONSTITUTING ACTUAL KNOWLEDGE – The Court of Appeal in

George Raymond accepted that a separate ‘species of actual knowledge ... is the failure to
infer’ (at [40]) – i.e. where the person knows all the facts relevant to a given matter, but
who fails to appreciate their factual or legal significance. The facts must necessarily lead to
the inference alleged. (at [40]). In such circumstnaces, it is not a failure to inquire that
causes the person to be bound or liable, but a failure to appreciate or infer (at [40)

o CASE LAW – In Belmonst Finance, the chairman of Belmont knew of the facts which
made the arrangement illegal even if he believed it to be a good commercial
proposition and had sought legal advice; accordingly, there was sufficient knowledge
attributed to ground liability in knowing receipt

(6) SUSPICIONS RELATE TO PARTICUALR TRANSACTION – The suspicion must be related to the
PARTICULAR transaction, as opposed to some extraneous factor (see Akindele). Therefore, in
Akindele, unconscionability could not be established from the defendant's suspicions about
the general reputation of the company; any suspicion had to relate to the particular
transaction

(7) OBJECTIVE KNOWLEDGE SUFFICIENT – objective knowledge (i.e. constructive knowledge) on

part of the Df being sufficient for establishing unconscionability for the purposes of knowing
receipt has been endorsed in English authorities as well. In Armstrong v Winnington, the
English High Court held that unconscionability could be established where, on the facts
actually known to the defendant, a reasonable person would have appreciated that the
transfer was in breach of trust or would have made such inquiries or sought advice which
would have revealed the probability of breach of trust (Virgo, pg 637). Similarly, in Arthur v
Attorney-General, Sir Terence Etherton described knowing receipt as 'involving
unconscionable conduct amounting to equitable fraud; this incorporate objective notions
of fault (Virgo, pg 637).

(8) TIMING OF FAULT; AT TIME OF RECEIPT OR SUBSEQUENTLY – The defendant must have
been at fault either at the time that they received the property in breach of trust or breach
of fiduciary duty or, if the receipt was innocent, the defendant was at fault subsequently
(Virgo, pg 635)

 CASE LAW; RAYMOND GEORGE – The Court was NOT satisfied that the evidence showed
that Rasif had conducted himself in a suspicious manner that ought to have invited further
inquiries about the source of the funds. Rasif had played the part of a genuine buyer well,
and did in fact assuage any obvious concerns through his convincing performance. Court
emphasised that it was NOT the usual practice for jewellers and retailers in general, to ask
their clients searching questions about the source of their funds (at [46]). A court should be

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 slow to conclude that the DeFred staff should have been put on their guard by most of the
circumstances surrounding the Rasif transaction.

o However, during the second transaction when Rasif handed the cheque over to one
Ho (director of the jewellery retailer), Ho possessed all the facts necessary for him to
conclude that Rasif had prima facie made an improper withdrawal of funds
belonging to third parties to pay for the particular transaction (at [50]). The plain
meaning of the words on the Cash Cheque indicated that it was an account
containing moneys belonging to DRP’s clients and not to him. Even when armed with
knowledge that Rasif was applying funds from his client’s account, Ho did not pause
to ask why Rasif was using funds from that particular account. There was now for
the first time an obvious red flag being vigorously waved. Taking into account all the
objective circumstances, we think that DeFred’s knowledge, imputed to it by Ho,
that the Cash Cheque was drawn on the DRP’s client account representing proceeds
belonging to third parties made it unconscionable for it to retain the benefit of the
Cash Cheque.

