faculty of law

EQUITY AND TRUSTS personal notes

COURSE DESCRIPTION
A. The Nature of Equity

The following Equity ideas come from Aristotle’s Ethics, and could be understood as
considering the difference between common law and equity:

“For equity, though superior to justice, is still just … justice and equity coincide,
and although both are good, equity is superior. What causes the difficulty is the
fact that equity is just, but not what is legally just: it is a rectification of legal
justice.”

So it is that equity may provide for a better form of justice than the common law
because it provides for a more specific judgment as to right and wrong in individual
cases which rectifies any errors of fairness which the common law would otherwise have
made:

“The explanation of this is that all law is universal, and there are some things about
which it is not possible to pronounce rightly in general terms; therefore in cases where it
is necessary to make a general pronouncement, but impossible to do so rightly, the law
takes account of the majority of cases, though not unaware that in this way errors are
made. … So when the law states a general rule, and a case arises under this that is
exceptional, then it is right, where the legislator owing to the generality of his language
has erred in not covering that case, to correct the omission by a ruling such as the
legislator himself would have given if he had been present there, and as he would have
enacted if he had been aware of the circumstances.”

Thus, equity exists to rectify what would otherwise be errors in the application of the
common law to factual situations in which the judges who developed common law
principles or the legislators who passed statutes could not have intended. Equity and
Trusts introduces students to foundational principles governing the law of trusts. The
module encompasses the historical development of equity, equitable principles and
equitable remedies, and considers the social and legal contexts in which trusts arise.
Students are encouraged to fully engage with the subject matter through an analysis of
key concepts, cases and contemporary judicial/academic debate.

OVERALL, this course seeks to enable the students to: provide a sound grounding in the
concepts, principles and rules relating to equity and trusts; build on students' existing
knowledge of the inter-action between common law and equity by looking more directly
at equitable remedies, the jurisprudence of equity and the contribution equity has made,
and continues to make, to the English legal system; introduce students to aspects of the
procedure and practice of equity; place the development of equity in a social and
economic context, and in particular track the evolution of the key jurisprudential themes
pg. 1 sebukalu@gmail.com 0779111777
faculty of law
EQUITY AND TRUSTS personal notes
in terms of their use in specific historical and contemporary developments; engage in a
critical discussion of the problems and advantages of using equitable ideas, and evaluate
their use in the context of other legal strategies (e.g. restitution); and consider the
implications of the development of equitable principles and actions in other jurisdictions
and the potential for their development in this jurisdiction. to extend these issues into an
engagement with the orthodoxies of trusts law through a critical evaluation of the use of
the trusts model and the techniques of thinking through trusts; and to engage in a
critical evaluation of the uses of the trust model in terms of contemporary policy issues,
by a consideration of the values and benefits the model carries, and an examination of
the extent to which orthodoxies presumed as necessary to the use of trusts may
constrain future developments, and the extent to which they remain necessary or can be
lost or stretched in order to make trusts more useful as a contemporary legal tool. The
course relates to the application of fairness to both substantive and procedural law. It
seeks to justify the evolution of equity, its governing principles, the nature of equitable
interests and the remedies available to aggrieved parties. The student is introduced to
the concept of a trust, how it is set up, the different types of trusts and the principles
governing each of them.

B. Learning Aims

The aims of the module are to ensure that students understand and are able to assess
critically:

a. The principles associated with equity and with trusts law;

b. the application of those principles to factual circumstances; the manner in which
these principles affect people in their everyday lives;
c. how those principles are to be reconciled with the principles governing the creation of
express trusts, the imposition of trusts by law;
d. how equity and trusts law adapt to changing social conditions; and how other legal
models challenge the traditional understanding of equity.

C. Learning Objectives

Knowledge

By the end of this module, a successful student will be able to explain;

a. what a trust is and how it operates generally, but with specific application to Uganda:
b. the informal acquisition of an interest in property through a resulting or constructive
trust;
c. the formal requirements for the establishment of a valid express trust, both inter
-vivos and on death;
d. the enforceability of trusts which have not been properly constituted;
e. the nature of the fiduciary relationship and the protection of the beneficial interest;
f. powers and duties of the trustees and remedies for any breach of duty;
g. the liability of third parties in respect of trust property; and and;

pg. 2 sebukalu@gmail.com 0779111777

faculty of law
EQUITY AND TRUSTS personal notes
I. READINGS

These Lecture Materials provide you with a comprehensive list of your case law and
statutory reading for lectures and seminars, together with an illustrative list of key
articles and other materials for lectures and seminars. You are expected to read all
statutory material - this will be essential for an understanding of the subject. Cases
marked ** are essential reading, being leading or very important cases, and so must be
read in full in the law reports. All other cases can be read in a casebook or covered in a
textbook. You are also expected to read all cases marked with an asterisk * at the very
least in a casebook but you are advised to read them in full in the law reports.

II. TEXTBOOKS

Your recommended textbooks are:- Alastair Hudson: Equity and Trusts (7th ed.,
Routledge, 2012) & D.J Bakibinga, Equity and Trusts in Uganda, LawAfrica. There are
other textbooks available, including the following: -

a. Hanbury and Martin: Modern Equity (19th ed., by Dr J. Martin: Sweet & Maxwell,
2012): “ME”.
b. Pettit: Equity and the Law of Trusts (11th ed.: OUP, 2009): “PET”. Other textbooks
to which you might want to refer are:-
c. Virgo, The Principles of Equity and Trusts (OUP, 2012)
d. Pearce, Stevens and Barr: The Law of Trusts and Equitable Obligations (5th ed.,
OUP, 2010).
e. Penner, The Law of Trusts (8th ed.: Core Text, OUP, 2012).
f. Watt, Trusts and Equity (4th ed, Oxford, 2010).

III. CASES AND MATERIALS BOOKS

You are not required to have a cases and materials book, but some people find them
useful to extract some of the main principles. The best cases and materials books in this
area are:-

a. Maudsley and Burn: Trusts and Trustees: Cases and Materials (7th ed.: Butterworths
2008) – an excellent digest of the most significant cases.
b. Mitchell, Hayton and Marshall: Commentary and Cases on the Law of Trusts and
Equitable Remedies (13th ed.: Sweet & Maxwell 2010).
c. Moffat: Trusts Law: Text and Materials (5th ed.: CUP 2009) – a very interesting,
alternative view of the law.

IV. BACKGROUND READING

Hudson’s Equity & Trusts, has a long bibliography containing a large amount of journal
and treatise literature. Journal literature is referred to in these “Lecture Materials” and in
the “further reading” sections in the Seminar Materials, although you are encouraged to
pg. 3 sebukalu@gmail.com 0779111777
faculty of law
EQUITY AND TRUSTS personal notes
identify journal and treatise literature, and other reading online, for yourself. In the
footnotes to your set reading there are cross references to this bibliography. This is how
you will find further reading, as well as the articles to which you are referred in these
Lecture Materials. A number of further files and web-links can be found at
www.alastairhudson.com/trustslaw in.pdf format.

WEEK ONE

1. GENERAL PRINCIPLES OF EQUITY

Reading

1. D.J Bakibinga, Equity and Trusts LawAfrica, chapter 1

2. Hudson Chapters 1 and 2, especially pp.1-8, 36–62;
3. Martin Chapters 1&2; Pettit Ch 1&3
4. Oxford Advanced Learner’s Dictionary, 6th edition
5. Hackney Jeffrey, (1987) Understanding Equity and Trusts; London: Fontana press
pp.1-34

6. Jill Martin, Hanbury & Martin: Modern Equity, 17th Edition, Sweet & Maxwell pp.1-14

Early Case Law on the Role of Equity

**Earl of Oxford’s Case (1615) 1 Ch Rep 1, per Lord Ellesmere:

“the office of the Chancellor is to correct men’s consciences for frauds, breach
of trusts, wrongs and oppressions … and to soften and mollify the extremity of
the law”

**Lord Dudley v Lady Dudley (1705) Prec Ch 241, 244, per Lord Cowper:

“Now equity is no part of the law, but a moral virtue, which qualifies,
moderates, and reforms the rigour, hardness, and edge of the law, and is an
universal truth; it does also assist the law where it is defective and weak in the
constitution (which is the life of the law) and defends the law from crafty
evasions, delusions, and new subtleties, invested and contrived to evade and
delude the common law, whereby such as have undoubted right are made

pg. 4 sebukalu@gmail.com 0779111777

faculty of law
EQUITY AND TRUSTS personal notes
remediless: and this is the office of equity, to support and protect the common
law from shifts and crafty contrivances against the justice of the law. Equity
therefore does not destroy the law, nor create it, but assist it.”

The fusion of common law and equity

The conflicting approaches of various judges: e.g. Lord Nottingham and Lord Mansfield.

Judicature Act 1873, its effect on equity.

Judicature Act 1873 merged the two streams of courts, however the intellectual
distinction between common law and equity remains very important.

