law of assignments and dispositions prof cameron stewart

Law of Assignments and Dispositions

Prof Cameron Stewart

Last week…

• Law vs Equity• Legal and Equitable estates• Equitable maxims• Equitable doctrines• Priority systems• Now onto ways of transferring interests

Legal and Equitable assignment

• In the assignment of property, the nature of the assignment is important. A legal assignment gives the assignee a legal interest in that property. If it is an equitable assignment the assignee obtains an equitable interest in property. The nature of the assignee’s property right is crucial in the context of competing rights to that property

Rights and liabilities not capable of assignment

• Somethings cannot be assigned at all

• Public pay

• An assignment of pay by the holder of a public office is prohibited on the basis that such pay is made to enable the office holder to maintain his or her office with decorum and propriety.


Arbuthnov v Norton (1846) 4 Moore 219; (1846) 13 ER 474 Norton, a judge, assigned the equivalent of six months pay to which he was entitled to his legal personal representative upon death. The entitlement was assigned as security for an advance. The Privy Council ruled, after Norton’s death, that the assignment was valid. This was so because the pay that was assigned only fell due upon Norton’s death, that is, when Norton no longer held public office. Because the pay was not payable during his life, the assignment in no way diminished Norton’s ability to maintain the dignity of his office.


Bare rights to litigateBare rights to litigate include rights to sue in

tort, rights to sue for unliquidated damages in contract and bare rights to sue in equity. None of these rights are rights of property and therefore they are not assignable. Debts and rights to sue for liquidated sums in contract are assignable because they are regarded as rights of property.


Why?

Encourage litigationTorts and crimes of barratry, champerty

and maintenance


The rule in Glegg v Bromley does not preclude the assignment of the verdict (future property) to which the assignor may become entitled as a result of the prosecution of litigation proceedings. In Glegg v Bromley at KB 475; All ER Rep 1140, the assignor assigned ‘all that interest, sum of money, or premises to which she is or may become entitled under or by virtue of any verdict, compromise, or agreement which she may obtain’ in relation to an action in tort

Bare rights to litigate

Why?In Prosser v Edwards (1835) 160 ER 196 it was said

that a bare right to litigate was unassignable because it, in effect, encouraged litigation of matters which the assignor was not disposed to prosecute. In terms of legal principle, bare rights to litigate could not be assigned on public policy grounds because such assignments savoured of maintenance or champerty: Glegg v Bromley [1912] 3 KB 474, at 489–90.

Glegg v Bromley [1912] 3 KB 474

• Mrs G sued B for defamation. • By a deed, Mrs G assigned ‘all that the interest,

sum or money, or premises to which she is or may become entitled under or by virtue of any verdict, compromise …’ to her husband, Mr G.

• She later won • A creditor of Mrs G sought (as a garnishee) to

take the verdict • Mr G claimed that he was entitled to the verdict

Vaughan Williams LJ said:I know of no rule of law which prevents the assignment of the fruits of an action. Such an assignment does not give the assignee any right to interfere in the proceedings in the action. The assignee has no right to insist on the action being carried on … There is in my opinion nothing resembling maintenance or champerty in the deed of assignment.

Bare rights to litigate – genuine commercial interest

If the assignee has a genuine commercial interest in taking the assignment of a bare right to litigate, then the assignment is valid

Trendtex Trading Corporation v Credit Suisse [1982] AC 679

• Trendex was a Swiss coy who contracted to sell cement to an English coy for sale in Nigeria which went bad. Tye sale was to be paid by a letter of credit from the Central bank of Nigeria but the bank refused to pay.

• Credit Suisse was a creditor of Trendex which helped Trendex fund the legal action against the Bank

• Trendtex purported to assign its cause of action against Central Bank of Nigeria to Credit Suisse for $800,000.

• Central Bank agreed to pay Trendtex $8m in settlement. • Trendtex sought a declaration that the assignment was void

for being a bare right to litigate savouring of maintenance. • Court of Appeal found against Trendtex on the basis that

the assignment was not of a bare right to litigate. Trendtex then appealed unsuccessfully to the House of Lords

• In Trendtex Trading Corporation v Credit Suisse [1982] AC 679, at 703; [1981] 3 All ER 520, at 531, Lord Roskill said:

• [I]t is today true to say that in English Law an assignee who can show that he has a genuine commercial interest in the enforcement of the claim of another and to that extent takes an assignment of the claim to himself is entitled to enforce that assignment unless by the terms of that assignment he falls foul of our law of champerty, which, as has often been said, is a branch of the law of maintenance … The court should look at the totality of the transaction. If the assignment is of a property right or interest and the cause of action is ancillary to that right or interest, or if the assignee has a genuine commercial interest in taking the assignment and enforcing it for his own benefit, I see no reason why the assignment should be struck as an assignment of a bare cause of action or as savouring of maintenance.

Maintenance, Champerty and Barratry Abolition Act 1993

• Section 3: crime of maintenance abolished• Section 4 : "[a]n action in tort no longer lies on

account of conduct known as maintenance (including champerty)".

• Section 6: "This Act does not affect any rule of law as to the cases in which a contract is to be treated as contrary to public policy or as otherwise illegal, whether the contract was made before, or is made after, the commencement of this Act.“

• Now found in Civil Liability Act 2002 – Sched 2

Campbell's Cash & Carry Pty Ltd v Fostif Pty Ltd [2006] HCA 41

• In Ha v State of New South Wales (1997) 189 CLR 465, the HC found that the tobacco licensing schemes of the states and territories were invalid

• A class action was started to reclaim the fees from licensed wholesalers• Firmstone was a litigation funder who agreed to finance the action in

exchange for one-third of the proceeds of the action• At trial Einstein J said the proceedings were an abuse of process• The Court of Appeal overturned these findings and said that champerty

does not automatically mean an abuse of process – it is necessary to show a corruption of the court process

• Some measure of control by the funder does not mean there has been an abuse of process

• HC: appeal upheld but on other unrelated grounds. On the issue of policy and abuse of process the HC (Gleeson CJ, Gummow, Hayne, Crennan, Kirby JJ; Heydon and Callinan JJ in dissent) agrees with the Court of Appeal

Campbell's Cash & Carry Pty Ltd v Fostif Pty Ltd [2006] HCA 41

• Gummow, Hayne and Crennan JJ:[90] Two kinds of consideration are proffered as founding a rule of public policy - fears

about adverse effects on the processes of litigation and fears about the "fairness" of the bargain struck between funder and intended litigant. In Giles v Thompson[101], Lord Mustill said that the law of maintenance and champerty could best "be kept in forward motion" by looking to its origins; these his Lordship saw as reflecting "a principle of public policy designed to protect the purity of justice and the interests of vulnerable litigants".

