Equity and trustsLXEC 2104

Why study equity separately?Historical reasonDifferent approach from common law the ecclesiastical influence Concepts of honour, duty, and moral obligation

EQUITYEquity is not a branch of the law,It is a source of the law

Sources of English LawCustom

Rules worked out by common laws and courts of equity

Common law

Law merchant

Legislation

Historical DevelopmentThe origins of equityThe rigours of common law and emergence of the Chancery courtProcedure in the Chancery courtThe struggle between the Chancery and Common Law CourtsSystematisation and procedural reforms

History The Norman Conquest growth of common law Circuit judgesCommon law courts (Curia Regis)-Kings bench, Common Pleas & ExchequerCommon law courts fettered by precedents

Emergence of EquityCommon law courts fettered by precedents did not develop fast enough to do justice in all casesPlfs often unable to obtain remedy- strength of the dfd (eg.intimidation of the jury) /vulnerability of the plfDeficiency of the remedyFailure to grant remedy These were grounds for petition to the King in Council to exercise his extrajudicial powers

The Court of ChanceryBegan as the King in CouncilChancellor acted a King in Council 1474 Court of Chancery established- independent of the King and his CouncilChancellor designated keeper of the Queens ConscienceDeveloped new rules and principles

Development and Systematisation of Equity and Chancery Courts Systematisation from 1735 onwards- Chancery became highly organised1813 appointment of Vice Chancelor1841 powers of the Exchequer transferred to the Chancery1851 Court of Appeal of ChanceryEquity courts became a regular system of courts with a recognised jurisdictionRidigity sets in Jessel MR: This court is not a court of conscience but a court of law

New rules, new inventions and modern equityTrusts express, implied, resulting, constructive

Equitable doctrines- eg equitable estoppel/fiduciary obligation

Equitable remedies- specific performance / injunctions

Procedural reformsDisadvantages of separate courts and the mischief that aroseNo court had power to grant full remediesResolved in Earl of Oxfords CaseLord Cairns Act gave power to award damages either instead of, or in addition to, an injunction or specific performance

Courts of Judicature Act 1873-75

Amalgmation of courts into one Supreme Court of Judicature Court of Appeal replacing QB, CP, and Ch and Court of Exchequer Chambers

The High Court of Justice three divisions

Effect of the Courts of Judicature Acts 1873-75Administration of law and equityEvery judge of every division to give to all equitable rights, obligations and defencesAny variance between law and equity on the same matter- rules of equity shall prevail.

Case examples:

Walsh v LonsdaleJob v Job (1877)Joseph v LyonsBerry v BerryLowe v Dixon

Distinctive relationship between common law courts and the courts of chanceryProf Maitland:We ought not to think of common law and equity as two rival systems. Equity was not a self sufficient system, at every point it presupposed the existence of common law. Common law was a self sufficient system. I mean this: that if the legislature had passed a short Act saying Equity is hereby abolished, we might have got on fairly well; in some respects our law would have been barbarous, unjust, absurd, but still the great elementary rights, the right of immunity form violence, the rights to ones good name, the rights of ownership and possession would have been decently protected and contract would have been enforced.

Maitland Contd

On the other hand, had the legislature said, Common law is hereby abolished, this decree if obeyed would have meant anarchy. At every point equity presupposed the existence of common law.

Equity a gloss on the common lawNow equity is no part of the law, but a moral virtue which qualifies, moderates, and reforms the rigour, hardness, and edge of the law, and is an universal truth; it does also assist the law where it is defective and weak in the constitution (which is the life of the law) and defends the law from crafty evasions, delusions, and new subtleties, invented and contrived to evade and delude the common law, whereby such as have undoubted right are made remediless; and this is the office of equity, to support and protect the common law from shifts and crafty contrivances against the justice of the law. Equity therefore does not destroy the law, nor create it, but assist it.

Fusion between Equity and Common Law?The rules of equity remained distinct from those at law but both administered in the same courts.

