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Equity – EXAM Notes

Equity (Trinity College Dublin)

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EQUITY – EXAM NOTES

TOPIC 1: Introduction and Historical Background to Equity

Equity is a body of principles of fairness which evolved with the object of mitigating the severity of
rules of the Common Law. Equity's origin lay in the exercise by the Chancellor of the residual
discretionary power of the King to do justice in circumstances in which for one reason or another,
justice could not be obtained in a Common Law Court. This developed into the Court of Chancery
which operated as a "court of conscience" with the objective of achieving a fair and equitable result
in all cases which came before it. The principle which it developed became known as equity.
Equity is essentially a supplementary jurisdiction to that provided by the common law which
developed to provide remedies where the common law is deficient. It is difficult to define the scope
of equity, in fact it is easier to define it by examining the areas in which an equitable jurisdiction has
developed- the law of trusts, equitable interests in land, discretionary remedies, etc.
Lord Millet speaking extra judicially, explained the supplementary role of equitable jurisdiction
in these terms: "The Common Law and Equity are not two parallel systems of law. The Common law
is a complete system which could stand alone, but which if not tempered by equity would often be
productive of injustice; while equity is not a complete and independent system of law and could not
stand alone."

Historical Background of Equity

By the end of the thirteenth century in England the Common Law, while well developed, had grown
into a rigid set of principles which were slow to adapt to the needs of a developing system of justice.
The result was that hardship frequently arose and many wrongs could not be remedied.

As a result of the defects in the Common Law a practice developed of petitioning the King in
situation where the litigant complained that he could not obtain an adequate remedy within the
framework of the CL. The Lord Chancellor was responsible for overseeing such matters and as the
number of petitions increased, the king delegated his functions to the chancellor with the direction
that a petitioner should be given a label remedy if a litigant was entitled to one and where none
existed, to give a remedy as would be just. As the number of petitions increased the Chancellor and
his office took on the role of a court which became known as the Court of Chancery.

The Court of Chancery, with the Lord Chancellor at the helm, continued to dispense equitable
remedies until the introduction of the Supreme Court of Judicature Acts 1873 and 1875 (followed in
Ireland by the Supreme Court of Judicature (Ireland) Act 1877), which established one supreme
court of Judicature and replaced the system of two courts exercising common law and equitable
jurisdiction. The effect of the legislation was to establish one court system to apply the principles of
CL and equity.

One issue which led to difficulties was how this new court system would deal with conflicts between
legal and equitable principles. Section 28 of the Supreme Court of Judicature Act (Ireland) 1877
provided that where conflict arose between the rules of equity and the CL, the equitable rule was to
prevail. This can be seen in decisions such as Walsh v Lonsdale.

Discretionary nature of equity - it is about principle and doctrine but the problem is that those
principles and doctrine have to be rectified in some circumstances. Involves a judge using his
discretion to achieve a fair and just result.

Unconscionability of equity - often the driving force behind judges making decisions which aren't

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100% based on precedent.

Fusion of Law and Equity- the Fusion Fallacy

Virgo has said that, "Equity is not an independent system of law, built it had a distinct identity and a
function to modify the rigours of the Common Law."

The generally accepted opinion at the time was that the Judicature Acts had effected a fusion of
administration rather than a fusion of the substantive principles of common law and equity. Jessel R
remarked in Salt v Cooper in relation to this issue, "but it was not any fusion nor anything of the
kind, it was the vesting in one tribunal the administration of law and equity in every cause, action or
dispute which should come before that tribunal."
However, this can be contrasted with the same judge's remarks in Walsh v Lonsdale where he
stated, "there are not two estates as there were formerly, one estate in common law by reason of
the payment of rent from year to year and an estate in equity under the agreement. There is only
one court and the equity rules prevail in it."

Ashburner Principles of Equity:

"The two streams of jurisdiction, though they run in the same channel, run side by side and do not
mingle their waters."

United Scientific Holdings Ltd. v Burnley Borough Council (1978)

Lord Diplock rather forcefully put forward the view that the CL and Equity had been merged as a
result of the Judicature Acts.
Facts:
The essential issue in this case was whether a landlord who had failed to adhere strictly to the time
requirements laid down by a rent review clause should be deprived of the right to increase the rent.
The Supreme Court of Judicature Act provided that stipulations in contracts which would have been
deemed to be of the essence in a court of equity prior to the enactment of the legislation should
henceforth receive that construction in all courts. The lessee argued that as this question had not
arisen prior to this, the relevant section could not apply and time was of the essence.
Ruling:
The HOL held that the position prior to the enactment of the legislation was not of relevance and
that since then a fusion of the rules of law and equity had occurred and that equity took precedence.
It therefore held that the council was entitled to invoke the rent review provision notwithstanding
the fact that the time limits prescribed had expired as time was not normally of the essence under
rules of equity.

Rivalry between common law and equity - equity came from a sense that the common law was too
inflexible. It could be unfair and this unfairness often manifested itself in the lack of a suitable
remedy. The lord chancellor took over the role of dispensing justice. Overtime this developed into
the court of chancery. The common law judges were not happy with chancellory court judges
describing their judgements as inappropriate.

Hynes v Independent Newspapers Ltd. (1980)

Facts:
The issue at the centre of this case was very similar to the one in USH, namely whether time was of
the essence with regard to their rent review provision in a contract.
Ruling:
The SC followed the English Courts held that if the time stipulation would not have been deemed to
be of the essence of the contract in a court of equity prior to the enactment of the Judicature Act

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then it would still receive the same construction. As there were no grounds for implying a term that
time was of the essence. The plaintiff tenant's appeal against the validity of the late service of a rent
review notice was disallowed. O'Higgins J said that in Ireland "the fusion of CL and equitable rules...
initiated by the Supreme Court of Judicature (Ireland) Act 1877... and completed by the Court of
Justice Act 1924."

Martin in ‘Fusion, Fallacy and Confusion’ argues that the view that flexibility and capacity for
development is best achieved by disregarding the legal or equitable origins of causes of action,
remedies or defences is misconceived. She asserts that it does not seem that the fusion fallacy
evidenced in cases such as United Scientific has become established in England; on the contrary
there has been a return to orthodoxy. This is apparent from decisions of the House of Lords which
contain meticulous analysis of the separate common law and equitable origins and principles in
various areas e.g. illegality in Tinsley v Milligan, which she argues does not seek to attribute
substantive effect to the Judicature Acts but to facilitate harmonious development of the common
law and equitable rules of illegality. Martin concludes that while the two systems are working more
closely together they are not yet fused.

Tinsley v Milligan (1994)

Facts:
The parties in this case were two women who were in a relationship. They bought a property which
was registered solely in the name of the plaintiff in order to assist in the perpetration of fraud by
claiming more social security than they were entitled to. However, there was a tacit understanding
between the women that they would both be joint beneficial owner of the property and the
defendant had contributed significantly to the purchase price and lived in the property. Their
relationship came to an end and the plaintiff sought possession of the house that was in her name.
The defendant claimed that it was their common intention that the house should belong to both of
them and sought a declaration that the house was held on trust by the plaintiff for both parties in
equal shares. One of the issues for the court in this case was the fact that the defendant had been
involved in fraud. Could the court declare that Miss Milligan had an interest in the property, thereby
conferring ownership rights unto her, where there was illegality involved?
Ruling:
The HoL meticulously analysed the separate common law and equitable origins in illegality. Lord
Browne-Wilkinson spoke of the fusion of the law and equity, although he seemed to rely in common
law and equitable principles which had developed side by side.
Principle- as long as you don't have to rely on your illegality to assert your claim the courts may
overlook it.

Meagher v Dublin City Council (2013)

Facts:
The plaintiff brought a claim for breach of contract arising out of an agreement to provide hostel
facilities and other ancillary services for asylum seekers. The Court had to consider whether the
equitable doctrine of laches could be used to defeat a claim for damages for breach of contract at
common law which was not otherwise statue barred.
Ruling:
Hogan J considered the fusion fallacy in Ireland. He stated that insofar as the comments of both
O’Higgins CJ and Kenny J in Hynes suggested some form of substantive fusion – and it was far from
clear that they do – they must be regarded as obiter. He added that ‘save for a stray reference by
O’Higgins C.J. to the “fusion of common law and equitable rules” there is, in fact, little in the
judgments to suggest that some broader concept of substantive fusion was actually being embraced
or considered.’ Hogan J said that despite all the claims which have been made in respect of the

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fusion of law and equity, there is no authority for the proposition that the court might refuse to
award damages for breach of contract or in tort on discretionary grounds such as undue delay per se
or because the claimant has been guilty of bad faith by, for example, exaggerating the nature of the
claim, even though these would be well established grounds for refusing any equitable relief which
might otherwise have been granted. He said that one may accordingly agree with the observations in
Hanbury and Martin, Modern Equity that while the two systems of law work ever more closely
together and draw mutual inspiration from each other, the two systems ‘are not yet fused’.

McGrath v Stewart (2016)

Laffoy J referred to the conclusion reached by Hogan J in Meagher that the two systems ‘are not yet
fused’ and that in consequence, the doctrine of laches has no application to a claim at common law
for damages for breach of contract where that claim is not otherwise barred by the Statute of
Limitations. She stated that she agreed with that conclusion.

Maxims of equity

The maxims of equity constitute the general principles developed by the Court of Chancery over the
years. While they are not to be interpreted as positive rules of law which should always be applied in
their literal sense, they do reflect general trends which can be discerned from the manner in which
the equitable jurisdiction of the courts has been exercised. It is important to realise that some of
these maxims overlap or may even appear to contradict each other, and the purpose of examining
them now is to provide a better understanding of the operation of equitable jurisdiction generally -
some of the cases referred to will be re-examined in particular in the section of the course dealing
with equitable remedies.

Equity will not suffer a Wrong to be without a Remedy

The principle which les behind this maxim is that equity will intervene to protect a recognised right
which for some reason is not enforceable at common law and it reflects the basis for the origins of
the equitable jurisdiction of the Chancellor. However, as equitable jurisdiction became more
established it also became increasingly formalised and based on precedent. As Greene MR
commented in Re Diplock (1948) 'if a claim in equity exists it must be shown to have an ancestry
founded in history and in the practice and precedents of the courts administering equity
jurisdiction'. Likewise, in Edlington Properties Ltd. v J.H Fenner & Co. Ltd. Neuberger LJ stated that
the fact that a particular type of right or relief may be equitable 'does not... operate as a green light
to invest new or specific rules in order to achieve what one judge might regard as a fair result in a
particular case.'
Textbook authors have noted that we should treat this particular maxim with caution today,
and not interpret it too literally. Wylie has said that 'it is a grossly inaccurate statement of equity's
approach in modern times.'
Despite its potential misleading nature, there are nevertheless some important practical
illustration of the operation of the maxim which can still be seen today. Perhaps the most classic
illustration of this maxim is the trust- the beneficiary can enforce equitable rights which the common
law would not recognise as it simply regarded the trustee as the legal owner.
Although this maxim still occurs frequently in practice, it would be fair to say that more recent
attempts to develop this maxim have not proved successful. The comment of Lindley LJ in Holmes v
Millage (1893) that: ‘It is an old mistake to suppose that, because there is no effectual remedy at
law, there must be one in equity’ must be borne in mind in this context. An example of how an
attempt to develop a new form of equitable relief has been met with mixed fortunes is the new
model contrastive trust, a creation of Lord Denning to be imposed whenever justice required it. This
development was criticised as it made it possible for the plaintiff to win where he had no legal

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doctrine or authority behind him.

Equity follows the Law

This maxim is contradictory and should not be interpreted too strictly. Biehler states that this maxim
may be more accurately stated in the following terms, 'Equity follows the law but not slavishly nor
always." Although equity does not seek to question the existence of legal rights it will attempt to
mitigate the often harsh results caused by their strict enforcement. Equity restrained or modified the
application of common law principles where it was in the interests of fairness to do so. For example,
equity recognises the existence of secret of half-secret trusts (where the common law does not) by
waiving the requirement of strict compliance with the necessary testamentary formalities (ie-
confirmation in writing.).

Generally equitable interest in land correspond with legal estates and interests. This point is well
illustrated by the fact that where parties are joint legal owners it will be assumed that equity follows
the law and that their beneficial interests reflect their legal interests in the property.

Jones v Kernott (2012)

Facts:
The parties in this case were an unmarried couple who had lived together and were the joint legal
owners of a house. They separated and the plaintiff (the man) moved out of the house. The
defendant lived there for a further 15 years, paying the mortgage and generally ensuring the upkeep
of the property. The plaintiff then tried to claim his legal right to the property.
Ruling:
The English SC ruled that 'the starting point is that equity follows the law and they are joint tenants
both in law and in equity.' Thus the starting point is a presumption that where parties are joint
tenant in law, they will also be in equity. A heavy onus of proof will lie on any party seeking to to
show that equity will not follow the law to establish that the parties held a common intention that
their beneficial interests should be different from their legal interests. In Jones this common
intention was successfully established by the defendant. She showed that parties had had a different
common intention at the time when they had acquired the home or that they had later formed a
common intention that their respective shares would change. The Supreme Court reversed the
decision of the Court of Appeal and restored the order of the trial judge that the claimant was the
beneficial owner of 90% of the property.

He who seeks Equity must do Equity

Equity will only grant relief on terms which ensure that a defendant is treated fairly and to obtain
equitable relief, a plaintiff must be prepared to act in an honourable manner. This maxim had many
different application and reflects that fact that equitable remedies are discretionary in nature. It is
one of the few maxims that can be interpreted fairly literally.

Chappell v Times Newspapers Ltd. (1975)

Facts:
The plaintiff sought an injunction to restrain their employers from terminating their contracts of
employments. However, they refused to give the undertaking sought by the employers not to
engage in disruptive behaviour.
Ruling:
The CoA refused to grant the injunction on the grounds that the plaintiff's had failed to establish that
they intended to act equitably by abiding by the terms of their contexts of employment.

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He who comes to Equity must come with clean hands

This maxim also reflects the discretionary nature of equity and requires that a person seeking
equitable relief must refrain from fraud, misrepresentation or any other form of dishonest or
disreputable conduct if he wishes to be granted a remedy. However, unlike the maxim just
considered, it refers principally to the past conduct of the plaintiff and the inequitable conduct must
be connected in some way to the relief which the plaintiff seeks.

Overton v Bannister (1844)

Facts:
An infant beneficiary fraudulently misrepresented herself as being of age, although she was only 19,
and thereby induced the trustees to give her possession of assets to which she should only have
been entitled at the age of 21. When she reached this age, she instituted a suit against her trustees
to compel them to reimburse to the trust fund the assists which they had improperly paid to her.
Ruling:
At common law her deceit was ineffectual to discharge the trustees of their duty. In equity,
however, her claim was disallowed because she had misrepresented her age.

Smelter Corporation v O'Driscoll (1977)

Facts:
The plaintiff claimed an order of specific performance to sell lands. The plainitff's agent had told the
defendant that if she did not sell the land in question, the property would be compulsorily acquired,
although, unknown to the agent, this was not in fact the case.
Ruling:
The SC refused a decree of specific performance. O'Higgins CJ said that the remedy was a
discretionary one and concluded that by reason of the plaintiff's misrepresentation, the defendant
was under a fundamental misapprehension as to the true facts and that it would be unjust to grant
specific performance in the circumstances.

Equitable relief may be refused to a plaintiff where his conduct in relation to the transaction at issue
has been less than honest even where this conduct has not directly prejudiced the defendant.
Parkes v Parkes (1980)
Facts:
Presumption of advancement- if you buy property for someone who is dependant upon you (such as
a wife or a child) it is treated as a gift.
An Englishman bought land in Ireland and the conveyance was taken in his Irish wife's name in order
to obviate the need for Land Commission consent. After the parties divorced the husband resisted
an inhibition on the land and the wife instituted proceedings, claimed that the land had been
wrongly registered. The husband counterclaimed that he was entitled to beneficial ownership in the
property. It was claimed on behalf of the wife that the husband should not be allowed to obtain
relief in equity 'by setting up his own illegality or fraud.'
Ruling:
Costello J held that 'the court should not grant relief to a purchaser who has placed property in his
wife’s name dishonestly and by means of an illegal act performed for the purpose of evading the law
relating to the transfer of land.'
Para 142 explains the law very clearly
Distinction from Tinsley:
Page 372 of Tinsley- Parkes is distinguished. Essentially one case involves a husband and wife and
the other doesn't. This has faced a huge amount of criticism. The court also wouldn't allow someone
to get a remedy based on their own illegality.

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Argyll v Argyll (1967)

Ungoed Thomas J stated that ‘a person coming to equity must come with clean hands but the
cleanliness required is to be judged in relation to the relief that is sought.'

Curust Financial Services Ltd. v Loewe-Lack-Werk Otto Loewe GmbH & Co. (1994)
Facts:
The SC gave some consideration to the type of conduct which is necessity to bring the "clean hands"
maxim into action. It was alleged that plaintiff had breached an exclusive licensing agreement
without the prior written consent of the defendant, and that this should disentitle the plaintiff to
relief.
Ruling:
Finlay CJ accepted that the court has a discretion, where it is satisfied that a person has come to
court otherwise than with ‘clean hands’ to refuse equitable relief in the form of an injunction on that
ground alone. However, he stated (at 467) that ‘It seems to me that this phrase must of necessity
involve an element of turpitude and cannot necessarily be equated with a mere breach of contract.’

This more flexible approach to the application of the maxim has also been adopted by the majority
of the Court of Appeal and the House of Lords in Tinsley v Milligan [1994] 1 AC 340. In the opinion of
Lord Browne-Wilkinson, illegality may render a proprietary interest unenforceable in certain
circumstances but only where the claimant had to rely on the illegality to prove the equitable right
and this was not the case in this instance. However, in Curust and Tinsley both parties had been
involved in some form of impropriety and where only one party has been guilty of this, the courts
have not taken such a benevolent attitude towards the wrongdoing.

Shiel v McKeon (2007)

Clarke J referred to the principle that ‘he who seeks equity must do equity’ and said that he must
have regard to whether it would be inequitable to allow the plaintiff to benefit from an arrangement
entered into by him in circumstances where he was aware that the defendant was under a
misapprehension as to the plaintiff’s negotiating position. He concluded that the plaintiff could not
invoke equitable principles in the circumstances.

Halliwell has suggested that ‘the application of the unclean hands principle and the concept of
illegality are producing some very questionable outcomes with respect to equitable property rights
and to discretionary remedies.’

Delay defeats Equity

Delay is well established as a discretionary factor which may influence a court's decision to grant or
withhold equitable relief. This is because delay often causes prejudice. Whereas a legal claim will
usually be governed by a period of limitation laid down by statute, the type of delay which will be
sufficient to defeat a claim for equitable relief is less clear cut. There are two main concepts:
Laches - where a party whose rights have been infringed has failed to pursue his remedy with
sufficient speed in the eyes of equity his inactivity may cause the right of action to be barred where
it is combined with prejudice to the other side.
Acquiescence - where one party infringes another's rights and the other does nothing or expressly or
impliedly represents that he does not intend to enforce the claim - equity infers that he has
acquiesced in the other's actions and he may lose his right of action.

Toal v Duignan (1991)

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Finlay CJ said that the courts have an inherent jurisdiction to dismiss a claim in the interests of
justice where the length of time which has elapsed between the events out of which it arises and the
time when it comes for hearing is in all the circumstances so great that it would be unjust to call
upon a particular defendant to defend himself and that to conclude otherwise would be to give the
Oireachtas a supremacy over the courts which is inconsistent with the Constitution.

An illustration of the doctrine of laches is provided by the decision of the English Court of Appeal in
Allcard v Skinner (1887)
Facts:
The plaintiff joined a convent and made her will in favour of the superior of the order. She also
transferred large amounts of money ands stock to the Superior. When she left the order she made
revoked her will but made no attempt to reclaim her property until 5 or 6 years later when she
instituted proceedings saying that it had been transferred as a result of undue influence.
Ruling:
The English CoA held that the claim was barred by laches and acquiescence. As Lindley LJ stated it
was a case which by no means rested on mere lapse of time and the plaintiff's conduct amounted in
effect to confirmation of the gift.

J.H. v W.J.H. (1979)

Facts:
The plaintiff signed an act in which she agreed to compromise her rights to her late husband's farm
under the Succession Act 1965 in favour of her son.
Ruling:
Keane J accepted that the transaction was an improvident one which, in the normal course of
events, the court would set aside, he refused to grant her relief in the circumstances. He referred to
the delay by the plaintiff for a period of four years in seeking to assert her claim and the time and
money invested in the running of the farm by the defendant on the basis that she had abandoned
her rights, and concluded that the lapse of time coupled with circumstances which made it
inequitable to enforce the claim was sufficient to bar the plaintiff's action.

A similar conclusion was reached by Murphy J in McGrath v Stewart (2008).

Facts:
The plaintiff sought specific performance of a contract for the sale of land entered into in 1998 in
proceeding instituted just over 6 years later.
Ruling:
In the circumstances, and given the large rise in the value of the properties since the contract had
been concluded, Murphy J was satisfied that the defence of laches had been made out and that to
make an order of specific performance against the defendant would be inequitable.
However, it should be noted that on appeal in 2016 Laffoy J concluded that the trial judge did not
have jurisdiction to award damages in lieu of specific performance and the Supreme Court allowed
the defendant’s appeal. She stated that the court had jurisdiction to award damages in lieu of
specific performance, but that where it had determined that laches on the part of the plaintiff
purchaser should operate as a bar to entitlement to an order for specific performance, it could not
award damages in lieu of specific performance.

Equality is Equity

In circumstances where more than one person is entitled to property, equity favours a principle of
equal division. The most common illustration of the maxim in practice is equity’s dislike of joint
tenancy as a method of holding property. Equity tends to lean in favour of a tenancy in common and
in certain circumstances even where persons are joint tenants at law they may be regarded by

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equity as tenants in common of the beneficial interest.

E.B. v S.S. (1998)

Keane J commented that the maxim that 'equality is equity' should not necessarily apply where an
application is brought under s.117 of the Succession Act 1965 by a child claiming that a parent has
failed in his moral duty to make proper provision for the child in accordance with his means –
although here equal distribution was the fair solution.

It will take something quite exceptional for the courts to decide that anything other than an equal
share among siblings is fair.

Equity looks to the intent rather than the form

This maxim essentially means that equity will occasionally turn a blind eye to strict formalities. While
this maxim does not mean that legal formalities will not be required by equity, it looks to the
substance rather than the form of a transaction and does not require ‘unnecessary formalities' to be
observed. So, for example, if by insisting on statutory formalities, fraud is likely equity will not insist
on a note or memo in writing in relation to a contract for the sale of land. However, it could be said
to conflict with the maxim that equity follows the law to some degree.

Parkin v Thororld (1852)

Lord Romilly MR stated, ‘Courts of Equity make a distinction in all cases between that which is
matter of substance and that which is matter of form; and if it find that by insisting on the form, the
substance will be defeated, it holds it to be inequitable to allow a person to insist on such form, and
thereby defeat the substance.’

Equity looks on that as done which ought to have been done

Where a specifically enforceable obligation exists, equity regards the parties as already in the
position which they would be in had the obligation been performed and their legal rights and duties
are assessed by reference to this position.

Once a specifically enforceable contract for the sale of land is entered into, the equitable interest
passes to the purchaser and the legal title is held for him on trust by the vendor until completion.
See s.52(1) of the Land and Conveyancing Law Reform Act 2009 which was also the minority view of
Henchy J in Tempany v Hynes (1976). (The view of the majority - at 114 per Kenny J - was that the
equitable interest only passed to the extent to which the purchase price was paid).

Equity imputes an intention to fulfil an obligation

Where a person is under an obligation to perform an act and does some other act which could be
regarded as fulfilment of that original obligation, it will be regarded as such. This maxim forms the
basis for the equitable doctrines of satisfaction (e.g. the satisfaction of a debt by a legacy) and
performance.

Equity acts in personam

This was originally one of the most fundamental equitable maxims that equitable jurisdiction was
exercised against the person of the defendant rather than against his property. The personal nature
of this jurisdiction is illustrated by the fact that failure to comply with an order e.g. specific
performance or an injunction constitutes contempt of court and is punishable by imprisonment.
While equitable relief may often be of a personal nature, equitable proprietary rights are also

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increasingly being granted and this maxim must be treated with a degree of caution.

In FHR European Ventures LLP v Cedar Capital Partners LLC (2015) Lord Neuberger commented that
‘it is fair to say that the concept of equitable proprietary rights is in some respects somewhat
paradoxical. Equity, unlike the common law, classically acts in personam; yet equity is far more ready
to accord proprietary claims than common law.’

Where the equities are equal, the first in time prevails

Where the equities are equal, the law prevails

These two related maxims refer to the question of priorities as between competing interests in land.
However, they cannot be looked at in isolation and it is necessary to examine the distinction
between equitable interests and mere equities, the effect of the doctrine of notice on the operation
of the maxims and the impact which registration has had on the question of priorities.

Equitable interests are regarded as actual rights in property and include interests under trusts,
equitable mortgages, equities of redemption, restrictive covenants and contracts to convey or create
a legal estate in land. Mere equities are rights usually of a procedural nature which are ancillary to a
property right and include e.g. the right to have a transaction set aside for fraud or undue influence
or a right to have a document rectified for mistake.

The most practical significance of this distinction can be seen in relation to priorities. While a bona
fide purchaser of a legal estate for value and without notice of an earlier equitable interest may take
the property free of that interest, a bona fide purchaser of an equitable interest without notice of an
earlier equitable interest will take subject to it on the basis of the maxim that where the equities are
equal the first in time prevails. However, while such a purchaser does not take free of prior equitable
interests, he will take free of any prior mere equities on the basis that the ‘equities’ are not equal.

There has been some dispute about the status of a beneficiary's equitable right to trace trust
property into the hands of third parties and specifically as to whether it can be categorised as an
equitable interest or as a mere equity. The position in England would appear to be that it is
recognised as an equitable interest (see Cave v Cave (1880) 15 Ch D 639). However, the opposite
conclusion was reached by the Irish Court of Appeal in Re ffrench’s Estate (1887) 21 LR Ir 283 which
also concerned a contest as between the right of beneficiaries to trace and that of an equitable
mortgagee. While this approach to the status of a beneficiary's right to trace appears to be
established in Ireland, Wylie has questioned its soundness on the basis that it seems to involve an
‘unjustifiable limitation' of the beneficiaries' interests.

These maxims should not be interpreted too literally. As Lord Neuberger PSC noted in FHR European
Ventures LLP v Cedar Capital Partners LLC [2015] AC 250, 269, ‘given that equity is far more ready to
recognise proprietary rights than common law, the effect of having an equitable right is often to give
priority over common law claims -sometimes even those which may have preceded the equitable
right.’

TOPIC 2: Maxims of Equity

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These maxims can be as unhelpful as they are helpful.

A. Equity will not suffer a wrong to be without a remedy
● Equity will intervene to protect a recognised right which for some reason is not enforceable at
common law and it reflects the basis for the origins of the equitable jurisdiction of the
Chancellor.
● Ronan Keane para 2-50: application of settled principles gives equity certainty and consistency.
The arbitrary departure from principles to seemingly do justice in an individual case will
often lead to a more fundamental injustice and unfairness.
● The idea that any wrong should have a remedy in equity is false.
● In re Diplock [1948] Ch 465 (CA) 481-482 (Lord Greene MR): ‘if a claim in equity exists it must be
shown to have an ancestry founded in history and in the practice and precedents of the
courts administering equity jurisdiction’.
● Holmes v Millage [1893] 1 QB 551 (CA) 555 (Lindley LJ): ‘It is an old mistake to suppose that,
because there is no effectual remedy at law, there must be one in equity’.
B. Equity follows the law
● Although equity does not seek to question the existence of legal rights it will attempt to mitigate
the often harsh results caused by their strict enforcement. However, generally equitable
interests in land correspond with legal estates and interests. This point is well illustrated by
the fact that where parties are joint legal owners it will be assumed that equity follows the
law and that their beneficial interests reflect their legal interests in the property. The whole
premise of equity is to step in where the law is deficient.
Jones v Kernott [2012] 1 AC 776, 794
● the parties were joint legal owners of a property; the defendant left long ago and the plaintiff
had paid the mortgage and other bills since; they eventually decided to sell the house; the
question was who owned the property.
● The House of Lords started with the maxim that equity should follow the law. Lord Walker and
Baroness Hale acknowledged, however, that they weren’t joint owners in equity. The House
of Lords upheld the finding of the trial judge that the plaintiff was entitled to 90% ownership
of the house.

C. He who seeks equity must do equity

● Conduct related maxim
● Future conduct is important here. Equitable relief will only be granted if a judge is satisfied that
the person will act equitably into the future.
● The plaintiff must also act equitably
Chappell v Times Newspapers Ltd [1975] 1 WLR 482 (CA) 502
● (Lord Denning MR): ‘if one party seeks relief, he must be ready and willing to do his part in it’.
The plaintiffs were looking for injunctive relief to restrain their employers from terminating
their employment. The employers had been plagued with disruptive behaviour amongst

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their employees. The plaintiffs had not been involved in any such behaviour, but the judge
asked that they would not engage in such conduct into the future. Lord Denning MR refused
to grant the injunction in the Court of Appeal.

D. He who comes to equity must come with clean hands

● This maxim also reflects the discretionary nature of equity and requires that a person seeking
equitable relief must refrain from fraud, misrepresentation or any other form of dishonest
or disreputable conduct if he wishes to be granted a remedy.
● However, unlike the maxim just considered, it refers principally to the past conduct of the
plaintiff and the inequitable conduct must be connected in some way to the relief which the
plaintiff seeks.
● Often impossible to be 100% sure of how a case will go. Discretionary nature of the remedies.
What if you didn’t disclose info or you didn’t enquire about certain things?

Overton v Bannister (1844) 3 Hare 503 (506) (67 ER 479)

● the person looking for relief was really chancing her arm. She was a beneficiary of a trust and an
infant. She fraudulently misrepresented herself as being 21 to get the assets she was
entitled to under the trust; she sued claiming that they had acted in breach of trust. The
judge dismissed the claim as she had misrepresented her age.
*Smelter Corporation v O’Driscoll [1977] IR 305
● the plaintiff’s agent was trying to persuade her to sell on the basis that she would make a better
deal. The defendant did sell under the mistaken belief that she would not get a good deal
otherwise. The Supreme Court noted that the defendant was under a fundamental
misapprehension as to the true facts and that it would be unjust to grant specific
performance in the circumstances.
Sometimes where the plaintiff’s behaviour is less than honest, this will reflect in their claim for an
equitable remedy.
*Parkes v Parkes [1980] ILRM 137 (144)
● Equitable relief may be refused to a plaintiff where his conduct in relation to the transaction at
issue has been less than honest even where this conduct has not directly prejudiced the
defendant.
● the presumption of advancement was at issue. The husband bought the land and at the time if
you weren’t a citizen then you needed the Land Commission’s permission to buy the land.
However, his wife was a citizen and she bought the land using the husband’s money. The
wife claimed that she owned the land, notwithstanding that the husband had provided the
purchase money. However, where the parties are husband and wife, the presumption of
advancement kicks in which says that the husband had merely given a gift to his wife.
● Furthermore, it seemed that the wife had only bought the house to avoid getting the Land
Commissions permission.
● Costello J stated that ‘the court should not grant relief to a purchaser who has placed property in

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his wife’s name dishonestly and by means of an illegal act performed for the purpose of
evading the law relating to the transfer of land.’
● See Biehler 184. Virgo 237. Biehler believes that this is an archaic rule and is unlikely to survive
constitutional challenge. There was misconduct here which did not prejudice the defendant.
Argyll v Argyll [1967] Ch 302 (332)
● the plaintiff sought an injunction to restrain a breach of confidence by her husband. The plaintiff
had engaged in acts of adultery in the past and the defendant (husband) couldn’t come to a
court of equity seeking a remedy. Ungoed Thomas J stated that ‘a person coming to equity
must come with clean hands but the cleanliness required is to be judged in relation to the
relief that is sought’. What the plaintiff had done or not done in the past was too remote to
the remedy sought. Thus causation is a relevant issue to the nature of the remedy sought.
Curust Financial Services v Loewe Lack [1994] 1 IR 450, 467
● both parties were involved in some element of misconduct. The plaintiff was looking to enforce
a contract that it had entered into with the defendant. The plaintiff had entered into this
contract to manufacture rust paint.
● The plaintiff had subcontracted an element of its work that it shouldn't have done, while the
defendant was in clear breach of contract.
● Finlay CJ accepted that the court has a discretion, where it is satisfied that a person has come to
court otherwise than with ‘clean hands’ to refuse equitable relief in the form of an
injunction on that ground alone. However, he stated that ‘It seems to me that this phrase
must of necessity involve an element of turpitude and cannot necessarily be equated with a
mere breach of contract’.
● He seemed to suggest that the conduct of the plaintiff was due to the defendant’s conduct. He
was satisfied that damages were an adequate remedy, though this is not to say the plaintiff’s
conduct disentitled itself to the injunction sought. (Hilary Delany, ‘Practice - Interlocutory
Injunctions - Adequacy of Damages and Other Discretionary Factors’ 15 (1993) DULJ 228)

*Tinsley v Milligan [1994] 1 AC 34

● the issue was should her previous conduct disentitle her to a remedy. The reason the defendant
succeeded was that she didn’t have to rely on her misconduct to succeed in her claim. Lord
Goff took a much stricter approach.
● Defendant came clean that the parties had entered into the scheme to fraud the benefits
system. The misconduct was directly related to the remedy. She didn’t have to rely on her
illegality. The plaintiff was equally at fault. The HOL were trying to finding a fair and
balanced result which is often dependent on the circumstances

Shiel v McKeon [2007] 2 ILRM 144

● the plaintiff and defendant were both interested in a certain property; the plaintiff liked the
house and garden, whereas the defendant sought the site for development purposes.
● The defendant made an offer and the plaintiff did not. The vendor claimed that the plaintiff
could not buy it unless he made an offer immediately.

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● The plaintiff purchased the house and held the house in trust for the defendant as he had made
an informal agreement with the defendant.
● Thus, the defendant was under a misapprehension as to the plaintiff’s bargaining position.
● Clarke J referred to the principle that ‘he who seeks equity must do equity’ and said that he must
have regard to whether it would be inequitable to allow the plaintiff to benefit from an
arrangement entered into by him in circumstances where he was aware that the defendant
was under a misapprehension as to the plaintiff’s negotiating position.
● He concluded that the plaintiff could not invoke equitable principles in the circumstances.

Halliwell has suggested [2004] Conv 439, 451 that ‘the application of the unclean hands principle and
the concept of illegality are producing some very questionable outcomes with respect to equitable
property rights and to discretionary remedies.’

E. Delay defeats equity

● All about the Statute of Limitations, exceptions would be O’D v Merrick etc… statute doesn’t run
until they reach the age of majority. In general if someone is looking for equitable relief,
laches and acquiescence will play a role.
● Whereas a legal claim will usually be governed by a period of limitation laid down by statute, the
type of delay which will be sufficient to defeat a claim for equitable relief is less clear cut.
there are two main concepts:
● Laches - where a party whose rights have been infringed has failed to pursue his remedy with
sufficient speed in the eyes of equity his inactivity may cause the right of action to be barred
where it is combined with prejudice to the other side.

● Acquiescence - where one party infringes another's rights and the other does nothing or
expressly or impliedly represents that he does not intend to enforce the claim - equity infers
that he has acquiesced in the other's actions and he may lose his right of action.

Toal v Duignan (No 2) [1991] ILRM 140 (142)

● Finlay CJ said that the courts have an inherent jurisdiction to dismiss a claim in the interests of
justice where the length of time which has elapsed between the events out of which it arises
and the time when it comes for hearing is in all the circumstances so great that it would be
unjust to call upon a particular defendant to defend himself and that to conclude otherwise
would be to give the Oireachtas a supremacy over the courts which is inconsistent with the
Constitution.
Allcard v Skinner (1887) 36 Ch D 145
● the applicant joined an order of nuns and changed her will in favour same; she then left and
sought to change her will several years later. The Court of Appeal held that her claim was
barred by laches.
JH v WCH (HC, 20 December 1979)
● the plaintiff agreed to compromise her rights under the Succession Act over her husband’s farm

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in favour of her son. Four years later she changed her mind. During this time, the son had
worked the farm under the impression that he owned the farm. He had acted to his
detriment in his belief. Keane J held that it would be inequitable for the plaintiff to enforce
her claim.
McGrath v Stewart [2008] IEHC 348
● the plaintiff sought specific performance of a sale of land. There had been a 6 year delay in
taking proceedings
● Murphy J referred to two things:
(1) the plaintiff had indicated that he would not enforce the contract;
(2) the plaintiff knew of the manner in which of the defendant would be prejudiced.
● Murphy J made an award of damages here.

F. Equality is equity

● In circumstances where more than one person is entitled to property, equity favours a principle
of equal division. The most common illustration of the maxim in practice is equity’s dislike of
joint tenancy as a method of holding property. Equity tends to lean in favour of a tenancy in
common and in certain circumstances even where persons are joint tenants at law they may
be regarded by equity as tenants in common of the beneficial interest.

In Sheehy v Talbot [2008] IEHC 207 [2]

● two parties had contributed in unequal shares. Edwards J noted
● The ownership of [the] interest is registered in the joint names of the plaintiff and the
defendant. Accordingly, they are legally speaking joint tenants. However, as the parties
contributed to the acquisition and subsequent improvement of the property in unequal
shares the maxim that equity leans against joint tenancies comes into play so that in equity
the parties are presumed to have acquired the property as tenants in common with
beneficial interests proportionate to their respective contributions.
EB v SS [1998] 2 ILRM 141, 150
● concerned ‘proper provision’ by parents for his child. The plaintiff had got an equal share from
both his parents. Keane J considered that this is enough. He noted that sometimes the
maxim that ‘equality is equity’ is not enough.
● Keane J commented that the maxim that 'equality is equity' should not necessarily apply where
an application is brought under s.117 of the Succession Act 1965 by a child claiming that a
parent has failed in his moral duty to make proper provision for the child in accordance with
his means – although here equal distribution was the fair solution.

G. Equity looks to the intent rather than the form

● The whole idea of equity is to provide a remedy where the common law failed

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● While this maxim does not mean that legal formalities will not be required by equity, it looks to
the substance rather than the form of a transaction and does not require ‘unnecessary
formalities' to be observed.
● So, e.g., if by insisting on statutory formalities, fraud is likely equity will not insist on a note or
memo in writing in relation to a contract for the sale of land. However, it could be said to
conflict with the maxim that equity follows the law to some degree.
Parkin v Thorold (1852) 16 Beav 59, 66; 61 ER 239
Lord Romilly MR observed
● Courts of Equity make a distinction in all cases between that which is matter of substance and
that which is matter of form; and if it find that by insisting on the form, the substance will be
defeated, it holds it to be inequitable to allow a person to insist on such form, and thereby
defeat the substance.
● Thus, often, time limits may not be as relevant.

H. Equity looks on that as done which ought to have been done

● This maxim underlies the doctrine of conversion in a land context.
● Where a specifically enforceable obligation exists, equity regards the parties as already in the
position which they would be in had the obligation been performed and their legal rights
and duties are assessed by reference to this position.

Land and Conveyancing Law Reform Act 2009, s 52(1)

● The equitable interest passes as soon as the contract has been entered into.
Tempany v Hynes [1976] IR 101 (114)
● To what extent can an agreement be enforced which hasn’t been finalised? For example, the
payment of a deposit for a house.
Shanahan v Redmond (HC, 21 June 1994)
● Carroll J invoked this maxim. The deceased had named his cousin as a beneficial of a trust.
● The parties had fallen out and the deceased attempted to exclude him from the will. However,
the transaction had not been completed. Carroll J held that, in applying this maxim, the
transaction should go through and thus overlooked the absence of any value or
consideration being provided.

I. Equity imputes an intention to fulfil an obligation

● Where a person is under an obligation to perform an act and does some other act which could
be regarded as fulfilment of that original obligation, it will be regarded as such. This maxim
forms the basis for the equitable doctrines of satisfaction (e.g. the satisfaction of a debt by a
legacy) and performance. It avoids a double payment.

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J. Equity acts in personam

● This was originally one of the most fundamental equitable maxims that equitable jurisdiction
was exercised against the person of the defendant rather than against his property. The
personal nature of this jurisdiction is illustrated by the fact that failure to comply with an
order e.g. specific performance or an injunction constitutes contempt of court and is
punishable by imprisonment.
● Ronan Keane has said that this maxim has long since ceased to be universally true. An injunction
is an equitable remedy and failure to adhere to the injunction can result in imprisonment.
Lett v Lett [1906] 1 IR 618, 635
● an injunction was granted to restrain proceedings taken in an Argentine court which amounted
to a repudiation of a settlement of divorce proceedings in Ireland by virtue of which a wife
had undertaken not to pursue any further claim against her husband. As
● Sir Samuel Walker stated: ‘Does it make any difference that the proceeding sought to be
restrained is a proceeding in a foreign court? I think not, because the equity against [the
wife] is founded not upon the tribunal to which she has resorted, but upon the personal
contract binding her conscience.’

K. Where the equities are equal the first in time prevails; Where the equities are
equal, the law prevails

● If you have two competing interests which rank equally, the first in time will succeed. If one
interest is ‘ranked’ higher, then that shall succeed.
● The most practical significance of this distinction can be seen in relation to priorities. While a
bona fide purchaser of a legal estate for value and without notice of an earlier equitable
interest may take the property free of that interest, a bona fide purchaser of an equitable
interest without notice of an earlier equitable interest will take subject to it on the basis of
the maxim that where the equities are equal the first in time prevails. However, while such a
purchaser does not take free of prior equitable interests, he will take free of any prior mere
equities on the basis that the ‘equities’ are not equal.
● Tracing involves tracing assets, particularly in the context of a trust where the trustee has
squandered the trust property inappropriately. There is an equitable right to trace this
property, according to Cave v Cave (1880) 15 Ch D 639.
re Ffrench's Estate (1887) 21 LR Ir 283
● it was considered that this right to trace was a mere equity and thus lower.
• In AIB v Glynn [1973] IR 188 the court described the father’s right as a mere equity.
Hilary Biehler agrees with Ronan Keane’s point that equity must focus on certainty and predictability
and not individual justice.

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TOPIC 3: Express Trusts

Development of the Trust Concept

The modern trust developed out of the medieval concept of the use whereby the owner of land
would give it to another to hold it on his behalf. One of the most significant aspects of the
jurisdiction of the Court of Chancery was the enforcement of the use of land. The Statute of Uses
was enacted in 1535 and extended to Ireland in 1634. The most important exclusion was that a use
upon a use did not come within the ambit of the Statute. It was established in Tyrrel’s case (1557)
that where there was a use upon a use, the second use would not be executed by the Act. However
the Courts of Chancery decided to enforce this second use in a manner similar to that in which the
first use had been enforced prior to the enactment of the Statute of Uses. The second use became
known as a trust.

Definition of a Trust
Keeton and Sheridan, The Law of Trusts, define a trust in the following terms: ‘A trust is the
relationship which arises wherever a person, called the trustee is compelled in equity to hold
property, whether real or personal, and whether by legal or equitable title, for the benefit of some
persons (of whom he may be one and who are termed beneficiaries) or for some object permitted
by law, in such a way that the real benefit accrues not to the trustee, but to the beneficiaries or
other objects of the trust.
Is is rare to have situation where the trustee is the only beneficiary and trusts are usually made in
wider family settings.
It is also possible for the trustee to hold the trust for a wider beeioft or purpose. The classic example
of this is a charitable trust. There are huge tax advantages to charitable trusts. It is very difficult to
set up a trust which it not charitable.

Distinction between Trusts and Powers of Appointment

Whether an instrument is a trust or a power is a question of the intention of the settlor ascertained
from the construction of the language of the instrument. The key difference is that, if it is construed
as a trust, a potential beneficiary can require a trustee to exercise discretion. There is a fundamental
distinction between trusts and powers; while trusts are of an imperative nature, powers are
discretionary. A trustee must carry out his functions according to the terms of a trust whereas the
donee of a power has considerable discretion as to the manner in which he exercises the power, if
indeed he exercises it at all. The beneficiaries under a trust are the owners in equity of the trust
property while the objects of a power have only the expectation that the power may be exercised in
their favour.

Essentially- trustees are obliged to carry out their function. A trustee must actively do something-
distribute property for example- where the trust requires him to do so.
The donee of a power of appointment on the other hand has complete dissection as to what
obligations he carried out and it not in fact obliged to do anything.

The most common type of power is a power of appointment. This authorises the creation beneficial
interest in property and authorises the donee to nominate objects of power who will get all be
selected from a defined class. A general pew Orr is where the donee may designate any person even
himself, as the object of the power. A special power is where those eligible to be designated are
more specific.

While these basic distinctions seem clear in theory, they are confused by the fact that a trust may
confer a measure of discretion on a trustee, for example, he may be given a discretion to select
beneficiaries from a specified class or to decide the proportions in accordance with which the trust

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property is to be divided, and this is known as a discretionary trust. There is also a concept known as
a power in the nature of a trust or a ‘trust power'. This essentially denotes the situation which arises
where a court implies the existence of a trust in default of any appointment being made by the
donee of a power.
There are several different types of trust; at one end if the spectrum there are fixed trusts and at the
other end are powers of appointment. In the middle there are discretionary trusts. Matters are
further confused by the concept of a 'trust power' which is a power in the nature of a trust. See page
67 of Beihler for details.

The manner in which a court should determine whether a mere power or a trust power exists in
circumstances where there has been a failure to exercise a power of appointment involves deducing
the intention or presumed intention to be derived from the language of the instrument. In Burrough
v Philcox (1840) Lord Cottemham stated: ‘When there appears a general intention in favour of a
class, and a particular intention in favour of individuals of a class to be selected by another person,
and the particular intention fails, from that selection not being made, the court will carry into effect
the general intention in favour of the class.’

