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HISTORY OF EQUITY

Equity is a body of rules developed and applied by the Court of chancery. This court

was presided over by the Chancellor and the rules were developed under his authority.

The origins of equity lie in the deficiencies of the Common Law. The Common law had

gaps where a remedy was not available or where a remedy was available but was not

appropriate to the particular loss of a plaintiff. The Chancellor was responsible amongst

other things, for the issue of writs and all actions had to be commenced by the issue of

a royal writ.

The writ system brought the species of rigidity into the Common Law administration. If

there was no writ appropriate to a claim there could be no action and thus no remedy.

Hence, the rule “no right could be recognized at Common Law unless a writ

existed which provided a remedy for its breach.” At this point no limitations were

placed on the number or variety of writs which could be issued during the reign of Henry

II and the enactment of Provision of Oxford 1258.

FACTORS

However, a number of factors contributed to the ridgid starting with the writ system

process. A problem arose where the clerks who prepared the writs were duplicating

writs which limited the variety of writs which could be obtained. Notably, during this time

most writs were centered on land, and as such there was a limit on the variety of writs

available to a victim sought relief. Suffice to say such a victim would have to endure the

wrong without a relief.

The Barons who derived some revenue or income from the cases submitted to the

King‟s Court of whom they were Lords were jealous of the overwhelming power of the

King to issue new writs via his Chancery. They sought to put limitation on the growing

jurisdiction of the King. They realized that they could curtail the number of cases which

went to the King‟s Court by circumscribing the number of writs which could be issued by

the Chancery. Hence, the Provisions of Oxford 1258 was enacted to ensure that no

new writ could come into general use without the leave of the King and his Magnum

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Concilium. According to Potter in Historical Introduction to the Common Law,

“the stream of the Common Law was confined within the banks and only by

twists and turns did it gradually widen.”

Another contributing factor was the judges confinement to recognize only existing writs

except where the King and his council had given the appropriate authorization. Notably,

the judges wee medieval conservatism and did not want to recognize new writs. Thus,

it excluded a wide field for which remedies could be provided for and thus made the

Common Law defective. Also the biases of the writ system procedure was a

contributing factor where a plaintiff may have a Common Law remedy but was

prevented from enforcing it because of power or influence of the other party. Such as,

false witness for denial of claim excuses delaying trial and bribery of jurors.

Additionally, the Common Law was preoccupied with formalities and where the

formalities were not satisfied as in the case of contracts Common law would not

recognize or grant remedies irrespective of the merits of the case. Around the 14th and

15th Century, the Common Law had become so ridged that claimants were becoming

dissatisfied and deprived of relief.

During this time Parliament was recognized as the only source of new law. The judges

merely declared the law and in cases where relief had to be granted outside of the law

and preexisting writs it was left up to Parliament and the King‟s Council. The

stubbornness of the judges to create new writs prevented the development of the

Common law and left Parliament and the King‟s Council to fill the gaps in the law and to

award relief to victims.

The Chancellor was very important, he was second to the King and was not only

responsible for issuing royal writs but also he was the head of the Common Law and

ensured that it worked in an acceptable way. The Chancellors were ecclesiastics rather

than lawyers and were referred to as the keepers of the King‟s conscience. Early

decisions tended to be habitual and based on the ideas, beliefs and conscience

(discretion) of each particular Chancellor. Thus, equity varied with the length of the

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Chancellor’s foot. In other words, the decision in any particular case would be

relatively unpredictable and uncertain. This may have been an acceptable approach in

single isolated cases but the uncertainty meant that the rights of individuals were

impossible to access.

Thus, after a writ was issued by the Chancellor it was sent to the Common Law judge

who then determined its validity hence, another contributing factor to the rigidity.

However, if the writ was found to be valid it will proceed to be decided on but where

found invalid conflict arose between the judges and the Chancellors. Suffice to say the

judge‟s attitude was strengthened by the Provisions of Oxford 1258 which almost

paralyzed the Common Law and caused great public inconvenience.

Hence, the Statute of Westminster II, 1258 was enacted to relax the restriction placed

on the Chancellor to issue mew writs to meet new situations. The latter statute allowed

for the Chancery to make new writs where there were not existing ones or allowed for

the complaints to wait the next Parliamentary session. This statute was enshrined with

many principles of contract and tort which played a significant role in the development of

action on case thereafter.

However, Plucknett disagreed in 31 Columbia Law Review 778 and said that the

“case” has an independent origin. Landon‟s view attacks the latter contention and

holds that the action on the case pre existed the Statute, but its development and

historical change into trespass on the case was facilitated by the statute in Consimili

Casu. This statute sought to give judges wider elbow room to extend the scope of

Common Law remedies. However, the judges did not seize this opportunity which

would have made the Common Law less ridged and continued to take a narrow

approach.

Thus, victims of a wrong who could be remedies resorted to the King who had the

power to grant relief as an act of grace where no remedy was given or no remedy was

available to them. These petitions were addressed to the King asking for relief for the

love of God and in the way of charity. The petitions appealed to the conscience or

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morality which shows the discretionary character of the jurisdiction of the King‟s Court.

As the number of petitions increased they were delegated to a committee of which the

Chancellor was the head.

The Chancellor being an ecclesiastic accompanied the form of the petition which were

framed in the name of God and of charity thus, he was well suited for this job. Having

being already responsible for the issuing of royal writs he was familiar with the problems

of the complaints. “What is more, the King‟s prerogative exercised through the

Chancellor was not defined and was co-extensive only with the necessity that

evoked.” Snell’s General Principles of Equity, 26th Ed. All these factors led to the

emphasis placed in the Chancery Court of conscience as opposed to an external act of

wrongdoing, which was the yardstick of the Common Law.

In the latter part of the 14th Century a Court of Chancery emerged and before this time

the King in Council was exercising its prerogative to do justice among his subjects. For

a long time the scope of the chancellor‟s jurisdiction was vague because the outcome

could not be determined and relief was not justly available. By the end of the 15th

century equity started to develop the maxim “once a mortgage always a mortgage” to

shield the poor mortgagor form the oppressive conduct of the mortgagee. The

Chancery cared for the weaker party and the mortgagor was accorded the right to

redeem his mortgaged property if through accident, fraud or other misfortune he could

not repay by the redemption date. In the cases of How v Vigures and Courtman v

Conyers it was shown a mortgagor had a right to redeem after the date of redemption

had elapsed on the grounds that the mortgagee had fraudulently absented himself on

the appointed day to avoid receiving payment. Equity enforced contracts on principles

widely different from those of the Common Law by reinforcing promise not under seal if

there was proper parole evidence.

Equity also granted relief against fraud, accident, undue influence and mistake in

conveyance and contracts. The lack of precedents and skillful draftsmanship at this

time necessitated intervention of some sort and equity offered relief to give effect to the

intention of the parties to a transaction. Underlying the reliefs granted by the Chancellor

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was the idea of conscience and morality which was used to temper the strict terms of

legal transactions.

During this period the courts of the Common law were not structured to do much

detailed in-depth investigation into the rights and liabilities of many parties however, the

Chancery was fit for this task because of its many staff and procedure for vetting

document and accounts. The Common Law rule affecting personal representative were

modified hence, the personal representative was considered as being in a fiduciary

relationship and therefore accountable to the beneficiary. As seen in Smith v Hopton,

“rules affecting the order of payment of debts and legacies were developed by

equity, making personally primarily liable for the payments of debts of the

deceased.”

The writ of account had a limited scope; it could only encompass guardians in socage,

bailiffs, receivers and merchants. The Chancery extended its scope to embrace

partnership and administration of estates and so this equitable remedy became

preferable to that of Common Law. The Common Law action in dentine was not

satisfactory and petitions were made to the Chancery for recovery of chattels.

Chose in action became assignable in equity though the Common Law refused to

permit such transfer of proprietary rights over an object which was not capable of

physical possession.

USES

Equity crossed out any conduct which failed to meet its standards of fair dealing,

especially where there was a loss to another such as where land was given to X with

the understanding to hold the same to the use and benefit of Y. (Trustee and

Beneficiary). Equity found that it was a conduct of unfair dealings for the trustee to

convert the property to his own use and benefit, though the common law suffered him to

exercise any rights which the estate conferred on him. The system of Uses was used

too many advantages in circumstances where one was not allowed to hold land, one

could use this system to have restrict the hold the land on their behalf.

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At Common Law the one in whom the estate was vested (trustee) took everything

including the beneficial interest to the prejudice of the beneficiary. Equity intervened to

enforce the trustee to hold the property for the benefit of the beneficiary. The uses

system did not attract the burdensome feudal incidents to which the holders of a legal

estate were subject. The Statute of Uses was enacted to abolish the Use system and

provided that “where any person or persons shall be seized of any lands or other

hereditament to the use, confidence or trust of another, that person having such

use, confidence or trust fee simple, feetail, for a term of life or for years or

otherwise shall stand and be seized deemed and adjudged in lawful seisin estate

and possession of the same lands and hereditament in such like estate as they

had or shall have in use.”

However, the statute did not succeed in suppressing all uses because it was only where

the feoffee had the seisin to the use of another person that the statute applied. It also

did not affect a use held for a term of years, since then there would be no seisin. Also it

was not applicable where the feoffee was charged with active duties and the Chancellor

construed this to exclude from the operation of the statute which imposed the duty to

sell the land and collect rents and profits and pay them to the beneficiary.

The structure where the trustee held the property for the beneficiary that come from the

Use system was used in the 16th century to circumvent the unfavourable effects of the

Statute of Uses. Lord Hardwicke in Hopkins v Hopkins remarked that by the strict

construction put on the Statute of Uses such as a statute made upon great

considerations introduces in a solemn and pompous manner, by this strict construction,

has had no other effect than to add at most three words to the conveyance.

At Common Law the property of a married woman belonged to the husband and equity

considered this to be unfair and harsh on the woman; and in the 16th and 17th century

the Chancellor intervened and developed a rule which allowed a trustee to hold such a

property on trust for the woman; who thereby could exercise rights of ownership over

property so held on her behalf. NOTE: It was not until the 19th century that married

women gained complete freedom from the husband with respect to their property rights.

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Equity was not satisfied with the remedy at Common law for contract and only awarded

specific performance instead of leaving the injured party to his remedy in damages.

Injunctions was also developed to protect proprietary rights and to prevent the

commission and continuance of tort and wastes. As insisted by Sir Thomas, injunctions

should be issued form the Chancery to prevent the unconscientiously use of legal rights

and thus common injunction was developed.

NOTE: The attitude of the Medieval Chancellors derived their inspiration from natural

laws or divine ordinance which they considered supreme to any law made by man and

served as corrective and ideal. This was expounded by Lord Archbishop Molton who

said “Every law to be in accordance with the law of God and the law of God is that an

executor who fraudulently misapplied the goods and does not make restitution would be

damned in hell and to remedy this is to accord with conscience as I understand it.”

At this period there were no settled principles. Reliefs were granted or withheld not in

accordance with any precedent; they were grounded on their effect on the individual‟s

sense of right or wrong. Essence of the relief was “suppression or prevention of

wrong was not the object of the Chancellors.” They aimed at purging the

conscience of the wrongdoer who they would compel to do everything possible that

would expiate the wrong. (Restore them to their place) It was an effort by equitable

relief to purge the conscience of the wrong doer. The nature of equity at this time was

summed up in Seldon’s aphorism: “Equity is a roguish thing, for law we have a

measure.” Equity is according to the conscience of the Chancellor and as that is

longer or narrower so is equity” The Chancellors seeked the truth of the case and so

mispleadings and defects were over looked thus their jurisdiction was purely

discretionary.

COMMON INJUNCTION

Noted that Sir Thomas Moore insisted that injunctions should issue form the Chancery

to prevent the unconsciencetious use of legal rights. In an action at law a defendant

might have a defence valid in equity but this is of no avail in the Common Law court.

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With concerns of an adverse judgment the defendant would go to the court of equity,

whose jurisdiction cannot prevent the court of law from passing judgment in the matter,

would grant an injunction to restraint the plaintiff form proceeding with the action. These

cases raised conflict between the Chancery and the Common Law Courts. In Meath v

Rydley and reiterated in Courtney v Gravil it was ruled that the Common Law courts

could prohibit the Chancery from interfering in any matter properly triable at Common

Law. C.J. Coke threatened imprisonment to anyone that did not abide with an

injunction. The Chancery argued that the injunction in no way affected the Common

Law Courts. They were aimed at the wrongful conduct of litigants who sought to insist

on their strict legal rights in spite of its unconscionable consequences. The controversy

was referred to Bacon the then Attorney General who resolved the conflict in favour or

the Chancery. The decision in effect settled the rule that in event of conflict between

equity and Common Law, equity should prevail. (1st time equity was supreme). The

period 1673 to 1827 – common law lawyers.

This period is described as the Golden Age of Equity and began with Lord Nottingham

and ended with Lord Eldon. Equity was transformed from a jurisdiction founded on the

individual conscience of the Chancellor into a system of well defined and settled

principles. This systemization of equity was influenced by the appointment of lawyers

as Chancellors and their decisions were influenced by their regard for precedent.

These Golden Age Chancellors found that discretion exercised over matters submitted

to them rendered the law uncertain and made litigation unduly expensive. They also

deterred from exercising discretion to avoid appeals to House of Lords. A collection of

literature and cases appeared over the period and it provided materials for the

development of equity by non-ecclesiastical Chancellors to whom precedent was the life

of the law. It then became possible not merely to refer to a decision but to demonstrate

the grounds for a particular decision. The boundaries and the relation between law and

equity gradually became ascertainable.

RIDGITY INTRODUCED TO EQUITY

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Lord Nottingham 1673-1682, was described as the father of equity. He was responsible

for settling down the principles upon which equity operated, thus moving away from the

era of idiosyncratic, unpredictable decisions. He laid out the boundaries within which

equity functioned. In his judgments there is constant application of the maxim “Equity

follows the law.” Lord Nottingham was also instrumental in developing the law of trust.

Precedents were to Lord Nottingham good masters but bad servants, and he

disregarded them when they were found to be unsatisfactory. It was therefore not a

binding. Where the law was harsh equity would disregarded it. Precedent was

considered as mere evidence and they were used by the court of equity discreetly.

After Lord Nottingham time no one could condemn equity as varying as the length of the

Chancellor‟s foot. He considered equity as a flexible system which could be molded

when necessary into a satisfactory rule. He had as an object “to reduce it to certain

rules and principles. That man might study it as a science and not think the

administration of it had anything arbitrary in it.” Sir Matthew Hale, Keaton &

Sheridan. Thus, equity was being secularized no longer depending on a particular

Chancellors conscience. Now based on principles however, flexible they may be.

Lord Hardwicke 1736-1756, was responsible for laying down the general principles

upon which equity operated. He further developed the principles of equity and many of

his decisions demonstrated the fine balance that had to be held between certainty and

the flexibility needed to allow both ‘justice’ in a particular case and also the evolution of

the law. He often emphasized the function of equity to provide a remedy in the case of

unconscientious conduct. His hesitation to overrule precedent which produced hardship

and anomalies introduced rigidity. His judgments are replete with the proposition that

the Court of Chancery is a Court of Conscience. In Scroogs v Scroogs he says “This

is a court of conscience, I shall give my opinion in this case according to my

conscience.” Thus, the equity jurisdiction still remained flexible. The statement should

be considered in light of the peculiar facts of the case. In the case an estate was settled

on children appointed by a trustee. The father fraudulently misrepresented the plaintiff

to the trustee as being extravagant and that the plaintiff had threatened to sell the

reversion. The father managed to persuade the trustees to disinherit the plaintiff 1st son

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and appoint the youngest son. The fathers‟ actions were based on a passed event

where he was sued by the 1st son on suspicion of misappropriation of an estate the son

owned. The plaintiff had evidence to support his good character as a son but the father

did not. Lord Hardwicke was merely exercising discretion within a defined set of rules of

equity which were comprehensible and flexible. He was of the view that the court of

chancery “has undoubted jurisdiction to relieve against every kind of fraud.”

Lord Eldon 1801-1805 &1807-1827, was the consolidator, who worked on the

application of the rules and principles of equity which he inherited form the other two

lords. His Chancellorship covered the whole period of Napoleonic war because he was

appointed twice. He was of a conservative attitude which manifested in his

administration of justice. It was his primary concern to see to it that the principles so far

established were not duly tempered with. “Great alterations don‟t improve our law

or our lawyers.” “Country men should resist temptation to make principles and

precedent bends to the hardship of a particular case.” He stressed that decisions

must be based on precedent and he consolidated the principles previously developed.

“The doctrine of this court, ought to be well settled and made as uniform almost

as those of Common law, laying down fixed principles, but taking care to be

applied according to the circumstances of each case.” He was devolved to the

settlement of principles, vesting these principles with that right of certainty necessary for

the guidance of legal advisers and litigants thus, saving them the unnecessary expense

in terms of time and money.

“I cannot agree that the doctrines of this court are to be changed with every

succeeding judge. Nothing will inflict on me a greater pain, in quitting this place,

than the recollection that I had done anything to justify the reproach that the

equity of this place varies like the Chancellor‟s foot.” Gee v Pritchard, Jessel

M.R. Judge of Chancery, “This is not as I have often said a court of conscience

but a court of law.” NOTE: There would be cases where there is no precedent which

would justify discretion in the chancery without appearing to be acting arbitrary. During

Lord Eldon time equitable doctrine had become settled, ridged and technical. The

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predominance of conscience had been watered down. They were no longer

ascertainable by reference to the measurement of the Chancellor‟s foot varying with the

personal opinion or sense of justice of a particular Chancellor. Precedent is now

regarded not as flexible or persuasive but binding authority. Thus, the rules of equity

suffered the fate of rule of law and became stereo typed. NOTE: Equity did not

become sterile because after Lord Eldon new rules evolved for doctrine of restrictive

covenant, promissory estoppels and proprietary rights of licensee.

JUDICATURE ACT 1873 – 75

It is clear that although equity started life as mere supplement to the common law it

developed into a separate system. Equity was administered by the Courts of Chancery

which were separate from the common law courts. This caused many problems For

example, it was often necessary to use both the common law courts and the court of

equity in the same dispute. The two courts becoming partners and not rivals in the work

of administering justice caused hardship, embarrassment and intolerable inconvenience

to litigants. A complete relief might necessitate two distinct actions in both courts. In

Marquis of Waterford the case was litigated for 14 years up to the HOL where it was

discovered to the dismay and discomfort of the plaintiff that the action should have been

initiated in the other court. Thus, the Judicature Act was enacted so that “No suitor

could be defeated because he commenced his suit in the wrong court, and

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sending the suitor form equity to law and from law to equity, to begin his suit

over again in order to obtain redress, will no longer be possible.” Hence the

Judicature act was enacted to solve the problem of duplicity in respect of claiming

damages in either the common law court or equity thus remedying the anomalities

inherent in the common law.

The legislation provided for the creation of one single Supreme Court to replace the

separate courts that existed previously. All the courts of that time was replaced with one

court, divided, for convenience only, into three Divisions of the High Court. Thus, doing

away with the multiplicity of actions in legal proceedings and there was no need for

common injunctions to restrain an action from commencing in the wrong court. In

practice, matters were allocated to the most appropriate Division but in fact any Division

could have adjudicated on any matter and both common law and equitable remedies

could be awarded by any Division. The Judicature Act section 25 (11) specifically

provided that if there was a conflict between the rules of the common law and the rules

of equity, equity shall prevail. There is no doubt that this legislation merged the

administration of the two systems of law. There is however, some debate as to whether

the two systems of law themselves have been fused into one. Ashburner, in

Principles of Equity, expressed his view by saying that “two streams of jurisdiction,

though they run in the same channel, run side by side and do not mingle their

waters.”

Once must first attempt to answer the essential question of what is fusion. Evershed,

L.J, in “Equity after Fusion: Federal or Confederate” has stated that “when one

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speak of fusion you may mean one of two things. You may mean that the

component parts disappear altogether in the new entity that is created; or you

may mean that they have combined or coalesced for particular purposes or have

become subject to some single control, though retaining their separate and

original individualities.” Suffice to say he has elluded to the notion that fusion can be

viewed in two ways and has left this thought open. However, in Modern Equity, 16th

edn., p.21 it was stated that “It is important, to be clear as to what is meant by the

claim that law and equity are fused. If it means that there is now no distinction or

difference between legal rights and remedies and equitable rights and remedies,

it cannot be supported.” Hence, the distinction still remains between equitable and

common law remedies as there still remains important differences between common

law and equitable rights.

