Commonwealth Common-Law Equity and Trusts (LLB Academic Unit)

# Commonwealth Common-Law Equity and Trusts — Topic Notes

GROUNDED (web-sourced from free-access law: AustLII (austlii.edu.au)) - citations real but not cross-checked against our DB; verify before deploy.

## Part 1: Equity — Origins and Equitable Remedies

### Historical Development and Fusion of Law and Equity

**Proposition:** Equity developed as a parallel system to common law to provide remedies where legal remedies were inadequate, and the two systems were eventually fused.

**Authority:** The principle is foundational to all Commonwealth equity; while no single case "decided" this history, the fusion is reflected in Lord Browne-Wilkinson's judgment in *Westdeutsche Landesbank Girozentrale v Islington London Borough Council* [1996] AC 669, which discusses the origins and development of equitable doctrine.
**Source:** AustLII case note [CASE NOTES WESTDEUTSCHE LANDESBANK GIROZENTRALE v ISLINGTON LBC](https://www.austlii.edu.au/au/journals/MelbULawRw/1996/24.pdf)

### Maxims of Equity

**Proposition:** Equity operates according to core maxims, including "He who seeks equity must do equity," "Equality is equity," and that equity acts upon conscience.

**Authority:** These maxims are discussed in *Birks, Peter — "Equity, Conscience, and Unjust Enrichment"* (1999) 23(1) Melbourne University Law Review 1, which traces the foundational role of conscience in equitable doctrine.
**Source:** AustLII journal article, Melbourne University Law Review [Equity, Conscience, and Unjust Enrichment](https://www.austlii.edu.au/au/journals/MelbULawRw/1999/1.html)

### Injunctions — Prohibitory, Mandatory, and Freezing Orders

**Proposition:** Injunctions are discretionary equitable remedies available to prevent breach of legal or equitable duties; they may be prohibitory (restraining conduct), mandatory (requiring action), or freezing (restraining asset dissipation). Specific performance is the equitable counterpart to damages.

**Authority:** The nature and conditions for injunctive relief in equity are discussed across multiple Commonwealth authorities. Australian courts recognize jurisdiction to grant injunctions under constitutional and equitable grounds, with the remedy subject to the balance of convenience test.
**Source:** AustLII academic articles: [EQUITABLE DAMAGES: A POWERFUL BUT OFTEN FORGOTTEN REMEDY](https://classic.austlii.edu.au/au/journals/DeakinLawRw/1999/3.pdf); [REMEDIES IN COMMERCIAL LITIGATION](http://classic.austlii.edu.au/au/journals/NSWJSchol/2014/4.pdf)

### Specific Performance and Equitable Defences

**Proposition:** Specific performance is an equitable remedy ordering the defendant to perform contractual or trust obligations. It is discretionary and refused where common law damages are adequate, where performance cannot be supervised, or where equitable defences (undue influence, mistake, fraud) apply.

**Authority:** The principles governing specific performance are derived from English common law roots and applied consistently across Commonwealth jurisdictions. The remedy is withheld in cases where the court cannot adequately supervise performance.
**Source:** AustLII [REMEDIES IN COMMERCIAL LITIGATION](https://www.austlii.edu.au/au/journals/NSWJSchol/2014/4.pdf); [THE EQUITABLE APPROACH TO MISTAKE IN CONTRACT](https://www8.austlii.edu.au/au/journals/ResJud/1957/3.pdf)

### Rescission, Rectification, and Account of Profits

**Proposition:** Rescission unwinds a contract ab initio for misrepresentation, undue influence, or fraud. Rectification corrects documents that fail to record the parties' true intention. Account of profits requires wrongdoers to disgorge benefits obtained in breach of fiduciary duty.

**Authority:** These remedies are equitable in origin and reflect the principle that equity will relieve conscience and correct wrongs.
**Source:** AustLII academic sources on equitable remedies framework.

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## Part 2: Express Private Trusts — Creation and Validity

### The Three Certainties (Knight v Knight)

**Proposition:** An express private trust requires three certainties: (1) **Certainty of Intention** — the settlor must intend to create a trust, not merely a moral obligation; (2) **Certainty of Subject Matter** — the trust property and the beneficial interests must be clearly identified; (3) **Certainty of Objects** — the beneficiaries must be ascertainable.

**Authority:** *Knight v Knight* (1840) 49 ER 58 (Ch) — the foundational case establishing these three requirements.
**Source:** AustLII references throughout equity scholarship; confirmed in articles discussing the three certainties framework.

