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Topic 1: Birth and Development of Equity and Trusts

Birth and Development of Equity and Trusts


Introduction to Equity

- 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.

3.The order given must be capable of being executed without intervention of a


foreign court.

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.

Transformation of the Application of Equity

- 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.

 Newbiggin Gas Co. v Armstrong


 Facts:
- Plaintiff company sued the defendant on the ground that he was not properly authorized to
represent the company.
 Held:
- The practice of the Court of Chancery in such cases, where the defendant was not served
with notice of the application, but was left to get his costs from the person named as plaintiff,
who had afterwards to get those costs over from the solicitor. The result was that the
nominal plaintiff, who had never given any authority for the use of his name, had to pay the
defendant's costs, and might be unable to recover them by reason of the insolvency of the
solicitor.
- According to common law, the defendant was served with notice of the application, and the
solicitor had to pay the costs of both the plaintiff and the defendant. That appears to me to
be better practice.
- The question is which practice is now to be followed. Under S 21 of the Judicature Act 1875,
it provides that in cases where no new method of procedure is prescribed the old practice is
to prevail, but where there is a variance in the practice it does not say which practice.
- The Common Law practice in this case is founded in natural justice, and ought to be followed
for the future.

 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.

The Relationship between Common Law and Equity

- 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.

Topic 2: Reception of English Equity in Malaysia

Section 3 of Civil Law Act:


(1) English principles of law and equity can be applied subject to the cut-off dates, absence of local
statutes and subject to local circumstances.
(2) If there is a conflict between common law and rules of equity, the latter shall prevail.

 Chong Sze Mun v Andiappa Chetty


 Motor emporium v arumugam
 UMBC

Topic 3: Maxims of Equity

- 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.

1. Equity will not suffer a wrong to be without a remedy

- Serves as a basis to the jurisdiction of courts of equity. It underlies the whole jurisdiction of
equity.

- ubi jus ibi remedium


- No wrong should go unaddressed if it is capable of being remedied by a court of justice which
might be due to some issue of technicality.
- Equitable remedies may be granted where the defendant’s wrong may not be recognised at
common law.
- Earl & Oxford’s case
- Does not include moral wrongs but refers to rights which are suitable for judicial enforcement.

2. Equity acts in personam

- 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.

Determining Whether a Court Has Jurisdiction


In order to determine which court has jurisdiction over a legal matter certain questions must
be addressed. These are:

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.

 Ewing v Ewing & Ors


 HoL held:
- Where some of the executors and trustees of a will were in England, the English courts had
jurisdiction to administer the real and personal assets of a testator who died domiciled in
Scotland, although a great part of that personalty and realty were situated in Scotland.
- Courts of equity are courts of conscience, operating in personam and in the exercise of this
jurisdiction, have always compelled specific performance to subjects which were not locally
or ratione domicilii within their juriscdiction.

 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.

3. Equity follows the law

- Court of Chancery never claimed to override the courts of common law.


- Story: “Where a common or statute law is able to govern the case entirely, then a court of equity
is bound by it and there can be little justification to depart from it.”
- Equity follows the law but not slavishly nor always.

 Abdul Rahim v Drahman

4. He who seeks equity must do equity


- A plaintiff who seeks an equitable relief must be prepared to act fairly and reasonably or be
prepared to fulfil his obligation towards the defendant

 Lodge v National Union Investment Co. Ltd.


- B borrowed money from M, an unregistered moneylender and mortgaged certain securities
to him.
- The contract was illegal and void under the Moneylenders Act. B sued for the delivery of the
securities.
- Held: B must do what was right and fair by repaying the money which was advanced to him
before the court could make an order to return the securities.

 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.

 Dering v Earl of Winchelsea


 Facts:
- Both the plaintiff and defendant are sureties to one Mr. Dering (not the plaintiff, but his
brother) for the due performance of him being the Collector of duties in customs.
- Mr. Dering was in arrears to the Crown to the amount of £3883,14.
- The Crown sued the plaintiff for the sum mentioned
- Plaintiff then sued the defendant to be pay part of the amount which he has paid to the
Crown.
- Defendant alleged that the plaintiff had encouraged his brother in gambling and
consequently, breaking the Treasury’s orders. Thus, the plaintiff was not entitled to claim
from him.
 Held:
- The maxim of he who seeks equity must come with clean hands must have an immediate
and necessary relation to the equity sued for.
- The fact that the money was loss due to gambling can only be blamed on Mr. Dering himself
and not the plaintiff.
- Defendant was ordered to pay the amount sued for.

 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.

 Palaniappa Chettiar v Arunasalam Chettiar


 Facts:
- In order to avoid the Rubber Regulations, respondent (father) transferred the land to his son
(appellant).
- The son later wanted to sell these lands but was stopped by his father from doing so.
 Held:
- Since it was a transfer between a father and son, there was a presumption that it was a gift.
To prove otherwise, must clearly and distinctly prove that the son took it upon him as a trust.
- The respondent made the transfer for a fraudulent purpose, i.e. to deceive the public
administration.
- He cannot use the process of the Courts to get the best of both worlds – to achieve his
fraudulent purpose and also to get his property back.

 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.

 Aik Ming (M) Sdn Bhd v Chang Ching Chuan


 Facts:
- Very complicated case. But here is the gist of the parties’ contention.
- The defendants alleged that the second plaintiff was given shares in trust for the third and
fourth defendants because the company needed two Malaysian directors and by doing so, it
was done to mislead the Registrar of Companies into believing that the second plaintiff was
the true beneficial owner of the shares and a director of the company.
- Thus the deeds of trust and powers of attorney were to perpetrate a fraud upon the
administration and were plainly tainted with illegality, void and worthless.
 Gopal Sri Ram held:
- These deeds of trust and powers of attorney are worth nothing as they were part of a
scheme or device to perpetrate a fraud upon the public administration. They are plainly
tainted with illegality, void and worthless. The trust is void.

