Equity Exam Notes

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1. Vitiating Factors in Equity (Duress, Undue Influence, Unconscionability)

1.1 Duress (Common Law)

• Test: Duress involves:
  • (1) Pressure amounting to compulsion of the will; and
  • (2) Illegitimacy of that pressure.
    Authority: Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40.
    1.2 Undue Influence (Equity)
• Types:
  • Actual undue influence: Proof of coercive conduct (Johnson v Buttress (1936) 56 CLR 113).
  • Presumed undue influence: Presumed in certain relationships; rebuttable.
• Presumed Relationships: Parent–child, doctor–patient, solicitor–client.
• Test:
  • Plaintiff’s will overborne by influence, pressure, or manipulation such that they did not exercise free will.
    1.3 Unconscionable Conduct (Equity)
• Test (Amadio (1983) 151 CLR 447):
  • (1) Plaintiff under a special disadvantage;
  • (2) Defendant knew or should have known;
  • (3) Defendant exploited that disadvantage.

2. Equitable Estoppel

2.1 Elements (Waltons Stores v Maher; Kramer v Stone)

• Assumption – Plaintiff assumed a legal relationship existed/would exist.
• Inducement – Defendant encouraged the assumption.
• Reliance – Plaintiff acted on the assumption.
• Detriment – Plaintiff would suffer detriment if assumption denied.
• Unconscionability – Defendant’s denial is unconscionable.
  2.2 Types
• Proprietary Estoppel: Expectation of proprietary interest.
• Promissory Estoppel: Promise not to enforce legal rights.
  2.3 Key Cases
• Waltons Stores v Maher: Promissory estoppel may be used as a cause of action.
• Sidhu v Van Dyke: Reliance must be proved; detriment need not be financial.
• Saleh v Romanous: Limitations in NSW for estoppel as a sword.
  2.4 Remedies
• Expectation enforcement (Plimmer v Wellington).
• Lesser remedy if disproportionate (Giumelli v Giumelli).

3. Fiduciary Duties

3.1 Core Duties

• No Conflict Rule (Aberdeen Railway Co v Blaikie Bros).
• No Profit Rule (Boardman v Phipps).
• Act Personally – Cannot delegate fiduciary duties without authority.
• Duty of Loyalty – Undivided allegiance (Bray v Ford [1896] AC 44).
  3.2 When Duties Arise
• Established Relationships: Trustee–beneficiary, director–company, lawyer–client.
• Ad hoc: When one undertakes to act for another in circumstances of trust and confidence (Hospital Products Ltd v USSC (1984) 156 CLR 41).
  3.3 Remedies
• Account of Profits: Gain-based remedy.
• Equitable Compensation: Loss-based.
• Constructive Trusts: If property acquired through breach.
• Removal: For breach (Miller v Cameron (1936)).

4. Accessorial Liability (Barnes v Addy)

4.1 Knowing Receipt
Elements (Farah Constructions v Say-Dee):

• Fiduciary duty exists
• Breach involving trust property.
• Property received beneficially.
• Knowledge of breach (Baden categories 1–3).
  4.2 Knowing Assistance
  Elements (Hasler v Singtel):
• Fiduciary duty.
• Dishonest and fraudulent design.
• Assistance by third party.
• Actual knowledge or wilful blindness.

5. Equitable Property

5.1 Legal vs Equitable Property
Type
Legal Titleholder
Equitable Interest Holder
Authority
Trust property
Trustee
Beneficiary
Paul v Constance
Shares via nominee
Nominee
Beneficial owner
Vandervell v IRC[1967]
Resulting/CT trust
Recipient
Contributor/Claimant
Muschinski v Dodds (1985)
5.2 Assignments

• s 12 Conveyancing Act 1919 (NSW): Legal assignment of choses in action requires:
  • Writing, signed, absolute, and notice to debtor.
• Equitable Assignment: Recognised if assignor has done everything necessary (Corin v Patton).

6. Express Trusts

6.1 Elements (Knight v Knight)

• Certainty of Intention – Trust must be intended (Byrnes v Kendle).
• Certainty of Subject Matter – Trust property identifiable (White v Shortall).
• Certainty of Objects – Beneficiaries identifiable or charitable purpose (Morice v Bishop of Durham).
  6.2 Creation
• Declaration: Settlor declares themselves trustee (Paul v Constance).
• Transfer: Settlor transfers to trustee.
• Direction: Beneficiary instructs trustee to hold for another (Grey v IRC).

7. Trustee Duties & Beneficiaries’ Rights

7.1 Trustee Duties

• Adhere to trust terms (Youyang v Minter Ellison).
• Act prudently (s 14A–14C Trustee Act 1925 (NSW); Speight v Gaunt).
• Keep accounts & provide information (Byrnes v Kendle).
• No delegation – except per s 64 Trustee Act.
  7.2 Rights of Beneficiaries
• Fixed: Enforce trust, compel performance, demand accounts, remove trustee (Saunders v Vautier).
• Discretionary: Limited rights (Karger v Paul).

8. Resulting Trusts

8.1 Presumed Resulting Trust

• Arises where A contributes to purchase price but B holds legal title (Calverley v Green).
• Presumption rebutted by evidence of gift intent.
• Exception: s 44 Conveyancing Act – voluntary transfers of land do not give rise to resulting trusts.
  8.2 Presumption of Advancement
• Applies: Husband → Wife, Parent → Child.
• Can be rebutted (Wirth v Wirth; Bosanac v Cth [2022] HCA 34).
  8.3 Automatic Resulting Trust
• Where beneficial interest not fully disposed of (Vandervell v IRC).

9. Constructive Trusts

9.1 Institutional

• Common Intention: Joint intention + detrimental reliance (Allen v Snyder; Shepherd v Doolan).
• Misappropriation: Black v Freedman.
• Fiduciary Breach: Chan v Zacharia.
• Sale of Land: Chang v Registrar of Titles.
  9.2 Remedial
• Joint Endeavour Fails: Muschinski v Dodds; Baumgartner v Baumgartner.
• Based on unconscionable retention of benefit.