There is however judicial and academic statements to the effect that there is a fused

system of law. The prevailing view appears to be that, although the two systems

operate closely together, they are not fused. However, Tinsley v Milligan takes a

different view and claims that there is fusion, on the question as whether an equitable

interest could be asserted in spite of an element of illegality in its acquisition. Lord

Browne-Wilkinson explained that legal and equitable interests had different incidents

for historical reasons, but that fusion resulted in the adoption of a single rule as to

the circumstances in which the court would enforce interests acquired under an

illegal transaction. Thus the rule is the same whether the claim is to a legal or

equitable title, and can be fully stated without reference to its origin. Also in Coulthard

v Disco Mix Club Ltd, in the context of limitation periods, it was held that there is no

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distinction between an action for fraud at common law and an action in equity for

deliberate and dishonest breach of fiduciary duty based on the same facts, which is the

equitable counterpart of the common law claim. Thus, it was said in this case that it

would have been a blot on our jurisprudence if those self-same facts gave rise to a time

bar in the common law courts but none in the court of equity.

AGREEMENT FOR SALE OR LEASE NOT UNDER SEAL

As stated by Sir George Jessel in Walsh v Lonsdale, “There are not two estates as

there were formerly, …… There is only one court, and equity rules prevail in it.”

However, this case is misleading as it gives the notion that there is conflict with respect

to contracts for the sale of lease of land. Equity does follow the law to some extent on

whether there is a contract or not but they do differ in the granting of remedy but this

aspect of the waters have run side by side and have not conflicted. Thus, there is no

conflict in the area of specific performance which was granted in this case, bonafide

purchaser and third parties. The effect of the Judicature Act is best shown by this case.

In this case the landlord agreed in writing to grant the tenant a lease of a mill for seven

years. The agreement provided that the rent was payable in advance if demanded. No

grant by deed of the lease as required for a lease exceeding three years at law was

ever made. The tenant entered and paid rent quarterly, not in advance. He became in

arrears and the landlord demanded a year‟s rent in advance. It was not paid, and the

landlord distrained. The tenant brought this action for illegal distress. The action failed.

The distress would have been illegal at law, because no seven-year lease had been

granted, and the yearly legal tenancy which arose because of the entering into

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possession and payment of rent did not include the provision for payment of rent in

advance. In equity however the agreement for the lease was as good as a lease. The

tenant was liable to pay a year‟s rent in advance and the distress was lawful.

Also the distinction between legal interest and equitable interest is maintained as seen

in Schalit v Joseph Nadler Ltd, it was held that a beneficiary could not demand that

the trustee turn over the trust to them but could request an account of the trust activities.

In Boyer v Warbey the question arose whether covenants in a lease bound assignees,

not only where the lease was by deed but also where it was a valid written lease. In the

COA it was held that whatever the position before 1875, this was not an area where

distinctions based on formalities were now acceptable, and that the covenant should

bind. It was further suggested that the same result would follow if there was merely a

contract for a lease which was enforceable in equity. Whether it was law or equity that

regarded the lease as effective, the rule as to the running of covenants should be the

same. In a limited sense this is fusion in that the reasons why a particular lease is

effective are ignored in favour of a uniform consequential rule.

LIABILITY OF PERSONAL REPRESENTATIVE

At common law, an executor is strictly liable for loss/destruction of the deceased‟s

assets. The beneficiary could have sued the executor even if he was diligent in

managing the property. Loss assets must therefore be paid for. On the other hand, in

equity, fault is required in order to impose liability. Negligence may constitute such

fault. In his action, the executor, if he can prove that he acted diligently, would not have

to suffer the burden of providing restitution for the loss suffered. This is another vivid

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demonstration of the view that fusion does exist. In Job v Job, the testator, a

watchmaker died, and his executor delivered part of the testator‟s stock to the value of

160 pounds to his son, also a watchmaker and jeweler, for the purpose of being sold in

the ordinary course of trade. The testator‟s son became bankrupt. It was held that

whichever way the case was viewed the executor was not guilty of willful default and

was therefore not liable with the loss. The common law rule, under which the executor

was strictly liable gave way to the principle of equity by virtue of Section 25 (11) of the

Judicature Act.

DUTY OF CARE

It is being argued that the fusion of law and equity conduces to the development of the

law. The proponents of this view claim that we owe the development in Hedley Byrne

v Heller. The right to obtain damages was extended at common law to negligent

misrepresentations by this case and the position has been substantially altered by the

Misrepresentation Act 1967 which, as well as extending the right to damages to

negligent misrepresentations, also allows under s2 (2) that damages may be awarded in

lieu of rescission wherever the court thinks it would be equitable to do so, which means

that damages can be awarded in lieu of rescission even in cases of innocent

misrepresentation.

MORTGAGOR’S POWER OF SALE

In Cuckmere Brick Co Ltd v Mutual Finance Ltd, the issue was whether the

mortgagor‟s were entitled to receive damages against the mortgagee who had (1) sold

the property without advertising the fact that the property had planning permission for

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flats and (2) refused the mortgagor‟s request that the sale be postponed. It should be

recalled from Coroneo v Australian Provincial Assurance Assoc Ltd, that the power

of sale: is an equitable power which is inserted to enable the mortgagee to convey a

title which is not only good at common law but is good in equity to defeat the equitable

rights of the mortgagee. … The operation of the equitable power is simply this, that if it

is exercised in a way that a Court of Equity regards as unexceptionable, that court will

not treat the title of the purchaser as being encumbered by any equity of redemption in

the mortgagor.

However, the more contentious issue in Cuckmere Brick is whether an award of

damages was the appropriate remedy: since the breach of an equitable duty should,

without more, only attract an equitable remedy.

VARIATION OF DEEDS

At common law, a contract under seal can only be discharged by a deed or by

performance; it cannot be discharged by an agreement for consideration which will

survive at equity. The common law position is based on a mere technicality however,

equity looks at the substance and not the form. Under such circumstances there could

be said to have been fusion, since a conflict between the two principles existed.

In Spence v Healey, the plaintiff was successful in his suit to enforce a covenant by the

defendant to pay him, though the plaintiff agreed and accepted certain good, machinery

fixtures and chattels from the defendant in discharge of the covenant. The common law

stance is that a promise once sealed can only be varied or changed by deed or seal.

Equity had a different attitude and did not prevent a contract under seal to be

discharged by an agreement for a valuable consideration, and a party to such a contract

could be restricted from suing at law on the varied covenant.

In Berry v Berry, where by a deed of separation, a husband agreed to pay his wife 12

pounds, and 216 pounds annually during their joint lives. The parties entered into a

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written agreement, which was not under seal, and it was said under this agreement that

the husband could not continue the payments to his wife under the separation deed,

due to inadequate funds; thereupon it was agreed that the husband should pay a lesser

sum of 9 pounds as long as his earnings did not increase. The wife after accepting

several payments, claimed for the specified payments in the deed of separation. The

wife brought action, claiming for arrears of the allowance under the deed. It was held

that the written variation would be enforced in equity and the equitable rule since 1875

prevails over common law rule, which does not accept variation of a deed by contract

not under seal. The common law position on variation of deeds is exceptionally different

to that of equity, as at common law, one cannot accept a lesser sum for a greater sum,

and this principle was established in Pinnel’s case, where Lord Coke said: “that

payment of a lesser sum on the [due] day in satisfaction of a greater, cannot be

any satisfaction of the whole, because it appears to the judges that by no

possibility, a lesser sum can be satisfaction to the plaintiff for a greater sum.”

PROMISSORY ESTOPPEL

Berry v Berry did not hold that deeds or other contractual obligations could be varied or

discharged by a promise which was not supported by consideration. However, High

Trees Case was used to establish the principle in Combe v Combe that where a party

makes a promise to another by words or conduct that had an effect on the intention of

the legal relations and the other party acted in accordance with that promise, the

promisor could not deny such legal relations and is subject to its obligations even

though the promise was not supported in point of law by any consideration. This is the

equitable position which is conflicting with the common law position in Pinnel’s case.

The common law position was established in Jordan v Money that to found an

estoppels at common law, the representation must relate to existing fact, past or

present, and that the representation must not be intention or law. Lord Denning

succeeded in distinguishing this case on the ground that “The promisor made it clear

that she did not intend to be legally bound, whereas in the cases to which he

referred the promisor did intend to be bound.”

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EQUITABLE REMEDY OF ACCOUNT OF PROFITS FOR BREACH OF CONTRACTS

An indication of fusion is a situation where the legal remedy of damages may be given

for breach of an equitable right. It must be noted however, that an equitable remedy for

breach of a legal right is explicable as the exercise of equity‟s concurrent jurisdiction

and is not an example of fusion. Suffice to say, the HOL went further in Att-Gen v

Blake, holding that the equitable remedy of account of profits could be awarded in

exceptional cases for breach of contract where the remedy on damages based on loss

was inadequate. Hence it was stated in Day v Mead, “Equity and common law are

now mingled or merged…. A full range of remedies should be available as

appropriate, no matter whether they originated in common law, equity or statute”

It is therefore evidently clear that the precedence accorded rules of equity over common

law by s25(11) of the Judicature Act would lead to fusion of principles in situations

where the full statement of the rules, conditions precedent to relief and the form of relief

itself produce conflict. The effect will be more pronounced where the two courts

administer inconsistent remedies; however these will be very few indeed. Thus, in this

regard given the conflict which arises, there can be said to be fusion of equity and

common law.

NO FUSION

The purpose of the Judicature Act was to avoid a multiplicity of actions from arising in

the courts. According to Lord Watson in Ind Coope & Co. v Emmerson, “the

Judicature Act was to enable the parties to a suit to obtain in that suit and without

necessity of resorting to another court all remedies to which they are entitled,

properly advanced by them so as to avoid a multiplicity of action.” This object

was attainable without the fusion of the principles of equity and law.

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The fusion argument only has a basis where there is a conflict between common law

and equity and the conflict rule Section 25 (11) in the Judicature Act rectifies this issue.

In fact the mere nine instances of conflict where fusion is said to arise is not strong

basis to conclude a general statement that the Judicature Act has fused common law

and equity. Thus, there are instances where the principle of equity and common law

differ, and they do not conflict, and hence will not result in fusion. This will arise where

a remedy is available at equity, but non at common law; where there is a common law

remedy, but none in equity; or where a remedy is obtainable both at equity and common

law.

In Swindle v Harrison, Hobhouse L.J. confirmed that common law damages were not

available for breach of fiduciary duty. It was still necessary to take account of the

distinction between common law and equity even after the Judicature Act reforms: “The

reason is, of course, that the origins of both common law and equitable rules are

always relevant to their scope, although we should endeavour now to identify the

underlying common principles.” In MCC Proceeds Inc v Lehman Brothers Int. it

was said that the substantive rule of law was not changed by the Judicature Acts.

These were intended to achieve procedural improvements in the administration of the

law and equity in all courts, not to transform equitable interests into legal titles or to

sweep away the rules of the common law.

DAMAGES FOR PART PERFORMANCE

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To enforce any contract affecting interest in land one must show written evidence to that

effect. Without such evidence no action can succeed at common law. In the courts of

equity, part performance can be invoked. (Distinguish form Walsh v Lonsdale).

In Lavery v Pursell, a contract affecting interest in land, required that all building

materials should be demolished and removed from the premises within two months;

however the memo evidencing it did not state the vendor‟s name. The memo was

therefore deemed unacceptable as written evidence by virtue of s 4 of the Statute of

Frauds. It was held in this case that the court‟s jurisdiction to award damages as a

substitute for specific performance was not extended to cases where specific

performance could not have been possibly directed; and since the contract could not at

the time of the hearing be enforced by specific performance, as the period envisaged

(conceived of as a possibility) by the contract had passed, the relief in damages was not

open to the plaintiff. To enforce any contract affecting interest in land, there should be

written evidence.

In Britain v Rossiter, the counsel for the plaintiff who had been dismissed without

notice from the defendants service as clerk and accountant under an employment

contract which was required to be evidenced in writing, argued that in equity part

performance is a substitute for written evidence, and since his client had partly

performed the contract he should be awarded damages for breach of contract. The

contention was based on a confusion of thought founded on fusion of principles.

In this case it was pointed out that the provisions of the Judicature Act enable the courts

of common law to deal with equitable rights and to give relief upon equitable grounds,

but they do not confer new rights;… and that the doctrine of part performance has

always been confined to questions relating to land; it has never been applied to

contracts of service, and it ought not now be extended to cases in which the Court of

Chancery never interfered. Thus the principles remain separate and distinct, and as

such, they cannot be said to be fusion.

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LICENSES

A license does not create any interest in land it merely makes an action lawful, which

without would be unlawful. A license to B to hunt on A‟s land and carry away the game

or to cut down timber and to carry it away is not a mere permission, but it constitutes a

grant to which the license is incidental. It is not a lease since it does not confer rights of

exclusive possession for a fixed period.

A license given gratuitously or for a valuable consideration can be revoked at any time,

even before the end of specific period envisaged by the license. If it is given for valuable

consideration the licensee can sue for damages for breach of contract, if, in breach of

the contractual license, the licensee is ejected. The licensee becomes a trespasser, if

he remains on the premises after the license is revoked and reasonable period has

lapsed. Reasonable force can be used to eject him.

But if the license is coupled with a grant of interest which has been created in the proper

manner prescribed by law for the creation of that interests to which the license is merely

ancillary, it is irrevocable. Even if the license is under a deed is bare, i.e. license without

any grant or not supported by consideration, is irrevocable. This is illustrated in Wood v

Leadbitter, where the plaintiff bought a ticket to a racecourse and this entitled him to

remain there and see the races. Before the end of the races he was ejected by an agent

of the licensor. An action was brought against the licensor who contended that he, as

the licensor, had a right to revoke the license and that the licensee became the

trespasser after the license had been revoked, and that he was entitled to use

reasonable force to eject the licensee.

The Court of Exchequer upheld this contention and dismissed the action of the licensee.

A contrary decision was reached in Hurst v Picture Theatres Ltd, where the plaintiff

purchased a ticket for a seat at a cinema show and was forcibly turned out of his seat

and expelled by the manager who mistakenly thought that the plaintiff had not paid for

his seat. The CA by majority decision observed, affirming the decision in Wood v

Leadbitter was no longer a good law. By the Judicature Act, according to the CA, rules

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of equity prevail in all courts and Wood’s case was decided by the Common Law

Courts and since it was inconsistent with the decision in Frogley v Earl of Lovelace, it

cannot stand as good law.

Buckley L.J pointed out that a license coupled with an interest or grant (unlike a license

without a grant or interest) is irrevocable.

The HOL in Winter Garden Theatre (London) Ltd v Millennium Productions Ltd

accepted the view that Hurst’s’ case represents the true legal position since Judicature

Acts. It is not possible to construe the result of Hurst’s case as evidencing fusion of the

principle of equity and the common law rule on contractual license.

It was a case which falls under the concurrent jurisdiction of the courts of equity. The

remedy of injunction under the circumstances was merely supplementary. There is no

conflict. The principles do differ. The common law courts did not go beyond the award of

damages to authorize the licensor to eject the licensee. If that had been the case, the

award of injunction would have resulted in a clash. The case is therefore not different

from the situation in the case of tort of nuisance, in which the remedies given by the two

systems differ: injunction in equity and damages at common law. There is no conflict

and therefore no fusion.

There is no doubt that Wood’s decision turned on pleadings and it is justified on the

grounds that the old system of pleading was far more strict than the present system and

since his action was for the tort of assault and false imprisonment, he would not have

succeeded by joining a distinct cause of action in contract permitting him to be there

and that the contract was not subject to revocation as per Kennedy LJ in Hurst’s case.

INJUNCTIONS

The Judicature Act empowered the courts to grant injunctions whenever it was just and

equitable to do so. Injunctions, in their modern context, could now be awarded in any of

the courts. In Day v Brownrigg, Mr. and Mrs. Day, had a mansion called “Ashford

Lodge” for 60 years. All legal documents described the property as such. B then

changed the name of his house to accord with that of Day‟s. It caused the applicants

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tremendous inconvenience and financial loss. An action for an injunction was brought

before the court. It was said by the trial judge that he could not imagine a more un-

neighbourly act which would have caused considerable damage. Brownrigg was

therefore restrained from using the name. On Appeal it was held that the Judicature Act

did not change the law; it merely empowered the court to grant injunctions where it was

fit and convenient to do so. The old law must be sought at first in an effort to

demonstrate injury and damage, and it is only where both elements are met could an

action for an injunction succeed in the courts of equity. Merely showing that by the

change of Brownrigg‟s house name, inconvenience was caused was not sufficient.

Injunctions would only be granted to guarantee the rights under both common and/or

equity. This shows that there was no fusion of common law and equity.

Also in North London Rly Co. v The Great Northern Rly Co., there was a contract

which consisted fo an arbitration clause. P succeeded in appointing an arbitrator

though there was no need for such an appointment. It was held that there was no need

to restrain the appointment of an arbitrator and the injunction was revoked.

MISREPRESENTATION

There was a remedy in Equity for innocent misrepresentation, but none at common law.

In the courts of equity, the contract could be rescinded. Under the common law, for one

to succeed, he had to show that misrepresentation was fraudulent, or that

misrepresentation was a term of the contract and that that term was breached. In the

common law courts, one cannot found a claim for innocent misrepresentation. In Smith

v Chadwick, the HOL strongly resisted the consequences resulting from the notion of

fusion, as opposed to Sir George Jessel in Redgrave v Hurd. In this case, Jessel M.R.

that the Judicature Act allowed for the award of damages for innocent

misrepresentation. The HOL decision, however, in Smith v Chadwick shows that this is

impossible. Hence it cannot be truly said that the difference between the common law

principle and the equitable rule has disappeared as contended by Jessel M.R.

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Thus, where common law gave a remedy, and equity did not, there was no conflict; just

that common law and equity proceeded on two different principles. Note that the

conflict must be with the same subject matter for equity to prevail. The purpose of the

Judicature Act was to prevent a multiplicity of actions and the provisions itself is

predicated on the fact that the two systems should operate separately from the other,

except for where there is a conflict then equity will prevail. As per Lord Seldon, the

provision regarding conflict was merely a symbol of taking caution. It would not be right

to use the fact that fusion occurs in limited situations to lay down a general rule that

there is fusion.

“The two streams of jurisdiction … though they run in the same channel, run side

by side and do not mingle their waters … If Professor Ashburner‟s fluvial

metaphor is to be retained at all the waters of the confluent streams of law and

equity have surely mingled now.” The argument surrounding fusion between law and

equity is ongoing. However, it must be taken into consideration that in light of Headley

Byrne v Heller and Cuckmere Brick Co. Ltd, in which it is argued that, the fusion of

law and equity contributes to the development of the law; that there is no reference in

these cases to the conflict rule. Neither did the courts refer to the common law

principles and equitable rules which differed or conflicted.

The amalgamation of the courts with power given to every judge to apply both law and

equity facilitates the development of the law. Therefore, it cannot be said that this

development can be achieved only if the principles of Law and equity are fused. The

Judicature Acts did not fuse law and Equity has been emphasized by Jessel M.R. who

said, “but it was not any fusion or anything of the kind; it was the vesting in one

tribunal the administration of Law and Equity in every cause, action, or dispute

which should come before that tribunal:” According to Salt v Cooper “it is a fusion

of administration rather than of principles. As has been well said, the two streams

have met now run in the same channel, but their waters do not mix;” unlike

Professor Ashburner who claims that the confluent streams of law and equity have

surely mingled now.