### Constitution of Trusts — Milroy v Lord, Re Rose, Pennington v Waine

**Proposition:** A trust is constituted when the settlor has done all within their power to vest the beneficial interest in the trustee. This may occur by (a) transfer of legal title to the trustee, (b) declaration of self as trustee, or (c) equitable intervention where the settlor has "done all" required.

**Authority:** 
- *Milroy v Lord* — Establishes that once the settlor has done all within their power to effect a transfer, the gift is complete in equity, even if further formalities remain.
- *Re Rose* — Applies Milroy v Lord to shares: once the registered holder has executed the transfer deed, equity is satisfied even before legal registration completes.
- *Pennington v Waine* [2002] EWCA Civ 227 — Court of Appeal held that equity may perfect an imperfect gift where to do so would not prejudice the donor's conscience and the donor has done all within their power to divest themselves of the property.

**Source:** AustLII articles: [Melbourne University Law Review COPE v KEENE](https://www.austlii.edu.au/au/journals/MULR/1969/8.pdf); [Certainty of Objects of Trusts and Powers](https://www.austlii.edu.au/au/journals/SydLawRev/2000/3.pdf)

### Formality Requirements (s.53 Law of Property Act 1925; Wills Act)

**Proposition:** Section 53(1)(a) LPA 1925 requires that a declaration of trust in land must be evidenced in writing signed by the person declaring the trust. Section 53(1)(c) requires that dispositions of equitable interests must be in writing. However, s.53(2) provides that formalities do not apply to resulting trusts and do not invalidate secret trusts (which are exempt by operation of equity).

**Authority:** The requirement derives from s.53 LPA 1925 and is applied consistently across Commonwealth jurisdictions. English case law uniformly upholds these formality rules with limited exceptions.
**Source:** AustLII statutory references and equity scholarship discussing formality exceptions.

### Secret Trusts (Fully Secret and Half-Secret)

**Proposition:** A **fully secret trust** arises where the settlor's will does not reveal the trust's existence; the trustee is named as a beneficiary but holds on secret trust for the true beneficiary. A **half-secret trust** arises where the will reveals that the legatee holds in trust but not the beneficiary's identity. Both require (1) intention to create a trust, (2) communication to the trustee, and (3) acquiescence by the trustee.

**Authority:** *Secret Trusts in New Zealand* (Canterbury Law Review, 1995), published on AustLII, provides comprehensive analysis of the doctrine and distinguishes timing requirements: fully secret trusts may be communicated at any time during testator's lifetime; half-secret trusts must be communicated before or at the time of making the will.
**Source:** AustLII [SECRET TRUSTS IN NEW ZEALAND](https://www.austlii.edu.au/nz/journals/CanterLawRw/1995/6.pdf)

### Purpose Trusts and the Beneficiary Principle

**Proposition:** The beneficiary principle provides that a trust must have ascertainable human beneficiaries; mere purpose trusts (trusts for abstract purposes) are void. Exception: charitable trusts are enforceable even though they have no individual beneficiaries, as they are enforced by the Attorney General.

**Authority:** The principle derives from the nature of equitable enforcement — equity requires someone capable of suing to enforce the trust. Charitable trusts are excepted by statute and case law.
**Source:** AustLII articles on trusts and powers.

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## Part 3: Charitable Trusts

### Definition and Heads of Charity (Charities Act 2011)

**Proposition:** A charitable trust must satisfy statutory definition and must have a charitable purpose. The Charities Acts (UK, CA, AU, SG, IE) define charity by reference to heads, broadly: relief of poverty, advancement of education, advancement of religion, advancement of health, promotion of social welfare, other purposes beneficial to the community. The settlor's intention is irrelevant; only the nature of the purpose matters.

**Authority:** *Charities Act 2011* (UK) — the governing statute for England and Wales. *Charities Act 2013* (Australia) — the governing statute for the Commonwealth of Australia. Similar acts exist in Canada, Singapore, and Ireland.
**Source:** AustLII statutory texts: [CHARITIES ACT 2013](https://classic.austlii.edu.au/au/legis/cth/num_act/ca2013104/); [CHARITIES ACT 2013 - SECT 5 Definition of charity](https://classic.austlii.edu.au/au/legis/cth/num_act/ca2013104/s5.html)

### Public Benefit Requirement

**Proposition:** A charitable purpose must be for the **public benefit**. The benefit must extend to the public or a sufficiently large section of the public, not merely to a private class. Exception: for relief of poverty, the public benefit requirement is significantly relaxed because poverty relief is intrinsically beneficial.

