iiaraliaU lEquttg QloUetttOtt (Sift of IE. 31. JlataliaU. ^^^-2^- ^- 1^3'* CORNELL UNIVERSITY LIBRARY 3 1924 085 503 930 /^^•*<} Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924085503930 A DIGEST OF EQUITY A DIGEST OF EQUITY BY J. A. STRAHAN, M.A., Hon. LL.D. OF THE MIDDLE TEMPLE, BARRISTEK-AT-LAW ; READER OF EQUITY, INNS OF COURT, LONDON; AND EMERITUS PROFESSOR OP CIVIL LAW, UNIVERSITY OF BELFAST AutJior of " A General View of the Law of Property," etc. ; and Joint Author of " Underhill and Slrahan on the Interpretation of Wills and Settlements,'" etc. FIFTH EDITION LONDON : BUTTEEWOETH & CO. (Publishers), Ltd. Bell Yard, Temple Bar, SYDNEY: BUTTEEWOKTH & 00. (ATTSTBAMA), LTD. MELBOUBNB : * ' CALCUTTA : MADRAS: BtTTTEBWOBTH & CO. (iNDIA), LTD. BOMBAY : TOEOKTO : BUTTBBWOETH & CO. (PUBLISHEES), LTD. WELLrNfGTON (N.Z.): BUTTEEWOETH & CO. (AUSTEALIA), LTD. 1928 PRINTED IN QEEAT BEITAIN Printed in England at The Bailanttne Press b^ Spottiswoode, Ballanttne &, Co. Ltd. Colchester, London & Eton To His Feiend and former Colleague SIR ARTHUR UNDERBILL, A BENCHER OF LINCOLN'S INN AND , SENIOR CONVEYANCING COUNSEL TO THE COURT, BUT FOR WHOM THIS BOOK WOULD NEVER HAVE BEEN WRITTEN, THIS EDITION OF IT IS Inscribed by the Author PREFACE. THBEE used to be a maxim that equity followed the law. The first edition of this little work appeared when the maxim had some application to existing things. Now, however, the maxim must be reversed and run that the law follows equity. That is in effect the result of the late legal revolution which ended for ever the ancient and historic common law of England so far as English land is concerned. Though now equity has to a large extent superseded the common law the two branches of English law are still administered in separate courts. Possibly that will itself be superseded before long. Then common law and equity so far as property is concerned and even contract • — outside the merchant law^ — will in fact become fused as to some extent has already been accomplished by the Judicature Acts. Then the Law of Property, real and personal, legal and equitable, will be treated in institu- tional works as one subject. Meanwhile I have confined myself in this book to equitable principles and dealt with the new legislation only so far as it affected them. J. A. Strahan. February \st, 1928. TABLE OF CONTENTS. Preface Table of Contents Table op Statutes Rtjles of the Stjpebme Court Table op Cases Table of Abbreviations Foreword PAGE vii ix . xxi xxvi xxix xliv xlv INTRODUCTION. JURISDICTION OF CHANCERY. Art. I.— Meaning of " Equity " 3 II. — ^Authority by which Eqmty was created ... 4 III. — Limits of that Authority 7 IV. — The Exclusive Jurisdiction of Equity ... 9 V. — The Concurrent Jurisdiction of Equity ... 11 VI. — The Auxiliary Jurisdiction of Equity ... 12 VII. — Fusion of the Administration of Equity and Law ... ... 14 VIII. — -The Chancery Division of the High Court ... 16 IX. — Arrangement of the Work 17 BOOK I. EQIHTABLE RIGHTS. INTRODUCTION. Nature op Equitable Interests. X. — How Equitable Rights arise XL — Equitable Interests in Property XII. — Who are bound by Equitable Interests 21 23 26 Table oj Contents. Art. page XIII. — Equitable Interests might always be held by Married Women ... ... ... ... 35 XIV. — Equitable Interests in Realty may be Person- alty and nice i;ersd ... ... ... ... 35 XV. — Equitable Interests in Land not the Subject of Tenure 37 XVI. — Equitable Personalty may be held in Succes- sive Estates ... ... 40 XVII. — Assignment of Equitable Interests ... ... 41 XVIII. — General Rule as to Equitable Interests ... 48 XIX. — Purposes for which Equitable Interests and other Rights were Created ... 49 A. FIRST DIVISION OP EQUITABLE RIGHTS. Equities to Peotect Conudbnces. INTRODUCTION, XX.— Kinds of Trusts 55 PART I.— ACTUAL TRUSTS. Section I. — Declaebd Trusts.^ XXI.— Kinds of Declared Trusts 69 A. — Private Trusts. XXn.— Divisions of Subject 60 Chapter I. — Formation of a Trust. XXIII. — Parties necessary to the Formation of a Trust 61 XXIV. — ^Declaration of a Trust to Operate Im- mediately ... ... ... 64 XXV. — Declaration of a Trust to be Ambulatory tiQ Death 66 XXVI. — Fraudulent Repudiation of a Trust 67 XXVIL— Declaration of Trust : the Three Certainties 69 XXVIII. — Interpretation of Declarations of Trust ... 73 XXIX.— Completely Constituted Trusts 76 XXX. — ^Incompletely Constituted Trusts 80 XXXI.— Trusts of Imperfect Obligation 84 XXXIL— Void and Voidable Trusts 87 XXXIII. — What Property may be the Subject-Matter of a Trust 88 Table of Contents. xi Chapter II. — Trustees : Their Kinds, Appointment, Retirement, and Estate. Art. page XXXIV. — Ordinary and Statutory Trustees 90 XXXV. — Ordinary Trustees : their Appointment ... 91 XXXVI. — Ordinary Trustees : who may be appointed ... 96 XXXVIL— Ordinary Trustees : Disclaimer of Trust ... 98 XXXVIII. — Ordinary Trustees : their Retirement . . . 100 XXXIX. — Ordinary Trustees : Vesting Trust Property 100 XL. — Ordinary Trustees : Estate taken 103 XLI. — Ordinary Trustees : Devolution of Estate ... 107 XLIL— Judicial Trustees 108 XLIIL— The Public Trustee 109 Chapter III. — Trustees : Their Duties, Powers, and Privileges. XLIV. — ^Nature of a Trustee's Duties, Powers and Privileges 117 XLV. — Positive and Negative Duties of a Trustee ... 124 XL VI. — First Positive Duty : Preserving the Trust Property ... 125 XL VII. — Second Positive Duty : Transferring the Trust Property 132 XL VIII. — Persons entitled to Income and Corpus ... 134 XLIX. — Third Positive Duty ■ giving Information as to the Trust Property 140 L. — Eirst Negative Duty : not to make Profit out of the Trust Property 142 LI.: — Second Negative Duty : not to Purchase the Trust Property from himself or his Co- Trustees 144 LII. — Third Negative Duty : not to Delegate his Duties ... 146 LIIL— A Trustee's Equitable Powers 149 LIV. — Statutory Power : as to selling Trust Property 150 LV. — Statutory Power : to Arrange as to Debts and Disputes Relating to Trust Property ... 152 LVI. — Statutory Power : to give Receipts for Trust Property ... 153 LVII. — Statutory Powers of Management 153 LVin. — Statutory Power : to Insure Insurable Trust Property 154 xii Table of Contents. Abt. page LIX. — Statutory Power : to Allow Maintenance for Infant Cestui que Trust 164 LX. — Statutory Power : to Advance Infant Cestui que Trust ... 156 LXI. — Jurisdiction of Court in Emergency to give Trustees Powers outside Trust Instrument 156 LXII. — Trustee's Right to an Indemnity out of the Trust Property 158 LXIII.— Trustee's Right to the Protection of the Court 162 IjXIV. — Trustee's Right to a Discharge on Complete Performance of the Trust ... 164 LXV. — Effect of a Direction or Judgment of the Court on a Trustee's Powers ... ... ... 164 Chapter IV. — Oestuis Que Trust and, their Bights. LXVI. — Position of Cestui que Trust who is a Life Tenant 166 LXVII. — Right of Cestui que Trust to Determine the Trust and Discharge the Trustee 168 LXVIII.— Right of Cestui que Trust to foUow the Trust Property 173 LXIX. — Right of Cestui que Trust to adopt a Breach of Trust 177 Chapter V. — Breach of Trust. LXX. — The Property in respect of which a Trustee is Chargeable ... 178 LXXI. — Liabihty of a Trustee for his own and his Agent's Acts 179 LXXII. — Measure of a Trustee's Liability for loss Resulting from a Breach of Trust 184 LXXIII. — Right to Contribution towards Loss through Breach of Trust as between Co-trustees ... 190 LXXIV. — Duration of a Trustee's Liability to the Cestui que Trust 194 LXXV. — Limitation of Actions by Cestui que Trust for Breach of Trust 196 LXXVI. — Discretion of Court to Impound the Interest of a Cestui que Trust, Party to a Breach of Trust 200 LXXVII. — Discretion of Court to Relieve Trustee liable for Breach of Trust 201 LXXVIII.— Criminal Liabihty of Fraudulent Trustee ... 202 Table of Contents. xiii B. — Chaeitablb Trusts. Aet. paoe LXXIX.— The Meaning of " Charitable Purposes " ... 205 LXXX. — Principles Applicable to Charitable Trusts ... 208 LXXXI. — Certaiaty as to the Objects of a Charitable Trust 209 LXXXII.-^AppUcation of the Rule against Perpetuities to Charitable Trusts 214 LXXXIII. — Assurances of Land on Charitable Trusts ... 218 LXXXIV. — Enforcement and Administration of Charitable Trusts ... 220 Section II. — Presumed Trusts. LXXXV.— Failure of Express Trust 221 LXXXVI. — Purchases through and Transfers to other Persons ... ... ... 223 LXXXVII. — Principles Apphoable to Presumptive Trusts 228 PART II.— CONSTRUCTIVE TRUSTS. LXXXVIII. — When a Stranger to a Declared Trust is a Constructive Trustee of the Trust Property 229 LXXXIX. — A Trustee or Agent is a Constructive Trustee of Improper Profits ... ... ... ... 233 XC. — Principles Applicable to Constructive Trusts 235 B. SECOND DIVISION OP EQUITABLE RIGHTS. Equities to Promote Fair Dealing. Introduction. XCI. — Principles governing the Subject-matter of the Division 240 Section I. — Conversion. XCII. — Modes in which Conversion arises 243 XCIII. — Times at which Conversion arises ... ... 246 XCIV. — Devolution on Failure of Purposes of Con- version ... ... ... 250 XCV. — Devolution on Actual Conversion, proper and improper 255 XCVI. — Election to take Converted Property in its actual State 256 xiv Table of Contents. Section II. — Election. Art. page XCVII.— The Doctrine of Election 258 XCVIII. — How far Doctrine is based on Intention ... 262 Section III. — Pbefobmance, Satisfaction, and Ademption. XCIX. — Definitions of Performance, Satisfaction, and Ademption ... C. — Presumption as to Performance CI. — Satisfaction of Debts ... CII. — Ademption of Legacies cm.— Definition of " Portion " CIV. — Satisfaction and Ademption of Portions CV. — Admission of Parol Evidence ... Section IV. — Mistake and Misbepeesentation. 265 267 270 272 274 277 281 CVI. — ^Mistake and Misrepresentation 283 CVII. — ^Mistakes and Misrepresentations of Law ... 287 CVIII. — Fmidamental and Incidental Mistakes of Fact 289 CIX. — Negative and Positive Misrepresentations of Fact 296 ex. — What amounts to Misrepresentation in Law 297 CXI. — Where Non-disclosure Constitutes Negative Misrepresentation ... ... ... ... 299 CXII. — ^Effect of Innocent Misrepresentation . . . 305 CXIII. — Effect of Fraudulent Misrepresentation ... 306 CXIV. — Responsibility for Misrepresentations of an Agent 306 Section V. — Fraud and Undue Inpltjence. CXV. — Fraud in Law 309 CXVL— Fraud in Equity 312 CXVIL— Undue Influence 316 C. THIRD DIVISION OF EQUITABLE RIGHTS. Equttibs to Prevent Oppression. Section I. — Relief Against Forfeitures. CXVIII. — Penalties and Liquidated Damages ... ... 324 CXIX. — Rules for distinguishing Penalties and Liqui- dated Damages ... ,,. 327 Table of Contents. xv Section II. — Moetgagbs and Liens. Chapter I. — Nature of a Mortgage. Aet. page CXX.— Definition of a Mortgage 333 CXXI. — The First Essential Characteristic of a Mort- gage ... 337 CXXII. — The Second Essential Characteristic of a Mortgage 343 Chapter II. — Position of Parties until Redemption or Foreclosure. CXXIII. — Mortgages at Law and in Equity 345 CXXIV.— Position of the Mortgagor 349 CXXV.— Position of the Mortgagee 352 CXXVI. — Mortgagee's Personal Remedy against the Mortgagor ... ... ... 355 CXXVII. — Express and Implied Incidents of Mortgages 358 CXXVIII. — Implied Incidents where Mortgagor or Mort- gagee is in Possession 358 CXXIX. — Imphed Incidents where the Mortgage is by Deed 360 CXXX.—Imphed Power of Sale 361 CXXXL— Implied Power to Insure 364 CXXXII. — Imphed Power to Appoint a Keceiver ... 365 Chapter III. — Bight to Bedeem. CXXXIIL— Extent of the Eight to Redeem 368 CXXXIV.— Conditions of Redemption 371 CXXXV. — Interest and Costs payable on Redemption ... 372 ■ CXXXVL— Tacking Mortgages 376 CXXXVIl.— Consolidation of Mortgages 378 CXXXVIII. — ^Reconveyance on Redemption 380 Chapter IV. — Bight to Foreclose. CXXXIX.— Extent of the Right to Foreclose 382 CXL.^Interest allowed on Foreclosure 383 CXLI. — Jurisdiction of the Court to Order a Sale ... 384 CXLII. — ^ When Foreclosure is Complete 385 xvi Table of Contents. Chapter V. — Equitable Liens. Art. page CXLIIL— Nature of an Equitable Lien 386 CXLIV. — Vendors' and Purchasers' Liens 388 CXLV.— Subrogation 391 CXLVI. — Assignment of After-acquired Property . . . 392 Section III. — Mabeied Women's and Infants' Property. CXLVIL— Trusts for the Benefit of Women 394 CXLVIIL — The RestraiQt on Anticipation 398 CXLIX.—-Wife's Equity to a Settlement 402 CL. — ^Mortgages of Married Women's Property . . . 404 CLL— Infants' Property 404 CLII. — Infants' Assurances and Contracts ... ... 407 BOOK II. EQUITABLE REMEDIES. INTRODUCTION. Chabacteristics of Equitable Remedies. CLIII. — ^Equity acts on the Conscience ... ... 413 CLIV. — Equity acts in ^ensomawi ... ... ... 414 CLV. — Equity forbids Contemplated and undoes Completed Wrongs ... ... ... ... 417 CLVI. — ^Who seeks Equity must do Equity 419 CLVIL— Delay Defeats Equity 421 CLVIIL— Chief Equitable Remedies 424 CLIX. — Specific Performance ... ... ... ... 426 CLX.— Injunction 427 CLXL— Receivers 428 CLXIL— Account 429 CLXIII. — ^Rectification of Instruments ... ... ... 430 CLXIV. — Damages in addition to or in lieu of Equit- able Remedies ... ... ... ... 433 CLXV. — Subject-matter of Equitable Remedies ... 436 A. FIRST DIVISION OE SUBJECT-MATTER OP EQUITABLE REMEDIES. Contracts. CLXVI. — Enforcement of Agreements by Specific Per- formance and Injunction 440 CLXVII. — Agreements which Equity wiU Specifically Enforce ... ... ... 441 Table of Contents. xvii Section I. — ^Enforcement of Agreements by Specieto Performance. Chapter I. — Agreements for the Breach of which the Law mil give Damages. Art. page CLXVIII. — Conditions of Specific Enforcement 443 CLXIX. — When Damages are an Inadequate Eemedy for Breach of Agreement ... 444 CLXX. — Where Specific Performance is an Effective Remedy ... 448 CLXXI. — When the Court can Efficiently Supervise the Performance of an Agreement 449 CLXXII.— When Hardship will Prevent Specific Per- formance ... 451 CLXXIII. — Reciprocity of Remedies 453 Chapter II. — Agreements for the Breach of which the Law will not give Damages. CLXXIV. — Conditions under which Equity enforces specifically Agreements for whose Breach the Law gives no Remedy 455 CLXXV. — What amounts to Part Performance of such an Agreement 458 CLXXVL— Preventing Legal Proof by Fraud 461 Chapter III. — Special Kinds of Specific Performance. CLXXVIL— Specific Performance with Variation ... 463 CLXXVIII. — Specific Performance with Compensation ... 464 CLXXIX. — Specific Performance with Abatement ... 467 Chapter IV. — Judgment for Specific Performance. CLXXX. — Judgment and Incidental RoUef 470 CLXXXI. — Enforcing Judgment in Default of Com- phance 475 Section II. — Injunctions to Restrain Breaches of Contract. CLXXXII.— As between Parties to the Contract 478 CLXXXIII. — As between Persons not Parties to the Contract 483 xviii Table of Contents. B. SECOND DIVISION OP SUBJECT-MATTER OE EQUITABLE REMEDIES. TOETS. Section I. — Injunctions to Restrain Wrongs. Art. page GLXXXIV. — Injunctions to Restrain Threatened, Recur- ring or Continuing Torts 489 CLXXXV. — Interim, Interlocutory and Perpetual Injunc- tions ... 491 OLXXXVI. — Undertakings as to Damages ... 494 CLXXXVII. — Mandatory or Positive Injunctions 495 CLXXXVIII. — Damages in lieu of Injunction ... ... 498 CLXXXIX. — Account in lieu of an Interlocutory Injunction 499 CXC. — ^ Account in lieu of Damages 500 Section II. — Injunctions to Prevent the Abuse of Rights. CXCL— Equitable Waste 501 CXCII. — Confidential and Private Information ... 505 CXCIIL— Passing Off 507 CXCIV. — Threatened Proceedings against a Patentee ... 511 C. THIRD DIVISION OP SUBJECT-MATTER OP EQUITABLE REMEDIES. Administration. Section I. — Administration Generally. CXCV. — Purposes for which Aocoimts are Issued ... 516 CXCVI. — Ordering Accounts 521 CXCVII.— Wilful Default 523 CXCVIII. — Receivers and Managers 525 CXCIX. — Jurisdiction to Appoint Receiver ... ... 528 CO. — Objects of Appointment 530 CCI. — How Appointed 535 Table of Contents. xix Section II. — Administbation or Assets. Chapter I. — Assets. Art. page CCIL— Meaning of " Assets " and of "Administration " 538 CCin. — Assets and their Devolution 539 CCIV. — Assets of a Person having a Foreign Domicile 544 Chapter II. — Executors and Administrators. CCV. — Origin of Executors' and Administrators' Authority 546 CCVT. — Offices of Executors and Administrators ... 548 CCVII. — Executors may act separately. . . ... ... 548 CCVIIL— Executor de son Tori 552 CCIX. — ^Who may claim Letters of Administration on Intestacy ... ... ... 553 CCX. — Who may be granted Letters of Administra- tion where there is a WiU 555 CCXI. — Powers of Personal Representatives over Assets ... ... ... ... ... ... 556 Chapter III. — Payment of Liabilities and Debts. CCXII. — First Charges on Assets 560 CCXIII. — Payment of Debts : Order when Estate is Solvent 561 CCXIV. — Payment of Debts : Order when Estate is Insolvent ... ... 565 CCXV. — Insolvent Estate : Administered by the Personal Representatives ... ... ... 566 . CCXVL— Insolvent Estate 567 CCXVIL— Arrears of Rent 570 CCXVIIL— Secured Creditors 571 CCXIX.— Statute-barred Debts 572 CCXX.— Retainer of Debts 573 CCXXL— Right to Prefer Debts 577 CCXXII.— Right to retain Legacy against a Legatee's Debt 578 CCXXIIL— Creditors' Right to follow Assets 579 CCXXIV. — Creditors' Right to Donationes Mortis Causa 580 XX Table of Contents. Chapter IV. — Distribution of Assets. Art. page CCXXV. — ^Notioe by Advertisement to Creditors ... 582 CCXXVI. — Future and Contingent Liabilities 583 CCXXVII.— Kinds of Legacies 585 CCXXVIIL— Order of Distribution of a Testator's Estate. . . 587 CCXXIX.— Order of Distribution of an Intestate's Estate 593 CCXXX. — Rights of Legatees to follow Assets ... ... 596 CCXXXL — -Payment of Interest or Income upon Legacies 598 Chapter V. — The Liability of Personal Representatives. CCXXXII. — Actions against Personal Representatives ... 601 CCXXXIII. — -Liabilities similar to those of Trustees ... 605 Index. TABLE OF STATUTES. PAGE 33 Hen. 8, o. 39. (Crown Debts, 1541), s. 75 541 1 Edw. 6, 0. 14. (Chantriea, CoUegiate, 1547) 207 21 Jao. 1, 0. 16. (Statute of Limitations, 1623) ... 22, 26, 58, 157, 193, 194, 196, 197. 235, 421, 422, 423, 458, 558, 572, 575, 579, 607 s. 3 605 12 Car. 2, o. 24. (Abolition of MUitaiy Tenure, 1660) ... 405 s. 8 405 s. 9... ... ... ... ... ... 405 29 Car. 2, o. 3. (Statute of Frauds, 1677) ... 41, 42, 58, 64, 67, 221, 223, 225, 433, 457, 458, 540 H. 4 11, 454, 456, 457, 460, 462, 572 s. 10 541 s. 12 540, 542 8 & 9 WiU. 3, 0. 11. (Bonds, 1696) 329 4 &5 Anne, 0.3. (Limitation of Time, 1705) 329 9Geo. 2, c. 36. (Charitable Uses Act, 1735) 218 32 Geo. 3, 0. 60. (Libel Act, 1792) 493 10 Geo. 4, u. 7. (Roman Catholic Relief Act, 1829) ... 207 3 & 4 Will. 4, 0. 27. (Real Property Limitation Act, 1833)— 3.24 383 8.34 351 s. 42 374 0. 42. (Civil Procedure Act, 1833)— d. 28 375,518 s. 29 518 0. 74. (Fines and Recoveries Act, 1833) ...41, 43 7 Will. 4 & 1 Vict. c. 26. (Wills Act, 1837) 66, 67, 68, 457, 543 ss. 3, 6 540 s. 9 43 B. 30 105, 593 s. 31 105 s. 39 106 s. 40 106 c. 28. (Real Property Limitation Act, 1837) ... 351 8 & 9 Vict. c. 16. (Companies Clauses Act, 1845) 550 s. 18 649 13 & 14 Vict. c. 60. (Trustee Act, 1850), 8. 5 94,102 15 & 16 Vict. 0. 76. (Common Law Procedure Act, 1852) — ss. 210, 212 328 16 & 17 Vict. 0. 137. (Charitable Trusts Act, 1853), ss. 17, 19... 220 18 & 19 Vict. c. 43. (Infants Settlement Act, 1855) 408 xxii Table of Statutes. PAGE 21 & 22 Viot. 0. 27. (Chancery Amendment Act, 1858) 3, 435, 436, 498, 499 s. 2 474 23 & 24 Viot. 0. 38. (Law of Property Amendment Act, 1860) 563 o. 127. (Solicitors Act, 1860), s. 28 ... 160 24 & 25 Viot. 0. 96. (Larceny Act, 1861), s. 86 203 0.114. (Wills Act, 1861) 545 26 & 27 Viot. u. 73. (India Stock Certificate Act, 1863) ... 130 0.87. (Trustee Savings Bank Act, 1863) ... 567 27 & 28 Vict. c. 114. (Improvement of Land Act, 1864) ... 130 30 & 31 Viot. 0. 127. (Railway Companies Act, 1867), s. 4 ... 527 32 & 33 Vict. u. 62. (Debtors Act, 1869) 203 s. 4 203,204 s. 8 476 33 & 34 Viot. c. 71. (National Debt Act, 1870) 130, 550 s. 23 ... ... . .. ... 549 35 & 36 Vict. 0. 93. (Pawnbrokers Act, 1872) ..'. ... ... 334 36 & 37 Vict. 0. 66. (Supreme Court of Judicature Act, 1873) 14, 45, 3*29, 350, 532, 534 s. 25 45, 493, 504, 528, 529, 536 37 & 38 Viot. 0. 67. (Real Property Limitation Act, 1874) ... 33 D. 1 351 s. 7... ... ... ... ... ... 355 s. 8 199, 351, 356,605 s. 25 197 c. 62. (Infants Relief Act, 1874) 409 38 & 39 Viot. u. 83. (Local Loans Act, 1875) 130 40 & 41 Vict. u. 59. (Colonial Stock Act, 1877) 130 41 & 42 Viot. 0. 31. (BiUa of Sales Act, 1878) 334,350 c. 38. (Innkeepers Act, 1878) 387 44 & 45 Viot. c. 41. (Conveyancing Act, 1881) ... 123, 348, 365, 369, 558 s. 30 107, 108, 347 45 & 46 Viot. 0. 38. (Settled Land Act, 1882) 130 0.43. (Bills of Sale Act, 1882) 334,350 0. 75. (Married Women's Property Act, 1882) 97, 99, 315, 395, 396, 403, 420, 575 o. 1 396,401 B. 4 397 s. 19 398,409 46 & 47 Viot. 0. 52. (Bankruptcy Act, 1883) 571 49 & 50 Vict. c. 27. (Guardianship of Infants Act, 1886) ... 405 51 & 52 Viot. c. 42. (Mortmain and Charitable Uses Act, 1888) 113, 209, 218, 219 s. 13 . ... 207 0.59. (Trustee Act, 1888) .' 23,"l95, 199, 235 s. 1 197, 199 s. 8 . 193! 197 , 198, 199 53 Viot. 0. 5. (Lunacy Act, 1890) 94, 256 8. 129 ... 94 ss. 135, 138 ... 102 s. 141 ... 102 B. 342 ... 102 53 & 54 Viot. u. 39. (Partnership Act, 1890)— s. 3 ... 567 8.20 248, 249 88.21,22 ... 249 Table of Statutes. xxiii 53 & 54 Viot. 0. 39. (Partnership Act, 1890) — continued — a. 23 ... 535 54 & 55 Viot. 0. 73. (Mortmain and Charitable Uses Act, 1891) 209, • 218, 219 56 Vict. c. 5, (Regimental Debts Act, 1893) ... ... 563 56 & 57 Vict. 0. 63. (Married Women's Property Act, 1893) ... 395 s. 1 396, 397 S.2 ... 402 s. 3 ... 397 0.71. (Sale of Goods Act, 1893), s. 52 ... ... 446 57 & 58 Vict. c. 30. (Finance Act, 1894), s. 9 ... 557 u. 46. (Copyhold Act, 1894), 3. 88 ... 108 59 & 60 Viot. c. 25. (Friendly Societies Act, 1896) ... ... 567 s. 35 ... 563 u. 35. (Judicial Trustees Act, 1896) ... 91 », 91, 109 60 & 61 Vict. 0. 65. (Land Transfer Act, 1897) 49, 542, 543, 550, 556, 557, 575, 604 s. 1 ... 543 s.2 550, 551 62 & 63 Viot. c. 20. (Bodies Corporate( Joint Tenancy) Act, 1899) 97 63 & 64 Viot. c. 51. (Money-lenders Act, 1900) 420, 523 c. 62. (Colonial Stock Act, 1900) ... 130 6 Edw. 7, 0. 55. (Public Trustee Act, 1906) 90, 112 B. 1 ... 110 S.2 109, 110 s. 3 ... 110 8.4 9] ., 97, 111 s. 5 ... 112 s. 6 ... 554 s. 7 ... 110 ss. 9—11 ... 112 s. 13 112, 114 7 Edw. 7, u. 18. (Married Women's Property Act, 1907] 1— s.2 ... 409 0.29. (Patents and Designs Act, 1907), s. 36 ... 511 8 Edw. 7, 0. 45. (Punishment of Incest Act, 1908), s. 1 ... 406 0. 69. (Companies (Consolidation) Act, 1908)- — 8.103 ... 338 s. 105 ... 446 s. 162 ... 532 1 & 2 Geo. 5, 0. 37. (Conveyancing Act, 1911) — s. 8 ... 123 3. 12 ... 551 0.46. (Copyright Act, 1911) 505, 506 s. 31 ... 505 u. 55. (National Insurance Act, 1911) ... ... 568 4 & 5 Geo. 5, o. 59. (Bankruptcy Act, 1914) ... 87 s. 30 569, 571 =.33 566, 567 s. 35 ... 571 s. 36 ... 569 3.42 ... 311 s. 45 ... 48 3.52 401, 402 a. 54 ... 584 s. 125 ... 401 3.130 ... 565 XXIV Table of Statutes. 4 & 5 Geo. 5, o. 59. 9 & 10 Geo. 5, c. 57. 12 & 13 Geo. 5, c. 16. 15 Geo. 5, ^. 18. 19. (Bankruptcy Act, 1914) — continued — 8.151 566 Sohed. II. 571 (Acquisition of Land (Assessment of Com- pensation) Act, 1919) 486 (Law of Property Act, 1922) ... 106, 316 (Settled Land Act, 1925) 104, 130, 156, 158 ss. 41-47 503 s. 66 503 s. 92 140, 150, 167 s. 113 17 (Trustee Act ,1925) 17, 97, 129, 184, 188 B. 1... 132 s. 2... 130 s. 3... 126, 130 s. 5... 130 s. 6... 130 a. 7... 127, 131 s. 8... 187, 188 s. 9... 187 a. 10 130, 152 s. 12 152 s. 13 152 H. 14 153 s. 15 152,558 s. 18 122, 123 H. 19 154 s. 20 154 ». 21 127, 152 s. 22 126,524 s. 23 149, 184 6.25 149 s. 26 162,585 s. 27 162,583 a. 28 34 s. 30 158, 179 s. 31 156 s. 32 156 s. 34 64 a. 36 94,97 8.37 94 s. 38 94 a. 39 94 s. 40 102, 103 8.41 94,461 a. 42 94,97 s. 43 94 a. 44 102 8S. 48-50 477 8.54 102 a. 57 157 8.61 201 8. 62 200,402 8.63 164 8.68 130 8.69 130 Table of Statutes. xxv PAGE Geo. 5, 0. 20. (Law of Property Act, 1925) 25 , 76, 102, 348 486 s. 1 ... 43 s. 2 ... 484 s. 23 ... 131 B. 25 ... 154 s. 28 ... 153 s. 29 ... 133 s. 31 ... 157 s. 32 ... 131 s. 34 ... 44 s. 40 454, 456 s. 43 ... 33 s. 49 17, 475 s. 53 ... 65 s. 55 ... 65 s. 60 ... 76 s. 84 ... 486 s. 85 ... 348 s. 86 ... 349 o. 88 355, . 363, 383 s. 89 355, 363, 383 s. 91 370, 384 a. 93 ... 379 s. 94 ... 378 s. 96 ... 381 a. 97 ... 380 s. 100 ... 360 =. 101 ... 365 s. 103 357, 363 ss. 104^107 ... 363 s. 109 ... 367 s. 114 ... 347 s. 115 ... 381 s. 130 ... 36,64,244 s. 131 ... 74 s. 135 ... 504 s. 136 ... 45 s. 137 ... 47 o. 140 ... 329 s. 153 ... 363 s. 168 ... 99 B. 169 ... 401 s. 170 ... 98 s. 172 ... 310 s. 173 ... 310 s. 174 ... 314 B. 175 ... 600 s. 199 ... 31 s. 200 ... 486 s. 203 ... 17 Sched. III. ... 381 c. 22. (Land Charges Act, 1925) ... ... 380 s. 198 380 c. 23. (Administration s. 2 of Estates Act, 1925) ... 596 ... 550 XXVI Table of Statutes. 15 Geo. 5 0. 23. (Administration continued — of Estates Act, 1925)— s. 3... 558 s. 7... 548 B. 8... 551 s. 9... 543 s. 15 555 H. 21 552 s. 28 552 o. 29 553 s. 32 542, 543 s. 33 560, 596 B. 34 576, 578 s. 35 591, 595 ». 37 559 s. 38 580 8. 45 596 s. 55 596 Sched. I. '.'.'. 569, 581 Sched. II.... 596 15 & 16 Geo. 5, o. 49. (Supreme Court of Judicature (C onsoUda- 16 & 17 Geo. 5, c. 7. c. 11. tion) Act, 1925) 14 =. 45 528, 529 s. 56 16 s. 159 553, 608 s. 160 555, 608 s. 161 608 s. 162 608 s. 163 556, 608 s. 164 608 s. 165 608 K. 166 556,608 s. 167 608 (Bankruptcy (Amendment) Act, 1926), s. 2 568 (Law of Property (Amendment) Act, 1926) 583 Sched 585 RULES OE SUPREME COURT. Order 3, r. 6 r. 8 15, 1. 1 16, r. 37 19, r. 6 1. 15 22, 1. 17 33, r. 2 r. 3. rr. 4— 9 42, rr. 3, 5—7 r. 17 ... r. 30 ... 43, r. 6 ... 44, r. 2 ... 350 ... 520 ... 520 ... 505 ... 524 ... 458 ... 130 472, 520 ... 521 ... 521 416, 476 ... 416 ... 477 ... 476 ... 477 Rules of Supreme Court. xxvii PAGE Order 46, rr. la, 16 ... 535 „ 50, r. 12 ... ... 493 r. 15a ... 535 X. 16 ... ... 537 rr. 18—22 ... 537 „ 54b ... 17 „ 55 150, 603 r 3 ... '.'.'. 162, 163, 573 603, 604 1.4 ... 163, 603 r. 5o ... ... 536 r. 10 ... 163, 604 rr. 28—64 ... 521 Rules of 1897 ... ... 109 Rules of 1912 under Public Trustee Act, 1906 112,114 Rules (Pees) of 1912, under Public Trustee Act, 1906 ... 112 TABLE OF GASES. A. PAGE Aaron's Reefs «. Twiss 298 Abrahams, /» re 579 , In re, Abrahams j;. Bendon 600 Aokroyd v. Smithson ... 251, 255 Adams, Re, Adams v. Adams 155, 600 and Kensington Ves- try, iJe 71 Aiken «. Short 291 AinsWorth, Re 133 ■ 1). Wilding 375 Alderson «. White 342 AUcard ?;. Skinner 317 AUgood V. Merrybent and Darlington Rail. Co 477 AUsop, iJe 199,202 Alston, iJe 256 Ambler, Re, Woodhead v. Ambler 575 Andrew's Trust, In re. Carter V. Andrew 79 Angel V. Jay 306 Anglesey (Marquis), Re 534 Anstis, Re, ChetWynd v. Morgan 82 Antrobus v. Smith 78 Arohbold v. HoWth (Lord) ... 310 Archibald J>. Scully 424 Ardagh's Estate, i?e 115 Amott i). Amott 212 Ashton, Re, Ingram v. Papillon 226,277 Aspinall's Settlement, Re ... 245 Atkinson, /» re 71,140 V. LittleWood 271 Attenborough (George) & Son V. Solomon 550 Att.-Gen. W.Albany Hotel Co. 495 V. Biphosphated Guano Co. 457, 459 V. Hubbuck 245 V. Ironmongers' Co. 213 PAGE Att.-Gen. v. Jacobs-Smith ... 83 ■ V. Jeffreys 595 W.Price 213 Att.-Gen. for New Zealand V. Brown 209 Att. -Gen.of Southern Nigeria W.Holt (John) 26,484 Attwood i). Small 299 Atwell w. Atwell 245 Averill, Re, Salsbury v. Buckle 155 Aylesford (Earl) v. Morris ... 314 B. Bacon, In re, Toovey v. Bacon 123, 396 Badger, Re 407 Bahin v. Hughes 193 Baird v. Wells 454 Baker, i?e 566 V. Sebright 504 and Selmon's Con- tract, In re 472 Balls, In re, Trewby v. Balls 573 Bank of Montreal v. Stuart 318 Banks, Re, Banks o. Bus- bridge 590 Banner v. Berridge 197 Barber v. Ulingworth 364 Barff, Ex parte 578 Barker «. Cox 468 Barnes v. Addy 232 V. City of London Real Property Co 450 Barnett v. Beirnstein 389, 591 Barney, Re, Barney v. Barney 230 Bateman (Lady) v. Faber ... 399 Bath V. Standard Land Co. 144 Batstone i;. Salter 226 Baudains v. Richardson ... 317 'B&x, Ex parte ., 516 XXX Table of Cases. PAGE Baynard u. Wooley 193 Beaufort (Duke) v. Berty ... 530 Beavan, In re 573, 575 Bective (Lord) v. Hodgson ... 600 Beddiugton v. Baumann ... 581 Bedford (Duke) v. British Museum Trustees 485 Beeman, Be 575 Behrens v. Richards 434, 490 Belham, Re 574, 575 Bennett v. Bennett 226 «. Stone 473 Bennison, Se, Cutler v. Boyd 132 Bentiuck, Me 564 Bentley v. Mackay 431 Beresford-Hope, iJe 73 Berners «. Fleming 464 Besant, /» re 406 Best, Se, Jarvis v. Birming- ham Corporation 208 Betts, /» re 561 Bevan w. Webb 234 Beyfus v. Lawley 544 Biggs w. Hoddinott 339 Bingham v. Bingham 295 Binns, Re 579 Birch, In re. Hunt v. Thorn 591 Birchall, Re, Birchall o. Birchall 99 Birmingham, Dudley, and District Banking Co. v. Ross 57 Birmingham Excelsior Money Society V. Lane 401 Birmingham Vinegar Brewery Co. ?). Powell 508 Biss, Re, Biss v. Biss 233 Blackwood w. R 545 Blagrave v. Blagrave 105 Blake v. Gale 422, 580 Blandy w. Widmore 269 Blockley, Re 276 Blow, In re 585 Blundell, Re 171, 402 , Re, Blundell v. Blundell 231,280 Blunt's Trusts, Ee 216 Bodega Co., Limited, Re 144, 291 Boles and British Land Oo.'s Contract, Re 145 Bolitho & Co. V. Qidley 400 Bolton u. Curre 201 Bonhote v. Henderson 432 Bonnard v. Ferryman 494 Booth, In re, Booth v. Robinson 259 PAGE Booth V. Leyoester 375 Borthwick v. Evening Post .. 511 Bostock f . Floyer 183 Bostook's Settlement, Re ... 76 Bouch V. Sproule 138 Boulter, iJe 156 Bourne, In re, Davey v. Bourne 203 V. Swan and Edgar, Limited 508 Bovill «. Endle 372 BoWen, Re, Lloyd Phillips v. Davis 215,216 Bowlby, Re, Bowlby v. Bowlby 156 Bowman v. Secular Society, Limited 207 Boyd W.Boyd 275 V. Brookes 575 Boyes, Re, Boyes v. Carritt 67,68,72 Brace v. Marlborough (Duchess) 29 Bracken, Re, Doughty v. ToWnson 583 Bradford (Mayor) v. Pickles 420 Bradley v. Carritt 338, 340 Brandt, Sous & Co. v. Dunlop Rubber Co 45 Brenchley «. Higgius 314 Brier, Re, Brier v. Evison 148, 184, 524 Briggs V. Jones 31 Briscoe v. Jackson 212. 213 Bristowe v. Ward 261 Britain v. Rossiter 456 British Linen Co. v. South American and Mexican Co 532 British Murac Syndicate, Ltd. V. Alperton Rubber Co. Ltd 449 British Power Traction and Lighting Co., Limited, Re 392, 526 Broadwood, /ra re 139 Brogden, iee 126,524,580 Brooke w. Mostyu (Lord) ... 302 Brooks V. Muokelston 352 Brooksbank, Re 261 Brown V. Dimbleby 400 Browne «. Keane 207 Bruce, /» re 579 Brunning v. Odhams 458 Bryant, Re, Bryant v. Hiokley 119,120 Table oj Cases. PAGE Bulteel's Settlement, Be ... 312 Burgess I). Booth 256 1;. Wheate 48 Burke, In re, Burke v. Burke 129 Burton, Ee, Banks v. Heaven 600 Bute's Trustees v. Bute (Marquis) 211 C. Cadogan v. Lyrio Theatre, Limited 533,534 Caird D. Sime 506 Campden'a Charities, Se ... 218 Capell ?>. Winter 152 Carmichael v. Carmiohael ... 552 Carroll, jRe 204 Carter ?>. Silber 260 Casbome v. Scarf e ... 39, 48, 346 Cash (J. & J.), Limited v. Cash 510 Castle V. Wilkinson 469 Catou V. Caton 457, 460 Cave V. Cave 44 Cercle Restaurant v. La very 15 Chalinder and Herington, In re 143 Challender v. Royle 493 Champion, Be, Dudley v. Champion 231 Chancey's Case 271 Chandler «. Pocook 257 Chapman t>. Browne 131 V. Michaelson ...420, 421 Charrington v. Camp 531 Charter w. Watson 357 Charteris, iSe 120 Cheese v. Keen 142 Chesham (Lord), Be, Cavendish i;. Dacre 258,262 Chesterfield v. Janssen 314 Chesterfield's Trusts, Be ... 137 Chetwynd's Settlement, Be, Soarisbrick v. Nevinson ... 95 Chichester (Lord) v. Cov- entry 279 Childe and Hodgson's Con- tract, /re re 469 ChiUingworth v. Chambers ... 191 Chrimes, Be 398 Churchill, In re, Hiscock v. Lodder 600 Clark «. Danvers 226 Clarke «. Wright 83 PAGE Clarke and Chapman v. Hart 424 Clayton's Case 175 Cleveland's (Duke) Settled Estates, Be 257 Clinan v. Cooke 460 Clout and Frewer's Contract, Be 99 Cloutte i;. Storey 30,44,316 Clowes V. Higginson 452 Clydebank Engineering and Shipbuilding Co. v. Ramos Yzquierdo y Castaneda (Don Jose) 330, 332 Cochrane, JEx parte 526 ■ 0. Moore 78, 80 Cookoroft, i?e 591 Codrington v. Codrington 260, 262 Cogan V. Duffield 431 Cohen,/?! re, Brookes W.Cohen 315 Cohen's Trustees, Be 108, 551 Coleman, Be, Henry v. Strong 170 Ceilings «. Wade 199 CoUison V. Warren 497 Colls V. Home and Colonial Stores, Limited 12, 15, 241, 436, 496, 497, 499 CoUyer w. Isaacs 393 Comiskey v. BoWring-Han- bury 71 Compton, Be 575 Connolly Brothers, Limited, In re. Wood v. Connolly Brothers, Limited 15 Cook u. Fountain 57 Coomber, In re, Coomber v. Coomber 318 Cooper, Ex parte 227 «. Cooper 263 V. Harlech 152 ■y.Macdonald 277,279 V. Morgan 471 — «. Phibbs ...286,287,295 Copestake v. Hoper 38 Corbett, Be, Corbett v. Cob- ham (Lord) 273 Cornish, iJe 197 Cornwall v. Henson 474 Cotter, Be 97 County Chemical Co. v. Frankenburg 508 Coimty of Gloucester Bank V. Rudry Merthyr Colliery Co 298,354 Courtenay v. Williams 578 Courtier, Be, Coles v. Courtier 121 XXXll Table of Cases. PAGE Cozens, Be 65, 79 Crabb t). Crabb 226 Craddock Brothers, Limited J). Hunt 433 Cradook v. Piper 1'I3, 144 Craig V. DoWding 512 V. Greer 485 Crichtou v. Criohton 272 Crook V. Seaford Corpora- tion 442 Crosse, Re 133 Cnmden and Meux's Con- tract, /» re 123 Cuban Land Co., JJe 340 CnSe,Inre 595 Cummins v. Perkins 529 Curling v. Flight 472 Currant v. Jago 226 Curteis, i?e 227 V. Wormald 252, 253, 254 Customs and Excise Officers' Guarantee Fund, -Re 87 D. Da Costa, In re, Clarke v. Church of England Col- legiate School of St. Peter 212, 216 Da Costa J). De Pass 207 Daniel v. Ferguson 496 Darby's Estate, In re ...347, 591 Daroy (Lord) v. Askwith 502 Damley (Earl), Be 138 Dartnell, Be, Sawyer v. Goddard 141 Dashwood v. Magniac 503 Davenport v. Rylands 436 David u.Frowd 580 Davies v. Gas Light and Coke Co 497 V. London and Pro- vincial Marine In- surance Co 300 V. Thomaa 389, 477 Davis, Be, Davis v. Davis ... 189 . Be, Hannen v. Hill- yer 213 V. Hutchings 46, 134 Davy V. Scarth 526, 531 Dawson, Be 277 Dean, Be, Cooper-Dean v. Stevens 86, 87, 207 Dearie v. Hall 45, 46, 47 Debenham v. Sawbridge 295, 466 PAGE Debtor, A, Be 401 Deeley v. Lloyd's Bank 175 Deighton and Harris's Con- tract, /m re 469 Delany v. Keogh 296 Delves 1). Gray 451 De Mestre «. West 83 Denton v. Davies 26S D'Epinoix's Settlement, Be 120 De Pothonier, Be, Dent v. De Pothonier : 121, 122, 148, 181 Derry v. Peek : 10, 240, 241 , 284, 285, 309 Deschamps u. Miller 416 Devereux, In re, Toovey v. Public Trustee 113 Deverges v. Sandeman, Clark & Co 334 De Verte, Be 261 Dick, Be, Lopes v. Hume- Dick 132 Dickenson v. Barrow 460 Dickinson's Trusts, Be 98 Diestal J). Stevenson 331 Dillon, iJe 581 Dimmock t). Hallett 296 Dingle v. Coppen 374 Directors of Central Railway Co. of Venezuela v. Kisch 424 Dive, In re. Dive v. Roebuck 131, 202 Dixon V. Dixon 525 V. Gayfere 391 Dodson, 7re re 248 Doe w. Field 105 Doetsoh, Be, Matheson v. Ludwig 545 Doherty v. Allman...479, 481,482, 485, 502 Dominion Coal Co. v. Do- minion Steel Co 446 Dougan w. Maopherson 172 Douglas V. Bolam 109 Douglas and Powell's Contract, Be 257 Douglass V. Pintsch's Patent Lighting Co 512 Dover Coalfields Exploration, Limited, In re 143 Downing, iJe 67,70,72 Dowse D. Gorton 392 DoWson and Jenkins's Con- tract, /» re 364 Doyle I). Crean 223 Drax, i?e, Savile i;. Drax ... 391 Druitt, Be 129 Table of Cases. xxxiu PAGE Brummond, Be 206 Duncan, In re 518 Dunlop Pneumatic Tyre Co. «. Dunlop Motor Co 511 Dunlop Pneumatic Tyre Co. D. Maison Talbot 512 Dunlop Pneumatic Tyre Co. V. New Garage and Motor Co 330, 331 Dunn, Se, Brinklow v. Single- ton 159,526 Durrant v. Ecclesiastical Commissioners 292 Dye V. Dye 65 Dyer D. Dyer 224 Dymond w. Croft 357 Dyson, /re re 248 E. Eaglesfield v. Londonderry (Marquis) 286,288 Earldom v. Saunders 245 Eastwood V. Lever 435, 436 Eaton «. Buchanan 122 Ebrand w. Dancer 226 Ecclesiastical Commissioners V. Wodehouse 502 Edgington v. Fitzmaurice ... 297 Edwards iJ. Carter 260 ■«. Hood-Barrs 189 Egerton v. BroWnlow (Earl) 72 Egmont's (Earl) Trusts, In re 154 EleotromobUe Co. v. British Eleotromobile Co. .Limited 509 Elias V. Snowden Slate Quarries Co 503 Elibank (Lady) v. Montolieu 404 EUard v. Phelan 207 EUenborough, In re, ToWry Law V. Bume 83 EUiott !;. Turner 523 Elphinstone (Lord) v. Monk- land Iron andCoalCo. ... 330 Elton u. Eason 41 England's Settlement Trusts, Re 160 Espin 1). Pemberton 34 Eustace, In re 423,580,591 Evans, llx parte 537 •«. Chapman 431 Evans' Will Trusts, Se 128 Ewing V. Orr Ewing 91, 417, 604 Exchange Telegraph Co. v. Central News 506 D.B. PACK Exchange Telegraph Co. v. Gregory & Co 507 Eykyn's Trusts, Se ........ 226 E. Pairclough v. Swan Brewery Co., Limited 339 Farmer 47. Pitt 379 Farrar v. Farrars, Limited ... 363 Fawcett and Holmes, Be 466 Fenner 1). Wilson 495 Fenwick «. Clarke 597 Ffennell's Settlement, Be 245, 254, 257 Fields. Field 127,148 Fine Cotton Spinners and Doublers' Association, Limited, and Cash (John) & Sons, Limited v. Har- woodCash&Co 510 Fish, Be, Bennett v. Bennett 141 Fitzgerald's Trustees v. MeUersh 372 Fitzpatrick v. Waring 150 Fletcher, Be, GiUings v. Fletcher 271 '■ — u. CoUis 196 • V. Green 191 Flight «. BoUand 454 V. Booth 467 Foley V. Hill 517 Fouutaine, /» re 198 Foveaux, Be 206,207 Fowkes V. Pascoe 67, 225 Fowler, Be, Fowler v. Odell 150 V. Fowler 432 Fox ?>. Mackreth 145 Foxwell V. Van Grutten ... 531 Francke, /m re 536 Eraser, Be, Lowther v. Eraser 591 Eraser u. Murdoch 161 Freund D. Steward 206 Frith, Be, NeWtou v. Rolf e ... 392 Fry V. Lane 313 V. Tapson 182,186 FuUer, iJe 94 Fumess, Be 280 Fylerv. Fyler 200 G. Gardner v. London, Chatham, and Dover Rail. Co. 527 V. RoWe 65 XXXIV Table of Cases. PAGE Gardom, Re 68 Gamham v. Skipper 521 Garrett t). Wilkinson 227 Garth w. Cotton 504 Garthshore v. Chalie 269 Gee «. Liddell 77 General Accident Assurance Corporation ti. Noel 480 General Accident Assurance Corporation, Limited, Me 102 General Credit and Discount Co. «. Glegg 371 Gething v. Keighley 523 Gibbs V. Cruikshank 351 Gibson v. Goldsmid 421 Gilbert, iJe 576 Gillam v. Taylor 206,217 Gillies, Archer and Penney, Be 75 Glasdir Copper Mines, Limited, In re 526 Glenorchy (Lord) v. Bosville 75 Glubb, Be 305 Godfree, Be 138 Godfrey «. Poole 86 Goldschmidt v. Oberrheinsche Metallwerke 533 Goldsmid V. Goldsmid 268 Good, Z» re 206 Gordon, iJe 257 V. Gordon 298 u. Street 291,298 Gordon Grant & Co. v. Boos 364 Gorringe v. Irwell India Rub- ber Works 387 Gosling i;. Gosling 169 Graham v. Graham 270 «. Mcllwaine 24 Grange, /» re 256 Grant (Gordon) & Co. v. Boos 364 Grassi, In re, Stubberfield v. Grassi 545 Greayea, Ex parte 127 ,Be 604 Green, In re 34 ^ U.Burns 353 Greg, Be 271 Grenville-Murray v. Claren- don (Earl) 85 Greville -Nugent v. Mac- kenzie 503 Griffith, Be, Jones v. Owen 561 — V. Blake 495 V. Hughes 200 Griffiths u. Owen 146 . V, Vezey 477 PAGE Griggs, Be 543 Grimond «. Grimond 212 Grimthorpe, In re 254, 257 Gunter u. Halsey 459 Gyles, /rare 599 H. H.'sSettlement,/»re,H.'y.H. 406 Halkett v. Dudley (Earl) 473 Hall, i?e 269 , Be, Foster v. Metcalfe 598 u. Bumell 475 t). Comfort 350 1;. Hall 404 V. Hai 282 Hallett's Estate, Be, Knatch- buU V. HaUett 174, 175, 236 Hallowes' Trust, /m re 152 Hamborough's Estate, In re 407 Hambro v. Bumand 308 Hampton, Be 115 Hancock, Be, Hancock v. Pawson 262 u. Smith 175 Hankey, Be, Cunliffe Smith v. Hankey 577 Harcourt v. Seymour 257 Hardaker v. Moorhouse 95 Hardoon v. Belilios 22, 160 Hardy, Be 589 Hare and O'More's Contract, In re 469 Hargreaves, Be, Hick v. Hargreaves 120 Hargrove, Be 264 Harle v. Jarman 259 Harris, Be 576 -V. Beauchamp Brothers 529, 534 Harrison, Be 223 , Be, Harrison v. Higson 88 u. Guest 314 Harton v. Harton 106 Hasluok V. Clark 570 Hastiags, Be 564 Hawksley v. Outram 446 Hay, i?e 566 Haynes t). Foster ...261,262,264 Hazeldiue's Trusts, In re ... 352 Head v. Gould 193, 232 Heales «. McMurray 354 Heath, 7?i re 595 Heather, In re, Pumfrey v. Fryer 279 Table of Cases. XXXV PAGE Hemmiugs v. Sceptre Life Association 303, 305 Henderson v. AstWood 354 Henty «;. Schroder 474 Herbert v. Herbert 256 Hermann «. Charlesworth ... 315 Hetley, Be, Hetley v. Hetley 67, 68, 212 Heugh iJ. Soard 140 Hewitt's Settlement, iJe 115 HeWson v. Shelley 559 Higginbottom, Be 95 Highwaymen's Case 420 Hill, iJe, Hill w.Pnoher 121 ■■!). HiU 71 V. Eowlands 384 HUliard «. Fulford 133 Hills «. Hills 581 Hilton, In re, Gibbes v. Hale- Hinton 120, 129 Hoare v. Kingsbury Urban District Council 442 Hodson 1). Deans 363 ■«. Heuland 460 Hodson and Howes' Con- tract, Be 363 Holford, Be, Holford v. Hol- ford 155 Holgate V. Shutt 522 Holland, Be, Gregg v. Hol- land 65,310 HoUiday v. Lockwood 305 Holmes «. Coghill 542 ■«. MiUage 529 Hommel v. Bauer & Co 509 Hood-Barrs v. Cathcart 402 V. Heriot ...398,400, 402 Hope u. Walter 451 Hopkins v. Hopkins 48 Hopkinson, Be 254 V. Richardson ... 256 Hopwood V. HopWood 278 Horlock, Be, Calham v. Smith 270,271 'Horn's Estate, Be, Public Trustee 1). Garnett 139 Home, Be, Wilson v. Cox Sinclair 133 ■ j;. Pringle 179 HorsnaU, In re, Wormersley V. HorsnaU 171 Houghton, Be, Hawley v. Blake 559 Houston V. Bums 208 . u. Hughes 105 PAGE Hovenden v. Annesley (Lord) 195 How «. Winterton (Earl) 198 Howe D.Dartmouth (Lord)... 127, 128 HoWel u. HoWel 75 Hoyles, In re. Row v. Jagg 139 Huddersfield Banking Co. v. Lister (H. ) & Son, Limited 294 Hudson, In re, Cassels v. Hudson 49, 58 v. Carmichael 404 V. Hudson 552 V. SpSncer 274 V. Viney 31 Hughes, iSe 245 V. Britannia Benefit Society 380 • V. Morris 461 Huish, Be, Bradshaw v. Huish 271 Humberston v. Humberston 75 Hunt, Be, Pollard v. Geake. . . 167 D. Luck 32 Hunt's Estate, 7™ re 131 Hunter i>. Allen 234 Huntley (Marchioness) v. Gaskell 402 Huxtable, Be, Huxtable v. Crawfurd 212 Hyde Park Place Charity, In re 214 I. Ideal Bedding Co., Limited «. HoUand 160,310 lUidge, Be, Davidson v. Ulidge 543 Imray v. Oakshette 33 Income Tax Commissioners V. Pemsel 205 Ind, Coope & Co. v. Em- merson 15 Ingham, Be 551 Ingleby & Co., J2e 95 IrWin, In re, Irwin v. Parkes 75 Isaacs, Be, Isaacs v. ReginaU 247 Jackson a. Dickinson 191 Jackson and Haden's Con- tract, /re re 469 XXXVl Table of Cases. PAGE Jacobs «. EeTell 467 Jaoomb t). Howard 551 Jacques, Be, Hodgson v. Braisby 280 Jamea, Ex parte 289 , In re, James v, James ^ 604 v. Dean 233 i;. Kerr 339,340 Jared «. Clements 30,232 Jeffery w. Stewart 474 Jeffries i;. Jeffries 83 Jenkins and Randall's Con- tract, iJe 177 Jennings ». Jordan 379 Jobson u. Palmer 142 John i;. John 531 Johns «». James 86,222 Johnson v. Bragge 432 V. Brock 352 Johnston-Cockerell v. Essex (Earl) 74 Jones, In re 578 V. Llanrwst Urban Council 505 w. Powxes 29 (James) & Sons, Limited v. Tankerville (Earl) 482 Judd and Skeloher, In re 152 K. Karberg's Case 307 Kay, Be, Mosley v. Kay : 201, 583, 607 Keeoh v. Sandford 233 Keith V. Gancia (R.) & Co., Limited 351 Kekewich «. Manning 78,80 Kemnal, Be 551 Kennedy v. Do Trafford 363 Kenny's Trusts, In re 102 Kenward, /» re 566 Kerr's Policy, /re re 375 KettleWell v. Refuge Assur- ance Co 308 — V. Watson 389 Kinahan's Trusts, In re ...46, 47 Kinei). Jolly 496,497 King, In re 585 «. Mullins 164 V. Wilson 466 Kinlooh ii. Secretary of State for India 85 PAGE Kinnaird w. Trollope 370 Kirohner & Co. I). Gruban ... 506 KleinWort v. Dunlop Rubber Co 293 Kloebe, Be, Kannreuther V. Geiselbrecht 545 Klug^;. Klug 121 Knapman, Be 578 Knight «. Simmonds 422 (John) & Sons v. Crisp &Co 509 Knight's (Sarah) Will, iJe ... 95 Kreglinger {Q. & G.) v. New Patagonia Meat and Cold StorageCo 340 Kronheim v. Johnson 63, 65 L. Lacon, Be, Lacon v. Laoon 280, 282 j;. Mortens 460 Lacons v. WarmoU 585 Lake, In re, Ex parte Caven- dish 45 , Be, Ex parte Howe Trustees 186 Lamb v. Evans 506 Lanoefield v. Iggulden 587 Land Purchase Trustee of Northern Ireland v. Beers 76 Lassenoe v. Tiemey 223 Lavery «;. PurseD 11,435 Lawj>. Law 303,305 Lawes, Be 278,280 — V. Bennett 244,247 LaWley, In re, Jackson u. Leighton 584 Lawrence v. Butler 453 Laycock, Be 567 Leaper, Be 581 Learoyd 1). Whiteley 131 Lechmere v. Carlisle (Earl) 268 Leeds Industrial Co-operative Society, Limited v. Slack 499 Le Lievre v. Gould 284 Leslie v. Baillie 287 J). Clifford 520 Leslie's Hassop Estates, 7« re 113, 114 Lester v. Foxoroft 461 Lever II. KofiSer 448 Levita's Claim 315 Levy V. Stogden 475 Levy (Sir W. C.) & Co., Limited v. Andrews 409 Table oj Cases. xxxvu PAGE Lewis, Be 143 «. Nobbs 181 L'Herminier, He, Mouusey V. Bustou 216 Lichfield (Earl), iJe 97,182 Lind, iJe 393 Lindsay Petroleum Co. «. Hurd 424 Liasley, Se, Cattley v. West 141, 193 Liskeard and Caradon Eail.Co.,i?e 527 Lister & Co. v. Stubbs . . .234, 236 Lloyd, Se, Lloyd v. Lloyd 374, 383 V. Banks .> 46 V. Grace, Smith & Co. 308 i!. Spillit 65 Lloyd's Bank v. Medway Upper Navi- gation Co. ... 534 J>. Pearson ... 45, 46 Lockhart v. Eeilly 193 Lodge V. National Union In- vestment Co., Limited 420, 421 London, Chatham and Dover Rail. Co. V. South Eastern KaU. Co 518,519 London County Council v. Allen 484 London County Council v. Hutter 479 London Pressed Hinge Co., In re 527, 528, 529 Lord and FuUerton's Con- tract, iJe 99 Loveless, Me 133 Low V. Bouverie 124, 141 w. Guthrie 317 LoWther u. Bentiack 155 Luker 11. Dennis 483 Lumley, Re, Ex 'parte Hood- Barrs 395 V. Ravenscroft 454 «. Wagner 450,479 Lurgan's (Lord) Case 307 Lyttou (Earl) i). Devey and Swan Sonnenschein & Co. 505 M. MoCarogher v. Whieldon 279, 281 Macdonald v. Irvine 128 Macduff, Re 208 McFadden v. Jenkyns 64 McGruther V. Pitcher 486 PAGE Mcintosh V. Great Western Rail. Co 517,519 Maokay, In re, Griessemaim V. Carr 122,202 MoManus u. Cooke 456 Macmillan v. Ehrmann Brothers 510 McMuUan, Re, McMullan v. MoMuUan 79 Maddisou v. Alderson 442, 456, 459, 460 Maddock, Re, Llewelyn v. Washington 586,590 Magee w. Lavell 330 Magrath, iJe 211 Major, iJe 591 MaUott V. Wilson 99, 123 Manchester, etc.,Banking Co. V. Parkinson 534 Manchester Ship Canal Co. v. Manchester Racecourse Co. 481 Manette, Re 206 Mann, Re, Hardy u. At- torney-General 212 Manners u. Pearson c& Son ... 520 Manning «. Freake 4 Manton ■«. Roe 604 Mara I). Browne 232 Marley, iJe 247 Marsden v. Kent 126 Marshall, iJe 171 u. Crutwell 227 V. James 294 1>. South Stafford- shire Tramways Co 527 Martin, JJe 109 w. Mitchell 454 V.Price 490 Martin's Trust, iJe 94 Marvin, /» re 576 Maryon-Wilson Estate, In re 130 Massingberd, Re, Clark v. Trelawney 187 Matthews v. Brise 127, 182 V. Ruggles-Brise 161 Maudslay, Sons and Field, Inre 529 Maxfield v. Burton 34 May «. Piatt 433 Maynard v. Easton 301 Meinhertzagen v. Walters ... 279 MeUison, /ra re 584 Melton, J?e 579 Mendes v. GuedeUa 181 Mercier v. Meroier 225 Merryweather v. Moore ...... 606 XXXVUl Table of Cases. PAGE Metropolitan Bank v. Heiron 235 Metropolitan Electric Supply Co. u. Ginder 480,482 Meuxw. Cobley 479,502 Meyer v. Simonsen 137 Midgley v. Midgley 572 Miller and AldWorth, Limited V. Sharp 459 Millett V. Davey 354 Mills V. United Counties Bank, Limited 347 Milroy v. Lord 78 Minors u. Battison 165 Minteri;. Carr 380 — V. Kent, etc., Land Society 536 Mitf ord V. Reynolds 86 Mohamidu Mohideen Hadjiar V. Pitchey 547 Molyneux t;. Fletcher 201 — ■ — ■ • u. Bichard 447 Monckton's Settlement, Be 76 Montacute (Viscountess) V.Maxwell 456,462 Montagu v. Sandwich (Earl) 278 Montefiore v. Guedalla 46, 97 Moody V. Cox and Hatt ...301, 304 Moore v. Fulham Vestry ... 293 Morgan v. Brisoo 476 — — V. Jefireys 339 Morris (Herbert), Limited V. Saxelby 4S2 Mortlook «. Buller 466, 468 Moses, In re, Moses v. Valen- tine 128,545 Moxon, Be 114 Moyle Finch's (Sir) Case ... 48 Mumford v. Stohwasser 31 Munton, iJe 232 Murray v. Elibank (Lord) ... 403 Mustapha v. Wedlake 581 Mutual Reserve Fund Life Association o. New York Life Assurance Co 480 N. Nail V. Punter 195 Nash, In re, Cook v. Frederick 39,261 w. Calthorpe 299 National Provincial Bank of England I). Games ..' 376 National Trustees Company of Australasia v. General Finance Co 184,202 PAGE Neate v. Marlborough (Duke) 388 NeiU I). Neill 157 New, Be 157 New, Prance and Garrard's Trustee v. Hunting 65, 79, 86 New South Wales Taxation Commissioners v. Palmer 564 New York Breweries Co. v. Attorney-General 553 New Zealand Midland Rail. Co., In re 376 Newbold V. Roadknight ... 592 Newen, iJe 167 Newman, /re re 329,332 Newstead ?;. Series 83 Nisbet and Potts' Contract, In re 25,33 Nitedals Taendstikfabrick «. Brustu 234 Nixon, Be, Gray v. Bell ... 584 Noakes & Co., Limited v. Rice 340 Nocton V. Ashburton (Lord) 10, 15, 242, 313 Nordenfelt v. Maxim -Norden- f elt Guns and Ammunition Co 483 North V. Perceval 471, 474 ■«. Way 39 North American Land and Timber Co., Limited v. Watkins 195 North Cheshire and Man- chester Brewery Co. v. Manchester Brewery Co. 510 Northern Bank v. MoMackin 589 Nottage, Be 86,206 Noyes v. PoUock 354 Nugent V. Nugent 146, 525 Nuttw. Eastou 363 0. Oatway, Be, Hertslet v. Oatway 175 Oberrheinisohe Metallwerke V. Cocks 495 Oddy, In re 114,203 Official Receiver v. Cooke ... 48 O'Flaherty v. Brown 65 O'Flanagan and Ryan's Contract, Be 148 Ogilvie, iJe 261 O'Hanlon v. Logue 207 Table oj Cases. xxxix PAGE Oldfield, Re, Oldfield v. Oldfield 70,72 Oliver, In re 138 — ■ 1). Hinton 31 Oliver's Settlement, Re 105 Olpherts i;.Corydon 576 Opera, Limited, /ra re 288 Onnrod's Settled Estate, Re 150 Osborne v. Bradley 485 Owen V. Homan 531 Oxley, iJe 392 P. Paget V. Paget 402, 404 Pain, iJe 160 Palfreeman, Re 600 Palmer, 7ra re 134 V. Emerson 188 Panama and South Pacific Telegraph Co. v. India Rubber, Gutta Percha. and Telegraph Works Co. ... 309,310 Papillon V. Voice 75 Parbola, Limited, In re 370 Pardee, /w re 212 Parker v. McKenna 22, 143 146, 419 Parker's Trusts, Re 95 Parry and Hopkiu, In re 503 Patman v. Harland 33 Patten v. Edmonton Guar- dians 177 Patterson v. Landsberg 296 Pattison v. Gilford 490 Fault). Paul 79 Pawley v. Pawley 402 Pawley and London and Provincial Bank, ^e ...547, 548, 551 Payne v. Mortimer 564 Payton & Co. u. Snelling, Lampard & Co 507 Peachy v. Somerset (Duke) ... 325 Pearce, In re 599 V. Morris 369 Pearson v. Dublin Corpora- tion 285,308 Peel's Release; i?e 216 Penn v. Baltimore (Lord) ... 416 Pepin V. Bruyere 545 Perham v. Kempster 31 Phillips V. Homfray 518 V. Phillips 517 V. Probyn 88 Phillips' Trusts, Re 46 PAGE Pickard v. Sears 293 Pickering v. Pickering 128 Pidoock, In re 48 Pike J). Eitzgibbon 396 Pilcher v. Rawlins 28, 30 Pilling's Trusts, J?e 95 Pinet (P.) et Cie v. Maison Louis Pinet, Limited 510 Pink, Re, Elvin v. Night- ingale 569 Pirbright v. Salwey 86 Pitt-Rivers, Re, Scott v. Pitt-Rivers 85 Piatt u. Mendel 384 Pole V. Pole 227 PoUaoh ?;. Ennis 94 Pollard's Settlement, Re ... 402 Pollock, Re, Pollock v. Worrall 266,272 Ponder, ife 550 PonsoUe v. Webber 343 Poole, Ex parte 268 Pope V. Curl 505 Pope's Contract, /«. re 130 Porter v. Moore 293, 301 Potts, /rare 536 Powell V. Brodhurst 376 1). Powell 318 U.Riley 590 Powell Duffryu Steam Coal Co. V. Taff Vale Rail. Co. . . . 440, 441 Power V. Hayne 170 Po wys V. Mansfield 276 Practice Note (1904) 495 Preston v. Luck 452 V. Tunbridge Wells Opera House, Limited 367 Price V. Easton 82 • V. Macaulay 467 Prison Charities, Re 213 Pryce, Re 84 Prytherch, In re 528, 536 PuUenu. Koe 83 Pulman v. Meadows 575 Vye,Exparte 276 Pyle, iJe, Pyle u. Pyle 247 Pym V. Lockyer 266 Q. Quicke's Trusts, /» re 154 R. P.., In re 94 R. V. Sharp 561 xl Table of Cases. PAGE Baikes v. Raikes 97 Ramsay, Be 600 Randall, Se, Randall v. Dixon 216 Ratoliffe, iJe 109 Rattenberry, iSe 271 Raven, i?e 121 Rawlinson v. Ames 460 RaWsthome v. Rowley 119 BeddaWay v. Banham ...507, 508 Redgrave v. Hurd 299, 305 Reeve D. Lisle 338 Reis,JJe, ^a; parte Clough 310,315 Rey V. Leconturier 508 Rhoades, JJe 576 Richards v. Delbridge..., 77 Richardson, Re 199,518 Ee, Parry v. Holmes 217 Rioherson, Se, Scales v. Heyhoe 253,254 Ridout V. Towler 390, 534, 537 Rileys v. Halifax (Mayor) ... 495, 497 Eobb V. Green 506 Roberts, Be, Roberts v. Roberts 302, 592 W.Gray 409 Robertson, v. Broadbent ... 592 Bbbinson, In re, McLaren v. Public Trustee 176, 422 w. Ashton 249 — ■ v. Gumming 578 — V. Harkin 182, 193 V. Pickering 401 Boohefouoauld v. Boustead 68 Rogers w. Hosegood 45,484 — U.Rice 329 Rooke D. DaWsou 220 Rose V. Watson 390 Ross, iJe, Ashton f. Boss 169 Rourke v. Robinson 376 RoWnson, Ee 572 RoWsell V. Morris 553 Royal Bristol Permanent Building Society v. Bomash 474 Rudd V. Lasoelles 465, 468 Rudge V. Rioheus 357 Russol V. Russel 336 Russell, Ee, Dorell v. Dorell 75 V. Plaice 580 Ruthvon's Trust, /re re ...102,461 Ryan v. Mutual Tontine Association 450 Kymer, In re 211 S. PAOB Sackville-West v. Holmesdale (Viscount) 72,73,75 SafEron Walden Building Society u. Rayner 46 Salisbury ?J. Salisbury 269 Salmon, In re. Ex parte The Trustee 379 , fie, Priest u.Uppleby 186 Salomon v. Salomon & Co. ... 299 Salti). Cooper .....493,537 • V. Northampton "(Mar- quis) 334 Salusbury v. Denton 209 Sampson, In re, Sampson v. Sampson 97 Samson, In re, Robbins v. Alexander 564, 576, 577 Samuel v. Jarrah Timber and Wood Paving Corporation 338, 341 Sanders' Trusts, Be 86 Santley v. Wilde 372 Saunders v. Newbold 523 «. Shafto 315 — — ■ — — V. Vautier 171 Savage, Ee 578 Sawyer t;. Sawyer 201 Scobie V. Collins 350 Scott, Be, Langton v. Scott 276 , iJe, Scott t). Scott 156 D. Coulson 294,301 1;. Morley 396 ■». Tyler 558 Scott and Alvarez's Contract, In re 452 Scottish Equitable Life Assur- ance Society, Policy No. 6402, Be 225 Seabrook, In re. Gray v. Baddeley 542 Searle, In re, Ryder v. Bird 256, 406 Seaton u. Heath 303 Seddon v. North Eastern Salt Co., Limited 305 Selby «. Alston 63 Selous, In re, Thomson v. Selous 64 Sewell, In re. White v. Sewell 192, 579 Sharp, In re, Rioketts v. Ricketts 198 ■ V. Lush 607 -«. Rickards 380 Shaw, Ee 114 Table of Cases. xli PAGE Shaw w. Gates 131 Shelley's Case 74, 106 Shephard, /w re 533 Shepherd «. Croft 467 V. Harris 183,184 Sheppa,rd', In re, De Brimout V. Harvey 182 Shields, In re, Corbould-EUis V. Dales 275,282 Ship's Case 294 Shropshire Union Rail. Co. v.R 29 Shuttleworth «. Clews 475 Sibley?). Perry 586 Sidney, In re 206,208 8im.m.on6B, Ex parte 289 Sinclair v. Brougham 174 Singer Manufacturing Co. V. British Empire Manu- facturing Co 508 Singer Manufacturing Co. V. Loog 507 Sisson's Settlement, He, Jones V. Trappes 127 Skeats ?;. Evans 96 Skinner, Be, Cooper v. Skinner 141,604 Skinner & Co. v. Shew & Co' 512 Slack V. Leeds Industrial Co-operative Society, Ltd. 498 Slade ?;. Chaine 139 Slater, /» re 586 Smith.ife 207 , Be, Eastick v. Smith 123 ?;. Armitage 524 •■«. Claxton 253 U.Cooke 86,222 U.Day 495 u. Kerr 213,217 V. Lucas 264 — ■ U.Smith 249,372 u. Wheatcroft 464 Smythies, Be, Weyman v. Smythies 273 Soar u. Ashwell 232 Soden and Alexander's Con- tract, Be 34 Soley u. Sainsbury 486 Solomon, /rare 188 u. Attenborough ... 550 Somerset, Be, Somerset v. Poulett (Earl) : 199, 200 (Duke) V. Cookson 445 Somerville and Turner's Contract, iJe 49,108,543 PAGE Soper u. Arnold 294 South African Territories, Limited u. Wallington ... 446 Sowden u. Sowden 268 Speight u. Gaunt 148,184 Spencer's Case 45 Sprange v. Lee 400 Staceyu. Elph 99 Stamford and Warrington (Earl), Be 140 Stamp V. Gaby 48 Standing v. BoWring 225 Stapleford Colliery Co., Be, Barrow's Case 30 Starr-Bowkett Building Society, /re re 469 Stead, Be, Witham v. Andrew 69 Steed u. Preece 255,256 Steeden v. Walden 406 Steedman u. Drinkle 448 Steel Wing Co., J?e 80 Stenning, Be, Wood v. Stenning 175 Stevens, In re, Cooke v. Stevens 524, 530, 553, 606, 607 V. Theatres, Limited 357 Stewart, /Je 78 Stock u. McAvoy 227 Stokes V. Prance 232, 337 Stoneham, Be 78 Stott V. Milne 150, 159, 168 Stratheden and Campbell (Lord), Be, Alt v. Stratheden and Campbell (Lord) 215 Strathmore (Countess) v. Bowes 315 Strickland w. WiUiams ...326,329 Stuart, Be, Smith v. Stuart 202 Stubbs (Joshua), /» re 526,532 -u. Slater 334 Stucley, In re, Stucley V. Kekewich 389 Sturge V. Midland RaO. Co. . . . 448 Sturgis V. Champneys 403 Sutton V. Sutton 357 Swain v. Ayres 448 Symons, /» re 524 Tackey u. McBain 285 TafE Vale Rail. Co. v. Nixon 517 Talbot (Sir John) v. Shrews- bury (Duke) 270 Tamplin v. James 295 xlii Table of Cases. rAOB Tanqueray-Willaume and Landau, iJe 558 Tarn v. Turner 369, 370 Taunton v. Morris 403 Taylor v. AUhusen 315 — — ■ — V. London and County Banking Co. ... 29 u. Neate 526 ■ ■ U.Russell 29 V. Taylor 275, 276 Teevan v. Smith 370, 381, 383 Tempest, iJe 95 «. Camoys(Lord)... 119, 120, 121 Terry and White's Con- tract, /re re 467 Tharp i;. Tharp 69 Thomas, Be 139 ■ — ~ In re, Sutton, Carden & Co., Limited v. Thomas 204 v. Bennet 270 v. Bering 468,469 Thomasset v. Thomasset . . . 406 Thompson v. Corby 207 ^u. Finch 181 V. Hickman 433 Thompson's Settlement, Be 97 Thomson v. Clydesdale Bank, Limited 231 ■ — • V. Eastwood 172 Thome v. Heard and Marsh ... 34, 198, 199, 364 Thomhill, iJe 171 Thorpe, Be, Vipont v. Radcliffe 234 Timmis, Be, Nixon v. Smith 197 ToUemache, Be 157 Tongue, iJe 264 ToWndrow, In re, Gratton u. Machen 192 Townsend's Contract, ii!e ... 105 Train v. Clapperton 134 Treasury Solicitor v. Lewis 539, 581 Trevor v. Trevor 75 Tubba, iJe 140 Tuck, In re, Muroh v. Loosemore 203 Tucker v. Bennett 432 Tulk V. Moxhay 6, 483 TuUett w. Armstrong 398 TumbuU, iJe 98 Turner, 7ra re 160 , iJe, Barker u. Ivimey 188, 201 PAGE Turner, «. Green 300 u. Turner 579 Turpin and Ahem's Contract, Be 234 Tussaud V. Tussaud 280 Tyler, Be, Tyler v. Tyler ... 87, 215 Tyrrell v. Palutou 533, 534 U. Udell u. Atherton 310 University of London, In re 211 V. Vagliano, In re 214 Valentine Meat Juice Co. o. Valentine Meat Extract Co 510 Valpy, In re 590 Van Grutten «. Foxwell 106 Van Joel i;. Homsey 497 Van Praagh v. Everidge ...291, 292 Van Straubenzee, Be, Boustead V. Cooper 127, 128 Vane v. Barnard (Lord) 504 Vardon's Trusts, Be 260, 264 Vaughan v. Vanderstegen . . . 542 Vibart «. Coles 578 Viokers, Be 280 Viditz ?;. O'Hagan 260 Vipont V. Butler 143 Von Breutano, In the Estate of 108 Vyse ?;. Foster 189 W. Waldy U.Gray 34 Wales u. Carr 376 Walford v. Walford 600 Walker, iJe 95,245,587 V. Linom 31 Wallis u. Smith 330 Walters v. Woodbridge 159 Ward u. Buncombe 46 u. Ward 150 Ward & Co. v. Wallis ...292, 293 Wareham, In re, Wareham V. Brewin 128 Waterer v. Waterer 246, 249 Watling u. Lewis 347 Watson, ife 579 Wauton u. Coppard 298 Weall, Be, Andrews v. Weall 149,182 Table of Cases. xliii PAGE Webb V. Crosse 376 u. Smith 591 Webster, In re, Pearson v, Webster 213 Wedgwood, Se 207 Wedgwood V. Adams 452 Wedmore, Ik re 586 Weir's Hospital, In re 213 Weller?;. Ker 121 Wells, In re 576 Welsh Hospital (Netley) Tund, Se :ill, 213 Wenham, Be, Hunt v. Wen- ham 573 West w. Williams 377,378 West Ham Central Charity- Board V. East London Waterworks 502 West Leigh Colliery Co., Limited v. Tunniolftfe and Hampson, Limited 418,436 Westby u. Westby 302 Wharton v. Mastermau 169 Wheeler, Be, Hankinson v. Hayter 397, 572, 575 Wheeler's Settlement Trusts, Be 401 Whistler v. Webster 261 Whiston'a Settlement, Be ... 75 Whitaker, Be, Whitaker v. Palmer 569 Whitbread & Co., Limited v. Watt 388,390,475 Whitchurch (George) v. Cavanagh 308 White, iJe 212 — — ■ — • V. Carter 73 —U.Metcalfe 367 Whitehead, iJe 245 Whiteley, In re, London (Bishop) i). Whiteley 220 Whiteley v. Edwards 400 Whitfield, Be 139 Whiting's Settlement, Be, Whiting i). De Rutzen 325 Whitley «;. Challis 527 Whitwood Chemical Co. v. Hardman 480 Wilcocks V. Wiloooks 268 Wilde «). Gibson 305 Wilkie'a Settlement, i?e 167 Williams, In re 94, 169, 170 PAGE Williams, Be, Holder v. Williams 575 Williams v. Hunt 357 V.Morgan 344 1). Scott 145,146 ■ V. Williams 561 Williamson v. Barbour 523 Willis, iJe 210 ti. Barron 318 V. Jernegan 522 Wills i;. Stradling 459 Willson V. Love 330,331 Wilson, In re 591,597 Be, Wilson v. Hollo- Way 249 i;. Keating 389 ^ «. Turner 119 Wimperis, 5e 399 Windhm Local Board of Health «. Vint 301 Wintour «. Clifton 263 Wise V. Perpetual Trustee Co., Limited 161 Woking Urban District Council (Basingstoke Canal) Act, 1911, iJe 25 WoUaston V. King 261 ~ V. Tribe 432 Wolverhampton Corporation U.Emmons 445,447 Woodf all V. Clifton 248 Woodgate, Be 95 Woods, Be, Gabellini v. Woods 138 Works Commissioner (Cape of Good Hope) v. Hills ... 331 Worthing Corporation v. Heather 216,248 Wright, iJe 315 V. Carter 318,319 Wrightson, In re ...100, 187, 524 Wrigley v. Gill 375,376 Wyman v. Pateraon 127, 182 Wynne v. Tempest 126 Y. Yates, In re 599 Yorke, In re. Barlow v. Yorke 167 Young V. Peachy 225,226 TABLE OF ABBREVIATIONS. Ash. Eq Holdsworth Stra. Conveyancing Stra. L.C. ... Stra. Mortgages Stra. Property Stra. Wills Stra. and Old. Under. Trusts Under, and Stra. Inter, of Wills. Principles of Equity, by Walter Ashbumer (1902). History of English Law (2nd ed. 1923). A Concise Introduction to Conveyancing, by J. Andrew Strahan (3rd ed. 1927). Leading Cases in Equity, by J. Andrew Strahan (1909). The General Law of Mortgages, by J. Andrew Strahan (3rd ed. 1926). A General View of the Law of Property, by J. Andrew Strahan (7th ed. 1926). The Law of Wills, by J. Andrew Strahan (1908). Strahan and Oldham's Law of Partnership (4th ed. 1926). A Concise Manual on the Law of Private Trusts and Trustees, by Sir Arthur Under- bill (8th ed. 1926). The Principles of the Interpretation of Wills and Settlements, by Sir Arthur Underhill and J. Andrew Strahan (4th ed. 1928). xlj' FOREWORD ON RECENT LEGISLATION SUMMARY I. Modes of Legislation. p^^j. Legislation in mass xlvii Codification and Amendment xlviii Object of Foreword 1 II. Indirect Changes in Equity. Main object of new legislation 1 Settlements by way of use abolished li Settlement by trusts for conversion superseded liv Estates in common liv First limitation of the doctrine of notice - Iv Second limitation of the doctrine of notice - Ivi Extension of the doctrine of notice - Ivii III. Direct Changes in Equity. Trusts - Iviii Mortgages Ix Administration of Assets Ixi xlvi FOREWORD ON REGENT LEGISLATION. I. MODES OF LEGISLATION. Legislation in mass . — Nearly fifty years ago I attended a course of lectures on Roman Law delivered in Middle Temple Hall. The lecturer was my old friend James Bryce, afterwards Viscount Bryce, O.M. He was dealing at the beginning of the course with the history of Roman Law and comparing the development of that great system of Jurisprudence with the development of the other and only other great system, English Law. Why I now recall those lectures is because of the weight which the lecturer placed on the predominance of express legislation in the development of later or what Austin would call " mature " law. He said there was more legislation by Parhament during the nineteenth century than during all the pre- ceding centuries between it and the Conquest. " The tide of enactments," he declared, " has now become so strong that practising barristers find it nearly impossible to keep abreast of it." Bryce, besides being Reader (or, as the office then was called. Professor) of Civil Law at the Inns of Court was at this time also a working conveyancer at Lincoln's Inn. xlvii xlviii Foreword on Becent Legislation. The lecturer when he spoke was thinking of the Judicature Act, 1873, the Vendor and Purchaser Act, 1874, the Conveyancing Act, 1881, and the Settled Land Act, 1882. These certainly constituted what up to that time was a record output ; and they were aU passed within eight years. What would he say if he were living now and found himseK faced with the Settled Land Act, the Trustee Act, the Law of Property Act, the Land Registration Act, the Land Charges Act, the Administration of Estates Act, the University and College Estates Act, not to mention the new Judicature Act, all passed in the same year ? These consist of no less than 677 sections supplemented by no less than 20 Schedules, some of them nearly as long as the Acts themselves to which they are annexed. In the Law Reports volume of the Statutes they fill 578 pages, all sohd law. There never has been such a flood of legislation since Justinian's Corpus Juris. Codification and Amendment. — But there is this difference : This vast body of law is not a corpus juris. When Justinian enacted his code he determined that it and it alone should con- stitute the whole law of the Empire, and to secure that he ordered that aU earUer treatises on Roman Law should be destroyed and made it a crime to preserve one. The new English legislation is not a general code nor even a special code treating to the exclusion of aU other law of any particular subjects it deals with except perhaps settled land and registration. For the rest it consists of a multitude of alterations of the existing law, some made by express enactment, others made by reference or Foreword on Becent Legislation. xlix incorporation, and others by inference or con- sequence. All of them presuppose a knowledge of the law as it existed before their enactment and are only to be understood on being interpreted by the light of earlier legislation or of legal or equitable principles which have in some cases never been very definitely laid down. These alterations are hard enough to comprehend now. If the British Parliament had followed Jiistinian's example and destroyed all records of the law on the subjects dealt with such as it was before the new Acts were passed, nobody could understand them at all. Three results follow from this mode of legisla- tion. In the first place old practitioners are never sure what alterations the new law has made until the judges, who know no more than they do, decide. Hence much doubting advice and much uncertain litigation. So far there have been few cases brought before the courts on points arising under the new law ; but we have only " to wait and see." Again this mode of simpli- fying the law doubles the labour imposed on students striving to learn it since they must master both the old jurisprudence and the new. Before the Conveyancing Act, 1881, and the Settled Land Act, 1882, the students' books on the Law of Property ran to well under five hundred pages ; now new editions of the same works are weU over a thousand. Lastly, the new Acts are sure to need before long other new Acts amending or explaining them. The new Acts came into operation only in 1926 : another new Act amending and explaining them was passed the same year. However, this is the mode in which law reform has always been effected in England ; and it will continue, 1 Foreword on Becent Legislation. I suppose, to be the mode until, in the words of Sir Fitz James Stephen, learning in English law will be reduced to a beggarly knowledge of indexes. Then perhaps we shall, like other civilised nations, have prepared for us a code of the general law. Object of Foreword. — With such a mass of legislation it is, of course, impossible to deal in any detail in a short article or even in a short treatise such as this. This is the less to be regretted since the bulk of the legislation does not concern Equity at all, but consists of alteration in the common law principles regu- lating the ownership of land and the practice of conveyancing. All that can be done and all indeed that is necessary here to do is to give a bird's-eye view of the fundamental changes in these two subjects and a more particular view of the specific changes made directly in equit- able principles. Strange as it may appear, the reactions resulting from the changes in the law of property and conveyancing have in the result effected greater alterations in at any rate the apphcation of equitable principles than the direct changes in those principles themselves, which as a rule are alterations merely of details. II. INDIRECT CHANGES IN EQUITY. Main object of new^ legislation. — The main object of this new legislation was to do away so far as possible with the feudal notions which still affected the nature of legal interests in land, their conveyance inter vivos and their devolution on death ; and to substitute therefor the simpler, and, to modern minds, the juster Foreword on Becent Legislation. li attributes attaching to ownership of goods. Now there are two modes by which this may be accompKshed. The one is by altering the attributes of legal interests in land by direct enactment. That has been used frequently in the past. To cite only a few instances, ahena- tion of freeholds by livery of seisin has been superseded by aUenation by grant ; fee simple estates have been made freely ahenable by will ; the principle that the seisin mast never be without an owner has been greatly modified ; and married women have been enfranchised as to all sorts of property. The other mode has been that pursued by the old Court of Chancery. That mode was to create by means of a trust a new ownership of the land, not instead of but alongside the feudal ownership, and to attach to this new ownership only such attributes of feudal ownership as commended themselves to the judgment of the reforming authority as just and expedient. Both these modes are adopted in the new Acts ; but much more use is made of the equitable than of the legal method. It is a maxim that Equity acts by means of trusts. It may now almost be said so far as real property is, concerned that law does the same. Settlements by way of use abolished. — One fundamental difference between ownership of land and ownership of goods in feudal law was this : Eees simple, which constitute full ownership of land so far as recognised by feudal law, could be divided into parts enjoyable by different persons in succession ; full ownership of goods could not. The Chancellor disregarded this distinction. He held that the beneficial or equitable ownership of goods could be portioned lii Foreword on Recent Legislation. out among different persons by means of a simple trust, e.g., " £10,000 to X. and Y. to be held by them in trust for A. for Hfe and then for A.'s children equally." Law again held that on the death of their owner intestate fees simple must devolve on his heir while goods must devolve on his next of kin. Again the Chancellor dis- regarded this. He held that, by a trust to sell land, the land to be sold could be notionaUy changed in equity into money and by a trust to invest money in the purchase of land money could be notionaUy changed in equity into land. Thus the owner of Blackacre, a fee simple, conveyed it to X. and Y. "in trust to sell and hold the proceeds in trust for A." Now whether Blackacre is sold or not if A died intestate the beneficial interest in it devolved not on A.'s heir but on his next of kin. Again, a settlor transferred certain stocks and shares to X. and Y. "on trust to sell and invest the proceeds in the purchase of freehold land and to hold the same in trust for A. and his heirs." Now whether the stocks and shares were sold or not on the death of A. intestate the bene- ficial interest in the stocks and shares vested in his heir-at-law. This was called the equitable doctrine of conversion (see infra, pp. 243-257). This doctrine gave rise to two systems of creating successive interests in land, called respectively settlements by way of use and by way of trust. If a settlor wanted to parcel out a fee simple in successive legal estates he did so by way of use ; e.g. he conveyed Blackacre to X. and Y. and their heirs " to hold to the use of A. for life and afterwards to the use of A.'s eldest son in fee simple." Here the Statute of Uses (see infra, p. 106) operated to convey at Foreword on Recent Legislation. liii once a legal life estate to A. and a fee simple in remainder to A.'s eldest son. If he wanted to give the beneficiaries merely equitable interests in the land, he conveyed Blackacre " unto and to the use of X. and Y. and their heirs " in trust for the beneficiaries. Here the Statute of Uses did not apply, and accordingly the legal fee simple remained in the trustees and the bene- ficiaries took only equitable interests in Blackacre, Whether such interests were in equity, realty or personalty depended on whether or not the land was conveyed to the trustees on or not on a trust for sale. All successive interests in money had to be created by way of trust, since the Statute of Uses did not apply to personalty. Whether, however, the equitable interests were realty or personalty depended on whether the money was transferred to the trustees on or not on a trust to invest in the purchase of freehold lands. The new legislation has made the settlement by way of trust the only mode of creating successive interests in freehold land. It has done this by enacting that henceforth the only freehold interest recognised as a legal estate is to be the fee simple ; all other interests are to be merely equitable. When a fee simple is conveyed to trustees to the use of A. for life and then to A.'s eldest son in tail with remainders over, A. now takes the fee simple and holds it as trustee for himself for life and then for the eldest son and remaindermen. When it is conveyed to trustees to sell and hold the proceeds in trust for beneficiaries the trustees as heretofore hold the legal fee simple. Incident- ally and consequentially the Statute of Uses is repealed. liv Foreword on Recent Legislation. This new enactment was intended merely to facilitate conveyancing by establishing an estate owner of aU settled land who could convey the fee simple free from all lesser interests ajBEectiag it ; but an indirect effect is to extend the theory of equitable estates in land to every freehold estate short of a fee simple. Settlement by trusts for conversion superseded. — That, however, is not the only change effected. As has been said the doctrine of equitable conversion enabled a settlor to decide whether his property should be treated as realty or personalty. The new legislation has adopted this in principle without requiring a trust to convert. Now a settlor wishing to decide how his property is to devolve has merely to indicate his wish, and whether the property is freehold land or money it will be carried out. Heredity as a principle of succession has been abolished ; but equitable estates in fee tail and in fee simple have not. But an equitable estate in fee tail can be now created in personalty without a trust to invest in the purchase of freehold lands ; and so far as heredity is now recognised in English law an equitable fee simple can be created equally in realty and personalty. The doctrine of equitable conversion is not so much as mentioned in the Acts making this great alteration in equity. But the effect of the alteration is to make trusts for conversion, on which, as I have said, real property, and, to a large extent, personal property conveyancing was based, for practical purposes obsolete. Estates in common. — This is not the only instance where for the purpose of facilitating Foreword on Recent Legislation. Iv the alienation of land the aid of equity has been called in by the law. Legal estates in common were fully recognised and the number of persons who might be owners in common was unlimited. Since all the tenants had to join in order to convey the common estate, the result was that sometimes land held in tenancy in common became practically inalienable except with the assistance of the court. Now this is altered. If there are more than four legal tenants in common the first four are to be treated as the estate owners. They are to be trustees for sale for themselves and the other tenants in common, who henceforth will have no legal interest in the land itself but merely an interest in the proceeds of the sale of the common property. On sale by the first four tenants in common the purchaser, if a bond fide purchaser for value, receives the land free from the claims of the other tenants in common, which claims are transferred to the proceeds of the sale. First limitation of the doctrine of notice. — Another great change is effected in equity by provisions intended only to simplify convey- ancing. This is in connection with the equitable doctrine of notice. That doctrine depends on the maxim that where equities are equal the law shall prevail. Now equity has always held that a legal interest in property has not an equal equity with an equitable interest where the legal proprietor at the time he advanced his money had notice, actual or constructive, of the existence of a prior equitable interest affecting the property. Actual notice needs no explana- tion. Constructive notice does. The Court of Chancery held that the purchaser of a legal Ivi Foreword on Eecent Legislation. interest was under an obligation to take reason- able precautions to ascertain whether a pre- ceding equitable interest affected the legal interest at the time he purchased it. If he did not so do the court postponed his legal to the prior equitable interest. The question was what amounted to reasonable precautions. The legis- lature by the Vendor and Purchaser Act, 1874, decided that for a purchase of freehold land on an " open " contract, that is a contract not limiting the rights of the purchaser, the pur- chaser could demand what is called a forty years' title, that is, the vendor had to show how the ownership of the land had devolved during the forty years before the contract to purchase. Sir George Jessel, however, held in Patman v. Harland (17 Ch. D. 353) that this enactment had not affected the question of what amounted to reasonable precautions ; and that the pur- chaser was affected with constructive notice of any equity the existence of which he might have discovered had he made the investigations usual among purchasers before the Vendor and Pur- chaser Act. That decision is now reversed by the Law of Property Act, 1925. The forty years' title is reduced to thirty and it is expressly enacted that there is to be no constructive notice of equities not appearing on the investigation of such title. Second limitation of the doctrine of notice . — Another limitation in the doctrine of notice is that henceforth notice, even if express, of the existence of equitable interests in settled land where such interests have been created after the settlement ; or in separate shares in land held for the benefit of tenants in common do not Foreword on Becent Legislation. Ivii affect the legal title received by a purchaser buying bond fide from the " estate owner," that is, the person or persons in whom the legal ownership is vested. A further limitation of the doctrine obtains in the case of contracts made by mortgagees to advance further loans to the mortgagor. Where there is such a contract the fact that the mortgagee learns that the mort- gagor has obtained an advance on the same property from another mortgagor does, not prevent his making a further advance in accordance with his contract and tacking the same to his first mortgage and so postponing the second mortgagee. This is the reversal of another decision {West v. Williams, [1899] 1 Ch. 132). By the Law of Property Act, 1926, it is, however, provided that the tacking mortgagee must register his mortgage and contract before the second has made his advance (see infra, p. 276). Extension of the doctrine of notice. — These are hmitations on the doctrine of notice. An immense extension of it, however, has been made in another direction. Formerly there was this peculiar distinction between mortgages of equitable interests in land and mortgages of equitable interests in goods or money. Equitable mortgages of land ranked in priority of right to be satisfied out of the mortgaged land accord- ing to the date of their execution ; equitable mortgages of goods or money ranked in priority of right to be satisfied out of the mortgaged personalty according to the date on which the mortgagee gave notice to the legal owners of the money or goods of the execution of the mortgage. This was called the rule in Dearie v. Iviii Foreword on Becent Legislation. Hall (3 Russ. 1). This rule is extended now to equitable interests in land, and since all interests in land except fees simple and absolute terms are equitable interests the operation of the new provision will be very large. Doubts which formerly existed as to what amounted to notice within the rule in Dearie v. Hall (supra) are now disposed of by special provision prescribing the conditions to which notice must conform in order to satisfy the law (see infra, p. 47). III. DIRECT CHANGES IN EQUITY. Coming now to specific changes in equity by the new legislation, these are indicated in sufficient detail for students' purposes in the text of this work. Here all that is sought to be done is to give a bird's-eye view of them to enable the reader more easily to understand their general effect. The specific changes may be said to apply directly to three heads of Equity, Trusts, Mortgages and Administration of Assets. Trusts. — With regard to trusts the new enactments give the trustees greater freedom in investing trust funds (see infra, p. 131) ; greater freedom in deahng with documents connected therewith (see infra, p. 127) ; greater freedom in delegating their duties to paid agents and appointing deputy trustees (see infra, p. 147), but there seems to be con- siderable doubt whether this freedom has modified or not the trustee's Habihty for the defaults of his agent (see In re Munton, [1927] Foreword on Becent Legislation. lix 1 Ch. 262) ; greater protection in discharging their duties by applying to them the advantages extended to executors and administrators wind- ing up an estate (see infra, p. 682) ; and greater powers in applying the income of the trust estate for maintenance and the capital for the advancement of cestuis que trust who are under a certain age (see infra, pp. 154, 156). With regard to the persons who are entitled to be trustees two changes are made, an infant who is now disqualified from owning property cannot be made a trustee (see infra, p. 96), and the number of trustees who can be appointed to hold land in trust is limited to four except where the trust is charitable (see infra, p. 64). Further, the person having statutory power to appoint new trustees may appoint himself, overruling the decision in In re Sampson, [1906] 1 Ch. 435 (see infra, p. 97). Trustees holding land on trust for sale have an implied power to postpone the sale, and where the deed appointing new trustees is executed after 1925 the appointment of the new trustees wiU, without vesting declaration or order, vest the trust property in the new or the new and continuing trustees (see infra, p. 102). A new form of trust called a " protective " trust is set out at length in the Trustee Act, but it is not a new trust at all, but the old and well-known discretionary trust writ large. Its object seems to be to shorten trust deeds, which has the undesirable effect of also shortening the trustee's knowledge of his duties. I doubt whether much use will be made of it by con- veyancers, and at any rate it is a provision affecting the drafting of trust instruments and not the law applying to the trust. Ix Foreword mi Recent Legislation. Mortgages. — ^As regards mortgages the new enactments are almost entirely of a conveyancing kind. Henceforth mortgages of fees simple are to be or are to be deemed to be made not by conveyances of the fees simple to the mortgagee but by long leases. This was formerly the practice, and of course its result is to change the interest remaining in the mortgagor after a mortgage from an equitable estate, called the equity of redemption, into a legal estate — the fee simple subject to the mortgage lease — which no doubt for convenience will still be called the equity of redemption. This wiU faciUtate deahngs with the so-called equity of redemption, since purchasers of it will not be bound by any equities affecting it of which they had no notice at the time of purchase. But otherwise the relations between mortgagor and mortgagee are unaltered. A further conveyancing alteration is that the mortgage lease is to contain or to be deemed to contain a cesser clause which will determine the lease on the repayment of the mortgage debt. Accordingly no reconveyance will be necessary and a receipt for the payment of the mortgage debt endorsed on the lease will be sufficient evidence that the mortgage is discharged ; but if the mortgagor thinks proper he can claim a reconveyance. Lastly, an assign- ment of the mortgage is to be sufficient to vest the debt, the mortgaged property, and all the other securities for the debt in the assignee without specific conveyance or assignment of them. Mortgages of leaseholds are in the same way to be made (as they always have been) by sub -lease. It is to be noted that these provisions apply Foreword on Becent Legislation. Ixi only to legal mortgages, and now the only legal estates in land are fees simple and leaseholds. It foUows that all mortgages of other interests must be equitable and so subject to the old law. There is, however, another point. Formerly in the case of mortgages of fees simple by conveyance there could be only one legal mortgage. After the mortgagor had granted a legal mortgage he had no legal interest left in him, but, as already pointed out, merely an equity of redemption. Accordingly all second and subsequent mortgages were merely equit- able. Now he has the legal fee simple left in him after the first mortgage by lease, and all his subsequent mortgages are made by lease and are legal mortgages. The effect of this is practically to abolish the doctrine of tacking, which consisbs of annexing an equitable mortgage to a legal mortgage of the same interest. Such doctrine, however, is expressly abolished except to the extent set out already. Administration of Assets. — The Admini- stration of Estates Act makes a revolutionary change in the law of property. Shortly, its effect is to abohsh so far as devolution on the owner's death intestate is concerned the old distinctions between real or personal property and the primary liability of his personalty to pay his debts. The common law doctrine of inheritance dis- appears altogether save so far as it is conserved in estates in fee tail, and these are made devis- able whether they arise out of realty or personalty. Escheat, estates by the curtesy and estates in dower also disappear. Henceforth the rules applicable formerly only to personalty Ixii Foreword on Becent Legislation. are so modified by the Act as to apply equally to realty so far as beneficial interests in it are concerned. For our purposes the important point is that the old distinction between legal and equitable assets as regards Habihty for the payment of the deceased' s debts also goes. Now on the death of an owner testate all his realty and personalty vests in his executors for the payment of his debts ; and the order in which, as among the beneficiaries, the property is to be appHed by the executors is to be the same whether the property left to the beneficiaries is realty or personalty (see infra, p. 588), even to this extent that the executors are entitled to retain and prefer out of the realty equally with the per- sonalty. If the deceased dies intestate aU his realty and personalty are to vest in the Judge of the Court of Probate until administrators are appointed. These administrators hold the estate on a trust for sale, and realty and personalty are treated as one fund for the pa3rment of the deceased's debts. If the deceased dies insolvent, whether testate or intestate, and whether his estate is administered by his personal repre- sentatives or by the court, the principles on which it is to be administered are those appUc- able to the estates of bankrupts (see infra, p. 567). Hitherto those principles oiily applied when the estate was wound up by the court ; and it seems somewhat inconsistent to enact that the rights of executors to retain and prefer are preserved and that the rules of bankruptcy are also to apply to their payment of the deceased's creditors, when the deceased died insolvent — the only occasion on which the rights to retain and prefer are of any importance. Foreword on Becent Legislation. Ixiii In the new rules as to the administration of a deceased's estate the law has again used the trust for its own purposes. On the death of a married person intestate a Hfe interest in his or her residuary estate goes to the surviving consort together with a first charge of £1,000. Until the hfe interest is compounded for and the first charge is paid the administrators of the residuary estate are trustees of it for this purpose. Further, the children of the deceased consort take no indefeasible interest in their deceased parent's estate until they attain 21 years of age or marry under that age. Where then such children are minors the administrators, unless special trustees are appointed, are to be trustees of the presumptive shares of such minors until such shares become in the ordinary course of time indefeasible. One final point as to grants of administration under the new law. This term now includes grants of probate as well as grants of letters of administration. In both cases grants are not to be made to more than four executors or administrators. This, of course, is another device to facilitate the transfer of the deceased's estate. Moreover, a wider discretion is given to the court as to whom it may appoint admini- strator of the estate of a deceased intestate. It is not desirable here to say anything about the Settled Land Act, 1925, or the Acts relating to Registration. These are purely real property law and conveyancing and have no bearing on equitable doctrines. What has been said shows that the immense legislation has left those doctrines httle altered in their principles but largely extended in their apphcation. INTRODUCTION. JURISDICTION OF CHANCERY. D.X. SUMMARY PAGE Article 1. Meaning of " eqiiity " 3 2. Authority by which equity was created - - 4 3. limits of that authority .... 7 4. The exclusive jurisdiction of equity ... 9 5. The concurrent jurisdiction of equity - 11 6. The auxiliary jurisdiction of equity - 12 7. Fusion of the administration of equity and law 14 8. The Chancery Division of the High Court - 16 9. Arrangement of the work - - - - 17 INTRODUCTION Jurisdiction of Chancery Article 1. Meaning of "Equity." By equity is meant that body of rights and remedies which before 1873 were not recognised or provided by Courts of Law, but only by the Court of Chancery. It seems clear that in early times even subsequently to the establishment of the three common law courts, what would now be called equitable relief was not un- frequently given by them, and especially by the justices in eyre and the judges of what we would now call assize. Gradually all jurisdiction to grant such relief became concentrated in the Court of Chancery and the Court of Exchequer. The latter's equitable jurisdiction was abolished in 1842, when two extra judges were appointed to the Chancery Court, and much about the same time limited powers were conferred by Parliament on common law courts to give equitable remedies, e.g. injunctions, and on the Court of Chancery to give damages (see Lord Cairns's Act, 1858). But after 1842 tiU 1873 none of the superior courts had a general jurisdiction to grant equit- able relief except the Court of Chancery. 4 A Digest of Equity. The Court of Chancery dealt only with civil matters.