Re Kieran (1916)
Facts:
A testator bequeathed his farm and the rest of his property to his brother on trust for the latter's
eldest son, and if this son were to die before reaching there age of 21, to one of the brother's three
other sons, to be selected by the brother. The brother's eldest son died before the age of 21 and the
brother died without making an appointment among his other sons.
Ruling:
Pim J he'd that the three surviving sons were entitled to the pretty as tenants in common. He stated
‘it is the recognised duty of every court to carry out a trust if it is /possible to do so, and if it is
possible, a court will avoid a construction which must result in an intestacy and in the carrying of the
property, possibly wholly, probably largely, to persons whom the testator never meant to get it.'
This was not the testator's exact intention, but was as close as the court could get to it. Indeed, the
intention of the test or has emerged as the paper mound consideration which will influence a court
in deciding whether a gift should be arise by implication in the absence of any appointment being
made.

Formalities
Primarily with a view to preventing fraud, legislation has intervened to provide that in specific cases
certain formalities must be observed in the creation of express trusts. However, no formalities are
required for the creation of an inter vivos express trust of personalty and provided that the settlor
manifests the intention of creating such a trust it may be established orally.

In relation to the creation of express trusts of land, whether freehold or leasehold, s.4 of the Statute
of Frauds (Ireland) 1695 requires that the trust be evidenced in writing and signed by a person able
to declare the trust, or by his will. Notwithstanding these statutory requirements, the courts will not
always insist on strict compliance with the provisions of the Statute of Frauds and the principle has
been established that equity will not permit the statute to be used as an instrument of fraud. As
Lord Westbury stated in McCormick v Grogan (1869): 'The Court of Equity has, from a very early
period, decided that even an Act of Parliament shall not be used as an instrument of fraud'. So, the
court will not permit a beneficiary to be deprived of an interest in land under a trust in the absence
of written evidence of it if such a result would amount to a fraud providing that there is some other
evidence to establish the existence and nature of the trust.

Rochefoucauld v Boustead (1897)

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Facts:
The plaintiff was the owner of a mortgaged property which was sold by the mortgagee to the
defendant. The defendant had orally agreed to hold the property on a trust for the plaintiff subject
to repayment to the defendant of the purchase price and other expenses incurred in the transaction.
The default subsequently sold the land and the plaintiff, who claimed that the land had ben
transferred to the defendant as a trustee for her, claimed that she was entitled to claim an order for
an account.
Ruling:
Lindley LJ stated: ‘It is a fraud on the part of a person to whom land is conveyed as a trustee, and
who knows it was so conveyed, to deny the trust and claim the land for himself. Consequently,
notwithstanding the statute, it is competent for a person claiming land conveyed to another to
prove by parol evidence that it was so conveyed upon trust for the claimant, and that the grantee,
knowing the facts, is denying the trust and relying upon the from of conveyance and the statute, in
order to keep the land himself.’ Despite the fact that there was no evidence in writing, the court
assessed the evidence and held for the plaintiff, giving effect to the trust. This shows how useful
equity can be.

McGillicuddy v Joy (1959)

Facts:
The plaintiff and defiant s agreed to purchase a farm jointly and the contract was signed by one fo
the defendants. The plaintiff paid one third of the purchase price and the defendants then rented on
the agreement. The plaintiff spud a declaration that the defendant, who had signed the agreement,
held the benefit of the contract in trust for him.
Ruling:
Budd J held that the principle in Rochefoucauld applied even though in the case before the court
there was only a contract of sale, as opposed to a conveyance. He concluded that the defendant had
purchased part of the lands previously agreed between them in trust for the plaintiff and that the
defendant's repudiation of that trust constituted a fraud.

Where a trust is created by will, the testator must comply with the statutory requirements laid down
by s.78 of the Succession Act 1965 in relation to the making of statutory dispositions. (Basically you
have to make sure that the will is valid.) However, as with trusts created inter vivos, equity will not
always strictly enforce the statutory formalities required where the statute is being used as an
instrument of fraud and it was in obedience to this principle that so called ‘secret trusts' came to be
recognised.

Essential Elements of a Trust

Apart from ensuring compliance with the formalities outlined above, no technical or precise
language is necessary to create a valid express trust. However, certain essential elements which
have come to be known as ‘the three certainties' must be present if such a trust is to be created.
These three conditions of substance are as follows:
1. The subject matter of the trust must be certain.
2. The objects must be certain.
3. The words relied on as creating the trust must have been used in an imperative sense so as to
show that the testator intended to create an obligation

Certainty of words or intention

The requirement that the words used be imperative does not mean that any precise form of wording
must be used, so a trust may be created without actually using the word ‘trust’. Conversely the use
of the word ‘trust’ does not conclusively indicate the existence of a trust. The words used must be
examined to see whether the intention was to impose the obligations of a trust upon the donee.

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Initially it was fairly often found that trusts might be constituted by precatory words e.g. where a
person gave property to another and expressed the wish, hope, desire or confidence that the donee
would deal with the property in a particular manner. However, by the time of Re Hamilton [1895]
Lopes LJ stated ‘it seems perfectly clear that the current of decisions with regard to precatory trusts
is now changed and that the result of the change is this, that the court will not allow a precatory
trust to be raised unless on a consideration of all the words employed it comes to the conclusion
that it was the intention of the testator to create a trust.’ (Vague language will no longer be
considered valued in the creation of a trust.)

Re Humphrey's Estate (1916)

Facts:
A testator left all his property, real and personal, to his wife and added that he wished that she
should bequeath or transfer during her lifetime a house and demesne to his son, and that the
remainder of the property should be left to his daughters. The issue here is whether the wife owns
the property absolutely or whether she holds it on trust.
Ruling:
Ross J ruled that the wife held an absolute interest in the property. Vague language such as "I wish",
"I hope"and "I pray" are not sufficient to create a trust.

Re Sweeney (1976-77)
Facts:
The testator bequeathed all his property to his wife for her absolute benefit subject to the "express
wish" that she make provision for the payment of certain legacies after her death. The question
arose as to whether the the words of the gift to the wife of all the testers assets could be curt down
by these subsequent words.
Ruling:
Hamilton J quoted with approval the statement of Ross J in Re Humphrey's Estate to the effect that
‘after a devise and bequest in clear and express terms, if a trust is intended to be created one would
expect that this would be done in terms equally clear and explicit’. He concluded that the words
used were not intended to create any trust in favour of the other defendants but were merely the
expression of his wish for the guidance of his wife as to the manner in which she should dispose of
her assets after her death.

Despite the general trend illustrated by these decisions, precatory words may be sufficient to create
a trust if it is clear from the language used in the will as a whole that this was the testator's
intention.

Comiskey v Bowring Hanbury (1905)

Facts:
A testator bequeathed all his property to his wife absolutely "in full confidence" that she would
make such use of it as he would have made himself and that at her death she might leave it to one
or more of the testator's nieces as she sees fit.
Ruling:
The majority of the House of Lords held that on the true construction of the will there was an
absolute gift of the testator's real and personal estate subject to an executory gift of the same at her
death to such of his nieces as survived her, either in accordance with the shares provided for in the
wife's will or otherwise equally.

Certainty of Subject Matter

To ensure the creation of a valid express trust, the subject matter of the trust must be defined with
sufficient certainty. This principle applies not just in a general way to the property which should form

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the subject matter of the trust, but also requires that the beneficial interests to be taken by the
beneficiaries are defined with sufficient clarity except in a situation where the trustees are given a
discretion to decide what the extent of these beneficial interests should be (a discretionary trust).

While a testator may leave his residuary estate on trust, where a phrase such as 'the bulk of
my...residuary estate' is used, no trust will be created. One of the most common examples of a trust
failing due to lack moi certainty of subject matter is there a testator gives property to an individual
and directs that whoever is not required during that individual's lifetime and remains at the time of
his death should go onto another person or persons. So where phrases such as, "the raining part of
what is left" or "such parts of my estate as she shall not have sold or disposed of" are employed,
these gifts will usually fail to take effect.

Where an objective criterion which can be applied by the court is provided by a settlor or testator, a
failure to quantify precisely the extent of the subject matter of a trust will not prove fatal to its
validity.

Re Golay’s Will Trusts [1965]

Facts:
A testator left a gift in his will directing the executors to allow a beneficiary to use a flat during her
lifetime and to ‘receive a reasonable rent’ from other properties. The question over the court was
whether the word 'reasonable' was sufficient to indicate the testator's intention to provide an
effective determinant of what he intends so that the court can apple that determinant and given
effect to the testers intention.
Ruling:
Ungoed Thomas J held that the gift was valid. He ruled that the testator had objectively identified a
'responsible income' and that because the court was constantly involved on making such objective
assessments, the direction in the will could not defeated on the grounds of uncertainty.

Difficulties have arisen where a settlor seeks to create a trust of a definite but yet unidentified
portion of an asset or assets. Where the asset is tangible, e.g. cases of wine, and it is not segregated,
no trust will arise. Where the asset in question is of an intangible nature, the courts have accepted
that a trust may arise in these circumstances.

Hunter v Moss (1993)

Facts:
This case concerned a trust made up of shares in a company which were indistinguishable from
other shares in the same company. All the shares were equally capable of satisfying the trust and it
was unnecessary to identify any particular shares before determining that the subject matter
requirements was satisfied. The issue here is whether the intangible subject matter was too
uncertain.
Ruling:
Colin Rimmer QC, giving the judgment of the Divisional Court, expressed the view that ‘any
suggested uncertainty as to subject matter appears to me to be theoretical and conceptual rather
than real and practical' and his finding that the trust was not void on the grounds of uncertainty of
subject matter was upheld by the Court of Appeal.
No real distinction drawn between tangible and intangible assets.
Martin [1996] Conv 223 comments that the Hunter solution is fair, sensible and workable and a
welcome example of the court's policy of preventing a clearly intended trust from failing for
uncertainty

Certainty of Objects

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The general principle that, 'in order to be valid a trust must be one which the court can control and
execute' has led to the development of a considerable body of case law and academic criticism in
relation to objects of a [Link] fundamental rule which must be observed is that the objects or
beneficiaries of a trust must be defined with a sufficient degree of certainty to enable the trustees,
or if necessary the court, to administer the trust according to the settlor or testator's intentions. The
requirements which must be satisfied will depend on whether the instrument being construed is
characterised as a trust or a power and in addition may vary according to the nature of the trust
involved.

● Test for Fixed Trusts

Under the terms of a fixed trust, the interest which each beneficiary is to take is specified in the trust
instrument and the trustees have no discretion to determine either who will benefit or the extent of
that individual's share. The requirement in this case is that the persons who are to benefit under a
trust must be clearly identified or identifiable by the time it comes into operation; the trust must
have ascertained or ascertainable beneficiaries.

● Test for Mere Powers

The donee of a power of appointment is under no duty to exercise it in a particular manner, if
indeed he exercises it at all and to this extent his position differs from that of a trustee. The test for
the certainty of objects in relation to powers was laid down in Lord Upjohn's judgment in the House
of Lords in Re Gulbenkian's Settlement Trusts [1970] as follows: ‘A mere or bare power of
appointment among a class is valid if you can with certainty say whether any given individual is or is
not a member of the class; you do not have to be able to ascertain every member of the class.’
● Test for Discretionary Trusts
Trustees are under an obligation to distribute the trust property to the beneficiaries, although they
have a discretion to select which members of the class should benefit and to what extent.
Considerable uncertainty still surrounds the question of the correct test of certainty in relation to
objects to apply to such discretionary trusts in this jurisdiction.

The test originally applied in England was as formulated by Jenkins LJ in IRC v Broadway Cottages
Trust [1955] namely that ‘a trust for such members of a given class of objects as the trustees shall
select is void for uncertainty unless the whole range of objects eligible for selection is ascertained or
capable of ascertainment.'
Rationale behind this test was twofold:
● A trustee's duty to distribute could only be carried out if he had before him a comprehensive list
of all the beneficiaries.
● If a court was required to make a distribution where the trustees failed to act it could only do so
on the basis of equal division and this would not be possible without a complete list of potential
beneficiaries.

The House of Lords reformulated the test of certainty the following year in McPhail v Doulton
[1971]

McPhail v Doulton (1971)

Facts:
A deed executed by the settlor provided that a fund was to be held on certain trusts for the benefit
of the staff of a company and their 'relatives and dependants'.
Ruling:
The HoL held that the deed created a trust rather than a power and Lord Wilberforce stated that the
test for discretionary trusts ‘ought to be similar to that accepted by this House in Re Gulbenkian's
Settlements for powers, namely, that the trust is valid if it can be said with certainty that any given

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individual is or is not a member of the class.’

There is good reason for supposing that in Ireland, certainly in relation to specific types of
discretionary trusts, the law remains as formulated in IRC v Broadway Cottages Trust. In Re Parker
[1966] Budd J formulated the test as follows (at 318): ‘[A]n imperative trust for the division of
income between such members of the class as the trustees may select is invalid unless the whole
class of potential beneficiaries can be ascertained.’

This view was approved, albeit in an obiter context, by Murphy J in O'Byrne v Davoren [1994] who
commented that not only was the judgment of Budd J a precedent of greater authority than that of
the House of Lords but he also preferred the reasoning in the former case, namely that an
imperative trust for the division of income between such members of a class as the trustees may
select is invalid unless the whole class of potential beneficiaries can be ascertained.

The rationale of the need for equal division which seems to lie behind Parker is far from suitable in
the case of many modern discretionary trusts and is based rather on the type of ‘trust powers' which
were common in the past. Perhaps before deciding which test is to be preferred in a given case, the
question of how the court would exercise its discretion where the trustees fail to do so should be
addressed. Where the testator's intentions are likely to be fulfilled by equal division amongst all the
potential beneficiaries, clearly the certainty requirement laid down in Parker is to be preferred.
However, as the judgment of Lord Wilberforce in McPhail made clear, this is no longer the case in
relation to many modern discretionary trusts which are designed to benefit a much wider class of
beneficiary and it is difficult to fault the conclusion reached in the latter case on the basis of the
nature of the trust involved.

As Lord Wilberforce pointed out in McPhail v Doulton, in one instance there might be a difference
between the test to be applied to discretionary trusts and powers i.e. where the class of
beneficiaries which complied with the requirement of certainty might be so large as to be
‘administratively unworkable’ – as Lord Wilberforce commented in McPhail ‘where the meaning of
the words used is clear but the defintition of beneficiaries is so hopelessly wide as not to form
‘anything like a class’ so that the trust is administratively unworkable…or one that cannot be
executed’.

In Re Manisty’s Settlement [1974] Templeman J put forward the view that in the case of a mere
power, it should not be found invalid on such grounds ‘a power cannot be uncertain merely because
it is wide in ambit'. However, it seems clear that a discretionary trust in favour of such a wide class
may be void as administratively unworkable, see R. v District Auditor ex p West Yorkshire
Metropolitan County Council [1986] where a trust for the benefit of ‘any or all or some of the
inhabitants of the county of West Yorkshire’ was within this category and the trust was therefore
void as there were no ’ascertained or ascertainable beneficiaries’. It was not capricious as the
council wanted to benefit the inhabitants when it realised that it had not spent all the available
funds.

It would appear that both trusts and mere powers may be declared void on the grounds of
capriciousness, e.g. a power to benefit the residents of Greater London, since the settlor in such a
case could not really intent to benefit 'an accidental conglomeration of persons who had no
discernible link with the settlor' per Templeman J in Re Manisty’s Settlement [1974].

Secret Trusts
Equity will not always insist on strict compliance with the statutory formalities required when this
would result in a statute being used as an instrument of fraud. The statutory formalities which must

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normally be complied with to create a valid trust after a testator’s death – that all testamentary
dispositions must be in writing - may in some circumstances be waived to give effect to what has
become known as a ‘secret trust'. A fully secret trust arises where a testator makes a gift of property
to a named person in his will without expressly stating that the latter is to hold it on trust. If either
before or after making his will, but during his lifetime, he informs the legatee that he wishes him to
hold the property on trust for a third party or a particular purpose and the legatee either expressly
or by his silence impliedly agrees to do so, he will be bound by the trust . A half secret trust is said to
exist where it is clear from the will that the legatee is to hold the property on trust but neither the
terms of the trust nor the identity of the beneficiaries are disclosed in the will. Historically secret
trusts were often used to bequeath gifts to people with whom the testator had had extra-marital
relationships and illegitimate children.
The practice of giving effect to secret trusts has been criticised as it effectively allows a
testator to bypass the statutory requirements laid down in relation to the execution of wills where
the need for secrecy is not present. However, certainly in the case of a fully secret trust, fraud may
still result if the effect is not given to these trusts and the principles governing their enforcement are
likely to be considered as too firmly established to now be disregarded for policy reasons.

Fully Secret Trusts

The dilemma for the courts when deciding whether to enforce a secret trust was this; should it be
possible for the testator to disregard or bypass the statutory formalities laid down in relation to
testamentary dispositions or should a legatee be permitted to take a gift beneficially when it was
clearly intended by the testator to be held on trust?
The Courts concluded that equity should intervene to prevent the perpetration of fraud and thus the
practice of giving effect to secret trust developed.
The next question was, should the legatee merely hold the property on a resulting trust for the
testator's estate, which would be sufficient to prevent fraud, or should the courts go a step further
and actually enforce the trust in favour of the beneficiary?
It was decided that the courts should enforce the trust in favour of the beneficiary. This was decided
both to prevent fraud, and to give effect to the intentions of the dead testator.

To create a valid, fully secret trust, the testator must intend to create a trust and its terms must be
accepted by him during the testator's lifetime.

In Ottoway v Norman (1972) Bright and J said that there are three essential elements which are
required for a secret trust to exist:
● The intention of the test or to subject the primary donee to an obligation in favour of the
secondary donee.
● Communication of that intention to the primary donee.
● The acceptance of that obligation by the primary donee either expressly or by acquiescence.

In French v French (1902) it was held that silence can constitute acceptance. (Confirmed in Brown v
Pourau (1995).)

The onus is on the party seeking the existence of the secret trust to establish its existence on the
balance of probabilities.

Gaddis v Semple
If a person has not been told about a trust they can only take 3 of the obligations
If i want to create a secret trust with A and B as trustees. A tells me that he and B will do what i
want. In that situation i have been induced to make a trust. Thus the trustees are bound by their
obligations. This should be the law in england.

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Prendiville - looks more complicated than it is. Barron J said that fully secret trust and half secret
trust should be treated.

Joint Tenants and Tenants in Common

There is an issue as to whether a secret trust will arise where several legatees are involved but the
testator’s intentions are communicated to one only. Traditionally the view taken has been that
where the legatees are tenants in common only those to whom the trust is communicated are
bound by it - the others take the gift beneficially.

*’innocent’ tenant in common will take free of trust only if gift can be regarded as independent one
– not induced by his co-tenant’s undertaking.

In Re Stead [1900] Farwell J stated: ‘If A induces B either to make or to leave unrevoked, a will
leaving property to A and C as tenants in common, by expressly promising or tacitly consenting, that
he and C will carry out the testator’s wishes, and C knows nothing of the matter until after B’s death,
A is bound, but C is not bound.’ (English case).

*distinction drawn between cases where will made on faith of antecedent promise and left
unrevoked on faith of subsequent promise

*Perrins’ Inducement theory – issues such as whether joint tenants or tenants in common merely
matters of evidence.

*be concerned about evidence of conversations that took place.

Geddis v Semple [1903]

Facts:
At the time that the testator in this case had executed his will section 16 of the Charitable Donations
and Bequests (Ireland) Act 1844 rendered gifts of land made three months before the testator's
death void. With the intention of avoiding this statutory restriction the testosterone left three
houses and a pecuniary legacy charged on land to three people as tenants in common, although at
the time the will was executed only one of these people was aware of the testator's intention to
create a secret trust for charitable purposes.
Ruling:
The Irish Court of Appeal held that while the gist to the individual who know of the testator's
intentions must fail, the other tenants in common, who knew nothing of the intended secret trust
until after the tenant's death, became beneficially entitled to their shares. Walker LJ held that an
‘innocent’ tenant in common will take free of the trust only if his gift can be regarded as an
independent one i.e. that it was not induced by his co-tenant’s undertaking in relation to the trust.

The position in relation to joint tenants appeared to be that where the trust was communicated to
one of them before the will was drawn up, the trust was binding on all of them if made on the basis
of a promise by one to be bound. Farwell J stated in Re Stead at p.241: ‘If however the gift were to A
and C as joint tenants, the authorities have established a distinction between those cases in which
the will is made on the faith of an antecedent promise by A and those in which the will is left
unrevoked on the faith of a subsequent promise. In the former case the trust binds both A and C, the
reason stated being that no person can claim an interest under a fraud committed by another; in the
latter case, A and not C is bound, the reason stated being that the gift is not tainted with any fraud in
procuring the execution of the will.’

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The inducement theory was developed by Perrins (1972) who has suggested that the only question
to which the court should address itself in such circumstances is whether the gift to the legatee who
was unaware of the testator's intention to create a secret trust was induced by the promise of the
legatee who knew of his intentions in this regard to carry out his wishes. If this approach is accepted,
issues such as whether the legatees take as joint tenants or tenants in common and whether the
promise was made prior to or after the execution of the will are merely matters of evidence which
may be of assistance to the court in deciding on the question of inducement but will not of
themselves determine the issue - although clearly if there is a promise made before the will an
inducement is likely.

Onus of Proof
The onus lies on the person seeking to show the existence of a secret trust to establish this on the
balance of probabilities. While earlier authorities suggested that a higher standard of proof would be
required, it was stated in Re Snowdon [1979] that the ordinary civil standard of proof applies. In this
case Megarry VC suggested obiter that this standard might be higher if any question of fraud arose,
although in Banco Ambrosiano v Ansbacher & Co [1987] the Supreme Court rejected the suggestion
that any higher burden of proof should be placed on a plaintiff where an allegation of fraud is made
in a civil case. *approach in Ireland seems to be the fair one – if a beneficiary has a claim, it should
be relatively easy for them to establish it. Balance of probabilities is an appropriate burden.

Half-Secret Trusts
A half secret trust arises where a testator gives property to an individual in a will and expressly
directs that this individual is to hold the property on trust without disclosing its precise terms or the
objects of the trust in the will. The principal advantage of employing this sort of secret trust is the
possibility of the legatee taking the pretty beneficially and successfully perpetrating a fraud is
avoided as it is clear from the face of the will that a trust was intended. Such a trust is treated as
arising independently outside the will based on an undertaking by the legatee to hold the trust
property in accordance with the testator’s instructions.

*Appropriate for courts to intervene to prevent fraud – but in half-secret trusts this can be
problematic.

*NB: Unconscionability

*Irish courts more proactive in trying to give effect to half secret trusts.

Riordan v Banon (1876)

Facts:
A testator's will directed that a legacy be disposed by the legatee 'in a manner of which he alone
shall be cognisant, and as contained in a memorandum which I shall leave to him'. Prior to execution
this will the testator had verbally informed the legatee that he intended to leave the legacy to a
named person whom he did not wish to identify in his will and it was accepted that the legatee had
agreed to carry out this obligation. The judiciary in England up until this point had been very
reluctant to overlook non-compliance with the Wills Act where there was no likelihood of fraud.
Thus the issue here was whether the Courts would recognise the trust in this will as a secret trust.

Ruling:
Chatterton VC held that a validly secret trust has been created. He stated: ‘The result of the cases
appears to me to be that a testator cannot by his will reserve to himself the right of disposing
subsequently of property by an instrument not executed as required by the statute, or by parol; but
that when, at the time of making his will, he has formed the intention that a legacy thereby given

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shall be disposed of by the legatee in a particular manner, not thereby disclosed, but communicated
to the legatee and assented to by him, at or before the making of the will, or probably according to
Moss v Cooper, subsequently to the making of it, the court will allow such trust to be proved by
admission of the legatee, or other parol evidence and will, if it be legal, give effect to it.’

Enforced because of fraud - don't want the trustee to not carry out their promise, this would be
fraud.
To enforce the will of the testator- after you die you can only enforce things through your will. The
courts say the law will intervene to enforce the wishes of the dead with regard to their property. (If
we didn't anyone could steal dead people's stuff.)

*proved by oral evidence in court that before will was drawn up, testator had told the trustee what
the nature of the trust was and the legatee had accepted it.

*important that you can establish the communication and acceptance took place before the testator
died.

The enforceability of half secret trusts remained in doubt in England until the case of Blackwell v
Blackwell [1929].
Facts:
A testator gave a sum of money on trust to legatees to apply the income thereof 'fore the purposes
indicated by me to them' in a codicil in his will. Detailed instructions were given to one of the
trustees and the others accepted these terms in outline before the execution of the codicil.
Ruling:
Viscount Summer recognised that a half-secret trust existed which arose independently of the will.
He stated (at 339-340) ‘it is communication of the purpose to the legatee, coupled with
acquiescence or promise on his part, that removes the matter from the provision of the Wills Act
and brings it within the law of trusts, as applied in this instance to trustees, who happen also to be
legatees.’

Like fully secret trusts, in order for a half-secret trust to be valid it must be communicated to and
accepted by the legatee before the testator's death. An issue which has caused controversy and an
apparent divergence in the law as it applies in England and Ireland is whether there can be effective
communication and acceptance of a half secret trust after the execution of the testator's will.

In Blackwell, Lord Sumner stated at 339: ‘A testator cannot reserve to himself a power of making
future unwitnessed dispositions by merely naming a trustee and leaving the purposes of the trust to
be supplied afterwards, nor can a legatee give testamentary validity to an unexecuted codicil by
accepting an indefinite trust, never communicated to him in the testator’s lifetime.’ This view was
taken as authority for the proposition that the communication of a half secret trust cannot be
effective if made after the date of the will.

Re Keen [1937]
Facts:
A testator gave a legacy to trustees 'to be held upon trust and disposed of among such person,
persons or charities as may be notified by me to them or either of them during their lifetime'. Before
executing this will the testator had given a sealed envelope to one of the trustees containing the
name of the intended beneficiary which the court accepted as 'notification'.
Ruling:
The Court of Appeal held that on the true construction of the will it reserved power to the testator
to dispose of property by future unattested disposition contrary to the Wills Act 1837. In addition,

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the clause in the will referred to future definitions of trust subsequent to the date of the will
whereas the notification of the directions had been communicated and accepted prior to the will, so
even if subsequent communication was admissible as a matter of principle, it was inadmissible as
being inconsistent with what the will prescribed.

Prendiville v Prendiville [1995]

Facts:
Then testator left his estate to his wife of life 'to be used by her according to my wishes- as she has
been advised'. Before he died the testator had told one of his sons that he had written out his wishes
as to the passing of his estate after his wife's death and had shown him a document containing these
instructions which included the provision that a named residence and lands were to be offered for
sale to another son at a reasonable valuation. Following the testator's death his wife made a
statutory declaration acknowledging that her husband's declaration had been communicated to her
and accepted by her. After her death a dispute arose between the testator's next of kin and the son
in whose favour the option to purchase had been made as to whether an enforceable secret or half-
secret trust existed.
Ruling:
Barron J said that Re Keen had been relied on as an authority for the proposition that a half secret
trust could not be established unless its terms were communicated and accepted prior to the
execution of the will. He felt that this proposition could not be taken from that case, which, in his
opinion, turned on the construction of the particular clause in the will and the issue of inconsistency.
Barron J concluded that the principles of law to be applied to secret and half secret trusts are the
same. He held that in the case bore him, a trust existed on the face of the will and found that there
was sufficient evidence that the terms of the trust in relation to the option to purchase the house
had been communicated by the test or to his wife and accepted by her during his lifetime.

Prendiville is not an entirely satisfactory authority for a number of reasons. Barron J failed to
identify precisely the time at which communication and acceptance of the trust occurred although
he did find that this had taken place at some stage during the testator's lifetime. The use of the
words ‘as she has been advised' would suggest that such communication was intended to take place
either before or at the time of execution of the will and yet one must ask why Barron J took the
trouble to refute the suggestion that Re Keen was authority for the proposition that communication
must occur prior to the will, unless on the facts of the case before him, communication did not take
place until after its execution. Because of his failure to be more specific about the timing of these
events, it is therefore still not clear whether Barron J's rejection of the need for prior communication
forms part of the ratio of the case. A further possible flaw in his judgment is the failure to address
the potential problem of inconsistency. Barron J appeared to endorse this ground of inconsistency as
being the basis for the decision in Re Keen and yet, if as his rejection of the wider ground for that
decision suggests, communication in the case before him took place after the execution of the will,
this would itself lead to inconsistency with the terms of the instrument.

*Barron J never really considered how/when this happened. Undermining Prendiville as an

authority is the confusion as to when the will was drawn up and accepted.

*further possible flaw in judgment is failure to address potential problem of inconsistency (‘as she
has been advised’ and possible subsequent communication)

Constitution of Trusts
A trust is said to be completely constituted when the trust property has been vested in the trustee
by transfer or declaration for the benefit of the beneficiaries; a trust remains incompletely
constituted until this is done. The importance of the distinction between completely and

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incompletely constituted trusts lies in the fact that once a trust is completely constituted it can be
enforced by any beneficiary, whether he has given value or is a mere volunteer. However, if a trust is
incompletely constituted, subject to certain exceptions, only beneficiaries who have given value can
enforce it and volunteers cannot enforce the trust. Generally speaking, equity will not enforce or
perfect an incomplete or imperfect trust in favour of a volunteer. See the comments of Turner LJ in
Milroy v Lord (1862): ‘In order to render a voluntary settlement valid and effectual, the settlor must
have done everything which, according to the nature of the property comprised in the settlement,
was necessary to be done in order to transfer the property and render the settlement binding upon
him.’

There are two main ways in which a trust may be completely constituted
● by conveyance, i.e. by transferring the trust property to the trustees inter vivos or by will, or,
● by declaration of trust, i.e. the settlor may declare himself to be a trustee either expressly or by
implication.
In order to completely constitute a trust by method
(1), there must be an effective transfer of the property to be included in the trust and an intention
on the settlor’s part to bring about such a transfer will generally not suffice. This is illustrated by the
decision of O’Donovan J in McArdle v O’Donohoe [1999].

The statement of Turner LJ in Milroy v Lord to the effect, inter alia, that in order to ensure that a
trust is completely constituted, the settlor must have done everything which it is necessary to do to
effect the transfer, is subject to some qualification in the following circumstances. Where the settlor
has done everything in his power to transfer the title to the property but cannot ensure compliance
with some formality which is outside his control, the trust will nevertheless be regarded as
completely constituted.

Re Rose [1952] The Court of Appeal held that as the settlor had done all in his power to divest
himself of the shares (unlike in Milroy where he had failed to register the transfer), although he
remained in law the owner until the transfer was registered, in equity the transfer was regarded as
being effective from the date of the deed.

Pennington v Waine [2002] Arden LJ stated that there was a clear finding that the donor intended to
make an immediate gift and that a stage had been reached when it would have been unconscionable
for her to recall it. In her view delivery of the share transfer before the donor’s death was
unnecessary so far as the perfection of the gift was concerned and it was not a case of equity being
asked to complete an imperfect gift.

The alternative method of completely constituting a trust is for a settlor to declare himself a trustee
of property for the benefit of third parties.

The decision of the Privy Council in T. Choithram International SA v Pagarani [2001] makes it clear
that where the settlor is one of a number of co-trustees the trust may be completely constituted by
a declaration of trust made by him even though the property has still to be vested in the co-trustees.
There has been some criticism of this decision on the grounds, inter alia, that it may breach the
principle laid down in Milroy v Lord to the effect that a failed transfer will not be interpreted as a
successful declaration of the settlor as trustee (see Rickett [2001]). However, it has also been
welcomed as showing a willingness to depart from strict legal formalities (see Hopkins [2001]) and it
is difficult to argue with the conclusion reached by Lord Browne-Wilkinson that it would be
unconscionable to allow a donor to resile from his intention to make a gift in such circumstances.

In Pennington v Waine [2002] Arden LJ commented that ‘the principle that, where a gift is

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imperfectly constituted, the court will not hold it to operate as a declaration of trust, does not
prevent the court from construing it to be a trust if that interpretation is permissible as a matter of
construction, which may be a benevolent construction.’

There are a number of exceptions to the rule that equity will not perfect an incomplete trust in
favour of a volunteer.

1. Where the settlor subsequently vests the legal title in the donee, known as the Rule in Strong v
Bird (1874). The effect of the rule is that where an incomplete gift is made during a donor's lifetime
and the legal title to this property subsequently becomes vested in the donee by will as executor or
administrator, the donor's prior intention to make the gift is regarded as having been perfected
provided that the intention has continued until the date of the donor's death so the personal
interest prevails.

2. Donatio Mortis Causa

An imperfect voluntary transfer of property will be perfected where the conditions for donatio
mortis causa are satisfied - these are gifts made in contemplation of the donor’s death. The
essentials of this concept are that:
● there must be a gift made in contemplation of the donor’s death;
● the subject matter of the gift must be delivered to the donee before the donor’s death and
● the gift must take effect on the donor’s death only, so that it must remain revocable during his
lifetime. See Russell CJ in Cain v Moon [1896].

Sen v Headley [1991] it was held by the Court of Appeal that a gift of land by the delivery of deeds
should not be excluded from the doctrine of donatio mortis causa.

Bentham v Potterton [1998] Barr J made it clear that the onus lay on the party claiming the gift to
establish to the court that the requirements for donatio mortis causa had been satisfied. Barr J
concluded that he was not satisfied that the deceased 'positively intended to make a radical change
in the disposition of her property in contemplation of her death'.

It has been suggested by the Court of Appeal in King v Dubrey [2016] that the doctrine of donatio
mortis causa serves little useful purpose today and that the courts should not permit any further
expansion of it. Jackson LJ stated that the doctrine paves the way for all of the abuses which
legislation such as the Wills Act is intended to prevent and he added that in his view it was important
to keep donatio mortis causa within its proper bounds. Patten LJ stated that ‘the paramount
principle is that the law’s recognition of a donatio mortis causa as a valid means of transferring
property on death operates as an exception rather than an alternative to the requirements of the
Wills Act or any other statutory provisions governing the valid transmission of interests in property.’

3. Proprietary Estoppel
Where an imperfect gift has been made and the donor knowingly allows the donee to improve the
property or acts to his detriment in some manner, equity will compel the donor to perfect the gift
even where the donee is a volunteer.

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TOPIC 4: Resulting Trusts

Resulting trusts come into existence by implication and are founded on the unexpressed but
presumed intention of the settlor. They are known as resulting trusts because the beneficial
interest in the property in question comes back or results to the settlor (or, if he is dead, to
his representatives) who transferred the property to the trustee in the first instance in
circumstances where the law presumes that this was the settlor’s intention. Due to the
informal manner in which they come into being, such trusts are exempt from the formalities
required in relation to the creation of express trusts.

Resulting trusts can be categorised in accordance with a distinction made by Megarry J in Re

Vandervell’s Trusts (No.2) [1974]:
- Automatically resulting trusts. Where a trust has been declared but the beneficial interest
fails for some reason or the entire beneficial interest is not disposed of.
- Presumed resulting trusts. Such trusts arise where property is transferred to a grantee who
gives no consideration, so as a result of voluntary dispositions of property or the purchase of
property in the name of a third party. In certain circumstances the presumption of a
resulting trust can be displaced, e.g. by the presumption of advancement or by showing an
intention to benefit the transferee.

In Westdeutsche Landesbank Girozentrale v Islington Borough Council [1996] Lord

Browne-Wilkinson queried whether Megarry J was correct in his assumption that some
trusts do not depend on intention but operate automatically. In his view all resulting trusts
give effect to the presumed intention of the transferor.

Automatically Resulting Trusts

Failure of the Trust
Where an express trust fails completely for any reason, a resulting trust of the trust
property will arise in favour of the settlor or his estate. This may occur for a variety of
reasons; e.g. there may have been a total failure of the beneficiaries; where it is sought to
create a half secret trust but the nature of the trust or the beneficiaries are not specified;
the settlement deed defining the scope of the trust may have been lost, the trust may be
void for uncertainty, or may fail to qualify for charitable status in circumstances where it
cannot operate as a valid purpose trust.

Vandervell v IRC [1967]

Facts:
The appelant transferred shares in a private company to a college which he wished to
endow with the intention of declaring dividends on the shares. The effect of the
arrangement was that the college would grant an option to a company which acted as
trustee for various family trusts enabling the shares to be acquired by the company
although it was not stated on which trusts these shares were to be held.
Ruling:
The HoL held that the option was held on a resulting trust for the appellant with the result
that, not having divested himself completely of his interest in the shares, he was liable on
surtax for the dividends paid to the college. As Lord Wilberforce stated (at 329): ‘the

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conclusion on the facts found, is simply that the option was vested in the trustee company
as a trustee on trusts, not defined at the time, possibly to be defined later. But the
equitable, or beneficial interest, cannot remain in the air: the consequence in law must be
that it remains in the settlor'.

Failure to Exhaust the Beneficial Interest

In practice a trust does not often fail completely but a situation may quite frequently arise
where there has been an incomplete disposal of the beneficial interest under a trust. Even
though it may appear at the time a trust instrument or will is executed that this interest has
been fully disposed of, subsequent events may occur, or fail to occur, which may change this
position.

A number of cases have dealt with the circumstances where property is given on trust for
the maintenance or education of specified persons and the difficulties which arise when
these purposes are fulfilled. Where the specified purposes can be regarded as merely
constituting the testator's motive for making the gift, the donee will be permitted to retain
the property, but this may be difficult to establish particularly where it is the donee's estate,
rather than the donee personally, who stands to benefit.

Re Trusts of the Abbott Fund [1900]

Facts:
Contributions were made to a fund to be used for the maintenance of two distressed ladies.
No provision had been made in relation to the disposal of the fund on the death of the
survivor.
Ruling:
Stirling J held that on her death the balance of the fund should be held on a resulting trust
for the subscribers.

Re Andrew's Trust [1905]

A fund was subscribed to by the friends of a deceased clergyman for the education of his
children.
Ruling:
Kekewich J held that when the children’s formal education was complete, no resulting trust
of the remaining balance should arise and that it should instead be divided equally amongst
them.

There is a clear contrast in the approaches taken in Abbott and Andrew's. It has been argued
that there is a certain lack of consistency in this area, although some distinguishing features
can be seen. In Abbott it was no longer possible to use the fund for the benefit of of the
beneficiaries, in Andrew's, however, this was not the case as the beneficiaries were still
alive. So while it is difficult to distinguish between the motives of the subscribers in
Andrew's and Abbott, the results in these cases are justified by the surrounding
circumstances.

Presumed Resulting Trusts

As a general principle, where the ownership of property is transferred to a grantee who
gives no consideration, an inference arises that the grantee holds the property by way of a

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resulting trust for the grantor where there is (1) voluntary conveyance or transfer and (2)
purchase in the name of another. However, it must be stressed that is only a presumption
which can be rebutted by evidence that a contrary result was intended. It can also be
displaced by the presumption of advancement, which involves the inference being drawn
that a gift of property was intended rather than that it should be held on a resulting trust
because of the relationship between the parties.

Voluntary Conveyance or Transfer

The law relating to the transfer of freehold land is now affected by statute in Ireland and
England. Section 62(3) of the Land and Conveyancing Law Reform Act 2009 provides that in
a voluntary conveyance a resulting use for the grantor is not implied merely because the
land is not expressed to be conveyed for the use or benefit of the grantee. Section 60(3) of
the Law of Property Act 1925 is in similar terms but refers to a ‘resulting trust’. The effect of
these provisions would appear to be that a voluntary conveyance of land takes effect as
expressed unless there is evidence of a contrary intention.

Where the owner of personal property makes a voluntary transfer of it to another person, a
presumption of a resulting trust arises unless there is sufficient evidence of a contrary
intention to rebut the presumption (evidence of an intention to benefit the transferee as in
Standing v Bowring (1885)) or the presumption of advancement dictates otherwise.

The law appears to be that where there is a voluntary transfer of personalty, the transferee
is presumed to hold on a resulting trust for the transferor.

Re Vinogradoff [1935]
Facts:
A testatrix had transferred and £800 war loan into the joint names of herself and her 4 year
old granddaughter but continued to receive dividends until her death.
Ruling:
Farwell J held that after her death the granddaughter held the loan on a resulting trust for
the testatrix's estate. This decision illiterates that presumed resulting trusts can often arise
in circumstances where it it is highly questionable whether this result would actually reflect
the settlor' real intentions, if she had been given the opportunity to decide on the ultimate
destination of the transferred property.

There is only a presumption of a resulting trust in such circumstances which can be

rebutted, see Standing v Bowring (1885).

Standing v Bowring (1885)

Facts:
A plaintiff widow transferred stock into the joint names of herself and her godson, the
defendant, having been warned that if she made the transfer she could not revoke it.
Ruling:
It was held that the plaintiff could not claim a re-transfer on equitable grounds because she
had not ignited to make the defendant a mere trustee except in relation tot eh dividends
payable on the stock. On the contrary, there was strong evidence to suggest that that at the
time of the transfer she intended to benefit the defendant and the presumption of a

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resulting trust was therefore rebutted. Cotton LJ stated (at 287): ‘[T]he rule is well settled
that where there is a transfer by a person into his own name jointly with that of a person
who is not his child, or his adopted child, then there is prima facie a resulting trust for the
transferor. But that is a presumption capable of being rebutted by showing that at the time
the transferor intended a benefit to the transferee.’

The manner in which the presumption may be rebutted was also considered by the Supreme
Court in Stanley v Kieran [2011] considered below in the context of rebutting a resulting
trust where property is purchased in the name of another.

Joint Deposit Accounts

One of the most common situations in which a transfer of property takes place into the joint
names of the transferor and transferee is where a joint deposit account is opened. This is
usually done in a manner which allows the transferor or depositor alone to retain dominion
over the money in the account during his lifetime but which displays the intention that the
balance should go to the other party should he survive him. Where such an arrangement is
put in place the question arises whether the money which remains in the account on the
depositor's death should be subject to a resulting trust in favour of his estate or whether it
can be paid over to the other party. The traditional position is that where a person transfers
money on deposit into his own name jointly with that of another person (who is not his
child) there is a resulting trust to the transferor. In order to rebut this presumption the
transferee must show that the transferor intended that the beneficial interest should pass
to him.

The main policy argument against allowing the survivor or transferee to take a beneficial
interest in circumstances where he has made no contribution to the monies in the account
is that such an interest arguably passes as a form of testamentary disposition which has not
complied with the formalities required by the Succession Act 1965. As we have seen above
in relation to secret trusts, the courts in this jurisdiction have not always taken such a strict
approach to this issue. It is ironic then that in the area of presumed resulting trusts, which
are in theory supposed to give effect to a settlor or testator's intentions, the judiciary in this
jurisdiction had until the recent Supreme Court decision in Lynch v Burke [1995] adopted a
more restrictive approach to this policy question and often succeeded in arriving at a result
which might be quite contrary to the transferor's actual intentions.

Owens v Greene [1932]

Facts:
The deceased kept sums of money on deposit in the joint names of himself and a nephew
and of himself and a distant relative. He retained control over these funds during his lifetime
but made it clear that he wished the money to go to his co-depositors in the event of his
death.
Ruling:
The SC held that that these persons, who were volunteers, had filed to rebut the
presumption of a resulting trust in favour of the deceased' personal representatives.
Kennedy CJ stated the while it was open to the plaintiffs to seek to rebut the presumption of
a resulting trust which arose in the circumstances this could only be done by establishing
that it was the deceased's intention when putting the money in the accounts to give to the

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plaintiffs ‘then and there and by that act, a right, that is to say an immediate present right to
take the monies with which he associated their respective names by survivorship’. It would
not suffice to she would testamentary intention on the part of the deceased as a disposition
of a testamentary nature could, in the option of the Chief Justice, only be made by a will.

Lynch v Burke [1990] (HC)

Facts:
The deceased opted a joint deposit account in the names of herself and her niece, the
defendant. The defendant had travelled from Scotland at her aunt's request and both had
signed the necessary documentation for opening the account. All lodgments were made by
the deceased and the account deposit book was endorsed payable only to the deceased or
survivors. The deceased bequeathed all her property to the plaintiff. The issue for the court
was whether a resulting trust could be presumed in favour of the plaintiff, or whether the
deceased had intended to pass the beneficial interest to the defendant.
Ruling:
O'Hanlon J found in favour of the plaintiff and held that a resulting trust arose. He stated the
general principle that where money is deposited in a joint account by a person who
subsequently ides, there is an equitable presumption of a resulting trust against the survivor
in favour of the deceased's estate. On the facts O'Hanlon J held that the deceased had
intended that the first defendant would be entitled by right of survivorship to the beneficial
interest in this money and the equitable presumption in favour of the deceased's estate was
therefore rebutted. However, he felt obliged on the authority of the Owens decision to hold
that the transaction was an invalid gift and an unsuccessful attempt to make a testamentary
disposition otherwise than by will. O'Hanlon J was somewhat unhappy with this decision.
This decision was reversed by the Supreme Court – see below.

Russell v Scott (1936) (Australia)

Facts:
An elderly lady transferred money into an account in the joint names of herself and her
nephew.
Ruling:
Although Dixon and Evatt JJ found that the deceased did not intend her nephew to benefit
during her lifetime, they concluded that ‘by placing the money in the joint names, the
deceased did then and there and by that act give a present right of survivorship'. The court
interpreted her actions as giving the nephew an immediate beneficial interest which
however, did not fall into possession until her death and which might be revoked up until
that time.

This approach involved regarding both parties upon the opening of the account as being
jointly entitled to a chose in action (right to sue) consisting of their contractual right against
the bank which would accrue to the survivor. It was seen as a plausible alternative to the
reasoning employed in Owens and avoided the difficulties inherent in regarding the
transaction as a testamentary disposition, namely the need for compliance with statutory
formalities.