10. Equitable Money Remedies

10.1 Account of Profits

• Gain-based remedy.
• Breach of fiduciary duty or knowing assistance (Warman v Dwyer; Lifeplan v Foresters).
• Net profits only – allowances for skill and effort.
  10.2 Equitable Compensation
• Loss-based remedy.
• No requirement for foreseeability/remoteness.
• Strict liability in trust breaches (Re Dawson; Youyang v Minter Ellison).

11. Tracing

11.1 Key Rules

• Re Hallett: Trustee presumed to spend own money first.
• Re Oatway: Presume trust funds used to buy asset.
• Lowest Intermediate Balance Rule: Limit claim to lowest post-deposit balance.
• Scott v Scott; Foskett v McKeown: Proportional claim over improved asset.
  11.2 Multiple Claimants
• Caron v Jahani: Adopt lowest intermediate balance or pari passu; reject Clayton’s Case FIFO rule.
  11.3 Remedies
• Constructive Trust: Over traceable assets.
• Equitable Lien: Fixed charge over asset.
• Equitable Compensation: If asset dissipated.

Cheat Sheet: Matching Claims to Remedies

Claim Type
Main Remedy
When to Use
Misapplied trust property
✅ Constructive trust
If the property or its substitute is identifiable; prefer this if value ↑
Misapplied trust funds → can’t trace
✅ Equitable compensation
When tracing fails or property value ↓
Breach of fiduciary duty (profit gained)
✅ Account of profits
If defendant profited, regardless of plaintiff’s loss
Breach of fiduciary duty (loss caused)
✅ Equitable compensation
When loss flows from fiduciary’s breach
Knowing receipt of trust property
✅ Constructive trust (if traceable)
If property still identifiable and recipient knew (Baden 1–3)
Knowing assistance
✅ Account of profits or equitable comp.
Choose based on loss suffered or gain made; no proprietary remedy
Failed trust or improper constitution
✅ Resulting trust
When trust fails and settlor wants property back (e.g. Calverley, Quistclose)
Joint endeavour collapse (property)
✅ Remedial constructive trust
Use where co-ownership/partner denied benefit after breakdown (Muschinski)
Improper trustee investment
✅ Equitable compensation + surcharge
Compensate for loss; surcharge = remove profit retained by trustee
Funds mixed, value ↓
✅ Equitable lien
When property lost or depreciated, lien gives priority for repayment
Funds mixed, value ↑
✅ Constructive trust (proportionate share)
When value ↑ and you want continuing equitable interest
Property in innocent volunteer hands
❌ No proprietary remedy (unless traceable)
May need personal remedy; tracing generally ends at volunteer unless exceptional
Real property registered (Torrens)
✅ In personam CT only
Must plead fiduciary/estoppel/conscience-based equity (Fistar, Bahr)

Step-by-Step Guide: How to Choose the Remedy (Exam Flowchart)

Step 1: Can you identify a specific asset that came from trust funds or fiduciary misuse?

• ✔️ Yes → Go to Step 2
• ❌ No → Go to Step 5

Step 2: Is the asset still identifiable (e.g. land, shares, bank balance, specific substitute)?

• ✔️ Yes → Tracing available → Proceed to Step 3
• ❌ No → Tracing fails → Go to Step 5 (personal remedies)

Step 3: Did the property increase or retain value?

• ✔️ Yes → ✅ Constructive Trust
  • Preferred if plaintiff wants proprietary remedy and asset has appreciated
  • Used in: Foskett v McKeown, Black v Freedman
• ❌ No → Go to Step 4

Step 4: Did the property decrease in value, or is plaintiff more interested in money?

• ✅ Equitable Lien
• Secures a fixed repayment amount
• Still gets priority over unsecured
• Used in: Foskett v McKeown, Latec Investments

Step 5: Tracing not available OR no identifiable property → what kind of wrong occurred?
5A. Fiduciary breach, and:

• Plaintiff suffered loss → ✅ Equitable Compensation
  • Strict liability (Youyang); no causation/remoteness required
• Defendant gained profit → ✅ Account of Profits
  • Even if no loss, must disgorge gain (Warman v Dwyer)
    5B. Knowing receipt:
• Property still identifiable + Baden knowledge (1–3)
  • Constructive Trust
• Property gone or not traceable
  • Equitable compensation only
    5C. Knowing assistance:
• Always personal liability
  • Account of profits or equitable compensation

Step 6: Did the plaintiff contribute value or expect a share in a joint venture?

• Yes
  • Equity may impose a Remedial Constructive Trust
  • Use Muschinski v Dodds, Baumgartner v Baumgartner

Step 7: Did the purpose for which money was advanced fail?

• Yes
  • Apply Quistclose Trust
  • Resulting trust to return
  • Must be narrow purpose, funds kept separate (Quistclose, Twinsectra)

Step 8: Real Property (Torrens)? Is the defendant registered proprietor?

• Yes
  • Proprietary claims barred unless in personam equity
  • Can still claim:
    • Constructive trust for fiduciary breach (e.g. Bahr v Nicolay)
    • Estoppel or unconscionability (e.g. Fistar v Riverwood)
      • Cannot use tracing alone to displace indefeasibility

Master Exam Answer Formula

A. Relationship / Cause

1. Fiduciary? Established cat or HP criteria.
2. Trust? 3 certainties + constitution.
3. Accessorial? Knowing receipt / assistance.
4. Estoppel / unconscionability?