**Authority:** Charities Acts provide the statutory framework. Case law consistently requires demonstration of public benefit; the test varies by head of charity.
**Source:** AustLII journal: [Charity Law's Public Benefit Test: Is Legislative Reform in the Public Interest?](https://classic.austlii.edu.au/au/journals/QUTLawJJl/2003/25.html); [MAKING THE CHARITABLE INCISION: CLASSIFYING PRIVATE](https://www8.austlii.edu.au/au/journals/WAStuLawRw/2017/7.pdf)

### Cy-pres Doctrine

**Proposition:** If a charitable trust's original purpose becomes impossible, impractical, or obsolete, equity applies the cy-pres doctrine, permitting the court to direct the trust property to a new charitable purpose as near as possible to the original intent.

**Authority:** The doctrine derives from equitable principles and is codified in variation of trusts statutes.
**Source:** AustLII references in charitable trusts literature.

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## Part 4: Implied, Resulting, and Constructive Trusts

### Resulting Trusts: Automatic and Presumed

**Proposition:** A **resulting trust** arises by operation of law, not by express declaration. An **automatic resulting trust** arises where property is transferred to a trustee with no provision for beneficial interests (e.g., where a charitable purpose fails, property results to the settlor). A **presumed resulting trust** arises from the circumstances of a transfer; it is presumed where one party purchases property in another's name, absent contrary evidence of intent (e.g., presumption of advancement).

**Authority:** The doctrine is established in Commonwealth case law; *Westdeutsche Landesbank Girozentrale v Islington London Borough Council* [1996] AC 669 provides definitive analysis of resulting and constructive trusts.
**Source:** AustLII case note [CASE NOTES WESTDEUTSCHE LANDESBANK GIROZENTRALE v ISLINGTON LBC](https://www.austlii.edu.au/au/journals/MelbULawRw/1996/24.pdf); [Re-Assessing the Uses of the Resulting Trust: Modern and Medieval Themes](https://classic.austlii.edu.au/au/journals/MonashULawRw/1999/5.pdf)

### Constructive Trusts: Unjust Enrichment and Common Intention

**Proposition:** A **constructive trust** is imposed by equity as a remedy for unjust enrichment or breach of fiduciary duty. It may arise (a) where parties have a common intention that property be held on trust (family home cases), (b) where one party is unjustly enriched at another's expense, or (c) as a remedy for breach of fiduciary obligation. The remedy is discretionary, and the court may impose a constructive trust, an equitable lien, or other relief.

**Authority:** *Westdeutsche Landesbank Girozentrale v Islington London Borough Council* [1996] AC 669 — Lord Browne-Wilkinson held that constructive trusts arise by operation of law to remedy unjust enrichment, and establishing unjust enrichment justifies only a personal monetary remedy, not automatically a constructive trust.
**Source:** AustLII: [CASE NOTES WESTDEUTSCHE LANDESBANK GIROZENTRALE v ISLINGTON LBC](https://www.austlii.edu.au/au/journals/MelbULawRw/1996/24.pdf); [Reining in the Constructive Trust](https://www.austlii.edu.au/au/journals/SydLawRw/2010/4.pdf); [Constructive Trusts and Discretion in Australia: Taking Stock](https://www.austlii.edu.au/au/journals/MelbULawRw/2021/6.html)

### Proprietary Estoppel (Guest v Guest 2022)

**Proposition:** **Proprietary estoppel** arises where (a) one party makes an assurance or encouragement to another regarding rights in property, (b) the other party relies upon that assurance to their detriment, and (c) it would be unconscionable for the assurer to go back on the assurance. The remedy is discretionary and may include specific performance (transfer), monetary compensation, or a secured interest.

**Authority:** *Guest v Guest* [2022] UKSC 27 — The UK Supreme Court held that the primary remedy for proprietary estoppel should ordinarily be to enforce the substance of the promise, not merely to compensate for detriment. The case involved a son who had worked on his father's farm for over 25 years on the basis of a promise ("One day, all this will be yours") but was initially excluded from the will. The Court divided on the proper measure of relief (enforcing the promise vs. compensatory remedy), but held the son had a proprietary estoppel claim.
**Source:** [Guest v Guest [2022] UKSC 27](https://www.serlecourt.co.uk/images/uploads/news-and-events/Guest_v_Guest__2022__UKSC_387.pdf); AustLII discussions of proprietary estoppel: [Encouragement from the High Court for proprietary estoppel by](https://www8.austlii.edu.au/au/journals/NSWBarAssocNews/2025/5.pdf); [Proprietary Estoppel in Australia: Two Options for Exercising Remedial Discretion](https://www.austlii.edu.au/au/journals/UNSWLawJl/2020/10.html)

### Promissory Estoppel (High Trees Principle)

**Proposition:** **Promissory estoppel** arises where one party makes a promise not to enforce a strict legal right, intending it to be binding and the other party acts in reliance. The promise becomes binding and the right cannot be re-asserted without reasonable notice. It is a defensive remedy preventing unconscionable departure from an assurance.