Newbiggins Gas Co v Armstrong (1879) 13 Ch D 310

Salt v Cooper

Fusion of law and equity?Ashburner: The two streams of jurisdiction. Though they run in the same channel, run side by side and do not mingle their waters.

Cf Lord Diplocks statement in United Scientific Holding Ltd v Burnley Borough Council [1978] AC 904 (the two jurisdictional system have surely mingled now. ) and its criticism

Two fundamental ideas of the chancellorsRecognition of the sanctity of the individual conscience and personal obligationRecognition of equity as complementary and not a contradiction of common law

CONSCIENCE-Express trusts -Injunction, tracing, accountSpecific performanceMisrepresentation UNCONSCIONABILITYmistakeFraudThe fiduciary relationshipObligations of confidence(Trust-key ingredient)Undue influenceImplied trustsPersonal RemediesTHE TRUST

UnconscionabilityA basis for a range of doctrinesPatrick Parkinson: Equitable intervention on behalf of a plaintiff is frequently based upon the fact that there is something in the conduct of the defendant which makes it uncoscionable for her or him to insist on the preservation or enforcement of the strict leagl rights arising under the law of contract or the law of property.

UnconscionabilityAn emerging preoccupation of the judiciary in the common law world

Per Anthony Mason, a universal talisman in many fields of equity

Relevance of Equity to contemporary issues

The ecclesiastical natural foundations of equity, its concerns with standards of conscience, fairness and equality and its protection of relationships of trust and confidence, as well as its discretionary approach to the grant of relief, stand in marked contrast to the more rigid formulae applied by the common law and equip it better to meet the needs of the type of liberal democratic society which has evolved in the twentieth century.

Sir Anthony Mason

Influence of equityIntervention in the administration of common lawPenetrates aspects of legal practiceInfluences modern commercial lawEnvironmental lawAdministrative law eg. Declaration & injunctionEmerging role of equitable principles eg. In human rights law restitution, fiduciary role of govts in relation to indigenous peoples

RECEPTION OF ENGLISH PRINCIPLES OF EQUITY IN MALAYSIA

Reception of English Common Law and EquitySignificant dates1807 18261937195119561963

Reception of equityWe have as a matter of fact adopted freely in these states a great mass of English rule of law and equity either directly or derivatively

Per Sproule J in the Re The Will of Yap Kim Seng (1924) 4 FMSLR 313. Discuss this statement with reference to other decided cases.

Application of English Principles of EquityMotor Emporium v Arumugam [1933] MLJ 276

Warren v Tay Seng Geok [1965] 1 MLJ 44

Application of English Principles of Equity

Civil Law Act 1956 s 3 Civil Law Act 1956 s 6 (no application of English land law principles)

But see National Land Code 1956 s 206 (3)

Case law on application of English principles of EquityHaji Abdul Rahman v Mohd Hassan (1915) 1 FMSLR 290 (PC)The State of Johor v Salleh bin Hassan (1939) 2 JLR 73UMBC Bhd v Pemungut Hasil Tanah, Kota Tinggi [1984] 2 MLJ 87Baghwan Singh &Co Sdn Bhd v Hock Hin Bros [1987] 1 MLJ 324Oh Hiam v Tham Kong [1980] 2 MLJ 159, 164

Lian Keow Sdn Bhd (In Liquidation) & Anor v Overseas Credit Finance (M) Bhd [1988] 2 MLJ 449[The Malaysian torrens system] does not prevent or restrict the creation of beneficial interests in land by way of express, implied or resulting trust arising by operation of law in Malaysia by virtue of s 3 of the CLA 1956. It does not abrogate the principles of equity but alters the application of particular rules of equity in so far as is necessary to achieve its special objects. In this way, the court is entitled to exercise jurisdiction in personam to insist upon proper conduct in accordance with equitable principles and norms.

Alfred Templeton &ors v Low Yat Holdings Sdn Bhd [1989] 2 MLJ 202, 222-223

S 206 (3) of the National Land Code provides statutory authority for the liberal application of equity whenever there is a basis for that.