 CASE LAW; YONG KHENG – Trial Judge held that Mdm Lim’s liability for dishonest
assistance was also made out given that: (a) Mr Yong, as Panweld’s director, was in the
position of a trustee in relation to Panweld’s assets; (b) Mr Yong breached that trust when
he misapplied monies belonging to Panweld; (c) Mdm Lim facilitated Mr Yong’s breach by
allowing her bank account to be used for such purposes; and (d) Mdm Lim was dishonest in
that she knew full well that she was not entitled to the salaries paid into her account over
the course of those 17 years (at [79]). Crucially, the Court emphasised that for liability for
dishonest assistance to attach, the assistor does not need to know exactly what is going on
so long as he suspects that something dishonest might be going on (at [81]; following
Banque Nationale)

 CASE LAW; AKINDELE – In Akindele, there was was insufficient evidence that the defendant
knew enough to make retention of the value of the money received unconscionable. He
was unaware of any facts that questioned the propriety of the loan transaction, despite the
very high rate of interest (which he assumed was because he was considered to be a high-
worth customer). Unconscionability could not be established from the defendant's
suspicions about the general reputation of the company; any suspicion had to relate to the
particular transaction (Virgo, pg 635)

 CRITICISM – Penner opines that this test of unconscionability is ‘really very unsatisfactory’
(Penner, pg 359). This is because the term ‘unconscionability’ ‘gives absolutely no guidance
to a court trying to properly to characterise the sort of facts that must be in place’ for
liability to arise (Penner, pg 359); a defendant’s behaviour is unconscionable ‘according to
law’.

o Penner opines that, while the Baden scale is not perfect, it fulfils ‘the useful
function of pointing out some of the different ways and extents to which and
defendant might have acquired knowledge of a breach of trust’ (Penner, pg 359).
This will guide the judge as to whether the defendant’s awareness is sufficient to
make his treatment of the property as his own ‘unconscionable’ (Penner, pg 359)

13.1D Misapplied Corporate Assets

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  RECOVERING ASSETS; PRINCIPLES OF KNOWING RECEIPT DOES NOT APPLY – Historically,
the knowing receipt doctrine applies to recipients of corporate assets misdirected by
directors. However, Great Investment, the Federal Court of Australia held that ‘where a
company seeks to recover assets’ from third party recipients, hat have been transferred
without authority, the principles of knowing receipt do not apply. Rather, the recovery of
assets turns on whether the validity of the agreement, which is to be determined with
reference to the principles of agency and corporate law. Therefore, knowing receipt is
"unnecessary" if the plaintiff is merely claiming the rights or the value of the rights
transferred without authority (Yip Man in Restitution)

o AGREEMENT INVALID; STRICT LIABILITY – If the agreement is invalid, the contract

can be voided and the liability of the recipient to make restitution is strict, unless
the 3P recipient is ‘bona fide’ and has no ‘notice of a lack of authority’ (Great
Investment at [56])

 Therefore, the contract forms the basis for the 3P being liable for any
benefit received from the voided agreement (and not a claim in knowing
receipt).

o AGREEMENT VALID; 3P RETAIN EVERYTHING – If the agreement is valid, in that the

company’s agent had actual or ostensible authority to enter into the agreement, any
property acquired by the Df would have been acquired legitimately and there would
not have been any misapplication of Pf’s assets, and no issue of knowing receipt
arises (Virgo, pg 636; Criterion; Great Investment at [56])

o Prof Yip Man endorses the holding in Great Investment, opining that where the
agreement is valid, the recipient should retain the benefit, even where the agent
has acted without authority / in breach of duty (Liability for receipt of misapplied
corporate assets: the relevance of knowing receipt).

 RECOVERING LOSS OR PROFITS; CLAIM RELEVANT – Where the underlying agreement is

invalid, then the receipt-based claim could arise (Virgo, pg 636). Therefore, where the
Company seeks to recover ‘consequential losses as equitable compensation or, in the
alternative, to obtain an account and disgorgement of a recipient’s profits. An action for
knowing receipt would be needed for those remedies’ (at [53])

13.1E Remedies

 ACCOUNT FOR VALUE OF PROPERTY RECEIVED; INCLUDING ACCOUNTING FOR GAIN –

Where the defendant is held liable for unconscionable receipt, the remedy is a personal
liability to account for the value of property received (Virgo, pg 639) – i.e. account for the
gain made from the receipt of property.

o Alternatively, if the value of the property (i.e. the gain to the Df) is smaller than the
value of the loss suffered by the claimant, the claimant can elect for the remedy of
equitable compensation rather than the value of the defendant's gain (Virgo, pg
640)