^ The Star Chamber, however, has been called the court of criminal equity ; and undoubtedly it inflicted in its time punishments for acts and omissions which the courts of common law did not regard as criminal. The Star Chamber disappeared in the troublous times of the first Charles ; but until the Stuarts, with their usual imprudence, had made it hated by using its powers to oppress their opponents, there is nothing to show that it was not as useful in criminal affairs as the Court of Chancery was in civil. This at least is certain, that after its abolition the Courts of Law found it judicious to adopt as part of the common law many of the offences which the Star Chamber had and which they had not previously punished. Criminal libel, fraud, perjury, and conspiracy are among those offences so adopted. Article 2. Authority by which Equity was created. ( 1 ) The authority by virtue of which the Court of Chancery created those rights and provided those remedies arose out of the delegation to its head, the Lord Chancellor, of the King's prerogative to afEord to his subjects in individual cases reUef outside the law where justice so required. (2) Being matter of prerogative, no subject could claim as of right that such rehef outside the law should be afforded him. Paragraph (1). This prerogative to grant relief outside the law was exercised by the King in Council {Curia Begis) and was * Before Charles I. the Chancellor frequently dealt with criminal matters. In 1639, however, we find the court refusing to hear a case on the ground that it was " of a penal and criminal nature " {Manning y. Freake, Tothill 139). Introduction, 5. associated with, and for a long time was not distinguished from, his duty to see that the law was enforced against any too powerful a subject who defied it. At first the exercise of this prerogative and the discharge of this duty were regarded as extraordinary matters, since justice in general was not administered by the King but by local courts. As the country, however, became more settled and the central authority more powerful, the King's judges overrode the local courts, and the adminis- tration of the law became the ordinary business of the King in Council. When this change occurred, special committees of the Council — as they may be called — were appointed to enforce the law. These were called the Courts of King's Bench, Common Pleas and Exchequer, and the Judges of Assize. The function of these, how- ever, was merely to declare and enforce the customs of the realm and the Acts of Parliament — that is, the law. The prerogative to give relief outside the law remained in the King in Council. Gradually the exercise of this prerogative was transferred to another committee, over which the Lord High Chancellor, who was at once keeper of the Great Seal and keeper of the King's Conscience and a priest, presided. It is doubtful whether the Chan- cellor ever sat alone to exercise this prerogative before the time of Cardinal Wolsey. When that masterful man was Ohancellpr he constituted himself a court for this purpose, and also made his subordinate in the Chancery, the Master of the EoUs, an assistant court. From this day onwards these officials had jurisdiction to exercise the King's prerogative on this behalf and to hear applica- tions for its exercise without the participation or assistance of members of the King's Council or judges of the common law. But though they were courts, they were not Courts of Law but Courts of Conscience, whose function was to use the King's prerogative to interfere with the administra- tion of the law in the interests of justice where conscience rendered such interference necessary. The relief given out- side the law could only be given in respect of each case as it arose. The prerogative gave no power to the King or his representative, the Chancellor, to lay down a principle 6 A Digest of Equity. on which henceforth rehef outside the law would be given^ That would have amoxmted to repealing a law of the kingdom, and this Parliament had always denied the right of the King to do, just as it denied his right to make a new law of the kingdom without its consent. So the function of the Chancellor was limited to granting relief outside the law in each individual case as it was brought before him. This was the reason why long after the Law Courts were staffed exclusively by judges trained in the principles of the law, no professional training was thought necessary for the great office of Chancellor. No professional train- ing was thought necessary because there were no principles to be learned upon which relief was to be given. In Charles I.'s time Selden could say without much exag- geration that equity depended on the length of the Chancellor's foot ; and even in Charles II.'s time a dis- tinguished layman, the Earl of Shaftesbury, could be appointed Chancellor without any public dissent. It may almost be said that Lord Nottingham, appointed in 1673, was the first Chancellor who by examining into the grounds on which his predecessors had granted rehef outside the law, and by basing his grants of rehef on these grounds, turned equity from matter of chance into matter of principle. Henceforth, on points hitherto dealt with in Chancery, precedents decided, and the suitor had from these to evolve a principle which covered his own case, and it was only on points never previously dealt with in Chancery that a new precedent was made and a new principle created. When the Chancellor refused to make new precedents, equity ceased to create new principles ; and its rights and remedies outside the law became as fixed as those within the law. The last new precedent openly made by the Chancellor was in 1848 {Tulk V. Moxhay, 2 Phil. 774). A person seeking relief in a Court of Law was called a plaintiff in personal actions and a demandant in real actions ; and in both cases he claimed the benefit to which he was by law entitled. All that the court had power to do was to decide if his claim was good by law. Introduction. 7 Once it decided that his claim was good at law, it was compelled to grant him relief according to law. A person, on the other hand, seeking relief in a Court of Equity, was called a suitor or petitioner, and he humUy frayed the benefit of the court's grace. He was asldng for something which the law did not allow him, and which the. King alone could give him by the voluntary exercise of his prerogative entitling him when he thought proper to interfere and grant relief outside the law. This is shortly summed up in the maxim that " equitable relief always was within the discretion of the court," while legal relief was ex debito justitice. The Judicature Act has in no way affected this distinction between legal and equitable remedies. (See infra, p. 14.) Paragraphs (1) and (2). These are the points which caused the chief differences in the development of Enghsh and Eoman equity. Just as the authority on which English equity was based was the royal prerogative, so the authority on which Eoman equity was based was the imperium — a survival of the royal power to see justice done to the people — which vested in the praetor during his year of office. But from the first the imperium entitled the praetor to set out on assuming office a list of the rights and remedies which he would recognise during his reign. This was engraved on a plate of brass and affixed to the wall of his court, so as to enable intending suitors to know what relief they could or could not get. So from the first Eoman equity was a matter of principle and a matter of right. English equity was neither matter of principle nor matter of right for many a day, and is not matter of right even now. Article 3. Limits of that Autliority. This prerogative to grant rehef outside the law, being appUcable only where justice so required, 8 A Digest of Equity. could only be exercised in matters (i) as to which the law gave no rights where conscience required that certain rights should be given, which matters are said to be within the exclusive jurisdiction of equity ; or (ii) as to which the law gave the rights required by conscience but the remedies which it gave to enforce the rights were insufficient to satisfy justice, which matters are said to be within the concurrent jurisdiction of equity ; or (iii) as to which the law gave the rights required by conscience and remedies sufficient to satisfy justice but as to which its process was too defective to secure the remedies without the assistance of equity, which matters were said to be within the auxiliary jurisdiction of equity. Though, as has been stated, it was not until compara- tively recently that the principles on which equity would grant relief outside the law were formulated, still from very early times one fact was recognised — that the customs of the realm and the statutes of Parliament constituted the law, and equity could only interfere with that law where it was so defective as to deny, or give inadequate, justice to the subject. As the principles upon which equitable relief would be given were gradually settled, so the ways in which the law might be defective were gradually classified as set out in the above article. For the purpose of protecting the rights and remedies given by the Court of Chancery but not recognised by Courts of Law, it was sometimes necessary to prevent a person enforcing his legal rights. This was done by the issue of an injunction forbidding him, on pain of imprisonment for contempt of court, from proceeding with an action in a Court of Law or executing the judgment procured in such an action. The Courts of Law highly resented this interference with their proceedings, and at last that resentment came to a head in the reign of James I. Introduction. 9 The facts in the case which brought the trouble to a climax were as follows : A plaintiff in a common law action obtained judgment against the defendant. Later it was proved before the Chancellor that the judgment had been won by the fraud of the plaintiff, who had by stratagem involved the defendant's chief witness in a drinking bout which prevented him giving evidence. Thereupon the Chancellor (Lord Ellesmere) issued an injunction forbidding the plaintiff to sue out execution on his judgment. The Lord Chief Justice (Sir Edward Coke) furiously protested, and threatened the pains of premunire against anyone who interfered with the plaintiff or the execution. Ultimately the dispute went to the decision of the King, who in accordance with the views of his law officers decided that the issue of the injunction was within the powers of the Court of Chancery. Since this decision the right to issue injunctions of this kind has not been disputed, though, as we shall see, since the Judicature Acts their issue is seldom needed.^ The jurisdiction to issue these injunctions is usually ranked as auxiliary ; but it is auxiliary rather to the grant of equitable than legal remedies. (See Art. 6.) Article 4. The Exclusive Jurisdiction of Equity. In matters within the exclusive jurisdiction of equity the nature and extent of the rights given depended exclusively on equitable prin- ciples; and, these rights being recognised only in the Court of Chancery, could be enforced only by equitable remedies. The importance of the distinction between the exclusive and the other jurisdictions of equity is well shown in the ' On all this history of the development of equity, see Holdsworth's History of English Law, passim. 10 A Digest of Equity. decision of the House of Lords in Nocton v. Lord Ash- burton, [1914] A. 0. 932. Nocton, the defendant in that case, was retained by the plaintiff, Lord Ashburton, as his sohcitor to advise him as to a proper investment for certain funds on mort- gage of real estate. The defendant advised so negligently that when the plaintiff subsequently realised his security he found it was not nearly sufficient in value to produce on sale anything like the loan advanced upon it. The defendant was at common law guilty as a servant of negligence, and so would have been liable in damages but that more than six years had elapsed since the advice was given ; and so the action was barred. The plaintiff therefore sued the defendant for fraud. Now to constitute fraud at common law it is necessary (as decided in Derry v. Peek (1889), 14 A. C. 337) to prove that the person charged was not merely guilty of negligent misrepresentation, but also that he made the misrepresentation with a wicked mind. When the case was heard before the judge of first instance, he held that he was bound by Derry v. Peek (supra) ; and as there was no sufficient proof that the defendant made the misrepresentation with a wicked mind, he must dismiss the action. On appeal the House of Lords held that this decision would have been right had this been an action for fraud at common law and so within the con- current jurisdiction ; but in fact it was an action for fraud in equity and so within the exclusive jurisdiction and therefore subject to equitable principles ; and in equity where one person who is under a fiduciary duty to take care makes a misrepresentation to the person to whom he owes that duty, with the intention that that person shall act on it, then whether he does so because he has a wicked mind or because of mere negligence he is guilty of fraud. Accordingly the decision of the judge of first instance was reversed by the House and the defendant held liable. In the same way rights coming within the exclusive jurisdiction not being recognised in courts of law cannot, Introduction. 11 independent of statute, be enforced otherwise than by remedies outside the law, that is by the remedies provided by the former Court of Chancery for the enforcement of rights recognised by it alone. Thus, in Lavery v. Pursell (1888), 39 Ch. D. 508, the plaintiff had entered into a contract for the purchase of an interest in land. Such a contract should, by the Statute of Frauds (sect. 4), be in writing in order to be enforceable at law. Where, however, it is not in writing it becomes enforceable in equity if it is part performed. Here the contract was not in writing but was part per- formed by the plaintiff. The defendant repudiated the contract. Now the remedy at law for a breach of con- tract is damages ; while the remedy in equity is specific performance. The plaintiff brought an action claiming specific performance or, in the alternative, damages. The court held that he would have been entitled to specific performance but that that had become impossible by the lapse of time. The court, however, could not award him damages as a court of law, since by law the agreement was incapable of legal enforcement owing to its not being evidenced in writing. Abticlb 5. The Concurrent Jurisdiction of Equity. In matters within the concurrent jurisdiction of equity the nature and extent of the rights depended exclusively on legal principles ; and being recognised both in Courts of Law and in the Court of Chancery, they could be enforced either by legal or by equitable remedies ; but before an equitable remedy could be given it had to be shown that the right had been or was about to be violated in such a way as would compel a Court of Law to grant the legal remedy, if the complainant had applied for it. 12 A Digest of Equity. In matters coining within the concurrent jurisdiction equity only intervenes in aid of the law by granting a remedy for a breach of the law superior to any the law itself could grant. The equitable remedy is therefore merely in substitution for the legal remedy, and accordingly where there is no breach of law for which a court of law would give a legal remedy, equity is unable to give an equitable remedy. (As to contemplated breaches of law, see Article 188.) This is sometimes forgotten. Thus, in Colls v. Home and Colonial Stores, Limited, [1904] A. C. 179 ; Stra. L. C, p. 1, the act of which the plaintiff complained was an interference with the ancient lights of his house. The right to light is a legal right, but it is usually enforced by an equitable remedy- — that is, by an injunction to restrain the defendant from interfering with the light. Now, at common law to constitute an actionable interference with the right, it must be shown that not merely has the defendant obstructed the light, but that he has obstructed it so gravely as to make the obstruction something in the nature of a nuisance. The Court of Appeal, forgetting that it was merely enforcing a legal right, held in this case that in equity any interference whatever with the right to light could be restrained, and granted the plaintiff an injunction, though the obstruction of his light was not such as would amount to an actionable wrong at common law. On appeal, held by the House of Lords, that where a matter was within the concurrent jurisdiction an equit- able remedy could be granted only where a legal remedy would lie if the plaintiff had sought a legal remedy ; and as in this case the plaintiff could not have recovered damages, he could not obtain an injunction. Article 6. The Auxiliary Jurisdiction of Equity. In matters within the auxiliary jurisdiction of equity the nature and extent of both the Introduction. 13 rights and the remedies depended exclusively on legal principles, and with regard to them equity intervened merely to supply the defects of legal process so as to enable the Courts of Law to give efifectively the legal remedies. In matters coming within the auxihary jurisdiction equity interfered merely to assist the law to give a legal remedy for a legal wrong. Thus in law an executor who wasted his testator's estate was liable to an action for devastavit, but before the law could give damages against him it was necessary to find out what assets the executor had received and what he had done with them. The law had no effective machinery for this purpose ; and so it was necessary to have recourse to equity which had, and equity would order the executor to render an account in aid of the action for devastavit. Again in law a person who broke a legal contract was liable to an action for damages for the breach. But where to prove the contract it was necessary to produce documents in the hands of the person guilty of the breach the law could not secure this. Equity could, and so in such cases it ordered discovery of documents, and when these were produced the action for damages could proceed. In the same way equity granted bills for the perpetuation of testimony ; bills to take evidence de bene esse, in the case of witnesses unable to appear in court through age, ill-health or absence from England, and interpleader where a person was sued as to matters in which he had no personal interest. As remarked by Mr. Ashburner, there was a marked inclination for matters coming originally within the auxiliary jurisdiction to come within the concurrent. This was due to the fact that the decision of a matter, if disposed of within the auxiliary jurisdiction, necessitated two proceedings, one in the law courts and another in the Court of Chancery ; while, if disposed of within the concurrent jurisdiction, it necessitated only one. Accord- ingly, where it was possible, litigants commenced their 14 A Digest of Equity. proceedings in Chancery when it could supply them with a sufficient remedy ; while Chancery endeavoured to supply them with a remedy as effective as the legal one. Akticle 7. Fusion of the Administration of Equity and Law. The Court of Chancery and the Courts of Law have now been abolished by Act of Parlia- ment and a High Court of Justice established with jurisdiction to recognise all the rights and to provide all the remedies formerly given either by the Court of Chancery or the Courts of Law. This fusion, however, of the admin- istration of equity and law has in no way altered the nature or extent of equitable rights and remedies. In matters coming within the old exclusive jurisdiction of equity, so far as equity is concerned, the High Court decides the nature and extent of the rights solely by equit- able principles and enforces them solely by equitable remedies ; and in matters coming within the old concurrent jurisdiction of equity, it decides the nature and extent of rights solely by legal principles and enforces them by equit- able remedies only where the old Courts of Law would have granted legal remedies. So far as equity is concerned, the whole effect of the establishment of the High Court has been to render practically obsolete its auxihary jurisdiction by making recourse to it no longer necessary. It is sometimes said that the Judicature Act, 1873 (repealed and re-enacted by the Judicature Act, 1925) fused law and equity. This is altogether inaccurate. The Introduction. 15 object of that Act was neither to fuse nor to confuse the principles which govern equitable rights and remedies ■with those which govern legal rights and remedies, though it may have had in some instances the latter effect. As said by Lord Watson in Ind, Coope <& Company V. Emmerson (1887), 12 App. Gas. 300, at p. 308 : " The main object of the Judicature Act was to enable the parties to a suit to obtain in that suit, and without the necessity of resorting to another court, all remedies to which they are entitled, properly advanced by them so as to avoid a multiplicity of actions." As has been stated, before the Act in matters coming within the auxiliary jurisdiction it was necessary to bring proceedings both in a common law court and in Chancery in order to have one matter disposed of. This is no longer the case, since any court before which a cause is brought has now power to grant all necessary relief whether legal or equitable or both. So that jurisdiction has been rendered practically obsolete. At the same time it has not been abolished. Thus, where it is de- sirable to do so, an injunction will be issued to restrain a party from instituting legal proceedings at home or abroad (Cercle Bestaurant v. Lavery (1881), 18 Ch. D. 555 ; In re Connolly Brothers, Ltd., Wood v. Connolly Brothers, Ltd., [1911] 1 Ch. 731). As regards matters coming within the exclusive or the concurrent jurisdiction, the principles controlling the rights and the remedies of the parties are precisely what they were before the Act. A forgetfulness of this has not infrequently led the courts into errors, as a consideration of the cases of Nocton v. Lord Ashburton (supra) and Colls v. The Home and Colonial Stores (supra) will show only too well. 16 A Digest of Equity. Aeticle 8. The Chancery Division of the High Court. Even the fusion of the administration of equity and law effected by the estabhshment of the High Court is not complete, since that court is composed for our purposes of two parts, called the Chancery and the King's Bench Divisions ; and to the former is relegated the hearing of practically all the matters which formerly came within the exclusive or concur- rent jurisdiction of equity. If any of these matters are brought before the King's Bench Division, as they may be, the judge has power to remit them for hearing to the Chancery Division. By sect. 34 of the Judicature Act (now sect. 56 of the Act of 1925) the following are assigned primarily to the Chancery Division : All causes and matters for any of the following purposes — The administration of the estates of deceased persons ; The dissolution of partnerships, or the taking of partnership or other accounts ; The redemption or foreclosure of mortgages ; The raising of portions, or of other charges on land ; The sale, and distribution of the proceeds, of property subject to any lien or charge ; The execution of trusts, charitable or private ; The rectification or setting aside or cancellation of deeds, or other written instruments ; The specific performance of contracts between vendors and purchasers of real estate, including contracts for The partition or sale of real estate ; and The wardship of infants and the care of infants' estates. Introduction. 17 Besides the matters here assigned to the Chancery- Division others have been allotted to it by special Acts — for example, applications under the Vendor and Purchaser Act, 1874, sect. 9 (repealed and re-enacted L. of P. Act, 1925, sect. 49) ; under the Conveyancing Act, 1881, sect. 69 (repealed and re-enacted L. of P. Act, 1925, sect. 203) ; under the Settled Land Act, 1882, sect. 46 (repealed and re-enacted S. L. Act, 1925, sect. 113) ; all proceedings under the Trustee Act, 1893 (repealed and re-enacted T. Act, 1925) (Order 54b, E. S. C), etc. Article 9. Arrangement of the Work. The distinction between the exclusive and the concurrent jurisdictions of equity has not been strictly observed either by the Legislature or by the court itself, equitable rights being modified and sometimes legally enforced by virtue of Acts of Parliament, and equitable remedies, in being applied for the enforcement of legal rights, being often used by the court to create new equitable rights. It is proposed then, in this work, not to follow that distinction in the arrangement of its contents, but to deal firstly with the chief equitable rights and incidentally with the legal rights and remedies affecting them, and secondly with the chief equitable remedies and incidentally with the equitable rights which have arisen out of the use of them for the pur- pose of enforcing legal rights. Just as matters originally coming within the auxiliary jurisdiction tended to come within the concurrent, so matters coming originally within the concurrent jurisdic- tion tended to come within the exclusive as time went on. 18 A Digest of Equity. Thus contracts for the sale of land were brought within the concurrent jurisdiction in order to get advantage of the equitable remedy of specific performance, and equity later introduced the equitable doctrine of part performance, which gave the plaintiff rights not recognised by law. Again, covenants relating to the land were brought within it for the benefit of the equitable remedy of injunction, and later equity began to enforce covenants which at law were void as against purchasers of the land. Again, the administration of the assets of deceased persons was brought within it so as to obtain the advantage of the equitable remedy of account, and later equity attached to the office of executor most of the equitable liabihties of trustees. In the same way Parliament has by many statutes defined and altered purely equitable rights : see passim the different Trustee Acts. It has also enforced many purely equitable rights by means of legal remedies, as by enabling the court to transfer the legal estate to the equitable owner and by giving it a discretion to grant damages in lieu of injunctions or specific performance. This will show that while the old distinction between the exclusive and concurrent jurisdictions remains and should never be forgotten, still it has been so interfered with that it now scarcely forms a good plan for arranging the subject-matter. It is therefore proposed to consider that matter after the manner stated in this Article. BOOK I. EQUITABLE RIGHTS. INTRODUCTION. NATURE OF EQUITABLE INTERESTS. SUMMARY PAGE Article 10. How equitable rights arise 21 ,, 11. Equitable interests in property 23 „ 12. Who are bound by equitable interests - 26 ,, 13. Equitable interests might always be held by married women 35 „ 14. Equitable interests in realty may be personalty and vice versa 35 ,, 15. Equitable interests in land not the subject of tenure - 37 ,, 16. Equitable personalty may be held in successive estates - 40 „ 17. Assignment of equitable interests 41 „ 18. General rule as to equitable interests 48 ,, 19. Purposes for which equitable interests and other rights were created 49 INTRODUCTION Nature of Equitable Interests Article 10. How Equitable Rights arise. (1) An equitable right arises when a right vested in one person by the law should, in the view of equity, be, as a matter of conscience, vested in another. (2) Where this state of affairs exists equity did not attempt to transfer the legal right to the person in conscience entitled to it, but directed the person entitled to the legal right to use it for the benefit of the person entitled in conscience to it. (3) Now by statute equity can transfer legal right to the person equitably entitled. Paragraph (1). It should always be remembered that the Court of Chancery was a Court of Conscience — that is, a court whose object was not so much to protect a person from damage arising from another's wrongdoing, as to prevent the other from soiling his conscience by doing wrong (see infra, p. 413 et seq.). Most of the rights and remedies 22 A Digest of Equity. given by equity are based on this principle ; and it is carried so far that where an act is contrary to conscience in the view of equity then equity will grant a remedy even though the person complaining of the act suffered thereby no damage whatever. Thus it is in the view of equity contrary to conscience for a trustee to make profit out of dealings with the trust property. In Parker V. McKenna ((1874), L. E. 10 Ch. 96, Stra. L. C, p. 6) a director of a company (who was as such a trustee of the company's property for the shareholders) bought from the company some unissued shares (that is, property of the company) at a certain price. He did so for the benefit of the company. Later the shares rose greatly in value over the price which he had paid to the company for them. Held, that he must hand over this profit for the benefit of the shareholders. Paragraph (2). This is sometimes summed up by saying that equity operated by means of trusts. Equity had no power of its own to transfer the legal rights of one person to another who had morally a better claim to them. All it could do was to direct the person having the legal rights to use them for the other's benefit. Thus if A. by fraud induced X. to convey Blackacre to A., A. became legal owner ; but on X.'s application equity would declare A. a trustee of Blackacre for the benefit of X. As said by Lord Lindley in Hardoon v. Belilios, [1901] A. C. 118, at p. 123 : " All that is necessary to estabhsh the rela- tion of trustee and cestui que trust is to prove that the legal title was in the plaintiff and the equitable title in the defendant." In this very broad sense trusts may be said to include the whole or almost the. whole subject-matter of equity. But while it is difficult to suggest any term other than " trust " to cover the relationship between any legal and equitable owner, we shall endeavour to confine this term to what are called express trusts — that is, trusts in actions for breach of which the Statutes of Limitations could not. Nature of Equitable Interests. 23 before the Trustee Act, 1888, be pleaded by the trustee — and constructive trusts arising more or less out of a fiduciary relationship. Paragraph (3). Large powers are now given by statute to enable the Court to transfer by vesting order the legal ownership to the person equitably entitled without the concurrence or consent of the legal owner. (See infra, pp. 100-103.) Article 11. Equitable Interests in Property. (1) When the subject-matter of an equitable right is definite property, the person entitled to the right is said to have an equitable interest in the property. (2) An equitable interest in property may be defined as a right in the nature of a personal servitude issuing out of and annexed to the legal owner's interest in the property. (3) This right may be such as to impose on the legal owner any obligation ranging from one to let the person entitled to it enjoy the whole benefits of the property to one binding the legal owner merely not to use the property in a particular way. Paragraph (1). Practically equitable rights as opposed to equitable remedies are merely extensions and modifications of legal rights over property. Some of them, however, give neither a right to an interest in definite property nor a right of action. Such, for instance, is a wife's equity to a settlement which consists in the power of the Court of 24 A Digest of Equity. Chancery to refuse its help to a husband to recover through it property coming by common law to him in right of his wife until he has made a reasonable settle- ment on her. Such an equity is a right of the court rather than of the person to be benefited by it. Paragraph (2). This is intended not as a definition of a trust but merely of an equitable interest in property however that interest may arise. The ancient use out of which arose all kinds of equit- able interests was no doubt suggested by the personal servitude of Eoman Law. But there was this difference between them. A usus or ususfrudus ^ was a share in the legal ownership of the property, a deduction from the rights of the legal owner, just as in English Law is a profit d prendre or an easement. The EngUsh use, on the other hand, was no share of the legal ownership and in no way deducted from the rights of the legal owner : it merely imposed on the legal owner an obligation so long as he remained legal owner to use his rights or some of them for the benefit of the person having the use. The legal estate was, to adopt Lord Coke's phraseology, an interest " issuing out of " the thing owned itself ; the equitable interest, an interest not issuing out of the thing owned itself but " a thing collateral, annexed in privity to the estate " of the legal owner of the thing. An example will make this difference clearer. When a person contracts to purchase land and pays the purchase money before a conveyance is executed, in equity the vendor becomes a trustee of the land for the purchaser until conveyance. In Graham v. Mcllwaine ([1918] 2 Jr. 35) the plaintiff purchased land which was in the occupation of a tenant ; and as the purchaser 1 Professor Maitland says that the term " use " was derived, not from the Roman usus, but from ad opus, in Norman French al ues. However this may be, the notion of uses seems to me to have come straight from the Roman personal servitudes. See on this question Holdsworth, Vol. IV., pp. 407 et seq. Nature of Equitable Interests. 25 wished to occupy the land himself, he, after the purchase money had been paid but before conveyance, gave the tenant notice to quit. When the notice expired the tenant refused to give up possession and the purchaser brought an action of ejectment. Held that though in equity the purchaser was owner in fee simple of the land, yet as he had no interest in law he was not entitled to posses- sion, and therefore the notice to quit was void and the action must fail. From the fact that all equitable interests issue from the legal estate two consequences follow. In the first place the equitable interest cannot be of greater extent than the legal estate out of which it issues. Thus, if freehold land was conveyed by deed " unto and to the use of X. and Y. in trust for A. and his heirs," X. and Y. took only an estate for their joint lives, since there were no words of inheritance to convey a legal fee simple. [Now under the L. of P- Act, 1925, words of inheritance are not necessary to convey a fee simple estate.'} Although then the equitable interest given to A. was limited with words of inheritance, all that A. could take was an equitable base fee which will determine on the death of the survivor of X. and Y. An equitable interest cannot survive the legal estate out of which it issues, a principle which seems to have been forgotten in In re Nisbet and Potts' Contract ([1905] 1 Ch. 391 ; Stra. L. C, p. 45), where it was held that an equitable easement could continue after the fee simple out of which it had issued was determined by the Statutes of Limitation. {Cf. In re Woking Urban District Council {Basingstoke Canal) Act, 1911, [1914] 1 Ch. 300.) The second consequence following from the fact that an equitable interest issues out of the legal estate and not out of the thing owned itself, is that it must partake of all the infirmities of the legal estate. Thus B. in 1924 was the second son of X., the owner of Blackacre. X. died intestate and A., X.'s eldest son, being then missing, B. takes possession of Blackacre as heir. B. conveys Black- acre to trustees to hold in trust for his wife. The trustees take the same legal title as B. possessed — a possessory title merely if A. is living. If A. returns and claims 26 A Digest of Equity. Blackacre, that legal possessory estate comes to an end, and so does the wife's equitable interest issuing out of it. It may be alleged that equitable interests not un- frequently issue primarily out of other equitable interests. This is no doubt so. Property is held in trust for X. ior life and then for X.'s daughter Y. During X.'s life Y. marries and assigns her interest under her mother's settlement to trustees to hold on the trusts of her marriage settlement. Those trustees take merely an equitable interest in the property contained in the first settlement. But Y.'s is a sort of sub-settlement, and in the end her interest under it issues as much out of the legal estate held by the trustees of the mother's settlement as does the mother's equitable life estate. Paragraph (3). An equitable interest may and often does amount to the whole beneficial ownership of the legal estate out of which it issues. On the other hand, it may amount to the merest equitable easement arising under a negative covenant. Equitable easements are infinitely varied in character, since they may be defined by agreement, while legal easements, though not absolutely fixed {Att.-Gen. of Southern Nigeria v. John Holt, [1915] A. C. 599), cannot be so defined. See further note to Article 183. Article 12. Who are bound by Equitable Interests. (1) Not merely the legal owner against whom the equitable right first arose is bound by this equitable interest, but so prima facie is every- one who takes the legal estate out of which it issues and to which it is annexed. (2) To this rule there is one exception: Any person who purchased that legal estate or any legal interest in that legal estate for valuable consideration without notice at the time he gave Nature of Equitable I-ai&pests. 27 the coasirpus - - . 134 „ 49. Third positive duty : Giving information as to the trust property ... 140 „ 50. First negative duty : Not to make profit out of the trust property - .... 142 ,, 51. Second negative duty : Not to purchase the trust property from himself or his co-trustees - 144 „ 52. Third negative duty : Not to delegate his duties - 146 „ 53. A trustee's equitable powers .... 149 „ 54. Statutory power : As to selling trust property - 160 „ 55. Statutory power : To arrange 05 to debts and disputes relating to trust property - - 152 „ 56. Statutory power : To give receipts for trust property - -----153 „ 57. Statutory powers of management - - - 153 ,, 68. Statutory power : To insure insurable trust property ....... 154 „ 59. Statutory power : To allow maintenance for in- fant cestui que trust - - - 154 „ 60. Statutory power : To advance infant cestui que trust - 156 „ 61. Jurisdiction of court in emergency to give trustees powers outside trust instrument - - - 156 „ 62. Trustee's right to an indemnity out of the trust property - 158 „ 63. Trustee's right to the protection of the court - 162 Trustees : Their Duties and Powers. 117 PAGE Abticlb 64. Trustee's right to a discharge on complete per- formance of the trust ... .164 ,, 65. Effect of a direction or judgment of the court on a trustee's powers - - 164 Article 44. Nature of a Trustee's Duties, Powers, ^nd Privileges. (1) A duty of a trustee is an obligation the failure to fulfil which will expose the trustee to legal liability for breach of trust, A privilege of a trustee is a right which the trustee may exercise or not exercise without being exposed to legal liability. (2) A trustee's duties are either imperative or discretionary. A duty is imperative where it imposes an obligation to do or to refrain from doing a certain thing. In this case the failure of the trustee to do that thing or to refrain from doing it, as the case may be, whether he acted honestly or dishonestly or with or without reasonable care and skill, is a breach of trust. A duty to do is called a positive, a duty to refrain from doing a negative, duty. A duty is discretionary where it imposes an obligation on the trustee to use judgment in de- ciding to do or refrain from doing a certain thing. In this case the failure to do or refrain from doing the thing is not, but the failure to act honestly or to exercise reasonable care and skill in decid- ing whether to do or refrain from doing the thing is, a breach of trust. 118 A Digest of Equity. Where an imperative duty is not accompanied by a discretionary duty, it is usually called an absolute duty or trust ; where a discretionary duty is not accompanied by an imperative duty, it is usually called an absolute power or discre- tion ; where an imperative and a discretionary duty accompany one another, the two are com- monly called a duty coupled with a discretion, or a discretion coupled with a duty. (3) All the duties and powers vested in the original trustees by the trust instrument, on the death of one or two or more trustees, sur- vive to the other or others surviving, and on the appointment of new trustees vest in such new trustees, unless it appears from the trust instru- ment that the settlor intended the duties and powers to be personal to the original trustees. On the death of a last surviving trustee the duties and powers imposed or conferred by the trust instrument now vest in the personal repre- sentatives of such trustee until new trustees are appointed. Paragraphs (1) and (2). What are usually called duties and what are usually called powers or discretions are both in their essence absolute duties. The difference between them does not lie in the nature of the obhgation on the trustee, but in the nature of the act he is obliged to do. In the case of duties he is bound to do the thing prescribed, whether in his judgment it is wise to do it or not. In the case of powers or discretions he is bound to exercise his judgment as to whether it is wise to do a thing or not, and act accordingly. Thus, if £10,000 be vested in A. upon trust to receive the income until B. attains twenty-one years of age, and until then to pay the whole or such portion thereof as he may think proper for the maintenance and Trustees : Their Duties and Powers. 119 education of B., and on B.'s attaining twenty-one to hand over to him the trust fund and all accumulations, A. is under two absolute duties, and has one power or discre- tion. His absolute duties are to receive the income and to pay over the corpus of the trust fund and the accumu- lations to B. These duties he must perform whether he thinks the settlor was wise in making such provision for B. or not. His discretion is as to the amount which is to be devoted to the maintenance and education of B. during his minority. Here his duty is to decide how much of the income, if any, may, in his judgment, be wisely devoted to this object. He has no right to hand over the whole or any part of the income without considering whether the money is wisely spent or not, any more than a jury have a right to decide by lot what their verdict shall be (Be Bryant, Bryant v. HicMey, [1894] 1 Ch. 324 ; and see Wilson v. Turner (1883), 22 Ch. D. 521). But all powers are also absolute discretions as far as they are discretions at all. Provided the trustee exercises his judgment properly, and executes the power accordingly, the court will not interfere with his exercise of it. The difference between what is called an absolute power and a power coupled with a duty is this : Where the power is absolute, if the trustee in the exercise of his judgment refuses to execute the power at all, the court will not compel him to execute it, unless his refusal amounts to wilful default {Bawsthorne v. Bowley (1907), 24 T. L. E. 51). Where the power is coupled with a duty, the court will compel him to perform the duty, and any refusal to perform the duty will be regarded as a repudiation of the power coupled with it. If, however, he is willing to perform the duty, the court will not interfere with his decision as to how the power coupled with it is to be executed (see per Jessbl, M.E., in Tempest v. Lord Camoys (1882), 21 Ch. D. 571 ; Stra. L. C, p. 98). Moreover, where a power is coupled with a duty and there are several trustees who cannot agree to the exercise of the power, then the duty prevails. Thus where trus- tees were directed to sell and given power to postpone 120 A Digest of Equity. sale, and all the trustees could not agree to postpone sale, the duty to sell at once became absolute (In re Hilton, [1909] 2 Ch. 548). Note, this is not the case where the trust is charitable (see infra, p. 220). In Be Bryant, Bryant v. Hickley (supra), a testator directed his trustees that after the death or remarriage of his wife they should apply the whole or such part as they thought fit of the income of the expectant share of any child towards the maintenance of such child. The wife remarried, and the trustees in the exercise of their discretion refused to allow her any part of the children's income for their maintenance : — Held, that the discretion of the trustees was absolute, and not coupled with any duty, and that the court could not interfere with their bona fide exercise of it (and see In re Charteris, [1917] 2 Ch. 379). Again, in Be Hargreaves, Hick v. Hargreaves, [1901] 2 Ch. 547, note, trustees were directed at their discretion to sell the trust railway stock and reinvest the proceeds. The trustees applied to the court for directions as to when they should sell such stock, and the court, being of opinion that though the trustees were bound to sell the stock sooner or later yet they had an absolute discretion as to when they should sell, held that it could not interfere with the bona fide exercise of such discretion. Here the power was coupled with a duty which the trustees were bound and willing to perform, but, so far as they had a discretion as to the mode or time of its performance, the discre- tion was absolute. (But cf. In re d'Epinoix's Settlement, [1914] 1 Ch. 890.) Powers coupled with the duty of managing the trust property are usually regarded as merely incidental to and part of the general scheme of management. When, there- fore, the court undertakes the administration of the trusts, it exercises itself such powers. Thus, in Tempest v. Lord Camoys ( (1882), 21 Ch. D., p. 576, note), a settlor devised to S. and P. his real estate upon trust to accumulate the rents and apply them for the benefit of certain persons, of whom P. was one. He empowered his trustees to let his Trustees : Their Duties and Powers. 121 mansion-house. In an administration suit the chief clerk upon inquiry directed, found that the house should be let. P. objected : — Held, that the power to let was incidental to the scheme of management, and could be exercised by the court without F.'s consent. (And see Be Courtier, Coles V. Courtier (1887), 34 Ch. D. 136 ; and of. Tern- ' pest V. Lord Camoys, swpra, p. 109 ; and Be Hill, Hill v. PilcJier, [1896] 1 Ch. 962.) It is to be remembered that the refusal of a trustee to exercise a discretion through an improper though not dis- honest motive — such as personal dislike of the beneficiary —is a breach of the duty to use his judgment and there- fore a breach of trust which will entitle the court to exercise the discretion itself (see Klug v. Klug, [1918] 2 Ch. 67). And that when the trust instrument gives the beneficiary certain rights, the trustees cannot be given a discretion to decide what is the extent of those rights : that is a matter for the decision of the court {In re Baven, [1915] 1 Ch. 673). Besides those expressly given by the trust instrument or by statute many powers are imphed. Indeed, as we shall see, most of the duties of trustees must in the nature of things imply a certain discretion : e.g., a trust to invest in any security in which trust funds may by law be invested gives the trustee a discretion as to choosing the particular security. As powers and discretions of trustees are duties, all that is hereinafter said as to duties and the mode in which they should be executed and observed applies equally to them ; and further, being duties, they cannot — as powers for the donee's own benefit may — be released by the trustee, nor extended or altered in their operation with the consent of a cestui que trust who is not absolutely entitled (Weller v. Ker (1866), L. E. 1 H. L. (Sc.) 11). Whether a trustee has in any given instance employed reasonable care, prudence, and intelligence in coming to a decision is purely a question of fact (see Be De Pothonier, 122 A Digest of Equity. Dent V. De Pothonier, [1900] 2 Ch. 529). To cite autho- rities, as is often done, to show what amounts to reasonable care, prudence, or intelligence, is, it is submitted, a mis- leading and dangerous practice. It is an attempt to decide a point of fact, not by evidence, but by authority, and tends to the establishment of a doctrine of " con- structive " want of care, etc., similar to the venerable but exploded doctrine of " constructive " fraud. If examples are wanted of what has been held in specific cases to prove want of reasonable care, etc., see infra, notes to Article 71. Further examples, and what is more valuable, a discussion of the matters which the court should take into consideration in deciding what amounts to negligence, will be found in In re Mackay, Griessemann v. Carr, [1911] 1 Ch. 300 ; and Eaton v. Buchanan, [1911] A. C. 253. It is to be remembered that as far as absolute duties are concerned, the question of neghgence does not arise. The trustee there is bound to do or refrain from doing a definite thing, and if in fact he fails to do or refrain from doing this he is guilty of a breach of trust, whether his failure arose from want of reasonable care, prudence, or intelligence or not. Where a discretion has to be exer- cised, on the other hand, the courts hold that the trustee must display reasonable care, prudence, and intelhgence in coming to a decision, or he has not performed his duty, i.e., has not exercised his discretion at all. Paragraph (3). The first part of this paragraph is a summarised state- ment of the law as enacted by sect. 22 (as to surviving trustees) and sects. 10 (8) and 37 (as to new trustees) of the Trustee Act, 1893 (now repealed and re-enacted by sect. 18 of the T. Act, 1925). In order to prevent express duties and powers surviving to surviving trustees or being exercisable by new trustees, the intention of the settlor that they should be personal to Trustees : Their Duties and Powers. 123 the original trustees must be made very clear. Thus, in Be Smith, Eastick v. Smith ( [1904] 1 Ch. 139), a testator appointed his wife M., together with C. and E., trustees of his will. He gave to " his trustees " all his estate in trust for his wife for life, with power to " the said trus- tees " at their discretion to sell all or any part of it :— Held, that the powers devolved on new trustees. (For the rule prior to the Conveyancing Act, 1881, see In re Bacon, Toovey v. Bacon, [1907] 1 Ch. 475.) The trust estates vested in a sole trustee, whatever their nature, with the exception of legal copyholds [and these have for the future ceased to exist'] and whether he attempts to devise them or not, now devolve on his death on his personal representatives. Such personal repre- sentatives take them subject to the trust, but formerly they took the powers of trustees duly appointed under the trust instrument only if the terms of the trust instru- ment showed that the settlor intended them to have them {In re Crunden and Meux's Contract, [1909] 1 Ch. 690). This was altered by sect. 8 of the Conveyancing Act, 1911, as to trusts constituted after 1881 [which has been re- pealed and re-enacted hy sect. 18, T. Act, 1926]. Now until new trustees are appointed, the personal representatives of the sole or last surviving trustee are entitled to exercise all the powers which could have been exercised by the sole or last surviving trustee, unless a direction to the contrary is contained in the trust instrument. So far as executors are concerned, " personal representatives " include only executors who prove the will. This enact- ment, however, does not seem to affect cases where through, for instance, the disclaimer of original trustees, the trust property becomes vested in the settlor or his personal representative. It would seem that such settlor or personal representative is not a trustee under the trust instrument, and therefore cannot exercise express powers (see Mallott v. Wilson, [1903] 2 Ch. 494). 124 A Digest oj Equity. Article 45. Positive and Negative Duties of a Trustee. (1) It is an absolute duty of a trustee to carry out the directions of the settlor expressed in the trust instrument as to the trust property so far as such directions can be lawfully carried out. (2) Subject to this, the trustee's positive duties under the general law of trusts are — (i) To preserve the trust property ; (ii) To transfer the income and corpus to the persons entitled thereto ; (iii) To give information to the cestui que trust as to the trust property ; The trustee's negative duties are : (i) Not to make profit out of the trust property ; (ii) Not to purchase the trust property from his co-trustees ; (iii) Not to delegate his duties. This statement of the positive duties of a trustee is adopted from the judgment of Lindlby, L.J., in Low v. Bouverie, [1891] 3 Ch. 82 ; Stra. L. C, p. 105 : " The duty of a trustee is properly to preserve the trust fund, to pay the income and the corpus to those who are entitled to them respectively, and to give all his cestuis que trust, on demand, information with respect to the mode in which the trust fund has been dealt with and where it is." The negative duties stated above might perhaps be described as the modes in which the positive duties are to Trustees : -Their Positive Duties. 125 be performed, but it seems simpler and more in accord- ance with usage to treat them as negative duties, which in fact they are. Aeticle 46. First Positive Duty : Preserving the Trust Property. Unless the trust instrument otherwise directs, or unless it gives the trustee a power in the exercise of which he otherwise decides, it is, in order to preserve the trust property, his duty where, and as soon after his acceptance of the trust as, it is reasonably possible so to do : (1) To obtain a transfer of all the trust funds uninvested or invested in negotiable securities into his own hands solely or into the hands of himself and his co- trustees jointly, and a transfer of all the securities for trust funds into his own name solely or into the names of himself and his co-trustees jointly, as the case may be. (2) To sell, unless a contrary intention appears in the trust instrument, aU wasting or reversionary personalty or unauthorised securities, where succes- sive interests in the same are given to different cestuis que trust, and the trust instrument assuring such personalty to the trustees is a will, and the gift is by way of residue. (3) And to invest the proceeds of trust pro- perty sold and called in, and the trust funds in his hands, in securities in 126 A Digest of Equity. which by law trust funds may be invested. (4) When the trust property is invested in securities in which by law trust funds may be invested, the trustee has a power, unless the trust instrument otherwise directs, to vary such invest- ments from time to time when in his judgment alteration in the invest- ments is for the benefit of the trust property. All the duties stated in this Article are coupled with an implied discretion. The trustee is bound to perforin them only " where, and as soon after his acceptance of the trust as, it is reasonably possible " to perform them. Thus, in order to obtain a transfer of the trust pro- perty it may be necessary to take legal proceedings. If in the judgment of the trustee such proceedings would be futile, he is under no obligation to take them {Be Brogden (1888), 38 Ch. D. 546). [Henceforth if a cestui que trust wishes a trustee to commence legal proceedings relating to the trust estate the trustee may require the cestui que trust to provide funds to meet the costs of the proceedings {T. Act, 1925, sect. 22).] Again, as to selling securities, he may, in the exercise of his discretion, decide not to sell immediately if he reasonably thinks there is hkely to be a rise in price {Marsden v. Kent (1877), 5 Ch. D. 598). Similar considerations apply to the selling of wasting and reversionary securities, and, in the nature of things, a trustee who is bound to invest in some of many securities must have a discretion as to which he should select (see Trustee Act, 1925, sect. 3). Paragraph (1). A trustee is not justified in leaving money belong- ing to the trust (Wynne v. Tempest, W. N. (1897) 43 ; Trustees : Their Positive Duties. 127 Wyman v. Paterson, [1900] A. 0. 271), or bonds pay- able to bearer or negotiable instruments {Matthews v. Brise (1843), 6 Beav. 239) in the sole control of a co- trustee, and still less, of course, in the control of retired trustees or agents {Field v. Field, [1894] 1 Ch. 425). [A trustee should now, however, unless the trustee is a trust corporation, deposit them with a bank (T. Act, 1925, serf. 7).] But title-deeds or securities not payable to bearer are different. Thus, in Be Sisson's Settlement, Jones v. Trappes, [1903] 1 Ch. 262, a trustee had for some years sole custody of the title-deeds to the trust property. There was no suggestion of dishonesty against him, or of any improper dealing with the deeds. Another trustee appUed to the court to compel him to deposit the deeds in a box accessible only to the trustees jointly : — Held, that there were no special circumstances to justify such an order. [Now under sect. 21 of the Trustee Act, 1925, trustees may deposit any documents with a hank or other company whose business includes the undertaking of the safe custody of documents.'] Getting in trust property includes getting satisfaction from former trustees for breaches of trust committed by them and causing loss to the trust property. But a new trustee is entitled to assume without inquiry that the former trustees discharged their duty properly, and it is only when he has notice of the breach that any duty to take proceedings arises {Ex parte Greaves (1856), 8 De G. M. & G. 291). Paragraph (2). This rule as to the duty to sell wasting, reversionary or unauthorised securities is called the rule in Howe v. Lord Dartmouth (1802), 7 Ves. 137. It apphes only where the property is personalty and is given to the trustees by will by way of residuary bequest {Be Van Straubenzee, Boustead v. Cooper, [1901] 2 Ch. 779 ; Stra. L. C. 114). " So far as I am aware, the rule in Howe v. Earl of Dartmouth has never been applied except to a disposition by will of residuary personal estate given as one fund to 128 A Digest of Equity. be enjoyed by several persons in succession. The court assumes an intention that the legatees should enjoy the same thing in succession, and, as the only mode of giving effect to such intention, it directs the conversion into permanent authorised investments of all such parts of the residuary estate as are of a wasting or reversionary or unauthorised character : see Pickering v. Pickering (1839), 4 My. & Or. 289, at p. 298 ; and Macdonald v. Irvine (1878), 8 Ch. D. 101, at p. 112. But the rule does not apply to any bequest which is specific as distinguished from residuary." (Per Cozbns-Hardy, J., in Be Van Straubenzee, Boustead v. Cooper, supra.) Where the wasting property is a leasehold in a foreign country and by the law of that country the life tenant would be entitled in specie, the rule in Howe v. Dartmouth, supra, does not apply (In re Moses, Moses v. Valentine, [1908] 2 Ch. 235). And see an application of the rule where the residuary estate consisted partly of the copy- right in books {In re Evans' Will Trusts, [1921] 2 Ch. 309). It is to be remembered that the rule has no reference to express directions contained in the trust instrument, whether deed or will. Such directions must be obeyed, and it is under such directions that most conversions take place. Nor does the rule apply if an intention that the wasting securities should be held in specie appears in the trust instrument. This intention need not be expressly stated : it may be gathered from the instrument generally. Thus, where the only land the testator possessed was leasehold, a gift of the " rents and profits " of his property to the life tenant may be held to be a sufiicient indication that he did not intend that the leasehold should be con- verted (see In re Wareham, Wareham v. Brevnn, [1912] 2 Ch. 312). In the same way a gift over of the property in specie after the life tenant's death is also a sufficient indication that the life tenant is intended to enjoy it in specie (ibid.). A trust to convert is usually accompanied by a power given to the trustees to postpone conversion if they think Trustees : Their Positive Duties. 129 proper to do so. Where such a power is given all the trus- tees must concur in retaining the unauthorised securities or the trust for sale will prevail {In re Hilton, Gibhes v. Hale-Hinton, [1909] 2 Oh. 548). Paragraph (3). The securities in which any particular trustee may by law invest trust funds in his hands may be regulated either by express directions contained in the trust instru- ment or by sects. 1-6 of the Trustee Act, 1893 (now repealed and re-enacted with amendments by Part I of the Trustee Act, 1925). The provisions contained in these two Acts apply to all trusts, whether created before or after the passing of the Acts, and are in addition to any powers of investment given by the trust instrument, unless the trustee is in the trust instrument expressly for- bidden to invest in the securities therein enumerated, see In re Burke, Burke v. Burke, [1908] 2 Ch. 248). The chief of these are real securities in the United Kingdom ; Government stock of the United Kingdom and India ; securities the interest of which is guaranteed by ParHament ; stock of the Banks of England and Ire- land ; Metropolitan stock ; the debenture or rent-charge or guaranteed or preference stock of any railway company in Great Britain or Ireland, incorporated by special Act of Parliament, and having during the last ten years past paid a dividend of not less than 3 per cent, per annum on its ordinary stock, or stock of a railway company leased for not less than two hundred years to such a company ; Indian debenture stock, the interest on which or stock the minimum interest on which is guaranteed by the Secre- tary of State for India ; any county council inscribed stock or the inscribed stock of the corporation of a borough having at the last census a population exceeding 50,000 (see Be Druitt, [1903] 1 Ch. 446) ; the debenture stock of water companies having for ten years past paid dividends at the rate of at least 5 per cent, per annum ; and any of the stocks, funds, or securities for the time being ai7thorised for the investment of cash under the 130 A Digest of Equity. control or subject to the order of the High Court (sect. 1, Trustee Act, 1893 ; and see E. S. C. Order 22, rule 17). By the Colonial Stock Act, 1900, any colonial stock regis- tered in the United Kingdom in accordance with the provisions of the Colonial Stock Acts, 1877 to 1900, and with respect to which there have been observed such conditions as the Treasury may by order prescribe, is included among the securities in which by law trustees may invest trust funds. But (notwithstanding the above provisions) trustees, unless the trust investment expressly empowers them so to do, are not entitled to invest in or hold certificates payable to bearer issued under — (a) the India Stock Certificate Act, 1868 ; (b) the National Debt Act, 1870 ; (c) the Local Loans Act, 1875 ; or (d) the Colonial Stock Act, 1877 (Trustee Act, 1893, sect. 7). [Note : The United Kingdom does include Northern Ireland but does not include the Free State {T. Act, 1925, sect. 68).] The above provisions are considerably quahfied by sects. 2, 3, 4, 5 and 6 of the Trustee Act, 1893 (repealed and re-enacted by sects. 2, 3, 69, 5 and 6 T. Act, 1925). Most of these sections have already been referred to, but one should particularly be mentioned. By sect. 5 (1) a trustee entitled to invest in real securities may invest — (a) on mortgage of leaseholds of which two hundred years at least are unexpired, and which are not subject to a rent greater than a shilling a year or to any condition of re-entry except for non-payment of rent ; (b) or on any charge or mortgage of any charge made under the Improvement of Land Act, 1864. (For supplemental powers see sect. 10, T. Act, 1925.) It is to be remembered that when trust funds are capital money under the Settled Land Acts, 1882 to 1890 (now S. L. Act, 1925), their investment depends upon those Acts. It is also to be noted that when there is an express power given to trustees to invest in securities outside those allowed by statute, the court -will construe such power very strictly {In re Maryon-Wilson Estate, [1912] 1 Ch. 55). And where an express power to invest in the purchase of land is given there is until the contrary is shown an implied power to sell land purchased under such power {In re Pope's Contract, [1911] 2 Ch. 442). Trustees : Their Positivd Duties. 131 Where such a power exists in any trust created after December 31st, 1911, by which the property is settled as personalty, any land purchased by the trustees is to be held by them as on a trust for sale, i.e., as personalty (see sects. 23 and 32 Law of Property Act, 1925). As has already been pointed out, the selection by a trustee of the security in which to invest trust funds is a discretion, and, like every other discretion, he must, in exercising it, employ reasonable care, prudence, and intelhgence. It is not sufficient that the security in which he invests is one authorised by the trust instrument or by the general law ; it is his business to ascertain whether it is also a proper investment (see In re Hunt's Estate, [1905] 2 Ch. 418). Thus, he should not, unless expressly authorised so to do, invest trust funds in speculative securities. A mortgage of land, for instance, is among the investments authorised in sect. 1 of the Trustee Act, 1893, but a mortgage of a building estate where the houses have not yet been tenanted, and so have no certain market value [Learoyd v. Whiteley (1887), 12 App. Cas. 727, at p. 731), is at any rate prima facie an improper investment though apparently it may be held good where circumstances indicate that the unfinished houses •will when finished be a good security (Shaw v. Gates, [1909] 1 Ch. 389) ; sed qucere. On the other hand, invest- ment on the security of a contributory mortgage, i.e., one in which several mortgagees advance the loan {In re Dive, Dive V. Boeluch, [1909] 1 Ch. 328), or of a second mort- gage (Chapman v. Browne, [1902] 1 Ch. 785), would ipso facto constitute a breach of trust. [By sect. 7 of the T. Act, 1925, trustees may hold securities payable to hearer which if not so payable would be good investments unless forbidden by the trust instrument to do so; but except where the trustee is a trust corporation the securities until sold must be deposited at a bank and the hank must collect the-income.~\ Paragraph (4). Unless it is expressly excluded by the trust instrument, a power to vary the investment of the trust funds is 132 A Digest of Equity. implied by the Trustee Act, 1925, sect. 1. This statu- tory power appHes not merely to investments made under the Act, but to all investments {Be Dick, Lopes v. Hume- Dick, [1891] 1 Ch. 423). Article 47. Second Positive Duty : Transferring the Trust Property. (1) It is an absolute duty of a trustee to pay and transfer the income and corpus of the trust property to the cestuis que trust respectively entitled thereto, or (if they are dead) to their legal representatives. (2) Provided he acts in good faith, and with- out notice, a trustee is, however, justified in paying trust money : (i) To a person appointed by power of attorney, given by the cestui que trust, to receive it, although the cestui que trust is dead or has avoided the power ; (ii) To the original cestui que trust, though he has previously assigned his interest in the trust fund to another person. Paragraph (1). This being an absolute duty, the question of neghgence does not arise ; if the trustee fails to perform it he is guilty of a breach of trust, to whatever cause his failure is due. Thus, if through the fraud of some other person the trustee is induced to pay trust money to a person who is not entitled to it {Be Bennison, Cutler v. Boyd (1889), 60 L. T. 859), or if by an honest but mistaken interpreta- Trustees : Their Positive Duties. 133 tion of the instrument of trust he distributes the trust funds wrongly {Hilliard v. Fulford (1876), 4 Ch. D. 389), he is liable, strictly speaking, to refund all the money improperly paid away to the cestui que trust properly entitled to it. And where he has overpaid one cestui que trust, even though the overpayment is out of a share of the trust funds to which he himself is beneficially entitled, he cannot recover the overpayment, since in order to do so he would have to claim for his own breach of trust (In re Home, [1905] 1 Ch. 76) ; but if any trust funds belonging to the overpaid cestui que trust still remain in the trustee's hands he can in adjusting accounts between himself and the overpaid cestui que trust retain out of them the amount overpaid {In re Ainsworth, [1915] 2 Ch. 96). It should perhaps be noticed that where the settlement gives an annuity to a beneficiary it is the duty of the trustees to deduct income tax payable upon such aimuity unless there are express directions that the annuity is to be paid free of income tax [In re Loveless, [1918] 2 Ch. 1). Income tax in such a direction includes super tax {In re Crosse, [1920] 1 Ch. 240). Paragraph (2). A power of attorney may be revoked either by express revocation or by the death, insanity or bankruptcy of the grantor of the power. And once it is revoked the attorney's right to represent the grantor is gone, and he is unable to give a discharge to persons paying the money to him owing to the grantor, whether he or they know of the revocation or not. As far as payments made by trustees to a person acting in pursuance of a power of attorney are concerned, the law is now altered by sect. 23 of the Trustee Act, 1893 (repealed and re-enacted by the Law of Property Act, 1925, sect. 29), which in effect makes such payments effectual where the trustee had no notice of the revocation, and gives to the grantor of the power as against the person receiving the payment all the remedies he would formerly have had against the trustee. 134 A Digest of Equity. The second part of the paragraph simply amounts to this, that the trustee is not bound to know what the different cestuis que trust do with their interests. . Until he has notice to the contrary, he is entitled to assume that the trust property belongs to the persons entitled under the trust instrument. It would seem that before he pays an assignee of whose assignment he has notice, he is bound to investigate the assignee's title or he will be affected with notice of any earlier assignment disclosed in it {Davis v. Hutchings, [1907] 1 Ch. 356) ; while at the same time on paying the assignee he is not entitled to delivery of the deed of assignment (In re Palmer, [1907] 1 Ch. 486). [But see now the new provisions as to notice to trustees, supra, p. 47.] Where the trust is discretionary, an assignee is just as much subject to the discretion as was the cestui que trust {Train v. Clapperton, [1908] A. C. 342). Article 48. Persons entitled to Income and Corpus. (1) Where the trust property is settled ia successive interests and consists of improper, wasting or reversionary securities which it is the duty of the trustees to sell, then if such securities are not in fact sold the trust funds should be appropriated between the life tenant and remainderman in the following manner : (a) Where the trust funds consist of improper or wasting securities, the trustees should have the securities valued at the time they should have been sold and give the life tenant 4 per cent, per annum on their value Trustees : Their Positive T>uties. l35 and invest the residue of the income accruing from them, paying the income on such investments to the hfe tenant and holding the corpus for the remainderman. (&) Where the trust funds consist of reversionary securities, then when they fall into possession the trustees should ascertain the sum which, put out at interest at 4 per cent, per annum at the time the securities should have been sold and accumulating at compound interest calculated at that rate, with yearly rests and deducting income tax, would, with the accumulations of interest, have produced at the time of receipt, the amount actually received on the reversionary securities falling into possession ; and the sum so as- certained should be treated as corpus and held for the remainderman, and the residue should be treated as income and paid to the life tenant. (2) Where the trust property is held on an express trust for sale and the sale is temporarily postponed, the income pay- able to the Hfe tenant until the sale takes place depends upon whether the trust property is realty or personalty. [a) Where the trust property is realty, then whether the trustees have power to postpone the sale or not, until the property is sold the hfe tenant must be paid the actual income accru- ing from it, unless the trustees wrong- 136 A Digest of Equity. fully postpone the sale in order to benefit the life tenant. (b) Where the trust property is per- sonalty, the trustees should have the trust property valued and pay the life tenant interest on it at the rate of 4 per cent, per annum and invest the balance of the actual income as corpus, unless they have a discretion perma- nently to retain the trust property in its actual condition. These rules do not apply where there is in the trust instrument any express direction to the contrary. (3) Where the "trustees invest trust money on improper security they may pay the whole income arising from such invest- ment, though it is more than 4 per cent, per annum on the capital, to the cestui que trust entitled to the income, and the remainderman will have no claim to any part of such additional income if, when the trust money is caUed in, there is no loss to the trust property. Where the trust money is invested on proper security but the interest due thereon is not fully received, then the interest received before the reahsation of the security should be paid to the person entitled to the income, and on realisation the money received for the security should be divided between the income and capital of the trust property in the same proportion as the arrears of income bear to original capital. Trustees : Their Positive Duties. 137 (4) Subject to any directions in the trust instrument to the contrary or to a power in the exercise of which the trustees otherwise decide, current ex- penses of administering the trust, the cost of repairs of leaseholds part of the trust property, and interest on capital charges, are payable out of the income of the trust property ; the cost of legal proceedings to protect the trust property, and capital charges, are pay- able out of the corpus of the trust property ; while the cost of repairs of copyholds and freeholds part of the trust property, and fines for the re- newal of leaseholds, are to be appor- tioned between income and corpus, as the court may direct. Paragraph (1). The rule stated as to wasting securities is usually called the rule in Meyer v. Simonsen ((1852), 5 De G. & Sm. 723) ; that as to reversionary securities, the rule in In re Chesterfield's Trusts ((1883), 24 Ch. D. 643). For a very able and exhaustive discussion of them see Mr. Walter Strachan's Law of Trust Accounts, chap. xix. The effect of the rules will best be shown by an example : A testator by his will bequeaths his interest in Blackacre and in £10,000, settled under his father's will, to A. and B. as trustees on trust to convert the same as soon as possible and invest the proceeds and pay the income to C. for life, and on C.'s death to divide the trust funds between D. and E. The testator's interest in Blackacre is a leasehold residue of twenty years ; his interest in the £10,000 is absolute subject to a life interest in the income vested in X. For some reason or other the trustees sell neither interest. The market value of the interest in Blackacre was at the 138 A Digest of Equity. testator's death £5,000, and on that valuation the net income was £500, i.e., 10 per cent per annum. C, the life tenant, is not entitled to the whole £500 per annum, but only to such portion of this as would amount to the interest on £5,000 if such £5,000 had been invested in securities permitted by the trust instrument or by the law. The balance of the £500 would be held by the trustees as capital, and the income arising from it would also be payable to 0. {Re Woods, Gahellini v. Woods, [1904] 2 Ch. 4). As to the £10,000, until X.'s death that produces no income. Say X. dies ten years after the testator. The trustees should then have an estimate made as to what sum would at 3 per cent, compound interest during ten years produce £10,000. Say this sum would be (roughly) £7,000, Then the £3,000 left after this is deducted from the actual value (£10,000) would be paid to C. as arrears of income, while the £7,000 would be retained as corpus. Paragraph (2). This distinction between realty and personalty held in trust for sale has long been recognised (see In re Earl Varnley, [1907] 1 Ch. 159). The general rule as to realty is that the life tenant is entitled to enjoy the property in specie whether the trustees have a right to postpone sale or not, if the sale is not unreasonably delayed. This rule does not apply to royalties on minerals, but it does apply even when the proceeds of the realty when sold are settled to accompany the proceeds of the personalty when sold (see In re Oliver, [1908] 2 Ch. 74; and In re Godfree, [1914] 2 Ch. 110). As to personalty, even when by the express terms of the trust instrument the life tenant is entitled to enjoy the trust income in specie, yet when the trust property con- sists of stocks or shares in a company, if the company resolves to pay part of a year's profits not as a dividend but as a bonus, the bonus is to be held by the trustees as an accretion to the capital of the trust funds {Bouch v. Sproule, [1887] 12 A. C. 385); and the same rule apphes where Trustees : Their Positive Duties. 1 39 undivided profits are distributed in the form of new shares {In re Whitfield, [1921] 125 L. T. 61) ; but if undivided profits are distributed later, not as a bonus or new shares but as a dividend, then the hfe tenant is entitled to them as income {In re Thomas, [1916] 2 Ch. 331). Where the personalty is invested in a mortgage of land which the trustees have had to foreclose, then if the trustees resolve to retain the land the life tenant is entitled to the income in specie of the land, but if that is not equal to the interest reserved on the trust funds invested on the mortgage he is not entitled to any compensation {In re Horn's Estate, Public Trustee v. Garnett, [1922] 2 Ch. 222). Paragraph (3). The rule stated here with regard to investments on improper security is now approved by the decision of the Court of Appeal in Slade v. Chaine, [1908] 1 Ch. 622 ; Stra. L. C. 158. There a sole trustee applied part of a trust fund for his own purposes, paying the life tenant 5 per cent, per annum interest on the money so misapplied. Afterwards he replaced the trust money in full. The remainderman claimed that the hfe tenant should refund and add to the corpus of the trust estate all interest she had received over 3 per cent. : — Held, that no such claim could be sustained. This is the case even where the trustee who made the improper investment is himself the life tenant who benefits by the larger interest {In re Hoyles, Bow V. Jagg, [1912] 1 Ch. 67). The personal liability of the trustee is not being here considered. That will be discussed later. Where the investment was proper but resulted in a loss, whether the investment was made by the settlor or the trustees, no conflict between the interests of the life tenant and the remainderman arises until the security is realised. Till then the life tenant is entitled to what- ever income the investment produces {In re Broadwood, [1908] 1 Ch. 119). On realisation the proceeds are to be 140 -A Digest of Equity. apportioned as stated in the Article {In re Atkinson, [1904] 2 Ch. 160). Paragraph (4). This seems to be the effect of the decisions, which, however, are not easily reconcilable. In this connection the provisions of sect. 36 of the Settled Land Act, 1882 (repealed and re-enacted sect. 92, S. L. Act, 1925), should be remembered. Under them the court may if it thinks fit approve of any legal pro- ceedings taken or to be taken for the protection or recovery of settled land, and may direct that the costs thereof shall be paid out of the property subject to the settlement (see In re Tubbs, [1915] 2 Ch. 540). As regards the pay- ment of costs of improvements on the settled property, see In re Stamford and Warrington (Earl), [1916] 1 Ch. 405. Article 49. Third Positive Duty : giving Information as to the Trust Property. It is an absolute duty of a trustee, on the application of a cestui que trust, whether such cestui que trust's interest in the trust property is vested or contingent, to give such cestui que trust all reasonable information as to the way in which the trust property has been dealt with, and the present state of its investment, and also the opportunity and means of verifying such information. For such purpose of verification he should keep intelligible accounts which will enable the inquiring cestui que trust to see the effect of such dealings and investment upon his interest in the trust property. As said by Jbssel, M.E., in Heugli v. Scard (1875), 33 L. T. 659 : " In certain cases of mere neglect Trustees : Theirr Positive Duties. 14 or refusal to furnish accounts, when the neglect is very gross or the refusal wholly indefensible, I reserve to myself the right of making the trustee pay the costs of litigation caused by his neglect or refusal." (And see Be Dartnell, Sawyer v. Goddard, [1895] 1 Ch. 474.) This rule — that a trustee must supply the cestui que trust with accounts, and that if he fails unreasonably so to do he may be held liable personally to pay all costs — is well illustrated in Be Skinner, Cooper v. Shinner, [1904] 1 Ch. 289 ; Stra. L. C. 133. There a testator left by his will £2,000 charged on his whole estate upon trust for his daughter, E, A. Cooper. Mrs. E. A. Cooper apphed to the trustees repeatedly for accounts, and finally received an account which showed no distinction between the corpus and income of the trust property. The plaintiff then obtained from the court an order for the administration by the court of the trusts of her father's wiU. An account was directed, and on its receipt the court, on the ground that the trustees had never supplied the cestui que trust with proper accounts, and therefore had not discharged their duty, held that the trustees must not merely supply such accounts, but, as it was their neglect to do so that caused the action for administration, that the trustees were liable for the costs of the hearing and accounts. (And see In re Linsley, [1904] 2 Ch. 785.) Two further points should be remembered. A trustee is bound to give information as to his own deahngs with the trust funds : he is not bound to give either to the cestui que trust, or to an intending purchaser from the cestui que trust, information as to the deahngs of the cestui que trust himself with his interest in the trust funds even when he has had notice of such dealings {Low V. Bouverie, [1891] 3 Ch. 82 ; Stra. L. C, p. 105). Secondly, no agreement between trustees as to costs or expenses precludes the cestui que trust's right to an account of such costs and expenses. As to the latter point, in Be Fish, Bennett v. Bennett, [1893] 2 Ch. 413, two trustees agreed that the costs due to one of them for work done for the trust amounted to a certain sum. 142 A Digest of Equity. The cestui que trust objected to this agreement : — Held, that he was entitled to have the account investigated. And even where the cestui que trust himself agreed to the charges, on proof of overcharge the court will reopen the settled account {Cheese v. Keen, [1908] 1 Ch. 245 ; Stra. L. C, p. 120). Eemuneration does not alter the liability of the trus- tees, except perhaps to this extent, that a trustee who undertakes for payment to do certain work must be held to represent himself as reasonably quahfied to do such work (see Jobson v. Palmer, [1893] 1 Ch. 91, and see infra. Article 89). Article 50. First Negative Duty : not to make Profit out of the Trust Property. (1) It is an absolute duty of a trustee not to deal with the trust property in such a way as to make for himself a personal profit out of it or out of his dealings with it. (2) An individual trustee is not entitled to receive any remuneration out of the trust property for his work as trustee, unless — (i) The trust instrument expressly directs or permits him to receive such remunera- tion ; or (ii) he has, before accepting the trust, stipu- lated with the cestuis que trust (these being all sui juris) to receive remunera- tion ; or (iii) the trust property is situate abroad in a country where, by the local law or custom, trustees are entitled to remuneration. (iv) the trustee is a solicitor and is engaged by his co-trustees to bring or defend an action relating to the trust property. Trustees : Their Negative Duties. 143 [(v) the trustee is a trust corporation and the court appointing him orders re- muneration.'} The position of a trustee is well illustrated by Vipont v. Butler, W. N. (1893) 64. There a solicitor trustee who, if he had acted as solicitor, would have been entitled under the trust deed to charge ordinary professional remuneration for his services, sent certain legal work connected with the trust to another solicitor, under an arrangement by which he, the solicitor trustee, was to receive the ordinary commission for such work : — Held, that as he was not the solicitor acting for the trust, the commission he received was an improper profit made by him out of his deaUngs with the trust property, and that he was liable to account to the trust estate for such profit. (And see Parker v. McKenna (1874), L. E. 10 Ch. 96 ; Stra. L. C, p. 6.) But where a trustee defends an action as sohcitor for the co-trustees or acts for the cestuis que trust, the court may allow him solicitor and client costs even where the trust instrument does not authorise him to charge them {Cradock v. Piper (1850), 1 Mac. & G. 664). Even where a professional trustee is expressly autho- rised by the trust instrument to charge for his services, the court will permit him to charge only for his pro- fessional services (see In re Chalinder and Herington, [1907] 1 Ch. 58). Where a trustee is made a director of a company, his qualification and the ground of his appointment being shares in the company which he holds as trustee, his fees as director are not a profit obtained by him out of the trust estate, but payment for his services as director, and so may be retained by him {In re Dover Coalfields Exploration, Limited, [1907] 2 Oh. 76 ; followed in In re Lewis (1910), 103 L. T. 495). Not infrequently now a corporate body acts as trustee for reward. It seems that though the corporate body in such case cannot make a profit out of its dealings with the trust property its officers may. Sed quaere {Bath v. Standard Land Company, [1911] 1 Ch. 618). 144 A Digest of Equity. The position of a solicitor trustee, as stated in this article depends chiefly on Cradock v. Piper (1850) 1 Mac. & G. 675. Though a trustee is not entitled, save under the con- ditions set out in the Article, to receive profits out of the trust property, he is, as we shall see, always, when he acts properly, entitled to an indemnity for all costs and expenses reasonably incurred by him in connection with the trust estate. (And see In re Bodega Company, Limited, [1904] 1 Ch. 276.) [As to the right of a trustee to remunerate an agent properly appoi^ited for work done in administration of the trust, see infra, p. 147.] Article 51. Second Negative Duty : not to Purchase the Trust Property from himself or his Co -trustees. (1) It is an absolute duty of a trustee, as long as he remains a trustee, not to buy or to take a lease or a mortgage of the trust property for his own benefit, either from himself or from himself and his co-trustees. This duty imposes on the trustee an absolute incapacity to take a good title to the trust property in breach of the duty. (2) This incapacity continues after he has ceased to be a trustee where, from the circum- stances, the court is of opinion that he ceased to be a trustee with a view of quahfpng him- self to buy or to take a lease or mortgage of the trust property. (3) The incapacity, while he remains a trustee, can be removed only — Trustees: Their Negative Duties. 145 (i) by virtue of an express power in that behalf contained in the trust instru- ment ; or (ii) by the consent of the court. The point to be noted here is not as to a purchase by the trustee from the cestui que trust — which under proper conditions is quite legal — but as to a purchase by a trustee from himself or from his co-trustees, which is in ordinary circumstances quite illegal (see Williams v. Scott, [1900] A. C. 499). Practically, save where, as stated in the Article, the sale is in pursuance of a special power — as where a testator gives one of his trustees a right to buy his business at a certain price within a certain time — or where the court gives a trustee express permission to buy, all pur- chases of trust property by a trustee from himself or his co-trustees are liable to be set aside by the court without any evidence that the purchase was unfair, or that the trustee took any improper advantage in the transaction (Fox V. Mackreth (1788), 2 Bro. C. C. 400). Where, however, the trustee has before the purchase ceased to be a trustee, then the vahdity of the purchase by him of property of which he once was trustee depends on the view of his conduct the court takes on the evidence. That is, the purchase is not ipso facto voidable ; it is voidable only if the court comes to the conclusion that the former trustee acted improperly. Thus, in In re Boles and British Land Company's Contract, [1902] 1 Ch. 244, a trustee, after twelve years' retirement from the trust, bought the trust property. There was no evidence whatever that he had retired with any view of subsequently purchasing the trust property, nor that he took any unfair advantage of the knowledge of the property which he had acquired as trustee : — Held, that in the absence of such evidence the purchase was quite valid. The rule prohibiting purchases from co-trustees extends to purchases from other purchasers from the trustees 146 A Digest of Equity. while the contract of purchase with the trustees is executory. Thus, in Williams v. Scott, supra, a trustee agreed to sell certain trust property to A. A. being unwilling or unable to complete the transaction, the trustee took over the contract and accepted a con- veyance. Subsequently the trustee resold, but the pur- chaser, on investigation of title, refused to complete, on the ground that the trustee's title was not good, being based on a purchase from himself as trustee : — Held, that this objection was good. The rule applies not merely to express trustees, but to every one in a fiduciary position, such as the director of a company (Parker v. McKenna (1874), L. E. 10 Ch. 96 ; Stra. L. C., p. 6), the receiver of an estate {Nugent v. Nugent, [1908] 1 Ch. 546), the life tenant of an equity of redemption (Griffiths v. Owen, [1907] 1 Ch. 195), etc. Article 52. Third Negative Duty : not to Delegate his Duties. (1) Subject to the powers hereinafter men- tioned, it is an absolute duty of a trustee not to delegate the performance of his duties either to his co-trustees or to an agent. (2) A trustee has power to delegate duties — (i) Where and in so far as such delegation is practically unavoidable, or is usual in the ordinary transactions of business of the nature of the duty delegated ; (ii) Where such delegation is specifically per- mitted by the trust instrument ; (iii) Where such delegation is specifically per- mitted by statute. Trustees : Their 'Negative Duties. 147 (3) Unless a contrary intention is expressed in the trust instrument, a trustee is, since December 24th, 1888, permitted by statute to delegate — (i) To a soUcitor the duty of receiving and giving a discharge for moneys payable to the trustee by permitting him to have the custody of and to produce a deed containing a receipt signed by the trustee, and this deed will be a sufficient authority to the person liable to pay such moneys for paying them to the sohcitor ; (ii) To a banker or sohcitor the duty of receiving and giving a discharge for any moneys payable to a trustee under a poHcy of insurance by permitting the banker or sohcitor to have the custody of and to produce the pohcy of in- surance with a receipt signed by the trustee. [(4) 8ince \st January, 1926, trustees are entitled instead of acting personally to employ and pay an agent to transact any business or do any act required to be transacted or done in the exe- cution of the trust, and to be paid all charges and expenses so incurred, and shall not be responsible for the default of any such agent if employed in good faith. [(6) Since 1st January, 1926, trustees are entitled to appoint any person to act as their agent or attorney for the purpose of administering any property real or personal, moveable or immoveable, subject to the trust in any place outside the United Kingdom, or executing or exercising any discretion or trust or power vested in them in relation to such 148 A Digest of Equity. property with power to appoint substitutes, and shall not by reason only of their having made such appointment be responsible for any loss arising thereby. [(6) A trustee intending to go out of the United Kingdom for not less than twelve months may by power of attorney delegate to any person including a trust corporation the administration of the trust, provided such person is not the only other trustee, unless this other trustee is a trust corporation. The donor of such authority shall be liable for the attorney's acts and defaults.] Paragraphs (1) and (2). The case which perhaps best illustrates the modern view of the above rule is Re De Pothonier, Dent v. De Pothonier, [1900] 2 Ch. 529. There the trustees held as part of the trust investments certain bearer securities with coupons attached for the payment of the annual interest due on the securities. These were deposited with a banker with authority given him to remove from time to time the coupons, and claim the interest on behalf of the trustees as it became due. This was held a proper delegation of the duties, since it was the conduct which would be followed by any reasonably prudent man looking after his own affairs. 'b As an example of what may be considered a practically unavoidable delegation, see the case of Field v. Field, [1894] 1 Ch. 425. There the trustees held a building estate which was being let off from time to time in plots. In order to save the constant reference to the trustees to produce title-deeds to prove title, the trustees left these with the solicitors for the trust estate : — Held, that under the circumstances this was perfectly reason- able, and therefore proper. (And see Be Brier, Brier v. Evison (1884), 26 Ch. D. 238 ; Speight v. Gaunt (1884), 9 App. Cas. 1 ; and In re O'Flanagan and Ryan's Contract, [1905] 1 I. E. 280.) Trustees : Their Negative Duties. 