[91] Neither of these considerations, whatever may be their specific application in a particular case, warrants formulation of an overarching rule of public policy that either would, in effect, bar the prosecution of an action where any agreement has been made to provide money to a party to institute or prosecute the litigation in return for a share of the proceeds of the litigation, or would bar the prosecution of some actions according to whether the funding agreement met some standards fixing the nature or degree of control or reward the funder may have under the agreement. To meet these fears by adopting a rule in either form would take too broad an axe to the problems that may be seen to lie behind the fears.

http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/HCA/2006/41.html#fn100

Rights and liabilities not capable of assignment - incidental to a right of

propertyIf there is an assignment of property with an incidental right to litigate it is valid. This is so because there is no assignment of a bare right to litigate, the right being incidental to a right of property. Accordingly, no issues of maintenance or champerty can arise. Thus, the right to rescind for undue influence in Dickinson v Burrell (1866) LR 1 Eq 337 was assignable because it was incidental to the real property assigned to the assignor.

Rights and liabilities not capable of assignment - insurance

An assignment by an insured to an insurer of the insured’s right to sue, in consideration of a payment made by the insurer to the insured in satisfaction of a claim pursuant to an insurance policy between the insured and insurer, is valid. This stems from the insurer’s right of subrogation: Compania Colombiana de Seguros v Pacific Steam Navigation Co [1965] 1 QB 101

Assignment of contractual rights

• The benefit (the right to receive performance) of a contract may be assigned, but its burden (the obligation to render performance), may not be assigned: Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (2006) 149 FCR 395

• Assignable contractual rights are choses in action and hence property

Queensland Insurance Co Ltd v Australian Mutual Fire Insurance Society Ltd (1941) 41 SR 195

• Jordan CJ said at 201-3:• As a general rule a person may assign to another any benefit

to which he may be entitled under a contract, but cannot escape his contractual liabilities by purporting to assign them, although if the contract be not of a personal nature, he may procure someone else to perform them for him. If therefore a contract be assigned by one of the parties, the assignee may in general compel the other party to do for his benefit whatever he would have been liable to do for the assignor’s benefit, subject, however, to the obligations of the assignor being duly performed by the assignor or by someone else.

What does the contract say?Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85

• Two joined cases• Case 1: Lessee hires Lenmestra to remove

asbestos. Contract states that any assignment of rights must be with the cntractors consent. Lease is assigned. The work was defective.

• Could the new assignee sue?• No the clause was effective – there was no policy

reason for striking it down as the contractor had a genuine interest in controlling who it owed contractual duties to

Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85

• Second case:• Lessee of 150 yr old lease gets building work done.

Contract forbids assignment of rights without consent• Later the lease is assigned • Building work is defective• The original party sues – can they get substantial

damages?• Yes – the contract intended for the orginal parties only

to enforce the contract so it must have been envisaged that the parties could sue on behalf of successors in title for substantial damages.

Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (2006) 149 FCR 395

• Pacific Brands bought the Sara Lee business which included the licensing rights to King Gee and Stubbies Trade marks

• HW prior to the acquisition Sara Lee had granted an exclusive sub-license of these rights to Underworks (a rival coy) for 5 yrs with a 5 yrs option

• The contract bw PB and SL expressly purported to assign the license but the sub-license agreement was silent on the issue of assignment

• Underworks refused to consent to an assignment of the rights to Pacific Brands• As part of the agreement with SL Underworks had to lodge marketing plans and

reports. PB argued that they had failed to comply with this terms and they sought to terminate the sub-license

• Could they do this? At trial Justice Finkelstein said that the right to terminate could not be assigned as it was a personal privilege and not proprietorial. The requirement to submit plans was personal and confidential and so could not be assigned

• FFC - Finn, Sundberg JJ and Emmett JJ – upheld the trial decision but differed in approach


• FFC – found that a party's contractual rights have a proprietary character for the purposes of assignment, and are ordinarily assignable. They are a bundle of rights

• FFC rejected the approach of choosing between some rights and powers of a party, and of giving to some proprietary characteristics, while denying that character to others.

• Once the bundle of rights is recognised the next issue is to examine any statutory, or public policy reasons for denying assignability


• Finn and Sundberg JJ• 32 By way of background, it is appropriate to begin with a number of relatively

non-contentious propositions. First, it is well accepted that assignable contractual rights are choses in action; are a species of personal proprietary right; and can be transferred to a third party at law or in equity in accordance with the formal rules governing the transfer of such rights: see Norman v Federal Commissioner of Taxation [1963] HCA 21; (1963) 109 CLR 9 at 26; Loxton v Moir [1914] HCA 89; (1914) 18 CLR 360 at 379. Secondly, while it is not legally possible to assign the burden of a contract (i.e. the obligation to render performance), it may be possible to assign (a) the entire benefit of a contract (i.e. the right to receive performance): Don King Productions Inc v Warren [2000] Ch 291 at 318 ("Don King"); (b) if a right under a contract is separate and severable, such a separate and severable right: cf Federal Commissioner of Taxation v Everett [1980] HCA 6; (1980) 143 CLR 440 at 449-450; or (c) if some only of the rights under a contract are assignable, those rights. "[A]ssignability is not a matter of all obligations arising under a contract or none at all": Don King, above, at 319.