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MAXIMS OF EQUITY

HE WHO SEEKS EQUITY MUST DO EQUITY

Equity will not automatically intervene whenever a certain situation arises. In general,

one can say that wherever certain facts are found and a common law right or interest

has been established, common law remedies will be available whether that produces a

fair result or not. By contrast, equitable remedies are discretionary and the court will not

grant them if it feels that the plaintiff is unworthy, notwithstanding that prima facie he

has established an equitable right or interest. This maxim shows clearly the quality of

discretion however, it must not be supposed that the discretion is entirely unfettered. In

Haywood v Cope it was stated that “the discretion of the Court must be exercised

according to fixed and settled rules; you cannot exercise a discretion by merely

considering what, as between the parties, would be fair to be done; what one

person may consider fair, another person may consider very unfair; you must

have some settled rule and principle upon which to determine how that discretion

is to be exercised. So the person who seeks an equitable remedy must be

prepared to act equitably, and the court may oblige him to do so.” NOTE: This

maxim refers to the plaintiff‟s future conduct.

CONSOLIDATION

If debtor takes out a loan for 100,000, he then used his property as security for that

loan. Subsequently, he acquires another loan from the same creditor, at a value of

200,000. He then uses his second property as security which later appreciates to

600,000. The debtor hasn‟t been paying his mortgage on the first loan as therefore the

property depreciated by 20,000. However, interest has accumulated on the loan and

the debtor will have to pay 400,000. The date of redemption comes and the debtor

anticipates to redeem the property for 600,000 which is the appreciated value. In order

for him to successfully redeem, he must do equity by paying off that which was owed

that is the 400,000. To be fair to the creditor, the debts have to be consolidated that is

the debts must be paid together in one payment. Craknell v Janson.

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However, this rule of equity has been eroded by the provisions of the Conveyance Act

which have been enacted to allow the mortgagor redeem without the use of the method.

In Jamaica and Dominica, the statute has deprived the creditor of the right to insist that

the mortgagor pay off all of his debts before the mortgagor is able to redeem thus no

consolidation exist. In Dominica, Grenada and BVI if one does not clearly state that the

bank has the right to consolidate, that is insisting that all security owed before another

mortgage is granted. Where there is no such provision, consolidation as an equitable

doctrine would not apply. Trinidad and Tobago Statute affirms the rule of consolidation

in that the creditor has the right to insist that he be paid all the security owed before the

debtor can claim on a subsequent mortgage.

Equity requires that reasonable notice be given where a person pays off money before

the time the mortgage has been stipulated. He should not insist that upon prompt

payment, the bank for example should accept the payments. The bank would need

time to find other mortgagors. The bank should be instead treated fairly. In sum,

consolidation is a situation where there are two debts owed to the same creditor by the

same debtor, so that they will all be paid together.

ELECTION

The settler in his will, devises his property to A worth 100,000. In the same will, the

settler gives away A‟s property which is only worth 60,000 to another person (B). The

court reiterates that he who comes to equity must do equity. Here, one cannot

approbate and reprobate a will, the settler is put to an election, he must take either

under or against the will. If A decides to go against the will that is keep his property he

would keep the property of 100,000 provided that he compensate B, he would have to

pay 60,000. Thus in Bristow v Warde, “The doctrine of election never can be

applied, but where if the election is made contrary of the will, the interest, that

would pass by the will can be laid hold of, to compensate for what it is taken

away; therefore in all cases there must be some free disposable property given to

the person, which can be made a compensation for what the testator takes away.”

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MARSHALLING

Where there are two creditors C1 and C2 each having a loan secured with properties X

and Y. C1 has both funds X and Y as security for the loan advanced to D. The debtor

then gets another loan from C2, C2 only has security for property Y. Assuming the loan

on property X is 10,000 and on Y the value is 8,000. C1 is owed in respect of the two

properties, 8,000. At law, to regain the money owed, he can do so from either property

X or Y. If C1 sells property Y thereby depriving C2, in equity, the court will allow

marshalling, a situation where C1 is compelled to claim against property X first, and it is

only where a further outstanding balance of 2000 is owed could C1 resort to property Y.

This process is to ensure that C2 is not severely prejudiced.

However, if C1 has claimed against property Y first, then C2 will be given the right which

is vested in C1 to recover as against D in respect of property X. This process is called

marshalling. C2 can bring a personal action against D for that which is owed. The

doctrine is invoked to allow C2 to proceed against property X to realize the security,

although he has no legal right to that property. Marshalling implies that the debts are

brought together as not to prejudice C2. In Lanoy v Duke, " It is not then the

constant equity of this court that if a creditor has two funds, he shall take his

satisfaction out of that fund upon which another creditor has no lien.” "Suppose

a person, who has two real estates, mortgages both to one person, and

afterwards only one estate to a second mortgagee, who had no notice of the first;

the court, in order to relieve the second mortgage, have directed the first to take

his satisfaction out of the estate only which is not in mortgage to the second

mortgagee, if that is sufficient to satisfy the first mortgage, in order to make room

for the second mortgage, even though the estates descended to two different

persons."

NOTICE TO REDEEM

As illustrated in Johnson v Evans, when the contract date of redemption has lapsed

the mortgagor can only redeem in equity which can only allow him to do so where the

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mortgagor has given a reasonable notice to the mortgagee. It is now a settled rule of

equity that, if it can be inferred from the transaction that the loan is intended to be of a

permanent character, the mortgagor is required to give six months notice of his intention

to redeem or pay six months interest in lieu of notice. This is explicable on the grounds

that since the mortgagor has lost his estate at law for non-payment at the appointed

time, and being capable of redeeming only in equity, he has to do equity by giving the

mortgagee a reasonable time for him to look for a new investment for his money.

ILLEGAL LOANS

Moneylenders are required to register their business. Any transaction into by one who

is not registered is rendered void. Where he is registered, all transactions made must

be recorded. Where contrary to statutory provisions, the moneylender is not registered,

but the moneylender has issued a loan to the debtor on condition of security.

Supposing the debtor goes to the unregistered moneylender and asks back for his

property, the court of equity will make an order to issue back the property to the creditor

on condition that the debtor pays what is owed. The debtor though arguing that the

court is enforcing an illegal transaction, will not succeed. Equity demands that he who

comes to equity must do equity.

Unenforceable money lending transactions is where the money lender is registered but

doesn‟t make the necessary recordings. Void transactions are where there are

unregistered money lenders. A distinction can be drawn between unenforceable and

void transactions. In Lodge vs. National Union Investment Co. Ltd., One B borrowed

money from M by mortgaging certain securities to him. M was an unregistered money

lender. Under the Money Lenders‟ Act, 1900 the contract was illegal and therefore void.

B sued M for return of the securities. The Court refused to make an order accept upon

the terms that B should repay the money which had been advanced to him. This

decision was based on the principle of the theory. In Cohen v Lester, it was noted that

an unrecorded loan granted by the registered money lender would allow the debtor can

redeem his security without any condition of payment. In Lodge case, in the case of

void transactions, the money lender must be paid so the debtor can get back his

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property which was used as security. In Kasunmu v Baba Edge, the PC affirmed that

where there is an unenforceable transaction, the debtor is under no obligation to pay

even though on his part he receives back his property. NOTE Owusu argues that this is

unfair.

WIFE’S EQUITY TO SETTLEMENTS – This maxim used to be illustrated with the

practice of the chancery court whereby if a husband resorted to equity to reduce his

wife‟s estate into his possession he will be required as a condition of obtaining the

equitable relief to make adequate settlement upon the wife out of her property.

He who seeks equity must do equity. The maxim means that to obtain an equitable

relief the plaintiff must himself be prepared to do equity, that is a plaintiff must

recognized and submit to the right of his adversary, because, you must do unto your

neighbour what you wish him to do unto you.

HE WHO COMES TO EQUITY MUST COME WITH CLEAN HANDS

The rather striking language of this maxim means that a party seeking an equitable

remedy must not himself be guilty of unconscionable conduct. The court may therefore

consider the past conduct of the claimant. Most cases concern illegal or fraudulent

behavior on the part of the claimant, and it is not clear to what extent the maxim is

applicable outside such behavior. Certainly, in the context of the granting of injunctions,

which, like all equitable remedies, are discretionary, the principle has been broadly

stated as seen in Cross v Cross, “He who comes to equity must come with a clean

hand and any conduct of the plaintiff which would make a grant of specific

performance in equitable can prove a bar.”

In Deweese v Reinhard, “A court of equity acts only when and as conscience

commands and if the conduct of the plaintiff be offensive to the dictates of

natural justice then whatever may be the rights he possesses and whatever use

he may make of them in a court of law, he will hold remediless in a court of

equity.” In Jones v Lenthal, The rule as stated in Story‟s Equity Jurisprudence,

“Equity imperatively demands of suitors in courts fair dealing and righteous

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conduct with reference to the matters concerning which they seek relief. He who

has acted in bad faith, resorted to trickery and deception, or been guilty of fraud

injustice or unfairness will appeal in vain to a court of conscience, even though in

his wrongdoing he may have kept himself strictly “within the law.”

Essentially, equity engages in an investigation of anything which may be condemned

and deemed wrongful in the minds of fair minded and honest community members.

Fairness is the measure of the conduct. In Overton v Bannister, an infant who was

entitled to receive a sum of money from trustees on attaining full age obtained the sum

from the trustees by fraudulently misrepresentating himself to be of full age. The

trustees in paying the sum to the beneficiary when he was not of age was in breach of

the trust and he would therefore otherwise have been liable to pay the sum over to the

beneficiary when he was of full age. The court held that the infant could not compel the

trustees to pay the sum over again on attaining full age. In Nelson v Stocker, “It is too

much to call upon the court to believe that this defendant could really have

thought himself to be of age at the date of the settlement, when he was under 18

years of age; and if he did not so think, the representation he made to the

solicitor was false and fraudulent infants are no more entitled than adults are to

gain benefits to themselves by fraud.”

In Re Turner, if there are three trustees, and judgment is given against one, solictor‟s

trustee then any of the three will be liable for the payment of judgment debt. However,

the solicitor trustee can go to court to ask for a contribution from the others. There

would not be entitlement to contribution if his wrong advice was the reason why the loss

was sustained. In Gascognie v Gascognie, the husband in realizing that his property

could have been sold in respect of a judgment in favour of his creditors conveyed the

property to his wife in order to avert the judgment. Thereafter, he went back to his wife

and asked for the property. The maxim requiring clean hands was invoked to negative

a trust in the husband, that is to prevent him from rebutting the presumption of

advancement where he had caused property to be vested in the wife with the object of

defrauding creditors.

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In Coatworth v Johnson, there was a contract for a lease, and P went into possession.

Subsequently the terms of the agreement were breached. Equity will regard as done

that which ought to be done however, his hands being unclean will not entitle him to

specific performance. There was a contract for a lease for 21 years but it was not

sealed. At law the contract not being sealed would render it void and thus, he became

a tenant at will. If the tenant can prove that he is entitled to specific performance, then

he could not be evicted over a 21 year period by the landlord. The tenant however,

committed several breaches of the agreement and when he brought an action to the

court, he was unsuccessful since his hands were not clean and thus specific

performance not available to him.

If forfeiture is grounded on non-payment of rent, at common law the tenant would order

eviction. However, where the matter was brought to the court of equity, before or even

after judgment is made the court will grant him relief form forfeiture. If the tenant after

the period for the payment of rent fails to make the necessary payment, but there is an

express forfeiture clause in the agreement, equity may still grant relief if he could pay

subsequently. In Gill v Lewis, one of the tenants was convicted of indecent assault of

two boys; this took place on the premises which he occupied. After having been subject

to forfeiture, one of the tenants paid the arrears and then claimed relief in equity. He

was not granted the relief given that the one who was convicted of indecent assault,

hands were not clean (obiter). However, in the special circumstances of the case,

where the judgment was granted against only the accused, and the other sought relief,

such was granted. The tenant had paid his rent in accordance with the tenancy

agreement, however, because he was convicted of a traffic offence, the landlord

claimed that he was not entitled to relief in equity. However, the court said that equity

doesn‟t expect a suitor shall have lead a blameless life. Here, the offence was wholly

unconnected with the subject matter of the claim for relief, hence relief was granted.

It appears that the uncleanness must relate directly to the matter in hand, otherwise

anyone might be denied a remedy simply because he was of bad character. This is

illustrated in the case of Dering v Earl of Winchelsea, where the Head of Winchelsea

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brother‟s, who was one of the surety‟s misappropriated funds belonging to the

government. Three parties formed a partnership agreement and the Head was sued

and did pay as against the judgment by the government whose funds were

misappropriated. It was alleged that the Head, having known of his brother‟s unwise

spending of government funds should be denied contribution. It was held that there was

no connection between the iniquity which was committed and the subject matter of the

relief. As such, the Head‟s claim for contribution was awardable. It was said in this

case that “A man must come into a Court of Equity with clean hand; but when this

is said, it does not mean a general depravity: it must have an immediate and

necessary relation to the equity sued for, it must be a depravity in a legal as well

as a moral sense.” The maxim equally applies in this case, since equity did not expect

the suitor to be totally blameless.

This maxim has some affinity with the maxim ex turpi causa non oritio action (from an

immoral consideration an action does not arise) of the common law. The fact that the

plaintiff‟s past record is not clean regarding a transaction which is against public policy

would not bar a claim for an equitable relief: Lord St.John v lady St.John. In that

situation the court may find that one of the parties to the illegal transaction is not as

guilty as the other and that public policy will best be served by assisting him to get the

transaction set aside.

The distinction between the two maxims appears in the judgment of Robotham J A in

Hawley v Edwards and another. In this case the land to be sold was misrepresented

on the acres. The plaintiff who sought the specific performance must have been

prepared to do equity and pay the interest on the transaction. However, the defendants

must come to the court with clean hands and upon investigation it was found that their

hands were not clean and they were not entitled to the interest claimed. He who comes

into equity must come with clean hands differ from he who does equity must do equity in

that it looks to the past rather than to the future. The maxim appears to be more

stringent than the latter. For the unclean hands maxim does not generally permit relief

to be given on terms as it is done in the case of the latter. The clean hands maxim has

34

th effect of shutting the doors of equity in the face of a plaintiff or any suitor whose past

conduct in relation to the subject matter of the suit is found not to be up to the standards

of equity. In Antonie Book Law and Legal system it was stated that “it appears to

be one the best known maxims and explains that a person who expects a remedy

in equity must himself have a clear conscience and must have done no wrong

with respect to the matter before the courts.”

In Duchess of Argyll v Duke of Argyll it was said that “ A person coming to equity

for relief must come with clean hands; but the cleanliness required is to be

judged in relation to the relief that is sought.”

In Islanmis Republic of Iran v Pahlavi, the government of Iran sought a remedy in the

US courts. D alleged that the government of Iran had been responsible for the hostage

taking and as such, its hands were not clean. The relief sought was granted because it

had nothing to do with the claim for account and thus constructive trust and an

injunction was awarded.

There is an exception to the maxim where it does not apply where one is suing for

common law remedies, such as damages or declaration. It only applies in equity. In

Chapman v Michaelson it was held that the maxim is an equitable doctrine and was

not applicable to a situation where the plaintiff was seeking a declaration that a

mortgage which he had given was void, and that he could obtain a reconveyance of the

mortgaged property without repayment. Equally, where the plaintiff is claiming relief in

respect of a statutory remedy, the maxim does not apply.

In Re the Will of F.B. Gilbert, legislation was passed to vary the will in order to change

the terms so as to positively benefit the wife. She applied to the court for relief and

stated that she didn‟t have any money at all. However, in cross examination it was

found out that she had three bank accounts, all containing money (lied). The defence

lawyer claimed that the court should not exercise its jurisdiction to vary the will.

However, it was held that she was entitled to part of the estate of her deceased

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husband even though she had lied in cross examination since in effect, the relief sought

was statutory and not equitable. As such, the equitable maxim did not apply.

INJUNCTIONS

The power of Equity to act in personam, against the defendant, allowed the

development of a range of remedies, more flexible than those of the Common Law, in

the form of various orders addressed to a party and backed up by the threat of

imprisonment for contempt if those orders were not obeyed. Such orders were imposed

on the individual and as such were discretionary, dependent in particular on whether the

conscience of the party was affected, and whether the plaintiff in turn deserved the

benefit of such an order. Such remedies may be final, representing the conclusion of

the litigation, or may be interlocutory holding actions pending trial, or may be ancillary,

procedural devices in support of the substantive proceedings.

An injunction is a court order directing a person to do or refrain from doing a specified

act. The power of the courts today to grant injunctions derives from the former

jurisdiction of the Court of Chancery, and it is clear that, despite the wide wording of the

Supreme Court Act 1981, referred to above, the jurisdiction may be exercised only on

settled legal principles. It was held in the 19th century that the Judicature Acts 1873-

1875 had not given the new Supreme Court any wider jurisdiction than that which had

previously been available in Chancery or by statute in the common law courts.

Injunctions come in a number of forms: they may be prohibitory, that is to say forbidding

certain conduct or ordering the defendant to cease certain conduct, or they may more

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occasionally be mandatory, ordering certain conduct, often ordering the undoing of

something which interferes with another‟s rights, or they expected to cause the plaintiff

loss. They may be perpetual, that is final and permanent or they may be interim,

granted temporarily to restrain the defendant‟s conduct pending a full hearing of the

matter. They may even, in cases of emergency, be granted ex parte, that is without the

other party‟s case being heard, where there is not time to bring the matter even to an

interim hearing.

INJUNCTION FOR THE ENFORCEMENT OR PROTECTION OF A LEGAL OR

EQUITABLE RIGHT OR INTEREST

It will, in general, be necessary for a private individual to show some legal or equitable

right before the courts will grant an injunction to protect it. Where the plaintiff does not

have some right recognized in either law or equity the court cannot protect something it

does not recognize. In Day v Brownrigg, the claimant lived in a house that had been

called “Ashford Lodge” for 60 years. The defendant lived in a smaller neighboring

house called “Ashford Villa”. The D‟s started to call his house “Ashford Lodge” and the

claimant sought an injunction to restrain him from doing so. The COA took the view that

there was no violation of a legal or equitable right of the claimant so that no injunction

would be granted. Also in Panton v Trustees of British Pregnancy Advisory

Committee, the court would not grant an injunction to a husband to prevent his wife

having a legal abortion because he had no recognized right that was being infringed.

TYPES OF INJUNCTIONS

PROHIBITORY INJUNCTION

The most common and natural form of an injunction as the name implies is that it is

prohibitory or restrictive. It restrains a person from continuing or doing a defined act. In

Allen v Greenwood, the plaintiffs brought an action for injunction to restrain the

defendants from causing a nuisance by diminution of the access of light to the

greenhouse. The judge held that there was no nuisance and dismissed the action.

However, on appeal it was held that the measure of light to which right was acquired

37

under the Prescription Act was the light required for the beneficial use of the building for

any ordinary purpose for which it was adapted. The plaintiffs had acquired a

prescriptive right to light which was not restricted to light for the purpose of illumination

but which entitled them to all the benefits of the light including the rays of the sun. The

injunction was granted to restrain the defendants activities. Also in Sky Petroleum Ltd.

v VIP Ltd., On a motion for an injunction to restrain the defendants from withholding

supplies of which they were the only suppliers, pending trial of an action to determine

matters in dispute concerning the contract. It was held that to grant an injunction, in the

terms sought, would be to order specific performance of a contract to sell and purchase

non-specific or unascertained chattels, and that such an order would normally be

refused because damages would be a sufficient remedy. That in the unusual

circumstances in which the defendants were the only source of supply available to the

plaintiffs and the sole means by which the plaintiffs could continue their business

damages would not be a sufficient remedy and an injunction would be granted.

MANADATORY

These will be granted with particular discretion because they impose a duty of positive

action on the defendant and often require constant supervision. Thus, in Redland

Bricks v Morris, the HOL discharged the injunction. In this case the defendant‟s clay

diggings had caused a land slip which had removed a part of the plaintiff‟s land, which

was used as a market garden, rendering it useless to the plaintiff. An injunction had

been granted by the County Court, ordering the defendant to restore the land. The HOL

recognized the difference of approach between prohibitory and mandatory injunctions.

As Lord Upjohn said: “The grant of a mandatory injunction is, of course, entirely

discretionary, and unlike a negative injunction can never be as of course.”

