Part A 5 marks = 9 minutes

Part B 10 marks = 18 minutes

Part C 20 marks = 36 minutes

EQUITY - LWZ010

EXAM NOTES

1Problem solving

2Standard Exam answers

(a)Equity

(b)Equitable interests

(c)Equitable assignments

(d)Fiduciary relations

(e)Confidential information

(f)Unconscionable conduct

(g)Undue influence

(h)Part performance

(i)Equitable estoppel

(j)Relief against forfeiture

(k)Penalty clauses

(l)Subrogation

(m)Contribution

(n)Marshalling

(o)Satisfaction

(p)Equitable ademption

(a)Election

(b)Equitable fraud

(c)Fraud on a power

(d)Misrepresentation

(e)Mistake

3Unconscionability – doctrinal analysis

4Estoppel – doctrine development

5Fiduciary duties – doctrinal analysis

6Confidential information (government) – doctrinal analysis

7Maxims

(f)Minor Maxims

8Equitable interests

(g)Equitable interests in property – created by Intention of creator

(h)Equitable interests in property – created by contribution and part performance

(i)Equitable interests in property – created by Completely and incompletely constituted gifts

(j)Equitable interests in property – created by Instrument of security

(k)Equitable interests in property – created by Implication of law

(l)Equitable interests in property - Operation of law

(m)Priorities – Legal v Equitable

(n)Equitable priorities

1Competing equitable interests

2Torrens system land

3Equitable Estate and Subsequent Legal Estate

4Legal Estate and Subsequent Legal Estate

9Equitable assignments

(o)Statutory requirements

(p)Requirements

(q)Ineffective assignment

(r)Attempted assignment for value of future property

(s)Assignment in equity

(t)Requirement of an intention to assign

(u)Relevance of consideration – legal choses

(v)Relevance of consideration - equitable choses

(w)Choses – s 182 Law of Property Act

10Fiduciary duties

11Confidential information & breach of confidence

12Unconscionable conduct

13Undue influence

14Fraud

15Misrepresentation

16Mistake

17Part performance

Effect of non-compliance

18Equitable Estoppel

(x)The requirements for promissory and proprietary (equitable) estoppel

19Relief against forfeiture

20Penalties

21Subrogation

22Contribution

23Marshalling

24Deceased estates

25Equitable defences

(a)Limitation Act (NT)

(b)Informed consent

(c)Public Interest defence

(d)Laches

(e)Set-off

(f)Waiver

(g)Unclean hands

26Equitable remedies

(h)Injunctions

(i)Specific performance

(j)Equitable Compensation

(k)Equitable Damages

(l)Account of Profits

(m)Constructive Trust

(n)Rescission

(o)Specific Restitution - Order of Court for return of specific chattels

(p)Rectification

(q)Delivering Up and Cancellation

27Other relevant issues

(r)Declarations

(s)Tracing - Remedy or Process?

(t)Romalpa Clauses

28Cases

29Latin terms

30Summaries completed

1Problem solving

Oral agreements

  • Law of Property Act requirements, Doctrine of part performance, Estoppel

General issues

  • Fiduciary relations
  • Confidential information (private, commercial, government)
  • Undue influence (plead unconscionable conduct also)
  • Unconscionable dealing (may also be undue influence present)
  • Part performance (plead constructive trust and estoppel)
  • Estoppel (for proprietary estoppel, may be able to argue constructive trust)
  • Relief against forfeiture (check for estoppel)
  • Penalty clauses
  • Subrogation, Contribution, Marshalling
  • Deceased Estates – Satisfaction, Equitable ademption, Election
  • Equitable fraud (duress; fraud on a power; statute as cloak for a fraud; innocent misrepresentation)
  • Fraudulent & innocent misrepresentation
  • Mistake (mutual; common; unilateral)

The applicable law

  1. StatuteCth & NT (land, trade & commerce (TPA, ASIC Act)
  2. Common law
  3. Equity (eg. Estoppel, part performance)

Defences

  • Laches / Limitation Act
  • Set-off
  • Waiver
  • Unclean hands
  • Mutuality

Remedies

  • Injunction (including quia timet, Mareva and Anton Piller orders)
  • Specific performance
  • Equitable compensation
  • Equitable damages
  • Account of profits
  • Constructive trust
  • Rescission
  • Rectification
  • Declaration
  • Specific restitution
  • Delivery up
  • Tracing
  • Romalpa clauses

Issue identification

  • What does the question ask?
  • Identify the parties (inc company directors, trustees)& relationship between the parties (eg familial relations; specific legal relations (ie employment, contract, sale of goods, land conveyance); arms length dealing)
  • What is the nature of the property involved & its attributes?
  • Identify the unfair/unconscionable act (inc. detriment and/or other party’s gain)
  • What do the parties know/think (inc. constructive knowledge and misconceptions)?
  • Who holds the legal & equitable interests?
  • Has there been an equitable assignment? (Was there consideration or was it a gift?)
  • Do the circumstances relates to past, present or future matters?
  • What timeframes have been involved?
  • Are there equitable priority issues?