 DATE ON WHICH PROPERTY IS TO BE VALUED – Ascertaining the date on which the property
should be valued is significant where the value of the property has fallen or increased after
it was received (Virgo, pg 639). Virgo argues that that the traditional description of the

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 defendant's liability as being accountable as if they were a constructive trustee would
suggest that the defendant recipient should be liable for all benefits received, so any
increase in the value of the property should be taken into account and the remedy should
therefore be assessed at the time of judgment (Virgo, pg 640; Crown Dilmun at [27] per
Peter Smith J).

o The only restriction was that the account would have to be taken before the end of
the six-year limitation period after the claimant first became aware of its claim
(Crown Dilmun per Peter Smith J; Virgo, pg 640)

13.1F Defences

Bona Fide Purchase

 DEFENDANT LIABLE UNDER KNOWING RECEIPT; CAN’T PLEAD BONA FIDE PURCHASE –
Proof of fault under knowing receipt will NEGATE the defendant's good faith, so that the
defendant will not be able to plead the defence of bona fide purchase for value successfully
(Virgo, pg 641).

(1) RECEIVE PROPERTY FROM BONA FIDE PURHCASER; AWARE OF INITIAL BREACH; DEFENCE
HOLDS – The basis of a knowing receipt liability is that the recipient received property in
which the plaintiff had a subsisting equitable interest (MKC Associates at [293]). However,
where the defendant had received the property from a third party who was a bona fide
purchaser for value, the claimant's equitable proprietary interest will already have been
defeated or extinguished. No liability will arise even if the defendant was aware of the
initial breach of trust or breach of fiduciary duty (MKC per Woo J; Virgo, pg 642)

(2) BONA FIDE PURCHASER; KNOWLEDGE ARISING AFTER PUCHASE DOES NOT NEGATE THE
DEFENCE – In MKC Associates, Woo J held that a bona fide purchaser without notice would
not be liable in knowing receipt if his conscience was subsequently affected by knowledge
of the breach of trust as this would render the bona fide purchaser defence ‘too easily
negated by, for instance, a letter of demand from the plaintiff or news publicity of a breach’
(at [300]). Indeed, once a bona fide purchaser takes the property, they are ‘free to continue
to use and enjoy the assets as they please ‘(at [300]).

Change of Position

 CHANGE OF POSITON; UNCLEAR; BUT REGARDLESS CAN’T PLEAD BECAUSE BAD FAITH –
Virgo opines that it is unclear whether the defence of change of position is available to the
defendant who is liable for unconscionable receipt. Virgo argues that this defence would
apply and the defendant would not be liable to account to the claimant for the value of the
property they had received, to the extent that the defendant had changed their position in
reliance on the receipt of the property (Virgo, pg 642). However, even if the defence was
available, it would NOT be established. This is because the defence cannot be established if
the defendant has acted in bad faith; bad faith has been equated with unconscionability
(Virgo, pg 642). Therefore, a defendant who is liable for unconscionable receipt will
necessarily have been acting in bad faith and so change of position will not be available to
them.

13.1G Strict Liability

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 LIABILITY INVOLVES 2 ASPECTS; WRONGDOING AND PROPERTY RIGHTS – Notably, Lord
Nicholls, writing extrajudicially, has argue for a strict receipt-based liability that is founded
on the vindication of equitable property rights (Virgo, pg 643). Where the defendant had
received, but no longer retains, property in which the claimant had an equitable
proprietary right, the fact that the defendant has interfered with the claimant's equitable
proprietary rights means that it is appropriate that the defendant's liability should be strict,
subject to the defences of change of position and bona fide purchase (Virgo, pg 644).
Similarly, in Twinsectra it was observed that there was powerful academic support for the
proposition that the liability of the recipient is the same as in other cases of restitution, that
is to say strict, but subject to a change of position defence.

o WILL STILL INVOLVE QUESTIONS OF BAD FAITH – Virgo notes that the defence of
change of position will not be available where the claimant has acted in bad faith.
Cases on the defence of change of position have relied on the notion of
unconscionability to determine whether or not the defendant can be considered to
have acted in bad faith. It follows that, even if the receipt-based claim becomes one
of strict liability, the question of unconscionability cannot be avoided (Virgo, pg
646). The difference is the burden of proof – who is to establish unconscionability.