B. Breach / Elements
• No-conflict / no-profit (Aberdeen; Regal)
• Misapplication strict liability (Youyang)
• Barnes v Addy prongs
• Resulting / constructive trust triggers

C. Property & Tracing
• Same asset → direct claim
• Substituted → Foskett
• Mixed funds → Hallett + LIB / Oatway
• Multiple innocents → pari passu (Caron)

D. Remedy fork
⇒ Asset identifiable? CT / lien
⇒ Not? Comp / account of profits
Election before J.

E. Defences / Discretion
• BFPFVWN
• Torrens indefeasibility
• Change of position
• Laches / acquiescence / unclean hands

Step 1: Characterise the Nature of the Claim

• Step 1: Does a Fiduciary Relationship Exist?
  • Check if the relationship falls within an established category:
    • Trustee → Beneficiary
    • Director → Company (Aberdeen Railway Co v Blaikie Bros (1854) 1 Macq 461)
    • Legal Practitioner → Client
    • Agent → Principal
    • Partners → Each Other (United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1)
    • Senior Employees → Employer (Anderson v Canaccord Genuity Financial Ltd [2023] NSWCA 294)
  • If not an established category, assess:
    • Undertaking to act in another’s interest? (Hospital Products Ltd v USSC (1984) 156 CLR 41)
    • Vulnerability and reliance? (Grimaldi v Chameleon Mining (No 2) [2012] FCAFC 6)
    • Power to unilaterally affect another’s rights? (United Dominions v Brian)
• 1.1. Is the plaintiff asserting:
  • Proprietary claim → specific asset is traceable and recoverable
  • Personal claim → equitable compensation or account of profits
• 1.2. Distinguish:
  • Following = same property, same form
  • Tracing = identifiable substitute asset or proceeds (Foskett v McKeown, 127–8)
• Step 1.3: Is the Fiduciary’s Conduct Within the Scope of the Duty?
  • Fiduciary duties only apply to specific aspects of the relationship (Clark Boyce v Mouat [1994] 1 AC 428).
    • Example: A doctor does not owe fiduciary duties to give medical records (Breen v Williams (1996) 186 CLR 71).

Step 2: What Happened to the Property?

• Step 2: Identify the Breach of Duty
  • Step 2.1: Has the Fiduciary Breached a Core Obligation?
    • No Conflicts Rule:
      • Duty vs Personal Interest (self-dealing) → Aberdeen Railway Co v Blaikie Bros (1854) 1 Macq 461
      • Duty vs Duty (serving two principals) → Farrington v Rowe McBride & Partners [1985] 1 NZLR 83
    • No Profits Rule:
      • Fiduciary must not profit without consent (Boardman v Phipps [1967] 2 AC 46).
      • Profits must be accounted for, even if no loss suffered (Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134).
    • 💡 Example:
      • Scenario: A company director secures a contract for themselves instead of the company.
      • The director used their position for personal gain → Breach of no profits rule (Regal (Hastings) Ltd v Gulliver).
      • Even if the company could not have pursued the opportunity, liability still arises (Warman International Ltd v Dwyer (1995) 182 CLR 544).
  • Step 2.2: Identify the Basis for Third-Party Liability
    • Knowing Receipt?
      • Did the third party receive trust property in breach of duty?
      • Did they beneficially receive the property (Farah Constructions)?
      • Did they have actual or wilful blindness knowledge (Grimaldi)?
    • Knowing Assistance?
      • Did the third party assist a dishonest and fraudulent design (Barnes v Addy)?
      • Was the assistance causally significant (Harstedt Pty Ltd v Tomanek (2018))?
  • Step 2.25: Assess the Third Party’s Knowledge
    • 1. Apply the Baden Scale:
      • Categories 1-3 = actual knowledge → liable.
      • Categories 4-5 = constructive notice → not liable.
    • 2. Did the third party wilfully ignore clear signs of a breach? (GP Building Holdings).
• 2.3: Has a Trust Relationship Been Created?
  • A trust is a fiduciary relationship where a person (the trustee) holds legal title to property for the benefit of another (the beneficiary), who holds the equitable interest (Commissioner of Taxation v Bamford (2010) 240 CLR 481, [17]–[20]).
• Step 2.4: Assignments or Declarations Over Future Property
  • Future property cannot be assigned at law as the assignor has no current title (Norman v FCT (1963) 109 CLR 9)
  • However, equity may enforce such assignments if made for value (Tailby v Official Receiver (1888) 13 App Cas 523)
  • Example:
    • Assignment of future royalties under an existing contract → enforceable in equity (Shepherd v FCT (1965) 113 CLR 385)
    • Gift of future dividends without consideration → unenforceable (Norman v FCT)
  • Equity recognises a contract to assign future property as creating a future equitable interest enforceable against the assignor once property materialises
  • This principle also informs declarations of trust: no trust can exist over property not yet owned, unless a contract or trust arrangement satisfies equity’s rules (Corin v Patton (1990) 169 CLR 540)

OPT: Step 2.5: Trusts

• Step 2.5: Has a Trust Relationship Been Created?

  • A trust is a fiduciary relationship where a person (the trustee) holds legal title for the benefit of another (the beneficiary), who holds the equitable interest
    (Commissioner of Taxation v Bamford (2010) 240 CLR 481, [17]–[20]).

• Step 2.5.1: Elements of a Valid Trust

  • To recognise a valid trust, the following four components must be satisfied:

• Trustee: a person holding title with fiduciary obligations

• Identifiable property: clearly defined trust assets

• Beneficiary or purpose: for a person or valid charitable purpose

• Equitable obligation: trustee must deal with property for the other’s benefit

  • Compare to other doctrines:
    • Agency: no bifurcation of title (Walker v Corboy (1990) 19 NSWLR 382)
    • Debt: no trust, only obligation to repay (Henry v Hammond [1913] 2 KB 515)
    • Bailment: mere possession, no equitable interest

• Step 2.5.2: Apply the Three Certainties (Knight v Knight (1840) 3 Beav 148)

  • Certainty of Intention
    • Objectively assessed (Byrnes v Kendle (2011) 243 CLR 253)
    • Informal language okay: “as much yours as mine” → valid trust (Paul v Constance [1977] 1 WLR 527)
    • Precatory words (e.g., “wish”, “hope”) are not enough (Gill v Gill (1921) 21 SR (NSW) 400)
  • Certainty of Subject Matter
    • Must identify the property with sufficient precision
    • Even fractional shares from a bulk asset are sufficient (White v Shorthall (2006) 68 NSWLR 650)
  • Certainty of Objects
    • Fixed trust: list certainty (can all beneficiaries be named?)
    • Discretionary trust: “is or is not” test (McPhail v Doulton [1971] AC 424)
      • Re Baden (No 2): three judicial views on how much certainty is required
    • Unworkable or capricious classes invalidate the trust (Re Manisty’s Settlement [1974] Ch 17)

• Step 2.5.3: How Was the Trust Created?