149 It is to be noted that, in order to render the delegation proper, it is necessary not merely that the circumstances should be such as to justify the trustee in delegating his duties, but also that the delegation should be to a proper agent. However right it may be that the trustee should delegate his duties, if he employs, say, a stock- broker to do what is properly a banker's business, or a lawyer to do what is properly a valuer's business, he is guilty of negligence in exercising his power to delegate, and so is liable for breach of trust {Re Weall, Andrews V. Weall (1889), 42 Ch. D. 674 ; and see further, infra, Article 71). Paragraphs (3), (4), and (5). [The powers to delegate duties set out in this paragraph (3) were originally conferred by sect. 17, T. Act, 1893 {now repealed and re-enacted hy sect. 28 of the T. Act, 1925). Sect. 23, however, also confers on trustees the remarkable powers set out in paragraphs (4) and (5). For a discussion as to the extent of these new powers, see infra, p. 182.] Paragraph (6). [This is a short summary of sect. 25 of the T. Act, 1925. The point to be noted is that the trustee who appoints a delegate trustee is liable for his delegate's defaults, while a trustee who delegates all his duties under the trust to an agent or agents is not if he acted bona fide in making the appoint- ment.^ Article 53. A Trustee's Equitable Powers. In addition to powers specifically given by the trust instrument or by statute, a trustee has implied or equitable powers to do any act or execute any instrument which may be reason- ably necessary for the purpose of carrying out 150 A Digest of Equity. the duties imposed on him by the general law or the trust instrument. The duties of a trustee have been stated. It neces- sarily follows that he must have the powers necessary to enable him to carry out such duties. Thus he has an impHed powpr to take such proceedings as may be necessary to protect the trust estate (Be Ormrod's Settled Estate, [1892] 2 Oh. 318 ; Stott v. Milne (1884), 25 Ch. D. 710 ; Stra. L. C, p. 127), though where the estate is land his more prudent course is to apply for the authority of the court under sect. 36 of the Settled Land Act, 1882 (see now s. 92 of the S. L. Act, 1925). Again, he has power where the immediate realisation of the trust estate would be disastrous to postpone it (Ward v. Ward (1843), 2 H. L. Cas. 777, at p. 784), though, again, the more prudent course is to apply for the sanction of the court under E. S. 0. Order 55. Where express powers are given by the trust instrument, they carry with them all the powers necessary to make them effective. Thus, where the trustee is given the management of the trust estate, he has power to do the necessary repairs (Re Fowler, Fowler v. Odell (1881), 16 Ch. D. 723), and to grant reasonable leases {Fitz-patrick v. Waring (1882), 11 L. E. Ir. 35). A power once very important is the power to refuse payment of the trust money of a wife to her husband until the wife has had an opportunity of claiming her equity to a settlement : this is explained where we deal with married women's property. Article 54. Statutory Power : as to selling Trust Property. (1) Independent of recent legislation when by the trust instrument a trustee is entitled to sell trust property, he may sell it in what- ever mode he may decide is for the benefit Trustees : Their Statutory Powers. 151 of his cestui que trust ; but unless the trust instrument came into operation since December 31st, 1881, he cannot concur with any other person in selhng nor sell subject to prior charges, and, even if it came into operation since that date, unless with the consent of the court, he cannot, where the trust property is land, seU the surface, reserving the minerals, except, in either case, the trust instrximent gives him an express power so to do. [(2) Since 1925 a trustee for sale of land is entitled to sell the land in any mode and subject to such conditions' as he thinks proper without any application to the court. If he sells subject to depreciatory conditions the sale cannot be impeached unless their result is to render the price received inadequate, and after conveyance as against an honest purchaser it cannot be impeached at all. He is also entitled to postpone the sale sinless there is a provision to the contrary in the trust instrument. [(3) Since 1925 trustees for sale of fee simple land or leaseholds for terms of 600 years unexpired are entitled where the purchase money is to be invested to leave two thirds of it on mortgage of the land sold with or without the security of other property. '\ (4) A trustee can buy in the property at an auction or vary or rescind a contract of sale and re-sell. Paragraph (1). The above is the effect, shortly stated, of sects. 13, 14, and 44 of the Trustee Act, 1893. Sects. 13 and 14 re-enacted substantially sect. 35 of the Convey- ancing Act, 1881, and sect. 3 of the Trustee Act, 1888. Strictly speaking, a trustee, whenever his trust instru- 152 A Digest of Equity. ment came into operation, may sell jointly with another person, but when it came into operation before De- cember 31st, 1881, the onus lies on him of proving that it was for the benefit of the cestuis que trust that he should so sell {Gooper v. Harlech (1876), 4 Ch. D. 802). This, of course, makes such a proceeding practically impossible. Leaseholds may be sold by trustees by way of under- lease {In re Judd and Skelcher, [1906] 1 Ch. 684) ; and a sale means a sale for money, not, for instance, for payment of an antecedent debt (Capell v. Winter, [1907] 2 Ch. 376). For the form of order for a sale of the minerals and surface of land separately, see In re Hallowes' Trust, [1906] 1 I. E. 526. Paragraphs (2) and (3). [These shortly are the effect of sects. 10, 12 a7id IQ of the T. Act, 1925.] Article 55. Statutory Power : to Arrange as to Debts and Disputes Relating to Trust Property. If, and in so far as, no contrary intention is expressed in the trust instrument, two or more trustees or a sole trustee entitled to execute the powers of the trust have a power to enter into any arrangement as to accepting com- position or security for debts or property claimed, or allowing time for the payment of debts, or setthng debts, claims, accounts, or other things relating to the trust estate, and to do anything he may think expedient to carry out this arrangement. [This is the gist of s. 15 of the T. Act, 1925, in substance re-enacting s. 21 of the T. Act, 1893.] Trustees : Their Statutory Powers. 153 Article 56. Statutory Power : to give Receipts for Trust Property. (1) Notwithstanding any direction to the con- trary in the trust instrument a trustee has power to give a receipt in writing for any money, securities, or other personal property owing to him as trustee, which shall be a sufficient dis- charge for them, and shaU effectually discharge the person who owed them from seeing to their application or beuig answerable for their loss. (2) [This does not enable a sole trustee, unless such trustee is a trust corporation, to give a receipt for the proceeds of the sale of land held on a trust for sale.~\ This article is a summary of s. 20 of the T. Act, 1893, as modified by s. 14 of the T. Act, 1925. Article 67. Statutory Powers of Management. [Trustees for sale of land have all the powers of managing the trust property till its sale granted by statute to a tenant for life.] [This is ike vital fart for present purposes of a very long sect. (28) of the L. of P. Act, 1925, which also makes elaborate provision as to dealing with the proceeds after a sale.] 154 A Digest of Equity. Article 58. Statutory Power : to Insure Insurable Trust Property. (1) Subject to the directions contained in the trust instrument, a trustee has power to insure insurable trust property (provided such property is not property he is bound to convey to the cestui que trust absolutely on being required so to do) to any amount not exceeding three- fourths of its value. On doing so he may pay the premiums out of the income of the trust property without the consent of the cestui que trust for the time being entitled to such income. [(2) The money received under such policy of insurance shall in case of a trust of land for sale he held by the trustees on the same trusts as the proceeds of the sale would be held if the land were sold or may be applied for the reinstatement of the property insured.] Paragraph (1). Chattels settled to accompany the land are insurable property within this enactment {In re Earl of Egmont's Trusts, [1908] 1 Oh. 821). As to the right of a remainder- man to insist on the insurance money paid after a fire being used for rebuilding and repairs, see In re Quiche's Trusts, [1908] 1 Ch. 887. Paragraph (2). [See ss. 19 and 20 T. Act, 1925, and s. 25 L. of Prop. Act, 1925.] Article 59. Statutory Power : to Allow Maintenance for Infant Cestui que Trust. (1) A trustee who holds property in trust for an infant for life or for a greater interest, and, either absolutely or contingently, to vest not Trustees : Their Statutory Powers. 155 later than his attaining twenty-one years of age, has power, provided the property is a portion or the gift of it carries the income, to pay to the infant's parent or guardian or to apply in his discretion for the benefit of the infant, the income of any accumulation of it, or any part of. either. Subject to this power, it is the duty of the trustee to accumulate the income for the benefit of the person who ultimately becomes entitled to the settled property. [(2) Where the instrument creating the trust came into operation after 1925, the trustees shall where the cestui que trust or coming of age does not take a vested interest in the trust property thence- forth pay him the income of the trust fund and accumulations until the interest vests or fails.] Paragraph (1). Where the property held is pure personalty, and there are several infants jointly entitled to it on severally attaining twenty-one, it seems that each infant on attain- ing twenty-one is entitled only to the income on an aliquot part of the fund {Re Holford, Holford v. Holford, [1894] 3 Ch. 30), while where the property is realty, the first child to attain twenty-one is entitled to the whole income imtil the next child attains that age, when he becomes entitled to a share, and so on {Re Averill, Salsbury v. Buckle, [1898] 1 Ch. 523). While all are infants the whole income may be used for their benefit jointly {Re Adams, Adams v. Adams, [1893] 1 Ch. 329). As to what is meant by " the benefit " of infants, see Lowther v. Bentinck (1875), 31 L. T. 719. The persons " ultimately entitled " are the persons ultimately entitled to the property. Thus, where pro- perty was settled contingently on their attaining twenty- one, for the benefit of certain children for Hfe and afterwards on other trusts, the children, on attaining twenty-one, were held entitled only to the interest accruing on the accumulations of income during their minority 156 A Digest of Equity. (In re Boivlby, [1904] 2 Ch. 685, overruling In re Scott, [1902] 1 Ch. 918 ; and see In re Boulter, [1918] 2 Ch. 40). Paragraph (2). [This is the vital part of a very long section (31) of the T. Act, 1925.] Article 60. Statutory Power : To Advance Infant Cestui que Trust. Where a trust is created after 1925, the trustees are entitled in their discretion to advance to a cestui que trust entitled absolutely or con- tingently on his attaining a certain age or other event subject to a gift over in failure of such condition, and whether his interest is in possession or in expectancy or is subject to a power of appointment or to be diminished by additions to a class, so much of his prospective share of the trust property as shall not exceed one half. This enactment applies only to trusts of per- sonalty or of land held in trust for sale, the proceeds of which would not be regarded as land or capital money under the Settled Land Act, 1925. [This is a new power conferred on trustees by s. 32 of the T. Act, 1925, a power not likely to be made much use of without the sanction of the Court.] Abticle 61. Jurisdiction of Court in Emergency to give Trustees Powers outside Trust Instrument. Where, in the administration of a trust, an emergency arises which it is reasonable to believe the settlor did not foresee, the court has jurisdiction to authorise the trustee to do Trustees : Their Statutory Powers. 157 an act which is not within the powers vested in him by the trust instrument. In the case of Be Tollemache, [1903] 1 Ch. 457; affirmed, [1903] 1 Ch. 955, Kekewich, J., states the most usual instances in which the court exercises this jurisdiction of empowering trustees to do something not permitted by the general law or the trust instrument. These are — first, advances out of capital for the benefit of infants ; secondly, postponing reahsation of securities where it would be disastrous ; thirdly, accepting shares in reconstructed companies ; and fourthly, foreclosure by mortgagee trustees where the trust instrument gives no power to invest trust money in the purchase of real estate. Most of these Acts are now within the ordinary powers of trustees without any application to the court. Thus by sect. 9 of the Conveyancing Act, 1911 (see now sect. 31 L. of P. Act, 1925), where trustees foreclose a mortgage, or become entitled to the mortgaged land under the Statute of Limitations, they may without application to the court hold the land upon a trust for sale — that is as personalty — and until sale apply the income as if it were the interest accruing on the mortgage debt. The principle was thus stated by Eomer, L.J., in Be New, [1901] 2 Ch. 534, at p. 543 : " The court may on an emergency do something not authorised by the trust. It has no general power to interfere with or disregard the trust ; but there are cases not foreseen or provided for by the author of the trust, where circum- stances require that something should be done." Neill V. Neill, [1904] 1 I. E. 513, is an example of power given outside the trust. The trust property there consisted of an Australian farm which was in danger of forfeiture through certain expenses not being incurred. There was no trust money to provide for these. The court gave power to raise it by mortgaging the farm. [By sect. 57 of the T. Act, 1925, very large powers of authorising acts by trustees outside the foioers conferred hy the trust instrument upon them are given to trustees. The 158 A Digest of Equity. section enables the court to make orders 'permitting the trustees managing the trust proferty to confer on such trustees whatever powers it thinks expedient, as to the sale, lease, mortgage, surrender, release or other disposition, or any purchase, investment, acquisition, expenditure, or other transaction affecting the trust property. This enactment does not apply to t7-ustees for the purposes of the S. L. Act, 1925,] Article 62. Trustee's Right to an Indemnity out of the Trust Property. (1) A trustee is entitled to reimburse himself or pay or discharge out of the trust property all expenses incurred in or about the execution of his trust and powers. For this purpose, though such expenses are primarily payable out of the corpus, the trustee has, until they are discharged, a Hen for them on both the income and corpus of the trust property. (2) Where a cestui que trust absolutely entitled and sui juris accepts the beneficial estate in the trust property, the trustee has a personal right against such cestui que trust to be indemnified against such expenses, and such right continues after the cestui que trust has assigned the beneficial estate to a new cestui que trust, even though the trustee concurred in such assignment and accepted an indemnity from the new cestui que trust. Paragraph (1). [See now s. 30 (2) T. Act, 1925.] " A trustee may be allowed to institute or defend a suit at the cost of the estate, where the suit has reference Trustees : Their Bight to Indemnity. 159 to the estate. Where, for instance, a claim is made upon the estate, the court allows the trustee his costs of resisting such claim, though his personal conduct is not called in question ; but the court ■will not allow a trustee his costs of defending a suit solely for the purpose of repelling charges of personal misconduct " {per Lord Eomilly, in Walters v. Woodbridge (1878), 20 W. E. 520). The case here cited well illustrates the principle on which the court proceeds. A trustee had compromised certain claims against the trust estate. His action in so doing was impugned by the cestuis que trust, and an action was brought to have the compromise set aside on the ground that it was fraudulent. The action was decided in favour of the trustee. He claimed to have his costs out of the trust estate. Lord Eomilly held that, the action being against his personal character, he was not entitled to this. On appeal, Jbssel, M.E., without questioning the principle laid down by Lord Eomilly (see supra), held that, though the trustee's personal conduct was impeached, nevertheless the action was in substance one to set aside a compromise which, it had been held, was for the benefit of the trust pro- perty. It was therefore an action relating to the trust property in part at any rate, and such being the case, the trustee was entitled to an indemnity for the costs he had been put to (Walters v. Woodbridge (1878), 7 Ch. D. 504). Compare with this the case of Be Dunn, BrinMow v. Singleton, [1904] 1 Ch. 648, where a receiver — who for this purpose is in the same position as a trustee — was simply sued for fraudulent dealing with the estate. He .proved his innocence, and as the plaintiff was a man of straw, from whom he could obtain no costs, he desired to have these made a charge on the estate : — Held, that as his success in the action could not possibly benefit the trust estate, he was not entitled to have this done. In Stott V. Milne (1884), 25 Ch. D. 710 ; Stra. L. C. 127, the plaintiff was tenant for life of certain freehold 160 A Digest of Equity. property of which the defendants were trustees. He had warned them that if they did not bring actions in respect to certain interferences with the property, he should hold them liable. They, on the advice of counsel, brought an action which they compromised before trial. The plaintiff then, on the ground that the particular action was not brought with his knowledge or consent, claimed that the costs of it were not payable out of either the income or the corpus : — Held, that as the action was properly brought for the protection of the trust property, they were a charge on both. That the proceedings taken by a trustee are taken on the advice of counsel is not in itself sufficient to entitle the trustee to an indemnity out of the trust property for the costs incurred ; but only if the court is of opinion that if it had been applied to it would have authorised the proceedings {In re England's Settlement Trusts, [19181 1 Ch. 24). Where the trustees are not personally to blame they have a first right to be indemnified out of the trust property, even where the trust is fraudulent {Ideal Bedding Company, Limited v. Holland, [1907] 2 Ch. 157), or where the solicitors for the plaintiffs in an action against them get a charging order for the costs of the action against the trust property under sect. 28 of the Solicitors Act, 1860 {In re Turner, [1907] 2 Ch. 539), or where the beneficiary has mortgaged or assigned his interest in the trust funds and the mortgagees or assignees have stood by and permitted the costs to be incurred by the trustees {In re Pain, [1919] 1 Ch. 38). Paragraph (2). In Hardoon v. Belilios, [1901] A. C. 118, the plaintiff had certain partly paid up shares bought by his employers registered in his name ; he held them of course as presumptive trustee for his employers. Subsequently these shares were transferred by the employers to the defendant, the plaintiff still continuing the registered Trustees : Their Bight to Indemnity. 161 and therefore legal owner. Calls having been made upon the plaintiff in respect to the shares, he claimed a personal indemnity from the defendant : — Held, that in the absence of any contract to the contrary he was entitled to this. Lord LiNDLBY said (at p. 124) : " Where trust property is settled on tenants for life and children, the right of their trustee to be indemnified out of the whole trust estate against any liabilities arising out of any part of it is clear and indisputable ; although if that which was once one large trust estate has been converted by the trustees into several smaller distinct trust estates, the liabilities incidental to one of them cannot be thrown on the beneficial owners of the others. This was decided in Fraser v. Murdoch (1881), 6 App. Gas. 855. But where the only cestui que trust is a person sui juris, the right of the trustee to indemnity by him against liabiHties incurred by the trustee by his retention of the trust property has never been limited to the trust property ; it extends further, and imposes upon the cestui que trust a personal obligation enforceable in equity to indemnify his trustee. And this right to an indemnity continues after the cestui que trust has parted with the beneficial estate. Thus, in Matthews v. Buggles-Brise, [1911] 1 Ch. 194, two partners in a firm took, on the firm's behalf, a lease of land which contained onerous covenants. They were, as has been stated, entitled to an indemnity from the partnership on trust for which they held it. The partner- ship was wound up and a company took over the beneficial interest in the lease. The company subsequently made default, and the two former partners had to liquidate the liabiHties under the covenants in the lease : — Held, that they were entitled to an indemnity from all the persons who formed the partnership when the lease was taken, although the company had in the assignment covenanted to indenmify the trustees. As an example of a contract which may exclude the trustee's right to a personal indemnity from the cestuis que trust absolutely entitled, the case of a club trust may be taken. Thus, in Wise v. Perpetual Trustee Company Limited; [1903] A. C. 139, the appellant was 162 A Digest of Equity. a member of a club in Sydney, Australia, called the Cercle l?ran9ais. He had been a member when certain leasehold premises were taken by the trustees of the club, and remained a member until the club ceased. The trustees were made liable for the rent of these premises, and claimed an indemnity from the members : — Held, that their only remedy was against the club (i.e., the trust) property. The feature, said Lord Lindley (at p. 149), which distinguishes clubs is " that no member as such becomes liable to pay to the fimds of the society or to any one else any money beyond the subscriptions required by the rules of the club to be paid so long as he remains a member. It is upon this fundamental con- dition, not usually expressed, but understood by every one, that clubs are formed ; and this distinguishing feature has been often judicially recognised." [The protection formerly enjoyed only by personal repre- sentatives of a deceased person is now extended to all trustees : see infra Articles 225, 226, and ss. 26 and 27 T. Ad, 1925]. Article 63. Trustee's Right to the Protection of the Court. (1) A trustee is entitled, where it is reason- ably necessary for his protection so to do, to obtain by originating summons at the expense of the trust property the direction of the court on any question within rule 3, Order 55, of the Rules of the Supreme Court. (2) Where such a course is reasonable, the trustees or a majority of them having ia their hands or under their control money or securi- ties belonging to a trust are entitled to pay the same into the High Court to be dealt with according to its orders. (3) Where such a course is reasonable, and the trust property is not capable of being paid Trustees: Their Bight to Protection. 163 into the High Court, a trustee is entitled to institute an action for the administration of the trusts by the court. Formerly, the only mode in which a trustee could in case of difficulties arising in the construction of the trust instrument or in the execution of the trust obtain the protection of the court, was by an action for the general administration of the trust estate, and advice on any particular point was not given by the court as a rule until all the trustee'^ accounts had passed the Master. Now a much simpler and cheaper mode of getting the directions of the court is provided by the rule cited in the Article, and though it is the practice in taking out summonses under that rule to apply also under rule 4 for administration " as far as the same is neces- sary," that is intended merely to give the court a wider jurisdiction as to the order to be made than it would otherwise have. Eule 10 of Order 55 now provides that the court, even when general administration is asked for, need not issue any order or judgment for administra- tion if the questions before it can be properly determined without it. The matters within rule 3 are (a) any question affecting the rights or interests of the persons claiming to be creditor, devisee, legatee, next of kin, or heir-at-law, or cestui que trust ; (b) the ascertainment of any class of creditors, legatees, devisees, next of kin, or others ; (c) the furnishing of any particular accounts by the executors, administrators, or trustees ; (d) the payment into court of any money in the hands of the executors, administrators, or trustees ; (e) the direction of the executors, administrators, or trustees to do or abstain from doing any particular act in their character as such executors, or administrators, or trustees ; (j) the approval of any sale, purchase, compromise, or other transaction ; (g) the determination of any question arising in the administration of the trust. Payment into court is one of the very few acts which a majority of trustees under a private trust may perform 164 A Digest of Equity. and compel the dissentient minority to accept their decision (see sect. 42, Trustee Act, 1893 [and sect. 63, T.^ci, 1925]). Article 64. Trustee's Right to a Discharge on Complete Performance of the Trust. Upon the complete performance of the trust or on the determination of the trust by the act of the cestuis que trust under Article 67 a trustee is entitled to have a discharge from the cestuis que trust, or on their refusal to give him one to have his accounts taken ia court. As a rule a trustee, unlike an executor, is not entitled to a release under seal {King v. Mullins (1852), 1 Drew. 308). Article 65. Effect of a Direction or Judgment of the Court on a Trustee's Powers. A direction to a trustee under paragraph (1) of Article 63 does not interfere with the powers of the trustee except so far as such interference may necessarily be involved in the particular rehef sought. A judgment in an administra- tion action under paragraph (3) of the same Article does not deprive the trustee of the powers vested in him, but henceforth he can exercise such powers only subject to the super- vision and sanction of the court. Trustees : Their Bight to Protection. 165 The leading case on the effect of an order for adminis- tration on the powers of a trustee is Minors v. Battison (1876), 1 App. Gas. 428. There a testator left all his property to trustees to hold for the widow for life, and then for the children. Part of the estate consisted of a newspaper, which the will empowered the trustees to carry on during the' widow's life. An absolute dis- cretion was given them to sell on the widow's death all the estate, including the newspaper. In 1866 a suit for administration was commenced, in which a decree was made. By an order made in 1870, when the widow was dead, it was declared that it was for the benefit of all parties that the newspaper should not be sold : — Held, that after the decree, the trustees, whether their discretion to sell was absolute or not, could not exercise it without the previous sanction of the court. ( 166 ) A. PEIVATE TEUSTS {continued). CHAPTER 4. Gestuis Que Trust and their Rights. SUMMARY. PAGE Aetiole 66. Position of cestui que trust who is a life tenant - 166 „ 67. Eight of a cestui que trust to determine the trust and discharge the trustee .... igg „ 68. Bight of a cestui que trust to follow the trust property - - ... 173 „ 69. Rightof a cestui que trust to adopt a breach of trust- 177 Article 66. Position of Cestui que Trust who is a Life Tenant. Where a cestui que trust is entitled in pos- session to be paid the net rents and profits of the trust property for a Hfe or other Umited estate — (1) the court may, where the trust property is land, in the exercise of its discretion, put him in possession of the land itself or the gross rents, whether the trustee consents thereto or not ; (2) he may, without the previous consent of the court, bring an action to protect the trust property, and in such a case the court will give him an indemnity out of the trust property, provided the Cestuis Que Trust : Their Bights. 167 action was one which, had it been appHed to, the court would have authorised. Paragraph (1). The cestui que trust entitled in possession to a limited interest in the equitable estate cannot claim as of right to be put in possession of the trust property, but the court in the exercise of its discretion will put him in possession provided due securities are given for the protection of the property. Thus, in Be Hunt, Pollard v. Geake, [1901] W. N. 144, an equitable life tenant of a freehold farm was put into possession of the rents paid by the lessee of the farm upon giving undertakings to (among other things) keep the farm buildings insured to the satisfaction of the trustees, keep down interest on incumbrances and pay all outgoings, see that the lessee performed the covenants in his lease, pay a person appointed by the court to inspect the property once a year and report to the trustees, etc. (And see Be Newen, [1894] 2 Oh. 297.) Paragraph (2). The proper course for a life tenant of settled lands to take is to apply for the previous sanction of the court under sect. 36 of the Settled Land Act, 1882 [see now sect. 92 S. L. Act, 1925]. But in case he does not so apply, the court will, in hearing an application, after action brought, for an indemnity for the costs out of the settled property, treat the application as if it were an application for its sanction to the bringing of the action, and may order payment out of the trust estate even where the application was made by the Hfe tenant after he had abandoned the action and himself paid the costs {In re Wilkie's Settlement, [1914] 1 Ch. 77). Mere advice of counsel that the action should be brought is not in itself sufficient to show that the action was proper {In re Yorke, Barlow v. Yorke, [1911] 1 Ch. 370). It is to be remem- bered that the trustees of the settlement may bring an 168 A Digest of Equity. action to protect the trust property, and are entitled, in a proper case to an indemnity out of the trust property, even though the life tenant did not consent to the bringing of the action {Stott v. Milne (1884), 25 Oh. D. 710 ; Stra. L. C. 127). Article 67. Right of Cestui que Trust to Determine tlie Trust and Discharge the Trustee. (1) Notwithstanding any directions contained in the trust instrument, and notwithstanding any rule of law hereinbefore stated, a trustee may be discharged of the duties of his trust and the trust itself determined by the sole cestui que trust, or, if there be more than one, by all the cestuis que trust, provided such sole cestui que trust or all such cestuis que trust is or are (i) sui juris (ii) and absolutely entitled, solely or jointly, to the whole equitable ownership of the trust property. (2) The trust may be determined by the trustee, at the direction or with the consent of the sole cestui que trust or all the cestuis que trust — ■ (i) conve5n.ng the trust property to the sole cestui que trust or one or more of the cestuis que trust, (ii) conveying the trust property to a third person or third persons, (iii) himself purchasing the trust property. (3) Provided that— (i) a discharge given by the cestui que trust to the trustee may be set aside where Cestuis Que Trust: Their Bights. 169 before granting it the cestui que trust was not fully informed of all the material facts bearing upon it, and (ii) a sale of the trust property by the cestui que trust to the trustee may be, set aside where the trustee is unable to show that, before the sale, the cestui que trust was fully informed of all the material facts known to the trustee bearing upon it, and that the price he gave for the trust property was, under the known circumstances, fair and reasonable. Paragraph (1). When a person is not under disability of any kind and is absolutely entitled in equity to trust property, he is entitled to direct the trustees to do what he wishes with such property quite independently of any directions in the trust instrument as to how it is to be used. This rule applies equally to trusts in favour of persons and trusts for charities (Wharton v. Masterman, [1895] A. C. 186), but the two commonest examples of its operation are these : (i) Where a settlor settles property subject to a direction that part only of the income shall be paid to the cestui que trust till he attains some age beyond his legal majority — such as twenty-six years. Here if the gift is absolute the cestui que trust on attaining twenty- one can direct the trustees to transfer the settled property to him in spite of the direction in the instrument of trust (Gosling v. Gosling (1858), Johns. 265 ; In re Williams, [1907] 1 Ch. 180), and as to gifts to charities corporate or incorporate the same rule applies (Wharton v. Master- man, [1895] A. C. 186). (ii) Where money is left to trustees to purchase a life or other annuity for a cestui que trust. Here the cestui que trust can claim the money left for this purpose and dechne to have it in- vested in an annuity (see Be Boss, Ashtonv. Boss, [1900 1 Ch. 162). 170 A Digest of Equity. This rule, it is to be noted, applies only when the cestui que trust is absolutely entitled. Thus in the case of annuities where there is a gift over to another on any attempt of the cestui que trust to alienate the annuity or on his bankruptcy, he is not entitled to claim the capital {Power V. Hayne (1869), L. E. 8 Bq. 262). And even without such restriction on alienation the right to claim the capital may be defeated by directing an annuity to be purchased for the life of the annuitant and, for example, one year more, the last year's income to go into the testator's residuary estate. Here the annuitant is only partly entitled to the annuity, and so cannot claim the capital sum ; but of course, imless subject to disability, he or she may alienate his or her interest in the annuity. It is to be noted, too, that any particular person who is a cestui que trust under a discretionary trust for the benefit of a class — such as A. and his children — ^is not entitled to any particular part of the trust fund, and so the trust can be determined only by all the cestuis que trust who are to be benefited under the trust joining together and jointly directing the determination of the trust {Be Coleman, Henry v. Strong (1888), 39 Ch. D. 443). And even then the trust can be determined only if the trustees are directed to apply all the property for their benefit. Here the cestuis que trust are jointly absolutely entitled and so come within the rule when they act jointly. A similar discretionary trust for the benefit of one person only comes also, of course, within the rule {In re Williams, [1907] 1 Ch. 180). The rule applies equally — as the above examples show — to simple and special trusts. The only difference is that while simple trusts are usually for the benefit of one cestui que trust only, special trusts are for the benefit almost invariably of a number of cestuis que trust, some of whom are pretty certain to be under some disabihty, and in any event all of whom must join in determining the trust. The rule applies also where the interests of the cestuis que trust are not all immediate, but successive, e.g., limitation of Blackacre in trust for A. for hfe and then to his children B., C, and.D. equally Cestuis Que Trust : Their Bights. 171 in fee. Here, if A., B., C, and D. are all sui juris they may combine to determine the trust during A.'s Hfe when B., C, and D.'s interests are in remainder just as well as B., C, and D. could after A.'s death combine for the same purpose when their interests would be in possession {Saunders v. Vautier (1841), Cr. & Ph. 240). The sole point is whether all the beneficiaries are agreed to determine the trust and are between them absolutely entitled to the trust property, whether in possession or in succession or alternatively at the discretion of the trustees. Where the possible beneficiaries include the children of any person the rule cannot, strictly speaking, ever be satisfied while such person hves, since the legal view is that no person is ever incapable of having issue ; but as a matter of practice, where the person whose children are possible cestuis que trust is a woman past the age of child-bearing, the court recognises this fact, and permits the persons then cestuis que trust to act as if they were the sole possible cestuis que trust (see Be Blundell, [1901] 2 Ch. 221; Be ThornhUl, [1904] W. N. 112). One of several cestuis que trust who has become absolutely entitled to his share of trust property held in trust for sale with power to postpone its sale indefinitely, cannot compel the trustees to sell in order that he may receive his share of the proceeds (In re Horsnail, [1909] 1 Ch. 631) ; but where the power to postpone is merely to postpone for a reasonable time and there is no good reason why the sale should be postponed indefinitely, then the cestui que trust whose shares have become absolutely vested may compel the trustees to sell {In re Marshall, [1914] 1 Ch. 192). Paragraphs (2) and (3). Purchases by a trustee from himself or his co-trustees of the trust property are, as we have seen, always voidable except when they have been made with the sanction of the court or under an express power contained in the trust instrument. Purchases from the cestuis que trust are 172 A Digest of Equity. not, however, voidable except for cause. Any failure, however, on the trustee's part to disclose to the cestui que trust any matter within his knowledge which would or might influence the cestui que trust's mind as to the bargain will render the sale voidable as against the trustee. The rule is thus stated by Lord Caiens in Thomson v. Eastwood (1877), 2 App. Cas. 215, at p. 236: " There is no rule of law which says that a trustee shall not buy trust property from a cestui que trust ; but it is a well-known principle of equity that if a transaction of that kind is challenged in proper time, a court of equity will examine into it, will ascertain the value that was paid by the trustee, and will throw upon the trustee the onus of proving that he gave full value, and that all information was laid before the cestui que trust when it was sold." Thus, in Dougan v. Macpherson, [1902] A. C. 197, A., who was a trustee and a cestui que trust under his father's will, had a valuation made of the trust estate for his own private purpose, namely, for the purpose of obtaining a loan on the security of his share of the estate. Subsequently he bought the share of his brother, who was also a cestui que trust but not a trustee. When he so bought, A. did not disclose to his brother the valuation : — Held, that the sale must be set aside. Lord Maonaghten, after approving the dictum of Lord Caiens above cited, says, at p. 204 : A. " was keeping back information which it was his bounden duty to have conveyed to his cestui que trust. And it does not matter in the least how or under what circumstances the information was gained ; if he had that information he was bound to place it at the disposal of his cestui que trust with whom he was dealing." Cestuis Que Trust : Their Bights. 173 Article 68. Right of Cestui que Trust to follow the Trust Property. (1) As long as trust property remains in substance in the hands of a trustee, however often and however improperly its nature or investment may have been altered by him, and whether it is or is not mixed with the trustee's own money, provided when it is so mixed it can be distinguished from his, the cestui que trust is entitled to claim it as against all the world. (2) When the trustee mixes the trust property with his own moneys in such a way as to make its identification impossible, the court assumes, if he invests the mixed fund, that he intends the investment to be for the benefit of the cestui que trust, and if he converts any part of such investment or any part of the mixed fund itself to his own use, that he intends so to convert in the first place the part of it which belongs to himself. (3) Where any part of the trust fund is transferred to a person who is not lawfully entitled to it but who takes it without notice of the breach of trust, the cestui que trust, so long as such part can be distinguished from the transferee's own property, may claim it against the world ; but when it cannot be so distin- guished he may sue the transferee for the value of it as a debt in eqmty. Paragraph (1). The above rule is usually called the right of a cestui que trust to follow the trust property as long " as it is 174 A Digest of Equity. earmarked." It used to be added that money is not ear- marked. This, the second part of the rule has now made somewhat misleading. It only amounts to this, that a person taking money from a trustee is not as likely to have notice that it is trust money as a person buying land or other such property, and that it is on the whole harder to discover where money came from than it is with other property. But where it can be distinguished money is just as much within the rule as anything else. No act of a trustee can make trust property part of his estate and therefore hable for his debts, though sometimes his acts make it very difficult to say what part of his estate is and what is not trust property. Where it can be shown that certain moneys are the proceeds of, or certain investments were made with, trust property, the cestui que trust can claim them ; where they can be shown to be partly the proceeds of, or partly made with, trust money, the cestui que trust has a lien or charge upon them for the amount of trust money they represent (see per Jessel, M.E., in Be Hallett's Estate, Knatchbull v. Hallett (1879), 13 Ch. D. 696, at p. 708). For a very strained application of this rule, see Sinclair v. Brougham, [1914] A. C. 298. The rule is stated in the Article as prevaiHng against all the world, but in fact it is effective only when the trustee is insolvent. When the trustee is not insolvent, then, in case of breach of trust, the cestui que trust's remedy is the proprietary one stated in the next Article or the personal one stated in Article 71. Paragraph (2). The leading case on the second part of the rule, and indeed on it all, is Be Hallett, Knatchhull v. Hallett (supra). There a sohcitor having in his possession bonds which he knew to be trust property sold the same and paid the proceeds, £2,200, into his private banking account. Subsequently he drew cheques for his own purposes and from time to time paid into his account further sums. When he died there was a balance of about £3,000, but if he had not paid in the other sums Cestuis Que Trust : Their Bights. 175 after he paid in the proceeds of the bonds his balance would have been much under £2,200. Now there is a rule called the rule in Clayton's Case (1816), 1 Mer. 572, under which it, is assumed that where a customer draws cheques upon his banker he intends, where there is no arrangement to the contrary (see Deeley v. Lloyd's Bank, [1910] 1 Ch. 648), to draw out first the money he first paid in : — Held, by the Court of Appeal, that this rule did not apply in this case. The customer here was trustee of part of the money and it must be taken, and were he the defendant he would not be allowed to deny it, that he intended to draw out first his own money. The rule in Clayton's Case (supra), however, applies as between different cestuis que trust claiming against the same account, there being no reason why the trustee should be assumed to have intended to rob one of them more than another (Be Stenning, Wood v. Stenning, [1895] 2 Ch. 433). Moreover, if the trustee's balance at the bank is overdrawn, the banker is entitled to discharge the overdraft out of the first money paid in by the trustee unless at the time he had notice it was trust money (Hancock v. Smith (1889), 41 Ch. D. 456). The rule stated in Be Hallett (supra) has been carried a step further in the case of Be Oatway, Hertslet v. Oatway, [1908] 2 Ch. 356. There A. and B. were trus- tees of certain funds. A loan of £8,000 of such funds was in breach of trust made to B. on the security of a reversionary interest belonging to B. B. afterwards went abroad, giving A. a power of attorney to sell the rever- sionary interest. A. sold it for £7,000, which he paid into his own account : £8,000 of this was, of course, trust money. A. subsequently bought certain shares for over £2,000 and converted the balance of the £7,000 to his own use in such a way that it was irrecoverable. A. died insolvent. A claim was made that B. as trustee was entitled to a lien on the share bought by A. in respect of the £3,000 trust money : — Held, that he was so entitled. When an investment is made out of a mixed fund com- posed of trust money and the trustee's own money and 176 A Digest of Equity. the rest of the mixed fund is converted to the trustee's own use, it must be assumed that the part converted was the trustee's own money no matter in what order the drawings upon the mixed fund took place. Paragraph (3). This rule is to be read subject to the rule previously stated, that a person taking the legal estate in trust property for value and without notice of the trust, gets a title which is good against the cestui que trust, and the rule to be stated later, that a person taking with notice that he is taking in breach of trust is a constructive trustee (see infra, Article 88). The mere transfer of the trust property to a person who takes it innocently, but does not give value for it, vests in such person no title to it in equity, though he takes a good one in law. Accordingly, so long as it is distinguishable it remains in equity the cestui que trust's property. Where it ceased to be distinguishable, an action for its recovery is treated as analogous to an action at common law for money had and received, and is therefore barred by lapse of time in six years after the receipt of the trust money. Where the person receiving the part of the trust fund to which he is not lawfully entitled is a co-cestui que trust, the money improperly paid to him may sometimes be recoverable after more than six years in an action for the administration of the trust. Thus, if on taking account it is found that he has received more than he was entitled to in the past, and some assets under the trust are still due to him, the court may deduct from such assets the money which had previously been paid to him {In re Bohinson, McLaren v. Public Trustee, [1911] 1 Oh. 502). Cestuis Que Trust: Their Bights. 177 Article 69. Right of Cestui que Trust to adopt a Breach of Trust. Where a trustee by improperly selling or improperly investing trust property commits a breach of trust, the cestui que trust or all the cestuis que trust jointly, if sui juris and entitled absolutely to the trust property, may elect to adopt the transaction and claim all the profits and benefits resulting from it. If they so adopt it the trustee cannot be made liable for breach of trust. Where all or any of them do not or cannot adopt the transaction, the trustee is chargeable with breach of trust. Where trustees have made an unauthorised investment they are entitled to resell, and can make a good title without the consent of the cestuis que trust, provided all the cestuis que trust have not elected to adopt the invest- ment {Patten v. Guardians of Edmonton (1883), 52 L. J. Ch. 787), or provided they are through disability or other cause unable to elect {Be Jenkins and Bandall's Contract, [1903] 2 Ch. 362). It is usual when trustees resell to make one of the cestuis que trust a party to the sale to show that all the cestuis que trust have not elected to adopt the unauthorised investment, more especially when the investment was in land. As to the habiHty of a trustee where his cestuis que trust repudiate an unauthorised investment, see infra, Article 72. ( 178 ) A. PEIVATE TRUSTS (continued). CHAPTEE 5, Breach of Trust. SUMMARY. PAGE Article 70. The property in respect of which a trustee is chargeable - - 178 71. Liability of a trustee for his ovm and his agent's acts - - 179 72. Measure of a trustee's liability for loss resulting from a breach of trust - - 184 73. Bight to contribution towards loss through breach of trust as between co-trustees - 190 74. Duration of a trustee's liability to the cestui que trust - 194 75. Limitation of actions by cestui que trust for breach of trust - 196 76. Discretion of court to impound the interest of a cestui que trust, party to a breach of trust - 200 77. Discretion of court to relieve trustee liable for breach of trust - 201 78. Criminal liability of fraudulent trustee - - 202 Article 70. The Property in respect of which a Trustee is Chargeable. (1) A cestui que trust can hold a trustee chargeable for breach of trust only in respect of trust property which the trustee himself has actually received or which he might have received but for his wilful default. (2) The mere joining with his co-trustees in a receipt for the payment or transfer of trust Trustees : Hahility for Breach of Trust. 179 property actually received, not by him but by his co-trustees, will not in itself render a trustee chargeable in respect of such property. This is merely a statutory rendering of the previous equitable rule, and makes no material alteration of that rule. (See sect. 30 T. Act, 1925.) The only point to be explained is as to trustees joining in receipts. The receipt of one co-trustee, unhke that of one co-executor, does not discharge a debtor who is paying over trust money. Now frequently it is difficult or impossible for all the trustees to receive jointly trust property, especially when such property is money. In such cases they may properly permit or delegate one of their number to receive it (florae v. Pringle (1841), 8 CI. & F. 264, at p. 288) ; and in order to give the payor a discharge they may join in the receipt given to him acknowledging payment. This is usually called joining for conformity only. It should be pointed out that allowing a co-trustee to receive trust money does not discharge his co-trustees from their duty to have it, as soon as is reasonably possible, placed under their joint control. See cases cited in note to next Article. Aeticlb 71. Liability of a Trustee for his own and his Agent's Acts. (1) A cestui que trust is entitled to hold a trustee liable for any loss to the trust property resulting from the trustee's breach of trust, whether such loss arose directly — (i) From the act or omission of the trustee himself, or the act or omission of a co-trustee rendered possible by the trustee's breach of trust ; 180 A Digest of Equity. (ii) From the act or omission of an agent appointed by the trustee (whether a co-trustee or stranger to the trust), where the duty delegated to such agent was one which could not properly be so delegated ; (iii) From the act or omission of an agent appointed by the trustee (whether a co- trustee or stranger to the trust), where the duty delegated was one which might have been properly but was in fact improperly delegated. (2) A duty which may properly be delegated to an agent is in fact improperly delegated where it is delegated to an agent who is not reasonably fitted (a) by character, and (6) by calling, properly to perform it ; and a delegation which in fact is proper may becom^e improper where a breach of trust results ; (c) from the delegation being continued longer than is reasonably necessary for its proper performance, or (d) from the trustee not ascertaining within a reasonable time by personal inquiry whether the duty has been properly performed. Paragraph (1). As has already been pointed out (o) a duty of a trustee is an obligation to do or to refrain from doing a . certain act ; (b) a power of a trustee is a duty to use reasonable care, skill, and prudence in doing or refraining from doing a certain act ; (c) the failure to perform a duty is a breach of trust ; (d) a trustee is not liable for any- thing but a breach of trust. In other words, if a trustee performs his own duties and exercises his own powers properly he is liable neither for his own acts nor the acts of his co-trustees or agents. If these propositions are Trustees : Liability for Breach of Trust. 181 borne in mind, the preceding Article and the following note will be more easily understood. We have already discussed the duties and powers of a trustee. As we shall see, the trustee's liability for the act of his agent invariably arises out of his own breach of trust. A few examples will show this. As to (i), the liability of one trustee for his co-trustee's act or omission usually arises through the trustee's failure to perform his first duty — to preserve the trust property. Thus, in Thompson v. Finch (1856), 22 Beav. 316, A. and B. were trustees. A. permitted B. to receive trust moneys. There was nothing wrong in this (see pre- ceding Article). But A. also permitted B. to invest them on mortgage in B.'s own name. This was clearly a breach of his duty to have all trust investments made in his and B.'s joint names. The mortgage debt proved irrecoverable and B. became bankrupt : — Held, that A. was liable. Mendes v. Guedella (1862), 8 Jur. (n.s.) 878, where his co-trustees permitted one trustee to have access alone to bearer securities, with the result that he converted some of them to his own use ; and Lewis v. Nohbs (1878), 8 Ch. D. 591, where two trustees agreed that they should hold half each of bearer bonds in which they had invested trust money, are similarly cases of breaches of the duty that co-trustees should have these bonds, like money, under their joint control (see Be De Poihonier, [1900] 2 Ch. 529). As regards (ii), it is hardly necessary to point out that the breach of trust which renders the trustee liable for the acts of his agent is delegating to the agent a duty which he cannot lawfully delegate. What duties a trustee can lawfully delegate are set out in Article 52, supra. As to (iii), the breach of trust is the failure of the trustee to perform the duty of displaying reasonable skill, care, and prudence in exercising the power to appoint the agent. 182 A Digest of Equity. Paragraph (2). As regards the character and calHng of the person appointed agent, in Be Earl of Lichfield (1737), 1 Atk. 87, it was held that to delegate the duty of paying dividends to a person whose reputation for honesty was bad was not a proper exercise of a power. (And see In re Sheppard, . De Brimont v. Harvey, [1911] 1 Ch. 50.) In Be Weall, Andrews v. Weall (1889), 42 €h. D. 674, it was held that it was not proper to appoint a sohcitor to do what was not legal business, namely, the collecting of rent, and the trustees were held liable for the extra expenses thereby caused. In Bohinson v. Harkin, [1896] 2 Ch. 415, the employment of an outside broker to buy stock was held improper. And see Fry v. Tapson (1885), 28 Ch. D. 268, where the appointment of a London surveyor to value a house in Liverpool was held bad, and rendered the trustees liable for a loss due to over- valuation. There the court specifically laid down the principle that the duty delegated to an agent must be one within his ordinary calhng. The particular point on which Fry v. Tapson, supra, turned, namely, that the surveyor employed did not reside in the neighbourhood, is now overruled by sect. 8 of the Trustee Act, 1893, which permits a non-resident surveyor to be a proper valuer, provided the trustees reasonably believe that he is so. As to the length of time the delegation may be continued, see Wyman v. Paterson, [1900] A. C. 271. There trustees by their solicitor received money on the payment of a bond, one of the securities of the trust estate. This in itself was a proper proceeding, as we have already seen. They, however, left the money in the possession of the solicitor for six months. Then the solicitor became bankrupt and the trust money was lost : — Held, that the trustees were liable, as it was unreasonable to continue the delegation so long. And see Matthews v. Brise (1843), 6 Beav. 239, and Bohinson v. Harkin, [1896] 2 Ch. 415. As to not taking Trustees : Liability for Breach of Trust. 183 r reasonable care to see that the duty delegated, is per- formed, see Bostock v. Floyer (1865), L. E. 1 Eq. 26. There a trustee properly instructed a solicitor to carry through a mortgage by which certain trust funds were to be invested on security of certain copyhold land. After a time the solicitor forwarded to the trustee a bundle of deeds containing a paper which purported to be a copy of the court roll admitting the trustee. But there was no receipt for the mortgage money, and it was afterwards discovered that there was no court held on the day of the purported surrender. For many years afterwards the interest was regularly paid. On the death of the solicitor it was found that no mortgage had been made and that he had fraudulently converted the cheque to his own use : — Held, that as the trustee had not taken care to see within a reasonable time that the mortgage had been made, he was liable. The loss of the trust property must, however, be due to the negligence of the trustee. Neghgence in itself will not make a trustee liable for the loss if diligence on his part would not have prevented it. Thus, in Shepherd v. Harris, [1905] 2 Ch. 310, a trustee (Janvrin) delegated to his co-trustee, who was a stockbroker, the duty of buying inscribed stock on behalf of the trust. It is not usual for a purchaser of inscribed stock to attend person- ally at the bank to accept the transfer. Janvrin did not so attend, and, after the date when the inscribed stock was supposed to be purchased, was satisfied by the broker trustee's production of what appeared to be a stock certi- ficate for the inscribed stock purchased. As a matter of fact, the broker trustee had not purchased any stock, but had misappropriated the purchase money immediately on receiving it. No inquiries were made by Janvrin until two years later, when the fraud was discovered : — Held, that Janvrin was not liable, since, though he was negli- gent, no diligence on Janvrin's part could have prevented the loss since the trust money was misappropriated immediately after its receipt. The rule in paragraph (2) is based on specific decisions merely. The real test to decide whether any delegation 184 A Digest of Equity. is a proper one is : is it reasonable ? {Speight v. Gaunt (1884), 9 App. Cas. 1 ; Stra. L. C, p. 140). Where, however, the duty is one that can be properly delegated, the burden of showing that the delegation is not reason- able lies on the person impeaching it {Be Brier (1884), 26 Ch. D. 238). The fact that a trustee accepted improperly a share of the commission paid to his co-trustee or agent on the purchase of stock, will not render him liable for the agent's or co-trustee's act if he was not otherwise liable {Shepherd v. Harris, supra ; and see National Trustees Company of Australasia v. General Finance Company, [1905] A. C. 373). [As has already been pointed out the new T. Act, 1925, has given trustees very extensive poivers of delegation {sect. 23). A peculiarity of these new powers is that so far as the statute is concerned, the trustee delegating his powers to an agent is declared not to he responsible for the agent's defaults if he employed him in good faith. Article 72. Measure of a Trustee's Liability for loss Resulting from a Breach of Trust. (1) Where a trustee is chargeable with breach of trust the cestui que trust is entitled to recover from him the depreciation of the trust property resulting from the breach, and interest or profits upon the trust property in- volved in the breach, according to the following rules : (2) As to depreciation : (i) Where the breach of trust is the improper sale or investment of trust property, Trustees : Measure oj Liability. 185 the cestui que trust can claim either for the actual depreciation of the trust property or for the loss to the trust property consequent on the trustee failing to do what he ought to have done. (ii) Where the trustee advanced trust money on loan on security of property whiclx in its nature is a security on which he was entitled to advance the trust funds, he wiU not be Uable for any part of the trust money so advanced which may be lost through the depreciation of the property, if before making the loan he had the property valued by one whom he reasonably beUeved to be an able practical surveyor, and he ad- vanced on such surveyor's advice not more than two equal third parts of the value as reported to him by such surveyor. (iii) Where the breach of trust is an invest- ment of the trust property which is improper because the sum advanced on the security is excessive, the cestui que trust can claim only for the amount by which it is excessive. (3) As to interest : (i) In all cases the cestui que trust can claim interest at the rate of 3 per cent, per annum on the amount of the trust property involved in the breach of trust, or in the alternative the interest actually received or which ought to have been received on the property. 186 A Digest of Equity. (ii) Where the breach amounted to an attempt on the part of the trustee to appro- priate the trust property to his own use or where the trustee used the trust property for his own purposes in trade or speculation, the cestm que trust can claim interest at the rate of 5 per cent, per annum, with yearly or half-yearly rests, or in the alternative an account of the profits actually made upon the trust property. (4) A trustee is not entitled to set off the profits made in one improper transaction against the losses made in another improper transaction. (5) Where several trustees are liable for the breach, each of them is Hable for the whole loss resulting from it ; and they are also all jointly liable. Paragraph (1). Where the breach of trust consists in the trustee making an improper investment, if the investment was one not authorised by the settlement or by law, he can either sell, in which case if there is a loss on the transaction he is liable for it, and if there is a profit the cestui que trust takes it ; or the trustee can take over the investment himself upon replacing the trust' funds {Fry V. Tapson (1885), 28 Ch. D. 268). If, however, the investment was authorised and was improper only because he advanced too much money on the security, he seems to have no option to take it over, and it can be reahsed whether he wishes it or not {Be Salmon, Priest v. Uppleby (1889), 42 Ch. D. 351 ; Be Lake, Ex parte Howe Trustees, [1903] 1 K. B. 439). Where no loss, direct or indirect, arises through a breach of trust, though the court may think the breach Trustees : Measure of Liability. 187 justifies the removal of the trustees from the trust, no damages of any kind can be recovered from them. The Court of Chancery never gave damages : it merely made the wrongdoer account for what he received or should have received. All breaches of trust for which it is sought to hold a trustee liable must be alleged in the statement of claim and proved at the trial. The rule applicable to cases of wilful default, namely, that on proof of one instance of wilful default at the trial, an account will be ordered on the footing of wilful default (see infra, Article 162), has no reference to active breaches of trust {In re Wrightson, [1908] 1 Ch. 789 ; Stra. L. C, p. 175). Paragraph (2). This Article is a summary of sects. 8 and 9 of the T. Act, 1893, now repealed and re-enacted by sects. 8 and 9 of the T. Act, 1925. (i) Thus, in Be Massingberd, Clarh v. Trelawney (1890), 63 L. T. 296, trustees sold Consols for the pur- pose of investing the trust money on a contributory mortgage — that is, a mortgage in which the mortgage money is advanced in parts by several lenders — ^which is- an unauthorised security. Subsequently they called in the mortgage and there was no loss on the transaction. But meanwhile the price of Consols had gone up : — Held, that since the sale of the Consols for the purpose of investing the proceeds in a contributory mortgage was a breach of trust, the trustees were bound to replace the Consols sold. This was a loss not of the trust property but to the trust property arising through the trustees not doing as they should have done. In the same way, where the trustees are directed by the trust instrument to invest in some particular security and 188 A Digest of Equity. no other, the trustees may be liable for profits which would have been gained to the trust property if they had obeyed this direction, even though there is no direct loss of the trust property. But since the Trustee Act, 1893 (now Part I of the T. Act, 1925), now gives a choice of investments and a power to vary investments, except where these powers are expressly excluded by the trust instrument, these cases are not very common now. (ii) Section 8 of the Trustee Act, 1893 (now sect. 8 T. Act, 1925), imposes no obligation on trustees to employ a surveyor to have the property valued. What it does is to provide that if trustees do employ a competent surveyor, and advance only two-thirds of the value as reported by him, and if he advises the advance, they will not be liable for any loss subsequently accruing to the trust property {Palmer v. Emerson, [1911] 1 Ch. 758 ; and for a consideration of the duties of surveyor and trustee under this section, see In re Solomon, [1912] 1 Ch. 261). (iii) Formerly, where a trustee advanced too large a sum on a security which would have been in every way a proper investment for a smaller sum, if there was loss the trustee was liable for it all. Now, however, he is liable only for the balance over and above the amount for which it was a proper investment. Thus, A., wishing to advance trust money on the security of Blackacre, retains B., a competent surveyor, to value Blackacre. B. values Blackacre at £9,000. Now on this valuation Blackacre is a proper security for £6,000. Say A. advances £7,000. If on sale Blackacre reaUses only £5,000, A. will not be liable for the £2,000 lost, but only the £1,000 he advanced over the £6,000. It is to be remembered that the security must be in every other way than merely in value a proper security before the trustee is entitled to the benefit of the Act, and it lies on the trustee to prove this {Be Turner, Barker v. Ivimey, [1897] 1 Ch. 536, at p. 541). Trustees : Measure of Liability. 1 89 Paragraph (3). Thus, in Be Davis, Davis v. Davis, [1902] 2 Ch. 314, A. and B. sold certain trust investments to the value of £6,400, and paid the same into the trust account at the L. and W. Bank. The bank only allowed 1^ per cent, on deposits, and there was no proper security to be obtained which would pay more than 3 per cent. A. was member of a firm which had an account at the L. and W. Bank. This account was overdrawn to the extent of £20,000, fully secured, the interest payable being 3J per cent. A. and B., in good faith, advanced the £6,400 to the firm at 3J per cent, as a temporary investment until a proper investment could be obtained, and the firm used the money to reduce their overdraft. Afterwards the £6,400 was repaid to the trustees : — Held, that the trustees were liable for interest at the rate of 5 per cent, per annum for the period during which it was lent to A.'s firm. Parwbll, J., in delivering judgment, cited the following from the judgment of Vyse v. Foster (1872), L. E. 8 Ch. 309, at p. 329, which, he said, is still a correct statement of the law : " If an executor or trustee make profit by an improper deaUng with the assets or the trust fund, that profit he must give up to the trust. If that improper deahng consists in embarking or investing the trust money in business, he must account for the profits made by him by such employment in such business ; or, at the option of the cestui que trust, or if it does not appear, or cannot be made to appear, what profits are attributable to such employment, he must account for trade interest, that is to say, interest at 5 per cent." Paragraph (5). See Edwards v. Hood-Barrs, [1905] 1 Ch. 20, where it was held by Kbkbwioh, J., that although a co-trustee has paid a part of the loss arising from a breach of trust, the cestui que trust may still prove for the whole loss — i.e., for loss that has ceased to be loss — against the estate of a co-trustee who is insolvent. 190 A Digest of Equity. Article 73. Right to Contribution towards Loss through Breach of Trust as between Co -trustees. Where as against the cestui que trust several co-trustees are each liable for the whole loss resulting from a breach of trust, as between themselves each is entitled to call on the others to contribute equally towards such loss, even though the moral responsibility of all for the each is not equal : Provided that : (1) Where the breach is fraudulent and aU the co-trustees are parties to the fraud, there is no right of contribution. (2) Where one of the trustees is, or subse- quently to the breach becomes, himself a cestui que trust [and he receives an exclusive benefit from the breach], his interest in the trust property is, as between the trustees, primarily Hable for the loss. (3) Where one of the trustees caused the loss either (i) by his personal fraud, or (ii) by his improper advice, he being a person on whose advice the other trustees were entitled to rely, he may be held liable to idemnify his co- trustees. (4) As regards the Umitation of actions, the right to contribution between co- trustees is a simple contract debt, but the period of limitation does not begin to run until the trustees are made liable for the breach of trust. Trustees : Bight to Contribution. 191 Where all the trustees were party to a breach of trust, •the liability of each to contribute continues after his death, even though no loss occurred during his life, and even though his personal representatives could not be sued for the loss. Thus, in Jackson v. Dickinson, [1903] 1 Ch. 947, A. and B., trustees, in breach of trust invested trust funds in partly paid-up shares. Some years after A.'s death, B., who had attempted but failed to dispose of the shares, had, on the company being wound up, to pay a call of £800 upon them -.—Held, that A.'s estate was liable to contribute £400 towards this call, although the liquidator could not have sued his personal representatives for it or any part of it. And where the deceased trustee's estate is insolvent, and in consequence the surviving trustee has to pay all the loss due to the breach, if costs out of the trust estate are given to the surviving trustee and the representatives of the other, the surviving trustee is entitled to a lien on the costs given the other's representatives {Fletcher v. Green (1864), 33 Beav. 426). Paragraph (1). This is simply an application of the common law rule that there is no contribution between joint tort feasors. There is, however, this distinction. The law treats every breach of law as a tort or wrong ; equity being a thing of conscience distinguishes between innocent and fraudu- lent breaches of trust, and limits the rule as to there being no contribution between joint tort feasors, to trustees who have jointly committed fraudulent breaches of trust. Paragraph (2). Thus, in Chillingworth v. Chambers, [1896] 1 Ch. 685, A. and B. were trustees under a will, under which A.'s wife was entitled for her separate use to an undivided fifth share of the trust funds. A. and B. invested in inadequate securities £8,650 of the trust money at the rate of 5 per cent, per annum. These investments were 192 A Digest of Equity. made at four different times. After the first two were made A.'s wife died, and he became entitled to her share. In an administration action the securities were sold, and realised in all £7,070, and thereupon an order was made declaring A. and B. jointly and severally hable for the balance, i.e., £1,580. In the result, all this sum was made good out of A.'s share. A. thereupon claimed that B. should contribute half of the £1,580, or in the alterna- tive half of the loss on the investments made before A. became a cestui que trust through his wife's death : — Held, that A. was not entitled to any contribution from B. Kay, L.J., in delivering judgment, said : " A trustee who, being also a cestui que trust, has received, as between himself and his co-trustee, an exclusive benefit by the breach of trust, must indemnify his co-trustee to the extent of his interest in the trust fund, and not merely to the extent of the benefit which he has received " (p. 707). Neither of the other Lords Justices (Lindley and Smith) limited the rule to cases where the trustee cestui que trust obtained an exclusive benefit. But the loss must have occurred in connection with the same trust under which the trustee was a cestui que trust. Thus, in In re Towndrow, Gratton v. Machen, [1911] 1 Ch. 662, two trusts arose under the same instrument with the same trustees but different cestuis que trust. Under one trust. A., one of the trustees, was also a cestui que trust. A. made default in the other trust : — Held, that his share in the first trust could not be appropriated to cover the loss in the second trust. Further, if the trustee guilty of the breach of trust becomes bankrupt, if the new trustees appointed in his place accept a composition along with the other creditors in full discharge of the trust debt, their right to retain his share of the trust fund is lost {In re Sewell, White v. Sewell, [1909] 1 Ch. 806). Paragraph (3). The most usual cases of one trustee being entitled to an indemnity from another trustee for a breach of trust for Trustees : Bight to Contribution. 193 which both are chargeable are where the other trustee has in breach of trust obtained possession of the trust property and converted it to his own use {Baynard v. Wooley (1855), 20 Beav. 583) ; and where he has acted as sohcitor to the trust and his co-trustee rehed upon his advice on matters of law (Loclihart v. Beilly (1856), 25 L. J. Ch. 697, and see cases considered, Bahin v. Hughes (1886), 31 Ch. D. 390). The second condition- that the trustee claiming an indemnity relied on the solicitor-trustee's advice — is necessary to enable him to succeed. In the words of Kbkewioh, J., in Head v. Gould, [1898] 2 Ch. 250, at p. 265: No "judge ever intended to hold that a man is bound to indemnify his co-trustee against loss merely because he was a solicitor, when the co-trustee was an active participator in the breach of trust complained of, and is not proved to have participated merely in consequence of the advice and control of the solicitor." As to indemnity as to costs incurred through one trustee's negligence, see In re Linsley, Cattley v. West, [1904] 2 Ch. 785. Pafagraph (4). Thus, in Bdbinson v. Harhin, [1896] 2 Ch. 415, A. and B. were trustees of a marriage settlement. Trust funds to the amount of £2,500 were paid to them by a cheque made payable to their joint order. A. indorsed this cheque and sent it on to B. B. handed it to an outside broker, C, with directions to buy certain stock. C. bought stock as directed to the value of £1,500. C. never invested the balance, but from 1885, when he received the money, till 1888, he continued to send cheques each half year in respect of dividends on unde- livered stock. After that date nothing was recovered from him in respect of either interest or principal, and eventually he became insolvent. In 1896 A. brought an action against B. to make him liable for the loss. B. denied his liability, and in the alternative claimed contri- bution from A. A. pleaded the Statute of Limitations and sect. 8 of the Trustee Act, 1888 : — Held, that the Statute of Limitations did not begin to run as between 194 A Digest of Equity. the co-trustees until their hability became fixed, i.e., until the claim of the cestuis que trust became, by the judgment of the court, established against the trustees, and that as A. was in pari delicto with B., he was liable to contribute. Article 74. Duration of a Trustee's Liability to tlie Cestui que Trust. (1) Subject to the exceptions contained in the three succeeding Articles, a trustee's hability to the cestui que trust for loss resulting from breach of trust continues until the cestui que trust's right of action is lost, either — (i) through his continued acquiescence in the breach, or (ii) by his executing a release of his right of action. (2) Acquiescence or release bars the action only when — (i) the cestui que trust in. question is ssii juris, (ii) has full knowledge of the facts, and (iii) is not coerced or unduly influenced in giving his acquiescence or release. (3) A cestui que trust who, being sui juris, consents to or concurs in a breach of trust, is not entitled to sue the trustee ia respect of such breach. Paragraphs (1) and (2). It was always a principle of equity that the Statutes of Limitation, neither directly nor by analogy, ran in Trustees : Duration of Liability. 195 respect of breaches of express trusts. The court was entitled at any period after the breach to give the cestui que trust rehef against the trustee. The reason of this was that a trustee who had converted trust property to his own use, or failed to get in trust property by his own wilful default, or improperly disposed of trust property, could not set up his own breach of trust as a defence against the action of the cestui que trust, and so he was always treated as having still in his possession the trust property which he should have had in his possession (Hovenden v. Lord Annesley (1806), 2 Sch. & L. 607). This rule, which is now modified by the Trustee Act, 1888 (see next Article), does not apply to those con- structive trusts which arise not out of any breach of confidence on the part of a person occupying a fiduciary position, but by way of ordinary contract (see Article 89, infra ; North American Land and Timber Company, Limited v. Watkins, [1904] 1 Ch. 242). It was also, however, a principle of equity that delay defeats equity, or, as it is sometimes put, Vigilantibus non dormientibus cequitas subvenit. If a cestui que trust who is sui juris and fully seised of all the facts in connection with a breach of trust, allows a long time to pass without taking action, though his action is not barred, the court will refuse him relief. This principle apphes not merely to actions against trustees, but to all equitable actions. It and the nature of a binding release will be considered in the section dealing with Estoppel, Acquiescence and Eelease. Paragraph (3). This is merely an appKcation of the common law doctrine. Volenti non fit injuria. Where a person con- sents to an unlawful act he cannot afterwards sue the wrongdoer for it. We have seen how this operates as regards the right of contribution between trustees both guilty of breach of trust. As an example, in Nail v. Punter (1833), 5 Sim. 555, the husband of a cestui que trust who had a hfe interest in the trust funds and a power of appointment in remainder, induced the trustees 196 A Digest of Equity. to pay to him part of the trust funds. The cestui que trust sued the trustees for breach of trust. While the action was pending she died, and by her will appointed the trust funds to her husband. He thereupon sued the trustees for breach of trust. The action was dismissed. Where a trustee who has been induced by the life tenant of the trust property to commit a breach of trust which results in loss has replaced the loss, he is entitled during the life of the life tenant to receive the income of the money he has replaced. This is altogether indepen- dent of the power given by sect. 45 of the Trustee Act, 1893, to impound the life tenant's income to compensate a trustee {Fletcher v. Collis, [1905] 2 Ch. 24 ; Stra. L. C. 163). Article 75. Limitation of Actions by Cestui que Trust for Breach of Trust. (1) The Statutes of Limitations are a good defence to an action against a trustee for breach of trust except where the action (i) is for fraudulent breach of trust and the trustee who pleads the Statutes was a party to the fraud, or (ii) is to recover trust property or its pro- ceeds stiU retained by the trustee who pleads the Statutes, or (iii) is to recover trust property which the trustee who pleads the Statutes re- ceived and converted to his own use. (2) The period of hmitation is six years, and it begins to run (i) as regards actions concerning interests in possession at the date of the breach, from such date ; Trustees : Limitation of Action for Breach. 197 (ii) as regards actions concerning interests in reversion at the date of the breach, from the time such interests vested in possession. (3) A cestui que trust whose claim is barred by lapse of time is not entitled to any benefit through an action brought by a cestui que trust whose claim is not so barred. (4) A married woman, even though her interest in the trust property is subject to a restraint on anticipation, is not a person under disability within the Statutes of Limitations for the purposes of this Article. This is a summary of sect. 8 of the Trustee Act, 1888 — -which with sect. 1 is all that now remains unrepealed of that statute. A judicial trustee is not entitled to the benefit of this section {Be Cornish, [1896] 1 Q. B. 99). Paragraph (1). The rule that time does not run in respect of breaches of express trusts was to a certain extent modified pre- viously by sect. 25 of the Eeal Property Limitation Act, 1874. By that section money or legacies charged on land and secured by an express trust were to be recoverable only within the same time as if there were not any such trust. This, however, applied only to the remedy against the land, not the personal remedy against the trustee {Banner v. Berridge (1881), 18 Ch. D. 254). On the other hand, the effect of sect. 8 of the Trustee Act, 1888, is to take completely out of the rule that time does not run in respect to breaches of express trusts all breaches save those excepted by it. Thus, in Re Timmis, Nixon V. Smith, [1902] 1 Oh. 176, three executors were appointed trustees of A.'s will. The trusts of the will 198 A Digest of Equity. were to convert and invest A.'s estate and pay the income to B. for life and on B.'s death to divide it into four equal parts, one of which was to be settled on C. for life, with remainder to her children, and the other three parts to be taken by the three trustees respectively. On B.'s death the trustees divided the trust estate, but instead of setthng C.'s share as directed by the will they paid it over to her absolutely. They kept the three remaining parts. More than six years after O.'s death one of her children brought an action for breach of trust : — Held, that as the trustees had taken out of the trust estate no more than they were entitled to take, and as the payment to C. was not fraudu- lent, they were entitled to the protection given by sect. 8, and the action was dismissed (and see How v. Earl Winterton, [1896] 2 Oh. 626). But a trustee who was also an annuitant under the trust and who paid himself his annuity without deducting income tax (as should have been done) was held not to be within sect. 8 {In re Sharp, Bicketts v. Bicketts, [1906] 1 Ch. 793). In order that a breach of trust may be fraudulent within the section the fraud alleged must be the defendant's. Thus, in Thome v. Heard, [1895] A. C. 495, A. was first mortgagee of Blackacre, and B. was second mortgagee. A., in exercise of his power of sale, retained C, a solicitor, to conduct the sale of Blackacre. There was a surplus, of which A. became trustee for B. C, however, fraudulently represented to A. that B. had authorised him to receive such surplus, and A. let him retain it. Thirteen years later C. became bankrupt : — Held, that as far as A. was concerned the breach of trust was not fraudulent, nor had A. " retained " the trust money within sect. 8, and there- fore he was entitled to the protection of the statute. Further, the payment of interest on trust property which has been lost through a fraudulent breach of trust, is no acknowledgment of the possession of the trust pro- perty by a trustee who was at the time he made such payment unaware that the trust property had been lost, or that a breach of trust had been committed by his co-trustee {In re Fountaine, [1909] 2 Ch. 382). Trustees : Limitation of Action for Breach. 199 Paragraph (2). Sect. 8 is limited to actions to recover money to which no other statute of Umitations applies. By sect. 1 execu- tors are to be trustees within the meaning of the Act. Now by sect. 8 of the Eeal Property Limitation Act, 1874, an action to recover a legacy is not barred till twelve years after the right to receive the legacy arose. Here, accordingly, another statute of limitations does apply if the legacy is still in the hands of the executor ; but if he has honestly parted with the assets, then he can claim that he comes within the Trustee Act, 1888, and that after the lapse of six years the action against him is barred (see In re Richardson, [1919] 2 Ch. 50). Where the breach consists in the improper investment (Be Somerset, Somerset v. Earl Poulett, [1894] 1 Ch. 231) or improper disposal [Thome v. Heard, [1895] A. C. 496) of trust moneys, in the absence of fraud time begins to run from the improper transaction, not from the date of the loss. As to the date from which the period begins to run where the claimant's interest was not in possession at the time of the breach, see In re Allsop, [1914] 1 Ch. 1. Paragraph (3). Thus, A., a trustee for B. for life and then for B.'s children equally, invests the trust funds in a speculative security in 1895. In 1904 the funds are in consequence lost. B. then is barred by the statute from suing A. for the breach in 1895. B.'s children, however, are not barred. If they bring an action for breach of trust A. will be compelled to replace the trust funds. But B. will not be entitled to the income, which will belong to A. until B.'s death (Collings v. Wade, [1896] 1 I. E. 340). Paragraph (4). Before this enactment a married woman under restraint upon anticipation did not lose her right of action either by lapse of time or release, or even if she herself had induced 200 A Digest of Equity. the trustee to commit the breach (see Fyler v. Fyler (1841), 3 Beav. 550, at p. 663). This enactment allows time to run against her when her interest is in possession, and under the following Article her interest in the trust property may be impounded for the purpose of contri- buting to the habihty of a trustee who, at her instigation, has committed a breach of trust. Article 76. Discretion of Court to Impound the Interest of a Cestui que Trust, Party to a Breach of Trust. Where a trustee commits a breach of trust at the instigation or request or with the written consent of a cestui que trust, the court may, if it thinks fit, impound the interest of such cestui que trust in the trust property, or any part of it, by way of indemnity to the trustee. This power apphes even where the cestui que trust is a married woman without power of anticipation. This is a summary of sect. 45 of the Trustee Act, 1898 (now sect. 62 T. Act, 1925). A consent must be in writing to come within this sec- tion, but an instigation or request need not be {Griffith v. Hughes, [1892] 3 Ch. 105). In order to make the instigation, request, or consent of the cestui que trust an instigation, request, or consent within the section, it must be shown that the cestui que trust knew that the act which he requested or consented to amounted necessarily to a breach of trust (Be Somerset, Somerset v. Earl Poulett, supra). And though there is no rule that the trustees must be deceived or misled bv Trustees : Belief for Breach. 201 the cestui que trust before the court will impound the interest of the cestui que trust for their indemnification {Bolton V. Curre, [1895] 1 Ch. 544), still, where the cestui que trust is a married woman, the court will require a strong case to be made out before it will take this course (see Sawyer v. Sawyer (1885), 28 Ch. D. 595 ; but see also Molyneux v. Fletcher, [1898] 1 Q. B. 648). Article 77. Discretion of Court to Relieve Trustee liable for Breach of Trust. If it appears to the court that a trustee who is hable for a breach of trust has acted honestly and reasonably and ought fairly to be excused, the court may reheve him either wholly or partly from personal habihty for the breach. This provision was introduced by sect. 3 of the Judicial Trustees Act, 1896 (now sect. 61 T. Act, 1925). In the words of Eomer, J., in In re Kay, Mosley v. Kay, [1897] 2 Ch. 518, at p. 524, each case must be dealt with according to its own circumstances. Accordingly, examples of cases that have been held to come within this section are of little use and may prove misleading. One or two points, however, may be laid down on which the court is likely always to lay weight. (1) A trustee is not justified in paying away trust funds after a legal claim has been made by other persons, merely because he is advised the claim will not succeed {In re Kay, Mosley v. Kay, supra). (2) A trustee does not act reasonably in allowing his co-trustee to conduct, without inquiry on his part, the business of the trust {In re Turner, Barker v. Ivimey, [1897] 1 Ch. 536) ; (3) nor in accepting the valuation of property for the purpose of advancing trust 202 A Digest of Equity. money on the security of it, not from a valuer appointed by himself, but from one appointed by the mortgagor {In re Stuart, Smith v. Stuart, [1897] 2 Ch. 583) ; (4) nor in acting in plain breach of the trust instrument, even though his solicitor advises such a course {In re Dive, Dive V. Boebuck, [1909] 1 Ch. 328). But where the trustee is a layman and the directions in the trust instru- ment might reasonably mislead him as to his legal duties, he will not be held Hable if he acted honestly on a false interpretation of these {In re Mackay, [1911] 1 Ch. 300; and see In re Allsop, [1914] 1 Ch. 1). Further, a trustee must, to obtain the protection of the statute, not merely act reasonably and honestly ; he must act in such a manner that he ought fairly to be excused. Where a trustee is remunerated for his services the court will be very reluctant to hold that he ought fairly to be excused {National Trustees Company of Australasia v. General Finance Company, [1905] A. C. 373). Article 78. Criminal Liability of Fraudulent Trustee. Besides the quasi-criminal liability to be attached and committed to prison for contempt of court on failure to pay into court trust money ordered so to be paid, (1) A trustee who, with intent to defraud, converts any trust property to his own use, or to any other purpose than the use of the cestui que trust, or destroys any of it, is guilty of a misdemeanor, and is liable on conviction to penal servitude for seven years. (2) No prosecution can be commenced with- out the sanction of the Attorney- Trustees : Criminal Liability. 203 General, or, when that office is vacant, of the Solicitor-General. (3) Where civil proceedings have been taken against the trustee, the person who took them cannot commence criminal proceedings against him without the sanction of the judge who heard the civil proceedings. (4) Criminal proceedings against a trustee in no way affect his civil liability (Larceny Act, 1861, sects. 