Tutorial Q1

After Kemp v Kemp, the court would not exercise discretion to distribute property unequally. Now, equity is equality.

McPhail v Doulton changed the test of certainty that applied to the objects of discretionary trusts.
Re Gestetner Settlement - a complete list is not needed in power of appointment. Thus was born the 'is or is not' test.
IRC v Broadway Cottages Trust - whether 'is or is not' test could be applied to discretionary trusts
argument for complete list test:
- if no complete list, t'ee cannot satisfy the duty - choosing the right b1b2 out of the whole set
- court unable to deal with failure
argument for is or is not test:
???
McPhail v Doulton - 3:2, held: 'is or is not' test was appropriate for discretionary trusts as well
Wilberforce: equal distribution is not possible, and is the last thing the settlor ever intended.

Trust tutorial Q1-4

"It seems to be as plain as can be that if all the objects are not ascertainable, then to distribute amongst the known objects is to take a narrower class than the settlor has directed and so to conflict with his intention' (Lord Guest (dissenting) in McPhail v Doulton (1970))


2. Explain the effect of the following separate transactions:

i. Alfred, the proprietor of a registered title to land, orally declares that he holds it on trust for Brian;

ii. Claudia, the proprietor of a registered title to land, completes a registered transfer form insructing the Chief Land Registrar to register David as proprietor. Before sending off the registration form, Claudia obtains David's agreement by telephone to hold the title on trust for Elizabeth. David is later registered as proprietor;

iii. Francis, the sold beneficiary of a bare trust of a title to a valuable painting, orally instructs his trustees to make a gift of the title to Graham, which they do by handing the painting to him;

iv. Harry, the sole beneficiary of a bare trust of shares, orally declares that he holds his rights on trust for James.


3. "It is high time the ghost of fraud was once and for all exercised from the doctrine of secret trusts".
Discuss

4. On the marriage of A to B in 2008, A's father, C, a widower, covenanted with D and E, that he (C) would transfer to them any rights valued at more than $10,000 he might receive to be held on the following trusts, namely, successive life interests to A and B, remainder in equal shares to the issue of the marriage, but, failing issue, to A's brother, F, absolutely.

In 2010, C acquired a painting under the will of a distant relative. The painting was valued at $250,000, but C failed to convey it to D and E. By his will drawn up in 2011, C left the painting to his cousin G absolutely.

Advise F as to his position regarding the painting. Would your answer differ if he could secure the co-operation of D and E in enforcing the covenant?

Company formation, promoters and pre-incorporation contracts

promoter- a person who takes necessary steps to form a company
Whaley Bridge Calico Printing Co v Green -
Promotion process involves:
- register the Co.
- enter into pre-incorporation conrtracts
- if public co, issue prospectus
- appoint directors, find shareholders

Definition of promoter (not found in 2006 Act):
Twycross v Grant - promoters are the persons who set it going
Whaley Bridge Calico Printing Co. v Green offers another definition
Promoters are fiduciaries. Fiduciary obligation are obligation owed to the principal to act with "loyalty and good faith in dealings which affect that person" (Penner)
Re Great Weal Pologooth - lawyers and accountant drafting constitution are not promoters
Court tend to leave the term "promoter" fluid so that it could catch as many fraudster as possible

For public companies, marketing of securities is strictly controlled by Financial Services and Markets Act 2000, and LR of FSA

In 2013, FSA is to be replaced by 2 bodies;
1) PRA - Prudential Regulation Authority
2) FCA - Financial Conduct Authority

*flotation (公司股票的〕發行﹐上市)

Promoter is not:
-agent: Kelner v Baxter. A person cannot be an agent of a nonexistent principal
- trustee: Re Leeds and Hanley Theatres of Varieties

Duties & liabilities
- no secret profits. promoters are required to make full disclosures of any such profits
Erlanger v New Sombrero Phosphate - a syndicate bought mine, sold to co, did not disclose. New board bring action to rescind the sale
Held: contract is voidable, except:
i) Co. affirms (Re Cape Breton) (but Co. can still promoter to account for the secret profit)
ii) Co. delays in exercising its right to rescind (Long v Lloyd)
Also there ust be restitutio in integrum - it is possible to restore

Salomon v Salomon - if the board was not independent, disclosure of benefit should be made to the original shareholders
Gluckstein v Barnes - even disclosure to original shareholders might not be sufficient, if the scheme as a whole is designed to defraud the investing public it is not okay

Remedies
Sinclaire Investments (UK) v Versailles Training Finance Ltd
Target Holdings v Redferns - personal