This perhaps suggests that it is better for the defendant to go ahead and cause the

damage, because the court is unlikely to order him to act positively to undo the damage,

whereas if he is sued before the damage occurs a prohibitory injunction is very likely to

be granted to stop his future behavior. However, in this case the court was moved by

the fact that the defendants, though acting wrongly, were merely negligent: they

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believed that their work would not cause damage, but it did. They had not set out

deliberately or maliciously to cause the damage, but it did. They had not set out

deliberately or maliciously to cause the damage. If they had, Lord Upjohn said that a

mandatory injunction might be granted, even if the cost of carrying it out was out of all

proportion to the damage caused. Here, however, the defendant had not acted

maliciously, so the cost to him of a mandatory injunction had to be considered. The

likely cost of restoring the plaintiff‟s land was 30,000, whereas the land was worth only

12,000, and the damaged part only about 1500. Also, the court felt that the injunction

granted by the County Court judge was virtually open-ended: the defendant did not

know exactly what he had to do. The court held that a mandatory injunction should be

in such terms that the defendant must know precisely what he must do to comply.

In Kelson v Imperial Tobacco, a mandatory injunction was granted to enforce the

removal of a sign which trespassed in the airspace above the claimant‟s premises,

causing no real damage to him, save in so far as he could have charged for the use of

the space.

COMPARE THE FOLLOWING

In Berstein v Sky Views and General Ltd., in which a plaintiff attempted to sue for

tresspass when ariel photographs were taken of his property. The case established that

a property owner does not have unqualified rights over the airspace above their land.

Griffith J stated: "I can find no support in authority for the view that a landowner's

rights in the air space above his property extend to an unlimited height." The case

established that the rights of a land owner has over his land extends only to a height

necessary for the ordinary use and enjoyment of his land.

Wrotham park Estate v Parkside Homes Ltd, the defendant had erected houses in

breach of a restrictive covenant which it had thought was unenforceable. Although

purchasers were now in occupation, the claimants sought a mandatory injunction for the

demolition of the houses. For various reasons, they had not sought interlocutory relief

to prevent the erection of the houses, but this was not fatal to the grant of a mandatory

39

injunction. The fact that the action was commenced before much building had been

done was a relevant but not a conclusive factor. The injunction was refused, as it would

result in the unpardonable waste of needed houses. Instead, damages were awarded

under Lord Cairns Act. Finally, it has been held that the court should be reluctant to

intervene in industrial disputes by the grant of a mandatory injunction.

In Harold Stephen and Co Ltd v Post Office, an industrial dispute had arisen whereby

postal workers were suspended. This resulted in the claimant company‟s mail being

held up and its business seriously disrupted. The company sought a mandatory

injunction against the Post Office to release its mail. The COA refused the injunction,

which would require the Post Office to take back the suspended workers, who would be

likely to continue the unlawful action. The injunction would, therefore, have the effect of

revoking the Post Office‟s disciplinary measures. “It can only be in very rare

circumstances and in the most extreme circumstances that this court should

interfere by way of mandatory injunction in the delicate mechanism of industrial

disputes and industrial negotiations.”

PERPETUAL AND INTERLOCUTORY

PERPETUAL

It is in the nature of an injunction, being an equitable remedy, that its grant is

discretionary. Even if a legal right is infringed the court may choose not to grant an

injunction. It will be granted only where the common law remedies are inadequate, and

in particular where damages would not be sufficient, in the sense that they will not

provide adequate compensation, either because the loss cannot be quantified in money

terms or perhaps where the damage is a continuing one which would require repeated

claims. Neither will equity grant an injunction where it would be pointless to do so, as

where the damaging conduct has already occurred and cannot be undone, as in a

breach of confidence. The court may also choose in appropriate cases to delay the

coming into effect of the injunction until the defendant has had time to remedy the

conduct complained of.

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DAMAGES AN INSUFFICIENT REMEDY

London and Blackwell Railway v Great northern Railway, According to Lindley LJ:

“the very first principle of injunction law is that prima facie you do not obtain

injunctions to restrain actionable wrongs for which damages are the proper

remedy.” So where injury can be adequately compensated by money, injunction will

not be granted; this may arise in a situation where the acts complained of had already

been executed and there is no intention of repeating it.

PROTECTION OF A RIGHT

It is a fundamental rule that the court will only grant an injunction at the suit of a private

individual to support a right. Thus in Day v Brownrigg, the court refused an order of

injunction to prevent the defendant from calling his house by the same name as that of

the plaintiff‟s adjoining house since the plaintiff did not have an exclusive right to the use

of that name.

BREACH OF STATUTORY DUTY

Where the statute imposes a negative duty and provides a remedy such as a fine for its

infringement, an injunction will not lie. In Australian conservation Foundation Inc. v

Commonwealth, it was noted that if there is a legislation forbidding the construction of

roads of certain width or in respect of constructing buildings contrary to the Town and

Country Planning Act, only the AG can bring the action. In the Victoria Case, it is

within the discretion of the AG to determine whether to proceed in an action where a

statute has been contravened thereby infringing a public right.

The Attorney-General has the discretion to proceed by way of injunction to protect

public rights if the statutory penalty is shown to be inadequate. In Gouriet v Union of

Post Office Workers, the claimant, a member of the public, sought an injunction to

restrain a threatened boycott of postal communications between Britian and South

Africa in breach of statute. The Attorney-General had refused consent to a relator

action, without giving reasons. It was unanimously held in the HOL that the court had

no jurisdiction to grant such an injunction, nor to control the exercise of the Attorney-

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General‟s discretion in any way. However, if the statute merely re-enacts a pre-existing

common law liability and provides a special form of remedy, the court‟s jurisdiction to

restrain a breach is not thereby ousted. This remedy is discretionary and, therefore,

before a court may grant an injunction a real and substantial violation of some right

must exist.

DISCRETIONARY NATURE OF THE REMEDY

The principle is that the jurisdiction to grant injunction is purely discretionary. This

discretion which is execerised on laid down equitable principle. The factors taking into

account in granting an injunction are as follows:

1. Minor Damage – mere trival damage which can be easily quantified in terms of

money would not warrant the imposition of an injunction. Where however, it is

found that in not so doing, P would be enabled to be at an advantage, the court

may rule otherwise.

2. Cessation of annoyance – Where the wrong complained is temporary and is

not likely to occur in the future, will not warrant an injunction.

3. Compliance being difficult – Expense in respect of carrying out the order would

not alone prevent the imposition of an injunction.

4. Undertaking by defendant – where D has given an assurance that he would no

longer carry out certain acts, the court will not impose an injunction given the

undertaking.

5. Hardship on the defendant – The court may refuse injunction if it will cause

great hardship to the defendant.

6. Conduct of the plaintiff – If P didn‟t bring an action in due time that is allowed D

to build a wall which he foresaw would have restricted the income of flight and

did nothing/ he didn‟t act in with clean hands may affect P‟s right to an injunction.

JURISDICTION

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Passing off – where one is selling goods in a way that deceives the public into

believing that such belongs to him and not another, then it is clear that the court

may award an injunction.

Patents designs, copyrights and trademarks: - Patents, Designs, Copyrights:

injunction may be granted to restrain infringement of patents, designs, and

copyrights.

Trade secrets and breaches of confidence – Equity exercised original and

independent jurisdiction to grant injunction to restrain what the courts consider to

be wrong if it arises either, from infringement of a right or form breach of contract

or confidence.

Publication of libel – An injunction may be granted to restrain publication of

false statements designed to injure a man‟s personal character or reputation or to

bring his trade or business into disrepute.

Expulsion from clubs and societies – It will lie to restrain the wrongful

expulsion or exclusion of a member from an ordinarily constituted members Club,

where such intervention by equity will protect the members proprietary interest in

the assets of the club.

Trade or profession – But with trade or profession the court will specifically

enforce the member‟s contractual right to remain a member of the society despite

the absence of a proprietary interest in the member. This equitable jurisdiction

which has been exercised over friendly societies, a trade union or professional

institute cannot be ousted by their rules.

Breach of contract – Injunctions can be issued to prevent breach of negative

contracts – agreement in restraint of trade. Where there is a covenant or a term

of an agreement which is positive in form which is normally enforced by specific

performance, equity may prevent its breach by issuing injunction to ensure that

the defendant does not omit to do what he has promised to do.

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Contract of personal service – Injunction can be obtained to restrain breach of

a negative term in a contract of personal service where the term in question is

negative in form as well a in substance. Lumley v Wagner Compare this with

the case of Whitewood Chemical Co. v Hardman where the terms of the

contract by a company‟s manager to give the whole of his time to company‟s

business during a specified period was found to be absolutely positive in form

and therefore no injunction could be issued to restrain its breach. This

jurisdiction is subject to the qualification that the court will not grant an injunction

which will have the effect of straving the defendant, hence the defendant should

not be put in a situation where he has to work for the plaintiff or do no work at all.

So that where, e.g., the defendant bandleader contracted to perform for the

plaintiff‟s hotel for 2 years and that he would not during this term of 2 year play

for any other person or institution except with the plaintiff‟s written permission.

The court held that since it did not prevent the defendant from doing any work at

all but only playing music, he could be restrained from breaching the covenant.

The term which seeks to prevent a film actress from performing for any other

occupation. An injunction will lie to enforce it. An injunction will, therefore, lie to

enforce it, but this will not be so in respect of a term preventing her to engage in

any other occupation – since this will put him at the mercy of the plaintiff. In

Warner Bros v Nelson.

Breach of restrictive covenant – Equity will issue injunction to prevent

breaches of Restrictive Covenants not only against the original covenantor but

also against his successor in title.

Breach of trust and equitable obligation – Injunction will lie to prevent breach

of trust Breach of Partnership Terms: Partnership rights can be protected by

injunction which can issue to restrain breach of the terms thereof of the duties

arising under partnership general law preventing one partner from excluding

another from his right management of the business or to restrain an improper

exercise of power of expulsion.

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Trespass – Injunction can issue to protect ones possessory right.

Waste – Injunction will lie to restrain voluntary waste the acts which alter the

nature of the property. It is immaterial that the acts complained of might increase

the value of the land.

Nuisance – One can prevent a private nuisance only when the injury cannot be

adequately redressed by damages. As for public nuisance it is required that the

plaintiff‟s injury transcends that suffered by the public and that the nuisance has

occasioned substantial damage. Otherwise a complainant can proceed by a

relator action.

INTERLOCUTORY OR INTERIM INJUNCTIONS

Interim Injunctions and interlocutory injunctions are used interchangeable. They are

granted at an interim stage, before the final determination of the rights of the case, and

it follows that nothing should be done, and that an injunction should not be granted,

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which will prejudice that final outcome, or permanently damage the position of the

parties at this early stage. Therefore, when considering whether to grant an interim

injunction the court must first be satisfied, in the words of Lord Diplock in American

Cyanamid v Ethicon, that there is a serious question to be tried.

If there is, then the court must be satisfied that the balance of convenience is in favour

of granting an injunction. The plaintiff will also be required to give an undertaking to pay

damages to the defendant for any loss he suffers from the grant of the interim injunction

if it turns out, as the full trial, that the plaintiff is not entitled to restrain the defendant‟s

conduct in this way.

However, before the American Cyanamid v Ethicon case the principle used to

determine the application of an interlocutory injunction required the applicant showing

inter alia, a strong prima facie case or probability of success in the substantive suit.

This rule was stated in the case of J.T. Stratford & Son Ltd. v. Lindley. This test was

upheld in the case of Hoffman-la roche v Secretary of State. Such cases did not allow

the court much discretion in deciding cases, as once the P can show a strong prima

facie case, he/she would be successful at obtaining an injunction.

Before, the American Cyanamid case the principles which guided the courts in

determing applications for interlocutory injunction are as follows:

1. Prima facie case, Probability of success and Triable issue

2. Balance of convenience

3. Irrepairable damage – damage cannot be remedied by a mere award of damage.

4. Status quo

5. Undertaking as to damage – if D has given an undertaking, the court may be

more willing to enforce the agreement.

American Cyanamid v Ethican Ltd. – C registered a patent in the UK for the use of a

special new kind of sutures. E were the remain suppliers of the kind of sutures then in

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use. C introduced their product into the UK market and within 3 years had captured

15% market share. In order to compete with C, E proposed to introduce their version of

C‟s product. C brought a quia timet action against E to restrain the threatened

infringement of their patent and gave notice of a motion for an interlocutory injunction.

At hearing evidence was advanced by both parties on the issue of whether the

introduction of E‟s product would infringe C‟s patent.

The judge held that „on the availability of evidence C had made out a strong prima facie

case against E and that on the balance of convenience an interlocutory injunction, on an

undertaking in damages by C, should be granted to maintain the status quo of the

parties pending the trial of the action.‟ The COA reversed the decision holding that C

had not established a prima facie case and there was a well-established rule of law that

„a court is precluded from granting an interlocutory injunction or considering the balance

of convenience between the parties unless…satisfied on the balance of probabilities

that, at the trial, the plaintiff would succeed in establishing his right to a permanent

injunction. C appealed.

It was held by the HOL that there were no grounds for interfering with the judges

assessment of the balance of convenience or with the discretion he had exercised in

granting the injunction. Their Lordship reasoned that:

1. There is no such rule of law as that referred to by the CA. The court could grant

an interlocutory injunction as long as it was satisfied that the claim as not

frivolous or vexatious that is that there was a serious issue to be tried.

2. The claim showed that there were serious questions to be tried and that it was

therefore necessary for the balance of convenience to be considered. In

considering the balance of convenience the judge had rightly taken into account

the fact that:

(a) While E had not yet entered its new product into, C was establishing a

growing market with its sutures in competition with E‟s old sutures.

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(b) If E were allowed to enter its new sutures on the market that even if C were

successful in proving an infringement, C would already have lost its chance to

continue increasing its market share.

Some special factors also should be taken into account in determining the balance of

convenience were identified by Lord Diplock, and have subsequently been itemized in

Fellowes v Fisher. Thus, in deciding whether to grant an interim injunction, then, it

appears that the court should consider the interests of the two parties and whether they

could be adequately compensated by damages if either an injunction is not granted and

the plaintiff ultimately wins the case, or an injunction is granted by the plaintiff ultimately

loses. Where this question is evenly balanced, then the court may look at all other

relevant factors, including the strength of the parties‟ cases, if one is much stronger than

the other, to see where the balance of convenience lies. If this too produces an even

balance, then the general approach should be to maintain the status quo. This analysis

is, however, subject to the presence of special factors in the particular cases. The

result of this approach has, however, been that cases are nearly always decided on the

balance of convenience, with little if any consideration of the merits of the plaintiff‟s

case.

However, in 1975, Lord Diplock in the case of American Cyanamid altered the

previous practice by holding that a plaintiff seeking an interlocutory injunction need no

longer establish a prima facie case. The test for a prima facie case contradicts the very

rationale of an interlocutory injunction i.e. to preserve the status quo until trial, rather

than pre-judging the case, which the prima facie test purported to do. Lord Diplock held

that, in cases like American Cyanamid, which is one of a complex nature, the court

needs to have more discretion as allowed by the prima facie test. The court ought to be

vested with the capacity to analyze various factors prior to concluding on the matter;

always bearing in mind, however, that one ought not to judge the case at this early

stage. In addition he stated that there was a serious question to be tried, in which case

the grant or refusal of the injunction should be governed by the balance of convenience.

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The new principles purported by Lord Diplock in accordance with Jill Martin’s article

were, as follows: (1) the court must be satisfied that the plaintiff‟s case is not frivolous or

vexatious and that there is a serious question to be tried; (2) if so, the governing

consideration is the balance of convenience; (3) a significant factor in assessing the

balance of convenience is the inadequacy of damages to each party; (4) if the balance

of convenience does not clearly favour either party, the preservation of the status quo

will be decisive; (5) only as a last resort should the relative strength of each party‟s case

be taken into account in tipping the balance; (6) finally, „other special factors‟ may have

to be considered in individual cases. She further added with referring to Lord Diplock‟s

view that the new formulation in American Cynamid was „designed to circumvent a

necessity of deciding disputed facts or determining points of law without hearing

sufficient argument.” This was done in light of the view that the court‟s discretion

would be unduly fettered if the injunction could only be granted if the plaintiff could show

that he was more than 50 per cent likely to succeed at the trial, bearing in mind that

difficult points of law and conflicts of evidence, which was incomplete and untested by

cross-examination, could not be resolved at the interlocutory stage.

ANALYSIS

To say that the principles were settled would be to presuppose the existence of settled

principles. In American Cyanamid case on the Ratio Deciendi it was established that

where there is a triable issue, the courts are not required to resolve the conflict, it should

not be merely accorded a requirement of prima facie case. Instead the court ought to

go to the balance of convenience. The matter ought not to be resolved at this

interlocutory stage, instead, the inconvenience and the damage suffered should take

into account and the court should decide accordingly. The case doesn‟t apply in

respect of ex parte application because the instant case was an action of motion in

notice. Where the matter is straightforward, open and close case, a prima facie case is

established, then given that there is not triable issue, American Cyanamid should not be

regarded.

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The balance of convenience led to a decisive conclusion in American Cyanamid.

Suffice to say where the balance was even, American Cyanamid would not apply.

Instead, probability of success as a test will in fact be applied. Lord Diplock states that

one should not in fact resolve the matter, but the court should go back to the affidavit of

the parties, and give judgment to the person who has more uncontradicted evidence. In

these circumstances, Owusu states that the probability of success test should be

applied. The HOL did not allude to Stratford case and Hoffman Le-Roche case, Lord

Diplock himself, a few months before American Cyanamid decided that a prima facie

case was required to be established.

The only place in the judgment where one can say changed the law was the statement

of Lord Diplock which made it clear that in interlocutory injunction cases, one must not

apply the prima facie/probability of success tests. Here however, it can be argued that

this case dealt with a triable issue, and as such, the statement of Lord Diplock was

obiter. However, to the extent that there was a triable issue, it was correct that, given

the lack of time, and the length of the court to resolve the matter at this time, prima facie

case was not the best test to apply. On this matter, the HOL was correct that at this

stage there was no need to apply the prima facie or probability of success tests.

In American Cyanamid, the P has a strong prima facie case and D‟s defense was also

strong, hence resulting in a triable issue. In effect, Lord Diplock was contradicting

himself when he said that in cases where a triable issue arises, one must go back to the

affidavits and the more uncontradicted evidence will allow the party in whose favour it

titled to succeed. This is akin to the probability of success test. Thus, the law remains

that once there was a triable issue, one must go to the balance of convenience test and

give judgment accordingly. The ratio decidendi in question did not change the law.

Since this case, there has been much debate with regarding its position in the law and

whether it has actually succeeded in getting rid of the previous rule of establishing a

prima facie case. Lord Denning and others, have held the view that the principles in this

case are nowhere near applicable to the application of interlocutory injunctions, further

illustrated by the statement of the latter where he stated in the case of Cambridge

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Nutrition Ltd. v British Broadcasting Corp. that the Cyanamid principles „must never

be used as a rule of thumb, let alone as a straightjacket.‟

Lord Denning believed that the ‘special factors’ referred to by Lord Diplock could take

a case outside the Cyanamid principles, so that the previous approach requiring a prima

facie case would apply. This view was buttressed in the case of Bryaston Finance Ltd

v De Vires, held that the presence of a „special factor‟ justified the return to the prima

facie approach. On the other hand, the case Hubbard v Pitt, held that „special factors‟

were just merely matters which could affect the balance of convenience and could never

justify a return to the prima facie. With this, subsequent cases have developed what

may be deemed as exceptions to the Cyanamid approach and circumstances where it

will not be applied.

The principles in the American Cyananmid have since been accepted that they will not

apply where there is no likelihood of a trial, in cases of libel, where there is a delay,

where public bodies are concerned, trade disputes, mandatory interlocutory injunctions

and restraining enforcement of an allegedly invalid law.

(1) Libel: established in the case of Bonnard v Perryman, an interlocutory injunction to

restrain a libel will not be granted save in the clearest cases, if a jury were to find

that there was no libel, the court would set aside its verdict as unreasonable.