  • Declaration of trust
    • Self-declaration: legal + equitable held by settlor
    • Oral declaration okay for personalty; writing required for land (s 23C(1)(b) Conveyancing Act 1919 (NSW))
  • Transfer on trust
    • Formalities apply (e.g. share registry, Torrens registration)
  • Disposition by beneficiary
    • Must be in writing if equitable interest is disposed (UK s 53(1)(c), persuasive in NSW; Grey v IRC [1960] AC 1)
  • Modes of Disposing Equitable Interests (Timpson’s Executors v Yerbury [1936] 1 KB 645)
    • 4 ways to dispose of an equitable interest:
      • Direct assignment
      • Direction to trustee to hold for third party
      • Direction to transfer both legal + equitable title
      • Declaration of trust over equitable interest

• Step 2.5.4: Types of Trusts

  • A. Express Trusts (as above)
  • B. Resulting Trusts
    • Presumed where:
      • Property transferred without consideration → Calverley v Green (1984) 155 CLR 242
      • A buys in B’s name using A’s money
      • Rebuttable by gift intention (e.g. Bosanac v COT [2022] HCA 34)
    • Presumption of advancement applies:
      • Husband → wife, parent → child (Wirth v Wirth)
      • Does not apply to: wife→husband, de facto, same-sex couples (Anderson v McPherson (No 2) [2012] WASC 19)
    • Court considers:
      • Evidence of financial independence (Bosanac [30])
      • Documentation (e.g. deeds in Zhang v Metcalf [2020] NSWCA 228)
      • Burden of rebuttal lies on contributor (Anderson v McPherson, [157]
  • C. Constructive Trusts
    • (i) Institutional (arise by operation of law):
      • Misappropriation → Black v Freedman (1910) 12 CLR 105
      • Fiduciary breach → Chan v Zacharia (1984) 154 CLR 178
      • Mutual wills → Birmingham v Renfrew (1937) 57 CLR 666
      • Contract for sale of land → Chang v Registrar of Titles (1976) 137 CLR 177
    • (ii) Remedial (discretionary, court-imposed):
      • Joint endeavour failure: Muschinski v Dodds (1985) 160 CLR 583
      • Domestic contributions: Baumgartner v Baumgartner (1987) 164 CLR 137
      • Common intention: inferred from contributions (Green v Green (1989) 17 NSWLR 343)

• Step 2.5.5: Special Trust Doctrines

  • Quistclose Trusts → Barclays Bank v Quistclose [1970] AC 567
    • Money given for purpose → held on resulting trust if purpose fails
    • Must be kept separate and not used for own benefit (Twinsectra, Coolbrew)
  • Failure of Trusts → Automatic Resulting Trust
    • E.g., incomplete gifts or unfulfilled purpose (Re Abbott Fund [1900] 2 Ch 326)
  • Illegality and Public Policy → trust may still be enforced unless it would frustrate statute (Nelson v Nelson (1995) 184 CLR 538)
  • Charitable Trusts
    • Must fit within Pemsel categories (poverty, education, religion, public benefit)
    • Governed by Charities Act 2013 (Cth) ss 5, 11–12
    • Political advocacy ≠ charitable (Aid/Watch v COT (2010) 241 CLR 539)

• Step 2.5.6: Formalities and Constitution

  • Trust must be constituted — legal title must vest in trustee (Milroy v Lord (1862) 4 De G F & J 264)
    • Equity will not assist a volunteer
    • Exception: donor becomes executor → Strong v Bird (1874) LR 18 Eq 315
  • A direction to a trustee to hold for another is a disposition of equitable interest and must be in writing (Grey v IRC).
  • A complete transfer of legal and equitable title escapes writing requirement (Vandervell v IRC).
  • Formal requirements:
    • Declaration over land → must be in writing (s 23C(1)(b))
    • Disposition of existing equitable interest → writing (persuasive: s 53(1)(c) LPA 1925 UK)

• Step 2.5.7: Duties of Trustees (Quick Reference)

  • Core fiduciary duties:
    • Loyalty; act in good faith; no conflict; no profit
    • Must obey trust terms and act personally (Speight v Gaunt)
  • Statutory duties:
    • s 14A: prudent investment
    • s 14B: impartiality
    • s 85: honest and reasonable conduct → court may excuse breach
  • Disclosure:
    • Must account to beneficiaries (Schmidt v Rosewood)
    • Discretionary disclosure subject to trust nature
  • Exercise of powers:
    • Must be in good faith, for proper purpose (Karger v Paul)
    • Real and genuine consideration

• 2.6. Was trust property:

  • Substituted into another asset?
  • Mixed with wrongdoer’s funds?
  • Mixed with funds from other beneficiaries?
  • Transferred to an innocent volunteer?

• 2.7. Can the asset or its traceable proceeds be identified?