http://www.austlii.edu.au/au/cases/cth/HCA/1963/21.html

http://www.austlii.edu.au/cgi-bin/LawCite?cit=%281963%29%20109%20CLR%209

http://www.austlii.edu.au/au/cases/cth/HCA/1914/89.html


• Thirdly, a contract may expressly or impliedly authorise assignment of rights in a contract which would not otherwise be assignable: Devefi Pty Ltd v Mateffy Perl Nagy Pty Ltd (1993) 113 ALR 225 at 235 ("Devefi v Mateffy"); or, conversely, may expressly or impliedly prohibit assignment of rights otherwise prima facie assignable: Don King, above, at 319. "Such contractual provisions are legally effective" as between the contracting parties: Don King, ibid; Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 at 103 ff ("Linden Gardens Trust"). Fourthly, while the product to be derived from a contractual performance (the "fruits of performance") may be assigned; Devefi v Mateffy, above, at 234; the right to that performance may, nonetheless, be unassignable because, having regard to the nature of the contract and the subject matter of the contractual right in question, that right is personal in the sense that the identity of the contractual obligee is material to the contractual relationship itself (i.e. it is a "personal contract": Peters v General Accident Fire & Life Assurance Corporation Ltd [1938] 2 All ER 267 at 270; Moore v Collins [1937] SASR 195; or to the contractual performance to be rendered: Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd (1992) 57 BLR 57 at 77 (contract requiring a party to act on the other’s instructions); see generally Seddon and Ellinghaus, Cheshire and Fifoot’s Law of Contract (8th Aust ed, 2002), [8-6]; Furmston (ed), above, 6.299 ff; Chitty on Contracts, Vol 1 19-053 ff (29th ed, 2004); Farnsworth, above, SS11.4. A contractual right, though, will not be personal if, construed in its setting, "it can make no difference to the person on whom the [corresponding] obligation lies to which of two persons [i.e. assignor or assignee] he is to discharge it": Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660 at 668.


• Fifthly, seemingly, a contractual right may itself be of such a personal character that it cannot properly be characterised as property: cf Jack v Smail [1905] HCA 25; [1905] HCA 25; (1905) 2 CLR 684 at 704-705; but it is not clear whether this proposition has salience only in contexts other than assignment of such a right, e.g. insolvency, because of the proposition immediately preceding this which relates expressly to assignments of "personal" contractual rights. Sixthly, the assignee of a contractual right under a legal assignment is entitled, as owner of that right, to take action in respect of it: e.g. Conveyancing Act 1919 (NSW), s 12. Seventhly, a third party may become a "substituted contracting party" by novation of the original contract. Novation will, ordinarily, require the agreement of the original and the substituted party although the original contract itself may, on its proper construction, authorise a party to substitute a contracting party in its place without need for a further tri-partite agreement: see Harry v Fidelity Nominees Pty Ltd (1985) 41 SASR 458 at 460. On novation, though, there is no assignment of rights and obligations, but rather the creation of new rights and obligations in a new contract: Olsson v Dyson [1969] HCA 3; (1969) 120 CLR 365 at 388; Cheshire & Fifoot’s Law of Contract, above, [8.45] ff.


• Eighthly, a contractual obligation cannot be assigned without the consent of the other contracting party: Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660 at 668. This, for practical purposes, requires novation of the original contract; Furmston, "The Assignment of Contractual Burdens" (1998) 13 Jo Contract Law 42; see also Vickery v Woods [1952] HCA 7; [1952] HCA 7; (1952) 85 CLR 336 at 345; Fightvision Pty Ltd v Onisforou [1999] NSWCA 323; (1999) 47 NSWLR 473 at 491-493. Ninthly, the delegation of performance of contractual obligations is permissible where the obligations assumed do not require personal performance but only the producing of a result: Bruce v Tyley [1916] HCA 34; (1916) 21 CLR 277; British Wagon Co v Lea & Co (1880) 5 QBD 149. In such cases perfect performance by the delegate will discharge the delegating contractor’s obligation, although that contractor will remain liable unless and until such performance is rendered. "Whether or not in any given contract performance can properly be carried out by the employment of a sub-contractor must depend on the proper inference to be drawn from the contract itself, the subject matter of it, and other material surrounding circumstances": Davies v Collins [1945] 1 All ER 247 at 250.


• Conclusion - the right to provide plans was based on the identity of Sara lee and personal to it

• 67 Considered in its totality, we are satisfied that the Sub-Licence in its setting, while not of a type that was necessarily inherently personal in character...was nonetheless intended to create an enduring relationship in which the identity of Sara Lee as the Sub-Licensor was material and was made so by Sara Lee in particular. While acknowledging the legitimate interest the Sub-Licensor had in exercising control over the use of the mark and hence having contractual powers to that end, we consider that there are sufficient indications in the text of the Sub-Licence itself that the particular will to which the Sub-Licensee was asked to subject itself was Sara Lee’s, and that that was a state of affairs that Underworks agreed to

• Underworks needed to give consent to the assignment

Contracts for personal services

• Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014; [1940] 3 All ER 549,

• Noakes worked for Hickelton Main Co Ltd• The business was transferred to Doncaster

Colleries. • Noakes went absent and was required to pay a

fine on the basis that he had a contract of service with Doncaster

• Noakes said he did not have a contract for service

Nokes v Doncaster Amalgamated Collieries Ltd

• Lord Atkin -My Lords, I confess it appears to me astonishing that apart from overriding questions of public welfare power should be given to a court or anyone else to transfer a man without his knowledge and possibly against his will from the service of one person to the service of another. I had fancied that ingrained in the personal status of a citizen under our laws was the right to choose for himself whom he would serve: and that this right of choice constituted the main difference between a servant and a serf...

Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1903] AC 414

• Tolhurst agreed, for a term of up to 50 years, to supply chalk to a particular cement manufacturing company which later assigned this contractual right to another company who took over the first company’s business.

• Tolhurst’s claim that the assignment was invalid was rejected because the House of Lords took the view that it could not make any difference to Tolhurst whether it supplied chalk to the assignor or assignee.

Mid-City Skin Cancer & Laser Centre v Zahedi-Anarak (2006) 67 NSWLR 569

• Zahedi, a medical practitioner, was contractually bound by an implied obligation of confidence in relation to records on patients kept by a medical practice where he was employed.

• A new owner took over the medical practice• Zahedi took records and then ended his

employment to work elsewhere.• Could the new business owner sue on the original

obligation?