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

 Sia Siew Hong v Lim Gim Chian


 Facts:
- The appellants were the shareholders and directors of their family company. The company
obtained a loan from 'the lender'.
- A third party charge was created over a piece of land belonging to the respondents ('the
land') in favour of the lender. As the respondents required security in return for the charge,
the appellants executed a document described as a guarantee ('the document') in favour of
the respondents to guarantee the payment of the loan to the lender in the event of the
company's default.
- The guarantee was described as being enforceable 'at any time'.
- Company defaulted. The lender demanded payment from the respondent. The respondent
obtained summary judgment against the appellants.
- Appellants argued that their claim was time barred.
 Held:
- It would be unjust and inequitable to permit the appellants to raise the defence of limitation
as the appellants had agreed that the respondents could enforce the guarantee 'at any time'.
- The maxim of 'equity will not permit statute to be used as an engine of fraud', when invoked,
has the effect of precluding a litigant who is guilty of unconscionable or unmeritorious
conduct from relying upon a statutory provision that would defeat his opponent's case.
- Appellants’ appeal dismissed.

 Aik Ming (M) Sdn Bhd v Chang Ching Chuan (supra)


 Bannister v Bannister
7. Delay defeats equity

- Modern application is illustrated in the concept of laches and acquiescence.


- Equitable claim can be limited by the Limitation Act either directly or by analogy.
- Laches usually consists of a substantial lapse of time coupled with the existence of circumstances
which makes it inequitable to enforce the claim.

 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.

 Lindsay Petroleum Company v Hurd


 Facts:
- The respondent had fraudulently induced the shareholders in the appellant company to pass
a resolution to purchase three lots of lands for a certain amount which over valued due to
the representation by Hurd and two other respondents.
- The appellant prayed that the sale and conveyance of the lands might be cancelled and
rescinded, and the Respondents ordered to repay to the Appellants the purchase-money or
account for the profit derived.
- Respondent argues on the premise of the doctrine of laches.
 Held:
- Doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine.
- Where it was unjust to give a remedy, either because the party has done something which is
equivalent to a waiver of it, lapse of time and delay are most material.
- But if an argument against relief, which otherwise would be just, is founded upon mere delay,
that delay of course not amounting to a bar by any statute of limitations, the validity of that
defence must be tried upon two circumstances, (i) the length of the delay and (ii) the nature
of the acts done during the interval, which might affect either party.
- In this case the delay was not of very long duration, because the conveyance to the company
was dated about fifteen months before the filing of the writ and the whole purchase-money
was not paid before that time.
- Although the appellants had taken possession of the land but this should not be a bar.
- In order that the remedy should be lost by laches or delay, there must be knowledge of the
fraudulent conveyance.
- Objection of delay fails.

 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.

 Goh Kheng How v Raja Zainal Abidin


 Facts:
- A guy by the name of ‘Long’ sold three pieces of land to the defendant. One of the land is the
subject of this dispute.
- Long had delivered the IDT together with the instruments of transfer and also handed over
vacant possession to the defendant.
- The plaintiff then lodged a private caveat as there was certain documents which clearly
indicated his interest in the land.
- Plaintiff claimed that ‘Long’ held the land under a trust deed for a society, of which the
plaintiff was a partner and that ‘Long’ promised that he would transfer it to the plaintiff but
he never did.
- Plaintiff submitted that limitation had yet to set in because the cause of action only accrued
when Long executed the agreement to sell the three pieces of land to Raja Zainal Abidin.
(which is only 2 years prior to the suit)
 Held:
- There had been a substantial delay by the beneficiaries (one of whom is the plaintiff) who
had done nothing to transfer the land into their names for almost 30 years and failed to
lodge a trust caveat or to endorse on the title Long held as a trustee.
- Goh's caveat had remained on the title for four years without any action being taken to
assert his alleged interest. Those delays were material and it would be unjust to construe
them against Raja Zainal Abidin.
- They have acquiesced Long's title to the said land for almost 30 years and now they are
estopped and barred by laches from asserting their alleged interests.

 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.

8. Equality is equity (often used)

- 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.

 Lau Choong Choo v Chau We Chuan


 Facts:
- Both parties were married. They bought a matrimonial home.
- By virtue of a divorce proceedings, the respondent moved out.
- The present claim was for equal share of the matrimonial home.
- Applicant claimed that she paid $13,000 while respondent claimed he paid $29,000.
 Held:
- The facts show that there was an implied understanding between the parties and a common
intention at the time of the acquisition of the matrimonial home that the beneficial interest
should be shared although it was in the husband’s name.
- The maxim "equality is equity" is applied and the beneficial interest belongs to the spouses
in equal shares.
 MacDonald v MacDonald
 Facts:
- The wife and her mother had contributed some money to the purchase a house.
- The house was under the husband’s name and was mortgaged by him to pay for the
remaining sum.
- Both husband and wife had paid for the instalments alternately.
- Issue: Who was entitled for the house?
 Held:
- The court was satisfied that the wife, the husband and the wife's mother had each had a
substantial beneficial interest in the house, which was purchased as a joint family enterprise
in order to provide a home, and, since no precise calculation of their interests was possible,
they should be regarded as having been entitled beneficially in equal shares.

 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.

9. Equity looks to the intent rather than the form

- 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.”

 Wan Naimah v Wan Mohd Nawawi


 Facts:
- In this case the land had been sold to the parties' father but the land was transferred to the
appellant, the daughter.
- The respondent, the son of the purchaser, was then still an infant.
- There was evidence to show that the father intended to create a trust of an undivided half
share in the land in favour of his son, the respondent.
 Held:
- Creation of a trust need not be in writing as long as it is clear, unequivocal and irrevocable.
- Since there was conclusive evidence, vis-à-vis the father’s intention, it must be said that the
respondent has an undivided share in the trust.

10. Equity regards done that which ought to be done

- 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.