Application of English equitable principles in the preservation of property

Order 29 rule 2(1) of the Rules of the High Court 1980Paragraph 6 to the Schedule to the Court of Judicature Act 1964Equivalent to [English] s 45(1) of the Supreme Court of Judicature (Consolidation) Act 1925 or its predecessor s 25(8) of the Supreme Court of Judicature Act 1973See: Zainal Abidin bin Haji Abdul Rahman v Century Hotel Sdn Bhd [1982] 1 MLJ 260

Section 45(1) SCJ (Consolidation) ActBeddow v Beddow (1878) 9 Ch D 89

Jessel MR: That being so, it appears to me that the only limit to my power of granting and injunction is whether I can properly do so. For that is what it amounts to I have unlimited power to grant and injunction in any case where it would be right or just to do so; and what is right and just must be decided, not by the caprice of the judge, but according to sufficient legal reasons or on settled principles.

History, Development and Nature of Equity1.Equity varies with the Chancellors foot. Do you agree?

Equity is often described as a gloss on the common law. Explain.

Equity does not destroy the law, nor create it, but assist it. Analyse this statement.

History, Development and Nature of Equity

4. Discuss the importance of the Judicature Acts in the development of law and equity.

5. There is only one court and equity rules prevail in it . Per Jessel MR in Walsh v Lonsdale (1882) 21 Ch D 9. Explain and illustrate this statement.

QUESTIONSIt has been said that Equity is not past child bearing. Do you agree?Do the courts have an inherent jurisdiction to do equity in appropriate cases notwithstanding sections 3 and 6 of the Civil Law Act 1956?Given CLA sections 3 and 6 , how have the courts exercised its inherent jurisdiction to do justice?

Maxims of Equity

1. The maxims do not cover the whole of the ground, they overlap, one maxim containing by implication what belongs to another. Baker and Langan, Snells Equity p 27. Discuss.

2. Equity will not suffer a wrong to be without a remedy. Explain how other maxims complement this maxim as they embody the peculiar functions of equity.

3. Equity acts in personam. How does this maxim extend the jurisdiction of equity?

Equitable Remedies1.Equitable remedies are discretionary. Discuss with reference to decided cases, the meaning and application of this statement in relation to the remedy of specific performance.

2. What are the various types of injunction? Explain with reference to decided cases the principles and factors that would guide the courts in the grant of: a) perpetual injunction;b) interlocutory injunction.

3. In what situations would it be obligatory for the courts to grant an injunction?

Equitable remediesIn Personam personal remedies equity supplements restricted range of remedies available at common law

Personal relate directly to the conduct or behaviour of the parties

Personal and proprietary attach to property eg constructive trusts and tracing

Discretionary - not according to the caprice of the judge: According to established principles:

Only granted where damages are inadequate

Equitable remedies are discretionaryDiscretionary - not according to the caprice of the judge: According to established principlesOnly granted where damages are inadequate

Accommodates relative merits of the plf and dfds eg. Equitable relief is refused where- It would be unfair to the defnedntWhere it would cause undue hardship to the defendantWhere plf comes to equity with clean handsWhere plf comes to equity with undeu delayWhere the relief would require constant supervision

Specific PerformanceAn order of the court to a contracting party to perform their obligations according to the contract

Established principles- breach of contract, inadequacy of damages, discretionary

Contracts that may be performed

Contracts that cannot be performed- Building contracts exceptions

Particular contracts

Contracts for sale of land ***Building contractsContracts for sale of goodsContracts to lend moneyContracts for personal services

Particular ContractsContracts for the sale of land sp generally decreed - see Specific Relief Act s 11

land is generally unique. damages may not be a complete remedy for the purchaser Building contracts Generally not decreedException- (1) building work is sufficiently defined by the contract(2) plf cannot be adequately compensated by damages(3) defendant has obtained possession of the land

Defences to specific performanceArising from the nature of the contractPerformance requires supervisionInsufficient definition of what is to be doneWant of mutuality eg. one party is an infantSpecific performance is futileDfd would have to do an act which he is not competent to doPerformance is impossible

Defences to specific performanceArising from the conduct of the partiesUndue hardship on the defendantNo willingness on the part of plf to perform his partUnconscionable conduct by the plf - unclean hands?Laches delay in instituting proceedings?

