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Equity

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Equity

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  1. Equity Winter Session 2009 Alysia Debowski alysia@largestprime.net

  2. Subject outline • Course description • Teaching arrangements • Assessment • Examination • Assignment • Texts and resources

  3. 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

  4. History and Nature of Equity

  5. What is equity? • “the body of principles developed by the Court of Chancery prior to 1873 as since modified by courts administering that jurisdiction”

  6. 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

  7. 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

  8. 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

  9. 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

  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

  11. 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

  12. 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

  13. 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

  14. 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?

  15. The nature of equitable interests (cont.) • The “Deserted Wife's Equity” • National Provincial Bank Ltd v Ainsworth [1956] AC 1175 • Confidential Information • Wheatley v Bell [1982] 2 NSWLR 544 • Equitable Security Interests • Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584

  16. 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

  17. Dealings with Property in Equity

  18. 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

  19. 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

  20. 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.

  21. 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

  22. 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

  23. 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

  24. 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

  25. 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

  26. 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

  27. 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

  28. 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.

  29. 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

  30. 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.

  31. 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

  32. 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

  33. 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

  34. 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

  35. 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

  36. Fiduciary Obligations

  37. 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?

  38. 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

  39. 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)

  40. 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

  41. 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

  42. 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

  43. 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

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

  45. 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

  46. 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

  47. 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

  48. 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

  49. 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 • GemstoneCorporation v Grasso (1994) 13 ACSR 695

  50. 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