Pre-incorporation contracts
problem: an agent (promoter) cannot bind a non-existent principal (Co.) to contracts
CL: 
Kelner v Baxter: promoter of hotel buy wine, wine are consumed, hotel went liquidated.
The privity doctrine prevents rights and liabilities being conferred on the co. 1999 Act does not apply to pre-incorp contracts
Promoter: the hotel ratified the contract, I am not liable
Held: personal liable
Novation: co. to make a new contract with similar terms. ( Natal Land & Colonization v Pauline Colliery & Development Syndicate)
Re Patent Ivory Manufacturing, Howard v Patent Ivory Manufacturing: Novation might be inferred

Re Northemberland Avenue Hotel - novation is ineffective if the co. mistakenly believed that it is bound by it
Newborne v Sensolid -

Reform: s.51 2006: personal liable
Phonogram v Lane -Denning: in order for the promoter to avoid the personal liability, the contract must expressly provide for his exclusion

s.51 does not apply:
i) Oshkosh B'Gosh v Dan Marbel - misnamed existing co.
ii) Cotronic v Dezonie - the co. no longer exists
iii)
Braymist Ltd v Wise Finance -

the promoter could also enforce the contract

Freedom of establishment (EU cases)
Centros v Erhversus-or Selkabssyrelsen -

variation of trusts

sui juris beneficiary - full age and sound mind
Principle in Saunders v Vautier - a sui juris beneficiary can collapse the trust.
By the same token, they can vary the terms of a trust.

2 limitation:
1. Re Brockbank: they cannot ask the t'ee to make such and such decision. They can insist upon a variation
2. only sui juris beneficiary can (Variation of Trust Act 1958)

Chapman v Chapman - HL said that the court has no inherent jurisdiction to consent to a variation of the trust on behalf of sui juris beneficiary. The inherent jurisdiction of a trust is only limited to:
1. grand additional administrative power to t'ee in emergency situation
2. sanction maintenance payments to beneficiary

Trustee Act 192, s.57 extended the court's power over emergency situation.
Trustees of the British Museum v AG - the court extend the t'ee's power of investment, based on the factors including:
i) standing of t'ee, their admin plans
ii) size of the fund
iii) object of the fnd


Variation of beneficial interest: Variation of Trusts Act 1958
- the court might approve if the variation would be for their benefit

Goulding v James - the s'or's intention is only relevant if they help the court to determine the what is of benefit to the beneficiaries
Knocker v Youle - but this Act may give rise to substantial inconvenience

Succession: family provisions

Inheritance (Provision for Family and Dependants) Act 1975

Succession: construction

Chp 10

narrow approach - Re Skyes, Re Lewis, Re Rowland

broad approach - Perrin v Morgan. What appears the most probable meaning. to ascertain from the will the t'or's intention

HL abandons literalism:
Perrin v Morgan: earlier case law established that money meant money held in cash, but not residuary personalty. TIX's estate was worth more than 30,000 and consisted almost entirely of stocks and shares. If only count cash, she would die almost wholly intestate.

Reluctance of chancery lawyers to abandon literalism:
Re Rowland -

General rules of construction:
- expressed intentions: Jones v Midland Bank, Anthony v Donges. Very limited power to omit/subsititute: Re Whitrick.
- construe words in their ordinary state - money could be interpreted as including all of the t'or's property (Perrin v Morgan). Re Trundle, Re Barne's WT. secondary meaning may prevail if:
i) Ordinary meaning does not make sense (Re Smalley)
ii) T'or supplies his own dictionary: Re Lynch
Capicious is ok: Gilmour v MacPhillamy
- technical words must be given their technical meaning. This rule is subject to contrary intention (Re Bailey)
- a will must be construed as a whole: Re Macandrew's WT, Higgins v Dawson

Specific rules of construction
- a will speaks from death: s.24 1837 Act: reference to property shall be construed to speak and take effect as if it had been executed immediately before the death (unless contrary intention, Re Sikes, Re Evans)
s.24 does not apply to description to persons (Re Whorwood)
- words denoting relationship:
children:
illegitimate children - s.1 Family Law Reform Act 1987
legitimated children - s.5 Legitimacy Act 1976
adopted children -s.39 Adoption Act 1976
issue: remoter descendants are prima facie included
 next-of-kin: prima facie those who are in the nearest degree of blood relationship. (Spouse is not, Garrick v Lord Cauden)
survivors- Re James's WT: those who were alive when t'or died. Re allsop: include persons born after t'or died.
-Golden rule: Re Harrison: you ought to read the will so as to lead to testacy
- falsa demonstratio rule: wrong description does not prevent a gift passing. Re Price, NSPCC v Scottish NSPCC
- eiusdem generis
- inconsistent provisions: rule of last resort. Later provision prevail over the earlier (Re Hammond). But earlier gift prevails (Re Gare)

Class-closing rules = rule in Andrew v Partington
*class gift: a gift to a class, consisting of persons who are included under some general description, and bear a certain relation to t'or
the rules are controversial: re Charters, Re Henderson's Trusts

i) immediate gift without qualification: Viner v Francis
ii) postponed gift without qualification:
iii) immediate gift with qualification: Andrew v Partington
iv) postponed gift with qualification:
- these rules do not apply if contrary intention (Re Edmondson's WT, Re Chapman's Settlement)

Types of extrinsic evidence
i) direct evidence: expression by t'or
ii) circumstantial evidence: armchair principle.