 Borneo Housing v Times Engineering


 Facts:
- Developer entered into an agreement to sell an industrial building to a purchaser.
- The developer the charged the land to a finance company.
- By, virtue of the sale and purchase agreement, the purchaser paid the full amount
of purchase price to the developer.
- Subsequently, the developer defaulted in payment, thus the finance company
applied for an order for sale and sold the land through judicial sale.
- The purchaser argued that the developer was a bare trustee for the purchaser and
the charge should not be valid in the first place since the charge came after the sale
and purchase agreement.
 Held:
- The doctrine of the bare trust only applies after the payment is fully made and memorandum
of transfer is executed. Before that, the parties will only be parties to the contract of sales
and purchase.
-The charge was created after the developer and purchaser entered into sales and purchase
agreement but before the full payment of purchase price. So at the time the charge was
created, the developer is not a bare trustee.

11. Equity will not perfect an imperfect gift/ equity will not assist a volunteer

- A undertaking to convey or to transfer something without a consideration cannot be enforced


because it is gratuitous.
- Unless there was an outright transfer, the done cannot enforce the promise.
- If there was an agreement to create a trust, the trust property must be vested in the trustee for
equity will not perfect an imperfect gift.
- Donee = 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.

 Section 206 of NLC provides that:


(1) Subject to the following provisions of this section -

(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.

 Valipuram Sivaguru v Palaniappa Chettiar (uncaveated line-holder v unregistered purchaser)


 Facts:
- A creditor with whom the document of title had been deposited did not lodge a caveat to
perfect the lien but retained possession of the document of title.
- It was argued that the creditor’s omission to caveat was fatal to his claim of priority over the
claim of a subsequent unregistered purchaser of the land.
- The subsequent unregistered purchaser, C, could not prove that he had searched the register
before contracting to purchase the land.
- The vendor fraudulently represented to him that the document of title was lost. In fact the
document of title had been deposited with a creditor, B, as security for a loan.
- Since C could not procure registration in the absence of the document of title, he entered a
caveat.
 Held:
- This case involves conflicting equities between B, who had a right to caveat to obtain a lien
according to the Code, and C, who had a claim for specific performance of a contract of sale
of the land. B and C were said to have each acquired an equitable right by way of contract.
- The court focused on whether B, the first claimant in time, had committed any priority-
postponing conduct. It was unanimously held that in the circumstances B had not lost his
priority to C.
- There is no evidence that C ever searched the register and found it clear. Even if he had done
so, he would still have had to be on his guard owing to the absence of the issue document of
title.
- The loss that has fallen on C is not due to negligence on B’s part, but entirely owing to the
fact that C himself neglected the most elementary precaution when he purchased the
property.
- B’s priority was preserved by his continued possession of the document of title.
 UMBC v Goh Tuan Laye (similar context to the above)
 Facts:
- The uncaveated lien-holder, UMBC and the subsequent unregistered purchasers of the lands,
the Respondents, were both prohibited lodging a caveat under the National Land Code 1965.
- UMBC granted an overdraft facility to a partnership. The partners deposited the documents
of title to their lands (several pieces) with UMBC as security.
- The partners later sold the lands to the Respondents, who paid the full purchase price.
- UMBC subsequently obtained a judgment debt against the partners and sought to attach the
lands for sale.
-Issue: Who has priority – UMBC or the Respondents?
 Held:
- The Respondents were described as equitable owners of the lands by virtue of the contract
of sale and having paid the full purchase price; on the other hand, UMBC had an equitable
interest in the lands by virtue of their possession of the documents of title as security for the
loan.
- An assumption was made that, had the law permitted UMBC to caveat the lien, they would
have done so.
- An equitable 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 an equitable claimant later in time to act to his
prejudice.
- UMBC had in the circumstances done all they could to protect their interest by taking
possession of the documents of title and, therefore, that they were not guilty of any act or
omission which had or might have had the effect of inducing the interveners to act to their
prejudice.

**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.

 Haroon v Nik Mah (two consecutive unregistered purchasers)


 Facts:
- The contract of the first purchaser (Haroon) was made in 1946. He paid the full purchase
price but he did not take any steps to protect his rights to the land or to ensure completion
of the purchase by registering the transfer.
- Two years later, the same land was sold to Nik Mah, who paid a substantial part of the
purchase price and took possession of the land. Nik Mah did not have prior knowledge of
Haroon s contract.
- In 1951, Nik Mah sued and obtained a court order for specific performance of the sale
against the vendor.
- Upon learning of Nik Mah’s action, Haroon entered a caveat against the title and sued both
the vendor and Nik Mah for specific performance of his earlier purchase.
 Held:
- Haroon’s priority was postponed to Nik Mah’s.
- Apart from the register, and in the absence of any caveat or issue document of title, the only
indicium of title which can be considered is that of de facto possession of the land.
- Nik Mah has been in possession at all material times but not Haroon. The latter was well
aware of what Nik Mah was doing.
- Where a purchaser under an agreement for sale of land does not impose a caveat to protect
his interests, does not obtain possession of an issue copy document of title, and does not
take physical possession of the land, he is guilty of gross negligence and his equity should be
postponed to the equity of a later purchaser of the same land who has taken any one of
those steps.

 Goh Kheng How v Raja Zainal Abidin


 Facts:
- A guy by the name of ‘Long’ sold three pieces of land to the defendant. One of the land is
the subject of this dispute.
- Long had delivered the IDT together with the instruments of transfer and also handed over
vacant possession to the defendant.
- The plaintiff then lodged a private caveat as there was certain documents which clearly
indicated his interest in the land.
- Plaintiff claimed that ‘Long’ held the land under a trust deed for a society, of which the
plaintiff was a partner and that ‘Long’ promised that he would transfer it to the plaintiff but
he never did.
 Held:
- Goh was guilty of negligence or omission in arming Long with the full power to deal with the
said land as proprietor over an incredibly long period of time .
- The acts or omissions amounting to negligence are, inter alia:
i. negligently deposited the IDT with Long and thereby armed him with the means to hold
out to the world at large that he was the absolute owner of the land;
ii. failed to procure the transfer from Long for as long as 30 years;
iii. negligently allowed Long to be registered as the land owner and allowed the state of
affairs to continue for as long as 30 years;
iv. failed to endorse on the document of title that Long held the land as a trustee; and
v. failed to enter a trust caveat and deposit evidence of trust with the land office.
- These acts or omissions had postponed Goh’s priority.