2Standard Exam answers

(a)Equity

Definition. The word "equity" refers to the process of being just, acting in accordance with moral rightness, acting in a manner that has the result of fair treatment, and, the simple concept of fairness generally.

  • “fairness in the resolution of disputes through the application of good conscience”(Dal Pont)
  • Equity mollifies. Equity tempers (softens, mollifies) the strict application of the common law when it would be unconscionable for the Courts not to intervene.
  • The foundation of a claim was an appeal to conscience.
  • Preventing or rectifying unconscientious behaviour
  • Providing remedies where common law remedies are inadequate or the commonlaw would produce an unjust result

Development. The law of Equity evolved as mechanism to moderate and ameliorate the rigours of what is called CommonLaw.

  • grievances with procedure, process or judgements of common law courts and defects of the writ system (strict adherence to form and precedent - the equivalent of standard forms and template) led to petitions of complaint to the King who later delegated to the Lord Chancellor (1347) – the first mention of the Court of Chancery is in academic dispute but seems to be mid 14th Century.
  • Christian influence. Significance and early influence of ecclesiastics (priests) - Christian/moral based judgements based on conscience - all the Chancellors were priests until 1529 (Sir Thomas Moore) then trained lawyers (in the medieval sense – everything in Latin)

The Earl of Oxfords Case (1615). – The inevitable clash between Kings Bench (common law as represented by Coke CJ) and the Court of Chancery (equity represented by Lord High Chancellor Ellesmore)

  • Lord Ellesmere - “The cause why there is a Chancery is, for that men’s actions are so divers and infinite, that it is impossible to make any general law which may aptly meet with every particular act, and not fail in some circumstances. The office of Chancellor is to correct men’s conscience for frauds, breach of trust, wrongs and oppressions, of whatever nature soever they be, and to soften and mollify the extremity of the law....”
  • This dispute was determined in favour of equity by Attorney General Francis Bacon – the famous quote-“in cases of conflict between the rules of common law and equity, the rules of equity should prevail”
  • See NT Supreme Court Act Section 68 - In all matters not particularly mentioned in this Part in which there was formerly or is a conflict or variance between the rules of equity and the rules of the common law with reference to the same matter, the rules of equity shall prevail.

Colonisation. The arrival of UK common law and equity in Australia 1788

  • (Blackstone’s Commentaries) - “it hath been held that if an uninhabited country be discovered and planted by English subjects all the English laws then in being, which are the birthright of every English subject, are immediately there in force”

The UK Judicature Acts 1873 – 75

  • The principle that equity prevailed over the common law was given statutory recognition by s 25(11) of the Judicature Acts 1873-1875.
  • Greatly reformed the practice and procedure of the Court of Chancery and resolved many previous difficulties by ‘fusing’ the Court of Chancery and the common law courts into the UK High Court of Justice which exercised both common law and equity jurisdiction from thereon.
  • In most states, these reforms were adopted quickly.

Maxims

  • The ethical principles of equity developed into a series of equitable maxims.
  • Whilst not positive rules of law or causes of action, they are guides to the exercise of the equitable jurisdiction. (see generally Corrin v Patton)

Fusion fallacy

  • There was a view by some judges that substantive and procedural reform had taken place
  • Walsh v Lonsdale provides an example of the fusion fallacy.
  • The substantive distinction remains between the doctrines of the common law and equity.

Jurisdiction

  • Equity has 2 areas of jurisdiction
  • Exclusive– where there are no common law remedies (eg. trusts, fiduciary relationships)
  • Concurrent or auxiliary – equity supplements common law rights and obligations (eg. remedies of injunction, specific performance, rescission, constructive trust)
  • All equitable remedies are discretionary

Modern examples of equity in action

  • Commercial Bank of Australia v Amadio (1983) 151 CLR 447 (unconscionable conduct)
  • Muschinski v Dodds (1985) 160 CLR 583 (constructive trusts)
  • Waltons Stores v Maher (1988) 164 CLR 387 (estoppel)
  • Garcia v National Bank (1998) 955 ALR 614 (Undue Influence)

(b)Equitable interests

Whereas a legal interest must be created or transferred as prescribed by the common law or statute, equitable interests can be created and transfered by intention, contribution, part performance, completely and incompletely constituted gifts, instrument of security, and by implication or operation of law. The recognition of an equitable interest is crucial for the potential granting of an equitable remedy to protect that interest.