COMMON LAW EQUITY

Examples of Claims
 Breach of Contract  Breach of Trust
 Negligence  Tracing Property
 Fraud  Claiming Property on
Insolvency
Examples of Remedies
 Damages  Compensation
 Common Law Tracing  Equitable Tracing
 Money had and Received  Specific Performance
 Injunction
 Rescission
 Rectification
 Subrogation…etc

INTRODUCTION: History of equity

1. Kerly, A Historical Sketch of the Equitable Jurisprudence (3rd Ed) P.25

2. Raja Binti Salim Bin Busaidi v. Hamed Bin Busaid [1962] E.A 248

Introduction of the doctrines of Equity into Uganda

1. Sempa Mbabali v. Kidza [1985] HCB 46 – Bonafide purchaser for value

2. **Yesero Mugenyi v. Wandera [1987] HCB 79 – Temporary Injunction
3. Waswa v. Kakooza [1987] HCB 79 – Temporary Injunction
4. *UCB v. General Parts (U) Ltd [1992-1993] HCB 210 – Injunction
5. Serunjogi v. Katabira [1988-90] HCB 149 – Specific Performance
6. Sekayombya v. Uganda Steel Corp [1984] HCB 42 – Restituo in intergrum
7. Mugime v. Basabosa [1991] HCB 70 - Mareva Injunction
8. Sheikh Kagimu Mulumba & Ors [1980] HCB 110 – Temporary Injunction
9. **Kenyi v. Grindlays Bank (U) Ltd [1982] HCB 116 – Discovery of Documents

Repugnancy Doctrine
pg. 5 sebukalu@gmail.com 0779111777
faculty of law
EQUITY AND TRUSTS personal notes
1. Rex v. Amkeyo (1971) 7 F.A.L,R14
2. Mohammed v. R [1963] E.A.18
3. Karuru v. Njeri [1968] E.A. 361

The Relation between Equity and Common Law

Inevitable Conflict: Common Law Courts & Chancery Court Jurisdiction: Coke and
Ellesmere

**The Earl of Oxford Case

Nature of equitable rights I

a. Rights in Rem or Personam

Rights based on common law
Rights created by Equity
Distinction: Legal & Equitable interests

b. Types of Equitable interests

a. Estate Contracts
b. Restrictive Covenants
c. Mortgagors Equity of Redemption
d. Equitable Mortgage

A. The Doctrine of Notice

a. Actual Notice
1. Lloyd v. Banks (1868) 3Ch. App 488
2. Perham v. Kempster (1907) 1 Ch. 373, 379
3. Fredrick Zaabwe vs. Orient Bank & 5 Ors (Civil Appeal No.4 of 2006)
s. 64 R.T.A Cap 230

b. Constructive Notice
1. Williamson v. Brown (1857) 15 N.Y. 354, 362 per Slden J.
2. Oliver v. Hinton (1899) 2 Ch. 264

c. Imputed Notice
1. Sharpe v. Foy (1868) 4 Ch. App. 35
2. Jared v. Clements (1903) 1 Ch. 428

Tutorial 2 hours

1. Trace the origin of equity and explain how the notions of conscience were
introduced into Uganda.
2. Explain the repugnancy doctrine and the conflicts between law and equity.

pg. 6 sebukalu@gmail.com 0779111777

faculty of law
EQUITY AND TRUSTS personal notes
WEEK TWO

A. General Principles of Equity II

2. MAXIMS OF EQUITY
Reading

D.J Bakibinga, Equity and Trusts LawAfrica, chapter 2, Pgs 16-25, Hudson,
section 1.4; Martin 3-48; Pettit 21-29. The twelve maxims set out below are
culled, as a list, primarily from Snell’s Equity, (31st ed., 2004) by McGhee, 27.

i. Equity will not suffer a wrong to be without a Remedy

ii. Equity follow the Law
a. Rules of Law
b. Rules of Evidence
iii. Where there is Equal Equity Law Prevails
iv. Where Equities are Equal, First in Time Prevails
1. *Cave v. Cave (1980) 15 Ch. D. 6;30
2. *Rice v. Rice (1854) 2 Drew 73
3. *Dearle v. Hall (1828) 3 Russ. 1

v. He who Seeks Equity Must Do Equity

1. **Lodge v. National Union Investment Company [1907] 1 Ch. 300
2. Doctrine of Election
3. Notice to Redeem Mortgage
4. Illegal Loans

vi. He who Comes to Equity Must Come with Clean Hands

1. Gill v. Lewis (1956) QB 1, 13, 14, 17
2. Coatsworth v. Johnson (1886) 54 L.T. 520
3. Loughran v. Loughran 292 US 216 (1934)
4.

vii. Delay Defeats Equities ( Doctrine of Laches)

1. Smith v. Clay (1767) 3 Broc. C. 639
2. Lindsay Petroleum Co. v. Hurd (1874) L.R. 5P.C 221
NB: Effect of Limitation Statutes
Limitation Act

viii. Equality is Equity

s. 28 Succession Act Cap 162
In Re Bower’s Settlement Trusts Ch. 197

ix. Equity Looks at Substance Rather than Form

1. Article 126 (2) (e) Uganda 1995 Constitution
2. **URA v. Stephen Mabrosi C.A 1995 (Supreme Court)
pg. 7 sebukalu@gmail.com 0779111777
faculty of law
EQUITY AND TRUSTS personal notes

x. Equity Looks on That as Done which Ought to be Done#

1. **Walsh v. Lonsdale (1882) 21 Ch. D. 9
2. Grosvenor v Rogan Kamper

xi. Equity Imputes an Intention to Fulfil an Obligation

Based on Doctrines of Performance and Satisfaction

xii. Equity Acts in Personam

Priorities

Assignment of choses in action

Conversion and reconversion

Election

Satisfaction

Tutorial 2 hours

1. **Earl of Oxford’s Case (1615) 1 Ch Rep 1,

2. **Lord Dudley v Lady Dudley (1705) Prec Ch 241, 244
3. *Lodge v National Union Investment

Reading

Alastair Hudson: Equity and Trusts (6th ed.: Routledge-Cavendish, 2009 pp. 24-45

WEEKs THREE & FOUR

3. EQUITABLE REMEDIES

pg. 8 sebukalu@gmail.com 0779111777

faculty of law
EQUITY AND TRUSTS personal notes
1. RESCISSION
Nature and Effect

1. Clough v. London & Northwestern Rly Co (1871) L.R. & Exch. 26

2. Abraham Steamship Co. v. Westville Shipping Co. [1923] A.C. 773

Grounds
a. Mistake
i. Common Mistake
1. Bell v. Lever Bros [1932] A. C. 161 H.L
2. Solle v. Butcher [1950] 1 KB. 671. C.A

ii. Unilateral Mistake

1. Cundy v. Lindsay (1878) 3 App. Cas 459
2. Phillips v. Brooks Ltd. [1919]2 KB 243
3. Lewis v. Averay [1971] 3 ALL E.R. 907
4. Ingram v. Little [1960] 3 ALL. E.R. 332

5. Requirement that Mistake Must Be Operative

Cundy v. Lindsay (1878) 3 App. Cas 459
Smith v. Hughes (1871) L.R.6Q.B.597
Raffles v. Wichelhaus (1864) 2H & C906

6. Mistake in Equity (Mitigating Role)

Smith v. Hughes (1871) L.R.6Q.B.597
Bell v. Lever Bros
Cundy v. Lindsay (1878) 3 App. Cas 459

Types

i. Mistake of Fact
Non Fundamental Mistake
1. Colyer v. Clay (1843) 7 Beav 188

ii. Mistake as to Value

1. Campbell v. Edwards [1976] 1 WLR 403
2. Re Garnett (1885) 21 Ch.D.1.

iii. Mistake of Law

1. Solle v. Butcher [1950] 1 KB. 671. C.A
2. Cooper v. Phibbs (1867) L.R. 2H.L. 149
3. Alcard v. Walker [1896]2 Ch. 369

pg. 9 sebukalu@gmail.com 0779111777

faculty of law
EQUITY AND TRUSTS personal notes
b. Misrepresentation

i. Innocent
1. Derry v. Peek [1896]14 App Cas 337
2. Ajayi v. Eberu (1974) 10 ALR Comm 155

ii. Fraudulent
1. Derry v. Peek
2. Peek v. Gurner

c. Constructive Fraud
1. Johnson v. Maja (1951) 13 W.A.C.A. 290.
2. Wingrove v. Wingrove (1855) 11 P.O.91
3. William v. Franklin [1961] 1 ALL. ALR. 128

d. Non- Disclosure of Material Facts

1. Century Insurance Co. Ltd. V. Atumiya 1966 (2) ALR Comm. 314.

LOSS OF RIGHT TO RESCIND

a. Affirmation
1. Ajayi v. Eberu (1974) 10 ALR Comm 155
2. Taiwo v. Princewell [1961] 1 ALL NLR 240

b. Restituo in Integrum Impossible

1. Uganda Steel Corp. [1984] HLB 42
2. Blackburn v. Smith (1848) 2 EX 783
3. Erlanger v. New Sombrero Phosphate Co.

c. Complete Contract
1. Bada v. The Premier Thrift Society (1938) 14 NLR 20
2. Wilde v. Gibson (1848) 1 HLC 605: 9ER

3. RECTIFICATION
1. Lavell Christmas Ltd v. Wall (1911) 104 L.T. 85
2. White v. White (1872) L.R. 15 Eq. 247 – Conveyance Documents
3. Murray v. Parker (1854) 19 Beav. 305 – Leasehold Agreements
4. Welman v Welman (1880) 15 Ch. D.570 – Marriage Settlements
5. Roberts & Co.v. LCC [1961] Ch. 555 – Building Contracts
6. In the Matter of Kasiita Estates Ltd [1982]HCB 107 – Company Register
7. Collins v Elstone (1893) P.1 and p.4 – Unrectifiable Documents (Will)

pg. 10 sebukalu@gmail.com 0779111777

faculty of law
EQUITY AND TRUSTS personal notes
8. Scott v. Scott (1940) Ch. 794, 801 – Unrectifiable Docs (Memorandum and
Articles of Association)

