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- Equity is a body of rules and principles that form an appendage to the general principles of law.
- Sir Anthony Mason: Equity concerns with conscience, fairness, equality and discretionary
approach in granting relief, in contrast to the rigid formulae of common law.
- Spry: Equity seeks to prevent unconscionable conduct.
History and Origins1.The defendant has to be within the jurisdiction of the court.
2.The order must not violate the legal rules of another country.
4.Legal proceedings must not have been started in the appropriate court.
- Equity was a branch of law administered in the Court of Chancery; prior to Courts of Judicature
Act. Court of Equity has been regarded as Court of Conscience and administration of equitable
principle is discretionary.
- Jurisdiction: Acts in personam; discretionary remedies; and bona fide purchaser for value without
notice is it’s darling.
- Originated from the exercise by the Chancellor of the residual power of the king to do justice
which could not be obtained in common law. Evolved to mitigate the severity/ weakness of
common law, inter alia:
1. Rigid procedure using the writ system. The petitioner’s case must fall into certain writ
categories in order to have a cause of action.
2. Inadequate common law remedies. Only able to provide damages.
3. Common law did not have jurisdiction in certain cases, e.g. foreign merchants.
4. Rigid judicial precedents system – restrict judges’ discretion.
- Court of Judicature Act had, inter alia: established a new Supreme Court; fuse the
administration of common law and equity where remedies of both jurisdiction can be
granted for all cases; and whenever there is a conflict, equity prevails.
Earl of Oxford’s case: Remedy given by common law court was nullified by the Court of
Chancery. In the case of conflict between rules of equity and common law, equity will
prevail.
Walsh v Lonsdale
Facts:
- Mr Lonsdale agreed to lease Mr Walsh (tenant) a mill for seven years. The rent varied
according to the number of looms being operated, but the lease stipulated that rent has to
be paid yearly in advance on demand.
- Plaintiff was let into possession but paid rent quarterly. This happened for quite some time.
- Defendant later demanded for advance payment for a year and put the plaintiff on distress.
- Plaintiff claimed for illegal distress and an injunction from the court against defendant’s
action because the clause does not bind him as it was not properly executed.
Held:
- There is an agreement for a lease. There are no two estates as there were previously, one
estate at common law by reason of the payment of the rent from year to year, and an estate
in equity under the agreement.
- There is only one Court, and the equity rules prevail in it. The tenant holds under an
agreement for a lease. Therefore, he holds under the same terms in equity as if a lease had
been granted. He cannot complain of the exercise by the landlord of the same rights as the
landlord would have had if a lease had been granted.
- The court now had jurisdiction to apply equitable principle and it would regard that as done
which ought to be done, and so the lease had been effective in absence of the formality.
Berry v Berry
Facts:
- By a deed of separation, the husband (defendant) agreed to pay a monetary allowance to
the wife.
- There was a variation to the deed, which was not put under seal, where the husband stated
that he will not pay the earlier agreed amount as there was a reduction to his salary. Wife
agreed to this.
- The wife later instituted proceedings claiming arrears of allowance under the deed.
Held:
- Under common law, variation of deed can’t be done if not put under seal but under equity,
variation of a contract under seal is allowed by a simple contract by preventing the party
who has agreed to the rescission or variation suing under the deed.
- Equity is a system which is competent to correct some of the worst and most odious
technicalities of the common law.
- Inequitable for wife to rely on the earlier deed as she had agreed to the variation.
Job v Job
Facts:
- This case concerns the administration of the estate of a testator, Joseph Job.
- The Defendant, who was the acting trustee and executor and also one of the residuary
legatees under the will, entrusted part of the testator's stock-in-trade to his, the Defendant's,
son James Job.
- James Job subsequently became bankrupt, whereupon his trustee took possession of and
sold the stock-in-trade then in his hands, including part of the testator's to the value of £160,
which thus became lost to the testator's estate.
Held:
- Under common law, an executor is liable at law for the loss of his testator's assets when they
have once come into his hands; but if that is in conflict with the law of a Court of Equity,
equity must now prevail.
- Under equity, an executor or administrator is in the position of a gratuitous bailee, who
cannot he charged with the loss of his testator's assets without wilful default; and a further
rule is that though he is liable in equity in case of wilful default, he cannot be charged with it
unless an account is ordered against him on that footing.
- There was no wilful default on the part of the Defendant. The stock-in-trade came into the
Defendant’s possession without his default. Thus, not liable. Common law overruled.
Seager v Copydex
Facts:
- Plaintiff (inventor) was negotiating with the defendant company the marketing of a carpet
grip which has not been patented. This information was given in confidence.
- Defendant later invented and patented an alternative carpet grip which was very similar to
the plaintiff’s.
Held:
- The law on this subject does not depend on any implied contract. It depends on the broad
principle of equity that he who has received information in confidence shall not take unfair
advantage of it without the consent of the person who gave it.
- The principle is clear enough when the whole of the information is private, but here, the
information was both public and private.
- The defendant company had made use, albeit honestly, of information which had been
received in confidence and which was not available to the public; they were accordingly
liable for breach of confidence, and the plaintiff was entitled to damages.
- Professor Maitland: Equity is not a self-sufficient system, presupposed the existence of common
law. Acts as a gloss on common law. It reforms the rigour of common law. Does not seek to
create or alter the law but to assist it.
- Ashburner: The two streams of jurisdiction runs side by side, do not mingle their waters.
- Dal Pont and Chalmers: If indeed there was a fuse, then no difference will be detectable. The fact
that equitable remedies are unavailable and can be awarded in certain circumstances where
common law damages are inadequate shows that there isn’t a fusion yet.