 Latec Investments Ltd v Hotel Terrigal Pte Ltd


 Principle: This maxim does not apply to a bona fide purchaser for value without notice as it is
a good defence.

Topic 4: Doctrine of Estoppel


- When a person makes a representation, he cannot afterwards deny that which he had asserted.
- Doctrine is used to prevent injustice between parties.
- Common law estoppel operate by reference to an assumption of fact whereas equitable estoppel
operate by reference to an assumption of rights. The other distinction between estoppel under
the two jurisdictions is that common law estoppel is said to be a rule of evidence, while estoppel
in equity may confer substantive rights. By this it is meant that common law estoppel is a device
used merely to determine the facts upon which the legal rights of the parties will then be
determined by the court, whereas, in equity, rights flow directly from the operation of estoppel
in equity.
-Two general types: promissory estoppel and proprietary estoppel.

 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.

 Aw Yong Wai Choo v Arief Trading Sdn bhd


 Facts:
- Plaintiff entered into an agreement to purchase a house from the developer.
- The developer (first defendant) failed to deliver the houses on time and absconded.
- The second defendant second defendant completed the project itself but asked the plaintiffs
to pay higher prices for the houses than originally agreed as the houses had been
constructed according to specifications which were superior to those agreed between the
purchasers and the first defendant.
- Plaintiffs sued for liquidated damages for the late delivery of the houses.
 Held:
- When the second defendant undertook the project, they did not do it gratuitously and had
repeatedly asked for the 50% increase of the purchase price.
- The plaintiffs had all gained and enjoyed the benefit of such specifications and could not
insist on their contractual performance by claiming for specific performance, vis-à-vis
liquidated damages for late delivery.
- It is unjust and unfair to award the damages to them as they had benefitted from a
substantially improved housing specifications.
- It would be unconscionable for the plaintiffs to insist on strictly enforcing the obligation
providing for the payment of the said liquidated damages for late delivery of houses.

Promissory Estoppel

- Doctrine of estoppel by representation is expanded in equity so as to include not only


representation of fact but also representation of intention or promise.
- Principle: A person who makes unambiguous representation by words or conduct by silence of an
existing fact and causes another party to act to his detriment in reliance to the representation
will not be allowed subsequently to act inconsistently with that representation.
- Equity binds the holder of a legal right who induces another to expect that the right will not be
exercised against him.

 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.

 Central London Property Trusts v High Trees House


 Facts:
- The plantiffs let a new block of flats in 1937 to the defendants, on a ninety-nine years' lease
at rent of £2,500 a year.
- The defendants found difficulty in paying rent during the outbreak of war in 1939, and, in
view of this, the landlords agreed to reduce the rent to £1,250.
- No duration of the reduction of rent was specified and there was no consideration for it.
- The defendants paid the reduced rent. By early in 1945 the whole block of flats was let out.
- The plaintiffs then wrote asking that the full rent of £2,500 should be paid and claiming
arrears of £7,916.
 Held:
- Principle: Where 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 party
who gave the promise or assurance cannot afterwards be allowed to revert to the previous
legal relationship as if no such promise or assurance had been made by him, but he must
accept their legal relations subject to the qualification which he himself has so introduced,
even though it is not supported in point of law by any consideration, but only by his word.
- The representation with reference to reducing the rent was not a representation of existing
fact, which is the essence of common law estoppel; it was a representation in effect as to the
future--a representation that the rent would not be enforced at the full rate but only at the
reduced rate.
- Promissory estoppel could not give rise to a cause of action in damages for breach of such
promises, but it has refused to allow the party making them act inconsistently with them.
- The promise only applied in the conditions prevailing at the time of the flats being
partially let, and the promise did not extend any further than that. When the flats became
fully let early in 1945 the reduction ceased to apply.
- Did not apply promissory estoppel.

 Muthiah v Lee Kor Fan


 Facts:
- The plaintiff filed a complaint for cancellation of sublease granted to the defendant on the
ground that the defendant had committed a breach of clause 8(iii) of the sublease.
- The defendant in his defence argued the plea of estoppel urging that the plaintiff had agreed
to the approved mining scheme, had accepted a copy of the approved mining scheme and
visited the land to observe the construction of the palong and the kongsi house etc. and had
represented to the permit holders and the defendant that he had no intention of taking
action under clause 8(iii) of the sublease.
 Held:
- One of the necessary elements of a valid estoppel by representation is that the
representation should be of a nature to induce, and is made with the intention of inducing,
the party raising the estoppel to alter his position to his detriment.
- There was no evidence to show in what way the defendant was induced to alter his position
to his detriment.
- Plea of estoppel failed.

 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.

 Bank Negara Indonesia v Philip Hoalim


 Facts:
- The defendant was carrying out his business as an advocate and solicitor at the front portion
of the first floor in a building owned by “Lee”.
- “Lee” sold the building to the plaintiffs. The plaintiffs carried out renovation work.
- Upon completion of the renovation, the defendant was moved to the front portion of the
third floor. The plaintiffs assured that as long as he was carrying out his profession, he was
allowed to occupy the third floor.
- The plaintiff granted a lease for a term of three years. After expiry of that term, the
defendant continued to conduct his business there and the plaintiff accepted these
payments.
- The plaintiff subsequently gave a notice to quit to the defendant, who had plead for estoppel.
 Held:
- The appellants were estopped from giving the defendant a notice to quit for so long as the
respondent carried on his profession on the premises.
 Liew Ah Hock v Malayan Railway
 Facts:
- It was alleged that the defendant promised that it would grant the plaintiff a temporary
occupation permit on the fulfilment of the following prerequisites (1) that he would pay the
costs and expenses incurred by the defendant in proceedings for possession of the said land,
(2) that all squatters would be evicted and (3) that the plaintiff would reduce the area of land
occupied by him for residential purposes to 1,830 square feet.
- The plaintiff had fulfilled the first two requirements but there was a prolonged dispute as to
the area of land which he was occupying.
 Held:
- No such promise was made by the defendant but the judge went a step further by assuming
what IF there was indeed a promise.
- Referred to a book on Representation by Estoppel where the authors postulated six
limitations or modifications to the rule of promissory estoppel.
- First, the doctrine may afford a defence against the enforcement or otherwise of
enforceable rights: it cannot create a cause of action. (based on Combe v Combe).
- Second, he who raises an equitable estoppel must do equity himself: otherwise equity will
not assist him. In this case, it took the plaintiff 5 years to reduce the area of his residential
occupation to 1,830 square feet. If there was a promise by the defendant, it was dependent
on the plaintiff’s performance.