Rectification Limited to Harmonisation of Written Document with Intention of

Parties

1. Mackenzie v. Coulson (1869) L.R. 8 Eq. 368

2. Rose Ltd, v. W,H. Pim Ltd [1953 2 ALL ER. 739
3. Tucker v. Bennet (1888) Ch. 1, 16

Grounds for Rectification

i. Existence of Finally Concluded Contract

1. Mackenzie v. Coulson (1869) L.R. 8 Eq. 368
2. **Rose Ltd, v. W,H. Pim Ltd [1953 2 ALL ER. 739
3. Cradock v Hunt [1923] Ch. 13P

iii. Common Mistake

1. Murray v. Parker (1854) 19 Beav. 305
2. **Rose v. Pim

iv. Continuing Intention of Parties

1. Tucker v. Bennet (1888) Ch. 1, 16
2. Murray v. Parker
3. Whiteside v. Whiteside [1950] Ch. 65, 76

v. Burden of Proof
1. **Murray v. Parker

vi. Mistake of Law

1. Whiteside v. Whiteside [1950] Ch. 65, 76
2. *Napier v. Williams [1911]1 Ch. 361

vii. Unilateral Mistake

1. Pagett v. Marshall (1885) 28 Ch. D. 255

Refusal of Remedy of Rectification

i. Contract Incapable of Performance

1. **Smith v. Jones [1954]2 ALL ER. 823
2. Borrowman v. Russel (1864) 16 CBNS 58

ii. Convenient Way of Reconciling Agreement with Written Instrument

pg. 11 sebukalu@gmail.com 0779111777
faculty of law
EQUITY AND TRUSTS personal notes
1. Whiteside v. Whiteside [1950] Ch. 65, 76
2. Wilson v Wilson (1854) H.L. Cas 40

iii. Contract Fully Performed

1. Caird v. Moss (1886) 33 Ch. D. 22

iv. Laches & Acquiescence

1. Fredensen v. Rothschild [1941] 1 ALL E.R. 430 (30yrs)
2. Beale v Kyte [1907] 1 Ch. 564. 566

4. DELIVERY UP AND CANCELLATION OF DOCUMENTS

1. Hoore v. Bremridge (1872) 8 Ch. App. 22 - Rationale
2. Gray v. Mathias (1800) 5 Ves 28 – Rationale
3. Underhill v. Horwood (1804) 10 Ves. 209 – Rationale
4. Wynne v. Callander (1826) 1 Russ 293 – Documents to be Delivered up
5. Peake v. Highfield 1 Russ 559 – Documents to be Delivered Up
6. Bromley v Holland (1802) 7 Ves.3 – Documents to be Delivered Up
7. Booking v. Maudslay, son & Field – Requirements for Delivery Up
8. **Lodge v. National Union Investment Co. Ltd [1907] 1 Ch. 300; [1904 – 7] ALL E.R
Rep 333
9. *Kasunmu v Baba-Egbe [1956] A.C 539. 549

5. RESTITUTION

6. TRACING

Tutorial 2 hours

Examine the relevance of both cases to equitable remedies. Saloman v A Saloman & Co
Ltd [1897] AC 22 and Westdeutsche Landesbank v Islington [1996] 2 All E.R. 961, 999).

WEEK FIVE

4. Doctrines of EQUITY

1) Doctrine of Election

1. **Re Edwards [1958] Ch. 168

pg. 12 sebukalu@gmail.com 0779111777

 faculty of law
EQUITY AND TRUSTS personal notes
a) Requirements for Election Property of another is disposed

1. *Cooper v. Cooper (1874) l.R. 7 H.K.53 – Intention to Dispose of Property

2. Re Harris [1909] 2 Ch. 206 – Intention to Dispose of Property
3. Re Lord Cheshem (1886) 31 Ch. D. 466
4. Re Dicey [1957] Ch. 145 – Property Capable of Alienation
5. Brown v. Gregson [1920] A.C. 860 – Property Capable of Alienation
6. Re Nash [1910] 1 Ch. 1 – Void Disposition
7. Re Oliver’s Settlement [1905] 1 Ch. 191, 197 – Void Disposition
8. Re Nash – Appointment to Object with Proviso in favour of Non-Object

b) Effects of Election
1. Pickersgill v. Rodger (1875) 5 Ch. D. 163
2. Re Booth [1906] 2 Ch. 321
3. Re Hancock [1905] 1 Ch. 16

2) Doctrine of Satisfaction

The doctrine of satisfaction is based on the maxim that equity imputes an intention to
fulfil an obligation. An example may help illustrate the point. Terry owes Ben £10 000,
the debt remaining outstanding at Terry’s death. In his will, Terry leaves Ben £10 000.
Can Ben claim the legacy and remain entitled to repayment of the debt from Terry’s
estate? In such a case equity may well consider that the legacy was intended by Terry to
satisfy his obligation towards Ben and so Ben will not be able to claim the repayment of
the debt and the legacy. If Ben wishes to take the legacy, he must give up his claim to
the debt.1
Satisfaction is the donation of a thing with it is to be taken in extinguishment of some
prior claim of donee. This maxim is helpful where the presumed intention of the testator
is to be found out; where the intention is express the maxim has no application.
There are a number of situations where the doctrine of satisfaction may be relevant and
each will be considered in turn.
The doctrine has a twofold operation: firstly, where a debtor bequeaths a legacy to his
creditor of a sum equal to or greater than the debt, the legacy is prima facie a
satisfaction of the debt, and secondly, when a father or a person in loco parentis has
covenanted to pay a portion
to a child and afterwards gives a Legacy o(the same or a larger amount to that child, the
legacy is prima facie a satisfaction of the portion, and, if the legacy is of a smaller
amount, it is a satisfaction pro tanto.

1
‘Richard Edwards_ Nigel Stockwell - Trusts and Equity-Longman (2011).Pdf’.
pg. 13 sebukalu@gmail.com 0779111777
faculty of law
EQUITY AND TRUSTS personal notes
a) Satisfaction of Debts by Legacies
I. General Rule
It is a general rule that a debt is presumed to be satisfied by a legacy of at least an equal
amount. It is presumed that the debtor does not intend the creditor to both take the
legacy and be repaid the debt.
Where a testator, who owes a person a debt, gives a legacy to that person which
is either equal to or which exceeds the amount of the debt there is a presumption
that the legacy extinguishes the debt (Talbott v. Duke of Shrewsbury (1714)).

Re Haves [1951] 2 All ER 928

A husband, on his divorce, covenanted to pay his wife £3 a week charged on real
property. By his will, he left her an annuity charged on the whole of his estate. The court
held that this legacy satisfied the covenant.

1. **Re Hall [1918] 1 Ch. 562

2. Thynne v. Glengall (1848) 2 HL. C. 131

II. Exceptions
1. **Rawlins v. Powel (1718) 1 PWms 297 - Existence of Debt before a Will
2. Horlock v. Wiggins (1888) 3 a Ch. D 142 - Existence of Debt before a Will
3. Bradshaw v Huish (1889) 43 Ch. D. 260 – Direction to Pay Debt in Will
4. Barret v. Beckford (1750) 1 Ves. Sen 519 – Legacy equal to Debt
5. *Re Hawes [1951] 2 HLL E.R. 928 - Legacy equal to Debt

a) Satisfaction of Portion of Debts by Legacies: Rule against Double Portions

1. **Re Hayward [1957] Ch. 528

2. *Taylor v. Taylor (1875) L.R. 20 Eq. 155
3. Hoskins v. Hoskins (1706) Prec Ch. 263
4. Pym v Lockyer (1841) 5 Myl & Cr. 29 – To whom Does Satisfaction Apply?
5. Ojule v. Okoya [1972] 1 AL N.L.R. (1) 385- To whom Does Satisfaction Apply?
6. Warren v. Warren (1783) 1 Brocc. – Strength of Presumption
7. Re Tussaud’s Estate (1878) 9 Ch. D 363 - Strength of Presumption
8. Re Shields [1912] 1 Ch. 291- Strength of Presumption

b) Satisfaction of Portion Debts by Portions

c) Ademption of Legacies by Portion

3. Doctrine of Performance
4. *Sowden v. Sowden (1785) 1 Cox Eq. 165, 166
pg. 14 sebukalu@gmail.com 0779111777
faculty of law
EQUITY AND TRUSTS personal notes
5. *Lord Lechmere v. Lady Lechmere (1733) 3 PWms 211- Covenants in Marriage
settlements
6. Blandy v. Widmore (1716) 1 PWms 323 – Intestacy

Equitable Defences

Promissory Estoppel

Proprietary Estoppel

Laches and Acquiescence

Tutorial 2 hours

Coursework 2

Reading

D.J Bakibinga, Equity and Trusts Law Africa, chapter 1

A J Oakley, Parker and Mellows: The Modern Law of Trusts, 9th Edition, Sweet & Maxwell
Chap.

WEEK SIX

3. INJUNCTIONS

Definitions:
A good answer shall define what injunctions are and also state the conditions under which they
are granted.

pg. 15 sebukalu@gmail.com 0779111777

 faculty of law
EQUITY AND TRUSTS personal notes
 An order of court that requires a person to refrain from doing or compels them to do a
certain act.
 Aim of an injunction is to preserve the status quo
 Injunctions are prohibitive or mandatory in nature
 Injunctions remain in force until they are discharged by the court
 Injunctive relief is not a matter of right but discretionary
punishable with a finefi ne or imprisonment for contempt of court in the event of noncompliance.