InjunctionsTypes of injunctions - perpetual / interim or interlocutory- prohibitory / mandatory- quia timet injunction

Principles that guide that court in the grant of injunctionsPerpetual injunctions- Day v Brownrigg- Redland Bricks v Morris- Gibb v Malaysia Building SocietyInterlocutory injunctions- American Cyanmid Co v Ethicon- Keet Gerald Francis Noel v Mohd Noor-

Mareva injunction and Anton PillarThird Chandris Shipping Corpn v Unimarine SA

Zainal Abidin v Century Hotel

Anton Piller KPG v Manufacturing Processes

Doctrines of Equity

Equitable Interests in PropertyTransfer of propertyDeclaration of trustDirection of trusteeSee Wan NaimahBorneo HousingFinance v Time EngineeringConstructive trustsEquitable Assignment/ Statutory Assignment

Equitable Interests/Proprietary interests

May arise in various circumstances:Express trustsBeneficial interests in a deceased estateUnder contract of sale bare trustImplied trustsConstructive trustsAssignment of property

Assignment of PropertyStatutory assignment under the Civil Law Act 1956 section 4Khaw Poh Chuan v Ng Gaik PengHarris Adacom Corporation v Perkom

Equitable AssignmentWilliam Brandts & Sons v The Dunlop Rubber CoMIMB v Malaysia AirlinesPublic Finance v Scotch Leasing Sdn Bhd

Estoppel By deedCommon law by judgement by conductEstoppelpromissory estoppelEquityproprietary estoppel

Development of EstoppelEstoppel by representationRepresentation by or omission by AInduced B to actCaused detriment to BPromissory EstoppelEquity binds the conscience of the personApplied to statements or promises about future conductPre-existing relationshipDefensive equity- only as a shield as regards to the other persons rightProprietory estoppelRepresentation of future conductDoes not require pre-existing contractual relationshipPromises concerning land or propertyUsed as a swordThe new EstoppelUnconscionabilityWalton Stores (Interstate) Ltd v Maher (1988) 164 CLR 394Boustead Trading V AMMB Chor Phaik Har V Choong Lye Hock

Promissory EstoppelWilliam Teos House and Estate Agencies v Chan Eng SweeWhere one party has by his words or conduct, made to the other a promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then once the other party has taken him at his word and acted on it, the one who gave the promise or assurance cannot afterwards be allowed to revert to the previous legal relations as if no such promise or assurance had been made by him, but he must accept their legal relations subject to the qualifications that he himself has so introduced even though it was not supported in point of law by any consideration butt only by his word. The principle does not create a cause of action where none existed before. It only prevents a party form insisitng on his legal rights, when it would be unjust to allow him to enforce them, having regards to the dealings which have taken palce between them.

Proprietary estoppelCrabb v Arun District CouncilThe basis of proprietary estoppel is the interposition of equity. Equity comes in , true to form, to mitigate the rigours of the strict law.The early cases did not speak of it as estoppel . They spoke of it as raising an equity. it is the first principle upon which all courts of equity proceed.

Fiduciary ObligationTrustConfidenceRelianceScope for exercise of discretion and powerBfy vulnerableDisadvantaged Vulnerability One in position of influence over anotherDependence One undertakes to act in the interest of anotherElements of Fiduciary Obligation

Pemecahan kewajipan?Meletakkan amanah konstruktifMenimbulkan remedi ekuitiInjunksi Tracing (Pengesahan)Account (akaun)Dasar:UnconscionabilityPrevents unjust enrichmentAmanah KonstruktifKonsep Fidusiari

Fiduciary dutyBasis - Personal accountability

Prevent unconscionability

Prevents unjust enrichment

Gives rise to constructive trust

Application: eg. Mutual will

The Law of Trust

Definition of trust

Yong Nyee Fan v Kim Guan [1979] 1 MLJ 182

Trustee

Trust property

Beneficiary ( cestui que trust)