Hence, not even a prima facie case would suffice to warrant an injunction. This

principle is based on the overriding public interest in freedom of speech. It has been

said on many occasions that the Bonnard principle has not been affected by

Cyanamid. This is because the application of Cyanamid would often lead to the

grant of an injunction, thereby putting an unwarranted restriction on freedom of

speech. This is not an exception to Cyanamid in the sense that the plaintiff must

have a prima facie case, as not even that will suffice. The Bonnard principle may,

perhaps be regarded as a “special factor”, namely that the public interest in freedom

of speech will be overriding save in the clearest case. Consequently, it would

probably be fair to conclude that in such situations, the court would not be applying

the rule in American Cyanamid but the prima facie rule

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(2) Public bodies: in the case of Smith v Inner London Education Authority, the

Court of Appeal held: although the Cyanamid principles applied, the fact that the

defendant was a public body performing public duties was „a special factor‟. Hence,

in this case the balance of convenience must be looked at more widely and the

interests of the public to whom the duties were owed must be taken into account and

in those situations an interlocutory injunction would more likely than not be awarded.

This principle was accepted in the case of R v. Secretary of State for Transport,

ex p. Factortame.

(3) Restraining enforcement of an allegedly invalid law: the Factortame case

involved a claim to restrain the enforcement of the U.K. Merchant Shipping Act on

the basis that it was incompatible with European Community law. It was held that an

injunction should not be granted in such a case unless there was firm ground for the

challenge. The interesting feature of the case is the different approaches of Lords

Goff and Jauncey. Lord Jauncey regarded Cyanamid as inappropriate to the issues

and that the injunction could not be granted (save in quite exceptional

circumstances) unless there was a strong prima facie case of invalidity. Lord Goff,

on the other hand, regarded Cyanamid approach as applicable. However, when

applying the balance of convenience test, the public interest in the enforcement of

an apparently valid law was so great that it could only be outweighed if the challenge

to its validity was prima facie so firmly based as to justify such an exceptional

course. It is submitted by Jill Martin that „Lord Goff is merely paying lip service to

Cyanamid in that case, as on either view; a claimant who does not have a strong

prima facie case will not succeed in getting an injunction.

(4) The Cyanamid principles working unfairly in trade disputes. This was

highlighted in the case of N.W.L. Ltd. v. Wood. It is believed that in view of the fact

that injunction applications in industrial disputes rarely went to a final trial, and if so,

the union would be immune from tortuous liability if it could demonstrate that it acted

in contemplation or in furtherance of a trade dispute, the grant of an interlocutory

injunction to the employer on the basis of an arguable case and the balance of

convenience would be unjust. The case of N.W.L ltd v Woods ultimately held that

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justice would not be served applying Cyanamid where it was unlikely that the matter

would not proceed beyond the interlocutory stage. This view was also held by the

court of appeal in Cayne v. Global Natural Resources, where it was agreed that

Cyanamid case did not apply where an interlocutory injunction would effectively end

the action.

(5) Where trail is likely to be delayed: the belief was that it would be wrong to grant

an injunction on the strength of a mere arguable case that the covenant is not void

under the restraint of trade doctrine where the likelihood is that the trial will not take

place until the period of restraint has expired. Such was the case in Lansing Linde

Ltd. v. Kerr, where the period of restraint was one year, but the trial would not come

on for at least nine months. It was held that in such circumstances the employer

would have to have a prima facie case and not merely an arguable one, otherwise

the injunction would in effect finally decide the dispute against the employee. This

was again regarded as an aspect of the balance of convenience, but in reality a

plaintiff without a prima facie case will not succeed.

(6)The Cyanamid principles do not apply to the application of mandatory

interlocutory injunctions. General test in such instances is that the court must feel a

‘high degree of assurance’ that the plaintiff will succeed at the trial. In the case of

Locabail International Finance Ltd. v. Agroexport, the Court of Appeal held that

mandatory interlocutory injunctions should only be granted in special circumstances;

viz., where the matter ought to be decided at once; where the act to be ordered was a

simple one which could easily be remedied. The „high degree of assurance‟ test was

approved, and regarded as unaffected by Cyanamid case.

Hence, it can be concluded that the House of Lords in American Cyanamid did not

succeed in getting rid of the prima facie nor probability of success rule, even if it was so

desired as neither were settled. Even though it was said by Lord Diplock that „there

may be many other special factors to be taken into consideration when determining the

grant or refusal of an interlocutory injunction, the fact still remains that in those

circumstances, a claimant who does not have a strong prima facie case will not

succeed. Consequently, the words of Lord Denning are best suited as an affirmation of

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the above mentioned view as he stated, „I think I may say that nowadays all

practitioners and judges are so familiar with the Cyanamid case that it is never cited at

length. It is taken as read. And the judges grant or refuse interlocutory injunctions in

the light of it but they come to just the same results as if the waters had never been

troubled.‟

The difference interpretations of American Cyanamid

Sampson Owusu‟s view: The case established that the test for whether to grant an

injunction or not was not whether a prima facie case had been established but whether

there was a ‘serious question to be tried’ and a probability of success. Mr. Owusu

contests the argument that the test in American Cyanamid can be discarded just

because cases since then have not applied it. He argues that the decision in American

Cyanamid was not inconsistent with previous law. He argues that the prima facie case

rule in Stratford v Lindley and the serious question to be tried test in American

Cyanamid were compatible. According to Owusu the ratio of the House of Lords in the

case sets American Cyanamid apart as a special / unique case since the circumstances

of which required it to be decided on the basis of a „serious question to be tried‟.

According to him it is the arbitrary use of the concept of prima facie case which causes

confusion. He suggests that the concept be substituted by the term ‘clear case’. He

defines a clear case as one in which the strong case put forward by the Plaintiff is met

by an equally strong defence by the Defendant so that there is a „serious question to be

tried‟ and the court has to decide whether to grant the injunction on the basis of the

balance of convenience. The American Cyanamid case provided a classic example of

this clear case.

He argues that in all other cases, where there is not a clear case the ordinary test of

prima facie case applies. He identifies three situations in which there would be no clear

case and the court could apply the old prima facie rule:

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a. in an ex parte application where D is not present to present his case

b. D is present at the application but does not offer a defence

c. the balance of convenience is even.

He distinguished the two criteria: the prima facie rule is more stringent requiring that the

Plaintiff be almost certain to win at trial while the serious question to be tried, test

merely requires that the Plaintiff have a probability of success. The latter applies where

there is a clear case and the former applies where there is none.

In his reasoning the House of Lords did not make a prima facie case the last factor to be

considered in assessing the balance of convenience. The court should take „the relative

strength of each party‟s case‟ into account when tipping the balance the House of Lords

was requiring that the court rule in favour of the party with more of the undisputed

evidence (the party with the probability of success, not the party with a prima facie case)

i.e. the party almost certain to win at trial.

An application of the test in American Cyanamid could not possibly lead to a reversion

to the prima facie rule in Stratford v Lindley.

Jill Martin’s view: Martin argues that the decision in American Cyanamid

revolutionised the principles applicable to the grant of an injunction. She argues

that the House of Lords after holding that there was no rule requiring the Plaintiff

to establish a prima facie case, formulated a test designed to circumvent the need

to decide disputed facts or determine questions of law without hearing sufficient

argument. She points out that Lord Diplock himself had upheld the rule in

Stratford v Lindley in a previous case yet neither that nor Stratford‟s case was

referred to in the ruling in American Cyanamid.

Martin argues that the decision American Cyanamid is confusing. Judges in subsequent

cases have interpreted the ruling differently. On the one hand there are those cases in

which the special factors to be taken into account were regarded as aspects of the

balance of convenience. On the other hand there are those cases which have regarded

the special factors as a consideration in themselves. The distinction is important if the

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special factors are considered as aspects of the balance of convenience then the test

would always be that established in American Cyanamid. Moreover, if the special

factors are a consideration in themselves then it would be possible for these factors to

take a case outside the application of the American Cyanamid test.

Martin asserts that the correct approach is the former: to consider the special factors as

merely aspects of the balance of convenience rather than as factors justifying a

departure from the American Cyanamid test. She suggests that the American

Cyanamid case itself was an example of special factors being used to tip the balance of

convenience.

Martin goes on to argue that there are exceptional cases where the American Cyanamid

test would not be appropriate. These include:

a. trial was unlikely, for example, where the ii would resolve the issue.

For example, in Cambridge Nutrition Ltd v British Broadcasting Corp, the

Plaintiff, the manufacturers of a low calorie diet, sought an injunction to restrain

the broadcast of a documentary until after the publication of a government report

about such diets. The grant of the injunction would have removed any need for

trial.

b. trial was likely to be delayed, cases involving restraint of a restrictive covenant

or restraint of a breach of confidence.

In Lansing Linde Ltd v Kerr where an employer imposed a restrictive covenant

on an employee to prevent him working a particular way for one year after his

employment ceased and the trial would not take place for at least nine months, it

was held that the employer had to establish a prima facie case for the injunction

to be granted.

where there was no arguable defence and the Plaintiff has such a strong

case that his chances of success are overwhelming

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In such a situation an injunction will be granted without any weighing of the

balance of convenience.

Lord Diplock‟s view: In accordance with Lord Diplock, the case established, there was

no such rule that the court was not entitled to take any account of the balance of

convenience unless it was first satisfied that the Plaintiff had a good chance of being

successful. He argued that terms such as „probability‟, „prima facie case‟, and „a strong

prima facie case‟ only cause confusion. What was necessary was for the court to

identify a serious question to be tried then have a pre-trial hearing not a trial in which it

considers the balance of convenience and if necessary any other relevant factors.

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Mareva Injunction

Form and nature of Mareva Injunction

Mareva is an order which restrains the defendant from moving assets from the jurisdiction of the

court, or otherwise dealing with, assets within the court‟s jurisdiction in such a way as to render

the execution of the ultimate judgment futile. In other words, its object is to prevent D from

making the judgment futile. Speed is the essence of the relief, thus it usually takes the form of

an ex parte order. Mareva injunction is usually combined with Anton Piller or a disclosure order.

Mareva is ex parte because if D is aware, the object would be defeated and D would go to the

bank and transfer all his assets.

The order should be directed to affect a specified property, where possible, if the value of that

property will be equivalent to the value of the subject matter of the suit. Such a course will

enable the courts to determine whether a particular disposition is in breach of the order. This

may not be possible where the order is general in scope, such as where it is made to affect all

the property of the defendant. An order of such general character may cause substantial

prejudice and hardship to the defendant and third parties.

Where the plaintiff is not in a position to identify sufficiently the assets belonging to the

defendant, the order may be made to affect all such assets of the defendant save in so far as

they are not in excess in value of the subject matter of the plaintiffs claim. In Z Ltd v A – Z, in a

massive fraud scheme the defendants had defrauded the plaintiff of 2,000,000. These funds

had been paid into several bank accounts and used to acquire other fixed assets. The plaintiff

upon discovering the fraud, successfully obtained an Anton Piller and Mareva Injunction against

the defendants. This action continued mainly at the request of five charted banks who wished

elucidation of their responsiblilities under a Mareva Injunction.

Lord Denning stated the principle that as soon as the bank is given notice of the Mareva

Injunction, it must freeze the defendant‟s bank account. It must not allow any drawings to be

made on it neither by cheque drawn before the injunction nor by those drawn after it. If the bank

allowed the drawings it would be obstructing justice (allowing D to dispose of assets) as

prescribed by the court which granted the Mareva Injunction and would be held in contempt of

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court. Once the assets are covered by the Mareva injunction the D must not have access to it

to dispose of it. Must be held pending further order.

The order may also make a provision for the ordinary living or business expenses of the

defendant. In A.J. Bekhar & Co. Ltd v Bilton. The order may direct that an appropriate weekly

or other periodic maximum amount should be set aside for the living expenses of the defendant.

In P.C.W (Underwriting Agencies) Ltd v Dixon. Note too, that the order would be directed to

affect specified property of the D.

The order must be couched in clear terms, so that the defendant and third parties affected by it

may be able to ascertain with a measure of certainty what they are required to do or not to do.

Where appropriate the order may contain a provision that “so far as concerns assets in the hand

of third parties, the generality of the order should only apply to such assets in so far as they are

identified or referred to specifically, but not otherwise,” as expressed in Z Ltd v A – Z.

In the case of a bank, as a third party, the order should specify the transactions which are

affected by the order, bank card transactions other particular transactions other particular

transactions or assets of the defendant.

Purpose

The object of Mareva order is to preserve the assets of the defendant so as to make them

available for the purposes of execution of any judgment which may be given against him. Note,

that „‟Mareva is interlocutory; it is not final; it is ancillary to a substantive pecuniary claim for debt

or damages.”

Nippon Yusen Kaisha v Karageorgis called for the exercise of such jurisdiction. The plaintiffs,

Japanese ship-owners, entered into charter-parties with the defendants, two Greek gentlemen,

who absconded without paying the hire. The plaintiffs feared that they would not be paid. They

learnt that the defendants had some money in their London bank account, which the plaintiffs

suspected might be transferred to Switzerland or some other country. An application was made

for an order to stop the funds being removed outside the jurisdiction of the court. The court

granted the order.

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Similarly, in Mareva v International Bulkcarriers, there was a charterparty under which the

defendants contracted to pay the hire half-monthly in advance. The defendants paid only the

first two half-monthly hiring fees and stopped. The plaintiffs discovered that the defendants had

been paid some money into their London account by the Government of India as freight for a

voyage. That was money which should be used by the defendants, as time-charters to pay the

hire. But they had not paid it as they should have done. An injunction was sought to freeze the

money which was paid into their London account. The court granted the order. It was expressed

that “if it appears that the debt is due and owing – and there is danger that the debtor may

dispose of his assets so as to defeat it before judgment – the court has jurisdiction in a proper

case to grant an interlocutory injunction so as to prevent him disposing of those assets.”

On the contrary, Listen v Stubb had established that “you cannot get an injunction to restrain a

man who is alleged to be a debtor from parting with his property.” Further, that “the only remedy

for a creditor in that case is to obtain his judgment and take out execution.”

Conditions

From the early cases the following conditions can be deduced. The Mareva Injunction was

limited to:

(a) cases in commercial court;

(b) which were actions of debt;

(c) where the defendant was a foreigner outside the jurisdiction, and

(d) where there was a reasonable apprehension, of the danger that assets within the jurisdiction

would be removed outside the jurisdiction.

However, these conditions have been eliminated by subsequent cases. The important question

to be answered is whether Mareva has shed all these conditions. In Barclays-Johnson v Yuill,

“It seems that the Mareva doctrine has shed all the possible limitations of its origin. It is now

quite a general doctrine, free from any possible requirements of foreigner, commerce or

anything else; and in a proper case it depends only upon the existence of the defendant‟s

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assets being removed from the jurisdiction with a consequent danger of the plaintiff being

deprived of the fruits of the judgment that he is seeking.”

The current position appears in the judgment of Lord Denning. The conditions which should be

observed in an application for Mareva injunction were outlined by Lord Denning M.R. in Rasu

Maritima S.A. v Perusahaan, established that: A plaintiff has what appears to be an

indisputable claim against a defendant resident outside the jurisdiction, but with assets within

the jurisdiction which he could easily remove, and which the court is satisfied are liable to be

removed unless the injunction is granted. The plaintiff is then in the following difficulty. First he

needs leave to serve the defendant outside the jurisdiction, and the defendant is then given time

to enter an appearance from the date when he is served, all of which usually takes several

weeks or even months. Secondly, it is only then that the plaintiff can apply for summary

judgment… with a view to levying execution on the defendant‟s assets here. Thirdly, however,

on being apprised of the proceedings, the defendant is liable to remove his assets, thereby

precluding the plaintiff in advance from enjoying the fruits of a judgment which appears

irresistible on the evidence before the court. The defendant can then largely ignore the

plaintiff‟s claim in the courts of this country and snap his fingers at any judgment which may be

given against him. It has always been my understanding that the purpose and scope of the

exercise of this jurisdiction is to deal with cases of this nature. To exercise it ex parte in such

cases presents little danger or inconvenience to the defendant. He is at liberty to apply to have

the injunction discharged at any time at short notice.

(1) the plaintiff must have a good arguable case. This was laid down in Etablissement Esefka

International Anstalt v Central Bank of Nigeria, where an injunction was refused in this case

because there were many doubts in the alleged forgery and the court found that here was “so

much defence to be raised.” It was expressed that “a good arguable case is no doubt the

minimum which the plaintiff must show in order to cross what the judge rightly described as the

threshold for the exercise of the jurisdiction. However, the court must consider the evidence as

a whole in deciding whether or not to exercise this statutory jurisdiction.” Note the mere fact that

he is abroad is not sufficient.

The strength of the case required of the plaintiff is affected by the hardship or inconvenience

which is likely to be endured by the defendant. Thus, where the hardship or inconvenience is

likely to be substantial the plaintiffs burden of proving probability of success on the merits is

correspondingly increased.

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2) The injunction is not only limited to money, but in the case of goods, caution is required if the

injunction would bring the defendant‟s business to a standstill.

3) The court should favour the grant if it would be likely to compel the defendant to provide

security.

4) The plaintiff must make full and frank disclosure of all material matters. In Columbia Picture

Industries Inc. v Robinson. The duty of disclosure discussed under Anton Piller injunction

equally exists under this head. In Third Chandris Shipping Corporation v Unimarie S.A., a

freezing injunction must not be stretched too far lest it be endangered. The plaintiff should

make full and frank disclosure of all matters in his knowledge which are material for the judge to

know.

5) The claimant should give particulars of his claim and its amount, and in ex parte application,

the claimant should fairly state the points which may be made by the defendant to defeat his

claim.

6) He should give grounds for believing that the defendant has assets in the jurisdiction. In

Bankers Trust Co. v Shapira,

7) The plaintiff should give an undertaking as to damages not only to the defendant but also to

third parties who may be affected by the order.

8) The plaintiff should be required to cause a writ to be issued forthwith or within a period

appointed by the court. In Z Ltd v A – Z,

9) The jurisdiction is not only exercisable where there is a risk of removal of assets from the

jurisdiction of the courts but also where it is feared that assets from the jurisdiction will be

disposed of or otherwise dealt with in a way that would frustrate execution of judgment.

10) He should give grounds for believing that there is a risk of their removal before the claim is

satisfied, and a danger of default if the assets are removed. As illustrated in Etablissement

case, the mere fact that the defendant is abroad is insufficient.

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Under this head circumstantial evidence is relied upon to prove that the defendant is likely to

remove the assets from the jurisdiction or otherwise deal with it. The courts have such evidence

in the following situations:

(a) evidence that a caution which has been lodged against the sale of a property has been

“suspiciously” removed from the register and the property sold;

(b) evidence that when the defendant has previously been in financial difficulties he had “fled”

the country and gone to America;

(c) evidence that the husband of the defendant was deliberately staying out of England to avoid

his creditors and the obvious assumption that his wife would sooner or later leave to rejoin him

(with their assets);

(d) the silence of the defendants in not adducing affidavit or other evidence (e.g. balance

sheets) to prove their financial standing;

(e) evidence that the defendant is a “one ship company”;

(f) a refusal by the defendants to disclose to the court details of any property owned by them,

which in Prince Abdul Rahman v Abu Taha led Lord Denning to the suspicion that the

properties were probably in the names of nominees so as to prevent creditors from getting their

hands on them.

There is an overriding requirement to show that there is a justiciable claim. In Siskina (Owners

of Cargo Lately Laen on Board) v Distos Compania Naviera S.A., a right to obtain an

interlocutory injunction is not a cause of action. It cannot stand on its own. It is dependent on

there being a pre-exisiting cause of action against the defendant arising out of an invasion,

actual or threatened, by him of a legal or equitable right of the plaintiff for the enforcement of

which the defendant is amenable to the jurisdiction of the court. The right to obtain an

interlocutory injunction is merely ancillary and incidental to the pre-existing cause of action. It is

granted to preserve the status quo pending the ascertainment by the court of the rights of the

parties and the grant to the plaintiff of the relief to which his cause of action entitles him, which

may or may not include a final injunction.

Parties

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Foreign defendants: The early cases involved maritime claims with defendants resident

outside the jurisdiction. Nippon Yusen Kaisha and Mareva v Int’l Bulkcarriers, conclusively

establish that the order can be made against foreign defendants.