  • ✔️ If yes → proceed to proprietary remedies via tracing
  • ❌ If not → consider personal remedies only

• Step 2.8: Future Property – Assignability in Equity

  • At law, future property (e.g. dividends, future income, royalties) cannot be assigned (Norman v FCT (1963) 109 CLR 9)
  • In equity, a contract or agreement to assign future property for value is enforceable once the property arises (Tailby v Official Receiver (1888) 13 App Cas 523)
  • Distinction:
    • Tree = existing property right → assignable
    • Fruit = future proceeds → only assignable in equity if consideration exists
  • Examples:
    • Assignment of dividends under existing shareholding = likely valid
    • Gift of future income with no contract = ineffective (Norman)
    • Future royalties under current agreement = presently enforceable (Shepherd v FCT (1965) 113 CLR 385)

Step 3: Apply Tracing Rules

• 3.1 Substituted Assets
  • Trust property used to buy identifiable asset → traceable
  • Presume trust funds used for purchase (Re Oatway [1903] 2 Ch 356)
  • Constructive trust imposed over asset (Foskett v McKeown [2001] 1 AC 102)
• 3.2 Mixed Funds (Wrongdoer + Plaintiff)
  • Rule 1: Spend own money first (Re Hallett’s Estate (1880) 13 Ch D 696)
  • Rule 2: Asset purchase = trust funds used (Re Oatway)
  • Apply Lowest Intermediate Balance Rule
    • Max claim = lowest point after trust funds deposited (Caron v Jahani [2020] NSWCA 117)
  • Example: Trust = 50k → max recovery = $50k
• 3.3 Mixed Contributions → Asset
  • If asset bought with mixed funds → apply proportionate share rule (Foskett; Scott v Scott (1963) 109 CLR 649)
  • Election:
    • Constructive Trust: if value ↑
    • Equitable Lien: if value ↓
  • Formula:
    • Trust share = (Trust Funds ÷ Total Purchase) × Current Asset Value
• 3.4 Mixed Beneficiaries → Shared Pool
  • Rule: Apply Lowest Intermediate Balance (default)
  • Alternative: Pari Passu – if multiple contributors (Caron)
  • No replenishment from later deposits unless shown (Caron v Jahani [2020] NSWCA 117, [144]–[149])
  • Clayton’s Case (FIFO): ⚠️ rejected unless intention shown (Keefe v Law Society of NSW (1998) 44 NSWLR 451; Caron v Jahani)

Step 4: Identify Remedy Type

• 4.1 Proprietary Remedies
  • Constructive Trust: traceable property; preferred if value ↑
  • Equitable Lien: security for fixed amount
• 4.2. Personal Remedies
  • Equitable Compensation
    • Substitutive: strict liability for trust breaches (Youyang v Minter Ellison (2003) 212 CLR 484)
    • Reparative breach (fiduciary advice) → loss from breach (Nocton v Ashburton [1914] AC 932)
    • Apply but for causation test (Canson Enterprises v Boughton (1991) 85 DLR (4th) 129)
    • No foreseeability/remoteness required
    • Loss assessed at judgment date (Youyang, 500)
    • Exemplary damages barred (Harris v Digital Pulse (2003) 56 NSWLR 298)
  • Account of Profits
    • Strict liability; no need to prove loss
    • Net gain only (Warman v Dwyer (1995) 182 CLR 544; Lifeplan [2018] HCA 43)
    • Deductions for effort/skill → onus on defendant
    • Allowances discretionary (Warman, 558)

Step 5: Election Between Remedies

• Plaintiff must elect before judgment (not necessarily at pleadings)
• Cannot obtain both account + compensation for same breach
• Strategic:
  • Profit? → Account of profits (gain-based)
  • Loss? → Equitable compensation (loss-based)
    (Election made before judgment — Warman at 561)

Step 6: Apply Remedy-Specific Discretion

• Equitable relief is discretionary
• Courts may impose:
  • Equitable lien in place of trust (Giumelli v Giumelli (1999) 196 CLR 101)
  • Fiduciary allowance for skill or capital (Warman, 558)
  • Substitute $$ for asset if proprietary remedy unfair
• Barriers:
  • Laches (Keech v Sandford (1726))
  • Acquiescence (Warman, 559)
  • Unclean hands

Step 7: Defences

• 7.1. Bona Fide Purchaser for Value Without Notice
  • Absolute bar to proprietary claim (Grimaldi v Chameleon Mining (No 2) (2012) 200 FCR 296)
• 7.2. Change of Position
  • Defence to unjust enrichment (Gertsch v Atsas (1999) 10 BPR 18,431)
• 7.3. Torrens Indefeasibility
  • Legal title protected unless fraud (Real Property Act 1900 (NSW) s 42; Fistar v Riverwood Legion and Community Club Ltd (2016) 91 NSWLR 732)

Step 9: Estoppel (Alternative Claim)

10.1. Apply five-part test (Stone v Kramer [2024] HCA 48):

• Clear assumption or representation (Legione v Hately (1983) 152 CLR 406)
• Induced reliance (Waltons Stores v Maher (1988) 164 CLR 387)
• Reasonable reliance (Sidhu v Van Dyke (2014) 251 CLR 505)
• Detriment (Giumelli v Giumelli (1999) 196 CLR 101)
• Unconscionability
  10.2. Remedies:
• Expectation enforcement preferred (Plimmer v Wellington (1884) 9 App Cas 699)
• May grant proportional relief if full expectation unfair (Giumelli)

EXAMPLE SCENARIO COVERAGE DIAGNOSTIC

🔸 Pirelli Trust – Breach of Distribution Obligation:

• Valid fixed trust? → Certainties + deed terms (1.5.1–1.5.2)
• Trustee breach → Misapplication (1.2, 3.1, 3.3)
• Tina’s knowing receipt? → 7.1 + tracing test (2.1)
• Giuseppe’s intention not to create a trust → test certainty of intention + Sham claim (1.5.2)
• Remedies: Constructive trust over funds held; account of profits if Tina gained net benefit
  ✔ All steps are covered in your structure.
  🔸 Giuseppe’s $300K to Franco (Quistclose / Resulting / Dissipation):
• Express purpose + segregation → Quistclose trust (5.2)
• Improper deposit by trustee → Breach of trustee duties (8)
• Dissipated funds → tracing via Re Hallett / Oatway (2.2–2.3)
• Nu Co shares → mixed fund purchase, use CT or equitable lien (2.3, 3.1–3.2)
• Remaining account balance → lowest intermediate balance rule (2.2)
• Official Receiver’s claim → rebut with tracing + BFPFVWN analysis (4.1)

