Nathan is a wealthy investor who is entering into his 'retirement phase'. He is upset with how modern Australia is progressing and wishes to set up a strategic litigation fund in order to fund the legal cases of individuals he thinks have made significant contributions to society. Nathan has heard of a woman - Frances - who he thinks has been unfairly vilified by the media. Nathan decides that he wants to fund defamation proceedings for Frances.

Nathan decides that he wants to set up a trust to act as the funding vehicle for Frances' legal fees. Nathan signs a document which states the following:

I (Nathan) hold $1,000,000 (1 million dollars) on trust for Frances whilst she fights the mainstream media! I am to pay Frances $25,000 a month from the funds held on trust.

Nathan transfers the $1m into a new bank account that he holds with the Commonwealth Bank, and titles the account 'Frances' Fighting Fund'.

1. For the following parts of the question, assume that the trust was valid.

The bank account that Nathan is holding the money in only accrues interest at a rate of 1.0% per annum. Nathan is considering using the trust funds to buy shares in the initial public offering of a new company, Dumas Pty Ltd. Nathan has read Dumas' marketing material and thinks that Dumas will be making a lot of money (and hence the value of the potential shareholding will increase).

Advise Nathan about his obligations relating to the investment of trust funds.

2. For the following parts of the question, assume that Nathan continues to hold the trust funds in the Commonwealth Bank account.

Nathan's past business activities come to haunt him when the Australian Tax Office chases him for unpaid taxes. Even once Nathan liquidates his own investments, he still owes a substantial amount to the tax office. And Nathan doesn't have enough money to fund the retirement lifestyle he had hoped for!

As there is still a significant amount of money sitting in Frances' Fighting Fund, Nathan decides that no-one will notice if he moves some funds around.

Nathan logs on to his Commonwealth Bank portal and accesses the Frances' Fighting Fund. Nathan makes the following transactions:

• First, Nathan transfers $500,000 from the Frances Fighting Fund to his regular transaction account.
• Second, Nathan transfers $100,000 from his transaction account to the ATO.
• Third, Nathan purchases a set of high-value Pokemon cards for $3,000 dollars as a gift for his nephew, Adam. The Pokemon cards are delivered to Adam's home.
• Fourth, Nathan purchases a sculpture by Patricia Piccinini for $200,000. Renewed interest in Piccinini's work means that the value of the sculpture is now $250,000.

What proprietary remedies would Frances, as beneficiary of the trust, be entitled to? (7 marks)

3. For the final part of the question, assume that the above transactions have taken place, but not remedy has been sought or granted.

Nathan, concerned that Frances will find out about his use of the trust fund, but also concerned that he will soon run out of money, decides to transfer all of the remaining money in the Frances Fighting Fund to his old pal, Kor.

Nathan phones Kor out of the blue and the following conversation occurs:

Nathan: Hi Kor, I've got a big favour to ask. I'm in a bit of a pickle, and things are a little tight at the moment. I've got some cash hanging around that I would like you to look after. Just put it into a savings account or whatever. I'll let you know when I need it back.

Kor: No worries mate. Happy to help. Where is the money coming from?

Nathan: Better not to ask questions like that! You know me!

Kor: Ha ha, just like the old times - I'll let you know once the money hits my account.

Does Frances, as beneficiary of the trust, have a claim against Kor? Do not advise on what remedies may be available as a result of a claim against Kor. (5 marks)