80 and 86). As we have seen, attachment and cominittal were originally the sole mode of enforcing equitable decrees, and they remain still a very usual way of enforcing judgments of the High Court in equitable matters. In the case of defaulting trustees an order to pay into court or to pay to the cestui que trust — ^not an order that the cestui que trust shall recover (In re Oddy, [1906] 1 Ch. 93) — is constantly so enforced where the trustee has or ought to have the trust money in hand (Debtors Act, 1869, sect. 4 (3)). Where the part of the trust estate which the trustee has failed to account for is a debt which was due by the trustee himself to the settlor before the trust was constituted, there the trustee will be held to have paid the debt to the trust estate if it can be shown that he was in a position since he became trustee to have paid it {In re Bourne, Davey v. Bourne, [1906] 1 Ch. 697). In order that a writ of attachment may issue, as a rule, the order for payment must be served personally on the trustee or proof must be given that he knows of the order and is evading service of it {In re Tuck, Murch v. Loose- more, [1906] 1 Ch. 692). Independently of the Debtors Act, where the solicitor of a trustee gets possession of the trust funds knowing of the trust, the court under its jurisdiction over its officers has power to order him to bring the trust funds into court and commit him for 204 A Digest of Equity. contempt if he fails to obey the order {In re Carroll, [1902] 2 Ch. 175). Where the cestui que trust has elected to proceed personally against the trustee and not against him in his representative capacity, and has got an order for payment of the debt arising from the breach of trust on which he is entitled to issue execution on the trustee's goods, the relationship of trustee and cestui que trust is at an end, and the remedy by attachment under sect. 4 (3) does not arise (In re Thomas, Sutton, Garden and Company, Limited v. Thomas, [1912] 2 Ch. 348). ( 205 ) Section I. Declared Trusts (continued). B. CHARITABLE TRUSTS. SUMMARY. PAGE Aeticle 79. The meaning of " charitable purposes " - - 205 „ 80. Principles applicable to charitable trusts - 208 „ 81. Certainty as to the objects of a charitable trust - 209 ,, 82. Application of the rule against perpetuities to charitable trusts 214 „ 83. Assurances of land on charitable trusts - - 218 „ 84. Enforcement and administration of charitable trusts - - - 220 Article 79. The Meaning of " Charitable Purposes." Trusts for charitable purposes are : (i) trusts for the rehef of poverty ; (ii) trusts for the advancement of education ; (iii) trusts for the advancement of rehgion ; and (iv) trusts for other purposes beneficial to the community, not falling Under any of the preceding heads, and not being for the purposes merely of sport or hospitality. The above definition of charitable purposes is taken almost verbatim from the judgment of Lord Macnaghten in Commissioners of Income Tax v. Pemsel, [1891] A. C. 531, at p. 583. Perhaps no better definition is possible. At the same time, the fourth head is very vague. With 206 A Digest of Equity. regard to it I think it may be laid down that, while no trust can be a charitable trust which may not at least be for the public benefit, yet a trust for the pubhc benefit may not be a charitable trust, and a charitable trust may be one which confers benefits only on certain particular individuals. A case or two will render this proposition clearer. Thus a trust for the suppression of vivisection is a good charitable trust, because the object which the settlor intended to advance is kindness to animals, which is a good charitable purpose, and this though the court is of opinion that the suppression of vivisection is more likely to be for the disadvantage than for the benefit of the pubhc {In re Foveaux, [1895] 2 Ch. 501). Again, a trust for the advancement of a purpose which is for the public benefit, is not a charitable trust when the object of it is sport, such as yachting or hospitality, not charity (In re Nottage, [1895] 2 Ch. 649). On the other hand, if the object is charitable the fact that it promotes sport does not render it non-charitable. For instance, where money is left to promote sport or hos- pitahty in connection with a particular school, this is a charitable trust {In re Manette, [1915] 2 Ch. 284). In the same way a trust for the settlor's poor kindred descend- ants of A., though it can confer benefits upon particular individuals only, yet is a good charitable trust, since it is for the public benefit that every class of the poor should be provided for {Gillam v. Taylor (1873), L. E. 16 Eq. 581). It may be added that the public to be benefited may be the public of a foreign country. Thus a trust for the poor of a German town is a good charity {Freund v. Steward, W. N. (1893) 161). These cases will show that the vagueness of the fourth purpose stated in the Article arises from the nature of the subject-matter (see In re Good, [1905] 2 Ch. 60 ; In re Sidney, [1908] 1 Ch. 488). " Poverty," in this definition of charity, means not relative but absolute poverty {In re Drummond, [1914] 2 Ch. 90) ; and the fact that the persons to be benefited Charitable TrusU. 207 are the blind, or orphans or widows is not sufficient to make a trust for their relief charitable ; but as a rule in the absence of anything to the contrary the court will construe such trusts as if the word " poor " had been inserted before the word " blind," etc. (Thompson v. Corhy (1860), 27 Beav. 649). In the same way " education " does not mean academic education merely, but any instruction calculated to improve the people mentally or morally. Thus a trust " for the protection and benefit of animals " is a good charitable trust (In re Wedgwood, [1915] 1 Ch. 113, and see In re Foveaux, supra). But a trust for animals to be a charity must not be for the benefit of specified animals, which is a good private trust if properly declared (see In re Dean (1889), 41 Ch. D. 552, supra, p. 83). " Eeligion " may now be said to include all forms of religion whose principles or practices are not contrary to law. Formerly, when the Christian religion was con- sidered part of the law of England, any gift for the benefit of any opposed religion was void (see Da Costa v. De Pass (1743), 2 Sw. 487a). But now a gift even to a secular society is good {Bowman v. The Secular Society, [1917] A. C. 406). Formerly, too, the law as to superstitious uses rendered gifts for such objects as prayers for the dead void, but now, notwithstanding 1 Ed. VI. c. 14, such gifts are good in England (Browne v. Keane, [1919] A.C. 818), as they have long been held to be good in Ireland where that Act does not apply (O'Hanlon v. Logue, [1906] 1 I. E. 247). On the other hand, gifts to rehgious male orders connected with the Church of Eome are held void in Ireland under The Eoman Catholic Eelief Act, 1829 (Ellard v. Phelan, [1914] 1 1. E. 76), while they have been held good in England (In re Smith, [1914] 1 Ch. 937). There is a definition, or rather an enumeration, of charitable purposes contained in the preamble of 43 EHz. c. 4, which is repeated in the Mortmain and Charitable Uses Act, 1888, sect. 13. It has, however, never been held to be exhaustive. 208 A Digest of Equity. Article 80. Principles Applicable to Charitable Trusts. Subject to the limitations contained in the following Articles, the principles applicable to declared private trusts apply equally to charit- able trusts. Thus, omitting certainty as to the objects of the trust, which is dealt with in the next Article, certainty as to the intention to declare a binding trust and certainty as to the property to be bound, are as strictly insisted upon in charitable as in private trusts. Indeed, most failures of charitable trusts arise owing to uncertainty on the latter point. Thus, in In re Macduff, [1896] 2 Ch. 451, a testator left a legacy in trust for " charitable or philanthropic purposes " in perpetuity. If "or philan- thropic " had been omitted the trust would have been good, as the words " charitable purposes " would have then appUed to the whole fund and they would have sufficiently defined the objects of the trust. But there are philanthropic objects which are not charitable in the legal sense, and since there was no indication as to what portion of the funds was to be devoted to charitable objects and what portion to philanthropic objects, and since the trust for philanthropic purposes — being a private trust — failed as transgressing the rule against perpetuities (see infra, Article 82), and further being a private trust it should but did not satisfy the third certainty — certainty of object — was bad, it was held that the whole trust failed for uncertainty. (Gf. In re Best, [1904] 2 Ch. 354, where the words " charitable and benevolent institutions " were held to be sufficient, and In re Sidney, [1908] 1 Ch. 488, where a trust for " charitable uses or emigration uses " was held bad. As to when the court will read " and " as if it were "or," see Houston v. Burns, [1918] A. C. 337.) Where the trustee is given a discre- tion as to the apportionment of the trust fund between charitable and other clearly defined purposes not charit- able, the trust will not fail for uncertainty, whether he Charitable Trusts : Certainty. 209 exercises his discretion or not. If he does not exercise it, the court will ; and, on the principle that equality is equity, will divide the trust fund equally between the different objects {Salushury v. Denton (1857), 2 K. & J. 529). But where the purposes not charitable are not clearly defined the trust must fail notwithstanding the discretion given to the trustee (Att.-Gen. for New Zealand v. Brown, [1917] A. 0. 393). There are elaborate provisions in the Charitable Trusts Acts, etc., relating chiefly to the administration of the property of charities, which do not apply to private trusts. These, however, have nothing to do with equitable prin- ciples, with which alone this work deals, and so they will be referred to only incidentally. Formerly other differences existed, such as marshalling assets in favour of charities. These have been superseded by the Mortmain and Charitable Uses Acts, 1888 and 1891 (see infra, Article 83). Article 81. Certainty as to the Objects of a Charitable Trust. (1) To sustain a trust for charitable purposes it is not necessary that the settlor should set out a specific object to be benefited by the trust. Whether he does set out a specific object or not, the court will hold that the trust is sufficiently declared if it can gather from the whole trust instrument that in any event the trust property should be applied for charitable purposes. Such an intention is called a general intention of charity. (2) Where a specific object is set out and such object was in existence when the trust instru- ment was executed but ceased to exist before 210 A Digest of Equity. the trust came into operation or where the object set out was when the trust came into operation incapable of performance, the court will not hold that any general intention of charity is disclosed and the trust wiU fail. (3) Where a specific object is set out if such object was in existence at the date when the trust instrument was executed and also at the date when the trust came into operation but failed afterwards, or if there was no such charit- able object in existence at the date when the trust instrument was executed ; or where the settlor merely declares that the trust is for charitable purposes ; the court will infer a general intention of charity, and the trust will be good. (4) Where the trust instrument discloses a general intention of charity but no specific charitable object is indicated or the specific charitable object indicated fails or does not exhaust the trust property, then the court will proceed thus : It will itself declare the specific charitable objects for which the trust property, or the surplus of it, is to be held. In so doing, it will, where a specific charitable object not capable of fulfilment or not exhausting the trust property is indicated, endeavour to carry out this purpose as nearly as is possible. This is called carrjiing out such purpose cy-pres. Paragraph (1). Two recent cases may be cited where from the whole circumstances the court gathered a general intention of charity. In In re Willis, [1921] 1 Ch. 45, a testatrix left the residue of her personal estate after the death of her sister Charitable Trusts : Certainty. 211 to charitable institutions to be selected by W. within three months after the sister's death. Both the sister and W. predeceased the testatrix : — Held, that the trust did not fail as the testatrix had shown an intention to devote the residue to charity and nothing else. In In re Welsh Hospital (Netley) Fund, [1921] 1 Ch. 655, funds had been collected for establishing and running a hospital at Netley for sick and wounded Welsh soldiers. After the war the hospital was closed : — Held, that there was a general intention to apply the funds for the benefit of sick and wounded Welsh soldiers, and that the court would order a scheme to be arranged for carrying this object out. Paragraph (2). Thus where a testator left a legacy to " the rector for the time being " of a Eoman Catholic seminary, which ceased to exist before the testator died, it was held that the legacy was in trust for the seminary and lapsed (In re Bymer, [1895] 1 Ch. 19). And in Bute's Trustees v. Bute {Marquis of) (1905), 7 ¥. 49, a testator left a legacy to build certain churches which were to be conveyed to the Eoman Catholic bishops of the places where they were built subject to certain conditions. The bishops, however, declined to accept the churches subject to the conditions : — Held, that the legacy lapsed into the residue of the testator's estate, on the ground that the performance of the trust was impossible. And see In re University of London, [1909] 2 Ch. 1. But where the settlor's intention is not to benefit a particular institution but to advance the objects such institution was formed to carry out, then the fact that such institution has ceased to exist if another has taken its place to advance the same objects will not cause the trust to fail (In re Magrath, [1913] 2 Ch. 331). Paragraph (3). Thus a testatrix by her will left a legacy in trust for " the following religious charities." Then followed a, blank, in which, no doubt, the testatrix had intended to 212 A Digest of Equity. insert the names of the particular charities to be benefited : — Held, a sufficient indication of the object of the trust, and therefore a good charitable trust (Be White, [1893] 2 Oh. 41). Again, in In re Huxtahle, Huxtahle v. Crawfurd, [1902] 2 Ch. 793, the words of the trust were " for the charitable purposes agreed upon between us " : —Held, a sufficient declaration of trust, and evidence was admitted to show what the particular trusts were (see supra, p. 62 ; and cf. In re Hetley, [1902] 2 Ch. 866). But of late where the trust is by will and there is only a very vague and general description of the charitable objects and a very wide discretion is given to the trustees to select the actual charities to be benefited, the court has held that the trust fails for uncertainty on the ground that under a will such as this the real disposition of the testator's property is made by the trustees and not by the testator (see Grimond v. Grimond, [1905] A. C. 124). But though this is a decision of the House of Lords it can scarcely be taken as establishing any principle and indeed it is of doubtful value (see Arnott v. Arnott, [1906] 1 I. E. 127 ; In re Pardoe, [1906] 2 Ch. 184 ; but cf. In re Da Costa, Clarke v. Church of England Collegiate School of St. Peter, [1912] 1 Ch. 337). When the trust instrument is a will, questions of difficulty constantly arise as to whether the testator has indicated a general intention of charity, though none is expressed, on failure of his intention of benefiting the specific charity indicated by him. If the specific charity intended to be benefited is a definite institution — e.g., " £1,000 in trust for Dr. B.'s Hospital "—and the institu- tion ceases to exist before the testator dies, then the gift fails absolutely. But where the specific institution survives the testator, but the benefit intended cannot be carried out in precisely the same mode as the testator intended, the court usually impUes a general intention of charity, and has the intention of the testator carried out cy-pr&s (see Be Mann, Hardy v. Attorney-General, [1903] 1 Ch. 232). Where the charitable intention relates not to an existing but to a future institution, such as a soup kitchen to be established in a certain parish {Briscoe v. Charitable Trusts : Certainty. 213 Jackson (1887), 35 Ch. D. 460), or a church to be built in a certain district, or to some supposed institution which in fact never existed (In re Davis, Hannen v. Hillyer, [1902] 1 Ch. 876 ; In re Webster, Pearson v. Webster, [1912] 1 Ch. 107), the court is not inclined to let the difficulty of carrying out, or the improbability that it will ever be possible to carry out, the testator's intention lead to the failure of the gift. It should be added that once a trust fund has become devoted to charitable purposes the subsequent failure of such purposes will not put an end to the trust. It will in this case be invariably carried out cy-pres (see Smith v. Kerr, [1902] 1 Ch. 774, infra, p. 217; and see In re Welsh Hospital (Netley) Fund, supra, p. 211). Paragraph (4). As to what is meant by cy-pres, three points may be noticed. The first is that the new purpose must be in the nature of the particular purpose intended by the settlor (see Be Prison Charities (1873), L. E. 16 Eq. 129). The second is that it is only permitted to look at the other charitable objects which the settlor intended to benefit by other gifts contained in the settlement, when it is impossible to carry out any charitable purpose in the nature of that for which he made the particular gift (Attorney-General v. Ironmongers' Company (1840), Cr. & Ph. 208 ; and see Smith v. Kerr, infra, p. 217). The third is that where an object is clearly indicated by the settlor which is capable of being carried out, the fact that the court or Charity Commissioners think that a different mode of applying the trust funds would be more beneficial to the community is no ground for disregarding the express intention of the settlor (In re Weir's Hospital, [1910] 2 Ch. 124 ; cf. Attorney-General v. Price, [1912] 1 Ch. 667, where this principle seems to have been overlooked). When it is determined that there is a general intention of charity the court orders a scheme to be prepared by, or with the approval of, the Attorney-General for its 214 A Digest of Equity. approval. This is subsequently submitted to the court, and, on approval by it, takes the place of the original purposes designed by the settlor. This may be done even where the charity to be benefited is abroad, if the trustees or any of them are within the jurisdiction, more especially if the trust fund is to stay in England (In re Vagliano (1906), 75 L. J. Ch. 119). The Attorney- General and the trustees of the charitable trust are the only persons who are entitled to settle the scheme for the application of the trust fund. Other persons can intervene only when the scheme is submitted for the confirmation of the court {In re Hyde Park Place Charity, [1911] 1 Ch. 678). Article 82. Application of the Rule against Perpetuities to Charitable Trusts. (1) A determining condition wMch may not be fulfilled within a life or lives ia being and twenty-one years — (i) is not bad as being contrary to the rule against perpetuities when it is attached to a trust for a charitable purpose, if the gift over on fulfilment of the con- dition is for another charitable purpose ; (ii) is bad when so attached, if the gift over is not for another charitable purpose, or if the trust to which it is attached is not charitable though the gift over is for a charitable purpose ; (2) Provided that where a charitable trust is of personalty, and the gift for the charit- able purpose is of the income of the trust property merely, then such a determining con- dition attached to the trust is good, if on the Charitable Trusts : Perpetuities. 215 fulfilment of the condition the trust property is only to result back to the settlor or to his personal representatives for the benefit of his residuary legatees or next of kin. (3) When property is directed to be used by trustees for a charitable purpose, the fact that no limit is placed upon the period of time for which it is so to be used will not make the direction bad as contrary to the rule against perpetuities, and, so long as the property has not passed into the hands of purchasers for value without notice, the trust in favour of the charitable purposes can be enforced. Paragraph (1). Thus, in Be Tyler, Tyler v. Tyler, [1891] 3 Ch. 252, a testator bequeathed to the trustees of a charity a sum of money subject to a condition that they kept in repair his family vault in H. cemetery, and on breach of such condition he directed that the legacy should go to another charity. On a summons to ask the court if the condition was good : — Held, that it was. But in Be Bowen, Lloyd Phillips V. Davis, [1893] 2 Ch. 491, another testator left money upon trust to establish and maintain for ever schools in cerfain parishes, subject to the condition that if the Government should establish a general system of education the trust fund was to fall into his residuary estate which he bequeathed to his three sisters. The Government having established a general system of educa- tion, the question arose whether the testator's sisters were entitled to the trust fund : — Held, that as the gift over was to individuals and not to a charity it was bad as contrary to the rule against perpetuities. Again, in Be Lord Stratheden and Campbell, Alt v. Lord Stratheden and Campbell, [1894] 3 Ch. 265, the testator by his will left an annuity out of his residuary estate to be provided for a volunteer corps on the next appointment of a lieutenant-colonel. He made S. his residuary legatee : — 216 A Digest of Equity. Held, that the gift was bad, as the interest to which it was attached^the residuary gift to S. — ^was not charitable and it was conditional upon an event which might not occur within the period allowed by the rule against perpetuities. (And see Worthing Corporation v. Heather, [1906] 2 Ch. 532 ; In re Da Costa, Clarke v. Church of England Collegiate School of St. Peter, [1912] 1 Ch. 337.) Paragraph (2). Thus, in Be Randall, Bandall v. Dixon (1888), 38 Ch. D. 213— later followed in Be Blunt's Trusts, [1904] 2 Ch. 767 — a testatrix bequeathed funds on trust to pay the income to the incumbent of a certain church for the time being so long as he permitted the sittings to be occupied free ; in case payment for sittings were ever demanded she directed the funds to fall into the residue of her estate : — Held, that as there was no general intention to devote the funds to charitable pur- poses, but merely a gift of the income of the fund so long as a certain condition was observed, and as on failure of this condition the fund was to go where the law would vest it in case the testatrix had made no disposition of it whatever, that disposition was good. (Cf. In re Peel's Belease, [1921] 2 Ch. 218.) This decision is carefully to be distinguished, from Be Bowen (supra). In Be Bowen the fund itself was given to the charity subject to a gift over on breach of condition. In Be Bandall, supra, the fund was not given, but merely the income of the fund up to the happening of an uncertain event, and then the fund was to lapse into the residue of the testatrix's estate. I confess I cannot see much force in the distinction, since the doctrine has always been that a gift of the income of property is a gift of the property itself, or, as was said by the same learned judge (North, J.) who decided Be Bandall (supra), " The power of appointing the income or fruit of a fund is, in my opinion, equivalent to a power over the tree which produces the fruit " (Be UHerminier, Mounsey v. Buston, [1894] 1 Ch. 675, at p. 676). Charitable Trusts : Perpetuities. 217 Paragraph (3). It is to be noted that this has nothing to do with gifts over. What is meant is that once property is impressed with a charitable trust, such trust remains binding upon it for ever. If A., for example, left property to trustees in trust to pay the income to his son B. for life, then to B.'s eldest son for life, then to such son's children equally, and then to their children's children equally, and so on for ever, this being a private trust, the trusts after that in favour of B.'s eldest son would be void ab initio, although there is no gift over {Be Bichardson, Parry v. Holmes, [1904] 1 Ch. 332). But if property be settled ia trust, that the income shall " from time to time be given to such of the lineal descendants of E. W. as may severally need," with no gift over, this is a charitable trust and perfectly good {Gillam v. Taylor (1873), L. E. 16 Eq. 581) ; and if there is any default in carrying it out hundreds of years after the settlement the court will enforce it. A remarkable example of this is the case of Smith v. Kerr, [1902] 1 Ch. 774. There, Clifford's Inn was in 1618 assured to trustees for the purpose that it " shall and may hereafter continue to be employed as an Inn of Chancery for the furtherance of the practisers and students of the Common Law of the Eealm." For many years Inns of Chancery — which were preparatory schools of law for the Inns of Court — had ceased their educational functions, and the members of the Society of Chfford's Inn had since then treated the Inn as their private property. In 1901, on action brought : — Held, that the property was held on a trust for the advancement of legal education, which trust must be carried out. It is to be remembered that the Charity Commissioners have large powers to alter the objects, especially of ancient charities — that is, charities which have existed over fifty years — by schemes prepared by them. These schemes, like those approved by the court, should be cy-pres the original objects of the trust. There is an 218 A Digest of Equity. appeal from the schemes of the commissioners to the court, but the court will not interfere unless the commis- sioners have violated some rule of law, or have been guilty of some gross oversight which calls for the inter- vention of the court {Be Gampden's Charities (1881), 18 Ch. D. 310). Aeticlb 83. Assurances of Land on Charitable Trusts. Assurances of lands or money to be laid out in the purchase of land, to trustees for charit- able purposes, if made by deed are void unless the assurance satisfies the requirements of Part II. or the charitable purpose is within the exemptions contained in Part III. of the Mortmain and Charitable Uses Act, 1888. If made by wiU they are vaUd, but the land must, unless with the consent of the court or of the Charity Commissioners to the contrary, be sold within one year of the testator's death, and the money must not be laid out in the purchase of land (Mortmaia and Charitable Uses Act, 1891). The matters dealt with in the above Article concern the law of property rather than the law of trusts. A very short summary, however, of the provisions of the two Mortmain and Charitable Uses Acts may be useful. The Charitable Uses Act, 1735, declared gifts by will of land (which included money secured on land), or money to be laid out in the purchase of land, to charities, to be void, and subjected gifts made otherwise to certain conditions. The Mortmain and Charitable Uses Act, 1888, sub- stantially re-enacted the Charitable Uses Act, 1735. Charitable Trusts : Assurances. 219 Part II. of the Act of 1888 enacts that an assurance of land or of personal estate to be laid out in land, in order to be vaUd, must fulfil the following conditions, which it will be seen rendered gifts by will of land and of personal estate to be laid out in land impossible : assurance (1) must take effect in possession ; (2) must be without power of revocation, reservation, condition or provision in favour of the assuror, save reservation of peppercorn rent, of mines or easements, covenants to repair, right of re-entry for non-payment of rent or breach of covenant, and reservations of like nature ; (3) must be by deed executed in the presence of two witnesses unless the land is copyhold and the personal estate is stock in the public funds ; (4) must be made at least twelve months before the death of the assuror ; (5) if the personal estate is stock in the public funds, must be made by transfer at least six months before the death of the assuror ; (6) if not of stock in the public funds, must be enrolled in the Central Office of the Supreme Court within six months after execution. Conditions (3), (4), and (5) do not apply where the assurance is made bona fide for valuable consideration. Part III. exempts altogether from the operation of Part II. assurances for the benefit of the Universities of Oxford, Cambridge, London, Durham, and the Victoria University, or any of their colleges, and assurances, save by wiU, of land to societies for the promotion of rehgion or learning where the land given does not exceed two acres and is for building purposes. It further exempts gifts by deed or will of land for public parks, museums, and elementary schools, where the land given to the first does not exceed twenty acres, to the second two acres, and to the third one acre. By the Mortmain and Charitable Uses Act, 1891, " land " is not, either in it or in the Act of 1888, to include money secured on land. This Act further gives a free power to testators to leave land to charities, but such land must be sold within a year, unless the consent of the Charity Commissioners or the court to the contrary 220 A Digest of Equity. is obtained. And money to be laid out in the purchase of land may be freely bequeathed to charities, but the money is to be held for the benefit of the charity as if there had been no such direction. Article 84. Enforcement and Administration of Charitable Trusts. (1) Charitable trusts, being trusts not for the benefit of individual cestuis que trust but for the benefit of the public, cannot (subject to the provisions of the Charitable Trusts Act) be enforced, except by or through the Attorney- General as representing the King. (2) In the administration of charitable trusts, powers given to the trustees may be exercised by a majority of them contrary to the wishes of the minority. Paragraph (1). A private person can now under sects. 17 and 19 of the Charitable Trusts Act, 1853, commence proceedings for the enforcement of a charitable trust on obtaining the certificate of the Charity Commissioners (see Booke v. Dawson, [1895] 1 Ch. 480). Paragraph (2). When the trustees of a private trust have a power to do or not to do a certain thing such power cannot be exercised unless all the trustees agree to its exercise (supra, p. 119). This is not so when the trust is charit- able. There such powers may be exercised by a majority of the trustees without the consent or contrary to the wishes of the minority (In re Whiteley, Bishop of London v. WhUeley, [1910] 1 Ch. 600). ( 221 ) PART I. ACTUAL TRUSTS. Section II. Presumed Trusts. SUMMARY. PAGE Abticle 85. Failure of express trust - - - - 221 „ 86. Purchases through and transfers to other persons 223 „ 87. Principles applicable to presumptive trusts - 228 Article 85. Failure of Express Trust. Where a settlor transfers property to a trustee and there is, owing to any cause, a total or partial failure to vest the equitable estate in such property in a cestui que trust, or the trusts declared do not exhaust the whole equitable estate, then there is a presumption that in so far as there is such failure or the equitable estate is not exhausted, the settlor intended the property to be held in trust for himself. To such trusts as these the provision of the Statute of Frauds that trusts of land must be evidenced in writing has no application. It is a rule of the common law that in so far as a grantor does not effectively convey his estate to the grantee or grantees it remains in him. The above Article is a mere application of this rule to assurances in equity : in so far as a settlor does not effectively assure his equit- able estate to the cestui que trust or cestuis que trust it remains in him. Thus if A. conveys a freehold to B. for life and on B.'s death to B.'s eldest son in fee simple and 222 A Digest of Equity. B. dies without ever having had a son, the fee simple is still in A. If A. instead had conveyed the freehold to trustees to pay the net rents to B. for life, and on B.'s death to convey it to B.'s eldest son in fee simple, and B. died without ever having had a son, the equitable iee simple would remain in A. But instead of saying this the chancery lawyers say the equitable estate results to A. As a matter of fact it never was out of him, for there never was anybody to take it. This being so, the trusts arising under the rule are rather constructive than presumptive trusts, since they are based less on any presumed intention than on a rule of law. At the same time it is usual to place them among presumed or implied trusts, and, after all, it is no very violent presumption to assume that so far as the settlor had any intention in the matter, he intended, if the persons he wished to benefit did not take the property, it was to remain his. It was inattention to the above considerations which led to much litigation in the case of Smith v. Cooke, [1891] A. C. 297. In ordinary trusts for the payment of the settlor's creditors, after the payment of the creditors in full, there is a resulting trust of any surplus there may be for the settlor (Johns v. James (1878), 8 Ch. D. 744; Stra. L. C, p. 87). This is because the trusts declared do not exhaust the equitable estate, and the balance of it there- fore remains in the settlor. In Smith v. Cooke (supra) , how- ever, the settlor assigned his estate to trustees to sell and divide the proceeds among his creditors in rateable propor- tions according to the amount of their respective debts. Here the trusts declared did exhaust the equitable estate. There being, however, a large surplus after payment of his debts in full, the settlor, blind to this distinction, claimed it on the general principle applicable when the trust is for payment of the settlor's debts. The House of Lords decided that he was not entitled to it. It is also to be remembered that it is only on the failure oi absolute trusts that there is a resulting trust for the settlor. It is, for instance, a common practice among PresuiHed Trusts. 228 testators (but the same rule applies to trusts inter vivos : Doyle V. Crean, [1905] 1 I. E. 252) to leave funds on trust for an unmarried woman with a direction that should she marry they are to be settled on herself and her children. Here the trust for the children is only contingent and on its failure the trust for the woman becomes absolute. The principle is called the rule in Lassence v. Tierney (1847), 1 Mac. & G. 552. (And see Under, and Stra. Inter, of Wills, pp. 293-296, and In re Harrison, [1918] 2 Ch. 59.) So many cases of resulting trusts arising through failure of the objects of the original trust have already been referred to that it is not necessary to give more examples. It should, however, be borne in mind in this connection that by the law of evidence, parol (or oral) evidence is not admissible to vary a written instrument, and accordingly, if on the face of the trust instrument the trustee is described as a trustee, he carmot give evidence to show the intention was that any of the equitable estate not disposed of under the trust was to belong to him. As regards charitable trusts where the object fails or does not exhaust the trust fund see Article 81 (4). Article 86. Purchases through and Transfers to other Persons. (1) Where the person purchasmg and papng the purchase-money for property, real or per- sonal, has it assured to another, or others, or to himself jointly with another or others, there is a presumption that he intends such other or others to hold it in trust for himself. To such trust the provision of the Statute of Frauds that trusts of land must be evidenced in writing does not apply. (2) Where a person assures pure personalty to another, or others, or to himself jointly with 224 A Digest of Equity. another or others who give no consideration for the assurance, there is a presumption that he intends such other or others to hold it in trust for himself. (3) The presumption in either case can be rebutted or supported : {a) By evidence of surrounding circumstances. The most important evidence of surrounding circumstances consists of evidence showing that the relationship subsisting between the parties at the date of the transaction was such as to impose a legal or quasi-legal obligation on the purchaser or transferor to provide for the other person. (6) By evidence of statements made by the parties. To prove that a gift was intended, evidence of statements made by the purchaser or trans- feror before, at, or after the purchase or transfer, but evidence of statements made by the other or others only before or at the purchase or transfer, is admissible. To prove that a trust was intended, evidence of statements made by the other or others before, at, or after the purchase or transfer, but evidence of statements made by the pur- chaser or transferor only before or at the purchase or transfer, is admissible. Paragraphs (1) and (2). In the leading case of Dyer v. Dyer (1788), 2 Cox, 92, at p. 93, Eyre, C.B., in giving judgment, says : " The clear result of all the cases, without a single exception, is, Presumed Trusts. 225 that the trust of a legal estate, whether freehold, copyhold, or leasehold ; whether taken in the names of the purchaser and others jointly, or in the name of others without that of the purchaser ; whether in one name or several ; whether jointly or siiccesswe, results to the man who advanced the purchase-money." The rule applies equally to pure personalty. The most recent case of the application of this rule is Be Policy No. 6402 of the Scottish Equitable Life Assurance Society, [1902] 1 Ch. 282. A. took out a poHcy of assur- ance on his own life " for behoof of " B., who was A.'s deceased wife's sister. Afterwards A. went through the ceremony of marriage with B. A. retained the policy in his possession during his life and paid the premiums. On his death the question arose, whether the policy money belonged to B.'s executors, B. having predeceased A., or to A.'s executors : — Held, that as B. was not the legal wife of A. but in law a stranger, and as there was no parol evidence to show that A. intended it as a gift to B., it must be presumed that A. intended it for his own benefit, and that B.'s personal representatives were trustees of the money for A.'s executors. (And see, as to purchases made by a husband in his own name with his wife's money, Mercier v. Mercier, [1903] 2 Oh. 98.) The rule applies equally to transfers of pure personalty to other persons who give no consideration for them {Stand- ing V. Bowring (1885), 31 Ch. D. 282), but not to convey- ances of land {Fowkes v. Pascoe (1875), L. E. 10 Ch. 343 ; Stra. L. C. 187). The ground for this distinction given by Lord Haedwickb in Young v. Peachy (1741), 2 Atk. 254, is that there is no presumption that in fact the grantor intended the land to be held for him on a voluntary con- veyance. Why the presumption of fact should be different in the case of land from what it is in the case of goods it is hard to discover. No such distinction was taken before the Statute of Frauds, 1677. But owing to the decision that trusts of land do not arise by operation of law on the transfer of the land to a person who gives no value, if such a trust is intended it must be evidenced by writing. 226 A Digest of Equity. Probably this doctrine of a presumed resulting use arose out of two now obsolete practices which made it at one time reasonable at least as far as land was concerned. The first was the practice of making feoffments of land to the use of the feoffor's — i.e., the grantor's — ^will, which was a very common practice before the Statute of Wills, 1540, made freehold land devisable at law. Often the uses upon which the feoffee was to hold the land were declared orally, and therefore to prevent fraud it was reasonable enough to assume that when a feoffee took land without giving value he held it in trust for the feoffor till the contrary was shown. The other practice was that of taking conveyances of freeholds in the names of other persons than the purchaser in order to bar dower. This practice prevailed down to the passing of the Dower Act, 1833. Perhaps the fact that the one. practice was obsolete, and the other was in , operation at the date of Young v. Peachy (supra), accounts for Lord Hardwickb's decision. Paragraph (3). (a) The relationships which impose this obHgation are those of father to son {Crabb v. Crabb (1834), 1 My. & K. 511) or daughter {Clark v. Danvers (1678), 1 Ch. Cas. 310), husband to wife {Be Eykyn's Triists (1877), 6 Ch. D. 115), grandfather to grandchild, the father being dead {Ebrand v. Dancer (1680), 2 Ch. Cas. 26), and a person in loco parentis to adopted child {Currant v. Jago (1844), 1 Coll. 261). As to what constitutes the latter relation, see infra, Article 103. In all these cases the relationship is sufficient prima facie to rebut the presumption. It is doubtful whether the relationship of mother to child, where the father is still living, is sufficient {Bennett v. Bennett (1879), 10 Ch. D. 474 ; but cf. Batstone v. Salter (1875), L, E. 10 Ch. 431 ; and In re Ashton, [1897] 2 Ch. 574), though now probably, since the Married Women's Property Act, 1882, sect. 21, imposes a legal obligation on married women to support their children under certain circumstances, it is. And a rebuttal of the presumption may arise through other circumstances than these, such, for instance, as where the persons into whose names stock Presumed Trusts. 227 is transferred are the trustees of a settlement by which the transferor had previously settled money {Be Curteis (1872), L. E. 14 Eq. 217). Though these relationships are in themselves sufficient to rebut the presumption, yet the counter-presumption arising from them may itself be rebutted either by sure evidence of other surrounding circumstances or by direct evidence of intention. Thus the fact that a father who had bought property in an adult son's name himself continued to manage it {Stock v. MeAvoy (1872), L. E. 15 Bq. 55), or the fact that the son was his father's man of business {Garxett v. Wilkinson (1848), 2 De G. & Sm. 244), is a sufficient circumstance to rebut the rebuttal arising from the blood relationship. In the words of Jessel, M.E., in Marshall v. Crutwell (1875), L. E. 20 Eq. 328, at p. 329 : " Although a purchase in the name of a wife or child, if altogether unexplained, will be deemed a gift, yet you may take surrounding circumstances into consideration, so as to say that it is a trust, not a gift. So, in the case of a stranger, you may take surrounding circumstances into consideration, so as. to say that a purchase in his name is a gift, not a trust." (And see Pole v. Pole (1747), 1 Ves. sen. 76.) In Ex parte Cooper, W. N. (1882), p. 96, Lindlby, L. J., is reported to have said that " when the parties to such a transaction are alive to give evidence, there is no occasion to resort to any presumption : the question is one of fact." The question is always one of fact, and it is submitted that, when the parties are alive the presumption applies as much as when they are dead, since it decides upon whom lies the burden of proving that a trust was or was not intended. (&) This rule depends on the rule of evidence that the declarations of a person in his own interest cannot be admitted to support his claim, but evidence of declarations against his own interest are admissible to rebut it {Stock v. McAvoy (1872), L. E. 15 Eq. 55). 228 A Digest of Equity. Article 87. Principles Applicable to Presumptive Trusts. There being no trust instrument to impose or confer special duties or powers on the owners of the legal estate, presumed trusts must always be simple trusts. The principles applicable to declared simple trusts apply equally to presumed trusts. ( 229 ) PART II. CONSTRUCTIVE TRUSTS. SUMMARY. PAGE Article 88. When a stranger to a declared trust is a construc- tive trustee of the trust property ... 229 „ 89. A trustee or agent is a constructive trustee of improper profits - - - 233 „ 90. Principles applicable to constructive trusts - - 235 Article 88. When a Stranger to a Declared Trust is a Constructive Trustee of the Trust Property. Where a stranger to a trust assumes to act as trustee, and in that capacity receives trust property, or where a stranger receives trust property knowing that it is being transferred to him in breach of trust, he is a constructive trustee of such property for the cestui que trust. A stranger to a trust who, though receiving no part of the trust property, knowingly aids a trustee to commit a fraudulent breach of trust, is chargeable as a constructive trustee of the trust property. It has already been pointed out that a stranger to the trust who takes trust property without giving value for it gets no better title to it than the trustee had. In this note the liability of other persons having deahngs with the trust property or the trustees will be considered. 230 A Digest of Equity. " Strangers " here includes agents employed by the trustees in connection with the trust estate, such as solicitors, brokers, bankers, etc. A stranger who assumes to act as a trustee is called a trustee de son tort. In order to constitute a person a trustee de son tort he must actually receive the trust money or put himself in such a position that he could, if he chose, appropriate it to his own use. For example, in Be Barney, Barney v. Barney, [1892] 2 Ch. 265, a deceased miller's widow was sole trustee of his estate under a trust to convert and invest the proceeds in trust securities, and hold the same in trust for herself for life and then for the deceased's children. The widow, who had assisted the deceased in carrying on his business, finding that to wind it up would greatly decrease the income from his estate, determined to continue it. Two friends agreed to assist her in so doing, and a banking account consisting of trust money was opened, upon which the widow was alone entitled to draw, but the bank was not to honour her cheques unless they were initialled by the two friends. The friends were aware that the carrying on of the business by the widow was a breach of trust. The friends received no remuneration, and there was no suggestion of fraud made against them. They paid many bills with cheques drawn by the widow and initialled by them. Ultimately the business proved a failure, the widow executed an assignment in favour of creditors, and the estate was distributed in payment of the trade debts. The children thereupon brought an action against the two friends, claiming a declaration that they were liable to repay all the money paid to or through them otherwise than for the purposes directed by the testator's wiU, and that each of them was liable for all the estate of the testator employed in carrying on the business, with profits or interest at 5 per cent. : — Held, that the two friends were not liable, as none of the trust property had ever been in their possession or under their control. Even where a stranger in the ordinary way of business knowingly receives trust money he is not liable to account unless at the time he received it he not merely knew that Constructive Trusts. 231 it was trust money but had reason to believe that it was being transferred to him in breach of trust. Thus, in Thomson v. Clydesdale Bank, Limited, [1893] A. C. 282, A., a trustee, sent certain trust shares to B., a stockbroker, to be sold. B. sold the stock and paid the proceeds into his bank. At the time he paid in the pro- ceeds his account was largely overdrawn. The bankers knew that he was a stockbroker, and that this money, being the proceeds of the sale of shares, was probably money belonging to his clients. They nevertheless appro- priated it to the liquidation of his overdraft. Subsequently B. became bankrupt. A. claimed that the bank was a constructive trustee of the proceeds of the sale of the shares : — Held, that it was not. Though it had reason to believe that the money paid in was clients' money, it had no reason to believe that B. was not entitled to deal with it as he had done. The same rule applies to the payment of a solicitor's costs out of trust funds (Be Blundell, Blundell v. Blundell (1889), 40 Ch. D. 370), and to auctioneers, stockbrokers, and all others having dealings with trustees (ibid.). Once a stranger to the trust receives trust property with notice of the trust, he is liable for it even when through misinterpretation of the terms of the trust he was unaware in fact that the property was trust property. Thus, in Be Champion, Dudley v. Champion, [1893] 1 Ch. 101, a testator left a cottage and the land occupied with it in trust for A., his wife, for life, and then to his children equally. After execution of his will he bought two other fields and occupied these with the cottage. On his death A. and B., the testator's heir-at-law, approached C, a solicitor, as to a mortgage upon the two fields. C. was advised by counsel that these two fields were not com- prised in the trust devise, and that they belonged to the testator's heir-at-law, B., subject to A.'s dower, C. advanced money on mortgage of the fields. Subsequently he sold them as mortgagee. The children of the testator then claimed the purchase money : — Held, that on a true construction of the will the two fields did pass under the 232 A Digest of Equity. trust devise, and that 0. was a constructive trustee of the purchase money for the cestuis que trust under the will (c/. Jared v. Clements, [1903] 1 Ch. 429, cited supra, p. 30 ; and see Soar v. Ashwell, [1893] 2 Q. B. 390). Where the stranger receives the trust money with notice of the trust, but in his dealings with it acts merely as the agent and on the instructions of the trustee, it seems that he is liable only where he deals with it on such instruc- tions as on the face of them must result in a breach of trust (see Mara v. Browne, [1896] 1 Ch. 199). Where, however, the stranger does not receive the trust property, whether he acts as agent or not, he is not liable for breach of trust, even when he advised the breach, unless the breach was fraudulent. Thus, in Stokes v. Prance, [1898] 1 Ch. 212, a solicitor advised trustees to invest trust money on a contributory mortgage — i.e., a mortgage in which different persons contribute shares of the mortgage money — ^which was plainly a breach of trust : — Held, that though this might render him liable for neghgence, it did not make him a constructive trustee. The whole effect of these cases may be summed up in one sentence of the judgment of Lord Selboene, C, in Barnes V. Addy (1874), L. E. 9 Ch. 244 ; Stra. L. C, p. 194 : " Strangers are not to be made constructive trustees merely because they act as the agents of trustees in trans- actions within their legal powers, transactions perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees." In the same way a retired trustee is not liable for a breach of trust committed by the remaining or new trustees unless he retired with the intention of enabling them to commit it {Head v. Gould, [1898] 2 Ch. 250). And see In re Munton, [1927] 1 Ch. 262. Constructive Trusts. 233 Article 89. A Trustee or Agent is a Constructive Trustee of Improper Profits. Where a trustee or any agent makes a per- sonal benefit or profit in connection with his management of the trust property or the pecu- niary affairs of his principal in a way that tends to put his interests in conflict with his duties as trustee or agent, he is a constructive trustee of such profit for his cestui que trust or prin- cipal, even though he can show that the interests of his cestui que trust or principal did not in fact suffer through the transaction. The leading case on this subject, as far as declared trusts are concerned, is Keech v. Sandford (1726), Sel. Ca. Ch. 61. There A. was trustee of a certain leasehold for an infant cestui que trust. Towards the expiration of the lease the trustee applied for a renewal on behalf of the infant, which the freeholder refused on the ground that the infant could not enter into the usual covenants. The trustee then applied for and was granted a renewal on his own account -.--Held, that he was a constructive trustee for the infant. Formerly it was thought that this principle extended not merely to trustees but to every one taking an interest in the settled property, such as the tenant for life {James v. Dean (1808), 15 Ves. 236). But the law has now been reconsidered in In re Biss, Biss v. Biss, [1903] 2 Ch. 40. There A., having a shop held from year to year, died intestate. B., his widow, took out administration. There were three children, one being an infant, and C, an adult child, continued with B. to carry on the business. B. applied to the landlord for a new lease on behalf of A.'s estate. The landlord refused. C. then apphed on his own behalf, and the landlord granted the lease. B. then claimed that C. should be declared a trustee of the new 234 A Digest of Equity. lease for her as administratrix of A.'s estate. The court rejected the claim. There is a constructive trust of the new lease only where the person obtaining the renewal occupied a fiduciary position, such as declared or pre- sumptive trustee, executor, administrator, or partner, or mortgagor or mortgagee of the old lease. Where he occupied no such position but had merely a partial interest in the old lease, if he obtains a renewal he holds it for his own benefit, unless (a) the lease was renewable by custom or covenant ; or (b) he surrendered a remainder of the old lease when he obtained the new one ; or (c) he used some fraud or concealment in obtaining the new lease (jper EoMEE, L.J., ibid. ; and see Hunter v. Allen, [1907] 1 I. E. 212, and cf. In re Turpin and Ahern's Contract, [1905] 1 I. E. 85). Trustees themselves are not prohibited from purchasing the freehold reversion on a lease held by them on trust unless the lease is renewable by custom, covenant, or practice {Bevan v. Webb, [1905] 1 Ch. 620). As to a trustee making personal profit out of his trust, we have already seen that this is contrary to his duty as trustee (Be Thorpe, Vipont v. Badcliffe, [1891] 2 Ch. 360). As regards profits made by agents who are not trustees in the ordinary sense, such as persons buying or selling for their principal, the most common of these are what are called secret commissions or bribes. Of these the agent is constructive trustee to this extent, that the principal is entitled to recover them from the agent {Lister and Company v. Stubbs (1890), 45 Ch. D. 1). But where the agent's acts are severable and he has made legitimate profits on some and illegitimate profits on others, the principal can treat as profits to which he is entitled only the profits made improperly {Nitedals Taendstikfabrick v. Brustu, [1906] 2 Ch. 671). Constructive Trusts. 235 Article 90. Principles Applicable to Constructive Trusts. The principles applicable to declared simple trusts apply equally to constructive trusts aris- ing under the two preceding Articles, subject to this limitation : When a profit received by a trustee or agent comes not directly out of or through the use of the trust property itself, but from a source outside the trust property, though he receives it in his capacity as trustee or agent, such profit is only an equitable debt due by him to the cestui que trust. As has already been pointed out (see supra, Article 75 and note), until the Trustee Act, 1888, the Statutes of Limitation did not run as to express trusts, but they did run as to " constructive " trusts. In the above Article I have attempted to distinguish where the express trust in this sense ends and the constructive trust in this sense begins. When by trading with or otherwise dealing with the trust property a trustee makes a personal profit out of it, this profit is part of the trust estate. It can be followed like other trust money as long as it can be distinguished. But when a profit is made which does not come out of the trust estate, either directly or by the use of the latter, then such profit is no part of the trust estate. Thus, if A., the director of a company, receives a bribe from a debtor of the company in order to ir!,duce him to use his influence to secure the debtor favourable terms of settle- ment, the bribe is not the property of the company until at any rate the court declares that it is {Metropolitan Bank v. Heiron (1880), 5 Ex. D. 319). It is merely an equitable debt due from him to the company, and the Statutes of Limitation commence to run in respect of it from the time the company has notice that he received 236 A Digest of Equity. the bribe (ibid.). Again, if an agent receives secret commission on the purchases he makes on behalf of his principal and invests it in securities which can easily be distinguished from his other property, the principal is not entitled to follow the secret commission into such securities {Lister and Company v. Stubhs (1890), 45 Ch. D. 1). All that he has a right to do is to sue the agent for the value of such commissions. The relation is really that of equitable debtor and creditor, not that of trustee and cestui que trust. Where an agent makes profit out of his dealings with his principal's property, it is submitted that such profit is ah initio the property of the principal, and, just like other trust property, can be followed into investments (see Be HalleWs Estate (1879), 13 Ch. D. 696 ; Stra. L. C. 149). Where the relations between the principal and agent are purely contractual, as where an agent is retained to sell the principal's goods, receiving the purchase money and from time to time settling accounts with the principal, then the moneys he receives are his own, and he is simply the debtor of the principal for their amount. It has already been pointed out that a stranger who innocently obtains the trust funds is only an equitable debtor to the extent of their value, at any rate when they are no longer capable of being traced. BOOK I. EQUITABLE RIGHTS. B. SECOND DIVISION OF EQUITABLE RIGHTS. EQUITIES TO PROMOTE FAIR DEALING. SUMMARY INTRODUCTION. PAGE Abticlb 91. Principles governing the subject-matter of the „ division - 240 SECTION I. Conversion. Abticle 92. Modes in which conversion arises 243 „ 93. Times at which conversion arises - 246 „ 94. Devolution on failure of purposes of conversion 250 „ 95. Devolution on actual conversion, proper and improper - 255 „ 96. Election to take converted property in its actual state - 256 SECTION II. Election, Abticle 97. The doctrine of election 258 „ 98. How far doctrine is based on intention - 262 SECTION III. Performance, Satisfaction, and Ademption. Article 99. Definitions of performance, satisfaction, and ademption 265 ,, 100. Presumption as to performance - 267 101. Satisfaction of debts - 270 „ 102. Ademption of legacies - 272 103. Definition of " portion " - 274 ,, 104. Satisfaction and ademption of portions - 277 „ 105. Admission of parol evidence - - 281 SECTION IV. Mistake and Misrepresentation. Aeticlb 106. Mistake and misrepresentation ... 283 „ 107. Mistakes and misrepresentations of law - 287 „ 108. Fundamental and incidental mistakes of fact - 289 Summary. 239 PAGE Aeticle 109. Negative and positive misrepresentations of fact 296 „ 110. What amounts to misrepresentation in law - 297 „ 111. Where non-disclosure constitutes negative misrepresentation - - 299 „ 112. Effect of innocent misrepresentation - - 305 „ 113. Effect of fraudulent misrepresentation - - 306 „ 114. Responsibility for misrepresentations of an agent 306 SECTION V. Fraud and Undue Influence. Aeticle 115. Fraud in law - - - - - 309 „ 116. Fraud in equity - - - - - 312 „ 117. Undue influence .... 316 ( 240 ) INTRODUCTION Article 91. Principles governing tlie Subject- matter of the Division. Of the subjects dealt with in this division of equitable rights, those discussed in the first three sections were within the exclusive jiu-is- diction of equity, and therefore are enforceable only by equitable remedies, and the grant of such remedies is controlled solely by equitable principles, but those discussed in the last two sections were largely within the concurrent jurisdiction, and, so far as they were within it, the grant of equitable remedies is controlled by the legal principles controlling the grant of the corresponding legal remedies. The doctrines of conversion, election, performance, satisfaction and ademption are purely equitable. This, however, is not so with misrepresentation and fraud. For a long time after the decision of the House of Lords in Deny v. Peek (1889), 14 A. C. 337, it was the custom to hold that the effect of that decision was to put an end to the distinction between fraud and misrepresentation in law and fraud and misrepresentation in equity. The real effect of it, however, was to put an end to what used to be called constructive fraud. What was held in Deny V. Peek (supra) was that when what was in fact a common law action of deceit was brought the defendant could not Equities to Promote Fair Dealing. 241 be held liable in equity as if he had been guilty of fraud at common law when in truth he was not guilty. In other words the Lords said, just as they did again in Colls v. Home and Colonial Stores, [1904] A. 0. 179, that where an equitable remedy is sought for a common law wrong that remedy cannot be granted till it is proved that a common law wrong has been committed. The Court of Chancery had forgotten this principle as regards common law fraud just as it had forgotten it as regards common law obstruction of ancient lights. The Chancery judges, deciding on both the law and the facts of the cases before them, had failed to discriminate : because they decided the law on precedent they not infrequently proceeded to decide the facts on precedent too. When a charge of fraud was made, instead of decid- ing each case on its own merits, they adopted the practice of deciding it by reference to previous decisions. In other words they would say, " In this case I do not think the defendant ever intended to deceive the plaintiff ; but we are bound by previous decisions to hold that he is as liable as if he actually had intended to do so." This they called constructive fraud. All that Derry v. Peek (supra) decided was that no such thing as constructive fraud was known to the common law ; and that accordingly in an action in effect one of deceit at common law no equitable remedy could be given for it. That case, however, did not decide that there was no such thing as fraud not recognised as such by the common law, but for which equity, acting within its exclusive jurisdiction, would grant an equitable remedy. To con- stitute fraud at common law there must be the wicked mind ; but in equity there has never been keenness in distinguishing between such fraud and mere opportunity for fraud or mere negligence. Thus where a party's interest conflicts with his duty, as in the case of a trustee purchasing trust property from himself, equity will set aside the transaction without evidence of moral fraud. Again, where in the interest of third persons a party to a transaction should take certain precautions, if that party 242 A Digest of Equity, through neghgence fails to take such precautions equity •will treat him as if he had fraudulently refused to take precautions. On this the whole doctrine of constructive notice is based. Again, where fiduciary relations exist between the parties equity imposes on the party in whom trust is placed a duty to take care of the interests of the other party, and any failure to take such care makes him liable in equity as if he were fraudulently negUgent. Thus a solicitor is under a fiduciary duty to be careful in advising his client ; and if he is negligent, he is liable in equity as if he had been fraudulent (Nodon v. Ashburton, [1914] A. C. 932). And where one party is in a position to take advantage of another in entering into a transaction equity insists that he shall make full disclosure of aU facts within his knowledge which would influence the weaker party's mind ; and if he fails to do so it will set the trans- action aside. It is on this principle that the rules as to trustees purchasing from cestuis que trust, contracts uherrimcB fidei, etc. (see injra, Article 111), are based. In none of these cases in order to render the transaction invalid is it necessary to prove moral fraud ; yet it would seem that to this day any of them may be pleaded as fraud in equity (see Nodon v. Ashburton, supra). It is unfortunate perhaps that what is in fact not fraud should be so called in equity ; but this practice no doubt arose, as Mr. Ashbumer points out, owing to equity at one time disclaiming all right of affecting a legal title except in cases of trust, fraud or accident ; and so being forced, when it wished to give an equitable title precedence of the legal title in cases arising outside trust and accident, to describe the ground of its interference as fraud. Under the head then of fraud and misrepresentation a great number of matters might be discussed. This, however, is not done here for two reasons. The first is, that many of them have been already dealt with in treating of Notice and Trusts ; another, that in practice many more of them are now not treated as cases of fraud. All that is discussed under the head of " Fraud in Equity " are those cases which approximate to fraud at common law. ( 243 ) Section I. Conversion. SUMMARY. PAGE Abticlb 92. Modes in which conversion arises ... 243 „ 93. Times at which conversion arises - • 246 „ 94. Devolution on failure of purposes of conversion 250 „ 95. Devolution on actual conversion, proper and improper ....... 255 „ 96. Election to take converted property in its actual state 256 Article 92. Modes in which Conversion arises. Legal realty may in equity become per- sonalty or legal personalty may in equity become realty : (i) Where a trust instrument imperatively directs trust realty to be sold or trust personalty to be invested in the pur- chase of land ; (ii) Where a binding contract is made for the sale of land ; (iii) Where an order of the court is rightfully made for the sale of land ; or (iv) Where land is made subject to a partner- ship agreement. Where, though conversion has taken place in equity, land has not been in fact changed into money, or money has not been in fact changed into land, the conversion will henceforth be called equitable ; where land has been in fact 244 A Digest of Equity. changed into money, or money has been in fact changed into land, the conversion will hence- forth be called actual conversion. [The doctrine of equitable conversion which has already been stated and discussed (supra, p. 35) has for the future lost most of its importance in England through recent legislation which in no way specifically refers to it. The doctrine of conversion derived its importance from two other doctrines. The first was that on the death of an owner of property intestate his realty vested in his heir and his personal went for the benefit of his next of kin. Now heirship is abolished and realty and personalty on the death intestate of the owner go beneficially among his statutory next of hin. The second was that personalty could not at common law be divided up into estates, heritable or otherunse, while equitable interest in personalty could. This principle has now been abolished and estates can be created in personalty as freely as in realty (sect 130, L. of P. Act, 1925). How far, if at all, these changes have affected the rules as to equitable conversion especially in connection with such decisions as that in Lawes and Bennett (infra) is very hard to say.] It should be noted that equitable conversion extends to more than the notional changing of realty into personalty or of personalty into realty. Thus in the case of wasting and reversionary securities, one kind of personalty — ^leaseholds or future interests in personalty — is notionally changed into another kind of personalty, viz., trust securities. That conversion is important, since it affects the amount of income which the persons entitled to the property are respectively to receive. But most other conversions which have not the effect of changing realty into personalty or personalty into realty are of little importance, since they do not affect the general characteristics of the property, and especially that very im- portant characteristic, its mode of devolution on the death of the person entitled to it. It is convenient, then, to con- fine the doctrine of conversion to' notional changes of " land into money or money into land," as the doctrine is Conversion. 245 briefly and popularly stated (see per Bowen, L.J., in Attorney-General v. Huhhuck (1884), 13 Q. B. D. 275, at p. 289). The examples given in the note to Article 14 are ex- amples of conversions arising through express directions in trust instruments and through contracts for the sale of freeholds. Nothing but an imperative direction in a trust instrument to convert will suffice to attach the attributes of realty to personalty or vice versa [In re Walker, [1908] 2 Oh. 705). The doctrine depends on the maxim that " equity regards that as done which ought to have been done " ; and so there is no conversion unless there is a duty to convert. But such an imperative direction may be sometimes implied at any rate in executory trusts. Thus, if in an executory trust the trustees were directed to have personalty settled on the settlor's eldest son for life and then on his first and younger sons in tail, with a gift over in fee simple in default of sons, it might fairly be assumed that this implied that the settlor intended the trust funds to be invested in land (see Earldom v. Saunders (1754), 1 Amb. 240 ; and cf. Atwell v. Atwell (1871), L. E. 13 Eq. 23). In the case of an executed trust, however, no imperative direction can be implied and so no conversion can take place even where it is clear that the settlor intended realty to be treated as personalty or vice versa. Thus a direction that money is to be regarded as capital money arising under the Settled Land Acts (In re Aspinall's Settlement, [1916] 1 Ch. 15), or that realty is to be distri- buted according to the Statutes of Distribution (In re Hughes, [1916] 1 Ch. 493), or that personalty is to go to legatees " or their heirs " (In re Whitehead, [1920] 1 Ch. 298) effects no conversion. But where there is an impera- tive trust to convert, then the fact that the trustees have a discretion to postpone conversion or even that they cannot convert without the consent of the life tenant does not prevent the trust property being converted in equity from the moment the trust to convert arises {In re Ffennell's Settlement, [1918] 1 Ch. 91). The reason why partnership agreements convert realty is this, that, where there is no provision to the contrary in 246 A Digest of Equity. the partnership instrument, a partner is not entitled on dissolution of the partnership to any specific part of the partnership property, but merely to have the partnership property sold and to receive his share of the proceeds. The consequence is that equity regards partnership realty as in effect held by the partners on an implied or construc- tive trust for sale (Waterer v. Waterer (1873), L. E. 15 Eq. 402). Article 93. Times at which Conversion arises. Equitable conversions arising under trusts to convert take place from the time the trust instruments came into operation ; those arising under contracts for the sale of land, from the date when the contract became effective in equity ; those arising under an order of sale made by the court, from the time the order was made ; and those arising under partnership agreements, from the time the land became substantially involved in the partnership business. As regards trusts for conversion, whether these will cause a conversion in equity will depend upon the state of affairs when the time for the trust to convert comes into operation. If the state of affairs then necessitates a conversion the conversion will relate back to the time when the trust instrument came into operation. Now it is to be remembered that deeds operate from delivery, while wills operate from the death of the testator. Accordingly, where the trust is declared by deed, then, on failure of the purposes of the trust, the trust property results to the settlor. If he is dead his heir, next of kin, or residuary devisee or legatee who claims to be entitled to it must claim through him. On the other hand, where the trust is declared by will, then, Conversion. 247 on failure of the purposes of the trust, the trust property- results, not to the settlor, but directly to the settlor's heir, next of kin, or residuary devisee or legatee, as the case may be. The importance of this distinction will appear when we come to consider the devolution of the resulting interests (see next Article). As regards conversions arising out of contracts for the sale of land, most of the cases turn on contracts by which options are given to purchase which are not exercised until after the death of the vendor. The effect of the decisions is this : the general rule is, that as between the heir and the personal representative of the deceased vendor, whether the vendor died testate or intestate {In re Isaacs, Isaacs v. Beginall, [1894] 3 Ch. 506), the conversion takes place from the time a binding contract was made by him to sell the estate. Where the contract only creates an option to purchase, then no conversion takes place until the option is exercised. Once, however, that option is exercised it takes effect by virtue of the contract which created it, and the contract becomes a binding con- tract for the sale of the land, and operates to convert it into personalty as between the late owner's real and per- sonal representatives (see In re Marley, [1915] 2 Ch. 264) from the date of such contract. This rule, which is usually called the rule in Lawes v. Bennett (1785), 1 Cox, 167, has long been held to apply as between devisees and legatees of the vendor, except perhaps when the devise of the pro- perty over which the option is given was specific and the will was made after the option was given {In re Pyle, Pyle v. PyU, [1895] 1 Ch. 724 ; Sm, 722). Eecently it has been held that it applies also as between the deceased vendor's heir and administrator. In In re Isaacs, Isaacs v. Beginall {supra), A. being owner in fee simple of a house, leased it in 1880 to B. for A.'s life. The lease contained a provision that for six months after A.'s death B. should have the option of purchasing the house at the price of £750. A. died intestate on January 9th, 1894, and on April 25th, 1894, B. exercised his option to purchase. The question in the 248 A Digest of Equity. action was whether the £750 paid by B. belonged to the plaintiff, who was A.'s heir, or to the defendant, who was his administrator : — Held, that it belonged to the latter, as the equitable conversion of the freehold house into money must on the exercise of B.'s option be considered to have taken place, not on April 25th, 1894, but in 1880, when the contract was made which created the option. These decisions were before Woodjall v. Clifton, [1905] 2 Ch. 257. In that and in the subsequent decision of Worthing Corporation v. Heather, [1906] 2 Ch. 532, it was held (i) that options to purchase given for con- sideration do not run with the land .; (ii) that where they are not limited to a period within a life or lives in being and twenty-one years they are void for remoteness ; but (iii) that they constitute even when void for remoteness a good personal contract at common law between the parties. How this will affect the doctrine of conversion by contract as above stated is not yet settled by authority. It is submitted that an option, void as creating a per- petuity, will not operate to convert, since, though good as a personal contract, it is not binding upon the land either at law or in equity. The whole of these decisions as to conversion by option are contrary to principle. A power to sell converts only from the time it is exercised, not from the time the trust creating it arose (In re Dyson, [1910] 1 Ch. 750). Why then an option to purchase should have a different effect is hard to say. An order of sale rightfully made by the court causes an equitable conversion from the date of the order {In re Dodson, [1908] 2 Ch. 638). As regards conversions of land into personalty arising out of partnership agreements, the law as to when property becomes partnership property is now stated in sect. 20 (1) of the Partnership Act, 1890 : " All property, and rights and interests in property, originally brought into the partnership stock or acquired, whether by purchase or otherwise, on account of the firm, or for the Conversion. 249 purposes and in the course of the partnership business, are called in this Act partnership property, and must be held and applied by the partners exclusively for the purposes of the partnership, and in accordance with the partnership agreement." Where the partnership agreement defines what the partnership property is no difficulty arises. But where the agreement does not so define the partnership property, questions of much difficulty arise as to whether land has been so used or acquired for partnership pur- poses as to make it partnership property, and therefore as between the partners themselves and as between the real and personal representatives of a deceased partner, personal property (sect. 22, Partnership Act, 1890). The phrase " substantially involved in the partnership " is one of Lord Eldon's which was adopted by Jambs, L. J., in the leading case of Waterer v. Waterer (1873), L. E. 15 Eq. 402. Its application is the difficulty. The effect of the cases is thus summed up by Mr. Underbill (Law of Partnership, p. 90) : " Speaking broadly, when we find property bought with partnership money (sect. 21, Partnership Act, 1890) or brought into the common stock, and credited in the books as part of the capital of one of the partners {Bobinson v. Ashton (1875), L. E. 20 Eq. 25), or otherwise treated by the partners as part or parcel of the partnership property {Waterer v. Waterer, supra), the inference is that it is part of the partnership property, and none the less so because the property happens to have been conveyed to or taken in the name of one only of the partners {Smith v. Smith (1800), 5 Ves. 188), or that it was originally devised to the partners as co-owners " (c/. per North, J., Be Wilson, Wilson v. Holloway, [1893] 2 Ch. 340, at p. 343). When freehold land becomes partnership property, then on the death of one of the partners the legal estate will " devolve according to the nature and tenure thereof and the general rules of law thereto applicable, but in trust, so far as necessary, for the persons beneficially interested in the land under this section " (sect. 20 (2), Partnership Act, 1890). 250 A Digest of Equity. Thus, if A., B., and C. are partners, and Blaokacre, which is a fee simple and partnership property, is vested in them jointly, on the death of A., leaving B. and C. surviving, the whole legal estate will survive to B. and C. But B. and C. will be trustees of Blaokacre as regards A.'s personal representatives to the extent of A.'s share in the partnership assets. Aeticle 94. Devolution on Failure of Purposes of Conversion. (1) Where the equitable conversion arises under a trust to convert, if the purposes for which the actual conversion was directed wholly or partially fail, the property directed to be converted, whether actually converted or not, results whoUy or so far as the purposes have failed, to the persons who would have taken it on failure of such purposes if no conversion had been directed. (2) If such persons are dead when such failure takes place, then whether the property has been actually converted or not, as between the real and personal representatives of such deceased persons the property wiU result as follows : If the failure of the purposes is total, it wiU result to those who would have taken if there had been no direction to convert in the trust instru- ment ; if the faUure is partial, it will result to those who would have taken if the trust property had always in fact been of the nature into which it was directed to be converted by the trust instrument. Conversion. 251 Paragraph (1). As pointed out already, when the trust instrument is a deed (which operates from its execution), so far as the pur- poses fail, the trust property results to, or rather remains in, the settlor. If he is living, no question arises. If he is dead, his representatives come within paragraph (2). When the trust instrument, however, is a will (which operates from the death of the testator), there is no resulting trust to the testator since he is dead ; the resulting trust is to his representatives themselves. The question then arises, when conversion of realty into personalty or of personalty into realty is directed by the will : Who, on failure of the purposes for which the conversion is directed, takes the property to be converted ? The answer is just the same : the persons who would be entitled to it if no conversion had been directed. In other words, in so far as the trust property consists of realty it goes to the heir, and in so far as it consists of personalty it goes to the next of kin. When the will contains a residuary clause difficulties often arise as to whether a conversion is directed for a special object only or for all the purposes of the will. If the court holds that the con- version is for all the purposes of the will, of course a failure of any special purpose will not prevent complete conversion ; and so land directed to be sold will go on failure of the special object to the residuary legatee and vice versa. This principle was finally decided in the leading case of Ackroyd v. Smithson (1780), 1 Bro. 0. C. 503. There a testator gave legacies to A., B., 0., and D., and then directed his real and personal property to be sold, and his debts and other legacies to be paid out of the proceeds. The residue of the proceeds he directed to be divided between A., B., C, and D. in the proportion of their legacies. A. and B. predeceased the testator, and their shares and legacies lapsed. The next of kin of the testator thereupon claimed these as personal estate -.—Held, that so far a,s the residue undisposed of by the will was 252 A Digest of Equity. constituted of the produce of realty, it belonged to the testator's heir-at-law. The conversion of it into personalty was only for the purposes of the will, and in so far as the purposes of the will failed the heir's right to the realty was not displaced. The only mode in which that right could be displaced was by disposing effectually of the whole realty. Paragraph (2). Now, just as what a settlor by deed does not effectually dispose of by the deed remains in him, so what a testator does not effectually dispose of by his will vests at once in his heir or next of kin, and does not wait to vest until events show that he has not effectually disposed of it. Thus, for example, if a testator leaves Blackacre to A. for life (A. being a bachelor), and on A.'s death to A.'s eldest son in fee simple, in case A. never has an eldest son, then the testator's heir at law was entitled in right to the fee simple in remainder, not from A.'s death, but from the testator's death. Accordingly, if the testator's heir dies before A., the person who becomes on A.'s death entitled to Blackacre must claim it as the representative of the heir of the testator and not of his own right. The same rule applies to the rights of the next of kin, and of the residuary devisee and legatee (see Curteis v. Wormald, cited below). This being so, when the failure of the purposes for which the conversion has been directed takes place after the death of the settlor, in case the trust is created by deed, or after the death of the heir, next of kin, or residuary devisee or legatee, as the case may be, in case the trust is created by will, any claim made for the trust funds not needed for these purposes must always be made by the legal representative of one of these persons. This then raises the further question. Which of these persons' representatives — the real or the personal representative — is entitled ? It is settled law that where the purposes of the conversion have totally failed, then, as no actual con- version can be necessary to carry out such purposes, the direction is a nulhty ; and accordingly whether actual conversion has taken place or not, there is no conversion in equity, and the representatives entitled to take are Conversion. 253 those who would have taken had there never been any direction to convert {Smith v. Claxton (1819), 4 Madd. 492). This is commonly put that, when the purposes wholly fail, land directed to be sold results back as land ; and money directed to be invested in land results back as money ; no matter what its actual condition may be at the time it results back. On the other hand, if the purposes have only partially failed, then an actual conversion is necessary to carry out such purposes as have not failed, and accord- ingly, whether actual conversion has taken place or not, there is a conversion in equity, and the representatives entitled to take are those who would have taken had the property been, from the date of the direction to convert, of the nature into which it was directed to be converted {Be Bicherson, Scales v. Heyhoe, [1892] 1 Ch. 379). This is commonly put that, when the purposes only partially fail, land directed to be sold results back as money ; and money directed to be invested in land results back as land ; no matter what its actual condition may be at the time it results back. Thus, in Curteis v. Wormald (1878), 10 Ch. D. 172, a testator by his will gave life estates to A., B., and C. in his freehold, with remainders to their sons in fee tail with a remainder in fee simple to D. He then directed his personal estate to be invested in the purchase of freehold lands, and these to be settled to the same uses as he had declared of his own freeholds. In pursuance of this direction the testator's trustees had invested his residuary personalty in land. D. predeceased the testator. A., B., and C. survived him, but all died without issue. At the testator's death X. and Y. were his next of kin. Both X. and Y. had died during the lives of A., B., and C, and P. and G. were now their real representatives, and R. and S. their personal representatives. The question arose whether P. and G. or E. and S. were entitled to the land which now represented the testator's personal estate : — Held, that the testator's residuary personal estate had vested in X. and Y. as the testator's next of kin at his death, but that it had vested in them as real estate, and had devolved on P. and G. as their real representatives. 254 A Digest of Equity, The case of Be Bicherson, Scales v. Heyhoe, [1892] 1 Ch. 379, is an exact counterpart of Curteis v. Wormald, supra. Land there was directed to be sold, and on partial failure of the purposes for which conversion was directed, it was held that the land unsold had vested in the settlor's heir, not as land, but as money. Total failure of the trusts for which conversion is directed arises most frequently under wills, where it is not unusual for all the beneficiaries under the trusts to predecease the testator. It seldom occurs in the case of deeds ; and this and the fact that, when it does occur in the case of deeds, the trust property results to the settlor, has led many writers to say that a deed creating trusts for conversion converts from its execution whether the purposes of the trusts fail or not. But that is not so : they only convert from the time the duty to convert arises, and if such duty never arises, do not convert at all. Thus in In re Grimthorpe, [1908] 2 Ch. 675, a settlor by deed settled land upon trust after the death of himself and his wife to sell and divide the proceeds among their children. There were no children : — Held, that the trust for con- version having totally failed no duty to convert had ever arisen ; and that consequently the land resulted back to the settlor as land, and passed under a general devise of his lands (c/. In re FJennelVs Settlement, [1918] 1 Ch. 91, where the trust was to convert and hold the proceeds for the settlor for life and where therefore the duty to convert arose from the moment the deed came into operation). If in fact in the end no duty to convert arises, the circum- stance that for a considerable time after the death of the person who would take if there were no conversion it was uncertain whether it should arise or not, in no way prevents the devolution of the property as unconverted {In re Hopkinson, [1922] 1 Ch. 65). Conversion. 255 Article 95. Devolution on Actual Conversion, proper and improper. (1) Where trust property is actually con- verted properly, then whether the owner is under disabiUty or not, on his death it will devolve according to its nature at that time. (2) Where it has been actually converted improperly, it will devolve as it would have done had there been no actual conversion. Paragraph (1). The leading case is Steed v. Preece (1878), 18 Eq. 192. There freeholds were conveyed to trustees to hold in trust for A. and B. as tenants in common in tail with cross remainders. In a suit for the administration of the trust the court ordered a sale and the payment into court of the purchase money. Half of this was paid to A., who was of full age, and the other half was carried to a separate account of B., who was still an infant. B. died unmarried before attaining twenty-one. A. thereupon executed a disentaihng deed and claimed B.'s share of the purchase money : — Held, that as the order of the court had been consented to by A., and also as it still stood unreversed, it was a good order, and, this being so, the freeholds were properly converted and were now per- sonalty, and that they consequently devolved on B.'s personal representative. Jessel, M.E., said : " All that Achroyd v. Smithson, supra, decided was, that a con- version directed by a testator is a conversion only for the purposes of the will, and that all that is not wanted for these purposes must go to the person who would have been entitled but for the will. It does not decide that if the court or a trustee sell more than is necessary there is an equity to reconvert the surplus for the benefit of the heir at law of the persons entitled at the time of the 256 A Digest of Equity. sale." This rule has now been approved by the Court of Appeal in Burgess v. Booth, [1908] 2 Ch. 648 ; but it does not apply to sales of infant's property in a partition action where neither order or sale effects any conversion (Hopkinson v. Bichardson, [1913] 1 Ch. 284), or to a sale of a lunatic's property under the Lunacy Act, 1890 {In re Alston, [1917] 2 Ch. 226). It is the practice of the court, however, on sales of property of persons under disability to make such order as may be necessary to prevent the conversion from alter- ing the devolution of the property during disability (Seton, 7th ed., p. 979 ; and see Herbert v. Herbert, [1912] 2 Ch. 268, and In re Searle, [1912] 2 Ch. 365). As stated in the Article, the rule in Steed v. Preece, supra, applies to sales by trustees or mortgagees where such sales were in the proper execution of their powers {In re Grange, [1907] 1 Ch. 813). Paragraph (2). This is simply the rule that the improper act of trustees cannot alter in equity the nature of the trust property. If they improperly sell land or improperly invest in land, the cestui que trust and those who claim through him can either reprobate or approbate the transaction. Article 96. Election to take Converted Property in its actual State. Where a person is entitled absolutely to equitably converted property he may elect to take it as converted or in its actual state. His election to take it in its actual state may be shown by his having in fact accepted a transfer Conversion. 257 of it in that state or by conduct indicating that he does not wish to have its actual state altered. The party who alleges such election is under the burden of proving it. When the cestui que trust takes the trust property in its actual state from the trustees it is commonly said to be " at home," and however short a period it may be at home amounts to an acceptance of it in its actual condition {Chandler v. Pocock (1881), 16 Ch. D. 648). As for election to take it in its actual condition other- wise than by accepting it from the trustees, all that is necessary is for the person or persons absolutely entitled to show in any way their intention to take it in that condition {In re Grimthorpe, [1908] 1 Ch. 668 ; approved by C. of App., 2 Ch. 675). But where a person who is entitled absolutely to realty converted in equity into personalty merely leaves by his will all his realty to a devisee, that is not sufficient to show that he had elected to take the converted property as realty {In re Ffennell's Settlement, [1918] 1 Ch. 91). If the absolute title is vested in more than one person, all interested must join in the election, but .they need not be aware that the effect of their election will be to alter the course of devolution of the trust property {Harcourt v. Seymour (1851), 2 Sim. (n.s.) 12). A person absolutely entitled in contingency may elect, and when the contingency happens, the pro- perty will be bound by his election {Be Duke of Cleveland's Settled Estates, [1893] 3 Ch. 244 ; cf. Be Douglas and Powell's Contract, [1902] 2 Ch. 296). And if the person entitled to elect dealt with the property in its actual state for a considerable time as if he did not desire to have its nature altered, this will be evidence of an election to take it in that state {Be Gordon (1877), 6 Ch. D. 531). ( 258 ) Section II. Election. SUMMAEY. PAGE Abtiolb 97. The doctrine of election - - , - - - 258 ,, 98. How far doctrine is based on intention - 262 Article 97. The Doctrine of Election. Where by the same instrument a gift of property is made to a donee and a gift of the donee's own property is made to a third person, the court will put the donee to his election either to take the gift made to him and transfer his own property to the third person or to retain his own property and out of the property given to him make compensation for it to the third person ; Provided : (i) That the property given to the donee is property of which the donor, and (ii) That the property of the donee given to the third person is property of which the donee, were each entitled freely to dispose. The principle here stated is what is known as the eqmtahle doctrine of election. The ground upon which it is based is thus explained by Chitty, J., in the leading case of Be Lord Chesham, Cavendish v. Dacre (1886), 31 Ch. D. 466, at p. 473 : " The principle on which the doctrine of election is based is that a man shall not be Election. 