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 Origins
- 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 its 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 petitioners 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 Oxfords 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 defendants
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 cant 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-intrade 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 stockin-trade came into the
Defendants 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 plaintiffs.
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 isnt 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 defendants wrong may not be
recognised at
common law.
- Earl & Oxfords 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 courts jurisdiction over property abroad, it is immaterial if
the property in
question is not within the courts 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.

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 testators
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 defendants
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 Treasurys 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
plaintiffs 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.
- Defendants 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 plaintiffs 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
mothers 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 husbands 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 husbands 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--vis the fathers 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 years 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 banks 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 cant be said to have been complete on April 10, 1943
(after registration in the
companys 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
Bs interest had priority, but eventually Bs caveat lapsed and Fs transfer
was registered.
- The Registrar-General erroneously failed to give a statutory notice to B
prior to registering
Fs transfer.
Held:
- By Bs 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
As mortgages.
Held:
- The Lapins priority was postponed to As 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, As 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 lineholder 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 creditors 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 prioritypostponing 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 Bs part, but
entirely owing to the
fact that C himself neglected the most elementary precaution when
he purchased the
property.
- Bs 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 Mahs action, Haroon entered a caveat against
the title and sued both
the vendor and Nik Mah for specific performance of his earlier
purchase.
Held:
- Haroons priority was postponed to Nik Mahs.
- 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 Gohs 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--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 cant 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
husbands 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. Banks 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 plaintiffs 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 cant 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 plaintiffs (P2) grandfather, Cheong had built the
dwelling house. After
Cheongs 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 P2s 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 Cheongs 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 Kenneths 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 plaintiffs
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 plaintiffs
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 debtors 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 counterclaimed for payment for
two other items in the invoices.
Held:
- The two items are the appellants expenses in promoting
Chemitrades 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 defendants 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 assignee.
- 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 Brandts Son v Dunlop Rubber Company
Facts:
- Kramrisch & Co. were rubber merchants, whose business was
financed by Brandts and also
another banking firm, Kleinworts.
- Kramrisch & Co. bought a parcel of rubber which they sold to the
respondents, the Dunlop
Rubber Company. Brandts had financed this purchase.
- Dunlop had mistakenly paid for the invoice to Kleiworts when it was
supposed to be for

Brandts.
- 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 equitys
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 masters (the Crowns) 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 Foundations first director and also a
trustee. DSK was also
Seranums 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. cant 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 clients 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 Respondents 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 clients interest by concealing
such facts.
* Defences: Consent given to the fiduciary or estoppel.
Remedies
Tengku Abdullah (supra)
- Injunction
- Tracing