Lynch v Burke [1995] (SC)

Facts:

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O'Flaherty J considered the legal effect of opening a deposit account in joint names. He said
that by her presence and signature, it was manifest that the defendant was a party to the
contract from the outset and she must be entitled to claim as a party to the contract under
its terms. He stated that since historically, the concept of a resulting trust was an invention
of equity to defeat the misappropriation of property as a consequence of potentially
fraudulent or improvident transactions, it would be paradoxical if the doctrine was allowed
to defeat the clear intention of the donor as found by the trial judge. O'Flaherty J
commented that if the arrangement in the case before him was not testamentary, which in
his view it was not, the statutory requirements relating to testamentary dispositions had no
application. O'Flaherty J also stated that Owens had given cause for unease on a number of
grounds and concluded that it was wrongly decided and should be overruled.

However, as Capper points out (1996) 'the underlying doctrinal principles remain very
unclear' and there are conceptual difficulties with both the 'gift theory' and the 'contract
theory'. Capper suggests that the 'contract theory' is preferable, and on this basis provided
that the survivor has signed the necessary contractual documents and there is sufficient
evidence of the donor's intention to rebut the presumption of a resulting trust, the outcome
in similar cases in the future should be the same as in Lynch.
See also Woods (2002) who points to a number of potential flaws in the contract theory and
favours the conditional gift theory.

The more recent decision of Laffoy J in O’Meara v Bank of Scotland plc [2011] suggests that
there may be some lingering uncertainty about the outcome in joint deposit account cases
in the absence of any basis for applying the contractual theory.

O’Meara v Bank of Scotland plc [2011]

Facts:
In this case the court had to determine the beneficial ownership of monies in two joint
deposit accounts in the names of the plaintiff widow and her late husband which the
defendant bank claimed to be entitled to set off against monies owed to it by the deceased.
Ruling:
In relation to the monies lodged in the first account, a presumption of advancement applied
which Laffoy J was satisfied had not been displaced. However, she went on to express the
following view: ‘[on the authority of [Lynch v Burke], the legal effect of the opening of that
account in the joint names of [the deceased] and the plaintiff on foot of the application
signed by both of them was that the defendant became contractually bound to both
account holders and, as a matter of contract between the plaintiff, as surviving joint account
holder, and the defendant, she became entitled to the balance in the account on the death
of [the deceased].' In relation to the second joint deposit account, Laffoy J noted that there
was no contractual relationship between the plaintiff and the defendant bank in relation to
the monies in that account. She found that the ‘plaintiff was not a party to it at any time’
and commented that ‘therefore the decision of the Supreme Court in Lynch v Burke, in my
view, does not assist the plaintiff.

Purchase in the Name of Another

Where a person provides the purchase money for property, whether real or personal, which
is conveyed or transferred to another person or to himself and the other person jointly, it is

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presumed that the latter holds the property on a resulting trust for the person who provided
the purchase money. This principle was set out by Eyre CB in Dyer v Dyer (1788).

Rebutting the Presumption of a Resulting Trust

The presumption which arises may be rebutted either by evidence that the purchaser
intended to benefit that other party or because the purchaser was under a form of natural
obligation to provide for that other party, known as the presumption of advancement
(which will be considered below).

Where evidence establishes that the transferor or purchaser intended to benefit the donee,
no resulting trust will arise. This is illustrated by Standing v Bowring (1885) (see above)
where evidence showed that the plaintiff transferor had intended to benefit her godson
when she transferred stock into his name.

Stanley v Kieran [2007] (HC) [2011] (SC)

Facts:
The plaintiff sought a declaration that he was the beneficial owner of a certain property
which as 'a matter of convenience' had been acquired in the defendant's name.
Ruling:
The evidence would give rise to a presumption of a resulting trust as the plaintiff/appellant
had provided the entire consideration. However, Laffoy J concluded as a matter of
probability that the plaintiff intended to benefit the first named defendant/respondent.
The appellant’s appeal was allowed by the Supreme Court. Denham J stated that on the
facts the presumption of a resulting trust in favour of the appellant arose and that the
respondent had not discharged the burden of rebutting this presumption. In her view the
inferences drawn in the High Court that the appellant intended to benefit the respondent
were contrary to the evidence. Denham J stated that she would not accord weight to the
inferences drawn by the High Court and in her view these inferences did not discharge the
onus or displace the presumption. Thus Denham J concluded in allowing the appeal that she
was satisfied that the property was held on a resulting trust for the appellant.
Even where a transfer of property occurs for an illegal purpose, this will not prevent a
resulting trust arising in favour of the transferee where the claim can be made without
reliance on this unlawful purpose. This point is illustrated by the decision of the House of
Lords in Tinsley v Milligan.

The Presumption of Advancement

The presumption of advancement arises where because of the relationship which exists
between the parties, the donor or purchaser is under an obligation recognised in equity to
provide for the person to whom the property is given. Just as the presumption of a resulting
trust can be rebutted by evidence showing that a gift was intended, so the presumption of
advancement can be rebutted by evidence which establishes that the donor did not intend
to benefit or make provision for the donee.

The manner in which these presumptions operate was summarised by Viscount Simonds in
Shephard v Cartwright [1955]: ‘The law is clear that on the one hand where a man
purchases shares and they are registered in the name of a stranger there is a resulting trust
in favour of the purchaser; on the other hand, if they are registered in the name of a child or

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one to whom the purchaser then stood in loco parentis, there is no such resulting trust, but
a presumption of advancement. Equally it is clear that the presumption [of advancement]
may be rebutted but should not … give way to slight circumstances.’

Husband and Wife

The presumption of advancement arises where a husband transfers property to his wife or
purchases it in her name. However, traditionally where a wife bought property and put it in
her husband's name, this did not give rise to the presumption of advancement and instead a
resulting trust was presumed.

Parkes v Parkes (1980)

Facts:
The defendant husband wanted to but land and arranged for it to be conveyed in his wife's
name to obviate the need for Land Commission consent, which would have been necessary
if he had purchased the property in his own name as he was not an Irish citizen. After the
parties divorced the husband resisted an inhibition on the land and the wife instituted
proceedings, claimed that the land had been wrongly registered. The husband counter
claimed that he was entitled to beneficial ownership in the property. It was claimed on
behalf of the wife that the husband should not be allowed to obtain relief in equity 'by
setting up his own illegality or fraud.'
Ruling:
One might have assumed a resulting trust in favour of the husband as it was him that paid
for the house. However, he came up against the presumption of advancement. The husband
could not rebut the presumption of advancement which existed his wife's favour because to
do so he would have had to rely on his own illegality.

Tinsley v Milligan
Facts:
The parties in this case were two women who were in a relationship. They bought a
property which was registered solely in the name of the plaintiff in order to assist in the
perpetration of fraud by claiming more social security than they were entitled to. However,
there was a tacit understanding between the women that they would both be joint
beneficial owner of the property and the defendant had contributed significantly to the
purchase price and lived in the property. Their relationship came to an end and the plaintiff
sought possession of the house that was in her name. The defendant claimed that it was
their common intention that the house should belong to both of them and sought a
declaration that the house was held on trust by the plaintiff for both parties in equal shares.
Ruling:
The HoL held that the defendant had established the presumption of a resulting trust by
showing that she had contributed to the purchase price of the house and that there was an
understanding between the parties that they had owned it jointly. There was no need for
her to explain why the house had been conveyed in the plaintiff's name only and it was held
that there was no evidence to rebut the presumption of a resulting trust. Had the plaintiff
tried to rebut the presumption of a resulting trust then she would have had to face the issue
of illegality.

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The defendants in Tinsley and Parkes had the same problem- that the property in question
had been conveyed in the name of their partner for tax evasion reasons. However, due to
the nature of their relationships (Parkes was married to his wife and Milligan was not
married to her partner) the two cases had very different outcomes. This has received a great
deal of criticism.

Presumption of a resulting trust may be rebutted by another presumption- namely the

presumption of advancement.

R.F. v M.F. [1995]

Facts:
This case concerned a dispute over ownership of property purchased by the husband in the
couple's joint names. The wife had refused to live in the house unless it was bought in their
joint names and, despite her promise to live there, she never moved in. The couple
separated and the wife claimed a beneficial interest in half the house as she was a co-
owner.
Husband had paid for house- presumption of a resulting trust.
BUT- Married couple- presumption of advancement.
The presumption of advancement may itself be rebutted by contrary evidence.
Ruling:
Henchy J appeared to accept the relevance of the presumption of advancement but went on
to hold that it had been clearly rebutted in the circumstances of the case. (Wife was being a
bit of a bitch- husband kept buying her gifts to try and make the marriage work.)The
husband was the beneficial owner of the entire house as the wife's legal ownership was
counteracted by equity. He didn't put wife's name on the deeds with the intention of giving
her half the house, he did it in good faith which she threw back in his face.

Father and Child

Similarly, where a father purchases property in the name of his child or transfers it into the
child's name, the presumption of advancement will apply.
Persons in Loco Parentis to a Child - The presumption also applies where the donor or
purchaser of property stands in loco parentis to the person in whose name this property is
held or bought.
Dowling [1996] suggests that the distinctions between father and mother should be
abandoned, a view shared by Carolan (2008) who points out that this change may also be
constitutionally necessary in this jurisdiction.

The presumption of advancement has been abolished in Northern Ireland between married
and engaged couples, and section 199 of the Equality Act 2010 will remove the presumption
of advancement in England and Wales for all transactions that take place after its enactment
when it comes into force.

Rebutting the Presumption of Advancement

There has been an erosion of judicial confidence in the concept of the presumption of
advancement due in part to the rather anomalous results which it may produce and to
significant constitutional developments in the area of equality. In circumstances where the
presumption has traditionally been held to exist, it has generally become easier to rebut. In

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addition to this general development, it is still important to note the circumstances in which
the presumption has traditionally been rebutted.

The presumption of advancement will be rebutted if evidence is adduced to show that no

gift was intended by the donor or transferor.
As Henchy J stated In R.F. v M. F. [1995] if the circumstances show that the benefit
contended for by the wife was not intended, the court will hold the presumption of
advancement to be rebutted.
Anson v Anson [1953] A transaction of this nature (a husband guaranteeing his wife's bank
account) cannot be presumed to be an advancement unless the donor makes it clear to the
donee at the time of making the guarantee that he does not expect to be reimbursed.

Trusts of Family Property

The circumstances which give rise to a resulting trust when property is voluntarily conveyed
into the name of another or where it is purchased in another party’s name have been
outlined above. A common application of these principles occurs in relation to the question
of ownership of family property when recourse to equitable principles is still necessary in
the context of property disputes involving spouses, civil partners, cohabitees and other third
parties, often financial institutions. While the enactment of legislation in the form of the
Family Law Act 1995, the Family Law (Divorce) Act 1996 and the Civil Partnership and
Certain Rights and Obligations of Cohabitants Act 2010 has considerably reduced the
circumstances in which resulting and constructive trusts continue to play a role in this field,
they nevertheless remain significant in some situations.

The Operations of Equitable Principles in Ireland

Direct Contributions
It has been clearly established that where property is purchased in one spouse or partner's
name but the other party has made direct contributions to the purchase price or the
payment of instalments on the mortgage, the property will be held on a resulting trust to
the extent of these contributions.

C. v C. [1976]
Facts:
The spouses purchased a family home in the husband's sole name though the wife made a
direct contribution to the payment price by paying the deposit and some of the mortgage
re-payments. When the marriage broke down the wife claimed that she was entitled to
hokey the beneficial interest in the house.
Ruling:
Kenny J said that the correct approach was to apply the concept of a trust to the legal
relationship which arises when a wife makes payments towards the purchase of a house or
the repayment of mortgage instalments when the house is in the sole name of the husband.
When this is done, the husband then becomes a trustee for her of a share in the house
proportionate to the size of her contributions. Keenly J held that the wife was entitled to
one held of the beneficial interest in the family home.

The principle was re-iterated in W. v W. [1981] by Finlay P.

He stated that where a wife contributes either directly to the repayment of a mortgage (or

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indirectly to a family fund) she will in the absence of an inconsistent agreement be entitled
to a share approximately proportionate to the contribution.

Hickey v O’Dwyer [2006]

Facts:
The plaintiff brought proceedings following her husbands death against his person
representatives and his child from another relationship seeking determination of a number
of questions, including whether she had any beneficial interest in a house in which she lived
with her husband for a number of years prior to his death. Her husband had been the sole
legal owner of the property and it had been purchased by means of a loan from his then
employer to pay the deposit and a small state grant, the remainder being financed by a
mortgage. When her husband changed jobs and the loan became repayable the plaintiff
borrowed the sum necessary to pay off her debt. Both parties salaries were paid into a joint
account and their mortgage payments were made from this account.
Ruling:
See page 202 of textbook. Laffoy J favoured the deceased's estate despite the contributions
made by the plaintiff. She gave a great deal of consideration to the fact that the wife owned
her own, separate property and that the deceased had a child.

Indirect Contributions
W. v W. [1981] per Finlay P. ‘Where a wife contributes [either directly to the repayment of a
mortgage or] to a general family fund thus releasing her husband from an obligation which
he otherwise would have permitting him to discharge liabilities out of that fund and
permitting him to repay mortgage instalments, she will in the absence of proof of an
inconsistent agreement or arrangement be entitled to an equitable share in the property
which had been mortgaged and in respect of which the mortgage was redeemed
approximately proportionate to her contribution to the mortgage repayments, to the value
of the mortgage thus redeemed and to the total value of the property at the relevant time.’

This approach of assuming that the wife should be entitled to a beneficial interest
proportionate to the extent of her indirect contributions ‘in the absence of proof of an
inconsistent agreement or arrangement’ was also applied by the Supreme Court in McC. v
McC. [1986].

Improvements
W. v. W. [1981] Finlay P stated that where a wife expends monies or carries out work in the
improvement of a property, the legal ownership of which is vested solely in the husband,
she will have no claim in relation to this contribution unless she can establish that it was
specifically agreed or that she was led to believe by virtue of the surrounding circumstances
that she would be recompensed for it. In addition, he stressed that any claim which she
might have was limited to a right to monetary compensation and could not give rise to any
beneficial interest. This dicta was applied by Barron J in N.A.D. v T.D. [1985].

A slightly less restrictive attitude was adopted by Finlay CJ in E.N. v R.N. [1992] where he
said ‘I do not consider .. that a direct contribution, even in money's worth, to an
improvement made on a family home by a wife, where the husband is the sole owner of it,
can, in the absence of express or readily implied agreement, constitute a claim for a

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beneficial interest in it. However, it should be noted that in C.F. v J.D.F. [2005] McGuinness
J, referring to McC. v McC. and N.A.D. v T.D. stated that ‘the making of improvements to
property cannot establish any form of beneficial title’.

Other Forms of Contribution

Traditionally the courts in this jurisdiction refused to accept that a partner's contribution by
working in the home, whether in performing housework or looking after children, may give
rise to a beneficial interest.

B.L. v M.L. [1992] Finlay CJ concluded that to allow the courts to extend the circumstances
in which a wife may claim a beneficial interest in the family home to a situation where she
has made no direct or indirect financial contribution to the acquisition of the property or to
a family fund but has performed the constitutionally preferred role of wife and mother in
the home would not be to develop any principle known to the common law but rather
would involve the creation of an entirely new right. As he said unless this result was ‘clearly
and unambiguously warranted by the Constitution or made necessary for the protection of a
specified or unspecified right under it, it must constitute legislation and be a usurpation by
the courts of the function of the legislature.' (at 107)

In E.N. v R.N. [1992] the Supreme Court recognised that work in the legal owner's business
was different from and not to be identified with work in the home. Mee has commented
[1993] that it is difficult to justify such differentiation.

The potential of the constructive trust as a device which will provide a remedy where
'justice and good conscience' demand it was explored by Barron J in Murray v. Murray
[1996] where he stated: 'It is I think quite clear that the law will impose a constructive trust
in all circumstances where it would be unjust and unconscionable not to do so.'

The Approach in England – the Common Intention Constructive Trust

The principle of proportionate interest which derives from the rationale behind the resulting
trust applies in this jurisdiction, and has ensured a degree of consistency in decision-making
although perhaps at the expense of an element of flexibility which might be preferable in
certain circumstances. In England, the resulting trust analysis has largely been rejected in
favour of an approach which involves the imposition of a constructive trust based on the
parties’ common intentions, and a claimant’s share will be measured by reference to such
intentions and may give rise to a share in excess of the actual financial contributions made.

In Lloyds Bank plc v Rosset [1991], Lord Bridge stated that the fundamental question was
whether, independently of any inference which might be drawn from the parties’ conduct,
there had been at any time prior to the acquisition of the house, or exceptionally at a later
date, any agreement, arrangement or understanding reached between them that the
property was to be shared beneficially. Alternatively, where there was no evidence to
support a finding of an agreement or arrangement to share the property, Lord Bridge stated
that the court must rely on the conduct of the parties and he said (at 133) ‘direct
contributions to the purchase price by the partner who is not the legal owner, whether
initially or by payment of mortgage instalments, will readily justify the inference necessary
to the creation of a constructive trust’.

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In determining quantum if a common intention constructive trust can be said to arise, in

Midland Bank plc v Cooke [1995] the Court of Appeal took into account ‘the whole course
of dealing between the parties’. A similar approach was adopted by the Court of Appeal in
Oxley v Hiscock [2004] where the Court of Appeal inferred a common intention as a result
of the financial contributions made by each party. In the absence of evidence of an
agreement as to the proportions in which the respective beneficial interest should be held,
it will be based on what the court considers fair having regard to all the dealings between
the parties in relation to the property.

In Stack v Dowden [2007] Baroness Hale stated that the court should ‘undertak[e] a survey
of the whole course of dealing between the parties and tak[e] account of all conduct which
throws light on the question what shares were intended’.

The law in England relating to the status of indirect contributions was originally quite
restrictive. However, it is clear from the comments of members of the House of Lords in
Stack v Dowden [2007] that the law has ‘moved on’ from the restrictive approach taken
towards indirect contributions in Lloyds. Baroness Hale commented in Stack that ‘[t]he law
has indeed moved on in response to changing social and economic conditions’ and she
stated that ‘[t]he search is to ascertain the parties’ shared intentions, actual, inferred or
imputed, with respect to the property in the light of their whole course of conduct in
relation to it.’ She identified a range of factors which are relevant in determining these
intentions.

Consideration was given to the question of what considerations should apply in a case of
joint as opposed to sole legal ownership by the House of Lords in Stack v Dowden [2007]
and the Supreme Court in Jones v Kernott [2012]. Baroness Hale made it clear in Stack at
[69] that cases in which joint legal owners are to be taken to have intended that their
beneficial interests should be different from their legal interests will be very unusual.
However, in both Stack v Dowden and Jones v Kernott a different apportionment of the
beneficial interest was recognised. In Jones the Supreme Court allowed the appeal and
restored the order of the trial judge that the claimant was entitled to 90% beneficial share.

In Jones v Kernott [2012] Lord Walker and Baroness Hale clarified that the search was
primarily to ascertain the parties' actual shared intentions, whether expressed or to be
inferred from their conduct. However, where it was clear that the beneficial interests are to
be shared, but it is impossible to divine a common intention as to the proportions in which
they are to be shared, the court might be driven to impute an intention to the parties which
they may never have had.

Mee [2012] suggests that ‘The decision appears to limit the imputation of openly fictional
common intentions to the relatively uncontroversial context of quantifying the parties'
shares under a constructive trust in cases where a common intention has been found to
exist which does not specify precisely the respective shares.’

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TOPIC 5: Constructive Trusts and Liability of Third Parties to Account

637-638- graham burger's book. Good overview on distinction between the two different
remedies

Introduction
A constructive trust is one which arises by operation of law and which comes into being
irrespective of the intention of the parties. It has been described as a trust which is imposed
by equity in order to satisfy the demands of justice and good conscience, and to prevent a
person deriving profit from fraudulent conduct or taking unfair advantage of a fiduciary
position.

A trustee or other party in a fiduciary position will not be permitted to take advantage of his
position to make a personal profit and any profit which he makes in this manner will be held
by him as a constructive trustee for the benefit of the persons equitably entitled to the
property.

Where there is no existing relationship of trustee and beneficiary or any type of fiduciary
relationship, liability to account ‘as a constructive trustee’ may arise because of the
circumstances in which the property is held. However, the phrase liability to account ‘as a
constructive trustee’ is somewhat misleading in this context and it might be better
described as an equitable liability to account as the defendant’s liability is personal not
proprietary in nature.

Advantages Gained by Persons in Fiduciary Positions

Fiduciary Relationships

In Bristol and West building Society v Mothew (1998) Millet LJ set out the key attributes of
a fiduciary relationship, describing it in the following terms:
"A fiduciary is someone who has undertaken to act on behalf of another in a particular
matter of circumstances which give rise to a relationship of trust and confidence. The
distinguishing obligation of the fiduciary is loyalty. The principal is entitled t the single-
minded loyalty of his fiduciary. ... A fiduciary must act in good faith; he must not make profit
out of his trust; he must not place himself in a position where his duty and his interest may
conflict; he may not act for his own benefit or for the benefit of a third party without the
informed consent of his principal."

There are many different categories of fiduciary relationship which have different
characteristics and involve different kinds of obligation. The most common kinds of fiduciary
relationship are those between a trustee and beneficiary, agent and principal, director and
company and between partners.

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The key obligations- The No-Conflict and No-profit rules

Gabbett v Lawder (1883)

Chatterton VC stated: ‘The fundamental position upon which the doctrine of constructive
trusts proceeds is, that no person in a fiduciary capacity shall be allowed to retain any
advantage gained by him in his character as trustee. His cestuis que trusts are entitled to the
benefit of any advantage so gained by him, to any addition or accretion to the trust estate
which he may have acquired, and to all profit which he may have made by any dealing with
it.’

Charleton J explained that the ‘fundamental position’ referred to by Chatterton VC in

Gabbett v Lawder applies strictly to trustees and personal representatives in the following
terms in Greene v Coady [2014]: “Since trusts deal with other people’s property and since
trustees must be faithful to deal properly with trust funds, trustees owe to the trust, and
thus to the beneficiaries, a duty of good faith and fidelity. Trustees are not entitled to put
themselves into a situation of conflict of interest whereby they may be influenced by how
they themselves may profit from any decision which the body of trustees may make.”

Fully Informed Consent

Where fully informed consent has been given to a transaction, a fiduciary’s actions are
regarded as authorised and he will not be liable to account. However, as Lord Hodson stated
in Boardman v Phipps [1967] nothing short of ‘fully informed consent’ could aid a fiduciary
who had taken advantage of the opportunity provided by that position to make a profit.

Charleton J also considered the issue of consent in Greene v Coady. He said that it is clear
that a trustee may proceed to act in a situation where there is a potential conflict between
duties or between duty and interest, provided fully informed consent is given by the
principals. He added that ‘[t]his does not require the disclosure of all information which is
material to the transaction and the conflict, provided that the consenting party is aware of
all material facts and is enabled to make a decision to retain the trustees notwithstanding.’
Given the strict approach that the courts normally take, fiduciaries should err on the side of
caution in this regard.

Purchase of the Reversion in a Lease

A common example of circumstances giving rise to the creation of a constructive trust in this
manner is where a trustee of leasehold property obtains a renewal of the lease in his own
name. See Keech v Sanford (1726).

The question of whether a trustee or other person in a fiduciary position may purchase the
reversion of a lease held in trust or for his principal for his own benefit has been the subject
of some controversy. Traditionally, the rule in Keech v Sandford was applied in a limited
way to such a purchase and a constructive trust would arise if the lease was renewable by

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contract or custom or where the trustee obtained the reversion by virtue of his position as
lessee.

This principle was applied by the Irish Court of Appeal in Gabbett v Lawder (1883) where
the administrator of the estate of an intestate held lands under a lease as trustee.

Competition with Trust Business

A trustee must not place himself in a situation where his duty to the trust and his own
personal interest may conflict, in circumstances where he is likely to derive a profit by virtue
of his fiduciary position.
Moore v McGlynn [1894] 1 IR 74, 89 Chatterton VC rejected the argument that a
constructive trust arose in the following terms: ‘I am not prepared to hold that a trustee is
guilty of a breach of trust in setting up for himself in a similar line of business in the
neighbourhood, provided that he does not resort to deception, or solicitation of custom
from persons dealing at the old shop'. However, he added (at 90) that ‘[h]e should not be
continued in a position where his duties and his self interest may conflict.’

The Liability of a Fiduciary to Account for Secret Commissions and Bribes

As a general principle, a fiduciary may not accept secret commissions or bribes arising out of
a transaction in which he is acting on behalf of a principal without the knowledge and
consent of his principal.

Attorney-General for Hong Kong v Reid [1994] 1 AC 324 Lord Templeman stated (at 332):
‘The rule must be that property which a trustee obtains by use of knowledge acquired as
trustee becomes trust property. The rule must, a fortiori, apply to a bribe accepted by a
trustee for a guilty criminal purpose which injures the cestui que trust. The trustee is only
one example of a fiduciary and the same rule applies to all other fiduciaries who accept
bribes.’
However, while it may be reasonable that a fiduciary should not profit from a breach of duty
even if this means that the principal receives a windfall, it has been argued by Jones [1994]
Conv 156 that it is not so obvious that a windfall is justified where the contest is between
creditors who have given value and a principal who has not.

In Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] 3 WLR 1153 the Court
of Appeal declined to follow Reid. Lord Neuberger MR held, in dismissing the appeal, that a
beneficiary, to whom a fiduciary owed duties, was not entitled to claim a proprietary
interest, although he was entitled to an equitable account, in respect of any money or asset
acquired by the fiduciary in breach of his duties to the beneficiary.

However, Sinclair has now been overruled by the Supreme Court in

FHR European Ventures LLP v Cedar Capital Partners LLC [2015] AC 250 where Lord
Neuberger stated where an agent acquired a benefit which came to his notice as a result of
his fiduciary position, or through an opportunity resulting from that position, the general
equitable rule was that he was to be treated as having acquired the benefit on behalf of his
principal, so that the benefit was owned by the principal who had a proprietary as well as
personal remedy against the agent. The Supreme Court held that since the objectionable
nature of bribes and secret commissions undermined trust in the commercial world the law

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had to be particularly stringent in relation to a claim against an agent who received them,
and that where the benefit acquired was a bribe or secret commission obtained by an agent
in breach of his fiduciary duty to his principal it was held by him in trust for his principal.
Accordingly, the claimants were entitled to a proprietary remedy in respect of the secret
commission.

The Position of Agents

As Lord Neuberger commented in FHR European Ventures LLP v Cedar Capital Partners LLC
[2015] AC 250 at [33], the conclusion reached by the Supreme Court in that case is
consistent with the fundamental principles of the law of agency. ‘The position adopted by
the respondents, namely that the rule applies to all unauthorised benefits which an agent
receives, is consistent with the fundamental principles of the law of agency. The agent owes
a duty of undivided loyalty to the principal, unless the latter has given his informed consent
to some less demanding standard of duty. The principal is thus entitled to the entire benefit
of the agent's acts in the course of his agency. This principle is wholly unaffected by the fact
that the agent may have exceeded his authority.’

Where an agent puts himself in a position where his duty to his principal and his own
interests may conflict and makes a profit out of his fiduciary position, he will be liable to
account for this. Moore LJ summarised the nature of the fiduciary duty owed by an agent to
his principal in Sherrard v Barron [1923] 1 IR 21, 24 as follows: ‘There is no dispute about
the law, which is that an agent cannot without the knowledge of his principal make any
profit for himself out of services rendered to his principal. Should he do so, he must
account. It is equally settled law that it is the duty of the agent to make the fullest disclosure
to his principal of all transactions in which the agent is making, directly or indirectly, a profit
out of his principal. If this is done and the principal, expressly or by course of conduct,
impliedly assents, the agent can retain his profit.’

An illustration of the rigour with which these principles have been applied is the decision of
the House of Lords in Boardman v Phipps [1967] 2 AC 46. The majority view was that the
defendants had placed themselves in a position in which their duty and self-interest might
conflict and had abused their fiduciary position by utilizing information acquired in a
fiduciary capacity.

The Position of Company Directors

Company directors are treated as being fiduciaries insofar as they owe a duty to their
company and they will not be permitted to place themselves in a position where their duty
to the company and their personal interests will conflict or to derive a profit from their
fiduciary relationship.
In some cases this general principle that a director must not profit from his fiduciary
relationship with the company has been inflexibly applied and if a director takes advantage
of his position and makes a profit, the court will not look behind his motives for so doing.
The harshness of this rule is well illustrated by the decision of the House of Lords in

Regal (Hastings) Ltd v Gulliver [1967] Lord Russell stated: ’The rule of equity which insists
on those, who by use of a fiduciary position make a profit, being liable to account for that
profit, in no way depends on fraud, or absence of bona fides; or upon such questions or

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considerations as whether the profit would or should otherwise have gone to the plaintiff,
or whether the profiteer was under a duty to obtain the source of the profit for the plaintiff,
or whether he took a risk or acted as he did for the benefit of the plaintiff, or whether the
plaintiff has in fact been damaged or benefited by his action. The liability arises from the
mere fact of a profit having, in the stated circumstances been made. The profiteer, however
honest and well intentioned, cannot escape the risk of being called upon to account.’-
equity is taking a pretty hardline approach in these cases.

Liability will also be imposed where the company itself was not in a position to take on a
contract secured by a director where he takes advantage of his fiduciary position to achieve
this. In Industrial Development Consultants v Cooley [1972] Roskill J stated: 'if the
defendant is not required to account he will have made a large profit, as a result of having
deliberately put himself into a position in which his duty to the plaintiffs who were
employing him and his personal interests conflicted'. Good example of hardline approach of
english courts. An opportunity came the way of mr cooley that his company could never
have taken up. This opportunity only came his way because he was a director. Managing
director of a construction company. In negotiations with a gas board he became aware of an
opportunity. Offered him a job as a consultant. Claimed ill health, got out of company and
took up potion with gas board. His prior company sued him.

CMS Dolphin Ltd v Simonet [2001] while Lawrence Collins J acknowledged that a director is
not precluded following his resignation from a company from using his general fund of skill
and knowledge or his personal connections, he also made it clear that where he exploits a
maturing business opportunity liability will be imposed.- involves an individual who was not
acting an honorable way. Ended up liable. A director of a company decided to leave and set
up his own company in breach of his contract. In doing this he took a lot of clients with him
and made a profit. Old company wanted the profit he mad out of a fiduciary relationship. If
a director exploits a business and makes a profit essentially he holds that profit on trust. He
has taken something from the company and must hold any profit made on trust for the
company. Courts tend to act in a way which suggests that they are going to take a hard line.
They do this as a deterrent- they don't want to encourage people to abuse a fiduciary
relationship. Equally must ask whtehrter the courts striking line is always appropriate?
Bielher thinks that they have no choice.

Constructive Trusts - Mutual Wills

Where two people, usually although not necessarily husband and wife, make an
arrangement concerning the disposal of their property and execute mutual wills which are
intended to be irrevocable and the survivor subsequently alters his will, his estate will be
held by his personal representatives on a constructive trust to give effect to the
arrangement provided for in the mutual wills. In determining whether the necessary
agreement exists, the court will have regard to the terms of the wills but may also infer
evidence of an agreement from the conduct of the parties and the surrounding
circumstances. The mere fact that the wills were made simultaneously and in substantially
similar terms is not of itself sufficient proof that the parties have entered into a legally
binding agreement not to revoke them, see Re Oldham [1925]. When one party dies the
other will be bound by a constructive trust. This is how to prevent your partner leaving all
you money to a cause/person that you dont want after you die.

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Oldham- husband died and wife remarried and the court upheld the terms of the new will.
No evidence of an agreement between them- case turned on this laïc of evidence.

In Re Goodchild [1997]the importance of having specific evidence as to the testator's

mutual intentions at the time of the execution of the wills was stressed. The Court of Appeal
held that the wills were not mutually binding. Legatt LJ stated that 'for the doctrine to apply
there must be a contract' (1224) and that a key feature of the concept of mutual wills was
the 'irrevocability of the mutual intentions' (1225). In his view what was missing in the case
before him was evidence of a mutual intention that both wills should remain unaltered and
that the survivor should be bound to leave the combined estates to his son. However, the
Court of Appeal upheld the decision to grant the plaintiff an order under the Inheritance
(Provision for Family and Dependants) Act 1975. Husband and wife- wife died. He remarried.
Made a new will 6 weeks before he died leaving all to the new wife. His son took a case that
his father will cutting him out. The court said that in this case the will was not mutually
binding- not mutual intention to make a will at the time the will was executed.

Olins v Walters [2009] Mummery LJ said that it was a necessary condition of mutual wills
that there be clear and satisfactory evidence of a contract between two testators. He stated
(at 9): “The obligation on the surviving testator is equitable. It is in the nature of a trust of
the property affected, so the constructive trust label is attached to it. The equitable
obligation is imposed for the benefit of third parties, who were intended by the parties to
benefit from it. It arises by operation of law on the death of the first testator to die so as to
bind the conscience of the surviving testator in relation to the property affected.’
Doctrine of mutual wills upheld. Grandson encouraged grandparents to draw up similar wills
and alter them in a similar way. Made an agreement at the time of finalising their wills that
they would not alter them- that they would be bound. Granny dies and grandad fell out with
grandson. Tried to change will- went to court. Doctrine upheld- grandad could not change
will after the wife had died. He was bound by his will.

The Remedial Constructive Trust

Simply the imposition of a remedy where the judge considers it appropriate. Much more
vague and controversial. Controversial because the person who is to benefit from that
contrive trust would take a priority
While it has generally been acknowledged that the concept of ‘justice' is too uncertain a
basis on which to found a constructive trust which will create proprietary rights and may
operate in a wider context than anticipated or required, Lord Denning pioneered just such a
development in the English Court of Appeal in the late 1960s and early 1970s. In Hussey v
Palmer [1972] Denning MR stated that a constructive trust would be imposed ‘whenever
justice and good conscience require it'. A mother in law had contributed to build and
extension on a house and fell out with her son in law. Denning thought it could be resolved
by a constructive trust of a new model.

N.A.D v T.D. [1985] Barron J appeared to speak in similar terms to Lord Denning when he
made the following statement: ‘The constructive trust is imposed by operation of law
independently of intention in order to satisfy the demands of justice and good conscience.

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Its imposition is dependent upon the conduct of the person upon whom the trust is imposed
and prevents him from acting in breach of good faith. There is no fixed set of circumstances
in which such a trust is imposed.’
The husband owned land and the wife contributed significantly to the building of a house on
ther land. Wif could not get presumed resulting trust. Judge tried to find a constructive trust
of a new model a la lord denning. Barron could not find it. Depended on the conduct of the
person on whom it is imposed.

H.K.N. Invest Oy v Incotrade Pvt Ltd [1993] Costello J stated that a constructive trust will
arise when the circumstances of the case are such as to render it inequitable for the legal
owner of property to deny another's title to it and agreed that ‘where a person … holds
property in circumstances which in equity and good conscience should be held or enjoyed
by another he will be compelled to hold the property in trust for another'. (at 162)
convoluted set of facts. Plaintiffs were trying to execute a judgment against insolvent
defendants who had clearly been up to no good. The individuals too money both before and
another the corporate entities were incorporated. Costello said that the evidence did not
disclose whether.... lots of money taken before they were incorporated. Part of what he was
looking at involved a remedial constructive trust.

Murray v Murray [1996] 3, 255 Barron J stated: 'It is I think quite clear that the law will
impose a constructive trust in all circumstances where it would be unjust and
unconscionable not to do so.' Mee (1996) 1 is critical of this approach, stating that Murray
shows the new model constructive trust in its worst light; in his view the absence of
intention should probably have precluded even a constructive trust, but its 'inherent
vagueness' made it more plausible for Barron J to provide the plaintiff with a remedy.
The person could not claim the presumed relations trust because the aunt had made it clear
that she did not want a transfer.

Kelly v Cahill [2001] 1 IR 56 although it was nominally based on the dicta laid down in
decisions such as H.K.N., seemed to involve an even further expansion of existing principles
in order to achieve a ‘just’ result. Barr J expressed the view that ‘a “new model” constructive
trust…the purpose of which is to prevent unjust enrichment is an equitable concept which
deserves recognition in Irish law.’ (at 62) In these circumstances ‘justice and good
conscience’ required that second named defendant should not be allowed to inherit the
property and the interest in remainder under the will should be deemed to be subject to a
constructive trust in favour of the first named defendant.
Husband and wife. Deceased told the solicitor that he wanted to change his will to solely
benefit his wife. He went tot see lawyer and his solo intro came up with a scheme to change
the names on property into the name of his wife. Mistake made- not all property changed.
Turned out nephew would still benefit. Barr j has to see if constructive trust would do the
trick. Clearly the testator wanted to cut out nephew. Nephew had done nothing wrong. Barr
used new model constructive trust- the purpose of which was to prevent unjust enrichment-
it would be unconscionable to give property to nephew. Surprising result- the nephew had
done nothing wrong.

O’Dell (2001) is critical of Barr J’s judgment and describes the statement referred to above
as ‘yet another example of the unfortunate conflation of unjust enrichment and the

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remedial constructive trust’, which has the effect of collapsing the distinction between
personal and proprietary claims. In his view the remedial constructive trust upon which the
decision was based, although clearly established in Irish law, was still ‘too unfocussed and
insensitive to issues of policy, priority and timing’ (at 95) and should be deployed with more
caution.

Re Custom House Capital Ltd [2013] Finlay Geoghegan J granted a declaration that a
company, which was in liquidation, held a sum of money on trust for the applicant. She
stated (at [35] that the court must be satisfied that it was by reason of fraudulent conduct
by or on behalf of the company that it retained the applicant’s monies in order to make a
finding of a constructive trust in her favour.
Shows a more grown up approach to recognising that constructive trusts can have
consequences. Retired solicitor got sucked into a scam. See text book for facts.

Liability of Third Parties to Account

Persons who are not appointed as trustees may nevertheless be liable to account to
beneficiaries in certain circumstances, where they are found to possess the requisite degree
of knowledge about the nature and consequences of their activities. Where a stranger to
the trust takes it upon himself to act as a trustee and subsequently commits a breach of
trust, he will be liable for such a breach. In addition, a third party may incur liability where
he receives or deals with trust property possessing a degree of knowledge sufficient to
justify the imposition of liability or where he dishonestly assists in a breach of trust.

*Some degree of knowledge or wrongdoing on the part of this individual

*Some academics have said this really shouldn’t be under the heading of ‘constructive
trusts’. There is a degree of relabeling going on.

Alternative Remedies

• Personal liability to the beneficiary or principal in the fiduciary relationship (week 8)

• Proprietary remedy at law or in equity involving:

(1) imposition of a constructive trust (week 4) or

(2) tracing trust property - but while a beneficiary may be able to trace trust property into
the hands of an innocent volunteer, the latter’s liability will be confined to the return of the
property or its proceeds while still in his possession

• Where trustee or fiduciary is insolvent or where no longer possible to trace trust

property, liability to account in equity may be best option

It is important to bear in mind that imposing liability to account on a stranger to a trust or

third party is not the only possible cause of action which may be pursued by a beneficiary
where trust property is misappropriated. The alternatives are a personal claim against the
party responsible for effecting the breach of trust, either at law in the form of an action for

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money had and received, or in equity or a proprietary remedy at law or in equity to trace
the trust property. While a beneficiary may be able to trace trust property into the hands of
an innocent volunteer, the latter's liability will be confined to the return of the property or
its proceeds while still in his possession.

Terminology

While constructive trust terminology has been used in some of the case law, it might be
better described as equitable liability to account and this form of liability is personal in
nature. As Virgo has suggested, in The Principles of Equity and Trusts (676-677), ‘the
language of constructive trusteeship should be avoided because of its proprietary
connotations’. An accurate description of a third party or stranger in this context is ‘not in
fact a trustee at all, even though he may be liable to account as if he were’ (Paragon
Finance plc v. D.B. Thakerar & Co. [1999]).

Williams v Central Bank of Nigeria [2014]

This case usefully set out clear distinctions which may be drawn between the two kinds of
cases in this area and essentially clarified the ongoing debate on whether defendants in this
context could be labelled as constructive trustees.

*ISSUE: third party/stranger to trust – whether they are a trustee or not. This was an issue
because in English Limitation Act 1980, there is no limitation period in fraud & breach of
trust where the person is a trustee. The claim could therefore be brought outside the
limitation period.
*Lee: ‘the majority accept the analysis.’ Relevance of terminology – in this case judge gives a
good explanation. He summarises best where this line is drawn.

Facts:
The claimant had participated in a transaction which involved importing food into Nigeria
and alleged that he had been defrauded. He claimed that a solicitor, who had held the sum
of $6.5 million in his client account on trust for the plaintiff, had fraudulently breached that
trust by paying $6 million into an account maintained by the defendant. He claimed that the
defendant was therefore party to the fraud. The defendant applied to set aside service of
proceedings on the basis that the claim was barred by the limitation period set out in s.21(3)
of the Limitation Act 1980 which provided that the limitation period for a beneficiary to
recover trust property is six years from when the cause of action arises. On the face of it
therefore, the claimant's claim was time-barred. However, section 21(1) of the 1980 Act
provides an exception to the normal rules on limitation for claims which are brought by the
beneficiary of a trust “in respect of any fraud or fraudulent breach of trust to which the
trustee was a party or privy”. In such circumstances the limitation period will not apply. This
makes the label given to the defendant in this context highly important because if he is a
'constructive trustee' no limitation period applies, meaning that the claimant can pursue his
claim. The claimant argued that that the case should fall within s 21(1)(a) and that no
limitation period should apply on the basis is that the defendant could be regarded as a
trustee.
Ruling:

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The majority of the Supreme Court allowed the defendant's appeal, holding that the words
‘trust’ and ‘trustee’ in s.21(1)(a) of the Limitation Act 1980 bore their orthodox meaning and
that a ‘trustee’ for the purposes of that subsection did not include a party who was liable to
account in equity simply because he was a dishonest assister in a breach of trust and/or a
knowing recipient of trust assets. As Lord Neuberger commented, ‘[t]his is because such a
party, while liable to account in the same way as a trustee, is not, according to the law laid
down by the courts, a trustee, not even a constructive trustee.’

Lee (2015) states that ‘Crucially, the majority accept the analysis of Lord Millett from earlier
cases that a ‘true’ constructive trustee ‘really is a trustee’, whereas a stranger to the trust,
‘is not in fact a trustee at all, even though he may be liable to account as if he were’.

Intermeddling in a Trust — the Trustee de son Tort

As Lord Sumption JSC noted in Williams v Central Bank of Nigeria [2014] liability may arise
where individuals lawfully assume fiduciary obligations in relation to trust property, but
without a formal appointment. In such a case he suggested that ‘[t]hey are true trustees,
and if the assets are not applied in accordance with the trust, equity will enforce the
obligations that they have assumed by virtue of their status exactly as if they had been
appointed by deed.’
Where a person intermeddles with the affairs of a trust or performs acts characteristic of a
trustee he will become a trustee de son tort i.e. because of his wrong.

Dishonest Assistance

Dishonest Assistance- Assisting in the Misappropriation of Trust Property

The traditional position was that a person who, although he did not himself receive the trust
property, might incur liability if he assisted in a ‘dishonest and fraudulent design on the part
of the trustees’. A more recent formulation of what amounts to knowing assistance, and
which is applied today, is set out by Lord Nicholls delivering the opinion of the Privy Council
in Royal Brunei Airlines Sdn Bhd v Tan Kok Ming [1995]: 'A liability in equity to make good
resulting loss attaches to a person who dishonestly procures or assists in a breach of trust or
fiduciary obligation'. *HOL focused on dishonesty of third party, the individual assisting –
that is the law today.
This latter formulation focuses on the dishonesty of the person assisting in the breach of
trust rather than requiring dishonesty on the part of the trustees. As Lord Nicholls stated in
Brunei, "Dishonesty on the part of the third party would seem to be a sufficient base for
liability irrespective of the state of mind of the trustee who was in breach of trust." This was
confirmed by Lord Sumption in Williams, who stated, "It is now clear that knowing assisters
are liable in account of their own dishonesty, irrespective of the dishonesty of the trustees."

In Brunei that say the person must have acted dishonestly not negligently. Test is
whether, given the knowledge of the person and their intelligence or experience, eras

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their action dishonest? Objective test understood in the light of the person involved-
subjective in terms of intelligence not in terms of knowing if something was wrong.
Strictly objective in terms of what the reasonable person would view as dishonest.

The Requirement of Knowledge/ Dishonesty

The courts in England have been far from consistent in their attitude to this issue over the
last few decades. Before examining the case law it is useful to set out the various categories
of knowledge identified by Peter Gibson J in Baden v Societe Generale pour Favoriser le
Developpement du Commerce et de l'Industrie en France SA [1993], although considerable
reservations have been expressed in relation to this categorisation, and the Privy Council
has suggested in Brunei that ‘the Baden scale of knowledge is best forgotten’.

Baden Scale of Knowledge

The categories set out in Baden are as follows:

● actual knowledge;
● wilfully shutting one’s eyes to the obvious;
● wilfully and recklessly failing to make such inquiries as an honest and reasonable man
would make;
● knowledge of circumstances which would indicate the facts to an honest and reasonable
man;
● knowledge of circumstances which would put an honest and reasonable man on inquiry.

