Equity

Winter Session 2009Alysia Debowskialysia@largestprime.net

Subject outline

Course description Teaching arrangements Assessment

ExaminationAssignment

Texts and resources

Today’s class

The History and Nature of Equity What is equity? History of equity The relationship between Law and Equity The maxims of Equity The nature of equitable interests Equitable interests and Torrens title

Dealings with Property in Equity Assignments of Property in Equity Voluntary Assignments Agreements to Assign Declarations of Trust Future Property

Fiduciary Obligations

History and Nature of Equity

What is equity?

“the body of principles developed by the Court of Chancery prior to 1873 as since modified by courts administering that jurisdiction”

History of equity

Development of the common law Development of the “English” jurisdiction of the

Chancellor Recognition of feoffments to uses

Fiscal consequences Doctor and Student dialogue of Christopher St Germain The Earl of Oxford’s Case in Chancery (1615) Mich 13

Jac 1; 21 ER 485 Cook v Fountain (1672) 3 Swanst 600; 26 ER 984

The relationship between Law and Equity Common law courts would not recognise equitable

rights, titles and interests Castlereagh Motels v Davies-Roe (1967) 67 SR (NSW) 279 Robertson v Wait (1853) 8 Exch 299; 155 ER 1360

Equity had no power to decide disputed legal rights and titles Equity Act 1880, s 4 (Equity Act 1901 s 8)

Equity had no power to award damages Goldsborough Mort v Quinn (1910) 11 CLR 674 King v Poggioli (1923) 32 CLR 222

The relationship between Law and Equity (cont.) The common law courts lacked power to give

interlocutory relief The courts of common law had no power to award

specific performance, or injunctions The common law courts lacked power to make

declarations Rooke v Lord Kensington (1856) 2 K & J 753; 69 ER 986

No power existed to transfer cases from one jurisdiction to the other Mines Royal Societies v Magnay (1854) 10 Ex 489; 156 ER 531 Carter v Smith (1952) 52 SR (NSW) 290

The judicature system

Judicature Act (Imp) 1873 s 25(11) Law Reform (Law and Equity) Act 1972 (NSW) Key features Fusion fallacies

Seager v Copydex [1967] 2 All ER 415; [1967] RPC 349 Re Pryce (1917] 1 Ch 234 Walsh v Lonsdale (1882) 21 Ch D 9 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 Cricklewood Ppty & Invest. Trust v Leighton [1945] AC 221, at 240 Chan v Cresdon (1989) 89 ALR 522 Harris v Digital Pulse Pty Ltd [2003] NSWCA 10

The maxims of Equity

Equity will not suffer a wrong without a remedy Equity follows the law

Delehunt v Carmody (1986) 161 CLR 464 Tasita Pty Ltd v Papua New Guinea (1991) 34 NSWLR 691

When the equities are equal, the first in time prevails He who seeks equity must do equity

Ryan v Dries [2002] NSWCA 3 Maguire v Makaronis (1997) 188 CLR 449

He who comes to equity must do so with clean hands Kettles & Gas Appliances v Anthony Horderns (1934) 35 SR (NSW) 108

Equity assists the diligent and not the tardy Equity is equality

The maxims of Equity (cont.)

Equity looks to the intent rather than the form Equity regards as done that which ought to be done Equity imputes an intention to fulfil an obligation Equity will not assist a volunteer

Corin v Patton (1990) 169 CLR 540 at 557 Equity will not perfect an imperfect gift Equity acts in personam

Penn v Lord Baltimore (1750) 1 Ves Sen 444; 27 ER 1132 Potter v Broken Hill Pty Ltd (1905) 3 CLR 479 Baker v Archer-Shee [1927] AC 844 Commissioner Stamp Duties v Livingston (1965) AC 694; (1960) 107 CLR 411 N Z Insurance Co Ltd v Commissioner Probate Duties (Vic) [1973] VR 659

The nature of equitable interests Proprietary – rights that can be exercised directly against property Equities – right to obtain certain remedies Mere equity – right to apply to the court for a remedy

Commissioner of Stamp Duties (Qld) v Livingston (1965) AC 694; (1960) 107 CLR 411