- Maxims are embodiment of general principles of Chancery court. They are not strict, rigid rules
but general guidelines as to how equitable jurisdiction should be exercised.
- These maxims are not positive laws and do not cover the entire field of equity but each maxim
embodies some peculiar function of equity.
- Serves as a basis to the jurisdiction of courts of equity. It underlies the whole jurisdiction of
equity.
- Stark distinction between common law and equity. At common law, a judgment by the court is
enforced by ordinary writs of execution but in Courts of Chancery, an order is made against the
defendant himself, and if he fails to comply with it, he will be punished for contempt.
- With regard to the court’s jurisdiction over property abroad, it is immaterial if the property in
question is not within the court’s reach provided that the defendant is within the jurisdiction and
there is some equitable right which the plaintiff can enforce.
Penn v Baltimore
Facts:
- The case concerns an agreement relating to the boundaries of the land in America. The
defendant was however from England.
- The first objection by the defendant was that this court has no jurisdiction to hear the case.
Held:
- A court of equity can exercise a more liberal discretion than common law courts.
- The conscience of the party was bound by this agreement; and being within the jurisdiction
of this court, which acts in personam, the court may properly decree it as an agreement.
- The defendant being in England, the court could enforce the agreement by process of
contempt in personam.
- Decree of specific performance was issued by the court.
Which court has jurisdiction in that geographical area (a civil lawsuit for an accident that
occurred in Florida cannot generally be heard in California)
Which court has jurisdiction over the defendant (or over the person being charged or sued)
Which court has jurisdiction over the subject matter (is it family law, traffic violation, or civil
lawsuit)
If the court in which any legal matter is filed lacks jurisdiction in even one of these areas, it
does not have the authority to render judgment.
Re Valibhoy deceased
Facts:
- The testator in his will directed his trustees to hold the balance of his net estate for certain
charitable purposes known as the Valibhoy Charitable Trust which was in India.
- The relevant issue was whether the Court had jurisdiction with regard to the chratible trust
outside its jurisdiction?
Held:
- It is true that the trust is to be executed and administered in India but it does concern
considerable property within the jurisdiction of this Court. It also concerns properties in the
- The three defendants are all within the jurisdiction of the Court as the defendants reside in
Singapore.
- Where the property or part of it and the trustees are within the jurisdiction of the Court,
then it has jurisdiction in the matter.
Chellaram v Chellaram
Facts:
- Plaintiffs sought the removal of the defendants as trustees and the appointment of new
trustees in their place.
- The trust assets were shares held by the two settlors in Bermudan companies and the
defendants were all born and domiciled in India, some resided outside India, and all
visited London with some regularity.
- Defendants argued that the court has no jurisdiction to remove an appoint trustees of
foreign settlements.
Held:
- The English court has in personam jurisdiction to administer the trusts of foreign settlements.
- This jurisdiction is exercised against the trustees on whom the foreign trust obligations lie,
and is exercised so as to enforce against the trustees the obligations which bind their
conscience.
- If the obligations are owed in respect of trust assets abroad, it can only be exercised, by in
personam orders made against the trustees.
- The court has inherent jurisdiction to remove trustees and to appoint new ones.
Chillingworth v Chambers
Facts:
- The plaintiff and the defendant held certain trust funds upon trust to secure an annuity to
the testator's widow. The will contained a power to invest on mortgage of leasehold
property.
- Both the plaintiff and defendant created several mortgages to erect houses on the testator’s
property.
- The mortgages were realised but there was a deficiency (not sufficient amount to pay off).
- The plaintiff paid for this loss and later sued the defendant, claiming for the loss to be
divided between them.
Held:
- In this case, the plaintiff paid for the losses not amounting to more than the amount of his
share and thus he was not in a position to ask for the defendant’s contribution.
- The plaintiff was only entitled to ask for contribution towards what he had paid over and
above his interest in the trust funds.
5. He who seeks equity must come with clean hands
- Similar to the previous maxim but it differs in the sense that this maxims looks to the past
conduct rather than to the future.
- Not only must the plaintiff be prepared to do what is right and fair, but his past record in that
particular transaction is clean.
Gascoigne v Gascoigne
Facts:
- A husband took a lease of land in his wife's name and built a house upon it with his own
money.
- He used his wife's name in the transaction with her knowledge and connivance because he
was in debt and with the intention of protecting the property from his creditors.
- He later sued the wife for the property, claiming that she was holding it in trust for him.
- Argued that since they were husband and wife, there is a presumption that it was a gift for
her.
Held:
- The property belonged to the wife. Husband was found to have the intention to defraud his
creditors.
Tinsley v Milligan
Facts:
- Both the plaintiff and defendant used their money to purchase a house which was under the
plaintiff’s name to enable the defendant to fraudulently claim for housing benefits.
- There was an argument and the plaintiff sought to evict the defendant. The defendant
counter claimed by arguing that the house was held by the plaintiff on trust to be shared
equally by both of them.
Issue: Whether the respondent in claiming the existence of a resulting trust in her favour is
seeking to enforce unperformed provisions of an unlawful transaction or whether she is
simply relying on an equitable proprietary interest that she has already acquired under such a
transaction
Held:
- A party is not entitled to rely on his own fraud or illegality in order to assist a claim or rebut a
presumption.
- So long as that agreement remained unperformed neither party could have enforced it
against the other. However, as soon as the agreement was implemented by the sale to the
appellant alone she became trustee for the respondent who can now rely on the equitable
proprietary interest which has thereby been presumed to have been created in her favour
and has no need to rely on the illegal transaction which led to its creation.
- The creation of such an equitable interest does not depend upon a contractual obligation but
on a common intention acted upon by the parties to their detriment. It is a development of
the old law of resulting trust under which, where two parties have provided the purchase
money to buy a property which is conveyed into the name of one of them alone, the latter is
presumed to hold the property on a resulting trust for both parties in shares proportionate
to their contributions to the purchase price.