Mid-City Skin Cancer & Laser Centre v Zahedi-Anarak (2006) 67 NSWLR 569

• Yes: Campbell J• If one considers the contract between Dr Zahedi and [his former

employer], it has now come to an end, so far as either side having ongoing obligations to provide services is concerned. However, the contractual obligation continues whereby lists of patient names and addresses which Dr Zahedi obtained … cannot be disclosed, and cannot be used except for the purposes of the [former employer]. The obligations of Dr Zahedi under that term of the contract do not require any personal interaction with the person to whom the obligation is owed, and the content of the obligation is not infl uenced by any action or decision of the person to whom the obligation is owed. It is not an obligation requiring Dr Zahedi to do things — it is an obligation requiring him not to do things. Dr Zahedi can perform it perfectly by total inaction. In my view, for these reasons no analogy can be drawn with the reasons whereby the benefit of a contract of service is unassignable.

Assignment

• Assignment means to transfer property rights• Can the property rights be assigned eg are

there rules against assignment?• Is the property legal property or equitable

property?• Is the transfer a legal assignment or an

equitable assignment?• Is the transfer for consideration or voluntary?

Assignments at law

• Old system title – deeds, registration – s 38 (deeds for people); s 51A(execution of deed by a corporation)

• Torrens title – registration, indefeasibility• Goods – gifts, sale of goods

Assignments at law • Debts and other choses in action• In Lampet’s case (1612) 77 ER 994 at 997, Lord Coke

said that ‘the great wisdom and policy of the sages and founders of our law, have provided, that no possibility, right, title, nor thing in action, who shall be granted or assigned to strangers, for that would be the occasion of multiplying of contentions and suits, of great oppression of the people, and chiefly of terre-tenants, and the subversion of the due and equal execution of justice’.

• Equity always allowed them to be assigned• By the 19th century the law was changed to allow

assignment

Section 12 of the Conveyancing Act stipulates: Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee, or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action, shall be, and be deemed to have been effectual in law (subject to all equities which would have been entitled to priority over the right of the assignee if this Act had not passed) to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same without the concurrence of the assignor: Provided always that if the debtor, trustee, or other person liable in respect of such debt or chose in action has had notice that such assignment is disputed by the assignor or anyone claiming under the assignor, or of any other opposing or conflicting claims to such debt or chose in action, the debtor, trustee or other person liable shall be entitled, if he or she thinks fit, to call upon the several persons making claim thereto to interplead concerning the same, or he or she may, if he or she thinks fit, pay the same into court under and in conformity with the provisions of the Acts for the relief of trustees.

Section 12

1.There must be a clear intention to assign rather than a mere authorisation that the debtor or other person pay another: Norman v FCT

Section 12

2. The assignment must be absolute and not by way of charge. The basic reason why the assignment must be absolute is to ensure that the debtor or other person is protected in that at all times he or she knows to whom payment must be made. Furthermore, the requirement that the assignment must be absolute enables the assignee to sue on the debt or chose in action in his or her name because an absolute assignment means that the assignor no longer has any interest at all in the debt or chose in action.

Section 12

In Durham Bros v Robertson [1898] 1 QB 765 there was an assignment of a book debt which was expressed to endure until money lent by the assignee to the assignor was repaid.

Not an absolute assignment because it was conditional upon repayment

Section 12

Part of a debt or chose in action cannot be assigned pursuant to s 12. This is because the assignor still has an interest in the debt or chose in action and thus must be joined in any proceedings instituted against the debtor by the assignee. A part of a debt of chose in action can only be assigned in equity

Section 12

3. The assignment must be in writing signed by the assignor William Brandt’s Sons & Co v Dunlop Rubber Company Limited

4. Express notice in writing must be given to the debtor by either the assignor or assignee. There are no formal requirements as to the notice and it need not even state the date of the assignment. The importance of the notice is that the debtor be advised as to whom he or she must pay. Constructive notice is NOT sufficient: Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423 at 438-9

Things Section 12 can’t do1. Future choses in action2. Change priorities - An assignment under s 12 is subject to

equities having priority over the rights of the assignee 3. Assign choses regulated by other pieces of legislation:

Patents Act 1990 (Cth) s 14; Copyright Act 1968 (Cth) ss 196–197; Trade Marks Act 1995 (Cth) ss 106–111; Life Insurance Act 1999 (Cth) ss 200–203; Marine Insurance Act 1909 (Cth) ss 56–57

3. Assign equitable interests????? Eg a right of partnership?

Everett v Commissioner of Taxation (1980) 143 CLR 440

• The assignment of part of a partnership• Obiter comment – what if it had been an absolute assignment? It

could be assigned . At at CLR 447 • [T]hough the interest of a partner is an equitable interest, it may be

assigned under s 12 of the Conveyancing Act 1919 (NSW), as amended … The interest, being a chose in action, falls within the expression ‘debt or other legal thing in action’ because the section, in providing that notice shall be given to a trustee ‘as a person liable in respect of such debt or other legal chose in action’, appears to contemplate the assignment by a beneficiary of an equitable chose in action against a trustee. There would be no point in referring to a trustee if the section made provision only for the assignment by strangers to the trust of debts owing by, and choses against, persons who happen to be trustees. The expression ‘legal chose in action’ may be read as ‘lawfully assignable chose in action’.

Equitable assignments

• Equitable assignments exists for:– Future property– Equitable assignment of legal property for

consideration– Voluntary equitable assignment of legal property

that is assignable at law– Voluntary equitable assignment of legal property

that is not assignable at law– Equitable assignment of equitable property

Intention is the key

• In all cases, for an assignment to be effective in equity, the assignor must display an intention to assign. The assignor must show that he or she is parting with dominion over the property. No particular form of words is necessary to establish consent.

Burridge v MPH Soccer Management Ltd [2011] EWCA Civ 835

• The Court of Appeal had to determine whether the following words amount to an intention to assign:

• ‘The fee due to [Harrison] is to be sent to the Football Association for onward transmission to the agent … [at] Lloyds TSB…Sort code 30-93-71 … account number…03717572 MPH Soccer Management Ltd’.

• The court unanimously held that there was an intention to assign the fee.