Re Leigh’s Will Trusts [1970] Ch 277 Perpetual Trustee v Commissioner Stamp Duties (Shallard’s Case) [1977] 2 NSWLR

472 Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306; 96 ALR 327 Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265 Silovi v Barbaro (1988) 13 NSWLR 466 Goldsborough Mort v Quinn (1910) 11 CLR 674 Double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409

Commissioner of Stamp Duties (Qld) v Livingston (1965) AC 694; (1960) 107 CLR 411

High Court: Dixon CJ – widow had beneficial interest in Queensland property;

beneficial interest must be somewhere while estate is administered Windeyer J - widow had interest in Queensland property Fullagar J (Menzies J agreeing) – widow had equitable interest in assets

which gave right to enforce proper administration; location of the right is where it would be exercised ie NSW

Kitto J – widow had interest in assets, but not any particular assets; that interest had the most substantial connection with the forum for enforcing due administration of the estate ie NSW

Privy Council: Widow had chose in action to ensure proper administration of the

estate; location was the proper forum for enforcing those rights ie NSW – where the executors were

Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265

Mortgagee exercised power of sale Sold property to wholly owned subsidiary – later held to

be fraudulent Subsidiary granted floating charge over hotel to third

party without notice Subsidiary defaulted under charge – the charge

crystallised and a receiver was appointed Mortgagor sought to have the sale set aside

Whose interest should take priority?

The nature of equitable interests (cont.) The “Deserted Wife's Equity”

National Provincial Bank Ltd v Ainsworth [1956] AC 1175

Confidential InformationWheatley v Bell [1982] 2 NSWLR 544

Equitable Security InterestsSwiss Bank Corp v Lloyds Bank Ltd [1982] AC

584

Equitable interests and Torrens title

Barry v Heider (1914) 19 CLR 197 Breskvar v Wall (1971) 126 CLR 376 Bahr v Nicolay (No 2) (1988) 164 CLR 604 Bogdanovic v Koteff (1988) 12 NSWLR 472 Grgic v ANZ Banking Group Ltd (1994) 33 NSWLR 202 Mercantile Mutual Life Assurance v Gosper (1991) 25

NSWLR 32 Heid v Reliance Finance Corp Pty Ltd (1983) 154 CLR

326 Davis v Williams [2003] NSWCA 371

Dealings with Property in Equity

Introduction

Who is the assignor? Who is the assignee? What exactly is being assigned? What is the nature of the property or interest being assigned? What is the intended form of the assignment? What is the test for assignments in that form? Is writing required? Is the assignment intended to take effect immediately? Is it voluntary or for consideration? If the assignment is voluntary, can the assign or (the “donor”) recall the gift?

Smith v Perpetual Trustee Co Ltd (1910) 11 CLR 148 Comptroller of Stamps (Vic) v Howard Smith (1936) 54 CLR 614

Voluntary Assignment of Legal Property Assignment of Property Assignable at Law Conveyancing Act 1919 (NSW), s 12 (Choses in Action) William Brandt’s & Sons v Dunlop Rubber Co. [1905] AC

454 Milroy v Lord (1862) 4 De GF & J 264; 45 ER 1185 The First “Leg” of Milroy v Lord Anning v Anning (1907) 4 CLR 1049 Corin v Patton (1990) 169 CLR 540; 92 ALR 1 Noonan v Martin (1987) 10 NSWLR 402

Conveyancing Act 1919 (NSW), s 12 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 such 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 if this Act had not passed) to pass and transfer the legal right to such debt or chose in action from the date of such 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: Provided always that if the debtor, trustee, or other person liable in respect of such debt or chose in action has had notice that such assignment is disputed by the assignor or anyone claiming under the assignor, or of any other opposing or conflicting claims to such debt or chose in action, the debtor, trustee or other person liable shall be entitled, if he or she thinks fit, to call upon the several persons making claim thereto to interplead concerning the same, or he or she may, if he or she thinks fit, pay the same into court under and in conformity with the provisions of the Acts for the relief of

trustees.

Voluntary assignments (cont.)

