Chan v Cresdon Pty Ltd

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History and Nature of Equity
Professor Cameron Stewart
The Blind Men and the Elephant
• John Godfrey Saxe
The Anglo-Saxon Invasions c500AD
The Battle of Hastings 1066
Norman Reorganisation
• Sovereignty
• Absolute
beneficial title
• Reception of laws
– Conquering
– Settling;
– Cessession
• Feudalism
Henry II – the Father of the Common law
• Curia Regis
• General Eyre and
Assizes
• Assize of Clarendon
1166 – 12 freemen
from the hundred and 4
from the town
• Henry, Richard Coeurde-Lion and John
Lackland
A’Beckett’s Legacy
The Church Courts
• The benefit of the
clergy
Edward Longshanks Hammer of the Scots
• Parliament begins 1275
• The use of statute as
opposed to ordinance
• Nisi Prius
• Quia Emptores
Curia Regis – embryonic courts
• Court of Exchequer – revenue
• Court of Common Pleas – civil actions
• Court of King’s bench – crime
• Remaining Council functions split into
King’s Council later Concilium Regis and then
Privy Council
The Writ System
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Bureacracy
Organisation of wrongs
Remedies
Popularity
Recording
Stare Decisis
Common law
What’s the common law meant to do?
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Persons & Property
Quick, efficient, fair and effective
Real property – real actions- real relief
Seisin
Remedies – return the seisin, pay monetary
damages
• Contract and tort
What goes wrong?
The Office of the Lord Chancellor
• Around since Norman
times
• Keeper of the King’s
Conscience
• Cleric and Keeper of the
Great Seal
• Member of Lords, Judge
and Church
Chancery as a Court
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Around the 15th century
Function to repair the failings of Common law
Principles of Christian fairness/conscience
Maxims of equity
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Substance not form
Does not assist a volunteer
Equity follows the law
Clean hands
• Discretion and the Chancellor’s foot
• The two streams – law and equity
What does Equity do?
Parkinson:
(i) the exploitation of vulnerability or weakness, as exemplified in
principles relating to unconscionable dealing and undue influence;
(ii) the abuse of positions of trust or confidence, as exemplified in the
law of trusts and fiduciary obligations generally;
(iii) the insistence upon rights in circumstances which make such
insistence harsh or oppressive as exemplified in relief from
penalties and forfeiture, the law of equitable set-off, and the refusal
of specific performance on the discretionary ground of hardship;
(iv) the inequitable denial of obligations, as exemplified in the doctrine
of part performance and the principle of equitable estoppel;
(v) the unjust retention of property, as exemplified in certain
constructive trusts and principles of subrogation
The relationship between CL and Eq
• James VI of Scotland
• The rise of
protestantism
• Absolutism of sovereign
– Divine Right of Kings
or King-in-parliament?
• Bacon & Ellesmere:
Earl of Oxford’s case
Earl of Oxford’s case
• The Office of the Chancellor is to correct
Men’s consciences for Frauds, Breach of
Trusts, Wrongs and oppressions, of what
Nature soever they be, and to soften and
mollify the Extremity of the Law ... [W]hen a
Judgment is obtained by Oppression, Wrong
and a hard Conscience, the Chancellor will
frustrate and set it aside, not for any error or
Defect in the Judgment, but for the hard
Conscience of the Party.
The legalisation of equity
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The Civil War – equity nearly destroyed
Lord Nottingham (1673-82)– father of equity
Lord Eldon – (1801-27) modern rules
Precedent and fixation
Appointment of VC
Poor administration
Infamous delay – record 16 years and still
interlocutory
19th Century reforms
• Bentham and the ‘dog law’
• Judicature Acts 1870s – 1970s
• The two streams in one courtWindeyer J in Felton v Mulligan (1971)
124 CLR 367 at 392; [1972] ALR 33 at 46
• Fusion fallacies
• Salt v Cooper (1880) 16 ChD 545 at 549, Jessel MR said of the effect
of the Act:
• It has been sometimes inaccurately called 'the fusion of Law and
Equity'; but it was not any fusion, or anything of that kind; it was
the vesting in one tribunal the administration of Law and Equity in
every cause, action, or dispute which should come before that
tribunal. … To carry that out, the Legislature did not create a new
jurisdiction, but simply transferred the old jurisdictions of the
Courts of Law and Equity to the new tribunal, and then gave
directions to the new tribunal as to the mode in which it should
administer the combined jurisdictions.