Paragraph Modules

1 OPENING FRAMEWORK
1.1 Characterise the Claim
In equity, [Plaintiff] alleges a [breach of fiduciary duty / breach of trust / knowing receipt etc.]. The relief pursued is proprietary, because [specific asset / traceable proceeds] is still identifiable; in the alternative it is personal for monetary relief (Foskett v McKeown). In the alternative, [Plaintiff] seeks a personal remedy such as equitable compensation or an account of profits. Proprietary claims enforce a continuing equitable interest, whereas personal claims provide monetary recovery based on loss or gain.
1.2 Identify & Describe the Breach
Fiduciary duties arise where a person has undertaken to act for or on behalf of another in a situation of trust and confidence, with discretionary power and vulnerability (Hospital Products Ltd v USSC (1984) 156 CLR 41, 96). Fiduciaries owe duties of loyalty, no conflict, and no profit. Here, [Defendant] held a fiduciary position, and by [describe act – e.g. diverting $X to buy Y], breached.
The no-conflict rule: fiduciaries must not place themselves in a position where personal interest may conflict with duty (Chan v Zacharia). The no-profit rule: fiduciaries must not derive unauthorised benefits from their position (Regal (Hastings) Ltd v Gulliver). Such breaches attract strict restorative liability, irrespective of profit or harm (Youyang v Minter Ellison).
1.3 Jurisdiction & Standing
The Supreme Court of NSW has original jurisdiction over equitable claims (Supreme Court Act 1970 (NSW) s 23). [Plaintiff] possesses standing because they hold a direct proprietary or fiduciary interest in [property], satisfying the ‘special interest’ test (ACF v Cth).

FIDUCIARY RELATIONSHIP
A fiduciary relationship arises where one party undertakes to act in the interests of another, with trust, confidence, and reliance, and possesses a discretionary power affecting that party’s interests (Hospital Products; Grimaldi (No 2)). Categories include trustee–beneficiary, partner–partner, director–company, legal practitioner–client, and senior employee–employer (e.g. Anderson v Canaccord Genuity).
Where outside recognised categories, the court assesses whether the facts show loyalty, discretion, and vulnerability. Equity imposes strict fiduciary duties of loyalty, no conflict, and no profit. Fiduciary duties can be expressly excluded by contract, provided the exclusion is clear and enforceable (Chan v Zacharia; Woolworths Ltd v Kelly; Citigroup). These duties arise only in respect of the scope of the fiduciary undertaking. A fiduciary is not liable for conduct outside that scope (Clark Boyce v Mouat). Thus, duties apply only to actions connected to the fiduciary’s role and discretion (Breen v Williams).
1.5 Fiduciary Duties - Trusts
A trust arises where one person (the trustee) holds legal title to property on terms that require them to act for the benefit of another (the beneficiary), who holds the equitable interest (Commissioner of Taxation v Bamford). Equity recognises a trust only where legal title, identifiable property, and enforceable obligations co-exist. The trustee is subject to fiduciary duties of loyalty and good faith and must deal with the property strictly for the beneficiary’s interest.

1.5.1 Valid Trust Formation — Four Elements
To constitute a valid trust, four core elements must be satisfied: (1) a trustee who holds legal title and assumes fiduciary duties; (2) identifiable trust property that is clearly defined; (3) a beneficiary or charitable purpose who holds the equitable interest; and (4) an enforceable equitable obligation binding the trustee to act for the beneficiary’s benefit.
1.5.2 The Three Certainties (Knight v Knight)
A valid express trust requires the ‘three certainties’:

• The first is the certainty of intention. The settlor must intend, objectively, to create a trust (Byrnes v Kendle). Informal language may suffice — e.g., “this is as much yours as mine” was upheld in Paul v Constance [1977] 1 WLR 527. Precatory language such as “wish” or “hope” is insufficient (Gill v Gill).
• The second is the certainty of the subject matter. The trust property must be identified with sufficient precision. Even fractional shares of a bulk class of assets can be valid (White v Shorthall).
• The third certainty is the certainty of the objects. The beneficiaries must be sufficiently certain. For fixed trusts, ‘list certainty’ applies — all must be identifiable. For discretionary trusts, the “is or is not” test applies (McPhail v Doulton), with Re Baden (No 2) offering three views on evidentiary thresholds. In discretionary trusts, no beneficiary has a proprietary entitlement until selected, but may restrain bad faith or capricious exercises of discretion (Karger v Paul).
  • Discretionary beneficiaries do not hold a proprietary interest in any specific trust asset until a distribution is made (Karger v Paul). However, they may restrain the trustee from acting capriciously, in bad faith, or failing to exercise discretion. They cannot compel distributions or collapse the trust (Saunders v Vautier inapplicable).
• A trust will fail if its class of beneficiaries is too vague or capricious (Re Manisty’s Settlement).
  1.5.3 Creation & Formalities of Trusts
  A trust may be created via declaration, transfer, or disposition. A settlor may declare themselves trustee — a ‘self-declaration’ — which does not require transfer of title. Oral declarations suffice for personal property; land requires written form under s 23C(1)(b) Conveyancing Act 1919 (NSW). Where a trust involves a transfer of property, legal formalities apply (e.g., share registry, Torrens registration for land).
  If a beneficiary seeks to dispose of their equitable interest, that must generally be in writing (Grey v IRC) Dispositions may take four forms (Timpson’s Executors v Yerbury): (1) direct assignment to another; (2) direction to the trustee to hold for a new beneficiary; (3) direction to transfer both legal and equitable title; or (4) declaration of trust over the equitable interest itself.
  Equity will not perfect an imperfect gift — if a trust is incompletely constituted (e.g. title not transferred), it fails unless saved by resulting trust principles or Strong v Bird (Milroy v Lord).
  Trustee Removal / Court Supervision
  The court may remove a trustee where continuance would be detrimental to the proper administration of the trust (Miller v Cameron (1936) 54 CLR 572), especially where impartiality, competence, or conflict arises.