Dishonest Assistance

• Agip (Africa) v Jackson - constructive notice of fraud not sufficient to make defendant
liable - true distinction is between honesty and dishonesty
• Lipkin Gorman v Karpanale Ltd – suggested nothing less than knowledge, as defined
in one of the first three categories in Baden sufficient
• Royal Brunei Airlines Sdn Bhd v Tan Kok Ming - standard of what constitutes honest
conduct is not subjective. A defendant will not escape a finding of dishonesty simply
because he sees nothing wrong in his behaviour
• Twinsectra Ltd v Yardley - differences of opinion arose in relation to whether Lord
Nicholls in Royal Brunei had intended to lay down a purely objective test in relation
to dishonesty
• Lord Hutton - dishonesty requires knowledge by defendant that what he was doing
would be regarded as dishonest by honest people
• Lord Millett dissenting - not necessary that he should actually have appreciated that
he was acting dishonestly - it was sufficient that he was
• Barlow Clowes International - reference to ‘what he knows would offend normally
accepted standards of honest conduct’ meant only that his knowledge of the
transaction had to be such as to render participation contrary to normally acceptable
standards of honest conduct
• Abou-Rahmah v Abacha - confirmed obiter that the test of dishonesty in this context

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is ‘predominantly objective’ and it is not a requirement of the standard of dishonesty

that a defendant should be conscious of his wrongdoing

Agip (Africa) Ltd v Jackson [1990] (One of the most important judgments in this area.)
Facts:
Mr Zdiri, a senior officer in the plaintiff company, fraudulently altered a payment order of
$518,000 by changing the name to that of a puppet company controlled by the defendants
which had been set up to launder the money. The money was credited to the bank's
company account and following series of transactions all but $43,000 was then paid on to
unknown parties. The company was then closed. With no paper trial of the money to follow,
the plaintiff company then sued the defendant for return of the money, claiming that that
defendants were constructive trustees of the funds on the basis of knowing receipt and
knowing assistance.
Ruling:
Millet J said that none of the defendants could be held liable on the basis of knowingly
receiving trust funds for their own benefit but that the defendants were liable under the
heading of knowing assistance as they were at best indifferent to the possibility of fraud. On
the question of knowledge, Millett J said that constructive notice of the fraud is not
sufficient to make a defendant liable and that ‘the true distinction is between honesty and
dishonesty’. Millett J continued,
‘If a man does not draw the obvious inferences or make the obvious inquiries, the
question is: why not? If it is because, however foolishly he did not suspect wrongdoing or,
having suspected it, had his suspicions allayed, however unreasonably, that is one
thing. But if he did suspect wrongdoing yet failed to make inquiries because ‘he did not
want to know' (category (ii) or because he regarded it as none of his business
(category (iii)), that is quite another. Such conduct is dishonest, and those who are guilty of
it cannot complain if, for the purpose of civil liability, they are treated as if they had actual
knowledge.’

This approach has also been advocated by May LJ in Lipkin Gorman v Karpanale Ltd [1989]
in the following terms: 'there is at least strong persuasive authority for the proposition that
nothing less than knowledge, as defined in one of the first three categories in the Baden
case of an underlying dishonest design is sufficient to make a stranger a constructive trustee
of the consequences of that design.'

Lipkin Gorman v Karpanale Ltd [1989]

Facts:
A partner in a plaintiff firm of solicitors withdrew money from clients' accounts and
subsequently lost this money gambling in a club. The plaintiff firm brought an action against
the club on the grounds of knowing receipt and against their banks on the grounds of
knowing assistance. (Couldn't sue solicitor as he had no assets.)
Ruling:
A first instance it was held that the club was not liable and that the bank was partly liable.
The bank's liability was reversed in the CoA. The firm's appeal against the club was
ultimately allowed by the HoL on the basis that the innocent receipt of stolen money was
obliged to an equivalent sum to the true owner where full consideration for it had not been

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given and where this party had been unjustly enriched at the expense of the true owner.
Such a claim would be subject to a defence of change of position- this would be a viable to a
person whose position whose circumstances have changed so that ti would be inequitable in
the circumstances to make him pay back the money.

Royal Brunei Airlines Sdn Bhd v Tan Kok Ming [1995] - (One of the most important
authorities on this issue.)
*they wanted to move away from the subject of knowledge – but you can’t.
Facts:
The plaintiff company appointed another company, of which the defendant was managing
director and main shareholder, to be its agent for booking passenger flights and cargo
transport around eastern Malaysia. The defendant was receiving money for the plaintiff
company, which was agreed to be held on trust in a separate account until passed over.
However, the defendant's company, with the defendant's knowledge and assistance, paid
the money into its own current account and used it for its own business. The defendant's
company failed to pay on time, the contract was terminated, and it went insolvent. The
plaintiff company claimed the money back from the defendant.
Ruling:
● Lord Nicholls stated that ‘“knowingly” is better avoided as a defining ingredient of the
principle and that it is ‘inapt as a criterion when applied to the gradually darkening
spectrum where the differences are of degree and not kind.’
● One aspect of the principles set out by Lord Nicholls which has proved controversial is
whether he intended the concept of ‘dishonesty’ to be interpreted in a purely objective
manner or whether it must be established that a defendant was aware that his conduct
was dishonest.
● He stated that, ‘Honesty, indeed, does have a strong subjective element in that it is a
description of a type of conduct assessed in the light of what a person actually knew
at the time, as distinct from what a reasonable person would have known or
appreciated…. However, these subjective characteristics of honesty do not mean
that individuals are free to set their own standards of honesty in particular
circumstances. The standard of what constitutes honest conduct is not subjective.
Honesty is not an optional scale, with higher or lower values according to the moral
standards of each individual. If a person knowingly appropriates another’s property,
he will not escape a finding of dishonesty simply because he sees nothing wrong in
such behaviour.’
● Essentially Nicholls LJ said that while honesty has a subjective element it does not mean
that a plaintiff is free to set out her own standards of honesty. People will not escape
liability because they personally consider their behaviour to be honest.
● Lord Nicholls went on to say that when a court is called upon to decide whether a person
is acting honestly, it will look at all the circumstances known to the third party at the time
and to personal attributes such as his experiment and intelligence.
● He added that if the concept of honesty is to be judged by objective standard an accessory
will not be able to escape liability by claiming that he did not know that his actions were
wrong.
● Confusion- what is the test? Seems objective but we cannot say for certain.

When the House of Lords was called upon to apply this reasoning in Twinsectra Ltd v

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Yardley [2002] differences of opinion arose in relation to whether Lord Nicholls in Royal
Brunei had intended to lay down a purely objective test in relation to dishonesty.

Twinsectra Ltd v Yardley [2002]

Facts:
A solicitor who was acting for a client in connection with the purpose of land had been
unwilling to secure a loan for the client by giving him a personal undertaking. A second
solicitor was prepared to do so and received the money after the firm gave an undertaking
that it would be used solely for the acquisition of property on the behalf of the client. The
money was released to the first solicitors who paid it out on the client's instructions
although he took no steps to ensure that it was only applied in the acquisition of property
and a substantial part of it was used for other purposes. The loan was not repaid and them
lender sought to impose liability on the first solicitor, alleging that he had dishonestly
assisted in the breach of the trust of the second solicitor, who had gone bankrupt.
Ruling:
● HoL appeal found in favour of the solicitor.
● Lord Hutton stated that there were three possible standards which could be applied
applied to determine whether a person had acted dishonestly, namely a purely subjective
standard, a purely objective standard and and a combined test which requires that in
order to find dishonesty it must be established that the defendants actions were
dishonestly by the standard of a reasonable person and that he himself had realised that
by that standard his behaviour was dishonest.
● Lord Hutton favoured the third option and said that it would be unjust for the law to
permit a finding that a defendant had been dishonest in assisting in a breach of trust
where he had not been aware that what he was doing would be regarded by honest men
as being dishonest.
● In his view (at 174): ‘Dishonesty requires knowledge by the defendant that what he was
doing would be regarded as dishonest by honest people, although he should not escape a
finding of dishonesty because he sets his own standards of honesty and does not regard as
dishonest what he knows would offend the normally accepted standards of honest
conduct.’
● However, Lord Millett dissented in Twinsectra and said that in his opinion Lord Nicholls
had adopted an objective standard in Royal Brunei according to which the defendant was
expected to attain the standard which would be observed by an honest person placed in
similar circumstances. While account must be taken of subjective considerations such as
the defendant’s experience and intelligence and his actual state of knowledge at the
relevant time, it was not necessary that he should actually have appreciated that he was
acting dishonestly; it was sufficient that his actions were dishonest.

Barlow Clowes International Ltd (in liquidation) v Eurotrust International Ltd [2006]
Facts:
The plaintiff company was in liquidation following true exposition of a fraudulent securities
scheme in which it had taken £140m of investors’ money, and paid it into a company in the
Isle of Man where the defendant was a director. The trial judge found that the defendant
strongly suspected that the monies which the company had received from investors
fraudulently but that he preferred not to run the risk of discovering the truth. The liquidator
of Barlow Clowes argued that the defendant had dishonestly assisted the dissipation of the

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investors’ money. The defendants argued that Twinsectra had established a subjective test
for dishonesty and because the defendant had not appreciated that his actions could be
considered dishonest, he could not be guilty of knowing assistance.
Ruling:
● The trail judge had stated that if a defendant could be considered to be dishonest by
'ordinary standards' then his own standards of dishonesty were irrelevant. The CoA and
Privy Council agreed that this was a correct application of the law.
● Lord Hoffmann in the privy council held that the defendants were liable for knowing
assistance of the misappropriation of funds.
● He stated: ‘Their Lordships accept that there was an element of ambiguity in [the remarks
of Lord Hutton] which may have encouraged a belief, expressed in some academic writing,
that Twinsectra had departed from the law as previously understood and invited inquiry
not merely into the defendant’s mental state about the nature of the transaction in which
he was participating but also into his views about generally acceptable standards of
honesty. But they did not consider that this is what Lord Hutton meant. The reference to
‘what he knows would offend normally accepted standards of honest conduct’ meant only
that his knowledge of the transaction had to be such as to render his participation
contrary to normally acceptable standards of honest conduct. It did not require that he
should have had reflections about what those normally acceptable standards were.’
● In the opinion of the privy council the test laid out in Twinsectra was no different to that
laid out in Royal Brunei. (Someone can know or suspect that they are assisting in the
misappropriation of funds without knowing that the money was held on trust.)
● So what we see is a reaffirmation of the objective test, with the defendant's dishonesty
being measured against ordinary standards.
● See pages 313 and 314 of textbook for further info.

Ryan [2006] commented that the decision in Barlow Clowes has ‘brought closure to the
ambiguity engendered by Twinsectra as to the true test posited by Lord Nicholls in Royal
Brunei’ and he correctly stated that the interpretation of Royal Brunei put forward in Barlow
Clowes is a more accurate reading of the former decision than that put forward by the
majority in Twinsectra.

Abou-Rahmah v Abacha [2006]

Facts:
The claimants had made payment she into the bank account of the fourth named defendant
bank as part of a fraudulent scheme orchestrated by the first three named defendants. The
money wears then transferred into the account of a client company, the principals of which
were involved in the fraud. The trial judge accepted that the bank's branch manager
probably suspected that these individual might have been assisting in money laundering
from time to time. The penny and fraudsters disappeared and despite the trial judge's
finding he dismissed the appellants' claims on all grounds. On appeal they pursued the
claims based on the equitable tort of knowing dishonest assistance and in restitution of the
money the bank had received. The first claim failed in the CoA and the Court upheld the
bank's defence of change of position with regard to the latter.
Ruling:
● Arden LJ confirmed obiter that the test of dishonesty in this context is ‘predominantly
objective’ and that it is not a requirement of the standard of dishonesty that the

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defendant should be conscious of his wrongdoing.

● She stated HC or CoA could only decide to follow a decision of the Privy Council rather
than a decision of the HOL in exceptional circumstances.
● She concluded that this was the case in Abou Rahmah.
● She expressed the opinion that while Twinsectra was binding on the court, Barlow Clowes
did not involve a departure from, or refusal to follow, Twinsectra.
● She stated, ‘Rather, the Barlow Clowes case gives guidance as to the proper interpretation
to be placed on it as a matter of English law. It shows how the Royal Brunei case and the
Twinsectra case can be read together to form a consistent corpus of law.’
● Arden LJ concluded that the the trial judge had been correct to proceed on the basis that
the law laid down in Twinsectra, was interpreted by the Privy Council in Barlow Clowes,
represented the law in England and Wales.
● Makes a distinction between general suspicions and specific suspicions.
● Confirms that Twinsectra is a primarily objective test and it does not matter that the def
was not conscious of wrongdoing,

Knowing Receipt

Knowing Receipt of and Inconsistent Dealing withTrust Property/Unconscionable Receipt

A recipient of property which has been misappropriated in breach of trust may be liable to
account for this property provided that he possesses the necessary degree of knowledge of
the breach of trust. Similarly, where a recipient of trust property deals with it in a manner
which he knows to be inconsistent with the terms of the trust, he will be liable to account.

The Degree of Knowledge Required

The earlier authorities suggested that either actual or constructive knowledge would suffice
in determining the question of whether liability would arise under this heading, see Belmont
Finance Corporation v. Williams Furniture Ltd (No.2) [1980].

Belmont Finance Corporation – either actual or constructive knowledge would suffice

Re Montagu’s Settlement Trusts [1987]

Facts:
The trustees in this case had transferred certain chattels to beneficiary (10th Duke of
Manchester) in breach of trust and he had disposed of a number of these during his lifetime,
although his solicitor had been aware of the terms of the settlement. After his death, the
beneficiary's heir claimed that the former was a constructive trustee of the chattels.
Ruling:
Megarry VC favoured the imposition of liability only in circumstances where the recipient
possessed actual knowledge of the breach of trust. He held at while the beneficiary's estate
was liable to return any remaining chattels or their traceable proceeds, the Duke himself
was not liable as a constructive trustee as he had no actual knowledge that the chattels
were trust property transferred in breach of trust. Megarry VC was of the view that
imposing a constructive trust should depend on the actual knowledge of the recipient and
not on whether he is deemed to have constructive notice of the trust.

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Agip Africa (Ltd) v Jackson [1990]

Millett J stated at one point in his judgement hat a person who receives for his own benefit
trust property transferred to him in breach of trust is liable as a constructive trustee if he
received it with either actual or constructive notice.

He reserved the question of whether Megarry VC's doubts about constructive notice being
sufficient in relation to knowing receipt were well founded.
Gardner (1996) suggests that Millett J's comment about whether Megarry's doubts about
constructive notice sufficing are well founded 'seems a reflection rather of courtesy towards
a brother judge than of uncertainty on Millett's part over his own view'.

Re Frederick Inns Ltd [1994] Irish case.

Facts:
Payments were made by a group of associated companies to the Revenue Commissioners in
the six months immediately preceding the commencement of the winding up of four of
these companies out of the proceeds of sale of various licensed premises which had
belonged to these four companies. The sum was appropriated by the commissioners in
reduction of the tax liabilities of not only the four companies involved in the proceedings
but also those of six other companies in the group. The liquidator challenged these
payments as being ultra vires in so far as they had effected an alienation of the companies'
assets when they were insolvent. The trial judge held that the payments made by the
companies which exceeded their liabilities where intended to reduce the liabilities of other
companies in the same group were ultra vires on the grounds that each company was a
separate entity. The commissioners appealed.
Ruling:
The appeal was dismissed by Supreme Court who held that no clause of the memoranda of
association between the companies gave them the power to pay the debts of another
company and that they payments were therefore ultra vires. Blayney J held that that ultra
vires payments constituted a misapplication by the directors of company funds, which
breached their fiduciary duties. These monies had been received by the Revenue
Commissioners with constructive knowledge of the breach of fiduciary duty as the
memoranda of association of the companies involved, which were documents of public
record, revealed the absence of capacity. So, ultra vires payments were held by them on a
constructive trust and had to be repaid to the official liquidator. The SC thus ruled that sums
should be repaid to the revue commissioners. SC said this money was held subject to a
constructive trust. Key point: Irish courts accepted the test for liability/knowledge of receipt
– was one of actual or constructive knowledge. Here the answer was yes, the Revenue
should have checked.
● Appears to accept that constructive knowledge will suffice. Test is any actual or
constructive knowledge.
● Constructive knowledge is notice of a fact that a person is presumed by law to have,
regardless of whether he or she actually does, since such knowledge is obtainable by the
exercise of reasonable care.

Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] English case.
Facts:
The claimants were the liquidators of two banking companies who contended that the

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defendant was liable to account to them for a sum of money as a constructive trustee on
the basis that he had knowingly assisted in the breach of trust or had received trust monies
with knowledge of the breaches. The trail judge dismissed the claim in the basis that
dishonesty by the defendant had not been established.
Ruling:
● The claimants appealed to the CoA where their appeal was dismissed.
● However, Nourse LJ clarified the basis for establishing liability on the grounds of knowing
receipt.
● He held that the trial judge had erred in insisting on dishonestly in this instance.
● Nourse LJ agreed with the trial judge that, as the defendant had not acted dishonestly in
this case, the claim of knowing assistance was bound to fail.
● However, he stated that dishonesty was not a prerequisite to liability under the heading of
knowing receipt and that the trial judge had been incorrect to proceed on this assumption.
● Nourse LJ stated that while the categorisation of knowledge laid down in the Baden case
has been influential in many decisions relating to knowing receipt, it was not formulated
with that head of liability in mind.
● While the Baden test very useful for establishing liability in the context of knowing
assistance, he had grave doubts over whether in could be of any use when establishing
liability for knowing receipt.
● There is no need for the Baden categorisation, rather, all that is necessary in this context is
that ‘the recipient's state of knowledge should be such as to make it unconscionable for
him to retain the benefit of the receipt.’- Unconscionability test.
● Concluded that the defendant's knowledge was not such as to make it unconscionable for
him to retain the benefit of the receipt and thus the appeal was dismissed.
● This simplified test established by Nourse J was welcomed, although it should be noted
that it is not perfect as it still gives rise to the question of what should be done in the case
of a defendant with no sense of right or wrong.

Fyffes plc v DCC plc [2009]

Laffoy J expressed the view that Nourse LJ's unconscionablity test in Akindele was a stricter
test than constructive notice. She concluded that in the circumstances it was not necessary
for her to decide between the application of the Akindele unconscionability test or the
Frederick Inns actual or constructive knowledge test, although she did refer to Frederick
Inns as ‘a decision by which this court is bound’.
- Laffoy J essentially had to chose between English and Irish law, she chose to follow the
Irish constructive notice test that was set out in Frederick's.

O’Donnell v Bank of Ireland [2014]

Laffoy J stated:
‘While, on the current state of the law on the equitable principle of “knowing receipt”,
there is a divergence between this jurisdiction and the United Kingdom in that “knowledge,
actual or constructive” of the breach of trust is an ingredient of the test for establishing
liability as a constructive trustee in this jurisdiction, whereas in the United Kingdom the
corresponding ingredient of the test is whether the recipient had sufficient knowledge of
the circumstances of the transfer to make it “unconscionable” for him to retain the benefit
of the receipt, the Court does not have to address that divergence, because it was not urged
on behalf of the appellants that this Court should adopt the approach which has been

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adopted in the United Kingdom.'

- Laffoy J again confirmed that the law in Ireland clear on this issue- it will follow the
Frederick's constructive knowledge test. Thus the important question in Irish law is were
you really put on notice. There is currently nothing to suggest that the Irish courts will adopt
the english unconscionablity approach as set out in Akindele.

There is arguably merit in the criticism of the approach of Megarry VC in Re Montagu's

Settlement Trusts that it ignores the restitutionary nature of the claim. If one accepts the
approach that liability in the knowing receipt category is based on the concept of unjust
enrichment, for which dishonesty is not required, it should follow that the degree of
knowledge possessed by the recipient should not be the decisive factor.

Lord Millett stated in Twinsectra Ltd v Yardley [2002] that liability in knowing receipt is
receipt-based and does not depend on fault. He added that there is 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 defence of change of position.

In Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Nourse LJ
stated that he doubted whether strict liability coupled with a change of position defence
would be preferable to fault-based liability in many commercial transactions. In his view the
courts must continue to do their best with the accepted formulation of liability in knowing
receipt, simplifying and improving it where possible.
Page 720 in Burgo are useful for showing that we should stick with the approach that equity
is taking at the minute.

This debate is far from over and it is entirely possible that given the opportunity, the House
of Lords might decide to favour a restitutionary based model in this area. However, for the
present, equitable principles are still relevant and as judgments such as that of Nourse LJ in
Akindele show, still developing. As the law stands at present in this jurisdiction, knowledge,
or if the approach in Re Frederick Inns is followed, at least some form of notice, is still
required before liability under the heading of knowing receipt can be imposed.

TOPIC 6: Purpose and Charitable Trusts

Non-Charitable Purpose Trusts

As we have seen a private trust may be established in favour of specified or ascertainable
individuals. In addition, a trust for purposes which are treated in law as charitable will be
recognised as valid. The distinctive feature of such trusts is that they are regarded as being
for the public benefit and are enforceable by the Charities Regulatory Authority (replacing
the Attorney General - see s.38 of the Charities Act 2009). Trusts for non-charitable
purposes will no generally be recognised as valid as they are considered to lack the human
beneficiaries necessary to secure their enforcement, to be too uncertain in nature, and will
often offend the rules against perpetual trusts and inalienability.

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These potential difficulties have not stopped people trying to establish so-called 'purpose
trusts'. In certain cases purpose trusts have been reluctantly recognised as valid, although
the courts have made it clear that this should not be common practice. It is necessary to
consider the objections raised in relation to the enforcement of non-charitable purpose
trusts and to consider the limited exceptions to the general rule that they will not be
enforced.

Rationale for the Policy of Non-Enforcement of Purpose Trusts

Enforceability — The Beneficiary Principle

One of the principal objections to non-charitable purpose trusts is that there is no one who
can ensure that the court will secure performance of the trust if this should become
necessary. As Grant MR stated in Morice v Bishop of Durham (1804) ‘there must be
somebody in whose favour the court can decree performance'. The trust hangs on someone
who can enforce the obligation.

This principle was explained by Roxburgh J in Re Astor's Settlement Trusts [1952] in the
following terms: ‘that a trustee would not be expected to be subject to an equitable
obligation unless there was somebody who could enforce a correlative equitable right.’

Enforceability — Clarity and Certainty

A further objection is that non-charitable purpose trusts are often not expressed in terms
which are sufficiently clear and certain to enable a court to oversee their performance. So,
in Morice v Bishop of Durham (1804) a gift for ‘such objects of benevolence and liberality as
the Bishop of Durham in his own discretion shall most approve of' was considered to be too
uncertain. It was left entirely to the Bishop to decide which objects he thought would be
appropriate. This was considered to be too uncertain. As Grant MR stated, "an
uncontrollable power of disposition would be ownership and not a trust."

Re Astor's Settlement Trusts [1952]

Facts:
An inter vivos settlement provided that shares were to be held on trsut for specified non-
charitable objects including, 'the establishment, maintenance and improvement of good
understanding, sympathy and co-operation between nations' and the 'preservation of the
independence and integrity of newspapers'.
Ruling:
Roxburgh J held that the trusts fell foul of the beneficiary principle as there was no clear
human beneficiary, but he also made it clear that they would have failed as being too
uncertain in nature.

The Need for Compliance with the Rules against Perpetuities and Inalienability
This objection is based on considerations of public policy, which dictate that property should
not be tied up for excessive periods of time. Before a purpose trust will be enforced the
court must be satisfied that its terms will not offend the rule against trusts of undue
duration and that the property included in the trust will not be rendered inalienable. In
some respects a fairly flexible attitude has been taken towards the need for compliance with
the rule against inalienability and the courts have assumed that the requirements of the rule

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will be met where it appears that this is a reasonable interpretation of a gift.

Trusts for purposes that are legally charitable are allowed to go on indefinitely.

Perpetuity period is 21 years. Where a phrase such as "so long as the law allows" or "such
period as the law permits" has been employed a gift will be regarded as having been valid
for a period of 21 years.

Mussett v Bingle [1876]

Facts:
A testator gave a legacy of £300 to be applied in the erection of a monument to his wife's
first husband and a further sum of £200, the interest on which was to be used for its
maintenance.
Ruling:
Hall VC upheld the validity of the former gift presumably on the assumption that the
monument would be erected within the perpetuity period. The latter gift was clearly of a
perpetual nature and therefore void.

The Law Reform Commission in the Rule Against Perpetuities and Cognate Rules LRC
recommended no change to the rule against trusts of undue duration, noting that it is just
open of the devices employed to regulate non-charitable purpose trusts (although it did
recommend the abolition of the rule against perpetuities which was effected by s.16 of the
Land and Conveyancing Law Reform Act 2009).

Exceptional Cases in which Purpose Trusts have been Enforced

Tombs and Monuments

At common law a trust for the erection of a tomb, gravestone or monument was not
regarded as being charitable in nature. Legislation has intervened in a limited way and s.50
of the Charities Act 1961 now provides that gifts for the maintenance or improvement of a
tomb, vault or gravestone or any other memorial to a deceased person are charitable gifts
so long as they do not exceed £60 per year in the case of income and £1000 per year in
other cases. These monetary values have increased over the years and there now exists an
exception in the common law, which allows gifts for the erection and maintenance of tombs
to be upheld as valid trusts, provided that they do not offend the rule against alienability.
The lack of beneficiaries is overlooked if the trust is sufficiently certain and the rule against
inalienability is complied with.

As illustrated by the decision of Hall VC in Mussett v Bingle [1876] the courts appear to
assume that directions of this nature will be carried out within the perpetuity period. To
come within this limited exception it must also be shown that the trust is expressed with
sufficient certainty in order to be carried out.

Re Endacott [1960]
Facts:
A testator bequeathed his residuary estate valued at £20,000 to a specified parish council
'for the purpose of providing some useful memorial to myself.'
Ruling:

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The gift was held to be void by the CoA. Harman LJ stated that a case of this kind, which
involved providing money to a church to build an unspecified and unidentified memorial,
should not be allowed to fall within the exception.

Animals
The lack of beneficiaries is overlooked if the trust is sufficiently certain and the perpetuity
rule is complied with. A gift to provide for the welfare of animals generally or for the care
and maintenance of a class of animals is regarded as being charitable in law. Gifts to provide
for the care of specified animals, while they are admittedly not of a charitable nature and
would prima facie seem to fall foul of the beneficiary principle, have been upheld as coming
within the limited class of exceptions to the principle that non-charitable purpose trusts will
not be enforced.
The lack of human beneficiary not considered problematic and will be overlooked provided
that the purposes are sufficiently clear in nature and the trust is of a limited duration.

Pettingall v Pettingall (1842)

A gift of £50 for the maintenance of the testator's favourite mare was upheld as valid.

Re Dean (1889)
North J upheld a gift of £750 per annum for a period of 50 years for the care and
maintenance of the testator's horses and hounds. He rejected the view that the court would
not recognise the validity of a trust unless it is capable of being enforced by someone. He
stated that he would uphold a gift of this nature ‘provided that it is not to last for too long a
period'. This judgement has since come to be regarded as unsatisfactory as North J
essentially ignored the potential problems of violating the rule against inalienability.

Re Kelly (1932)
Facts:
A testator bequeathed a sum of money to be applied in the case and maintenance of his
dogs with a gift over should any surplus remain on the death of the last dog.
Ruling:
Meredith J upheld a gift to be applied in the care and maintenance of the testator’s dogs as
being valid for a period of 21 years following his death, although it would have been
technically void thereafter and the gift over was found void for remoteness. It also clearly
emerged in this case that only a human life can be used as a measuring life for the purpose
of applying the rule against perpetuities.
In the light of Re Kelly it can be said with a fair degree of certainty that in this jurisdiction
purpose trusts for the care and maintenance of specified animals will be upheld provided
that they are expressed with sufficient clarity.

Gifts to Unincorporated Associations

Unincorporated associations are defined as two of more person bound together for
common purposes which are not business purposes, and in which each party has mutual
duties and obligations.
While a gift to a body corporate even for non-charitable purposes will be valid because
such a body has a separate legal personality and therefore can enforce it, difficulties arise
where it is sought to confer a gift of a non-charitable nature on an unincorporated

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association. Gifts of this nature may fall foul of the beneficiary principle or may contravene
the rule against inalienability.

Cocks v Manners (1871)

A gift to a contemplative order of nuns was treated as a gift to the superior of the
community for the time being and in this manner was upheld on the basis that it did not
infringe the rule against inalienability.

The approach has been to treat a bequest as a gift to the present members of the
association as an accretion to the funds which are subject to the rules of the association
upon which the members have agreed and which must accrue to the remaining members on
the death or resignation of another member. In Re Lipinski's Will Trusts [1976] Oliver J held
a gift to be used in the work of constructing new buildings for it was valid as an absolute gift
to the members of the association beneficially as an accretion to its funds subject to its
rules.
While some decisions show a greater willingness to place a favourable construction on gifts
of this nature, a warning was given by the Harman LJ Court of Appeal in Re Endacott [1960]
that the categories of these ‘anomalous' cases should not be extended.

Hayton (2001) recommended that an ‘enforcer’ might be appointed under the terms of a
trust in order to oversee its enforcement and he suggests that there is no reason why equity
should not permit a settlor to confer additional enforcement rights on other persons,
including himself. This suggestion has been taken up by a number of other academic
commentators, including Brown, who advocated a statutory system of enforcement,
supervision and incentives. However, Pawlowksi and Summers [2007] suggest that someone
indépendant of the trustees and beneficiaries should be appointed as the enforcer.

The reason all of this is important is tax. Tax havens use non-charitable purpose trusts in a
way which is very significant for their economies. It allows people to avoid liability and
protecting assets from potential creditors. It is not impossible that post-Brexit, Britain will
look into this type of trust to attract new industries- although there is currently hesitation
surrounding non-charitable purpose trusts and it may be something that the legislator rules
out. Currently difficult in England and Wales due to tax avoidance but this may not continue.

Charitable Trusts

Advantages of Charitable Status

● Charitable trusts are considered as being for the benefit of the public generally or at least
for an appreciable section of it and for this reason they have traditionally enjoyed a
number of advantages over other types of trust.
● Charitable trusts do not depend on the existence of human beneficiaries to enforce them
and they are not subject to the same requirements relating to certainty of objects which
must be complied with if a private trust is to be considered valid.
● Another crucial distinction is that charitable trusts may be perpetual in nature to the
extent that the rule against inalienability which has proved such a major stumbling block
in any attempts to enforce non-charitable purpose trusts, does not apply to them.

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● [While charitable trusts may be of perpetual duration, they were subject to the rule
against perpetuities (until the enactment of s.16 of the Land and Conveyancing Law
Reform Act 2009- key elements only in force since 2014) to the extent that the initial
vesting had to take place within the relevant perpetuity period, although this principle was
subject to the limited exception that a gift over from one charity to another was not
subject to the rule, see Christ’s Hospital v Grainger (1848).]- established the principle
THAT CHARITIES MUST VEST within the perpetuity period and charities can make gists to
each other.
● There are also huge financial advantages to achieving charitable status. Charities are not
taxed and if you make a donation to a charity they can claim 'gift aid' tax back. The
downside is that charities are so tightly regulated.

Definition of Charity
● The meaning of the word charity in law arguably bears little realisation to a lay person's
conception of the word.
● Until recently no attempt had been made by the legislature to actually define what is
legally charitable.
● A list of charitable purposes was contained in legislation passed in the seventeenth
century (in Ireland the Statute of Charitable Uses 1634 – repealed by Statute Law
(Revision) Act (Ireland) 1878), although these statutes were not intended to define
charitable objects in a legal sense but rather to enumerate a variety of purposes
recognised as being legally charitable. This list was never intended to be exhaustive and as
Keane J stated in Re Worth Library [1995] a trust might be considered charitable if it fell
within the ‘spirit or intendment' of the statute.
● In Commissioners for Special Purposes of Income Tax v Pemsel [1891] Lord Macnaughten
identified four broad categories of charitable trust, which are as follows:
1. Trusts for the relief of poverty
2. Trusts for the advancement of education
3. Trusts for the advancement of religion
4. Trusts for other purposes beneficial to the community
● For more than a century these four categories provided the basis on which the English and
Irish courts approached the question of charitable trusts, and it was generally accepted
that trusts which fell within these four categories were charitable at law.
● Macnaughten's categories as set out in Pemsel are closely mirrored in s. 3(1) of the 2009
Act, which was the first time a statutory definition of 'charitable purposes' was provided
for in Ireland.
● Under section 3 of the 2009 act charitable purposes are defined as:
The prevention or relief of poverty and economic hardship
The advancement of education
The advancement of religion
Any other purpose that is of benefit to the community
● This latter category is stated to include the advancement of community welfare and
development, the promotion of voluntary work, the promotion of health, the
advancement of conflict resolution, the protection of the environment, the prevention of
animal cruelty, the advancement of the arts, etc.

The Public Benefit Requirement

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● What the Macnaghten Classification failed to make clear explicitly is that for a trust to be
regarded as legally charitable, it had to be of a public character and contain some element
of benefit to the public generally, so there were in effect two hurdles to be overcome,
first, an element of benefit, e.g. the relief of poverty, and secondly, an element of public
benefit.
● The concept of public benefit is retained by s.3(2) of the Charities Act 2009 which provides
that a purpose shall not be regarded as a charitable purpose for the purposes of the Act
unless it is of public benefit.
● Section 3 (3) provides that subject to subs.(4), which provides that a gift for the purpose of
the advancement of religion shall be regarded as being of public benefit, a gift shall not be
regarded as being of public benefit unless it is intended to benefit the public or a section
of the public and that in a case where it confers a benefit on a person other than in his
capacity as a member of the public or a section of the public, any such benefit must be
reasonable in all the circumstances and ancillary to and necessary for the furtherance of
public benefit.
● Section 3(7) further provides that in determining whether a gift is of public benefit,
account shall be taken of any limitation imposed by the donor of the gift on the class of
persons who may benefit and whether this limitation is justified and reasonable having
regard to the nature and purpose of the gift, and also the amount of any charge payable
for any service provided in furtherance of the purpose for which the gift is given and
whether it is likely to limit the number of persons or classes of persons who will benefit
from the gift.
● Section 3(8) - which will change how the public benefit requirement has been applied, in
particular in relation to trusts for the relief of poverty - provides that a limitation on the
persons who may benefit ‘shall not be justified and reasonable if all of the intended
beneficiaries of the gift or a significant number of them have a personal connection with
the donor. (See further s.2(2)(a) of the Act which sets out a number of circumstances in
which a person is connected with another for this purpose.)

● The 2009 act was introduced to alleviate public concerns about charities- there were
scandals and a lack of regulation before. The 2009 act has led to a lot more
administration- problematic for smaller charities but regulation was necessary.

Charitable Purposes

● Trusts for the Relief of Poverty

Trusts for the relief of poverty was the first category in the Macnaughten classification and
has been modified to ‘the prevention or relief of poverty or economic hardship’ in s.3(1) of
the Charities Act 2009. The existing case law interpreting the meaning of ‘poverty’ or ‘poor’
for the purposes of the Macnaghten classification remains a useful guide in this context. This
category of charitybale purposes has given rise to a great deal of interesting case law. There
are two important aspects to trust for the relief of poverty and economic hardship, firstly
understanding what is meant by 'poor' and secondly what the scope of the public benefit is.
The law in England and Ireland has taken very different directions on this matter.

Meaning of Poor
Re Coulthurst [1951]

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Evershed MR made the point that: ‘It is quite clearly established that poverty does not mean
destitution; it is a word of wide and somewhat indefinite import; it may not unfairly be
paraphrased for present purposes as meaning persons who have to “go short” in the
ordinary acceptation of that term, due regard being had to their status in life and so forth.’
● In this case the CoA held that a trust for the benefit of widows and children of deceased
officers of a bank, who by reason of their financial circumstances were the most deserving,
was a valid charitable trust.
● The main principle established in this case is that one does not have to be destitute to be
considered impoverished.

Segelman deceased [1996]

Chadwick J accepted that a gift to poor and needy members of a class of the testator's
relatives was a valid charitable gift for the relief of poverty. He stated that 'most members
of the class are comfortably off, in the sense that they are able to meet their day-to day
expenses out of income, but not affluent' and that 'like many others in similar
circumstances, they need a helping hand from time to time in order to overcome an
unforeseen crisis'.
● This case suggests that a more flexible approach is being taken towards the degree of
poverty which must be established.
● This was a so-called 'poor relations case' where someone tried to leave money to their
relatives in the form for a charitable trust. The key issue in this case is distinguishing a gift
to certain individuals from a gift to a class of people. Gifts to individuals are not charitable
even where they are dressed up as such.
● Histed has commented [1996] that 'the court has come perilously close to implying that an
occasional problem of expenditure exceeding income is sufficient to qualify a class
member as "poor".'

The Public Benefit Element- Differing English and Irish Tests.

● In Ireland the absence of statutory intervention means that the public benefit test is fairly
easy to satisfy.
● However, Section 3(7) of the Charities Act 2009 provides that in determining whether a
gift is of public benefit, account shall be taken of any limitation imposed by the donor of
the gift on the class of persons who may benefit and whether this limitation is justified and
reasonable having regard to the nature and purpose of the gift, and also the amount of
any charge payable for any service provided in furtherance of the purpose for which the
gift is given and whether it is likely to limit the number of persons or classes of persons
who will benefit from the gift.
● Section 3(8) - which will change how the public benefit requirement has been applied, in
particular in relation to trusts for the relief of poverty - provides that a limitation on the
persons who may benefit ‘shall not be justified and reasonable if all of the intended
beneficiaries of the gift or a significant number of them have a personal connection with
the donor.'
● Section 2(2)a of the Act provides that a person is connected to another if they are their
grandparent, parent, sibling, child, grandchild, spouse or employee.
● For this reason 'poor relations' trusts are unlikely to qualify for charitable status in Ireland.
● These limitations do not apply in England and it is likely that the case law which has built
up in England in this area will continue to be followed in there, meaning English public

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benefit test differs significantly the Irish one. It is useful to be familiar with the English
test.

English Public Benefit Test

● In English law it is important to distinguish a gift to specified poor individuals from a gift to
a class of the poor.

Re Scarisbrick [1951]
● In this case Jenkins LJ stated, "I think the true question in each case has really been
whether the gift was for the relief of poverty amongst a class of persons or was merely a
gift to individuals, albeit with the relief of poverty amongst those individuals as the motive
of the gift."
● This case concerned a 'poor relations' trust, where the testatrix had left a gift of money to
benefit relatives of her children who were in difficult financial circumstances.
● Despite Lord Jenkins' previous statement, Evershed MR stated that: ‘The “poor relations”
cases may be justified on the basis that the relief of poverty is of so altruistic a character
that the public element may necessarily be inferred thereby; or they may be accepted as a
hallowed, if illogical, exception.’
● This case essentially established that poor relations trust can be upheld as valid because
helping the poor is an altruistic thing to do.

Re Segelman deceased [1996]

● Chadwick J accepted that a gift to poor and needy members of a class of the testator's
relatives, which was not to close until 21 years after his death, was a valid charitable gift
for the relief of poverty and that it was not disqualified from being such by the restricted
nature of the class.
● In this case the class of people was particularly small, there were 26 members. Despite
this Chadwick J upheld the trust as it was likely that the class of people would be much
larger at the end of the 21 years from the testator's death.
● Chadwick J held that a girds for the benefit of poor and needy persons is a gift for the
relief of poverty, and such a gift is no less charitable because those whose poverty is to be
relived are confined to a particular class limited by blood ties or employment.

Dingle v Turner [1972]

● In this case the House of Lords confirmed that trusts for the benefit of ‘poor employees’
will be recognised as valid charitable trusts.

Attorney General v Charity Commission for England and Wales [2012]

The Upper Tribunal confirmed that trusts for the relief of poverty could be upheld as
charitable even if confined to a restricted class defined by personal relationship or contract
of employment. It acknowledged that the ‘poor relations’ cases represent an exception to
the general rule or an anomaly but the tribunal added that ‘within the exception, logic and
coherence must prevail’.

The pattern which seems to be emerging in England that trusts which benefit people who
are not affluent but not destitute is a charitable trust. It is important to recognise that the

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public benefit test in this category in England and Walsh is different- public benefit had been
reduced almost to vanishing point. It is for this reason that certain scholars (Rahmatian)
suggest that the House of Lords may overturn Re Scarisbrick and Dingle v Turner.

In Ireland, aspects of any relevant decisions relating to the public benefit test under this
heading must now be read in the light of ss. 3(7) and (8) of the Charities Act 2009 set out
above and the requirement of public benefit will undoubtedly be more rigorously applied in
the future as a result.
Remember: Big difference in public benefit requirement in England and Ireland.

2. Trusts for the Advancement of Education

● Trusts for the advancement of education were recognised in Pemsel’s case as charitable in
nature and s.3(1)(b) of the Charities Act 2009 expressly states that the advancement of
education is a charitable purpose.
● It should also be noted that s.3(11)(k) of the Charities Act 2009 now specifically provides
that ‘the advancement of the arts, culture, heritage or sciences’ is included in the heading
of purposes that are of benefit to the community which should ensure that any gifts of this
nature which are not found to come within the meaning of ‘education’ may still qualify as
charitable in nature.
● The concept of what will be regarded as 'educational' in a legally charitable context has
been considerable widened over the last 50 years by a process of judicial interpretation.
A rather narrow view of the concept of what is ‘educational' in the sense of what will be
recognised as legally charitable was taken by Harman J in Re Shaw [1957].

Re Shaw (1957)
Facts:
The will of George Bernard Shaw provided that his trustees should use his estate to provide
for research into the advantages of reform of the alphabet.
Ruling:
Harman J held that ‘if the object be merely the increase of knowledge that is not in itself a
charitable object unless it be combined with teaching or education'. He found that these
latter elements were missing in this case and that the objects were not beneficial to the
community in a way regarded as charitable by law.

A more expansive interpretation of what should qualify as ‘education' was put forward by
Wilberforce J in Re Hopkins' Will Trusts [1965] where Wilberforce J stated that: ‘the word …
must be used in a wide sense, certainly extending beyond teaching.’ This case established
that Harman J's interpretation of education in shaw was too narrow, and that private
research for purposes other than teaching could be categorised as educational.

Re Worth Library [1995]- highly important Irish decision on educational trusts.

Facts:
The HC was called upon to decide whether to approach a cy-pres scheme proposed by the
trustees of the Worth Library which consisted of a bequest of a large collection of books
originally made in the 18th century to Dr Steeven's hospital in Dublin. The the hospital was
closed in 1988, the trustees of the library decided to temporarily transfer the books to

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Trinity College for safekeeping amend appointed the college as trustees in their place. The
Eastern Health Board, which had purchased the hospital that year, took the view that the
books should be returned to their original location. The Attorney General gave his consent
to the trustee's application to the HC for and order framing a cy-pres scheme and the board
was joined as a defendant in the proceedings.
Ruling:
● Keane J stated that the fundamental issues in this case which required resolution were
whether the initial bequest of the worth library was, in law, a charitable trust and, if so,
the type of charitable bequest that it represented.
● When considering whether the initial bequest should be considered as being for the
advancement of education, Keane J stated, 'Gifts for the advancement of education …
would embrace, not merely gifts to schools and universities and the endowment of
university chairs and scholarships: ‘education' has been given a broad meaning so as to
encompass gifts for the establishment of theatres, art galleries and museums and the
promotion of literature and music. In every case, however, the element of public benefit
must be present and, if the benefit extends to a section of the community only, that
section must not be numerically negligible.’
● It would seem that Keane J favours a broader and more liberal interpretation of
'education' than that of Harman J in Re Shaw.

Defining education is broad in England and Ireland. Problems- the public benefit test has
been very strictly applied.

Public Benefit Requirement

● It is well established that a gift fore the advancement of education will only qualify as
charitable provided that it for the public benefit generally, or the benefit of an appreciably
important class.
● The courts in Ireland and England have tended to reject claims to charitable status on the
basis of the purpose of the advancement of education where there is a personal
connection between the donor and the intended beneficiaries. To this extent the
provisions of s. 3(8) of the Charities Act 2009 are unlikely to effect any real change in
practice here.

Oppenheim v Tobacco Securities Trust Co. Ltd [1951]

Facts:
This case concerned the validity of a trust set up to provide for the education of the children
of employees of a tobacco company and its subsidiaries.
Ruling:
● Despite the fact that the number of employees exceeded 110,000 at the time of
settlement, it was held that the trust must fail as the distinguishing quality of the class of
beneficiaries was a relationship with a named propositus and for this reason they could
not constitute a section of the public.
● Lord Simonds stated: ‘These words ‘section of the community’ have no special sanctity,
but they conveniently indicate first, that the possible (I emphasise the word ‘possible’)
beneficiaries must not be numerically negligible, and secondly, that the quality which
distinguishes them from other members of the community, so that they form by

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themselves a section of it, must be a quality which does not depend on their relationship
to a particular individual.’
● This case reflects the restrictive approach that the courts in Ireland are likely to take.

R (Independent Schools Council) v Charity Commission [2012]

● The Upper Tribunal suggested that ‘the fact that fiscal privileges are given underlines the
need for genuine public benefit’.(at 273)
● It concluded that a hypothetical school, which had as its sole object the advancement of
the education of children whose families could afford to pay fees, did not have purposes
which provided the element of public benefit necessary to qualify as a charity.
● In its view the primary focus in considering whether a school was operating for the public
benefit had to be on the direct benefits it provided, such as scholarships or other forms of
direct assistance but it was permissible to take into account indirect or wider benefits as a
result of the particular way in which the educational object was carried out by a particular
school.
● It stated as follows (at 282): ‘Nobody has suggested that fee-paying schools are not
entitled to charitable status provided that they do enough to promote access whether by
way of scholarships, bursaries or other provision, but paying regard to the need to charge
fees to operate at all. Nobody complains that the schools are educating fee-paying
students; the concern is that they must be seen to be doing enough for those who cannot
afford fees.’
● Hillary: The message that seems to be coming through is that if you have a paying school
in England can still achieve charitable status through providing scholarships and bursaries
etc. The school must do something for those who cannot afford fees- however this
requirement is quite vague, and it is left up to the school itself to decide what it must do.

O’Connell v AG [1941]
Gavan Duffy J concluded that a bequest to enable the nephews and nieces of the testator
and their male descendants to obtain professions was too narrow in scope to be charitable
and that the intention of the testator was to benefit specific individuals.

Re Worth Library [1995]

Keane J stated that in every case the element of public benefit must be present and if the
benefit extends to a section of the community only that section must not be numerically
negligible.
In this case only 3 named people were allowed to read the books- could not qualify as
advancement of education and thus was not charitable.

3. Trusts for the Advancement of Religion

● Section 3(4) of the Charities Act 2009 provides that ‘it shall be presumed, unless the
contrary is proved, that a gift for the advancement of religion is of public benefit’,
continuing the presumption of public benefit originally provided for by s.45(1) of the
Charities Act 1961, although this presumption will no longer be conclusive.
● It should be noted that there are considerable differences in the law as it has been applied
in Ireland and England in relation to these forms of trust and the English textbooks should
be used with caution in this context.
● The key thing to remember is that in Ireland it shall be presumed that, unless the contrary

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is proven, a gift for the advancement of religion is for the public benefit. Moreover, the
word 'religion' can be interpreted quite broadly. There is no equivalent of this in England
and Wales.