 VIRGO CRITICISES STRICT LIABILITY – Virgo opines that it is simply not appropriate for third-
party recipients of property in which the claimant has an equitable proprietary interest to be
held strictly liable for the value of the property received, because equitable interests tend to
be hidden (Virgo, pg 644). Strict liability would place unacceptable burdens on third-party
recipients, such as banks, which have no reason to suspect that the claimant might have a
proprietary interest in the property received (Virgo, pg 644).

o Whilst it is true that the imposition of such strict liability would require there to be
generous defences of bona fide purchase for value and change of position to protect
defendants, this would still place an onerous burden on an innocent recipient to
establish the defences. It is only where the third-party recipient knew, or suspected,
that there might be such interests in the property received that it is appropriate to
hold the third party personally liable (Virgo, pg 644)

o Australia has rejected the recognition of a strict liability receipt-based claim, terming
it as a ‘grave error’ as it is unjust to impose such liability on the defendant who has
no idea that they had received property in breach of trust or fiduciary duty (Virgo,
pg 645).

 UNJUST ENRICHMENT DOES NOT REPLACE UNCONSCIOABLE RECEIPT – In a simple case

where A transfers property to B pursuant to a transaction that was void for want of
authority, the claimant can recover the value of the property transferred to the defendant
by virtue of the defendant's unjust enrichment. However, where 3 parties are involved a
claim for unjust enrichment may not be available as there is been NO enrichment at the
expense of the claimant. For example, where A has an equitable interest in property
misappropriated by B, the rustee, and it is received by C and dissipated. A cannot sue C in
unjust enrichment as C has been enriched at B’s expense, not at A’s expense. A would need
to rely on her equitable proprietary right to establish a claim against C; unjust enrichment
does not help. Unconscionable receipt is available in a three-party situation, involving
typically the beneficiary, the trustee, and a third party (Virgo, pg 646).

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13.2 Dishonest Assistance

 ACCESSORIAL LIABILITY; DISHONESTY – [...] is likely to be liable for dishonestly assisting the
breach of trust / breach of fiduciary duty on part of [...]. The three elements required for
dishonest assistance is fulfilled in the present case – First, ... (Von Roll Asia at [105])

o CONDITIONS – Three elements have to be proven – (1) Breach of Trust / Fiduciary

duty; (2) Assistance rendered by the third party towards the breach; and (c) Finding
that the assistance rendered by the third party was dishonest (Virgo, pg 648)

o [...]. Therefore, [...] is likely personally liable to the beneficiaries for the loss arising
from the breach or consequent gain made by the defendant from the
encouragement or assistance (Virgo, pg 624)

 THEORETICAL JUSTIFICATIONS – Notably, Virgo opines that liability in cases of dishonest

assistance is justified because (1) it ensures that the beneficiary or principal is recompensed
for the loss that they have suffered if the trustee insolvent / lacks the financial means to do
so; and (2) it deters others from undermining the institution of the trust or the fiduciary
relationship (Virgo, pg 647)

 NOT DEPENDENT ON RECEIPT OF PROPERTY – Further, it is irrelevant that [...] did not
receive the trust property that was illegitimately transferred out in a breach of trust. This is
because accessorial liability is founded upon the commission of a wrong arising from the
third party's association with the trustee's or fiduciary's breach of duty (Twinsectra at [107]
per Lord Millet) not the receipt of trust property.

