TRUSTS, WILLS AND PROBATE LIBRARY SNELL'S EQUITY THIRTY-SECOND EDITION. General Editor. JOHN McGHEE QC M.A. (Oxon) oflincoln's Inn, Barrister

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1 TRUSTS, WILLS AND PROBATE LIBRARY SNELL'S EQUITY THIRTY-SECOND EDITION General Editor JOHN McGHEE QC M.A. (Oxon) oflincoln's Inn, Barrister Contributors STUART BRIDGE M.A. (Cantab) Fellow of Queens' College, Cambridge; Lecturer in Law, University of Cambridge; Barrister and Bencher of the Middle Temple; Recorder; Law Commissioner MATTHEW CONAGLEN LL.B.(Hons) (Auck.); LL.M. (Mich.); Ph.D. (Cantab.) University Senior Lecturer, Faculty of Law, Cambridge; Fellow and Director of Studies in Law, Trinity Hall, Cambridge; Door Tenant at XXIV Old Buildings, Lincoln 's Inn; Barrister and Solicitor of the High Court of New Zealand PAUL S. DAVIES M.A. (Cantab), Barrister of Lincoln 's Inn; Fellow ofgonville and Gaius College; - Newton Trust Lecturer in Law in the University of Cambkdge JAMES EDELMAN B. Ec, LL.B. (Hons) (UWA), B. Comm. (Murd), B.A. (Hons), D. PhilfOj&m); Professor of the Law of Obligations, University of Oxford; Fellow and Director of Studies in Law, Keble College; of Lincoln 's Inn, Barrister STEVEN ELLIOT B.A.(Hons), J.D.(Hons), D.Phil (Oxon) of Lincoln's Inn, Barrister DAVID FOX PhD. (Cantab.) of Lincoln's Inn, Barrister and Fellow in Law, St John's College, Cambridge RICHARD NOLAN M.A. (Cantab); Reader in Corporate & Trust Law at the University of Cambridge and Fellow of St John's College, Cambridge Barrister (Middle Temple) and Door Tenant at Erskine Chambers, London JANET O'SULLIVAN M.A., Ph.D. (Cantab); University Senior Lecturer, Faculty of Law, University of Cambridge; Fellow and Director of Studies in Law, Selwyn College, Cambridge.

2 CONTENTS Preface Table of Cases Table of Statutes Table of Statutory Instruments PAGE v xix ccvii ccxxvii PART I EQUITY AND EQUITIES PARA. 1. THE NATURE, HISTORY AND COURTS OF EQUITY 1. Nature of Equity History of Equity in England Courts of Equity EQUITABLE PROPERTY 1. Equitable Interest of Trust Beneficiary Selected Equitable Rights to Property ASSIGNMENT OF CHOSES IN ACTION 1. Common Law and Equity Statutory Assignment Equitable Assignment Effect of Assignment on Equities Assignment of Future Choses in Action Ineffective Assignments PRIORITIES 1. The Basic Rule: Order of Creation Registration Overreaching The Bona Fide Purchaser for Value Without Notice Conduct of the Parties The Rule in Dearle v Hall 4-052

3 viii Contents PART II MAXIMS AND DOCTRINES 5. THE MAXIMS OF EQUITY James Edelman 1. Equity will not suffer a wrong to be without a remedy Equity follows the law Where there is equal equity, the law shall prevail Where the equities are equal, the first in time shall prevail: qui prior est tempore, potir est jure He who seeks equity must do equity He who comes into equity must come with clean hands Delay defeats equities, or, equity aids the vigilant and not the indolent: vigilantibus, non dormientibus, jura subvient Equality is equity: aequitas est aequlitas Equity looks to the intent rather than to the form Equity looks on that as done which ought to be done Equity imputes an intention to fulfil an Obligation Equity acts in personam THE EQUITABLE DOCTRINES Stuart Bridge 1. Conversion Election Performance Satisfaction PART III EQUITABLE PROTECTION 7. FIDUCIARIES Matthew Conaglen 1. Fiduciaries and Fiduciary Relationships General Nature of Fiduciary Duties Conflicts Between Duty and Interest Conflicts Between Duty and Duty Profits Made Out of Fiduciary Position Remedies for Breach of Fiduciary Duty Relationship with Other Equitable Doctrines of Protection FRAUD, UNDUE INFLUENCE AND UNCONSCIONABLE TRANSACTIONS James Edelman 1. Fraud in Equity 8-001