- A party to an illegality can recover by virtue of a legal or equitable property interest if, but
only if, he can establish his title without relying on his own illegality. In cases where the
presumption of advancement applies, the plaintiff is faced with the presumption of gift and
therefore cannot claim under a resulting trust unless and until he has rebutted that
presumption of gift: for those purposes the plaintiff does have to rely on the underlying
illegality and therefore fails.
- The defendant here pleaded the common intention that the property should belong to both
of them and that she contributed to the purchase price: she claimed that in consequence the
property belonged to them equally. Thus, she was not forced to rely on the illegality to prove
her equitable interest.
- Defendant’s claim allowed.
6. Equity will not allow permit the provisions of a statute to be used as an instrument for fraud.
- Equity will not allow a person to rely on his strict legal right under a statute to perpetrate a fraud
against another person
Smith v Clay
Principle:
- A court of equity has always refused its aid to stale demands, where a party has slept upon
his right and acquiesced for a great length of time.
- Courts of Equity will only act if conscience, good faith and reasonable diligence is found
wanting.
Allcard v Skinner
Facts:
- Plaintiff became a member of the sisterhood and observed the rules of poverty which
requires members to give up their property to their relatives or the sisterhood.
- Plaintiff bequeaths all her property to the defendant. She left the sisterhood in 1880 but
made no demand of her property until 1885.
Held:
- Delay in asserting rights cannot be in equity a defence unless the Plaintiff were aware of her
rights.
- More than six years had elapsed between the time when the Plaintiff left the sisterhood and
the commencement of the present action. There is far more than inactivity and delay on the
part of the Plaintiff. (Example: She insisted on having back her will, but she never asked for
her money until the end of five years after she left the sisterhood.)
- Plaintiff could not be said to have not known of her rights as she was in communication with
her present solicitor in 1880, that the amount bequeath was too large and that she should
reconsider her actions but she declined to do so.
- As soon as the donor escapes from the religious influence which hampered her at the time,
as soon as she becomes free, she should have brought an action at that time.
- There a material delay and the plaintiff’s action is dismissed.
In Re Len Chee Omnibus Co Ltd Chin Sow Lan v Lee Chee Omnibus Co Ltd
Facts:
- The applicant in applied for an order that the register of members be rectified by deleting
the name of Low Hon as holder of certain shares in the respondent company.
- The applicant wanted to give a limited power of attorney to Low Hon (her mother), that is
only to receive dividends paid by the company and NOT to transfer the shares to the
mother’s name.
- When the mother died, the applicant found out about this transaction and wanted to rectify
it.
Held:
- Letters of administration of her estate were granted in 1966 but this present summons was
made in 1968.
- The two year lapse was not a reasonable time after she became aware of the facts entitling
her to relief.
- Application dismissed due to laches.
- Where there is no other basis of division, all who are entitled for the property should have equal
division of it.
- This is the basis of presumption of tenancy in common and partnership.
Tai Kwong Goldsmiths & Jewellers v Yap Kooi Hee
Facts:
- Tai Kwong Goldsmiths & Jewellers ('the partnership') was dissolved and a receiver was
appointed by the court.
- The receiver applied to the court for directions on the priority to be given in respect of the
payment out of the moneys.
Held:
- There are no provision in the Partnership Act that specifies any order of priority in which the
debts and liablities of a partnership are to be paid.
- The maxim of 'equality is equity' which succinctly expresses that distribution of property and
losses should be proportionate to the several claims or to the several liabilities of the person
concerned is invoked in this case.
Jones v Maynard
Facts:
- Husband withdrew money from his account to create a joint account with his wife before he
went overseas for service under the Royal Air Force.
- Wife used a sum of his money for some investments. They later got divorced and there was a
dispute as to the balance in the joint account and the profit from the investments.
Held:
- The principle of equality ought to be applied, and that the wife was entitled to one half of
the final balance and to one half of the value of the investments existing at the date when
the account was closed.
- Equity looks to the substance rather than the form. It will not allow a transaction to be set aside
on grounds of technicality.
Parkin v Thorold
Principle:
“Courts of Equity make a distinction in all cases between that which is matter of substance
and that which is a matter of form: and if it finds that by insisting on the form, the substance
will be defeated, it holds it inequitable to allow a person to insist on such form, and thereby
defeat the substance.”
- Where there is a specifically enforceable obligation, equity regards the parties as already in the
position which they would be in after the performance of the obligation.
- For instance, a contract relating to land is specifically enforceable if there is writing or part
performance. Thus, in equity, a specifically enforceable contract for lease creates an equitable
lease. (Walsh v Lonsdale)
Lysaght v Edwards
Facts:
- The Plaintiffs entered into a contract for the purchase of real estate. After the title had been
accepted, and before completion, the vendor died, having by his will devised to H, alone all
the real estate which at his death might be vested in him as trustee.
- Issue: The question of whether the real estate contracted to be sold passes at law under a
devise of trust estates depends on the question whether there was a binding contract for
sale at the death of the testator.
Held:
- The effect of the contract for sale is the moment you have a valid contract for sale that the
vendor becomes in equity a trustee for the purchaser of the estate sold, and the beneficial
ownership passes to the purchaser, the vendor having a right to the purchase-money, a
charge or lien on the estate for the security of that purchase-money, and a right to retain
possession of the estate until the purchase-money is paid, in the absence of express contract
as to the time of delivering possession.
- The vendor is a bare trustee from the moment the contract is entered into.