Voluntary Assignments of Torrens Title Land Brunker v Perpetual Trustee Co Ltd (1937) 57 CLR 555 Norman’s Case per Windeyer J at 28-9 Cope v Keene (1968) 118 CLR 1 Taylor v FCT (1969) 123 CLR 206 Olsson v Dyson (1969) 120 CLR 365 Grey v Australian Motorists & General Ins. Co. P/L [1976] 1 NSWLR

669 Bogdanovic v Koteff (1988) 12 NSWLR 472 Corin v Patton (1990) 169 CLR 540; 92 ALR 1 Costin v Costin (1997) 7 BPR 15,167

Voluntary assignments (cont.)

The Second “Leg” of Milroy v Lord Re Rose; Rose v IRC [1952] Ch 499 Re Rose [1949] Ch 78 Assignments of Property Not Assignable at Law Fortescue v Barnett (1834) 3 My & K 36; 40 ER 14 Re Patrick; Bills v Tatham [1891] 1 Ch 82 Norman’s Case per Windeyer J, at 31-34 Shepherd v FCT (1965) 113 CLR 385, per Kitto J, at 397

Voluntary assignments of equitable property Smith v Perpetual Trustee Co. Ltd (1910) 11 CLR 148 at

163 Comptroller of Stamps (Vic) v Howard-Smith (1936) 54

CLR 614 Timpson’s Executors v Yerbury [1936] 1 KB 645 at 664

Voluntary assignments of equitable property (cont.) Dealings in the Form of Direct Assignments Norman’s Case per Windeyer J, at 30 FCT v Everett (1979) 143 CLR 440 at 446-7 Comptroller of Stamps v Howard-Smith per Dixon J at 622 Ward v Duncombe [1893] AC 369, per Lord McNaghten at

392 Timpson’s Executors v Yerbury [1936] 1 KB 645 at 658 PT Ltd v Maradona Pty Ltd (No 2) (1992) 27 NSWLR 241 Hagan v Waterhouse (1992) 34 NSWLR 308 at 382G to

387A

Voluntary assignments of equitable property (cont.)Dealings in the Form of Declarations of Trust Grey v IRC [1958] Ch 690 at 715 Comptroller of Stamps v Howard-Smith, per Dixon J at

621-2 Paul v Constance [1977] 1 All ER 195

Voluntary assignments of equitable property (cont.)Dealings in the Form of Directions to the Trustee(a) to deal with the equitable estate Howard-Smith per Dixon J, at 622 Grey v IRC [1960] AC 1 Parker & Parker v Ledsham [1988] WAR 32(b) to deal with the legal estate Vandervell v IRC [1967] 2 AC 291 DKLR Holding Co (No. 2) P/L v Commissioner of

Stamp Duties (NSW) (1982) 56 ALJR 287

Voluntary assignments of equitable property (cont.) Dealings in the Form of a Release Crichton v Crichton (1930) 43 CLR 536 The Requirement of Writing Conveyancing Act 1919 (NSW), s 23C Secretary Department of Social Security v James (1990)

95 ALR 615 Hagan v Waterhouse (1991) 34 NSWLR 308 at 385–6 Hunter v Moss [1994] 3 All ER 215

Conveyancing Act 1919 (NSW), s 23C (1) Subject to the provisions of this Act with respect to the creation of interests

in land by parol: (a) no interest in land can be created or disposed of except by writing signed

by the person creating or conveying the same, or by the person’s agent thereunto lawfully authorised in writing, or by will, or by operation of law,

(b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by the person’s will,

(c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same or by the person’s will, or by the person’s agent thereunto lawfully authorised in writing.

(2) This section does not affect the creation or operation of resulting, implied, or constructive trusts.

The Rule in Strong v Bird

Strong v Bird (1874) LR 18 Eq 315 Re Mulholland (1916) 33 WN (NSW) 89 Benjamin v Leicher (1998) 45 NSWLR 389

Donationes Mortis Causa

Smith v Casen (1718) 1 P Wms 406 Duffield v Elwes (1827) 1 Bligh (NS) 497 at 534; 4 ER 959 at

972 Bayliss v Public Trustee (1988) 12 NSWLR 540 Sen v Headley [1991] 2 All ER 636 Assignments for Value Holroyd v Marshall (1862) 10 HLC 191; 11 ER 999 Tailby v Official Receiver (1888) 13 App Cas 523 Chang v Registrar of Titles (1976) 137 CLR 177, per Mason J

at 184.

