CASES Flashcards
1
Q
Penn v Lord Baltimore
FACTS
A
- A dispute over boundary lines between Pennsylvania and Maryland
- Penn claimed that the parties entered into a settlement agreement on a boundary dispute and seeks specific performance of the settlement provisions
- Lord Baltimore objected to this, claiming that the court could not decree specific performance of an agreement concerning foreign lands, nor could it enforce its judgment even if it could make such a decree
2
Q
Penn v Lord Baltimore
JUDGMENT
A
LORD HARDWICKE LC
- The court has no original jurisdiction on the question of the original right of the boundaries and the bill does not need that.
- However, an action of covenant could be brought to the courts if either side commits a breach
- “Both charters require that the law of the respective provinces should be conformable to the law of England”
- An equitable conclusion must be cone to
- This is an agreement, not an award, which was originally proposed by the defendant himself
- Time does not matter regarding this case, and thus it is not like a submission to arbitration
- The boundaries have been drawn
- “A plain mistake contrary to the intent [of the defendant] would be a ground not to decree specific performance”
- The agreement was entered into fairly and without surprise
- An agreement must be entered into entirely or not at all
- “Full and actual possession is sufficient title to maintain a suit for settling boundaries. A strict title is never entered into in cases of this kind”
- The court compelled Lord Baltimore to comply with the obligations he had assumed to the Penn family by demarcating boundaries between the states
- The court did not claim to interfere with the land laws of colonial North America because those were the exclusive provinces of the local judges. However, it did have a right in personam against Lord Baltimore
- “Those persons, therefore, who make these settlements ought to protected in the possession as far as law and equity can”
3
Q
Penn v Lord Baltimore
RATIO
A
-
Equity acts in personam
- Usually, equity relates to a person rather than their property. It applies to property outside a jurisdiction provided that a defendant is within the jurisdiction
- “An English court has jurisdiction to enforce in personam against a party resident in England by a decree of specific performance a contract relating to real property abroad”
- The court will not grant an order for the specific performance of a contract which is not supported by consideration, nor where there has been a mistake in the contract contrary to its intent
-
Where equities are equal, the law prevails
- Where two parties want the same thing and the court can’t honestly decide who deserves it most, they will leave it where it is
4
Q
American Cyanamid v Ethicon
FACTS
A
- American Cyanamid Co held a patent for artificial absorbable surgical sutures
- Ethicon was a company that intended to launch a suture to the British market. ACC claimed this was in breach of its patent
- At first instance, the ACC was granted an injunction preventing the respondent’s use of the type of suture at issue until the trial of the patent infringement
- On appeal, the CA discharged the injunction on the basis that the case for patent infringement was not made out. American Cyanamid appealed to the HoL
5
Q
American Cyanamid v Ethicon
JUDGMENT
A
LORD DIPLOCK
- It was not the court’s role to consider conflicting evidence in respect of an interim application
- This is a matter for trial
- It is only necessary that the claimant should show that there was a real issue to be tried
- The court must be satisfied that the claim “is not frivolous or vexatious; in other words, that there is a serious question to be tried”
- The court should consider whether damages were an adequate remedy for a claimant if an injunction cannot be granted
- If so, an injunction should be granted
- If damages are not adequate, the court should then ask whether the claimant would be able to give an undertaking in damages to the defendant
- If it was considered that there was any difficulty regarding the availability of damages on either side, the court should consider the balance of convenience between the parties
- If these factors were evenly balanced, the court should consider maintaining the status quo
- The balance of convenience lays with the appellant, and thus the appeal was allowed
6
Q
American Cyanamid v Ethicon
RATIO
A
- Lord Diplock’s “governing principle”
“T**he governing principle is that the court should first consider whether, if the plaintiff were to succeed at trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant’s continuing to do what was sought to be enjoined between the time of the application and the time of the trial_. If damages in the measure recoverable would be [an] adequate remedy_ and the defendant would be in a financial position to pay them, no interim injunction should normally be granted, however strong the plaintiff’s claim appeared to be at that stage
7
Q
Co-Operative Insurance v Argyll Stores
FACTS