Walsh v Lonsdale
Facts:
- The defendant (landlord) agreed in writing to grant the tenant (plaintiff) a lease of a mill for
seven years.
- The agreement provided that rent was payable in advance if demanded.
- No grant by deed of the lease was drawn up, which was required by the law to be made for a
lease exceeding three years.
- The tenant entered into possession and paid quarterly, not in advance.
- Landlord claimed for advanced payment and later put the tenant in distress.
- Plaintiff sued for illegal distress
Held:
- The action failed. The distress would have been illegal at law because no seven year lease
had been granted and the yearly legal tenancy did not provide for payment of rent in
advance.
- However, in equity, an agreement for a lease is considered to be as good as a lease.
- Tenant had to pay a year’s rent in advance and the distress was lawful.
11. Equity will not perfect an imperfect gift/ equity will not assist a volunteer
Milroy v Lord
Facts:
- A settler transferred 50 bank shares belonging to him to the defendant to be held upon trust
for the plaintiff, his niece.
- The defendant held a general power of attorney from the settler to transfer the stock of any
incorporated company which might be standing in his name, and gave him the certificate of a
large number of shares he held in the same bank, including the shares mentioned in the deed
poll, and executed a special power authorising him to receive the dividends on all of the
shares in the bank then in his name.
- Under the bank’s constitution, the shares are only transferable by registration in the register
book. If it is transferred under a power of attorney, the power of attorney must be left in the
bank.
- Plaintiff sued for the recovery of the 50 shares from the defendant.
Held:
- In order to render a voluntary settlement valid and effectual, the settlor must have done
everything which, according to the nature of the property comprised in the settlement, was
necessary to be done in order to transfer the property, and render the settlement binding
upon himself.
- There is no equity in this court to protect an imperfect gift. No trust was ever created for the
defendant.
- The plaintiff could not claim the shares from the defendant as the shares are not vested in
him.
Jones v Lock
Facts:
- A father put a cheque into the hand of his son of nine months old, saying, "I give this to baby
for himself," and then took back the cheque and said that he will keep it for the baby.
- He also expressed his intention of giving the amount of the cheque to the son.
- He met with his solicitors intended to amend his will to provide for his son this amount.
- Unfortunately, he died on the same day. (bad luck Brian meme)
- The cheque was dispute by the legatees.
Held:
- A Court of equity will not aid volunteers. But when there has been a declaration of trust,
then it will be enforced, whether there has been consideration or not.
- On evidence, the father really had an intention of settling something on the child but this
does not mean that the child could bring an action for the cheque, but he merely meant to
say that now he could make a provision for the boy; and this was consistent to what he said
to the solicitor.
- The child could not claim for the cheque as no trust was created in his favour.
Re Rose
Facts:
- The deceased transferred to his wife (plaintiff), shares in an unlimited company.
- The transfers were in the form required by the company's articles of association and these
authorized the directors to decline to register any transfer. (emphasis added)
- At the date of their execution, the transfers were handed with the relative share certificates
to the wife.
- The transfers were duly stamped on April 12, 1943, and registered in the books of the
company on June 30, 1943. The deceased died on February 16, 1947.
- The Crown (defendant) claimed estate duty on the shares on the ground that the gift of the
shares was not completed before April 10, 1943, the date which the parties agreed was the
relevant date before which the gifts must have been completed to avoid duty under the
Statutes in England. (i.e. after April 10, transfer of shares is taxable).
Held:
- The deceased had done everything in his power by executing the transfers to transfer his
legal and beneficial interest in the shares to the transferees.
- The gifts of the shares were completed (made perfect) on March 30, 1943 (which is the
critical date) after he had executed the instruments of transfer.
- The transfer can’t be said to have been complete on April 10, 1943 (after registration in the
company’s book), as the deceased had no control over this matter because it is up to the
company to register it.
- No estate duty became payable in respect of the shares on the deceased's death.
12. Where the equities are equal, the law shall prevail
- Where the rights of both parties are the same, the party with the right in law shall prevail.
(a) every dealing under this Act shall be effected by an instrument complying with the
requirements of sections 207 to 212; and
(b) no instrument effecting any such dealing shall operate to transfer the title to any
alienated land or, as the case may be, to create, transfer or otherwise affect any interest
therein, until it has been registered under Part Eighteen.
(3) Nothing in sub-section (1) shall affect the contractual operation of any transaction relating to
alienated land or any interest therein.
What can be derived from these subsections is that the provision of the NLC requiring dealings to
be effected in statutorily prescribed manner shall not affect the contractual operation of any
operation relating to alienated land or any interests therein. Thus ss (3) may be relied upon to hold
that equitable interests has been created by a particular agreement. However, if there are two
equitable interests which are admitted through this section, priority should be given to the party
holding the legal title.
13. Where equities are equal, the first in time shall prevail (qui prior est tempore, potoir est jure)
- Therefore emphasis is placed on the conduct of the claimant prior in time to consider whether
his priority accorded by the advantage of time has been displaced. The need to weigh the equality
between equities only arises when some act or omission of the first in time has been shown.
Rice v Rice
Principle: Priority in time is the ground of preference last resorted to when the merits
between the equities are equal: priority in time is immaterial if as between the claimants one
has on other grounds a better equity
Butler v Fairclough
Facts:
- G agreed to charge his land to B by a legal mortgage on 30 June.
- G sold the land to F on 2 July. F made a search on 1 July and found no caveat on the register.
- On 7 July B entered a caveat to protect his equitable mortgage. B and F initially agreed that
B’s interest had priority, but eventually B’s caveat lapsed and F’s transfer was registered.
- The Registrar-General erroneously failed to give a statutory notice to B prior to registering
F’s transfer.
Held:
- By B’s failure to caveat promptly, B had lost his priority to F.