13.2A Breach of Trust of Fiduciary Duty

 BREACH; NO NEED TO CONSIDER THE STATE OF MIND BY TRUSTEE – It is not required that
the trustee’s breach is of a dishonest or fraudulent nature; it is sufficient that a breach of
trust has occurred without needing to consider the nature of that breach (Virgo, pg 648).
This is because, where 3P liability is concerned, the court is concerned with the state of
mind of the 3P and not of the trustee.

o Breach of trust includes a breach of the trustee duty to act with care and skill in the
administration of the trust

 NO NEED FOR THERE TO BE TRUST PROPERTY – Dishonest assistance applies even where
there is no breach of trust / mishandling of trust property, but simply a breach of fiduciary
duty where there is NO trust property involved (Hew Keong Chan at [157]; JD
Whetherspoon)

 CASE LAW; CLEARLAB; NOT REFERABLE TO BREACH OF DUTY – In Clearlab, the Court held
that the defendants had not assisted the breach of duty of one Ting when the defendant
complied with Ting’s request to misappropriate the confidential information. This was
because when the these requests were made, Ting was no longer a fiduciary to Clearlab. He
had already been dismissed form his position. Therefore, the act were not referable to Ting’s
breach of fiduciary duty.

 CASE LAW; CLEARLAB; NO TRUST OVER CONFIDENTIAL INFORMATION – In Clearlab, the

Court rejected the finding of a trust over the confidential information, and a corollary breach
of trust when the Defendants misappropriated the confidential information. Lee J opined

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 that (1) unlike property, there is no concept of “title” in respect of information and,
therefore, no segregation of legal and equitable titles for the purposes of a trust (at [305]);
(2) further, while the Dfs were bound to use Clearlab’s confidential information only for
Clearlab’s benefit, these obligations arose as a matter of the law of confidence. The
appropriate cause of action would be a breach of confidence

13.2B Inducing, Encouraging or Assisting the Breach

 ACCESSORY; (1) ASSISTNACE; (2) CAUSAL SIGNIFCANCE – The 3P was also an accessory to
the breach of trust or fiduciary duty by [inducing, encouraging, or assisting the breach]
(Virgo, pg 649; Royal Brunei Airlines) through his action of [...]. Further, the
[encouragement / assistance /inducement] was connected the breach of trust / fiduciary
duty, in that there was some ‘causative significance’ in the acts by the defendant (Clearlab
at [297]); [...] made the breach easier that it would have otherwise been.

(i) ENCOURAGED – The third party will have encouraged the breach where they suggested
that the trustee should act in breach of duty. (Liability has also been incurred where the
defendant has bribed a fiduciary to breach her duty)

(ii) ASSISTED; AT TIME OF BREACH OR BEYOND – The third party will have assisted the
breach.

o DON’T NEED TO INDUCE – Notably, it has been opined that dishonest

assistances allows for a lesser degree of participation than that for the tort of
inducing a breach of contract. It suffices that the defendant in question assists,
as opposed to, induces the breach of fiduciary duty (Clearlab at [296)

o EXAMPLE – they prepared paperwork in order to transfer property in breach of

trust.

o ORIGINAL BREACH OF TRUST OR CONTINUING DIVERSION – The assistance can

either take place at the time of the original breach of trust / fiduciary duty, or
can extend to assistance in the continuing diversion of property following the
breach (e.g., cover up the breach by laundering money that has been
transferred) (Twinsectra v Yardley)

(iii) PROCURED – The third party will have procured the breach where they caused the
breach to occur, for example by instigating the breach by the trustee.

 Cf. NO MERE PASSIVE RECEIPT; REQUIRE ACTIVE ASSISTANCE – Dishonest assistance

requires ACTIVE ASSISTANCE; where there is mere passive receipt the case is more properly
analysed under knowing receipt (George Raymond at [43]).

o In George Raymond, the Defendant was ‘in a very broad sense, involved’ in the
laundering, but the participation was more in the way of passive receipt than active
assistance. Dishonesty describes and qualifies action, not passive receipt. DeFred’s
state of knowledge was not dishonest

 CAUSATION; MUST BE CONNECTED TO BREACH – The encouragement or assistance must be

connected the breach of trust / fiduciary duty, in that there must be show some causative
significance in the acts by the defendant. Therefore, at the very least, the claimant must at

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 least show that the 3P’s action have made the breach easier than it would otherwise have
been.

o NO DIFFERENCE – If the 3Ps’ actions made no difference at all to the

implementation of the breach of trust, there is no causative effect and therefore,
no assistance

o CANNOT BE LIABLE AFTER FULL IMPLEMENTATION – Therefore, the dishonest

assistant cannot be liable if her actions only occurred after the breach was fully
implemented (Brown v Bennett)

 CASE LAW; CLEARLAB; NO CAUSAL SIGNIFICANCE – In Clearlab, it was held that the offering
of a higher salary to one Ting did not constitute dishonest assistance as there was no causal
link between the offering of high salary and Ting’s breach of fiduciary duty in taking the
confidential information for its own benefit.