259 allowed to approbate and reprobate ; that if he approbates he shall do all in his power to confirm the instrument which he approbates. ... If a man approbates, his obligation is confined to his adopting the instrument as a whole and abandoning every right inconsistent with it." If he reprobates, his obligation is confined to making compensation out of the gift made by the instrument to him to the person to whom his property is given by the instrument. It follows from this that in order to give rise to election there must in the first place be property of another person given to the donee out of which he can make compensation in case he reprobates the instrument, and in the second place, property of the donee, which he can transfer in case he approbates the instrument, must be given to a third person (see In re Booth, Booth V. BoUnson, [1906] 2 Ch. 321). Taking this general statement of the law, it will be seen that the principle of compensation, in case the donee reprobates or takes against the instrument, distinguishes equitable election from the election a cestui que trust is said to make when he adopts or repudiates an unauthorised investment. There if the cestui que trust adopts the investment he loses all right to complain of the breach of trust ; and if he repudiates the investment he loses all right of claiming the unauthorised investment. Again, the same thing distinguishes equitable election from a conditional gift. Where a gift is made to A. of one property on condition he gives another belonging to him to B., if A. refuses to give his property to B., A. has no right whatever to the property given to himself, since he has not performed the condition precedent subject to which it was given. The same thing may be said to distinguish equitable election from a principle with which it is often confused, that is confirmation of voidable instruments. Instruments ab initio void carmot be confirmed {Harle v. Jarman, [1895] 2 Ch. 419). All that is meant by confirmation is that by the act or omission of the person who was able to make the instrument absolutely void, it has ceased to 260 A Digest of Equity. be voidable and is binding on all parties. Thus the contract of an infant is not void if it be for his benefit, but he is entitled if he likes to repudiate it on coming of age. If he does not repudiate it within a reasonable time after he comes of age, this will be held a confirmation of it {Edwards v. Carter, [1893] A. C. 360). Now if A., an infant bride, enters into a marriage settlement under which B., the husband, settles property for her benefit and she covenants to settle all property subsequently acquired by her on the trusts of the settlement, this covenant will be held to be for her benefit and therefore voidable only. If then A., after attaining full age, does not repudiate it within a reasonable time, the trustees of the settlement will be entitled to claim her after-acquired property, and she will have no option in the matter (Viditz v. O'Hagan; [1900] 2 Ch. 87). If, however, A.'s covenant to settle had been absolutely void ah initio, then, without re- pudiating it on coming of age, she could claim to retain any after-acquired property accruing to her. If she did so a true case of election would arise. Then the court would say if A. claims her after-acquired property contrary to the settlement she must not also retain the benefits she receives under the settlement, but must make compensa- tion out of these to those persons who are damaged by her action (Be Vardon's Trusts (1885), 31 Ch. D. 275 ; Carter v. Silber, [1891] 3 Ch. 553 (reversed on another point, [1892] 2 Ch. 278) ; and see Codrington v. Codrington (1876), L. E. 7 H. L. 854). Next, as to the two essential conditions necessary to raise election, namely, that the donor must give property to the donee and the donee's property must be given to a third person. Not merely must the donor give property, but he must give property of a kind which will constitute it a free benefaction to the donee : otherwise the donee receives nothing out of which he is under any obligation to recompense the third person in case he insists on keep- ing his own property which the donor has attempted to give away. Thus if A. has a special power to appoint £10,000 among his children, who are to take in default of appointment, and he appoints £9,000 among them Election. 261 and £1,000 to B., who is a stranger to the power, the children will be under no obligation to elect between taking the £9,000 and transferring the £1,000 to B. and repudiating the appointment altogether {Bristowe v. Ward (1794), 2 Ves. jun. 336; and cf. Wollaston v. King (1869), L. R. 8 Eq. 165). The appointment to B. simply fails for the benefit of the children. It would, however, have been different if A. had left, say. Black- acre — his own property — among the children. Then the children would have to elect either to confirm the appointment to B. or make B. compensation for not doing so, to the value, at any rate, of Blackacre (Whistler v. Webster (1794), 2 Ves. jun. 366). Again, if A., a land- owner in a country where the law does not permit the devise of land, devised his land to B. and C, then whether the heirs of A., who on his death became the owners of his lands, would be entitled to claim such lands without making any compensation to B. and C. would depend on whether A. has by his will left other property of his own to such heirs. If he has, they must compensate or give the lands to B. and C. ; if he has not, there is no fund out of which B. and 0. can claim compensation {Haynes v. Foster, [1901] 1 Ch. 361, and see In re Ogilvie, [1918] 1 Ch. 492). This rule applies to all gifts, whether under special trusts or not, which fail : the persons entitled on failure must elect between confirming any gift given them or the gift which has failed — even though the result of the election may be to benefit, not the object of the donor's bounty, but merely that person's residuary legatee (Be BrooJcsbanJc (1886), 34 Ch. D. 160). But it seems it does not apply where the will purports to exercise a power and the appointment fails because it is contrary to law, ex. gr., as being void under the rule against perpetuities (In re Nash, [1910] 1 Ch. 1), or where the will fails to be effective through neglect of the necessary formalities, ex. gr., where a foreign will not executed so as to pass English realty purports to devise land in England (In re de Verte, [1915] 1 Ch. 920). The second essential condition to raise election, is that not merely must the donee's property be given to a third 262 A Digest of Equity. person, but the property so given must be property which the donee is able to transfer to the third person. Other- wise, if he chooses to take under the instrument there is nothing which he can give up. Thus, in Be Lord Chesham, Cavendish v. Dacre (1886), 31 Ch. D. 466, a testator left certain chattels in trust for his two sons and his residuary estate to the eldest son. Now, the chattels left to the two sons were in fact heirlooms, or, more correctly, chattels settled to accompany the family mansion, of which the eldest son was only tenant for life. The eldest son, there- fore, could not transfer any of them to his brother : — Held, that in consequence he could not be put to his election either to transfer them or to recompense his brother for not doing so out of the residuary estate. Election was formerly confined to gifts by will. It now, however, applies also to gifts under settlements both ante- and postnuptial. It arises only where the two gifts are contained in the same instrument ; but for this purpose a marriage settlement, though contained in more than one document, is regarded as a single instrument {Codrington v. Codrington, supra). When the election arises under a will, the rights of the parties become fixed at the testator's death : when under a deed, when the party to elect is in the enjoyment of both properties and is competent to elect. Accordingly, if election does not take place until some time after these periods and before then a change has taken place in the parties' positions, the court will disregard this change {Haynes v. Foster, [1901] 1 Ch. 361 ; Be Hancock, Han- cock V. Pawson, [1905] 1 Ch. 16). Article 98. How far Doctrine is based on Intention. In order that the doctrine of election may apply, it is not necessary to show that the donor intended to put the donee to his elec- Election. 263 tion ; but if it appears that he did not intend to put the donee to his election, it does not apply. Where the donee is a married woman, the fact that the gift to her is made subject to a restraint upon anticipation prevents her making compensation if she elects against the gift and so she cannot be put to her election at all. Election is not based upon any actual intention on the part of the donor. It is based simply on the rule of con- struction that the maker of an instrument presumably intends that all parts of it should be carried into effect. Accordingly— at any rate, in a will — it is immaterial whether the donor knew that the property he gives to the third person is the donee's or not {Cooper v. Cooper (1874), L. E. 7 H. L. 53). It is, however, necessary that the testator should clearly intend to give the property away whether he knows it is the donee's or not. This is impor- tant, since in the case of wills the presumption is that the testator intends to give away only what is his own pro- perty, and so if there is any ambiguity as to the property intended to be given, the court will hold it was not his intention to give away the donee's property {Wintour v. Clifton (1856), 8 De G. M. & G. 641). But though election is not based upon any actual inten- tion on the part of the donor, still the expression by the donor of an intention that the donee shall not be put to his election excludes it. Such an intention is seldom or never stated in so many words, and where it is so stated no difficulty arises. The difficulty arises where the court has to gather the actual intention from the form in which the gift to the donee is made. It has been held that where the gift is to a married woman, and is made without power of anticipation, this is sufficient to indicate that the donor did not intend her to elect, since an election to keep her own property and make compensation for it out of the gift would have the effect of doing away with the restraint which the donor intended should affect the gift 264 A Digest of Equity. to her (Be Vardon's Trusts, supra). Thus, in Haynes v. Foster (the facts of which are cited at p. 261), the testator besides attempting to devise his land in Turkey, gave a married daughter, who was one of his heirs, a share in his residuary estate, subject to a restraint upon anticipation. The devise of the land being void by Turkish law, the persons disappointed sought to make the married daughter elect either to affirm the devise or compensate them out of her share of the residuary estate : — Held, that the restraint on anticipation showed an intention on the tes- tator's part inconsistent with the application of the doctrine of election. In Smith v. Lucas (1881), 18 Ch. D. 531, Jessbl, M.E., seemed inclined to hold that in such a case the married woman could not elect, on the ground that if she elected against the gift she could not make compensa- tion out of the gift, and this, it is submitted, is the better ground on which to place the matter. Since the above was written the view of Jbssel, M.E., has been approved in In re Tongue, [1915] 1 Ch. 390, and In re Hargrove, [1915] 1 Ch. 398, and accordingly where the gift of pro- perty restrained from anticipation is to an unmarried woman the restraint does not prevent her being put to her election. ( 265 ) Section III. Performance, Satisfac- tion, and Ademption. SUMMARY. PAQE Abticle 99. Definitions of performance, satisfaction, and ademption - 265 100. Presumption as to performance 267 101. Satisfaction of debts 270 102. Ademption of legacies 272 103. Definition of " portion " 274 104. Satisfaction and ademption of portions 277 105. Admission of parol evidence 281 Article 99. Definitions of Performance, Satisfaction, and Ademption. For the purposes of this sub-section — Performance means a transfer of property which, whether the donee wishes it or not, operates in law as a complete or pro tanto discharge of a previous legal liability of the donor ; Satisfaction means a transfer of property which, if the donee accepts it, operates in law as a complete or pro tanto dis- charge of a previous legal llabihty of the donor ; and Ademption means a transfer of property which, whether the donee wishes it or not, operates in law as a complete or pro tanto 266 A Digest of Equity. substitution for a gift previously made by the donor's will, and unrevoked at his death. Thus A. covenants on his marriage to purchase and settle lands to the value of £10,000 on his wife B. He purchases lands to the value of £5,000, and so settles them. This is performance in part of his liability under the covenant, and B. has no option but to accept it as such. Again, A. covenants on the marriage of his son X- to give him £10,000. By his will A. leaves to X. one-third part of his residuary estate. This is a satisfaction of A.'s liability under the covenant if X. accepts it. But X. is under no obligation to accept the share of the residue as a discharge of A.'s estate. He can insist on receiving out of such estate the £10,000, the amount A. covenanted to pay him. Again, A. by his will leaves his daughter Y. one-third of his residuary estate. Subsequently, on Y.'s marriage, he gives her £10,000. A. dies without having altered or revoked his will. The £10,000 is an ademption com- plete or pro tanto of the gift of one-third of A.'s residuary estate. Y. has no option in the matter. If she claims anything under the will, she must bring into account the £10,000 she received upon her marriage as part of what she is entitled to receive under A.'s will. Formerly it was thought that in cases of satisfaction and ademption the donee's acceptance of the second gift constituted a complete forfeiture of his right under the covenant or will. It is now settled, however, that this is so only where the second gift is of a value equal to or greater than the value of such right. Where it is of less value it works a forfeiture only to the extent of its value {Pym v. Lockyer (1841), 5 My. & C. 29 ; Be Pollock, Pollock V. Worrall (1885), 28 Ch. D. 552). Performance. 267 Article 100. Presumption as to Performance. (1) Where a person covenants for valuable consideration to purchase and settle lands upon certain trusts, and subsequently purchases lands of the nature of those covenanted to be purchased and settled, equity, if he retains such lands unsettled till his death, will presume that such lands were purchased in performance of the covenant and are bound by it. (2) Where a person covenants for valuable consideration that he will leave by will a legacy or a proportionate part of his personalty, or that his executors shall pay a certain sum or annuity, to a certain person, and subsequently dies intestate, or by his will leaves a different sum or annuity to such person, equity will presume that any share of the covenantor's estate received by such person under the in- testacy or the different sum or annuity left by his will is a complete or pro tanto performance of the covenant. Paragraph (1). A covenant for value to purchase and settle lands generally creates simply a specialty debt. It does not create a specific lien or charge upon lands purchased in pursuance of it and not settled. Formerly, when a tes- tator's lands were answerable only for specialty debts in which the heir was bound, and all specialty debts were payable out of personalty in preference to simple con- tract debts (see Administration of Assets), the doctrine of performance, as stated in the Article, had an importance it does not now possess. A covenant to purchase and settle specific lands, on the other hand, probably does 268 A Digest of Equity. create a lien on such lands when purchased and not settled. But as to such covenants, the Bankruptcy Act, 1883, sect, 47, provides that, on the covenantor's bank- ruptcy, the covenant is void save in so far as the lands have been actually conveyed before the bankruptcy. The doctrine is now useful chiefly to prevent heirs claiming what in effect are double portions. A good example of its operation in this way is the case of Wilcocks V. Wilcocks (1706), 2 Vern. 558. There A., in consideration of marriage, covenanted to purchase and settle lands of the value of £200 a year on his wife for life, and the first and other sons of the marriage in tail. He purchased lands of this value but did not settle them. He died intestate. A.'s eldest son succeeded as heir to the lands purchased. He brought an action to have the covenant to purchase and settle lands enforced : — HeM, that the lands descended to him constituted a performance of the covenant. If the covenant is to purchase freehold lands, it is not performed by the purchase of leaseholds or copyholds, but a smaller purchase of lands of the kind to be settled is pro tanto a performance of the covenant {Lechmere v. Earl of Carlisle (1735), 8 P. Wms. 228). And a pur- chase of lands by the covenantor without consulting the trustees is a performance of a covenant to purchase with the consent of the trustees [ibid.), or of a covenant to pay money to trustees to be expended in the purchase, with the covenantor's consent, of lands to be settled (Sowden v. Sowden (1785), 1 Bro. C. C. 582). And where lands are purchased in performance of a covenant to settle, they will be bound by it if they descend to the heir (Denton v. Davies (1812), 18 Ves. 499) ; or if the covenantor mort- gages them, the equity of redemption will be bound (Ex parte Poole (1847), 1 De G. 581). Paragraph (2). In Goldsmid v. Goldsmid (1818), 1 Swanst. 211, a testator who, under his marriage articles, had covenanted that if he died in the lifetime of his wife his executors Performance. 269 would, -within three months of his decease, pay her £3,000, died in his wife's lifetime. By his will he left all his property to his executors, with a direction to pay his debts, and, at the expiration of three years from his decease, distribute the residue of his estate in such way as seemed to them right. The executors all either pre- deceased the testator or renounced, and the residue became consequently divisible under the Statute of Distributions : — Held, that the rule stated in this paragraph (called usually the rule in Blandy v. Widmore (1716), 1 P. Wms. 323) applied to this partial intestacy as much as to a com- plete intestacy, and that the widow's distributive share of the residue was a performance of the covenant. On the same principle where a man on his marriage covenanted that if his wife should survive him his executors should make up her income under the settlement to £1,000 a year and he died before his wife and left all the income of his residuary estate to her for life, it was held that such income was to be taken as a performance of the covenant (In re Hall, [1918] 1 Ch. 562). The rule does not apply where the liability is a liability arising during the lifetime of the covenantor — such as where the covenant is to settle a sum two years after marriage, and the settlor lives over two years and does not make the settlement. Here, on breach of the covenant, the obligation becomes a debt, and must, like other debts, be paid before the intestate's estate is dis- tributed under the statute (Garthshore v. Chalie (1804), 10 Ves. 1). Nor does it apply where the liability under- taken cannot be covered by the payment of a gross sum — e.g., where the covenant is to pay the covenantee an annuity for life (Salisbury v. Salisbury (1848), 6 Hare, 526). A covenant to leave a legacy or a specific proportion or the whole of the covenantor's estate to certain persons creates no lien on the estate. The covenantor is per- fectly entitled to deal freely with his property during his lifetime, the liability affecting his estate only after his death. 2,70 A Digest of Equity. Article 101. Satisfaction of Debts. Where a testator having contracted a debt before the date of his will dies without having paid it, and by his will leaves his creditor a pecuniary legacy equal to or greater than the amount of the debt, and in every other respect as advantageous to the creditor as the debt was, equity, in the absence of anything to show a contrary intention, will presume that the testator intended the legacy to be in satisfaction of the debt. The rule here stated was first established in 1714 by the decision in Sir John Talbot v. Duke of Shrewsbury, Prec. Ch. 394. " No sooner," in the words of Stirling, J., in Be Horlock, Galham v. Smith, [1895] 1 Ch. 516, " was it invented than learned judges of great eminence expressed their disapproval of it, and invented ways to get out of it." This was because it was felt that to establish a general presumption that every legacy left by a debtor to a creditor is intended to be in payment of the debt is carrjdng much too far the sensible doctrine that a debtor is not presumed to give {Debitor non prcesumitur donare). The chief ways invented by the judges to get out of it were these : In the first place, they held that no satisfac- tion of a debt 'pro tanto could be presumed. The legacy must be either equal to or greater than the debt, or the creditor could claim both debt and legacy {Graham v. Graham (1791), 1 Ves. 272). In the second place, a legacy could not be presumed to be in satisfaction of a debt which had no existence when the will was made {Thomas v. Bennet (1725), 2 P. Wms. 341). In the third place, to raise the presumption it must be clear that the legacy is at least as advantageous to the creditor as the debt was. This condition strictly applied would pretty well have disposed of the rule, since debts are payable Satisfaction of Debts. 271 immediately, and legacies, unless otherwise directed by the will, cannot as a rule be recovered till twelve months after the testator's death, and a difference in time of pay- ment is a disadvantage {Re Horlock, Calham v. Smith, supra). Other disadvantages arise where the legacy is contingent, or uncertain or less easily recoverable, as where the debt is secured by bond or negotiable instru- ment {Chancey's Case (1717), 1 P. Wms. 408). In the fourth place, it was held that the fact that the will contains a direction to pay debts, or to pay debts and legacies, is a sufficient indication of the testator's intention that the legacy is not to be taken as a satisfaction of the debt (Be Huish, Bradshaw v. Huish (1889), 43 Ch. D. 260 ; Chancey's Case, supra). Some of these difficulties have been got over by holding that a legacy to a creditor of the testator (where it is held to be in satisfaction of the debt) is to be treated as a debt due to him on which interest is payable from the death of the testator {In re Battenberry, [1906] 1 Ch. 667). In the case of a residuary legacy no difficulty as to interest arises ; and when the legacy is larger than the debt it satisfies it even when the debt is secured by a legal mortgage {In re Greg, [1921] 2 Ch. 243). But still the chief cases now where the doctrine applies are where on the facts it clearly was the testator's actual intention that the donee should take the legacy in satisfaction of the debt. Thus, in Be Fletcher, Gillings v. Fletcher (1888), 38 Ch. D. 373, a husband owed his wife £625. Subsequently to incurring this debt he made his will and left a legacy to his wife of £625. Before he died, he repaid the £625 debt : — Held, that the legacy was intended in satisfaction of the debt, and the debt having been paid by the testator in his life-time, the legacy was thereby adeemed (and see Atkinson v. LitUewood (1874), L. E. 18 Eq. 595). The limited rule stated in the Article applies equally where the debtor is the father of the creditor, provided the debt is not created by the father by way of portion for the child. And it applies to gifts inter vivos as well as to legacies, where the question arises after the donor is 272 A Digest of Equity. dead. Thus where a father appropriated to his own use part of trust funds settled on himself for life and then on his children, it was held that a settlement of a smaller sum by the father on the child on marriage was no satisfaction of the debt to the child created by the breach of trust [Grichton v. Crichton, [1895] 2 Ch. 853 ; reversed on another point, [1896] 1 Ch. 870). Article 102. Ademption of Legacies. Where a legacy appears on the face of a will to be bequeathed for a particular purpose (not being a portion within the next Article), and a subsequent gift appears to have been made for the same purpose, a presumption arises that the second gift was intended to adeem the legacy either completely or in part. This is adapted from the language of Lord Selborne, L.C., in In re Pollock, Pollock v. Wormll (1885), 28 Ch. D. 552, at p. 556. He proceeds thus : " To constitute a par- ticular purpose within the meaning of that doctrine it is not, in my opinion, necessary that some special use or application of the money, by or on behalf of the legatee (e.g., for binding him an apprentice, purchasing for him a house, advancing him upon marriage, or the like), should be in the testator's view. It is not less a purpose, as distinguished from a mere motive of spontaneous bounty, if the bequest is expressed to be made in fulfilment of some moral obligation recognised by the testator, and originating in a definite external cause, though not of a kind which (unless expressed) the law would have recog- nised, or would have presumed to exist." His lordship is here referring to the natural duty of a father to provide for his children, dealt with in the next Article. The case of In re Pollock, Pollock v. Worrall (supra) is itself a good example of this expressed moral duty. There Ademption of Legacies. 273 a widow by her will left £500 to her husband's niece, " according to the wish of my late beloved husband." Afterwards she asked the niece whether she would prefer a smaller sum down to a larger sum on the widow's death. The niece expressed a preference for a smaller sum down, and the widow gave her £300. On the widow's death, the legacy of £500 was held to be adeemed to the extent of £300. Two recent cases will illustrate the difference between spontaneous bounty and a particular purpose not based on a moral duty. In In re Smythies, Weyman v. Smyfhies, [1903] 1 Ch. 259, a testator, not in loco parentis to the beneficiary, gave a legacy to a trustee for the benefit of the beneficiary. Subsequently he made a gift to the trustee of the same sum for the same purpose : — Held, that the gift being merely for the benefit of the beneficiary, it was simply a gift to him for no particular purpose, and so it did not adeem the legacy for his benefit. On the other hand, in Be Corbett, Corhett v. Lord Cobham, [1903] 2 Ch. 326, a testator left £10,000 to the trustees of " the endowment fund of C. Hospital." Sub- sequently he wrote to the trustees saying he wished to redeem a promise to give £10,000 to the endowment fund of C. hospital and sent a cheque for this amount : — Held, that the gift being for a particular purpose and that purpose being the same as that for which the legacy was given, it adeemed such legacy. Sometimes a legacy is said to be adeemed by a subse- quent legacy. Strictly speaking this is altogether incorrect . When two legacies of the same amount are given to the same person in the same will, the question arising is, whether or not the testator was in both cases referring to the same legacy or to different legacies. It will be pre- sumed that he was referring merely to the same legacy if the two legacies are of equal amount and given to the same person, and by the same will or same codicil, or, if 274 A Digest of Equity. by separate instruments, they are, in addition, expressed to be given from the same motive (see Under. & Stra. Inter, of Wills, p. 193). It should be noted that a donatio mortis causa is not adeemed by a subsequent legacy of the same value as the donatio. Thus, in Hudson v. Spencer, [1910] 2 Ch. 285, A. in his last illness gave B. as a donatio scrip repre- senting securities of a certain value. Subsequently he made his will by which he left B. a legacy of the same value -.—Held, that B. was entitled to both the securities and the legacy. Article 103. Definition of " Portion." (1) By portion is meant a gift made by a father of his own property, or of settled property over which he has a power of appointment among his children, to or for the benefit of a lawful child for the purpose of discharging the moral obhgation of the father to provide for the child. (2) Prima facie all gifts by will to a child, all settlements made on a child on marriage, all moneys expended in establishing a child in a profession or business, and all considerable lump sums given without a specific purpose to a child are portions. Sums, however, given to a child for the payment of his debts, and small gifts made to a child from time to time without a specific purpose, are not to be regarded as portions, but rather as temporary assistance, unless it appears that the father intended them to be regarded as portions. Portions. 275 (3) A person who shows that he has taken upon himself towards a person who is not his child the moral obhgation of a father, is said to be a person in loco 'parentis to such person. Gifts, which if made by a father would be portions, are portions if made by a person in loco parentis to the donee. (4) A mother, as mother, is not under the moral obligation of a father to provide for her child, and prima facie no gifts by her to the child are portions. Neither is a grandfather under the obligation as regards his grandchildren. (5) Portions given to a child during his father's hfe are called advancements. Paragraphs (1) and (2). In Taylor v. Taylor (1875), L. E. 20 Eq. 155, at p. 157, Jessel, M.E., thus describes what is to be considered a portion : " I have always understood that an advance- ment by way of portion is something given by a parent to estabhsh the child in life, or to make what is called a provision for him. ... If in the absence of evidence you find a father giving a large sum to a child in one payment, there is a presumption that that is intended to start him in life or make a provision for him ; but if a small sum is so given you may require evidence to show the purpose. . . . Not every payment is a provision for the child ; and I think that Wood, V.-C, referred to that when he said, in Boyd v. Boyd (1867), L. E. 4 Eq. 305, that the sum must be paid for a particular purpose ; by which I understand him to mean a special purpose with a view to the establishment of the child in life." And the money may be either the father's own property or property settled to provide for his family over which he has a special power of appointment {In re Shields, [1912] 1 Ch. 691). 276 A Digest 0/ Equity. This statement of the law, which was not followed by Pbaeson, J., in Re Blockley (1885), 29 Ch. D. 250, has been expressly approved by the Court of Appeal in Be Scott, Langton v. Scott, [1903] 1 Ch. 1. As examples of portions, Jessbl, M.E., in Taylor v. Taylor (supra), gives these among others : a marriage settlement, payments for putting a son into a business or profession, buying a commission for him in the Army, buying for him the goodwill and stock-in-trade of a business (ibid., p. 157). It is to be noted that in order that a provision by a father for his child should be a portion, the child must be his lawful child. An illegitimate child is in law nullius filius, and so a stranger to the father. This often causes the rule against double portions, which we shall next discuss, to work out very unfairly as between legitimate and illegitimate children of the same father {Ex -parte Pye (1811), 18 Ves. 140). Paragraph (3). In order that a person may be in loco parentis for the purpose of this and the following Article, it is necessary to show that he intended to assume the duty of a lawful father to provide for the child (Ex parte Pye (1811), 18 Ves. 154). " The of&ces and duties of a parent are," says Lord Cottenham, in Powys v. Mansfield (1837), 3 My. & Cr. 359, at p. 366, " infinitely various, some having no connection whatever with making a provision for a child ; and it would be most illogical, from the mere exercise of any of such offices or duties by one not the father, to infer an intention in such person to assume also the duty of providing for the child. . . , The rule, both as applied to a father and to one in loco parentis, is founded on the presumed intention. . . . The having so acted towards a child as to raise a moral obligation to provide for it affords a strong inference in favour of the fact of the assumption of the character ; and the child having a father with whom it resides, and by whom it is Portions. 277 * maintained, affords some inference against it ; but neither are {sic) conclusive." Paragraph (4). A mother is not under the same moral obligation as a father to provide for her children, and therefore gifts by her to them are prima facie not portions {Re Ashton, Ingram v. Papillon, [1897] .2 Ch. 574). But, like any other person, she may assume the obligations of a father, in which case the rule applicable to persons in loco parentis will apply to her {ibid., p. 578). A grandfather is in the same position as regards grandchildren {In re Dawson, [1919] 1 Ch. 202). Paragraph (5). An advancement usually means giving property to the child, and especially money. But it also includes entering into a liability to give him money or money's worth. Thus a covenant to settle a sum of money is an advancement which, if the child claims performance of it against his father's estate, is equivalent to the advance of the money itself {Cooper v. MacdonaU (1873), L. E. 16 Eq. 258). Abticle 104. Satisfaction and Ademption of Portions. (1) Where a portion is given to a child by will and subsequently an advancement by gift or covenant is made to the same child, or where an advancement by covenant (but not by gift) is made to a child, and subsequently a portion is given to the same child by will, there is a presumption that the portion, in the first case, is adeemed by the advancement, and the ad- vancement, in the second case, is satisfied by 278 A Digest of Equity. the portion either wholly or pro tanto, as the ease may be. (2) This presumption will be rebutted if the portion by will and the advancement differ substantially — (i) in the nature of the property given ; (ii) in the nature of the limitation of the gifts ; (iii) in the nature of the conditions affecting the gifts. Paragraph (1). The rule here stated is what is called the presumption against double portions. Whatever may have been the original reason for raising this presumption (and probably it was to prevent too many portions being fixed upon the father's lands in the hands of his heir), it is now useful — if useful at all — chiefly for preventing one child being favoured at the expense of the others. An example or two will show how far the rule has been carried. Thus, in Montagu v. Earl of Sandmch (1886), 32 Ch. D. 525, Lord S. by deed charged his estates with an annuity of £1,000 in favour of his second son. Subsequently he devised, subject to all charges, the estates to his eldest son. He also bequeathed to his second son personalty of a value of more than £1,000 per annum : — Held, that the bequest was a satisfaction of the charge of £1,000 upon the real estate. And see In re Lawes (1881), 20 Ch. D. 81. Again, in Hopwood v. Hopwood (1859), 7 H. L. Cas. 728, a testator bequeathed a legacy to one of his children. Subsequently, on the marriage of this child, he settled certain moneys on her. After this advancement he added a codicil to his will, but did not alter the legacy to the child advanced : — Held, nevertheless, that the advance- ment made was an ademption of the legacy. Satisfaction of Portions. 279 Again, in McCarogher v. Whieldon (1866), L. E. 3 Eq. 236, a father covenanted on his son's marriage to settle a certain sum upon him and his wife and children. Subsequently, the father by his will left a legacy to the son : — Held, that this legacy was a satisfaction of the covenants as far as the son was concerned, although it was not a satisfaction as regarded the wife and children. Cf. Lord Chichester v. Coventry (1867), L. E. 2H. L. 71. A covenant to settle may in the same way constitute an ademption of a portion given previously by the father's will (Cooper v. Macdonald (1878), L. E. 16 Eq. 258). Where the residuary estate is divided between the. children of the testator and a stranger, then if one of the children is subsequently advanced, this advancement will not be brought into account so as to benefit the stranger. The stranger will first receive his share of the residue, and then when the child who has been advanced claims a share of what remains he will have to bring the advance- ment into hotchpot in favour of the other children (Mein- hertzagen v. Walters (1872), L. E. 7 Ch. 670). If a legacy not residuary given to a child is adeemed, then all the residuary legatees, whether children or strangers, share the benefit ; but if the child receiving the legacy is also one of the residuary legatees the strangers will not be allowed to benefit by the ademption of the legacy {In re Heather, Pumfrey v. Fryer, [1906] 2 Ch. 230). A direction in the will that the testator's debts are to be paid will not prevent an advancement by covenant being satisfied by a legacy {Cooper v. MacDonald (1873), L. E. 16 Eq. 268). Paragraph (2). The differences which will rebut the presumption that a second portion was intended to satisfy or adeem a previous portion must be such as to make it either — . (i) a gift of a different thing ; (ii) a gift to substantially different persons ; or (iii) a gift subject to substantially 280 A Digest of Equity. different conditions. It should be noted that smaller differences will suffice to rebut the presumption of satis- faction than are necessary to rebut the presumption of ademption (Tussaud v. Tussaud (1878), 9 Ch. D. 363). As to differences in the nature of the property, the gift of land inter vivos will not adeem a legacy of money. The thing given to be a satisfaction must be ejusdem generis with the gift which it is to satisfy (Be Jacques, Hodgson v. Braisby, [1903] 1 Ch. 267). In the same way the gift of a share in the father's business may adeem a legacy, but it would seem that this is the case only when the share of the business was fixed at a money value when the gift was made (see Be Lawes (1881), 20 Ch. D. 81 ; and c/. Be Vickers (1888), 37 Ch. D. 525 ; Be Lacon, Lacon v. Lacon, [1891] 2 Ch. 482). As to other differences see Tussaud v. Tussaud, supra. There T., on the marriage of his daughter W., covenanted that his executors would settle within six months of T.'s death £2,000, to be held in trust for W.'s appointees, and in default of and until appointment for W. for Ufe for her separate use, then for her husband for life, and on the death of the survivor for the children of the marriage. During his life T. handed £1,000 to the trustees of the settlement, which was a performance in part of the covenant. On his death, he left £2,800 to the trustees in trust for W. for life for her separate use without power of anticipation, then for her children who attained twenty- one years, and in default of such children for T.'s sons : — Held, that this was no satisfaction of his covenant, and that the trustees were entitled to recover the £1,000 covenanted to be settled from T.'s executors, and at the same time retain the legacy of £2,800. And see Ee Furness, [1901] 2 Ch. 346. A covenant, however, to settle a portion on a child and her family may be satisfied as to the child's life interest by a legacy to her absolutely. Thus, in In re Blundell, [1906] 2 Ch. 222, a father on his daughter's marriage covenanted to pay the trustees of her settlement a certain sum to be settled on the daughter for life, then on the Satisfaction oj Portions. 281 husband for life, and then on the children of the marriage absolutely. He afterwards lent the daughter £3,000 and by his will he left her absolutely a third of his residuary estate, she to bring the £3,000 lent into hotchpot. Her settlement contained a covenant to settle after-acquired property, and her share of residue exceeded the sum covenanted to be settled : — Held, that the legacy to the daughter was a satisfaction of the covenant only as re- garded her life interest since her husband and children did not take directly any share in it. And see McCarogher V. Whieldon, supra, p. 279. Article 105. Admission of Parol Evidence. Where any question of performance, satisfac- tion, or ademption arises, the court will, as to the admission of parol evidence, proceed upon the following rules : (1) Where both transactions are contained in written instruments, if the court, on construing such instruments — (a) holds that the second transaction was not a performance, satisfaction, or ademption of the earher liability or gift, it will not admit parol evidence of the donor's actual intention ; (6) holds that there is a presumption that the second transaction was intended as a performance, satisfaction, or ademption of the earher habiHty or gift, it will admit all relevant parol evidence of the donor's actual in- tention to rebut or support such presumption. 282 A Digest of Equity. (2) Where one of the transactions is not contained in a written instrument, the court will admit all relevant parol evi- dence to show the donor's actual inten- tion in entering into that transaction. This is the rule as laid down by Sir Edward Sugden (Lord St. Leonards) in Hall v. Hill (1841), 1 Dr. & War. 132. It is simply an application of the general principle that where on the construction of written instruments the court presumes a meaning not expressed in the docu- ments, it will admit parol evidence to rebut such pre- sumption, and where it admits evidence to rebut it will also admit evidence to support it. The rule against double portions is merely a presumption as to the intention of the father. Where parol evidence is admitted, and this shows that the father did not, in fact, intend a portion or advancement to be adeemed or satisfied by a subsequent advancement or portion, then the rule has no application (Be Lacon, Lacon v. Lacon, [1891] 2 Ch. 482). The evidence most relevant is evidence of the declara- tions made by the father at the time the gifts were made (ibid.). It may be noted that a letter left by a testator of declaring his intention that a gift made to a legatee during the testator's life was intended to adeem the legacy is not admissible as evidence of such intention after the testator's death if during his life it was not communicated to the legatee (or semhle, otherwise published). Thus, in In re Shields, Corhould-Ellis v. Dales, [1912] 1 Ch. 591, a testator left by will £300 to his housekeeper. He sub- sequently gave her £300, and told her to hand a sealed letter to his executors after his death. When the executors opened the letter they found it contained a declaration that the £300 given was to adeem the legacy : — Held, that the letter was not admissible in evidence, and that the legacy was not adeemed by the gift. ( 283 ) Section IV. Mistake and Misrepre- sentation. SUMMARY. PAOE Abticxe 106. Mistake and misrepresentation - - 2»3 107. Mistakes and misrepresentations of law 287 108. Fundamental and incidental mistakes of fact 289 109. Negative and positive misrepresentations of fact - 296 110. What amounts to misrepresentation in law - - £97 111. Where non-disclosure constitutes negative mis- representation . - - . . 299 112. Effect of innocent misrepresentation - 305 113. Effect of fraudulent misrepresentation 306 114. Responsibility for misrepresentations of an agent 306 Article 106. Mistake and Misrepresentation. (1) Where a person, party to an agreement to enter into a legal relationship with another, is induced to agree thereto by a misconception of the facts surrounding or the legal rights and obUgations arising out of such relationship, such misconception must have arisen either through a mistake on his own part or through false representations made to him by others. (2) Where such misconception arose through false representations, then, if those who made such representations honestly believed them to be true, the agreement is said to have been induced by innocent misrepresentation, but if they knew them to be false or made them reck- lessly, not caring whether they were true or 284 A Digest of Equity. false, the agreement is said to have been induced by fraudulent misrepresentation. (3) Where such misconception is as to the surrounding facts it is said to be, according as it arises, a mistake or misrepresentation of fact ; where as to the legal rights and obligations a mistake or misrepresentation of law. Paragraph (2). We are not concerned here with what amounts to a representation in law. That is dealt with in the note to Article 110. What is important here is the distinction between innocent and fraudulent misrepresentation. This distinction was finally settled by the House of Lords in Deny v. Peek (1889), 14 App. Cas. 337. But perhaps the best exposition of the law on the subject is that in the judgment of Bowen, L.J., in Le Dievre v. Gould, [1893] 1 Q. B. 491. In an action for fraudulent misrepresentation, as his lordship points out in that case (at p. 500), the direction given to the jury was this : " The jury were told that before they found a verdict against a man who was charged with fraudulent misrepresentation, they must be satisfied either that he had stated what was untrue, know- ing that it was untrue, and intending that the untruth should be acted upon, in which case — a wilful lie being a wicked thing — he was necessarily dishonest, or, at any rate, they must be satisfied that, if he did not know that the statement was untrue, he made it deliberately intend- ing that it should be acted upon, and not knowing and not caring whether it was true or false. If a man makes a wilful statement, intending it to be acted upon, and he is reckless whether it is true or false, he has a wicked mind ; but his mind is wicked, not because he is negli- gent, but because he is dishonest in not caring about the truth of his statement. In the first case, it is the know- ledge of the falsehood, in the second, it is the wicked indifference, which constitutes the fraud." Mistake and Misrepresentation. 285 This case and Derry v. Peek, swpra, put an end to the doctrine of constructive fraud — that is, the doctrine by which a person was held hable to an action in damages for fraud, although it was admitted that he was not fraudulent, but merely grossly negligent. Negligence, if gross, may be evidence of fraud, but never in itself constitutes fraud. There can be no fraud without dishonesty. Even if the false representation is false to the know- ledge of the person making it, it is not fraudulent if it is not made with the intention of inducing a person to enter into a certain legal relationship. This is shown by the case of Tackey v. McBain, [1912] A. C. 186. There the director of a company was pressed by numerous dealers in its stock to disclose to them the nature of the report of an expert who had been sent to investigate the condition of the company's undertaking. The expert's report had been received and the director knew this ; but to stop further inquiries he told the dealers that no report had yet reached the company. The dealers inferred from this that the report was delayed because it was unfavourable and sold in consequence the stock of the company, which fell heavily in value. Subsequently the report was published and proved very favourable. The dealers sued the director for fraud. The jury found that the director made the statement knowing it to be false and that the plaintiffs acted on the statement and were danmified. They found, further, that the defendant did not make it to induce them to act : — Held, that there was no fraud. A fraudulent misrepresentation is none the less fraudu- lent because it is accompanied by a statement that the party to whom it is made must not rely upon it, but should verify the representation for himself. Thus, in Pearson v. Dublin Corporation, [1907] A. C. 351, the engineer of the corporation put statements in a specifica- tion for work which, it was alleged, he knew to be false. But the specification was accompanied by an announce- ment that intending contractors must verify for themselves all statements of fact : — Held, that if the engineer knew that his statements were false and dishonest, they were fraudulent notwithstanding such announcement. 286 A Digest of Equity. Paragraph (3). It is not always easy to say whether a mistake or misrepresentation is one of law or one of fact. The rule followed by the courts seems to be this : if a person know or have represented to him the surrounding circumstances accurately, and knowing these, he mistakes, or has misrepresented to him, the legal rights resulting there- from, this is a mistake or misrepresentation of law. On the other hand, if, without stating the facts, the other party misstates to him the joint effect of the surrounding circumstances and the law applicable, this is a misrepresen- tation of fact. As Jbssel, M.E., puts it in Eaglesfield v. Marquis of Londonderry (1875), 4 Ch. D. 693, at p. 702 : " A misrepresentation of law is this : when you state the facts and state a conclusion of law, so as to distinguish between facts and law. The man who knows the facts is taken to know the law ; but when you state that as a fact which no doubt involves, as most facts do, a conclusion of law, that is still a statement of fact and not a statement of law. Suppose a man is asked by a tradesman whether he can give credit to a lady, and the answer is, ' You may ; she is a single woman of large fortune.' It turns out that the man who gave the answer knew that the lady had gone through the ceremony of marriage with a man who was believed to be a married man, and that she had been advised that that marriage ceremony was null and void. ... He does not tell the tradesman all these facts, but states that she is single. That is a statement of fact. If he had told the whole story and all the facts, and said, ' Now, you see, the lady is single,' that would have been a misrepresentation of law." A good example of a misrepresentation partly of law and partly of fact is the case of Cooper v. Phibis (1867), L. E. 2 H. L. 149. In that case, by the misreading of a private Act of Parliament, A. believed and represented to his nephew that he (A.) was entitled absolutely to a fishery. On A.'s death his nephew, believing what A. had repre- sented, took a lease of such fishery. Afterwards, on reading the private Act, he saw that the property was Mistake and Misrepresentation. 287 his own : — Held, that he was entitled to have the lease rescinded. It is to be remembered that any question of foreign law is a question of fact ; and accordingly all mistakes, and misrepresentations of foreign law are not mistakes or misrepresentations of law, but of fact {Leslie v. Baillie (1843), 2 Y. & C. (N.E.) 91). What is law outside England is in an English court always a question of fact upon which expert evidence may be given. Article 107. Mistakes and Misrepresentations of Law. Where a person is induced to agree to enter into a legal relationship with another by a mis- take or misrepresentation of law, such person is bound by his agreement unless the other party to it — (i) knew of the mistake or misrepresentation and took advantage of it ; or (ii) was an officer of the court who in that capacity received property under the agreement ; or (iti) was in a fiduciary position towards the person agreeing. The principle underlying this rule is Ignorantia juris haud excusat — a maxim in which (as pointed out by Lord Westbuky in Cooper v. Phibbs, supra) " the word jus is used in the sense of denoting general law, the ordinary law of the country. When the word jus is used in the sense of denoting a private right, that maxim has no application." As. already pointed out, most representa- tions as to private rights are really representations as to mixed questions of law and fact, and as such are always treated as representations of fact. 288 A Digest of Equity. In the case of Eaglesfield v. Marquis of Londonderry (supra, p. 286) a company had issued £85,000 " No. 1 preference stock," which had precedence over " No. 2 preference stock " and the ordinary shares. Under certain Acts of ParUament the company had power to issue £15,000 further preference stock, which, by a mistake in interpreting the Acts, the company thought would rank with the No. 1 preference stock. This stock they issued, describing it as No. 1 preference stock in the certificate. Subsequently the court decided that the new stock ranked after both No. 1 and No. 2 preference stock. The plaintiff, being aware of the Acts of Parliament at the time, bought some of the £15,000 stock knowing it was not part of the £85,000 No. 1 preference stock, but new stock which he believed would rank with that. Afterwards he sued for rescission of contract. Jessel, M.E., held that the misdescription of the stock in the certificate was a misrepresentation of fact. The Court of Appeal reversed this decision, holding that as the plaintiff never thought the stock was part of the £85,000 No. 1 preference stock, but merely new stock issued imder an Act of Parliament which he and the company both thought made it rank with that stock, there was only an innocent misrepresentation of law, and the plaintiff was therefore not entitled to rescission. (i) A wilful misrepresentation of law is a misrepre- sentation of fact, since it misrepresents the state of the representor's mind, which is a physical fact. (ii) The rule as to payments made by mistake of law to officers of the court is stated thus by Kekewich, J., in Be Opera, Limited, [1891] 2 Ch. 154 ; 3 Ch. 260 : " If tho assets in the hands of an officer of the court on behalf of creditors or others have been increased by a trans- action occasioned by an honest mistake of law, then, notwithstanding such mistake is not capable of rectifica- tion as between ordinary adverse litigants, the court will compel its officer to recognise the rules of honesty as between man and man and to act accordingly." Mistakes and Misrejpresentations of Law. 289 This rule, which Lord Bsher in Ex parte Simmonds (1885), 16 Q. B. D. 308, pronounced a good, a righteous, and a wholesome principle, was first applied to a trustee in bankruptcy {Ex parte James (1874), L. E. 9 Ch. 609) ; but now it has been extended to all officers of the court receiving payments by mistake of law in that character {Ex parte Simmonds, supra). If the officer has, before the mistake is discovered, distributed the funds, he must make compensation out of any future moneys coming into his hands in the same matter {ibid.). (iii) This is . mentioned here merely for complete- ness. The rules regulating dealings between persons in a fiduciary relation are discussed elsewhere {infra, Article 117). Article 108. Fundamental and Incidental Mistakes of Fact. (1) Where a person is induced to agree in form to enter into a legal relationship with another person by an entire mistake of fact as to — (i) the subject-matter of the transaction ; or (ii) the legal relationship intended ; or (iii) the identity of the other party to the agreement ; then the parties are never ad idem, and there is no agreement in law or in fact between them. Such a mistake is said to be ' a fundamental mistake of fact. (2) Though there is no agreement in law or in fact between the parties to such a transaction, 290 A Digest of Equity. yet a party may be estopped from pleading this if the other party did not know of his mistake, and if — (i) such other party has in consequence of the transaction changed his position ; or (ii) the transaction relates to money paid by mistake, and such money has been paid under pressure of legal process initiated by the payee ; or (iii) the transaction relates to the sale of land, and it has been completed by conveyance. (3) A mistake of fact not coming within para- graph (1) is called an incidental mistake. Where a person is induced to agree to enter into a legal relationship with another person by an incidental mistake of fact, he is bound by his agreement ; but where the agreement is to sell or purchase land, or any agreement of which in ordinary circumstances specific performance would be decreed, then on an action for specific performance against the party damaged by the mistake, the court wiU not grant a decree in cases where such decree would inflict great hardship upon the party in question. Paragraph (1). The decisions as to mistakes are not very clear, nor very- easy to reconcile. The broad rule, however, which seems to be deducible from them is that a mistake of fact does not affect in law an agreement unless the mistake is funda- mental, and then it prevents there being in law any agreement at all. This rule, of course, is subject to many limitations and refinements, some of which will be referred to here. Mistakes of Fact. 291 First, as to examples of fundamental mistakes. If Blackacre and Whiteacre are being sold at the same auction, and A., intending to buy Blackacre, by mistake bids for and has knocked down to him Whiteacre, this is a fundamental mistake as to the subject-matter of the transaction, and there is no agreement. A. and the auctioneer were at cross purposes, and therefore there could not be any agreement between them {Van Praagh v. Everidge, [1903] 1 Ch. 434). Again, if A., intending to mortgage Blackacre for £1,000, agrees with B. by mistake to sell it for that sum, here there is a fundamental mistake as to the legal relationship intended. A. intended to mortgage only, B. intended to buy, and therefore there could be no agree- ment between them. In the third place. A., a notorious money-lender, enters under an assumed name into a contract of loan with B. If B. had known who A. was he would never have con- tracted with him. Here there was no agreement on B.'s part to contract with A. {Gordon v. Street, [1899] 2 Q. B. 641). An example of the rule which is usually treated as not coming within it is the case of money paid by mistake or on total failure of consideration. It is, however, really in its essence but an application of the rule. This is shown by the consideration that to make such money recoverable the mistake under which it is paid must be fundamental. In the words of Beamwell, B., in Aiken v. Short (1856), 1 H. & N. 210, at p. 215, the mistake must be "as to a fact which, if true, would make the person paying liable to pay the money ; not where, if true, it would merely make it desirable that he should pay the money." In other words, the mistake must go to the whole basis of the transaction — the payor's liability, in fact, to pay. A good example of money paid by mistake or recover- able on total failure of consideration is Be the Bodega Company, Limited, [1904] 1 Ch. 276. The defendant was a director of the B. company. By the articles it was 292 A Digest of Equity. provided that a director who became interested in any contract with the company should ipso facto cease im- mediately to be a director. The defendant, unknown to the other directors, became so interested. He continued to act as director and to receive director's fees for his services. When it was discovered that he was interested in the contract an action was brought to recover back the fees paid to him, on the grounds — (1) that they were paid under a total mistake of fact as to his not being a director, and (2) that there was a total failure of consideration, since though he had done the work of a director, he had never been asked to do so, and therefore on the ordinary law of contract he had rendered no services for which remuneration was due :■ — Held, that the company was entitled to recover on both grounds. " Consideration," as used in the phrase " total failure of consideration," does not mean that no consideration in fact was given, but that there was no consideration sufficient to support an action to recover the remuneration (per Farwell, J., at p. 287 ; for further examples of cases of total failure of considera- tion, see infra, p. 291). It has been decided that mere negligence on the payor's part will not prevent his recovering money really paid by mistake {Durrant v. Ecclesiastical Commissioners (1880), 6 Q. B. D. 234). It is submitted that the same rule applies to all transactions originating in fundamental mistakes (see Van PraagJi v. Everidge, [1903] 1 Ch. 434), and that such transactions become binding only on the grounds stated in paragraph (2) of the above Article. The rule applies equally to credit given by mistake. Thus, in Ward and Company v. Wallis, [1900] 1 Q. B. 676, the plaintiffs, in bringing an action against the defen- dant, credited him by mistake with having paid £75 on account, and sued only for the balance. Discovering after judgment their error, the plaintiffs began a second action for the £75 credited by mistake : — Held, that they were entitled to recover. " It is well settled," said Kennedy, J. (ibid., at p. 679), " that an allowance in account is equiva- lent to a payment." Mistakes of Fact. 293 Paragraph (2). By estoppel is meant that the court will not allow a party to rely on certain matters, even though those matters, if established, would entitle him to the court's decision. Estoppel by representation, though probably originally an equitable doctrine (see Ash. Eq., p. 628), has since Pickard v. Sears (1837), 6 A. & E. 475, been treated as belonging to common law. No 'person can claim the benefit of estoppel unless he acted bona fide in the transaction. If A. makes by mistake an offer to sell Blackacre for £1,000, when he meant merely that he would let it at that rent, and B. accepts the offer, knowing of the mistake, B. cannot be heard to say that he took advantage of what he knew to be a blunder (see Porter v. Moore, [1904] 2 Ch. 367). In the same way, if A. sues B. for £100 knowing that only £50 are owing, and B. pays by mistake £100, A. will not be heard to say that though he knew only £50 to be due, still, since B. paid under pressure of process of law, he is entitled to keep the £100. Thus, in Ward and Company v. Wallis (supra) the defendant was aware that the amount for which the plaintiffs had given him credit was not in fact paid : — Held, that the plaintiffs could still recover it, though the credit was given in a previous action. (i) A common instance of this arises where money is paid by mistake to an agent who, before the mistake is discovered, has accounted to his principal for it. In such a case, if the agent received it innocently, no action lies against him (see Kleinwort v. Dunlop Bubher Company (1907), 97 L. T. 263). (ii) By payment under pressure of legal process is meant here not merely recovery , under judgment of a Court of Law, but payment after the commencement of legal proceedings. Thus, in Moore v. Vestry of Fulham, [1895] 1 Q. B. 399, after summons issued to recover the money alleged to be owing, the defendant had paid : — Held, that the money was paid under pressure of legal process. 294 A Digest of Equity. Apparently this principle does not apply to payments under a consent order in an action, agreed to under a mistake of fact (see Marshall v. James, [1905] 1 Ch. 432). Thus, in Huddersfield Banking Company v. H. Lister and Son, Limited, [1895] 2 Ch. 273, the debenture-holders of a certain company agreed to an order for the sale by the receiver of the company of certain machinery, on the mis- taken assumption that such machinery was not annexed to the freehold and therefore not included in their mort- gage. After the sale was completed it was discovered that the machinery was in fact so annexed. The deben- ture-holders then applied to the court to set aside the order : — Held, that as it was based upon a mistake, the order must be set aside, and that the price of the machinery was money had and received by the receiver on their behalf. Lindlby, L. J., in the Court of Appeal, held that wherever the agreement could be set aside if there were no consent order, it could be set aside notwithstanding a consent order'. Qucere, if there had been no consent order in this case, but the parties had merely agreed after action brought that the property belonged to the com- pany, whether that agreement could have been set aside ? (iii) This exception to the rule — if it is an exception — is very limited in its operation. It applies only to the case of a vendor of land bona fide selling it when his title to it is bad. Here it may be said that there is a total failure of consideration just as if he had sold an annuity which had lapsed, in the bona fide belief that it still existed {Shifs Case (1865), 2 De G. J. & S. 544), or a life assurance where the assured was dead, in the bona fide belief that the insured was still living {Scott v. Coulson, [1903] 2 Ch. 249). In both of these cases the court would grant rescission of contract after assignment just as before — in the first case, on the application of the vendee, and, in the second, on the application of the vendor. But in the case of the sale of land by a vendor having had a bad title the court would not grant rescission even though the next day after the conveyance the purchaser was evicted by the person to whom the land really belonged {Soper V. Arnold (1887), 87 Ch. D. 96). This seems Mistakes of Fact. 295 settled law, at any rate where the vendor had a possessory title. But it cannot be said that a vendor who has a possessory title has no interest in the land, and if he has an interest it cannot be said that there has been a total failure of consideration. Where there is a total failure of consideration there seems no doubt that the sale can be set aside even after conveyance (see Dehenham v. Saw- hridge, [1901] 2 Ch. 98). Thus, where land actually belonging to the purchaser is sold to him, the court will set the sale aside for total failure of consideration {Bingham v. Bingham (1748), 1 Yes. sen. 126). And this is the case equally when the sale was induced by iimocent misrepre- sentation (Cooper V. PUhhs (1867), L. E. 2 H. L. 149). Paragraph (3). A good example of an incidental mistake as to the subject-matter of an agreement is seen in Tamplin v. James (1878), 15 Ch. D. 215. There a property called " the Ship " was offered for sale by auction. In the particulars for sale it was accurately described, and there were displayed on the walls of the auction-room plans giving accurately the frontages. It was, however, actually occupied in conjunction with two other premises not belonging to the vendors. The defendant, who knew the property, assumed, without looking at the particulars or plans, that the property to be sold was the property as occupied. He bought it, and on discovering his mistake refused to complete : — Held, that he was not entitled to rescission or a refusal of specific performance. Here the parties were ad idem. They both intended to deal with the property called " the Ship." But the defendant, through no fault of the plaintiffs, made a mistake as to the exact quantity of land included under that description. As to the question what hardship will prevent the court granting a judgment for specific performance, see infra, Article 172. 296 A Digest of Equity. Article 109. Negative and Positive Misrepresentations of Fact. Misrepresentation is of two kinds, negative and positive. By negative misrepresentation is meant a failure to disclose facts where there is a legal duty to disclose them. By positive misrepresentation is meant the actual representation by words or conduct of facts as being different from what they are. By negative misrepresentation is meant here not the suppressio veri, which has the effect of making the facts disclosed misleading. Thus, in Delany v. Keogh, [1905] 1 I. E. 267, an auctioneer in selling a leasehold property stated that the rent was £25 a year but the landlord accepted £18 (as was the fact). At the time he stated this he knew that the landlord intended to demand the full £25 from a new tenant. This was held to amount to an implied representation, and such implied representa- tions are regarded for present purposes as positive mis- representations. By negative misrepresentation is meant simply a failure to disclose relevant facts, imiocently or otherwise, where the law puts a duty upon the party to disclose them. Positive misrepresentation usually is made by means of words uttered or written. But it may be made by any act or mode, provided it has the effect of inducing the other party to believe the thing that is not. Thus, the offering for sale of sham antiques may of itself amount to a positive misrepresentation that they are genuine. Here the maxim Res ipsa loquitur applies {Patterson v. Landsherg (1905), 7 P. 675). But the representation must be more than mere puffing of one's goods and vague general state- ments (Dimmock v. Hallett (1866), L. E. 2 Ch. 21). Misrepresentation in Law. 297 Article 110. What amounts to Misrepresentation in Law. In order that it may constitute a cause of action a positive or negative misrepresentation of fact relevant to a transaction must fulfil the following conditions : (i) It must relate to an existing physical fact. (ii) It must relate to a material fact. (iii) It must constitute part of the grounds which were intended to induce the person to whom it was made to enter into the transaction. (iv) It must have contributed to induce such person to enter into such transaction. (i) By saying that a misrepresentation in order to be actionable must be of an existing physical fact, what is meant is that mere expressions of beliefs, hopes, and opinions are not sufficient to ground an action for mis- representation. The person making the misrepresentation must refer in it to a fact actually existing or which he says actually exists. But in this connection it is to be remem- bered that the state of the representer's mind is a physical fact. As said by Bowbn, L. J., in Edgington v. Fitzmaurice (1885), 29 Ch. D. 459, at p. 483, the state of a man's mind is as much a physical fact as the state of his digestion. Accordingly, if he misrepresents the actual state of his opinions on a particular point, then, if the misrepresenta- tion fulfils the other conditions mentioned in the Article, the representer is liable for false representation. Further, a mere expression of opinion may amount to an absolute misrepresentation of fact. Thus, a statement that a certain mine is practically ready for work as soon as 298 A Digest of Equity. machinery can be erected amounts to a representation that the mine is in an almost complete state of develop- ment {Aaron's Beefs v. Twiss, [1896] A. C. 273, at p. 283). (ii) Whether a fact is or is not material is itself a question of fact, not of opinion. Accordingly, where a person either misstates a fact or fails to disclose it, being under an obligation to disclose it (see next Article), he is guilty of misrepresentation, even though he was honestly of opinion that the fact was not material (Gordon v. Gordon (1816), 3 Swanst. 400). Again, any fact which is made the basis of a contract is — ^whether it would be so con- sidered or not independent of the contract's terms — a material fact {Gordon v. Street, [1899] 2 Q. B. 641). It is to be remembered that a representation as to the contents of a document not shown to the person to whom the representation is made is a representation as to a fact (Wauton V. Coppard, [1899] 1 Ch. 92). It is also to be noted that what is the law in foreign countries is always a question of fact. As to companies, while all that appears in the public documents of the company — such as the memorandum of association and the articles — is under- stood to be known to all persons dealing with the company, what has actually happened in meetings of the company or of the directors is not supposed to be known, and a mis- representation as to proceedings at such meetings is one of which the court will take cognisance {County of Gloucester Bank v. Budry Merthyr Colliery Company, [1895] 1 Ch. 629). (iii) and (iv) A mere representation by a person having no intention of establishing a legal relation between him- self or some one else and the man to whom he makes the representation is not actionable. If, however, the mis- representation was made for the purpose of inducing the person to whom it was made to enter into a legal relation- ship, the fact that the latter person might have corrected the misrepresentation had he examined the facts does not in the slightest degree prevent his bringing an action for loss caused by the misrepresentation, if, in fact, he relied Negative Misrepresentation. 299 upon it (Redgrave v. Hurd (1881), 20 Ch. D. 1). Further, where a misrepresentation has been made, and the person to whom it was made enters into a legal relation, it will be assumed till the contrary is shown that the latter entered into the legal relationship in consequence of the misrepre- sentation (see Attwood v. Small (1838), 6 CI. & P. 232 ; cf. Nash V. Calthor'pe, [1905] 2 Ch. 237). Where, how- ever, nobody was deceived by the misrepresentation, no action lies (Salomon v. Salomon and Company, [1897] A. C. 22). Article 111. Where Non- disclosure Constitutes Negative Misrepresentation . (1) A person entering into an agreement is not under a legal duty to disclose to the other party to such agreement facts within his know- ledge relevant to the agreement, even though he knows that the other person is labouring under a mistake as to these facts, and that such mistake is influencing him in entering into the agreement, provided he has not directly or indirectly induced such mistake. (2) Exceptions to this rule occur in the case of— (i) Compromises of disputed claims. (ii) Family arrangements. (iii) Contracts uberrimce fidei. (iv) All agreements between two persons, one of whom stands in a fiduciary re- lation to the other, in so far as such agreements are within their fiduciary relationship. 300 A Digest of Equity. Paragraph (1). The general principle is thus stated by Fry, L.J., in his work on " Specific Performance " (par. 705) : " Mere silence as regards a material fact which the one party is not under an obligation to disclose to the other cannot be a ground for rescission or a defence to specific perform- ance." This statement of the law was adopted and approved by Chitty, J., in Turner v. Green, [1895] 2 Ch. 205, at p. 208. The case of Turner v. Green {supra) is a good (if some- what extreme) example of the application of this principle. Here negotiations for the settlement of an action were going on. Before the final arrangement was arrived at the solicitor of one of the parties (A.) learned by a telegram from his London agent that the Master had decided against him, and he had appealed to the judge. The other party (B.) was unaware of this, and neither A. nor his solicitor communicated it to him. In ignorance of it B. agreed to the settlement : — Held, that the settlement was good, as A. was under no obligation to inform B. of the Master's decision (sed qucere). If, however, one of the parties has directly or indirectly induced the mistake, he is bound on discovering the mistake to correct it before the contract is carried out. Thus, if a representation is made which was true, or believed to be true, at the time it was made, but is after- wards rendered false by a change in the subject-matter of the transaction or in the circumstances surrounding it, information of this change must be given to the party to whom the representation was made. Thus, in Davies v. London and Provincial Marine Insurance Company (1878), 8 Ch. D. 469, the defendants had had an agent of theirs arrested on a charge of felony. The agent's friends, to save him from prosecution on the charge, provided money as security for the repayment of the funds of the defen- dants which the agent was charged with stealing. Before the security was completed the defendants were informed by their legal advisers that the facts were not sufficient to Negative Misrepresentation. 301 sustain a charge of felony against the agent. This infor- mation was not communicated to his friends until the security was completed : — Held, that the agreement for security must be rescinded, and the money deposited returned to the agent's friends. Here, the defendants at the time they accepted the security knew that the charge which had been made by them against the agent was mistaken, and that his friends were bargaining on the understanding that the defendants were resolved to pro- ceed on it. And note incidentally that the fact that the agreement was illegal as a compromise of a charge of felony, did not affect the right of the friends to have it rescinded (c/. Scott v. Coulson, [1903] 2 Ch. 249 ; see also Windhill Local Board of Health v. Vint (1890), 45 Ch. D. 351). Porter v. Moore ([1904] 2 Ch. 367) is an instance of a mistake being indirectly induced. There the solicitors for an intending mortgagee of a trust fund induced the trustee to sign a memorandum to the effect that he had received no notice of any charge affecting the trust property. The solicitors did not before doing so inform him that they had submitted this memorandum to the trustee's solicitors, who were considering it. After the trustee had signed, his solicitors informed the mortgagee's solicitors that it was their practice to advise clients not to sign a memorandum such as that submitted : — Held, that the trustee was not bound by the memorandum. (Cf. Moody v. Cox and Hatt, [1917] 2 Ch. 71.) Paragraph (2). (i) The compromise of the action would not have been binding, says James, L.J., in Maynard v. Easton (1874), L. E. 9 Ch. 414, at p. 422, " if there had been any conceal- ment of truth, or suggestion of what is false, but that must be understood as relating to what is relevant to the matter to be compromised." In that case a father bought certain shares in the name of his son, who was an infant. Subsequently, on the com- pany going into liquidation, the son sued the vendor by 302 A Digest of Equity. his father as next friend for false representation. The vendor compromised the action. Subsequently the vendor, on the liquidator discovering the son was an infant, was placed on the list of contributors. He then tried to have the compromise set aside, on the ground tha,t when it was entered into the fact was concealed from him that the father, and not the son, was the real owner of the shares : — Held, that this fact was immaterial, and the compromise was binding. The vendor had compromised the action because he feared if it was heard the decision would be against him. That did not depend in any way upon whether the father or the son was the true purchaser of the shares. (ii) The law as to family arrangements is well and concisely stated in the judgment in Westby v. Westby (1842), 2 Dr. & War. 503 : " Wherever doubts and dis- putes have arisen with regard to the rights of different members of the same family, and especially where those doubts have related to a question of legitimacy, and fair compromises have been entered into to preserve the harmony and affection, or to save the honour, of the family, those arrangements have been sustained by this court, albeit, perhaps, resting upon grounds which would not have been considered as satisfactory if the transaction had occurred between strangers." Though, however, the court is more reluctant to set aside a family arrangement than a compromise between strangers, still the principle on which it proceeds in both cases is identical. This is stated by Turnee, L.J., in Brooke v. Lord Mostyn (1864), 2 De G. J. & S. 378, at p. 416 : " If there be no fraud and equal knowledge on both sides, the compromise cannot be disturbed." The fraud may be the work of a third person. Thus, in Be Roberts, Roberts v. Roberts, [1905] 1 Ch. 704, the parties' family solicitor, honestly believing that a compromise pro- posed by him was for the benefit of them all, deliberately or by a misconception misrepresented the respective rights of the parties : — Held, that the compromise could not be supported. Negative Misrepresentation. 303 (iii) It is usual in speaking of contracts uberrimcefidei to confine the expression to contracts of insurance, guaran- tees, and partnership agreements {LawY. Law, [1905] 1 Ch. 140). This, however, though convenient, is inaccurate. Contracts are uherrimce fidei, not because they are con- tracts of insurance, etc., but because they are contracts in which one party has to rely on the knowledge of the other party as to the risk he takes in entering into the transaction. Thus, not merely are the contracts above mentioned contracts uherrimce fidei, in most cases, but so also are contracts between trustee and cestui que trust {supra, p. 145), between client and solicitor, guardian and ward {per EoMBE, L.J., in Seaton v. Heath, [1899] 1 Q. B. 782, at p. 792). These latter, however, it will be convenient to consider separately. Thus, a contract of insurance — whether life, fire, or marine — must in the nature of things be in nearly every case a contract uberrimoe fidei, because the insurer must take the insured's word for most of the facts on which he calculates the risks he undertakes (see Hemmings v. Sceptre Life Association, [1905] 1 Ch. 865). But a guarantee is usually not a contract uberrimcefidei at all. In guarantees the other party to the guaranty has in most cases no negotiations with the guarantor. The negotiations are with the person whose liability is being assured, and, in the absence of fraud, under such circumstances the party to whom the guarantee is given is entitled to assume that the guarantor satisfied himself as to the transaction before becoming surety {ibid.). Where, however, the person becoming surety does so at the request of the person to whom the guarantee is given, the latter is bound to disclose all material facts within his knowledge. It is often said that contracts for the sale of land are uberrimcB fidei. This is a mistake. It is true the vendor of land has to produce an abstract of his title to the land, and such abstract, so far as it extends, must set out his title accurately. But he is not bound to disclose defects of title not coming within such abstract, nor need he disclose matters of fact which affect the value of the land. 304 A Digest of Equity. The court, however, has a discretion to refuse specific performance of such a contract where facts have been withheld which make it a great hardship upon the pur- chaser to insist on his carrying out his contract to buy. As to the effect of conveyance, see next Article. (iv) It has been said that contracts between trustee and cestui que trust, solicitor and client, guardian and ward, etc., are, strictly speaking, contracts uberrimce fidei. The first of these have already been dealt with. As an example of how far the court will go in upholding the rule that where a fiduciary relation exists between two parties to a transaction the fullest disclosure must be made, the case of Moody v. Cox and Hatt, [1917] 2 Ch. 71, may be cited. There the plaintiff entered into a contract to buy property from the defendants who were trustees of the property. The plaintiff retained one of the defendants as his solicitor to carry through the negotiations for the purchase and complete the transaction, and he gave bribes to the other defendant to help forward the negotia- tions. Under the contract the price the plaintiff was to pay for the property was to the knowledge of the defen- dants much more than it was worth : — Held, that it was the defendant solicitor's duty as solicitor to disclose to the plaintiff all he knew affecting the value, and as he had not done so the plaintiff, notwithstanding his having bribed the other defendant, was entitled to have the contract rescinded. It is to be remembered that a party entitled to the rescission of a contract on the ground of negative mis- representation, may waive, expressly or impliedly, his right to rescind or may be estopped from asserting it by laches on his part (see infra, p. 421). And estoppel may arise even where the party was not fully aware of the extent of the negative misrepresentation. Thus, on the dissolution of a partnership one partner did not reveal to the other all the assets of the firm. In consequence the other partner sold his share in them for less than its value. Afterwards he learnt of some of these undisclosed assets but not others. Nevertheless he accepted payment subse- Innocent Misrepresentation. 805 quently of the original price. Subsequently he learnt of the other undisclosed assets : — Held, he was estopped by lacJies from impugning the contract {Law v. Law, [1905] 1 Ch. 140 ; and see Hemmings v. Sceptre Life Association, [1905] 1 Ch. 365). Article 112. Effect of Innocent Misrepresentation. An innocent misrepresentation will, when made by the other party to the transaction, sustain an action for rescission of the agreement induced by it. Where, however, the agreement has been executed by conveyance or assignment of the subject-matter of the agreement, such mis- representation will not sustain an action for rescission of the conveyance or assignment. See Bedgrave v. Hurd (1881), 20 Ch. D. 1 ; Re Glubh, [1900] 1 Ch. 354 ; and Wilde v. Gihson (1848), 1 H. L. Cas. 605. Innocent misrepresentation as to one contract will not induce the court to grant rescission of another contract between the same parties unless the two contracts are so complicated as to make them inseparable transactions ; but where it appears that but for the innocent misrepre- sentation as to the one the party misled would not have entered into the other, the court may refuse specific performance of the second contract (see Holliday v. LocJcwood, [1917] 2 Ch. 47). After the contract has been completed by conveyance the court will not rescind. Thus, in Seddon v. North Eastern Salt Company, Limited, [1905] 1 Ch. 326, the plaintiff bought certain shares in a company from the defendants. During the negotiations for sale the defen- dants made certain innocent misrepresentations as to the 806 A Digest of Equity. business of the company. After sale these were dis- covered : — Held, that, though if the misrepresentations had been discovered before the transfer of the shares the plaintiff might have rescinded, he was not entitled to rescind after such transfer. But see infra, p. 423. For the purpose of rescission, an executed lease is a conveyance within this Article {Angel v. Jay, [1911] 1 K. B. 666). Article 113. Effect of Fraudulent Misrepresentation. (1) A fraudulent misrepresentation wiU, when made by the other party to the transaction, sustain an action for rescission of the contract induced by it, or, if the contract is one of sale, of the conveyance completing such contract; and will, in any case, sustain an action for damages for deceit against the party making the fraudulent misrepresentation. (2) A conveyance completing a contract of sale induced by fraudulent misrepresentation is, however, not void, but only voidable. Accord- ingly, if, after the conveyance and before action brought, the property conveyed is sold and transferred at law to a purchaser for value without notice of the fraud, no action for rescission lies against such third person. Article 114. Responsibility for Misrepresentations of an Agent. (1) Misrepresentations within Article 110, and whether innocent or fraudulent, will, when Misrepresentations of an Agent. 307 made by an agent, give the person to whom they are made the same remedy against the principal as if they had been made by the principal, where : (i) the agent was specially authorised by the principal to make the misrepresen- tations ; or (ii) the agent was generally authorised by his employment to make representa- tions in that connection on behalf of his principal ; or (iii) the agent's representations, though not made with the special or general' authority of the principal, are adopted by him. (2) Misrepresentations by an agent unautho- rised in any way to make them will render the principal liable to account to the person to whom they are made for any profit the principal may have gained through them. (3) Misrepresentations by a stranger will have the same result as regards a party who, when entering into a contract, is aware that the other party is being induced to enter into it by the representations of the stranger, and, where such representations are fraudulent, is also aware that they are in fact false. Paragraph (1). Cf. Karherg's Case, [1892] 3 Oh. 1 ; and Lord Lurgan's Case, [1902] 1 Ch. 707. Where the agent is acting within the scope of the authority expressly given him by the principal, the 308 A Digest of Equity principal is liable for his fraud, even when the fraud was committed, not for the principal's, but for the agent's benefit {Lloyd v. Grace, Smith and Company, [1912] A. C. 716 ; cf. George Whitchurch v. Cavanagh, [1902] A. C. 117 ; Hamhro v. Burnand, [1904] 2 K. B. 10 ; Pearson v. Dublin Corporation, [1907] A. C. 351 ; and supra, p. 285). Paragraph (2). Thus, an agent of an insurance company, with the object of inducing a lady who was insured with the company to continue her insurance, falsely represented to her that after she had paid the annual premium for four years more she would receive a policy free from future premiums. The agent had no authority, express or implied, to make this representation, which was inconsistent with state- ments appearing on the face of the original policy. The lady in consequence of this misrepresentation paid the annual premiums for the four years. The company then refused to grant her a free policy : — Held, that it must return to her the premiums for the four years (Kettlewell v. Befuge Assurance Company, [1907] 2 K. B. 241). { 309 ) Section V. Fraud and Undue Influence. SUMMARY. PAGE Aetiole 115. Fraud in law - 309 „ 116. Fraud in equity - - 312 „ 117. Undue influence - - 316 Article 115. Fraud in Law. Besides agreements induced by fraudulent misrepresentations, every agreement is at com- mon law voidable as against one party to it where it can be shown that the other party has in connection with such agreement been guilty of a dishonest act going to the basis of the understanding between the parties. This, like fraudulent misrepresentation, is called actual fraud. As was pointed out in Derry v. PeeJc (1889), 14 App. Cas. 337, actual fraud is essentially a common law tort, and as such its discussion in detail is out of place in a treatise on equity. Having, however, in dealing with misrepre- sentation, to discuss the most important kind of actual fraud — that due to fraudulent misrepresentation — it is proper to add the above rule lest it may be thought that no fraud renders an agreement voidable except a fraud which actually induces the agreement. The rule completes the subject of fraud as between parties to an agreement. It is based on the case of Panama and South Pacific Telegraph Company v. India 310 A Digest of Equity, Rubber, Gutta Percha and Telegraph Works Company (1875), 10 Ch. D. 515. There the defendants agreed with the plaintiffs to lay a telegraph cable at a certain price which was to be payable in twelve instalments as the work progressed, on the certificate of the plaintiffs' engineer, who was named in the contract. After the contract was entered into the defendants agreed with the engineer that he should lay the cable at a price payable by instalments on the defendants receiving payment from the plaintiffs : — Held, that the plaintiffs were entitled to rescind. The defendants had not induced the contract by fraud, but subsequently to entering into it they had been guilty of an act which made it impossible for the plaintiffs to secure its honest performance. This was the sole ground assigned by Jambs, L.J., and one of those assigned by Mbllish, L.J., for the decision. As said by Wilde, B., in Udell v. Atherton (1861), 7 H. & N. 172, at p. 181, " Fraud in all courts and at all stages of the transaction has been held to vitiate all to which it attaches " (c/. Archbold v. Lord Howth (1865), Ir. E. 1 C. L. 608). Though logically the matter is part of the law of pro- perty, yet, as it is usually referred to in works on equity, it is desirable to state very shortly the statutory law as to fraudulent dispositions of property. (1) Under 13 Eliz. c. 5 (repealed and re-enacted by sect. 172 of the L. of P. Act, 1925), where a person makes a volun- tary disposition of his lands or of his goods capable of being taken in execution, and where such disposition is calculated to, and does in fact, delay or defeat his creditors at the time of the disposition, or subsequent creditors who are entitled to stand in their shoes, the disposition will be deemed fraudulent as against such creditors. It will be voidable so far as is necessary to provide funds for the pay- ment of such creditor's debts (see'Ee Holland, Gregg v. Holland, [1902] 2 Ch. 360 ; Stra. L. C, p. 68 ; Be Beis, Ex parte Clough, [1904] 2 K. B. 769 ; Ideal Bedding Com- pany V. Holland, [1907] 2 Ch. 157). (2) Under 27 Eliz. c. 4 (repealed and re-enacted by sect, 173 of the L. of P. Act, 1925), any conveyance of land made for the purpose of defrauding subsequent purchasers Fraud in Law. 311 for value of such land is void as against such subsequent purchasers. Formerly any conveyance not made for value was presumed to come within this enactment if the grantor subsequently conveyed the land for value. This rule has now been altered by the Voluntary Conveyances Act, 1893 ; and the 27 Eliz. c. 4 consequently only applies where the first conveyance was not merely voluntary, but actually fraudulent. (3) By sect. 42 of the Bankruptcy Act, 1914— (a) Any settlement of property not being a settlement made (i) in consideration of marriage, or (ii) in favour of a purchaser or incumbrancer in good faith and for valuable consideration, or (iii) on the wife and children of the settlor of property coming to the settlor in right of his wife after marriage is voidable as against the settlor's trustee in bankruptcy if the settlor becomes bankrupt within two years after the settlement was executed ; or if he becomes bankrupt more than two years and less than ten years after the settlement was executed, unless in the latter case it can be shown that at the time the settlement was made the settlor could pay all his debts without having recourse to the property settled. (b) Any covenant made in consideration of marriage to settle property in which at the time of covenant- ing the settlor had no interest is on the settlor's subsequent bankruptcy void as against the settlor's trustee in bankruptcy in so far as the property covenanted to be settled has not been transferred to the trustees before the settlor becomes bankrupt and the persons claiming under the covenant can prove for the value of such property as creditors of the settlor ; and in so far as such property has been transferred, the trustee in bankruptcy can reclaim it unless the transfer (i) was made more than two years before 312 A Digest of Equity. the settlor became bankrupt, or (ii) was made when the settlor could pay all his debts without recourse to the property transferred, or (iii) was of property expected to come to the settlor on some person's death and it was transferred within three months after it came into the possession or under the control of the settlor (see In re BulteeVs Settlement, [1917] 1 Ch. 251). As respects the enactments as to covenants to settle, the settlor may be either the husband or the wife, and the beneficiaries either the wife or the husband and the chil- dren ; and they do not apply to covenants, by a husband to settle property coming to him in right of his wife. As to bankruptcies of married women, see infra, p. 401. Article 116. Fraud in Equity. (1) Where fiduciary relations exist between the parties to a transaction and such relations impose a fiduciary duty on one party to be careful, mere negligence on the part of this party will amount to fraud in equity and make him Hable to account to the other for loss resulting from his neghgence. (2) In equity an agreement not proved to be actually fraudulent may be presumed to be so unconscionable that it is tainted with fraud, and therefore voidable. This presumption will be rebutted by proving that in fact it is fair and reasonable. This presumption wiU be made for the benefit of the weaker party where the parties to the agreement dealt with each other on very unequal terms, and especially for the benefit Fraud in Equity. 