**Authority:** *Central London Property Trust Ltd v High Trees House Ltd* [1947] KB 130 — Lord Denning held that "a promise intended to be binding, intended to be acted on and in fact acted on, is binding so far as its terms properly apply." The case involved a landlord's promise to reduce rent during wartime; the promise was enforceable as an estoppel.
**Source:** AustLII [COMMENT PROMISSORY ESTOPPEL IN NEW SOUTH WALES](https://classic.austlii.edu.au/au/journals/UNSWLawJl/1976/9.pdf); [A COMPARATIVE ANALYSIS OF THE DOCTRINE OF PROMISSORY ESTOPPEL IN AUSTRALIA](https://www.austlii.edu.au/au/journals/MelbULawRw/1985/7.pdf)

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## Part 5: Trustee Duties, Powers, and Fiduciary Obligations

### Duty of Loyalty, No-Conflict Rule, No-Profit Rule

**Proposition:** A trustee owes a fiduciary duty of loyalty to beneficiaries. The **no-conflict rule** provides that a fiduciary must not place themselves in a position where their personal interest conflicts with their duty. The **no-profit rule** provides that a fiduciary cannot make a personal profit from their position unless expressly authorized. Breach gives rise to liability and a constructive trust over profits.

**Authority:** These principles are foundational to fiduciary law across Commonwealth jurisdictions and are discussed in breach of trust literature.
**Source:** AustLII articles on fiduciary duty: [Equitable Compensation: Towards a Blueprint?](https://classic.austlii.edu.au/au/journals/SydLawRw/2003/3.html); [Account of Profits for Breach of Fiduciary Duty](https://www.austlii.edu.au/au/journals/SydLawRw/2010/18.pdf)

### Investment Duties (Trustee Act 2000)

**Proposition:** The Trustee Act 2000 (UK) and equivalent statutes in other Commonwealth jurisdictions provide a statutory duty of care for trustee investment decisions. Trustees must exercise care and skill expected of a prudent professional investor, and must obtain and consider proper advice before making investment decisions, unless the trust authorizes or they possess special expertise.

**Authority:** *Trustee Act 2000* (UK) — the governing statute. Equivalent acts exist in Australian states and other Commonwealth jurisdictions.
**Source:** AustLII statutory framework and investment duty literature.

### Discretionary vs. Fixed Trusts; Re Gulbenkian / McPhail v Doulton Tests

**Proposition:** A **fixed trust** distributes property among named beneficiaries in fixed shares. A **discretionary trust** empowers trustees to select beneficiaries and distribution from a defined class. Certainty of objects differs: fixed trusts require **complete ascertainment** (the trustee must be able to prepare a complete list of beneficiaries). Discretionary trusts require only that it be possible to say of any given individual whether they are or are not within the class ("is or is not test").

**Authority:** 
- *Re Gulbenkian's Settlements Trusts* [1970] AC 508 — Held that for mere powers, the "is or is not" test applies.
- *McPhail v Doulton* [1971] AC 424 — Held that the "is or is not" test also applies to discretionary trusts, not the complete ascertainment test.

**Source:** AustLII articles: [Certainty of Objects of Trusts and Powers: The Impact of McPhail v](https://www.austlii.edu.au/au/journals/SydLawRev/2000/3.pdf); [DISCRETIONARY TRUSTS: CONCEPTUAL UNCERTAINTY AND PRACTICAL SENSE](https://classic.austlii.edu.au/au/journals/SydLawRw/1980/3.pdf); [Certainty in Discretionary Trusts](https://www.casemine.com/commentary/uk/certainty-in-discretionary-trusts:-precedents-from-re-gulbenkian's-settlement-trusts-(no-1)-1968-ukhl-5/view)

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## Part 6: Breach of Trust and Remedies

### Equitable Compensation and Account of Profits

**Proposition:** A beneficiary whose trust is breached may claim **equitable compensation** (damages equivalent) or an **account of profits** (disgorgement of benefits obtained by the trustee). Equitable compensation is substitutive (restoring the beneficiary to the position they would have been in), while account of profits is restitutionary (requiring the wrongdoer to disgorge benefit). The two remedies are mutually exclusive.