13.2C Dishonesty; Fault

 FAULT REQUIRED; NOT STRICT LIABILITY; OR ELSE BUSINESS IMPOSSIBLE – Where the
defendant has assisted a breach of trust or fiduciary duty, some FAULT is required, so that
innocent 3Ps with no reason to suspect a breach will not be liable (Virgo, pg 649). If
accessorial liability were strict, ordinary business would become impossible, since anybody
who did anything that assisted a breach could be potentially liable to the beneficiary or the
principal, even if they had no reason to think that they were dealing with a trustee or
fiduciary or were involved in a transaction that was inconsistent with the fiduciary’s
obligations. ull

 DISHONESTY – Furthermore, the fault element of dishonesty is fulfilled on the facts [...]

 TWO STAGES; KNOWLEDGE & SUSPICIONS; OBJECTIVE TEST – With regards to the
requirement of dishonesty, the Court will (1) assesses the defendant's knowledge or
suspicions about the particular transaction (including the conscious choice to not make
inquiries for fear that it might result in knowledge of the transaction); and (2) in the light of
the defendant's knowledge or suspicion, whether the reasonable person would consider
the defendant's conduct to be dishonest. (Royal Brunei per Lord Nicholls; followed in
Raymond George at [22]). In the present case [...]. As opined by Lord Nicholls in Royal Brunei,
an honest person would [SEE BELOW]. Under these cirucmsntaces, it cannot be said that the
bank’s conduct ‘offend the normally accepted standards of honest conduct’ (Royal Bruinei
per Lord Nicholls at [390]) and the bank is unlikely to be liable.

o ELABORATION ON OBJECTIVE STANDARD; ACTING IN DISREGARD OF OTHER’S

RIGHTS – Acting in reckless disregard of others’ rights or possible rights can be a
tell-tale sign of dishonesty. An honest person would have regard to the
circumstances known to him, including the nature and importance of the proposed
transaction, the nature and importance of his role, the ordinary course of business,
the degree of doubt, the practicability of the trustee or the third party proceeding
otherwise and the seriousness of the adverse consequences to the beneficiaries.
The circumstances will dictate which one or more of the possible courses should be
taken by an honest person. He might, for instance, flatly decline to become
involved. He might ask further questions. He might seek advice, or insist on further
advice being obtained. He might advise the trustee of the risks but then proceed

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 with his role in the transaction. He might do many things. Ultimately, in most cases,
an honest person should have little difficulty in knowing whether a proposed
transaction, or his participation in it, would offend the normally accepted standards
of honest conduct (Royal Brunei per Lord Nicholls at 390)

(i) KNOWLEDGE; NOT NEED TO KNOW BREACH OF DUTY – In respect of (1), the
defendant need not know that they are procuring, encouraging, or assisting a
breach of trust or breach of fiduciary duty (Banque Nationale at [144])

a. EXAMPLE – However, it will be highly significant that they are aware of the
facts which would indicate this. For example, it would be relevant that the
defendant knows that they are assisting or encouraging somebody to do
something that they are not entitled to do, such as the transfer of money to
somebody who is not entitled to receive it, or suspects this and fails to
make appropriate inquiries.

(ii) KNOWLEDGE; ACTUAL KNOWLEDGE AND WILFUL BLINDNESS – The standard of

knowledge includes actual knowledge of the facts and Nelsonian knowledge (i.e.
wilful blindness). This arises where the (1) has a subjective suspicion that certain
specific facts may exist; and (2) the defendant deliberately abstains from inquiry
into the facts in order to avoid acquiring knowledge of what the defendant already
suspects to be the case (Virgo, pg 656).