313 of the vendor or mortgagor where the agree- ment is for the sale or incumbrance of an expectant interest to which the vendor or mort- gagor is, or expects to become, entitled. (3) In equity an agreement intended to be an imposition or deceit upon other persons not parties to the agreement is regarded as fraudu- lent, and therefore voidable. (4) A bargain by the donee of a special power that he shall receive a benefit out of, or in con- sideration of, the property subject to the power as a reward for his exercising it in favour of an object of the power, is a fraud upon the power and makes the exercise of it in favour of such object void. Paragraph (1). This principle is best illustrated by Nocton v. Ashhurton, [1914] A. C. 932, the facts of which are stated supra, at p. 10, and discussed supra, at pp. 240-242. Paragraph (2). It is to be noted that undervalue in itself never is sufficient to constitute presumed fraud. It is a necessary element merely, which, taken in conjunction with other circumstances — and more particularly such circumstances as the ignorance, poverty, or weakness of mind of the other party — may be sufficient to induce the court to hold that till the contrary is shown it will presume that the agreement was brought about by fraud. Thus, in Fry v. Lane (1888), 40 Ch. D. 312, persons who occupied the position of a laundryman and a plumber becoming entitled to shares in a certain property were taken by A. to his solicitor. A. entered into an agree- ment with them to purchase their shares at a gross under- value, and his solicitor acted both for him and for them. 314 A Digest oj Equity, giving a great advantage to A. : — Held, that the sale was voidable. As regards what used to be called snatching bargains from expectant heirs the law was formerly more stringent. It now depends on the Sales of Reversions Act, 1867 (re- pealed and re-enacted by sect. 174 of the L. of P. Act, 1925). That statute enacts (sect. 1) that " no purchase, made bona fide and without fraud on unfair dealing, of any rever- sionary interest in real or personal estate shall hereafter be opened or set aside merely on the ground of under- value." And by sect. 2 " purchase " includes every " kind of contract, conveyance, or assignment, under or by which any beneficial interest in any kind of property may be acquired." Apparently the effect of this Act is to put bargains with heirs on the same line as bargains with owners in posses- sion, subject to this, that the law regards an heir as being in a weaker position for making bargains than an owner in possession. As Lord Sblboenb points out in Earl oj Aylesford v. Morris (1873), L. E. 8 Ch. 484, at p. 490, the Act leaves undervalue still as an element to be taken into consideration in deciding whether there has been fraud. " These changes of the law have in no degree whatever altered the onus prohandi in those cases which, according to the language of Lord Hardwicke (in Chesterfield v. Janssen (1750), 2 Ves. sen. 125, at p. 155), raise ' from the circumstances or conditions of the parties contracting — ^weakness on one side, usury on the other, or extortion, or advantage taken of that weakness ' — a presumption of fraud. Fraud does not here mean deceit or circumven- tion : it means an unconscientious use of the power arising out of the circumstances and conditions ; and when the relative position of the parties is such as prima facie to raise this presumption, the transaction carmot stand unless the person claiming the benefit of it is able to repel the presumption by contrary evidence, proving it to have been in point of fact fair, just, and reasonable " (c/. Harrison v. Guest (1860), 8 H. L. Gas. 481 ; and Brenchley v. Higgins (1900), 88 L. T. 751). Fraud in Equity. 315 Paragraph (3). The most usual examples of this species of equitable fraud were formerly those agreements for what was called marriage brocage, and secret settlements by women about to marry in fraud of the future husband's marital rights. Thus, an agreement under which A. agreed that if B. would help him to secure C. in marriage he would give B. part of G.'s fortune, was a fraud upon C. {Hermann v. Charlesworth, [1905] 2 K. B. 123). If, on the other hand, after C. and A. had agreed to marry, C. secretly conveyed her fortune to B. to hold in trust for her separate use, that would have been a fraud on A.'s marital rights {Countess of Strathmore v. Bowes (1789), 1 Ves. 22). See now Married Women's Property Act, 1882. The ordinary case now of frauds on third parties is where a debtor, to induce a creditor to join in a composi- tion or offer accepted by the other creditors, secretly agrees to give him better terms than those which the other creditors have mutually agreed to accept {Lemta's Claim, [1894] 3 Ch. 365 ; and cf. Be Beis, Ex parte Clough, [1904] 2 K. B. 769). Paragraph (4). When a person having a power to appoint to a certain person or class enters into a corrupt bargain with such person or one of such class to exercise it, this bargain is a fraud upon the person or class or those entitled to take in default of appointment. But to be so the bargain must be corrupt, i.e., for the purpose of obtaining for the appointor a benefit out of or in consideration of the property appointed (see Saunders v. Shafto, [1905] 1 Ch. 126 ; In re Cohen, Brookes v. Cohen, [1911] 1 Ch. 37 ; In re Wright, [1920] 1 Ch. 108). And it is no fraud upon a power if the donee, being one of the objects of the power, exercises it by appointing the whole property to himself {Taylor v. Allhusen, [1905] 1 Ch. 529). It should be remembered that some powers operate to convey legal estates {i.e., common law powers and powers 316 A Digest of Equity. under the Statute of Uses (repealed as regards England by the L. of P. Act, 1922), while others only convey equitable interests. Where the estate conveyed is legal, a purchaser without notice of the fraud takes a good title ; but this is not so where the appointee takes only an equitable interest in the property fraudulently appointed {Cloutte V. Storey, [1911] 1 Ch. 18). Article 117. Undue Influence. (1) Every agreement induced by the exercise of undue influence over a party to the agree- ment is in equity voidable as against such party. (2) Where the relationship between the par- ties to an agreement is such as to make it Ukely that one party will be unduly influenced by the other party, then if by such agreement a gift is made to the latter or his wife or child, such agreement will be presumed to have been induced by the exercise of undue influence by the person supposed to possess such influence, until the contrary is shown. (3) The contrary . can only be shown by proving that : (i) the person supposed to possess such influence did not in fact possess it ; or (ii) the agreement was not in fact entered into on his advice but on the indepen- dent advice of a third person. The three personal grounds on which the common law granted rescission of an otherwise lawful agreement were fraud, coercion, and incapacity. Equity invented a fourth. Undue Influence. 317 Without holding that there was actual fraud or coercion, or that the person agreeing was mentally incapable of doing so, it held that a person might enter into an agree- ment under a combination of circumstances so akin to all the three legal grounds as to make it inequitable to hold him bound by it. This is what is meant by the equitable doctrine of undue influence. Equity went farther. Not merely did it hold that an agreement induced by undue influence was voidable, but that where one was made between persons occupying certain relative positions it must be presumed to have been induced by undue influence till the contrary was shown. This is really only an application or development of the general principle, that where one person reposes, or, in the nature of things, has to repose, confidence as to any matter in another person, it lies on the latter to show that in his dealings with the other as to such matter he acted fairly and reasonably. Examples of that principle we have had in the rules as to purchases by trustees from their cestuis que trust, as to constructive trusts, and as to contracts uberrimw fidei. Where actual undue influence is proved it is for present purposes practically equivalent to fraud. It may be that the person influenced knew clearly what he was doing, and was not actually forced into doing it, and was in his right mind, but the person who influenced him must have acted upon him in such a manner as to reduce him to a state in which he was not fit to be trusted with his own interests. This sort of state usually arises under the influence of religious emotions stirred up by an over- zealous or dishonest spiritual superior or adviser (see Allcard v. Skinner (1887), 36 Ch. D. 145). But, in the making of wills at any rate, there must be more than persuasion to constitute actual undue influence. The person subject to the influence must be unwilling to do the act and be coerced into doing it by the stronger will of, or by the terrors, spiritual or otherwise, held over him by the other (Baudains v. Bichardson, [1906] A. C. 169 ; and see Low v. Guthrie, [1909] A. C. 278). 318 A Digest of Equity. Presumed undue influence arises chiefly in connection with gifts, but as regards sales the cases we have mentioned as to trustees, constructive trustees, etc., might often be based on undue influence as much as on any other groimd (see Wright v. Carter, [1903] 1 Ch. 27). As to gifts, before it is presumed that they are made under undue influence, it is necessary to prove a relationship between the parties likely to give one of them great influence over the other ; and even where such relationship is proved, the inference from it may be rebutted by showing that in fact no such influence resulted {Willis v. Barron, [1902] A. C. 271). Thus, the relation of parent and child is presumed to give the parent much influence over the child, but not the child over the parent [In re Coomher, Coomler v. Coomher, [1911] 1 Ch. 174). But this may be rebutted by showing that the child has been " emanci- pated " — that is, that he or she has outgrown the influence which a parent naturally has over a child, either through his or her having reached mature years, and having lived away from home, or having broken with the parent. Till this is shown, the court will presume that a gift made by the child to the parent was made under the parent's influence unless it is shown that it was made in pur- suance of independent advice given by somebody else (see Powell V. Powell, [1900] 1 Ch. 243). The same inference arises where the relationship between the parties is one similar to that between parent and child, as, for example, between guardian and ward, person in loco parentis and adopted child, trustee and cestui que trust, etc. But that inference does not arise from the relationship of husband and wife. If undue influence is there alleged against the husband it must be proved in fact (Bank of Montreal v. Stuart, [1911] A. C. 120). Mere business or professional relations may, as to matters coming within the scope of the relation, give rise to the presumption of influence where the relations are such as presuppose con- fidence between the parties. Thus, a doctor towards his patient, a clergyman towards his spiritual ward, a solicitor towards his client, a partner towards his other partners, may be presumed to exercise great influence as to matters on which the others are likelv to consult him. As to Undue Influence. 819 all these terminable relations the strength of the pre- sumption depends on the intimacy and the recentness of the relation. The law was considered by the Court of Appeal in Wright v. Carter, [1903] 1 Ch, 27. There A. made a voluntary settlement of part of his property on his children X. and Y. and on his solicitor Z. There was no evidence that the settlement was made on Z. on Z.'s advice, and it purported to be made in reward for services rendered by Z. The settlement was drawn by another solicitor called in by Z.'s advice. A year later A., being in pecuniary difficulties, entered into an agreement with X., Y., and Z., whereby this settlement was revoked and in consideration of X., Y., and Z. covenanting to pay A. an annuity for his life, A. settled all his present and future property on X., Y., and Z. equally. This transaction was again carried through by a solicitor called, in by Z.'s advice ; but apparently the solicitor was not consulted as to the expediency of the transaction : — Held, that the second settlement was entirely bad and that the first settlement was good as regarded the interests taken by the children, but bad as regarded the interest taken by Z. BOOK I. EQUITABLE RIGHTS. C. THIRD DIVISION OF EQUIT- ABLE RIGHTS. EQUITIES TO PREVENT OPPRESSION. SUMMARY SECTION I. Relief against Forfeitures. PAGE Abtiolb 118. Penalties and liquidated damages - 324 „ 119. Eules for distinguishing penalties and liqui- dated damages 327 SECTION II. Mortgages and Liens. n Chapter 1. Nature of a Mortgage. Article 120. Definition of a mortgage 333 „ 121. The first essential characteristic of a mortgage 337 ,, 122. The second essential characteristic of a mortgage 343 Chapter 2. Position of Parties until Eedemption OR Foreclosure. Article 123. Mortgages at law and in equity - 345 „ 124. Position of the mortgagor 349 „ 125. Position of the mortgagee 352 „ 126. Mortgagee's personal remedy against the mortgagor 355 „ 127. Express and implied incidents of mortgages 358 „ 128. Implied incidents where mortgagor or mortgagee is in possession 358 „ 129. Implied incidents where the mortgage is by deed 360 ,, 130. Implied power of sale 361 „ 131. Implied power to insure 364 ,, 132. Implied power to appoint a receiver 365 Chapter 3. Eight to Eedeem. Article 133. Extent of the right to redeem - 368 ,, 134. Conditions of redemption - 371 „ 135. Interest and costs payable on redemption 372 Summary. 323 PAGE Aeticle 136. Tacking mortgages - 376 „ 137. Consolidation of mortgages 378 „ 138. Reconveyance on redemption - 380 . . Chapter 4. Eight to Foebclose. Article 139. Extent of the right to foreclose 382 ,, 140. Interest allowed on foreclosure 383 ,, 141. Jurisdiction of the court to order a sale 384 ,, 142. When foreclosure is complete 385 Chapter 5. Equitable Liens. Akticlb 143. Nature of an equitable lien 386 ,, 144. Vendors' and purchasers' liens 388 ,, 145. Subrogation - - 391 „ 146. Assignment of after-acquired property 392 SECTION III. Married Women's and Infants' Property. Article 147. Trusts for the benefit of women 394 148. The restraint on anticipation 398 149. Wife's equity to a settlement 402 150. Mortgages of married women's property - 404 151. Infants' property 404 152. Infants' assurances and contracts 407 ( 324) Section I. Relief against Forfeitures. SUMMABY. PAGR Aeticle 118. Penalties and liquidated damages - - 324 „ 119. Rules for distinguishing penalties and liquidated damages - 327 Article 118. Penalties and Liquidated Damages. (1) For tlie purpose of equitable relief for- feiture means — (i) tlie transfer to one party to a contract of the other party's interest in specific property ; (ii) the payment of a sum of money to one party by the other party, where such transfer or payment is by the terms of the contract to take place on the failure of the other party to perform and observe some or aU of the covenants and conditions contained in the contract. (2) Where the forfeiture is the payment of a sum of money, then, if it is intended — (i) to be a punishment for the failure, it is called a penalty ; (ii) to be an assessment before failure of indefinite damages Ukely to result to the other party through such failure, it is called liquidated damages. Penalties and Liquidated Damages. 325 (3) Equity always reKeves against a for- feiture, whether it be the payment of a sum of money or the transfer of specific property, where such forfeiture is in the nature of a penalty. It never relieves against a forfeiture where it is in the nature of liquidated damages. Paragraph (1). Equitable relief against forfeiture can only be given where the forfeiture arises out of contract. Many for- feitures arise out of tenure. For example, by custom a copyhold interest becomes forfeited to the lord in case the copyholder grants a lease of more than a year without the licence of the lord. Here the court cannot relieve {Peachy v. Duke oj Somerset (1722), 1 Stra. 447). Again, a forfeiture imposed on a gift may be unenforceable because the condition to which it is attached is void as contrary to the policy of the law. Thus, a condition in general restraint of marriage is void ; but a condition in partial restraint— such as not to marry without guardians' consent — may be good, and, if good, any forfeiture result- ing on breach cannot be relieved against (Be Whiting's Settlement, Whiting v. De Butzen, [1905] 1 Ch. 96). " The true ground of relief against penalties," as said by Lord Chancellor Macclesfield in Peachy v. Duke of Somerset (supra), " is from the original intent of the case, where the penalty is designed only to secure money, and the court gives him all that he expected or desired." Though this principle has been expanded it still states the real foundation of equitable relief. Paragraph (2). An example of equity regarding a money payment as a punishment for failure to perform a covenant arises in connection with covenants for payment of interest on 326 A Digest of Equity. mortgage debts. If interest at an increased rate is pay- able on failure to pay the interest reserved on the proper days, then the higher rate is regarded as being by way of penalty. If, on the other hand, a deduction is to be made from the interest reserved in case the interest is paid punctually, the higher rate reserved is not regarded as being by way of penalty. Parties are quite at liberty when entering into a con- tract to agree what will be considered the damages resulting from breaches of covenants. This is a par- ticularly useful practice where the damages likely to result are very indefinite and difficult to prove. Where this is done the court will enforce the agreement ; but where the damages which can result are clearly ascertainable the court holds that anything more agreed to be given must be in the nature of a penalty, and will not enforce it. The rules stated in .the next Article are those followed by the court in deciding whether a forfeiture is or is not iritended as a punishment. It sometimes happens that by these a forfeiture which is in fact intended as a punish- ment is held to be liquidated damages. Thus, in Strick- land V. Williams, [1899] 1 Q. B. 382, A., being committed to prison for breach of an injunction not to trespass on B.'s land, in order to obtain his discharge entered into a bond with B. to pay B. £100 if he did again trespass on B.'s land. Subsequently A. broke the covenant. Here, in fact, the £100 was intended to be a punishment of A. for breaking his word, but since it came within the rule stated in paragraph (2) of the next Article it was held to be liquidated damages. Paragraph (3). The relief which equity gives where it holds a forfeiture to be in the nature of a penalty is this : where the for- feiture is of specific property, upon the person liable paying the actual damage resulting from the breach of the covenant and all costs, it annuls the forfeiture. Where the forfeiture is of a sum of money, it holds that Penalties and Liquidated Damages. 327 the covenantee is entitled to sue the person liable only for the actual damage resulting from the breach. These principles of relief have been in some cases modified by statute. The court has not been so liberal in holding forfeitures of specific property as in holding forfeitures of sums of money to be penalties (see next Article). This arises, partly at any rate, from the fact that in the nature of things it is more difficult to apply the rules distinguishing penalties from liquidated damages to specific property of uncertain value than to sums of money. Article 119. Rules for distinguishing Penalties and Liquidated Damages. (1) When the covenant or condition or one of the covenants or conditions to which a for- feiture is annexed, is for the payment of a sum of money to the covenantee, the forfeiture is in the nature of a penalty. (2) When the forfeiture is annexed only to one covenant or condition, and that covenant or condition is for the doing or not doing of something else than paying a sum of money to the covenantee, and is one the breach of which would cause uncertain damage, then the for- feiture is in the nature of liquidated damages. (3) When a forfeiture is of a sum of money, and is payable on the breach of one or aU of several covenants or conditions, and the damage resulting from the breach of these would vary substantially, but would in aU of them be 328 A Digest of Equity. incapable of precise ascertainment, then if the sum payable on breach is not unconscionable the forfeiture will be held to be in the nature of liquidated damages. (4) The fact that the forfeiture is described in the contract as a penalty, or as hquidated damages, though a fact to be considered by the court in determining whether it is or is not a penalty, is not decisive of that question. Paragraph (1). This rule may be said to be without exception or Umita- tion. Whether the forfeiture arises under a mortgage, a lease, a bond, or a simple contract, the forfeiture, either of an interest in property or a larger sum of money than that secured by the condition or covenant, will be held to be in the nature of a penalty, and will be relieved against. Thus, in a mortgage equity has for ages reheved against the forfeiture of the mortgaged estate, which by law takes place when the mortgagor fails to pay the mortgage debt on the day fixed for its payment (see infra, Article 121). Then in a lease equity in the same way has long relieved against the forfeiture of the lease for the failure of the lessee to pay the rent reserved on the proper day. Formerly, the jurisdiction of the court to give relief was indefinite. Now by sects. 210 and 212 of the Common Law Procedure Act, 1852, application for relief must be made at the latest within six months after judgment in eject- ment has been obtained. Further, the lessee must, on the application, tender all rent due and costs. On the other hand, no forfeiture for non-payment of rent is to arise except demand is expressly made for the rent on the last day on which it is payable. But the demand is not necessary where the lease expressly provides otherwise, or where half a year's rent is due and there is no sufficient distress on the premises. Penalties and Liquidated Damages. 329 Forfeiture of leases for breaches of conditions to pay rent were the only forfeitures of leases against which equity relieved. Now, however, by sect. 14 of the Con- veyancing Act, 1881, relief can be given before judgment in ejectment (but not after : Bogers v. Bice, [1892] 2'Ch. 170) in the case of most other conditions. (See now s. 140 L. of Prop. Act 1925 and Stra. Property, pp. 99, 100.) The equitable rule as to relief on bonds was declared in 8 & 9 Will. 3, c. 11, and 4 & 5 Anne, c. 3. The chief object of these statutes seems to have been to transfer the jurisdiction of relief to the Common Law Courts. The latter Act applies only to money bonds — that is, bonds in which the payment of one sum of money is secured by a covenant to pay on default a larger sum. Here judgment is to be given for the smaller sum, with interest, and the bond discharged. 8 & 9 Will. 3, c. 11- — which probably goes beyond the equitable rule (see per Collins, L.J., in Strickland v. Williams, [1899] 1 Q. B. 382, at p. 385)— applies to " covenants or agreements in any indenture, deed, or writing contained," under which more than one breach might occur. Here the covenantee is to assign all breaches ; the damages for these are assessed and judg- ment is entered for the sum reserved by the bond, but execution is issued only for the amount of the damage, the judgment remaining to cover any subsequent breach. Since the Judicature Act, 1873, these Acts serve little purpose, except, perhaps, that of traps for the unwary (see StricMand v. Williams, supra). Independently of these statutes, the rule applies to all indentures and contracts. And it applies equally when the forfeiture is annexed to several conditions, some of which are for securing the doing of other things, if any of them are for securing the payment of a smaller sum of money (see Be Nevmian (1876), 4 Ch. D. 724). Paragraph (2). This rule also seems to be without exception or limita- tion, unless it be where the sum reserved is so exorbitant 330 A Digest of Equity. as to make it impossible to believe that it was intended to be liquidated damages : per Lord Davey in Clydebank Engineering and Shipbuilding Company v. Don Jose Ramos Yzquierdo y Castaneda, [1905] A. C. 6, at p. 17. In that case the appellants had contracted to build certain warships for the Spanish Government. There was a clause in the contracts fixing the dates for the delivery of each ship, and placing a " penalty " of £500 per week for each ship which was delivered later than such dates. There was considerable delay in the delivery of all the ships. The Spanish Government paid the contract price and then sued for the amount of such " penalties " as liquidated damages : — Held, that it was entitled to recover them in full. Paragraph (3). The rule formerly was that " where the contract con- tains a variety of stipulations of different degrees of importance, and one large sum is stated at the end to be paid on breach of any of them, that must be considered as a penalty " (per Lord Coleridge, C.J., in Magee v. Lavell (1874), 9 C. P. 107, at p. 111). This rule was much criticised (see per Jessbl, M.E., in Wallis v. Smith (1882), 21 Ch. D. 243, at p. 262, and per Eigby, L.J., in Willson V. Love, [1896] 1 Q. B. 626). Now it has been modified as stated in the Article by the decision of the House of Lords in Dunlop Pneumatic Tyre Company v. New Garage and Motor Company, [1915] A. C. 79. It was laid down by Lord Watson, in Lord Elphin- stone V. Monkland Iron and Coal Company (1885), 11 App. Gas. 332, at p. 342 : When a single lump sum is made payable by way of compensation on the occurrences of one or more or all of several events, some of which may occasion serious and others but trifling damage, the pre- sumption is that the parties intended the sum to be penal and subject to modification. This statement of the law seems still accurate provided emphasis is put upon trifling damage. A large forfeiture for a breach which could Penalties and Liquidated Damages. 331 result in no appreciable damage is unconscionable and will not be enforced. Every case, as said by Lord Parkbb in Dunlop 'Pneumatic Tyre Company v. New Garage and Motor Company {supra, at p. 330), must be judged on its merits, but prima facie a forfeiture incurred for the breach of one of several covenants is, if reasonable, to be con- sidered liquidated damages. In Diestal v. Stevenson, [1906] 2 K. B. 345, a forfeiture which clearly camp within this principle was held by BiGHAM, J., to be liquidated damages apparently on the ground that that was the intention of the parties. It is submitted that the true test is whether the circumstances show that the parties really tried to make a pre-estimate of damages or merely meant to punish for the breach (see Commissioner of Works (Cape of Good Hope) v. Hills, [1906] A. C. 368). Where punishment was intended the court relieves notwithstanding the intention of the parties. In other words, it will not permit them to contract in that way (c/. relief under mortgages, Article 121). It is to be noted that this rule applies only when the forfeiture is of a sum of money, not of specific property. Where it is of specific property, the court will judge whether the forfeiture is a penalty or not in respect to each covenant to which it is annexed. Thus, it is the custom in a lease to put in a general clause forfeiting the lease on the breach of any of the covenants contained in it, including the covenant to pay rent. The forfeiture here in regard to the payment of rent will be treated in equity as in the nature of a penalty and relief given (see Stra. Property, p. 90), but in regard to the other covenants and conditions as in the nature of liquidated damages. Paragraph (4). In the words of Lord Eshbk, M.E., in Willson v. Love (supra), " A succession of judges have held that the use of the term ' penalty ' or ' liquidated ' damages is not con- clusive ; but no case, I think, declares that the term used by the parties themselves is to be altogether disregarded ; 332 A Digest of Equity. and I should say that where the parties themselves call the sum made payable a ' penalty,' the onus lies on those who seek to show that it is to be payable as ' liquidated damages.' " That the use of the term " penalty " or " liquidated damages " is not conclusive is suf&ciently evident from the foregoing cases. Thus, in Clydebank Engineering and Shipbuilding Company v. Don Jose Bamos Yzquierdo y Castaneda {supra), where the forfeiture was held to be liquidated damages, it was described in the contract as a penalty, and in Be Newman (supra), where it was held to be a penalty, it was described in t^e contract as liquidated damages. ( 333 ) Section II. Mortgages and Liens. CHAPTEE 1. Nature of a Mortgage. SUMMARY. PAGE Article 120. Definition of a mortgage 333 „ 121. The first essential characteristic of a mortgage • 337 „ 122. The second essential characteristic of a mortgage • 343 Article 120. Definition of a Mortgage. (1) A mortgage for the purposes of this section may be defined as an assurance of a proprietary interest in land by a borrower (who is called the mortgagor) to a lender (who is called the mortgagee) made for the purpose of securing the repayment of a loan (which is called the mortgage debt) and conditioned expressly or impliedly to become absolute on the failure of the borrower to repay the loan. (2) When the proprietary interest assured is a legal interest the mortgage is called a legal mortgage. When it is an equitable interest it is called an equitable mortgage. (3) A mortgage made by a mortgagee is called a sub-mortgage. A mortgage where each of several mortgagees advances a share of the loan is called a contributory mortgage. 334 A Digest of Equity. Paragraph (1). It is to be noted that the summary of the law contained in this section is limited to mortgages of land. Mortgages are also made of choses in possession, but the law as to these is now contained in the Bills of Sale Acts, 1878 and 1882 (see Stra. Property, p. 218), and forms no part of equity. Again there are mortgages of choses in action. The law as to these seems to be the same, so far as applic- able, as that relating to mortgages of land {Salt v. Marquis of Northampton, [1892] A. C. 1) save that sometimes the right of foreclosure does not apply (see infra, Article 122), and there is an implied right of sale to be reasonably exercised on the mortgagor making default of payment {Deverges v. Sandeman, Clark & Co., [1901] 1 Ch. 70 ; Stubhs V. Slater, [1910] 1 Ch. 682). In order that a transaction may amount to a mortgage it must transfer to the lender a proprietary interest ia the land, This is what distinguishes a mortgage from a pledge and a lien. In a pledge only the possession of the thing pledged passes. Mortgage {mJjei.tin mortuurnvadium; in French morf gage) in reality means a pledge, but pledges (in the present sense of the word) of land, if they ever existed, are now unknown. Pledges of chattels, are, however, common enough. These are now, when the article pledged is of small value, within the Pawnbrokers Act, 1872. Liens on the other hand transfer no proprietary interest totheperson entitled to them. In this sense the new statutory charges by way of legal mortgage are liens ; but the person entitled to them has all the rights of a legal mortgage. It will not be necessary to consider separately these charges since their existence is due entirely to conveyancing considerations, and as a matter of fact it is extremely doubtful whether conveyancers will make much use of them any more than they have with other statutory forms of mortgage. A mortgage must not merely transfer a proprietary interest, but it must transfer it as security for a loan. This is what distinguishes a mortgage from a conditional sale. The importance of this distinction will appear from the note to the next Article. Definition of a Mortgage. 335 A mortgage must also be an assurance conditioned to become absolute on failure to pay the mortgage debt. It was this condition which gave equity the opportunity of interfering. As was pointed out in dealing with Belief against Forfeiture, the forfeiture of the mortgaged land on , the mortgagor's failure to pay a mere money debt was by the rules of equity a forfeiture in the nature of a penalty. Equity therefore, in accordance with its principles, relieved against it. This point, too, will be considered further in the note to the next Article. There are some mortgages which do not result in forfeiture on failure to pay. As has been pointed out, mortgages of choses in action, or indeed of choses in possession, only confer a right of sale. Sometimes there are mortgages of land made by way of power of sale which give rise to no forfeiture. These are of too little importance to be separately considered in a work like this. For practical purposes, when one speaks of a mortgage of land one always means a mortgage of the nature described in the Article. When mortgages were made by conveyance of the mortgaged property to the mortgagee there could be only one mortgage of the same legal estate in the land. When such a mortgage was made the maker ceased to have any legal interest in the land. Any interest which remained in him was one recognised only in equity and so any second or third mortgages must in the nature of things be equitable only. [Under the new law, as we shall see, all mortgages 0/ legal estates are to be or to he deemed to he made not hy con- veyance hut hy lease or underlease. The results of this are that the mortgagor remains after a mortgage the legal owner of the land subject to the lease or sublease granted to the mortgagee and the mortgagees themselves all take legal interests in the land mortgaged whether their mortgages are first or subse- quent. This change, however, makes little change in the positions of mortgagor and mortgagee respectively, since it is expressly enacted that save as ex-pressly provided these are to continue as before.^ 336 A Digest of Equity. Equitable mortgages confer equitable interests in the land, and the rules set out in Articles 11-20 (supra) apply to them equally with equitable interests arising under trusts express or otherwise. It will not be neces- sary, therefore, to say here anything as to the priority, etc., between them. The only doctrine applying exclusively to equitable mortgages is that of tacking, which we will consider when we come to deal with the restrictions on the right to redeem (infra, p. 376.) Equitable mortgages may arise because the mortgagor has only an equitable interest to transfer, as in the case of a cestui que trust mortgaging his interest under the trust. [These henceforth will be very numerous since now every interest in land save fees simple and absolute terms of years are to be equitable and not legal interests.^ They may also arise owing to the form of assurance used in effectiug the mortgage being such as equity only recognises. To create a legal mortgage of land a deed must be used, as nothing else will transfer the legal title to an interest in land, however small. But an equitable interest (other than an equitable estate in tail) may be transferred by mere writing unsealed (ibid., p. 33), or when it does not arise under a trust, even without writing. Thus a usual way of creating an equitable mortgage is by depositing the title-deeds of the property to be mortgaged with the lender. This creates a good mortgage in equity (Bussel V. Bussel (1783), 1 Bro. C. C. 269). In general the incidents of these mortgages are the same — so far as equity is concerned — as the incidents of mortgages created by deed, but it will be observed that most of the powers given by statute relate only to mortgages by deed (see infra, p. 360). Paragraph (3). Thus if A. mortgages land to B. and B. afterwards mort- gages it to C. the mortgage to C. is a sub-mortgage. If, on the other hand, B. and C. each advanced half of the mortgage loan to A., this mortgage would be a contributory mortgage. Mortgages : Bight to Bedeem. 337 Trustees are not permitted to advance trust money jointly with others on a contributory mortgage {Stokes v. Prance, [1898] 1 Ch. 212). Article 121. The First Essential Characteristic of a Mortgage. (1) The first essential characteristic of a mortgage is the mortgagor's right to redeem. (2) By the mortgagor's right to redeem is meant that a mortgagor, notwithstanding any condition or stipulation to the contrary con- tained in the mortgage agreement, is entitled, on repaying the mortgage debt with interest and costs and discharging any other legal obligation forming part of the consideration for the mortgage, to call upon the mortgagee to re-transfer to him the mortgaged interest and to discharge him and it from aU legal obliga- tions arising out of the mortgage agreement. (3) The right to redeem is inchoate until the time for repajdng the mortgage debt, according to the mortgage agreement, arrives. It then becomes complete. In a legal mortgage, if it is not exercised immediately it becomes complete, it is lost at law for ever. But in equity, whether the mortgage be legal or equitable, the right to redeem continues until it is determined in some of the ways hereinafter stated. Paragraphs (1) and (2). The principle stated here is usually summed up in the maxim " once a mortgage always a mortgage." By this 338 A Digest of Equity,, is meant that once it is shown that a transfer of an interest in property was intended as security for the repayment of a debt, then no condition or stipulation introduced into the transaction will be permitted to turn it into a con- ditional sale (see note to paragraph (3)) or otherwise prevent the mortgagor from getting back his property free from obligation on his repaying the mortgage debt (see Samuel v. Jarrah Timber and Wood Paving Corpora- tion, [1904] A. C. 323, at p. 329). In the words of Lord Macnaghtbn in Bradley v. Carritt, [1903] A. C. 253, at p. 261, " Equity will not permit any device or contrivance designed or calculated to prevent or impede redemp- tion." Any such device or contrivance is called a clog on the right to redeem. A statutory exception has been made to this rule. A debenture is a mortgage of a joint stock company's pro- perty or undertaking. By sect. 103, Companies (Consoli- dation) Act 1908, a condition contained in a debenture is not to be invalid by reason only that thereby the debenture is made irredeemable or redeemable only on the happening of a contingency, however remote, or on the expiration of a period, however long, any rule of equity to the contrary notwithstanding. The following points should be noted with regard to clogs : (1) The stipulation in order to be a clog must form part of the mortgage agreement. The ground on which a Court of Equity held any stipulation giving the mort- gagee a greater right than the right to have his debt repaid at the date fixed for redemption to be invalid was based on the view that mortgagor and mortgagee were not dealing on equal terms. The mortgagor was presumably in need of money, the mortgagee in possession of money. Therefore equity interfered to protect the weaker party ■ — as it often did. Once, however, the mortgage is made the mortgagor has got the money he wants. If he chooses subsequently by a new agreement to release his right of redemption to the mortgagee, there arises no ground of relief from such agreement {Reeve y. Lisle, [1902] A. C.461). Mortgages : Bight to Bedeem. 339 (2) A stipulation postponing the right to redeem for a reasonable time is no clog on the right of redemption, The usual period fixed for repayment of the mortgage debt is the first date upon which interest on the mortgage debt becomes payable — that is, six months or three months after the date of the mortgage. But not infrequently there is a stipulation that the mortgagor shall not redeem until a much later date. Such a stipulation, if reasonable, is quite proper {Biggs v. Hoddinott, [1898] 2 Ch. 307). In Morgan v. Jeffreys, [1910] 1 Ch. 620, a stipulation that the mortgagor should not redeem until the elapse of twenty-eight years from the date of the mortgage was held unreasonable and void. And the same point was upheld in Fairclough v. Swan Brewery Company, Limited, [1912] A. C. 565, where in a mortgage of a leasehold property the right to redeem was only to be exercised almost immediately before the expiration of the lease. (3) A stipulation which gives the mortgagee during the continuance of the mortgage a right to other advantages (called collateral advantages) besides the mere payment of interest on the mortgage debt is, if fair and reasonable, not a clog on the right to redeem. Thus, where in the mortgage of a public-house there was a condition in the mortgage deed that the mortgagor would buy the beer sold on the mortgaged premises from the mortgagee during the continuance of the mortgage, this condition was held good {Biggs v. Hoddinott, [1898] 2 Ch. 307). But every collateral advantage is regarded with suspicion, and if it is not fair and reasonable it is void ab initio {James V. Kerr (1889), 40 Ch. D. 449). (4) Formerly it was assumed as an axiom of equity that any stipulation which gives a right to the mortgagee against the mortgagor himself, or against the mortgaged property, after the mortgagor has paid off the full mortgage debt with interest and costs, is a clog on the equity of redemption. Thus, where a brewer advanced money on mortgage to a publican and there was a stipu- lation that whether tlie mortgage debt was meanwhile paid off or not the pubUcan would continue for a certain 34d A Digest of Equity. period to buy his beer for sale in the mortgaged inn from the brewer : — Held, that after the mortgage debt was discharged the publican was no longer bound by the stipulation {Noakes d; Co., Limited, v. Uice, [1902] A. C. 24 ; Bradley v. Carritt, [1903] A. G. 253). The decisions cited are those of the House of Lords and are quite clear and specific. They however appear to have been over-ruled by another decision of the House of Lords which is far from being clear or specific. The case I refer to is G. <& C. Kreglinger v. New Patagonia Meat Company, [1914] A. C. 25. I will content myself with giving the facts in that case and their lordships' decision upon them. The grounds for that decision are stated so differently and so vaguely that it is useless in a treatise Hke this to discuss them. In G. (& C. Kreglinger v. New Patagonia Meat Co. {supra) the plaintiffs in 1910 lent the defendant company £10,000 on a floating charge on their undertaking. If the defendants discharged all their obligations under the mortgage the plaintiffs were not to reclaim repayment of the mortgage debt till September 1915. One of the obligations was to, give the plaintiffs the option to pur- chase on certain terms all the sheepskins at the defendants' disposal for five years from August 1910. - The defendants repaid the loan with interest in January 1913 and claimed then to determine this obligation : — Held, that the obHga- tion continued binding on them till August 1915. And see In re Cuban Land Company, [1921] 2 Ch. 147 and Stra. Law of Mortgages, pp. 36-38. It should be noted that whether or not the collateral benefit given to the mortgagee determines with the mortgage, the courts regard it with suspicion. If it is not reasonable they will treat it as being induced by the oppression of the mortgagee, and will hold it voidable {James v. Kerr, [1889] 40 Ch. D. 449). (5) Lastly, a stipulation giving the mortgagee a col- lateral benefit, even though exercisable only during the Mortgages : Bight to Bedeem. 341 continuance of the mortgage, is a clog if the effect of its exercise will be to prevent the inchoate right to redeem ever becoming complete. Thus, in Samuel v. Jarrah Timber and Wood Paving Corporation, Limited, [1904] A. 0. 323, a limited company mortgaged some of its debenture stock to S. The mortgage debt was to be paid off at any time after thirty days' notice on either side. The mortgage agreement gave the mortgagee the right to purchase the mortgaged stock at forty per cent, at any time within twelve months. Within the twelve months and before any notice to pay off the mortgage debt had been given, the mortgagee exercised his option to purchase the mortgaged stock : — Held, that the stipulation was void and the company was entitled to redeem. Paragraph (3). The right to redeem is an essential characteristic of a mortgage — that is, a transaction cannot be a mortgage without it. But a transaction may give a right to redeem and yet not be a naortgage. Thus, a conditional sale gives the vendor a right to redeem, yet a conditional sale is not a mortgage. The difference between them is that a mortgage is based on a loan, a conditional sale upon a price. Wherever the person to whom the property is transferred can Sue the transferor for debt in case the transferor fails to redeem, the transaction is a mortgage. As we shall see, the law did not distinguish between mortgages and conditional sales. In both cases it regarded the transaction as an out-and-out conveyance, subject to a condition to reconvey on payment of a certain sum of money. This condition, like all legal conditions, had to be strictly observed. If it were not fulfilled by the payment of the money on the day it was to be paid, the right to redeem was gone for ever. Equity sharply distinguished. It refused to help the vendor on a con- ditional sale. A vendor is just as well able to look after himself as a purchaser, or is supposed to be till the contrary is shown, and so it was assumed that he had secured the fair price of his property. Accordingly, if 342 A Digest of Equity. he did not repurchase it when he had a chance, the court held his right to repurchase was gone. But a borrower is always regarded in equity as bargaining with a lender on unequal terms. It is assumed, therefore, that the amount he receives on the security of his property is not its full value — -an assumption generally right. Accordingly to deprive him of his property for failing to repay the loan on the precise day was not merely a penalty in the technical sense, but a real injustice. On this ground equity intervened, and held that the mortgagor should have still a reasonable time after the legal forfeiture to redeem his estate. The next Article shows the limitation which is put on this continuance of the right to redeem. Conditional sales are still occasionally made and are still strictly enforced, provided it can be shown that they are in fact sales and not in fact securities for repayment of debts. As a rule, no questions now ever arise on this point, as a mortgage is always drafted in a form that clearly shows it was intended to be a mortgage. Where any such question does arise, the points the court will consider ia deciding it are chiefly these : (a) Who paid the costs of the transaction ? The practice is that the grantor pays them where the transaction is a mortgage and the pur- chaser where it is a sale, (b) Did the grantee take possession immediately ? In mortgages the grantee seldom takes immediate possession ; in sales the pur- chaser usually does, (c) Did the grantee, when he took possession, keep accounts of rents and profits ? In mort- gages, the mortgagee in possession must keep accounts, but, of course, in sales, the purchaser is under no such obligation, (d) Was the consideration given adequate as the price of the property or not ? (See per Lord Cranwokth in Alderson v. White (1858), 2 De G. & J. 97, at p. 135.) Though the right to redeem is inchoate until the time fixed for the repayment of the mortgage debt arrives, yet if the mortgagee before that time brings an action for the possession of the mortgaged land, the mortgagor is entitled Mortgages : Bight to Foreclosure. 343 to redeem at once. When no time is fixed for the repay- ment — which rarely happens except when the mortgage is by deposit of title-deeds — ^the right to redeem is complete from the first. The right to redeem after the time fixed for redemption has passed exists notwithstanding any custom of trade to the contrary {Ponsolle v. Webber, [1908] 1 Ch. 254). Article 122. The Second Essential Characteristic of a Mortgage. (1) The second essential characteristic of a mortgage is the mortgagee's right to foreclose. (2) By the mortgagee's right to foreclose is meant that when the mortgagor's right to re- deem has become complete, and he has failed to exercise it, the mortgagee is entitled to apply- to the court for an order directing the mort- gagor to redeem within a certain time, or in default be deprived for ever of his right to do so. (3) Such an order is called an order of foreclosure. When equity decided not to permit the mortgaged property to be forfeited merely because the mortgagor failed punctually to repay the mortgage debt, it never intended to deprive the mortgagee permanently of this remedy. Accordingly it gave him the right to foreclose described in the text, and so to appropriate to himself the mortgaged property towards the satisfaction of the mortgage debt. 344 A Digest of Equity. This right to foreclose is simply then the right to ask the court to withdraw its relief against a forfeiture which is created by the mortgage (Williams v. Morgan, [1906] 1 Ch. 804). Accordingly it does not exist where there is no forfeiture created by a transaction by way of security for a debt. Thus, where a mortgage is made by way of sale — -i.e., giving the mortgagee simply power to sell in case the mortgagor makes default in payment — ^there is no right of foreclosure. Neither is there such a right in the case of pledges or liens. In all these cases, the right to redeem continues until the property mortgaged or changed has been actually sold to satisfy the debt. Where, however, there is a forfeiture, no stipulation in the mortgage deed can prevent the right to foreclose arising upon default in payment, though the court now in an action of foreclosure can, if it sees fit, direct a sale of the mortgaged property instead. ( 345 ) CHAPTBE 2. Position of Parties until Redemption or Foreclosure. SUMMARY. PAGE Abtiole 123. Mortgages at law and in equity - 345 124. Position of the mortgagor - 349 125. Position of the mortgagee - 352 126. Mortgagee's personal remedy againstthe mortgagor 355 127. Express and implied incidents of mortgages 358 128. Implied incidents where mortgagor or mortgagee is in possession 358 129. Implied incidents where the mortgage is by deed - 360 130. Implied power of sale - 361 131. Implied power to insure - 364 132. Implied power to appoint a receiver - - 365 Abticle 123. Mortgages at Law and in Equity. (1) At law, a legal mortgage of fees simple being regarded as a sale subject to a condition of repurchase, after the mortgage all that remained in the mortgagor was the benefit of such condition, which carried with it no interest in the land mortgaged. (2) In equity, a legal or equitable mortgage being regarded as a mere mode of securing a debt, after the mortgage all the interest in the mortgaged land remains in the mortgagor, sub- ject to the mortgage debt. This interest is called his equity of redemption. 346 A Digest of Equity. [(3) Under the new law as all mortgages of land, whether held in fee simple or on lease, are to be made or deemed to have been made by lease or sub- lease, the legal ownership either of the fee simple or of the leasehold remains in the mortgagor after the mortgage and the equity of redemption has ceased to be an equitable interest and now is a legal estate in the land carrying a right on the part of the mortgagee to determine the mortgagor's interest in the mortgaged land on certain conditions and on the part of the mortgagor to determine thd mortgagee's interest on other conditions.] Paragraph (2). It was not until the middle of the eighteenth century that it was finally decided what the nature of a mort- gagor's right in equity was. It was then held in Casborne v. Scarf e (1737), 1 Atk. 603, that it was an equitable estate in the land just as much as the interest of a cestui que trust under a declared trust. Indeed, the mortgagee is a constructive trustee of the land for the mortgagor, using that term in the wide sense (Article 10, supra). While the mortgagor is left in the possession of the land this is of no importance, but as soon as the mortgagee enters on the land, it will be seen that many of the duties of an ordinary trustee are immediately imposed upon him. His position then is that of a con- structive trustee with a beneficial interest in the trust property. The equity of redemption being then an ordinary equitable estate in the land, the rules laid down in Article 20 (sujpra) apply to it. The different mode in which it arises gave a peculiarity, however, which other equitable estates did not possess. As we shall see, when a person dies his debts are primarily payable out of his general personal estate. Mortgages at Law and in Equity. 347 Now a mortgage, being in equity simply a borrowing transaction, tbe debt which it created was on the death of the mortgagor primarily payable out of his personal estate. The mortgagor might alter this by expressly directing in his will that the mortgaged land should be liable for the debt ; and the rule did not apply where the debt was an ancestral one — that is, where the deceased owner of the equity of redemption was not the actual borrower. But in other cases the heir or devisee of the land could call on the executors or administrators to pay off the mortgage. That has now been altered as regards mortgaged estate devolving on death. But the rule still applies where the mortgaged land is transferred by way of gift during the life of the mortgagor {In re Darby's Estate, [1907] 2 Ch. 465). Where the equity of redemption is sold there is always, in the absence of an express provision on the point, an implied undertaking on the part of the assignee to indemnify the mortgagor against the mortgage debt {Mills v. United Counties Bank, Limited, [1911] 1 Ch. 669). Where, however, the mortgaged property is reversionary this indemnity arises only on the property vesting in possession {ibid.). As to the liability under a covenant of indemnity, see Watling v. Lewis, [1911] 1 Ch, 414). [By recent legislation an assignment of the mortgage debt carries with it without express mention the mortgaged land and all the other securities, if any, for the repayment of the mortgage debt {sect. 114, L. of P. Act, 1925).] The different views held by law and equity of the mortgagee's position created a peculiar situation where the mortgaged land was freehold or copyhold and the mortgagee died intestate. At law as he was owner of the legal title to the land, it vested in his heir. In equity as the whole transaction was regarded as a loan, the right to repayment vested in his personal representatives. This was, as far as freeholds were concerned, put an end to by sect. 30 of the Conveyancing Act, 1881. 348 A Digest of Equity. Paragraph (3). [This new enactment is really nothing more than a reversion to the old 'practice under which mortgages of fees simple were made by long leases without rent reserved instead of being made as they have been since the Conveyancing Act, 1881, by conveyance of the freehold. The object of making mortgages of fees simple by lease was to ensure that the right to receive the mortgage debt and the right to reconvey the mortgaged land to the mortgagor should, if the mortgagee died intestate, vest in his administrators. The old practice has now been revived not for that object since under the L. of P. Act, 1925, realty and personalty devolve in the same way but rather to secure the free alienation of what is still called the equity of re- demption. Under a conveyance of a fee simple on mortgage that was only an equitable estate. Now it is the legal fee simple subject to the mortgage ; and so a purchaser of it is not affected by equities of which he had not notice when he purchased. Though the mortgagor's interest in the mortgaged land has now ceased to be an equitable interest we will still call it by its old name — equity of redemption — since save as above it still carries the same characteristics as the equitable interest had. There is really no change as to mortgages of leaseholds which have always been made as a rule not by assignment but by sub-lease, the object being to free the mortgagee from liability in regard to covenants and conditions contained in the lease until he took possession. Thus the mortgagor's so-called equity of redemption was, as now every equity of redemption is, a legal interest in the land mortgaged, that is the mortgagor after the mortgage continued to be the lessee of the land, the mortgagee being a sub-lessee holding from him (sect. 85, L. of P. Act, 1925). Under the new law a mortgage of fee simple is now to be made or to be deemed to be made by a lease for three thousand years without rent, without liability for waste and with a condition for cesser on the repayment of the loan. Where a Position of the Mortgagor. 349 second mortgage is made a new lease is granted to the second mortgagee for the unexpired term of the first mortgagee, and one day more, and the same rule is applied to all subsequent mortgagees. In the case of leasehold the first mortgagee is to take or be deemed to take a sub-lease of the mortgaged land subject to the conditions contained in the mortgagor's lease for a term ten days less than the unexpired term of the mortgagor. Subsequently mortgagees take terms first nine days less than the first mortgagee's term and the next eight days less and so on (sect. 86, L. of P. Act, 1925).] Article 124. Position of the Mortgagor. (1) Where after a legal mortgage the mort- gagor remains in possession of the mortgaged land, he was tenant at wiU of it to the mortgagee if he had attorned tenant, and tenant on suffer- ance if he had not so attorned. [This position does not seem to be materially affected by recent legislation.l (2) Though only a tenant of the mortgagee nevertheless the mortgagor in possession is entitled — (i) To receive aU the rents and profits of the land and keep the same for his own use without in any way accounting for them to the mortgagee. (ii) To sue for the possession of the mort- gaged land and for any rent or profit arising out of it or for any injury done to it, in his own name only, unless the cause of action arises under a lease or contract made by him and another person jointly. 350 A Digest oj Equity. (iii) To commit deteriorating waste on the mortgaged land unless the land is so scanty a security for the mortgage debt that the waste endangers it. (iv) To grant leases of the mortgaged land, but unless he has express or statutory powers so to do such leases are not binding on the mortgagee. (3) Where a mortgagor remains for twelve years in possession of the mortgaged land with- out paying any interest on the mortgage debt and without giving any written acknowledg- ment of the mortgagee's title, the title of the mortgagee to the land is extinguished. Paragraph (1). Mortgagors under the old law not infrequently were made to attorn tenants to the mortgagee at a rent equal to the interest on the mortgage debt in order to give the latter the right of distraint in case the interest fell into arrear. Now, however, since there is usually an imphed power to appoint a receiver, this is scarcely necessary. Where, however, there was no attornment the mortgagor in possession was, as has been said, merely a tenant on sufferance {Scobie v. Collins, [1895] 1 Q. B. 375). Attornment clauses are now seldom inserted in mort- gages, as unless the mortgage is registered under the Bills of Sale Acts they are void. When inserted it is usually for the purpose of enabling the mortgagee to obtain possession of the land by a judgment under E. S. C, Order 3, rule 6 (see Hall v. Comjort (1886), 18 Q. B. D. 11). Paragraph (2). (ii) Before the Judicature Act, 1873, the position of a mortgagor in possession was this. As regards tenancies Position of the Mortgagor. 351 of the mortgaged land which commenced before the mort- gage, he could not sue without joining the mortgagee as legal owner. He could distrain for arrears of rent, as the court held he had an implied authority to do so. As regards tenancies which commenced after the mortgage, he could sue in his own name. The ground of the dis- tinction was that the former tenants could deny his right to sue, while the latter could not, without questioning his title to create the tenancy-^a thing which no tenant is entitled to do. In the first case the tenant had ceased to be his landlord since he had parted with the ownership of the land. In the second case any right to the land which the tenant obtained under the lease was derived from the mortgagor and so he could not question the mortgagor's title without impugning his own. [How this is affected by the new law which leaves the freehold in the mortgagor is not very clear, and in view of recent legislation on the foint, of little importance.'] (iv) Leases granted by a mortgagor in possession were good against himself as contracts between him and the lessees. But as against the mortgagee, who was legal owner, they were not binding unless he was party to them. When the mortgagee took possession he was entitled to repudiate, without notice, leases to which he was not a party {Gibbs v. Cruikshank (1873), L. E. 8 C. P. 454), but if he did so and the lease was a beneficial one he might be held responsible for the loss to the mortgaged estate as loss arising through his own wilful default (see next Article). If the mortgagee gives the tenant notice to pay the rents to him, or accepts rent, then the tenant becomes his tenant on a tenancy from year to year {Keith v. B. Gancia and Company, [1904] 1 Ch. 774). Paragraph (3). This is independent of the effect of sect. 8 of the Eeal Property Limitation Act, 1874, which applies only to remedies for the mortgage debt. By sect. 34 of the Eeal Property Limitation Act, 1833 (explained by the Eeal Property Limitation Act, 1837), as modified by sect. 1 of 352 A Digest of Equity. the Eeal Property Limitation Act, 1874, twelve years' possession, after the right of the true owner to eject the holder of the land accrued, without payment of rent or interest or written acknowledgment of the true owner's title, extinguishes the title of the true owner and creates a new title in the holder — even where the mortgaged property has been sold and is represented by funds in the hands of trustees or the court (In re HazeMine's Trusts, [1908] 1 Ch. 34). An advowson, however, is not land within the meaning of the section {Brooks v. Muckelston, [1909] 2 Ch. 519). Where a prior mortgagee has taken possession a subse- quent mortgagee cannot, of course, do so without redeem- ing the prior mortgage ; that, however, wiU not prevent the statute running against the subsequent mortgage (Johnson v. Brock, [1907] 2 Ch. 535). Article 125. Position of the Mortgagee. The mortgagee's position after the execution of the mortgage may be summed up under the following heads : — (1) — (i) Where the mortgage is legal, the mortgagee may take possession of the mortgaged land at any time, but if he takes proceediags to obtain possession the mortgagor may stay such pro- ceedings by paying him the mortgage debt with interest and costs. (ii) If he takes possession of the mortgaged land he is bound to keep accounts of all the rents and profits received by him and all the outgoings paid by him. Position of the Mortgagee. 353 he must in such accotints make allow- ance of an occupation rent for any part of the mortgaged land occupied by him, he is Uable for all rents and profits not actually received by him but which he might have received but for his wilful default, he is not entitled to commit waste unless the rents and profits of the mortgaged land are not sufficient to keep down the interest on the mortgage debt, and he is bound to keep the mort- gaged land and the buildings on it in repair so far as the surplus rents and profits wiU allow. (2) Where the m.ortgagee has taken posses- sion, if he remains for twelve years in posses- sion without acknowledgment in writing of the title of the mortgagor or of his right of re- demption, the mortgagor's right to redeem is extinguished. Paragraph (1). (i) There are two ways in which the legal right of the mortgagee as owner of the mortgaged land to take posses- sion may be restricted. The first is by a covenant by the mortgagee in the mortgage deed not to take possession until default in paying the interest or principal of the debt. This at common law does not prevent the mort- gagee bringing an action of ejectment, since it confers no interest in the land upon the mortgagor so as to entitle him to possession as against the mortgagee. If the mort- gagee disregards it the mortgagor's remedy is an action for damages for breach of covenant. But equity, where there is such a covenant, would restrain the ejectment {Green v. Burns (1879), 6 L. E. Ir, 173). In the second place, the mortgagee may demise the mortgaged land to the mortgagor for a term at a rent equal to the interest of the mortgage debt. Here the mortgagor has an interest D.E. 2 a 354 A Digest of Equity. in the mortgaged land as lessee, and accordingly the mort- gagee cannot oust him except in accordance with the terms of the lease. (ii) A mortgagee is held to have taken possession when he has done some act which practically deprives the mort- gagor of the management or control of the mortgaged property, ex. gr., by giving the tenants of the mortgaged land notice to pay their rents to him {Heales v. McMurray (1856), 23 Beav. 401). And taking possession of the mortgaged property is like accepting trust property ; having once taken the step, the mortgagee cannot abandon possession at his pleasure, but must be relieved of it by the court {County of Gloucester Bank v. Budry Merthyr Colliery Company, [1895] 1 Ch. 629). Once in possession, he is liable not merely for all the rents and profits he actually receives, but, again like a trustee, for all he might have received but for his own wilful fault {Noyes v. Pollock (1886), 32 Ch. D. 53). At law he can commit waste or grant leases like any other legal owner, but equity will restrain him from doing so unless in the case of waste his security is deficient {Millett v. Davey (1862), 31 Beav. 470). After satisfying the outgoings of the estate, and keeping down the interest on his mortgage, he is bound to effect all necessary repairs as far as the surplus income will permit. (As to devoting the surplus income to reducing the mortgage debt, see Article 135 (iii).) If he spends money of his own on permanent improvements, he is not entitled to charge these against the mortgagor. His sole right is that in taking accounts he will be entitled to claim for the expenditure so far as it has enhanced the value of the land {Henderson v. Astwood, [1894] A. C. 150). Not merely is the mortgagee who takes possession bound to do all these duties without remuneration, but by taking possession he makes himself liable upon any onerous cove- nants affecting the land. These are very often extremely burdensome, especially in the case of leaseholds. The remedy by taking possession is, therefore, a double-edged one. To prevent a mortgagee being driven to it, it became customary to insert in mortgage deeds a power enabling Mortgagee's Personal Bemedy. 355 the mortgagee to appoint a receiver of the rents and profits of the land who would be the mortgagor's agent, and be paid by commission for his work. The office of receiver was an invention of equity, by means of which it secured a remedy to equitable mortgagees who, having no legal title, could not obtain possession of the land. As we shall see, now, power to appoint a receiver is implied in all mortgages by deed unless a contrary intention appears. In the case of leaseholds where the mortgage is made by way of assignment, the mortgagee becomes liable under the covenants of the lease without taking possession. To prevent this, it was usual to make such mortgages by way of sub-demise. [Under the new law, as has already been said, all mortgages of legal estates are to he deemed to he mortgages hy lease or suh-lease.] Paragraph (2). Though the mortgagee in possession is, in a sense, a constructive trustee for the mortgagor, yet by the Eeal Property Limitation Act, 1874, sect. 7, the mortgagor's right to recover the land under the circumstances stated is barred. [When so harred under the neiv law the mortgagee of a fee simple ohtains not the ownership of the lease of 3000 years hut the fee simple itself, and m the same way a mortgagee of a leasehold ohtains the lease of the mortgage, L. of P. Act, 1925, sects. 88 and 89.] It may be noted here that a mortgagee in possession is always liable to account on the footing of wilful default (see infra, p. 528) while a trustee is not liable to account on this footing unless a special order to that effect is made by the court. Article 126. Mortgagee's Personal Remedy against the Mortgagor. (1) As a mortgage is merely a security for a loan, then, unless the mortgagee has expressly 356 A Digest of Equity. agreed not to hold the mortgagor personally liable, on the loan becoming repayable the mortgagee can sue the mortgagor for its re- covery independent of the mortgage. (2) Where the mortgage deed contains no covenant for the repayment of the mortgage debt, the mortgage debt is a simple contract debt, and, as such, may be barred by six years' non-claim after it becomes payable. Where the mortgage deed does contain a covenant for repayment, it is a specialty debt, and, as such, barrable only after twenty years' non-claim. If, however, the mortgagee's rights as respects the mortgaged land have been barred by twelve years' non-claim then he will not be allowed to recover the mortgage debt by an action on the covenant. ^ (3) An action for recovering the mortgage debt either in simple contract or on the cove- nant in no way prejudices the mortgagee's right to foreclose or to secure repajrment in any other mode. It may be resorted to before or simultaneously with these other remedies, but if resorted to after a decree for fore- closure it will have the effect of reopening the foreclosure, and if the mortgagee is not in a position to restore the mortgaged lands, it wiU be estopped. Paragraphs (1) and (2). By sect. 8 of the Eeal Property Limitation Act, 1874, the remedy by action for money secured on land is barred by the lapse of twelve years since the last payment of interest or principal or the last written acknowledgment of the debt. The remedy on a covenant — that is, a con- tract under seal — continues for twenty years. But since Mortgagee's Personal Remedy. 357 the remedy in the case of a mortgage is primarily against the land, when it is barred by the statute as against the land the court holds that the personal remedy on the covenant is barred also {Sutton v. Sutton, 22 Ch. D. 511 ; Stra. Lead. Gas. p. 215 ; and see Charter v. Watson, [1899] 1 Ch. 175). Paragraph (3). The three remedies of a mortgagee are (1) foreclosure, (2) action on the covenant, (3) sale of the mortgaged estate. These three are concurrent, not alternative remedies. The exercise of one of them sometimes renders another impos- sible. Thus, if the mortgagee sells the mortgaged property, of course he cannot afterwards foreclose the mortgagor's equity of redemption. That went when the mortgagee exercised his power of sale, and for this reason it was once argued that the existence of an express power of sale in a mortgage deed was inconsistent with the right of foreclosure. The Conveyancing Act, 1881, sect. 20 (5), (now sect. 103 L. of P. Act, 1925), expressly provides that the power of sale implied by it shall not prejudice the right of foreclosure. Subject to this all remedies may be utilised at the same time. Thus a mortgagee may claim in the same writ foreclosure and judgment on the covenant {Dymond v. Croft (1876), 3 Ch. D. 512). Or he may sue on the covenant and foreclose for the unsatisfied balance of his debt {Budge v. Bichens (1873), L. E. 8 C. P. 358). But if he forecloses and afterwards parts with the property, he cannot then sue on the covenant, since if he recovered judgment on the covenant he could not restore the mortgaged property on the mort- gagor paying the mortgage debt. And on his obtaining a decree nisi for foreclosure, he cannot sell under a power of sale without the consent of the court {Stevens v. Theatres, Limited, [1903] 1 Ch. 857). And where he brings a fore- closure action in the Chancery Division (in which he is entitled to claim a personal order for payment of principal and interest against the mortgagor) he will not be allowed to issue while the Chancery action is pending a specially indorsed writ in the King's Bench to recover the principal and interest {Williams v. Hunt, [1905] 1 K. B. 612). 358 A Digest of Equity. For the form of a judgment on the covenant and for foreclosure or sale if necessary, see Stra. Mortgages, pp. 162 et $eq. Article 127. Express and Implied Incidents of Mortgages. Subject to the mortgagor's right to redeem and the mortgagee's right to foreclose, any other incidents in addition to those above mentioned may be attached to a mortgage by express agree- ment between the mortgagor and mortgagee. Those which formerly it was customary so to attach are now generally implied by statute in all mortgages executed since December 31st, 1881, unless expressly excluded. Article 128. Implied Incidents where Mortgagor or Mortgagee is in Possession. A. (1) Whether the mortgage is made by deed or not, a mortgagor or mortgagee in possession is entitled to make the following leases, which will, when made by the mortgagor, be binding on the mortgagee, and when made by the mort- gagee will be binding on the mortgagor and prior mortgagees : (i) An agricultural or occupation lease for any term not exceeding twenty-one years ; [if mortgage was made since 1925, fifty years'] and Mortgages : Implied Incidents. 359 (ii) A building lease for any term not ex- ceeding ninety -nine years [if mortgage was made since 1925, nine hundred and ninety-nine years']. (2) Every such lease is to be made at the best rent reasonably obtainable, and to take effect in possession not later than twelve months after its date ; and building leases are to be in considera- tion of the lessee having erected or agreeing to erect or repair buildings within five years, and having executed or agreeing to execute within that time an improvement on the land, and a peppercorn rent may be reserved in such lease during the first five years. (3) This power does not enable a lease to be granted which the mortgagor could not have granted had he not mortgaged his land, and it is imphed only if and in so far as no contrary intention is expressed in the mortgage deed, or otherwise in writing. (4) Where the lease is by the mortgagor he must within one month after making the lease deliver to the mortgagee a counterpart of the lease executed by the lessee. B, (1) A mortgagor or mortgagee in posses- sion may, for the purpose only of granting a lease authorised by statute or by the mortgage deed of the land or minerals, accept the surrender of an existing lease or agreement for a lease. (2) Where any consideration is given to the mortgagor for the surrender beyond the accept- ance of the new lease the surrender will not be vahd without the consent of the incumbrancers. 360 A Digest of Equity. (3) The surrender shall not be vahd unless a new lease is accepted within a month. (4) After the appointment of a receiver the powers of leasing and accepting surrenders are to vest in the mortgagee appointing such receiver. The right to accept a surrender of a lease was conferred on mortgagors and mortgagees in possession by sect. 3 of the Conveyancing Act, 1911, which has been repealed and re-enacted by sect. 100 of the L. of P. Act, 1925. This right is imphed only in mortgages made after 1911. Article 129. Implied Incidents where the Mortgage is by Deed. (1) Where the mortgage is made by deed a mortgagee has the following powers to the like extent as if they had been in terms conferred by the mortgage deed and not further : (i) A power to sell the mortgaged property or any part of it, either subject to prior charges or not, by pubhc auction or private contract, and where the mort- gage was executed after December 31, 1911, the mortgagee may on sale of part of the land impose restrictive cove- nants on the land not sold or reserve restrictive covenants on the land sold, and on sale of the minerals apart from the land may grant or reserve way- leaves. (ii) A power to insure and keep insured against fire any insurable property forming part of the mortgaged property, Mortgages : Power of Sale. 361 and to add the premiums paid to his mortgage debt. (iii) A power to appoint a receiver of the income of the mortgaged property, or any part of it. (iv) A power when in possession to cut timber ripe for cutting, and not planted for ornamental purposes, or to contract for such cutting to be completed within twelve months at most from the making of the contract. (2) These powers are impUed only in so far as no contrary intention is expressed in the mort- gage deed, and may be varied or extended by such deed. Article 130. Implied Power of Sale. (1) The power of sale referred to in the preceding Article cannot be exercised by the mortgagee unless : The mortgage debt has become payable and — (i) Notice requiring payment has been given to the mortgagor, and he has made default in payment for at least three months ; or (ii) Some interest under the mortgage is in arrear and unpaid for two months after becoming due ; or (iii) There has been a breach of some cove- nant in the mortgage deed or imphed 362 A Digest of Equity. by statute on the part of the mortgagor, other than that for the payment of the mortgage debt or interest. [(2) Though after 1925 all mortgages of fees simple are to be made or deemed to have been made by a lease for 3000 years, on sale by the first mortgagee he is entitled to transfer to the 'purchaser the fee simple of the mortgaged land, and in the same way a mortgagee by sub-lease of a leasehold can on sale assign the leasehold to the pur chaser. '\ (3) The mortgagee on sale can convey by deed to the purchaser the interest mortgaged, dis- charged of aU other interest ranking after his mortgage. (4) The sale cannot be impeached on the ground that no case has arisen which authorises the mortgagee to exercise his power of sale. If he has improperly exercised it, the mortgagor's remedy is an action for damages against him. (5) The purchase money received by the mort- gagee is to be applied to the following purposes and in the following order : (i) In discharge of prior incumbrances (if any) to which the sale is not made subject. (ii) In payment of the costs of the sale. (iii) In discharge of the mortgagee's own debt and any interest due upon it. The balance he is to hold in trust for the person entitled to the mortgaged property or authorised to give receipts for the proceeds of the sale thereof. Mortgages : Power to Insure. 363 (6) As soon as the power of sale becomes exercisable, the mortgagee may demand and recover from any person, save a mortgagee entitled in priority to him, all the documents of title which a purchaser could demand and recover from him. (7) The mortgagee's receipt for the purchase money is a complete discharge to the purchaser, who is not concerned to inquire whether any money is owing on the mortgage or not. These powers were all implied and defined by sects. 20, 21 and 22 of the Conveyancing Act, 1881, and sect. 5 of the Conveyancing Act, 1911, which have now been re- pealed and re-enacted by sects. 103-107 L. of P. Act, 1925. [The estate going to the purchaser on sale depends on sects. 88, 89 and 153 L. of P. Act, 1925.] The following points are to be remembered in connection with a power of sale : (1) A puisne mortgagee may exercise the power of sale, but without the concurrence of the prior mortgagee he can only sell the equity of redemption mort- gaged to him {In re Hodson and Howes' Contract (1887), 35 Ch. D. 668). (2) The power is conferred upon the mortgagee for his own benefit. He accordingly in exer- cising it is under no obligation to consult the interests of the mortgagor. Thus, for example, it is no impeachment of its exercise to show that he sold at a bad season, and that had he held his hand for a time he might have secured a better price (Farrar v. Farrars, Limited (1888), 40 Ch. D. 395 ; and see Nutt v. Easton, [1900] 1 Ch. 29). Provided he acts honestly he is not liable for any loss resulting from its exercise {Kennedy v. De Trafford, [1897] A. C. 180). (3) In exercising it he is a trustee to the extent that he cannot buy from himself. This principle has been carried very far in the case of Hodson v. Deans, [1903] 2 Ch. 647. There a building society which was mortgagee of a property sold it by auction under its power of sale. An ofi&cer of the society, who had probably fixed the reserved price and instructed the auctioneer, attended the sale and 364 A Digest of Equity. bought it for himself. The sale was at a small undervalue : — Held, that it was invalid. He may, however, himself buy with the authorisation of the court, and if he does so at a price insufficient to pay the mortgage debt in full he can sue for the balance {Gordon Grant <& Co. v. Boos, [1926] A. C. 781). (4) A mere general power of attorney does not entitle the agent of the mortgagee to exercise the power to sell {Be Dowson and Jenkins's Contract, [1904] 2 Ch. 219). (5) The mortgagee is a trustee of the surplus of the purchase money for the persons entitled thereto. If he has no notice of incumbrances subsequent to his own, he is entitled, like any other trustee, to assume that the mortgagor has not alienated his equity of re- demption, and to pay over the surplus to him {Thome V. Heard and Marsh, [1895] A. C. 495). The default in payment of principal mentioned in (1) (i) is three months after the date of the notice {Barber v. Illingworth, [1908] 2 Ch. 20). Article 131. Implied Power to Insure. (1) The power to insure does not arise — (i) Where there is a condition against in- surance by the mortgagee contained in the mortgage deed. (ii) Where there is a covenant to insure in the mortgage deed and the mortgagor has insured in accordance with it. (iii) Where there is no such covenant and the mortgagor has insured to the extent the mortgagee is entitled to insure under the power. Mortgages : Power to Afpoint a 'Receiver. 365 (2) The mortgagee is entitled to insure under the power only to the extent of two-thirds of the value of the insured property. (3) All money received under the insurance, whether made under the mortgage deed or under the power, is at the option of the mortgagee to be used in restoring the insured property or (subject to any obhgation to the contrary) in repa5T.ng the mortgage debt. This power to insure was given by the Conveyancing Act, 1881, and now depends on sect. 101 of the L. of P. Act, 1925. Article 132. Implied Power to Appoint a Receiver. (1) The appointment, position, and duties of a receiver are regulated by the following rules : (i) He cannot be appointed until the mort- gagee's power of sale referred to in the. same Article has become exercisable. (ii) He, though appointed by the mortgagee, is deemed to be the agent of the mortgagor. (iii) He is entitled to recover the income of the mortgaged property in the name of either the mortgagor or mortgagee. (iv) Any person pajdng him income is not concerned to inquire whether any case has happened to authorise the receiver to act. 366 A Digest of Equity. (v) He must be appointed in writing under the hand of the mortgagee, and he may be removed and a new receiver appointed in the same way. (vi) He is entitled to keep out of the income commission at such rate, not exceeding 5 per cent., as is specified in the instru- ment appointing him, or, if no rate is so specified, then at the rate of 5 per cent., or at a higher rate if allowed by the court. (2) Income paid to the receiver shall be applied by him to the following purposes : (i) In discharge of outgoings of the mort- gaged property. (ii) In keeping down all annual or other payments, and interest on aU principal sums, having priority to the mortgage in right of which he is appointed. (iii) In payment of his own commission, pre- miums of insurance properly payable under the mortgage deed, and costs of necessary or proper repairs directed in writing by the mortgagee. (iv) In payment of the interest on the mort- gage debt of the mortgagee appointing him or, if so directed by such mortgagee, in paying off the mortgage debt. The balance he is to hand over to the person who, but for the possession of the receiver, would be entitled to the income of the mort- gaged property, or who is otherwise entitled to that property. Mortgages : Power to Appoint a Beceiver. 367 This power was implied by sect. 24 of the Conveyancing Act, 1881, and now depends on sect. 109 of the L. of P. Act, 1925. A later or puisne mortgagee is not entitled to appoint a receiver unless the prior mortgagee does not wish to do so, or unless the puisne mortgagee is prepared to redeem the prior mortgage. Even when a puisne mortgagee has appointed a receiver, if the prior mortgagee demands possession he is entitled to it and to all the rents received by the receiver after notice of the demand (Preston v. Tunbridge Wells Opera House, Limited, [1903] 2 Ch. 323 ; and see the position of a receiver appointed under the above implied power considered by Kekbwich, J., in White v. Metcalfe, [1908] 2 Ch. 567). ( 368 ) CHAPTEK 3. Right to Redeem. SUMMARY. PAGE Aeticlb 133. Extent of the right to redeem - 368 134. Conditions of redemption - 371 135. Interest and costs payable on redemption 372 136. Tacking mortgages 376 137. Consolidation of mortgages 378 138. Reconveyance on redemption - 380 Article 133. Extent of the Right to Redeem. (1) Any person who has any interest in the equity of redemption of the whole or any part of the property included in a mortgage is entitled to redeem the whole of such property. (2) Any person will be deemed to have an interest in the equity of redemption where he is hable to be and is sued for any part of the mortgage debt or any interest due upon it. (3) Where there are two or more persons interested in the equity of redemption, the right to redeem will be exercisable by them succes- sively in the order of time in which their different interests arose, or, where the same interest is enjoyed by them in succession, in the order in which it vests in them. (4) Where the person seeking redemption is a puisne mortgagee, he is entitled to redeem the Mortgages : Extent of the Bight to Bedeem. 369 prior mortgages, if more than one, only in the order in which they precede his mortgage, and only by foreclosing all the mortgages (if any) subsequent to his own. (5) Any person entitled to redeem mortgaged property may in an action of redemption have judgment for sale instead of redemption. The court may order a sale without deciding the priorities of different mortgagees, and it may give the carriage of the sale to any defendant. Paragraph (1). By an interest in the equity of redemption is meant an interest binding on its owner, the mortgagor, whether such interest is or is not binding also on the mortgagee. Thus, in Tarn v. Turner (1888), 39 Ch. D. 457, a mort- gagor in possession prior to the Conveyancing Act, 1881, agreed in writing to grant a lease. The mortgagee did not join in the agreement. It was therefore not binding against him. It was, however, binding against the mortgagor : — Held, that the intended lessee was entitled to redeem. In the words of Cotton, L.J. (at p. 465), " The interest which he got " (under the agreement) " from the mortgagor makes him to a certain extent an assignee of the equity of redemption, and therefore entitled to all the rights which appertain to the owner for the time being, however small his interest in the equity of redemp- tion may be with regard to duration of time." If, however, the agreenient had not been binding on the mortgagor — as, for instance, if it had been an option to purchase not founded on value — ^the party to it would take no interest in the equity of redemption, and would not be entitled to redeem {Pearce v. Morris (1869), L. E. 5 Ch. 227). The person to be entitled to redeem need not be interested in the equity of redemption of the whole pro- perty. If he is interested in the equity of redemption of any part of it he may redeem the whole. Of course, he D.E. 2 b 370 A Digest of Equity. redeems subject to the equities of all other persons interested (see per Cotton, L.J., in Tarn v. Turner (1888), 39 Ch. D. 457, at p. 466). A judgment creditor who has got a receiving order against the mortgagor's property is interested in the equity of redemption and entitled to redeem {In re Parhola, Limited, [1909] 2 Ch. 437). Paragraph (2). The most ordinary case of this is that of a mortgagor who, after he has sold his equity of redemption, is sued upon the covenant for the mortgage debt. He is entitled to redeem on payment of the debt and have the mortgaged property reconveyed to him, subject to such equity of redemption as may be subsisting in any other person, as, for instance, his assignee of the equity (Kinnaird v. Trollope (1888), 39 Ch. D. 636, at p. 647). Paragraphs (3) and (4). Thus, if Blackacre is mortgaged to A., then to B., and afterwards to C, B. is entitled to redeem before C, and G. before the mortgagor. Again, if Whiteacre is mortgaged by X. to Y., and afterwards X.'s equity of redemption is settled on F. for life and then on G., F. is entitled to redeem before G. Again, in the case of Blackacre (supra), if B. refused to redeem, and C. wished to do so, he must redeem B.'s mortgage before he is entitled to redeem A.'s. Not only so, but if B. brought an action to redeem A.'s mortgage he would have to join C. and the mortgagor and claim to foreclose them {Teevan v. Smith (1882), 20 Ch. D. 724, at p. 729). This rule should be read in con- nection with that as to foreclosure (see Article 139, infra). Together they constitute the rule that a puisne mort- gagee may foreclose without redeeming but cannot redeem without foreclosing. Paragraph (5). This is the effect of sect. 25 of the Conveyancing Act, 1881, now repealed and re-enacted by sect. 91 L. of P. Act, 1925. Conditions of Redemption. 