Assignment of Legal Property for Valuable Consideration Last v Rosenfeld [1972] 2 NSWLR 923 Rochefoucauld v Boustead [1897] 1 Ch

196 Bannister v Bannister [1948] 2 All ER 133 Allen v Snyder [1977] 2 NSWLR 685

Assignment of Equitable Property for Value Comptroller of Stamps (Victoria) v

Howard-Smith (1936) 54 CLR 614 Conveyancing Act 1919 (NSW) s 23C Adamson v Hayes (1973) 130 CLR 276 Oughtred v IRC [1960] AC 206

Assignments of Future Property

The Definition of Future Property Re Lind [1915] 2 Ch 345 Tailby v Official Receiver (1888) 13 App Cas 523 Norman v FCT (1963) 109 CLR 9 Shepherd v FCT (1965) 113 CLR 385 Williams v IRC [1965] NZLR 395 McLeay v IRC (1963) 9 AITR 265

Assignments of Future Property (cont.) The Basis for the Enforcement of Assignments

of Future Property Holroyd v Marshall (1862) 10 HLC 191; 11 ER

999 Tailby v Official Receiver (1888) 13 App Cas 523 Palette Shoes Pty Limited v Krohn (1937) 58

CLR 1, at 27, by Dixon J McIntyre v Gye (1994) 122 ALR 289

Property which cannot be Assigned

Personal Contracts Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC

1014 Peters v General Accident and Life Assurance Co [1937] 4

All ER 628 Bare rights to Sue Glegg v Bromley [1912] 3 KB 474 Trendtex Trading v Credit Suisse [1980] 3 All ER 721; [1981]

3 WLR 766 Monk v ANZ Banking Group Ltd (1994) 34 NSWLR 148

Fiduciary Obligations

Overview

1. Is there a fiduciary relationship? Established category? On the facts?

2. What is the scope of the fiduciary relationship? 3. Were the fiduciary’s obligations breached?

No conflict No profit

4. Is there a relevant defence? Disclosure and informed consent

5. What remedy is available for the breach?

The Source of Fiduciary Duties

Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 97

Re Coomber; Coomber v Coomber [1911] 1 Ch 723, per Fletcher-Moulton LJ at 728-9

Aberdeen Railway Co v Blaikie Bros (1854) [1843-60] All ER Rep 249, at 252

Chan v Zacharia (1984) 154 CLR 178, esp per Deane J at 198-9

Lac Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14

The Scope of the Fiduciary Relationship N Z Netherlands Society ‘Oranje’ v Kuys [1973]

2 All ER 1222 Noranda Resources Ltd v Lachlan Resources

NL (1988) 14 NSWLR 1 Blythe v Northwood (2005) 63 NSWLR 531 Farah Constructions P/L v Say-Dee P/L (2007)

236 ALR 209; [2007] HCA 22 (24 May 2007)

The Recognised Categories of Fiduciary Relationships Solicitor and Client Boardman v Phipps [1967] 2 AC 46 Queensland Mines Ltd v Hudson (1978)

52 ALJR 399 Farrington v Rowe McBride and Partners

[1985] 1 NZLR 83 Maguire v Makaronis (1997) 188 CLR 449

The Recognised Categories of Fiduciary Relationships (cont.) Director and Company Bell v Lever Brothers [1932] AC 161 Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 Peso Siver Mines Ltd (NPL) v Cropper (1966) 58 DLR

(2d) 1 Canadian Aero Services Ltd v O’Malley (1973) 40 DLR

(3rd) 371 Queensland Mines Ltd v Hudson (1978) 18 ALR 1 Mordecai v Mordecai (1988) 12 NSWLR 58

The Recognised Categories of Fiduciary Relationships (cont.) Trustee and Beneficiary Partners Birtchnell v Equity Trustees (1929) 42 CLR 384 Chan v Zacharia (1984) 154 CLR 178 United Dominions Corp Ltd v Brian Pty Limited