(iii) OBJECTIVE TEST; STANDARD VARIES – In assessing the objective standard of

dishonesty, the court will have regard to the personal attributes of the defendant,
such as their experience and intelligence, and the reason why the defendant acted
as they did. So, if the defendant is a professional, such as a solicitor, the objective
standard of honesty will be higher (Virgo, pg 650)

(iv) NO NEED TO SUBJECTIVELY KNOW ITS DISHONEST – It is possible that he defendant

subjectively considers their conduct to be honest, but liability will be made out
where, in the light of the defendant's knowledge of the circumstances, the
reasonable person disagrees and considers the conduct to be dishonest (Virgo, pg
651).

(v) DON’T NEED TO KNOW EXACTLY WHAT’S GOING ON – The Court of Appeal in
George Raymond emphasised that for liability for dishonest assistance to attach,
the assistor does not need to know exactly what is going on so long as he suspects
that something dishonest might be going on (at [81]; following Banque Nationale)

 POLICY; JUSTIFIED – Virgo opines that for policy reasons it is ‘appropriate to require
defendants to comply with objectively determined standards of honesty’ (Virgo, pg 657), as
opposed to solely follow their subjective standard of honesty. Moreover, this objective test
of dishonesty, which has regard to the defendant's knowledge of and suspicions about the
facts, is consistent with the core meanings of conscience and unconscionability which
underpin equitable liability (Virgo¸ pg 657)

 LEVEL OF SUSPICIONS; NO NEED FOR SPECIFIC KNOWLEDGE; GENERAL SUSPICION OF

SOMETHING WRONG IS OKAY – In Agip v Jackson, Millet J held that the defendant does not
need to know exactly what is going on, so long as he suspects that something dishonest
might be going (followed in Banque Nationale at [147]). Therefore, it is not necessary that

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 the 3P was aware of the precise nature of the fraud. A man who consciously assists others
by making arrangements which he knows are calculated to conceal what is happening from
a third party takes the risk that they are part of a fraud practised on that party (at [147])

 Cf. SUBJECTIVE TEST – In Twinsectra, Lord Hutton advocated for a subjective test where the
defendant can be considered to be dishonest only if they subjectively perceived that the
reasonable person would consider the conduct to be dishonest (Virgo, pg 652).

o Cf. DISHONEST CONDUCT OR STATE OF MIND – Lord Millet in his dissenting

judgement considered that the dishonesty is used in a purely objective sense, with
the focus being on dishonest conduct rather than a dishonest state of mind (Virgo,
pg 652). As opined by Lord Millet, ‘it is not necessary that he should actually have
appreciated that he was acting dishonestly; it is sufficient that he was.’ (Virgo, pg
652)

 CASE LAW; BARLOW CLOWES – In Barlow Clowes, the Df suspected that the money was
either being transferred in breach of trust or in breach of fiduciary duty. He consciously
decided not to make inquiries about the source of the money because he did not wish to
discover the truth. This state of mind was considered to be dishonest by ordinary standards,
and it was irrelevant that Henwood might have had different moral standards and saw
nothing wrong in what he was doing, preferring to follow his clients' instructions at all costs
because of an exaggerated notion of duty to them.

13.2D Remedies

 COMPENSATORY REMEDIES; JOINTLY AND SEVERALLY LIABLE – Dishonest assistant is also

fixed with secondary liability that derives from and duplicates the liability of the trustee
such that he is jointly and severally liable for the claimant’s loss. The claimant can
therefore sue the accessory and recover all losses suffered as a result of the breach of trust
or fiduciary duty (Virgo, pg 658).

o NO NEED TO SHOW CAUSATION – Notably, it is not necessary to show that this loss
was caused by the accessory's assistance or encouragement (Virgo, pg 658).

o CAN ELECT – 'Joint and several' liability means that the beneficiary will be elect to
sue either the trustee or the dishonest assistant for the full amount of the loss
(Penner, pg 296).