**Common Law Procedure Act, 1854 (U.K.)

Judicature Act Cap 12, s. 38

Judicature Act s.33 &38 (1)2 (Grants powers to the High Court to issue injunctions)
33. General provisions as to remedies.
The High Court shall, in the exercise of the jurisdiction vested in it by the Constitution, this Act or
any written law, grant absolutely or on such terms and conditions as it thinks just, all such
remedies as any of the parties to a cause or matter is entitled to in respect of any legal or
equitable claim properly brought before it, so that as far as possible all matters in controversy
between the parties may be completely and finally determined and all multiplicities of legal
proceedings concerning any of those matters avoided.

Civil Procedure Act s. 98

ELT Kiyimba Kagwa v. Haji Abdu Nasser Katende [1985] HCB 43

- Injunctions used to be framed in a negative form.
- Injunctions are intended to protect rights. The plaintiff must have locus standi. (Court only
grants injunctions to a private individual to support a legal right)
Adam v Duke (There must be a violation, real and substantial violation of some right before an
injunction is granted)
Article 50 (2) widens the category of persons with locus standi
- Rights to be protected must be certain (Karama v. Aselemi)
- A right to be protected by an injunction must be one known to the law and equity
- Mandatory injunctions are issued ordering an act to be undone.
- Mandatory Injunctions are difficult to enforce and supervise thus rarely granted

Beddow v. Beddow (1878) 9 Ch. D. 89, 93 Per Jessel, M.R

what is right or just must be decided, not by the caprice of the judge, but according to
sufficient legal reasons or on settled legal principle

Day v. Brownrigg (1878) 10 Ch. D, 294, 301

Infringement of a legal or equitable right

Types of Injunctions
2
‘Judicature Act | Uganda Legal Information Institute’ <https://ulii.org/ug/legislation/consolidated-act/13> accessed 7 October
2019.
pg. 16 sebukalu@gmail.com 0779111777
 faculty of law
EQUITY AND TRUSTS personal notes
There are several different types of injunctions. An injunction may be ‘Prohibitory’, i.e.
forbidding the performance of a particular act; or ‘mandatory’, i.e. ordering the
defendant to do a particular act. Injunctions could also be classified as ‘perpetual’, i.e.
following the final determination of the rights of the parties or, until recently, as
‘interlocutory’ (now referred to as ‘interim’), i.e. pending the determination of rights at
the trial. In addition, a ‘quia timet’ (literally, ‘because he fears’) injunction could be
obtained where the claimant fears that damage may occur in the future.3
Injunctions, like all equitable remedies, are discretionary, but the court will exercise its
discretion according to well established equitable principles.

1) Prohibitory & Mandatory Injunctions

Prohibitory injunctions forbid the doing of a specified act, such as ordering the
defendant not to build an extension to his property.

Mandatory injunctions have the effect of ordering a defendant to take positive steps to
perform a particular act, such as the demolition of an unauthorised extension of his
property.

Since the decision in Jackson v Normandy Brick Co, however, it has been the rule that if
an injunction is mandatory in substance, it should be made in direct mandatory form

**Sky Petroleum Ltd v V. I.P. Petroleum Ltd. (1974) 1 WLR 576

Concerning: grant of an injunction, which would amount to specific performance, where
damages would not be an adequate remedy.
Facts; During a petrol shortage the defendants terminated their contract with the
claimants to supply them with petrol.
Where, although it is theoretically possible to use the award of damages to buy a
replacement, in practical terms this is almost impossible.
In this case, the defendant and the claimant had contracted for the sale and purchase of
petrol. Petrol prices increased significantly during the 1970s and therefore the defendant
sought to terminate the contract, because the price at which it had agreed to sell petrol
to the claimant was significantly lower than the price that would have been paid by a
new buyer. Accordingly, the claimant sought specific performance in order to compel
the defendant to sell at the agreed price. In principle, it would have been possible for the
claimant to obtain petrol from another supplier. However, because the situation at
the time was such that petrol was scarce and prices exceptionally high, Goulding J
considered
that it would be appropriate for him to grant an order of specific performance. hence
There was a petrol shortage at the time and so, if only damages had been awarded to
the claimants, they would have been unlikely to obtain supplies elsewhere. As there
were no alternative supply damages would not be adequate and the claimant would be
put out of business. An injunction was granted as specific performance would also have
been
available due to the inadequacy of damages.

3
Mohamed Ramjohn, Unlocking Equity and Trusts (Fifth edition, Routledge 2015).
pg. 17 sebukalu@gmail.com 0779111777
 faculty of law
EQUITY AND TRUSTS personal notes
I. Jackson v. Normandy Brick Co. (1899) 1 Ch. 438
II. A.G. v. Colchester Corporation (1955) 2 Q.B. 207

Pride of Derby Angling Association v. British Celanese Co. [1953] Ch. 149
A Prohibitory injunction
the owners of a fishery sought an injunction to stop the defendants from discharging
effluent and sewage into the river Derwent, which had killed all the fish and destroyed
the fishery.
An injunction was granted.
The primacy of the injunction was reasserted by Lord Evershed MR:
It is, I think, well settled that if A proves that his proprietary rights are being wrongfully
interfered with by B, and that B intends to continue his wrong, then A is prima facie
entitled to an injunction, and he will be deprived of that remedy only if special
circumstances exist, including the circumstance that damages are an adequate remedy
for the wrong that he has suffered.

it must be proven that a clear probability of grave damage will occur to the applicant if
such an injunction were not granted, and that, under such circumstances, damages
would be inadequate

2) Perpetual & Interlocutory Injunctions

a perpetual injunction one that aims at settling a dispute between parties. They are
however not necessarily perpetual as held in the case of Babumba V Bunju.

The interlocutory injunction on the other hand “is given until the commencement of the
trial.” The rational for its application and subsequent execution is, as shown the case of
Musoke V Kezaala to be; that in the midst of the delayed trial the plaintiff may suffer
loss if the defendant dealt with the matter in dispute.

Perpetual
It is awarded to finally settle the existing dispute between the parties.

I. Odunuwa v. Uduaga (1952) 14. W.A.C.A. 187

Babumba v. Bunju [1988-90] HCB 119

Plaintiff entered into a lease with the respondent’s husband for 49 years for residential
purposes at a yearly rent of 400 Shs. To be paid in advance on the 1st day of march
every year.
The respondent breached the agreement.
Court was satisfied that the applicants would suffer irreparable loss in view of the
scarcity of accommodation in Kampala.

A permanent injunction would decide the whole case. It was held that a temporary
injunction which settles the dispute would not be granted.

Interlocutory

pg. 18 sebukalu@gmail.com 0779111777

 faculty of law
EQUITY AND TRUSTS personal notes
The object of an interlocutory injunction is to preserve the status quo until the trial of an
action. They are usually Prohibitory and may be applied for ex parte (i.e. without notice
to the other side).
- Are given until the commencement of the trial
- Plaintiff may realize there may be delay before the suit is heard and may suffer
damages or losses in the process.
- Hence, they are given to restrain the respondents from dealing with the subject
matter of the dispute until the case is determined.

 Jones v Pacaya Rubber & Produce Co. [1911] 1 K.B. 455

Musoke v. Kezaala [1987] HCB 81

The applicant applied for a temporary injunction to restrain the defendants from carrying
on a construction on a plot of land in disregard of a pending part heard suit between
them. Counsel for the plaintiff argued that carrying on with the construction work would
make the outcome of the part heard suit meaningless.

3) Ex-parte Injunctions
Ex-parte injunctions also help one who cannot wait for motions to be read. Thus, it is
applied until “when the application on motion is heard” but not after. Where something
is urgent and you can’t wait.
I. **Civil Procedure Rules (SI 71-1)

**Yoseri Mugenyi v. Wandera [1978] HCB 78

This was an application seeking an order to restrain the respondent from erecting
barriers obstructing the applicant’s road. The applicant did not inform court which
service the respondent was dispensed with. The applicant only stated that the
respondent was continuing to erect fences, barriers and other barricades to completely
block the road. The applicant did not impress upon court that the election of barriers and
the damage that would occur that therefrom could not be compensated by damages or
cause irreparable damage.
It was held that it would not help where barriers were already fixed, for the whole
purpose of injunctions is to preserve matters in status quo until dispute is investigated
and disposed off. The requirement to give notice to the opposing party was mandatory
and the burden of satisfying court was on the applicant.

II. Waswa v. Kakoza [1987] HCB 79

Law was ammednded under civil procedure rules,..it requires everyone to be informed.

4) Interim Injunctions
Interim injunctions on the other hand stop the defendant from acting in a certain way up
to the commencement of a given date. A perpetual injunction will be granted at the final
hearing, whereas an interim injunction is awarded at an early stage of proceedings in
order to preserve a position before the full trial.
 CPR
pg. 19 sebukalu@gmail.com 0779111777
 faculty of law
EQUITY AND TRUSTS personal notes
 Fenwick v East London RY (1875) L.R. 20 Eq

There are four main types of interim injunction:

􀁳 interim Prohibitory injunction
􀁳 interim mandatory injunction
􀁳 freezing order
􀁳 search order.

The claimant is normally required to give an undertaking in damages if the claimant

loses at trial or if the injunction is granted without good cause.
The undertaking is to the court not to the defendant and hence breach is contempt of
court (Hussain v Hussain (1986)).