•
Fusion?
•
United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904 at 924;
[1977] 2 All ER 62 at 68, where Lord Diplock said:
•
If by ‘rules of equity’ is meant that body of substantive and adjectival law that,
prior to 1875, was administered by the Court of Chancery but not by courts of
common law, to speak of the rules of equity as being part of the law of
England in 1977 is about as meaningful as to speak similarly of the Statute of
Uses or of Quia Emptores. Historically all three have in their time played an
important part in the development of the corpus juris into what it is today; but
to perpetuate the dichotomy between rules of equity and rules of common
law which it was a major purpose of the Supreme Court of Judicature Act 1873
to do away with, is, in my view, conducive of erroneous conclusions as to the
ways in which the law of England has developed in the last hundred years.
Your Lordships have been referred to [Ashburner’s] vivid phrase ... [on] the
effect of the Supreme Court of Judicature Act … My Lords, by 1977 this
metaphor has in my view become both mischievous and deceptive … If
Professor Ashburner’s fluvual metaphor is to be retained at all, the waters of
the confluent streams of law and equity have surely mingled now.
Walsh v Lonsdale (1882) 21 Ch D 9
• It was held that a person who enters into
possession of land under a specifically
enforceable contract for a lease is regarded,
by a court having jurisdiction to enforce the
contract, as being in the same position, as
between itself and the other party to the
contract, as if the lease had actually been
granted
• Remedy of distress granted
Chan v Cresdon Pty Ltd (1989) 168 CLR
242
• Cresdon agreed in writing to lease land to Sarcourt.
• The agreement contained the terms of the lease as an
annexure.
• The lease was duly executed but never registered.
• Sarcourt defaulted under the lease and Cresdon took action
against Chan as guarantor of the unregistered lease.
• Cresdon’s action against Chan was stated as being one
taken on the guarantee ‘under this lease’.
• Cresdon’s action was unsuccessful.
• The court held that as there was no registered lease there
was no enforceable guarantee. Cresdon’s alternative claim
was based upon the rule in Walsh v Lonsdale.
Chan v Cresdon Pty Ltd (1989) 168 CLR
242
• This claim also was unsuccessful. In coming to
its conclusion the court ruled that, although
the rule in Walsh v Lonsdale meant that an
agreement to lease gave rise to an equitable
lease, it did not create a legal interest. A
consequence of this is that the equitable
lessee will be defeated by a bona fide
purchaser of the legal estate who acquires the
legal estate for valuable consideration and
without notice of the equitable lease
Chan v Cresdon Pty Ltd (1989) 168 CLR
242
• The court also confirmed that the operation of
the rule depended upon the availability of
specific performance of the agreement to lease.
• In the circumstances of the case, two facts raised
doubts as to the availability of specific
performance. First, Cresdon had in the meantime
mortgaged the property. Second, the lease had
come to an end before the expiration of the term
due to Sarcourt’s breach.
Aquaculture Corp v New Zealand
Green Mussel Co [1990] 3 NZLR 299
• Cooke P, in the context of a confidential
information case, said:
• For all purposes now material, equity and
common law are mingled or merged. The
practicality of the matter is that in the
circumstances of the dealings between the
parties the law imposes a duty of confidence. For
its breach a full range of remedies should be
available as appropriate, no matter whether they
originated in common law, equity or statute.
Day v Mead [1987] 2 NZLR 443
• Mead had been Day's solicitor for 25 years.
• He was also a director and shareholder of a newly-formed
company, Pacific Mills Ltd.
• Acting on Mead's advice, Day purchased 20,000 shares, at $1 per
share, in Pacific Mills, knowing that Mead was a shareholder and
that his firm's nominee company had lent money to Pacific Mills.
• Day actively participated in the management of the company
• Day subscribed for a further 80,000 shares in the company at a cost
of $80,000.
• Company went into receivership, and Day lost both investments.
• Day sued Mead for his loss plus interest, claiming breach of
fiduciary duty.
• Was his contribution to the loss relevant?