4 Contents ix 2. Actual Fraud Undue Influence Unconscionable Transactions BREACH OF CONFIDENCE James Edelman 1. The Nature of Breach of Confidence The Elements of breach of Confidence Breach of Confidence and Privacy Remedies POWERS GENERAL PRINCIPLES 1. Powers and the Sources of Powers The Categorisation of Powers The Exercise of Powers Matters Preliminary to the Exercise of a Power Controlling Powers SPECIFIC POWERS POWERS OF APPOINTMENT 1. General Defective or Excessive Execution of a Power of Appointment Mistake The Rule in Hastings-Bass Fraud on a Power/Improper Purposes Severance Appointment to Holder Protection of Purchasers Disclaimer or Release of a Power Revocation Illusory Appointments Delegation of a Power ESTOPPEL James Edelman 1. Sources of the Modern Law of Estoppel Promissory Estoppel Propriety Estoppel

5 x Contents 13. PENALTIES AND FORFEITURES James Edelman 1. Contrast Between Penalties and Forfeiture 2. Penalties 3. Relief Against Forfeiture PART IV EQUITABLE REMEDIES 14. INTRODUCTION Legal and Equitable Discretion Minor and Defunct Remedies Remedies Steven Elliott RESCISSION Steven Elliott 1. Nature Relation to Other Doctrines Grounds Self-help Rescission and Judicial Rescission Exclusion of Rescission Effect of Rescission RECTIFICATION Paul S. Davies & Janet O'Sullivan 1. Nature of Rectification Scope of Rectification Mistake Defences Effect of Order SPECIFTC PERFORMANCE Janet O'Sullivan 1. Introduction Inadequacy of Damages Threshold Requirement for Availability of Specific Performance Bars to Specific Performance Parties to Action for Specific Performance The Court Order

6 Contents xi 18. INJUNCTION Paul S. Davies 1. Introduction Perpetual (or Final) Injunctions Interim Injunctions Operation of Injunction RECEIVERS 1. Appointment and Functions Persons who may be Appointed Appointment Out of Court Appointment by the Court Receiver by Way of Equitable Execution PERSONAL MONETARY CLAIMS Steven Elliott 1. Introduction Accounting in Equity Equitable Compensation Account of profits Monetary Awards Relating to Rescission Monetary Awards Relating to Specific Performance and Injunctions Accounts Between Co-Owners PART V TRUSTS 21. DEFINITION AND CLASSIFICATION OF TRUSTS 1. The Core Case of the Trust Classifications Trusts Compared with Other Relationships PRIVATE EXPRESS TRUSTS 1. Varieties of Express Trusts Certainty in Defining the Essen tial Elements of the Trust Executed and Executory Trusts Enforcement of the Trustee's Duties

7 Xll Contents 5. Formalities Constitution of Trusts Setting Trusts Aside and Unenforceable Trusts CHARITABLE TRUSTS 1. Introduction 2. The Essentials of Charity 3. Perpetuity 4. The Cy-pres Doctrine 5. Administration and Supervision TRUSTS ARISING TO ENFORCE AN INFORMALLY EXPRESSED INTENTION 1. General Trusts Giving Effect to Specifically Enforceable Obligations Trusts to Enforce Incomplete Inter Vivos Gifts Trusts Giving Effect to a Donatio Mortis Causa Secret Trusts Mutual Wills Constructive Trusts under the Equity in Pallant v Morgan Equity Constructive Trusts of Land to Enforce Informal Common Intention RESULTING TRUSTS 1. Rationale 2. Gratuitous Transfer 3. Failure of Express Trust to Exhaust Beneficial Interest Property 4. Quistclose Trusts TRUSTS ARISING FROM WRONGS 1. General 2. Wrongs From Which Trust May Arise 3. Remedial Constructive Trust