5) Quia Timet Injunction

‘quia timet’ (literally, ‘because he fears’) injunction could be obtained where the
claimant fears that damage may occur in the future.
It is granted to restrain a threatened apprehended injury to the claimant’s rights even
though no injury has yet occurred.
It is issued where the claimant alleges that the defendant has threatened to infringe the
claimant’s rights without the actual infringement taking place, such as the threat from
the defendant to trespass on the claimant’s land.

Fletcher v. Bealley (1885) 28 Ch. D. 688

Quia timet is an injunction to restrain wrongful acts which are threatened or imminent
but have not yet commenced.
Fletcher v. Bealey (1884) [28 Ch.D. 688 at p. 698] stated the necessary conditions for
equity courts to properly grant an injunction in such cases:
i. proof of imminent danger;
ii. proof that the threatened injury will be practically irreparable; and
iii. proof that whenever the injurious circumstances ensue, it will be impossible to
protect plaintiff’s interests, if relief is denied.

1. Principles applicable to Issue of Injunctions

General Principles
a. Injunction is a discretionary remedy and Remedy in Personam
I. Aragba v. Elegba [1986] 1 NWLR 333
II. Judicature Act

b. Non-Compliance with Injunction

Contempt of court. Even the person who aids and baits another
I. Arrow (Automation) Ltd v. Rex Chainbelt Inc [1971] WLR 1678

c. Government Proceedings
Its rarely issued against the government but can be awarded towards statutory bodies
like KCCA,police etc
pg. 20 sebukalu@gmail.com 0779111777
 faculty of law
EQUITY AND TRUSTS personal notes
II. The Governmnet Proceedings Act (Cap 77) s. 14.
III. Ostraco v. AG (Court of Appeal)
IV. ULS v. AG (Const. App 7/2003)
V. James Rwanyarare & Ors v. AG (Const App 2/2002

d. Protection of Rights
Injunctions seek to protect rights.
Locus Standi
VI. CPR O.41 Rule 1
VII. Hoffman – La Roche (F) & Co. v. Sec of State for Trade & Industry [1975] A.C. 295

Perpetual injuctions ..principles for awarding

The prohibitory
Inadequency of damages-money is unquantifiable,
Actual loss is immaterial
Action will be useless if the infringement complained by is temporary,occasional
or trivial. Equity does not act in vain
If someone undertakes not to do the act complained of,its not awarded
Armstrong cas….

Mandatory
Guided by same principles but are difficult to supervise
Not given involving continuous performance
It is unnecessary to show damage or inconvenience kelsens case
Court will consider the hardship likely to be faced by the defendant.

Suspension of injuctions
When it will be hard for the defendant to comply with the injuction at once

Interlocutory injuctions
They are given to maintain the status quo.
Can be discontinued if court discovers its based on wrong application of law
Complete relief
Equity does not act in vain…will not be granted if its of no effect

There has to be a prima fasie case…a strong case against defendant

Ucb v general parts Uganda ltb
Substancial injury if the injuction is not awarded. Or irreparable injury
Balance of convenience
Undertaking and conditions

Quia timet
s.38 of the judicature act
it can be any of the other forms
Redland bricks ltd v morris
Strong probability of future infrigemnt
Future infrigementis imminent
Substancial and iireparable damage
pg. 21 sebukalu@gmail.com 0779111777
faculty of law
EQUITY AND TRUSTS personal notes
Damage will be of a more serious nature

Exparte proceedings
Order 37 r 3 CPR

2. Defences to Injunctions
a. Delay
Equity aids the vigilant. Plaintiff must act quickly
b. Acquiescence
c. Hardship
d. Conduct of the Plaintiff
Equity will come with clean hands…related to subject matter not conduct.
e. equity will not act in vain
f. adequency of common law remedies.

3. Damages In Lieu of Injunction

Damages in substitution of an injuction
4. Injunctions in Particular Situations
a. To Restrain Breach of a Contract
b. To Restrain Breach of Trust
c. To Restrain Commission or Continuation of a Tort
d. To Restrain a Company from Acting Ultra Vires
e. The Mareva Injunction
f. The Anton Piller Injunction

Additionally, an injunction might be awarded with or without notice. An injunction will be

‘with’ notice, where it is awarded after a hearing of both sides of the argument. In
contrast, an injunction without notice will be awarded where only the applicant is
present.

WEEK SEVEN

4. SPECIFIC PERFORMANCE
5. Nature and Extent of the Remedy
3 Conditions to be satisfied for its grant
a. Inadequacy of Common law remedies
b. Discretionary
c. Enforceability
6. Contract must be enforceable

Doctrine of Part Performance

pg. 22 sebukalu@gmail.com 0779111777

faculty of law
EQUITY AND TRUSTS personal notes
Specific Performance in particular situations

a. Contracts for sale of land

b. Contracts for sale of personal property
c. Contracts to pay Money
d. Contracts requiring supervision

3 Defences to Specific Performance

a. Mistake and Misrepresentation

b. Conduct of the Plaintiff
c. Laches & Acquiescence
d. Hardship
e. Where Subject matter is different in Substance
f. Misdescription of Subject Matter
g. Public Policy

WEEK EIGHT
TUTORIALS

THE LAW OF TRUSTS

WEEK NINE

trust
This is a relationship which arises when property is vested in a person (or persons) called
the trustees, which those trustees are obliged to hold for the benefit of other persons
called the cestuis que trust or beneficiaries’
(Hanbury and Martin (2009): 49).

A. The Concept of a Trust

1. Pilcher v. Rawlins (1872) l.R. 7ch. App 2

B. Distinction from Other Legal Relations

a. Bailment
1. Sales of Goods Act, Cap 82, Ss 24-26

b. Agency
1. Bankruptcy Act, Cap 67, Companies Act, Cap 110
2. Re Hallets Estate (1880) 13 Ch. D 696
pg. 23 sebukalu@gmail.com 0779111777
faculty of law
EQUITY AND TRUSTS personal notes
3. Lister v. Stubbs [1890] 45 Ch. D

c. Contract
1. Tweddle v. Atkinson (1861) 1 B & s. 393
2. Fletcher v. Fletcher (1844) 4 Hare: 67; 141 L.J.C. 66

d. Debt
1. Potters v. Loppert [1973] Ch. 399
2. Morley v Morley (1678) 2 Ch. Cos 2; 22 ER 817
3. Barclays Bank Ltd v. Quistclose Investment Ltd. [1970] A.C 567
4. Re Lester (1942) Ch. 324
5. Re Cowley (1885) 53 L.T 494

e. Conditions and Charges

1. Re: Frame [1939] 2 ALL ER 865
2. Re Cowley (1885)
3. Re: Oliver (1890) 62 L.T 533

f. Power of Appointment
1. Re Weeks Settlement [1897] 1 Ch. 289
2. Brown v, Higgs (1799) 4 ves 708.

C. The structure of the trust relationship.

Reading: Hudson, sections 2.1 and 2.2; Martin 49-78; Pettit 30-65

‘The essence of a trust is the imposition of an equitable obligation on a person who is the
legal owner of property (a trustee) which requires that person to act in good conscience
when dealing with that property in favour of any person (the beneficiary) who has a
beneficial interest recognised by equity in the property. The trustee is said to “hold the
property on trust” for the beneficiary. There are four significant elements to the trust:

1. that it is equitable,
2. that it provides the beneficiary with rights in property,
3. that it also imposes obligations on the trustee, and
4. that those obligations are fiduciary in nature.’ –

Thomas and Hudson, The Law of Trusts ‘

A trust is an equitable obligation, binding a person (called a trustee) to deal with

property owned by him (called trust property, being distinguished from his private
property) for the benefit of persons (called beneficiaries or, in old cases, cestuis que
trust), of whom he may himself be one, and any one of whom may enforce the obligation
pg. 24 sebukalu@gmail.com 0779111777
faculty of law
EQUITY AND TRUSTS personal notes
[or for a charitable purpose, which may be enforced at the instance of the Attorney-
General, or for some other purpose permitted by law though unenforceable].’ –

Underhill and Hayton, The Law of Trusts and Trustees, as amended by Pettit

D. Classification of trusts.

Reading: Hudson, section 2.2; Martin 49-78; Pettit 66-85

Types of trusts

i. Express trusts

Subdivided into completely and incompletely Constituted trusts

1. Re Bostocks Settlement [1921] 2 Ch. 469

2. Re Flavell’s Wills Trusts (1969) I.W.L.R 445
3. Cook v. Fountain (1676) 3 Swan 585

a. The rudiments of Express Trusts

Reading: Hudson, section 2.3; Martin 79-122; Pettit 86- 99

An express trust can be understood as follows, comprising the “magic triangle” of settlor,
trustee and beneficiary. The core of the “trust” is the inter-action of personal rights and
claims between these persons in relation to the trust property. It is therefore vital to
distinguish between “in personam” and “in rem” rights.

ii. Resulting trusts

1. Re Llanover Settled Estates [1926] Ch. 626

iii. Constructive trusts

1. Barnister v. BArnister (1948) 2 ALL ER 133

iv. Implied trusts

1. Barnister v. BArnister (1948) 2 ALL ER 133
2. Re Llanover Settled Estates [1926] Ch. 626

v. Statutory Trusts

1. Cook v. Fountain
2. Succession Act Cap 162

Section 53(2) Law of Property Act 1925 refers to “implied, resulting and constructive
trusts”.
pg. 25 sebukalu@gmail.com 0779111777
faculty of law
EQUITY AND TRUSTS personal notes
**Westdeutsche Landesbank v. Islington [1996] 1 AC 669, per Lord Browne-
Wilkinson:-

“(i) Equity operates on the conscience of the owner of the legal interest. In the case of a
trust, the conscience of the legal owner requires him to carry out the purposes for which
the property was vested in him (express or implied trust) or which the law imposes on
him by reason of his unconscionable conduct (constructive trust).”