371 The advantage of selling without settling the priorities between the various incumbrances of the same property may be shown by an example. Take the case of Black- acre, supra. Say A.'s mortgage's priority is undisputed, but there is a dispute as to whether B. or C.'s mortgage is to rank next to his. If on the sale of Blackacre the proceeds are sufficient only to pay the expenses of sale and the debt due to A., this dispute ceases to be of importance, and the cost of settling it is avoided by selling without deciding that dispute (see General Credit, etc. Company v. Glegg (1883), 22 Ch. D. 549). Article 134. Conditions of Redemption. (1) If the right to redeem is exercised on the precise day fixed in the mortgage for the repay- ment of the mortgage debt, the redemption may be claimed without notice. If, however, such day is past, then the person wishing to redeem must give the mortgagee six months' notice of his intention to redeem, or tender six months' interest over what is due on the mortgage in heu of such notice, unless (i) the mortgagee himself claims repayment, or (ii) the mortgage is made by deposit of title-deeds. (2) On redemption the person redeeming must pay the mortgage debt with interest and costs, as determined by the principles stated in the next Article. (3) Where another mortgage or advance has become tacked to or consolidated with the mortgage relating to the property which it is desired to redeem, this mortgage or advance must also be discharged before redemption of 372 A Digest of Equity. the property contained in the original mortgage can be claimed. Paragraph (1). If the mortgagor repays the mortgage debt on the day- fixed for repayment, he exercises his legal right under the mortgage, and is entitled to an immediate reconveyance of the mortgaged property. If he does not do so, his legal right to redeem is gone, and he must appeal to equity to assist him to get the mortgaged property back. Equity will assist him only on terms of his doing equity. One of these terms is that he should give the mortgagee reasonable notice of his intention of repaying the debt in order to afford the mortgagee time to find another invest- ment for his money. If, however, the mortgagee demands repayment, he is entitled to repay at once (Smith v. Smith, [1891] 3 Ch. 550), and the mortgagee is not entitled, once he has demanded payment, to withdraw the demand and claim notice (Santley v. Wilde, [1899] 1 Ch. 747, at p. 763). Entering into possession of the mortgaged land is a demand for repayment (Bovill v. Endle, [1896] 1 Ch. 648). in the case of a mortgage by deposit, where the ac- companying memorandum (if any) does not otherwise provide, the mortgagor may redeem at any time (Fitz- gerald's Trustees v. Mellersh, [1892] 1 Ch. 385). This is because such mortgages are made merely for temporary purposes — for instance, with a banker to secure the depositor's overdraft — and are not taken by the mortgagee as an investment (ibid.). Article 135. Interest and Costs payable on Redemption. Upon redemption interest and costs will be given to the mortgagee upon the following principles : Mortgages : Interest and Costs. 373 (1) As to interest — (i) Where the rate of interest is fixed by the mortgage agreement, all arrears of interest at that rate. (ii) Where no rate of interest is fixed by the mortgage agreement, interest at the rate of 4 per cent, per annum ; and where the rate is fixed only up to the time agreed for repayment of the mortgage debt, interest after such date at the fixed rate, provided it does not exceed 5 per cent, per annum. (iii) Even where the mortgagee has taken possession, and his accounts show that he has each year received more net income than was sufficient to pay the interest on the mortgage debt, he will still be allowed interest upon the whole amount of the mortgage debt until the debt is wholly paid off, unless (a) he took possession before any interest on the debt was in arrear, or (6) the mortgage agreement shows that it was intended that he should accept repayment piecemeal. Where the surplus of income over interest is deducted each year from the amount of the mortgage debt, leaving the balance only bearing interest, the account is said to be taken with annual rests. (2) As to costs — The general rule is that the mortgagee will be allowed all costs incurred in perfecting, maintaining, and reahsing his security, and, if 374 A Digest of Equity. he takes possession, all charges and expenses reasonably incurred in collecting the income and managing the property ; and, if a sohcitor, he can charge for personal services, where the work done is such as he would have been entitled to charge against the mortgagor had he retained another solicitor to do it, and where there has been a redemption action, the costs of such action as between party and party. But where the redemption action was necessitated by the mortgagee's misconduct, the court may refuse him the costs of the action and even order him to pay the mortgagor's costs. Paragraph (1), (i) When a mortgagor claims redemption the court will grant it only on the terms that he pays all arrears of interest, notwithstanding that sect. 42 of the Eeal Pro- perty Limitation Act, 1833, makes only six years' arrears of interest recoverable {Dingle v. Coppen, [1899] 1 Ch. 726 ; approved by the Court of Appeal in. Be Lloyd, Lloyd V. Lloyd, [1903] 1 Ch. 385). The same rule applies where the mortgaged property has been sold and the mortgagor claims the surplus proceeds {Be Lloyd, Lloyd V. Lloyd, supra), or in any other case where the mortgagor has to claim the aid of equity to obtain rehef. This rule is based, not on the legal rights of the parties, but on the principle just mentioned — ^that he who seeks equity must do equity. As we shall see, when the mort- gagee claims his legal rights the rule does not apply. It must be remembered that if the rate of interest fixed is to be increased on failure to pay punctually, the increase is held to be in the nature of a penalty, and equity will allow only the rate payable on punctual payment. (ii) The ground upon which interest is in these cases allowed is not very definitely fixed. Probably the true Mortgages : Interest and Costs. 375 ground is that he who seeks equity must do equity {Booth V. Leycester (1838), 8 My. & Cr. 459). Some judges, however, have put it on impHed contract (see Be Kerr's Policy (1869), L. E. 8 Eq. 331). As to the case where interest is fixed only up to the time for repay- ment, it may be put on the same ground, or it may be justified as damages for failure to repay the mortgage debt at the proper date under Lord Tenterden's Act, 1833, sect. 28. (iii) It is a rule that a mortgagee is not bound to take the repayment of his debt piecemeal. Accordingly when he takes possession his accounts are kept simply by entering receipts to his debit and interest and outgoings to his credit. These are not made up until redemption is claimed. Then debts and credits are each added up, and the surplus of receipts over outgoiugs and interest is deducted from the amount of the mortgage debt. If, however, he has agreed to accept payment piece- meal, or has taken possession before there are any arrears of interest, the accounts are not balanced merely upon redemption, but at the end of each year. The surplus of receipts is then deducted from the mortgage debt, and interest henceforth is payable only on what remains of it. Even if the receipts are not confined merely to the ordinary income of the mortgaged property, but are increased by the sale of part of it, this will not be enough to entitle the mortgagor to a rest as to the ordinary income (Wrigley v. Gill, [1905] 1 Ch. 241 ; Ainsworth v. Wilding, [1905] 1 Ch. 435). A clause is sometimes inserted in mortgage deeds per* mitting the mortgagee to add all arrears of interest to the capital of the mortgage debt so that they shall bear interest. This corresponds to the practice of allowing yearly rests, except that instead of being for the benefit of the mortgagor it is for the benefit of the mortgagee. In taking accounts the court has no power to allow interest on arrears ; it must be allowed by an express provision in 376 A Digest 0/ Equity. the mortgage deed. And where there is such a provision and the mortgagee takes possession, if the profits he receives are equivalent to or greater than the interest accruing on the mortgage, he will not be permitted to treat the interest as in arrear (Wrigley v. Gill, [1906] 1 Ch. 165). Paragraph (2). Costs incurred in negotiating for the loan cannot be added to the mortgage debt {Wales v. Carr, [1902] 1 Ch. 860) ; but the costs of the mortgage deed, where the mortgagor has given a promise to make one if required, the costs of protecting the security, and costs of redemp- tion or foreclosure action can be so added (Be New Zealand Midland Bailway Company, [1901] 2 Ch. 357 ; and see National Provincial Bank of England v. Games (1886), 31 Ch. D. 582. And as to expenses of manage- ment, see per Fakwell, J., in Powell v. Brodhurst, [1901] 2 Ch. 160, at p. 167). It is the duty of the mortgagee to hand the mortgagor the title-deeds of the mortgaged property together with a reconveyance of it on the mortgagor proffering him the mortgage debt with proper interest and costs ; and where the mortgagee refuses wilfully to do so the court will hold him liable for all costs subsequently incurred owing to such refusal {Bourhe v. Bdbinson, [1911] 1 Ch. 480). But the refusal must be wilful. When a vesting order is neces- sary, if its necessity does not arise from the mortgagee's default the mortgagor must bear the costs [Webb v. Crosse, [1912] 1 Ch. 323). Article 136. Tacking Mortgages. (1) Where there was a legal mortgage sub- sisting, and a subsequent equitable mortgagee advanced money upon the mortgaged property Mortgages : Tacking. 377 without notice of any preceding equitable mort- gage, such mortgagee, if he had or afterwards acquired the legal mortgage, will be entitled to the same priority for his equitable as he had for his legal mortgage. The equitable mortgage was said then to be tacked to the legal mortgage. [(2) By the new law tacking is abolished save in three cases : (i) where the tacking takes place with the consent of other mortgagees ; (ii) where a legal mortgagee makes further advances without notice of an intervening mortgage ; (iii) where a legal mortgagee has contracted to make further advances, then such further advances can be tacked although when he made them he had notice of intervening mortgages.^ Paragraph (1). This doctrine of tacking, as it is usually called, is often discussed as if it were a doctrine applicable only to mort- gages. It, however, applies to equitable interests, in whatever way they arise, and has been already sufficiently treated in connection with equitable interests generally {supra, Article 12). It is here mentioned only for the purpose of reminding the reader of its peculiar application to mortgages. Sometimes a mortgagee takes a legal mortgage to secure, not merely the loan made at the date of the mort- gage, but subsequent advances. In this connection it is always to be remembered that the right to tack is based on the subsequent mortgagee having no notice of an inter- vening equity at the time he advanced his money. If he has such notice, he cannot tack against the intervening equity, whatever may be his agreement with the mort- gagor as to further advances. That agreement is rendered void by the mortgagor's accepting a loan on the security of the land from another person than the mortgagee (West v. Williams, [1899] 1 Ch. 132). 378 A Digest of Equity. Paragraph (2). [The great alteration here made in the law by sect. 94 of the L. of P. Act, 1925, is twofold. In the first place hence- forth a legal mortgagee cannot by buying up an equitable mortgage made without notice and an equitable mortgagee who made his allowance without notice cannot by getting in a legal mortgage tack the equitable to the legal mortgage. The second is that where by a legal mortgage the mortgagee has bound himself to make further advances on making such advances he can tack them to his legal mortgage though he had notice all the time he made his further advances of intervening mortgages. This is a statutory reversal of the decision in West V. Williams (supra).'] Article 137. Consolidation of Mortgages. Where two mortgages made by the same mortgagor, but affecting different properties, are or become vested in one mortgagee, such mortgagee will be entitled, as against the mort- gagor and his subsequent assigns of his equity of redemption, to consolidate such mortgages into one mortgage for the aggregate of the different mortgage debts upon the aggregate of the different properties. Provided — (i) One of such mortgages contains a clause permitting such consolidation ; (ii) The times fixed for the repayment of the different mortgage debts have expired ; (iii) The mortgagor has not assigned his equity of redemption under one or both of the mortgages before the two Mortgages : Consolidation. 379 mortgages became vested in the same person. Formerly the right to consoUdate mortgages made by the same mortgagor, but affecting different properties, was unUmited, miless the mortgage instruments contained a clause forbidding consolidation. This rule has been re- versed by sect. 17 of the Conveyancing Act, 1881 (see now sect. 93 L. of P. Act, 1925) which enacts that where the mortgages or one of them are or is made after the commencement of the Act, there is to be no right of consohdation unless a contrary intention appears. (i) The contrary intention may appear only in one of the various mortgages. Thus, in Be Salmon, Ex parte the Trustee, [1903] 1 K. B. 147, a mortgagor mort- gaged Blackacre to A. Afterwards he again mortgaged it to B. Afterwards he again mortgaged it and some other property to C. The mortgage to A. alone contained a clause permitting consolidation. On the bankruptcy of the mortgagor, B. took transfers of A.'s and C.'s mortgages : — Held, that the C. mortgage could not be redeemed by the mortgagor's trustee in bankruptcy without his also redeeming the mortgages A. and B. Where a mortgagor by deposit has agreed to execute a legal mortgage when required, a clause permitting con- solidation is not a usual condition which the mortgagee is entitled to have inserted in the legal mortgage when that is made {Farmer v. Pitt, [1902] 1 Ch. 954). (ii) and (iii) The rules as to consolidation of mortgages may be summed up thus : (a) Where an owner mortgages two or more properties to the same person he or any assignee of the equity of redemption on one of the mortgages can redeem it when the mortgage debt becomes payable without redeeming the other or others. This is a legal right arising under the mortgage contract (Jennings v. Jordan (1881), 6 App. Gas. 698 ; Stra. Lead. Cas., p. 211). 380 A Digest of Equity. (b) If the mortgagor or his assignee do not do so, the mortgagee is entitled to consolidate the two debts and refuse to allow one to be redeemed without the other {Hughes v. Britannia Benefit Society, [1906] 2 Ch. 60). (c) Where the different mortgages were originally made to different persons the same rules apply to assignees of the equity of redemption where the assignments were made after the mortgages became vested in the same person (Minter v. Carr, [1894] 3 Ch. 498). (d) A puisne mortgage is, of course, an assignment of the mortgagor's equity of redemption. (e) There is no consolidation unless where the different mortgages were made by the same mortgagor {Sharp v. Bickards, [1909] 1 Ch.,109). [It is to he noted (i) that by sect. 97 of the L. of P. Act, 1925, every mortgage of a legal estate save one arising by deposit of title deeds is to rank as to priority according to the date of its registration as a land charge under the Land Charges Act, 1925, and (ii) that by sect. 198 of the same Act the registration of any instrument which must or may be registered under the Land Charges Act, 1925, is actual notice to all persons for all purposes as from the date of registration.} Article 138. Reconveyance on Redemption. (1) On redemption the mortgagor is entitled in equity to require the mortgagee to reconvey to him the mortgaged property and to return all the title-deeds. Instead of a reconveyance he, or in priority to him any incumbrancer, may require the mortgagee to reconvey to a third person. As between different incumbrancers, the requisition of the one who is prior in time prevails over the requisitions of the others. Beconveyance on Bedemption. 381 [(2) Since 1925 every mortgage of a legal estate is made or deemed to he made by a lease or sub- lease containing a clause rendering it void on the payment of the mortgage debt ; and a receipt endorsed on the mortgage instrument is sufficient evidence that the lease or sub-lease is determined and the mortgaged land freed from the incum- brance ; but this does not prevent the mortgagor demanding a reconveyance or assignmerit of the mortgage if he desires.] Paragraph (1). Section 15 of the Conveyancing Act, 1881 (re-enacted by sect. 96 of the L. of P. Act, 1925) was intended to facilitate the transfer of mortgages where the mortgagee wanted his debt repaid and the mortgagor was not himself in a position to repay it. The amendment by sect. 12 of the Conveyancing Act, 1882 (re-enacted, as supra) was intended to preserve the right of subsequent mortgagees to have the legal estate preserved to them on the payment of the legal mortgage (see per Jessel, M.E., in Teevan v. Smith (1882), 20 Ch. D. 724, at p. 729). Paragraph (2). [The new law is contained in sect. 115 o/ tJbe L. of P. Act, 1925. The receipt must state the name of the person repaying the loan and that the receipt is executed by the person entitled to give a receipt for the mortgage debt. Foi- form of receipt see No. 2, Third Schedule, L. of P. Act, 1925. The effect of the receipt is simply to prove that the cesser clause in the. mortgage lease has come into operation with the consequence that the mortgagor holds the fee simple or the head lease, as the case may be, discharged of the mortgage lease or snh-lease.'] ( 382 ) CHAPTEE 4. Right to Foreclose. SUMMARY. . PAGE Aeticle 139. Extent of the right to foreclose 382 „ 14:0. Interest allowed on foreclosure 383 „ 141. Jurisdiction of the court to order a sale 384 „ 142. When foreclosure is complete 385 Article 139. Extent of the right to Foreclose. A mortgagee can foreclose tlie mortgagor's equity of redemption without redeeming mort- gages (if any) prior, but not without foreclosing all mortgages subsequent, to his own. This rule, taken in conjunction with the one stated in Article 133 (3), (4) (supra), is commonly summed up in the maxim " redeem up, foreclose down." Thus, say A. mortgages Blackacre first to B., then to C, then to D., and finally to E. If D. wishes to redeem B.'s mortgage he must also offer to redeem C.'s, though he can if he chooses redeem C.'s without redeeming B.'s. Again, if D. wishes to foreclose A.'s right of redemption, he must also foreclose E.'s right as mortgagee. He can, however, foreclose both A. and E. without redeeming B. or C. But he cannot redeem B. or C. without claiming to fore- close A. and E. The reason of the rule is that B. and C. are not interested in the foreclosure of A. and E. since their securities in any event take precedence of A.'s and E.'s interest. But A. and E. are interested in the redemp- tion of B. or C. since the value of their security depends Interest on Foreclosure. 383 upon the state of accounts between B. and C. and the mort- gagor, and so it is necessary in an action to redeem B. or C. to have them before the court {Teevan v. Smith (1882), 20 Ch. D. 724. See Stra. Mortgages, pp. 134, 135). [It is to be remembered that foreclosure does not merely render the lease or sub-lease held by the mortgagee absolute but vests in him the fee simple or lease held by the mortgagor, sects. 88 and 89, L. of P. Act, 1925.] Article 140. Interest allowed on Foreclosure. After a decree nisi of foreclosure the- mort- gagor may redeem at any time within six months on payment of the mortgage debt and the same costs as in an action of redemption, and all interest on the mortgage debt which has accrued due during the six years preceding the decree. Where, however, the mortgaged pro- perty has been sold and the mortgagor applies for the surplus of the purchase money, the court, in ascertaining what is the surplus, will allow the mortgagee all arrears of interest. The practice in foreclosure actions is to order an account to be taken as between the mortgagor and the mortgagee seeking foreclosure and all the subsequent mortgagees. The prior mortgagees are not made parties since they are not concerned with the rights of parties who take only after they are satisfied. When such accounts are taken they are similar in all ways to those taken in a redemption action, except that the court allows the mortgagee only six years' arrears of interest. This limitation is based on the consideration that the mortgagee is seeking to recover arrears of interest, and is therefore within sect. 24 of the Eeal Property Limitation Act, 1833 (see Be Lloyd, Lloyd V. Lloyd, [1903] 1 Ch. 385). When the chief clerk 384 A Digest of Equity. has certified the amount of debt, interest, and costs owing by the mortgagor to the mortgagee, he adds six months' further interest to that amount, and an order is made that the mortgagor and the subsequent mortgagees shall redeem within the six months following the order, or be for ever foreclosed of their right to redeem. The defendants then have six months to redeem, but they are bound to pay the whole six months' extra interest, however soon after the order they or any of them may redeem {Hill v. Bowlands, [1897] 2 Ch. 361). It is customary now where there are several puisne mortgagees to limit one period for all of them to redeem, unless one of them asks for further time. A further time will not be allowed to the mortgagor (Piatt v. Mendel (1884), 27 Ch. D. 246). Article 141. Jurisdiction of the Court to Order a Sale. In any action for foreclosure, redemption or sale, or for raising the mortgage money in any other way, the court may, if it thinks fit, at the request of any one interested in the mortgage money or in the equity of redemption, and not- withstanding the objection of any other such person, order a sale, without allowing time for redemption, on such terms as it thinks fit. The power of the court to order a sale is given by sect. 25 (2) of the Conveyancing Act, 1881 (now sect. 91 L. of P. Act, 1925). It is to be distinguished from the right of a plaintiff in a redemption action to require a sale instead of an order for redemption. The latter confers a right to a sale on the plaintiff. This sub-section confers a discretion upon the court to order a sale if it thinks fit. When Foreclosure is Complete. 385 Article 142. When Foreclosure is Complete. A foreclosure becomes complete — (i) In a foreclosure action by an order of the court making a decree nisi for foreclosure absolute ; (ii) In a redemption action as against the person seeking redemption by an order of the court dismissing the action for any other cause than want of prosecution. 2c 386 ) CHAPTEE 5. Equitable Liens. SUMMABY. PAGE Article 143. Nature of an equitable lien - 386 „ 144. Vendors' and purchasers' liens - - 388 ,, 145. Subrogation - - 391 „ 146. Assignment of after-acquired property 392 Article 143. Nature of an Equitable Lien. (1) An equitable lien is a right in equity residing in one person to have a claim satisfied out of property belonging to another. (2) It differs from a mortgage in this, that it does not transfer to the person having it any title at law or in equity to the property, and therefore it cannot be enforced by fore- closure. (3) It differs from a common law lien in this, that it does not depend for its continuance on the person having it retaining possession of the property, but affects everybody taking the pro- perty with notice of it, and is not a mere right of retention until the claim is satisfied, but entitles the person having it to obtain satis- faction of his claim by means of a judicial sale of the property. Nature of an Equitable Lien. 387 Paragraph (1). Most equitable liens arise by operation of equity. We have already had occasion to refer to several of these, ex. gr., the lien which a trustee has upon the trust estate for costs and expenses properly incurred by him in dis- charging the trust. Where the lien arises by express contract, it is called usually not a lien but a charge. However, for all practical purposes, a lien and a charge are identical. [A71 exception to this statement is now created by statute. A registered charge intended as a mortgage is now Jor all f radical purposes a legal mortgage giving the chargee all the rights of a legal mortgagee (see supra, p. 380).] Paragraph (2). As we have seen, a mortgage transfers the mortgagor's title to the mortgagee, and on the mortgagor's failure to redeem the mortgagee's title becomes absolute in law. Foreclosure is simply the withdrawal of the bar to for- feiture which equity imposes. It in itself never transfers title, and, therefore, where the title has not been otherwise transferred, it can have no application. Paragraph (3). It is enough here to point out that at common law a lien is simply the right to retain another person's property until he pays a claim against him, and that such lien is lost the moment the person having it parts with the possession of the property subject to it. Any right to sell to satisfy the lien — which now occurs sometimes — must be given expressly by statute (see, for instance, the Inn- keepers Act, 1878). In equity, on the other hand, ' ' the owner of an equitable charge or lien on property as a security for money which is due and payable, has a right to a judicial sale of that property to satisfy the charge or lien" (per Kbkbwich, J., in Gorringe v. Irwell India Bubber Works (1886), 34 Oh. D. 388 Digest of Equity. 128, at p. 134 ; and see per Lord Cottenham, L.C, in Neate v. Duke of Marlborough (1838), 3 My. & Or. 407, at p. 417). Moreover, like every other equity, it binds every person receiving the property even for value if such person had notice at the time he received the property of the lien {Whithread and Company v. Watt, [1901] 1 Ch. 911 ; affirmed, [1902] 1 Ch. 835 : cited infra, p. 375). Abtiolb 144. Vendors' and Purchasers' Liens. (1) An owner of property who has entered into a binding contract for the sale of it has a hen on such property for the unpaid purchase money from the time at which such sale should have been completed until such purchase money is paid. (2) A person who has entered into a binding contract for the purchase of property, and in pursuance of such contract has paid before con- veyance part or all of the purchase money, has a hen on such property for the purchase money so paid until the property is conveyed to him. (3) Where such contract is not completed, if the failure to complete is due to the default of the person having the lien, the lien is defeated ; if it is due to the default of the other party, it can be enforced by a sale. (4) When the money secured by the lien is not paid when it should be paid, the court will allow interest upon it at the rate of 4 per cent, per annum. Vendors' and Purchasers' Liens. 389 (5) The above rules apply only when there is nothing in the contract or in the circumstances surrounding the contract to show that they were not intended to apply. Paragraph (1). It is commonly said that a vendor's lien for unpaid purchase money arises upon the conveyance of the pro- perty before the whole purchase money is paid. This is not accurate. It arises as soon as the purchase money should be paid, i.e., at the time fixed for completion (Kettlewell v. Watson (1884), 26 Ch. D. 501). If after such time the vendor seeks to enforce the contract, he always asks the court to declare that he has a lien for the purchase money on the land contracted to be sold, and, on this lien being declared, he can ask for a sale and hold the original purchaser responsible for any loss which may occur on such sale. Formerly, upon a conveyance of land, if the whole purchase money was not then paid, it was customary to insert a receipt in the body of the conveyance, but not to indorse it on the deed. Accordingly, if there were no indorsed receipt, this was held to give any subsequent purchaser notice that the property was affected by a vendor's lien (Wilson v. Keating (1859), 27 Beav. 121). This rule has now been abolished by sect. 54 of the Con- veyancing Act, 1881, which makes a receipt in the body of the conveyance sufficient for all "purposes. A vendor's lien is now an incumbrance within Locke King's Acts (see infra, Article 228, and note on para. 1 (i) ). But it seems that a direction in a mortgagor's wiU that all mortgages are to be paid off does not amount to a direction to pay off a vendor's lien (Barnett v. Beirnstein, [1925] Ch. 12). It is to be noted that the law as to a vendor's and also a purchaser's lien applies equally to realty and personalty {Dapies v. Thomas, [1900] 1 Ch. 435 ; In re Stucley, Stucley V. Kekewich, [1906] 1 Ch. 67). 390 A Digest of Equity. Paragraph (2). This right is simply the counterpart of the vendor's lien. It is customary on entering into a contract for the purchase of property for the purchaser to pay a deposit of about 10 per cent, of the purchase money as an earnest. This deposit creates a lien till the contract is completed by conveyance, or the deposit is repaid or the lien defeated under the next rule. The usual cause for the enforcement of this lien is the failure of the vendor to make a good title to the property he has contracted to sell. Here, as in every case, save where the contract goes off through the purchaser's default, the purchaser can recover his deposit (Bose v. Watson (1864), 1 H. L. C. 672). Paragraph (3). The rule here stated is but a completion of those stated in the two preceding paragraphs. The vendor and pur- chaser have their respective liens unless the contract goes off through their respective defaults. If it goes off through the default of either his lien is gone. Thus, in Bidout v. Fowler, [1904] 2 Ch. 93, A. contracted to purchase land from B., and having paid a deposit, was let into posses- sion. When the time for completion arrived A. failed to complete. Subsequently C, to whom A. was indebted, appointed a receiver of A.'s interest in the land. B. com- menced an action of ejectment against A., which was settled by A. giving up possession on B.'s paying him a certain sum of money : — Held, that A.'s lien on the land had been lost by his default in failing to complete, and that C. had no remedy either against the land or against B. A contract does not go off through the purchaser's default within this rule when it is rescinded by the vendor under an express power which could not be exercised if the purchaser had faithfully, carried out his obligations. Thus, in Whitbread and Company v. Watt, [1902] 1 Ch. 835, A. entered into a contract to purchase land from B., and paid a deposit of £200. By the terms of the contract Subrogation. 891 A. was to erect three hundred houses within two years, and on the erection of such houses B. was to convey the land to A., and if A. failed so to erect these houses, B. could rescind the contract. A. did fail to erect them and B.'s assign rescinded : — Held, that A. had a lien on the land for the £200 deposit. Paragraph (4). See Be Drax, Savile v. Drax, [1903] 1 Ch. 781. Paragraph (5). Sometimes the purchaser's lien for his deposit is expressly excluded by the contract, and very often his right to interest is excluded in the same way, unless the contract goes off through the vendor's wilful default. The vendor's lien is more often excluded by the circum- stances of the contract showing that no such lien was intended. Thus, if he accepts a valuable security for the purchase money, or if the consideration is not the payment of a lump sum but is an armuity not charged on the land, the court will hold no lien was intended {Dixon v. Gay fere (1857), 21 Beav. 118). Article 145. Subrogation. Where a debtor has a right to indemnity against a third person, equity will permit the creditor to stand in the shoes of the debtor and take advantage of all remedies he is entitled to against such third person. This is what is called the doctrine of subrogation. The most common example of subrogation occurs in the case of an executor carrying on the business of his testator. 392 A Digest of Equity. When this happens the executor is hable personally to the trade creditors for the debts he contracts in carrying on the business. If, however, he is acting in carrying it on in accordance with the testator's will, he is entitled to an indemnity against these trade debts from the estate of the testator. And where the business is carried on with the consent of the testator's creditors, this indemnity takes precedence of the claims of such creditors (Dowse v. Gorton, [1891] A. C. 190), but merely standing by does not amount to a consent of creditors to carrying on the busi- ness (In re Oxley, [1914] 1 Ch. 604). The trade creditors may proceed personally against the executor, but they may also claim the advantage of his indemnity and proceed directly against the testator's estate {Re Frith, Newton v. Bolfe, [1902] 1 Ch. 342). If they proceed against the estate they can recover only what he was entitled to recover. Thus, where a receiver of a company had incurred trade debts to the extent of £900 and had re- ceived on behalf of the company £400 which he had not accounted for, it was held that the trade creditors could subrogate only to the extent of £500 {In re British Poiver Traction and Lighting Company, Limited, [1910] 2 Ch. 470). Article 146. Assignment of After -acquired Property. A contract for valuable consideration to trans- fer property wliieh at the time of contracting does not belong to the person agreeing to transfer it, will, on such person becoming entitled to such property, be enforced in equity as if the contract were a declaration of trust. " A man cannot in equity, any more than at law, assign what has no existence. A man can contract to assign property which is to come into existence in the future, and when it has come into existence, equity treating as done Assignment of Ajter-acquired Property. 393 that which ought to be done, fastens upon that property, and the contract to assign thus becomes a complete assign- ment " (per Jbssel, M.E., Collyer v. Isaacs (1881), 19Ch.D.342,atp.351). At the same time, where the assignment is of a prospec- tive share in definite property the assignment creates from its commencement more than a personal contract between the assignor and the assignee which will be dis- charged by the bankruptcy of the assignor before the expectant share vests in him : it gives the assignee a right in rem which will in equity vest the property in the share in him the moment the share vests in law in the assignor {In re Lind, [1915] 2 Ch. 345). As to covenants to settle such property in consideration of marriage, see for the effect of the bankruptcy of the covenantor supra, p. 311. ( 394 ) Section III. Married Women's and Infants' Property.. SUMMARY. PAGE Abticlb 147. Trusts for the henefit of women 394 148. The restraint on anticipation 398 149. Wife^s equity to a settlement 402 150. Mortgages of married momenta property 404 151. Infants' property - - 404 152. Infants' assurances and contracts - 407 Aeticle 147. Trusts for the Benefit of Women. (1) A trust for the benefit of a woman, whether married or unmarried, is now governed in general by the ordinary law applicable to private trusts subject to the following qualification : (2) A condition in the trust instrument re- straining her from ahenating the trust property or anticipating the income of it so long as she is married is good. (3) Such a condition may be imposed before or during coverture and may be restricted to a particular coverture or be general in its terms. Where it is restricted to a particular coverture it becomes void on the determination of such coverture ; but where it is general in its terms, on the determination of a particular coverture it becomes dormant only and wiU revive on her Trusts Jor the Benefit of Women. 395 re-marriage, unless m the meantime she by ahenating the trust property or in some other way avoids it. Paragraph (1). In Article 13 (supra) it was pointed out that the old common law incapacity of a married woman to hold property apart from her husband is not recognised in equity. This equitable doctrine has now been adopted by the Legislature, which, by the Married Women's Property Acts, 1882 to 1893, conferred on a married woman a legal capacity to hold all kinds of property and to contract in respect of it as if she were a feme sole. In spite of this enactment the property of women is still usually held in trust for them. This is for the purpose of securing for them, when married, the benefit of a restraint upon antici- pation, though, where the property is realty, a trust is no longer strictly necessary {Re Lumley, Ex parte Hood- Barrs, [1896] 2 Ch. 690). With the exception, then, of the equitable doctrines of restraint and a wife's equity to a settlement (see infra, Articles 148, 149), married women's property seems not a proper subject for detailed discussion in a treatise on equity, but rather matter for the law of property generally (see Stra. Property, pp. 415-419). As, however, the law applicable now to married women's legal property is based upon the equitable rules once in force only in Chancery, it is desirable to trace very shortly the origin and development of that law. The foundation of the whole system was what was called the separate v^e. If property were given by any one — including the husband — ^to a married woman and the donor directed expressly that it should be enjoyed by her independent of her husband, or if before marriage husband and wife agreed that after marriage her own property should be so enjoyed, equity insisted that the direction or agreement should be observed. If trustees were appointed, it was their duty to see the married woman received herself the property and its profits, and if no trustees were appointed 39G A Digest of Equity. then, though the property vested in law in her husband, equity constituted him a trustee of it for the same purpose. Having once estabhshed thus the capacity of a married woman to hold property in equity, equity proceeded slowly to apply the maxim " equity follows the law." It held that she could sell it, leave it by her will, or contract so as to bind it. A married woman, however, was pre- sumed both in equity and law to contract as her husband's agent, and her debts accordingly could be satisfied out of her separate estate only when she contracted in respect to it {Pike V. Fitzgibbon (1881), 17 Ch. D. 454). And the separate use was established to protect the wife during the coverture against her husband. Accordingly, when she died during coverture, in so far as she had not dis- posed of her property during her hfe or by her will, her husband's common law rights revived. That is, he was entitled to her personalty as her administrator and, if he had issue by her capable of inheriting, to an estate for his life by the curtesy iu her heritable freeholds. This was the state of the law as to trusts for married women's benefit when the Married Women's Property Act, 1882, was passed. The short effect of that statute was to declare to be statutory separate estate all the unsettled property of a woman married after December 31st, 1882, and all the unsettled property the title to which accrued after that date to a woman married before it (see In re Bacm, Toovey v. Bacon, [1907] 1 Ch. 475). The same incidents were attached by the Act to such statutory separate estate as equity had attached to the equitable separate estate. One or two alterations were made affecting all separate property indirectly. Thus a married woman may be made bankrupt (see infra, p. 401), and she can be made liable for damages and costs in an action on contract or in tort (sect. 1 (2) ). But the remedies of her creditors are still limited to her separate property : they have no remedy against her personally {Scott v. Morley (1887), 20 Q. B. D. 120). And by sect. 1 of the Married Women's Property Act, 1893, a married woman, when contracting otherwise Trusts for the Benefit of Women. 397 than as agent, is to be deemed to contract in respect of her separate estate, whether she then has any or not, and her contract is to bind all separate property which she then or afterwards has and is to be enforceable against all property which she may afterwards, while discovert, be possessed of or entitled to. By a proviso, however, nothing in sect. 1 is to render available to satisfy any liability arising out of any such contract any separate property which at that time or thereafter she is restrained from anticipating (see Be Wheeler, Hankinson v. Hayter, [1904] 2 Ch. 66). By sect. 3 a married woman's will made during coverture is to speak from the death of the testatrix without any republication after her husband's death, i.e., it now carries not merely what was her separate estate during coverture, but all additions to it made during her widowhood. Finally, by sect. 4 of the Married Women's Property Act, 1882, the execution of a general power of appointment by will by a married woman has the effect of making the property appointed on her death assets for the payment of her debts. Paragraphs (2) and (3). Both at law and in equity a condition restraining a man from alienating his property is void. The only way in which this object can be indirectly secured is by a con- dition determining his interest in the property on his attempting to alienate it. And such a condition is void if attached to an absolute interest or if introduced by a settlor in settling his own property on himself. But both in equity and now at law a condition restrain- ing a woman from alienating her property during coverture is good. And it may be attached to the income merely or to the absolute interest, and may be introduced where the settlor is settling her own property on herself. The clause against anticipation, as this condition is usually called, was invented by Lord Thuelow, C, for the purpose of protecting the wife's property, in the words of Lord Brougham, from the kicks or kisses of her husband. 398 A Digest of Equity. By sect. 19 of the Married Women's Property Act, 1882, nothing in that Act is to interfere with or render inoperative any restraint on anticipation ; but no restraint introduced into a settlement of a woman's own property upon herself is to have any validity as regards debts contracted by her before marriage. As the restraint is for the purpose of protecting the wife's property from the husband it only operates while she has a husband. The moment he dies or ceases to be her husband her absolute right to do what she will with her property revives {Tullett v. Armstrong (1838), 1 Beav. 1). If, however, the restraint is general it will revive again on a second marriage unless the woman while not under coverture alienates it, or takes it from the trustees or serves the trustees with notice that she repudiates the restraint (In re Chrimes, [1917] 1 Ch. 30). In the same way, it ceases, as far as income is concerned, the moment the income becomes payable to her, even though it has not then reached her hands. Prom that moment she becomes absolute owner of the income accrued due (Hood-Barrs v. Heriot, [1896] A. C. 174). Article 148. The Restraint on Anticipation. Where a married woman's property is subject to a restraint upon anticipation, the following rules apply : (1) Where a judgment is obtained against her during coverture, the corpus and the future income cannot be taken to satisfy the judgment debt, unless the settlement imposing the re- straint was of her own property and the debt for which judgment is recovered was contracted by her before marriage. The Restraint on Atiticvpation. 399 (2) Where she is made bankrupt her separate estate vests in her trustee in bankruptcy, but during coverture the income remains payable to her unless the court in its discretion otherwise directs. (3) During coverture the court may by its order deal with the property subject to restraint as if it were not subject at its discretion for the following purpose — (i) For her own benefit, and with her con- sent, where it is shown to be for her benefit that it should be removed. (ii) For the purpose of indemnifjdng her trustee in respect of liabihty for a breach of trust where the trustee com- mitted such breach at her instigation or request or with her consent in writing. (iii) For the purpose of pajdng the costs of an action or proceeding instituted by her or her next friend on her behalf. (iv) For the purpose of paying her creditors when she has been made bankrupt. The restraint on anticipation was invented to protect the married woman's separate property against her husband. To accomplish this purpose it was necessary to protect it against herself, her creditors also, and indeed all others having claims against her (see Lady Bateman v. Faber, [1898] 1 Ch. 144). This absolute immunity was formerly given by the Court of Chancery, but, as the above Article shows, it has now to some extent been modified by statute. A married woman might always refuse to accept property given or left to her subject to a restraint {In re Wimperis, [1914] 1 Ch. 502). 400 ^ A Digest of Equity. Paragraph (1). In the first place it should be remembered that as far as. income is concerned, that is protected by the restraint only so long as it is subject to it. This subjection ends the moment an instalment of income becomes immediately payable to the married woman. It is then her separate property, with which she may deal as she likes. Accordingly, like other unprotected separate property, it is liable for judgments recovered against her while it remains her separate property — that is, while her trustees hold it for her or while it remains in her hands unspent (Hood-Barrs v. Herioi, [1896] A. C. 174, and see Sf range v. Lee, [1908] 1 Ch. 424, where a very curious and questionable application of this principle is made). But it is not liable for judgments recovered against her before it accrued due to her, i.e., a judgment creditor cannot claim satisfaction of his debt out of the future income of the protected estate (Whiteley v. Edwards, [1896] 2 Q. B. 48 ; Bolifho and Company v. Gidley, [1905] A. C. 98). As regards the corpus of the separate estate subject to restraint the married woman cannot incur during cover- ture any legal obligation with regard to that, subject to the exceptions contained in the second and third paragraphs of the above Article. Accordingly, if by the death of her husband during coverture such restraint ceases, it cannot then be taken in execution of a judgment founded on any contract or tort of the married woman during coverture {Broivn v. DimhUby, [1904] 1 K. B. 28). It has been pointed out that a single woman who incurs debts is not permitted to defraud her creditors by means of a settlement on a subsequent marriage. Her liability continues after her marriage as before, notwith- standing any clause against anticipation contained in her settlement, as far as the property contained in that settlement is her own. If it is property settled upon her on or after the marriage by some one else — as, for example, her husband — the restraint is perfectly effectual The Restraint on Anticipation. 401 as regards ante-nuptial as well as post-nuptial debts (Birmingham Excelsior Money Society v. Lane, [1904] 1 K. B. 35). Paragraph (2). Originally a married woman could not be made bank- rupt. This was an inevitable corollary from the common law doctrine that she could not enjoy property or incur a legal obligation apart from her husband. When equity conferred the right to hold property and incur legal obligations on her own behalf, her immunity from the law of bankruptcy continued. For an attempt to create an " equitable " bankruptcy see Robinson v. Pickering (1881), 16 Ch. D. 660. By sect. 1 (5) of the Married Women's Property Act, 1882, she might be made bankrupt, but only under one state of circumstances — when she was carrying on a trade separately from her husband. Now by sect. s. 125 of the Bankruptcy Act, 1914, she may be made bankrupt if she trades at all. Where she does not trade she cannot be made bankrupt, even if she committed an act of banfauptcy before her marriage (Be A Debtor, [1898] 2 Q. B. 576). The effect of her becoming bankrupt is that her separate estate, whether free or subject to a restraint on anticipa- tion, vests in her trustee in bankruptcy. The free separate estate vests absolutely. The protected separate estate in the absence of an order of the court to the contrary vests subject to the restraint, that is, as long as her husband lives she continues, in spite of the bankruptcy, entitled to the income of it for her own use. On her husband's or her own death, the trustee holds it free from the restraint (Re Wheeler's Settlement Trusts, [1899] 2 Ch. 717 ; Stra. Lead. Cas. 227). But now by sect. 52 of the Bankruptcy Act the court has power to direct that the whole separate property may be applied to the payment of the creditors as if no restraint applied to it. Paragraph (3). (i) Sect. 7 of the Conveyancing Act, 1911 (re-enacted sect. 169 L. of P. Act, 1925) gives the court power D.E. 2 p 402 A Digest of Equity. ■with her consent to bind, by judgment or order, a married woman's interest in property which is subject to a restraint upon anticipation or which by law she is unable to dispose of or bind, including a reversionary interest arising under her marriage settlement. The benefit which will justify the court in lifting the restraint must be a personal benefit to the wife, though not necessarily a pecuniary one {Paget v. Paget, [1898] 1 Ch. 47). What is such a benefit is, in each case, a question of fact (see Re Pollard's Settlement, [1896] 1 Ch. 901 ; Be Blundell, [1901] 2 Ch. 221). (ii) This is the effect of sect. 45 of the Trustee Act, 1893 (re-enacted sect. 62, T. Act, 1925). (iii) This is the effect of sect. 2 of the Married Women's Property Act, 1893. Where the married woman is the defendant in an action, an appeal or other step in such action is not {Hood-Barrs v. Heriot, [1897] A. C. 177), while a counterclaim is {Hood-Barrs v. Cathcart, [1895] 1 Q. B. 873), a proceeding instituted by her within this rule. And see Huntley {Marchioness) v. Gaskell, [1905] 2 Ch. 656. Where the married woman does institute the proceeding, the onus of showing that the costs should not be paid out of her separate estate lies on her {Pawley v. Pawley, [1905] 1 Ch. 593). (iv) This is the effect of sect. 52 of the Bankruptcy Act, 1914. Article 149. Wife's Equity to a Settlement. Where an interest in possession in property- accrues to a husband in right of his wife, and to obtain such property a claim has to be made which comes within the exclusive or concurrent Wife's Equity to a Settlement. 403 jurisdiction of equity, the court in which such claim is heard will make it a condition of aiding the claimant to obtain the property that a settlement of such property or such part of it as the court thinks fit shall be made for the benefit of the wife and her children. The equity is called the wife^s equity to a settlement. The equity was good whether the claimant was the husband himself or his assignee for value or trustee in bankruptcy. The wife's equity to a settlement was an invention of the Court of Chancery to mitigate, where it was within its power so to do, the legal doctrine as to the rights which marriage formerly gave a husband as to his wife's property. Marriage, since the Married Women's Property Act, 1882, gives a husband no such right at any rate during his wife's life. The doctrine, therefore, now applies only to property the title to which accrued before January 1st, 1883, to a woman married before that date. Naturally it has ceased to be of much practical importance. It will, therefore, be sufficient to say that it extends to equitable interests in possession in land which the husband takes absolutely, whether such interests are equitable because the land is held in trust or because it is subject to a legal mortgage {Sturgis v. Champneys (1839), 5 My. & Cr. 97), and to equitable choses in action, legacies, etc. It does not, however, extend to mere life interests taken by the husband in right of the wife, as where the fee simple of land descends to the wife. As long, at any rate, as the husband is supporting her, she has no equity to a settlement out of such life estates {Taunton v. Morris (1879), 11 Ch. D. 779). The equity is personal to the wife, who may abandon it even after judgment in her favour (Murray v. Lord Eli- bank (1804), 10 Ves. 84 ; (1806), 13 Ves. 1) ; and the 404 A Digest of Equity. wife may claim as plaintiff or the trustees may claim on her behalf (Lady Elibank v. Montolieu (1801), 5 Ves. 737). And see as to frauds on marital rights, supra, page 316. Abticle 150. Mortgages of Married Women's Property. Where a husband and wife join in mortgaging the wife's property and the mortgage money is shown by the mortgage deed to have been paid to the husband (or before 1883 to the husband and wife), then the court presumes that the mortgage debt was the husband's debt and the wife's property was merely security for it, unless it can be shown that this was not in fact intended. This rule was first based on a dictum of Wood, V.-C, in Hudson v. Carmichael (1854), Kay, 613, at p. 620. It was generally thought to have been displaced by the comments of Lindley, M.E., in Paget v. Paget, [1898] 1 Ch. 474, 475; but in the case of Hall v. Hall, [1911] 1 Ch. 487, it was adopted and applied by Warrington, J. The presumption may be rebutted by showing, for instance, that in fact a gift by the wife was intended, or that the money was in fact applied for her use. Article 151. Infants' Property. (1) The father is the natural guardian of his infant legitimate children, and where no trustees are appointed to their property he is entitled to receive the income of it during the infants' Infants* Properly. 405 minority. He is also entitled to appoint by deed even if he is a minor, or by will if he is over age, guardians to act after his death. Such guardians are called testamentary guardians. The mother of illegitimate infant children is their natural guardian, and the mother of legitimate infant children is now, if she survives the father, a statutory guardian jointly with the testamentary guardian (if any) ; and if the father is unfitted to be sole guardian of infant children, then the mother, if she predeceases him, may by will or deed provisionally appoint for the court's approval a guardian to act with the father. (2) As representing the King, who is parens patriae, the Chancery Division has jurisdiction over infants and their property, and can make orders for the removal of natural, testamentary or statutory guardians, for the maintenance and upbringing of infants and for the confirmation of contracts by and sales of the property of infants where it is for the benefit of the infants that such orders should be made ; and where infants are entitled to property it can itself assume a guardianship over them by making them wards of court. Paragraph (1). This is a summary of the law as enacted by 12 Car. 2, c. 24, and 49 & 50 Vict. c. 27. Where there are no trustees of an infant's property the father or guardian takes no estate in it ; but he is by ss. 8 and 9 of 12 Car. 2, c. 24, entitled to receive on the infant's behalf the rents and profits of it. If it is desirable to sell the infant's property, a provisional contract must be submitted for the approval of the court. The order permitting the sale usually provides that the nature of 406 A Digest oj Equity. the property is not to be changed in case the infant dies before attaining twenty-one. In the absence, however, of such a provision the property becomes converted from the time the order is made {In re Searle, Ryder v. Bird, [1912] 2 Ch. 365). Paragraph (2). The court has full jurisdiction over infants whether tht father is living or not ; but it will not remove him from their guardianship except on a strong case being made for such removal {In re Besant, 11 Ch. D. 508. As to incest, see 8 Edw. 7, c. 46, s. 1). This jurisdiction has come to the Chancery Division from the former Court of Wards. The Court of Probate also has power to make orders as to the custody of infants during their minority {Thomasset v. Thomasset, [1894] P. 295). Any person is entitled to apply to the court as next friend to the infant. Such person is responsible for the costs of the proceedings, but is entitled to an indemnity out of the infant's property in case the proceedings were clearly initiated and carried on for the infant's benefit {Steeden v. W olden, [1910] 2 Ch. 393). Any such pro- ceedings have the effect of making the infant a ward of court. Once an infant has been made a ward of coiurt all dealings with his property and person are subject to the sanction of the court, though in general the court will enforce the wishes of the infant's natural or testamentary guardian where such wishes are reasonable. Any un- authorised dealings with the infant — such as marriage — amount to contempt of court, even where the person having the dealings was not aware that the infant was a ward of court. In consequence of this it has become customary for a parent or guardian, who wishes to prevent an undesirable marriage, to pay some money into court in trust for the infant and commence an action for the administration of the trust (see In re H.'s Settlement, H. V. H., [1909] 2 Ch. 260). The father, being under a legal obligation to maintain and educate his children, the court will not allow him part Infants' Assurances and Contracts. 407 of the income of the child's property for this purpose where it is shown that he is in a position to fuliil the obhgation without such assistance. But in deciding whether he is in such a position the court will not take into consideration the fortune of his wife and will take into consideration not merely the income of the father but the prospects and fortune of the child. It appears clear that the court cannot mortgage or charge the corpus of an estate tail vested in an infant for the maintenance of the infant ; but it can charge a fee simple in possession but not in reversion (see In re Badger, [1913] 1 Ch. 385), at any rate for the payment of past maintenance on the ground that if the person providing the infant with maintenance had sued him for it as a necessary, judgment binding the fee simple would have been recovered (In re Hamborough's Estate, [1909] 2 Ch. 620). [As to a trustee's powers of applying income to maintain and capital to advance infants, see swpra, pp. 151-153.] Article 152. Infants' Assurances and Contracts. An infant on coming of age can then or "within any reasonable time afterwards affirm or repu- diate any disposition of his property, or any contract made by him during his infancy, subject to the following limitations : (1) A settlement of his or her property by an infant not less than twenty being a male, or not less than seventeen being a female, made on his or her marriage and approved by the court, is as valid as if the settlor had been of full age when the settlement was made. 408 A Digest of Equity. (2) A settlement not within the above rule made on marriage by the man of his intended wife's property, if she is an infant, may on her attaining full age be repudiated by her, but if she dies before attaining full age it will bind or pass any property of hers to which he may become entitled on her death and which he could otherwise have bound or disposed of. (3) A contract or disposition of property made by an infant for the purpose of providing himself with necessaries or for any other purpose which, in the opinion of the court, is for his benefit, cannot be repudiated by him on attain- ing full age. (4) A contract with an infant for money lent or goods supplied where such were not necessaries and an account stated are void and cannot be ratified by the infant on attaining full age so as to make them enforceable against him. (5) An infant who repudiates a settlement on attaining full age is hable to have any interest taken by him or her under it appropriated to make compensation for any benefits lost by the other parties to the settlement through such repudiation. Paragraph (1). This IS a short summary of the Infants Settlement Act, 1855. Infants'' Assufances and Contracts. 409 Paragraph (2). This is a short summary of sect. 2 of the Married Women's Property Act, 1907, which was passed for the purpose of getting rid of some decisions on the effect of sect. 19 of the Act of 1882. Paragraph (3). This depends upon the common law, and is merely a statement of the ordinary disability of an infant (see Sir W. C. Levy and Company, Limited v. Andrews, [1909] 1 Ch. 763, at p. 769, and Roberts v. Gray, [1913] 1 K. B. 520). Paragraph (4). This is a summary of the Infants Belief Act, 1874. Paragraph (5). See Under, and Strahan's Inter, of Wills and Settle- ments, pp. 363 and 368. BOOK II EQUITABLE REMEDIES. INTRODUCTION. CHARACTERISTICS OF EQUITABLE REMEDIES. SUMMARY Aeticle 153. Equity acts on the conscience 413 154. Equity acts in personam 414 155. Equity forbids contemplated and undoes com- pleted Wrongs 417 156. Who seeks equity must do equity 419 157. Delay defeats equity - 421 158. Chief equitable remedies 424 159. (i) Specific performance 426 160. (ii) Injunction 427 161. (iii) Receivers 428 162. (iv) Account 429 163. (v) Rectification of instruments 430 164. Damages in addition to or in lieu of equitable remedies 433 165. Subject-matter of equitable remedies 436 413) INTRODUCTION Characteristics of Equitable Remedies Article 153. Equity acts on the Conscience. The Court of Chancery, being not a court of law but a court of conscience, had for its object the guardianship not of the rights but of the consciences of the parties coming before it. Hence its remedies were directed not to secure through the action of its officers compensation to a plaintiff whose rights had been invaded, but to ensure that both the plaintiff and the de- fendant should themselves act in such a manner as would leave their consciences void of offence. As we have seen, equity originated from the King's conscience. It also operated on his subject's conscience. The notion was that the King as a conscientious man sat by his representative the Chancellor in the Court of Chancery to make litigants there act as men of conscience should act. As the Chancellor was invariably a priest down till Henry VIII. 's time, his notions of right and wrong were based rather on the religious notion of wrong to God than on the legal notion of wrong to man. Accordingly, in granting remedies, his chief concern was to protect the health of men's souls. 414 A Digest of Equity. This could only be done by insisting that all parties to proceedings in equity should be compelled personally not to do what was evil and to do what was good : for to allow them to do wrong and then seize their chattels to make compensation to the person wronged could not relieve them from the sin of wrongdoing. Nor was it less a sin for a plaintiff to demand justice against a wrongdoer when he himself was doing wrong. These principles, combined with the fact that whether an equitable remedy was granted or not or whether it was granted absolutely or subject to equitable conditions depended on the discretion of the Chancellor (see Article 2), enabled him to base equitable remedies on the rules and shape them in the forms now to be discussed. Article 154. Equity acts in personam. Originally equity directed its decree to the person who had done or was contemplating doing a wrong, and ordered him personally to keep his conscience clear by carrying out the decree. If he failed to obey, it had him arrested for contempt of court and imprisoned untU he purged his contempt by obeying the order. Though now equitable remedies can often be enforced as if they were legal remedies, this characteristic is still the chief distinction between the enforcement of the judgments of equity and the enforcement of the judgments of the law. This rule is summed up in the maxim that equity acts in personam. Formerly Chancery decisions were not technically termed judgments, but orders or decrees. That was Equity ads in Personam, 415 because they were directed to the defendant who was himself required to carry them out. If he failed to do so, the court ordered that he should be arrested and im- prisoned until he did as directed. This was commonly summed up by saying that Chancery decisions were enforced by process of attachment. Courts of law, on the other hand, delivered judgments and enforced their judgments by their own officers. This was usually called enforcement by process of execution. Thus, if equity decided that a defendant had obtained the legal owner- ship of land from the plaintiff by a fraud, it ordered the defendant to execute a reconveyance to the plaintiff; and if he refused to obey, the court attached him and sent him to jail till he did so. If the law, however, decided that land held by the defendant was legally the property of the plaintiff, and the defendant nevertheless refused to surrender it to the plaintiff, the court directed the sheriff to execute the judgment by turning out the defendant, if necessary by force, and putting the plaintiff in possession. At first the writ of attachment was the only mode by which Chancery could enforce its judgments ; but in time the obstinacy of particular defendants led the court to seek other modes. Firstly, a fine was added to im- prisonment ; then a writ of assistance which directed the sheriff to put the plaintiff in occupation of property to which he was equitably entitled ; then a writ to sequester first the property in dispute, then one to sequester all the property of the defendant till he made submission ; and lastly, one to pay equitable debts out of the profits of the sequestered property. A very learned account of this strengthening of the powers of the court is given in Mr. Ashburner's Equity, to which the inquiring reader is referred. Lastly, equity still acts in personam, though by virtue of various statutes not only may its judgment now be enforced by other means than process of contempt, but in certain cases it can by its order transfer the legal ownership of the property concerned in an action. Thus, by Order 42, E. S. C, a judgment directing the 416 A Digest of Equity. payment of money can, like ordinary legal judgments, be enforced by the writ of fieri facias or elegit (rules 3, 17) ; and a judgment for the recovery of land by writ of possession (ibid., rule 5), and for the recovery of property other than land by a writ of delivery or of sequestration {ibid., rule 6). And, as we shall see, the court has now large powers to make vesting orders which, without a conveyance, transfer the legal property from one person to another (see Article 10). But still the ordinary mode of enforcing a judgment which formerly could be given only in the Court of Chancery, i.e., orders especially requiring a party to an action to do any act other than the payment of money, or to abstain from doing anything, is still by attachment and committal (Order 42, rule 7, E. S. C). The doctrine that equity acted in personam had the effect of enlarging the jurisdiction of the chancery courts over that of courts of law. Since the latter enforced their judgments by process of execution, where the dis- pute was as to the ownership of land and the land was not situate in England, the law courts refused to hear it ; since, if they gave judgment for the claimant, their ofi&cers could not execute it. As equity acted against the persons of the defendants, then if the defendants or any of them were in England equity could enforce its decision in a dispute as to land, no matter whether the land was situate in England or not ; and accordingly it heard such disputes. But it hears such disputes only (i) when the remedy sought is an equitable remedy {Penn v. Baltimore (1750), 1 Ves. sen. 444) and (ii) when the dispute is one of the conscience. In the words of Parker, J., in Deschamps v. Miller, [1908] 1 Ch. 856, at p. 863 : " In my opinion the general rule is that the court will not adjudicate on questions relating to the title or the right to the possession of immovable property out of the jurisdiction. There are, no doubt, exceptions to the rule, but, without attempting to give an exhaustive statement of those exceptions, I think it will be found that they all depend on the existence Equity forbids Contemplated Wrongs. 417 between the parties to the suit of some personal obligation arising out of contract or implied contract, fiduciary relationship or fraud or other conduct which, in the view of a Court of Equity in this country, would be unconscion- able, and do not depend for their existence on the law of the locus of the immovable property. Thus in cases of trusts, specific performance of contracts, foreclosure or redemption of mortgages, or in the case of land obtained by the defendant by fraud, or such other unconscionable conduct as I have referred to, the court may very well assume jurisdiction " (see Stra. L. C, pp. 11-20). In order, however, to induce the court to exercise this jurisdiction over disputes as to land outside England, not only must the defendants or some of them be in England and the dispute be matter of conscience and not merely of law, but the court must be the most convenient forum for deciding the dispute. If it is shown that there is a competent court to decide the dispute in the country where the land is situate, and it would be more convenient to have that court decide it, the English court in exercise of its discretion to refuse to give an equitable remedy will not entertain the action [Ewing v. Orr Swing (1885), 10 A. C. 453 ; Stra. L. C. p. 11). Aeticle 155. Equity forbids Contemplated and undoes Completed Wrongs. Eqiiity does not permit a wrong to be done wMch it can prevent ; but will forbid the person contemplating such a wrong to soil his conscience by doing it. When the wrong is already done, it will not give the person wronged compensation for the damage done to him, but will order the person who has done the wrong to purge his conscience by undoing it, or if that 418 A Digest of Equity. be impossible, by surrendering to the person wronged all the profits made by the wrong, whether the person wronged has suffered actual damage or not. The general rule is that a legal remedy cannot be claimed until a legal wrong has been actually suffered. Where in order to make an act or omission a legal wrong actual damage is necessary, then damage resulting from the act must also have occurred before action brought, and the only compensation the court can give is for the damage so suffered (West Leigh Colliery Company v. Tunnicliffe and Hampson, Limited, [1908] A. C. 27). But an equitable remedy will often be granted before any wrong has been done ; and not infrequently no equitable remedy will be granted if the applicant has only applied for it after the wrong is done. It is on these principles that the remedy by injunction is based (see infra, pp. 498, 499). When, however, the wrong has been done before action brought, then if it is a wrong done to the plaintiff's property, under certain circumstances the court will order the defendant to undo it, and where it consists of a breach of contract the court will, under certain circum- stances, order the defendant to undo the wrong by per- forming the contract, or where the contract is negative, by ceasing to break it. It is on this principle that the remedies by specific performance and mandatory injunc- tions are based. When, however, the wrong has been done and is not one the court can or will order the wrongdoer to undo, the mode in which the court, when it grants an equit- able remedy, estimates the liability of the wrongdoer is altogether different from the mode adopted by the law. Shortly, the law orders compensation and equity orders restitution. In other words, the law estimates the damage done to the plaintiff by the defendant's wrongful act and gives judgment for damages sufficient to compensate him. Equity, on the other hand, does not concern itself with Who seeks Equity must do Equity. 419 the damage done to the plaintiff : it concerns itself solely with the profits made by the defendant through his wrongdoing. These it holds he cannot in conscience retain ; and so it orders him to deliver them up to the plaintiff even when the plaintiff has suffered no actual damages through the wrong (see Parker v. McKenna (1874), L. E. 10 Ch. 36 ; Stra. L. C, p. 6). This is the principle upon which the remedy by account is based. Where the wrong consists of a tort (or breach of con- tract) at common law, the court now has under the Judicature Acts power to give common law damages instead of an account, and in actions for accounts in such cases it is customary to claim both an account and damages. But where the injuries alleged were suffered before action brought, on obtaining judgment the plaintiff will be put to his election which remedy he will take. Where the wrong is only a wrong in equity, damages cannot be given unless in lieu of specific performance or an injunction (see infra, p. 433). Article 156. Who seeks Equity must do Equity. Equity considers it contrary to conscience for a plaintiff to seek an equitable remedy in a matter in which he himself has not acted conscientiously ; and accordingly, -where an equitable remedy in such circumstances is sought, it wiU either refuse it or wQl grant it only on condition that the plaintiff himself acts according to conscience. This is a summing-up of two maxims of equity : firstly, that he who comes into equity must come with clean hands ; and secondly, that he who seeks equity must do equity. Both are based on the principle aheady stated, that the Court of Chancery was a court of conscience, and therefore 420 A Digest oj Equity. saw not merely that the defendant, but that also the plaintiff, acted as a conscientious man would. A court of law cannot take into consideration the conduct of the plaintiff provided he is acting within the law. Even where his motive is pure malignity, if he has not broken the law he is entitled to his legal remedy {Mayor of Bradford v. Pickles, [1895] A. C. 587). But as equitable remedies are in the discretion of the court, the court before granting one will inquire whether the plain- tiff's conduct in the matter before it has been conscientious, and also whether he himself is prepared to act as a man of conscience towards the defendant. Thus, as a rule, the court will grant an account as between partners ; but when it was shown that the partnership consisted of carrying on highway robbery, the court refused one of the partners an account against the others who he alleged had divided unfairly the partnership plunder {Highway- men's Case (1893), 9 Law Quarterly, 197). That is an example of coming into equity with far from clean hands. On the other hand, at law a husband before the Married Woman's Property Act, 1882, succeeded to all personalty devolving on his wife during coverture. Where such personalty could be reduced into possession by legal process, the law could not prevent the husband appropriat- ing it to his own use ; but where he had to resort to equity to reduce it into possession, equity only helped him on condition he made a reasonable settlement on his wife. This is what is called a wife's equity to a settlement (see supra, p. 402). Possibly the best illustration of this fundamental difference between legal and equitable remedies is afforded by the two recent cases of Lodge v. National Union Investment Company, Limited, [1907] 1 Oh. 300, and Chapman v. Michaelson, [1908] 2 Oh. 612. Both of these cases arose under the Money-lenders Act, 1900. That Act makes contracts of loans void where the money-lender making the loan is not registered as such under the Act. In both cases the plaintiffs had Delay Defeats Equity. 421 borrowed money from the defendants who were not regis- tered as money-lenders. In both cases the plaintiffs brought actions for declarations that the debts could not be recovered. Such declarations are legal relief. In Chap- man V. Michaelson, supra, that was the only relief de- manded, and the court held that it had no option but to grant it subject to no condition. In Lodge v. National Union Investment Company, Limited, supra, the plaintiff asked for further relief, namely, the delivery up by the defendant of certain bills of exchange which the plaintiff had deposited with him as security for the loan. This was equitable relief, and the court refused to order the return of these bills except on condition that the plaintiff repaid the money which he had received on loan from the defendant, on the principle that he who seeks equity must do equity. The rule is limited to the matter in respect of which the assistance of the Court of Equity is asked. It does not extend so as to authorise the court to impose upon a plaintiff any terms relating to a matter independent of that in respect of which the relief is sought (see Gibson v. Goldsmid (18541, 3 Eq. Eep. 106). Article 157. Delay Defeats Equity. The remedies given by equity, being outside the law, are not subject of their own nature to the Statutes of Limitation, which fix the periods within which remedies given by the law must be sought. But equity considers it contrary to conscience for plaintiffs to take advantage of this to harass defendants by undue delay in appljdng for its remedies. Accordingly, if the equitable remedy sought is one alternative or corresponding to a legal remedy, it will apply 422 A Digest of Equity. by analogy to the equitable remedy the Statute of Limitations applicable to the legal remedy ; and, if the equitable remedy is one to which there is no alternative or corresponding legal remedy, then it will refuse the equitable remedy where the plaintiff has been guUty of unreason- able delay in appl3dng for it. Such unreason- able delay is called technically laches. Prompt action to enforce an equitable claim is regarded as an essential condition to equitable relief, or in other words unreasonable lapse of time in seeking an equitable remedy will operate as a bar to the right to relief. Lapse „ of time will afford a defence to a legal claim only when the remedy has been barred by a Statute of Limitations. Equitable claims, on the other hand, may be barred not only by Statutes of Limitations which apply to them directly, or which in some cases are applied by analogy (see In re Bohinson, McLaren v. Public Trustee, [1911] 1 Ch. 502), but also by the laches or unreasonable delay of the plaintiff in seeking equitable relief. This is the meaning of the maxim Vigilantibus non dormientihus ccquitas subvenit. The application of this equitable doctrine may be well illustrated in the words of Lindley, L.J. : " When a Court of Equity is asked to enforce a covenant by decreeing specific performance or granting an injunction, in other words, when equitable as distinguished from legal relief is sought, equitable as distinguished from legal defences may have to be considered. The conduct of the plaintiff may disentitle him from rehef ; his acquiescence in what he complains of, or his delay in seeking relief, may of itself be sufficient to preclude him from obtaining it " (see Knight v. Simmonds, [1896] 2 Ch. 294, at p. 297). In Blake v. Gale (1886), 32 Ch. D. 571, it was held by the Court of Appeal that the equitable right of a mortgagee of real estate, in the event of the security proving insufficient, to follow the assets into the hands of Delay Defeats Equity. 423 the residuary legatees of the mortgagor, amongst whom his personal estate had been distributed, might be, and in the particular case was, barred by lapse of time and acquiescence on the part of the mortgagee. Bowen, L. J., in his judgment, pointed out that the question for decision was whether a Court of Equity under the circumstances would give the mortgagee recourse to parties against whom he had no claim at law. " When we find that a long time has elapsed during which the right has never been insisted upon, and when neither the Statute of Limitations applies, nor can the' analogy of the statute be invoked according to the well-known way in which Courts of Equity occasionally invoke it, what have we to do ? We have to look at the delay which hats taken place, coupled with the circumstances under which it has taken place, in order to see whether or not the true inference to be drawn from such delay under such circumstances is that the party claiming the right either agreed to abandon or release his right, or else has so acted as to induce the other parties to alter their position on the reasonable faith that he has done so. If that is the inference to be drawn the claim will, for the purpose of quieting possession, be treated as abandoned " (iM. at p. 581). But mere delay in such a case where no such inference as this can be drawn will not in itself prevent the mortgagee following the assets. Thus in In re Eustace, [1912] 1 Ch. 561, a mortgagor after assigning his equity of redemption, of which assignment the mortgagee received notice, died. Interest was duly paid by the assignee for thirteen years when he made default. The mortgagee realised his security which proved insufficient : — Held, he was entitled to follow the deceased mortgagor's estate. Though mere delay, in asserting an equitable right, may defeat the right of a plaintiff to relief when he has merely an executory interest to enforce, such as a trust to be established, or an executory contract to be specifically enforced, yet when a plaintiff has a vested right or is in actual possession of property, and seeks to enforce an executed interest, mere laches will not of itself deprive the party of equitable relief ; nevertheless, in such case he 424 A Digest of Equity. may by " standing by " waive or abandon his right, so that it would not be enforced by a Court of Equity (see Clarke and Chapman v. Hart (1858), 6 H. L. C. 633, at pp. 647, 655 ; Archibald v. Scully (1861), 9 H. L. C. 360, at p. 883). The doctrine of laches in Courts of Equity is not, it has been said, an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy either because the party has by his conduct done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct or neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases lapse of time and delay are most material (see Lindsay Petroleum Company v. Hurd (1874), L. E. 5 P. C. 221, at pp. 289, 240). Thus, for example, where a purchaser seeks to set aside or rescind a contract induced by fraud, he must apply for relief with reasonable diligence, and where owing to delay on his part other parties have acquired rights or the property has deteriorated in value or changed in condition the court will refuse rescission (see Directors of Central Railway Company of Venezuela v. Kisch (1867), L. R. 2 H. L. 99, at pp. 125, 126). Aeticle 158. Chief Equitable Remedies. Besides the numerous auxiliary remedies which are now equally obtainable in courts of equity and of law, there are five capital remedies which were originally obtainable only in the Court of Chancery, and actions for which will still as a rule be entertained only in the Chancery Division of the High Court. These are : (i) Specific Performance, (ii) Injunctions, Chief Equitable Bemedies. 425 (iii) Receivers, (iv) Accounts, (v) Rectification of Written Instruments. Perhaps it is an overstatement to say that these remedies were originally obtainable only in the Court of Chancery. Eecent research has shown that in very early times the common law judges when on circuit were accustomed to grant remedies very like, at any rate, to most of the five remedies set out in the above Article. This, however, is true beyond question, that it was the Court of Chancery which developed these remedies and gave them their present form and potency ; and before the Judicature Acts any plaintiff seeking them had to bring his case in the Court of Chancery. (See Holds- worth, vol. v., p. 287.) Now, though nominally every judge of the High Court has power to grant theim, in fact the judges of the Chancery Division have the only machinery capable of framing and enforcing them in anything but the simplest cases, and therefore applicants for them must come to the Chancery Division for them. Accordingly these five classes of equitable relief, form- ing as they do importan;t branches of equity jurisdiction at the present time, require special discussion in this part of the work. In addition to these, however, there were several other kinds of equitable remedies which were formerly obtain- able under the concurrent or auxiliary jurisdictions of the Court of Chancery, and which are, under the present system, obtainable in any Division of the High Court. The rescission or setting aside of deeds or other instru- ments for fraud, undue influence, etc., has already received consideration in the discussion of " Mistake," " Fraud," and " Undue Influence." Other equitable remedies were " Set-Off," i.e., the equitable defence of setting up a countervailing claim to that of the plaintiff ; Interpleader, a proceeding by a person in possession of property in which he claims no interest for the determina- tion of the rights of adverse claimants ; Discovery of facts 426 A Digest of Equity. or documents in the course of an action ; Bills lor the perpetuation of testimony ; Bills to take evidences de bene esse, in the case of witnesses in ill-health, resident abroad, or too old or infirm to appear before the court ; Bills quia timet, for relief in case of apprehended injuries ; Bills of peace to establish in favour of or against a number or class of individuals some right which there was reason for supposing might be subsequently claimed or disputed, the object being to prevent multiplicity of suits. Actions in the nature of Bills quia timet and Bills of peace are still maintainable. Most of these remedies were originally obtainable only by substantive proceedings in equity in aid of the defective procedure at law. They are now in many cases regulated by statute, and by rules of court, and since the Judicature Acts may properly be regarded as matters of procedure. Information as to them should therefore be sought in works on Practice and Evidence, rather than in a text-book on the principles of Equity. Article 159. (i) Specific Performance. The remedy of specific performance consists of an order directing a defendant to carry out literally, or as near literally as is possible, the terms of a positive agreement made between him and the plaintiff, which agreement may, under certain circumstances, be one not enforceable at law by damages. The common law allowed a party to break a contract and compensated the other party by awarding him damages sufficient to cover any loss which he may havo suffered by the breach. Equity being matter of conscience, when it gave a remedy in the case of contracts based it on a different principle. It held that a man should not be allowed to soil his conscience by refusing to keep his word ; and therefore the remedy it supplied was an order to the party who wished to commit a breach not to do so, but to Uemedies : Injunction. 427 carry out the contract so far as it was in his power so to do. This is the remedy called specific performance. It is to be remembered that this remedy, like other equitable remedies, can be given only where the legal remedy is inadequate (see injra, Article 168). But it is to be noted that it is also given to repair breaches for which the law would give no damages, as, for instance, where in consequence of having entered into an agreement unenforceable at law the applicant party has so changed his position that equity cannot be done except by compelling the other party to perform his side of the agreement (see injra, Article 174). Article 160. (ii) Injunction. The remedy of injunction consists of an order directing a defendant (i) not to do an act which he has threatened, or not to continue doing an act which he has already commenced, to do ; or (ii) directing him to undo an act which he has already done. The first kind of injunc- tion is usually called an ordinary or negative, and the second kind a mandatory or positive, injunction. The remedy of injunction is based on the same principle as other equitable remedies — that equity will not permit a man to soil his conscience by wronging his neighbour. Accordingly, where it is proved that one party is about to commit an act or continue an act which will interfere or interferes with his neighbour's rights, the court will forbid him to proceed. The proper time then to apply for an injunction is before any wrong is done, or where the wrong is a continuing one, as soon as possible after it is com- menced. If the application is made later and the result of granting a mandatory injunction would be to throw loss on the defendant, as by compelling him to destroy 428 A Digest of Equity. his works, then, in the absence of proof that an unfair advantage has been taken by the defendant, the court will leave the plaintiff to his remedy in damages (see infra, Article 187). The legal remedy in damages only arises after the wrong has been done, and so it usually happens that the equitable remedy ceases to exist as soon as the legal remedy arises. Article 161. (iii) Receivers. The remedy by way of receiver consists of an order appointing a person to receive and to give discharges for debts and other property belong- ing to a defendant for the purpose of applying what is so received to the satisfaction of claims against the defendant which cannot be satisfied by process of execution. When a plaintiff was a person having only an equitable claim against legal property — such, for example, as an equitable mortgagee — or where the defendant was a person having an equitable interest in property, such as a cestui que trust, legal process could not be issued to enforce a judgment, since the law did not recognise a merely equitable claim or a merely equitable interest. Accord- ingly, in order to give a remedy in such cases, the Court of Chancery invented the receivership. In other words, it appointed a person to receive the rents and profits of the legal property until the equitable claim was satisfied out of them or to take over the equitable property till the legal or equitable claim of the plaintiff was satisfied. This was sometimes called equitable execution. Now the court as we have seen has statutory power to appoint receivers in many cases where both the plaintiff's claim and the defendant's property are legal, and the same power is given sometimes as a personal remedy to persons having legal claims against other people's property. Remedies : Account. 