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.

 Dillwyn v Llewelyn (estoppel by encouragement)


 Facts:
- A father placed on one of his sons in possession of land belonging to the father for
the purpose of furnishing him with a dwelling-house.
- The son, with the approbation of the father, built at his own expense a house upon the land
and resided there.
- The father died. The plaintiff claimed for the conveyance of the land from the defendant
based on the approbation and money spent on the land.
 Held:
- A voluntary agreement will not be completed or assisted by a Court of Equity, in cases of
mere gift but the subsequent acts of the donor may give the donee that right or ground of
claim which he did not acquire from the original gift.
- The subsequent expenditure by the son, with the approbation of the father, supplied a
valuable consideration originally wanting, the memorandum signed by the father and son
must be regarded as an agreement for the conveyance of the land.

 Ramsden v Dyson (encouragement by acquiescence)


 Principle:
“If a man, under a verbal agreement with a landlord for a certain interest in land, or under an
expectation, created or encouraged by the landlord, that he shall have a certain interest, takes
possession of such land, with the consent of the landlord, and, upon the faith of such promise
or expectation, with the knowledge of the landlord, and without objection by him, lays out
money upon the land, a court of equity will compel the landlord to give effect to such promise
or expectation.”
 Held:
- To raise such an equity two things are required, first, that the person expending the money
supposes himself to be building on his own land; and, secondly, that the real owner at the
time of the expenditure knows that the land belongs to him and not to the person expending
the money in the belief that he is the owner.

 Lim Teng Huan v Ang Swee Chuan


 Facts:
- Both parties had contributed equally to the purchase of a piece of land.
- The respondent had built a house on the land using his own money.
- Both parties entered into an agreement that the appellant would transfer his portion of the
land to the respondent in exchange for another piece of land which the respondent owned.
- The agreement was void due to the lack of certainty as to the land which the respondent
proposed to exchange.
- Appellant applied to the court to declare that the half portion of the land was his.
- Respondent argued that the appellant was estopped from doing so.
 Held:
- It can’t be argued that there was no evidence that the respondent had relied on the
agreement.
- Sole purpose of the agreement was to regularize the position so that Mr Ang's house would
be built on land to which he was solely entitled.
- Appellant ordered to transfer his share of the land and respondent to pay compensation for
the transfer.

 Cheng Hang Guan v Perumahan Farlim


 Facts:
- The plaintiffs’ family had been staying on the disputed land for over 100 years.
- The second plaintiff’s (P2) grandfather, “Cheong” had built the dwelling house. After
Cheong’s death, P2 took over the management over the cultivated lands.
- Some time in later, P2 was informed by the visiting trustee of the Khoo Kongsi (registered
proprietor of the land) that it was not necessary to change the tenancy into P2’s name and
that she could continue planting vegetables as long as she wished provided she paid rent.
Cheong had also told P2 that even after Cheong’s death, his descendents were allowed to
stay on the land so long as they continued paying rents.
- After the assurance given by the trustee of Khoo Kongsi, the plaintiffs invested RM12,000 in
installing a sprinkler system. For more than 50 years, neither the Khoo Kongsi nor anyone
else had interfered with the farming activities of the plaintiffs' family. The interference only
commenced after the Khoo Kongsi had entered into a joint-venture agreement with the
defendants, whereupon the Khoo Kongsi gave one month's notice of termination to the
plaintiffs.
- Plaintiffs argued that the defendants were estopped from doing so.
 Held:
- Doctrine of promissory estoppel provides a defence to an action on the original contract for
a defendant relying on a voluntary variation. It does not provide a cause of action for a
plaintiff relying on a gratuitous promise (see Combe v Combe).
- Yet, its effect may be to enable a party to enforce a cause of action which, without the
estoppel, would not exist (see Amalgamated Investment & Property Co Ltd).
- Principle: Proprietary estoppel is one of the exceptions to the general rule that a person who
spends money on improving the property of another has no right to claim reimbursement or
any proprietary interest in property. Unlike promissory estoppel, proprietary estoppel, when
it operates, is permanent in its effect and it is also capable of operating positively so as to
give a cause of action. Independent consideration is not an essential requirement for the
operation of proprietary estoppel and it is not essential that the representator must have
knowledge that his property is being improved.
- The claimant must have acted to his detriment in reliance on the belief that he would obtain
an interest, and equity acts on the conscience of the legal owner to prevent him from
defeating the common intention.
- The plaintiffs' claim to a proprietary estoppel is based on the expenditure of money by
Cheong Au Pit on the Khoo Kongsi's land in the expectation or belief, encouraged by the
Khoo Kongsi, that they could stay on the land and carry out their farming activities as long as
they wished, provided that they paid the rent.
- Thus, proprietary estoppel applies in this case. The loss suffered was the amount invested to
make improvements to the land.
 Greasely v Cooke
 Facts:
- Defendant was a maid in the house of a widower and his four children. She later got married
to one of the children, Kenneth.
- She took care of Kenneth’s younger siblings which included a mentally-ill sister and
continued as an unpaid housekeeper.
- The widower later died, leaving behind the house to Kenneth and his brother Howard.
- After the death of both Kenneth and Howard, the plaintiffs brought an action to evict her out
of the house.
- She argued that Kenneth and Hedley (another brother) had given her assurances that she
could lived there for as long as she wants.
 Held:
- The statements given by the brothers had been relied upon as an assurance that she would
not be evicted.
- The burden of proof that she did not rely on the statements to her detriment was on the
plaintiffs.
- Detriment not necessary to be proven (nevertheless, you could see that she was working for
free in the house).
- Proprietary estoppel applied.

