CASE FACTS PRINCIPLE
Barlow Clowes, in breach of trust, paidinvestormoneytoacompanyon the Isle of Man. That company went into liquidation and its director was found to have dishonestly assisted thebreach.
The parties bought a property together, using joint savings for the deposit and taking out a mortgage. It was placed in joint names. The appellant then bought several more properties in his name and got into financial difficulties, persuading the respondent to remortgage the joint property. The parties then split, and thecourtwasaskedtodeterminethe beneficialownershipoftheproperty.
Where the result of applying the “first-in first-out” rule is impractical or unjust, the money can, at the court'sdiscretion,besharedrateably, i.e. in proportion to the amounts appropriatedfrom theinvestors
There was no specific agreement between the parties as to their respective shares in the property. It was for the court to determine what was fair. The appellant was awarded 85%.
Baxter v Todd [2019]
Professional trustees delegated the management of a company (the sharesofwhichwerethesoleassetof thetrust)tobankers.Theboardofthe company, with the delegate’s encouragement, embarked on speculative developments which causedasignificantlosstothetrust.
1) Taking a controlling interest in a company obliges the trustees to be involved in the management of the business(ortodelegatemanagement to anappropriateperson).
2) Professional trustees must ensure there is an adequate flow of information from the company to enablethemtoactas“prudentmen of business”. They should have met with and talked to directors and not just reliedonpublishedaccounts.
COMPARE with Re Lucking’s Will Trusts*
The Baxter’s bought a property in joint names, with the benefit of a mortgage. Later, the property was transferred to Mrs Baxter. It was claimed that this was an administrative arrangement. Mr Baxter’s daughters from another relationship were living with him and the local authority was providing accommodation for the family in another area, close to the girls’ school.WhenthegirlsleftMrandMrs Baxter returned to their original property but did not change the ownership.
Following Mrs Baxter’s death the courthadto determinethebeneficial ownership of the property. The couple had maintained their own bank accounts but had shared expenses,andatdifferenttimeseach had taken primary responsibility for working and paying expenses. The court held that when the flat was transferred to Mrs Baxter it became subject to a constructive trust, held beneficially exactly as it had been immediately priortothetransfer.
CASE FACTS PRINCIPLE
[2000]
Akindele invested substantial sums with BCCI on a fixed return agreement. The arrangement was part of a fraud BCCI had established. When BCCI went bankrupt, the liquidator sought to claim from Akindele forknowingreceipt.
The court sought to simplify the test for knowing receipt by reformulating the test as: “Is the defendant’s knowledge such that it would be unconscionable for him to retain the benefitofthereceipt?”
[1927]
The claimant sought specific performance of a contract. He had contracted to buy a ship that was unique in complying with specific regulations.
Where an item is of special value to the claimant, but is otherwise unexceptional, it may be the subject ofaspecifically-enforceable contract.
[1980]
A complex conspiracy between companies to finance the share purchase of another company. This involvedthepurchaseatanovervalue of the shares in Belmont. The claim forknowingreceiptwasupheld.
Craven was a partner in a sugar refinerybusinessandwasresponsible for buying the sugar. He sold it to the partnershipataprofitto himself.
An investment vehicle which had been designed to exploit a tax loophole failed in its purpose, and investors sought to show that a Quistclose trust had been established. They were unable to demonstrate this.
1) “Knowledge”whichissufficientto be liable for knowing receipt is knowledge asdefinedbyany level(i)(v)ofthe Baden* scale
2) Dishonesty is not required for knowingreceipt.
COMPARE with Re Montagu’s Settlement Trusts
Craven had to account to the partnershipforthe profithe earned.
Restated and summarised the law in this area. The court held that it must be objectively ascertainable that the money advanced was for a specific purpose.Themoniesshouldnotform part of the general assets of the company. The mechanism for achieving this gives rise to fiduciary responsibilities on the part of the recipient.
Nat West traded in carbon credits through “Carbon Desk”. When the tradeincreasedenormouslyNatWest employees surmised that this might have been fuelled by VAT fraud (the increase coincided with a French crackdown on VAT fraud). The employeesdidnotseekexplanations
The judge held that this was dishonestbasedontheirsuspicions;it amounted to dishonest assistance. This extends the law. Dishonest assistance can arise where the dishonest party has not transacted withthevictimorprovidedassistance to the perpetrator of the fiduciary breach.Itissufficientiftheactions(or inaction) facilitated thatbreach.
CASE FACTS PRINCIPLE
Adeathbedgift ofmoney ina savings account was established and evidenced by the dying donor handing over savings books for the accounttothe donee.
Example of an effective Donatio Mortis Causa (i.e. a gift made in contemplation of the donor’s imminentdeath).
COMPARE with Re Beaumont
An Australian case concerning stolen money.
A secret trust for £12,000 was established, with the money transferred to five trustees in a codicil. Detailed parol instructions on the beneficiaries were given to one trustee and the rest knew in outline what was intended. Later detailed written instructions were created. The parol evidence was admissible to establishthetrust.