Gifts to Ecclesiastical Office Holders -

A gift for the benefit of the incumbent of an ecclesiastical office for the time being is
charitable, whereas a gift for the particular individual who happens to hold that office at the
time of the gift will not be.

Gibson v Representative Church Body (1881)

A bequest to the chaplain of the Rotunda Chapel at the time of the testatrix's death and his
successors was upheld as charitable.

Donnellan v O'Neill (1870)

A bequest to a cardinal absolutely for his own use and benefit was held to be a gift to him in
his private capacity and not to be charitable in nature.

Gifts for the Celebration of Masses -

The question of the charitable nature of gifts for the saying of masses, whether in private or
in public was resolved by the Irish Court of Appeal in O'Hanlon v Logue [1906].

O'Hanlon v Logue [1906]

Facts:
A testatrix bequeathed her property on trust to sell it and invest the proceeds and pay the
income thereof from time to time to the Roman Catholic Primate of All Ireland for the time
being foe the celebration of masses for the repose of the should of her late husband, her
children and herself, her will containing no direction that these masses be said in public.
Ruling:
The CoA held that a bequest for the saying of masses whether in public or not, constituted a
valid charitable gift.

The issue was put beyond doubt by the enactment of s.45(2) of the Charities Act 1961which
confirmed that charitable nature of these gifts.

Re Hetherington [1990]
More recently Browne-Wilkinson VC confirmed that a gift for the saying of masses is prima
facie charitable since it is for a religious purpose and contained the necessary element of
public benefit because in practice the masses would be celebrated in public. He stressed
that the celebration of a religious rite in private would not contain he essential public
benefit element, but stated that where possible, the gifts for the celebration of masses
should be construed as charitable.

Section 99 of the Charities Act 2009 (which came into force on 1 September 2009) provides
that a person who sells a mass card other than pursuant to an arrangement with a
recognised person (a bishop of the Roman Catholic church or a provincial of an order of
priests) shall be guilty of an offence. A challenge to the validity and constitutionality of
section 99 was rejected by the High Court in McNally v Ireland [2011].

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Gifts to Religious Orders

Historically gifts to religious orders of a continuing nature might fail at common law if the
purposes of the order were not exclusively charitable. This problem was particularly evident
in relation to contemplative orders on the grounds that they did not fulfil the necessary
public benefit requirement.

Cocks v Manners (1871)

Facts:
A testatrix directed that her property should be sold and after the payment of certain
legacies that the proceeds should be established among certain specialised religious
institutions, including the Sisters of Charity and a Dominican Convent.
Ruling:
Wickens VC held that the gift to the sister of charity could be upheld as a charitable gift as it
had the purpose of 'teaching the ignorant and nursing the sick' and it therefore could not be
distinguished from other types of voluntary associations in this respect. However, the gift to
the Dominican convent could not be regarded as charitable as it had 'none of the requisites
of a charitable institution'. Wickens VC commented: ‘It is said … that religious purposes are
charitable, but that can only be true as to religious services tending directly or indirectly
towards the instruction or the edification of the public'.

The view that contemplative religious orders did not provide some benefit to the
community was questioned in Ireland in Maguire v Attorney General [1943]

Maguire v Attorney General [1943]:

Facts:
The testatrix had directed in her will that a sum of money be spent founding a convent of
'perpetual adoration' in a specified place or somewhere else that the trustees might
determine.
Ruling:
When examine the issues involved, Gavan Duffy J stated that it was a ‘grave discredit to the
law that there should, in this Catholic country, be any doubt about the validity of [such a
bequest].’ He said that it was assumed that the judgment in Cock v Manners had decided as
a matter of law that a gift to a contemplative order of nuns could not be charitable because
the public benefit requirement was not fulfilled. He, however, regarded it as a question of
fact and ruled that because it was held that the public were not benefited by private prayer
in Manners, did not mean that there was any reason to attribute this same outlook to public
opinion in Ireland when he was considering this case. He thus upheld the gift as charitable.
(Important to remember that Gavan Duffy J held strong Irish nationalist and anti-British
beliefs which often reflected in his judgments.)

Doubts were raised about the validity of the decision of Gavan Duffy J when the House of
Lords held in Gilmour v Coates [1949] that a gift to a community of Carmelite cloistered
nuns was not charitable as it lacked the necessary element of public benefit.

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Dixon J in Bank of Ireland Trustee Co. Ltd v Attorney General [1957] declined to follow the
decision in Gilmour and held that a gift to be applied to the repair and/or improvement of a
convent of a contemplative order of nuns was charitable.

The matter was put beyond doubt by legislation and Section 45 (1) of the Charities Act 1961
set out a conclusive presumption of public benefit. Now s.3(4) of the Charities Act 2009
provides that it shall be presumed unless the contrary is proved that a gift for the
advancement of religion is of public benefit.

Gifts for Churches and Other Miscellaneous Purposes -

Gifts for the erection or maintenance of the fabric of a church building or its fixtures and
fittings will be upheld as charitable- interpreted as being a gift for the advancement of
religion. Similarly, gifts for the upkeep of a churchyard or cemetery will be regarded as
charitable in nature, see Re Vaughan (1886). This is the best way to maintain your family's
graves indefinitely.
See pages 405-406 for more detailed info- but this seems to be a good summary.

4. Trusts for Other Purposes Beneficial to the Community

● This category comprises purposes which do not fall within any of the three categories
already considered but which are nevertheless beneficial to the community in a way
recognised by the law as charitable.
● This fourth category of charitable trust was reworded to read ‘any other purpose that it is
of benefit to the community’ in s.3(1)(d) of the Charities Act 2009.
● There are a number of well established charitable purposes under this heading and s.3(11)
of the Act of 2009 now provides that ‘purpose that is of benefit to the community’
includes the purposes which are specifically set out. The latter category is stated to include
the following:

a) the advancement of community welfare, including the relief of those in need by reason of
youth, age, ill-health or disability,
b) the advancement of community development, including rural or urban
regeneration,
c) the promotion of civic responsibility or voluntary work,
d) the promotion of health, including the prevention or relief of sickness, disease
or human suffering,
e) the advancement of conflict resolution or reconciliation,
f) the promotion of religious or racial harmony and harmonious community
relations,
g) the protection of the natural environment,
h) the advancement of environmental sustainability,
i) the advancement of the efficient and effective use of the property is charitable
organisations,
j) the prevention or relief of suffering of animals,

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k) the advancement of the arts, culture, heritage or sciences, and

l) the integration of those who are disadvantaged, and the promotion of their full
participation, in society.

Attorney General v National Provincial and Union Bank of England Ltd [1924]
Viscount Cave stated: ‘it is not enough to say that the trust in question is for public purposes
beneficial to the community or is for the public welfare; you must also show it to be a
charitable trust.’

A more flexible interpretation was placed on the dicta of Lord Macnaghten by Russell LJ in
Incorporated Council for Law Reporting for England and Wales v A.G. [1972] where he
suggested that in substance the position is that if a purpose is shown to be of sufficient
benefit or utility to the community, it is prima facie charitable in law. Here the CoA held
unanimously that the purpose of providing law reports was charitable under the fourth
head of Lord MacNaughten's classification. The benefit to the community test is a good
starting point- if you can show benefit to a sufficiently large section of the community then
it's enough to be charitable.

Public Benefit
Re Dunlop [1984] important NI case
Facts:
The court was required to consider the validity of a trust to found or assist in the founding
of a home for 'Old Presbyterian persons'.
Ruling:
● Carswell J stated: ‘The essence of the charitable nature [of trusts within Lord
Macnaghten's fourth category] is that the beneficiaries should not be a private class, nor
should any limitations be placed upon the gift which would prevent the public as a whole
from enjoying the advantage which the donor intends to provide for the benefit of all of
the public. It would be quite consonant with this concept that it should be more difficult
for a trust under the fourth head to satisfy the requirements of public benefit, and that a
bridge to be used only by Methodists should fail to qualify where a gift for the education
of the children of members of that church might be a valid charity.’
● Somewhat contradicting himself, Carswell J proceeded to hold that the object of the trust
in this case was a valid charitable gift for the relief of the aged which satisfied the public
benefit requirement, despite the fact that it was limited to Presbyterians.
● In his view, the fact that the gist was limited to a particular denomination did not negative
the paramountcy of the public purpose of assistance for the aged.

An Objective or Subjective Test?

● There has traditionally been a divergence in the approach taken by the Irish and English
judiciary in relation to the test which should be applied by the courts in determining
whether a purpose satisfies the requirement of 'beneficial to the community.'
● The Irish courts favour a subjective test and place considerable weight on the donor's view
of the charitable nature of his bequest provided that that purpose is not obviously illegal
or immoral.
● However, the courts in England and NI have adopted an objective test and the court
forms its own option based on the evidence placed before it.

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Re Cranston [1898]
This is a hugely important Irish authority which established the subjective position taken by
the Irish courts and which is still in force to this day.
Facts:
In this case the Irish CoA was required to decide whether gifts for vegetarian societies were
charitable in nature.
Ruling:
Fitzgibbon LJ stated that the view of the donor should be decisive in determining whether a
gift fell within the category of ‘other purposes beneficial to the community’, provided that
this purpose is not immoral nor illegal.

Re Worth Library [1995]

Keane J: ‘In every case, the intention of the testator is of paramount importance. If he
intended to advance a charitable object recognised as such by the law, his gift will be a
charitable gift. In the case of gifts which do not come within the first three categories, the
fact that the testator's view as to the public utility of his favoured object — e.g.
vegetarianism — is not shared by many people will not of itself prevent it from being, in the
eyes of the law, a valid charitable object within the fourth category, provided it is not illegal,
irrational or contra bonos mores. That, as I understand is the effect of the majority decision
of the Irish Court of Appeal in In re Cranston.’

An objective approach is favoured in England and in NI, see Re Hummeltenberg [1923]

where Russell J stated ‘the question whether a gift is or may be operative for the public
benefit is a question to be answered by the court by forming an opinion upon the evidence
before it’.

Specific Types of Trusts which may Qualify as being ‘for Other Purposes Beneficial to the
Community' - Gifts for the Aged, the Disabled and the Sick
● These types of purpose are now specifically referred to in s.3(11)(a) and (d) of the
Charities Act 2009

Re McCarthy's Will Trusts [1958]

Budd J upheld as valid charitable gifts under this heading a bequest to a society which had
as its principal object the care of the sick making pilgrimages to Lourdes and a bequest to a
hospital at Lourdes which he described as being for the benefit of the sick.

Barrington’s Hospital v Commissioner of Valuation [1957]

Kingsmill Moore J held that ‘a trust for the care of the sick or the maintenance of a hospital
is a charity in the legal meaning of that term.’ (at 321) The court also found that the
presence in the hospital of a limited number of patients falling into this category did not
detract from the charitable purpose of the institution.

A flexible interpretation was placed by Keane J on the concept of a gift for the benefit of a
hospital in Re Worth Library [1995].

Gifts for Sporting and Recreational Purposes and for the Benefit of a Locality

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● In this context it is necessary to draw a distinction between trust to promote and

encourage a particular sport or sports, which have traditionally not been regarded as
charitable, and trusts to provide facilities for recreation purposes which will almost
invariably be upheld.
● Note- this is a non-issue in England and Wales as legislation there expressly says that
recreational sporting purposes are charitable

Re Nottage (1895)
A gift to encourage the sport of yacht racing was not upheld as the CoA stated that a gift to
encourage a sport for its own sake was not a charitable one.

Re Gray (1925)
A gift to a regimental fund for the promotion of sport was upheld on the basis that it would
improve the efficiency of the army .

● Gifts to provide for the promotion of sports in schools or in other educational institutions
will be regarded as being for the advancement of education.
● The provision of recreational or leisure facilities such as parks or playing fields have been
recognised as charitable objectives.

Shillington v Portadown UDC [1911]

A gift to an urban council for the purpose of encouraging and providing ‘means of healthy
recreation’ for the residents of an area was found to be charitable. This finding was aided by
the application of a subjective test to the question of whether the trust was beneficial to the
community. Barton J stated, "The testator's purpose was a charitable or public purpose...
The benefits which he intended to confer (on the residents of his native town) were such as
he believed to be of public advantage. This belief was rational and not contrary to the law of
the land or the principles of morality."

Guild v IRC [1992]

Facts:
A testator left the residue of his estate to a town council for use in connection with the
town's sport centre or for some similar purpose not in connection with sport.
Ruling:
The House of Lords held that on the true construction of s.1(2)(a) of the Recreational
Charities Act 1958 (now see s.5(3)(a) of the Charities Act 2011), facilities for recreation or
other leisure time activities could be provided with the object of improving people's
conditions of life notwithstanding that such people were not in a position of relative social
disadvantage or suffering from some degree of deprivation.
Accepted that it was in everyone's interest to have sporting activities open to them.

National Tourism Development Authority v Coughlan [2009] Irish position on the matter
Facts:
This case concerned whether a trust, the subject matter of which was golf courses in Co.
Kerry, was charitable in nature.
Ruling:
Charleton J stated that ‘Sport has never been recognised to be an object of sufficiently wide

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benefit to the community as to enjoy charitable status’. In his view a golf course could not
be the subject of a charitable trust under ordinary circumstances.
Hillary disagrees with the outcome of this case. See page 430 for more detail.

Gifts for the Benefit of Animals

Gifts for the welfare of animals generally or for a particular type of animal are recognised as
charitable in law. Eg- prevention of cruelty to animals
Section 3(11)(j) of the Charities Act 2009 now specifically includes this purpose.
We have to weigh up animals interests and the interests of mankind- eg: animal testing.

Armstrong v Reeves (1890) a legacy to the Society for the Abolition of Vivisection was held
to be charitable on the grounds that the society was for the public benefit as it tended to
correct and prevent cruelty to animals.
Held that interest of mankind outweighed the harm of allowing experimentation to occur.

However, the House of Lords held in National Anti-Vivisection Society v IRC [1948] that the
society was not entitled to income tax relief on the grounds that its object was not a
charitable one.

Gifts for Political Purposes

It is well established that trusts for the advancement of political purposes are not charitable
and gifts for the benefit of specific political parties will not qualify for charitable status.

Re Ní Brudair High Court [1979]

A gift for the benefit of republicans according to the objects of that movement as they were
in the years 1919-1921 did not constitute a valid charitable gift.
Gannon J said it was a statement of broad political objectives and thus could not be
charitable.

Often trusts for the advancement of political purposes will involve advocating a change in
the law and this latter objective provides one of the primary reasons why trusts of this
nature will not be regarded as charitable, see McGovern v Attorney General [1982]. Slade J
stated that a trust for political purposes cannot be regarded as being for the public benefit.
These included trusts of which a principal purpose was to further the interests of a
particular political party, to procure changes in the law of this or a foreign country or to
procure a reversal of government policy here or abroad.

It has been held in Australia in Aid/Watch Inc v Commissioner of Taxation (2010) that there
is no general rule excluding ‘political objects’ from charitable purposes in that jurisdiction.

Similarly in New Zealand, the majority of the Supreme Court held in

Re Greenpeace New Zealand Inc [2015]
that the political purpose exclusion should no longer be applied in that jurisdiction It was
suggested that a blanket exclusion is unnecessary and distracts from the inquiry of whether
a purpose is of public benefit within the sense recognised by the law as charitable. Elias CJ
noted that a strict exclusion policy ‘risks rigidity in an area of law which should be
responsive to the way society works.’

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In England it is only a matter of time before the political purposes exclusion is challenged

Cy-près Jurisdiction
● Where a gift is made to charity, it may be impossible or impracticable to give effect to the
intentions of the donor in the precise terms which he intended.
● The cy-près doctrine allows for the making of a scheme for the application of such
property for other charitable purposes as near as possible to those intended by the donor.
● The common law required that a purpose should have become impossible or impractical
whereas as a result of the provisions of the 1961 Act ceasing to provide a suitable or
effective method of using the property suffices.
● Pre 1961 it was only possible to get the doctrine in cases of impossibility. Post 1961 the
test was broadened significantly.
● An important distinction must be drawn between circumstances where the gift fails ab
initio, in which case the property can only be applied cy-près where the donor has
manifested a general charitable intention and cases of subsequent failure where it is not
necessary to show such an intention provided that the donor has made an absolute and
perpetual gift to a particular charity.
● This distinction is summarised by Murray J in Re Dunwoodie: "There is an important
disction between a charitable trust which is initially impossible or impracticable, i.e.
Impossible or impracticable as at the death of the testator, and a charitable trust which
becomes impossible or impracticable after his death. As regards the former type the
property will not be applied cyprès unless the court finds that the testator had a general
charitable intention, but as regards the latter type- usually referred to as a case of
supervening impossibility- the court will direct a cyprès application whether or not a
general charitable intention on the part of the testator can be found in the relevant will."

Initial failure charitable purposes

Re Dunwoodie [1977] this case is the best example of how this cyprès jurisdiction kicks in
and what it means.
Facts:
The testatrix bequeathed the residue of her estate on trust for a particular Presbyterian
Church with a direction that the bequest should be used for the installation of bells at that
church. The committee of the church decided not to install the bells and the question arose
whether the residuary bequest should devolve as on intestacy or be applied cyprès.
Ruling:
Murray J held that the trust for the installation of he bells must be held as initially
impossible to fulfil because of the consent of the relevant church authority (which was
essential to the fulfilment of the trust) had never been given. However, was satisfied that
the testatrix had shown a general charitable intention to further the general purposes of the
particular church and that the initial failure of trust in no way invalidated the general trust
for the church which remained perfectly good. He ordered that the property should be
applied cy-près.

Re Stewart’s Will Trusts [1983]

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Facts:
The testator left the residue of the estate to a fund established by the Non-Subscribing
Presbyterian Church of Ireland for the purpose of supplementing the income of ministers of
that church. He directed that the residue of the income of should be used for the support of
ministers whose congregations complied with certain provisions, one of which, relating to
the use of of unaltered and unabridged hymn books, was impossible to fulfil.
Ruling:
Murray J ordered a cy-pres scheme to remove this condition from the trust, holding that the
paramount intention of the testator was to increase the salary of ministers of a Christian
church. He said that he could not not see how it would be right to regard such an "ill
considered" provision as an essential part of charitable scheme particularly when the result
of doing so would be to make the trust completely unworkable and frustrate the testator's
paramount intention. He approved drawing a distinction between cases in which every
element in the description of the trust is indispensable to its validity and operation and
cases where a further and more general purpose is disclosed as the true and substantial
object of the trust.

Re Prescott [1990]
Facts:
The testatrix bequeathed her house to a Dublin parish of the 'Russian Orthodox Church
abroad' and directed that if there were no parishioners or members of the church living in
Ireland then it should be sold and the proceeds given to the same church in England. At the
time of the testatrix's death the parish had ceased to exist and the executioner applied to
the court for directions as to the manner in which the proceeds of the sale of the house
were to be distributed.
Ruling:
MacKenzie J held that the gift of the house had lapsed as it was to a body which did not exist
either had the time of making the will or at the death of the testatrix, and the gift over,
being dependent on the validity of the gift of the house, has also lapsed. While MacKenzie J
accepted that there may be cases where a court can find a general charitable intention even
in a case of a single gift, he concluded that there was no indication that the testatrix had any
intention other than to benefit the named institution in the case before him and he held
that the doctrine of cy-près could not be applied. This judgment is particularly restrictive
and somewhat out of line with previous case law. Generally the Irish courts have leaned in
favour of a fairly flexible attitude to this issue.

A gift may be capable of being carried out in the precise terms laid down by the donor or
testator at the time it takes effect but may subsequently fail or become impossible or
impracticable to enforce. In such circumstances, it is not necessary to establish a general
charitable intention provided that the gift is given ‘absolutely and perpetually to charity’.

Subsequent Failure of Charitable Purposes

Re Royal Kilmainham Hospital [1966]

Facts:
A hospital founded by Charles II in 1684 for the support and maintenance of old soldiers or
his army and those of his successors gradually ceased to function after the establishment of

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the Irish Free State and the Irish government took over control of the lands and buildings. In
1961 the Royal Kilmainham Hospital Act was passed which provided for the settling of a
scheme for some specified charitable purposes or purpose for the benefit of some classes or
some memebers of the defence forces.
Ruling:
It was held by Budd J that since it was no longer possible to carry out the founder's
intentions the available funds should be applied cy-près and he directed that they should be
used to benefit former members of the defence forces and the British Army.

Re Worth Library [1995]

Keane J found that the original bequest of the library in the will of Dr Worth was
‘undoubtedly an absolute and perpetual gift’ and for this reason could be applied cy-près
when the hospital ceased to exist, notwithstanding his finding that no general charitable
intention could be inferred on the facts before him.

Legislative Reform of the Cy-près Doctrine

S.47 of the Charities Act 1961 laid down much broader parameters for the exercise of this
jurisdiction, allowing a cy-près order to be made in circumstances where there were
difficulties in implementing the original terms or where more effective use might be made of
the trust property by framing an alternative scheme.

The provisions of s.47(1)(e)(iii) were considered in Representative Church Body v Attorney

General [1988] in which O'Hanlon J held that the original purposes of the charitable gifts
had ceased to provide a suitable or effective method of using the property available, regard
being had to the spirit of the gift.

The equivalent English provision, s.13(1)(e)(iii) of the Charities Act 1993 (now see s.62(1)(e)
(iii) of the Charities Act 2011) was considered by the Court of Appeal in Varsani v Jesani
[1999].

This case involved a charitable trust for the purpose of promoting a particular Hindu sect in
London. The trust included a temple. There was subsequently a split in the sect and the two
factions refused to worship in the same tempe.
Morritt LJ concluded that original purposes had ceased to be a suitable and effective
method of using the available property. He made an cry-pres order foe the temple to be
solid and the assets divided between the two sects for separate places of worship.

Section 47(2) of the 1961 Act provides that its provisions are not ‘to affect the conditions
which must be satisfied in order that property given for charitable purposes may be applied
cy-près except insofar as these conditions require a failure of the original purposes'.
Therefore, the importance of the distinction between initial and subsequent failure remains.

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TOPIC 7: Administration of Trusts

Introduction

● Wylie has commented that: "The position of a trustee is an extremely exacting one, and all
too frequently, a thankless one."
● Trustees are required to carry out duties and publications which can often be of
considerable complexity and in doing so are expected to display a high degree of integrity
and honesty.
● In view of theses considerations, it may be reasonably asked why any right minded
individual would ever agree to act as a trustee. In fact, the onerous nature of the
responsibilities of the trustees has lead to a growth in the numbers of professional
trustees

Traditionally, trustees have fallen into two categories;

● non-professional trustees, who are often family members or close associates of the
settlor or testator who agree to act out of a sense of duty
● professional trustees, usually banks and financial institutions, which undertake the role
only in circumstances where suitable provision is made for their remuneration.

● Any person can be appointed a trustee in this jurisdiction, even a minor, although in
practice it is desirable to appoint a person who will be capable of carrying out the
functions required of him. Corporate persons (companies) can also bee trustees.
● The Law Reform Commission recommended that minors should not be allowed to act as
trustees in Trust Law: General Proposals LRC 92 -2008 [2.12].
● There is generally no minimum number of trustees necessary (although the LRC
recommended a minimum of two or a corporate trustee [2.22]) and there is no maximum
number of trustees. To have only one puts a lot of trust in one individual- two of more
helps to ensure that they are all acting appropriately.

Appointment of Trustees

● The first trustees are ordinarily appointed by the settlor or testator in the trust instrument
and where this is a will, the executors and trustees will often be the same persons.
● Where none are appointed or where those nominated predecease the testator or refuse
to act, the court has jurisdiction to appoint trustees.
● The power to appoint new or additional trustees may be exercised by persons nominated
for that purpose in the trust instrument in the circumstances laid down in that document.
● Trustee Act 1893 is the most comprehensive legislation Ireland has on trustees.
● A statutory power to appoint new trustees is contained in s.10 of the Trustee Act 1893.
● In addition, s.25 of the Trustee Act 1893 confers a power on the court to appoint new or
additional trustees whenever it is expedient to do so and would be ‘inexpedient, difficult
or impracticable so to do without the assistance of the court’.

Retirement of Trustees

Not easy to retire as a trustee.

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● A trustee may disclaim his appointment and refuse to take up the office at the outset and
if he wishes to do this, to avoid any possible uncertainty he should preferably express his
intention by deed. Basically if you refuse to be a trustee at the outset it is a good idea to
do this by deed. But it is important to know that potential trustees do have a choice- they
can say no at the beginning. If, however, they yes and later want to retire it becomes more
difficult.
● However, once a trustee has accepted the office and has failed to disclaim it within a
reasonable time, he can only retire in specified circumstances; if there is an express clause
in the trust instrument permitting him to do so or if he receives the consent of all the
beneficiaries, provided that they are all sui juris and between them entitled to the entire
beneficial interest in the trust property. In these precise circumstances the trustee can
leave.
● Statutory provision is made for retirement by virtue of s.11 of the Trustee Act 1893 which
lays down that provided there will be at least two trustees left to administer the trust, a
trustee may by deed declare that he wishes to retire and if his co-trustees consent by
deed, he will be permitted to do so.

Removal of Trustees

● A trustee may be removed from office where express provision is made for this in the trust
instrument or by the beneficiaries where they are sui juris and between them absolutely
entitled to the trust property.
● A trustee may be removed where the court exercises the power conferred on it by s.25 of
the Trustee Act 1893 to appoint a new trustee where an existing trustee refuses or is unfit
to act.
● The court also has an inherent jurisdiction to remove trustees where they act dishonestly
or incompetently or even where their conduct is deliberately obstructive.
● There are a series of cases which show this. When deciding to remove trustees there are
two key criteria looked at by the court:
1. Conflict of interest- this is huge.
2. The welfare of the beneficiaries.

Arnott v Arnott (1924)

Facts:
The defendant was removed from the position of trustee to which she had been appointed
on the basis that the business, the subject matter of the trust, was to be managed by the
plaintiff in circumstances where her persistent non-cooperation rendered the trust virtually
unworkable.
Ruling:
Murnaghan J stated that the jurisdiction of the court to remove a trustee should be
exercised if the welfare of the beneficiaries demanded it, even though no dishonesty or
incompetence had been alleged or proved against the trustee in question. He said that the
jurisdiction of the courts to remove trustees should be exercised was usually resorted to
when a trustee had mismanaged a trust or had been proved dishonest incompetent but the
guiding principle to which all others must be subordinate was to the welfare of the
beneficiaries.

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A further ground on which a court may exercise its inherent jurisdiction to remove a trustee
is where there is a clear conflict of interest between the trustee's duty to the trust and his
own personal interests

Moore v McGlynn [1894]

Facts:
The defedant was discharged from further performance of the duties of the trustee where
he had set up a rival business in competition with that of which he was the trustee for the
benefit of the family of his deceased brother.
Ruling:
Although Chatterton VC held that the new business should not be affected by a trust for the
benefit of his brother's estate, he was satisfied that it was improper for the trustee to
continue in a position where his perosnal interest and his duty to the trust might conflict. He
stated that the trustee ‘should not be continued in a position where his duties and his self-
interest may conflict.'

The fact that the primary issue which the court should have regard to in deciding whether to
order the removal of a trustee is the welfare of the beneficiaries was confirmed by Barron J
in Spencer v Kinsella.

Spencer v Kinsella [1996]

Facts:
Showgrounds in Gorey, Co. Wexford were vested in trustees on trust so that they might be
used as a sports ground, park or pleasure ground subject to conditions as to payment or
otherwise to be prescribed by trustees. In recent years the grounds had been used by a local
football club and coursing club, as well as for the grazing of sheep. Complaint is ere made
against the trustees by the football club which has spent money on the repair and
maintenance of the grounds, and it was alleged that they were neglecting their duties and
that the grounds were being allowed to fall into a state of disrepair. The plaintiffs sought the
removal of the trustees on the basis that they had persistently refused to act when called on
to do so and submitted that the welfare of the beneficiaries required this course of action.
All but one of the trustees contended that they had at all times acted in a bona fide manner
and argued that the exercise of their trust should not be interfered with by the court unless
they had acted mala fide or outside the terms of the trust.
Ruling:
Barron J held that the existing situation could not be allowed to continue and that a
reorganisation need to take place, either with or without the help of the court. He
acknowledged that in this situation it was very difficult to find local people who had no
affiliation with any organisation seeking to use the grounds. However, he said that, "in all
cases of a trust, it is a truism to say that no trustee should allow his interest to conflict with
his duty." Referring to Arnott, Barron J said that a trust is set up for the welfare of
beneficiaries and that before determining whether or not any trustee should be removed it
is necessary to examine whether his continuation in that office will be detrimental to such
welfare. He held that in this case there were clearly trustees with a confiscation of interest
who outhit to step down and allow for a reorganisation of the trust. However, he adjourned
the matter for 6 months.

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The Duties of Trustees

● The first duties of a trustee once appointed are to ascertain the nature and extent of the
property in the trust and to ensure that he understands the terms of the trust instrument.
● It is essential that a trustee is aware from the outset of the precise nature of the powers
conferred on him by the instrument e.g. in relation to investment, and he should seek
legal advice if there is any reasonable doubt about the ambit of these powers.

Greene v Coady [2014]

Plaintiffs were potential beneficiaries of a company pension fund. They were claiming
damages for breach of trust against the trustees for accepting an offer from the company to
close the pension fund.
Ruling
Claim dismissed. Judge recognised that the trustees had done their best. per Charleton J at
[5.6]: ‘One matter is clear. On setting up a trust, the funder and the beneficiaries have an
expectation that can never be departed from in law: that the trustees will pursue the aims
of the trust honestly and in good faith. Clarity of conscience and ability to think both clearly
and objectively is thus required on any decision that impacts on the management of the
trust for the benefit of those for whom it was set up. No matter what is said in a trust deed,
this fundamental obligation can never be departed from.’

Duty to Invest
● Trustees are under a duty to invest the trust property with a view to ensuring a steady
income for the beneficiaries currently entitled to an interest while at the same time
preserving the value of the capital for the benefit of those who may subsequently become
entitled to an interest in the property.
● They are under no obligation to consult the beneficiaries about their investment decisions
unless required to do so under the terms of the trust.
● A trustee is only permitted to invest in authorised securities and must all times display
impartiality and act with ordinary prudence in deciding which investments to make. The
fact that a form of trust instrument sis authorised by law or by statute will not absolve a
trustee from liability if he does not exercise the require degree of care in deciding which
investments to make. Essentially the message that the law sends to trustees is not to take
risks if they want to escape liability.
● In the absence of an express investment clause, or subject to its terms, a trustee may
invest the trust property in accordance with the statutory scheme laid down in Part I of
the Trustee Act 1893 as amended by the Trustee (Authorized Investments) Act 1958.

Even where a trustee does not stray outside the ambit of investments authorised either by
the terms of the trust or by statute, he must nevertheless observe certain standards in
carrying out his duties in this regard. As O’Connor MR pointed out in Re O’Connor [1913],
75-76: ‘However unlimited the power of investment may be, the trustee remains subject to
the jurisdiction of the court. The trustee has no power to act dishonestly, negligently or in
breach of trust to invest on insufficient security’.

Bartlett v Barclays Bank Trust Co. Ltd [1980]

Facts:

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The defendant bank was a trustee of a trust, the only assets of which were nearly all the
shares in a family property company. It was thought that the funds might be more readily
raised to pay taxes due on the death of the life tenants if the company went public and that
a public issue would be more successful if the company was also involved in property
investment. One speculative purchase resulted large losses to the trust fund, and the
plaintiff took and action for breach of trust.
Ruling:
The plaintiffs were successful in their claim. Brightman J stated: ‘The cases establish that it is
the duty of a trustee to conduct the business of the trust with the same care as an ordinary
prudent man of business would extend towards his own affairs. … That does not mean that
the trustee is bound to avoid all risk and in effect act as an insurer of the trust fund. … The
distinction is between a prudent degree of risk on the one hand, and hazard on the other.
Nor must the court fix liability upon a trustee who has committed no more than an error of
judgement, from which no bisnhess man, however prudent can expect to be immune.’
A further important principle that was confirmed by Brightman J was that in his opinion a
higher duty of care is expected of a professional trustee, such as a trust corporation which
carries on the specialised business of trust management and it may be liable if it neglects to
exercise the special care and skill it professes to have.

Nestle v National Westminster Bank plc [1993] very important case in which the application
of the 'ordinary prudent man of business' standard has a more disturbing consequence from
the point of view of the beneficiary.
Facts:
By virtue if the terms of a settlement made in 1922 by the defendant bank, the successor to
the original trustee, was given wide powers to invest in equities. However, the bank never
obtained legal advice about the scope of its powers of investment and assumed that they
were narrower than they in fact were. The plaintiff, the remainder beneficiary, contended
that the trust fund which was worth approximately £269,000, when she became absolutely
entitled in 1986 should have been worth well over £1 million by then if the fund had been
properly invested.
Ruling:
● The CoA dismissed the plaintiff's claim and concluded that the plaintiff had not succeeded
in establishing that she had suffered loss.
● Legatt LJ stated that it had not been established that a prudent trustee, knowing the true
scope of the power of investment and having conducted regular reviews, which the bank
had not done, would have invested the fund in such a manner that it would have been
worth more than it was when the plaintiff became entitled to it.
● The CoA applied the traditional test. As Legatt LJ stated: ‘the essence of the bank's duty
was to take such steps as a prudent businessman would have taken to maintain and
increase the value of the trust fund. Unless it failed to do so, it was not in breach of trust.'
● Although the Court of Appeal did not find the bank liable, the judges did not agree with
the trial judge's conclusion that the bank had acted conscientiously and Legatt LJ
commented: ‘No testator, in the light of this example, would choose this bank for the
effective management of his investment.'
The is a classic case of the trustee company choosing the easy route by taking absolutely no
risks and in doing so, escaping liability. Kenny [1993] Conv 63, 67 has rightly
commented that it is a sad reflection on the present state of trust law that a bank

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which "no testator … would choose … for the effective management of his
investment' should be found not to be liable for mismanagement of the trust.
The law in England in this area seems to unduly favour the position of the trustee. Doyle has
commented that there is no reported case in which a trustee has been found liable
for a breach of trust arising from investment within the ambit of that authorised by
the trust instrument of the general law where the trust capital has simply continued
to erode as a result and he concludes that; "the burden of proof facing facing
potentially litigious beneficiaries is prohibitively high."
Bieler believes that the strict standard which emerged in Bartlett must be developed further
to avoid results such as the one in Nestle.

Stacey v Branch [1995] Irish authority which shows a very similar approach to that taken by
the English courts.
Facts:
The plaintiff beneficiary brought a claim against the defendant trustee alleging a breach of
trust on the grounds that that the latter had not managed a trust property with the
necessary degree of care and claimed specifically that if this house had been let over a
periods of 14 years rather than maintained by a caretaker, it would have yielded substantial
rental income. The trust deed conferred on the defendant the power to deal with this
property "as he in his absolute discretion shall see fit" until the beneficiary turned 21.
Ruling:
● Murphy J made it clear that the words "absolute discretion" would not necessarily relive a
trustee from his duty to excessive reasonable care and prudence.
● However, he was satisfied that the decision to put a caretaker into the property was one
made in bona fide of the exercise of his discretion and he dismissed the plaintiff's claim.
● Murphy J also considered the nature of a trustee's investment in general terms.
● He stated: ‘In exercising his discretion a trustee must act honestly and must use as much
diligence as a prudent man of business would exercise in dealing with his own private
affairs; in selecting an investment he must take as much care as a prudent man would take
in making an investment for the benefit of persons for whom he felt morally bound to
provide. Businessmen of ordinary prudence may, and frequently do, select investments
which are more or less of a speculative character; but it is the duty of a trustee to confine
himself not only to the class of investments which are permitted by the settlement or by
statute, but to avoid all such investments of that class as are attended with hazard.’
● This is a relatively stringent standard to impose on trustees, however, it can also be said
that the degree of care that which a prudent man would exercise in these circumstances
has changed over the years. (In the New Zealand case of Re Mulligan, Pankhurst J
commented "prudence provides a flexible standard, one which will change with economic
conditions and in the light of contemporary thinking and understanding.)

Where the default on the part of the trustees, as in Nestle and Stacey, is due to lack of
initiative rather than to speculative investment decisions, it would still seem to be extremely
difficult for a beneficiary to succeed in establishing a breach of trust on the part of the
trustee. Beneficiaries may legitimately have concerns that the law as it stands does not
adequately protect them from trustees who are inactive or neglectful in their duties.
However, any attempt to change the existing principles will clearly be very difficult giving
the need to discourage trustees from engaging in excessive speculation.

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Schedule 1 paragraph (1) of the Trustee Act 2000 (England) applies the statutory duty of
care to powers of investment which requires that trustees ‘must exercise such care and skill
as is reasonable in the circumstances having regard in particular to any special knowledge or
experience that he has or holds himself out as having, and if he acts as trustee in the course
of a business or profession, to any special knowledge or experience that it is reasonable to
expect of a person acting in the course of that kind of business or profession.’

Harries v Church Commissioners [1992] English case which addresses the extent to which
trustees may pursue an ethical investment policy in the context of charitable trusts.
Facts:
The plaintiffs sought a declaration that the commiserate were obliged to have regard to the
object of promoting the Christian faith and were not to act in a manner which was
incompatible with that object when managing the assets of which they were trustees. The
plaintiffs contended that the commissioners in making investment decisions attached an
overriding importance to financial considerations and that they were only prepared to take
non-financial considerations into account to the extent that they did not want to top
significantly jeopardise or interfere with the accepted investment principles.
Ruling:
Nicholls VC refused the declaration and held that it was axiomatic that charitable trusts
were conserved to further the purposes of the trust which they had accepted the office of
the trustee. He stated that the circumstances in which charity trustees were bound or
entitled to make a financially disadvantageous investment decision for ethical
considerations were extremely limited. He added that trustees ‘must not use property held
by them for investment purposes as a means for making moral statements at the expense of
the charity of which they are trustees.’
In general the obligation of the trustees is to make money for the charity, but there are
limits to this in circumstances where it would not be appropriate.

Duty to Maintain Equality Between Beneficiaries

● A trustee is obliged to balance what may be the competent interests of a life tenant and
remainderman in relation to the trust property.
● In Re Mulligan, Pankhurst J commented that, "It is elementary that a trustee must act with
strict impartiality and endeavour to maintain a balance between the interest of the life
tenant and the remaindermen. Put another way, a trustee must be as even handed even
handed as between income and capital beneficiaries."
● In seeking to ensure that a fair result is achieved, a trustee may be obliged to convert
certain types of trust investment into an alternative form and this in turn may necessitate
apportionment of the beneficiaries' interests.

Duty to Distribute
A trustee is under an obligation to ascertain the identity of those who are entitled under the
trust instrument and to take the necessary steps to ensure that the trust property is
distributed in accordance with its terms.

In circumstances where the whereabouts or continued existence of a beneficiary is

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unknown, the court may authorise distribution of the trust property to proceed after a
specified period of time. Such an order is known as a ‘Benjamin order’ and may be made
after a period of seven years on the authority of the decision of Joyce J in Re Benjamin.

Re Benjamin [1902]
Facts:
The testator's son disappeared in 1892 and under the will of his father, who died in 1893, he
was entitled to a hare of the letters estate if he survived the testator.
Ruling:
Joyce J concluded that the son must be presumed dead and the court gave the trustees
liberty to distribute his share on the basis that he had predeceased the testator.

Re Green's Will Trusts [1985]

Facts:
The testatrix's son went missing in 1943 while on a wartime bombing raid and was certified
by the Air Ministry as presumed dead. She bequeathed the residue of her estate to trustees
for her son's benefit and directed that if he'd not come forward to claim the property by the
year 2020 the trustees were to establish a charitable foundation for the benefit of cruelly
treated animals.
Ruling:
The court gave the executors liberty to deal with the estate on the basis that the testatrix’s
son had predeceased her and made a Benjamin order, the effect of which was to enable the
charity to enjoy the testatrix's estate from the date of her death.
Luxton has criticised this judgment as it did not give effect to the wishes of the testatrix.
From the point of view of the trustees, however, the most prudent course of action is to get
a court order which, while not accurately reflecting the wishes of the deceased,
absolves the trustees from any personal liability.

● The Law Reform Commission in its Report on Civil Law Aspects of Missing Persons LRC
106- 2013 recommends reform of the law on presumed death.
● It recommends that, in situations where death is virtually certain, there should be no
minimum waiting period before an application can be made to obtain a declaration of
death. This declaration could be made by a coroner and would be identical to a standard
declaration of death
● The Commission also recommends that, in circumstances where death is highly probable,
application may be made to the Circuit Court to obtain a declaration of presumed death.
● It recommends that it should be provided that the 7 years reference period does not
constitute a mandatory minimum waiting period, and that an application may be made at
any time to the Circuit Court where it is established that, on the balance of probabilities,
death may be presumed

An alternative to seeking a Benjamin order is to take out a missing beneficiary insurance

policy. This course was followed by the defendant trustee/beneficiary in Re Evans.

Re Evans [1999]
Facts:
The defendant trustee/beneficiary had not heard from her brother, the only other trustee,

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in 30 years.
Ruling:
The HC held that the premium payable on such a policy was a proper and allowable
expense. The judge held that representatives for small estates should not be discouraged
from seeking practice solutions to difficult administration problems and that sizeable sums
should not have to tied up indefinitely for fear of the re-emergence of a long lost
beneficiary. The missing beneficiary policy provides at a relatively small cost a practical
answer to such problems. It was also held that the protection provided by such a policy is to
some extent more effective than the limited protection provided by the more costly
application to the court for a Benjamin ordered.

Duty to Keep Accounts and Provide Information

● A trustee is obliged to keep clear and accurate accounts of the trust property and a
beneficiary is entitled to inspect these accounts although in theory if he wants a copy of
them he must pay for them.
● It is not strictly necessary for a trustee to have these accounts audited although it may be
prudent where the complexity of the trust demands it.
● A beneficiary is entitled to inspect documents relating to the assets of the trust, although
beneficiaries should only be permitted to have access to information relating to their
interest in the trust property, so, for example, a remainderman would only be entitled to
information relevant to capital transactions.
● Should beneficiaries be allowed to see documents relation to the trust? Yes, goes back to
the issue of accountability.

Chaine-Nickson v Bank of Ireland [1976]

This case confirmed the extent of a beneficiary's entitlement to receive information on the
assets of a trust, this case concerned the entitlement if potential trustees to receive
information under a discretionary trust.
Facts:
The plaintiff was one of a number of beneficiaries under a settlement of property vested in
the defendants as trustees on discretionary trusts. The plaintiff sought an order directed the
defendants to give him particulars relations to the matters relating to the administration of
the trust. The defendants argued that in a discretionary trust none of the potential
beneficiaries were entitled as of any right of information relating to the management of the
trust.
Ruling:
Kenny J could not accept that trustees would be under no obligation to account to anyone in
relation to their actions. He stated: ‘Legal principle and the one relevant authority [Moore v.
McGlynn] establish that a potential beneficiary under a discretionary trust is entitled to
copies of the trust accounts and to details of the investments representing the trust funds.’

Murphy v Murphy [1999]

● This case also concerned the entitlements of potential beneficiaries under a discretionary
trust.

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● Neuberger J held that the plaintiff was entitled to know the names and addresses of the
trustees of settlements under which he was identified as a specific potential beneficiary
although he was not entitled to such information in relation to settlements under which
he was, along with the rest of the world, merely a potential beneficiary.
● Neuberger J agreed that in relation to the former type of settlement, a potential
beneficiary does have the right to ask the trustees for ‘information as to the nature and
value of the trust property, the trust income, and as to how the trustees have been
investing and distributing it’.
● It is clear from this judgment that the extent of the obligation of trustees in discretionary
trusts to provide information will depend on the nature of the discretionary trust and the
number of beneficiaries.
● Mitchell has commented that these distinctions leave the law in this area in an uncertain
state as it cannot be predicted when the courts will hold that a class of beneficiaries is so
large that it would be undesirable to allow its individual members enforce their rights.
● Despite this criticism, the decision in Murphy has clarified the open ended obligations
which Kenny J's judgement in Chaine-Nickson could potentially have given rise to.

Schmidt v Rosewood Trust Ltd [2003]

Facts:
The petitioner sought disclosure of documents relating to trusts under which he claimed
discretionary interests.
Ruling:
● The petitioner's claim was allowed by the Privy Council. Lord Walker held that there were
three areas ion height the court might have to form a discretionary judgment:
Whether a discretionary object should be granted relief at all,
What classes or documents should be disclosed (either redacted or in full), and
What safeguards should be imposed to limit the use which might be made of documents or
information disclosed.
● Lord Walker stated that a beneficiary's right to seek disclosure of trust documents is best
approached as one aspect of the court's inherent jurisdiction to supervise. Therefore there
is no reason to draw a stark distinction between discretionary and non-discretionary
trusts.
● He added: ‘Especially when there are issues as to personal or commercial confidentiality,
the court may have to balance the competing interests of different beneficiaries, the
trustees themselves, and third parties. Disclosure may have to be limited and safeguards
may have to be put in place. Evaluation of the claims of a beneficiary (and especially of a
discretionary object) may be an important part of the balancing exercise which the court
has to perform on the materials placed before it. In many cases the court may have no
difficulty in concluding that an applicant with no more than a theoretical possibility of
benefit ought not to be granted any relief.’