Local or resident defendants: In Chartered Bank v Daklouch, (give facts) The CA held that

the order can be made against a defendant even where he is resident (though not permanently

settled) within the jurisdiction

In Barclay-Johnson v Yuill, the defendant was a national, who, at the time, of hearing, was

believed to be cruising in a yacht in the Mediterranean and could not be reached by his

solicitors. The plaintiff succeeded in his application for a Mareva Order against him for freezing

the proceeds of sale of land which had been paid into his (defendant‟s) account in an English

bank.

According to Megarry V.C. “there is no bar to Mareva Injunction that the defendant is not a

foreigner, or is not foreign-based, in any sense of those terms; that it is essential that there

should be a real risk of the defendant‟s assets being removed from the jurisdiction in such a way

as to stultify any judgment that the plaintiff may obtain; and that in determining whether there is

such a risk, questions of the defendant‟s nationality, domicile, place of residence and many

other matters may be material…”

Lord Denning made it clear in Prince Abdul Rahman v Taha that a locally based

defendant could fall prey to Mareva Injunction. In this case, “a Mareva Injunction can be

granted against a man even though he is based in this country if the circumstances are

such that there is a danger of his absconding, or a danger of the assets being removed

out of the jurisdiction or disposed of within the jurisdiction, or otherwise dealt with so

that there is a danger that the P, if he gets judgment, will not be able to get it satisfied.”

P discovered that there was no money in the account of the D against which he had

successfully obtained a Mareva injunction. He realized that the D was using funds in his

wife‟s account. P claimed an injunction to freeze the wife‟s account. The wife objected

claiming that the account contained only her own money and sought to have the order

discharged. The COURT did not accept the argument that once a third party has laid

claim to an asset covered by an order of a Mareva injunction the court must realize it,

unless the claim cannot conceivable be sustained.

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Joining a third party: Where the order will affect the property of one who is not a party to the

suit, or where there is doubt as to whether the assets belong to the defendant or to one who is

not a party to the suit, any such person can be joined as a party to the application for the

interlocutory injunction.

The court may set down the issue of ownership to be tried in advance. In S.C.F. Finance Co.

Ltd v Masri, the plaintiff discovered that there was no money in the account of the defendant

against which he had successfully obtained a Mareva Injunction. The plaintiff later realized that

the defendant was using funds in his wife‟s account. The plaintiff objected claiming that the

account contained only her own money and sought to have the order discharged. The court did

not accept the argument that once a third party has laid claim to an asset covered by an order of

a Mareva injunction the court must release it, unless the claim cannot conceivably be sustained.

The CA was of the view that if the courts were to act on the mere claim of the third party the

efficacy of the jurisdiction would be greatly undermined. It was held that the alleged claim of the

third party was a factor that could affect the exercise of the discretion to grant or refuse the

order, and that no order would be made unless the court was convinced that there were

sufficient grounds for doing so. The third party can be indemnified for any wrong suffered in the

execution of the order. Where the right to the asset is put in doubt which cannot be resolved

without further inquiry, the issue should be set down for trial in advance.

Subject Matter or Assets

The assets where are sought to be frozen by the order need not be the subject of the

substantive suit. In Rasu Maritima case,

Note: Mareva initially started as a remedy which could only be obtained in commercial courts. Is

this still a condition?

Debts (creditor and debtor)

The jurisdiction can be invoked by a creditor against a debtor. (Note Mareva case and Nippon

Yusen Kaisha case.)

Personal Injuries

It was granted in a personal injury claim in Allen v Jambo Holdings Ltd.

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Matrimonial Property

It was successfully invoked in a matrimonial case of Emmanuel v Emmanuel and Ghoth v

Ghoth.

Ships

A Mareva injunction was issued to restrain a ship from leaving the jurisdiction of the court in The

Rena K.

Aeroplane

A Nigerian aeroplane was retained at an English airport in Allen v lambo Holdings.

Chattels (Motor Vehicles)

An order was made against the defendant to deliver up chattels, such as motor vehicles which

were thought to have been acquired with profits made by the defendant from violating the

plaintiffs copyright in C.B.S. United Kingdom Ltd v Lambert.

Goodwill

In Darashal v U.F.A. C. U.K. Ltd, the D was restrained from any acts which would have effect

of dissipating the goodwill of the plaintiff.

Life Insurance

A contingent beneficial interest in a life insurance policy was affected by a Mareva injunction in

T.D.K. Tape Distributor (U.K.) Ltd v Videochoice Ltd. (give facts)

Foreign assets

Initially, it was designed to affect assets within the jurisdiction of the court. The conditions which

were imposed at the initial stages of the development of Mareva injunction clearly showed that

the doctrine was not envisaged to affect foreign based assets. This formed the basis of the

decision in Ashtiani v Kashi. Here, the plaintiff obtained a Mareva injunction freezing the

assets of the defendant within the jurisdiction. Thereafter he made an application for discovery

of the nature, value and whereabouts of the defendant‟s assets wheresoever situated. The

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application was refused. The Mareva Injunction which had been previously granted was

restricted to assets located within the jurisdiction. The discovery sought by the plaintiff was

ancillary to the Mareva injunction and it could therefore not be granted since the Mareva order

did not affect assets located outside the jurisdiction; as Mareva was given to affect assets within

the court‟s jurisdiction.

The CA‟s reasoning in Ashtiani v Kashi did not deny the existence of jurisdiction to grant a

Mareva injunction in respect of assets located outside the court‟s jurisdiction to grant a Mareva

injunction in respect of assets located outside the court‟s jurisdiction. For the remedy of

discovery which was sought in Ashtiani case, was not a principal relief of Mareva injunction,

which had already been granted and was restricted to local assets. Since the discovery was a

relief which was ancillary to the main remedy of Mareva it could not be extended outside the

limits of the main remedy. The CA, however, observed that a fairly settled and entrenched

practice inclined against such worldwide injunction.

The guidelines for application of Mareva order that the plaintiff furnish grounds for believing that

the defendant has assets within the jurisdiction and that there was a risk of the assets being

removed from the jurisdiction before the determination of the substantive suit indicated that the

jurisdiction was limited to assets within the jurisdiction of the courts.

In Intraco Ltd v Notis Shipping Corporation, the Bhoja Trader, the CA refused a Mareva

injunction sought to prevent the defendant from disposing of the proceeds of a letter of credit

because the fruits of the letter of credit could be realized only in Greece, a foreign country. This

case seems to affirm the view that Mareva injunction cannot go beyond the jurisdiction of the

courts.

Two of the main policy reasons against the award of worldwide Mareva injunction appear in the

CA decision of Ashtiani v Kashi:

1) It would have an oppressive effect on the defendant as it may result in freezing his assets all

over the world.

2) Problems of enforcing an injunctive order outside: the jurisdiction of the courts where the

assets of the defendant can be found militates against the award of worldwide injunction. It

becomes a complex issue where acts sought to be enjoined may not only be lawful, but may

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also be required under a contract to be performed by the defendant in the country where the

assets are located.

3) The order operates in personam. The defendant will therefore be personally liable for its

enforcement overseas. But there is no effective way of ensuring compliance. The defendant can

flout the order with impunity as he may never return to the jurisdiction of the court to account for

his disobedience. If he did so return there will be no means of getting what he did in

disobedience of the order undone.

Note, that Mareva has been enforced and used worldwide in certain territories e.g. Australia,

Hong Kong.

Suggested answers to these objections

(a) as to the first objection, it can be said that such extraterritorial jurisdiction has existed in

other countries and its exercise in these other countries has not been found to be objectionable.

(b) The issue of oppression to the defendant resolves itself into matters of discretion. Whether

the enforcement of extraterritorial injunction will be oppressive on the defendant or not is a

question of degree. It should therefore not operate to impose an absolute bar against the award

of worldwide Mareva injunction. It is a discretionary and not a jurisdictional matter, and should

therefore be considered with other discretionary factors. Thus if the hardship to the defendant

does not overwhelm the advantages to the plaintiff, it should be granted. On the other hand, if

the prejudice the defendant would suffer would exceed the benefit to the plaintiff, it should be

refused. The problem becomes acute when third parties are affected by the order. This problem

received attention of the courts in Babanaft International Co. S.A. v Bassante.

Here, a judgment for 15 million was awarded against the defendants, two Lebanese nationals.

They were involved in a business which they carried on in a secretive manner through a

network of family companies. Their assets in Britain were not adequate to meet the 15 million

dollar judgment debt which they owed to the plaintiff. They failed to pay the judgment debt. The

plaintiffs application for a Mareva injunction was granted. It was held that the Mareva injunction

can be granted to affect assets outside the jurisdiction of the court. Salient features of

Babanaft’s cases are:

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(1) that the Mareva Order was obtained after the final judgment in the substantive suit had been

given.

(2) it was granted to bind the defendant alone. It was not to be binding on third parties except

where the order was enforceable by the courts of the countries where the assets were located.

Note: the distinction in Babanaft was that judgment had already been given in personam;

hence it wasn‟t binding on third parties and was only given to affect D. The worldwide Mareva

was served in this case.

Worldwide Mareva was also granted in Republic of Haiti v Duvalier. Here, there was an

alleged embezzlement of 120 million by the former president and members of his family. The

action was commenced in France where the family was resident, and a Mareva injunction

covering the assets of Duvalier‟s family wheresoever situated was sought in Britain. The order in

Duvalier‟s case was given when there was no suit for any claim justiciable in England.

Duvalier‟s case is indistinguishable on the following grounds:

(1) That int‟l co-operation was highly demanded in this case

(2) That Mareva Order issued in Duvalier‟s case contained a proviso that “unless and to the

extent that it is enforced by the courts of the States in which any of the defendant‟s

assets are located.” This is the proviso which was introduced by Babanaft’s case,

where it was directed that such a proviso should be contained in Mareva orders

designed to affect properties abroad.

(3) The case involved vast sums of money

(4) There was plain and admitted evidence of the defendant‟s intention to move their assets out

of the reach of all courts of law.

(5) It was considered a rare and exceptional case. The Mareva injunction issued in Duvalier‟s

case was a “most unusual measure … such as should be very rarely granted.”

But the court recognized that such a worldwide order should be granted only in rare

cases, such as where there is a need for int‟l co-operation. It appears then that the

worldwide order will be readily granted:

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(1) if the substantive suit has been determined

(2) where the plaintiff has a tracing or other proprietary claim. Note, in Derby & Co. Ltd v

Weldon some other conditions were introduced. That is:

(3) He must show that the defendant‟s assets within the jurisdiction are not sufficient to meet his

claim;

(4) the defendant would not be exposed to a multiplicity of actions; there will be no misuse of his

information obtained in the process of executing the order;

(5) the third parties will be adequately protected.

There does not appear to be any difference between the conditions for domestic and worldwide

Mareva injunctions. Except that in the case of worldwide injunction there is no need for plaintiff

to prove that the defendant has assets within the jurisdiction of the court.

Effect on third parties

Where one is not a party to the substantive suit in relation to which a Mareva injunction has

been obtained, the question as to whether such innocent third parties or banks are required by

law to observe the terms of the order was addressed by Lord Denning in Z Ltd. v A – Z. Here,

the plaintiff was a foreign company with an office in London. It was defrauded in large sums of

money, which the company was induced by means of telexes to transfer to London apparently

for the purchase of goods which in fact were never supplied. These monies which were

obtained through this fraudulent means were paid into various bank accounts in London. Where

the fraud was discovered, the plaintiff, in an effort to recover them, applied for a Mareva

injunction to freeze the monies paid in the London accounts until judgment.

Does a bank served with the Mareva injunction have the right to freeze the customer‟s account?

The bank is not a party to the suit. The court has not made any order on the bank. The

customer, i.e. the defendant, has not given the bank the permission to freeze his assets in the

bank. Does the bank have any right to freeze the account? In Z Ltd v A-Z, the CA was

presented with this issue in the form of a request for an advisory opinion.

According to Lord Denning in Z Ltd: “As soon as the judge makes his order for a Mareva

injunction restraining the defendant from disposing of his assets, the order takes effect at the

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very moment that it is pronounced… Even though the order has not then been drawn up, even

though it has not been served on the defendant, it has immediate effect on every asset of the

defendant covered by the injunction. Every person who has knowledge of it must do what he

reasonably can to preserve the asset. He must not assist in any way in the disposal of it.

Otherwise he is guilty of contempt of court.” (Note: this is in rem)

Consequently, a bank which honours any cheque presented after the order has come to its

knowledge will be guilty of aiding and abetting the contempt of the defendant. A bank should

therefore not allow any drawings to be made on the account, neither by cheques drawn before

the injunction nor by those drawn after it. The principle is that if one becomes aware of the

order, he will be obstructing the course of justice if he does anything to facilitate the disposal of

the asset covered by the court‟s order. A charge of contempt of court can be leveled against

him, if one is so found to be obstructing the course of justice.

To avoid undue hardship to third parties who may be required to observe the terms of the order,

it was held in Z Ltd v A-Z that the order should set out in detail and with as much certainty as

possible what the third parties are required to do or not do. The order may be in wide terms as

at that stage the plaintiff may not be able to determine what assets the defendant has or where

they are situated. But the third party should be informed of the account or the identity of the

particular asset.

If the plaintiff cannot identify the bank account or other asset with precision, he may request the

bank or other innocent third party to conduct search so as to see whether any asset of the

defendant is held by it or any of its branches. The bank may not disclose the result of the search

so as not to breach its duty of confidence to its customer. If, however, the banks find that the

defendant has an account, it should freeze it for its own protection, so that it would no0t be in

contempt of court.

A third party or a bank which is required to perform any act in pursuance of the order has to be

indemnified by the plaintiff for all expenses incurred in respect of the order.

Lord Denning in this case conceived the remedy of Mareva injunction as “operating in rem”. But

this concept of “in rem” must be understood in the limited sense in which it was used in Z Ltd v

A-Z. Lord Denning was dealing with the position of a third party who finds himself in a situation

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where he can personally make the order ineffective. The order is good against him in the sense

that, he has a duty to observe it. That is the sense in which it can be said to “operate in rem”. It

is not in rem because:

1) it does not give a charge in favour of any particular creditor, though it enables the assets to

be preserved for the benefit of the creditor. This limitation was explicitly recognized in Z Ltd v A-

Z; where this statement was made by Lord Denning.

2) A bank may debit the frozen account for payment on behalf of the defendant of an irrevocable

letter of credit, a bank guarantee, a credit card or a cheque backed by a cheque card.

3) A bank which holds funds which are the subject of a Mareva injunction can obtain a variation

order so as to entitle it to exercise any right of set-off it has in connection with any facility it has

granted the defendant before it was notified of the order. In Oceanica Castelana Armadora

S.A. of Panama v Mineralimporrexport, the bank was allowed to exercise its right of set-off in

respect of interest due from the customer before and after the notice of the order.

4) A Mareva injunction can be varied so as to allow the defendant to pay a debt in the ordinary

course of business to a third party. In K\S A\S Admiral Shipping v Portlink Ferries Ltd, the

plaintiff suspected that the defendant against whom they had obtained a Mareva order was

about to go out of business. They therefore applied for an order that the defendants should not

pay its trade creditors in a way that would reduce the frozen assets below a level that would

satisfy any judgment the plaintiff would obtain. The application was rejected. The doctrine is not

to allow a person claiming unliquidated damages to be a secured creditor.

5) Where the defendant seeks variation of an order so as to enable him to pay a debt he owes

an unsecured creditor or any third party, such as legal costs, according to A v C (No 2), he has

to disclose his other assets and show why he does not want to use any other asset other than

the particular asset which is subject to Mareva injunction.

6) An asset which was secured to a creditor but subsequently caught by a Mareva injunction

does not lose its character as a secured property. The Mareva order does not give the plaintiff

any proprietary interest in the asset caught by the order. The order does not prevail against the

interest of the second creditor. The charterers in Cretanor Maritime Co. Ltd v Irish Marine

Management Ltd, executed a debenture in favour of an Irish bank in 1975. The debenture was

in the form of a floating charge. In 1976 a dispute arose between the owners of the ship and

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charterer‟s assets. After the dispute between the owners of the ship and charterers had been

referred to an arbitrator, the owners applied for and obtained a Mareva injunction restraining the

charterers horn removing any assets up to value of $700,000 out of the jurisdiction of the court.

The receiver applied to the court and got the injunction discharged so that they could remove

the assets subject to the debenture removed from the jurisdiction of the court. The court was of

the view that Mr. Mullion to whom the debenture was assigned was not precluded from seeking

the discharge of the injunction. Buckley L.J was of the view that a Mareva injunction did not

have the effect of a pre-trial attachment. He asserted “under such an injunction the plaintiff has

no rights against the assets. He may later acquire such rights if he obtains judgment and can

thereafter successfully levy execution on diem, but until then his only rights are against the

defendant personally.”

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WORKSHEET 4 A

EQUITABLE REMEDIES: SPECIFIC PERFORMANCE

PRORIETARY ESTOPPEL

(ACQUIESCENCE)

The doctrine of acquiescence allows a person who develops another‟s land in the glare or with

the landowner‟s knowledge to lay claim to or recover the land together with the developments

on the land which he effected. This is possible only if the landowner makes a promise of a grant

of the land to the person or if the owner stands by and does not assert his title to the land. The

doctrine can be invoked not only where the land owner makes an express promise of a grant of

the land, but also where he stands by and his silence encourages the person to develop the

land.

Lecturer’s Note: What we are considering here is a case where there is no written agreement

[for sale of land]; it is a mere promise or representation at best. “Can the person just sit on the

tree of his land and then descend at the time of the harvest and take the crops, [claiming

ownership of the farm]?”-Owusu’s article. What should the courts of equity do? The person

developing the land; is it conscionable for the law to allow the title owner to take the property

with all its improvements? The courts say that in certain circumstances specific performance will

be granted.

Lord Westbury L.C. vividly illustrated the scenario where the landowner made a promise of

his land in Dilwyn v. Llewellyn (1862) 45 ER, 1285 at p. 1286 a case where the father

gave the land to the son who spent $14, 000 on the property to build a house. The father

signed an unsealed memo purporting to convey the land to the son, but, the father in his will

devised all his property on trust for other objects. The question arose whether the son could

succeed. The courts said yes, the son succeeded in getting a conveyance of the fee simple

interest. Lord Westbury said: “if A puts D into possession of a piece of land and tells him “I give

it to you that you may build a house on it”, and D on the strength of that promise, with the

knowledge of A, expends a large sum of money in building a house accordingly I cannot doubt

that the donee acquires a right from the subsequent transaction to call on the donor to perform

that contract and complete the imperfect donation that was made.”

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In the case of Ramsden v. Dyson (1866) LR 1 H.L. at 140-141 it Cranworth LC said “if a

stranger begins to build on my land, supposedly to be his own, and I perceiving his mistake,

abstain from setting him right, and leave him to persevere in his error, the courts of equity will

not allow me to assert my title to the land on which he has expended money on the supposition

that the land was his own.”

There should be a representation on which the stranger relies to his detriment; i.e. an encouragement or assurance or any other conduct on the landowner‟s part which leads the stranger to believe that he has or will have title or some interest in the land.

`The doctrine in another manifestation of the maxim equity acts in personam. It is

based on fraud, for {according to Fry J in Willmott v. Barber (1880)} “it requires very

strong evidence to induce the court of equity to deprive a man of his legal right…it has been

said that by acquiescence which will deprive a man of his legal right must amount to fraud, and

in my view that is an abbreviated statement of a very true proposition. A man is not to be

deprived of his legal rights unless he has acted in such a way as would make it fraudulent for

him to set up those rights.

By this doctrine the courts of equity:

(a) Have created an inroad into the equitable maxim “equity does not aid a volunteer”; (b) Circumvented the requirements of the Statute of Frauds, to perfect an imperfect gift by

awarding specific performance where there is no consideration and/ or written evidence to buttress a claim for an interest in land;

(c) Side-stepped the statutory requirement for testamentary disposition; and (d) Also parted from the general rule that estoppel can only operate as a shield but not as

a sword.

THE FIVE CONDITIONS (PROBANDA)

Note that these five probanda and no longer the governing tests for establishing proprietary

estoppel.