(c)Equitable assignments

An equitable interest in property may be created by way of assignment in two main ways; (i) the assignment is for future property for valuable consideration or (ii) an intended assignment under statute that does not fulfil the statutory requirements. Rights that are purely personal to a person cannot be assigned in law or in equity for public policy reasons.

No particular form is required for an equitable assignment and valuable consideration is not essential for a vested equitable interest (Norman v FCT). An intention to assign may appear on the face of the document, or it may be proved by extrinsic circumstances (Smith v Perpetual Trustee Co Ltd) and notice to the debtor or other relevant party is not required, albeit desirable to ensure that (i) the other party is bound by the assignment (ii) an equitable priority is established (see Dearle v Hall) and (iii) a court may deny standing to sue on the chose in action as this is the subject of some conflicting authority, however recent authority suggests that notice is not required.

  • Shepherd v FCT–assignment of rights to future payment ofroyalties was a vested chose in action.
  • FCT v Everett – assignment of a share of partnership income was a vested chose in action.
  • Peter v Shipway – contingent interests under the will of a deceased testator
  • Norman v FCT – a legal right to be paid money at a future date under an existing contract on the repudiation of which an action could be brought for anticipatory breach; the right to receive sums payable in the future under an existing hire-purchase agreement or building contract
  • Williams v IRC – the whole or a fraction of a life interest under a trust.

Future property

In equity, the parties will be held to their bargain if the agreement to transfer is for valuable consideration, the property is identified and it is able to be specifically performed (Tailby v Official Receiver). Once the property comes into existence or belongs to the assignor, equity will require the assignor to transfer the property to the assignee (Holroyd v Marshall).

  • Norman v FCT – dividends of shares and interest of a loan which may be repaid at any time are future choses in action.
  • Redman v Permanent Trustee Co of NSW – an expectancy under the will of a living person is a future chose in action.

Assignment under statute

Section 182 of the Law of Property Act(“LPA”) regulates the assignment of a thing in action and section 10 regulates instruments which are required to be in writing. An assignment of an equitable interest in property regulated under the LPA, including a disposition or conveyance,must be in writing (see also Adamson v Hayes) unless it is a resulting or constructive trust.

  • includes an option (it creates an equitable interest)
  • includes an equitable mortgage

Requirements

  1. The assignment must be absolute (not subject to a condition precedent or part only of a debt) and unconditional (Commercial factors Ltd v Maxwell Printing Ltd)
  2. In writing and signed by the assignor
  3. The subject matter must be an assignable chose in action
  4. Express notice must be given to the debtor(Olsson v Dyson) and accurate in all particulars (International Leasing Corp) (Vic) Ltd v Aiken)

Three certainties in creating a trust

Certainty of (i) intention, (ii) subject (the property) and (iii) object (the beneficiary). To create a valid trust, the disposition must be completely constituted, not illegal or otherwise invalid and (in some cases) comply with statutory requirements for writing.

Valuable consideration

If the transferor attempts to assign presently existing property to the transferee for valuable consideration, but does not complete, equity may recognise the transfer (Perpetual Trustee Co Ltd v Smith)

Recognition under the law

A transfer or assignment may be recognised under the doctrine of part performance (Maddison v Alderson), equitable estoppel (Giumelli v Giumelli) or constructive trust (Chan v Zacharia; Muschinski v Dodds).

Gifts

Equity will not perfect an imperfect gift. There are two requirements concerning gifts:

  • If an intending donor of property has done everything which it is necessary for him to have done to effect a transfer of legal title, then equity will recognize the gift. So long as the donee has been equipped to achieve the transfer of legal ownership, the gift is complete in equity "Necessary" used in this sense means necessary toeffect a transfer. (Milroy v Lord; Corin v Patton)
  • If a settlement is intended to be effected by a particular mode or form (eg by a trust), the court will not giveeffect to it by applying another form (In re Rose; Corrin v Patton). Equity neither compels an owner ofproperty who intends to give it to another to do anything to perfect the gift nor impresses the property with a trustwhich the owner did not intend to create (Milroy v Lord)

The rationale for refusing to complete an incomplete gift is that a donor should not be compelled to make a gift, the decision to give being a personal one for the donor to make. This is supported by the maxim, Equity looks to intent rather than form. Where the gift is incomplete, the transferor could have recalled the transfer at any time.