Admissibility of extrinsic evidence
*extrinsic evidence: evidence outside the will itself. Court cannot rewrite a will (Re Willliams)
 - t'or died after 1982, s.21 AJA 1982:
s.21(1)
a. meaningless (Kell v Charmer)
b. ambiguous language
c.
patent ambiguity: ambiguity on the face of the will
latent ambiguity: ambiguity in the light of surrounding circumstances

Promises to create trust

Only 3 types of promises that the court will enforce
- promises in deeds
- promises given for consideration
- promises detrimentally relied upon

Promises in Deeds

Basic rule: promise contained in a deed is called a covenant. CL will enforce it whether there is consideration or not, but equity will not because equity looks at intent not form
whether a third party can enforce a covenant at CL is a question. If covenant is a contract, C(Rights of Third Parties) Act 1999 will help. But we are not sure if a covenant is a contract or not.

Enforcement by the intended beneficiary
In general no, except:
i) C is a party made by statute
ii) C is within marriage consideration
iii) trust of the right to sue on the covenant - Re Cook's ST - problem: no declaration of such trust (some said such intention should be inferred from the mere fact that the promise to create a trust was contained in a deed). problem 2:
after-acquired property

*quid pro quo -a favour or advantage granted in return for something.
"the pardon was a quid pro quo for their help in releasing hostages"

Enforcement by the intended t'ee
- Re Pryce, re Cook's ST, Re Kay - please note these are decisions at first instance
- even if these cases are wrongly decided, what damages can t'ee claim? substantial or nominal?
- all B entitled is nominal damages because he is no worse off > Promises for consideration. 
But in the eyes of law, they are the owner of the property and therefore they have suffer lost.

Promises for detrimental reliance



Penner Chp.8-
The enforcement of covenants to settle by equity
-Covenants are promises formally expressed by being written in a deed
- covenants must be distinguished from contracts
-modern law of contract developed out of law of covenants. there is no formality requirement before (Now LP(MP) Act 1989 s.2. require contracts in land be made in writing though)
- a covenant is a formal means by which CL will enforce it, regardless of consideration
- equity will not enforce a gratuitous promise only because it is in a deed. Because equity will not assist a volunteer
- covenant to settle is a covenant to create a trust
- marriage settlement - a trust created by a man or woman in contemplation of marriage (because in 19th century a married woman's property become her husband's)
- these covenants are not made for any consideration
- AG v Jacobs-Smith - Equity regarded marriage as "the most valuable consideration imaginable"
- if they are already married, and they set up a trust for themselves, their children do not create a marriage settlement
- Pullan v Koe - wife transferred some after-acquired property to husband's bond. Husband dies. T'ee sue husband's executor to transfer the bond to them so that the t'ee can hold them on marriage settlement trusts. Held: yes, it is duty of t'ee to enforce the covenant
- Re Plumptre's marriage settlement - next of kin sue to enforce a covenant. Held: they cannot because they are volunteer, they are not within the marriage consideration. If it is a fully constituted trust, the volunteer beneficiary has the same right as beneficiaries who have given consideration

- Davenport v Bishop - once the c'or has transferred the properties to the t'ee, it is constituted for both non-volunteer and volunteer beneficiaries

The enforcement of covenants to settle at CL
- Re Pryce- said t'ee cannot sue c'or to transfer the property in favour of next of kin. Because if so, volunteer beneficiaries would be able to enforce the promise, which they could not through equity
- criticism of re Pryce - equity will not assist a volunteer, it does not mean that equity will stand in the way of a volunteer. Although the t'ee is asking if they have to sue or not, and the t'ee is not asking for help from equity, if they are to sue, they will sue at CL.

- 2 cases go in another way - Fletcher v Fletcher, Re Cavendish Browne's ST.
- 2 cases follow Re Pryce - Re Kay's ST, Re Cook's ST.
So now the authority is t'ee cannot sue for damages at CL
- Cannon v Hartley - father failed to settle the property. Daughter sues for damages. Held: yes
- if t'ee brings an acition at CL for breach of covenants. He may recover on 2 basis: certain sum, or c'ee's loss. Sometimes it is argued that c'ee lost nothing because it is the beneficiary who lost. So if the damages are paid on the basis of the latter criteria, the sum pay would be nominal. CL does not allow him to recover the damages for a third part (volunteer here): Woodar Investment Developemtn v Wimpey Construction UK
-

The trust of the benefit of a promise to settle
Until c'ee has the property constituted in him he holds his CL rights to enforce the covenant for himself absolutely

XXX

Fortuitous vesting of the trust property

-Re Brook's ST