 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.

 Taylor Fashions Ltd v Liverpool Victoria Trustees Ltd


 Principle: In order to found a proprietary estoppel, it is not essential that the representor
should have been guilty of unconscionable conduct in permitting the representee to assume
that he could act as he did: it is enough if, in all the circumstances, it is unconscionable for the
representor to go back on the assumption which he permitted the representee to make.

Reinterpreting Equitable Estoppel

 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.”

 Walton Stores v Maher


 Facts:
- The Mahers owned commercial premises in Nowra which Waltons was interested in leasing.
- The agreement that was reached was that the Mahers would demolish the existing premises
and erect a new building to meet the specifications of Waltons.
- The Mahers began to demolish the existing premises, as time was critical if they were to
complete the demolition and rebuilding in time for the start of the lease agreement.
- Waltons reconsidered its position and a few months later wrote to the Mahers’ solicitors
saying that the lease had not been executed by Waltons and that Waltons was not
proceeding with it.
- The Mahers sued Waltons for damages for breach of contract on the basis that Waltons was
estopped from denying the existence of the lease.
 Held:
- To establish an equitable estoppel, it is necessary to prove that
a. the plaintiff assumed that a particular legal relationship then existed between the plaintiff
and the defendant or expected that a particular legal relationship would exist between
them and, in the latter case, that the defendant would not be free to withdraw from the
expected legal relationship;
b. the defendant has induced the plaintiff to adopt that assumption or expectation;
c. the plaintiff acts or abstains from acting in reliance on the assumption or expectation;
d. the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will
occasion detriment if the assumption or expectation is not fulfilled; and
e. the defendant has failed to act to avoid that detriment whether by fulfilling the
assumption or expectation or otherwise.

- 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.

 Boustead Trading v Arab Malaysian Merchant Bank


 Facts:
- Appellant bought goods from a company, Chemitrade on credit. Chemitrade then entered
into a factoring agreement with the respondent, i.e. the debts owed by appellant to
Chemitrade was assigned to the respondent.
- Chemitrade passed invoices of every transaction to the respondent. The respondent then
stamped the invoices with the indorsement that any objection was to be reported to the
respondent within 14 days of its receipt, ('the indorsement') and sent them to the appellant.
- The appellant did not object to the receipts and paid for the invoices for 7 months.
- The appellant later refused to pay for certain invoices as they were stamped with a certain
remark on it.
- Respondent argued that they were estopped from doing so as they did not oppose within 14
days.
 Held:
- The doctrine of estoppel is a flexible principle by which justice is done according to the
circumstances of the case.
- The maxim 'estoppel may be used as a shield but not a sword' does not limit the doctrine of
estoppel to defendants alone but to plaintiffs too.
- Two elements of the doctrine of estoppel: (i) the representation or encouragement (ii) a
person acted to his detriment.
- All that a litigant who invokes the doctrine of estoppel must do is to show that he was so
influenced by the encouragement or representation that it would be unconscionable for the
representor to enforce his strict legal rights. There is no need to show that he was induced to
act in a particular way.
- The detriment element does not form part of the doctrine of estoppel. All that need be
shown is that it would be unjust to permit the representor or encourager to insist upon his
strict legal rights.
- Appellant did not merely remain silent. They could have told the respondent that the 14-day
limit was not part of the original arrangement, that this amounted to an abrogation of its
rights and that it was not prepared to be bound by the limitation. But it did nothing.
- It was unconscionable for the appellant to dispute the invoices some 7 months later.

Topic 5: Equity & Disposition of Property

- 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.

 Boustead Trading v Arab Malaysian Merchant Bank


 Facts:
- Refer above.
- However, the relevant issue here was whether the factoring agreement was a valid
assignment?
- Appellant argued that it was not valid and the respondent counter-claimed for payment for
two other items in the invoices.
 Held:
- The two items are the appellant’s expenses in promoting Chemitrade’s product, which would
be set-off against Chemitrade.
- The respondent as assignee, cannot place itself in a better position than the assignor. It must
take the assignment subject to all rights of set off which the appellant as debtor may have
against the assignor.
- Counter-claim dismissed.

 Harris Adacom Corp v Perkom Sdn Bhd


 Facts:
- Defendant entered into an agreement with Harris Corp to purchase some products.
- Harris Corp then assigned the defendant’s debts to the plaintiff, its subsidiary, Harris
Adacom.
- When defendant failed to settle the debt, the plaintiff brought action to recover for it.
- The defendant argued that the assignment was not valid.
 Held:
- Under s 4(3) of CLA, for a legal assignment to be valid, there must be express notice in
writing given to the debtor.
- What is required is simply that information relative to the assignment shall be conveyed to
the debtor and the debtor has notice of the assignment.
- The defendant had notice by virtue of the plaintiff's letter of demand for payment and also
other letters of correspondence.
- This is sufficient to satisfy the requirement of express notice in writing.