A
- The insurance society owned the freehold of a shopping centre and they let the anchor unit to Argyll as a supermarket for 35 years, with a promise to “keep open the demised premises for retail trade”
- In 1995, the store was making a loss and Argyll closed, despite the insurance society’s protests
- The trial judge refused a specific performance order
- The CoA granted an award of specific performance because there was considerable difficulty proving a loss suffered and Argyll had acted with “unmitigated commercial cynicism”
- Argyll appealed
8
Q
Co-Operative Insurance v Argyll Stores
JUDGMENT
A
LORD HOFFMANN
The appeal was allowed because:
- It was settled practice that no order would make someone run a business
- Enormous losses would result from being forced to run a trade
- Framing the order would be hard
- Wasteful litigation over compliance could result
- It was oppressive to have to run a business under threat of contempt of court
- It was against the public interest to require a business to be run if compensation was a plausible alternative
9
Q
Co-Operative Insurance v Argyll Stores
RATIO
A
- Specific performance will not be ordered where it would require the running of a store at a loss, just to avoid contempt proceedings
10
Q
FSHC Group Holdings v Glas Trust Corporation
FACTS
A
- The claimant sought rectification of 2 deeds against Barclays Bank as security agent for the lenders (FSHC)
- Glas replaced Barclays as the security agent
- Both parties understood and intended the deeds to “do not more than provide the missing security” However, the mechanism had the effet of undertaking additional obligations
11
Q
FSHC Group Holdings v Glas Trust Corporation
JUDGMENT
A
- Historical rectification is concerned with amending contracts which failed to reflect the “actual intention of the parties … as a matter of psychological fact”
- The test that used to be applied is was objective one: “what a reasonable observer with knowledge of the background facts and prior communications between the parties would have though their common intention at the time of contracting to be” [Chartbrook v Persimmon House, Lord Hoffman]
12
Q
FSHC Group Holdings v Glas Trust Corporation
CURRENT TEST FOR RECTIFICATION
A
- “Before a written contract may be rectified on the basis of a common mistake, it is necessary to show either
- “That the document fails to give effect to a prior concluded contract or
- “That when they executed the document, the parties had a common intention in respect of a particular matter which, by mistake, the document did not accurately record
- “It is necessary to show not only that each party to the contract had the same intention with regard to the relevant matter, and that there was an ‘outward expression of accord (as a result of communication between them, the parties understood each other to share that intention)”
- Rectification is strictly limited to some clearly established disparity between the words of a legal document and the intentions of the parties to it
13
Q
FSHC Group Holdings v Glas Trust Corporation
RATIO
A
- It is wrong to apply the objective approach to assessing the parties’ common continuing intention, where rectification is sought for common mistake
- The correct assessment is of the subjective intention of the parties
14
Q
McPhail v Doulton
FACTS
A
- In 1941, Bertram Baden executed a deed settling a non-charitable trust for the benefit of the staff of Matthew Hall & Co Ltd and their relatives and dependents.
- The objects clause provided that
- “The trustees shall apply the net income of the fund in making at their absolute discretion grants to or for the benefit of any of the officers and employees or ex-officers or ex-employees of the company or to any relatives or dependants of any such persons in such amounts at such times and on such conditions as they think fit”
- Baden died in 1961.
- The validity of the trust was challenged on the basis that the objects of the trust were insufficiently certain.
15
Q
McPhail v Doulton
JUDGMENT
A
ORD WILBERFORCE
- The settlor had left his property on trust, with instructions to distribute according to the trustees’ choices
- This meant that the trust property was not to be distributed equally among the beneficiaries
- “As a matter of reason, to hold that a principle of equal division applies to trusts such as the present is certainly paradoxical. Equal division is surely the last thing the settlor ever intended: equal division among all may, probably would, produce a result beneficial to none. Why suppose that the court would lend itself to a whimsical execution? and as regards authority, I do not find that the nature of the trust, and of the court’s powers over trusts, calls for any such rigid rule. Equal division may be sensible and has been decreed, in cases of family trusts, for a limited class, here there is life in the maxim “equality is equity,” but the cases provide numerous examples where this has not been so, and a different type of execution has been ordered, appropriate to the circumstances.”