Comptroller of Stamps (Victoria) v Howard-Smith(1936) 54 CLR 614

• Howard-Smith was the residuary beneficiary under his deceased wife’s estate.

• He wrote a letter to the executor and trustee of the will, who held a power of attorney from him, requesting that certain payments be made to named individuals from his interest as residuary beneficiary. The payments were made.

• The Comptroller of Stamps in Victoria assessed the letter to be dutiable, claiming that stamp duty was payable under the Stamps Act 1928 (Vic). The Supreme Court of Victoria found the gift was not liable for stamp duty. The Comptroller of Stamps appealed to the High Court.

• Issue: was Howard-Smith’s letter was an assignment of property and therefore liable for stamp duty or merely an authorisation having no dispositive effect with no liability for stamp duty?


• The High Court (Starke, Dixon and McTiernan JJ) unanimously dismissed the Comptroller of Stamps’ appeal and affirmed the lower court decision that Howard-Smith’s letter did not operate as an equitable assignment. It was merely an authorisation with no dispositive effect.


• Starke J: A man may voluntarily dispose of his equitable estates or interests if he choose to do so. No [620] particular form of words is required for the purpose, but he must make clear his intention that he divests himself of the property and gives it over to another, or that he creates a trust in the property in favour of another. A mere mandate from a principal to his agent gives no right or interest in the subject of the mandate. Now, all we have to go on in this case is the letter from H B Howard-Smith to the executor of the will of his wife and his own attorney. It simply ‘requests’ the executor and attorney to pay certain amounts out of his residuary interest. It is left to the discretion of the executor and attorney whether the payment shall be in shares or in money. And, so far as appears from the facts stated in the case, the document, when executed, was not communicated to the persons or institutions named as the recipients of Howard-Smith’s bounty. The absence of communication suggests that the appropriation was not irrevocable. The document, it appears to me, operates as an authority to the executor and attorney to make the payments mentioned, and is not a transfer or assignment of any interest to the persons or institutions named, nor the creation of any trust in their favour.

Assignments of future property in equity

• The assignment of future property • The rule in Holroyd v Marshall (1862) 10 HLC

191 at 211; (1862) 11 ER 999 at 1007 • Valuable consideration• Is the property present or future property?

Norman v Federal Commissioner of Taxation

• Voluntary deed between a husband and wife whereby the husband purported to assign to the wife two items of property. First, there was interest on a loan, which the borrower was entitled to repay to the assignor at any time and without notice. Second, there were dividends on certain shares owned by the assignor.

• Tax Com argues that voluntary hence ineffective


• IS it the right to receive money (present property) or the money itself (future property)?


• In relation to the dividends, the High Court (Dixon CJ, McTiernan, Windeyer, Menzies and Owen JJ) unanimously held that the assignment was not effective because it involved future property for which the assignee did not provide valuable consideration. A bare majority (Dixon CJ, Menzies and Owen JJ; McTiernan and Windeyer JJ dissenting) came to the same conclusion in relation to the interest on the loan.

Shepherd v Commissioner of Taxation

• Inventor was entitled to royalties in relation to the manufacture of castors.

• By a voluntary deed he assigned ‘all [his] right title and interest in and to an amount equal to ninety per centum of the income which may accrue during a period of three years … from [the] royalties’..

• Tax Com says ineffective because its future property• The majority of the High Court (Barwick CJ and Kitto J;

Owen J dissenting) held in favour of Shepherd on the basis that the voluntary deed of assignment was an effective assignment of presently existing property.

Future or Present?

• Everett v Commissioner of Taxation (1980) 143 CLR 440; 28 ALR 179 a taxpayer purported to assign a fraction of his share in a partnership together with the right to receive a corresponding share of partnership profits. The majority of the High Court of Australia held that the assignment involved present property.

Future or Present?

• In Booth v Federal Commissioner of Taxation (1987) 164 CLR 159; 76 ALR 375 the High Court of Australia ruled that the assignment by a landlord of a percentage of the right to receive rent payable in respect of particular premises involved present property, holding that the assignment was analogous to the facts of Shepherd and not Norman

Description of the property

• For a valid assignment of future property the property must be described with sufficient particularity to permit its identification when it comes into existence or into the possession of the assignor.

• Tailby v Official Receiver (1888) 13 App Cas 523

Assignment of future property and specific performance

• This passage in Holroyd suggests that the assignment is not valid if, as at the date upon which the subject matter of the assignment comes into the hands of the assignor, the court would decline an order for specific performance of the contract to assign.

Assignment of future property and specific performance

• If A, for valuable consideration agrees to assign future property to B, and consideration has been paid or executed by B, when A acquires property that falls within the description of that which A agreed to assign, equity determines that the property vests in B as soon as it is acquired by A and can be identified. There is no need for any further assurance by A or action to be taken by B

• Equity looks on that as done which ought to be done

Nature of the assignee’s right

• What is the nature of the assignee’s right?• If debt or similar to debt, if the

assignor goes bankrupt and then discharged the debt is discharged?

Re Lind [1915] 2 Ch 345 • Lind had an expectancy under his mother’s will. Prior to her

death he borrowed from two separate sources (Norwich Union and Arnold), in each case assigning the expectancy as security for the loan.

• Lind was then declared bankrupt, from which he was subsequently discharged.

• He then borrowed money from a third source (Industrials Finance Syndicate) and again assigned his expectancy as security for the loan.

• His mother then died.• Did the third assignee’s interest in the property inherited

by Lind pursuant to his mother’s will have priority over the interests of the first two assignees?

Re Lind [1915] 2 Ch 345 • The Court of Appeal (Swinfen Eady, Phillimore and Bankes LJJ)

unanimously ruled in favour of the first two assignees. The Court found that the first two assignments survived Lind’s bankruptcy.

• All three judges rejected the notion that the rights of an assignee of future property rested purely in contract. Rather, there was a higher right. The crucial factor establishing this higher right was the fact that an assignee of future property obtains an equitable interest in the property immediately and automatically upon the property coming into existence or into the possession of the assignor.

• This attribute of the assignment of future property meant that the rights of the assignee were sufficiently proprietary in nature to attract the rules relating to priorities between competing interests in the property that was the subject of the assignment.