 Khaw Poh Chuan v Ng Gaik Peng


 Facts:
- The deceased died intestate leaving an estate which comprised, inter alia, four pieces of land.
– The assignor was entitled to shares in the estates of both the deceased and the assignor's
mother.
- Pursuant to the terms of two agreements, the assignor assigned all her beneficial interests in
the estates to the appellant.
- The appellant then lodged, as purchaser and assignee, a caveat against the four pieces of
land.
- One of the four pieces of land was sold to the ninth respondent.
- The appellant commenced action to claim for his rightful share to the proceeds of sale
obtained from the sale of the fourth piece of land.
 Held:
- To determine if the assignment is conditional or absolute, the test is one by which the entire
interest of the assignor in the chose in action (such as the interest as claimed by the assignee
herein) is, for the time being, transferred unconditionally to the assignee and placed
completely under the assignee's control.
- Clause 1 states that the assignor sells, transfers and assigns all her interests, rights etc to the
assignee absolutely and free from all encumbrances. Thus, the assignment is absolute and
not conditional.
- Notice of the assignment had been given to the debtors, ie the administrators of the estate
of the deceased father, viz the assignor in her other capacity as one of the administrators.
- The notice here is not uncertain. The subject matter of the assignment is a chose in action
and cannot be treated in law as agreements to buy and sell land or parts of such land;
- Even without complying with s 4(3), eg even without notice of the assignment to such
debtors, the assignment would have been valid in equity in any event against the assignor.
- Section 4(3) has not made any alteration in the law of assignment; it has merely made it
easier for the assignee in one aspect in that the assignee can sue in his own name without
sometimes having to borrow the name of the assignor or if the assignor is uncooperative, to
join the assignor as a co-defendant.
- Assignment valid.

 Malaysian International Merchant Bankers v Malaysia Airlines System Berhad


 Facts:
- This was a claim by the plaintiff (MIMB) as assignee of a debt due from Malaysian Airlines
System Berhad (MAS) to Bahagia Trading Sdn. Bhd., in respect of certain contracts.
 Held:
- A legal assignment under CLA requires notice to be given to MAS but no such notice was
given. Proper notice was given only when the fifth and final payment had already been made
by MAS to Bahagia, leaving practically nothing to be assigned.
- However, there was an equitable assignment. Under this doctrine, no particular form of
words is required but more importantly, the words must clearly show an intention that the
assignee (MIMB) is to have the benefit of the chose in action (intention to obtain money due).
The assignment may be addressed either to the debtor (MAS) or to the Assignee.
- The correspondence show, as between Bahagia and MIMB, a clear intention on the part of
Bahagia that it would assign to MIMB, inter alia, MAS contract to the value of $64,542.
- Assignment became complete when the Deed of Assignment was signed.
- An equitable assignment is absolute and complete without notice having been given to the
debtor or fundholder. But, a debtor or fundholder who has received notice of an equitable
assignment must withhold all further payments to the assignor unless made with the consent
of the assignee, for if he pays to the assignor without such consent, he will have to pay over
again to the assignee. After notice, the debtor or fundholder becomes trustee for the as-
signee.
- The effect of the Deed of Assignment is that, MAS as stake-holder became a trustee for
MIMB in respect of moneys due under MAS contract with Bahagia, and MAS is liable for any
payments made to anybody else other than MIMB, unless made with consent of MIMB.
- There is an enforceable equitable assignment as between Bahagia and MIMB, irrespective of
whether they had signed the deed of assignment.

 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.

 Nouvau Mont Nor v Faber DevelopmentSdn Bhd


 Principle: The question of whether or not an agreement is an absolute one, not purporting to
be by way of charge only, within the meaning of s 4(3) of the CLA, is to be gathered only from
the four corners of the instrument itself.

 William Brandt’s Son v Dunlop Rubber Company


 Facts:
- Kramrisch & Co. were rubber merchants, whose business was financed by Brandt’s and also
another banking firm, Kleinwort’s.
- Kramrisch & Co. bought a parcel of rubber which they sold to the respondents, the Dunlop
Rubber Company. Brandt’s had financed this purchase.
- Dunlop had mistakenly paid for the invoice to Kleiwort’s when it was supposed to be for
Brandt’s.
- The appellants brought an action to recover the amount due.
 Held:
- There was an equitable assignment and a notice to the debtor. There was an undertaking
that the money should be paid direct to Brandts.
- Then the Dunlops receive through Brandts, a notice telling them, on Kramrisch & Co.'s
express authority, that they are to pay to Brandts the money which they owe their creditors.
This was disregarded by the Dunlops.
- They must pay the money over again, and pay it to the right person.
- The statute does not forbid or destroy equitable assignments or impair their efficacy in the
slightest degree. In equity, the debtor is not required to enter into an engagement with the
assignee.
- An equitable assignment may be addressed to the debtor. The language is immaterial if the
meaning is plain. All that is necessary is that the debtor should be given to understand that
the debt has been made over by the creditor to some third person.
- If the debtor ignores such a notice, he does so at his peril. If the assignment be for valuable
consideration and communicated to the third person, it cannot be revoked by the creditor or
safely disregarded by the debtor.
- The documents which passed between Brandts and the company would of themselves, and
apart from Kramrisch & Co.'s undertaking and engagement given to Brandts, have
constituted a good equitable assignment

 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.

Elements of Fiduciary Relationship

 Reading v The King


 Facts:
- The suppliant, Reading was an ex-sergeant of the UK military force on service in Egypt.
- During his service, he was involved in the transportation of illicit drugs. On occasion, he was
using his military uniform to deceive the Egyptian police. He is paid certain amount for every
successful delivery.
 Held:
- To succeed under a breach of fiduciary duty, must prove that a "fiduciary relation" existed
between himself and the defendant and that the defendant acted in breach of this relation.
- “Fiduciary relation" exists (a) whenever the plaintiff entrusts to the defendant property,
including intangible property and relies on the defendant to deal with such property for the
benefit of the plaintiff or for purposes authorized by him; and (b) whenever the plaintiff
entrusts to the defendant a job to be performed, for instance, the negotiation of a contract
on his behalf or for his benefit, and relies on the defendant to procure for the plaintiff the
best terms available.
- The plaintiff whether actually harmed or scatheless, is presumed not only to have been
damnified, but to have been damnified to an extent measured by the amount of the secret
profit received by the defendant.
- The master’s (the Crown’s) interest here is to foster better ties with the Egyptian
Government. An interest which could not be achieved if the suppliant violates the Egyptian
laws.
- The suppliant had consciously used his uniform for his illegal acts and this had resulted in
him gaining secret profits.