Re Londonderry’s Settlement [1965]

Trustees exercising a discretionary power are not bound to disclose to the beneficiaries the
reasons which motivate them in reaching a decision as to the manner in which the trust
property should be distributed.
Facts:
The defendant, a daughter of the settlor, was dissatisfied with the provision made for her

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and her children and sought access to the minutes of the trustees' meetings and other
documents and correspondence prepared for those meetings. The trustees only supplied
her with certain documents relations to the accounts of the trust and sought clarification
from the court on the extent of their duty of disclosure.
Ruling:
● The CoA held that trustees were not obliged to disclose reasons for their decisions as to
do so would result in them being unable to properly exercise their confidential role.
● As Danckwerts LJ stated: ‘the trustees are given a confidential role and they cannot
properly exercise that confidential role if at any moment there is likely to be an
investigation for the purpose of seeing whether they have exercised their discretion in the
best possible manner.’ However, he continued by saying that this position might be
otherwise if a case were made of lack of bona fides.
This judgment has been criticised for placing more importance of confidentiality than
accountability.
Hayton [2005] has suggested that the courts, taking their lead from Schmidt, should insist
on pension trustees providing reasons for their decisions and be more prepared to
intervene in the affairs of such trusts. See page 516 for a full criticism.

Breakspear v Ackland [2009]

● This case suggests that while the principle of confidentiality laid down in Londonderry is
still good law, the increasing significance of accountability may lead to a greater degree of
disclosure than might previously have been contemplated.
● The case is also significant as it provided the courts with the opportunity to clarify the
status of so-called ‘wish letters’ written by settlors for the guidance of trustees of
discretionary trusts.
Facts:
The claimants sought disclosure of a wish letter in order to evaluate their future
expectations under such a trust.
Ruling:
● Briggs J reiterated that the heart of the Londonderry principle is the unanimous conclusion
that it is in the interests of beneficiaries of family discretion trusts that the trustees
exercise their dispositive discretionary powers in a completely confidential manner.
● This case really tested the Londonderry principle.
● briggs J found that the fact that the trustees intended to seek the courts sensation for a
scheme of distribution of the trust fund was of real significance to the question of whether
disclosure should be ordered and that the wish letter was a key document to be taken into
account by the trustees.
● In the circumstances it was found that the trustees has surrender any form of
confidentiality protection against full disclosure and examination of their reasoning by
seeking the court's sanction and he ordered that the letter be disclosed to the claimants.

Duty Not to Profit from the Trust

A person who occupies a fiduciary position is not entitled to make a profit from that position
unless expressly authorised to do so, or to place himself in a situation where his interest and
duty may conflict.

Remuneration and Expenses

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● As a general principle, a trustee is not entitled to remuneration for work carried out by
him in his capacity as trustee unless a trust instrument itself makes provision for this.
● However, the court has an inherent jurisdiction to order that a trustee be remunerated for
his services where no provision for payment has been made in the trust instrument or to
allow a trustee to receive payment in excess of what was originally laid down or agreed or
a trustee may make an arrangement to this effect with all the beneficiaries, provided that
they are sui juris.

● As a general rule a trustee who is a solicitor is not entitled to charge for his services unless
provision is made for this.
● However, where a solicitor/trustee acts for himself and his co-trustees in litigation relating
to the trust and the costs of his so acting do not exceed the costs which would have been
incurred had he acted for his co-trustees only, he is entitled to be paid these costs, known
as the rule in Cradock v Piper (1850).

Purchase of Trust Property

● Subject to limited exceptions, a trustee may not purchase trust property from himself and
his co-trustees.
● This rule, sometimes referred to as the ‘self-dealing rule’ was summarised as follows by
Megarry VC in Tito v Wadell (No. 2) [1977]: ‘The self-dealing rule is (to put it very shortly)
that if a trustee sells the trust property to himself, the sale is voidable by any beneficiary
ex debito justitiae, however fair the transaction.’
● Thus any sale is voidable at the option of the beneficiary, who should take steps to have
the transaction set aside within a reasonable time.

● A less strict approach has always been adopted by the courts where a trustee purchases
property from a beneficiary rather than from the trust itself, sometimes referred to as the
‘fair-dealing rule’.
● While a presumption of undue influence will arise because of the nature of the
relationship, this is rebuttable and the onus lies on the trustee to show that the
transaction should be upheld.
● Megarry VC laid down this principle in Tito v Wadell (No. 2) in the following terms: ‘If a
trustee purchases the beneficial interest of any of his beneficiaries, the transaction is not
voidable ex debito justitiae, but can be set aside unless the trustee can show that he has
taken no advantage of his position and has made full disclosure to the beneficiary, and
that the transaction is fair and honest.’
● There is a presumption that the benefit was obtained by undue influence but this
presumption may be rebutted, irrespective of whether the beneficiary has had
independent advice, if it is shown that the transfer was the result of the free exercise of an
independent will.

Smyth v Smyth [1978]

Facts:
The deceased gave a life interest in a field to his brother, who was one of the trustees of the
will, and the remainder to his nephew. The nephew agreed to sell this interest to his uncle
and subsequently sought to have the sale set aside on the grounds of undue influence and
on the basis that, as a trustee, the defendant should national have purchased the plaintiff's

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interest in this manner.

Ruling:
● Costello J confirmed that the onus of proving the bona fides of the transaction lay on the
defendant and that the surrounding circumstances ought to be examined with very great
care to ascertain whether any unfair advantage had been taken by the defendant.
● He held that the price paid by the defendant was a fair one and that he had not sought to
take advantage of his position as trustee or to influence the plaintiff's decision to sell.
● He further concluded that the defendant was not under any obligation to ensure that the
plaintiff received independent legal advice nor was he under a duty to procure an
independent valuation as in his view both the defendant and his solicitor were correct in
their assessment that the price agreed was a fair one.
● This case turned on its own facts and should not be relied on to support the proposition
that no independent valuation or advice should be sought.

Duty Not to Delegate

● The rationale behind the principle of non-delegation of a trustee's duties is that the office
is viewed as one where confidence is placed in the abilities of the particular individual
appointed and it is therefore expected that he should personally look after the interests of
the beneficiaries.
● However, the principle of delegatus not potest delegare cannot be applied inflexibly to the
position of trustees and it has long been recognised that a trustee may delegate in
situations of ‘legal necessity’ or ‘moral necessity’.
● Provision may be made for delegation in the trust instrument, and provided that the
delegation does not exceed what is authorised it will be permissible.
● In addition, it has been recognised that the proper administration of a trust would not be
practicable if a trustee was not free to delegate the performance of certain functions to
professional agents, such as solicitors and brokers.
● Section 11 of the Trustee Act 2000 (England) provides that a trustee may delegate except
in relation to how assets are distributed and the power to appoint trustees. The LRC
Report Trust Law: General Principles recommended legislation in similar terms be
introduced in this jurisdiction.

The Powers of Trustees

● Before the intervention of statute in this area, where a trust instrument was being drafted
it was necessary to ensure that sufficient powers were conferred on the trustees by the
instrument to enable them to carry out their duties in the manner envisaged by the settlor
or testator.
● The Trustee Act 1893 confers a number of basic powers on trustees but this legislation
was only intended to augment the powers conferred by the trust instrument, which will
often still determine the precise extent of the trustees' powers.

Power of Sale
● A trustee may be authorised to sell trust property by virtue of an express power contained
in a trust instrument or such a power may be implied, for example, in circumstances

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where the rule in Howe v Earl of Dartmouth applies.

● The only other circumstances in which a trustee may sell property is where he is
authorised to do so by the court or where a power of sale in conferred on him by statute.
● The LRC in its Report Trust Law: General Principles recommended that trustees should be
provided with a statutory power of sale.

Power of Maintenance
● Powers of maintenance refer powers of the trustee to use trust income towards an
infant's education and maintenance.
● Express provision can be and often is made in the trust instrument empowering the
trustees to apply the income of the trust property for an infant's benefit.
● Limited statutory powers of maintenance are also conferred on trustees by s. 43 of the
Conveyancing Act 1881.
● The LRC [10.23] recommended that existing powers should be extended.

Re O'Neill [1943]
Maguire P directed that a payment be made out of the trust capital for the maintenance
and education of the testator's children, although he made it clear that it was a jurisdiction
which should only be exercised where it was really necessary.

Power of Advancement
● While ‘maintenance’ usually refers to the payment of income for the benefit of infant
beneficiaries, the term ‘advancement’ is used to describe payments made out of the trust
capital to a beneficiary before he becomes entitled to an interest under the trust.
● A power to make advancements out of capital may be expressly conferred by the trust
instrument.
● In addition a statutory power exists under s.11 of the Guardianship of Infants Act 1964
whereby the court can sanction capital payments for the support of an infant beneficiary
where an application is made by the infant’s guardian.
● The LRC in the above mentioned Report recommended the introduction of a statutory
power to advance capital and that the amount advanced should not exceed half of the
presumptive or vested share of the beneficiary. It also recommended that the powers of
maintenance and advancement should be subject to the statutory duty of care.

Liability of Trustees for Breach of Trust

Extent and Measure of Liability

● A trustee will be found to be acting in breach of trust if he fails to perform the duties
required of him or if he acts in an unauthorised manner.
● A breach may occur in a variety of circumstances such as where trust monies are invested
in unauthorised investments, where a trustee fails to distribute the trust estate to the
beneficiaries in the correct proportions, or where he fails to exercise a proper degree of
supervision over the management of the trust by his co-trustees.
● A trustee can also be found in breach of trust where they don't do enough- inadequate
action, failure to exercise an appropriate degree of supervision. These negative actions
constitute a breach of trust as much as taking a harmful positive action.

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● However Charleton J suggested in Greene v Coady [2014] that ‘counsels of perfection

cannot be applied to the decisions of trustees’. He stated at that ‘in making any decision
as to the liability of trustees it is not for the court to be cleverer or better informed or
more astute or more enquiring or better in its judgment than the trustees. The court must
also avoid the temptation to listen to the evidence and to make its own conclusion as to
what should have been done by the trustees on the date of the impugned decision.’
● Essentially Charleton J said that it is not the role of the court to look back in hindsight and
say that they could have done better. The role of the court is to decide whether a line had
been crossed, not to look back and decide if it could have done a better job.

● Where a trustee fails to comply with the duties imposed on him by the trust instrument he
is liable to make good the loss to the trust estate if this was caused by the breach of trust,
or where he makes an unauthorised profit for himself even if this does not cause loss to
the trust, he must account for it.
● As a general rule, a trustee is liable only in respect of the breaches of trust which he has
himself committed and not those committed by his co-trustees, so liability is personal and
not vicarious.
● However, this indemnity will not apply where his conduct amounts to wilful default on his
part, and inactivity on the part of a trustee in circumstances where he ought to have
intervened can often be regarded as sufficient grounds for imposing liability. Basically if
you don't intervene to prevent co-trustees taking harmful actions then you are liable for
breach of trust.

• A trustee is not liable for breaches of trust committed before his appointment unless there
is evidence indicating such a breach which requires him to investigate further.
• When a trustee retires from a trust he remains liable for breaches committed by him
during his term of office.
• If a trustee dies his estate remains liable after his death.
• Where a breach occurs shortly after his retirement he will be liable if he retired in order to
facilitate a breach of trust which he foresaw would take place or if he contemplated at the
time that a breach of trust would be effected and decided to retire to avoid direct
involvement.
• Basically, don't walk away from an ongoing breach of trust because you will be found
liable.

Head v Gould [1898]

Kekewich J held that to make a retiring trustee liable for a breach of trust committed by his
successor it must be proved that the breach committed was not merely the outcome of the
retirement and new appointment but was contemplated by the former trustee when the
retirement took place.
It is difficult to show that someone retired contemplating a breach of trust, but it can be
done. In this case the court held the retiring trustee didn't contemplate a breach, and this is
the normal approach.

• The measure of a trustee's liability is the loss caused to the trust estate either directly or
indirectly.
• Where the breach consists of a trustee making an unauthorised investment, the measure

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of damages will be the loss incurred by the trust in selling this investment if this is the
course of action agreed on by the beneficiaries.
• Where trustees improperly retain an unauthorised investment, they will be liable for the
difference between the price which the property would have fetched if sold at the proper
time and the price actually received for it, see Fry v Fry.

Fry v Fry [1859]

Facts:
A testator had directed that an inn should be sold "as soon as convenient" after his death.
The trustees refused an initial offer of £900 and nine years after the testator's death the
value of the property was greatly depreciated by the opening of a railway which deprived it
of coach traffic. The inn still remained unsold some 26 years after the testator's death and
the trustees had died in the interim. A case was taken against the estate for breach of trust.
Ruling:
The estates of the trustees weren't held liable for breach of trust for the difference between
the original offer of £900 and the amount of proceeds of the sale which the court directed
should take place.

Target Holdings Ltd v Redferns [1996]

• Lord Browne-Wilkinson stated that the basic rule is that 'a trustee in breach of trust must
restore or pay to the trust estate either the assets which have been lost to the estate by
reason of the breach or compensation for such loss'.
• However, he stressed that there does have to be some causal connection between the
breach of trust and the loss to the trust estate for which the compensation is recoverable.
• Equitable compensation is designed to make good a loss. But is important to show that
this loss was caused by the breach of trust.

A compensatory analysis was also adopted by the Supreme Court of the United Kingdom in
AIB Group (UK) plc v Mark Redler & Co. [2015]
Lord Reed JSC stated as follows: ‘The model of equitable compensation, where trust
property has been misapplied, is to require the trustee to restore the trust fund to the
position it would have been in if the trustee had performed his obligation.’

Liability of Trustees Inter Se

• Liability is personal not vicarious but default by doing nothing may amount to a breach of
trust.
• Where two or more trustees are involved in a breach of trust, liability is joint and several,
so each is liable in respect of the whole loss although all may not have been equally
blameworthy.

Bahin v Hughes (1886)

Facts:
A testator gave a legacy to his three daughters on trust to pay the income of the plaintiff for
life and after her death to her children. One of the d'au there's and the husband of another
effected an unauthorised investment in leasehold property and when this security proved
insufficient the plaintiff sought to impose liability on all the trustees.
Ruling:

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The Court of Appeal held that the trustees were jointly and severally liable and all equally
responsible for indemnifying the beneficiaries. In the opinion of the court, the money had
been lost just as much as a result of the default of the inactive trustees as by the innocent
though erroneous action of their co-trustee.

• Where one of the trustees has a special skill or area of expertise and you allow him to do
his job (eg accountant) then you may not be liable
• In limited circumstances where a breach of trust has occurred, a trustee may escape
liability or may be entitled to indemnity from a co-trustee, so e.g. where one trustee acts
in a fraudulent manner he alone will be liable. In addition, where the beneficiary has
instigated, participated in or even consented to or acquiesced in the breach of trust, the
trustee will not be liable for any breach which occurs.

Re Pauling's Settlement Trusts [1964]

Wilmer LJ stated that if the trustee can establish ‘a valid request or consent by the
beneficiary' to an advance made in breach of trust, that may provide the trustee with a good
defence against any claim by the beneficiary.

Trustee Exemption Clauses

• There is some uncertainty about the extent to which an exemption clause in a trust
instrument may protect a trustee from liability.
• In England Schedule 1, Paragraph 7 of the Trustee Act 2000 trustee provided that the
statutory Duty of Care does not apply in so far as it appears from the trust instrument
that the duty is not meant to apply. The current position in England in relation to the
recognisition of trustee exemption clauses was outlined in Armitage v Nurse.

Armitage v Nurse [1998]

• Upheld a clause in a settlement that no trustee should be liable for any loss or damage
unless it was caused 'by his own actual fraud.'
• In upholding the trial judge’s conclusion that the trustees were absolved from liability in
the circumstances, Millett LJ expressed the view that it would exempt a trustee from
liability ‘no matter how indolent, imprudent, lacking in diligence, negligent or wilful he
may have been, so long as he has not acted dishonestly’.
• Millett LJ himself acknowledged that there is a widely held view that exemption clauses of
this nature had gone too far and that professional trustees should not be able to rely on a
trustee exemption clause covering gross negligence.
- This case shows exemption clauses in their worst possible light. The clause in this
settlement was that no trustee should be liable for any loss or damage unless caused
by his own fraud. This allows the trustees to escape liability in an extremely wide
range of circumstances. Exemption clauses such as this show how easy it may be for
trustees to escape liability. Judges thought that they had no alternative but to give
effect to exemption clauses, but even among judges there were misgivings. See
page 543 for more info.

Spread Trustee Co Ltd v Hutcheson [2012]

• The majority of the Privy Council found that Guernsey customary law until 1991, when
legislation had altered the position, did not prohibit trustee exemption clauses excluding

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liability for gross negligence.

• The trustees argued that the content of Guernsey customary law should be taken a similar
to that of England and that English law permitted exclusion of liability for gross negligence.
• Lord Clarke agreed with Millett LJ’s conclusion in Armitage that a clause may exempt from
liability no matter how indolent, imprudent, negligent or wilful a trustee may have been,
so long as he was not dishonest.
• However, Baroness Hale expressed the view that the reasoning in Armitage was open to
serious question. She stated that there was a body of opinion which considered that the
law was not clear, and that it was not ‘an eccentric or unusual view’ to find that the
exclusion of liability for gross negligence was repugnant to the nature of a trust or
contrary to public policy.

- Aitken (2011) stated that ‘it seems clear that the blanket protection at present
provided by Armitage itself to the delinquent trustee is likely to come under
sustained attack when a suitable vehicle for the Supreme Court presents itself.’
- Loi [2011] suggests that following the divergence of opinion amongst the senior
judiciary in Spread Trustees that the standing of Millett LJ’s controversial reasoning
in Armitage can only be resolved by an authoritative decision of the Supreme Court.

Irish position on exemption clauses

Greene v Coady [2014]

Facts:
The plaintiffs were beneficiaries of a company pension fund and claimed damages for
breach of trust against the trustees for accepting an offer from the company to close its
liability and contribute to the fund. They claimed that the failure of the trustees to seek a
contribution demand for a higher sum to make up the funding deficit amounted to wilful
default on their part. An exemption clause in the trust instrument provided that the trustees
should not be liable in any manner whatsoever in CL during for negligence, but that ant
trustee should be liable for wilful default.
Ruling:
• The High Court rejected the plaintiffs’ submission that the defendant trustees were not
exonerated by an exemption clause set out in the trust deed.
• Charleton J stated that ‘it is always possible for a trust deed to provide in advance for
exemption from anything except the core obligation of trustees to exercise fidelity to the
objects of the trust for the ultimate good of the beneficiaries through acting honestly and
objectively and in good faith.’
• He held that for the trustees to be liable for wilful default the beneficiaries must show that
the default is a true conscious or reckless breach of duty.
• He dismissed the plaintiffs' claim, holding that the decision of the trustees to accept the
company's offering winding up the pension scheme was within the range of what might be
considered a reasonable response to a difficult situation.

In its Final Report on Trustee Exemption Clauses No. 301 (2006) published in July 2006, the
Law Commission recommended that a rule of practice should be recognised and enforced
by regulatory and professional bodies which means that statutory regulation of this area in
England is now unlikely and the law in that jurisdiction remains as set out by Millett LJ in

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Armitage v Nurse. Trustee exemption clauses continue to be upheld although continuing

disquiet amongst both academics and judges about the potential for abuse might suggest
that further judicial intervention to restrict their scope is in some respects inevitable.

The Law Reform Commission in its Final Report Trust Law General Proposals expressed the
view that there is a need for regulation of trustee exemption clauses so that liability for
breach of the irreducible core obligations of trustees may not be excluded. It suggested that
there was no need to draw a distinction between professional and lay trustees as the issue
would be adequately addressed by the flexible duty of care which the Commission had
recommended. It further recommended that it should not be possible to absolve a trustee
from liability from his duty to act honestly and in good faith and that the courts should have
a statutory discretion to relieve trustees from liability where they have acted honestly and
reasonably and ought fairly to be excused for the breach of trust.

Variation of Trusts

• In certain situations the terms of the trust may be varied without court approval.
• Where the beneficiaries are all of full age and capacity and together are absolutely
entitled to the trust property, they may terminate the trust and require that it be
distributed in accordance with their directions, a principle sometimes referred to as the
rule in

Variation of the terms of a trust without court approval

Saunders v Vautier (1841)
The testator bequeathed stock on trust to accumulate the dividends until the beneficiary
reached the age of 25 and directed that the capital and the accumulated dividends should
the be transferred to the beneficiary. When the beneficiary reached the age of 21 he
claimed he was entitled to the entire fund.
Ruling:
The plaintiff's claim was successful. In practice this principle has been interpreted as
meaning that any one or more adult beneficiaries who are of sound mind and are entitled to
the whole beneficial interest under the trust can direct the trustees to transfer the trust
property and end the trust.

Variation of the terms of a trust with court appraisal before legislative change
• Before recent legislative intervention in this area, variation of a trust scheme might be
sanctioned by the court in certain limited circumstances.
• Court approval might be sought to vary the terms of a trust where there were unborn or
minor beneficiaries who could not consent to a variation which might be desirable, to
permit the payment of maintenance to minor beneficiaries, to avoid the destruction of, or
ensure the preservation of, trust property, or to effect a compromise of disputes as
between the claims of various beneficiaries.

Legislative reform
• Sections 23 and s.24 of the Land and Conveyancing Law Reform Act 2009 effect similar
reforms here.

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• Section 24 provides the courts with a new statutory mechanism for approving variations of
the terms of trusts.
• The application to the court must be made by an appropriate person in relation to a
relevant trust, namely a trustee, a beneficiary or any other person who the court
considers appropriate to approve an ‘arrangement’ for the benefit of a ‘relevant person’.
• The nature of the arrangement must be specified in the application and in this context
‘arrangement’ means varying, revoking or resettling the trust or varying, enlarging or
restricting the powers of the trustees.
• For this purpose ‘relevant person’ means a person who has a vested or contingent interest
under a trust but who is incapable of assenting to an arrangement by reason of lack of
capacity, an unborn person, a person whose identity, existence or whereabouts cannot be
established by taking reasonable measures, or any other person with a contingent
interest.
• The court shall not hear an application made to it in respect of a relevant trust unless it is
satisfied that the applicant has given notice in writing of the application to the Revenue
Commissioners and to such persons as may be prescribed by Rules of Court at least two
weeks before the hearing of the application.

Prob question
Issue of what the trustees have not done
Court should not judge with the benefit of hindsight
They key duty arising is the duty of investment
There are a few thing sot looks at
1) the house
2) The money
Set out law in relation to investment in a general sense and the examine it under the
headings

Identify that there is only one beneficiary- minor

Preserve the capitula so that she has something for the future
In terms of investment look at what the trust investment says and also what statute
provides. There is a duty not to take risks.
Not the primary source of what trustees can and can't do.

No liability in relation to the care taker

Sarah would be liable because she made a conscious choice to do nothing
Mark- might be able to claim an indemnity because he tried his best

TOPIC 8: Resulting Trusts

Notes made up of
● Biehlers reading List (core of the notes)
● Biehlers notes

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● Lecture notes from Biehlers lectures

● Ella’s cousins notes
● Biehler, Chapter 7

Introduction
● Come into existence by an implication - the unexpressed but presumed intention of the
settlor
● Beneficial interests always revert to the settlor or the settlor's representatives
● Exempt fro formalities required for the creation of express trusts
Re Vandervell's Trusts (No.2) [1974] Ch 269, 294
● This case provides the modern categorisation for the different types of resulting trust
● Resulting trusts can be categorised in accordance with a distinction made by Megarry J
in Re Vandervell’s Trusts (No.2) [1974] Ch 269, 294:
● Automatically resulting trusts. Where a trust has been declared but the beneficial
interest fails for some reason or the entire beneficial interest is not disposed of.
● Presumed resulting trusts. Such trusts arise where property is transferred to a grantee
who gives no consideration, so as a result of voluntary dispositions of property or the
purchase of property in the name of a third party. In certain circumstances the
presumption of a resulting trust can be displaced, e.g. by the presumption of
advancement or by showing an intention to benefit the transferee
Westdeutsche Landesbank Girozentrale v. Islington Borough Council [1996] AC 669, 708
● Lord browne wilkinson queried the intention aspect of Magarry J’s concept of automatic
resulting trust
● Biehler disagrees with the honourable lord in this case and says simply that some
resulting trusts are genuinely automatic

● Automatically Resulting Trusts

Failure of the express trust
● Where an express trust fails completely for any reason, a resulting trust of the trust
property will arise in favour of the settlor or his estate.
● Also arises where the entire beneficial interest in the property has not been disposed of
- when this happens an express trust will be rebutted back to the settlor
● This may occur for a variety of reasons; e.g. there may have been a total failure of the
beneficiaries; where it is sought to create a half secret trust but the nature of the
trust or the beneficiaries are not specified; the settlement deed defining the scope of
the trust may have been lost, the trust may be void for uncertainty, or may fail to
qualify for charitable status in circumstances where it cannot operate as a valid
purpose trust.
*Vandervell v I.R.C. [1967] 2 AC 291 (329)
● Complicated share scheme involving the RCSI
● Appellant had failed to dispose himself of all beneficial interest in a number of shares
(because he possessed a buy back option on them) therefore they rebutted back to

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him and a trust was created

● Lord Wilberforce “the equitable, or beneficial interest, cannot remain in the air: the
consequence in law must be that it remains in the settlor'.”
Failure to exhaust beneficial interest
● At the time that a trust is executed it may appear fully disposed of but subsequent
events may change this position
● Where a specified purpose can be regarded as the motive behind the gift, the donee can
keep the property but this can be difficult to establish especially if it's the donee's
estate that stands to benefit rather than the donee personally
Re Trusts of the Abbott Fund [1900] 2 Ch 326
● Contributions made to a fund for the benefit of two women
● No provision made for what should happen to the money on the death of one of the
women
● Biehler “as a matter of practicality it can be very difficult to determine where the money
should go”
● In this case the court held that the failure of the express trust created an automatically
resulting trusts in favour of those who put money into the fund in the first place

Re Andrew's Trust [1905] 2 Ch 48

● Friends of dead clergymen created a trust in order to educate his children - in line with
the request of his will
● No provision was made for any leftover cash after the children's education was complete
● In this case the judge construed education in the broadest sense possible so that it could
be divided between the children as an inheritance
● Biehler “the only reason this happened was because the children were still alive to
benefit and the trust was made for both children and both children were both alive
(rather than in the Abbott case
Mee “’Automatic Resulting Trusts” in Constructive and Resulting Trusts (ed., Mitchell, 2010)
207 - 235

Presumed Resulting Trusts

● As a general principle, where the ownership of property is transferred to a grantee who
gives no consideration, an inference arises that the grantee holds the property by
way of a resulting trust for the grantor where there is (1) voluntary conveyance or
transfer and (2) purchase in the name of another (joint deposit receipts)
● Where property passes between individuals, English law presumes that the relationship
between them makes it an outright gift, and thus not subject to a resulting trust in
the event of failure; this is the "presumption of advancement". A presumed resulting
trust is where the transfer fails, and there is no reason to assume it was intended as
an outright gift.
● However, it must be stressed that is only a presumption which can be rebutted by

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evidence that a contrary result was intended.

● It can also be displaced by the presumption of advancement, which involves the
inference being drawn that a gift of property was intended rather than that it should
be held on a resulting trust because of the relationship between the parties.
Swadling (2008) 124 LQR 72Mee [2014] CLJ 86(a) Where trust arises from voluntary
conveyance
The law relating to the transfer of freehold land is now affected by statute in Ireland and
England. Section 62(3) of the Land and Conveyancing Law Reform Act 2009 provides that in
a voluntary conveyance a resulting use for the grantor is not implied merely because the
land is not expressed to be conveyed for the use or benefit of the grantee. Section 60(3) of
the Law of Property Act 1925 is in similar terms but refers to a ‘resulting trust’. The effect of
these provisions would appear to be that a voluntary conveyance of land takes effect as
expressed unless there is evidence of a contrary intention.
Mee [2012] Conv 307
● The modern case law on this subsection is inconclusive but suggests that, while a
presumption of resulting trust arose upon a voluntary conveyance of land prior to
1926, this presumption has been eliminated by s.60(3). However, the case law
3

appears to indicate that a resulting trust can nonetheless arise if it can be

established on the evidence that this was intended by the grantor. 4

Where there is a transfer of personal property to another person done voluntarily, a

presumption of a resulting trust arises unless there is evidence of a contrary intention or the
presumption of advancement arises

Re Vinogradoff [1935] WN 68
● Testatrix transferred 800£ war loan into names of herself and an infant granddaughter
but continued to receive dividends until her death
● Court held that after her death the granddaughter held the loan on resulting trust for
the testator's estate
● where there is a voluntary transfer of personalty, the transferee is presumed to hold on
a resulting trust for the transferor’s estate
Standing v Bowring (1886) 31 Ch D 282 (287)
● Plaintiff widow transferred stock into joint names of her and her godson who was the
defendant
● Was warned that once the transfer was made she couldn't revoke
● Later tried to revoke by claiming that there was a presumption of a resulting trust
● Presumption rebutted as as there was ample evidence that at the time of the transfer
she intended for it to benefit the defendant
● Establishes principle that the courts look at the intention at the time of creation -
presumption cannot be used if one changed their mind later on
(b)Joint deposit receipts

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● Where the transferor opens a JDA in the names of himself and the transferee, usually
the transferor retains sole dominion over the account
● Until recently, the Irish courts took the view that a resulting trust would arise here and
that the transferee would not be entitled to the money - this approach often meant
going contrary to the transferor's actual intention
● Important to consider here the role of JDA as a form of testamentary dispositions other
than wills - in such a case the formalities under the succession act will apply
Owens v Greene [1932] IR 225 (237-238)
● Man opened account in the name of himself his nephew and a distant relative
● He retained dominion over the accounts
● Plaintiffs failed to rebut the presumption of a resulting trust in favour of the family of
the man
● Onus was on the plaintiffs to rebut the presumption of a resulting trust which could only
be done by establishing that it was the deceased’s intention when transferring
money to give the plaintiffs an immediate gift then and there
● Overruled in Lynch v Burke
*Lynch v Burke [1990] 1 IR 1 (HC) & [1995] 2 IR 159
● Deceased opened a JDA in the name of herself and her niece who travelled from
scotland to sign the paperwork
● In the will of the deceased everything was left to the plaintiff
● The defendant was the Niece - was she entitled to the money in the account?
● In the High Court O'Hanlon J held that the deceased had intended that the first
defendant would be entitled by right of survivorship to the beneficial interest in this
money and the equitable presumption in favour of the deceased's estate was
therefore rebutted. However, he felt obliged on the authority of the Owens decision
to hold that the transaction was an invalid gift and an unsuccessful attempt to make
a testamentary disposition otherwise than by will.
● Therefore found in favour of the plaintiff (estate)
● This decision was reversed by the Supreme Court - Found in favour of defendant
● In the SC O'Flaherty J considered the legal effect of opening a deposit account in joint
names.
● He said that by her presence and signature, it was manifest that the first named
defendant was a party to the contract from the outset and she must be entitled to
claim as a party to the contract under its terms.
● Held that the plaintiff one because she was a party to the contract or alternatively
because it was a gift subject to a contingency (ie death of the donor)
● He stated that since historically, the concept of a resulting trust was an invention of
equity to defeat the misappropriation of property as a consequence of potentially
fraudulent or improvident transactions, it would be paradoxical if the doctrine was
allowed to defeat the clear intention of the donor as found by the trial judge.
● O'Flaherty J commented that if the arrangement in the case before him was not

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testamentary, which in his view it was not, the statutory requirements relating to
testamentary dispositions had no application.
● O'Flaherty J also stated that Owens had given cause for unease on a number of grounds
and concluded that it was wrongly decided and should be overruled.

*Capper (1996) 47 NILQ 281

● 'the underlying doctrinal principles remain very unclear' and there are conceptual
difficulties with both the 'gift theory' and the 'contract theory'. Capper suggests that
the 'contract theory' is preferable, and on this basis provided that the survivor has
signed the necessary contractual documents and there is sufficient evidence of the
donor's intention to rebut the presumption of a resulting trust, the outcome in
similar cases in the future should be the same as in Lynch.
*Woods (2002) 37 Ir Jur 281
● who points to a number of potential flaws in the contract theory and favours the
conditional gift theory. - avoids issues of consideration
Russell v Scott (1936) 55 CLR 440
● Use of the gift theory
● Woman transferred money into an account in the name of her nephew and herself
● Court held that although the woman had not intended for the money to be given to the
nephew during her lifetime, the money was a gift of a present right of survivorship as
opposed to a testamentary disposition
O’Meara v Bank of Scotland plc [2011] IEHC 402
● Laffoy J makes obiter comments suggesting that the contract theory in Lynch v Burke is
correct
● Biehler disagrees and points out that they are only obiter comments

Biehler “overall prefers the contract theory”

Brady (1990) 12 DULJ 155
Where purchase money paid by third party
● Where a person provides the purchase money for property and it is conveyed in another
person's name wholly or partly it will be assumed that the latter holds the property
on trust for the person who actually provided the cash
Dyer v Dyer (1788) 2 Cox Eq Cas 92, 93 (30 ER 42)
● Principle that “The trust of a legal estate results to the man who provides the purchase
money”
Rebutting the presumption of a resulting trust
● Presumption can only be rebutted by showing that the purchaser intended to benefit
the other party OR by the operation of the presumption of advancement
Stanley v Kieran [2007] IEHC 272; [2011] IESC 19
● Plaintiff was awarded a declaration that property bought in his ex wife's name but with
his money was held on a resulting trust for him

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● Presumption arose on the facts

Tinsley v Milligan [1994] 1 AC 340
● Plaintiff was sole owner of property although on the facts it was held that milligan had
contributed financially
● HOL held that Milligan could succeed because of the presumption of a resulting trust -
why? Because she had contributed
● Why did the court involve the illegality argument
● All court held that they needed to do was look at the contribution
Presumption of advancement
● Arises where a relationship exists between the parties where the donor or purchaser is
under an obligation recognised in equity to provide for the person to whom the
property is given
● Rebutted by showing no intention to benefit
Categories include
● Husband and wife
● Father and child
● Persons loco parentis to a child

Shephard v Cartwright [1955] AC 431, 445

● Establishes principle that an act or declaration by the transferor at the time or prior to
the transaction may be used to rebut the presumption of advancement but
subsequent acts may be not used to rebut the presumption

● Husband and wife

● Husband buys property in wifes name - presumption of advancement
● Wife bys property in husband's name - presumption of a resulting trust

*R.F. v M.F. [1995] 2 ILRM 572

● Wife tried to claim beneficial ownership in a property purchased in the name of herself
and her husband but for which the husband had paid for
● Facts of teh case were that the wife had refused to live in the house unless it was in their
joint names
● Henchy J accepted the relevance of the presumption of advancement but that on the
facts it was clearly rebutted given the wife's insistence on joint ownership and the
fact that the husband had paid for ita ll
● Husband got 100% ownership

2. Father and child

Dowling [1996] Conv 274
● suggests that the distinctions between father and mother should be abandoned, a view
shared by Carolan (2008) 26 ILT 26 who points out that this change may also be

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constitutionally necessary in this jurisdiction.

3. Persons in Loco parentis

Pecore v pecore

Rebutting The presumption of advancement

● An erosion on judicial confidence in the concept has made it easier to rebut
● However, Won't be rebutted if evidence is subsequent (Shephard v Cartwright)

Anson v Anson [1953] 1 QB 636

● Will be rebutted if there is evidence to show that no gift was intended
● Husband guaranteed wifes bank debt but made it clear that he wanted to be payed back
and not simply relieve her of her debts
*Carolan (2008) 26 ILT 26S.199 of the Equality Act 2010 (see Glister (2010) 75 MLR 807)

Trusts of Family property

• The circumstances which give rise to a resulting trust when property is voluntarily
conveyed into the name of another or where it is purchased in another party’s name
have been outlined above.
• A common application of these principles occurs in relation to the question of ownership
of family property when recourse to equitable principles is still necessary in the
context of property disputes involving spouses, civil partners, cohabitees and other
third parties, often financial institutions.
• While the enactment of legislation in the form of the Family Law Act 1995, the Family
Law (Divorce) Act 1996 and the Civil Partnership and Certain Rights and Obligations
of Cohabitants Act 2010 has considerably reduced the circumstances in which
resulting and constructive trusts continue to play a role in this field, they
nevertheless remain significant in some situations.

Direct Contributions
• Where property held in one name but the other party makes direct ocntributions to the
purchase price, the property will be held on resulting trust with the beneficial
interest proportionate to the contributions
• Irish courts do not take into account non financial contributions
C.v C. [1976] IR 254
• Presumption of a resulting trust arose in situation where a wife paid over 50% towards a
home purchased in her husband's name
• Court held she was entitled to 50% beneficial interest
*W. v W. [1981] ILRM 202 (204)
• Irish position - Finlay J stated that in the absence of an inconsistent agreement, a wife

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will be entitled to a share proportionate to her contributions whether direct

(repayment on a mortgage etc) or indirect (payment into a so called family fund
• Biehler likes this approach

No presumption will arise where there is evidence of a contrary intention, even where
financial contributions have been made
Hickey v O’Dwyer [2006] 2 ILRM 81
• Widow of deceased sought a beneficial interest ina joint property purchased in his
name but the mortgage was paid off using her and his joint account
• Laffoy J reiterated that the rule in w&W is subject to the overriding requirement that a
beneficial interest will only be made in the absence of some other agreement or
arrangement
• In her view the evidence was inconsistent with the plaintiffs claim that she and her
husband had an agreement that she would have a beneficial interest
• They both owned their own houses therefore difficult to show that she should have a
beneficial interest in the husbands property especially in the absence of an
agreement or arrangement stating otherwise
• Biehler “plaintiff here was possibly unlucky”

Indirect contributions
W. v W. [1981] ILRM 202, 204
• per Finlay P. ‘Where a wife contributes [either directly to the repayment of a mortgage
or] to a general family fund thus releasing her husband from an obligation which he
otherwise would have permitting him to discharge liabilities out of that fund and
permitting him to repay mortgage instalments, she will in the absence of proof of an
inconsistent agreement or arrangement be entitled to an equitable share in the
property which had been mortgaged and in respect of which the mortgage was
redeemed approximately proportionate to her contribution to the mortgage
repayments, to the value of the mortgage thus redeemed and to the total value of
the property at the relevant time.’
• Eg property bought in husband's name and wife contributes financially by paying utility
bills is recognised as giving a right to an interest
McC. v McC. [1986] ILRM 1
• Wife contributed to cost of previous home - proceeds of sale pf previous home used to
furnish new home - new home itself purchased by husband
• SC held that wife's original contribution was too far removed and did not apply directly
or indirectly to purchase of the new house

Indirect financial contributions which relieves the other party of a financial burden that they
would otherwise bear gives rise a proportionate beneficial interest (in the absence of any
contrary agreement

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Improvements
*N.A.D. v T.D. [1985] ILRM 153
- Court held that resulting trusts could not be extended to improvements
- Court held she was not entitled to anything despite the fcat she had contributed ⅓
towards the improvements
- Case turned on the finding by the court that the beneficial ownership was vested 100%
in the husband as he owned the property
- Somewhat restrictive approach

E.N. v R.N. [1992] 2 IR 116

• A slightly less restrictive attitude was adopted by Finlay CJ in
• Important case to read
• What did the wife do? 1. She worked part time and payed her earnings into a joint bank
account triggering joint family fund scenario 2. She spent time running a small
business out of the house (bedsits) 3. She also made contributions to various
mortgages, one that was used to fund improvements on the property
• Step forward - an agreement to this effect will provide a relative share
• Law in ireland seems to be that improvements will always require agreements
• 122 where he said ‘I do not consider .. that a direct contribution, even in money's worth,
to an improvement made on a family home by a wife, where the husband is the sole
owner of it, can, in the absence of express or readily implied agreement, constitute a
claim for a beneficial interest in

Other forms of contribution

C.F. v J.D.F. [2005] 4 IR 154, 166*B. L. v M. L. [1989] ILRM 528 (HC); [1992] 2 IR 77 (107)
- Couple seperating and trying to resolve issues of whether or not the wife had an interest
in the property
- She had made contributions but they were only work in the home - looking after kids etc
- Finlay CJ said that it was allowing the courts to legislate
- Finlay CJ concluded that to allow the courts to extend the circumstances in which a wife
may claim a beneficial interest in the family home to a situation where she has made
no direct or indirect financial contribution to the acquisition of the property or to a
family fund but has performed the constitutionally preferred role of wife and mother
in the home would not be to develop any principle known to the common law but
rather would involve the creation of an entirely new right. - going too far - calling
halt to the incremental approach of equity giving beneficial interests
- As he said unless this result was ‘clearly and unambiguously warranted by the
Constitution or made necessary for the protection of a specified or unspecified right
under it, it must constitute legislation and be a usurpation by the courts of the

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function of the legislature.' (at 107)

*E.N. v R.N. [1990] 1 IR 383 (HC); [1992] 2 IR 116 (122)

• Contributions from the wife in this case involved work done in the husbands business
• She got 50%
• Crucial differentiation here between work done in the business place and work done in
the hoe

Mee [1993] Conv 359

• Comments that the differentiation was unwarranted and hard to justify
• Argues that the two cases demonstrate the static and idiosyncratic approach towards
resulting trusts in ireland
The potential of teh constructive trust
Murray v Murray [1996] 3 IR 251
The Approach in England – the Common Intention Constructive Trust

(see photocopy of ella’s cousins notes on this section)

Lloyd's Bank v Rosset [1991] 1 AC 107 (133) Midland Bank v Cooke [1995] 4 All ER 562
Oxley v Hiscock [2004] 3 WLR 715 *Stack v Dowden [2007] 2 AC 432 Gardner (2008) 124
LQR 422*Jones v Kernott [2012] 1 AC 776 *Mee [2012] Conv 167 Gardner and Davidson
(2012) 128 LQR 178 Gardner (2016) 132 LQR 373 *Mee (2016) 56 Ir Jur 161

TOPIC 9: Proprietary Estoppel

Introduction

Estoppel is not an exclusively equitable concept and operates today both at common law
and in equity. Two main aspects of equitable estoppel are recognised; promissory and
proprietary estoppel. The basis of the doctrine of proprietary estoppel is to prevent a
person from insisting on his strict legal rights where to do so would be inequitable having
regard to the dealings which have taken place between the parties. It developed as an
exception to the formalities required for the creation of interests in land and the rationale
behind the doctrine could be said to be to prevent unconscionable behaviour. While
proprietary estoppel is almost exclusively invoked in the context of rights in or over land, it
can extend to other forms of property.

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As Lord Walker commented in Thorner v Major [2009] the doctrine of proprietary estoppel
is based on three main elements:
● a representation or assurance made to the claimant,
● reliance on it by the claimant, and
● detriment to the claimant in consequence of his (reasonable) reliance.

However, as Robert Walker LJ made clear in the course of his judgment in the decision of
the Court of Appeal in Gillett v Holt [2001] the doctrine cannot be treated as if it can be
‘subdivided into three or four watertight compartments.’ As he stated, ‘the quality of the
relevant assurances may influence the issue of reliance’ and ‘reliance and detriment are
often intertwined.’

Gillet and Thorner are good cases for establishing the three main principles.

Assurance/ Representation

The assurance given, while it need not necessarily have been express, must have been made
by the party with the intention that it should be relied on and a mere expression of opinion
would be insufficient in this context. It will usually consist of encouragement by words or
deeds although it is possible that mere acquiescence or 'conscious silence' might also
suffice.
However, doubt was cast on this proposition by McGuinness J in her judgment in C.D. v
J.D.F. [2006] where she said that in her view in order to establish an estoppel ‘there must
actually be a promise, or at least a reasonably clear direct representation or inducement of
some kind’ and it is not sufficient to assert that something was permitted to happen or that
third parties looking at the situation thought that a particular outcome was likely.

Thorner v Major [2009]

Facts:
The claimant, who was the deceased's cousin's son, had worked on an unpaid basis on the
deceased's farm for a period of nearly 30 years. Over time a number of oblique references
had been made by the deceased to the fact that he had intended the claimant to inherit the
farm. The deceased made a will in which he left his residuary estate, including the farm, to
the claimant, but he later destroyed this will and died intestate. The claimant sought a
declaration that the defendants, the deceased personal representatives, held the estate on
trust for him.
Ruling:
● The trail judge found in the plaintiff's favour based on proprietary estoppel.
● This was overturned by the CoA but the original decision was restored by the HoL.
● Lord Scott referred to the fact that a representation, if it is to found a claim based on
proprietary estoppel, must be ‘clear and unequivocal’. He concluded that if at the time of
the testator's death, evidence was available to identify the property in question with
certainty, the appellant's claim could not be rejected on the basis of a lack of clarity of
subject matter.
● Lord Neuberger said that the 'clear and unequivocal' principle must be read as subject to
some qualifications. The relevant words and actions must be assessed in their context, one
should not apply the test too rigorously and there would be instances when the stamens

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related upon to found an Estoppel could have more than one meaning.
● Lord Walker stated that he would prefer to say that to establish a proprietary estoppel the
relevant assurance must be ‘clear enough’ and that what amounts to sufficient clarity will
greatly depend on the context. The clear and unequivocal test should not be applied, it
should simply be clear enough. What constitutes enough will be decided based on the
facts of the case.
Family situation makes it relevant as to whether not not it's reasonable to rely on it. The
deceased on this case was not prone to speaking or making big announcement so on
the facts it was understandable that he would not make a direct promise.
In this case the COA decided against the p because there was no irrevocable promise, bit
this was overturned. Thus this case clearly shows that an irrevocable is not necessary-
it just needs to be clear and unequivocal.

Smyth v Halpin is the main Irish case that shows that an assurance can grant a claim for
proprietary estoppel.

Gillet v Holt establishes a principle for a direct assurance as opposed to an indirect

assurance.

Reliance
Reliance would seem to be established once it is shown that a representation ‘was
calculated to influence the judgment of a reasonable man' and generally once an assurance
on the part of the legal owner has been established, there is a presumption of reliance.
Thorner v Major- what a reasonable man would rely on. If this is present then detriment is
assumed.

Detriment
● Detriment will be suffered where the assurance on which reliance is placed is withdrawn
and it is the fact of detriment having been suffered which will render it unconscionable for
the legal owner to insist on enforcing his rights.
● While the detriment suffered by the claimant will usually involve expenditure of money or
the building of premises on another's land, it need not consist of the payment of money or
other quantifiable financial detriment as long as it is something substantial.