- In the case of a contest between two equitable claimants the first in time, all other things
being equal, is entitled to priority.
- The claimant who is first in time may lose his priority by any act or omission which had or
might have had the effect of inducing a claimant later in time to act to his prejudice
Abigail v Lapin
Facts:
- The Lapins executed two memoranda of transfer of lands to H as security for a loan.
- H, who obtained the certificate of title, registered herself as the absolute land owner.
- The Lapins did not lodge caveats promptly to protect their equity of redemption.
- Subsequently, H purported to mortgage the lands to A, who granted the loan thinking that H
was the absolute owner.
- A did not have notice of the Lapins’ equitable interest, but could not prove that he had
searched the register.
- The Lapins eventually lodged caveats, which prevented the registration of A’s mortgages.
Held:
- The Lapins’ priority was postponed to A’s because, by executing the transfers to H and
neglecting to caveat promptly, they had armed H with the power to represent herself to the
world as the absolute owner, in consequence of which A provided the loan under the
impression that H was an unencumbered owner.
- As there was no caveat when A committed himself to the security transaction, A’s failure to
search did not alter the fact that he was misled by Ls conduct in enabling H to hold herself
out as an absolute owner.
- The postponement of the Lapins’ equity was not solely due to their failure to caveat but also
to their conduct in arming or enabling another to misrepresent to the world an untrue state
of ownership.
**The principle to distil from the above two cases is that, where the prior equity holder is an
uncaveated lien-holder who retains the possession of the document of title, his mere failure
to caveat is not a priority-postponing conduct.
Jordan v Money
Facts:
- Money owed Marnell 1,200 pounds. Money gave Marnell a bond for this amount. Marnell
died and Mrs Jordan inherited the bond.
- Money was contemplating marriage, but was concerned about his means. Mrs Jordan said
that she would never enforce the debt, so he married. Five years later, she sought to enforce
the debt, and Money claimed she should be estopped.
Held:
- Common law estoppel was confined to assumptions and representations of existing fact.
- Representations of future intention (that is, promises) were to be governed by the presence
of a contractual relationship between representor and representee with a price being paid
for the promise in the form of sufficient consideration.
- There was no estoppel in this situation.
- Estoppel can only work when the statement is about an existing fact, not a promise. As soon
as it becomes a promise, it crosses into the territory of contract law.
- A representation as to the future must be embodied as a contract or be nothing.
Promissory Estoppel
Combe v Combe
Facts:
- The parties were husband and wife. There was an agreement between them, before
the decree of divorce became absolute, that the husband would pay maintenance to
the wife for £100 but never did so for six years.
- There was no written agreement between them. The wife claimed for arrears.
Held:
- Promissory estoppel does not create new causes of action. It only prevents a party
from insisting upon his strict legal rights, when it would be unjust to allow him to
enforce them, having regard to the dealings which have taken place between the
parties. It may be part of a cause of action but it can’t be a cause of action itself.
- There must be a consideration for such a cause of action.
- There was no evidence to prove that having relied on the husband’s representation;
she would be induced to do something, i.e. to forbear from applying to the court for
maintenance.
- Promissory estoppel did not apply.
Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd
Facts:
- Complicated facts which also involves the subsidiaries of both parties.
- Appellant was a property company in England. Its wholly-owned subsidiary, “ANPP” was
registered in the Bahamas.
- Respondent was a bank in England. Its wholly-owned subsidiary, Portspoken Properties, was
also registered in the Bahamas.
- Amalgamated had mortgaged a property in the Bahamas in order to obtain loans worth
$3.25 million. They executed a guarantee for repayment of the loan. These loans were also
made available to their subsidiary.
- Amalgamated managed to pay off $2.5 million before they went into liquidation. Upon,
liquidating their assets, there was a balance of $750,000.
- The respondent claimed for this amount to pay off the loans given to ANPP.
- Amalgamated argued that the guarantee only covered the sums which Amalgamated owed
to the bank: and that it did not cover the sums which were owed by their wholly-owned
subsidiary, ANPP, to the bank.
- The bank said that it did cover them: or alternatively that Amalgamated were estopped from
saying that it did not cover them.
Held:
- The evidence shows that from the very moment when the $3,250,000 was advanced to
ANPP, all the parties thought that it was secured not only by the mortgage of the building
but also by the guarantee of Amalgamated. In pursuance of that belief the bank embarked
on a course of conduct, rearranging their portfolio of investments, releasing properties and
moneys to Amalgamated which they would not have done except on the basis that the
guarantee of Amalgamated covered the loan to ANPP.
- Amalgamated knew that the guarantee did not include loans given to ANPP but they allowed
the bank to harbour under this mistake and kept quiet.
- It was unconscionable to allow Amalgamated to take advantage of it nor is it fair to insist on
the strict interpretation of the original terms of the contract when it would be inequitable to
do so.
- Plea of estoppel applies. Bank’s claim allowed. Unconscionable to go back on the
representation.
Dicta:
- Maxims of estoppel: estoppel is only a rule of evidence; estoppel cannot give rise to a cause
of action; estoppel cannot do away with the need for consideration.
Conclusion: The application of promissory estoppel is limited to defences such as, it can only be
used as a defence and not a cause of action (Combe v Combe). Promissory estoppel may have the
effect of enabling a person to insist on his right based on the assumption of both parties, where
without estoppel, that right would not have existed (Amalgamated).
Proprietary Estoppel
- It operates to prevent an owner of an interest in property from asserting his/her rights against
another party whom he/she allowed or encouraged to deal with that interest, or in relation to
the property, if the latter had rights to the said property.
- Able to act as a sword as well as a shield and it is this feature that it has brought to equitable
estoppel generally.