 EQUITABLE COMPENSATION; DISGORGEMENT OF PROFITS – However, the claimant can

also elect an account of profits against a dishonest assistant, even where no corresponding
loss has been suffered by the victim (Von Roll Asia at [113] per Chan J). The rationale is that
permitting an account of profits of a dishonest assistance would safeguard the ‘prophylactic
nature of accessory liability’ (at [114]).

o QUOTE – Chan Seng Onn J opined that to do otherwise would be ‘allow the
dishonest assistant to enjoy an unjustified windfall, particularly where the loss
suffered by the victim is insignificant compared to the profits made by the dishonest
assistant’ (Von Roll Asia at [117]). Such a conclusion would be a perverse one as the
dishonest assistant would stand to gain despite having acted dishonestly in
rendering assistance to the fiduciary’s breach of his duty

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 o MUST HAVE DIRECT CAUSAL CONNECTION – However, unlike where a fiduciary is
liable to account for all profits made which fall within the scope of the duty of
loyalty, the dishonest assister is only liable to account for those profits which were
directly causally connected to the assistance (Von Roll Asia at [120] per Chan J). The
Court ascertains whether the assistance or encouragement was a real or effective
cause of the profits (Virgo, pg 659). [NOTE: Not a simple application of but for test]

o NOT AUTOMATIC; COURT HAS DISCRETION – Moreover, Chan Seng Onn J observed
that where a claim for an account of profits is made against a 3P who is NOT a
fiduciary, the ‘court has a discretion to grant or withhold the remedy’ (at [115]); an
account in a non-fiduciary case is therefore not ‘automatic’.

 MUST NOT BE DISPROPORTION IN LIGHT OF FORM AND EXTENT OF

WRONGDOING – One ground on which the court may withhold the remedy
is that an account of profits would be disproportionate in relation to the
particular form and extent of wrongdoing (at [115])

o Cf NO PROFIT / LOSS EXCEEDS GAIN – Where, however, the defendant has not
profited from assisting the breach of duty, or where the claimant's loss exceeds any
gain made, the claimant will elect for a compensatory remedy (Virgo, pg 658).

 Cf. ACCOUNT OF PROFITS NOT OF TRUSTEE – Notably, Elliott and Mitchell argues for a limit
to this rule – the accessory would NOT be disgorged of the trustee’s personal profit from
the breach of fiduciary duty, for the simple reason that the accessory did NOT obtain this
profit (Virgo, pg 658). This was recognized by Lewison J in Ultraframe on the basis that the
liability of the accessory is personal and is not punitive. In Singapore, Chan Seng Onn J in
Von Roll Asia ostensibly rejected the dishonest assistant being liable for the profits of the
fiduciary (at [119]).

 DIVERSION OF GAINS TO COMPANY; APPLIES TO DIRECTOR WHO HELP THEIR COMPANY –

Given that [...] was the ‘directing mind and will’ of the [the company], his knowledge and
dishonesty ‘can be imputed’ to the [company] (Von Roll Asia at [109]) which [served as a
vehicle to store the unauthorised profits / adopted the exploited corporate opportunity].
Therefore, [...]’s conduct, as a separate legal personality, constitutes dishonest assistance as
well. This is rationalised on the basis that a fiduciary ‘cannot avoid the rules concerning
accountability for profits by arranging for the profit to be taken by his company (or a
company in which he has a substantial interest) which is a mere cloak for the [fiduciary]’
(Lewin on Trust; Parakou at [129]). Therefore, the company will be liable for the profits as
well.

o The question in such cases is who had management and control over the company
in relation to the act or omission in question

o Therefore, where the unauthorised profits is put into a company established by the
errant directors, both the directors and the company are liable to account for
profits’ (CMS Dolphin).

 CASE LAW; COMPENSATORY LOSS – In Fyffes Group Ltd v Templeman, the defendant had
bribed an employee of the claimant company to enter into a contract with the defendant
on favourable terms for the defendant. It was held that the defendant was liable for
dishonestly assisting the employee's breach of fiduciary duty. It was accepted that the

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claimant's loss was the difference between the terms as agreed and the terms that would
have been agreed had the employee not been bribed (Virgo, pg 658)

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