Settlor / testator

Trust Compared With Other ConceptsTrust and debt*

Trust and contract

Trust and agency

Trust and bailment

Trust and power (of appointment)**

Classification of trusts1. Express / Implied/ Constructive2. Private/ Public3. Perfect/ Imperfect Obligation4. Simple/ Special5. Executed/ Executory6. Completely and Inconstituted Trust

Express trustExpress TrustIntervivos trustDeclaration of trustA trust which operates duringThe life of the settlorTransfer or property toTrustee for the beneficiary

Requirements of an express trustKnight v Knight: : 3 CertaintiesCertainty of Word/IntentionCertainty of SubjectCertainty of ObjectSee : Wan Naimah v Wan Mohd Nawawi [1974] 1 MLJ 41Quah Eng Hock v Ang Hooi Kian [2005] 5 CLJ 126Teoh Ah Bin v Tan Kheng Guan [2002] 3 MLJ 121Yap Joyce v Tee Molly & Anor [2000] 3 MLJ 599

Failure of certaintiesLee Phek Choo v Ang Guan Yau

The paramount certainty is that of subject matter in the first sense; if there is no certainty as to the property to be held upon trust, the entire transaction is nugotary. Next, if that certainty is present but there is no certainty of words, the person entitled to the trust property holds free from any trust. (cont..d)

Failure of certaintiesFinally, if both these certainties are present but there is uncertainty of objects, there is a resulting trust for the settlor for once established that a trust (of definite property) was intended and the legatee cannot take beneficially- the same applies where there is uncertainty of the subject matter as regards the beneficial interest, unless one of the beneficiaries can establish a claim to the whole.

COMPLETELY AND INCOMPLETELY CONSITITUTED TRUSTIs the trust completely constituted?YESTrust is enforceable by beneficiariesNOHas the trust been created by transfer of property to trusteeYESHas the settlor done everythingthat is necessary for him to do??

Completely Constituted Trust

Settlor must have done everything which is necessary to be done to transfer the property

Transferor must use appropriate mode of transfer according to thenature of the propertySettlor has declared himself or another as trusteeTransferor must do all those Acts which are obligatory for him to do12Milroy v Lord (1862) 45 ER 1185Koperasi Wanita Swak v Robert Sim [2005] 4 MLJ 493Yeong Ah Chee v Lee Chong Hai [1994] 2 MLJ 614Multipurpose holdings Sdn v General Holdings Sdn Bhd [2003] 2 MLJ 252

Appropriate mode of transfer according to thenature of the property

leaseGift by chequechattelsshareslandbank accountsTransfer byassignmentCheque endorsed to its beneficiarydeliverydelivery of duly executed instrument of transferdeliver a duly executed instrument of transfer (IDT) deed of conveyanceOpen bank account and Hand passbook to bfy

Has the settlor done all in his power to create the trust?YesTrust is enforceable by beneficiariesNOIs it an agreement to create a trust?Is the agreement being Enforced by volunteers?Multi Purpose Holdings Sdn Bhd vAnor v General Holdings Sdn [2003] 2 MLJ 252

Equity will not perfect an imperfect giftor Equity will not assist a volunteer

Equity will not assist a volunteerexceptionsThe Rule in Strong v Bird2. Gifts in contemplation of death 3. Estoppel

The rule in Strong v Bird A expresses a present intention to make a gift to BThat intention continues unchanged until As deathB becomes the executor of As willB is entitled to hold property for his (Bs) benefitandandthenRule in Strong v BirdIf

Gifts in contemplation of death (Donationes Mortis Causa)1. Personal property only2. Must be in contemplation of impending death3. Must be intended to take effect upon death4. Must be delivery of propertyie Actual or symbolic token

EstoppelRepresentation by the representorDetriment suffered by the representeeReliance on the representation by the representeeAn imperfect gift may be enforceable where 3 elements are present

Express trustTrust Created By willExpress trustSecret trustFully secret trustHalf secret trustArises in a will but operates Outside the willOperationTypesNo indication in the will that X only holds as trustee and not beneficiaryThere is some indication in the will that X holds as trustee and not as beneficiaryEg To X for the purpose I have communicated