8 Contents xiii 27. APPOINTMENT, RETIREMENT AND REMOVAL OF TRUSTEES 1. Capacity to be a Trustee Number of Trustees Appointment of Trustees Vesting of Trust Property The Public Trustee Determination of Trusteeship SPECIFIC POWERS: THE ADMINISTRATIVE POWERS OF TRUSTEES 1. Säle Partition Insurance Delegation Compromise and Valuation Protection Against Claims Maintenance and Advancement THE DUTIES AND DISCRETIONS OF TRUSTEES 1. The Trust Property Howe v Earl of Dartmouth Duty to Keep Accounts and Records and Disclosure of Trust Documents Control by Beneficiaries Control by Court Trustee Profiting from Trust Indemnification of Trustee BREACH OF TRUST 1. Nature of Breach of Trust Establishing a Breach of Trust Personal Remedies Against a Trustee in Breach Defences and Adjustments to Trustee's Liability Proprietary Remedies Against Proceeds of Breach of Trust Personal Liability of Third Parties involved in Breach of Trust

9 xiv Contents PART VI ADMINISTRATION OF ASSETS 31. COLLECTION AND REALISATION OF ASSETS 1. General Introduction 2. The Definition of Assets 3. Collection of Assets 4. The Trust on Intestacy 5. Powers of Personal Representatives Stuart Bridge PAYMENT OF DEBTS Stuart Bridge 1. DutytoPay Order of Payment Payment of Statute-barred Debts Preference and Retainer by Personal Representatives Order of Application of Assets Charges on Property DISTRIBUTION OF ASSETS 1. Transfer of Property 2. Ascertainment of Settled Residue 3. Retainer of Debt to the Estate 4. Liabilities Stuart Bridge REMEDIES Stuart Bridge 1. Administration by the Court Substitution or Removal of Personal Representatives Guidance by the Court Actions Against Personal Representative Liability of Recipients of Assets LEGACIES 1. Classification 2. Ademption and Abatement 3. Payment of Legacies 4. Annuities 5. Income from Legacies and Devises 6. Accretions to Legacies Stuart Bridge

10 Contents xv PART VII SECURITIES 36. THE NATURE AND CLASSIFICATION OF SECURITIES Generally Mortgages Charges Pledges Liens Suretyship CREATION AND SETTING ASIDE OF MORTGAGES 1. General Matters Mortgages of Land Mortgages of Personalty Equitable Mortgages Setting Aside Mortgages for Undue Influence or as Unconscionable Bargains Misrepresentation and Mistake Statutory Provisions Affecting the Enforceability of Mortgages Forgeries Unlawful Consideration THE RIGHTS AND INTEREST OF THE MORTGAGOR 1. The Nature of the Mortgagor's Interest The Right to Redeem Exercise of the Right to Redeem Loss of Right to Redeem Rights of the Mortgagor in Possession THE RIGHTS AND INTEREST OF THE MORTGAGEE 1. Right to Enforce Personal Covenant of Mortgagor Right to Possession Right to Säle out of Court Right to Foreclosure or Judicial Säle Right to Appoint a Receiver Right to Transfer the Mortgage Right to the Titk Deeds Limitation

11 XVI Contents 9. Right to Consolidation 10. Right of Marshalling 11. Rule in Ex p. Waring 12. Subrogation FLOATING CHARGES 1. The Nature of the Floating Charge The Importance of Overreaching An Alternative View Conceptual Limits on Floating Charges Practical Limits on Floating Charges The Utility of Floating Charges: Benefits and Costs Characterising a Charge: Fixed or Floating Priorities Crystallisation Enforcement Mechanisms PRIORITIES OF MORTGAGES 1. General Principles Tacking Subrogation DISCHARGE OF MORTGAGES 1. Merger 2. Redemption PLEDGES 1. Creation of Pledges 2. Rights of the Parties LIENS 1. Typesof Liens Vendor's Liens Purchaser's Liens Solicitor's Liens Lien for Sums Spent on Property of Another Other Equitable Liens

12 Contents xvii 45. SURETYSHIP 1. The Conceptof Suretyship Nature of Suretyship Position of Creditor Position of Surety Quia Timet Relief for Surety: Before Payment Remedies of Surety: After Payment Discharge of Surety