1.5.4 Collapse of Trust – Saunders v Vautier
Where all beneficiaries are of full legal capacity (sui juris) and absolutely entitled, they may unanimously agree to terminate the trust and compel the trustee to transfer legal title to them outright (Saunders). This applies to fixed trusts where no beneficiary’s entitlement is subject to conditions or contingencies. Equity recognises that the beneficiaries, as the real owners in equity, may end the trust relationship even against the settlor’s intent. However, this principle does not apply to discretionary trusts, as no single beneficiary is entitled to a fixed share (Re Smith; CPT Custodian).

2 TRACING & PROPERTY PARAGRAPHS
2.1 Substituted Property
Although the original trust asset has changed form, the substitute—[describe asset]—is still readily identifiable, so equity permits tracing into it (Re Diplock). Tracing protects proprietary rights and is not fault-based (Re Diplock; Foskett at 128). Thus, [Plaintiff] may trace into [describe asset] as a direct substitution for the misapplied funds.
2.2 Mixed Bank Account (Wrongdoer Funds)
Trust money mixed with [Defendant]’s funds in account [#]. Under Re Hallett (1880) 13 Ch D 696, the wrongdoer is presumed to spend personal funds first, so the trust monies are deemed the surviving balance. Accordingly, [Plaintiff] may claim the lowest‑intermediate balance of [ ÷ Total  result]—if the asset appreciated; or an equitable lien for the misapplied amount if it depreciated (Foskett 129).
2.4 Multiple Beneficiaries Pool
Where trust funds from multiple beneficiaries are combined, equity applies pari passu distribution by contribution (Caron v Jahani) FIFO (first-in, first-out) rules from Clayton’s Case apply only if parties intended (Keefe v Law Society of NSW). Later deposits do not replenish earlier traceable amounts unless agreed or traceable. Thus [calculate each share] represents [Plaintiff]’s proportionate entitlement.

3 REMEDY PARAGRAPHS
3.1 Constructive Trust Election
A constructive trust may arise where money is transferred under a mistake or failure of consideration, such that retention by the recipient would be unconscionable (Chase Manhattan Bank; Heperu Pty Ltd v Belle).
A constructive trust may be imposed either institutionally, where a fiduciary misapplies trust property (Black v Freedman), or remedially, to prevent unconscionable retention of an asset gained through a joint venture or breach (Muschinski v Dodds). Tracing ends at an innocent volunteer unless the asset remains identifiable and unaltered (per Re Diplock, Boscawen v Bajwa).
As the misapplied funds can be linked to [asset], it is unconscionable for [Defendant] to retain it; the court should declare that asset held on constructive trust for [Plaintiff] to the extent of [percentage] (Black v Freedman; Muschinski).
3.2 Equitable Lien Alternative
If the court considers a constructive trust too intrusive, it may instead impose an equitable lien securing repayment of [ amount], calculated as the value at the date of judgment, with no deduction for causation, remoteness, or foreseeability (Re Dawson; Youyang).
3.4 Account of Profits (Gain‑Based)
A fiduciary who breaches duty may be required to account for net profits, even if the principal suffered no loss (Warman v Dwyer; Lifeplan). As the breach generated identifiable profits of [$ gross], equity may order an account. Net profit = gross minus proven allowances for skill or capital (onus on [Defendant])
Removal of trustees (Miller v Cameron)
The court may remove a trustee where continuance would be detrimental to the proper administration of the trust (Miller v Cameron (1936) 54 CLR 572), especially where impartiality, competence, or conflict arises.
3.5 Remedy Election Statement
Equity prohibits double recovery; [Plaintiff] elects [chosen remedy] prior to judgment, not necessarily at pleading stage, reserving liberty to revert should valuation assumptions change (Warman 561). Where asset value is uncertain, courts may allow contingent election.

4 DEFENCE PARAGRAPHS
4.1 Bona‑Fide Purchaser Defence
[Defendant] claims bona‑fide purchaser for value without notice. To succeed, they must show payment of value, legal title acquired (not merely equitable), and no actual or constructive notice of the breach (Grimaldi v Chameleon; Akers v Samba). If these are established, proprietary remedies and tracing are barred.
Because they [paid value / had notice], the defence [succeeds / fails];
4.2 Change of Position Defence
In response to personal restitution claims, [Defendant] invokes the defence of change of position, requiring an irrevocable alteration of position in reliance on the benefit, good faith conduct, and no dishonesty or fraud (Gertsch v Atsas). Similarly, trustees may be protected by an exculpation clause in the deed, relieving liability for breach. However, it cannot excuse fraud, dishonesty, or bad faith (Armitage v Nurse).

Having irrevocably altered position by [describe expenditure] in good faith, [Defendant] invokes change of position. If accepted, personal restitution may be reduced (Gertsch v Atsas); dishonesty would defeat the plea.
4.3 Torrens Indefeasibility
Where [Defendant] is the registered proprietor of land, title is protected under s 42 of the Real Property Act 1900 (NSW) unless there was fraud, or an in personam equity arises (Fistar).
Because [Defendant] is the registered proprietor of [land], indefeasibility under s 42 RPA applies unless fraud or an in personam equity is proven (Fistar). No such exception is made out, so proprietary claims cannot disturb the title.

5 RESULTING & QUISTCLOSE PARAGRAPHS
5.1 Presumed Resulting Trust
Where [A] contributes purchase money but legal title is vested in [B] without clear gift intent, equity presumes a resulting trust (Calverley v Green). This may be rebutted by the presumption of advancement (e.g. husband → wife: Bosanac), but not in all relationships. In the absence of a clear intention to gift, however, equity presumes a resulting trust. Where a trust has not been properly constituted, legal title not vested. Equity will not perfect an imperfect gift (Milroy v Lord), unless the donor later becomes executor (Strong v Bird (1874).
[A] paid [$] toward the purchase of [property] registered in [B]’s name without clear gift intention.
5.2 Quistclose Trust
Where funds are advanced for a narrow purpose and are segregated, but the purpose fails, equity may find a Quistclose trust: the funds are held on resulting trust for the lender (Barclays Bank v Quistclose; Twinsectra). The money must not have been intended for general use. This is persuasive in Australia but not settled at High Court level.
Funds were advanced for the sole purpose of [describe purpose].
6 ESTOPPEL PARAGRAPH
To establish equitable estoppel, [Plaintiff] must show (Stone v Kramer [2024] HCA 48) a clear assumption or expectation (Legione v Hately), inducement or encouragement by [Defendant] (Waltons Stores), reasonable reliance (Sidhu) on that inducement, to their detriment, and unconscionability.
Here, [Plaintiff] relied on [representation], changed position, and would suffer detriment. Equity may enforce the expectation or tailor proportional relief (Giumelli v Giumelli).