16
Q
McPhail v Doulton
RATIO
A
- “Can it be said with certainty that any given individual is or is not a member of the class”
- The test for objects under a discretionary trust is to be the less strict test which is used with regards to powers
- In executing the trust, the court should try to give effect to the settlor’s intentions: equal division would often not be the most appropriate method for a discretionary trust, as, if the settlor wanted everyone to have equal shares, he would have made a fixed and not a discretionary trust
17
Q
Re Hay’s Settlement Trust
FACTS
A
- By a settlement, the trustees were directed to hold the trust fund for ‘such persons or purposes’ as the trustees should in their discretion appoint by deed within 21 years of the date of the settlement, and in default of appointment, for the settlors nieces and nephews living at the date of the settlement in equal shares
- Apart from the settlor, her husband and the trustees, there was no restriction on the persons or purposes that could be the object of an appointment
- The settlement further provided that prior to any appointment the income was to be paid or applied in the trustees’ discretion to or for “any niece of nephew of the settlor” or any charitable object
- Later, the trustees executed a deed of appointment in which they appointed the whole of the trust fund to be held by themselves on a similar trust to that created by the settlement
- The deed of appointment provided that prior to any appointment the trustees were to hold the trust fund on trust to pay the income thereof any person or any charity as the trustees thought fit for a period of 21 years after the death of the last survivor of the settlor’s nieces and nephews living at the date of the settlement
- Following the expiration of a period of 21 years from the date of the original settlement the trustees instituted proceedings to determine
- Whether the power of appointment in the original settlement in favour of ‘such persons or purposes’ as the trustees should appoint was invalid as being too wide, and therefore the trust fund vested ab initio in the nieces and nephews living at the date of the settlement,
- Whether, if the power of appointment in the original settlement was valid, the discretionary trust created by the deed of appointment was nevertheless invalid as being too wide and outside the power of appointment in the settlement, so that the nieces and nephews living at the date of the settlement became entitled to the trust fund on 7 May 1979 on the expiration of 21 years from the date of the settlement, or
- Whether both the power of appointment in the original settlement and the deed of appointment were valid so that the trustees continued to hold on trust to pay the income to such persons or charities as they thought fit until 21 years after the death of the last surviving niece or nephew.
18
Q
Re Hay’s Settlement Trust
JUDGMENT
A
SIR ROBERT MEGARRY V-C
- An ‘intermediate’ or ‘hybrid’ power of appointment vested in a trustee to appoint to anyone in the world except a specified number of class or persons was not rendered invalid merely by the width of the power and the number of persons who were objects of the power, since exercising such a power of appointment the duties of the trustees were
- To ensure that any appointment was within the power
- To consider periodically whether to exercise the power
- To consider the range of objects of the power
- To consider the appropriateness of individual appointments
- Nothing in the nature of an intermediate power of appointment prevented the trustees from discharging those duties
- The power of appointment contained in the settlement was not void for uncertainty
- By requiring the trustees to hold the trust fund for ‘such persons’ as they should appoint, the deed of appointment had not, as the settlement itself required, designated the persons to whom the appointment was to be made, but had merely provided the mechanism whereby appointees might be ascertained in the future, and in so doing the deed of appointment offended against the rule, which applied to intermediate powers of appointment, that unless authorised to do so a trustee could not delegate his powers.
- It was immaterial that the appointors under the deed of appointment were the same persons as the trustees under the settlement.
- The deed of appointment were the same persons as the trustees under the settlement. The deed of appointment was therefore void as being an excessive execution of the power to appoint contained in the settlement.
