Date: Fri, 17 Nov 2006 12:07:48 +1100

From: Neil Foster

Subject: Third Party Trust Case

Dear Jason;

Another Australian example can be found in Bahr v Nicolay (No 2) (1988) 164 CLR 604. The Bahrs had gone through what looked like a sale of their Torrens system land to Nicolay, but the agreement contained a promise by Nicolay to re-sell the land to them at an agreed price in the future.

Nicolay then sold the land to Thompson, who in his agreement with Nicolay "acknowledged" that the earlier agreement with the Bahrs existed. But Thompson, having become registered proprietor of the land, refused to sell it back to the Bahrs.

The case reveals a difference of opinion within the High Court on the meaning of "fraud" as an exception to indefeasibility under the Torrens system. That's not the current issue. But at least Mason CJ and Dawson J were prepared to find that Thompson by his actions had created a trust for the benefit of the Bahrs. They said (at 164 CLR 618-619):

If the inference to be drawn is that the parties intended to create or protect an interest in a third party and the trust relationship is the appropriate means of creating or protecting that interest or of giving effect to the intention, then there is no reason why in a given case an intention to create a trust should not be inferred. The present is just such a case. The trust is an express, not a constructive, trust.

Wilson & Toohey JJ (referring to Binions v Evans which I see Andrew mentioned) preferred to categorise it as a "constructive" trust, and I think that Brennan J did as well. But there is at least the authority of the above two judges for the possibility of the creation of a trust without express use of the "T" word.

Regards
Neil F

Neil Foster
Lecturer & LLB Program Convenor
School of Law
Faculty of Business & Law
University of Newcastle
Callaghan NSW 2308
AUSTRALIA
ph 02 4921 7430
fax 02 4921 6931

>>> Jason Neyers 17/11/06 12:01 >>>

Dear Colleagues:

Does anyone have a favourite case of high authority where the courts found that a trust was created by a third party beneficiary contract and where the words "in trust" were not used?

Of course, I am aware of Les Affreteurs/Walford and McEvoy, but I get the feeling that most people (at least in North America) see the trusts created in those cases as fictional and results orientated. So I am looking for a case where such a charge would be harder to level. Any suggestions?

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