E. The means by which the different forms of trusts come into existence

Reading: Hudson, section 2.2, Martin 123-154; Pettit 86-99

The three forms of trust come into existence in the following ways:

‘A trust comes into existence either by virtue of having been established

expressly by a person (the settlor) who was the absolute owner of property
before the creation of the trust (an express trust); or by virtue of some
action of the settlor which the court interprets to have been sufficient to
create a trust but which the settlor himself did not know was a trust (an
implied trust); or by operation of law either to resolve some dispute as to
ownership of property where the creation of an express trust has failed (an
automatic resulting trust) or to recognise the proprietary rights of one
who has contributed to the purchase price of property (a purchase price
resulting trust); or by operation of law to prevent the legal owner of
property from seeking unconscionably to deny the rights of those who have
equitable interests in that property (a constructive trust).’

- Thomas and Hudson, The Law of Trusts 11

WEEK TEN

F. Creation of a Trust
a. Capacity
Minors
1. Edward v. Carter [1893] A.C. 360

Mental Abnormality

Married Women
1. Married Women Property’s Act, 1882
2. Jackson v. Hobhouse (1817) 2 Mer. 483
Companies
pg. 26 sebukalu@gmail.com 0779111777
faculty of law
EQUITY AND TRUSTS personal notes

G. Formalities of Creation of a Trust

a. Intervivos
b. Testamentary
c. Succession Act Cap 139; s. 50
2. Jones v. Lock

H. Exceptions to the rule that equity will not assist a volunteer

a. Donatio Mortis Causa
1. Cain v. Moon (1896) 2 Q.B. 283
2. Wilkes v. Allington (1931) 2 Ch. 104
3. Re Weston (1902) 1 Ch. 680
4. Delgate v. Fader [1939] Ch. 922

b. Non Application to wills

c. Equitable Estoppel
d. Statutory Exceptions

I. Significant features of the trust

1. Once a trust is created, the settlor ceases to have any property rights in the trust or
any control over the trust in her capacity as settlor.

2. The instant that the trust is declared (or deemed to have been created in the case of a
constructive or resulting trust) the legal title in the trust property is owned by the
trustee(s) and the equitable interest is owned by the beneficiary(-ies).

3. The trustee(s) hold the legal title in the trust property.

4. The trustee(s) owe equitable obligations to the beneficiaries to obey the terms of the
trust. The trustee(s)’ obligations are fiduciary in nature (thus requiring the utmost good
faith and prohibiting any conflict of interest).

5. The beneficiaries own equitable proprietary rights in the trust fund (each has an
“equitable interest” as a consequence).

6. There can be an infinite number of beneficiaries in theory, or there may be only one
beneficiary (a bare trust).

7. The same human being can be settlor, one of the trustees and also one of the
beneficiaries. If she is only one of the trustees or only one of the beneficiaries then some
other person will have acquired rights in relation to that property. Importantly, she will
be acting in different capacities in each context (as though she were three different

pg. 27 sebukalu@gmail.com 0779111777

faculty of law
EQUITY AND TRUSTS personal notes
people). However, the same person may not be the settlor, the sole trustee and the sole
beneficiary because then no property rights would have moved at all.

8. The beneficiaries may fall into various classes with different qualities of rights: e.g.
there may be a beneficiary entitled to the income from the trust fund during her lifetime
(a “life tenant”) with the capital being divided among the other beneficiaries after her
death (“remainder beneficiaries” or “remaindermen”).

9. Individual items of property making up the trust fund may, if the terms of the trust
permit it, be sold or exchanged for other property – that other property then becomes
part of the trust fund.

10. Significantly, then, more than one person can have property rights in the same
property at the same time: this enables settlors to create an infinite range of property
holdings to suit their circumstances.

11. The trustee(s) will be personally liable for any loss caused to the trust by her/their
breach of trust. 12. The trust, or “settlement”, is endlessly flexible (provided it is not
illegal).

The concept of fiduciary responsibility.

Reading: Hudson, section 2.3.3; and the essay comprising chapter 14.

A trustee is an example of a fiduciary (along with, inter alia, company directors, agents,
and partners “acting in common with a view to profit”). So, it is important to understand
what the concept of fiduciary responsibility entails.

‘A fiduciary is someone who has undertaken to act for or on behalf of another

in a particular matter in circumstances which give rise to a relationship of
trust and confidence. The distinguishing obligation of a fiduciary is the
obligation of loyalty. The principal is entitled to the single-minded loyalty of
his fiduciary. The core liability has several facets. A fiduciary must act in
good faith; he must not make a 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 the benefit of a third person without the informed
consent of his principal. This is not intended to be an exhaustive list, but it is
sufficient to indicate the nature of fiduciary obligations. They are the defining
characteristics of the fiduciary.’

- Bristol and West Building Society v Mothew [1998] Ch 1 at 18, per Millett LJ

pg. 28 sebukalu@gmail.com 0779111777

faculty of law
EQUITY AND TRUSTS personal notes
"A person will be a fiduciary in his relationship with another when and in so
far as that other is entitled to expect that he will act in that other's interests
or (as in a partnership) in their joint interests, to the exclusion of his own
several interest."

Paul Finn, "Fiduciary Law and the Modern Commercial World", in Commercial Aspects of
Trusts and Fiduciary Relationships (ed. McKendrick, 1992), p. 9.

See also: Finn, Fiduciary Obligations (1977); Finn, "The Fiduciary Principle", in Equity,
Fiduciaries and Trusts (ed. Youdan, 1989); A.J. Oakley, Constructive Trusts (1997), Ch. 3;
A.J. Oakley (ed.), Trends in Contemporary Trust Law (1996) generally.

(G) The benefits of trusts

Reading: Hudson, section 2.5

A framework for understanding change in the law of trusts: three conceptions of the trust
- moralistic, individual property, capital management: see Cotterrell, "Trusting in Law"
(1993) 46 CLP 75, 86-90.  Proprietary right in the trust property for beneficiaries, not
simply a personal claim against the trustees.  Provides preferential rights in an
insolvency. Important in giving priority for beneficiaries in the event of the trustee’s
bankruptcy.

 A range of equitable remedies enforceable against the trustees and any third parties by
the beneficiaries in the event of loss.

 Flexibility – useful in commercial and domestic situations, as considered below.

 Usefulness in tax planning and estate planning generally.

 A trust is a “gift over the plane of time” giving the settlor flexibility and control.

 Trusts constitute the most significant players in UK securities markets in the form of
pension funds and investment funds (like unit trusts).

(H) Fundamental principles of trusts: the obligations of trustees and the rights
of beneficiaries

Reading: Hudson, section 2.4

1. **Westdeutsche Landesbank v. Islington [1996] 2 All E.R. 961, 988. [1996] AC 669

pg. 29 sebukalu@gmail.com 0779111777

faculty of law
EQUITY AND TRUSTS personal notes
2. *Saunders v Vautier (1841) – the rights of the beneficiary

13 Lord Browne-Wilkinson in Westdeutsche Landesbank v. Islington [1996] AC 669,

[1996] 2 All E.R. 961, 988 sought to set out the framework upon which the trust
operates:- “

THE RELEVANT PRINCIPLES OF TRUST LAW:

(i) Equity operates on the conscience of the owner of the legal interest. In the case
of a trust, the conscience of the legal owner requires him to carry out the
purposes for which the property was vested in him (express or implied trust) or
which the law imposes on him by reason of his unconscionable conduct
(constructive trust).
(ii) (ii) Since the equitable jurisdiction to enforce trusts depends upon the
conscience of the holder of the legal interest being affected, he cannot be a
trustee of the property if and so long as he is ignorant of the facts alleged to
affect his conscience …
(iii) (iii) In order to establish a trust there must be identifiable trust property …

(iv) (iv) Once a trust is established, as from the date of its establishment the
beneficiary has, in equity, a proprietary interest in the trust property, which
proprietary interest will be enforceable in equity against any subsequent holder
of the property (whether the original property or substituted property into which
it can be traced) other than a purchaser for value of the legal interest without
notice.”

I. CERTAINTY OF INTENTION AND CERTAINTY OF SUBJECT MATTER

General reading: Hudson, chapter 3; Martin 98-106; Pettit 47- 58

The need for the three certainties

Reading: Hudson, sections 3.1 and 3.2

1. **Wright v. Atkyns (1823) Turn. & R. 143, 157, per Lord Eldon: “...first...the
words must be imperative...; secondly...the subject must be certain...; and
thirdly...the object must be as certain as the subject"
2. **Knight v Knight (1840) 3 Beav 148

a. CERTAINTY OF INTENTION.

Reading: Hudson, section 3.3, and also

pg. 30 sebukalu@gmail.com 0779111777

faculty of law
EQUITY AND TRUSTS personal notes
2.6; Martin 98- 101; Pettit 47-50

Question: When a person seeks to create a trust (the settlor) in what ways must that
person’s intention be manifested?