Bracken v Byrne [2006]

Facts:
The plaintiff contended that an arrangement had been entered into between herself and
the defendant (her sister) that she would be provided with a plot of land on the property
belonging to the latter on which to build a house.
Ruling:
● Clarke J stated that the only detriment suffered by the plaintiff was the making of a
planning application and some brief discussions with a builder and he concluded that he
was not satisfied that any sufficient detriment had been incurred such as would require a
court of equity to convey the lands in reliance on the doctrine of proprietary estoppel.
● It is clear from the judgment of Clarke J that the requirement that the detriment suffered
will be substantial in nature.

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A comprehensive analysis of the manner in which the principle of detriment operates in the
context of proprietary estoppel was undertaken by Robert Walker LJ in Gillett v Holt.

Gillet v Holt [2001]

The plaintiff worked as a golf caddie for the defendant and the two became friends. The
plaintiff later began working on the defendant's farm for a period of 38 years, and
eventually moved into a farmhouse belonging to the defendant. During this time the
defendant had made several separate representations to the plaintiff as to his eventual
inheritance of the farm - such as "all this will be yours" and "it was all going to be yours
anyway".
However after a dispute the defendant sacked the plaintiff and removed him from the
farmhouse. He also altered his will, removing him as main beneficiary in favour a third party.
The plaintiff claimed proprietary estoppel, with a view to being able to remain in possession
of the farmhouse, and acquiring part of the defendant's farm.
Ruling:
● Robert Walker LJ in the CoA held that Mr Gillett was entitled to a share of the property
and could not simply be ejected
● He held that:
there must be a sufficient causal link between the assurance relied on and the detriment
asserted
the issue of detriment must be judged at the moment when the person who has given the
assurance seeks to go back on it
whether the detriment is sufficiently substantial is to be tested by whether it would be
unjust or inequitable to allow the assurance to be disregarded.
● He continued: ‘The overwhelming weight of authority shows that detriment is required.
But the authorities also show that it is not a narrow or technical concept. The detriment
need not consist of the expenditure of money or other quantifiable financial detriment, so
long as it is something substantial. The requirement must be approached as part of a
broad inquiry as to whether repudiation of an assurance is or is not unconscionable in all
the circumstances.’
If the property/make up of the land changes overtime, as long as its still the same
identifiable property it is ok, you still have a claim.

Categories of Cases in which Proprietary Estoppel may Arise

Where an Imperfect Gift is Made

● A wants to give B land but doesn't go through with the required formalities.
● While the general principle is that equity will not complete an imperfect gift (Milroy v
Lord) in some circumstances the courts will allow the perfection of a gift, usually in the
context of a voluntary gift of realty, see Dillwyn v Llewelyn.

Dillwyn v Llewelyn (1862)

Facts:
A son built a house on his father's land with the latter's consent and informal memorandum
was signed which showed that it was the father's intention that the land should be given to
the son for this purpose. In the father's will the land was left on trust for the benefit of third
parties.

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Ruling:
● After the father's death the HoL held that the father's intention to convert the fee simple
would be carried out by the court, despite what was written in the will.
● Lord Westbury pointed out that a promise of a gift had been made and on the strongest of
thats promise and with the father's knowledge, the son had incurred substantial
expenditure on the land.
● Lord Westbury stressed that a voluntary agreement would not be completed by a court of
equity in the case of a mere gift and that it was instead the subsequent acts of the donor
which gave rise to the claim.

Smyth v Halpin [1997]

Facts:
The plaintiff had asked his father to provide him with a site on the latter's land so that he
could build a house for himself. The father refused, stating that the family house would go
to the son after his mother's death and why would he want two houses. He suggested that
the plaintiff instead build an extension onto the family home. The father then left the house
to his wife for her life, and thereafter to one of his daughters. The plaintiff sought a
declaration that he was entitled to the interest in the property after the life of his mother.
Ruling:
Geoghegan J stated that the plaintiff's clear expectation was that he would have a fee
simple interest in the entire house and concluded that the protection of the equity arising
from the expenditure required that an order be made by the court directing a conveyance of
that interest to him.

Common Expectation
● Proprietary estoppel may also arise where parties have consistently dealt with each other
in such a way as reasonably to cause one party to rely on a shared assumption that he
would acquire rights in the other party's lands.

The accepted classic formulation of this proposition was laid down by Lord Kingsdown in his
dissenting speech in Ramsden v Dyson (1866):
‘If a man, under a verbal agreement with a landlord for a certain interest in land, or, what
amounts to the same thing, under an expectation, created or encouraged by the landlord,
that he shall have a certain interest, takes possession of such land, with the consent of the
landlord, and upon the faith of such promise or expectation, with the knowledge of the
landlord, and without objection by him, lays out money upon the land, a Court of equity will
compel the landlord to give effect to such a promise or expectation.
If, on the other hand, a tenant being in possession of land, and knowing the nature
and extent of his interest, lays out money upon it in the hope and expectation of an
extended term or an allowance for expenditure, then, if such expenditure has not been
created or encouraged by the landlord, the tenant has no claim which any Court of law or
equity can enforce.’

● It is important to stress that before Lord Kingsdown's dicta will apply it is essential that the
expenditure has been requested, or more commonly encouraged, by the land owner. As
the second paragraph of his statement makes clear, where the other party merely lays out
money in the hope or expectation of acquiring an interest, which has not been

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encouraged by the land owner, no estoppel will arise.

This point is well illustrated by the decision of the Privy Council in Attorney General of Hong
Kong v Humphrey's Estate.

Attorney General of Hong Kong v Humphrey's Estate [1987]

Facts:
It was agreed that the Hong Kong Government and a group of companies, which included
the respondent, that the government would grant the group a lease of a specific property in
exchange for flats which believed to the latter. The government took possession of the flats
and fitted them out for civil servants but before the contract was concluded the group
withdrew from the transaction. The government brought an action contesting the group's
right to withdraw and the respondent sought a declaration that it was entitled to the flats.
The government contended that the group were Estoppel from withdrawing what had been
agreed in principle.
Ruling:
● The Privy Council rejected the government's claim.
● It was held that to found an estoppel it would have to be established that not only had the
government acted to its detriment to the knowledge of the group in the hope that it
would not withdraw from the agreement, but it would also have to be established that the
group had created a belief that they would not withdraw and that the government had
relied on this belief.
● The Privy Council accepted that while ‘the government acted in the confident and not
unreasonable hope that the agreement in principle would come into effect,' the group had
not encouraged or allowed a belief or expectation on the government's part that it would
not withdraw from the agreement and that in the circumstances no estoppel arose.

The importance of the fact that any expectation or belief be created or encouraged by a
land owner can also be seen from the decision of Blayney J in Haughan v Rutledge/

Haughan v Rutledge [1988]

Facts:
The plaintiffs were trustees of of an association which promoted harness racing. They
sought to lease the defendant's land for the purpose of holding races. It was agreed that the
defendant would let a field for a trial periods and that the plaintiffs would construct a
racetrack on it. It was further agreed that if at the end of this period the plaintiffs left the
property, they would pay no rent and the defendant would retain the benefit of the works
carried out. Following a dispute, the defendant repossessed the land and the plaintiff's
sought specific performance of the agreement to lease the lands or an order requiring the
defendant to let them go into possession.
Ruling:
● Blayney J rejected the proprietary estoppel claim.
● He took a four point approach, holding that four conditions would have to be satisfied
before an estoppel could arise, namely detriment, expectation or belief, encouragement
and finally, that there be no bar to the equity.
● On the facts of the case before him he held that the second and third requirements had
not bee satisfied.

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● He said: ’I consider that the plaintiffs laid out money on the construction of the track in
the hope and expectation that the defendant would continue to make lettings of the track
to them, but as that hope and expectation was not created or encouraged by the
defendant, the plaintiffs have no claim which can be enforced at law or in equity.’

Unilateral Mistake
Proprietary estoppel may also be invoked where one party has made an error as to the
nature of his rights, the crucial factor being that detriment is suffered by the party who
innocently relies on the mistaken assumption that he has rights in land.

Ramsden v Dyson (1866)

Lord Cranworth: ‘If a stranger begins to build on my land supposing it to be his own, and I,
perceiving his mistake, abstain from setting him right, and leave him to persevere in his
error, a Court of equity will not allow me afterwards to assert my title to the land on which
he had expended money on the supposition that the land was his own. It considers that,
when I saw the mistake into which he had fallen, it was my duty to be active and to state my
adverse title, and that it would be dishonest in me to remain wilfully passive on such an
occasion, in order afterwards to profit by the mistake which I might have prevented.’
However, he continued: ‘If a stranger builds on my land knowing it to be mine, there is no
principle of equity which would prevent my claiming the land with the benefit of all the
expenditure made on it.’

It is necessary that the person spending the money thought that he was building on his own
land and that the real owner knew at the time that the land did in fact belong to him; no
estoppel will arise under this heading where the ‘stranger’ knows that he has no rights over
the land. This point is illustrated by the case of O’Callaghan v. Ballincollig Holdings Ltd High
Court.

O’Callaghan v. Ballincollig Holdings Ltd High Court [1993]

Facts:
The plaintiffs claimed that they had acquired a title to a house by adverse possession. This
claim was rejected by the defendants and a notice to quit was served. The plaintiffs sought a
declaration of their title or alternatively a declaration that they had a lien on the house for
moneys spent on reinstating it while the defendant counterclaimed for possession. The
plaintiffs claim to a lien was based on the grounds of proprietary estoppel and unjust
enrichment. They had spent significant sums of money reinstating the house while the
defendant stood idly by.
Ruling:
The court held that the plaintiff's claim was not well founded. As long as the plaintiffs'
tenancy continued to subsist the defendant was not entitled to interfere and therefore it
was not a case of standing idly by. He concluded that the plaintiffs knew that they held the
defendant's house as tenants. Therefore they could not prevent the defendant from
claiming the house with the benefit of their expenditure on it.

Wilmott v Barber (1880)

Fry J laid down the proposition that a person should not be deprived of his strict legal rights
unless he has acted in a manner which would make it fraudulent to assert those rights,

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fraud in this context being dependent on establishing five necessary elements. These were
as follows:
[Link] claimant must have made a mistake as to his legal rights.
2. The claimant must have expended some money or done some act on the faith of his
mistaken belief.
3. The owner of the land must know of his own right which is inconsistent with the right
claimed by the plaintiff.
4. The owner must know of the claimant's mistaken belief as to his rights.
5. The owner must have encouraged the claimant in relation to the expenditure incurred or
other acts done, either directly or by refraining from asserting his legal rights.
These so called five probanda became so popular that they were applied by the courts in
cases where a claim of proprietary estoppel was made irrespective of the basis of such a
claim and even where it did not involve a case of unilateral mistake. This restricted the
development of the doctrine for some time as a result.

A Move Towards a Test of Unconscionability

Taylor's Fashions Ltd v Liverpool Victoria Trustees Co. Ltd [1982] This was the first time
that a court gave any detailed consideration to a departure from the Wilmott v Barber
approach.
● Oliver J pointed out that in the example given by Lord Kingsdown in Ramsden v Dyson,
there was no room for a literal application of the probanda as the circumstances referred
to did not presuppose a mistake but rather the fostering of expedition in the minds of
both parties
● He said that more recent authorities seemed to support a much wider equitable
jurisdiction to interfere in situations where the assertion of legal rights was found by the
court to be unconscionable.
● Oliver J suggested that the relevance of the probanda, even in cases of unilateral mistake,
was now open to doubt.
● He stated: ‘The more recent cases indicate, in my judgment, that the application of the
Ramsden v. Dyson principle … requires a very much broader approach which is directed
rather at ascertaining whether, in particular circumstances, it would be unconscionable for
a party to be permitted to deny that which, knowingly or unknowingly, he has allowed or
encouraged another to assume to his detriment rather than to inquiring whether the
circumstances can be fitted within the confines of some preconceived formula serving as a
universal yardstick for every form of unconscionable behaviour.’
● This case essentially said that the 5 probanda are not strictly required and intruded a more
flexible approach.

Lim Teng Huan v Ang Swee Chuan [1992]

Facts:
The parties entered into an agreement whereby the the plaintiff acknowledge his consent to
the building of a house by the defendant on land which they had purchased jointly. The
plaintiff agreed to exchange his share in the property for unspecified land which the
defendant expected to acquire. After the defendant had completed the house and gone into
occupation of it, the plaintiff sought a declaration that he was the owner of half the land
and the defendant counter-claimed that he was entitled to the sole beneficial ownership of

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the plaintiff's share, or alternatively sought an injunction to restrain the plan from entering
the land.
Ruling:
● The Privy Council inferred that the defendant had completed construction of the house in
relative on the agreement made between the parties and found that it would be
unconscionable for the plaintiff to renege on the assumption that the defendant would
have sole absolute interest in the land upon paying compensation to the plaintiff.
● The plaintiff was therefore Estoppel from denying the defendant's entitlement to the
whole of the land.
● Lord Browne-Wilkinson said that in order to found a proprietary estoppel, ‘it is enough if,
in all the circumstances, it is unconscionable for the representor to go back on the
assumption which he has permitted the representee to make.’

Taylor v Dickens [1998]

Judge Weeks concluded that there was nothing unfair or unjust in the deceased changing
her will and that no equity arose in the plaintiff’s favour. It was a case of counting their
chickens before they had hatched. In his view if one were to conclude otherwise ‘one might
as well forget the law of contract and issue every judge with a portable palm tree. The days
of justice varying with the size of the Lord Chancellor’s foot would have returned’.

Gillett v Holt [2001]

Facts:
The plaintiff spent his life working as a farm manager for the defendant, who repeatedly
promised him that he would succeed him in the farming business and the farm house. After
the plaintiff and the defendant fell out, the plaintiff was dismissed from his job and the
defendant changed his will in favour of another party. The plaintiff made a claim based on
proprietary estoppel.
Ruling:
● Carnworth J dismissed the plaintiffs claim. He found the representation made could not be
construed as a irrevocable promise and that the claim would in any event have failed
because the plaintiff had not proved himself to have suffered sufficient detriment in
reliance on the defendant's assurances to give rise to proprietary estoppel.
● However, Carnwoth J did agree that the overriding principle was that a defendant should
be held to his representation 'if only it would be unconscionable to go back on it.'
● He also stressed that estoppel must be founded on expectation, created on encouraged by
the party alleged to be bound by it, in reliance on which the other party has acted to his
detriment.
● Appealed to CoA.
● Robert Walker LJ said that where assurances were intended to be relied upon and were in
fact related upon, it was not necessary to look for an irrevocable promise as it was the
other party's detrimental reliance that made the promise irrevocable.
● He overturned the trial judge's decision, saying that this was an unusually compelling case.
● Lord Robert Walker's judgement also shows increasing acceptance of the principle of
unconscionability.
● In his view ‘the fundamental principle that equity is concerned to prevent unconscionable
conduct permeates all elements of the doctrine. In the end the court must look at the

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matter in the round.’

● He added that the requirement of detriment must be approached as part of a broad
inquiry as to whether repudiation of an assurance is or is not unconscionable in all the
circumstances. It is clear from the tenor of his judgment that he believed
unconscionability to be fundamental to the imposition of liability.

The role which unconscionability plays in establishing a claim based on proprietary estoppel
particularly in a commercial context will need to be reassessed in the light of the decision of
the House of Lords in Cobbe v Yeoman’s Row Management Ltd.

Cobbe v Yeoman’s Row Management Ltd [2008] the HoL took a strong stand against the
concept of unconscionability. Thought it was introduce uncertainty into commercial cases-
you need the 3 main criteria, you can't rely on a hope or a feeling of unfairness.
● There were increasing academic and judicial concerns about the focus on
unconscionability and lack of reference to the traditional elements of proprietary
estoppel, such as assurance, detriment and reliance. Concerns that these fundamental
principles were being overlooked.
Facts:
The claimant, who was an experienced property developer, entered into an oral agreement
with the third named defendant, who was the sole director of the first named defendant, to
purchase an apartment block with considerable development potential. The parties agreed
that the claimant would apply for planning permission at his own expense and would then
develop the property with the defendants obtaining a percentage of any amount by which
the gross protected exceeded a stated sum. After planning permission was obtained the
defendants sought to renegotiate the terms of the agreement. The claimant brought
proceedings alleging that the defendants were estopped from denying that he had obtained
a beneficial interest in the property or that a constructive trust had arisen in his favour.
Ruling:
● The HoL limited the claimant's relief to an in personam remedy of a quantum meriut
payment for his services in obtaining planning permission for the property.
● The role which unconscionabilty plays in established a claim based on proprietary estoppel
will need to be reassessed after Cobbe.
● The judgements of Lord Scott and Lord Walker show that their decision was based on a
total reappraisal of the circumstances in which proprietary estoppel may arise, particularly
in a commercial context.
● Lord Walker expressed the view that it was not enough ‘to hope, or even to have a
confident expectation, that the person who has given assurances will eventually do the
proper thing.’
● As he stated, ’hopes by themselves are not enough’ and in his view in the cases in which
an estoppel has been successfully established, the claimant had believed that the
assurance on which he relied was binding and irrevocable.
● Lord Walker also voiced concerns about how the courts ‘should be very slow to introduce
uncertainty into commercial transactions’.
● Lord Scott expressed the view that unconscionability of conduct may well lead to a
remedy but, in his opinion, proprietary estoppel could not be the route to it unless the
ingredients for such an estoppel were present. He stated that the treat proprietary
estoppel as requiring neither a proprietary claim by the plaintiff nor an estoppel by the

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defendant but simply unconscionable behaviour was a recipe for confusion.

By re-adjusting the pre-requisites to establishing a claim based on proprietary estoppel the
HoL has in a sense used the notion of unconscionabilty as a scapegoat.
It should be noted that prior to Cobbe there was no real evidence that the traditional
elements of assurance, detriment and reliance would be dispensed with and
unconscionability had merely been observed as an overarching concept that did not
fret rid of the need for assurance and detrimental reliance to be established.
Bieler believes that the general condemnation of unconscionabilty voiced by Lord Scott and
Lord Walker does not bode well for the future of proprietary estoppel, even in a non-
commercial context.

There are signs in the decision of the House of Lords in Thorner v Major [2009] that a more
flexible approach will be taken towards the use of the concept of unconscionability where
proprietary estoppel is not invoked in a commercial context. Thorner v Major lets us know
that unconscionability is still part of the test.

McFarlane and Robertson (2009) have expressed the view that the decision in Thorner, by
implicitly rejecting the limitations set out by the House of Lords in Cobbe, allows proprietary
estoppel to continue to perform its role of protecting those who reasonably rely on
assurances in relation to another’s land. However, as they point out the inquiry in relation
to whether an assurance has been made and whether reliance on it is reasonable will have
to be sensitive to the background of the case.

Unconscionability in Ireland
Coyle v Finnegan [2013]
Facts:
The plaintiff worked for the deceased at his farm for many years on the basis of a promise to
devise and bequeath the farm to him. The deceased made a will to this effect in 1991.
However, without telling the plaintiff the deceased later changed his will leaving the farm to
the defendants. The new will excluded the plaintiff as beneficiary of the property but
providing a legacy of €5,000 in return for the work he carried out and another will made by
the deceased 1 year later made no provision at all for the plaintiff. The plaintiff sought an
order for specific performance or in the alternative a monetary award in quantum meruit to
the sum of €74,000.
Ruling:
● Laffoy J found that there had been an express representation or assurance by the
deceased to the plaintiff, that the plaintiff had acted in reliance on the assurances given to
him by the deceased and had suffered detriment in consequence of his reasonable
reliance on the deceased’s assurances.
● She concluded that looking at the facts in the round, she was satisfied that it would be
unconscionable if the plaintiff was not recompensed for the labours and services he had
provided to the deceased. She further found that it would be unconscionable if the
defendants acquired the deceased’s farm free from any entitlement of the plaintiff to be
recompensed.

The Extent of the Remedy

As Brennan J commented in the Australian decision of Waltons Stores (Interstate) Ltd v

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Maher (1987) ‘the remedy required to satisfy an equity varies according to the
circumstances of the case’. Much of this has since been erased by the Australian high court
but it is nonetheless a useful statement. Proprietary estoppel is an area where the scope of
the remedy is very much at the discretion of the court.

The Minimum Equity

Jennings v Rice [2003]
Facts:
The claimant worked as a gardener for an elderly lady and overtime he increasingly began to
care for her. She was running out of money and could not afford to pay him. She implied
numerous times that she would bequeath her house to him after her death. She died
intestate and the claimant brought a claim based on proprietary estoppel, claiming that he
was entitled to the house and he had been assured that it would be left to him.
Ruling:
● The trial judge warded the claimant £200,000, despite the fact that the deceased's estate
had been worth over £1 million.
● The claimant appealed to the CoA. The CoA outlined how to correctly assess damages for
proprietary estoppel.
● Robert Walker LJ stated that it was no coincidence that the statements of principle in
relation to this question referred to satisfying the equity rather than satisfying or
vindicating the claimant’s expectations and that the equity arises not from the claimant’s
expectations alone, but from the combination of expectations, detrimental reliance, and
the unconscionableness of allowing the benefactor to go back on the assurance.
● He added that while it may be the natural response of the court to seek to fulfil the
claimant’s expectations, if these are uncertain, extravagant or out of all proportion to the
detriment which he has suffered, the court can and should recognise that the claimant’s
equity should be satisfied in another and generally more limited way.
● Robert Walker LJ held that proportionality was essential between expectation and
detriment in deciding how to satisfy an equity based on proprietary estoppel. If
expectation is out of all proportion to the detriment suffered then the plaintiff should
receive a lesser remedy.
● He concluded that ‘the essence of the doctrine of proprietary estoppel is to do what is
necessary to avoid an unconscionable result, and a disproportionate remedy cannot be
the right way of going about that.’
● Expectation starting point- but if the expectation and detriment are totally out of what
then you take a proportional approach.

Expectation and Reliance based approaches

● There has always been a degree of uncertainty about what the doctrine of proprietary
estoppel should seek to achieve.
● Is it designed to fulfil the expectations of a party which have arisen as a result of her
dealings with another, or is its role the more limited one of reversing any detriment
suffered as a result of reliance on the promise of another?
● Eg: there is a piece of land worth £1 million. The owner tells you you can build on it, and
that the property will be transferred to you. You build the house, which is worth £100,000,
and the owner then refuses to transfer the land. You bring a claim based on proprietary
estoppel. Your expectation is that you should be transferred the land, worth £1 million.

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Your reliance is the price of the house, which is £100,000. There is therefore a huge gulf
between the two approaches.
● Generally speaking, the expectation based approach leads to the granting of a more
extensive remedy and where a claimant's expectations are fulfilled this may lead to a
more far reaching relief than merited by detrimental reliance.
● It has been suggested that the expectation and reliance based approaches overlap since
the grant of expectation relief should also ensure that no detriment is suffered as a result
of the representee's reliance.

Smith v halpin shows that an expectation remedy can be rewarded

Coyle v Finnegan- detriment reliance remedy given. Essentially remunerated for the work he
did but not given the estate which was what he expected.
Need to way up how unequivocal the assurance is and how bad the detriment is and then
make an assessment.

Suggitt v Suggitt [2012]

● The Court of Appeal (Australia) upheld the decision of the High Court that under the
doctrine of proprietary estoppel a son was entitled to a share of his deceased father's
estate despite the terms of his will where repeated assurances of inheritance had been
given to the son by the deceased.
● It concluded that there was no basis for interfering with the judge's evaluation of reliance
and detriment or change of position, and the relief granted could not be said to be
disproportionate.
● Arden LJ referred to the principles set out by Robert Walker LJ in Jennings v Rice at and
stated as follows: “In my judgment, this principle does not mean that there has to be a
relationship of proportionality between the level of detriment and the relief awarded.
● What Walker LJ holds in this paragraph is that if the expectations are extravagant or ‘out
of all proportion to the detriment which the claimant has suffered’, the court can and
should recognise that the claimant's equity should be satisfied in another and generally
more limited way. So the question is: was the relief that the judge granted ‘out of all
proportion to the detriment suffered?’ She concluded that it was not, despite the
detriment being very low.
● This case placed Jennings in doubt. They get their expectation even though the detriment
was very low.
This involved a family scenario. The son was working on his fathers farm. The father made a
will and did not leave anything to the son. The son brought a proprietary estoppel claim and
the daughter challenged this. The first instance court gave the son the land and house. This
was appealed to the CoA who upheld the HC and said that the son was entitled to a portion
of his father's estate.

Most CL jurisdiction are looking at both expectation and detriment and trying balance the
two to come up with a proportionate remedy.

The Relationship between Proprietary Estoppel and Constructive Trusts

It has been accepted that there is a close relationship between the concepts of proprietary
estoppel and constructive trusts, in that both involve the application of the equitable

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principle that it would be unfair to allow a party to enforce his strict legal rights when it
would be inequitable to do so on the basis of the dealings which have taken place between
the parties.

Grant v Edwards [1986]

Browne-Wilkinson VC stated: ‘In both, the claimant must to the knowledge of the legal
owner have acted in the belief that the claimant has or will obtain an interest in the
property. In both, the claimant must have acted to his or her detriment in reliance on such
belief. In both, equity acts on the conscience of the legal owner to prevent him from acting
in an unconscionable manner by defeating the common intention.’

Yaxley v Gotts [2000]

Facts:
There was an oral agreement between the plaintiff and a property owner that the plaintiff
would be given part of a house if he carried out work on it. There was no confirmation in
writing.
Ruling:
● Robert Walker LJ stated that ‘at a high level of generality there is much common ground
between the doctrines of proprietary estoppel and the constructive trust’ and that in the
area of a joint enterprise for the acquisition of land, the two concepts collide.
● The Court of Appeal held that an oral agreement whereby the plaintiff was promised an
interest in a house in excnahge of carrying out work on it was enforceable on the basis of
a contract ive trust.
● Walker LJ acknowledged that the trial judge had not made any finding of a constructive
trust, however on the findings of fact the fact it could not be disputed that a proprietary
estoppel arose and in his view auch findings equally provided the basis for the conclusion
that the plaintiff was entitled to in interest under a constructive trust.
● In this case it did not matter what remedy he plaintiff got as he was going to recover
anyway.

Stack v Dowden [2007]

Lord Walker made reference to the encouragement he had given to the notion of the
equating of proprietary estoppel and constructive trusts but said that he was now ‘rather
less enthusiastic’ than he might previously have been about the idea that the two doctrines
could or should be completely assimilated.
It is also clear following Stack, that the imposition of a common intention constructive trust
does not depend in any way on establishing detrimental reliance.

Thorner v Major [2009]

Lord Scott returned to the them of the interaction between the concepts of proprietary
estoppel and constructive trusts, stating: "For my part I would prefer to keep proprietary
estoppel and constructive trust as distinct and separate remedies, to confine proprietary
estoppel to cases where the representation, whether express or implied, on which the
claimant has acted is unconditional and to address the cases where the representations are
of future benefits, and subject to qualification on account of unforeseen future events, via
the principles of remedial constructive trusts.’

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Finnegan v Hand [2016]

● White J stated that ‘the House of Lords decision in Thorner v Major would suggest that it is
open to the court where it has concerns about the uncertainty of the promise or promises
in particular to a future promise of a bequest in a will, to hold that a constructive remedial
trust arises.’
● He added that ‘[t]his Court would consider the decision of Thorner v Major a further
evolutionary step in the development of proprietary estoppel and, in particular, its overlap
with constructive trust or constructive remedial trust.’

The english courts do not recognise remedial constructive trusts.

Relationship between Promissory and Proprietary Estoppel

● The Irish courts appear to have used the labels of promissory and proprietary estoppel in a
somewhat indiscriminate manner and it is necessary to consider what significance, if any,
attaches to this development.
● One of the most controversial developments in the area of equitable estoppel has been
the judgment of Costello J in Re J.R.

Re J.R. [1993]
Facts:
The committee of an elderly ward of court, who was living in a psychiatric hospital and could
not manage his own affairs, sought to effect the sale of his house which had fallen into a
dilapidated state. He had lived there with the respondent for many years and she
maintained that he had represented to her that he would look after her and she would be
sure of having a home for the rest of his life. In his will the ward had left all his property to
the respondent
Ruling:
Costello J concluded that the respondent had made out a case of promissory estoppel as she
had acted to her detriment on the representation made to her. ‘It would be plainly
inequitable for the ward now to deny that she has a right to live in his house and it seems to
me that she has an equity which entitles her to stay in the house rent free for as long as she
wishes to which the court must give effect.’
While this result was fair and equitable, it seemed to suggest that the promissory estoppel
can create proprietary rights. While it has been long accepted that proprietary
estoppel can give rise to a cause of action, promissory estoppel is incapable of doing
so.

Dicta in a number of Australian decisions suggest that there is ‘but one doctrine of
estoppel’.

Waltons Stores (Interstate) Ltd v Maher (1988)

Mason CJ stated as follows: ‘One may therefore discern in the cases a common thread
which links them together, namely the principle that equity will come to the relief of a
plaintiff who has acted to his detriment on the basis of a basic assumption in relation to
which the other party to the transaction has ‘played such a part in the adoption of the
assumption that it would be unfair or unjust if he were left free to ignore it’. Equity comes to
the relief of such a plaintiff on the footing that it would be unconscionable conduct on the

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part of the other party to ignore the assumption.’

Mee suggests that ‘there has been nothing resembling a carefully considered (or even
conscious) decision to merge the estoppels in Ireland’ (1998) and states that the present
position in this jurisdiction appears to be that the doctrines of proprietary and promissory
estoppel retain their separate identities.

Thorner v Major [2009]

● Lord Walker gave consideration to some of the distinctions between what he clearly
viewed as separate doctrines.
● He stated that in his opinion it is a necessary element of proprietary estoppel that the
assurances given to the claimant, whether expressly or impliedly or even tacitly should
relate to identified property owned, or about to be owned, by the defendant. In his view
this is one of the main distinguishing features between promissory estoppel and
proprietary estoppel.
● As he stated, promissory estoppel must be based on an existing legal relationship, usually
a contract, but not necessarily a contract relating to land, and while proprietary estoppel
need not be based on an existing legal relationship, it must relate to identified property,
usually land, owned or about to be owned by the defendant.

Concluding comments
The role which unconscionability plays in the doctrine of proprietary estoppel has given rise
to considerable debate and uncertainty. As Etherton comments [2009] (extra-judicially) it is
ironic that the House of Lords relaxed the requirements for a constructive trust in Stack v
Dowden while at the same time restricting the doctrine of proprietary estoppel in Cobbe v
Yeoman’s Row Management Ltd: in his words, ‘[i]t might be said that they have shot the
wrong beast.’

TOPIC 10: Injunctions

At common law the usual remedy where a plaintiff succeeded in his action was an award of
damages; this form of relief was often inadequate or inappropriate and equity
supplemented the legal remedies available by developing alternative types of remedy such
as the injunction. An injunction is an order which restrains the performance or continuance
of a wrongful act or has the effect of requiring the performance of an act. It is a flexible and
versatile form of remedy which is used with increasing frequency today.

Injunctions may be classified in a number of ways:

● Prohibitory injunction- restrains the performance or continuance of a wrongful act. Most
common form of injunction.
● Mandatory injunction- requires the performance of an act.

A further classification can be made between interim and interlocutory injunctions on the

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one hand and perpetual injunctions on the other hand.

● Interim injunction- granted prior to the tail of an action. The interim injunction is obtained
for a limited period and only have effect until a further order is made.
● Interlocutory injunction- also granted prior to a trial of action. An interlocutory injunction
will have effect until the final action takes place and its purpose is to maintain the status
quo between the parties as far as possible until the final determination of the issue in
court.
● Perpetual injunction- will only be granted at the trial of action where a plaintiff has
established a right and the actual or threatened infringement of that right by the
defendant.

General Principles Governing the Grant of Perpetual Injunctions

Injunctions will only be granted where the plaintiff has established infringement of a right.
Injunctions, like other forms of equitable remedy, are discretionary in nature. So while a
plaintiff may establish the infringement of a right and a prima facie entitlement to relief he
may still be denied this relief on discretionary grounds.

The Inadequacy or Inappropriateness of Damages as a Remedy

Historically, the main reason for the intervention of the Court of Chancery was the
inadequacy or inappropriateness of damages or other remedies at common law. No
injunctions will be granted where a plaintiff can be properly compensated in monetary
terms. Where a plaintiff seeks an injunction he must demonstrate, as a matter of
probability, the risk that damages would not be an adequate remedy. If there is a continuing
nuisance or it appears that the wrongdoing will continue into the future an injunction will
often be considered the only just form of relief.
It will often be considered fair to confine a plaintiff to an award of damages where the
wrongdoing of which he complains has ceased and is not likely to re-occur, and where his
loss is quantifiable.

Curust Financial Services Ltd v Loewe-Lack-Werk Otto Loewe GmbH [1994]

Facts:
there was an exclusive licensing agreement between the plaintiff and the defendant. The
plaintiff allegedly breached this contract by subcontracting the manufacture of a product
without the prior written consent of the defendant. The issue was whether this breach
should disentitle it to relief, and the key issue was whether damages were an adequate form
of remedy.
Ruling:
● Finlay CJ stressed that ‘difficulty, as opposed to complete impossibility, in the assessment
of … damages should not, in my view, be a ground for characterizing the awarding of
damages as an inadequate remedy.'
● It was suggested by Finlay CJ that the loss which the plaintiff might suffer was purely
commercial it wad capable of being assessed in damages both under the heading of loss
actually suffered up to the date of assessment, and also under the heading of probable
future loss.

The Conduct of the Parties

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The discretionary considerations which are taken into account by a court in deciding
whether to grant an injunction include factors relating to the conduct of the person invoking
the jurisdiction of the court, and to a lesser extent, the conduct of the defendant.
In this regard, two of the maxims considered earlier are relevant, namely ‘he who comes to
equity must come with clean hands’ and ‘he who seeks equity must do equity’. While these
maxims should be treated with caution, they do reflect the general principles which operate
in relation to a plaintiff's conduct.

Argyll v Argyll [1967]

● Ungoed-Thomas J held that the alleged immorality of the plaintiff's conduct which had led
to divorce did not deprive her of her entitlement to an injunction to restrain a breach of
confidence by her husband.
● He stated: ‘A person coming to equity for relief … must come with clean hands, but the
cleanliness required is to be judged in relation to the relief that is sought.’

Chappell v Times Newspapers (1975)

Facts:
This case concerned a dispute which had arisen between employees and unions in the
printing industry. Following selective industrial action, the employers threatened to
terminate the employees contracts unless normal production was resumed. The plaintiff's,
who were individual union members who had not personally been involved in any industrial
action sought an interim injunction to prevent their employers terminating their contracts
of employment, although they refused their employer's request that they not engage in
destructive actions.
Ruling:
● The CoA refused to grant them an injunction on the grounds that they themselves had
failed to established that they intended to act equitably in abiding by the terms of their
contracts.

Laches and acquiescence

The court may also refuse to grant an injunction on the grounds of laches or acquiescence.
Delay by itself is unlikely to bar a claim for equitable relief but when coupled with other
circumstances, often relating to the conduct of the plaintiff, it may be sufficient to lead to an
equitable remedy being refused. A good example of a case in which acquiescence barred a
claim for an injunction but not a remedy in damages is the decision of the Court of Appeal in
Shaw v Applegate.

Shaw v Applegate (1977)

The defendant bought property and a covenanted not to use it as an amusement arcade.
The vendor subsequently assigned the benefit f the covenant to the plaintiffs. Three years
after the defendant had begun to install amusement machines the plaintiff sought an
injunction to restrain the breach of covenant.
Ruling:
● The CoA held that to deprive the possessor of a legal right of that right on the ground of
his acquiescence to the situation must have been such that it would be dishonest or
unconscionable to seek to enforce it.
● Since the plaintiff's were confused about whether the defendant's activities constituted a

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breach of covenant, it could not be said that the plaintiffs would be acting dishonestly or
unconscionably in seeking to enforce their rights under the contract when they did and
the court held that their acquiescence had not been as such to deprive them of any
remedy at all.
● Damages were awarded- did not fully satisfy either side.

Jurisdiction to Award Damages Under Lord Cairn's Act

While originally the Court of Chancery had no jurisdiction to award damages, the Chancery
Amendment Act 1858 (Lord Cairns' Act) authorised the court in all cases where it had
jurisdiction to grant an injunction or an order of specific performance to award damages
either in addition to or in substitution for the other remedies.

Shelfer v City of London Electric Lighting Co. [1895]

Facts:
An electrical lighting company caused significant discomfort an annoyance to the lessee of a
premises by carrying out excavation work. Damages or injunction?
Ruling:
● Smith LJ laid down the general principle that damages should only be awarded in lieu of an
injunction or specific performance in the following circumstances:
● If the injury to the plaintiff's legal rights is small,
● and is one which is capable of being estimated in money,
● and is one which can be adequately compensated by a small money payment,
● and the case is one in which it would be oppressive to the defendant to grant an
injunction.
● Even where these four principles are satisfied, an injunction may still be awarded if the
defendant has acted in reckless disregard of the plaintiff's rights.
● A further point stressed by Lindley LJ is that the court will not allow a wrong to continue
simply because the wrongdoer is able and willing to pay for the injury he may inflict.

Kennaway v Thompson [1981]

Facts:
The plaintiff sought an injcution to restrain power boat racing on a lake near her house.
Ruling:
● The Court of Appeal held that the principles in Shelfer's case applied and granted an
injunction limiting the racing activities on the grounds that that injury to the plaintiff was
not small or capable of bing estimated in monetary terms.
● The judge considered that the judgment in Shelfer was binding on him and stressed that in
cases of continued nuisance the jurisdiction to award damages in lieu should only be
exercised in very exceptional circumstances.

Patterson v Murphy (1978) Leading Irish authority in this area

Facts:
The plaintiff's sought damages and an injunction arising out of an alleged act of nuisance
caused by blasting and quarrying activities carried on by the defendants in a field adjoining
their house.
Ruling:

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● Costello J found that these activities did constitute nuisance and that the plaintiffs were
entitled to an injunction.
● Straight applications of the principles outlined in Kennaway v Thompson.
● He said that the infringement of their rights was most serious, the injury which that had
suffered, an would continue to suffer if the nuisance was allowed to continue, had been
and would be considerable and he was satisfied that damages would not adequately
compensate them.
● Costello J laid down a number of ‘well established principles' on which the court exercises
its discretion in deciding whether to grant an injunction based on the Shelfer principles.
See page 583 of Bieler.

Lawrence v Fen Tigers (2014)

● Reservations were expressed about the application of the Shelfer principles by a number
of members of the Supreme Court.
● Lord Neuberger suggested that the approach to be adopted when considering whether to
award damages instead of an injunction should be more flexible and that a mechanical
application of A L Smith LJ’s four tests in Shelfer, and an approach involving damages being
awarded only in ‘very exceptional circumstances’, is both wrong in principle and gives rise
to a serious risk of injustice in practice.
● In his view, ‘the court’s power to award damages in lieu of an injunction involves a classic
exercise of discretion, which should not, as a matter of principle, be fettered.’
● Basically- need more flexibility, Shelfer is too rigid.

Principles Governing the Grant of Interlocutory Injunctions

The essential aim of an interlocutory injunction is to preserve the status quo existing
between the parties to an action until the trial of the issues in dispute can take place and it
will have effect until the final determination of the rights of the parties by the court.
Traditionally, a plaintiff would be granted an interlocutory injunction only if he could
establish a prima facie case i.e. a probability that he would succeed in his claim at the
hearing of the action. However the prima facie test was criticised on the basis that it led to
confusion as to the object sought to be achieved by this form of relief and was rejected by
the House of Lords in 1975 in favour of a less rigid requirement in the landmark decision of
American Cyanamid Co. v Ethicon Ltd.

American Cyanamid Co. v Ethicon Ltd [1975]

Facts:
The plaintiff sought and obtained an interlocutory injunction to restrain the defendant from
marketing surgical products in an alleged infringement of the plaintiff's patent.
Ruling:
● Lord Diplock modified the test and required a plaintiff to show that the claim was not
frivolous or vexatious, in other words that there was ‘a serious question to be tried'.
● Where this was established, the court had to go on to consider the balance of convenience
which involved assessing the probable implications for both parties should the relief
sought be granted or refused and the most important of these factors was recognised as
being the question of the adequacy of damages.
● Diplock also held that it was not the court's function to get involved in deciding

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contentious issues of fact or complicated legal questions as to the rights of the parties
because the information and evidence was not available.

.
Campus Oil Ltd v Minister for Industry and Energy (No.2) [1983] - leading Irish case.
Approved American Cyanamid principles.
Facts:
The case dealt with an application for an interlocutory injunction of a mandatory nature.
The plaintiff claimed a declaration that an obligation imposed on it by a statutory
instrument to buy a specified portion of its petroleum oil supplies from a state owned
refinery was contrary to articles 30 and 31 of the EEC Treaty. The Issue was referred to the
European Court of Justice and the defendants sought an interlocutory injunction compelling
the plaintiff's to comply with the terms of the order pending determination of the plaintiff's
claim at the trial of action.
Ruling:
● It was held by Keane J in granting an interlocutory injunction that the probability of
success at the trial was not the proper test to be applied by the court in deciding whether
to grant such an injunction.
● Instead an applicant must determine that there is a fair question to be determined and
that the balance of convenience lies on the side of granting the injunction.
● This finding was upheld by the SC.
● O'Higgins CJ stated, "In my view the test to be applied is whether the a bona fide question
has been raised by the person seeking the relief. If such a question has been raised, it is
not for the court to determine that question on an interlocutory application; that remains
to be decided at the trial. Once a question has been raised then the court should consider
the other matters which a re appropriate to the exercise of its discretion it grant
interlocutory relief. I entirely agree with the view expressed by Lord Diplock in American
Cyanamid."

Westman Holdings Ldt. v McCormack (1992)

Facts:
Proceedings were brought by the plaintiff to restrain the defendants picketing on their
premises by means of an interlocutory injunction.
Ruling:
● It was held by the Supreme Court that an interlocutory injunction granted to the plaintiffs
should continue until the trial of the action.
● The CL position leans in favour of the employer in this area.
● An employer could usually establish that the balance of convenience favoured the
preservation of the status quo pending the trial of action and the courts were often
influenced by the inability of tome of the defendants to pay damages.
● Little emphasis was placed in the loss of the defendant's right to picket, the courts instead
stressed that they could later be compensated in respect of any loss of wages which they
might suffer.
● A straight application of the American Cyanamid test almost led to failure- prevented
trade unions exercising their right to picket.

While there is general acceptance of the view that the strength of the plaintiff’s claim

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should not be a relevant factor in determining whether an injunction should be granted

once it has been accepted that a fair question has been raised save in an exceptional case,
the court will inevitably consider a plaintiff’s prospects of success to some extent in
determining the threshold question of whether he has established a serious or fair question
to be tried. In Chieftain Construction Ltd v Ryan [2008] Edwards J stated: ‘It seems to me
that any evaluation of a plaintiff’s prospects of success must necessarily involve a
consideration of both the utility and the strength of the point in question. Moreover, the
use of the adjective ‘real’ imports a need to evaluate the ‘reality’ of the prospects of success
and that requires an examination, if it be possible, of the strength of a plaintiff’s case.’

Debate has surrounded the question of whether the balance of convenience and the
adequacy of damages are two distinct issues for the court to consider or whether the latter
is simply as aspect of the former. However, Clarke J suggested in Metro International SA v
Independent News and Media plc [2006] that whether the criteria are viewed as a single
test of the balance of convenience of which the adequacy of damages is a potentially
significant part or as two separate tests is ‘more a matter of semantics than substance’.

Circumstances in which a departure from the Cyanamid Principles are Justified

It is now acknowledged that the departure for the Cyanamid principles is justified in
circumstances. The most obvious of these is wherever the parties agree that the hearing of
the interlocutory injunction will constitute the trial of action. Another is where there is no
arguable defence to the plaintiff's claim. Other executions have developed and the following
circumstances have been recognised:

1) Where an Interlocutory Injunction is Sought in the Context of a Trade Dispute

● The conclusions reached by the Supreme Court in Westman Holdings Ltd v McCormack
made it clear that the common law position clearly favoured the employer where
proceedings were brought seeking to restrain picketing by means of an interlocutory
injunction.
● Section 19 of the Industrial Relations Act 1990 has qualified the effect of common law
principles in the context of trade disputes.
● The effect of s.19(2) would appear to be that once a plaintiff establishes an entitlement to
an interlocutory injunction by showing that there is a fair question to be tried, the court
must consider whether the defendants can establish a fair case that they were acting in
furtherance or contemplation of a trade dispute. If they can, the injunction will not be
granted; if they cannot, the court will go on to consider as it does at common law,
whether the balance of convenience favours the grant of an injunction.
● This statutory provision can only be availed of by defendants where they have complied
with the formalities laid down in the statute in relation to such matters as the holding of
secret ballots and the giving of adequate strike notice.

A strict approach to the application of s. 19(2) of the 1990 Act was taken in G. & T.
Crampton Ltd v Building and Allied Trades Union [1998]. The Supreme Court was satisfied
that the trial judge had been entitled to come to the conclusion that a condition precedent
to the implementation of s.19 had not been established and upheld the conclusions which
she had reached in deciding the matter on the basis of the principles set out in the Campus
Oil case.

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However, in a number of more recent decisions, the courts have found that the provisions
of s.19(2) have been complied with. In Dublin City Council v Technical, Engineering and
Electrical Union [2010] Laffoy J found that the pre-conditions to engaging in industrial action
stipulated in s. 19(2) had been fulfilled by the union before the industrial action had been
commenced and that the union had established a fair case that it was acting in
contemplation or furtherance of a trade dispute.

Crampton
The p wanted an injunction to stop picketing taking place. The p argued that to get the
protection s 19 the trade union needed to do everything it should have done. The trade
union had not held a required secret ballot. The def lost out here. The american cyanmid
test was giving a straight application here. Def lost

Dublin City council 2010

More flexible approach. In this case the def's had established a fair case and the picketers
won.