Death of transferor

The weight of current authority supports the view that a transfer executed by a registered proprietor in registrable form and delivered to a proposed transferee may be registered after the death of the transferor (Tierney v Halfpenny and National Trustees; Executors and Agency Co of Australasia Ltd v Boyd; Brunker v Perpetual Trustee Co Ltd)

(d)Fiduciary relations

A fiduciary relationship is characterised by the fiduciary agreeing to act on behalf of the principal. The relationship will exhibit such hallmarks as loyalty (Boardman v Phipps), trust and confidence (Hospital Products Ltd v United States Surgical Corporation; Tate v Williamson) by the principal in the fiduciary and this will give rise to proscriptive fiduciary obligations (Breen v Williams).

Certain relationships are presumed to be fiduciary relationships.

The list of categories of relationships which import fiduciary duties is not closed (Hospital Products Ltd v United States Surgical Corporation), however, there must be a substantial combination of; trust, confidence, duty of loyalty, undertaking to act in interests of another, power to affect the principal’s interests, disadvantage, vulnerability and unequal bargaining power to demonstrate that the relationship is fiduciary.

(e)Confidential information

A person who receives information (a confidant) from another (a confider) in circumstances where such information should be regarded as confidential, is obliged by equity to treat such information as confidential. Three categories of information are protected by the equitable doctrine; personal confidences, commercial information and government information. The obligation of confidentiality can arise by statute, contract or through a fiduciary relationship.

With respect to commercial information, provided that the information is specific (O’Brien v Komesaroff), confidential (Coco v AN Clarke (Engineers) Ltd), it was communicated in circumstances that indicated its confidentiality (Coco v A N Clark (Engineers) Ltd), its use is unauthorised by the confider (Smith Kline & French Laboratories (Australia) Ltd v Secretary, Dept Community Services and Health)and the restriction on the use of the information is not a restraint of trade under the Trade Practices Act, its disclosure will be a breach of confidence.

The protection of government information will require detriment to be shown and that it is not in the public interest to disclose the information. (Commonwealth v John Fairfax & Sons Ltd)

Personal confidences will be protected when the nature of the communication is confidential and the nature of the relationship is one of close confidence and mutual trust. (Duchess of Argyll v Duke of Argyll; Stephens v Avery)

Third parties who have actual or constructive knowledge of being given confidential information can be restrained by injunction from publishing that information (Attorney General v Punch Ltd), whereas innocent third parties who have acquired information in good faith and for value without notice have some protection until they receive notice. (Wheatley v Bell)

(f)Unconscionable conduct

Unconscionable conduct looks at the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disadvantage in circumstances where it is inconsistent with equity or good conscience that they should do so. The will of the disadvantaged person even if independent and voluntary, is the result of the disadvantageous position in which they are placed and this may arise from a misplaced trust or reliance in the defendant.

Specifically, where W is under a special disadvantage in dealing with S, and S has sufficient knowledge of W’s special disadvantage to make it unfair or unconscionable for S to enforce or take the benefit of the transaction (see generally Earl of Chesterfield v Janssen;Fry v Lane;Blomley v Ryan; Louth v Diprose). Imprudent, foolish, unfair, unjust or onerous bargains will not be set aside by a court (see Familiar Pty Ltd v Samarkos; Bridge v Campbell Discount Co Ltd)

The special disadvantage may be inferred from personal characteristics and/or from circumstances surrounding the transaction and have the effect of placing the weaker party at a serious disadvantage vis-à-vis the other (see generally Blomley v Ryan)

(g)Undue influence

The equitable doctrine of undue influence is focused on inter vivos dispositions and it looks to the quality of the consent or assent of the weaker party. In cases of undue influence, the weaker party’s will is not independent and voluntary because it is overborne and there need not be any malign intent (Carey v Norton), whether in the form of coercion, pressure or concealment (Bridgewater v Leahy).

Specifically, the improper use by the strong party of confidence, control, domination, influence or some otherform of superiority over the weak party for the benefit of himself or a third party, so that the

acts of the weak partyare not his free voluntary acts (see generallyUnion Bank of Australia v Whitelaw)