(1)The core principle: an intention to create a trust can be inferred from the
circumstances

Reading: Hudson, section 3.3.1

1. **Paul v Constance [1977] 1 W.L.R. 527

2. **Re Kayford [1975] 1 WLR 279, Megarry J:

“The sender may create a trust by using appropriate words when he sends the money
(though I wonder how many do this, even if they are equity lawyers), or the company
may do it by taking suitable steps on or before receiving the money. If either is done, the
obligations in respect of the money are transformed from contract to property, from debt
to trust. Payment into a separate bank account is a useful (though by no means
conclusive) indication of an intention to create a trust, but of course there is nothing to
prevent the company from binding itself by a trust even if there are no effective banking
arrangements.”

3. Twinsectra Ltd v Yardley [2002] UKHL 12 at [71], [2002] 2 All ER 377 at

[71], [2002] 2 AC 164:

'A settlor must, of course, possess the necessary intention to create a trust, but his
subjective intentions are irrelevant. If he enters into arrangements which have the effect
of creating a trust, it is not necessary that he should appreciate that they do so; it is
sufficient that he intends to enter into them.'

4. Don King Productions v. Warren [1998] 2 All E.R. 608 (an example of how
the court may have to infer the intention to create a trust even in complex
commercial cases)
5. Re Farepak Food and Gifts Ltd [2006] All ER (D) 265 (Dec) (an anomalous
decision of Mann J which was per incuriam Re Kayford and which sought to rely on
Quistclose trust)
6. *Annabel’s (Berkley Square) Ltd v Revenue and Customs Commissioners
[2009] EWCA Civ 361, [2009] 4 All ER 55 (tronc system for restaurant wait
staff = trust in favour of staff, held by troncmaster as trustee)
7. Byrnes v Kendle [2011] HCA 26, 14 ITELR 299 (use of the word “trust” usually
suggests a trust – here husband disingenuously seeking to argue that when he had
used word “trust” it had not meant trust) 15

(2)Trusts as opposed to merely moral obligations

pg. 31 sebukalu@gmail.com 0779111777

faculty of law
EQUITY AND TRUSTS personal notes
Reading: Hudson, section 3.3.2

1. (Lambe v. Eames (1871) L.R. 6 Ch. 597 ("to be at her disposal in any way she may
think best, for the benefit of herself and her family" = merely moral obligation)).
2. Re Adams and the Kensington Vestry (1884) 27 Ch. D. 394 ("unto and to the
absolute use of my dear wife ... in full confidence that she will do what is right as to
the disposal thereof between my children" = a merely moral obligation).
3. Cf. Comiskey v. Bowring-Hanbury [1905] A.C. 84 (HL) ("in full confidence that... she
will devise it to one or more of my nieces as she may think fit..." = a trust).
4. Re Hamilton [1895] 2 Ch 370 (“take the will you have to construe and see what it
means, and if you come to the conclusion that no trust was intended you say so”,
per Lindley LJ)

(3)Intending to create express trusts without knowing what a trust is

1. Paul v. Constance [1977] 1 W.L.R. 527 ("… we are dealing with simple people,
unaware of the subtleties of equity …").

(4)Lack of intention where a joke or an imperfect gift

1. Jones v Lock (1865) 1 Ch App 25 (“… look you here, I give this to the baby …”)
2. Richards v Delbridge (1874) LR 18 Eq 11 (failure to effect transfer of lease)

(5)Sham trusts and trusts intended to defraud creditors

Reading: Hudson, section 3.3.3

1. Snook v London and West Riding Investments Ltd [1967] 2 QB 786, esp 802
2. *Midland Bank plc v. Wyatt [1995] 1 F.L.R. 696, [1997] 1 BCLC 256 (sham trusts).
3. Marquis-Antle Spousal Trust v R 2009 TCC 465, 12 ITELR 314 (Canadian case:
sham discretionary trust in Barbados seeking to avoid liability to tax)

(6)Intention to create a charge not a trust Reading:

Hudson, section 3.3.3

1. Clough Mill v Martin [1984] 3 All ER 982 (floating pool of property)

(7)Trusts and bank accounts

Reading: Hudson, section 3.3.3

1. Foley v Hill (1848) 2 HL Cas 28

2. Alastair Hudson, The Law of Finance (Sweet & Maxwell, 2009), para 30-04.
pg. 32 sebukalu@gmail.com 0779111777
faculty of law
EQUITY AND TRUSTS personal notes

b. CERTAINTY OF SUBJECT MATTER

Reading: Hudson, section 3.4; Martin 101-106; Pettit 50- 58

Question: What is the necessity of ascertaining subject matter and extent of beneficial
interests; and what is the effect of lack of certainty of subject-matter?

(1)The traditional principle – the trust fund must be separately identifiable

Reading: Hudson, section 3.4.2

1. Palmer v Simmonds (1854) 2 Drew. 221 ("bulk of my... residuary estate"; not
valid).
2. Sprange v. Barnard (1789) 2 Bro. C.C. 585 ("remaining part of what is left, that he
does not want for his own wants and use to be divided..."; not valid).
3. *Re London Wine Co. (Shippers) Ltd. (1986)
4. Palmer's Co. Cas. 121, Oliver J (wine bottles to be held on trust not separated from
other bottles):
‘I appreciate the point taken that the subject matter is a part of a homogenous
mass so that specific identity is of as little importance as it is, for instance, in the
case of money. Nevertheless, as it seems to me, to create a trust it must be
possible to ascertain with certainty not only what the interest of the beneficiary is
to be but to what property it is to attach.’
5. *MacJordan Construction Ltd v Brookmount Erostin Ltd [1992] BCLC 350
6. **Re Goldcorp [1995] 1 A.C. 74 (necessity of segregating trust property - bullion
“ex bulk”) Westdeutsche Landesbank v Islington [1996] AC 669

(2)A different principle for intangible or for fungible property?

Reading: Hudson, section 3.4.3

1. **Hunter v. Moss [1994] 1 W.L.R. 452 (identification of shares - the nature of

intangible property).
2. *Re Harvard Securities [1997] 2 BCLC 369 Cf. MacJordan Construction Ltd v
Brookmount Erostin Ltd [1992] BCLC 350 above.
3. *White v Shortall [2006] NSWSC 1379 (criticism of Hunter v Moss).

Summary

The traditional rule

 Re London Wine
pg. 33 sebukalu@gmail.com 0779111777
faculty of law
EQUITY AND TRUSTS personal notes
 Re Goldcorp
 MacJordan v Brookmount
 Re Global Trader
 Lehman Brothers per Briggs J

Bending the rule

 Hunter v Moss
 Lehman Bros (No2) Criticising Hunter v Moss, and finding a large single trust

c. CERTAINTY OF OBJECTS

Reading: Hudson, section 3.5; Martin 107-121; Pettit 50- 65

Question: how certain must the words used by the settlor be in creating a trust, and in
what way will the court measure sufficient certainty?

Introduction: the central principle

Reading: Hudson, section 3.5.1

1. Morice v. Bishop of Durham (1804) 9 Ves. Jr. 399 (affd. (1805) 10 Ves. Jr. 522):
there must be some person in whose favour the court can decree performance.
 The need for the court to be able to police the trustees’ management of the trust
 If the court cannot know with certainty, how can the trustees know and how can
the court police the trustees?
2. **Re Hay's Settlement Trusts [1982] 1 W.L.R. 202: for the most useful summary of
these principles and of the various forms of power.
1) Distinguishing between types of power and of trust The distinction between
“powers” and “trusts”:
 Fixed trusts and bare trusts obligations
 Discretionary trusts, (once known as “powers in the nature of a trust”)
 Fiduciary powers: powers of appointment and powers of advancement (known as
“mere powers” because they are merely powers and not trusts)
 Personal, non-fiduciary powers Cf. The nature of beneficial entitlements (cf. mere
powers) in general and of corresponding trustees’ duties.
Burrough v. Philcox (1840) 5 My. & Cr. 72.
*Re Hay's Settlement Trusts [1982] 1 W.L.R. 202

2) Certainty rules for fixed trusts (e. g. fixed shares within a class).

Reading: Hudson, section 3.5.2

1. *I.R.C. v. Broadway Cottages Trust [1955] Ch. 20.

 A complete list of the beneficiaries must be possible.

pg. 34 sebukalu@gmail.com 0779111777
faculty of law
EQUITY AND TRUSTS personal notes
 Both conceptual and evidential certainty required.

2) Certainty rules for fiduciary “mere powers”, e.g. powers of appointment.

Reading: Hudson, section 3.5.3

1. Re Gestetner Settlement [1953] Ch. 673 (the old, strict approach).

2. **Re Gulbenkian's Settlement [1970] A.C. 508: the “any given postulant test”;
aka the “is or is not test”.

Effect of Uncertainity

Word

Subject matter

1. Re Jones (1898) 1 Ch 438

J. THE BENEFICIARY PRINCIPLE

Question: when will a trust be void for want of a beneficiary, and what manner of
beneficiary will be necessary?

General reading: Hudson, Chapter 4; Martin 385-414; Pettit 58- 65

a. The nature of the beneficiary’s rights in the trust fund

Reading: Hudson, section 4.1 1)

The principle in Saunders v Vautier

1. **Saunders v Vautier (1841) 4 Beav 115

2. Re Bowes [1896] 1 Ch 507
3. Re Smith [1928] Ch 915 (could compel transfer to beneficiaries even where two
classes of beneficiaries under discretionary trusts)
4. In re Holt’s Settlement [1969] 1 Ch 100, 111, per Megarry J:
‘If under a trust every possible beneficiary was under no disability and concurred
in the re-arrangement or termination of the trusts, then under the doctrine in
Saunders v Vautier those beneficiaries could dispose of the trust property as they
thought fit; for in equity the property was theirs. Yet if any beneficiary was an
infant, or an unborn or unascertained person, it was held that the court had no
general inherent or other jurisdiction to concur in any such arrangement on behalf
of that beneficiary.’