7 ACCESSORIAL LIABILITY PARAGRAPHS
7.1 Knowing Receipt
To establish knowing receipt, Farah v Say-Dee indicates that the plaintiff must prove receipt of trust property; beneficial receipt (not as agent or trustee), and knowledge of breach, at least wilful blindness (Baden scale levels 1–3: Grimaldi v Chameleon). The recipient holds the property on constructive trust. Liability attaches at Baden categories 1–3 (actual knowledge, wilful blindness), but not 4–5 (constructive notice)
7.2 Knowing Assistance
To establish knowing assistance, Farah v Say-Dee indicates that the plaintiff must prove a dishonest and fraudulent breach, substantial assistance by [Defendant], and knowledge of facts making the conduct dishonest.  The assistance must be causally significant to the fraudulent design (Harstedt Pty Ltd v Tomanek), while dishonesty amounts to a transgression of ordinary standards of honest behaviour (Hasler). Liability for knowing assistance follows (Farah [159]); remedy is a personal account of profits or compensation.
[Defendant] actively assisted by [act] knowing the facts that made the design dishonest.

8 TRUSTEE DUTY PARAGRAPH
Acting as trustee of [trust], [Defendant] was required to act prudently (Trustee Act 1925 (NSW) s 14A; Speight v Gaunt) and obey the trust instrument (Youyang), while acting honestly and for proper purposes. Their unauthorised investment in [asset] breached those duties, equitable compensation (or surcharge) equal to [$] is payable, secured by the trustee’s indemnity lien (Carter Holt).

9 FUTURE PROPERTY
[Assignor] purported to assign [describe future property, e.g. “future royalties” or “expected dividends”].
An assignment of future property is invalid at law, future property cannot be assigned before it exists (Norman v FCT). However, equity enforces a contract to assign future property if it was made for value, sufficiently certain, and the property has since come into existence (Tailby; Shepherd v FCT). This principle also informs declarations of trust: a person cannot declare a trust over property not yet owned unless the arrangement complies with equity’s rules on future interests (Corin v Patton). Once the property materialises and consideration has passed, equity may enforce the arrangement.
Because [Plaintiff] provided consideration and the property is now in existence, equity should compel performance.
10 JOINT ENDEAVOUR CONSTRUCTIVE TRUST
A remedial constructive trust may arise where parties jointly pursue a venture over [property] without formal trust terms, and the venture collapses (Muschinski v Dodds). Where it would be unconscionable for one party to retain the benefit, the court may adjust beneficial interests proportionately (Baumgartner v Baumgartner).

11 UNCONSCIONABLE DEALING

To set aside a transaction for unconscionable dealing, [Plaintiff] must prove, they were under a special disadvantage (e.g., illness, inexperience, language barrier), [Defendant] knew or ought to have known, and [Defendant] exploited it to secure unfair benefit.(Commercial Bank v Amadio (1983) 151 CLR 447).
[Plaintiff] suffered a special disadvantage [detail] exploited by [Defendant], whose conduct was unconscientious. Equity sets aside or re-writes the impugned transaction (Commercial Bank v Amadio).

12. DISPOSITION OF EQUITABLE INTERESTS
    [Plaintiff] holds an equitable interest in [property] and has sought to [assign / redirect / dispose] it. Under s 23C(1)(c) Conveyancing Act 1919 (NSW), dispositions of existing equitable interests must be in writing and signed by the disposer. A direction to a trustee to hold for another is a disposition that triggers this rule (Grey v IRC).
    However, where the disposer directs the trustee to transfer full legal and equitable title to another, no separate writing is required (Vandervell v IRC). Equity will not assist a volunteer nor perfect an imperfect gift unless formalities are met (Milroy v Lord), subject to exceptions like donor-as-executor (Strong v Bird).

Remedy Election Paragraph

The claimant elects a [constructive trust / equitable lien / equitable compensation / account of profits] based on [property identifiability / profit / loss / tracing availability]. This remedy offers the most appropriate response to [fiduciary breach / trust misapplication / tracing outcome], and avoids double recovery (Warman v Dwyer). Equity requires election before judgment, not at pleading (Warman, 561), and the court retains discretion to mould relief where fairness requires (Giumelli v Giumelli).

QUICK NUMBERS & FORMULAS (EDGE OF SCRIPT)

• Share = (Trust ) × Value.
• LIB = lowest balance post‑deposit.
• Net profit = Gross − proved deductions.

Important:

• Right to receive future compensation
• Trustee sells shares and splits equally - living descendant from great grandparents - 18 years or older (identifiable)
• Discretionary trust to equity course - excellent grades (charity?)
• Identifiable property, vague terms, discretion with the sale of the rest towards charity

Important:

• Wealth Custodian’ (‘WC’), a professional trustee company that serves as the corporate trustee for the Charlton Family Trust (CFT).
• According to the trust deed, the trustee may distribute income at their absolute discretion and have powers to manage, lease, or sell any of the properties.

Important:

• Dural farm
  • Beth → Cam
  • Beth → David (Voicemail)
  • Voicemail → Adam (Holiday)
• Dividends Greenbak
  • Beth → David (2025-2026 financial)
• Kellyville Farm
  • Beth → David (phone)
  • Voicemail → David
• Will (document)
  • Marge

Important:

Important: