Monash Law Students Society

STUDENT TUTORIAL
PROGRAM 2015

SKETCH NOTES
Equity

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INFORMATION FOR STUDENT USE
NAME: Tim Rankin
SUBJECT: Equity Law (LAW3111)
STUDIED: Semester 2, 2014
LECTURER: Patrick Emerton
Topics included in the Semester 2, 2015 Reading Guide which are not referred to in these notes:

Section 1: Introduction

Cases included in the Semester 2, 2015 Reading Guide which are not referred to in these notes:

Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266.

FHR European Ventures LLP v Cedar Capital Partners LLC [2014] 3 WLR 535.
Wilson v Ferguson [2015] WASC 15.


ASSIGNMENT OF PROPERTY RIGHTS IN EQUITY
(1) Voluntary Assignment of Legal Property
Where a party seeks to voluntarily assign legal property (gift), and fails at law, equity will ordinarily
not assist the volunteer. However, in some circumstances the rule in Corin v Patton will find the
assignment effective where the assignor has done everything they must do to effectuate the
transfer, and then removed themselves from the process (Milroy).
(a) Property where the rule in Corin v Patton can apply.
Property
Torrens
System
Land

Legal Requirements for Assignment

Registration of a proper instrument of
transfers, signed by both transferee and
transferor, lodged with the Duplicate
Certificate of Title: (s 40 TLA 1958).

Equitable Requirements for rule in CvP

Instrument of transfer in registrable form
delivered or constructive delivery to
assignee with DCT.
Wont be made out where:
Fail to request DCT from bank (Corin).
Instrument of transfer missing or in
wrong form (Milroy).
Shares
Registration in books of company of an
Execute transfers and deliver or
sold off- instrument in the prescribed form with
constructive deliver share certificates
market the share certificates (s 1071B
(Milroy). Where only remaining step is
Corporations Act 2001 (Cth)).
registration by company (Re Rose).
Choses Absolute transfer in writing, signed by
If assignee is equipped with valid notice and
in action the transferor, and notice to the debtor merely needs to show debtor to change
or other party of the transfer (PLA s 134). legal title: Norman.
s 134 provides only the power to assign an obligation, not change the character of the
debt itself (Bluebottle). All that is assigned is the chose in action or debt, not any
associated rights (Equuscorp).
(b) Property where the rule in Corin v Patton can not apply
Where property is either fully transferred, or not transfer (i.e. there are no steps or gaps between
starting the process and the transfer) there is no scope for the rule in Corin v Patton to apply.
Property
General Law Land
Choses in
possession
Cheques

Requirement for transfer

Assigned by deed (s 52(1) PLA 1958).
Intention of transferring legal ownership with delivery:
possession (Re Stoneham); or
constructive possession (Thomas v Times).
Bearer or Cash cheques by delivery. Cheques made payable to person
endorsement and delivery (s 40 Cheques Act 1986 (Cth)).
Cheques are either assigned or not: Jones v Lock.

(c) Constructive delivery

Has the assignor delivered or constructively delivered all relevant documents to the assignee?

Giving to agent where the assignor can still call off the relevant transaction = No (Milroy).
Placing somewhere and informing the receiver wh ere the property is = Yes: (Thomas).
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(2) Assignment Only Recognised in Equity
There are two categories of assignments of present property recognised only in equity:

where the property is only recognised in equity; or

where the manner of dealing with legal property is only permitted in equity.

The test for equitable assignment is has there been a manifest intention to immediately assign
(Shepherd per Kitto J).

Therefore there must be a manifest or clearly expressed intention, an intention that is

evidenced by implication is not manifest.
The intention must be for assignment to occur immediately, if I write a birthday card today
purporting to grant you equitable property, but the birthday card is found tomorrow, there
was not an immediate intention. However, if I deliver the birthday card tomorrow, this
demonstrates that my intention is still immediate.

(3) Assignment of Future Property

(a) Is it future property?
Future property is property that has not yet come into existence, or to which the transfer is not yet
entitled. It is property that someone hopes to own.
(b) For Value
Where a party assigns future property for value, equity will recognise that equitable title has passed
at the moment the property becomes identifiable in the hands of the assignor (Tailby).
(c) Voluntarily
Equity will not recognise the voluntary assignment of future property (Williams). However, in
Shepherd the High Court recognised the assignment of those aspects of present property which may
give rise to future gains.
Case
Assignment
Williams The first 500 of trust income.
Norman Next years dividends payable on
shares.
All right, title and interest in
respect of next years interest
payable on the first 3,000 pounds
of a loan.

Outcome
Invalid assignment of future property.
Invalid assignment of future property.

Menzies CJ invalid assignment because the future

existence of the loan was contingent on it not being
repaid which the debtor could do so at will.
Windeyer J valid assignment carving out a present
property right.
Shepherd All right, title and interest in and Barwick CJ valid assignment of a carved out part of
to 90% of the royalties entitled to the present chose in action.
me under a licence agreement
Importantly, it contemplated no property existing in
for the next three years.
the future.
Are you assigning the future fruit from the tree, or the part of the tree that will grow the fruit?


BREACH OF CONFIDENCE
Breach of confidence is an equitable doctrine that protects rights of confidentiality. Equity will
protect information that satisfies the three elements stated by Megarry J in Coco v AN Clark in
addition to the requirement for specificity from OBrien v Komesaroff.
(1) The Information Must be Specific
Firstly, the information claimed to be confidential must be defined with sufficient precision (OBrien
v Komesaroff).
Ask, which part of the information was not common knowledge (OBrien v Komesaroff per Mason J)?
This requirement exists because a common remedy for breach of confidence is injunction, thus the
information must be able to form the subject matter of an injunction (Ocular Science). In addition,
the requirement exists so that the defendant may formulate an individuated defense to the items of
information allegedly misused (Ocular Science).
(2) Information must have the necessary quality of confidence
Secondly, the information must have the necessary quality of confidence that equity is concerned
with protecting. This question may be considered in two limbs, secrecy and value.
(a) Secrecy
It cannot be claimed that information is confidential if it is a matter of common knowledge. Thus it
cannot be public property or public knowledge (ABC v Lenah). Does the
Ask: Has the information entered the public domain?
Factor
Degree of
accessibility
If generally
accessible then
the info will be
considered in
the public
domain.

Case Examples
Jane Doe Rape victim testifying in Court. ABC published her name.
People who know who she is due to their presence in the courtroom have
been brought into the circle of secrecy.
People who were not in the courtroom were subject to a statutory regime
designed to keep them uninformed.
Therefore, not easily accessible.

AFL subscribers to a media information service were notified of info.
a limited dissemination to a small group of people will not remove
confidentiality. Circle of secrecy.
Authority of
Speculation, gossip or even an assertion from an anonymous source is not
disbursement sufficient for information to have entered the public domain: AFL.
Effectiveness of If an injunction is ordered, will the relevant detriment be avoided: AFL?
Injunction?
This will indicate information is sufficiently secret.
Security of
Lenah films of possum slaughtering released and distributed by ABC.
Location?
Private property did not exclude public access to the requisite level.
The slaughter of possums was heavily regulated, took place on regulated
facilities and the process was privy to govt inspection.


(b) Value
Equity is not concerned with protecting banal or trivial information. The information must have
some sort of value.
(i) Commercial value
Case
Talbot

Facts/Outcome
T.V producer pitched an idea for new TV show with scripts of questions, structure of
episodes and camera set ups etc.
The idea of talking to millionaires about generating wealth was banal and trivial.
However, once it had been written up as a format for a T.V program, with a script, that
does involve sufficient creation to attract equitys attention.
Franklin A nectarine grower owned a new breed of nectarine, developed through cross-pollination
and grafting. A rival and former employee stole a branch from the growers property.
The information was sufficiently specific as the genetic encoding contained within the
product tree.
The tree, as a self-replicating source of information, was distinguished from some
other scientific and genetic information where there would be laboratory notes or a
different source of the same information.
Once the first element was made out, secrecy was clearly established and, as a classic
trade secret (a secret formula or product) value was also established.
(ii) Non-commercial value
Equity may also protect information that has non-commercial value.
Case
Foster

Giller

Facts/Outcome
An anthropological book published details on a group of indigenous Australians and their
religious practices
The information was secret in the relevant sense as only those initiated into the
religion and brought into the circle of secrecy knew of it.
Information of religious practices has a value in social dignity.
Films of sexual encounters, some with and some made without the Ps knowledge.
Typically the information that someone is having sex is not a secret (eg. a couple with a
child). However the mode of depiction can be secret knowing and seeing is different.

(iii) Information without value / banal

Case
Lenah

Facts/Outcome
A factory in Tasmania processing Possum meat. A group of animal activists snuck into the
factory and hid a camera which recorded the butchering of the animals.
The factory is, in the relevant sense, a public place. No gates or guard dogs or other
security. Many regulatory officers attended and business tours occurred.
Everyone knows what occurs in a butchering factory. The knowledge that animals are
killed and processed is banal and not of the appropriate value.
Douglas Secret photos of celebrity wedding that were to be exclusively published elsewhere.
v Hello! Lord Walker (in dissent) may be considered as stating the Australian position.
That a party is offering to pay for something does not mean it is valuable info.
The details of a wedding are banal. There was no personal intimacy.
There was no pioneering innovation in weddings.


(3) Circumstances Importing the Duty
Equity does not provide a carte-blanche protection for all secret and valuable information. Equity
fastens to the conscience which must be bound by circumstances importing a duty of confidence.
(a) Where the information was given
Where the information has been given to the defendant, the question is whether a reasonable
person, standing in the recipients shoes, would have realised that the information was given in
confidence (Coco per Megarry J).
The classic example is the employee, who is given information in the context of work.
(b) Where the information was taken
Where information is stolen or taken the Court will import a duty of confidence (Franklin v Giddins).
(c) Where the information passes to a third party?
Where information passes to another party, the action may be made out again. The analysis of
specificity and value will be the same. However, each person in a chain of recipients must acquire
the information in circumstances importing a duty to be so bound.
For example, in Franklin v Giddins the male defendant stole the relevant information however the
female defendant was also liable for breach of confidence by virtue of her knowledge of the theft.
(d) Where the information was transmuted accidentally?
Where an obviously confidential document is wafted to a third party, or where someone comes
across an obviously confidential document accidentally, an obligation of confidence may arise (A-G v
Guardian per Lord Goff).
The question is an objective one; would a reasonable person in the shoes of the recipient realise that
the document was obviously confidential?
(4) Unauthorised use
The fourth element for breach of confidence, is that the information must be used without
authorisation (Coco per Megarry J).

Where information is taken any use will be unauthorised (Franklin; Talbot).

Where the information is given there may be some authorised uses.

Ask whether the information was given as part of a voluntary scheme or mandatory scheme? What
is the regulatory framework / purpose of the information?

Ensuring truth in advertising does not require regulative vetting of ads for truth (Castrol).
Preventing poison in the community is a stricter regulative purpose and may indicate more
powers to insist for information (Smith-Kline).

There is no need to show detriment (Moorgate per Gummow J).


(5) Defences
(a) Iniquity
A defendant may argue that they only disclosed information in breach of an obligation of confidence
in order to bring to light some wrongdoing. This is the defence of Iniquity, and is subject to a three
step test set out in AFL v Age:
(1) is a serious wrong or civil misdeed being disclosed;
(2) is the iniquity of public importance (that is, does it impact the community); and
(3) is the disclosure to a third party with a real and direct interest in redressing the alleged
wrong (will the disclosure actually help fix the wrongdoing)?
You cannot plead your own iniquity to defeat someone elses duty of confidence (Kumar).
(b) Public Interest
A defendant may argue that the UK defence of public interest ought to apply in Australia (Lenah per
Gleeson CJ). This is not settled law in Australia (AFL) however may apply if D can satisfy the court
that there is a public interest in having the information known (Castrol).
(6) Remedies
Breach of confidence gives rise to personal remedies only, therefore the available remedies are:
(1) Injunction primary remedy.
a. Negative injunction specific performance.
(2) Equitable Compensation
a. Lord Cairns Act damages Talbot.
b. Equitable compensation (Giller) including exemplary damages.
(3) Account of Profits
a. Money made from the information usually trade secrets cases.
Remember to elect!

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FIDUCIARY RELATIONSHIPS
(1) Is there a Fiduciary Relationship?
(a) Accepted Categories
Certain relationships are accepted as of a fiduciary character. This is not by way of a legal
presumption or deeming, but because those relationships necessarily exhibit the characteristics that
attract equitys protection.

Partners (Chan v Zacharia; Birchtnell).

Trustees and beneficiaries (Boardman; Keech v Sandford).
Agents and Principals.
Employees and Employers (A-G v Reid; Warman).
Directors and companies (Grimaldi; Regal Hastings).
Solicitors and Clients (Farrington v Rowe; KPMG; Nocton).

(b) Factual Characterisation

Where a relationship is not an accepted category, it may still be fiduciary where one party possesses
powers or discretions, capable of affecting anothers legal or practical interests, in circumstances
where the other party is vulnerable (Hospital Products per Mason J).
Per Breen v Williams a doctor will not be a fiduciary relationship unless there exists some legal or
practical interest of the patient in question usually a pecuniary interest in either:
receiving competitively priced and appropriate medical care; or
commercializing aspects of the patients medical record.
There is no general interest in:
being of good health (Breen v Williams); or
not being tortured (Habib).
Parties to a joint venture will be fiduciaries where there relationship resembles a partnership and
may occur prior to the actual formalities of a future partnership (UDC v Brian).
(c) Scope of Relationship
Relationships may be fiduciary as to all or some of their aspects. In determining the scope of the
fiduciary duty, consider:
the extent of connection to the fiduciary position (VUT);
the content of the contractual relationship between the parties (Hospital Products).
the character of the relationship (Birtchnell); and
the course of dealing actually pursued (Birtchnell per Dixon J).
However, the scope of duty will not extend to positive duties, which are the domain of contract and
negligence (Breen v Williams). Not liable for profits gained outside scope of relationship (VUT).

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(2) Breach of the Conflicts Rule?
A fiduciary cannot enter into transactions where a serious possibility of conflict exists (Chan v
Zacharia per Deane J). A real, sensible possibility of conflict, or not merely hypothetical, is required
(Boardman per Lord Upjohn).
There is no requirement for the fiduciary to be dishonest (Keech v Sandford).
(a) Duty v Interest
A conflict between a duty to one party and the interests of the fiduciary himself or herself.
Nocton

A solicitor advised a client to release a mortgage over a property the solicitor also had a
mortgage secured against. Moved Noctons interest up in priority.
Keech
The renewal of a lease in the name of the trustee, not beneficiary.
Boardman Boardman as solicitor to trustees acted with the trustees to obtain directorship of a
company to great financial reward to all parties. Including Boardman = breach.
Chan
Dr renewed a lease in his own name, benefitting himself at expense of partnership.
(b) Duty v Duty
A conflict between a duty to one party and a duty to another party. No one can serve two masters
Concurrent duties arises where both duties are owed simultaneously.
In Farrington a solicitor advised one client, who had won moneys in a personal injuries matter, to
invest in another client (who subsequently went bankrupt). This was a conflict of the solicitors
concurrent duties to both clients.
Successive duties arises where former duties clash with current duties.
In KPMG the Court held KPMGs obligations to a former client ended at the termination of their
retainer and that the only recourse was breach of confidence. However, in Victoria Spincode
suggests that KPMG was wrongly decided and that the fiduciary obligation survives the termination
of any retainer.
It was important that the solicitors also owed a duty to the court to act with integrity throughout the
carriage of litigation. The duties to the client flow from this, not a fiduciary duty.
In Chan the relevant partnership had ended yet the doctor exercised powers or discretions that the
other was vulnerable to misuse. Arguably fiduciary obligations following the termination of an
accepted category are possible where they satisfy a factual category of fiduciary.
Pilmer

Directors of M1 and M2 and shareholders in M1 convinced M2 to purchase M1. They

obtained an independent evaluation of M1 which subsequently overstated its price.
The fiduciary obligations of the accountants ended when they delivered their report to
the board of directors (c.f. Kirby J who says it ends when delivered to shareholders).

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(3) Breach of the Profits Rule?
A fiduciary cannot make unauthorised profits through exercising their powers or discretions as
fiduciary (Chan per Deane J). This is known as the profits rule, and extends to a benefit or gain
obtained by reason or use of the fiduciary position, or opportunity or knowledge resulting from it.
It is no defence that the fiduciary gave consideration for the profit or exercised skill in creating the
profit. Equity will be very strict in enforcing the profits rule, even where enforcing it will grant other
parties a windfall (Regal Hastings).
Chan

Dr refused to renew a lease with the partnership and instead, covertly renewed in his
own name and to his profit.
UDC v
Three parties agreed to construct a shopping centre (builder, land owner, financier) as a
Brian
joint venture. The land-owner and financier entered an agreement whereby the rents
from the shopping centre would pay off a separate debt owing to the financier.
Regal
A cinema companys directors, solicitor and friends formed a subsidiary, capitalised it
Hastings with their own funds and acquired the lease over the only other cinema in town. They
then sold this monopoly at a commercial price however, by acquiring the shares in the
subsidiary had made a profit.
Boardman Boardman as solicitor to trustees acted with the trustees to obtain directorship of a
company to great financial reward to all parties. There was a causal nexus between Bs
role as solicitor and knowledge of the opportunity and not all trustees consented.
A-G v Reid Taking bribes and secret commissions clearly unauthorised profits.
(4) Defences - Consent
Consent may be a defence to breaches of the conflict or profit rules. There are several conditions:
All fiduciary beneficiarys must unanimously consent (Boardman).
A companys board can give consent on behalf of a company to all but themselves as
Directors (Regal Hastings). Directors likely also need approval of the shareholders at an AGM
except where the shareholders nominated the Board (QLD Mines).
Consent must be real and genuine and fully informed (QLD Mines).
The consent may come either before (approval) or after (ratification) the event.
QLD Mines seems to suggest that a party may consent by acquiescence. However, this proposition is
yet to be endorsed into Australian law since this 1978 Privy Council case, and is arguably at odds
with the proposition of full and informed consent.
(5) Remedies
Personal Account of Profits
Liable for a profit made within scope/ambit of duty (Warman).
Profits in breach of duty (Regal Hastings).
Equitable Compensation
Loss incurred through investing (from conflict) (Farrington).
Equitable Rescission of the transaction entered with P (McKenzie).
Injunction restraining fiduciary from breaching obligations (Spincode).
Property Constructive trusts (Boardman).
Equitable liens (Warman).

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(6) The Rule in Barnes v Addy
(a) Knowing Assistance
A third party who, with knowledge, assists a trustee in a dishonest and fraudulent design will be
liable per the second limb of the rule in (Barnes v Addy).
(i) Assistance in a dishonest and fraudulent design.
Assistance may in advance, helping plot or plan, or after the event in dealing with the asset.
The conduct need not be criminally fraudulent nor morally reprehensible (Farah Constructions),
therefore the threshold for this is very low (Westpac).
(iii) Knowledge
In Farah Constructions the Court endorsed the Baden scale of knowledge with categories (1) (4)
being sufficient to attach liability.
(1)
(2)
(3)
(4)

Actual Knowledge;
Willful blindness;
Willfully and recklessly failing to make reasonable inquiries.
Knowledge of circumstances which would indicate the facts to an honest and reasonable
person.
(5) Knowledge of circumstances which would put an honest and reasonable man on inquiry.
(b) Knowing Receipt
A third party who knowingly receives trust property will be liable per the first limb of the rule in
Barnes v Addy.
(i) Property
Includes property held on trust and subject to other fiduciary obligations (Grimaldi). However, it
does not include property which does not belong with the plaintiff:

In Consul a director misappropriated an opportunity to acquire a house and used another

company to acquire it instead. Knowing assistance, not receipt, as house never belonged to P.
Would also include bribe moneys / secret commissions etc (A-G v Reid).

(ii) Receipt
Must acquire some form of title, not merely act as a conduit in the transfer of the fiduciary asset.
(iii) Knowledge
Categories (1) (4) of the Baden scale will be sufficient: Farah confirmed in Grimaldi.
May receive the property innocently and receive the knowledge later: (Varga).
(c) Remedies
Barnes v Addy liability is personal, therefore only personal remedies are available.