Day v Mead [1987] 2 NZLR 443
• Cooke P stated:
• Whether or not there are reported cases in which
compensation for breach of a fiduciary obligation has
been assessed on the footing that the plaintiff should
accept some share of the responsibility, there appears
to be no solid reason for denying jurisdiction to follow
that obviously just course, especially now that law and
equity have mingled or are interacting. It is an
opportunity for equity to show that it has not petrified
and to live up to the spirit of its maxims
G R Mailman & Associates Pty Ltd v
Wormald (Aust) Pty Ltd (1991) 24
NSWLR 80
• Roderick P Meagher JA, as a member of the
Court of Appeal in New South Wales, opined
that the views of Lord Diplock in United
Scientific Holdings v Burnley Borough Council
were ‘so obviously erroneous as to be risible’
Harris v Digital Pulse Pty Ltd (2003) 56
NSWLR 298
• Breach of confidence case
• Can you get exemplary damages?
• Mason P, at 335–9, argued that an award of
exemplary damages in cases of equitable wrongs
was justified. His Honour suggested that the
rationale for exemplary damages in tort law could
be applied by analogy to equitable wrongs, and
characterised this approach as an example of
‘fusion by analogy’ with the law of torts.
Harris v Digital Pulse Pty Ltd (2003) 56
NSWLR 298
• However, the majority of the Court of Appeal disagreed.
Spigelman CJ, at 307–10, stressed that if ‘fusion by analogy’
was to be used, then the appropriate analogy was with
contract law, where exemplary damages are not available.
• Heydon JA, in a lengthy and detailed analysis of the
relevant authorities and arguments, rejected the
proposition that exemplary damages should be available
for breaches of equitable obligations. His Honour, at 402,
also suggested that such a view, if based upon the view that
the fusion of the courts allowed the new single court to
award common law remedies for breaches of equitable
obligations, amounted to a ‘crude fusion fallacy’
Areas of conflict
• Mortgagee’s power of sale
• Damages in equity (especially in breach of
confidence and breach of fiduciary duty)
• Causation in breach of fiduciary duty
Maxims
Spry has written the following in relation to the maxims:
[T]he maxims of equity are of significance, for they reflect the ethical
quality of the body of principles that has tended not so much to the
formation of fixed and immutable rules, as rather to a determination
of the conscionability or justice of the behaviour of the parties
according to recognised moral principles. This ethical quality remains,
and its presence explains to a large extent the adoption by courts of
equity of broad general principles that may be applied with flexibility
to new situations as they arise.
I C F Spry, The Principles of Equitable Remedies, Specific Performance,
Injunctions, Rectification and Equitable Damages, 7th ed, Lawbook Co,
Sydney, 2007, p 6.
Maxims
• Kirby J in Australian Broadcasting Corporation
v Lenah Game Meats Pty Ltd (2001) 208 CLR
199 at 271; 185 ALR 1 at 49: ‘It is a
commonplace that equity is a living force and
that it responds to new situations. It must do
so in ways that are consistent with equitable
principles. If it were to fail to respond, it
would atrophy.’
Maxims
• In Corin v Patton (1990) 169 CLR 540 at 557; 92
ALR 1 at 12, in relation to the maxim ‘equity will
not assist a volunteer’, Mason CJ and McHugh J
said:
• Like other maxims of equity, it is not a specific
rule or principle of law. It is a summary of a broad
theme which underlies equitable concepts and
principles. Its precise scope is necessarily illdefined and somewhat uncertain.
Equity will not suffer a wrong to be
without a remedy
• A common approach of judges is exemplified in the
statement in In re Diplock’s Estate; Diplock v Wintle
[1948] Ch 465 at 481–2; [1948] 2 All ER 318 at 326,
where the English Court of Appeal said:
•
• [I]f the claim in equity exists, it must be shown to have
an ancestry founded in history and in the practice and
precedents of the courts administering equity
jurisdiction. It is not sufficient that because we may
think that the ‘justice’ of the present case requires it,
we should invent such a jurisdiction for the first time.
Equity will not suffer a wrong to be
without a remedy
• Cowcher v Cowcher [1972] 1 All ER 943 at 948, Bagnall
J said:
•
• So in the field of equity the length of the Chancellor’s
foot has been measured or is capable of measurement.
This does not mean that equity is past childbearing;
simply that its progeny must be legitimate — by
precedent out of principle. It is well that this should be
so; otherwise no lawyer could safely advise on his
client’s title and every quarrel would lead to a law suit.
