Most of the remedies discussed in this book are personal remedies (apart from the proprietary consequences of rescission). Personal remedies, as the name suggests, are directed at the person of the defendant. The defendant must comply with the court order. By contrast, proprietary remedies are directed at property to which the defendant holds title, not to the person.

Proprietary remedies are difficult to allocate on a functional basis. We have not attempted to do so, as the rationales behind the imposition of proprietary remedies vary, and the criteria for their award are uncertain and contested.

It should be noted at the outset that this chapter does not purport to provide an exhaustive account of proprietary remedies. It is presumed that the reader already has a knowledge of trust law and the principles governing the creation of trusts and equitable liens. What follows is an overview from a remedies perspective.

The availability of proprietary remedies in common law is limited. Even where the defendant has committed a proprietary tort, the common law tends to award damages as a remedy. There is no rei vindicatio, or ability of a plaintiff to demand the return of property from a defendant, at common law. Consequently, the proprietary remedies we discuss in this chapter are equitable in origin.

AI will greatly assist in the administration of express and charitable trusts and also be of significant benefit to trust law in acting as an adjudicator. AI should be able to act as an acceptable trustee of an express trust, and resulting trusts do not insurmountably challenge AI, either as trustees or adjudicators. The proposition that discretionary trusts are unsuited to AI administration can be rejected along with the notion that the discretionary nature of remedies makes this area of law unsuited to AI adjudication. Although constructive trusts may pose some difficulties for AI, this may be solved through legal reform. Further, the difficulties that AI trustees will create are not incapable of practical solutions.

Trusts are a popular form of business and investment vehicle in Australia and are also established for a variety of other reasons (eg charitable purposes). This chapter examines the nature of a trust and discusses how trust estates are taxed. The general rules relating to the taxation of trust estates are contained in div 6 of pt III ITAA36 (ss 95AAA to 102). Division 6 calculates the ‘net income’ of a trust estate and assesses the net income in the hands of either the beneficiaries or the trustees of the estate. The operation of the assessment rules depends on whether a beneficiary is ‘presently entitled’ to a ‘share’ of the ‘income’ of the trust estate and whether the beneficiary is under a ‘legal disability’. The rules also operate subject to jurisdictional rules that take into account the concepts of residence and source. Trusts differ fundamentally from companies in that they are not treated as separate taxpayers. Although s 960-100(1) ITAA97 refers to a trust as an ‘entity’, no tax is payable by a trust.

This paper examines the legal framework governing, and the policy questions arising from, the management of wealth within the United States when the settlors or beneficial owners of the assets are citizens and domiciliaries of countries in Asia. Among the topics discussed will be the rules governing the US financial accounts, investments and land owned by non-citizens who are domiciled abroad; the use of the US-based trusts for such overseas settlors and beneficiaries; and the federal income and transfer taxation rules applicable to wealth planning for such overseas clients, with special reference to the People’s Republic of China and its tax treaty with the United States.

The Australian compulsory superannuation system contains nearly $AUD 3 trillion in funds, which is a substantial share of the personal wealth held by Australians. This means decisions made by superannuation trustees are important for everyone in Australia, both as beneficiaries and as participants in the Australian economy. The regulation of trustee decision-making, like the superannuation system as a whole, is founded on the equitable principles of trust law, but with an extensive overlay of legislative and regulatory intervention. Examining the regulation of decision-making in this context provides important insights into foundational trust law principles as well as a major component of wealth management in Australia.

In Ilott v. The Blue Cross, the UK Supreme Court restated the centrality of the principle of testamentary freedom in English succession law. This chapter considers the principle’s application in the context of will and trust disputes in Hong Kong, an English common law jurisdiction that is not only influenced by Chinese culture and traditions but also serves as a hub for mainland Chinese entrepreneurs who may be subject to the forced heirship laws of civilian China. The chapter has two objectives. First, it reviews recent notable family inheritance cases pertaining to the application of the testamentary freedom principle in Hong Kong to examine how the balance between personal autonomy and familial obligation is struck. Second, as the preference for testamentary freedom also informs the law of private express trusts, the chapter discusses the use of trust and family trust litigation involving some of Hong Kong’s wealthiest families to highlight the most attractive features of the trust device for managing Asian wealth, as well as the corresponding theoretical issues raised by such features.

The purpose of orders of specific performance of a contract and of injunctions is to compel the performance of legal obligations. Many, though not all, of the considerations relevant to an order granting specific performance of a contract are also germane to the award of an injunction. Matters such as inadequacy of damages, hardship and the ability of a court to supervise the execution of its own orders are relevant to both remedies (see textbook chapter 3). Underlying the principles governing these orders are policy questions relating to the nature and limits of judicial coercion to which monetary remedies, such as damages, do not usually give rise. These questions include: to what extent can private law (as opposed to the criminal law) restrict individual freedom, including a person’s freedom to select his or her employment; can a court compel parties whose commercial relationship has broken down to cooperate with each other; and what are the limits of a court’s power to prevent wrongdoing, for example where the wrong is likely to occur outside a court’s jurisdiction but will cause damage within its jurisdiction?