- Two forms of proprietary estoppel:
1. Estoppel by encouragement: representor encouraged expenditure on his/her property by
some representation or benefit
2. Estoppel by acquiescence: representor passively acquiesced to the expenditure
- Cases have illustrated that we must prove that the reliance has caused a detriment, i.e. in terms
of expenditure (Cheng Hang Guan), working without pay (Greasely v Cooke) or opportunity
foregone.
Pascoe v Turner
Facts:
- Plaintiff and defendant lived together in a house, whereby the defendant was the plaintiff’s
housekeeper and had also helped him with his business.
- The plaintiff then told the defendant that she had nothing to worry about and that the house
and its contents were hers, but no conveyance was ever drawn up.
- The defendant continued to live in the house and, with the plaintiff's full knowledge and
encouragement, spent a quarter of her modest capital on repairs, improvements and
redecorations to the house.
- The plaintiff and the defendant later had a quarrel and the plaintiff was determined to evict
her out of the house. The defendant refused to leave the house.
Held:
- ‘Promissory estoppel' is the estoppel by encouragement or acquiescence, which is found on
the facts of those facts give rise to a cause of action. They may be relied on as a sword, not
merely as a shield.
- Here there was an imperfect gift from the plaintiff. The appropriate way in which the equity
can here be satisfied is by perfecting the imperfect gift as was done in (Dillwyn v Llewelyn).
- In reliance on the plaintiff's declaration of gift, encouragement and acquiescence she
arranged her affairs on the basis that the house and contents belonged to her. So relying, she
devoted a quarter of her remaining capital and her personal effort on the house and its
fixtures.
- Thus, doctrine of estoppel applied.
Legione v Hateley
Principle:
“The requirement that a representation as to existing fact or future conduct must be clear …
does not mean that the representation must be express. Such a clear representation may
properly be seen as implied by the words used or to be adduced from either the failure to
speak where there was a duty to speak or from conduct. Nor is it necessary that a
representation be clear in its entirety. It will suffice if so much of the representation as is
necessary to found the propounded estoppel satisfies the requirement.”
- In cases of promissory estoppel, the equity binds the holder of a legal right who induces
another to expect that that right will not be exercised against him … In cases of proprietary
estoppel, the equity binds the owner of property who induces another to expect that an
interest in the property will be conferred on him.
- For classification of property: real v personal; moveable v immoveable property, refer to Public
Finance Berhad. Excellent judgment by Peh Swee Chin J
Definition of Choses in Action
Torkington v Magee
Principle:
“Chose in action" is a known legal expression used to describe all personal rights of property
which can only be claimed or enforced by action, and not by taking physical possession. It is
an expression large enough to include rights which it can hardly have been intended should be
assignable by virtue of the sub-section in question, as, for instance, shares, which can only be
transferred as provided by the Companies Acts.”
Statutory Assignment
Section 4(3):
Any absolute assignment, by writing, under the hand of the assignor, not purporting to be by way
of charge only, of any debt or other legal chose in action, of which express notice in
writing has been given to the debtor, trustee or other person from whom the assignor would have
been entitled to receive or claim the debt or chose in action, shall be, and be deemed to have
been, effectual in law, subject to all equities which would have been entitled to priority over the
right of the assignee under the law as it existed in the State before the date of the coming into
force of this Act, to pass and transfer the legal right to the debt or chose in action, from the date
of the notice, and all legal and other remedies for the same, and the power to give a good
discharge for the same, without the concurrence of the assignor.
- Under this section, a statutory assignment must be absolute and unconditional; in writing; signed
by the assignor; notice in writing to the debtor; consideration is not necessary if all requirements
of the statute are fulfilled.
- For an equitable assignment, there must be a clear intention to assign; the act of assignment;
consideration is not necessary.
- Although notice is not essential, but until notice is received a third party is not bound by the
assignment and may continue to pay the assignor. Any informal notice is sufficient as long as it is
brought to the debtor’s attention (William Brandts, below)
- Notice is useful to prevent the operation of the rule in Dearle v Hall where priority of payment
will depend on the order in which notice is given to the debtor.
Public Finance Berhad v Scotch Leasing (Important principle. Facts confusing, may disregard)
Facts:
- The respondent, the leasing company assigned the book debts under 21 leasing
agreements to the appellant, the finance company in consideration of the financial
assistance given to it.
- The leasing company later executed a debenture in favour of Perwira Habib Bank Malaysia,
intervener, under which a floating charge was created over all the undertakings and assets of
the leasing company as security for some loan facilities granted by the debenture holder. The
leasing company later defaulted.
- The as assignee applied for a declaration that the leasing company held the rights and
property in respect of the lease agreements as trustees for the finance company pursuant to
the master agreement. The debenture holder alleged that the leasing company was its
debtor, and claimed as an intervener for all payments in respect of the 21 leasing agreement
Peh Swee Chin J held:
- Personal property a.k.a. personalty or movable property is different from real property a.k.a.
immovable property or land - in one important aspect for the purpose of the nemo dat rule.
- Personal property includes money, goods, stocks and shares, cattle and choses in action.
Examples of choses in action: stock and shares, debts (as stated above), life insurance
policies, bills of lading, patents and copyrights etc.
- Subject to statutory intervention and modifications, all kinds of personal property are
subject to the nemo dat (nobody can claim any personal property against the real owner of
that personal property).
- There is no statute which protects a subsequent bona fide buyer of a book debt for value
without notice.
- Principles of equity as regards land cannot be applied to personal property at all, or without
modifications because of the basic inherent difference between land and personal property.
It is because personal property is capable of absolute ownership while land (real property) is
not.