- It followed that the nieces and nephews living at the date of the settlement became entitled to the trust fund on the expiration of 21 years from the date of the settlement (i.e. on 7 May 1979) by virtue of the gift over in default of any valid appointment being made during the term of the settlement
19
Q
Re Hay’s Settlement Trust
RATIO
A
- A power need not be exercised. It may be but it does not have to therefore it will not fail for administrative unworkability
- It may fail for capriciousness
- Fiduciary powers are powers in a different sense. They are not part of a trust but a ‘pure’ power, i.e. something that can be done but does not need to be done; something valid but unenforceable. The person who may benefit from the power cannot make the fiduciary exercise the power but can make sure that the fiduciary considers exercising the power, and the donee of the power must not act unreasonably in making the decision to exercise the power
20
Q
English v Keats
FACTS
A
- The beneficiaries of 6 discretional family trusts (who were also the children of the settlors of the trust) were advised that the family should give them an interest in possession under the settlement, as this would be advantageous from a tax perspective
- To effect this, a deed of appointment was required for each of the 6 trusts, and each deed of appointment had to be signed by each of the 4 trustees
- Unfortunately, only 3 out of 4 trustees signed the document, and one died before she could rectify the situation
- The claimants applied to the Court to seek to remedy the defective execution of settlements 4 to 6, claiming
- Proprietary estoppel
- An order that equity will remedy the defective exercise of a power of appointment
21
Q
English v Keats
PROPRIETARY ESTOPPEL
A
- Proprietary estoppel can apply in the context of a trust, but on the facts of this case it does not apply because:
- Estoppel cannot circumvent a statute, the failure to sign was a breach of section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989 – which requires for the deed of appointment to be signed, witnessed and delivered as a deed. Therefore, estoppel could not be relied upon to remedy the breach of this provision;
- The claimants could not satisfy the evidential burden that they had suffered a detriment due to their reliance on the representation made by the trustees; and
- The trustees could also not be bound in relation to the non-claimant beneficiaries under the trusts, namely the charities that were also beneficiaries but who were the defendants in this case (Isabella English was appointed to represent all persons and charities under the trusts).
- Further, the claim would also bind the way HMRC taxed the trust fund. As the claim would be binding on a number of strangers to the trust, the claim of estoppel failed, estoppel is only binding between the representors and the representees.
22
Q
English v Keats
REMEDYING THE DEFECTIVE EXECUTION OF A POWER
A
- There is a difference between defective execution and non-execution. Defective execution will always be aided in equity if the defective execution results in the non-execution
- Defective execution will always be aided in equity if it results in the non-payment of a debt or leaving a wide or child unprovided for
- Where a trustee simply does not execute the deed, the Court will not assist in remedying the non-execution
- The conditions of the rule:
- There is an intention by the person with the power to exercise it;
- There has been an attempted execution of the power;
- The defect must be formal rather than going to the substance of the power;
- The purported exercise must have been a proper exercise of the power (it must not be a breach of trust or be fraudulent)
- The doctrine will only operate in favour of certain categories of people, these being –
- Purchasers for value,
- Creditors,
- Charities, and
- Persons who the appointer is under a natural or moral obligation to provide for – such a wife, child or volunteer. Though, equity will not grant relief for those who the appointer is not under an obligation to grant relief such as a husband or grandchild.
- The execution was defective, as it was intended by all the trustees that the deed of appointment would be validly executed, and there had been an attempt to do so
23
Q
English v Keats
RATIO
A
- Doctrine of remedying defective execution can be used to remedy the omission of a signature by one of the trustees
24
Q
Saunders v Vautier
FACTS
A
- Richard Wright, a testator, had bequeathed £2,000 worth of stock in the East India Company on trust for his great-nephew, Daniel Wright Vautier, and his wife and heirs
- According to the terms of the trust, it was to accumulate until Vautier attained the age of 25
- The stock’s dividends were to be accumulated along with the capital
- Daniel’s father died in the testator’s lifetime, but after the testator’s death his mother commenced a suit for payment out of maintenance to her son during his minority
- When Daniel turned 21 and was about to get married, he presented a petition for the trustees to be ordered to transfer to him the East India stock, or for it to be sold and the proceeds transferred to him
The application came before the Master of the Rolls, who on becoming aware of the earlier. Order dated 25 July 1835 remitted it to the Lord Chancellor for hearing
25
Q
Saunders v Vautier
JUDGMENT
A
COTTENHAM LC
- The rights of the beneficiary were held to supersede the wishes of the settlor as expressed in the trust instrument
- “Where a legacy is directed to accumulate for a certain period, or where the payment is postposed, the legatee, if he has an absolute indefeasible interest in the legacy, is not bound to wait until the expiration of that period, but may require payment the moment he is competent to give a valid discharge”
- Where the beneficiary has an absolute, indefeasible interest in a trust, and is of adult age and of sound mind, then the sole beneficiary may require the trust to be terminated and trustee to transfer the legal estate before the date stipulated in the terms of the trust
- Similarly, the absolute consent of all beneficiaries to a. trust enables them to terminate or transfer their beneficial interest under a trust
26
Q
Saunders v Vautier
RATIO
A
If all of the beneficiaries are of adult age with full legal competence, they may force the trustee to transfer the legal estate to them and thereby terminate the trust.