(1985) 157 CLR 1 Ravinder Rohini Pty Ltd v Krizaic (1991) 105

ALR 593

The Recognised Categories of Fiduciary Relationships (cont.) Employee and Employer DPC Estates Pty Ltd v Grey & Anor [1974] 1 NSWLR

443 Hivac Ltd v Park Royal Scientific Instruments Ltd [1946]

Ch 169 Printers & Finishers v Holloway [1965] RPC 239 Industrial Development Consultants Ltd v Cooley [1972]

1 WLR 443 British Reinforced Concrete v Lind (1917) 86 LJ Ch 486 Sterling Engineering Co v Patchett [1955] 1 All ER 369

The Recognised Categories of Fiduciary Relationships (cont.) Agent and Principal Haywood v Roadknight [1927] VLR 512

Other Relationships

Broker and Client Hewson v Sydney Stock Exchange [1968] 2 NSWR 224; 87 WN (NSW) Pt 1

422 Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 Commercial Transactions Keith Henry & Co v Stuart Walker & Co Pty Ltd (1958) 100 CLR 342 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 4 LAC Minerals v International Corona Resources Ltd (1989) 61 DLR (4th) 14 Moorgate Tobacco Co Ltd v Phillip Morris Ltd (No 2) (1984) 156 CLR 414 News Limited v Australian Rugby Football League Ltd (1996) 139 ALR 193

Other Relationships (cont.)

Banker and Customer Commonwealth Bank v Smith (1991) 102 ALR

453 Standard Investments Ltd v Canadian Imperial

Bank of Commerce (1985) 22 DLR (4th) 411 Other and Special Relationships Breen v Williams (1996) 70 ALJR 772

Breach of Duty: “Conflict of Interest” and “Improper Gain” Prince Jefri Bolkiah v KPMG [1999] 2 AC

222 The Doctrine in Keech v Sandford Keech v Sandford (1726) Sel Cas T King

61; 25 ER 223 Chan v Zacharia (1984) 154 CLR 178

Defences: The Duty of Disclosure and Informed Consent Boardman v Phipps [1967] 2 AC 46 BLB Corporation of Australia v Jacobsen

(1974) 48 ALJR 372 NZ Netherlands Society v Kuys [1973] 2

All ER 1222 Gemstone Corporation of Australia Ltd v

Grasso (1994) 13 ACSR 695

Remedies for Breaches of Fiduciary Duty Nocton v Lord Ashburton [1914] AC 932 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 Chan v Zacharia (1984) 154 CLR 178 Maguire v Makaronis (1997) 188 CLR 449 Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 Re Dawson [1966] 2 NSWR 211 Peter Pan Corp Ltd v Corsets Silhouette Ltd [1963] RPC 45; [1964] 1 WLR

96 Timber Engineering Co Pty Ltd v Anderson [1980] 2 NSWLR 488 Hagan v Waterhouse (1992) 34 NSWLR 308 at 360-365F Boardman v Phipps [1967] 2 AC 46 Mordecai v Mordecai (1988) 12 NSWLR 58 Warman International Ltd v Dwyer (1995) 128 ALR 201 Gemstone Corporation v Grasso (1994) 13 ACSR 695

Secret Commissions and Equitable Debt Metropolitan Bank v Heiron (1880) 5 Ex D 319 Boston Deep Sea Fishing and Ice Co v Ansell (1888) 39

Ch D 389 Lister v Stubbs (1890) 45 Ch D 1 A-G (Hong Kong) v Reid [1994] 1 AC 324 DPC Estates Pty Ltd v Grey [1974] 1 NSWLR 443 Re Stephenson Nominees (1987) 76 ALR 485 Reading v AG [1951] AC 507 Jirna Ltd v Mister Donut of Canada Ltd (1973) 40 DLR

(3d) 303

Applying the theory…

Mary and Martha agree to develop a property in Sydney owned by Mary. Martha will provide her technical expertise and supervise the project. They agree to split the profits.

Mary and Martha successfully obtain development consent from the Council.

Before a formal agreement can be entered into, Mary and Martha have a falling out. Mary sells the land and makes a substantial profit, as the land already has development approval.

Does Martha have a claim against Mary for breach of fiduciary duty? If so, what remedy should Martha seek?