- Land is not capable of such absolute ownership because all land is vested in the Ruler of the
Land. At common law, all 'owners' of land are tenants of the Crown, holding the same under
various tenures. These tenures are called 'estates'. Nobody can claim therefore that he is the
absolute owner of any land, thus the owners of these estates enjoy legal rights in the land in
question and all other interests in land which are short of estates in land. Such other
interests in land are often called 'equitable interests in land'. Equitable interests in land
started off first as rights in personam against another person.
- Inability of absolute ownership of land makes it possible for a land owner to be subjected to
overlapping claims and this severely modifies the nemo dat rule in land, exceptin execution
cases where, eg a judgment creditor enforces and executes a judgment obtained against the
land of a judgment debtor (who is the registered owner of the land) and has to fight against
the owner of an equitable interest in the land, such as a prior purchaser of the judgment
creditor's land where the purchaser has not got the land registered yet in his own name.
- Debt or book debt can only be transferred by way of assignment, and not, eg by delivery in
the case of sale of goods, or in the case of land by executing a valid and registrable transfer
according to the provisions of the National Land Code 1965. Assignment is the
instrumentality of transfer or sale of a debt.
- At common law contractual rights, eg as to debts, were not assignable, ie transferable to
another person without the consent of both parties to the contract conferring such
contractual rights. Equity stepped in and has long allowed such assignment of such debts to
another person who is not privy to the contract in respect of such debts, without at all the
consent of the debtor. Such assignments as so allowed by equity are called 'equitable
assignments'.
- The validity of equitable assignments is not affected by any failure to comply with
requirements as laid down in s 4(3) of CLA, for an assignment that so complies has been
described as a statutory assignment; being so statutory for such an assignment has the sole
intended effect of facilitating an assignee to sue in his own name directly, irrespective of
whether the chose in action is an equitable chose in action or a legal chose in action (not, be
it noted, whether an assignment is equitable or statutory).
- By being a statutory assignment itself, the 'statutoriness' of such an assignment, ipso facto,
does not prevail over an earlier equitable assignment, and this is so even with the added
factor that the assignee involved in a statutory assignment took the assignment for value
without notice of an earlier equitable assignment.
- Absence of the notice of assignment does not affect the validity of the equitable assignment
as between the assignor and the assignee. If notice is not given, the assignee must give credit
for any payment made to the assignor by the debtor. It means that, even if the assignor
assigns once more the debt to another person in fraud or otherwise on the earlier assignee,
and that other person gives notice to the debtor; and if the debtor pays that other person or
the second assignee, then the earlier assignee must still give credit to the debtor for his
payment thus, for the debtor cannot be blamed for doing lawfully in ignorance of the title of
the earlier assignee who has failed to give notice of the assignment to the debtor.
- Notice to debtor is for the protection of the assignee himself. It is this effect of what the
debtor does lawfully as described that dims the view of the true role of the nemo dat rule in
the resolution of disputed claims to a same debt. The money paid to the 'second assignee'
can, of course, be recovered by the earlier assignee on the nemo dat principle.
Dearle v Hall
Facts:
- One Brown was entitled, during his life, to about £93 annually arising from a share in the
residue of his father's estate. Being in need of money, Brown, in consideration of receipt of a
sum of money, granted to Dearle annuity of £37 a year out of the £93 aforesaid.
- By way of collateral security, Brown had assigned all his interest to Dearle in the sum of £93
per annum. Both Dearle and Brown did not give notice of this assignment to the executors of
the estate of Brown's father.
- Brown later publicly advertised for the sale of the same interest, ie the annuity of the £93
aforesaid and the same was assigned to Hall by Brown. Hall gave notice of the assignment to
the executors of the estate and consequently, the first payment by the executors of Brown's
father's estate was made to Hall who, however, subsequently found out about the earlier
assignment to Dearle.
- Dearle took action in court.
Held:
- It is a general principle that notice of assignment of a debt should have been given to the
debtor i.e. (the estate of the deceased father of Brown) 'in order to take away from the
debtor the right of making payment to the assignor ...', and not on the rule of priority in
point of time frequently employed by courts in dealing with conflict of claims of holders of
equitable interests in land.
- Judgment for Hall.
Topic 6: Fiduciary Relationships
The law of fiduciary is linked with the jurisdiction of the Courts of Equity, by which one in whom
confidence was reposed (“the trustee”) was disabled from obtaining for himself any benefit from a
transaction falling within the scope of that confidence to the exclusion of the person reposing
confidence and to whom the benefit ought properly to accrue (“the beneficiary”).
The existence of a fiduciary relationship is determined according to the nature and scope of the
relationship between the parties, thus expanding equity’s jurisprudence according to the facts of
each case.
Frame v Smith
Principle:
Three characteristics of fiduciary relationship
1. There must be a relationship based on confidence, trust and reliance that the fiduciary
would act in the best interest of the other person.
2. Confidence was reposed or reliance was placed by the other person on the fiduciary and
this creates inequality of bargaining power which put the other party in a
disadvantageous or vulnerable position.
3. The fiduciary has undertaken to exercise some discretionary power in the best interest of
the other person.
Fiduciary Duties
(a) No person in that fiduciary position may use that position for private advantage or for his own
benefit.
Keech v Standford
Facts:
- The lease of a market was devised to a trustee for the benefit of an infant. Before the
expiration of the lease the trustee applied to the lessor for a renewal for the benefit of the
infant as it was impossible to obtain a renewal for the infant.
- The lessor refused to renew for the infant for various reasons, but granted a renewal to the
trustee for himself.
Held:
- Ordered the lessor to assign the lease to the infant. Unjust for the lessor to renew the lease
for himself.