27
Q
Paul v Constance
FACTS
A
- Mr Constance’s marriage broke down, and he moved in with Ms Paul
- After a workplace accident he received £950 in damages, and following discussions with a bank manager, paid it into a new joint account
- They were unmarried, so the account was just put in Mr Constance’s sole name
- He said repeatedly, ‘the money is as much yours as mine’
- They paid in joint bingo winnings too, and they made a £150 withdrawal, which they split
- 13 months later, Mr Constance died without a will. Ms Paul claimed the account was hers
- Mrs Constance reappeared and claimed they money was hers
28
Q
Paul v Constance
JUDGMENT
A
SCARMAN LJ
- The parties’ words and conduct demonstrated that he wished for the money to be held on trust for Mr Constance and Ms Paul jointly
- “It is right that one could consider the various things that were said and done by [the parties] during their time together against their own background and in in their own circumstances”
- The statement conveyed clearly a declaration that the existing fund was that of the plaintiff
BRIDGE LJ
- “It is true he need not use the words ‘I declare myself a trustee,’ but he must do something which is equivalent to it, and use expressions which have that meaning, for, however anxious the court may be to carry out a man’s intention, it is not at liberty to construe words otherwise than according to their proper meaning”
29
Q
Paul v Constance
RATIO
A
- it is necessary that a settlor’s “words and actions … show a clear intention to dispose of property … so that someone else acquires a beneficial interest”
30
Q
Re Goldcorp Exchange
FACTS
A
- Goldcorp Exchange Ltd had a business of holding reserves in coins and ingots for customers wishing to invest in gold
- Some gold was held for customers, but the levels varied from time to time
- The employees told customers that the company would maintain a separate and sufficient stock of each bullion to meet their demands, but in fact did not
- In July 1988, the Bank of New Zealand (to whom Goldcorp Exchange owed money) petitioned for the business to be wound up
- It transpired that Goldcorp had not held anywhere near enough money for the members of the public (around 1000 people) who had supposedly bought gold with it, even though in their contracts they were entitled to delivery of the gold if they wished
- The company also lacked enough assets to satisfy the debts to the bank
- The members of the public argued that the gold that remained in stock was entrusted to them
- The bank argued that it did not, because the gold stocks had remained in stock entrusted to them
- They argued this because the gold stocks had never been isolated, and that all the gold customers were unsecured creditors and that the bank’s security interest (a floating charge) took priority
31
Q
Re Goldcorp Exchange
JUDGMENT
A
LORD MUSTILL
- The purchase contract did not transfer title to purchasers because the goods were unascertained
- The customers’ purchase contracts did not transfer title because which gold specifically was to be sold was not yet certain
- Although Goldcorp’s brochures promised that purchasers would have title to gold held in storage, a trust did not arise when the purchase contract was signed or when G bought the gold
- There was not enough gold to satisfy the claims, even though it was promised that the gold would be set aside
- “The remaining stock, having never been separated, is just another asset of the company, like its vehicles and office furniture”
- It would be contrary to public policy and logic to imply a fiduciary duty where all that existed was breach of contract
- The collateral promises made in the company’s brochures and by its employees did not constitute a declaration of trust by the company in favour of the customers in relation to the company’s current stock of bullion of the relevant type so as to immediately transfer title to them in respect of that bullion
- Only the customers who could prove their order of bullion was in fact held separately from their general store of bullion would be entitled to enforce a trust against the exchange and consequently be able to take their bullion orders away as secured creditors
- The customers who could not demonstrate that their orders had been segregated from the general store of bullion could not demonstrate that they were under a trust because the subject matter of the trust was uncertain