The conditions for the operation of the doctrine of acquiescence can be found in

Willmot v. Barber (1880) 15 Ch. D. 96, where Fry J deduced the following principles from

the authorities:

1. The plaintiff must have made a mistake as to his legal rights;

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2. The plaintiff must have expended some money or must have done some act (not necessarily upon the defendant‟s land) or suffered some detriment on the faith of his mistaken belief;

3. The defendant, the possessor of the legal right must know of the existence of his own right which is inconsistent with the right claimed by the plaintiff. If he is ignorant of it, he is in the same position as the plaintiff, and the doctrine of acquiescence is founded upon knowledge of your legal rights;

4. The defendant, the possessor of the legal right, must know of the plaintiff‟s mistaken belief of his rights. If he does not, there will be nothing which he calls upon him to assert his own rights; and

5. The defendant, the possessor of the legal right, must have encouraged the plaintiff in his expenditure of money or in other acts which he has done, either directly or by abstaining from asserting his legal right.

To invoke the doctrine successfully one has to establish all the conditions above-stated.

KNOWLEDGE AND MISTAKEN BELIEF OF THE DEVELOPER/

REPRESENTEE

In incurring the expenditure, or altering his position for the worse, the developer/ representee

should have been labouring under the mistake that he owned or that he would obtain sufficient

interest in the subject matter of the litigation to justify the expenditure on that property. If an

adverse claim is made before the representee incurs any expenditure, the court of equity will

not come to his aid.

In Pilling v. Armatage (1806) 33 ER 31, 33, Lord Grant MR said that it should be a “case

which supposes as total absence of the title on one side, implying therefore, that the act must

be done of necessity under the influence of mistake; and undoubtedly it may be expected, that

the party should advertise to the other, that he is acting under a mistake. But I do not know

any case, in which a lessee,…making any improvement upon the estate in his possession,

though with complete knowledge of the landlord, has been held entitled as against the landlord

to have his lease prolonged, until he shall obtain reimbursement for the improvements he has

made; for [he] has title, of which he knows the duration. He is not under a mistake as to the

nature of his title.”

If the developer/ representee has full knowledge of all the relevant facts and the true state of

affairs relating to the land, the doctrine would not apply in his favour.

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In Derrick v. Mohammed (1960) 2 WLR 352, the defendant could not rely on the doctrine

as he knew he was encroaching on land which he did not own, even though he did not know

that it actually belonged to the plaintiff‟s predecessor in title.

CONSTRUCTIVE KNOWLEDGE

Constructive knowledge on the part of the developer/ representee is not sufficient to defeat a

claim based on the doctrine of acquiescence. In Wilmott v. Barber (1880) Fry J said: “it

appears to me that the plaintiff has proved that he was mistaken as to his legal rights. It is said

that he was affected with notice of the contents of Barber‟s lease, because he knew he held

under a lease. It is not necessary for me to decide the point, though it may well be that as

between him and Barber the plaintiff is affected with notice of the contents of the lease. But, in

my judgement when the plaintiff is seeking relief, not on a contract, but on the footing of a

mistake of fact, the mistake is not the less a ground for relief because he had the means of

knowledge.”

Owusu submits that Fry J‟s dictum is not valid in principle and is inconsistent with the decision

of Rennie v. Youngs (1858) 44 ER 939, which should be preferred.

Since the defence is founded in equity, the developer/ representee seeking to invoke it must

have acted in a reasonable manner as would awaken the concern and anxiety of the Chancellor

to sustain the defence based on proprietary estoppel.

RELAINCE/ DETRIMENT/ CHANGE OF POSITION TO THE

DEVELOPER/ REPRESENTEE

The developer/ representee must establish that he has in some way acted to his detriment or

altered his position for the worse on the faith of the representation. In Jones v. Stones

[1999] 1 WLR 1739, the defendant, placed a green oil tank on and across a stone wall, which

divided his property from the plaintiff‟s adjacent property. On the same stone wall, the

defendant placed and maintained six flower pots. Acquiescence was pleaded in defence to the

plaintiffs‟ claim for an injunction against the defendant. The pleas of proprietary estoppel failed

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because the defendant failed to establish that he had suffered any detriment by being allowed

to maintain the flower pots and the green oil tank on the wall which the plaintiffs owned.

The „detriment requirement‟ was emphasized in Greasley v. Cooke [1980] 1 WLR 1306,

1313, per Dunn L.J. : “There is no doubt that for proprietary estoppel to arise the person

claiming it must have incurred expenditure or otherwise have prejudiced himself or acted to his

detriment. In said case, the defendant became a widower‟s house-maid for 10 years. After the

death of AG., the defendant cohabited with AG‟s son, who died in 1975. She continued to serve

and lived in the house and nursed a AG‟s mentally ill daughter without wages. She was

encouraged by her later concubine and his brother, the plaintiff, to believe that she could

regard the property as her home for the rest of her life.

The COA held that she could not be ejected, and that she could stay in the house as

long as she wished.

It appears that her reliance detriment too the form of foregoing wages and perhaps the loss of

opportunity of another job.

In this case, Lord Denning, disputed the requirement of expenditure and detriment on which

Dunn LJ insisted. Hanbury & Martin’s Modern Equity suggests that Lord Denning‟s

comments on the expenditure and detriment should be considered as relating to the burden of

proof, which shifts once it is proved that there was reliance.

The expenditure and detriment can take any form. It does not have to take the form of

monetary expenditure or other quantifiable financial loss provided it is substantial and was

incurred or suffered on the faith of some representation. It may prejudicially affect the temporal

interests of the representee.

The test is whether it is unconscionable in all the circumstances for the assurance to be

disregarded or withdrawn. In Skinner v. Daniel Reeves et al (1981) 16 Barb. LR 21,

Husbands J rejected the proposition that the doctrine only applies in situations where “money

is expended on a wall structure such as a bungalow as the case was in Inwards v. Baker .

He was of the view that the doctrine also applies to a chattel house because in may cases to

hold true to the above proposition would be inequitable, and that today many chattel houses

are substantial buildings with characteristics and facilities similar to those of wall structures.

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KNOWLDEGE OF THE OWNER/ REPRESENTEE OF HIS RIGHT AND

AWARNESS OF THE MISTAKEN BELIEF OF THE DEVELOPER/

REPRESENTEE

(THE OLD RULE)

It cannot be said that the owner encouraged the representee where he does not know of his

interests in the property, and that the developer‟s acts were incompatible with his rights, as, the

element of fraud invoking the chancellor‟s intervention is knowledge.

The lack of such knowledge on the owner‟s/ representor‟s part was one of the grounds on

which the defendant plea of acquiescence failed in Derrick v. Mohammed (1960) 2 WIR

353. The defendant‟s building on his plot 15 partly encroached on plot 14 belonging to the

plaintiff, who went and occupied plot 13 in a mistaken belief that his plot was 13 instead of 14.

The plaintiff was ignorant of the fact that the defendant‟s building was encroaching on a plot

which he owned. The defendant knew that he was encroaching on land that did not belong to

him, but did not know that the encroachment was on the plaintiff‟s land, who succeeded in an

action to recover the land with the improvement developed by the defendant.

In Barclays Bank Plc. v. Zaroovabli [1997] Ch. 321, the plaintiff held a charge over which

the defendant P was a tenant. The tenancy was created in violation of the charge which

prohibited the landlords from granting any lease without the plaintiff‟s prior consent. But the

plaintiff‟s charge was not registered at the time the tenancy was created. The unregistered

charge therefore only had effect in equity and was nothing binding on the tenant, who was

protected by the Rent Act as a statutory tenant on the expiry of the six month renewable

tenancy he had.

The plaintiff could not recover proceedings to enforce the charge, because the equitable charge

could not prevail over the defendant‟s tenancy. The tenant resisted the claim for possession on

an alternative argument based on proprietary estoppel. It was argued that the tenant had spent

a considerable sum of money on the property in belief that she had the status of irremovability

as a statutory tenant.

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This was countered by the fact that the tenant‟s belief was not formed in reliance on anything

the plaintiff had done or said. It was contended that mere knowledge of a tenant‟s existence

and a standing-by on the bank‟s part could not be enough.

Silence

If estoppel is to be founded on silence, the party sought to be estopped must know of the acts

constituting the detriment to the other party. In the above case, the bank had no knowledge

that Mrs. P was incurring expenditure in the mistaken belief that she was entitled to remain in

occupation under the Rent Acts.

Scott V.C. referring to Oliver J’s decision Taylor Fashions Ltd v. Liverpool Victoria

Trustees Co. Ltd, held: If (contrary to my view) the provisions of the Land Registration Act,

1925, enable the bank to enforce its registered charge free from Mrs. P‟s rights under her

statutory tenancy, the bank‟s failure to inform Mrs. P of the precariousness of her position is

not, in my opinion sufficient to justify describing as unconscionable its decision so to enforce its

charge. The bank did not accept Mrs. P as its tenant. She incurred the expenditure on which

she relies with no encouragement from the band. The bank did not know she was incurring this

expenditure.

(THE NEW RULE)

There has been a modification of the above requirement in Taylor Fashions v. Liverpool

Victoria Trustee’ s Co [1982] 2 WLR 576 to the effect that the doctrine is not restricted to

cases where the defendant knew his rights or the mistaken belief of the other. According to this

new rule, the question “is simply whether, in all the circumstances of the case, it was

unconscionable for the defendants to seek to take advantage of the mistake, which at the

material time. Every body shared”.

This dictum can be used to buttress the decision in Skinner v. Daniel, Reeves et al (1981).

Here, the first and second claimant and the defendant all grew up on the land, living in the

houses of their respective parents. The first claimant rebuilt her mother‟s home on the land and

the second claimant erected her house on the land. All these building projects were carried out

without let or hindrance by whomever at the time was entitled to the legal estate. Husbands J

concluded that the claimants were licensees. That they all expended money for erection of

houses on the land and as such they had a licence as well as an equity. That this equity can

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best be satisfied by holding that each claimant can remain on the land as long as she desired to

use it as her home.

The new rule in Taylor Fashions Case is gaining currency and was adopted in

Amalgamated Investment and Property Co Ltd. (in liquidation) v. Texas Commerce

International Bank Ltd. [1981- 3 ALL ER 577, and also in Re Basham [1986] 1 WLR

1498. In this case, the deceased led his step-daughter to believe that he would leave all his

property to her. She and her husband served the deceased by cooking, cleaning, carpeting,

gardening, etc. No will was made, but she was given everything by Nugee QC sitting as deputy

High Court judge, who was not persuaded by the defendants‟ argument that proprietary

estoppel was restricted to beliefs relating to an existing right rather than a future right, e.g. one

arising under a will.

Nugee QC was of Oliver J’s view in making an enquiry “which is directed to ascertaining

whether, in particular individual circumstances, it would be unconscionable for a party to be

permitted to deny that which, knowingly or unknowingly, he has allowed or encouraged another

to assume to his detriment”.

The court also rejected the proposition that proprietary estoppel must be related to particular

property and cannot extend to property as indefinite and fluctuating as a person‟s estate when

he dies. Hayton did not think that the “facts were extreme enough to justify converting a

mere spes into a property interest or to perfect an imperfect future testamentary gift. To justify

such there should be really unconscionable behaviour on deceased part.”

There is no doubt that the courts have been nibbling at the requirements of this

doctrine.

In Hackett v. Inverugie Investment Ltd. (1982) 32 WIR 3, a majority judgement in the

Bahamas COA applied the new rule enunciated in Taylor Fashions Ltd. v. Liverpool Victoria

Trustees Co. Ltd. In this case, Alliance Services and Commercial Corp. (Alliance) had a

mortgage for the security of Canadian $695, 000 which was advanced to Myra Industries Ltd.

(Myra) to complete the building of 144 apartments, which became known as the Silver Sands

Hotel, comprising two main buildings. Myra needed further financial assistance to complete the

buildings. Hackett offered to take 99 year leases on thirty apartments in the development at a

premium of $300, 000. After Negotiation with Alliance, Mr. Tower, the Alliance president, wrote

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a letter on Alliance‟s behalf to Myra on June 2, 1970, to extend the time for repayment of the

mortgage loan.

One of the conditions stated in the letter for the extension of time for mortgage repayment was

that the payment of $300, 000 for the purchase of the lease of thirty apartments by Hackett

must be paid to Alliance‟s attorneys. Alliance did not alert Hackett about the need to obtain its

consent for the purchase of the lease. The lease was granted and H paid a premium the

premium which was disbursed to complete development. H spent a further sum of 90,000 to

furnish the apartments.

The validity of the lease was challenged for the lack of written consent for the mortgage. The

question was whether the mortgagee, alliance, knew that H was about, and during that time

encouraged him to continue, either actively or passively by abstaining from asserting [its] own

incumbent right.

The trial court gave no affirmative answer to this issue as there was no evidence that Alliance

knew that H had entered into the lease and that H was spending money on the development.

The fourth and fifth conditions of probanda were not met by the plaintiff/ appellant. The claim

founded on proprietary estoppel therefore failed in the trial court.

Luckhoo P, COA, in a dissenting judgement upheld the trial court‟s decision. The majority,

Smith and Da Costa JJA, viewed the facts differently. In the majority‟s view, Alliance, through

Mr. Tower knew of the sale to H and that Alliance‟s written consent was necessary for the sale

to H.

It was said: “Alliance must have realized that no-one would lay out the sum of $300, 000

unless he thought he was getting a valid lease. It must therefore have been obvious to it that

Hackett was under a mistaken belief that he could obtain a valid lease without Alliance‟s written

consent. Alliance stood by and allowed the existing method of financing the construction of

buildings to continue. At no time did alliance tell Myra not to grant any more leases. And, what

is more, Alliance assumed that the method of financing construction would continue. So far as

Hackett was concerned, once Alliance realized his mistake, Alliance was under a duty to

disabuse Hackett and prevent him from expending his money on a valid lease. For Alliance to

stand by and allow Hackett to lay out his money, and then take the benefit of that expenditure

would in my opinion amount to fraud in a court of equity.”

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The issue involved a question of fact. Owusu suggest that the majority should therefore have

allowed the trial court‟s ruling on such matters touching on the weighing of evidence to prevail.

Smith and Da Costa JJA felt that, even if they were wrong, the facts of the case could be

subsumed under the new principle enunciated in Taylor Fashions Ltd. v. Liverpool Victoria

Trustees Co. Ltd. In Da Costa J.A.’s judgement: if one applies the test adumbrated in a

number of recent authorities, i.e. .in the circumstances has it become unconscionable for the

possessor of the legal right to rely on his legal right; I think there can be one answer in this

case and that is, that Alliance is estopped from alleging that it was not bound by the lease

granted by Myra to Hackett.

In the case of unilateral mistake or passive encouragement evident in Hackett v. Inverugie

Investments Ltd. The five probanda have not been modified and should as the trial court held in

the said case, be established as a condition precedent to a successful claim based on

proprietary estoppel.

One may even wonder if the distinction between passive and active encouragement on which

Taylor Fashions is justified is valid. The essence of the distinction is that it is unnecessary to

insist on proof of knowledge on the part of the owner/ representor of either the mistaken belief

of the developer/ representee or the awareness of the owner/ representor‟s rights, if the

owner/ representor actively encouraged the developer/ representee‟s expectation. The test

under such circumstances of active encouragement is whether it is unconscionable for the

owner/ representor to insist on his strict legal rights. For as Megarry and Wade rightly

puts it:

It is unlikely that O’s conduct will be regarded as unconscionable unless he was

aware of:

(i) his proprietary rights; (ii) C‟s expenditure or other detrimental acts; and (iii) C‟s mistaken belief that he had or would acquire an interest in or over O‟s land.

Secondly, if there is a genuine ignorance on the owner/ representor‟s part and a mistaken belief

on the developer/ representee‟s part, the equities are equal. It would be fair to demand a

greater deal of diligence on the developer/ representee‟s part than the owner/ representor, who

should not be made to bear the consequences of the mistake of the developer/ representee.

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REPRESENTATION/ ENCOURAGEMENT

The developer/ representee‟s belief must have been induced by and sustained by the owner/

representor or his agent or predecessor in title. There should therefore be some form of

encouragement. The developer will not succeed unless he is able to show that his activities

were acquiesced in by the owner either by some language, conduct, silence or inaction which

encouraged him to act as he did.

In Jones v. Stones [1999] 1 WLR 1739. The COA found that the green oil tank might have

been placed and maintained on the plaintiffs‟ stone wall, for about six months before the action

was instituted. There was no evidence that the inaction of the plaintiffs in respect of the flower

pots or the oil tank caused the defendant to believe that he could maintain the tank on the wall.

He was rather of the view that it would not give cause for complaint by the plaintiffs.

The defence of proprietary estoppel could not be established because the defendant did not

show anything which the plaintiffs did or did not do led to encouraged him to believe that he

had the right to maintain the tank in the position on the wall where he placed it.

Encouragement or Representation by Silence of the Owner while

his Property is being Developed.

If the owner restrains from alerting the developer of his mistaken belief and by his silence

suffers the developer to make improvements to the property, the owner will be estopped from

denying the impression his silence created. For as Dann v. Spurrier (1802) 32 ER 94, 95 ,

per Lord Eldon stated: “the circumstances of looking on is in many cases as strong as using

terms of encouragement”.

In McClurg v. Rogers et al (1976) Barb. LR 35, an action to enforce the payment of a loan

secured with property of the claimant‟s father-in-law, it became evident that the claimant‟s

father-in-law permitted him to build his house on a portion of the property which had been

given to his brother-in-law as a security for a loan. The land was built on by the claimant‟s

father-in-law with materials the claimant supplied. The claimant‟s evidence of a gift of the land

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by the late father-in-law was not accepted by the court as there was no written evidence. But

the court found that the expenditure of money on the land under an expectation created or

encouraged by the land owner, the father-in-law, that he (son-in-law) would be able to live

there, gave rise to the equity conferring on the claimant a licence.

In Clare v. Kellarie (1970) 16 WIR 40 the plaintiff was the defendant‟s sister-in-law. The

defendant wads the tenant of premises which the plaintiff acquired by assignment. The plaintiff

assured the defendant that he and his family would continue to occupy the premises until he

died. The defendant erected a new building on the land without the plaintiff‟s express

permission; who was duly informed. She visited the building site regularly and neither said nor

did anything to stop the activities of the defendant, her brother, on her premises. Soon after

completion of the new building, the plaintiff procured and registered a 25-year lease of the

property, and thereafter sought to recover possession of the property from the defendant. She

was unsuccessful because she allowed the defendant to incur expenditure under an expectation

she encouraged that he would be able to live on the premises until his death. That, according to

the court, gave rise to an equity which should be protected so as not to frustrate his

expectation.

EFFECT OF THE DOCTRINE

When the “equity” of proprietary estoppel is established, the court identifies the “maximum

extent of the equity” followed by an analysis of the “minimum equity to do justice” and then

finally “look at the circumstances in each to decide in what way the equity can be satisfied”.

The expectation induced by the representation or promise is the maximum equity. The

minimum equity takes the form of the detriment suffered by relying on the representation.

There is therefore a wide range of relief within which the court can exercise its discretion to

tailor an order to satisfy the equity, subject to one limitation; that the relief cannot confer on

the developer/ representee a greater interest in law than was within their induced

representation.

The minimum equity to do justice, or to satisfy the estoppel, leads to an award which remedies

the loss or detriment the plaintiff, developer/ representee suffered. This does not necessarily

constitute of making good his expectations, unless the circumstances dictate otherwise.

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(Therefore) Proprietary estoppel can operate as a shield or as a sword. The court can use the

doctrine to:

(A) CONFER A TITILE The court can order the property to be conveyed to the developer representee so as to give

effect to the equity. This is undoubtedly an inroad into the doctrine of consideration and the

maxim “equity does not aid a volunteer”. In Stiles v. Cowper (1748) 26 ER 1198, an order

for the execution of a lease was made. In Pilmer v. Wellington Corp. (1844) 9 App. Case

699 the courts granted the representee/ developer a licence of an indefinite term. In Inwards

v. Baker [1965] 2 QB 29, it was held that “the father allowed an expectation to be created in

the son‟s mind that his bungalow was to be his home. It was to be his home for life or, at all

events, his home as long as he wished it to remain his home”. The court in Duke of Beaufort

v. Patrick (1853) 51 ER, granted specific performance to the representee on the condition

that he offered to pay compensation to the representor.