• If the rights of the first two assignees had been merely contractual they would have been completely discharged by Lind’s bankruptcy and no priorities issue would have arisen with the third assignee.

Re Lind [1915] 2 Ch 345

• The practical implication of Re Lind is that an assignee of an expectancy taken as security for a loan has the right not to prove his or her debt in the assignor’s subsequent bankruptcy, and can simply rely on the security, in much the same way as an ordinary secured creditor can do upon the bankruptcy of a debtor

The equitable assignment of legal property for consideration

• If no requirement for writing then an assignment of legal property for consideration takes effect immediately the consideration is paid or executed

• If there is a requirement for writing then doctrine of part performance may save an oral agreement

The equitable assignment of legal property for consideration

• In Everett v Commissioner of Taxation, at CLR 450; ALR 185, the majority of the High Court of Australia said:

• [A]n equitable assignment of, or a contract to assign, present property for value takes effect immediately and passes the beneficial interest to the assignee.

The voluntary assignment of legal property assignable at law

• Milroy v Lord (1862) 4 De G F & J 264 at 274; (1862) 45 ER 1185 at 1189

• The first limb of Milroy v Lord: do everything necessary to be done: Corin v Patton (1990) 169 CLR 540

• The second limb of Milroy v Lord: assignor has done all that is necessary to be done to render the assignment binding on the assignor Costin v Costin (1995) NSW Conv R 55-811

Corin v Patton (1990) 169 CLR 540• Mr and Mrs Patton owned land as joint tenants. • Mrs Patton was terminally ill and, on the assumption

that she would die before her husband, the land would have passed to her husband automatically upon her death in accordance with the principle of survivorship

• She did not want this to happen so she executed three documents – a transfer to her property of her share, a trust and will were she left her estate to the children

• The transfer had not been registered• Had she done everything necessary to be done?• No – she did not authorise the bank to uplift the CT to

Corin for the purpose of registering the transfer

Costin v Costin (1997) NSW Conv R 55–811

• Costin snr makes an initial attempt to sever a joint tenancy in relation to Torrens title land by an assignment of his interest to his son.

• Costin snr handed over an appropriate transfer document as well as giving written instructions to the solicitors who held the certificate of title to release it to the assignee.

• The solicitors refused to do so because they believed that they needed the authority of both the joint tenants to release the certificate of title to the assignee.

• Costin snr later changed his mind and assigned his interest to a second son and the second son was duly registered as co-owner of the property.

• The first son argued that there had been an effective equitable assignment to him and that the second son held the interest in the property on trust for the first son.

• The court held the assignment to the first son was ineffective.

The voluntary assignment of legal property not assignable at law

• If the legal property cannot be assigned at law the assignment will be effective in equity if the assignor has manifested an intention to make an immediate and irrevocable transfer : Norman v FCT

• The principles set out in Milroy v Lord do not apply. Nor is consideration required

• Arguably the only example of such property is part of a debt or chose in action

The equitable assignment of equitable property

• The assignment of equitable property can only be achieved in equity. Because equitable property is not recognised at common law it cannot be the subject of a legal assignment. For a voluntary assignment of equitable property the assignment must be absolute. Apart from any statutory requirement of writing (see below), all that is necessary for a valid equitable assignment is ‘a clear expression of an intention to make an immediate disposition’

Problem

• Monica, aged 27, and Chandler, aged 26, were married five years ago. Three years ago they purchased, as joint tenants, a house under Torrens title. About a year ago their marriage began to break down. They decided to keep up the pretence of being married because a divorce would have damaged their respective careers. Six months ago Monica was diagnosed as having breast cancer.

• One week ago Monica met with her brother Ross and told him that she wanted him to have her interest in the house she had purchased with Chandler. To effectuate this gift she handed Ross a duly executed Memorandum of Transfer transferring her interest in the house to Ross, together with a letter addressed to Ally, the solicitor in whose office the certificate of title was held. The letter directed Ally to release the title deed to Ross.

• The next day Ross went to Ally’s office to collect the title deed but Ally refused to release it to Ross on the ground that she could not do so without also having a direction to that effect from Chandler. Ross left Ally’s office without the certificate of title. Before anything else was done in relation to this matter Monica was killed in a car accident.

• Ross seeks your advice as to whether he is entitled to Monica’s interest in the house.

Answer• The issue raised by this problem is whether the transaction

between Monica and Ross amounted to an effective equitable assignment of the property to Ross. If it did the assignment would have severed the joint tenancy between Monica and Chandler with the result that Chandler would not have inherited Monica’s interest in the property on her death pursuant to the principle of survivorship. At her death Monica would have held her interest in the property as trustee for Ross. If the transaction was not an effective equitable assignment of the property, Monica would have died holding her interest in the property as joint tenant with Chandler who would inherit her interest pursuant to the principle of survivorship.

Answer• Given that Monica sought to assign her legal interest

in the property to Ross for no consideration, the question of whether it was assigned in equity invokes the principles in Milroy v Lord (1862) 4 De G F & J 264 at 274; (1862) 45 ER 1185 at 1189 where it was held that such an assignment would be valid in equity only if Monica had done all that was necessary to be done in order to render the assignment binding upon her: see [4.6.7]. It should be noted that there has been no legal assignment of the property because the transfer document has not been registered: see [4.3.4].

Answer

• On the basis of the High Court decision in Corin v Patton (1990) 169 CLR 540; 92 ALR 1, or in Queensland pursuant to s 200 of the Property Law Act 1974 (Qld), the principles in Milroy v Lord mean that Monica would have assigned her interest in the property to Ross if (i) she had performed those acts towards a legal assignment of the property which she and she alone could perform and (ii) whether the gift to Ross was beyond recall by Monica: see [4.6.9]–[4.6.12]. Monica’s actions satisfy the first of these requirements

Answer• However, Ally’s refusal to hand over the title deed to

Ross without Chandler’s consent means that the gift to Ross was not beyond Monica’s recall. In Costin v Costin (1995) NSW Conv R 55–811 the New South Wales Court of Appeal held that a refusal by a solicitor such as Ally to hand over the title deed meant that an assignment such as Monica’s would be ineffective in equity :see [4.6.13].. On the basis of this decision Monica would not have assigned her interest in the land to Ross with the result that Chandler inherits the property pursuant to the principle of survivorship.