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PERSONAL REMEDIES
Where more than one is available the plaintiff may elect (Warman). The P may collect from each
defendant to the extent of the elected remedy (Club of Clubs). However there is to be no double
compensation.
(1) Remedies
(a) Non-money legal remedies
Remedy
Factors
Specific
1. Parties must be willing and able to perform.
Performance 2. No continued supervision required (JC Williamson
where services required ongoing cooperation (cinema
confectionary)).
Commonly ordered where one off performance contracts
e.g. sale of land.
Injunction & 1. Granting must be just and convenient (s 37(1) SCA).
Specific
2. Balance of convenience may be influenced where one
Delivery
party makes an undertaking (Foster).
3. Parties need to show a serious question to be tried and
that they have a prima facie case (ABC v Lenah).
4. Does a negative injunction effectively demand specific
performance?
a. Lumley opera singer can chose not to sing at all.
b. Atlas company is not versatile and has no other
operations.
Declarations 1. Will only be useful where the relevant party would
follow the declaration of law (E.g. Government) (Cth v
Sterling).
2. Need not be the only remedy (r 23.05 Sup Court Rules).
Equitable
1. Because there is a transaction you may assume consent
Rescission
to entering the transaction.
2. Rescission to the extent of non-disclosure (Vadasz
party gave a guarantee on a misunderstanding of its
terms).
3. Partial rescission is not available for unauthorised
profits (Maguire contrasted Vadasz as a stand alone
transaction).
4. Where you would be entitled to rescission however can
not obtain it (e.g. BFPVWN) money in lieu is permitted:
(McKenzie v McDonald).
Pecuniary rescission v equitable compensation timing?

Outcome
Obligations under the
relevant contract
must be performed.

The status quo is

maintained.

The correct statement

of law is made
authoritatively
The transaction is
rescinded.

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(b) Money remedies
Remedy
Account of
Profits

Factors
1. Extends to all profits made in the context of the breach
(Boardman). However, if it is argued that the profits
themselves are held on trust, then dealings in them may
also be within scope.
2. Where the D has made a simple gain, strip the D of that
gain (Regal Hastings).
3. Where the D has created a stream of profits, obtain AoP
for the head start period (Warman).
4. Allowances can be made for contributions of time and
effort to make the profit (VUT).
Lord Cairns
Court may grant damages in addition to, or in substitution
Act Damages for, an injunction or specific performance (s 38 SCA).
1. Injunction or specific performance must have been
available at the time of the suit commencing (Mills).
Mills decided not to exercise an option to purchase based
on a misrepresentation. Sought specific performance then
discovered another had acquired title.
Note: no duty to mitigate whilst in Court seeking ownership
of the relevant property.

Outcome
Creates a debt owing
by the D to the P. A
disgorgement remedy
which does not
impact ownership.

Moneys in lieu of
specific performance

(c) Equitable Compensation

Remedy
Equitable
Comp

Factors
Outcome
1. Measured at the time of the judgment: Re Dawson.
Compensates the P
2. Causation of loss is a but for test (Youyang Minters for their losses.
released moneys improperly. Even though some loss
would have occurred anyway, Minters liable).
a. However, note the common sense test in Canson.
b. Why cant we rely on mitigation? Orthodoxy.
What losses are compensable?
1. Trustee paying out money improperly (Re Dawson).
2. Releasing trust money prematurely (Minters).
3. Compensation for the release of security interest
(Nocton).
4. Costs of maintaining children based on estoppel (W-G).
5. Embarrassment and humiliation (Giller).
3. Not exemplary damages: (Harris per Heydon J) however
possibly aggravated damages (Giller).

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(4) Causation and the Common Law
Common Sense Causation - equitable novus actus interveniens?
In Canson solicitors aided in a land transaction however flipped the property to give themselves a
secret profit as part of the transaction. A building was constructed however, due to an engineering
error, had to be reconstructed.

Breach of the profits and conflicts rule was made out an, applying but for causation the
solicitors would be liable for the reconstruction.
However, applying equitys common sense approach the solicitors could not be said to
have caused the engineering error. Therefore no liability.

Common Sense Causation - Equitable mitigation?