The proprietary rights of beneficiaries

1. Saunders v Vautier (1841) 4 Beav 115

pg. 35 sebukalu@gmail.com 0779111777
faculty of law
EQUITY AND TRUSTS personal notes
2. Re Nelson [1928] Ch 920
3. Stephenson v Barclays Bank [1975] 1 All ER 625 (beneficiary able to take separate
share from the trust where property naturally divisible)
4. Lloyds Bank v Duker [1987] 3 All ER 193 (prevention of removal of interest
because loss of majority shareholding for other beneficiaries)

The nature of the rights of objects of discretionary trusts

Reading: Hudson, section 4.1.4 Prof Geraint Thomas, Powers (2nd ed, Sweet & Maxwell,
2011), para 6-268 Thomas & Hudson, The Law of Trusts (OUP, 2004), p.184 et seq., &
p.1587 et seq.

1. Saunders v Vautier (1841) 4 Beav 115

2. Gartside v IRC [1968] AC 553, at 617, per Lord Wilberforce
3. CPT Custodian Pty Ltd v Commissioner of the State Revenue [2005] HCA 53
4. Richstar Enterprises Pty Ltd v Carey (No.6) [2006] FCA 814

The beneficiary principle

Reading: Hudson, section 4.2 1)

The general principle

1. *Morice v. Bishop of Durham (1804) 9 Ves. 399; (1805) 10 Ves 522.

"There can be no trust, over the exercise of which this court will not assume control
..If there be a clear trust, but for uncertain objects, the property... is undisposed of...
Every...[non-charitable] trust must have a definite object. There must be somebody in
whose favour the court can decree performance" (per Lord Grant M.R.).

2. Bowman v Secular Society Ltd [1917] AC 406 2) The strict, traditional principle
**Leahy v. Att.-Gen. for New South Wales [1959] A.C. 457 (trust for ‘such order of
nuns’ as trustees shall select) – this case is considered in detail below

K. THE DUTIES OF TRUSTEES & BREACH OF TRUST

THE DUTIES OF TRUSTEES

Reading: Hudson, Ch8&9; Martin,Ch18-19,23; Pettit,Ch16-17,23 (A) The trustees’ duties

in outline. 1)

The core trustees’ duties

This chapter of the course considers a selection of the key duties of trustees.

pg. 36 sebukalu@gmail.com 0779111777

faculty of law
EQUITY AND TRUSTS personal notes
Hudson, 2005, chapter 8 considers 13 general duties, as well as the procedures for the
appointment and removal of trustees:

(1) The duties on acceptance of office relating to the need to familiarise oneself with the
terms, conditions and history of the management of the trust.

(2) The duty to obey the terms of the trust unless directed to do otherwise by the court.

(3) The duty to safeguard the trust assets, including duties to maintain the trust
property, as well as to ensure that it is applied in accordance with the directions set out
in the trust instrument.

(4) The duty to act even-handedly between beneficiaries, which means that the trustees
are required to act impartially between beneficiaries and to avoid conflicts of interest.

(5) The duty to act with reasonable care, meaning generally a duty to act as though a
prudent person of business acting on behalf of someone for whom one feels morally
bound to provide. (6) Duties in relation to trust expenses.

(7) The duties of investment, requiring prudence and the acquisition of the highest
possible rate of return in the context.

(8) The duty to distribute the trust property correctly.

(9) The duty to avoid conflicts of interest, not to earn unauthorised profits from the
fiduciary office, not to deal on one’s own behalf with trust property on pain of such
transactions being voidable, and the obligation to deal fairly with the trust property.

(10) The duty to preserve the confidence of the beneficiaries, especially in relation to
Chinese wall arrangements.

(11) The duty to act gratuitously, without any right to payment not permitted by the
trust instrument or by the general law.

(12) The duty to account and to provide information.

(13) The duty to take into account relevant considerations and to overlook irrelevant
considerations, failure to do so may lead to the court setting aside an exercise of the
trustees’ powers.

There are other duties considered in Hudson, section 8.1 and in chapter 9
(relating specifically to investment of the trust property); and there are also
general powers for trustees considered in Hudson, chapter 10.

Key concepts in the obligations of trustees

i) The requirement of good conscience

pg. 37 sebukalu@gmail.com 0779111777

faculty of law
EQUITY AND TRUSTS personal notes
Reading: Hudson, para 8.2.4

1. Westdeutsche Landesbank v Islington [1996] AC 669. 38

ii) The general duty of care and prudence

Reading: Hudson, para 8.3.5

iii) Duties to act jointly

1. Luke v South Kensington Hotel (1879) 11 Ch D 121 – ordinarily trustees must
act jointly Trustee Act 2000, s.11 – the trust instrument may permit some
other arrangement
2. Consterdine v Consterdine – (1862) 31 Beav 330 – or the nature of the trust
property may require separate holding.

iv) Liability for breach of trust

1. *Target Holdings v Redferns [1996] 1 AC 421 This topic is considered in detail in

the next chapter of these Course Documents.

v. Fiduciary responsibility of trustees.

Reading: Hudson, section 8.6 Trustee Act 2000 Trusts of Land and Appointment of
Trustees Act 1996, ss. 19-21. 1) What it means to be a fiduciary

1. White v Jones [1995] 2 AC 207 at 271, per Lord Browne-Wilkinson: ‘The

paradigm of the circumstances in which equity will find a fiduciary relationship is
where one party, A, has assumed to act in relation to the property or affairs of
another, B’.
2. Bristol and West Building Society v Mothew [1998] Ch 1 at 18, per Millett LJ:

‘A fiduciary is someone who has undertaken to act for or on behalf of another in a

particular matter in circumstances which give rise to a relationship of trust and
confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The
principal is entitled to the single-minded loyalty of his fiduciary. The core liability has
several facets. A fiduciary must act in good faith; he must not make a 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 the benefit of a third person without the
informed consent of his principal. This is not intended to be an exhaustive list, but it is
sufficient to indicate the nature of fiduciary obligations. They are the defining
characteristics of the fiduciary.’

vi. Conflicts of interest not permissible

Reading: Hudson, para 8.3.9

pg. 38 sebukalu@gmail.com 0779111777

 faculty of law
EQUITY AND TRUSTS personal notes
(i) The general principle against secret profits and conflicts of interest in
general terms
1. Keech v Sandford (1726) Sel Cas Ch 61 Boardman v. Phipps [1967] 2 AC 46

(ii) The self-dealing principle

1. Ex parte Lacey (1802) 6 Ves 625 (any transaction in which the trustee has a
personal interest is voidable at the instance of the beneficiary) Holder v
Holder [1968] Ch 353 (the court may not inquire into the trustee’s intentions)
(iii) The fair-dealing principle
1. Tito v Waddell (No 2) [1977] 3 All ER 129, per Megarry V-C: “... 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 advantage of his position and has made full
disclosure to the beneficiary, and that the transaction is fair and honest.”

vii. Duty of impartiality

Reading: Hudson, section 8.3.4; Pettit Ch.18

a) The duty in general terms

1. **Cowan v Scargill [1985] Ch 270, 286, per Megarry V-C:
‘It is the duty of trustees to exercise their powers in the best interest of the
present and future beneficiaries of the trust, holding the scales impartially
between the different classes of beneficiaries.’ b) The duty in relation to
trustees’ powers of investment

2. **Nestlé v National Westminster Bank (1988) [2000] WTLR 795, 802,

Hoffmann J:
‘A trustee must act fairly in making investment decisions which may have
different consequences for differing classes of beneficiaries. … The trustees
have a wide discretion. They are, for example, entitled to take into account the
income needs of the tenant for life or the fact that the tenant for life was a
person known to the settlor and a primary object of the trust whereas the
remainderman is a remoter relative or stranger. Of course, these cannot be
allowed to become the overriding considerations but the concept of fairness
between classes of beneficiaries does not require them to be excluded. It would
be an inhuman rule which required trustees to adhere to some mechanical rule
for preserving the real value of capital when the tenant for life was the
testator’s widow who had fallen upon hard times and the remainderman was
young and well-off.’

pg. 39 sebukalu@gmail.com 0779111777

 faculty of law
EQUITY AND TRUSTS personal notes

Nestlé v National Westminster Bank plc (1988) [1993] 1 WLR 1260, CA (deciding
between life tenants and remainder beneficiaries)

viii. The duty in relation to pension funds

1. Edge v Pensions Ombudsman [2000] Ch 602, 627:

‘the so-called duty to act impartially … is no more than the ordinary duty which the
law imposes on a person who is entrusted with the exercise of a discretionary
power: that he exercises the power for the purpose for which it is given, giving
proper consideration to the matters which are relevant and excluding from
consideration matters which are irrelevant. If pension fund trustees do that, they
cannot be criticized if they reach a decision which appears to prefer the claims of
one interest – whether that of employers, current employers or pensioners – over
others. The preference will be the result of a proper exercise of the discretionary
power.’

pg. 40 sebukalu@gmail.com 0779111777