Many trusts are established specifically to facilitate investment activity. Many managed investment schemes and most superannuation funds, for instance, employ the legal architecture of the trust. Parties may also create specialised trust structures that are not open to the public in order to arrange their investment affairs. The trust is a convenient device to enable a collection of investor monies under the management control of a party with experience and skills in the business of investing. The need for a trustee to invest trust assets can arise in other circumstances. The most obvious of these is where the trust is expected to exist for some time and has assets that are not specifically nominated in the trust instrument as assets that must be held by the trustee. In this situation, a trustee is likely to be subject to a duty, implied from the circumstances of the trust, to invest unallocated assets. This chapter examines the rules that apply to the investment of trust funds. It takes the statutory regime as its starting point but also illustrates the interplay between the statutory and general law rules that apply in different contexts.

A successful claim against the fiduciary may result in an award of compensation for loss, disgorgement of gain or restitution of property misappropriated by the fiduciary. But it will sometimes be impossible for the plaintiff to obtain complete relief, particularly if the fiduciary is insolvent or beyond the jurisdiction of the court. In some of these cases, the plaintiff may be able to pursue third parties who participated in the breach of duty. The principles governing the imposition of liability on participants are discussed in this chapter. This chapter principally examines the liability of third parties under the so-called ‘two limbs’ of Barnes v Addy. Liability under the first limb arises when the defendant has knowingly received property in breach of fiduciary duty. Liability is imposed under the second limb on a defendant who knowingly assists the commission of a breach of fiduciary duty. But, as the cases make clear, third parties can be held accountable on other equitable grounds. Finally, a common law claim can sometimes be brought in unjust enrichment against the third party which does not require proof of a breach of fiduciary duty.

Assignments are transfers of property from one party to another. The dualist nature of our legal system is exhibited here. The common law originally only recognised two kinds of property (land and chattels), and developed mechanisms for their legal transfer. Over time, new varieties of property interests (such as shares in companies) were recognised by the common law, and transfer methods adopted for them. Different methods of assignment (most now sourced in statute) apply to different forms of legal property. Equity enforced rights that were unrecognised at common law, such as the partnership interest and the beneficiary’s interest in trust property. The Court of Chancery developed its own methodology for assignment of property or rights it recognised. All equity required was that the assignor manifest an immediate intention to assign the equitable property interest. It was even possible to manifest an immediate intention to assign without any writing. A statutory requirement of writing was, however, later introduced as different transfer rules apply to each.

In understanding constructive trusts, it is essential to be clear about labelling. First, not all judicial remedies labelled ‘constructive trust’ are in substance proprietary remedies. An example is the use of a so-called constructive trust as a personal remedy to compensate the plaintiff for loss incurred where the defendant has knowingly assisted in the commission of a breach of fiduciary obligation. Secondly, a chapter on constructive trusts necessarily assumes a sensible delineation between trusts labelled constructive and those labelled resulting. To the extent that resulting trusts are seen as being imposed by operation of law, rather than arising from the intentions (or vitiation of intention) of the transferor of property, a separate chapter devoted to each type of trust may seem unnecessary. However, for ease of exposition, this book deals separately with resulting and constructive trusts. Two forms of constructive trust are often juxtaposed: remedial constructive trusts and institutional constructive trusts. This distinction is said to be maintained by the following elements, which themselves may overlap.

Tracing is the process of identifying one asset as a substitute for another. Identification (or tracing) rules are needed if property is removed from the trust and mixed or exchanged with other property. For example, trust money that a trustee pays into his personal bank account can be traced into the bank account as well as into property purchased with money withdrawn from the account. Once identified, the trust money can be recovered from the trustee’s personal account, or from property purchased with the money, or from both. Note that the beneficiary does not literally ‘recover’ the trust money. Tracing entitles her to new personal or proprietary rights enforceable against the contractual right the trustee has to payment from his bank account, or against any right in property purchased by the trustee with the trust money. If the trustee pays trust money to a third party who applies it in the purchase of a painting, tracing enables the beneficiary to obtain proprietary rights in the painting unless the purchaser is a good faith purchaser for value without notice of the beneficiary’s right to enforce the trust.

The Court of Chancery required ‘three certainties’ in order to recognise a valid private express trust. These are: certainty of intention to create a trust, certainty of subject matter of a trust (trust property), and certainty of object (those who are or may be entitled to trust property). Each of the certainties is crucial, for varying reasons. Unless the certainty requirements can be satisfied, an enforceable trust will not have been created. Each of the three certainties will be considered separately.

The trustee’s position is both simple and highly complex. The trustee is the legal owner of the trust property, and therefore has all the rights and responsibilities that come with complete ownership. The trustee is regarded as personally liable for debts incurred on behalf of the trust unless documents contain clear and unambiguous words excluding that conclusion: see Helvetic Investment Corporation Pty Ltd v Knight (1984) 9 ACLR 773. But in equity the trustee only holds the property for those beneficially entitled to it. Thus, trustees may potentially incur personal liability in performing trust business without taking personal benefit from the expense. Few would take on the responsibilities of trusteeship without some financial relief from that outcome. Equity, and more recently, statute, has dealt with the situation by recognising the trustee’s right to be indemnified out of trust assets for expenses incurred in carrying out the trust. Practically, this means the trustee can pay the trust expense directly out of trust funds (called the right of exoneration) or pay the expense out of personal funds, and then be reimbursed for it (called the right of recoupment).