Elements of a Secret TrustSecret trustIntention of the testator that the property be used according to Specified purposeCommunication of intention to the trusteeAcquiesence on behalf of the trusteeBlackwell v Blackwell

Discretionary TrustBeneficiaries do not have a fixed entitlementAn expectation that theDiscretion will be excercisedIn their favourBeneficiaries cannot call upon the trustee to make a distribution Bfys interest is not property whichIs available to creditors upon bankrputcyAn equitable chose in actionassignableNot disposable intervivos or by will

Protective trustProtective TrustInterest will determine on the occurrence of specified eventCouples life interestIn a settlement with a discretionary trust

Bankrputcy

Attempted alienation of propertyTo A on protective trustS 36 Trustee Act

Resulting Trusts2 categories1)Automatic resulting trusts2)Presumed resulting trusts

Automatic resulting trustArises where the settlor fails to dispose of entire beneficial interest in propertyThe undisposed beneficial interest automatically results to the settlorconseq

Automatic Resulting trustsArises where the settlor fails to dispose of entire beneficial interest in property4 typical situationsFailure of express trustFailure to set out trust or dispose of the whole beneficial interestProperty conveyed on trust for a specific purpose which failsUndistributed surplus of a fund

Failure to create express trustReasons for failurevoiduncertaintyperpetuityillegalityegIntended beneficiary predeceases testatorunenforcableIncomplete constitutionLack of formalityegconseqTrust property automatically results to the settlorSettlor retains what he doesnt expressly give away

Failure to set out trust or dispose of the whole beneficial interestTrustee holds undisposed property on resulting trust for settlorUsually because of an error in draftingconseq

Property conveyed on trust for a specific purpose which failsTrust property automatically results to the settlorQuistclose trustegconsequenceBarclays Bank v Quistclose

Undistributed surplus of a fundTrust property automatically results to the settlorconseqWhere the funds were provided with a clear intention to part with the property ie an out & out giftWhere the funds were provided with an overriding general charitable intentionWhere the rules of the contributor fund dictate otherwise-no resulting trust-property passes to CrownBona vacantia (ownerless goods)-no resulting trust-monies are applied to purposes which are as near as possible to the original purposeCy-pres applicationEXCEPT

Where there is no expressintention to create a gift, there is a presumed intention that the gift results back to settlorPresumption againsta giftREBUTTABLEBy evidence of contrary intention (words or conduct)at the time of transactionBy presumption of advancementConsideration paid?Express agreement?Presumed Resulting Trust

Presumption of AdvancementIn loco parentis relationshipsthe law presumes the transferor intends to benefit the tranferee by way of giftREBUTTABLEBy evidence that at the time of transfer no gift was intended Ponniah v Sivalingam Neo Tai Kim v Foo Stie WahSheppard v CartwrightTransfer fromman to fianceeTransfer from parent to childTransfer from husband to wifeDefacto partners?Tinsley v MilliganDamaratna v Damaratna?Includes adoption

2)Presumed resulting trustsArises where title to property is transferred but the transferor does not intend to dispose of the beneficial interestCan be legal or equitable, real or personalegVoluntary transfer of As property into Bs name and B provides no considerationA purchases property in the name of BProperty purchased by A, but property is transferred into A&Bs name (X=>A&B)Purchase of property by A&B and B makes a direct financial contribution to the purchaseProperty is deemed to be held in shares proportionate to the contributions of A&BMatrimonial propertySabrina Loo Cheng Cheng Suan v Eugene Khoo (1995) 1 MLJ Presumed Resulting trust

Fiduciary ObligationTrustConfidenceRelianceScope for exercise of discretion and powerBfy vulnerableDisadvantaged Vulnerability One in position of influence over anotherDependence One undertakes to act in the interest of anotherElements of Fiduciary Obligation

Powers of TrusteesAdvancementMaintenanceInvestment BusinessInsurance

QUESTIONS

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