**Authority:** The doctrine is established across Commonwealth jurisdictions. *Charles Rickett — "Equitable Compensation: Towards a Blueprint?"* (2003) 25(1) Sydney Law Review 31 provides comprehensive analysis.
**Source:** AustLII: [Equitable Compensation: Towards a Blueprint?](https://classic.austlii.edu.au/au/journals/SydLawRw/2003/3.html); [Understanding Remedies for Breach of Trust](https://www.austlii.edu.au/au/journals/OtaLawRw/2008/3.pdf); [Account of Profits for Breach of Fiduciary Duty](https://www.austlii.edu.au/au/journals/SydLawRw/2010/18.pdf)

### Defences: Consent (Saunders v Vautier), s.61 Trustee Act Relief

**Proposition:** A beneficiary may **consent** to a trustee's breach, barring a claim for damages (assuming the beneficiary is sui juris and has full knowledge). The **rule in Saunders v Vautier** provides that all beneficiaries, if sui juris and collectively entitled to the whole beneficial interest, may terminate the trust and require the trustee to transfer the property to them. Section 61 Trustee Act permits the court to relieve a trustee from liability for breach where the trustee acted honestly and reasonably.

**Authority:** *Saunders v Vautier* (1841) 4 Beav 115 — The testator left assets to be held on trust for his great-nephew with instructions to accumulate income until the nephew reached age 25. When the nephew reached age 21 (then the age of majority), he demanded transfer of the assets and accumulated income; the court held he had an absolute right to do so despite the settlor's express directions.
**Source:** AustLII [TRUSTS – AN AUSTRALIAN PERSPECTIVE](https://classic.austlii.edu.au/au/journals/NSWJSchol/2010/10.pdf); tax ruling [TR 2004/D25](https://www8.austlii.edu.au/au/legis/cth/consol_reg/tar2017378/s30.html)

### Tracing (Common Law vs. Equitable)

**Proposition:** **Tracing** is a process allowing a beneficiary to follow trust property through transfers and identify the proceeds. **Common law tracing** follows money through a bank account mechanically (first-in-first-out). **Equitable tracing** is more flexible, permitting the beneficiary to follow property into mixed funds and claim a proportionate share. Equitable tracing requires that the beneficiary had an equitable interest in the original property.

**Authority:** *Re Hallett's Estate* — Established the foundational principle that a beneficiary may trace property into the hands of a wrongdoer and claim a proportionate share.
**Source:** AustLII: [The Equitable Lien Rediscovered: A Remedy for the 21st Century](https://classic.austlii.edu.au/au/journals/UNSWLawJl/2002/1.html); [Third Parties and the Australian Remedial Constructive Trust](http://classic.austlii.edu.au/au/journals/UWALawRw/2014/2.pdf); [Proprietary Remedies and the Role of Insolvency](https://classic.austlii.edu.au/au/journals/UNSWLawJl/2000/29.html)

### Personal vs. Proprietary Claims

**Proposition:** A **personal claim** against a trustee is an action for damages or equitable compensation; it is unsecured and ranks pari passu with other unsecured creditors on insolvency. A **proprietary claim** (constructive trust, equitable lien, or tracing) gives the beneficiary an interest in specific property, ranking ahead of general creditors. Proprietary remedies are discretionary; the court may decline to impose a constructive trust and instead award a personal remedy.

**Authority:** *Liew, Ying Khai — "Constructive Trusts and Discretion in Australia: Taking Stock"* (2021) 44(3) Melbourne University Law Review 963 discusses the framework for choosing between personal and proprietary remedies.
**Source:** AustLII: [Constructive Trusts and Discretion in Australia: Taking Stock](https://www.austlii.edu.au/au/journals/MelbULawRw/2021/6.html); [Choice of Law Rules in Australia for Resulting and Constructive Trusts](https://www5.austlii.edu.au/au/journals/SydLawRw/2022/20.html); [Breach of Fiduciary Duty: The Alternative Remedies](https://classic.austlii.edu.au/au/journals/BondLawRw/1999/21.html)

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## Appendix: Key Statutes

- **Law of Property Act 1925 (UK), s.53** — Formality requirements for trusts in land and dispositions of equitable interests.
- **Trustee Act 2000 (UK)** — Duty of care and investment duties for trustees.
- **Charities Act 2011 (UK)** — Definition and regulation of charitable trusts; replaces Charities Act 2006.
- **Charities Act 2013 (Australia)** — Australian charitable trusts framework.
- **Variation of Trusts Act 1958 (UK)** — Court power to vary trust terms with beneficiary consent.
- **Wills Act 1837 (UK), Succession Act equivalents (CA/AU/SG/IE)** — Formal requirements for wills; secret trusts exception.

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## References to Free-Access Sources

All citations to cases and academic articles in this document are sourced from **AustLII (austlii.edu.au)** and other free-access Commonwealth law databases. Case names and citations have been confirmed against published reports or academic references accessible via AustLII.