Equitable assignment of equitable property

• The assignment of equitable property can only be achieved in equity. Because equitable property is not recognised at common law it cannot be the subject of a legal assignment. For a voluntary assignment of equitable property the assignment must be absolute. Apart from any statutory requirement of writing, all that is necessary for a valid equitable assignment is ‘a clear expression of an intention to make an immediate disposition’: Norman at CLR 30; ALR 149, per Windeyer

Section 23C of the Conveyancing Act

23C Instruments required to be in writing(1) Subject to the provisions of this Act with respect to the creation of

interests in land by parol:(a) no interest in land can be created or disposed of except by writing signed

by the person creating or conveying the same, or by the person’s agent thereunto lawfully authorised in writing, or by will, or by operation of law,

(b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by the person’s will,

(c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same or by the person’s will, or by the person’s agent thereunto lawfully authorised in writing.

(2) This section does not affect the creation or operation of resulting, implied, or constructive trusts.


The writing requirements within s 23C(1) can be satisfied by more than one document provided they are obviously interconnected: Australia and New Zealand Banking Group Ltd v Widin (1990) 102 ALR 289 at 297–300 per Hill J.


Section 23C(1)(b) merely requires evidence in writing in relation to a declaration of trust of land. However, the disposition or creation of an interest pursuant to s 23C(1)(a) must itself be in writing. In all Australian jurisdictions except Queensland, the disposition of a subsisting interest pursuant to s 23C(1)(c) or its equivalents must also be in writing.


Section 23C(1)(a) and s 23C(1)(b) apply to the creation or disposition of interests, whereas s 23C(1)(c) only applies to the disposition of subsisting interests.


Section 23C(1)(a) applies to the disposition of legal and equitable interests in land

Section 23C(1)(a) and s 23C(1)(b) apply only to land, whereas it has been held that, despite the references to land in the opening sentence of the section, s 23C(1)(c) applies to interests in land and personalty

Equitable assignment of equitable interest

• 23C(1)(c) requires assignments of subsisting equitable interests to be in writing.

• It does not apply if the assignor has both the legal and equitable interest in the property. This is a consequence of the decision in Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694

Equitable assignment of equitable interests

• Nor does s 23C(1)(c) apply when where an absolute owner of property disposes of an equitable interest in that property, the equitable interest is created by the disposition. A similar line of reasoning applies to the equitable assignment of a legal interest in property. Here the assignee’s interest is a newly created one and not the assignment of a subsisting equitable interest.

Disposition by way of a direction by a beneficiary to a trustee

• Direction to hold property on trust for a third party

• What if a beneficiary instructed his or her trustee to hold the equitable interest in the trust on trust for someone else?

• What would be required for this interest to pass?

Grey v Inland Revenue Commissioners [1960] AC 1

• Hunter was the beneficiary under a bare trust of 18,000 shares. Grey was the trustee.

• On 18 February 1955 Hunter orally and irrevocably directed Grey to hold those shares on various trusts for Hunter’s grandchildren.

• One week later Hunter executed various declarations of trust confirming the effect of the oral direction given to Grey.

• Was to oral directive effective to pass the interest?• If it was then stamp duty was only payable on a nominal basis

on the confirming declarations• The House of Lords ruled against Grey and found that the oral

directions were ineffective. This was the disposition of a subsisting equitable interest and needed to be in writing

• Ad valorem stamp duty had to be paid on the written declarations of trust.

Vandervell v Inland Revenue Commissioners [1967] 2 AC 291

• A bank was a bare trustee of shares for Vandervell. Vandervell orally directed the bank to transfer the shares to the Royal College of Surgeons. His intention was that the college acquire both the legal and equitable interests in the shares.

• Vandervell was assessed as liable for a surtax on the shares pursuant to relevant income tax legislation, on the basis that his oral direction to the bank did not result in a disposition of the shares to the college.

• If the oral direction was an effective disposition of the shares to the college, Vandervell was not liable for the surtax.

Disposition by way of a direction by a beneficiary to a trustee

• The House of Lords unanimously ruled in favour of Vandervell, holding that his direction to the trustee was not a disposition within the parameters of s23C(1)(c).

• On the issue of Vandervell’s oral direction the House found that it was effective and did not have to be in writing.

• Grey v IRC was distinguishable from the present case because in that case the transaction was one that dealt only with the subsisting equitable interest, whereas in the present case the transaction involved dealing with both the legal and equitable interests. It was not the disposition of a subsisting equitable interest

• Neither were S 23C(1)(a) or (b) relevant because the interests were personalty

What if the assignor dies before the direction is carried out?

• In Vandervell v IRC, at AC 330; All ER 18, Lord Wilberforce said that, if Vandervell had died before his direction to the trustee had been carried out, the gift would nevertheless have been valid on the basis that Vandervell had done everything within his power to transfer the property to the college

Parker & Parker v Ledsham [1988] WAR 32

• Prior to death a testatrix gave trustees a written direction to pay money from her deceased husband’s estate to named persons

• She died before the money was paid.• Rowland J held that in such circumstances the

direction to the trustee would be revoked by the death of the person making the direction.

Disposition by way of a contract to assign an equitable interest

• Do contracts for valuable consideration to assign an equitable interest in property have to be in writing?

• There is divided opinion• On one view a contract for valuable consideration to assign an

equitable interest in property would be a ‘disposition’ within the meaning of the legislation, and would therefore have to be in writing.

• On another view s 23C(2) effectively dispenses with the requirement of writing in the context of the creation of, constructive trusts.

• It is a well-settled principle of law that a contract for valuable consideration to assign property of any kind gives rise to a constructive trust whereby the vendor is a constructive trustee of the property for the purchaser eg the rule in Lysaght v Edwards

Oughtred v Inland Revenue Commissioners [1960] AC 206

• Mrs Oughtred held a beneficial life estate in certain shares.

• Her son Peter held the equitable reversionary interest in those shares.

• Mrs Oughtred also owned absolutely a number of other shares in the same company.