In CBA v Smith clients of the CBA sought financial advice in circumstances comparable to a solicitor-
client relationship. The CBA advised Smiths to invest in property of another client which was non-
profitable.
Breach of the conflicts rule was made out and clearly the losses would not have occurred but
for the advice of the CBA.
However the CBA was not liable to compensate for the entire loss as the Smiths should have
abandoned the investment when they discovered it was unprofitable. Not mitigation, but an
application of common sense causation.
Both are an application of equitys common sense causation, however rely on analysis rooted in the
same motivations for the doctrine of novus actus or mitigation. Therefore, when shaping your
understanding of common sense causation, look to the same sorts of matters as in common law.

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PROPRIETARY REMEDIES
Proprietary remedies are only available for breach of fiduciary duty. Two remedies:
Remedy
Constructive
Trust
Equitable
Lien

Outcome
P gains equitable title in the
asset - must be yielded to them
P gains a security interest in the
asset, securing another debt.

Priority
Yes trust assets excluded
from bankrupt estate.
Yes secured creditors take
priority over unsecured.

Change in $
Yes P has
ownership.
No P limited to
debt.

(1) Constructive Trust

A trust imposed by equity where it would be unconscionable for the legal owner of an asset to retain
the beneficial interest in that property.
(a) Misappropriation of fiduciary asset
A constructive trust is automatically imposed at the moment the misappropriation occurs.
(b) Misappropriation of opportunity
Occurs where the property would have come to the plaintiff, but for the defendant.
A constructive trust may be imposed over the asset at the moment the misappropriation occurs. This
is discretionary for the Court to determine, having regard to the impact of the CT on innocent parties
(VUT v Wilson).
Where a constructive trust cannot be imposed, consider imposing a lien or other arrangement.
Boardman Boardman acquired the opportunity to take up directorship over the textiles company
and make a profit for himself and the other trustees in his role as fiduciary.
Therefore a CT was imposed over his shares in the company.
VUT v
Two university employees collaborated with a third person to invent and patent a new
Wilson
IP right - whilst on Uni time, using Uni resources and on Uni premises.
Could not impose a CT over the patent as that would unduly hurt the third party.
Cannot carve out a right held in a joint venture.
Since the three had incorporated a company and assigned it the patent in exchange
for shares the Uni could be granted a CT over the shares of the two fiduciaries.
(c) Fiduciary receipt of bribes or secret commissions
Where the property would never have left the third party had the fiduciary had acted properly.
Lister
A-G v
Reid
Sinclair

P has no logical property claim to ownership, therefore no CT available.

Lister is wrong, do not treat criminal fiduciaries worse than the innocent Boardman. CT
imposed at the moment of receipt on the basis of doing justice.
Lister is correct, there is no property logic for the property falling to the plaintiff.
Proprietary remedies unduly impact third parties and justice should be done through
personal remedies.
Grimaldi Lister is not correct Australia law. A proprietary remedy is available however not
mandatory and should not be granted where it would unduly impact third parties.

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(2) Tracing
Where a fiduciary exchanges an asset, which another enjoys equitable title to, the equitable owner
may trace their title to the new asset (Foster).
(a) Where Property is mixed into an indistinguishable pile.
Where property is mixed in an indistinguishable pile and then used, for profit or loss, the plaintiff can
elect whether or not it was their property that was used (Brady v Stapleton).
(b) Where property is combined into an intangible asset.
Where the indistinguishable bundle is used to acquire an intangible asset, ownership is
proportionate to ownership of the bundle (Foskett).
(c) Where property is combined to create a new tangible asset.
Where the indistinguishable bundle is used to acquire a new tangible asset ownership is
proportionate to ownership of the bundle (Scott v Scott).
(d) Where property is combined to improve an existing tangible asset.
Where the relevant asset is added to an existing tangible asset (e.g. bricks are added to someone
elses house, or fur pelts are added to someone elses coat) equitable title is extinguished.
(i) Against a wrongdoer:
The Plaintiff can instead claim equitable compensation for the reduction of trust property secured by
an equitable lien over the improved asset.
(ii) Against a third party
However, where the recipient is an innocent volunteer (that is, a volunteer without notice) or
BFPFVWN the title will be extinguished and no personal remedies will be available (Re Dawson).

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