Equity will not suffer a wrong to be
without a remedy
• Farah Constructions Pty Ltd v Say-Dee Pty Ltd
(2007) 230 CLR 89 at 151–2, 155; 236 ALR 209 at
252–3, 255–6, made it clear that trial judges and
intermediate appellate courts should not depart
from decisions of intermediate appellate courts in
other Australian jurisdictions, nor radically
change existing law unless such decisions or
existing law were plainly wrong. The High Court
made it clear that such changes to the law were
properly within the domain of the High Court
only
Equity follows the law
• Equity recognises common law rights, estates,
interests and titles and does not say that such
common law interests are not valid. Thus, in
Leech v Schweder (1873) 9 LR Ch App 463 at 475,
Mellish LJ said that ‘where a right existed at law,
and a person came only into equity because the
Court of Equity had a more convenient remedy
than a Court of Law … there equity followed the
law, and the person entitled to the right had no
greater right in equity than at law’
Equity follows the law
• In DKLR Holdings Co (No 2) Pty Ltd v Commissioner of
Stamp Duties [1980] 1 NSWLR 510 at 519, Hope JA said:
•
• Where the trustee is the owner in fee simple, the right of
the beneficiary although annexed to the land, is a right to
compel the legal owner to hold and use the rights which
the law gives him in accordance with the obligations which
equity has imposed upon him. The trustee, in such a case,
has at law all the rights of the absolute owner in fee simple,
but he is not free to use those rights for his own benefit in
the way he could if no trust existed. Equitable obligations
require him to use them in some particular way for the
benefit of other persons.
Equity follows the law
• Time stipulations inn contract
• s 25(7) of the Judicature Act 1873 (UK) resolved the conflict
between the common law and equity approaches to the
effect of a contractual time stipulation by giving statutory
effect to the equitable rules, effectively transforming a time
stipulation from an essential term of a contract to an
intermediate term of a contract: Zaccardi v Caunt [2008]
NSWCA 202 at [92].
• Consideration in common law vs consideration in equity
• Co-ownership when there is a 50:50 contribution –
Delehunt v Carmody
Where the equities are equal, the first in time shall
prevail, and, Where there is equal equity, the law shall
prevail
• Remember these?
One who seeks equity must do equity
• Plaintiffs in equity must fulfil their legal and
equitable obligations before seeking a remedy.
The maxim represent’s equity’s version of the
biblical ‘golden rule’ set out in the Book of
Matthew (7:12): ‘do unto others as you would
be done by’. The maxim emphasises that the
Court of Chancery originated as a ‘court of
conscience’.
One who seeks equity must do equity
• In Hanson v Keating (1844) 67 ER 537 at 538–9, Wigram V-C
said the following in relation to this maxim:
• It decides in the abstract that the court giving the plaintiff
the relief to which he is entitled will do so only upon the
terms of his submitting to give the defendant such
corresponding rights (if any) as he also may be entitled to in
respect of the subject matter of the suit; what these rights
are must be determined aliunde by strict rules of law, and
not by any arbitrary determination of the court. The rule, in
short, merely raises the question of what those terms (if
any) should be.
One who seeks equity must do equity
• In Hanson v Keating (1844) 67 ER 537 at 538–9, Wigram V-C
said the following in relation to this maxim:
• It decides in the abstract that the court giving the plaintiff
the relief to which he is entitled will do so only upon the
terms of his submitting to give the defendant such
corresponding rights (if any) as he also may be entitled to in
respect of the subject matter of the suit; what these rights
are must be determined aliunde by strict rules of law, and
not by any arbitrary determination of the court. The rule, in
short, merely raises the question of what those terms (if
any) should be.
One who comes to equity must come
with clean hands
• This maxim is closely related to and descends
from the maxim just discussed: FAI Insurances Ltd
v Pioneer Concrete Services Ltd [1987] 15 NSWLR
552
• It requires a plaintiff in equity not to be guilty of
some improper conduct, or else relief will be
denied
• This maxim confirms that equity is not solely
concerned with preventing unconscientious
conduct by a defendant, but also requires
conscientious behaviour by a plaintiff.
Delay defeats equity
• In seeking equitable relief a plaintiff must act
promptly and diligently: Smith v Clay (1767)
27 ER 419 at 420. Equity will not allow
defendants to remain for too long in a position
of not knowing whether equitable relief will
be ordered against them because it would be
unconscientious to do so.