Equitable intervention into contract law defies easy summary. Apart from equitable remedies to enforce contracts, such as specific performance and injunctions, or to rescind voidable contracts, equitable doctrines perform a number of distinct roles in the formation, modification and enforcement of contracts. Equity recognises more extensive grounds than the common law to set aside agreements based on defective consent. So, while contracts can be rescinded at common law for duress or fraudulent misrepresentation, in equity they can be avoided on the additional grounds of undue influence, unconscionability, non-fraudulent misrepresentation, mistake and under the rule in Yerkey v Jones (1939) 63 CLR 649. Equity can also occasionally modify or prevent contract enforcement even though the bargaining process was not defective. Terms constituting penalties (as opposed to liquidated damages clauses), forfeiture clauses and contractual restrictions on a mortgagor’s equity of redemption belong to this category and can be set aside.

Rescission has several legal meanings. In this chapter, it refers to the setting aside of a contract or gift on the ground that the plaintiff’s intention to contract or to make the gift was defective. Two types of defective intention can cause a transaction to be rescinded. First, the plaintiff’s intent to transact may be vitiated by mistake, misrepresentation, duress or undue influence. Secondly, the defendant’s blameworthy conduct may have caused the plaintiff to enter into a disadvantageous transaction. The second category includes transactions induced by unconscionable conduct, breach of fiduciary duty and failure to explain the nature and effect of a guarantee under the doctrine of Yerkey v Jones (1939) 63 CLR 649. A transaction which is liable to be rescinded is voidable, not void. This means that it is valid until the plaintiff elects to set it aside. Failure to set aside a contract means that it remains valid and enforceable: see Daly v Sydney Stock Exchange Ltd. Rescission can be ordered at common law as well as in equity.

Equity is a chameleonic word, taking its colour from the context in which it is used. Equity refers to the principles, doctrines and remedies applied by Australian courts exercising the jurisdiction of the English Court of Chancery prior to the enactment of judicature legislation which reformed the structure of the court system in the mid-nineteenth century. Equity, in this sense, is intelligible without having to acquire an understanding of legal history, but the understanding will be deeper if that history is known. This chapter identifies some of the landmarks of that history. The final section summarises some of the more common equitable maxims. The student will occasionally encounter them when reading the cases, and should consider their value in applying equitable doctrine to the circumstances of an individual case.

Equity’s personal monetary remedies are the account of profits and equitable compensation. Additionally, statutory damages are available in some cases, under versions of Lord Cairns’ Act discussed in chapter 3. The possibility of exemplary damages in equity will also be considered. As the name suggests, an account of profits is a profit-stripping remedy. It can be contrasted with the proprietary remedy of a constructive trust which can also achieve profit-stripping by reallocating beneficial ownership of property held by the defendant. Accounts of profits are only intended to redirect gains made by the wrongdoer; they are not intended to punish. Therefore allowances have to be made to the defendant for proven actual inputs, and may also be made for ‘value-adding’ inputs such as skill and expertise. However, equity proceeds from the assumption that all profits are recoverable; it is up to the defendant to prove otherwise. Accounts of profits are available for equitable wrongs such as breach of confidence, breach of trust, breach of fiduciary duty and third-party participation in a fiduciary breach.

Trusts come in all shapes and sizes. They are used for multifarious purposes; by individuals and families, by financial institutions and other businesses, by charities and foundations and by the courts. The trust is, as Maitland once famously observed, ‘An institute of great elasticity and generality; as elastic, as general as contract’. It is usually neither difficult nor controversial to recognise the existence of a trust. However, as we shall see, this is not always the case. This chapter first presents a description of express trusts in terms of the main characteristics with which they are typically associated. It then approaches the question from the opposite direction, by contrasting the legal archetype to other legal concepts, such as equitable charges, debts and partnerships that have points of similarity but also points of difference. The picture of the institution we know as an express trust that emerges through these two perspectives, although perhaps not deserving the title ‘definition’, will provide some guidance as to the nature and form of this most elastic of legal concepts.

Plaintiffs may have an ‘equity for relief’ but this does not mean that the plaintiff holds a right to relief. All equitable relief is discretionary, and judicial discretion is exercised in a principled manner. The court considers the surrounding circumstances of the case, weighing factors from both the plaintiff’s and defendant’s perspectives in fashioning an appropriate remedy. Principles informing the exercise of equitable discretion include the doctrines of laches and acquiescence, unclean hands and hardship to the defendant. Additionally, a court exercising equitable jurisdiction will not make an order that is futile or impossible to supervise. The impact of the court’s order on third parties will also be considered. These factors apply generally to all equitable remedies. The availability of specific performance is additionally controlled by particular discretionary grounds: want of mutuality and the plaintiff’s willingness and readiness to perform her own obligations. Bars to relief are sometimes referred to as equitable defences but properly understood they are not true defences.