A trust owned a substantial percentage of a company. The company enquired whether the trust wouldliketosellbacktheirshares,as aresultofwhichthetrusteesreceived inside information about the company. The trustees then bought therestofthesharesofthe company independently (not in their capacity as trustees), and restructured the company, improving the return on both their own shares and the trust's shares.
Thecaseconcernedanargumentthat a charitable trust was for educational purposes and therefore charitable. The trust ran a college which admitted students without reference to their political beliefs, but the governors and education committee were all Conservative Party members and lectures were only given on the ConservativeParty.
A fiduciary relationship, for the purpose of the requirements of equitabletracingasestablishedby Re Diplock*, was established by the theft.
1) Authority that a half secret trust will not be defeated by a trustee disclaimingthelegacy.
2) Stated obiter that a fully secret trust would not be defeated by a trustee disclaiming the legacy once evidence of the trust had been admittedto thecourt.
COMPARE with Re Maddock*
1) The trustees were obliged to account for all the profit they had madeonthesharesandpayitbackto thetrust,astheyhadmade theprofit as a result of the information they receivedintheirpositionastrustees.
2) The court may award reasonable remuneration for any work done by fiduciaries in improving trust property,asthey didinthiscase.
COMPARE with Bray v Ford* and
v Cedar
The purposes of the trust were held tobepoliticalratherthaneducational and it therefore failed as a charitable trust.
[1995]
A lender gave loan monies to a property purchaser’slawyer,who,in breach of trust, passed it on to the seller.Themoneywasusedtopayoff the seller’s mortgage. The lender sought to trace itsmoney.
1) Tracing is a process, not a remedy in itself, by which the claimant can identify his property and who has handled/receivedit.
2) Suggested that “inequitability” from Re Diplock* should be confined to its facts – an innocent volunteer spending a donation on pre-owned assetsinthatcase.
A testator left money in his will to Westminster Cathedral and another religious organisation for the saying ofprivatemasses.
An “Endacott exception”: a trust for the saying of private masses may be upheld.
[1916-17]
A testator gave the residue of his estateontrustforacompanyformed with the purpose of promoting the principlethat"humanconductshould be based on natural knowledge and not supernatural belief." There were otherobjectscriticalofChristianity.
Atestatorlefttwohousesontrustfor his daughters. One daughter was to chooseone,andtheotherwouldtake the remainder. However, the first daughterdiedbeforechoosing.
A vice-chairman of Yorkshire College (which became Leeds University) also acted as its solicitor. The case concernedalibelclaimbyhimagainst a governor who claimed that he was inbreachofhisfiduciaryposition.
The bequest was valid. Christianity is not part of the common law and it is not criminal to promote ideas hostile to Christianity.
The beneficial entitlement must be capable of determination or the trust will fail for uncertainty. Here which housewouldhavebeenchosenbythe first daughter could not be known, thetrustfailed.
A fiduciary may not put himself in a positionofactualorpotentialconflict and must not make a profit from his position.
COMPARE with Guinness plc v Saunders* and FHR v Cedar
[2015]
The Malufs (Brazilians) procured bribes totally US$10.5 million. These were paid to a US bank in a false name. Payments totalling US$13.1 million were paid from that account to a Jersey account, payments totally US$ 13.5 millionwere thenpaid from that account to a third Jersey based account. The last three bribery payments were made after the final payments to the first Jersey account and on two occasions the first account was less than the amount whichwastheproceedsofthebribes.
Under the lowest intermediate balance rule the amount which could be recovered would have been severely restricted. The Privy Council said that the proper approach was to look at the substance of the transaction overall. In money laundering the court should not "allow a camouflage of interconnected transactions to obscureitsvisionoftheirtrueoverall purposeandeffect."
[2008]
When beneficiaries were advised of the trust, they were given details of the trust deed and advised that a letterofwishesexisted.
A letter of wishes was confidential, and beneficiaries had no absolute right to see it, but trustees should take allcircumstances intoaccount.
Brewer v Iqbal [2019]
An incompetent but honest administrator(inapositionanalogous to that of a trustee) failed to make proper enquiries of company directors and caused further dissipationofassets.
He wasliableforbreachoftrust.
Bristol and West Building Society v Mothew* [2000]
Bull v Bull* [1955]
Asolicitorappealedagainstadecision that he had breached his fiduciary dutyinrelationtoasecondmortgage ona property transaction.
Theclaimantandhismotherboughta house together, but it was conveyed solely to the claimant The claimant provided most of the purchase money.
Defined the fiduciary duty owed by trusteesasprimarilyan“obligationof loyalty”.
Where unequal contributions to the purchase price are made, a purchase money resulting trust can arise, to benefitthosewhocontributedtoit,in proportiontotheircontributions.
Bulmer v Bollinger* [1974]
A dispute over the use of the word “champagne” on bottles of Babycham.
The court may restrict equitable remedies where the claimant has suggestedhewillnotenforcehislegal rightsandthedefendanthasactedto hisdetrimentasa result.