• Laches
• Acquiescence
Equality is equity
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Idea of proportionate equality
Co-ownership
Resulting trusts
Also, equity will generally, but not always,
execute a trust power of appointment equally
among the objects of the power if the donee
of the power has failed to exercise the power:
McPhail v Doulton [1971] AC 424
Equity will not assist a volunteer
• In Colman v Sarrel (1789) 30 ER 225 at 227, Lord
Chancellor Thurlow said that a plaintiff seeking
equitable relief has to have ‘a valuable or at least
meritorious consideration’. This requirement is
expressed in the maxim that ‘equity will not assist
a volunteer’, a volunteer being a person who has
not given valuable consideration. The maxim
does not require that the consideration be paid
or executed: Reef & Rainforest Travel Pty Ltd v
Commissioner of Stamp Duties [2001] QCA 249 at
[10].
Equity will not assist a volunteer
• The rationale for this maxim is that it would not be
unconscientious for equity to decline equitable assistance
to a plaintiff who is a volunteer, whereas it would be so if
he or she had provided valuable consideration: Redman v
Permanent Trustee Co of New South Wales Ltd (1916) 22
CLR 84 at 96. Thus, it is the presence of valuable
consideration that ‘will attract the intervention of equity’:
Director of Public Prosecutions for Victoria v Le (2007) 232
CLR 562 at 575; 240 ALR 204 at 215. However, in Conlan v
Registrar of Titles (2001) 24 WAR 299 at 338, Owen J
suggested that this rationale was ‘a little strange given that
the common law would (and will) accept something that is
entirely inadequate or lacking in actual value as being
“good” consideration’.
Equity will not assist a volunteer
• The maxim is primarily associated with ‘the rule that a
voluntary covenant is not enforceable in equity’: Corin v
Patton (1990) 169 CLR 540 at 557
• Valuable consideration
• In The Bell Group Ltd (in liq) v Westpac Banking Corporation
(No 9) (2008) 225 FLR 1 at 741, Owen J said:
• The notion of valuable consideration usually requires
finding some economic worth as compared with something
that is purely nominal, trivial or colourable … Valuable
consideration is more than the nominal consideration that
would be sufficient to support a common law contract.
Equity will not assist a volunteer
• Maxim doesn’t apply to gifts under Milroy v Lord
• In Morris v Hanley [2000] NSWSC 957 at [35],
Young J said that ‘[w]hen one looks behind the
maxim one can see that the real truth is that
equity rarely helps a volunteer’.
• This stems from the fact that the maxim’s ‘precise
scope is necessarily ill-defined and somewhat
uncertain’ and ‘subject to certain clearly
established exceptions’: Corin v Patton at CLR
557; ALR 12.
Equity looks to the intent rather than
the form
• In Parkin v Thorold (1852) 51 ER 698 at 701, Lord
Romilly MR said:
• Courts of Equity make a distinction in all cases
between that which is a matter of substance and
that which is a matter of form; and if it find that
by insisting on the form, the substance will be
defeated, it holds it to be inequitable to allow a
person to insist on such form, and thereby defeat
the substance.
Equity looks to the intent rather than
the form
• Part performance
• Express trusts
• Rectification
Equity looks on that as done which
ought to be done
• In Frederick v Frederick (1721) 24 ER 582 at
583, Lord Chancellor Macclesfield said that
‘where one for valuable consideration agrees
to do a thing, such executory contract is to be
taken as done; and … the man who made the
agreement shall not be in a better case, than if
he had fairly and honestly performed what he
agreed to’
Equity acts in personam
• Earl of Oxford’s Case (1615) 21 ER 485 at 487
(see 1.34), where Lord Ellesmere said that
equity could restrain a plaintiff at common law
from enforcing a judgment of that court ‘not
for any error or Defect in the judgment, but
for the hard Conscience of the Party’.
• Extra territoriality
Equity acts in personam
• Oz-US Film Productions Pty Ltd v Heath [2000] NSWSC 967
at [13], Young J explained this development as follows:
• A court of equity basically exercises only in personam
jurisdiction. That is, it makes orders against people who are
present in the jurisdiction or who have submitted to the
jurisdiction. The in personam jurisdiction may, in proper
cases, be exercised where the defendant has property in
the jurisdiction over which the Court can enforce its order.
In recent times, this jurisdiction has been further
developed by the presumption that a defendant is
considered to have property within the jurisdiction unless
the evidence shows otherwise.
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