(ii) Where an Interlocutory Injunction is Sought in Proceedings for Defamation

A more onerous task faces a plaintiff seeking an interlocutory injunction to restrain
publication of alleged defamatory matter, partly because of a traditional reluctance on the
part of the courts to interfere unduly with an individual's right to freedom of expression, a
right given constitutional protection in this jurisdiction. A further reason for such caution is
that while a statement might appear defamatory, a defendant may intend to plead a variety
of defences at the trial, including those of fair comment and justification, or he may seek to
establish that he is protected by privilege.

Reynolds v Malocco [1999]

● Kelly J referred to the American Cyanamid/Campus Oil principles and that they have a
wide but not universal application, and that in some cases special rules apply.
● He stated that a plaintiff must show that is no doubt that the words are defamatory.
● Furthermore, if the defendant intends to plead justification or any other recognised
defence, normally an injunction of this type will be refused.’
● Despite this test being of a high watermark from the perspective of those seeking
injunctions the plaintiff in this case succeeded in obtaining an interlocutory injunction on
the basis that the defendant had gone nowhere near the demonstrating that he had an
arguable prospect of makes the defence of justification and that it would be virtually
impossible for the plaintiff to ever recover any sum of damages which might be awarded.

Cogley v RTE (2005)

Facts:
This case involved an application to seek interlocutory injunctions to stop the broadcast of
material.
Ruling:
● Clarke J stated that in any interlocutory application in which a plaintiff sought prior
restraint on the publication or broadcast of material on the grounds that it was
defamatory, the first question that must be asked is whether, on the evidence available at

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the interlocutory stage, it was clear that the plaintiff would ultimately succeed at a trial.
● In his view the plaintiff would fall at the first hurdle if, on the basis of the arguments and
materials before the court, it appeared that water was any reasonable basis for believing
that the defendant might succeed at the trail of the action.
● Even in a case where the it is clearly shown that the defendant would have no defence,
the court will retain a discretion which can be exercised having regard to all the
circumstances of the case.
● In this case Clarke J refused the application for interlocutory relief which would have had
the effect of restraining a broadcast that the plaintiff claimed was defamatory. This
reaffirms how difficult it is to obtain interlocutory injunctive relief to restrain alleged
defamation.
● Clarke J spoke about the importance of encouraging and preserving public debate on
issues of importance.
● He commented that one of the underlying reasons for the reluctance of the courts to
grant interlocutory injunctions in defamation cases stemmed from the fact that if the
traditional basis for the grant of such injunctions was sufficient, there would be a
disproportionate effect on public debate and it would be largely stifled in respect of many
issues.
● The key in such cases is to achieve the correct balance between encouraging public debate
and preserving the freedom of the press on the one hand and protecting the reputation of
an individual on the other hand.

Philpott v Irish Examiner (2016)

● Barrett J noted that the provisions of section 33 of the Defamation Act 2009 provide that
(1) The High Court…may upon the application of the plaintiff, make an order prohibiting the
publication or further publication of the statement in respect of which application was made
if in its opinion -
(a) the statement is defamatory, and
(b) the defendant has no defence to the action that is reasonably likely to succeed.’
● He stated that “by reducing the test to a matter of judicial opinion, our elected lawmakers,
in enacting s.33, appear to have lowered the bar for plaintiffs in this regard”.
● However he later stated that ‘If anything, this Court would note, the position appears even
stronger under s.33. Under that provision, the court must be of the opinion that an
impugned statement “is defamatory”, not that it is arguably or even unarguably so, but
that, in the court’s opinion, it “is” so.
● This is a high threshold for a plaintiff to satisfy.

(iii) Where the Trial of the Action is Unlikely

It is now well established that as a pre-requisite for the application of the guidelines in
American Cyanamid it must be shown that a trial is in fact likely to take place.

This principle was laid down in England by Lord Diplock in N.W.L. Ltd v Woods [1979] where
he stressed the American Cyanamid was not dealing with a case where the grant or
injunction would in effect dispose of the action finally in favour of whichever party was
successful. An important additional element must be brought into the balance of
convenience.
He stated: ‘Where … the grant or refusal of the interlocutory injunction will have the

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practical effect of putting an end to the action because the harm that will have been already
caused to the losing party by its grant or refusal is complete and of a kind for which money
cannot constitute any worthwhile recompense, the degree of likelihood that the plaintiff
would have succeeded in establishing his right to an injunction if the action had gone to trial
is a factor to be brought into the balance by the judge in weighing the risks that injustice
may result from his deciding the application one way rather than the other.’

This approach has been followed by the Court of Appeal in England in a number of cases.

Cayne v Global Natural Resources plc [1984]

Facts:
The plaintiff shareholders sought an interlocutory injunction to restrain the defendant
company from implementing a merger agreement and proceeding with the allotment of
shares proportional to the company's impending annual general meeting. If the injunction
was granted the balance of power in the company would remain the same until after a
crucial vote had taken place and the plaintiffs would therefore obtain the result which they
sought. On the other hand, if the injunction was refused the votes of the new shareholder
would ensure that the plan of the incumbent directors succeeded.
Ruling:
● May LJ stated that in a case such as that before the court where the grant or refusal of an
injunction will effectively dispose of the action in favour of the successful party, the
‘balance of the risk of doing an injustice' better described the process involved.
● The CoA concluded that in these circumstances it would be better not to apply the
American Cyanamid guild Ines which were based on the assumption that a proper trial
would determine the issues at a later stage and instead decided that the defendant should
be entitled to dispute the plaintiffs' claim at the trial of action. If an injunction would
preclude this it should not be granted at the interlocutory stage.

Jacob v Irish Amateur Rowing Union Ltd [2008]

Facts:
The plaintiff was a rower sought an order restraining the defendant from preventing him
from competing in a regatta which provided the only remaining opportunity for him to
qualify for a rowing class competition in the 2008 Olympic Games.
Ruling:
● Laffoy J concluded that because of the nature and effect, if granted, of the injunctions
sought by the plaintiff, it seemed that it was very much a case of balancing the risk of
injustice.
● Laffoy J stated that the best that could be done was to consider the question suggested
by May LJ in the Cayne case: whether the plaintiff’s case on the evidence was so strong
that to refuse an injunction would constitute an injustice.
● In her view it was not possible to conclude that the plaintiff’s case on his own evidence,
leaving aside the conflicts, bore that weight and she concluded that the proper exercise of
the Court’s discretion, balancing the risk of injustice, was to refuse the interlocutory
injunction.

Principles Governing the Grant of Mandatory Injunctions

While a prohibitory injunction requires a defendant to refrain from doing certain acts, a

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mandatory injunction is one which compels a defendant to carry out an obligation or to

perform a specified act. In practical terms, the making of a mandatory order will usually
impose an additional degree of hardship or expense on a defendant and such factors may
often influence a judge in deciding how to exercise his discretion.
The Courts are generally more reluctant to make prohibitory orders. The courts don't like it
when their orders are ignored, and orders making people do things involve some element of
on-going supervision and thus are harder to enforce.

Redland Bricks v Morris (1970)

Facts:
Land owned by the respondents, who were strawberry farmers, was affected by subsidence
caused by quarrying work undertaken by the appellant on adjoining property. It was
estimated that the cost of remedying the subsidence would be wholly disproportionate to
the value of the land affected.
Ruling:
● The respondents were awarded damages and both prohibitory and mandatory injunctions
to restrain against future excavation.
● However, the HoL placed emphasis on the disproportionate cost of remedial work and
allowed an appeal against the grant of a mandatory injunction.
● Lord Upjohn stated: ‘A mandatory injunction can only be granted where the plaintiff
shows a very strong probability upon the facts that grave damage will accrue to him in the
future … It is jurisdiction to be exercised sparingly and with caution but, in the proper
case, unhesitatingly.’
● The cost of the works the defendant would be required to carry out must be taken into
account except where he has acted very unreasonably.
● The requirement of a "very strong probability of grave damage" has been criticised. This
view cannot be accepted without qualification.

Where mandatory injunctions of an interlocutory nature are sought, the test of ‘a ‘strong
case’ that the plaintiff is likely to succeed at trial has tended to be applied. The balance of
convenience is unlikely to lie in favour of granting mandatory interlocutory relief save in
fairly exceptional cases and it is clear that the courts are more reluctant to grant an
interlocutory injunction when it is of a mandatory as opposed to a prohibitory nature.

Shepherd Homes Ltd v Sandham [1971]

● Megarry J refused the injunction and made it clear that the court is far more reluctant to
grant a mandatory injunction than a prohibitory injunction of an interlocutory nature.
● He said that the ‘case has to be unusually strong and clear before a mandatory injunction
will be granted’ and the court must ‘feel a high degree of assurance that at the trial it will
appear that the injunction was rightly granted’.
● Said 3 things:
The courts should adopt whatever approach that would cause less injustice.
He acknowledged that the grant of mandatory interlocutory relief is exceptional.
He said in many, if not all, cases the mandatory nature of relief will be a factor when the
balance of convenience is considered. Most significant aspect of this case.

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A more flexible approach was adopted subsequently by Hoffmann J in Films Rover

International Ltd v Cannon Film Sales Ltd [1987] where he said that the ‘high degree of
assurance’ test does not have to be satisfied in every case before an interlocutory injunction
of a mandatory nature may be granted. Hoffmann J pointed out that in an exceptional case,
where withholding such an injunction would carry with it a greater risk of injustice than
granting it, even where the court does not feel a high degree of assurance about the
plaintiff’s likelihood of succeeding at the trial, there cannot be any rational basis for
withholding the injunction.

National Commercial Bank Jamaica Ltd v Olint Corporation Ltd [2009]

● Lord Hoffman formulated a unified test to be applied in cases where either prohibitory or
mandatory interlocutory injunctions are sought.
● This test focused on avoiding causing remedial prejudice.
● Lord Hoffmann stated: ‘In both cases, the underlying principle is the same, namely, that
the court should take whichever course seems likely to cause the least irremediable
prejudice to one party or the other …What is true is that the features which ordinarily
justify describing an injunction as mandatory are often more likely to cause irremediable
prejudice than in cases in which a defendant is merely prevented from taking or
continuing with some course of action: see Films Rover International Ltd v Cannon Film
Sales Ltd [1987]. But this is no more than a generalisation. What is required in each case
is to examine what on the particular facts of the case the consequences of granting or
withholding of the injunction is likely to be.’
● This is a logical approach which removes the uncertainly caused by the need for different
tests.

The test to be applied where an application is made for a mandatory interlocutory

injunction in this jurisdiction now seems reasonably settled although there have been
inconsistent approaches applied over the years. In some cases a relatively low threshold
based on the Campus Oil guidelines has been imposed on plaintiffs e.g. by Carroll J in her
judgment in A. & N. Pharmacy Ltd v United Drug Wholesale Ltd [1996]. However, in many
other High Court decisions following Campus Oil, it has been stressed that mandatory
interlocutory injunctions will only issue in very limited circumstances.

Boyhan v Tribunal Of Inquiry into the Beef Industry [1992]

● Denham J declined to grant an interlocutory injunction of a mandatory nature to the
United Farmer's Association directing that they should be generated full legal represent
before the beef tribunal as she was satisfied that the limited representation granted to ti
by the was sufficient in the circumstances.
● She described a mandatory injunction as a ‘powerful instrument’ and said that in seeking
‘this exceptional form of relief … it is up to the plaintiffs to establish a strong and clear
case — so that the court can feel a degree of assurance that at a trial of the action a
similar injunction would be granted.’

Lingham v HSE [2006]

Fennelly J stated that: ‘It is well established that the ordinary test of a fair case to be tried is
not sufficient to meet the first leg of the test for an interlocutory injunction of a mandatory

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nature. On such a case it is necessary for the applicant to show at least that he has a strong
case that he is likely to succeed at the hearing of the action.'

Okunade v Minister for Justice, Equality and Law Reform [2012]

● Clarke J reaffirmed that where the order sought in a case involves something which, in
substance, is a mandatory order, the courts have required the plaintiff to establish not just
a fair or arguable case but rather the higher standard as set out by the Supreme Court in
Lingham.
● He acknowledged that it could be said that there is something of a tension between the
practical requirement which suggests that the court should not engage in a detailed
analysis of the facts or complex legal questions at an interlocutory stage, on the one hand,
and the requirement that a higher standard than ‘fair issue to be tried’ be established.
● However, he said that even in those cases where a higher threshold may need to be met,
that requirement does not involve the court in a detailed analysis of the facts or complex
questions of law, ‘rather it obliges the plaintiff to put forward, in a straightforward way, a
case which meets the higher threshold.’

A slightly different approach, along the lines of that adopted by Hoffmann J in Films Rover,
has been adopted by Kelly J in
Shelbourne Hotel Holdings Ltd v Torriam Hotel Operating Co. Ltd [2010]
Facts:
The plaintiff sought an injunction to direct the defiant to to grant it access to the hotels
books and records on foot of its rights under a management agreement. The plaintiff
contended that the test for such an injunction was was that laid out be the SC in Campus
Oil. The defendant contended that the issue must be saucy as to allow the court to feel a
high degree of assurances that the injunction would be granted at trial, or a strong
likelihood of success.
Ruling:
● Kelly J said that the approach taken in Boyhan and Lingam was very different to that taken
by the SC in Campus Oil.
● He noted that there has been an inconsistency of approach in relation to the standard that
must be met to obtain an interlocutory injunction of a mandatory nature.
● Kelly J stated : ‘Faced with these conflicting approaches and pending a final determination
of the issue by the Supreme Court, I am much attracted by the approach of Hoffmann J.
(as he then was) in the Films Rover case [1987] where he took the view that the
fundamental principle on interlocutory applications for both prohibitory and mandatory
injunctions is that the court should adopt whatever course would carry the lower risk of
injustice if it turns out to have been the ‘wrong’ decision. Whatever standard applies it is
clear that the grant of mandatory interlocutory relief is exceptional. In many if not all
cases, the mandatory nature of the relief will also be a factor to be taken into
consideration when the balance of convenience falls to be considered.’
● Kelly J concluded that he was satisfied on the evidence that the plaintiff had achieve the
higher of these two tests, namely the demonstration of a clear case and that damages
would not be an adequate remedy were the plaintiff to be further denied access to the
information sought.
● He also held that the balance of convenience lay in favour of granting rather than refusing
the injunction and therefore made an order in the plaintiff's favour.

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Tola Capital Management LLC v Joseph Linders [2014]

● Cregan J expressed the view that ‘there is what Clarke J has described in Okunade as “a
refinement” or “a variation” of the “pure” Campus Oil test.’
● He noted that this variation has been applied in determining whether to grant mandatory
injunctions in the Supreme Court decision in Lingham and commented that it appears
from the these decisions that where the order sought is a mandatory one, the appropriate
test is that the plaintiff must establish, in the words of Fennelly J in Lingham, that he has ‘a
strong case that he is likely to succeed at the hearing of the action’.
● He added that where a mandatory injunction is being sought, the court should also adopt,
as suggested by Kelly J in Shelbourne Hotel and Clarke J in Okunade, ‘whatever course
would carry the lower risk of injustice’.

● It now seems clear that the standard which will generally by applied where an
interlocutory injunction of a mandatory nature is sought is a strong case that the plaintiff
is likely to succeed at trial.
● There is also considerable merit in taking the approach adopted by Kelly J is Shelbourne
which would allow a court not to insist on a higher onus of proof being met in such cases
where withholding an interlocutory injunction would carry with it a greater risk of
injustice than granting it.
● It is also important to note that the balance of convenience is unlikely to lie in favour of
granting mandatory relief save for in fairly exceptional cases.
● The reality is that a court may be reluctant to grant interlocutory relief of a mandatory
nature unless it is satisfied that ‘the chances that it will turn out to have been wrongly
granted are low’. Per Lord Hoffmann in National Commercial Bank Jamaica Ltd v Olint
Corporation Ltd [2009].

Principles Governing Quia Timet Injunctions

This jurisdiction is preventative in nature and will be exercised either where a person
threatens and intends to do an unlawful act or where the plaintiff's rights have already been
infringed and he alleges that this infringement will be repeated. It is granted before any
injury or damage shad actually been sustained.

The principles applicable to the grant of a mandatory quia timet injunction were set out by
Lord Macnaghten in Redland Bricks v Morris [1970]. Lord Upjohn stated that where a
mandatory quia timet injunction is sought, the plaintiff must show a very strong probability
that grave damage would accrue to him in the future and that unlike in the case of a
prohibitory injunction, the cost of the works which the defendant would be required to
carry out must be taken into account except where the defendant has acted quite
unreasonably.
Creates a very high hurdle

Attorney General (Boswell) v Rathmines and Pembroke Joint Hospital Board [1904]
Facts:
The plaintiff sought an injunction to prevent the defendant building a smallpox hospital in
Rathmines.

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Ruling:
● The injunction was refused on the ground that no danger had been proved.
● Fitzgibbon LJ stated: ‘To sustain the injunction, the law requires proof by the plaintiff of a
well-founded apprehension of injury — proof of actual and real danger — a strong
probability, almost amounting to moral certainty, that if the Hospital be established, it will
be an actionable nuisance.’

More recently the courts have changed their tone.

Szabo v ESAT Digiphone Ltd [1998]

Facts:
The plaintiff's were schoolchildren attending a national school. The sought quia timet
injections to restrain the erection and operation of a mobile phone base station in the
grounds of the Garda station located beside their school.
Ruling:
● Geoghegan J stated that the test that the plaintiff must show a "strong case that the
apprehended mischelf will in fact arise" we too far.
● He stated that for a quia timet injcution to be awarded there would have to be a proven
substantial risk of danger.
● Geoghan J said that he would adopt the treatment of the subject in Spry on Equitable
Remedies in which the author made it clear that there is no difference in the legal
principles to be applied to interlocutory quia timet injunctions and any other kind of
interlocutory injunction.
● However, as Spry pointed out in his consideration of quia timet injunctions in general, it
should not be thought that it is never material that no breach of the applicant's rights has
taken place at the time of the hearing of the application and if no breach has taken place,
it may be more difficult to establish, as a matter of evidence, that there is a sufficient risk
of a future injury to justify the immediate grant of an injunction.

The principles laid down by Geoghegan J in Szabo have been applied in more recent
decisions. In Ryanair Ltd v Aer Rianta cpt [2001] Kelly J stated that in cases of this nature
the court must balance the magnitude of the evil against the chances of its occurrence.

Specific Circumstances in which an Injunction will be Granted- Employment Cases

An injunction may be a significant remedy where the positive obligation in the contract is
not specifically enforceable, although in certain circumstances, particularly in the context of
contracts for personal services, it is accepted that an injunction should not be granted by
the court where this would indirectly provide for specific performance of the positive terms
of the contract. This principle is well illustrated by the decision of Lord St Leonards in
Lumley v Wagner.

Lumley v Wagner (1852)

Facts:
The defendant undertook to sing at the plaintiff's theatre for a specified period and not to
perform elsewhere during this time. Subsequently the defendant agreed another contract
with a larger fee with a third party and the plaintiff sought an injunction to restrain her from
singing for this person.

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Ruling:
● The court held that the plaintiff was entitled to an injunction to restrain the breach of the
negative stipulation in the contract.
● The decision has been criticised on the basis that it amounted to the equivalent of
ordering specific performance of the original contract, although the judge pointed out that
the defendant could not have been compelled to fulfil this obligation.
● Idea of forcing parties to work together- there is an issue in making orders of a mandatory
nature, especially where this would create tensions in a work place. Sometime people get
around this by seeking prohibitory injunctions- but theses are often mandatory in nature
and creates the same problems.

Warner Brothers Pictures, Incorporated v Nelson [1937]

Facts:
The defendant was the actress Bette Davis. She had agreed to act for Warner Brothers for a
period of 5 years and not to act of any other studio during this period, or to engage in any
other activity without written consent from the Warner Bros. the plaintiff sought to enforce
the obligation not to act for anyone other than itself.
Ruling:
● Branson J granted an injunction to restrain the defendant from breaching her undertaking
not to act for any other studio. Followed Lumley.
● Where a contract of personal service contains a negative covenant, the enforcement of
which will not amount to either a decree specific performance of the positive covenants of
the contract or to a decree under which the defendant must remain idle or perform the
the positive covenants, the court will enforce those negative covenants subject to the
consideration that and injunction is a discretionary remedy which the court may limit.
● Branson J rejected the argument that the order made amounted to an indirect form of
specific performance and said that while the defendant might be tempted to perform the
contract in view of the fact that alternative work would be considerably less lucrative, she
would not be driven to do so.

Page One Records Ltd v Britton [1968]

Facts:
The plaintiff's had contracted with a group of musician known as the Troggs that they would
act as their manager for a period of five years and the group agreed not to employ anyone
else during this time. The plaintiffs sought an injunction to prevent the employment of
another manager.
Ruling:
● Stamp J refused to grant an injunction on the basis that as a practical matter it would
force the group to continue to employ the plaintiffs.
● He said that to grant an injunction would be tantamount to ordering specific performance
of a contract of personal services and it would be wrong to put pressure on the
defendants to continue to employ someone in a fiduciary capacity in whom they had lost
confidence.
● This approach is preferable to that of Branson J in Nelson as it is unrealistic to expect the
defendants in weather case to give up their chose careers and the alternative was that
they would find themselves compelled to perform a contract of personal services.

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The Court of Appeal has confirmed that an injunction should not be granted if its indirect
effect would be to compel performance of a contract for personal services.

Warren v Mendy [1989]

Facts:
A boxer agreed that he would not be managed by anyone except the plaintiff for a three
year period and subsequently entered into an employment contract with the defendant.
The plaintiff sought an injunction to restrain the defendant from indicting a breach of
contract and from acting for the boxer.
Ruling:
• The effect of such an injunction would have been to restrain the boxer from receiving
services from the defendant and would arguable have completed him to perform his
agreement with the plaintiff. For these reasons the court of appeal held that no such
injunction could be granted.
• Nourse LJ commented that Branson J's approach in Nelson was extraordinarily unrealistic
and he developed a new test.
• Nourse LJ stated: ‘the following general principles are applicable to the grant or refusal of
an injunction to enforce performance of the servant's negative obligations in a contract
for personal services inseparable from the exercise of some special skill or talent. In such a
case the court ought not to enforce the performance of the negative obligations if their
enforcement will effectively compel the servant to perform his positive obligations under
the contract. Compulsion is a question to be decided on the facts of each case, with a
realistic regard for the probable reaction of an injunction on the psychological and
material, and sometimes the physical, need of the servant to maintain the skill or talent.’

McCutcheon has stated (1997) that ‘the practical consequence of Warren v Mendy is to
make it highly improbable that negative injunctions will be granted in sports cases, at least
where the contract is for anything other than a short duration’ and has expressed the view
that the approach of the English courts may be too lenient.

A limited exception to the general principle that employer and employee should not be
forced to work together has been recognised where a relationship of mutual trust and
confidence still exists between them, see Hill v C.A. Parsons & Co. Ltd.

Hill v C.A. Parsons & Co. Ltd (1972)

An injunction was granted against an employer to restrain an alleged wrongful dismissal
after the employer had been reluctantly forced to terminate the contract of employment of
an engineer who had refused to join a trade union. Lord Denning stated, :if ever there was a
case where an injunction should be granted against an employer, this is the case."

Employment Injunctions in this Jurisdiction

The courts in this jurisdiction have accepted that even where the relief sought is set out in
prohibitory terms, where it is mandatory in effect, a plaintiff will have to meet the strong
case requirement necessary for obtaining an interlocutory injunction of a mandatory nature,
see Lingham v Health Service Executive [2006].

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Bergin v Galway Clinic Doughiska [2008]

Clarke J stated: ‘I have, therefore, come to the view that in any case in which an employee
seeks to prevent a dismissal or a process leading to a dismissal, as a matter of common law,
and in whatever terms the claim is couched, the employee concerned is seeking what is, in
substance, a mandatory injunction which has the effect of necessarily continuing his
contract of employment even though the employer might otherwise be entitled to
terminate it. In those circumstances it is necessary for the employee concerned to establish
a strong case in order to obtain interlocutory relief.’

While there has been some evidence of inconsistency in the application of this principle,
overall. It is fair to say that in recent decisions it has proved more difficult for plaintiffs to
establish the necessary preconditions for obtaining relief for this reason.

The significance of an ongoing relationship of mutual trust and confidence may be relevant
to a greater or lesser extent depending on the nature of the relief sought. It is well
established that where this relationship has broken down the courts will decline to make an
order of an interlocutory nature requiring reinstatement, although in limited circumstances
orders have been made in such cases restraining the implementation of a purported
dismissal. (e.g. Coffey v. William Connolly & Sons Ltd [2007])

Orders Restraining Implementation of Dismissal or Requiring Reinstatement

A number of decisions have been made to grant interlocutory injunctions restraining
implementation of purported terminations of appointments pending trial. However, in
many of these cases, the court specifically declined to order reinstatement.
Coffey v William Connolly & Sons Ltd [2007] Edwards J granted interlocutory injunctions
restraining the defendant from giving effect to the plaintiff’s purported dismissal or from
appointing any other person to her position but declined to grant an order restraining the
defendant from treating the plaintiff otherwise than continuing to be employed on the basis
that the plaintiff had not discharged the onus of establishing a strong case that she was
likely to succeed at trial in obtaining such relief.
An interlocutory injunction restraining the defendant from placing the plaintiff on
administrative leave was granted by Hogan J in Wallace v Irish Aviation Authority [2012]
although this was a case in which the determination at the interlocutory stage would
effectively determine the substantive issue.

Coffey and Berlin a re slightly different in a number of respects but they both involved
people wanting rid of employees. Berlin involved a CEO. Clarke J as satisfied that he had
established a strong case but after that he ran into trouble. When clarke looked at the
balance of convenience.
In coffey the court did not think she had established a strong case, only a fair issue to be
tried.

Wallace v Irish aviation authority

Hogan J. This was an unusual case. The p did not have a Central role to the organisation. She
did have a strong case and he made an interlocutory order that she could continue to do her
job. The order being challenged was one which placed her on administrative leave,

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essentially stopped her doing her job.

This is a truly exceptional case.

Orders Requiring Payment of an Employee’s Salary Pending Trial

Another form of order which the courts in this jurisdiction have appeared willing to make
notwithstanding a lack of a continuing relationship of trust and confidence between the
parties is one which directs the employer to pay the employee’s salary and other benefits
pending trial, see Fennelly v Assicurazioni Generali SPA, High Court, 12 March 1985.
In more recent decisions plaintiffs have failed to obtain an interlocutory injunction requiring
the continued payment of salary pending trial because there has been a failure to establish
the ‘strong case’ required due to the mandatory effect of such an order, see e.g. Stoskus v
Goode Concrete Ltd [2007].
Injunctions to Restrain the Appointment of Third Party
Even in cases where the court will refuse to order a plaintiff’s reinstatement pending trial, it
may grant an injunction to restrain the appointment of a person other than the plaintiff to
his position or may prevent the advertising of a post which overlaps with the plaintiff’s. In
Coffey v William Connolly & Sons Ltd [2007] an interlocutory injunction was granted
restraining defendants from dismissing the plaintiff from their employment and from
appointing any person other than the plaintiff to his position. An order of a slightly different
nature was made by Clarke J in Bergin v Galway Clinic Doughiska Ltd [2008] restraining the
defendant from appointing any person to carry out the plaintiff’s duties save in
circumstances where the appointment of such a person contained terms sufficient to permit
the plaintiff to return to his duties should the court be persuaded to make an order to that
effect at the trial.

Mareva Injunctions
A ‘Mareva' injunction may be granted to prevent a defendant from removing assets from
the jurisdiction or from disposing of them within the jurisdiction in a manner likely to
frustrate the plaintiff's proceedings. More recently it has been accepted that an injunction
of this nature may extend to assets held outside the jurisdiction on a worldwide basis.

Nippon Yusen Kaisha v Karageorgis [1975] 1 WLR 1093 The Court of Appeal held that where
there is a strong prima facie case that a plaintiff is entitled to money from a defendant
within the jurisdiction and the plaintiff has reason to believe that the defendant may
remove these assets from the jurisdiction, the court may grant an interlocutory injunction
on an ex parte basis restraining the defendant from disposing of these assets. This principle
was confirmed in Mareva Compania Naviera SA v International Bulkcarriers SA [1975] 2
Lloyds Rep 509.

Although a Mareva injunction is a form of interlocutory injunction, it has been argued that
the strength of the plaintiff's case is more important in Mareva proceedings than where
other types of interlocutory order are sought.
Countyglen v Carway [1995] 1 ILRM 481 Murphy J stated that he doubted that there was
any significant difference between the expressions ‘good arguable case' and ‘substantial
question to be tried', but he said that if such a distinction could be drawn he would prefer
the latter formulation. He stated that it was in relation to the risk of the defendant's assets

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being dissipated in advance of any judgment and also with regard to the general balance of
convenience that considerations different from those pertaining in relation to conventional
injunctions arose.
O'Mahony v Horgan [1995] 2 IR 411 the Supreme Court favoured the 'good arguable case'
test.

One of the most important issues which must be addressed in the context of Mareva
injunctions is the extent to which it is necessary to adduce evidence that the defendant's
intention is to frustrate the judgment of the court. This issue was considered by McWilliam J
in Fleming v Ranks (Ireland) Ltd [1983] ILRM 541 who stated (at 546): ‘I am of opinion that,
to justify such an injunction, the anticipated disposal of a defendant's assets must be for the
purpose of preventing a plaintiff from recovering damages and not merely for the purpose
of carrying on a business or discharging lawful debts.’

O'Mahony v Horgan [1995] 2 IR 411, 419 Hamilton CJ stated that ‘the cases establish that
there must be an intention on the part of the defendant to dispose of his assets with a view
to evading his obligation to the plaintiff and to frustrate the anticipated order of the court. It
is not sufficient to establish that the assets are likely to be dissipated in the ordinary course
of business or in the payment of lawful debts.’ Commenting on this decision, Courtney
(1996) 3 Comm LP 3, 8 has stated that the Supreme Court has clarified the fact that an
applicant for a Mareva injunction must adduce specific evidence of 'the requisite intention'.

Capper has stated (1995) 17 DULJ 110, 117 that 'while the approach in the Irish cases
reduces the risk of abuses of the Mareva jurisdiction it is unrealistic and unfair, especially on
an ex parte application, to require plaintiffs to show that the defendant intends by the
disposal of assets to defeat any judgment the plaintiff may obtain'. A more pragmatic
approach towards this question was taken by O'Sullivan J in Bennett Enterprises Inc. v Lipton
[1999] 2 IR 221, 228 where he stated: ‘Equally, however, I consider that direct evidence of
an intention to evade will rarely be available at the interlocutory stage. I consider it is
legitimate for me to consider all the circumstances in relation to the case and I do not
consider that this approach is in any way prohibited by or at variance with the principles set
out in the Supreme Court judgment in O'Mahony v. Horgan.’

Tracey v Bowen [2005] 2 IR 528, 532 Clarke J stated that it seemed to him that Bennett was
authority for the proposition that: ‘in assessing the risk of dissipation the court is entitled to
take into account all the circumstances of the case which can include, in an appropriate
case, an inference drawn from the nature of the wrongdoing alleged which if fraudulent or
unconscionable may lead to the establishment of a risk that further fraudulent or
unconscionable actions will be taken so as to place any assets of the defendant outside the
jurisdiction of the court.’
Bonice Property Corporation v Oakes [2016] IEHC 461 Keane J expressed the view that
where there is a good arguable case of fraud or dishonesty or the defendant acting
unconscionably, no further specific evidence of a risk of dissipation of assets would be
strictly necessary, although on the facts he drew the inference that there was a risk of
dissipation of the defendant’s assets in order to defeat the plaintiffs’ claim.
The Duty of Full and Frank Disclosure
Generally where a Mareva injunction is sought, due to considerations of urgency and

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secrecy it will be applied for on an interim ex parte basis and often it is the very fact of
giving notice which may precipitate the action which the application is designed to prevent.
However, a duty to make full and frank disclosure applies.
Bambrick v Cobley [2006] 1 ILRM 81 Clarke J was satisfied that the court has a discretion, in
cases where failure to disclose had been established, to refuse to grant the interlocutory
injunction. In exercising this discretion the court should have regard to factors such as: (1)
The materiality of the facts not disclosed, (2) The extent to which it might be said that the
plaintiff is culpable in respect of a failure to disclose. A deliberate misleading of the court is
likely to weigh more heavily in favour of the discretion being exercised against the
continuance of an injunction than an innocent omission and (3) The overall circumstances of
the case which led to the application in the first place (at 89). Clarke J added that where a
defendant had readily identifiable assets held in a country to which the Brussels Regulation
or Convention applied that was a factor which the court could properly take into account in
assessing whether there was a real risk that the removal of further assets from this
jurisdiction to another convention country could be said to be ‘with a view to evading
obligations’.

Worldwide Marevas
One of the most significant developments in relation to Mareva injunctions in recent years
has been the willingness of the courts to make such orders in respect of assets outside the
jurisdiction on a worldwide basis.
Babanaft International Co. SA v Bassatne [1990] Ch 13, 28 Kerr LJ concluded that ‘in
appropriate cases, though they may well be rare, there is nothing to preclude our courts
from granting Mareva type injunctions against defendants which extend to their assets
outside the jurisdiction.' However, he stressed that it was necessary to restrict such
injunctions so as to bind only the defendant personally and to include a limiting proviso
which made it clear that the order did not affect third parties.

Extra-territorial Mareva injunctions are more likely to be granted after judgment has been
obtained as the risk that such an order will be made in favour of a party who is wrongly
asserting a cause of action is removed and it has been stressed that pre-judgment orders
will be granted on a worldwide basis less readily than after trial. In Republic of Haiti v
Duvalier [1990] QB 202, 215 Staughton LJ stressed that the cases in which it would be
appropriate to grant such an injunction were ‘rare — if not very rare indeed'. The limiting
proviso was extended to the effect that the order should not affect any third parties unless
and to the extent that it is enforced by the courts of the state in which the defendants'
assets are located.
Bank of China v NBM LLC [2002] 1 WLR 844 The Court of Appeal varied the proviso so that,
in respect of assets outside the jurisdiction, nothing in the order prevented the third party
from complying with what it reasonably believed to be its obligations, contractual or
otherwise, under the laws and obligations of the country in which those assets were
situated.
Bennett Enterprises Ltd v Lipton [1999] 2 IR 221 O'Sullivan J stated that it was clear that the
defendants had no assets within the jurisdiction but said that he did not consider that the
plaintiffs' alleged failure to establish that there were assets within the jurisdiction was
necessarily fatal to their application. On the contrary, he said that he could see the logic in
the observation to the effect that the fewer the assets within the jurisdiction the greater the

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necessity for taking protective measures in relation to those outside it.

The far reaching and often draconian nature of Mareva injunctions is more readily
recognised today than when the jurisdiction was first exercised. However, as against this,
the sophisticated fraudulent endeavours which can often extend into numerous different
jurisdictions are also becoming increasingly difficult to control.
In Polly Peck International plc v Nadir (No. 2) [1992] 4 All ER 769 Scott LJ stressed that the
court will not grant a Mareva injunction before any liability has been established if the
injunction would interfere with the normal course of the defendant's business particularly if
the cause of action which was sought to be protected, as in the case before him, was no
more than speculative. Zuckerman (1992) 108 LQR 559, 561 has commented that the
approach of the Court of Appeal in Polly Peck restores the Mareva jurisdiction to its true
basis as a measure against abuse rather than a form of security for the plaintiff.
Signs of a more cautious approach were also evident in the Supreme Court decision of
O'Mahony v Horgan [1995] 2 411, 422 as O'Flaherty J commented: 'it needs to be
emphasised that the Mareva injunction is a very powerful remedy which if improperly
invoked will bring about an injustice, something that it was designed to prevent'.

Anton Piller Orders

Anton Piller orders were developed as a means of dealing with cases where there is a
serious risk that a defendant may destroy or otherwise dispose of material in his possession
which may be of vital importance to the plaintiff if he is to establish his claim at a trial. An
Anton Piller order requires the defendant to consent to a plaintiff, attended by his solicitor,
entering his premises to inspect and if necessary take away any documents or articles
specified in the order. Such an order is obtained on an ex parte basis and applications are
often heard in camera as secrecy will be of the essence if the order is to have the required
effect and if the defendant is forewarned he will in all likelihood take steps to frustrate the
plaintiff's intentions.

Anton Piller KG v Manufacturing Processes Ltd [1976] Ch 55, 61 Lord Denning MR stated (at
61): ‘It seems to me that such an order can be made by a judge ex parte, but it should only
be made where it is essential that the plaintiff should have inspection so that justice can be
done between the parties: and when, if the defendant were forewarned, there is a grave
danger that vital evidence will be destroyed, that papers will be burnt or lost or hidden, or
taken beyond the jurisdiction, and so the ends of justice be defeated: and when the
inspection would do no real harm to the defendant or his case.’ In addition, Omrod LJ laid
down three ‘essential pre-conditions' which must be satisfied before an order of this nature
will be granted; namely that the plaintiff must have an extremely strong prima facie case,
the potential or actual damage must be very serious for the plaintiff and there must be clear
evidence that the defendant has incriminating documents or articles in its possession and
there must be a real possibility that these will be destroyed before any application inter
partes can be made.

Columbia Picture Industries v Robinson [1987] Ch 38, 76 Scott J stated: ‘a decision whether
or not an Anton Piller order should be granted requires a balance to be struck between the
plaintiff's need that the remedies allowed by the civil law for the breach of his rights should
be attainable and the requirement of justice that a defendant should not be deprived of his

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property without being heard. …The Draconian and essentially unfair nature of Anton Piller
orders from the point of view of respondents against whom they are made requires, in my
view, that they be so drawn as to extend no further than the minimum extent necessary to
achieve the purpose for which they are granted, namely the preservation of documents or
articles which might otherwise be destroyed or concealed.’

Another factor which has tended to swing the balance back in favour of defendants in
recent years has been the increasingly frequency with which the privilege against self-
incrimination has been invoked.
Rank Film Distributors Ltd v Video Information Centre [1982] AC 380 Lord Russell pointed
out that because the privilege against self-incrimination could largely deprive the owner of
copyright of his right to the protection of his property, legislation in this area would be
desirable. This privilege was withdrawn in England by s.72 of the Senior Courts Act 1981 in
proceedings to obtain disclosure of information relating to the infringement of rights in the
area of intellectual property which provided that matters disclosed would not be admissible
in evidence against the defendant in proceedings against him for a related offence.
However the privilege can still be invoked in other forms of action and as the decision of
Browne-Wilkinson VC in Tate Access Floors v Boswell [1991] Ch 512 shows it can still
provide a most effective weapon in a defendant's fight against the application of Anton
Piller orders.
Dockray and Laddie (1990) 106 LQR 601, 603
suggested that unless the ambit of s.72 is extended Anton Piller jurisdiction will to a large
extent become incapable of being exercised and comment that in their view something
more than ‘limited legislative tinkering' is required.. Reference was made to some of their
suggestions by Nicholls VC in
Universal Thermosensors Ltd v Hibben [1992] 1 WLR 840, 861 Nicholls VC suggested a
number of safeguards in relation to the execution of Anton Piller orders which he felt should
be observed.

Microsoft Corporation v Brightpoint Ireland Ltd [2001] 1 ILRM 540 Smyth J commented that
the essence of an Anton Piller order is surprise and that the publication of the existence of
such an order in advance of its execution could weaken or deprive it of its element of
surprise. An affidavit in support of the application for the order ought to err on the side of
excessive disclosure because in the case of material which falls into the area of possible
relevance, the judge and not the plaintiff should decide what is relevant. Smyth J said that
as there was an obligation to preserve all copies taken under the Anton Piller order and the
furnishing of a list was a courtesy which should have been accorded. He stated that the law
on this issue was properly put by Scott J in Columbia Picture Industries where the latter had
stated that it is essential that a detailed record of the material taken should be made by a
solicitor executing an Anton Piller order before the material is removed from the premises.

Bayer Injunctions
As Fox LJ stated in Bayer AG v Winter [1986] 1 WLR 497, 502 ‘the law in relation to the
grant of injunctive relief for the protection of a litigant's rights pending the hearing of an
action has been transformed over the past ten years by the Anton Piller and Mareva relief’
and he added that ‘the court should not shrink, if it is of opinion that an injunction is
necessary for the proper protection of a party to the action, from granting relief,

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notwithstanding it may be, in its terms, of novel character. A Bayer injunction restrains a
defendant from leaving the jurisdiction and will usually be granted in circumstances where
an existing Mareva or Anton Piller order has not been complied with. Fox LJ suggested that
the order should be of very limited duration and should be in force for no longer than was
necessary to enable the plaintiffs to serve the Mareva and Anton Piller orders which they
had obtained and to endeavour to obtain from the defendant the information referred to in
those orders.

The principles set out in Bayer were applied in this jurisdiction in O’Neill v O’Keeffe [2002] 2
IR 1. Kearns J stated that it went without saying that such relief could be granted in this
jurisdiction only in ‘exceptional and compelling circumstances’. Kearns J stated that he was
happy to adopt the criteria for granting such relief as enumerated by Courtney Mareva
Injunctions (p. 457) where the author stated that such an injunction should only be granted
where: (1) The court is satisfied that there is a probable cause for believing that the
defendant is about to absent himself from the jurisdiction with the intention of frustrating
the administration of justice and/or an order of the court. (2) The jurisdiction should not be
exercised for punitive reasons; a defendant’s presence should be required to prevent a
court hearing or process or existing order from being rendered nugatory. (3) The injunction
ought not to be granted where a lesser remedy would suffice. (4) The injunction should be
interim in nature and limited to the shortest possible period of time. (5) The defendant’s
right to travel should be out-balanced by those of the plaintiff and the proper and effective
administration of justice, (6) The grant of the injunction should not be futile.

Problem question
Common issues:
- Orders usually made on an ex parte basis (if defendant is warned in advance, the order
will be ineffective)
- Undertaking in damages – draconian nature of the relief
- Full and frank disclosure – Colombia pictures
- All ancillary orders

Must be real evidence that the def wants to frustrate the court by removing
assets/evidence.

Exam Advice
• Hillary's expectations are tempered by the fact that she knows closed book exams are
tough and that we haven't had to do them before. She won't be trying to catch us out.
• It is a closed book exam- no materials allowed in. We wont be expected to know the
content of legislation. You need to have a rough idea of what the scope of important
sections (s.3 charities) but you don't need to know it word for word.
• David Capper's name will be on the paper too.
• The format of the exam is the same as last year.
• You can answer any two from 5 questions

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• No compulsory questions
• 3 essay style and 2 problem style. Nothing to stop you doing two problems and two
essays pr one of each.
• Read the questions carefully. Think through whether it focuses on a theme or specific
areas.
• There is always an angle to essay questions- they usually concentrate on something
specific. You need to provide info- but also need to go beyond this. Analysis etc.
• Problem qu- identify issues, set out relevant legal principles and then apply them, to the
issue in the problem.
• Mixing topics- in questions think about natural overlaps. Wont be asked to deal with
unrelated topics. Eg: natural overlap between Liability of trustees and we looked at
equitable liability to account (knowing assistance and receipt)- these are alternative ways
of seeking redress. Express trusts (certainty, formalities, constitution of trusts- need to
look at all.) purpose trusts- non-charitable and charitable. When you are revising and
choosing topics to so pend more time on- it wouldn't make sense to revise one topic and
not another.
• More general themes- equity allowing non-compliance with statutory formalities,
unconscionability.
• You wont have time to revise everything in detail but do not leave things out completely.
Then at least if you're trying to tackle a question and you've only revised 2/3 of it well,
you'll have some idea of what you haven't revised well. Read over everything start to
finish once.
• The handouts give you a basic framework of the principles. They are a good place to start-
for the areas you want to learn well you need to supplement the handouts with case
details, textbook or articles. If there's an area you're learning well, read over the articles.
No need to read everything but take away the general gist of what was said in the articles
and take 1 or 2 points.
• She doesn't expect people to go checking for new material after the course ends- you
dont need to check judgements.
• Jurisdiction issue- do you need to bring in english law. Ask yourself would the answer be
any different if the question was based in England? If yes then explain how. In essays
compare the two jurisdictions. There are certain areas where there is a dirth of case law
in Ireland- eg: remedies for prop estop- the English cases provide a wealth of information.
If you are not specifically told where the question takes place- refer to both.
• Usually reference to articles and your own opinions in relation to case law do improve an
answer.
• Problem question- is it better to go issue by issue or advise person by person- issue by
issue but slant the advice to benefit the person you are advising.
• Essay length- sometimes the best answers are not the longest. Its more about the quality
of your analysis.
• Essay headings- up to you. It never hurts, but you wont be penalised for not doing it. Can
be helpful for you.
• Not detrimental to do 2 problem questions or two essays.

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Equity Exam

Saturday 6th May 9:30am

2 hours

● Same format as last year

● Answer 2 from 5 questions
● There is no compulsory question
● Three essay type questions
● Two problem type questions

Essay questions: may involve themes that extend beyond one topic. Read the questions
carefully, particularly with essays. Is it focused on themes or specific areas. There is always
an angle to an essay question, you must critically analyse. You need to look at the question
in terms of what else is required.

Problem questions: No right or wrong way of dealing with a problem questions.

● Identify issues
● Set out relevant legal principles
● Discuss
● No cast iron right or wrong

Mixing of topics? Natural overlaps - not setting out to try and tackle unrelated topics

Look at past papers and the connections that can be made

Equity is allowing non-compliance with statutory formalities
Secret Trusts and Joint Deposit Accounts
Unconscionability runs through a lot of areas
Read through everything

For the areas you want to focus on - supplement the hand outs
Include English and Irish

Essay question
1. Introductory paragraph - equity continues to play a role in resolving family property
disputes, legislation has intervened but equity still has a role. The argument that parties do
not always reach express agreements is something that is central to the argument. That is
the case whether you have joint legal owners or role, irrespective. The importance of having
a doctrinally clear and justifiable solution. He is very critical of common intention
constructive trusts because on a lot of levels it doesn't make sense. It is important - why?

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