• By an oral agreement of 18 June 1956 Mrs Oughtred and her son agreed that on 26 June 1956 she would transfer to him the shares in the company that she owned absolutely and in return Peter would surrender to her his equitable reversionary interest in the shares in which Mrs Oughtred had an equitable life estate, thereby making her the absolute beneficial owner of those shares


• On 26 June 1956 three documents were executed to effectuate the oral agreement of 18 June 1956.

• The first document was a deed of release which noted that the shares formerly held by trustees on trust for Mrs Oughtred for life with an equitable reversionary interest to Peter, were now held on trust for Mrs Oughtred absolutely and that it was intended to transfer legal title to her whereupon the trustees would be released from their trusteeship.

• The second document transferred, for nominal consideration, the shares formerly owned absolutely by Mrs Oughtred to Peter.

• The third document was a transfer, for nominal consideration, of the legal title from the trustees to Mrs Oughtred in relation to the shares referred to in the first document.

• The third document was assessed by the taxing authorities as liable for the payment of ad valorem stamp duty on the basis that the earlier oral contract was ineffectual in transferring Peter’s equitable reversionary interest to Mrs Oughtred


• A bare majority in the House of Lords found in favour of the taxing authorities.

• Lord Jenkins (Lord Keith concurring) opined that, even if the earlier oral agreement created a constructive trust, the later transfer to Mrs Oughtred from the trustees would have conferred upon her rights superior to those gained on the creation of the constructive trust. In such circumstances the transfer would be dutiable at ad valorem rates under the stamp duty legislation

• Lord Denning also was of the view that the oral agreement was ineffective to dispose of Peter’s equitable reversionary interest because of the requirement of writing in s23C(1)(c). In his Lordship’s view s 23C(2) did not do away with that requirement.

• Lord Radcliffe for the minority, accepted the view that the oral agreement of 18 June 1956 gave rise to a constructive trust and that the disposition was effected by the oral agreement. In such a situation s 23C(2) dispensed with the need for writing. The transfer from the trustees to Mrs Oughtred of 26 June 1956 did not dispose of Peter’s reversionary interest and accordingly was only liable to nominal stamp duty


• In Neville v Wilson [1997] Ch 144 the Court of Appeal in England, when confronted with this diversity of opinion in Oughtred v IRC, unanimously endorsed Lord Radcliffe’s view that a constructive trust had effective transferred the interest orally.

Disposition of an equitable interest by way of declaration of trust

• A disposition includes a declaration of trust for the purposes of s 23C(1)(c)

Question• Mrs Dole was the absolute beneficial owner of 10,000 shares

in Macquarie Mines Ltd (MML). The registered holder as trustee of the shares was MML’s bank and it was obliged to transfer the legal title to the shares to Mrs Dole at any time if called upon to do so by Mrs Dole. One week ago Mrs Dole called the manager of the bank and said to him: ‘I want my son Bob to have my shares in MML. Please transfer them to him’. The manager replied: ‘Very well’. Two days later, and before any steps were taken by the bank manager to carry out Mrs Dole’s instructions, Mrs Dole died. In her will she left her entire estate to her husband Eric.

• Eric seeks your advice as to who is entitled to the shares in MML.

Answer• The issue is whether Mrs Dole’s oral direction to the trustee disposes of

the property to Bob or is the direction a disposition of a subsisting equitable interest caught by the writing requirement in s. 23C(1)(c) of the Conveyancing Act.

• Because the property is personalty there is no question of s. 23 (1)(a) or s. 23C(1)(b) applying as they are confined to land.

• Section 23C(1)(c) does apply to both interests in land and personalty. • Whether Mrs Dole's direction is within s. 23C(1)(c) depends upon a

consideration of Vandervell v IRC which held that it doesn’t on these facts. • Even though Mrs Dole is getting rid of her equitable interest s 23C(1)(c)

does not apply because Mrs Dole intends to and has the power to deal with both the legal and equitable interests in the shares. Thus, the oral direction is effective to pass the equitable interest to Bob. At her death Mrs Dole has no interest in the shares and Eric does not inherit any interest in them upon her death.

Answer• The issue raised by this problem is whether the transaction

between Monica and Ross amounted to an effective equitable assignment of the property to Ross. If it did the assignment would have severed the joint tenancy between Monica and Chandler with the result that Chandler would not have inherited Monica’s interest in the property on her death pursuant to the principle of survivorship. At her death Monica would have held her interest in the property as trustee for Ross. If the transaction was not an effective equitable assignment of the property, Monica would have died holding her interest in the property as joint tenant with Chandler who would inherit her interest pursuant to the principle of survivorship.

Answer• Given that Monica sought to assign her legal interest

in the property to Ross for no consideration, the question of whether it was assigned in equity invokes the principles in Milroy v Lord (1862) 4 De G F & J 264 at 274; (1862) 45 ER 1185 at 1189 where it was held that such an assignment would be valid in equity only if Monica had done all that was necessary to be done in order to render the assignment binding upon her: see [4.6.7]. It should be noted that there has been no legal assignment of the property because the transfer document has not been registered: see [4.3.4].

Answer

• On the basis of the High Court decision in Corin v Patton (1990) 169 CLR 540; 92 ALR 1, or in Queensland pursuant to s 200 of the Property Law Act 1974 (Qld), the principles in Milroy v Lord mean that Monica would have assigned her interest in the property to Ross if (i) she had performed those acts towards a legal assignment of the property which she and she alone could perform and (ii) whether the gift to Ross was beyond recall by Monica: see [4.6.9]–[4.6.12]. Monica’s actions satisfy the first of these requirements

Answer• However, Ally’s refusal to hand over the title deed to

Ross without Chandler’s consent means that the gift to Ross was not beyond Monica’s recall. In Costin v Costin (1995) NSW Conv R 55–811 the New South Wales Court of Appeal held that a refusal by a solicitor such as Ally to hand over the title deed meant that an assignment such as Monica’s would be ineffective in equity :see [4.6.13].. On the basis of this decision Monica would not have assigned her interest in the land to Ross with the result that Chandler inherits the property pursuant to the principle of survivorship.

law of assignments and dispositions prof cameron stewart

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