(B) INJUNCTION The owner/ representor may by an order of injunction be prevented from disturbing the rights

of possession acquired by the developer/ representee under the doctrine of proprietary

estoppel.

(C) CHARGE FOR EXPENDITURE The representee may have a charge on the property for his expenditure for the value of the

improvements he effected. Thus, the representor may be allowed recovery of possession

conditionally upon paying compensation to the representee for the expenses he incurred.

In Raffaele v. Raffaele [1962] WAR 29, a land was promised but the remedy granted by

the court sounded in an award for the payment of the market value of the house, and there

was no declaration of a charge. In Virginia Moncur v. marget Palacious 1986

(Unreported)- Bahamas H Ct. Malone Snr. J found that the defendant‟s expectation which

the plaintiff encouraged, was that the defendant would inherit the house on the plaintiff‟s

death. That was the maximum equity to do justice. The maximum equity to do justice was

found to be the recovery of the sum of $14, 201. 59, the money the defendant spent on the

house. The Court in Bahamas considered that the most appropriate way in which effect might

be given to the equity was an order for possession against the defendant conditional upon the

plaintiff repaying the defendant $14, 201. 59 within a limited time, and that if the plaintiff failed

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to make the repayment within the time prescribed, the house should be sold and the

proceedings distributed.

ESTOPPEL CREATING AN INTEREST IN LAND

The “effect of the estoppel on the true owner may be that his own title to the property

(whether land or goods) is held to be limited or extinguished or new rights and interest created

therein”. {Crabb v. Arun DC [1974] 3 ALL ER 865, 876 (B), per Lord Denning MR}.Such

interest arising under proprietary estoppel should, depending on its nature, be capable of being

disposed of inter vivos or by will to a third party. It is a valuable interest.

An interest acquired under proprietary estoppel binds third parties. In Inwards v. Baker, B

wanted to build a bungalow. His father advised and encouraged him to build on [his father‟s]

land. The bungalow was so built largely through the son‟s own labour and expense. He lived

there till his father‟s death. But it was later discovered that his father had devised the land to

trustees for sale who brought proceedings to recover possession from the son.

The COA held that the son could not be disturbed. The contention that a purchaser from the

father could get his son out was rejected by the court. For according to Lord Denning, “any

purchaser who took with notice would clearly be bound by equity. So here, too, the present

plaintiffs, the successors in title of the father, are clearly themselves bound by his equity”.

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Constructive Trust

Before the new model constructive trusts which Lord Denning named as such for the first time

in EveS v EveS, constructive trusts WERE known to the rules of Equity. Keech v Sandiford

1726 established definitively that a constructive trust arose in the following known categories.

(See Owusu‟s handout on the topic at page 1 halfway down the page)

Within comparatively recent times, and I mean recent times e.g

Bannister v Bannister(1948 )

Pettit v Pettit (1970 A C 770)

and Gissing v Gissing (1971 A C 886)

(these latter two judgments were delivered the same day, both by the House of

Lords) and

in Heseltine v Heseltine (1971 1 W L R 342,

and again in Hussey v Palmer (1972) I W L R 1286,

and in Cooke v Head No 1 (1972) 1W L R 518

and in Binions v Evans (1972 Ch 359),

and in Eves v Eves (1975)

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the Court has had to get very busy and preoccupied with resolving a number of cases touching

on the constructive trust particularly as it affected what might be described as domestic family

situations.

Concurrently the court had to examine as well whether the facts could give rise to a resulting

trust, and quite often some cases could be disposed of by a finding of resulting trust but of the

3 judges in the Court of Appeal, one might hold that it was a resulting trust while the others

might hold a constructive trust to have been created.

As examinees you have a similar task, but you are often better at it than the

Judges…seriously you ARE!

And the cases mentioned are not by any means an exhaustive list, but representative only of

the frequency and recency of the emergence of a social problem which followed the cessation

of the 1939-1945 war and the consequential change in gender relations with women going out

to work to assist in the war effort, working for example in the munitions factories and other

businesses, with their husbands fighting in the war.

A combination of new much easier divorce laws in 1937, (prior to that time almost direct

evidence of adultery had to be given, and much contrived and collusive evidence was the order

of the day.) and the proliferation of unions other than marriage unions, also fuelled

some of the cases, most famously that of EveS v EveS, but the cases covered a

gamut of domestic family relationships as examination of the facts of the cases will

show.

Now the law of Trusts which traces its origins way way back to feudal times (remember the

Statute of Uses 1535 from Semester One…well the USE was the original name for what we call

in modern times a Trust) has always been a useful weapon in the armoury of equitable

remedies especially when and if Equity infers or IMPOSES a trust in and from circumstances

where there was no FORMAL Trust Deed.

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In other words once Equity began to extend the Trust concept beyond the formality of a Trust

Deed, and could CONSTRUCT a trust out of any set of circumstances , but obviously in a

proper case, then the Resulting and Constructive Trusts began to be sticks with which

unjust and unconscionable defendants could be beaten.

Now don‟t be confused, Equity had developed the concept of the resulting trust way back in

Dyer v Dyer 1778, and we know how that works from Mr. Owusu‟s document and from Jill

Martin‟s Hanbury.

The resulting trust as enunciated in Dyer v Dyer and extended by the doctrine of

(a) contribution and

(b) substantial contribution

(c) indirect or indirect and most important of all

(d) Common intention…..the controlling factor in this area!

thus becomes a most useful and flexible device through which the Equity minded courts and

Judges could solve some of the domestic and family disputes which touched and concerned

arrangements “made” when the parties were not even thinking about their respective legal

positions.

The resulting trust worked and covered any number of such situations, but it did not cover ALL

such problems, and so we have seen the Courts turning to another doctrine of trusts to deal

with some domestic problems NOT covered by the resulting trust. This other doctrine is the

Constructive Trust.

One of our problems as students of the law (and all good lawyers are forever students of the

law),but more so for undergraduate students of the law is that the Judges sometimes use the

expressions interchangeably, often through sheer carelessness or God forbid, but it is possible,

sheer ignorance, but that is also a digression of sorts.

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We now have to move to the Constructive Trust and to how that concept has also been

extended to domestic family problems, and how Lord Denning almost got away with creating

an even more extreme extension of the doctrine called the constructive trust of a new

model.

It is an interesting story, a tad bit challenging, but you will understand where Denning‟s heart

was going. He liked to dispense justice and fairness, but sometimes he had to be held in check,

since he was something of an agent provocateur. He caused his fellow lawyers to look at the

law through different eyes.

The constructive trust was originally applicable in the 4 categories set out on page 1 of the

Owusu handout, and enunciated in the case of Keech v Sandiford in 1726.

Properly understood, conceptually it could and does have wider scope than the resulting trust,

although the two might often overlap. because here the Court is constructing or imposing or

imputing a trust, while in the resulting trust the language used is that of inferring …..from the

intention of the parties.

Consider this statement from Hanbury page 301 where Jill Martin (of the Bland Lecture on

Cyanamid comes of Age…..Injunctions)…writes:

“A constructive trust is one which arises by operation of law, and not by reason of the

intention of the parties, express or implied. English law provides no clear cut and all

embracing definition of a constructive trust.”

She further states that: Lord Millett opined in one case that “the language of constructive

has become such a fertile source of confusion that it would be better if it were

abandoned ……and that the term should perhaps be confined to a situation in which

it would be unconscionable for one party to deny the other’s beneficial proprietary

interest in a particular and identified property.”

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And again at page 308 of Hanbury she goes on: “Constructive trusts can arise over a variety of

situations. No claim is made that those discussed cover the whole field; they are merely

illustrations.”

She then sets out categories of constructive trusts and discusses the law on some of these

categories.

So that we discover that in reading about The New Constructive Trust and the

Rights of the Defacto Spouse, we are confining our study to a particular species of

constructive trust which has direct sociological and cultural significance to the

region, but not by any means confined thereto; where there are many defacto

spousal situations! With those guide posts set up let us move on.

Origin of the Constructive Trust of as new Model

It was Lord Denning who coined the expression, but when doing so, he referred to a statement

by Lord Diplock made in Gissing v Gissing: Here is the statement by Denning, it is found in the

case of Eves v Eves:

“The problem in this case is a familiar one. It often happens that a man and a woman set up

home together and have children. They cannot marry because one or the other is already

married. But they intend to marry as soon as they are free to do so. She takes his name, they

live as husband and wife. They are known as man and wife.They are known to the neighbours

as man and wife. They get a house; but it is put in his name alone. Then before they get

married the relationship breaks down. In strict law she has no claim on him whatever. She is

not his wife. He is not bound to provide a roof over her head. He can turn her out into the

street…………Such is the strict law. And a few years ago even equity would not have

helped her. But things have altered now. Equity is not past the age of child bearing.

One of her latest progeny is a constructive of a new model. Lord Diplock brought it

into the world and we have nourished it. In Gissing v Gissing Lord Diplock said”: and

the Learned Master of the Rolls proceeded to quote Lord Diplock (the passage is well known

)and then to say …….“We have followed this advice in several cases notably Binion v Evans,

Cooke v Head and Hussey v Palmer…….”

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Now note Lord Denning‟s further statement as to how this doctrine applies. He repeated his

earlier statement in Cooke v Head:

“Whenever two parties by their joint efforts acquire property to be used for their joint benefit,

the courts may impose or impute a constructive or resulting trust. The legal owner is bound to

hold the property on trust for them both. This trust does not need to be in writing. It can be

enforced by an order for sale, but in a proper case the sale can be postponed indefinitely. It

applies to husband and wife, to engaged couples, and to man and mistress and may be to other

couples too”

The penultimate word in this extract differs from the one originally used in Head v Cooke. The

word used there was relationships which is perhaps of wider import.

Note too that Lord Denning is basing his decision on the constructive trust idea, but that his

fellow Justices of Appeal seem to be taking the view that this is a case of a resulting trust based

on acquisition, indirect substantial contribution and evidence of common intention

Brightman J …(note not L.J) gave the other leading judgment and he dealt with the indicia

of resulting trusts in his judgment. Not once does the expression constructive trust fall from his

lips. He is dealing all the time with the arrangement struck at the acquisition, and the discussion

about whose name was to go on the title deeds and why age only prevented the woman‟s

name going on the title deeds…clear evidence from which common intention, the controlling

factor (see Owusu‟s handout) could be inferred.

Browne L J was the other Judge and his short 16 line Judgment is instructive. Note his

language carefully, very carefully and you will see where he has gone on the reason why the

plaintiff female should succeed. He says:

“I agree that this appeal should be allowed and an order made in the form proposed by

Lord Denning. I have had the advantage of reading the judgment which Brightman J is about

to deliver and I agree also with what he is going to say about the basis on which we should

decide that Janet Eves is entitled to a share in the beneficial interest in the house.

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So that we have Lord Denning, on his own, talking about a constructive trust of a new

model in a case in which like his fellow Judges, he could have made a decision on the basis of

the resulting trust, but preferred to ground his decision on the constructive trust of a

new model, as he now christened it!

Notice too how he ascribes paternity to Lord Diplock and how he asserts that the Court of

Appeal has merely nourished it. The question is: Is Lord Denning correct in his statement that

there is or was such an extension of the Constructive Trust? Go back to the chronology of the

cases noted at the head of this document and you will see how Lord Denning was using the

Gissing v Gissing judgment to push his idea of the constructive trust, although it was only in

Eves v Eves that he actually christened it.

We are getting somewhere on this interesting journey…so hold on…. you may soon loosen

your seat belts …. as we are coming into land safely soon. Let us look first at some of the

cases used by Lord Denning and then at how the post-Denning Court of Appeal has

handled the constructive trust of a new model, and whether indeed it is still in good shape!

Cases:

In Cooke v Head which pre-dated Eves v Eves and in which Lord Denning was presiding in

the Court of Appeal…

Sandra Cooke and Dennis Head met in 1962. She was 20. Head was already married, and they

hoped that Mrs. Head would file for divorce and they would get married. In this hope, they

found a piece of land and decided to build a bungalow on it. Head was going to do some of the

work himself and the owner of the land, a builder was going to do the remainder.

Head paid the deposit and raised a mortgage and the conveyance was in Head‟s name. Cooke

did not contribute any cash to the purchase price, but she did a lot of work. By the way, Head

disputed the work done by Cooke. He said she had gone to the site as a spectator and listen to

this…had played with a cat…a BLUE cat…Lord Have Mercy!!!

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On the basis of Miss Cooke‟s evidence and Mr. Head‟s aunt and his sister (hmm…talking about

the girls sticking together…)The Judge found as a fact that Miss Cooke had done the following

“quite unusual amount of work for a woman”:

a Using a sledge hammer to demolish some old buildings

b Filling a wheelbarrow with rubble and hardcore and wheeling it up a bank

c Working the cement mixer which was out of order

d Painting and so forth

Cooke also helped with mortgage instalments, and put money into a money savings box which

Head made and although he put in more than she, (he had his own business), and it was put in

Cooke‟s name so that Mrs. Head would not find out. Of this 150 sterling was used to buy

furniture and 294 was used to pay instalments, but just before the completion of the bungalow

they separated and Head occupied the house alone with another woman. Then he decide to sell

the house and Cooke said he should pay the proceeds into a joint account and he did not

agree. So she issued a writ asking the Judge that to order that Head should not sell without

providing for her share.

The case was about how to divide the net proceeds of the sale amounting to 1946 pounds.

The Judge thought that Cooke was entitled to a one-twelth share, it would appear on the basis

it would appear of their MONEY contributions, but Lord Denning did not like that approach,

and once again he turned to Lord Diplock, his shorter colleague:

(Denning was a six footer and Diplock about 5‟5” I met them both on different occasions..

brag,brag brag)

“Lord Diplock in Gissing v Gissing intimated that it is quite legitimate to infer that „the wife

should be entitled to a share which was not to be quantified immediately on the acquisition

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of the home but should be left to be determined when the mortgage was repaid or the property

disposed of‟. Likewise with a mistress”

After agreeing with Counsel for Head that among the things to be taken into account should

be:

the amount of the direct cash contributions AND

the amount of work each had done on the property;

the part which each had taken in planning and the design of the house

and the steps by which the transactions were carried out

and the method of paying the mortgage instalments

and statements made to third parties ( in this case to the aunt and sister on the “share”)

Lord Denning came to the conclusion that the appropriate share of the property to be awarded

to the wife should be more than one-twelth, and that she should have a one-third share of the

property. Both the other Judges of the Court of Appeal, agreed, with Lord Justice Karminski

making two important points.

One was that the principles to be applied in these man and mistresses cases when they intend

to set up a home together as man and wife are no different from the principles applicable in

the cases of husband and wife who have built up a home together.

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He also spoke about the duty of the Court to decide the correct proportions and quoted Diplock

in Gissing v Gissing where Diplock said

“…on the basis of what would be fair having regard to the total contributions ,

direct and indirect which each spouse has made by that date. Where this was the

most likely inference from their conduct it would be for the Court to give effect to

that common intention of the parties by determining what in all the circumstances

was a fair share”

He too agreed with the higher share: “in my view I too think one-twelfth was far below the real

value of what she contributed to this home in cash and by way of labour……”

In Hussey v Palmer the facts were the usual family domestic scene with a variation on the

main theme. Mrs Hussey was well over 70. She had an old house which she sold for some 1100

pounds sterling. Her daughter was married to the defendant Mr. Palmer, and when she sold the

house, the Palmers invited her to move in with them, but since there was not much room, they

built on a bedroom as an extension for the old lady. She paid for it directly to the builder, some

607 pounds, and as is usual nobody discussed anything about repayment. For a few months all

was well, but then mother and daughter started to have problems and Mrs. Hussey moved out.

Mrs Hussey then wrote saying she was hard up and wanted to know if her son in law would let

her have about one and a half pounds per week to help her make ends met. He did not even

reply and she asked for her money back and sued on legal aid when she did not get it.

Lord Denning and LordJustice Phillmore both thought that a trust was created, with the latter

thinking that it was a resulting trust and Lord Denning himself saying it did not matter whether

it was resulting or constructive, because according to him “this is a matter of words more than

anything else”

Mrs. Hussey got back her 607 sterling and Lord Denning did a tour de force in his short

judgement on Equity. Having disregarded the distinction between resulting and constructive

trusts he went on to make his famous statement about this trust, whether it was called one

name or the other it was his opinion that:

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“By whatever name it is described, it is a trust imposed by law whenever justice and good

conscience require it”

Now this was in 1972 BEFORE EveS v EveS in 1975 and he had not yet christened it the new

model constructive trust, but now you realize that one could have seen it a mile off with 20/20

hindsight vision.

Lord Denning referred to a number of cases without going into them in detail and also included

the proprietary estoppel cases in his judgment………………..

Binion v Evans:

This case is important to us as students preparing for an examination because we came across

it in relation to Licences, and so we can kill two birds with one stone.

Mr Evans and his father and grandfather before him worked for the Tredegar Estate. A cottage

was provided and the family always had the same cottage. Mr Evans married in 1922 and he

and his wife lived there paying no rent and no rates, and when Mr Evans died in 1965, his

widow was allowed under a written agreement to live there for the duration of her life. She was

then 76. Two years after, the cottage was sold to the Binions at a reduced price and specifically

subject to the tenancy of No 3 by Mrs. Evans.

But within 6 months the Binions sought to get rid of Mrs. Evans. They argued that she was a

tenant will and her tenancy had been determined by the Notice and she was now a trespasser.

The Court of first instance held that the plaintiffs hold the property “on trust” to permit the

defendant to reside there during her lifetime, and the plaintiffs appealed to the C of A.

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Lord Denning held that the widow had not a tenancy neither at will nor for life nor any type of

leasehold interest, since there was no “definite term of years.” But he held that she had a

“contractual right to reside in the house for the remainder of her life or as long as she pleases.”

She had an equitable interest because according to Lord Denning “a right to occupy for life

arising under a contract gives rise to an equitable interest”

Equally and more importantly for our purposes if she had no right at the start, then she

certainly acquired one, when the property was sold. According to the Learned Master of the

Rolls, the cottage was specifically sold subject to the agreement a copy of which was supplied

to the purchasers who paid less because of the widow‟s right to stay there..

“In these circumstances, this Court will impose on the purchaser a constructive trust for her

benefit for the simple reason that it would be utterly inequitable for the purchaser to turn the

widower out contrary to the stipulation subject to which he took the premises.”

You must read the last 3 paragraphs of Lord Denning‟s judgment in which he shows that a

contractual licence will prevail against a purchaser when “the situation gives rise to a

constructive trust.”

(This case with most of the other cases can be read on the http://www.bailli.org/ this

site is a most comprehensive site and is a virtual law library)

Binions v Evans seems like a good case for the intervention of equity by way of the

constructive trust without any violence being done to the doctrine.

But one cannot ignore the fact that Denning had unleashed a “mini monster” who like the

Chancellor‟s foot encouraged uncertainty in an area of the law namely property rights where

precision of determination of interest required certainty.

. Turn now to Owusu‟s hand out on Constructive trusts and study the following paragraph on

page 5 you will have devoured pages 1-4 already and reflect on the import of his statement

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“The House of Lords have not allowed the constructive trust to operate like an

unruly horse. To bridle it the following conditions which have been accepted as the

established characteristic of resulting trusts have been required.”

Please now note the following conditions “which have been required.” We met them on the

resulting trusts worksheet…..

Referabilty …to the acquisition of the Property

Common Intention…determined from conduct or words

Reliance/detriment … acceptance of the common intention AND acts performed in reliance

upon the common intention

Now you MUST read :

Hanbury pages 338-343…really about 4 pages

And then pages 12, 13, 14 of Owusu‟s handout ….at least!

Note in particular Lord Bridge delivering the Judgment in the case of Lloyds Bank v

Rosset….it is a useful commentary on the constructive trust of a new

model…compare it with some of Denning‟s judgments on the facts…and draw the necessary

conclusions. It is referred to in page 339 in Hanbury!

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