- Principle: The trustee owes it to his cestui que trust to obtain a renewal, if he can do so, on
beneficial terms, and that the Court will not allow him to obtain a renewal upon beneficial
terms for himself when his duty is to get it for his cestui que trust.
(b) No person in fiduciary position may enter into any agreement in which his personal interests
conflicts or may possibly conflict with his duty.
Boardman v Phipps
Facts:
- The respondent, a beneficiary under a will trust, claimed an account of profits made as a
result of purchasing shares in a company.
- The purchasers, the appellants were Boardman , who at all material times was solicitor to
the trustees of the will, and Thomas Phipps, a beneficiary.
- The appellants were dissatisfied with the company's accounts and later decided to make a
"takeover" bid personally for the outstanding 22,000 £1 shares in the company so as to
obtain control.
- During the negotiations for the purchase of the shares, the appellants made use of the
information which they had received at the annual general meeting as representatives of the
trustees. Further detailed knowledge of the assets of the company and their value was
obtained during the negotiations, the information being acquired upon the basis of their
representation of the share holding of the trust.
- The transaction was profitable. The assets of the company were worth far more than what it
was earlier valued and the appellants made a substantial profit.
Held:
- The appellants were bound to give the information to the trustees.
- The information and the opportunity to purchase these shares came to the appellants
when they were given the chance to attend the board meeting and acting on behalf of the
trustees.
- An agent is liable to account for profits he makes out of trust property if there is a possibility
of conflict between his interest and his duty to his principal.
- The appellants could not use that information and that opportunity to purchase the shares
for themselves if there was any possibility that the trustees might wish to acquire them for
the trust.
- The fiduciary position was of such a nature that (as the trust fund was distributable) the
appellants could not purchase the shares on their own behalf without the informed consent
of the beneficiaries: it is now admitted that they did not obtain that consent.
- There was fiduciary relationship on the part of Boardman as he was a solicitor to the trust.
- The appellants are accountable to the respondent for his share of the net profits they
derived from the transaction.
IDC
Avel Consultants v Mohd Zain Yusof
Facts:
- The first and second respondents were directors of the first appellant company while the
third respondent was director of the second appellant company.
- The three respondents formed a firm with the object of carrying on business as consultant
engineers, the same as that of the appellant companies. The firm canvassed for work and
were appointed to carry on work in place of the appellants.
Salleh Abas LP held:
- A director of a company is in fiduciary relationship with his company and is precluded from
acting in a manner which will bring his personal interest into conflict with that of his
company.
- The cause of action is founded on the fact that the respondents as directors of the appellants
have committed breach of their fiduciary duties.
- The respondents were found liable as they had used information from the appellant
companies.
- A fiduciary relationship arises when a person relies on another to negotiate a contract on his
behalf and depends on the other to get the best terms for him.
Tengku Abdullah ibni Sultan Abu Bakar v Mohd Latiff bin Shah Mohd
Facts:
- The appellants wanted to incorporate a recreational club. (note: they are promoters).
- They wanted to purchase shares of another company, “Allied” in order to acquire the
building and the facilities for the club. These shares would later be re-sold to the provisional
members of the club.
- During the EGM, a resolution was passed to purchase the shares for a total of RM47 mil. The
provisional members were not invited to this EGM to make the decision.
- The appellants later said that the cost to purchase the shares was RM63 mil due to
additional costs.
- The respondents alleged that there was a breach of fiduciary duty between the promoters
and the members.
Held:
- The fiduciary doctrine was applicable to promoters of proprietary clubs. The categories of
fiduciary relations are never closed.
- Where a fiduciary duty is owed to an identifiable class of persons, it is the class to whom the
law directs its attention. In the present case, that class comprised all those persons who had
applied for and were awaiting admission to membership of the club.
- It was clear that the interests of the respondents was in conflict with the financial interests
of the appellants. It was in the respondents' interests that the purchase price be kept as low
as possible, but the appellants, who were connected to Allied or RDB in one way or another,
were there to ensure that Allied reaped the highest possible profit. However, the appellants
had failed to disclose their financial interests in Allied to the respondents.
- A plaintiff who proves a case of breach of trust or of fiduciary relationship is entitled to a
wide range of relief, such as an account of profits, the appointment of receiver to recover
money due to him, or damages.
- Fiduciary relationships include the relationships of spiritual adviser and penitent, doctor and
patient, agent and principal, solicitor and client, company directors, partners and joint
venturers.
- A fiduciary is liable to account for a profit or benefit if it was obtained (1) in circumstances
where there was a conflict, or possible conflict of interest and duty, or (2) by reason of the
fiduciary position or by reason of the fiduciary taking advantage of opportunity or knowledge
which he derived in consequence of his occupation of the fiduciary position.
- A solicitor has an obligation to act with absolute fairness towards their client. He must not
make a profit or a benefit from a transaction , without the client’s consent.
Boardman v Phipps (supra)
Letchemy v Arumugam
Facts:
- The plaintiff was an illiterate woman who thought that she was signing a loan agreement.
However, it turned out that it was a document for the transfer of her land to the defendant.
- She sought to prove that the defendant with the aid of his advocate and solicitor had taken
unfair advantage of her ignorance.
Held:
- It is the duty of the advocate and solicitor to explain the terms and conditions of the contract
and the legal consequences thereof fully and frankly to the unrepresented party and ensure
that this unrepresented party understands the terms and conditions and legal consequences
fully, so that neither of the contracting parties has any unfair advantage over the other.
- Where there is a conflict of interest, the advocate and solicitor should advise the plaintiff to
be separately represented. He must at all times maintain his professional ethics, honestly,
integrity and independence.
- He should never abuse his special position and the confidence reposed in him if he is not
maintain the public respect for and confidence in the legal profession.
Remedies
- Injunction
- Tracing