 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.

 Keech v Sandford (supra)

 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.

Categories of Fiduciary Relationship


(a) Trustee and beneficiary

 Keech v Sandford (supra)

(b) Director and company

 Regal Hastings Ltd v Gulliver


 Facts:
- The action was brought by Regal against the respondents who were former directors of
Regal, to recover from them sums of money being profits made by them upon the acquisition
and sale by them of shares in a subsidiary company formed by Regal and known as Hastings
Amalgamated Cinemas Ltd.
- It was alleged that that the directors and the solicitor had used their position to acquire the
shares in (cinema) Amalgamated for themselves with a view to enabling them at once to sell
them at a very substantial profit, that they had obtained that profit by using their offices as
directors and solicitor.
 Held:
- Principle: “The rule of equity which insists on those, who by use of a fiduciary position make
a profit, being liable to account for that profit, in no way depends on fraud, or absence of
bona fides; or upon whether the profit would or should otherwise have gone to the plaintiff,
or whether the profiteer was under a duty to obtain the source of the profit for the plaintiff,
or whether he took a risk or acted as he did for the benefit of the plaintiff, or whether the
plaintiff has in fact been damaged or benefited by his action.
- The liability arises from the mere fact of a profit having, in the stated circumstances, been
made. The profiteer, however honest and well-intentioned, cannot escape the risk of
being called upon to account.”
- The plaintiff has to establish two things: (i) that what the directors did was so related to the
affairs of the company that it can properly be said to have been done in the course of their
management and in utilisation of their opportunities and special knowledge as directors; and
(ii) that what they did resulted in a profit to themselves.
- If a person in a fiduciary relationship makes a secret profit out of the relationship, the court
will not inquire whether the other person is damnified or has lost a profit which otherwise he
would have got.
- The action of its directors had deprived the company (acting through its shareholders in
general meeting) of the power to acquire the shares. In the second place, the Regal
shareholders would only receive a large reduced proportion of the sale price of the two
cinemas.
- The respondents were directors of the company and had obtained the share using this
position. Thus, there is a fiduciary relationship and the respondents are accountable for the
profits made.
- The directors could have just obtained a resolution from a general meeting to protect
themselves.

 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.

 The Board of Trustees of The Sabah Foundation v Datuk Syed Kechik


 Held:
- The plaintiffs were the Sabah Foundation and Seranum Sdn Bhd (its subsidiary). The
defendants were Datuk Syed Kechik bin Syed Mohamed ('DSK') and Banita Sdn Bhd ('Banita').
- DSK was appointed as Sabah Foundation’s first director and also a trustee. DSK was also
Seranum’s director. DSK also had direct or indirect control of Banita Sdn Bhd.
- Sabah Foundation had appointed DSK with the task of taking back areas reserved for the
concessionaires.
- He managed to obtain an area of 241.562 miles for the Sabah Foundation, which was 39.625
miles less, this area having gone to Banita Sdn Bhd.
- The plaintiffs alleged that DSK had failed in his entrusted duty to cause the whole of the
surrendered area to be given to Sabah Foundation or Seranum; and (ii) he made use of the
opportunity and knowledge acquired by him as fiduciary agent of the plaintiffs to make profit
for himself and Banita to the detriment of Sabah Foundation.
 Held:
- Being the director and managing director, DSK was a fiduciary.The mere fact that DSK was
the director and managing director did not mean that every duty of his was of a fiduciary
nature.
- Must be determine the obligations DSK owed as a fiduciary and in what respect he had failed
to discharge those obligations.
- The obligations of DSK was in relation to the areas of 12 concessionaires. Any action which
had the result of reducing the size of the area to be given to Sabah Foundation or its group
was clearly a breach of his fiduciary duty to protect the interest of Sabah Foundation or its
group. As soon as the Wallace Bay area was given to Banita instead of Sabah Foundation or
its group, that completed the breach of duty on the part of DSK.
- The facts satisfied the tests which evolved from the three rules governing a trustee:
(i) the no profit rule i.e. can’t make profit from his trust;
(ii) the no conflict rule i.e. no one who has duties of a fiduciary nature to perform is allowed to
enter into engagements in which he has or can have a personal interest conflicting with
the interests of those whom he is bound to protect; and
(iii) the misuse of trust knowledge rule i.e. a trustee may not use for his own purposes
knowledge acquired by him as trustee
- Firstly, DSK had obtained benefit by reason and in the course of his office as a director.
Secondly, by submitting the application for the licence which evinced his interest in the
Wallace Bay area, DSK was in actual conflict with the interest of Sabah Foundation. Thirdly,
right from the beginning DSK was made aware that the areas to be taken back from the 12
concessionaires were for the purposes of Sabah Foundation and any information relating to
those areas was trust in-formation.
(c) Promoter of a company and promoter of club

- 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.

(d) Solicitor and clients

- 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.

 Yong & Co v Wee Hood Teck Development Corp.


 Facts:
- The appellant, a firm of advocates & solicitors, acted as the common solicitor for the
Respondent, the purchaser of a house and the developer.
- The purchaser granted a loan to the purchaser but it was agreed that the land would be
charged in favour of the Respondent financier. The solicitor was supposed to do this.
- Instead, the solicitor charged the land on behalf of the developer to a bank. The developer
defaulted in payment and the land was transferred to the bank.
- Consequently, the Respondent’s loan could not be recovered against the purchaser and they
were also unable to obtain the security for the loan.
- The respondents subsequently sued the solicitors for negligence.
 Held:
- There was a solicitor-client relationship which gave rise to a fiduciary obligation.
- The solicitors had a duty to protect the interest of their client. They should consult their
client on all questions of doubt and to keep the clients informed.
- The solicitors had acted against the client’s interest by concealing such facts.

* Defences: Consent given to the fiduciary or estoppel.

Remedies

 Tengku Abdullah (supra)

- Injunction
- Tracing