429 Article 162. (iv) Account. The remedy by way of account consists of an order directing the accounting party to prepare and submit for the inspection of the court a statement as to the property which he has in fact received in connection with a certain transaction, to which is sometimes added a further direction to explain why he has not in fact received other property which prima facie he should have received ; and to state how he has dealt with such property. Where he is directed to state merely what property he has in fact received, the order is said to be one for a common account ; where he is directed to explain why he has not in fact received property which prima facie he should have received, the order is said to be one for an account on the footing of wilful default. As has already been said, the principle on which legal remedies are based is compensation for damage done to the plaintiff, while the principle on which equitable remedies are based, where property is concerned, is restitu- tion. The law seized so much of the goods of the wrong- doer as was needed to compensate the plaintiff for the damage which he had suffered through the defendant's wrong. Equity, however, paid no attention to the damage done to the plaintiff : it was concerned only with the injury which the defendant had done himself by doing wrong to his neighbour ; and it sought to undo this by compelling him to give to the person wronged all the profits he had made out of his wrongdoing, however large or small the damage to the plaintiff may have been. It held, in other words, that it would soil the defendant's conscience if he kept ill-gotten gains. Though the Court of Chancery had no punitive powers, it sometimes went further than this and imputed to the 430 A Digest of Equity. wrongdoer or accounting party the receipt of profits which in fact he had not received. This it did only when it was through the accounting party's neghgence or wilful default, as the technical phrase is, that such profits were not received. Where the court assumed that all the profits reasonably recoverable had been recovered by the accounting party, he was ordered to render a common account — that is, an account of what he had actually received. When it did not assume that but ordered him to show that in fact he had recovered all the profits reasonably recoverable, the account was said to be on the footing of wilful default (see infra, p. 523). Article 163. (v) Rectification of Instruments. (1) Where one or several persons with the object of carrying out a definite intention executes or execute a legal instrument, if such instrument, through being inaccurately ex- pressed, fails to carry out accurately such intention, the court wiU, on the apphcation of one or all of the persons party thereto and on evidence clearly estabhshing the intention, rectify the instrument. (2) Where the instrument is intended finally to settle the rights of the parties thereto, parol evidence as to the intention will be admitted even though the transaction intended to be carried out is one an agreement as to which should, by statute, be evidenced in writing. Paragraph (1). Eectification or reformation of written instruments is usually discussed as part of the law as to mistakes of Bemedies : Bectification. 431 fact. There are, no doubt, two kinds of mistakes of fact : naistakes as to the expression of the intention, and mistakes as to the subject-matter of the transaction. But rectification is not always based on mistake. It is based simply upon this ground : that an instrument which for any reason — say, the fraud or ignorance of the draftsman — does not express the intention of the parties to it will be rectified if the intention can be proved. Thus, in Cogan v. Duffield (1876), 2 Ch. D. 44, it was agreed by marriage articles to' settle certain moneys. When the settlement came to be drafted the draftsmen introduced limitations into it different from those which the court would, under the circumstances, presume to be intended by the parties : — Held, that the settlement must be rectified. By statute some instruments, however much they fail to express the real intention of the maker of or parties to them, cannot be rectified, as, for example, wills and articles of association (Evans v. Chapman, [1902] W. N. 78). Such instruments may be voidable through their execution being obtained by fraud, but they cannot be altered by the court on the ground that they do not express the real intention of the parties to them. As appears from the Article, in order that the court may order rectification three conditions must be fulfilled. In the first place, the intention must be definite. If the intention is not definite, there is nothing hj which the court is able to rectify the instrument. A person who, when executing an instrument, does not know clearly his own mind must be presumed to mean what the instrument he executes expresses. An exception to this occurs in cases like Cogan v. Duffield, supra, where the court pre- sumes parties entertain definite intentions which in fact they, as a rule, do not entertain. Again, where there are two or more parties to the instrument, the intention to be definite must, of course, be the common intention of all the parties (Bentley v. Mackay (1862), 4 De G. F. & J. 279). 432 A Digest of Equity. In the second place, the definite intention must subsist at the time of execution. Where documentary evidence exists of the parties' intention some time preceding the execution of the instrument, then this will be prima facie evidence of the intention of the parties when the instru- ment was executed. Thus, if a marriage settlement made after marriage is not in accordance with articles executed before it, the court will, in the absence of express evidence of a change of intention, rectify the settlement to agree with the articles {Tucker V. Bennett (1887), 38 Ch. D. 1). But if the subsequent settlement shows that disputes have occurred as to the meaning of the articles and that all the parties have agreed to the settlement as a compromise, then the fact that the settlement is not in accordance with the articles is not a ground for rectification {Fowler v. Fowler (1859), 4 De G. & J. 250). In the third place, the intention must be strictly proved. Parol evidence, even when it is the evidence of the settlor only {Bonhote v. Henderson, [1895] 1 Ch. 742), or of one of the parties after the death of the other parties {Wollaston v. Tribe (1869), L. E. 9 Eq. 44), may be held sufficient ; but the court is inclined to regard such evi- dence, unsupported by documents, with suspicion {Tucker V. Bennett, supra, and Bonhote v. Henderson, supra). Paragraph (2). The case of Johnson v. Bragge, [1901] 1 Ch. 28, is a good example of the admission of parol evidence. There A., being about to marry, wrote to B., his solicitor, for information as to his own present and future means. B. replied mentioning, among other things, that A. had a life estate in £7,000, with a power to settle the same on his intended wife for life, and then on his children, and suggesting he should do this. B.'s letter was handed to C, another solicitor, to prepare marriage articles carrying out B.'s suggestions. C. prepared the articles, which failed, however, to execute the power of appointment so as to give A.'s intended wife a life interest. On A.'s death, the question arose whether A.'s widow took a, hfe Damages and Equitable Bemedies. 433 interest in the £7,000. It being held that the power was not executed, she appKed to the court for rectification of the articles, so as to make the articles execute the power. It was objected that, the agreement to settle a life interest on A.'s wife being one in consideration of marriage and not being in writing signed by the party to be charged, the articles could not be rectified as required merely on parol evidence : — Held, that they could be so rectified. Where, however, the instrument is merely executory and is within the Statute of Frauds, parol evidence cannot be given to show the real intention, though the fact that it does not express the real intention is a good ground for resisting an action for its specific performance {May v. Piatt, [1900] 1 Oh. 616). And where an executory con- tract which does not express the real intentions of the parties is executed by a conveyance incorporating its inaccuracy, the conveyance cannot be rectified. And see Thompson v. Hickman, [1907] 1 Ch. 550. In Craddoch V. Hunt, [1922] 2 Ch. 809, however, it has been held that even where the contract is within the Statute of Frauds and is followed by a conveyance, if an inaccuracy in the contract is incorporated in the conveyance, the conveyance can be rectified. This seems strangely in- consistent with the rule that while a contract induced by innocent misrepresentation can, a conveyance com- pleting it cannot, be set aside. Article 164. Damages in addition to or in lieu of Equitable Remedies. (1) In an action for an equitable remedy the court may, where it has no jurisdiction to grant such a remedy or in addition to the equitable remedy, also give the plaintiff damages, pro- vided the act or omission of the defendant is one for which damages could be given in a common law action. D.B, 2 F 434 A Digest of Equity. (2) In actions for specific performance or an injunction where the court has jurisdiction to grant these remedies, it may refuse them and grant in heu of them damages, whether the law could allow damages or not. (3) Where the court grants damages in addi- tion to granting, or because it has no jurisdiction to grant, the equitable remedy sought it is acting as a court of law, and assesses the damages on the legal principle that a plaintiff can recover only such damages as result from the defendant's acts or omissions before the writ issued. Where, however, it grants damages in heu of specific performance or an injunction, it assesses them on the equitable principle which takes into consideration not merely the damages which have resulted from the defendant's past acts or omissions, but also the damages which may result from the defendant's future acts or omissions which the grant of specific perform- ance or of an injunction would have prevented. Paragraph (1). This jurisdiction arises under the Judicature Acts, which enable every judge of the High Court to give both legal and equitable remedies where justice requires them. A good example of the court giving damages in an action for an equitable remedy Avhere there were no grounds for granting the equitable remedy sought, and yet where the plaintiff had suffered a legal wrong, is the case of Behrens v. Hichards, [1905] 2 Ch. 614. In that case the plaintiff was the owner of a strip of land between the public road and the foreshore of the sea, and the defendant insisted on crossing the plaintiff's land, claiming that there were public rights of way over this land between the road and the foreshore. Plaintiff Damages and Equitable Bemedies. 435 asked for an injunction to restrain the defendant trespass- ing, and the court, in exercise of its discretion, refused, the injunction, while holding that there were no public rights of way across the land. As therefore the defendant in crossing the land had committed trespass it gave nominal damages (thirty shillings) for the trespass before action brought. Paragraph (2). This jurisdiction was given the old Court of Chancery by Lord Cairns's Act, 1858. Equity had no right to award damages for breach of a legal right. Where in such a case an order for specific performance of a contract or an injunction to restrain a tort was asked for and the facts did not justify the court in granting the equitable remedy, all the Court of Chan- cery could do was to advise the plaintiff to bring an action for damages in a court of common law. Moreover, where it was an equitable right which was interfered with or where no legal wrong had been done before action brought, and the Court of Chancery did not see fit to grant an injunction — on the ground that the injury done to plaintiff was not sufficient to make an injunction necessary (see infra, p. 498) — then neither it nor a court of common law could grant damages. To prevent the necessity of bring- ing two actions for a wrong at law and for the purpose of compensating a plaintiff who had suffered a wrong in equity, see Eastwood v. Lever (1868), 4 De G. J. S. 114, where damages were given for breach of an equitable easement. Lord Cairns's Act was passed conferring on the court the right to give damages in lieu of an order for specific performance or an injunction. This Act has now been repealed, but the jurisdiction it gave the court has not by that repeal been taken away. Once jurisdiction is given it can only be taken away by a positive enactment to that effect. It has been held in Lavery v. Pursell (1888), 39 Ch. D. 508, that in order that damages may be awarded under 436 A Digest of Equity. Lord Cairns's Act for an equitable wrong, it must be shown that at the time the writ was issued the facts would have enabled the court to grant specific performance or an injunction. This decision seems in accordance with the words of the Act — in lieu of — but inconsistent with the decision of Eastwood v. Lever (supra). And see Davenport V. Bylands (1865), 1 Eq. 302, at p. 307. Paragraph (3). When damages are given under the Judicature Acts they are assessed only for injuries resulting from a breach of the plaintiff's rights which occurred before action brought (see West Leigh Colliery Company v. Tunnicliffe and Hampson, Limited [1908] A. 0. 27). On the other hand, when damages are given under Lord Cairns's Act, the damages are assessed for injuries in the future which may result from the refusal of the court to restrain the defendant from committing further breaches of the plaintiff's rights. The difficulty of assessing these future injuries is so great that the courts for a long time practically refused to put Lord Cairns's Act in operation. This, however, is no longer the case (see per Lord Macnaghtbn in Colls v. Home and Colonial Stores, [1904] A. C. 179, at p. 193) ; but still it is put in operation only when it is clear that any future injury to the plaintiff will be of a minor character. And see infra, p. 498. Article 165. Subject-matter of Equitable Remedies. The subjects in connection with which these capital equitable remedies are granted may be classed under three heads : (i) Contract, (ii) Tort, and (iii) Administration. These sub- jects will be treated seriatim in detail. BOOK II. EQUITABLE REMEDIES. A. FIRST DIVISION OF SUBJECT- MATTER OF EQUITABLE REMEDIES. CONTRACTS. SUMMARY CONTRACTS. PAGE Article 166. Enforcement of agreements by specific per- formance and injunction 440 „ 167. Agreements which equity will specifically enforce 441 SECTION I. Enforcement of Agreements by Specific Performance. Chapter 1. Agreements for the Breach op which THE Law will give Damages. Article 168. Conditions of specific performance 443 ,, 169. When damages are an inadequate remedy for breach of agreement 444 „ 170. Where specific performance is an effective remedy 448 ,, 171. When the court can efficiently supervise the performance of an agreement 449 „ 172. When hardship win prevent specific performance 451 ,, 173. Reciprocity of remedies 453 Chapter 2. Agreements for the Breach op which THE Law will not give Damages. Article 174. Conditions under which equity enforces speci- fically agreements for whose breach the law gives no remedy 455 „ 175. What amounts to part performance of such an agreement 458 ,, 176. Preventing legal proof by fraud 461 Summary. 439 Chapter 3. Special Kinds of Specific Pbrfoemance. PAGE Article 177. Specific performance with variation 463 ,, 178. Specific performance with compensation - 464 ,, 179. Specific performance with abatement 467 Chapter 4. Judgment for Specific Performance. Aeticle 180. Judgment and incidental relief 470 „ 181. Enforcing judgment in default of compliance 476 SECTION II. Injunctions to Restrain Breaches of Contract. Article 182. As between parties to the contract 478 „ 183. As between persons not parties to the contract 483 ( 440 Contracts. Article 166. Enforcement of Agreements by Specific Performance and Injunction. Agreements, when they are of a positive character, can under certain circumstances be enforced in equity by specific performance, and when they are of a negative character, their breach can under different circumstances be forbidden in equity by injunction. Specific performance is the proper remedy for the enforcement of a positive contract — that is, a contract which binds the defendant to do something ; and injimc- tion is the proper remedy for preventing the breach of a negative contract — that is, a contract which binds the defendant not to do something. With that love for using the same terms to mean different things which dis- tinguishes BngUsh lawyers, the term specific performance is often applied equally to the judgment which compels the defendant to do something and the judgment which prevents him doing something. This is unfortunate, since, as we shall see, equity grants injunctions restraining the doing of acts contracted not to be done on quite different principles from those on which it grants specific perform- ance requiring the doing of acts contracted to be done. This confusion of terms sometimes leads to attempts being made to enforce positive contracts by injunction. Where this is attempted, the rule of equity is that it will not enforce by negative process a contract which it would not enforce by positive process. Thus, in Powell Duffryn Steam Coal Company v. Ta;ff Vale Bailway Company (1874), Contracts : STpecific Performance. 441 9 Ch. 331, the plaintiffs had running rights over the defendants' railway. A misunderstanding arose between the plaintiffs and defendants, and as a consequence the defendants ordered their signal-men not to facilitate the plaintiffs' trains. Thereupon the plaintiffs brought an action for an injunction to restrain the defendants from giving such orders. The court decided that what the plaintiffs really wanted was not an order to forbid the defendants directing their men not to facilitate their trains, but an order to bid them to direct their men to facilitate them. If this had been claimed in an action for specific performance the court would have refused relief (see infra, p. 449) ; and it would not grant it because the action brought was for an injunction. Article 167. Agreements which Equity will Specifically Enforce. The agreements which equity will enforce by specific performance consist of two classes : Firstly, agreements for the breach of which the law will give damages ; and secondly, agree- ments for the breach of which the law will not give damages. There are only two kinds of contracts recognised by the common law, contracts by deed (or special contracts) and contracts by parol (or simple contracts). The law merchant does in effect recognise a third kind, written contracts such as bills of exchange ; but the common law knows nothing of these. In some cases, however, statute has required that certain contracts for which a deed is not necessary must, to be enforceable, be evidenced by writing. This does not invalidate the parol agreement, but merely makes it unenforceable at law until it can be proved by writing. When it is so proved it does not operate from 44'2 A Digest 0/ Equity. the time the writing was made, but from the time the parol agreement was made. Under certain circumstances equity, as we shall see, will enforce specific performance of parol agreements which the law will not enforce because they are not evidenced by writing as required by statute. But there are doubts whether equity can enforce a parol agreement or an agreement in writing where the agreement is one which by common law can only be made by deed. Here the distinc- tion has been drawn that a parol agreement which is unenforceable at law merely because it is not properly evidenced is all the same a legal agreement, while an agreement which by law can be made only by deed, if not so made is not a legal agreement at all. This distinction seems to me not to be based on the true grounds on which equity enforces an agreement not enforceable at law. Equity enforces such an agreement because to refuse to do so would be inequitable to one of the parties to it who in consequence of the agreement has altered his position in a way which cannot be undone (see infra, p. 444). Where then a party has so altered his position it seems a matter of no importance so far as the equities are concerned whether, where there has in fact been an agreement, it is one recognised in law as an agree- ment or not (see per Lord Selboene, L.C, Maddison v. Alderson (1883), 8 App. Cas. 467, at p. 476, and Crook v. Corporation of Seaford (1871), L. E. 10 Eq. 678, and 6 Ch. App. 551). It would seem however that where a statute requires certain contracts to be made by deed, if not so made they cannot be specifically enforced (see Hoare v. Kingsbury Urban District Council, [1912] 2 Ch. 452). In this connection it is to be remembered that in equity a seal does not import consideration ; and therefore specific performance of a contract by deed is never ordered where in fact it is not based on valuable consideration. ( 443 ) SECTION I. ENFORCEMENT OF AGREE- MENTS BY SPECIFIC PERFORMANCE. CHAPTER 1. Agreements (or the Breach of Which the Law will give Damages. SUMMARY. PACK Article 168. Conditions of specific performance 443 ,, 169. When damages are an inadequate remedy for breach of agreement - 444 „ 170. Where specific performance is an effective remedy 448 ,, 171. When the court can efficiently supervise the per- form/ince of an agreement - 449 „ 172. When hardship will prevent specific performance 451 173. Reciprocity of remedies 453 Article 168. Conditions of Specific Performance. Equity will enforce by specific performance agreements for the breach of which the law will give damages where damages are an inadequate remedy for the breach ; provided : (i) Specific performance would be an effec- tive remedy for the breach ; (ii) The court could efficiently supervise the specific performance of the agreement ; and 444 A Digest of Equity. (iii) The specific performance of the agree- ment would not inflict undue hardship on the defendant. The equitable remedy of specific performance lies only where the legal remedy — ^in this case damages — is not an adequate remedy. Accordingly, where damages are an adequate remedy equity has no jurisdiction to interfere, but where damages are not an adequate remedy it has jurisdiction to interfere and grant its own remedy, specific performance ; but it will not interfere unless the other three conditions set out in this Article are fulfilled. In other words, inadequacy of damages is the basis of equity's jurisdiction, the three conditions limit the exercise of that jurisdiction. Article 169. When Damages are an Inadequate Remedy for Breach of Agreement. Damages are an inadequate remedy for the breach of an agreement where the agreement is one which nobody, or practically nobody, but the defendant, or nobody without his consent, can carry out so as to enable the plaintiff to place himself with the aid of damages in practi- cally the same position as if the defendant had himself carried out the agreement. It is commonly said that damages are an adequate remedy where the contract relates to something which can be obtained for money in the open market. This seems to me inadequate. Many things might be obtained in the open market if the other party to the contract consented to their being so obtained. Where he is in a position to prevent any other person carrying out the contract and does so, then damages is not an adequate remedy for the breach. Contracts Enforceable at Law. 445 Thus a contract to build houses is one which can be performed by many people and performed by them equally well, and therefore one which prima facie equity will not specifically enforce. But if the contract is one by which the defendant undertakes to build houses on his own land, then without his consent no one can carry it out. If he refuses, therefore, to carry or permit some one else to carry it out damages are not an adequate remedy, since they will not place the plaintiff in the same position as if the defendant had himself carried out the contract (see Mayor of Wolverhampton v. Emmons, [1901] 1 K. B. 515). The most common example of contracts which no one except the defendant can perform are contracts for the sale of land. If A. contracts to sell Blackacre to X.,then it is clear that if A. refused to carry out his contract no other person can put X. in the same position as if A. had carried it out. A. has contracted to convey Blackacre to X.; if he does not convey it, nobody else can. Accordingly all contracts for the sale of land or of an interest in land — such as a lease — are prima facie specifically enforceable in equity. Let us apply this principle, by citing a few decisions, to three other kinds of contracts : (i) contracts for the sale of chattels, (ii) contracts for loans, (iii) contracts for works. (i) Contracts for sale of chattels : At one time it was thought that the only contracts of sale which equity would specifically enforce were contracts for the sale of land. But now it is settled that contracts for the sale of specific chattels which can only be obtained from the defendant will also be enforced specifically in equity. The leading case on this point is Duke of Somerset v. Cookson (1735), 3 P. Wms. 389, though this was not really a case of enforcing a contract of sale, but specifically recovering a chattel which belonged to the plaintiff. The Duke of Somerset as lord of a certain manor was entitled to any treasure trove found upon it. A silver 446 A Digest of Equity. altar-piece was so found and purchased by the defendant with notice of the Duke's right. The Duke brought a bill in equity demanding dehvery of the altar-piece. The defendant demurred on the ground that such a bill lay only for land or for chattels savouring of the land, such as heirlooms and title-deeds. The demurrer was overruled on the ground that specific chattels of a rare and otherwise unprocurable kind could be recovered specifically in equity. (And see Hawksley v. Outram, [1892] 3 Ch. 359.) But where the chattel contracted to be sold is one which can easily be obtained from others than the defendant, as, for instance, coal, then the wrong done by the defendant in refusing to carry out his contract is a mere matter of money ; the plaintiff can buy the chattel from others and claim any greater price which he has to pay as damages against the defaulting contractor, when he will be in the same position as if the defaulting con- tractor had carried out the contract (see Dominion Coal Company v. Dominion Steel Company, [1909] A. C. 293). It should be noted that contracts for the sale of specific chattels can now be enforced specifically in an ordinary action for breach of contract in the King's Bench Division (Sale of Goods Act, 1893, sect. 52, re-enacting sect. 2 of the Mercantile Law Amendment Act, 1856). (ii) Contracts of loan : If A. contracts to lend X. £10,000 and fails to do so, then there are mam^ others who can lend the money ; and if X. has to pay a higher interest than A. had contracted to take, damages covering this will place X. in the same position as if A. had lent him the money. So damages for breach of a contract to lend is an adequate remedy ; and such a contract will not be speci- fically enforced by equity (South African Territories, Limited v. Wallingion, [1898] A. G. 309). A statutory exception has been made to this principle so far as joint stock companies are concerned. By sect. 105 of the Companies (Consolidation) Act, 1908 (re-enacting sect. 16 of the Companies Act, 1907) " A contract with a company to take up and pay for any debentures of the Contracts Enforceable at Laio. 447 company may be enforced by an order for specific performance." (iii) Contracts for works : A contract for works (locatio- conductio operis) is to be distinguished from a contract for work (locatio-conductio operarum). The first is not a contract to do personally anything : it is merely an under- taking to produce a certain finished result, as, for instance, to build a house according to plan. A contract for work is, on the other hand, a contract to do personally something, such as to act as the employer's clerk or to paint his picture. Though the latter contract is one which can only be performed by the person undertaking to do it, still for other reasons it is never specifically enforced. The contract for works is not usually enforceable, because as a rule many other persons are always able and ready to produce the thing contracted to be produced for a proper consideration. Where, however, as already stated, the works to be produced can only be produced by the person undertaking to produce them or by others with his consent, prima facie the contract can be specifically enforced against him. Thus in Wolverhampton Corporation v. Emmons, [1901] 1 K. B. 515, the corporation of Wolverhampton purchased certain lands in the town for the purpose of public improvements. Some of these were resold subject to covenants by the purchasers to build houses according to a general plan on the plots purchased within a certain time. Emmons purchased a plot and contracted to build houses in accordance with the general plan of the corporation. Later he refused to build, and the corpor- ation sued for a mandatory injunction, which was practi- cally the same as specific performance : — Held, that specific performance should be granted, since damages would not place the corporation in the same position as if the defendant had built the houses in compliance with the contract. ' (And see Molyneux v. Richard, [1906] 1 Ch. 34.) 448 A Digest of Equity. Article 170. Where Specific Performance is an Effective Remedy. Specific performance will be an effective remedy where it can be put in operation in time substantially to perform the agreement and where by the terms of the agreement the defendant is not in a position legally to deter- mine the agreement before it can be sub- stantially performed. Formerly, when the court was less swift in its remedies, there were doubts whether it would enforce contracts for lettings for short terms ; but now there seems to be no fixed Umit. In Lever v. Koffler, [1901] 1 Ch. 543, an agreement to let for one year certain and then from year to year was enforced specifically, and in giving judgment Byrne, J., said that in a proper case an agreement for even a shorter term would be specifically performed. The commonest cases where specific performance is not an effective remedy arise in connection with contracts which for some reason may be legally determined by the defendant. Thus, where a contract is revocable on notice, equity will not specifically enforce it {Sturge v. Midland Bailway Company (1858), 6 W. E. 234), or where it can in effect be determined by the defendant, as where the agreement is to grant a lease and the plaintiff has before the lease is granted done acts which by the terms of the lease entitled the defendant to forfeit it {Swain v. Ayres (1888), 21 Q. B. D. 289). In the same way, if time is made of the essence of a contract and there is failure to carry out the contract within the time fixed, the court cannot after that speci- fically enforce the contract. Thus, in Steedman v. DrinUe, [1916] A. C. 275, an agreement in writing for the sale of land required that the price should be paid in instalments, and on failure to pay an instalment at the date fixed the Specific Performance : Effective Bemedy. 449 vendor might cancel the contract. Failure to pay an instalment took place, and the vendor determined the contract. The purchaser claimed specific performance : — Held, that the court had no power to order it and that the vendor was entitled to retain the instalments which had been paid. This principle seems to have been forgotten in the case of British Murac Syndicate v. Alperton Rubber Company, [1915] 2 Ch. 186. There one company had power to appoint certain directors to the board of another com- pany and the other company had the right to reject the directors so appointed if these were not in its opinion satisfactory persons. The first company appointed certain persons whom the second company rejected. Another appointment was also rejected. Then the first company applied for specific performance of the agreement to have directors on the board of the second company and it was granted, the judge remarking that though the second company had the legal right to reject the persons nominated it would be disrespectful to the court to do so. Article 171. When the Court can Efficiently Supervise the Performance of an Agreement. The court can efficiently supervise the specific performance of an agreement where the agree- ment is not one which depends for its effective execution upon the personal skiU or will of the defendant, or where it is not so vague in its obhgations as to make the question of its effective execution a matter of taste or opinion. The practice of the court has varied as to the principle set out in the above Article. At one time it seemed inclined to refuse absolutely to endeavour to enforce any contract which involved more than one act on the part of the defendant, such as the execution of a deed. D.E. 2 Q 450 A Digest of Equity, Now the tendency is to enforce any contract, however many acts its execution may involve, where damages will not be an adequate remedy, unless the contract is one the performance of which is a proceeding which it is beyond the power of the court to supervise effectively. All contracts for personal service are of this nature : one can bring a horse to the water but nobody can make him drink. The case of Lumley v. Wagner (1852), 1 De G. M. & G. 604, is a good illustration of this. Madam Wagner contracted to sing for some seasons in the plain- tiff's opera house. During the currency of the contract she agreed with another impresario to cease to sing for the plaintiff and to sing for her new friend. The plaintiff applied for specific performance of the lady's contract to sing for him : — Held, that although this was a contract for the breach of which damages were not an adequate remedy, nevertheless equity could not specifically enforce it, since if it ordered specific performance it could not supervise effectively the carrying out of its own judgment. Whether this principle has not been carried too far in recent cases is open to grave doubt. It seems to me that the court sometimes has confused the appointment of a person to carry out certain personal services with the carrying out of such services efl&ciently. See for example Byan v. Mutiml Tontine Association, [1893] 1 Ch. 116, and Barnes v. City of London Beal Property Company, [1918] 2 Ch. 18. Contracts which are not contracts for personal service in the strict sense, that is contracts which do not create the relation of master and servant {locatio-conductio operarum), but the execution of which nevertheless depends on the personal skill and disposition of the party who is to do the work, such as contracts to write books, to paint portraits, etc., are not specifically enforceable on the same ground : the court cannot effectively supervise their proper execution. Specific Performance : Undue Hardshi-p. 451 Article 172. When Hardship will Prevent Specific Performance. Whether the hardship which will arise through the specific performance of an agreement is so undue as to induce the court to refuse an order for specific performance is in every case a question of fact; but generally the court will not order specific performance of an agreement where, if the agreement were enforced, the de- fendant would not get substantially what he thought he was to get when he entered into the agreement or might be exposed in con- sequence to civil or criminal proceedings at law. The court will refuse to enforce the specific performance of a contract where to decree its performance would be to compel a person who has entered inadvertently into it to commit a breach of duty, as where trustees have entered into a contract the performance of which would be a breach of trust (see Delves v. Gray, [1902] 2 Ch., at p. 611). Again, the court, in its discretion, would not compel a purchaser to accept a property which, if he took no steps to prevent it, would by reason of its state {e.g., if it were a brothel) at the time of the sale expose him as owner to criminal proceedings. In such a case the court at any rate would not force specific performance upon an innocent purchaser, though it might be otherwise if the purchaser knew, or ought to have known, the state of the property at the time of the contract (see Hope v. Walter, [1900] 1 Ch. 257, at p. 260, per Lindley, M.E.). When the court refuses to specifically perform a contract on the ground of hardship it does not thereby rescind it. When a contract is rescinded the parties to it are placed as nearly as possible in the position they would be in had no contract been made. When, however, the court merely 452 A Digest of Equity. refuses to enforce a contract, the contract remains and the plaintiff is left to his remedy by recovery of damages at law (see Wedgwood v. Adams (1843), 6 Beav. 600). " I conceive the doctrine of the com-t to be this," said Lord Langdale in the case last cited (6 Beav., at p. 605), " that the court exercises a discretion in cases of specific performance, and directs a specific performance, unless it should be what is called highly unreasonable to do so. What is more or less reasonable is not a thing that you can define, it must depend on the circumstances of each particular case. The court, therefore, must always have regard to the circumstances of each case, and see whether it is reasonable that it should by its extraordinary juris- diction interfere, and order a specific performance, knowing at the time that if it abstains from so doing a measure of damages may be found and awarded in another court. Though you cannot define what may be considered un- reasonable by way of general rule, you may very well, in a particular case, come to a balance of inconvenience, and determine the propriety of leaving the plaintiff to his legal remedy by recovery of damages." " In cases of specific performance " (said Coxton, L.J., in Preston v. Luck (1884), 27 Ch. D. 497, at p. 506), " the court does not grant that special equitable relief if it finds for any reason that it would be what is called a hardship, or unreasonable to compel the defendant specifically to perform the contract." On this principle, in a contract for the sale of land where the vendor is unable to give a holding title to the purchaser the court will, in the exercise of its discretion, refuse to decree specific performance of the contract, but will leave the parties to their remedies at law (see In re Scott and Alvarez's Contract, [1895] 2 Ch. 603). Where in fact any circumstances outside the written contract and independent of it can be shown to exist which would make a decree for specific performance inequitable, the court would not grant such relief (see Clowes V. Higginson (1813), 1 V. & B. 524, per Plumer, V.-C, at p. 527). Beciprocity of Bemedies. 453 Article 173. Reciprocity of Remedies. (1) Where an agreement is such that damages would not be an adequate remedy to one party to it for its breach, equity will specifically en- force it, not merely on the apphcation of that party, but also on the application of the other party, though so far as he is concerned damages would be an adequate remedy for its breach. (2) Where the agreement is one for the breach of which damages is not an adequate remedy, then, if for any special reason equity would not enforce it against one party, it will not as a rule enforce it against the other party. This may be said to be a summing up of what is commonly known as the doctrine of mutuality. This doctrine seems to have been first enunciated by Lord Ebdesdalb in Lawrence v. Butler (1802), 1 Sch. & L. 13, and has not been altogether acquiesced in either by the bench or by text writers (see Ashburner's Equity, p. 558). And it must be admitted that there are many exceptions more especially to the second part of it. Paragraph (1). The commonest example of this is in the case of a contract for the sale of land. It may reasonably be contended that so far as the vendor is concerned damages would be a sufficient remedy ; nevertheless equity will specifically enforce it on his application just as much as on the application of the purchaser. Of course it may be contended that ownership of land carries with it duties as well as rights, and that the vendor cannot rid himself of these duties except by having the contract of sale carried out specifically ; but this would hardly apply in the case of a mere letting^f land, and it would not apply at all to the case of a contract to sell a rare chattel ; and 454 A Digest of Equity. still it can hardly be argued that in these cases the court would refuse to enforce specifically the contract at the vendor's request. Paragraph (2). The commonest example of this doctrine is that of a contract of sale by a minor. Equity will not specifically enforce such a contract at the minor's suit where it would not enforce it at the suit of the other party against the minor (Flight v. Bolland (1828), 4 Euss. 298 ; and see Lumley v. Bavenscroft, [1895] 1 Q. B. 683). In the same way, damages might not be an adequate remedy for say an editor who in breach of contract is dismissed from his appointment ; but nevertheless, since equity would not specifically enforce the contract if he refused to carry it out it will not specifically enforce it in his favour (Baird v. Wells (1890), 44 Ch. D. 661). Compare the position of parties to a negative agreement which the court is asked to enforce by injunction (see infra, pp. 478 et seq.). The doctrine, if it really is an established doctrine, is notable chiefly by the multitude of cases to which it does not apply. Thus, when a contract which should be evidenced in writing under sect. 4 of the Statute of Frauds, 1677 (now sect. 40, L. of P. Act, 1925) is so evidenced only by one of the parties, the other party can have it specifically enforced against him although he, having no note or memorandum signed by the party to be charged, cannot enforce it against the other party (Martin v. Mitchell (1820), 2 J. & W. 413). And not infrequently a purchaser can enforce specifically a contract for the sale of land which the court would not enforce on the application of the vendor (see infra, Articles 178, 179). It is to be remembered that in equity a seal does not as in law import valuable consideration (as the ordinary and very inaccurate phrase is) ; and so equity will not specifically enforce a contract under seal whatever its nature unless it is based on actual consideration. ( 455 ) SECTION I. ENFORCEMENT OE AGREE- MENTS BY SPECIEIG PERFORMANCE {continued). CHAPTEE 2. Agreements for the Breach of which the Law will not give Damages. SUMMARY. PAGE Article 174. Conditions under which equity enforces speci- fically agreements for whose breach, the law gives no remedy - - - 455 ,, 175. What amounts to part performance of such an agreement - 458 „ 176. Preventing legal proof hy fraud ... 461 Article 174. Conditions under wliich Equity enforces specifically Agreements for whose Breach the Law gives no Remedy. Where the law requires for their proof that agreements of a certain kind must be evidenced in a particular way, then if they are not evidenced ia that way the law cannot give damages for their breach ; but if they are agreements which, if evidenced in the way the law requires, eqtiity would have specifically en- forced, then though they are not so evidenced equity will specifically enforce them, provided : 456 A Digest of Equity. (i) They have been part performed by the party applying for their specific per- formance or his agent, or (ii) They are not evidenced in the way re- quired by the law owing to the fraud of the party resisting their specific performance or his agent. As has already been pointed out, the specific perform- ance by equity of agreements for the breach of which the law will not give damages concerns principally agreements within sect. 4 of the Statute of Frauds (now so far as contracts for the sale of land are concerned sect. 40, L. of P. Act, 1925). But it is to be noted that equity will specifically enforce only agreements not in writing within that section where they are agreements which, if they had been in writing, it would have specifically enforced. The section includes agreements of executors to answer damages out of their own estate, agreements to guarantee other people's debts or defaults, agree- ments in consideration of marriage, agreements or sales " of lands, tenements or herditaments or any interest in or concerning them," and agreements not to be per- formed within a year. Among these, contracts for sales of lands or interests in them are the only ones which equity usually specifically enforces (but see Montacute v. Maxwell, infra, p. 462, which however turns on fraud), and in some of the cases it is laid down that these are the only agreements to which the doctrine of part performance apphes {Britain v. Bossiter (1879), 11 Q. B. D. 123). This view is questioned, however, by Lord Sblbornb, L.C, in Maddison v. Alderson (1883), 8 App. Cas. 467, at p. 474. And it is laid down by Kay, J., in McManus v. Coohe (1887), 35 Ch. D. 681, at p. 697, that " probably it would be more accurate to say it applies to all cases in which a Court of Equity would entertain a suit for specific performance if the alleged contract had been in writing " (as to which see infra, Article 175). He adds, however, that " the most obvious case of part performance is where the defendant is in possession of land of the plaintiff under the parol agree- Contracts not Enforceable at Law. 457 ment." In McManus v. Cooke he held that a parol agreement for an easement, though an easement is not an interest in land within sect. 4 of the Statute of Frauds, 1677, was capable of being part performed so as to make it specifically enforceable. In the second place, the doctrine of specific performance by equity of agreements not enforceable at law because they are not evidenced in writing is based on just the same principle as applied to the enforcement of trusts not declared in accordance with the Statute of Frauds or the Wills Act (see supra, p. 67), namely, that equity will not allow the law to be made a shield for fraud. In the words of Lord Ceanwokth, L.C, in Caton v. Caton (1886), L. E. 1 Ch. 137, at p. 148, " When one of two contracting parties has been induced or allowed by the other to alter his position on the faith of the contract, as, for instance, by taking possession of land and expending money in building or other like acts, there it would be a fraud in the other party to set up the legal invalidity of the contract in the faith of which he induced or allowed the person contract- ing with him to act and expend money." Accordingly the party who applies for specific perform- ance of the agreement must, to make out a case, be the party who has changed his position in consequence of the agreement. Thus part performance of a parol agree- ment by one party gives the other party no cause of action. As a rule, most acts of part performance are the acts of both parties, as, for example, the delivery and accept- ance of possession of the land agreed to be dealt with (Attorney-General v. Biphosphated Guano Company (1878), 11 Ch. D. 327, at p. 831). But where the part perform- ance is by one party only, he alone can claim specific performance on the strength of it. Thus, in Caton v. Caton (1866), L. E. 1 Ch. 187, A. and B., about to marry, agreed in writing that A., the husband, should have the wife's property for his life, he allowing her £80 a year pin money and she having the property at his death. Subse- quently after marriage they agreed verbally that there 458 A Digest of Equity. should be no settlement by deed, and that A. should by his ■will leave to B. the property which accrued to A. in her right. He made a will to this effect, but subsequently revoked it : — Held, that the execution of the first will by A. was no part performance to bring the parol agreement within the rule, as no " consequences can be attached to acts of part performance by the party sought to be charged." It is often said that specific performance of an oral agreement, which by the Statute of Frauds should be evidenced in writing, will be granted where the defendant failed to plead the statute. This, however, is not a principle of law but merely a rule of practice. By Or. 19, r. 15, of the Eules of the Supreme Court a defendant must plead in his defence all the matters on which he intends to rely at the trial, and if he relies on a statute he must plead it, whether it is the Statute of Limitations or the Statute of Frauds. But, like other rules of practice, the court may suspend this and allow the defendant to amend his defence by pleading the statute where it would be unfair to him to forbid him to rely on the statute. Thus, in Brunning v. Odhams (1896), 75 L. T. 602, the plaintiff in his statement of claim alleged a written con- tract. The defendants did not set up the statute. At the hearing only an oral contract was proved. The court allowed the defendants to amend their pleading and set up the statute. Akticle 175. What amounts to Part Performance of such an Agreement. In order that an act of a party appljdng for specific performance of an agreement not evi- denced in writing as required by law should be such an act as will justify the court in ordering Part Performance. 459 specific performance, it must be not merely an act in fact intended to carry out the contract, but also an act — (i) which can be explained only on the assumption that an agreement relating to the subject-matter of the act had been come to between the party apply- ing for and the party opposing specific performance before the act was done, and (ii) the act done is one which cannot be un- done so as to place the party doing it in the same position as if it had never been done. (i) Acts done in pursuance of the parol agreement, in order to constitute part performance of it within the rule, must, in the words of Lord Hardwicke in Gunter v. Halsey (1739), Amb. 586, " be such as could be done with no other view or design than to perform the agree- ment, the terms of which must be certainly proved." Or, as expressed by Lord Selboene in Maddison v. Alderson (1883), 8 App. Cas. 467, at p. 479, " All the authorities show that the acts relied upon as part performance must be unequivocally and in their own nature referable to some such agreement as that alleged." Thus, for example, the letting of a purchaser or tenant under a parol agreement into possession of the land is an act of part performance on the part of both parties (Attorney-General v. Biphosphated Guano Company, supra). The permitting, however, a tenant in possession to remain in possession after his tenancy has determined is an equivocal act (Wills v. Stradling (1797), 3 Ves. 378), unless qualified by the payment of a different rent (Miller and Aldworth, Limited v. Sharp, [1899] 1 Ch. 622) or some other variation of incident. Again, where there is a parol agreement between A. and B. that A. shall build a house on A.'s land according to a certain 460 A Digest oj Equity. plan on condition that B. shall, on completion, buy the land and house at a certain price, A.'s building the house is an equivocal act (per Kekewich, J., in Dickenson v. Barrow, [1904] 2 Ch. 339, at p. 343 ; but c/. •per Lord Ceanworth in Colon v. Caton, supra). If, however, B., while A. was building the house, inspected it from time to time and gave directions for alterations which A. carried out, then obeying such directions would be sufficient part performance {Dickenson v. Barrow, supra, followed in Bawlinson v. Ames, [1925] Ch. 96). Investigation of title or other prehminary acts are equivocal, and so is payment of a part, or, it would seem, the whole of the purchase money {Clinan v. Cooke (1802), 1 Sch. & Lef . 20), though Lord Haedwicke held otherwise {Lacon v. Mertens (1743), 3 Atk. 1). The ground upon which the payment of the purchase money is held to be equivocal is not very clear. It would be, perhaps, best to place it on the ground on which it is put in the Article — namely, as an act which does not, on being undone, cause the doer unliquidated damage. On repayment with interest of the purchase money the party paying it is precisely in the same position as he was before he entered into the parol agreement. In all cases where an act has been held sufficient part performance the party has altered his position in consequence of the parol agree- ment in a way which cannot be assessed accurately in money loss. Such acts, as said by Lord Selboene in Maddison v. Alderson (1886), 8 App. Gas., at p. 480, " have been (almost, if not quite, universally) relative to the possession, use, or tenure of the land." As showing the weight put by the court upon the first of these (possession), the case of Hodson v. Heuland, [1896] 2 Ch. 428, may be referred to. There a contract for a lease of land for more than three years was drafted but never signed, as required by sect. 4. Before the date of the contract, and therefore not in pursuance of it, the intended lessee had been let into possession, and he continued in possession after the date and paid rent in accordance with the draft lease. It was held that the continuing in possession and payment of rent after the date of the contract was a part performance of it. Preventing Legal Proof by Fraud. 461 (ii) The most ordinary example of acts which may be undone is paying part of the agreed purchase money as a deposit to secure an oral contract. This, though clearly inexplicable except on the ground that some agreement has been entered into between the parties, is an act that can be undone so as to place the parties in such a position as if it had never been done. It has been doubted whether the payment of the whole price is not a sufficient act of part performance to enable the court specifically to enforce the agreement (see Hughes v. Morris (1852), 2 D. M. & G. 349, at p. 356), since in equity on the payment of the whole price the vendor becomes a trustee of the property sold for the purchaser. Whether in such a case the agreement can or cannot be specifically enforced, it seems to be settled now that the court can make an order under sect. 25 of the Trustee Act, 1893 (now T. Act, 1925, sect. 41), vesting the property in the purchaser {In re Buthven's Trust, [1906] 1 I. E. 286). Article 176. Preventing Legal Proof by Fraud. Where one party to an agreement deliberately prevented the provision of the evidence required by law to prove it, with the intention of taking advantage of the other party to the agreement, and had thereby prejudiced the other party, then in an action by the other party for specific performance of the agreement the court will not allow the party who prevented the pro- vision of the evidence to plead that owing to its absence the agreement cannot be enforced. Two cases will be sufficient to illustrate this principle. The first is LesUr v. Foxcrofl (1700), Colles Par. Gas. 108. Here a landowner agreed verbally with builders to grant long leases as soon as the builders had pulled down the old buildings on a certain plot of his ground and erected 462 A Digest of Equity. new ones. The builders entered on the land, removed the buildings and erected others as agreed. They then submitted a draft lease, which was approved by the land- owner subject to certain trifling alterations. While these alterations were being made the landowner became very ill, and made his will leaving the plot of ground in question to the defendant, his son. When the builders brought back the lease altered and engrossed the defendant would not allow them to see the landowner, who was nearing death. On the death of the landowner the defendant repudiated the agreement and claimed the land with the houses erected on it by the builders. The House of Lords ordered the defendant to execute the lease as his father would have done had the defendant allowed the builders to submit it to him. The other case {Montacute v. Maxwell (1720), 1 P. Wms. 616) is somewhat peculiar, since it applies to another agreement within sect. 4 of the Statute of Frauds, namely, an agreement made in consideration of marriage. There Viscountess Montacute being about to marry the defen- dant, he and she entered into a verbal agreement that he should execute a deed settling her property on her for her separate use after marriage. The, settlement was not ready for execution when the day fixed for the wedding arrived, and the defendant induced the plaintiff to marry him, pledging his word of honour that he would execute the settlement as soon as it was ready to be executed. After marriage he refused to execute it, and in an action by his wife for specific performance pleaded that the agreement, beiag one coming within sect. 4 of the Statute of Frauds, it must be evidenced in writing before it could be enforced. The court held that the husband by repudiat- ing his agreement, after inducing the plaintiff by means of it to marry him, was guilty of fraud, and therefore it would not permit him to rely on the statute. { 463 ) SECTION I. ENFORCEMENT OF AGREE- MENTS BY SPECIFIC PERFORMANCE (continued). CHAPTBE 3. Special Kinds of Specific Performance. SUMMARY. PAGI5 Aeticlb 177. Specific performance with variation - 463 „ 178. Specific performance with compensation 464 ,, 179. Specific performance with abatement - - 467 Article 177. Specific Performance with Variation. An agreement which to be enforceable at law must be evidenced in writing may, when so evidenced, be varied by parol agreement. When so varied in the absence of part performance the parol variation cannot be specifically en- forced, nor can the agreement as evidenced in writing. But if one party to the agreement seeks specific performance of the agreement as evidenced in writing and the other party resists specific performance on the ground that the agreement was afterwards varied by parol, and sets out in his defence what the variation was, the party applying for specific performance can adopt the variation as set out in the defence and ask for specific performance of the agree- ment as so varied. A contract made by deed may be revoked or altered only by deed. A simple contract reduced into writing, even where required by law to be so reduced before it is 464 A Digest of Equity. enforceable, can be revoked or altered by subsequent verbal agreement. Where it has been so revoked or altered the verbal revocation is a good defence to a claim for specific performance of the contract as reduced into writing, and so is a verbal alteration. But if the plaintiff claims specific enforcement of the contract as reduced into writing, and the defendant pleads that the written con- tract was subsequently varied by verbal agreement in certain respects, the plaintiff can admit this variation in his reply and ask the court to enforce the contract as varied in the manner set out in the defence (see Smith v. Wheatcrojt (1878), 9 Ch. D. 223). This doctrine is to be distinguished from rectification of written instruments. In rectification the plea is that the written instrument, from a mistake or misunderstand- ing, did not set out the real contract between the parties. In the case of specific performance with variation the plea is that the written instrument did represent the real contract, but that contract was subsequently altered by parol agreement. In this connection, perhaps, it should be noted that the fact that a plaintiff claims specific performance of a contract written or otherwise on a wrong interpretation of its terms does not prevent his claiming specific per- formance of it on the interpretation placed upon it by the court {Berners v. Fleming, [1925] Ch. 264). Of course, if the contract so altered has been part performed, then it can be specifically enforced hke any altogether parol contract. Article 178. Specific Performance with Compensation. Where the agreement is one for the sale of land, if the vendor is unable to transfer to the purchaser the land precisely as it is described in the agreement, the court wiU nevertheless, Specific Performance : With Compensation. 465 on the vendor's application, enforce specifically against the purchaser the agreement, provided : (i) The vendor can transfer the land substantially as described in the agreement ; (ii) The extent of the vendor's failure to transfer the land precisely as described in the agreement is capable of being estimated in money ; and (iii) The failure to transfer the land precisely as described in the agreement is not due to the fraud or wilful default of the vendor. When the court makes such an order for specific performance it directs that the extent of the vendor's failure to transfer shall be assessed in money, and that the vendor shall compensate the purchaser to the amount of such assessment. When the vendor can substantially, but not literally, perform his contract, the purchaser is entitled to com- pensation in respect of the difference between the property which the vendor compels him to take and the property as described in the contract. This difference must, of course, be capable of assessment in money. If it is of such a nature that the court cannot say what compensation the purchaser should receive for it, then the court cannot grant specific performance with a speculative compensation (Budd v. Lascelles, [1900] 1 Ch. 915). The right of the purchaser to compensation is usually provided for in the conditions of sale. In the absence of any condition for compensation the difference between what the vendor contracted to do and 466 A Digest of Equity. what he can actually do is the subject of compensation. For example, if a leasehold interest of twenty years and nine months has in the contract been represented as a lease for twenty-one years, the vendor can compel specific performance, but the purchaser has a right to be com- pensated in respect of the difference of the three months (see Mortlockv. Buller (1804), 10 Ves. jun. 291, per Lord Thurlow, at p. 305). So where on the purchase of property by a tenant in possession it was described as being forty-six feet in depth, whereas in fact it was only thirty-three feet, the deficiency was held to be a subject for compensation (King v. Wilson (1843), 6 Beav. 124). On the same principle the existence of trifling incumbrances, such as a liability to a quit-rent, does not deprive the vendor of his right to specific performance. The vendor's right to insist upon specific performance with compensation exists, however, only in the case of a non-essential defect, and not where the defect is essential or material, as where the tenure of the property is different from that expressed in the contract. Nor can the vendor enforce the contract with compensation for a non-essential defect where he has knowingly misrepresented the property. The conditions of sale frequently contain conditions as to compensation. A usual condition is that errors or misdescriptions in the particulars or conditions of sale shall not annul the sale, but shall entitle the purchaser to compensation. The principles above stated are applic- able ; thus where a purchaser will get substantially what he has contracted to buy, he will be compelled to complete with compensation even though there be a considerable deficiency of quantity, provided that such deficiency does not affect the substance of contract he has bargained for (see Be Fawcett and Holmes (1889), 42 Ch. D. 150). A condition of this sort has been held not to extend to any defect of title, but merely to error or misstatement in the subject-matter of the sale (see Debenham v. Sawlridge, [1901] 2 Ch. 98). Another condition frequently is that there shall be no right to compensation in respect of any error of measure- specific Performance : With Abatement, 467 tnent. But, notwithstanding any such condition, if the error be material, or the result of misrepresentation calculated seriously to mislead a purchaser, the vendor cannot obtain specific performance (see In re Terry and White's Contract (1886), 32 Ch. D. 14; Jacobs v. Bevell, [1900] 2 Ch. 858). The principle of compensation, whether there be a condition or not, will not be applied where there has been any intentional misrepresentation, even though the difference be of such a character that if it had arisen from mere error it would have been the subject of compensation (see Price v. Macaulay (1852), 2 De G. M. & G. 339). But the failure of the vendor to disclose a latent defect which he should have disclosed and of which he was aware, will not, if the failure to dis- close was not fraudulent and the defect is not substantial, prevent his obtaining specific performance {Shepherd v. Croft, [1911] 1 Ch. 521). Moreover, notwithstanding any condition for compen- sation, if a contract contains a misdescription in a material and substantial point so far affecting the subject-matter of the contract as that it may be reasonably supposed that but for such misdescription the purchaser might never have entered into the contract at all, in such case the contract is avoided altogether, and the purchaser is not bound to resort to the clause for compensation (see per TiNDAL, C.J., in Flight v. Booth (1834), 1 Bing. N. C. 370, at p. 377). Article 179. Specific Performance with Abatement. Where the agreement is one for the sale of land, if the vendor is unable to transfer to the purchaser the land altogether as it is described in the agreement, the court will nevertheless, on the purchaser's application, enforce speci- fically against the vendor the agreement so 468 A Digest of Equity. far as the vendor can perforni it, provided the extent of the vendor's failure to transfer the land as described in the agreement is capable of being estimated in money. When the court makes such an order for specific performance it directs that the extent of the vendor's failure to transfer shaU be assessed in money, and that the price payable by the purchaser shall abate by the amount of such assessment. When the vendor has not got the whole interest which he is under contract to convey, he is not, as a rule, able to enforce the contract. On the other hand, under these circumstances, the purchaser generally has the right to insist upon taking the partial interest which the vendor can convey, with abatement of the agreed price by way of compensation for the difference (see Mortlock v. Buller (1804), 10 Ves. jun. 291, at p. 315 ; Barker v. Cox (1876), 4 Ch. D. 464). Such relief will not, it seems, be granted where the actual subject-matter which the vendor can convey is substantially different from that stated in the contract (see Budd v. Lascelles, [1900] 1 Ch. 815). This jurisdiction to enforce the contract specifically with compensation for defects where the contract contains no terms as to compensation, is based upon the equitable estoppel that where a vendor by contracting to sell an estate as his own has represented that it is within his power to convey the estate as described, and the purchaser has relied upon such representation, the vendor is pre- cluded from afterwards saying that he has not got the entirety, and, therefore, the purchaser shall not have the benefit of his contract (see Mortloch v. Buller, and Budd v. Lascelles, cited supra). This mode of relief by decree of specific performance with abatement is not, however, granted to a purchaser in any case in which it would involve hardship, or in which it would operate umreason- ably, unjustly, or inequitably. Thus it would be refused when the partial performance of the contract would be prejudicial to third parties (see Thomas v. Bering (1837), Specific Performance : With Abatement. 469 1 Keen, 729) ; or if the purchaser was from the first fully aware of the defect in the vendor's title (Castle v. Wilkin- son (1870), L. E. 5 Ch. 534 ; see also In re Childe and Hodgson's Contract (1906), 54 W. E. 234) ; or when the misdescription of the subject-matter of the sale has been corrected at the auction (In re Hare and 0' Move's Contract, [1901] 1 Ch. 93). Nor would this relief be available to a purchaser when a condition exists which enables the vendor to annul the sale on the purchaser making, or insisting upon, a requisition with which the. vendor may be unable or unwilling to comply (see, for instance. In re Deighton and Harris's Contract, [1898] 1 Ch. 458), for the vendor may reserve the right to rescind rather than to complete with compensation. But even when so pro- tected the vendor could not annul the sale under the condition if he has no title whatever to the property sold (see In re Jackson and Haden's Contract, [1905] 1 Ch. 603), and in the exercise of the power he must act reasonably and not arbitrarily (see In re Starr-Bowkett Building Society (1889), 42 Ch. D. 375). ( 470 ) SECTION I. ENFORCEMENT OF AGREE- MENTS BY SPECIFIC PERFORMANCE {continued). CHAPTEE 4. Judgment for Specific Performance. SUMMARY. PAGE Article 180. Judgment and incidental relief - - - - 470 „ 181. Enforcing judgment in default of compliance 475 Article 180. Judgment and Incidental Relief. The judgment in an action for specific per- formance may contain such of the following, or other, orders, declarations, and directions as the circumstances of the case may require : (i) Order for specific performance. (ii) Order for inquiry as to title, (iii) Order for compensation or abatement, (iv) Declaration of unpaid vendor's Hen. (v) Order for inquiry as to rents and profits. (vi) Order for inquiry as to interest. (vii) Order for execution of conveyance and delivery of title-deeds. (viii) Order for inquiry as to damages. (ix) Order for return of deposit. Specific Performance : Judgment 471 The form of judgment or decree for specific performance, and the directions consequential thereon, must necessarily depend upon the particular circumstances of each case. In contracts relating to the sale and purchase of land the form of the judgment will vary according to whether the plaintiff, who has obtained the decree, be the vendor or the purchaser. In some cases, again, the title may have been accepted or established. In others where the title has not been admitted or proved before judgment a reference as to title will be necessary. Various declara- tions, and directions or orders consequential upon the decree, or modes of incidental relief appropriate in the particular circumstances, may be incorporated in the judgment. Those of more frequent occurrence in practice are mentioned above, and will now be explained, but the list is by no means exhaustive. Injunctions as ancillary to specific performance are discussed in the next section (Article 182). (i) Order for specific performance. — The declaration that the contract sued upon is a binding contract, and ought to be specifically performed, is, of course, the main object of the action. Such an order may be in the following form : " Declare that the agreement dated the day of in the pleadings mentioned ought to be specifically performed and carried into execution, and order and adjudge the same accordingly." Or, in the case of specific performance of a contract for sale of land : " The court doth declare that the agreement in the pleadings mentioned constituted a binding contract between the plaintiff and the defendant for the sale by the defendant to the plaintiff of acres of the defen- dant's freehold land situate at in the county of at the price of £ , and that the same ought to be specifically performed and carried into effect ; and doth order and adjudge the same accordingly " (see North V. Perceval, [1898] 2 Ch. 128 ; see also Seton on " Decrees," 7th ed., pp. 2136-2138 ; Cooper v. Morgan, [1909] 1 Ch. 261). 472 A Digest of Equity. When the title has not been established, it is usual for the decree to declare the right to specific performance in case a good title can be shown. (ii) Inquiry as to title. — The court may before, or at the trial of an action for specific performance, direct an inquiry as to the title of the vendor. Such an inquiry may be ordered not only in the case of contracts relating to freeholds or leaseholds, but in any case in which a decree for specific performance could be made. Hence it has been ordered in the case of a contract for sale of mining shares {Curling v. Flight (1848), 2 Ph. 613). The order for inquiry as to title is usually made at the trial, but, under Order 33, rule 2, any necessary inquiries may be ordered to be made at any stage of the proceedings. Questions as to title may also be determined on originating summons under the Vendor and Purchaser Act, 1874 {In re Baker and Selmon's Contract, [1907] 1 Ch. 238). (iii) Order for compensation or abatement. — The cir- cumstances under which, and the principles on which, compensation for deficiency or an abatement in price will be ordered in an action for specific performance have already been discussed. (iv) Declaration of unpaid vendor's lien.— The nature of the equitable lien of an unpaid vendor over the land sold in respect of the unpaid purchase money, interest, and costs has been explained. In a proper case the vendor may in his action for specific performance obtain a declaration of the existence of his lien with " liberty to apply " to the court to enforce it. (v) Inquiry as to rents and profits. — As a rule a vendor is entitled to the rents and profits of the property sold up to the date fixed for completion. As from that date the purchaser is entitled to the rents and profits, and the vendor must account to him for what he has received. Specific Performance : Judgrmnt. 473 When necessary, therefore, the judgment will order an account to be taken of rents and profits received by the vendor {Bennett v. Stone, [1903] 1 Oh. 610 ; see further on this subject Fry on " Specific Performance," 6th ed., Chap. v.). (vi) Inquiry as to interest. — In the absence of any express term or stipulation in the contract, or conditions of sale, as to interest, a purchaser who completes after the time stipulated is usually regarded as having been in possession since the date fixed for completion. From that date, therefore, being entitled to the rents and profits, if any, he is generally liable for interest on the unpaid purchase money at the rate of 4 per cent., but not when the delay in execution was due to the vendor. An inquiry as to the amount of interest due will be ordered when necessary. The contract, however, usually stipulates for the pay- ment of interest if the purchase be not completed on the day named. In this event an inquiry as to the amount of interest due from the purchaser on the unpaid purchase money will be ordered, and the amount of the rents and profits will be ordered to be deducted from the amount of the purchase money and interest (Bennett V. Stone, [1908] 1 Ch. 610). But notwithstanding any such stipulation, a vendor who has been guilty of wilful default will not be entitled to interest (Halkett v. Earl of Dudley, [1907], 1 Ch. 590. See further Fry on " Specific Performance," 6th ed.. Chap. V., and Farrer on " Conditions of Sale," pp. 69 et seq.). (vii) Execution of conveyance and delivery of title-deeds. — In an action by a purchaser for specific performance, a usual order is " that upon the plaintiff paying to the defendant the balance which shall be certified to be due to him in respect of the purchase money and interest, after deduction of the amount of the rents, profits, and taxed costs, the defendant to execute a proper conveyance of the lands comprised in the agreement to the plaintiff or to whom he shall appoint, such conveyance to be settled by the judge in case the parties differ, and deliver 474 A Digest of Equity. to the plaintiff (upon oath if required) all deeds and writings in his custody or power relating thereto " (see North V. Perceval, [1898] 2 Ch. 128, at p. 133 ; Jeffery v. Stewart (1899), 80 L. T. 17). In the same way the execution of any other instrument, such as a lease, transfer, assignment, etc., which may be necessary to the specific performance of a contract, may be ordered. (viii) Inquiry as to damages. — In actions for specific performance there is power (under Lord Cairns's Act (the Chancery Amendment Act, 1858), sect. 2, or the Judi- cature Acts) to award damages in addition to specific performance in whole or in part, in substitution for specific performance, or where there is no case for specific performance. When damages have not been assessed at the trial the judgment may direct an inquiry as to the amount of damages sustained by the plaintiff by reason of the non- performance of the contract by the defendant, or an inquiry whether the plaintiff has sustained any and what damages by reason of the delay of the defendant in completion of the agreement (see Boyal Bristol Per- manent Building Society v. Bomash (1887), 35 Ch. D. 890). A plaintiff may be awarded damages although he may not be entitled to specific performance. So where a plaintiff by delay in payment of the balance of the purchase money was held to have disentitled himself to equitable relief, he was awarded damages, as his conduct did not amount to a repudiation of the contract {Corn- wall V. Henson, [1900] 2 Ch. 298). A plaintiff cannot, however, obtain rescission of the contract and, at the same time, damages for its breach {Henty v. Schroder (1879), 12 Ch. D. 666). (ix) Beturn of Deposit. — Where a purchaser has paid a deposit and an action brought by the vendor against him for specific performance has been dismissed for want of title or otherwise, the defendant is usually specific Performance : Enforcing Judgment. 475 entitled to an order for the return of his deposit with interest. " The deposit is not merely a part payment of the purchase money, but constitutes a security for the com- pletion of the purchase, so that if the purchaser fails to perform his part, the vendor may retain it. On the other band, if the vendor fails to perform the contract on bis part, and there is no default on the part of the purchaser, the latter may, in the absence of a stipulation to the contrary, recover the deposit from the vendor " (see Levy V. Stogden, [1898] 1 Ch. 478, at p. 485, per Stirling, J.). Where in a vendor's action rescission only is asked for, the deposit is forfeited even though in the contract there is no express condition of forfeiture (Hall V. Burnell, [1911] 2 Ch. 551). On the other hand, where a resale is asked, the defendant must be given credit for the deposit {Shuttleworih v. Clews, [1910] 1 Ch. 176). Where the contract fails through the vendor's default the purchaser has a lien upon the estate for the amount of bis deposit and interest (see Whitbread and Company, Limited v. Watt, [1901] 1 Ch. 911). {Where the Court refuses specific performance, or in any action for the return of a deposit, the Court may, if it thinks fit, order repayment of any deposit (L. of Prop. Act, 1925, s. 49 (2) ).] Article 181. Enforcing Judgment in Default of Compliance. A judgment for specific performance when not complied with may be enforced by the plaintiff in one or more of the following ways according to the terms of the judgment, that is to say, the plaintiff may obtain : (i) An order appointing a time and place for payment of the purchase money and 476 A Digest of Equity. delivery of the conveyance, or a period within which the defendant is required to comply with the judgment, and in default of compliance proceedings may be taken against the defendant for contempt ; (ii) A direction that the act required by the judgment to be done be done by the plaintiff at the cost of the defendant ; (iii) An order for the rescission of the contract ; (iv) An order for enforcing a vendor's Hen by sale or receiver ; (v) A vesting order in lieu of conveyance, or an order appointing some person to execute a conveyance. (i) After obtaining judgment the plaintiff may on motion obtain an order for completion of the contract by payment of the unpaid purchase money and delivery of the conveyance and title-deeds at a specified time and place (see Morgan v. Brisco (1886), 32 Ch. D. 192), or an order appointing a time within which the defendant must comply with the judgment. In the event of non- compliance with such an order a writ of sequestration may be immediately issued against the defendant's estate and effects (see Order 43, rule 6 ; see also Debtors Act, 1869, sect. 8). A judgment for the payment of money is enforceable by writ of fieri facias or elegit (Order 42, rule 3) ; a judg- ment for the delivery of possession of land, by writ of possession (Order 42, rule 5) ; a judgment for the recovery of any property other than land or money, by writs of delivery, attachment, or sequestration (Order 42, rule 6) ; a judgment requiring any person to do any act other than the payment of money, or to abstain from doing anything, by writ of attachment, or by committal (Order 42, rule 7). Specific Performance ; Enforcing Judgment 477 Application for leave to issue a writ of attachment must be on notice to the party against whom the attachment is to be issued (Order 44, rule 2). (ii) Besides, or instead of, proceedings against the disobedient party for contempt, the court may direct that the act be done, so far as practicable, by the party who has obtained judgment, or some other person appointed by the court, at the cost of the disobedient party, and execution may subsequently issue for the amount of the expenses incurred (Order 42, rule 30). (iii) An order for the immediate rescission of the contract may be obtained on application by motion when the party in default has refused to complete, otherwise the order may be for rescission in default of completion within a time named {Griffiths v. Vezey, [1906] 1 Ch. 796). (iv) In cases where the plaintiff is a vendor, and in the judgment for specific performance has obtained a declaration that he is entitled to a lien for unpaid pur- chase money, he may obtain on motion or by petition an order for the enforcement of his lien by sale of the property, by appointment of a receiver pending sale, or in some cases by injunction to restore possession of the property (Allgood v. Merrybent, etc., Bailway Company (1886), 33 Oh. D. 571). As to lien on proceeds of sale of leaseholds, see Davies v. Thomas, [1900] 2 Ch. 462. (v) In cases where the plaintiff is a purchaser of land, and has obtained judgment for specific performance, when he is unable to get a conveyance of the property, he may obtain a vesting order, vesting the defendant's estate in him, or an order nominating some person to execute a conveyance of the estate to him (ss. 48-50, T. Act, 1925). { 478 ) Section II. Injunctions to Restrain Breaches of Contract. SUMMARY, PAGE Abticle 182. As between parties to the contract . . . 478 „ 183. As between persons not parties to the contract - 483 Abticle 182. As between Parties to the Contract. (1) Where a party to a contract expressly undertakes for valuable consideration not to act in a certain way the court wiU usually enforce this negative undertaking by injunc- tion without proof that the other party would suffer damage if the undertaking were broken. Where, however, the party has not expressly undertaken not to do the act which he contem- plates doing, but such act is inconsistent with his doing some act which by the contract he has undertaken to do, then the court will take into consideration the damage likely to result from the doing of the contemplated act, and in general it will not forbid it if the positive under- taking is one which it would not specifically enforce. (2) Where the contract is one in restraint of trade, even where the negative covenant is express, the court will enforce it only if its enforcement is necessary for the protection of the interests of the other party to the contract. Injunctions and Contracts. 479 Paragraph (1). " If," said Lord Caiens, L.C, " parties for valuable consideration, with their eyes open, contract that a par- ticular thing shall not be done, all that a Court of Equity has to do is to say by way of injunction that which the parties have already said by way of covenant, that the thing shall not be done ; and in such case the injunction does nothing more than give the sanction of the process of the court to that which already is the contract between the parties. It is not then a question of the balance of convenience or inconvenience, or of the amount of damage or of injury — it is the specific performance by the court of that negative bargain which the parties have made, with their eyes open, between themselves " {Doherty v. Allman (1878), 8 App. Cas. 709, at p. 720, and see London County Council v. Hutter, [1925] 1 Ch. 626). Where, how- ever, there is no express undertaking the court will go into the question of the balance of convenience or incon- venience, or of the amount of damage or of injury, and exercise its discretion as to whether or not an injunction should issue on the answer to this question (see Meux v. CoWe?/, [1892] 2 Ch. 253). This distinction is based on the principle that the Court of Chancery is a court of conscience : when one has contracted for value not to do a certain act, to do it .afterwards is a breach of faith. It has been carried very far in the case of Lumley v. Wagner (1852), 1 De G. M. & G. 604, where it was held to apply to a negative undertaking which was merely subsidiary to a positive undertaking which the court would not specifically enforce. There a singer contracted to sing for an opera and not to sing for any other opera during a fixed period. She afterwards during that period entered into an agree- ment to sing for another opera. The agreement to sing was not one which the court would specifically enforce, yet the court enforced by injunction the agreement not to sing. This decision has been much criticised and its principle will not be extended to cases where there is no express 480 A Digest of Equity. undertaking not to do an act, and the principal contract is one which the court would not specifically enforce. Thus, where the manager of a company contracted to give for a certain period " the whole of his time to the company's business," in the absence of any express stipu- lation not to give any of his time to a rival company, the Court of Appeal refused to grant an injunction to restrain him from so doing (Whitwood Chemical Company v. Hardman, [1891] 2 Ch. 416). And in another case of a contract of personal service the Court of Appeal held that a stipulation by the person employed to " act exclu- sively for the employers " does not in the absence of a negative covenant, express or implied, which is sufficiently clear and definite, enable the employers to obtain an injunction to restrain him from entering into other employment (Mutual Beserve Fund Life Association v. New York Life Assurance Company (1897), 75 L. T. 528). The tendency of recent decisions, it has been said, is towards the view that the court ought to look at what is the nature of the contract between the parties, and if the contract as a whole is the subject of equitable jurisdiction then an injunction may be granted in support of the contract, whether it contain, or does not contain, a negative stipulation, but if, on the other hand, the breach of contract is properly satisfied by damages, then that the court ought not to interfere, whether there be, or be not, the negative stipulation (Metropolitan Electric Supply Company v. Cinder, [1901] 2 Ch. 799, at p. 808). Where a contract containing a negative stipulation pro- vides for the payment of a certain sum as ascertained and liquidated damages in the event of a breach, the plaintiff must elect between the remedy by injunction and the liquidated damages, but caimot adopt the two remedies (General Accident Assurance Corporation v. Noel, [1902] 1 K. B. 377). The breach of an affirmative or positive term in a contract is restrainable when the contract is such as would be specifically enforced by the court, if the breach when Injunctions and Contracts. 481 committed would not be remedied or compensated by damage?, or would involve a multiplicity of actions for the recovery of damages, unless, indeed, the granting of an injunction would cause possible damage to the defen- dant greater than any possible advantage to the plaintiff (see Doherty v. Allman (1878), 3 App. Cas. 709, at p. 720). In other words, the granting or refusing of the injunction in such a case is purely a matter of discretion. An afSrmative covenant may, however, be of such a character that the court, although it cannot enforce afiSrmatively the performance of the covenant, may in special cases interpose to prevent that being done which would be a departure from, and a violation of, the cove- nant (see ibid.). But, as we have observed, the grant of an injunction to restrain the doing of a particular thing depends on the discretion of the court, in the exercise of which the court will consider whether injury would result from the act which it is sought to restrain, and whether such injury, if any, would be adequately compensated by damages recoverable in one action (ibid.). Where an agreement between a racecourse company and a canal company provided that if the racecourse should at any time be proposed to be used for dock purposes the former company should give the latter the " first refusal " thereof, it was held that the canal com- pany were entitled to enforce their rights as against the racecourse company and an intended purchaser by injunc- tion, on the ground that the contract to give the " first refusal " involved a negative contract not to part with the racecourse to any one other than the canal company without giving them that first refusal {Manchester Ship Canal Company v. Manchester Racecourse Company, [1901] 2 Ch. 37). Upon this principle, where under contract with an electric supply company a consumer agreed to take the whole of the electric energy required for certain premises, for a period of not less than five years, at a rate specified, though there was no covenant by the company to supply, nor by the consumer to take, D.E. 2 I 482 A Digest of Equity. any energy, it was held that the contract was enforceable by injunction, it being in substance a contract not to take any electric energy from any one else {Metropolitan Electric Supply Company v. Ginder, [1901] 2 Ch. 799). The principle that the court is not inclined to enforce negatively a contract which it would not enforce positively does not apply where one party prevents the other from carrying out a contract which the court would not compel him to carry out. Thus, in James Jones, Limited v. Earl of Tankerville, [1909] 2 Ch. 440, the plaintiffs had entered into a contract to buy, cut down and remove timber growing on the defendant's land. While they were enagaged in cutting down the timber the defendant instructed his servants to prevent their continuing so to do : — Held, that though the contract was one the court would not specifically enforce against the plaintiffs if they refused to carry it out, it would, nevertheless, restrain by injunction the defendant from preventing them carrying it out. Moreover, as the law's opposition to restraints on trade is not based merely on private but also public interests, these, too, may be taken into consideration before an injunction to restrain a person from following his calling is issued (see Morris {Herbert), Limited v. Saxelby, [1915] 2 Ch. 57). Paragraph (2). As a general rule, where there is in a contract an express undertaking not to do a certain thing, the court will grant an injunction to prevent the doing of that thing without evidence that the plaintiff would be damaged by its being done (see Doherty v. Allman, supra). To this an exception occurs in the case of covenants in restraint of trade. There the court will restrain a defendant from following his calling only so far as it is shown to be neces- sary for the protection of the plaintiff. How far it may be necessary to restrain the defendant for this purpose is a matter of fact, and under certain circumstances the court may hold that it may be necessary to prevent him Injunctions and Contracts. 483 following a certain calling anywhere (see Nordenfelt v- Maxim-Nordenfelt Guns and Ammunition Company, [1894] A. 0. 535). Article 183. As between Persons not Parties to the Contract. Where the owner of one parcel of land covenants for value with the owner of another parcel of land not to use his land for some specified purpose, then the court will, on the apphcation of the covenantee or his assigns, restrain not merely the covenantor and his heirs, but persons purchasing his land for value with notice of the covenant for using the land for that purpose, unless the covenantee or his successors in title have by their conduct disentitled themselves from obtaining the injunction. The doctrine here laid down is usually known as the rule in Tulk V. Moxhay (1848), 2 Phil. 774, from the case in which it was first clearly enunciated. The effect of it is to create new easements unknown to the common law, that is, rights over another's land annexed to the land of the covenantee. These rights usually arise in connection with the sale of the part of an estate ; but there is no reason why they should not arise between contiguous owners if the covenants under which they are given ^ire based on valuable consideration. Thus, if the owner of Blackacre covenanted for value with the owner of White- acre not to do anything on Blackacre which would spoil the view from the windows of Whiteacre, the court would restrain a purchaser of Blackacre with notice from break- ing the covenant (seeJi/uJcer v. Dennis (1877), 7 Ch. D. 227). Certain covenants as between landlord and tenant run at common law with the land, that is, they are enforceable 484 A Digest of Equity. between the landlord and his assigns and the lessee and his assigns. But on a sale in fee simple the common law regards all covenants between vendor and purchaser as to the land sold or the land retained by the vendor as merely personal covenants, and therefore not binding on the assigns of either. Equity recognises and enforces such covenants provided they are of a negative character, that is, restrain the use of, but do not compel the covenantor to do anything on the land. The rights resulting are usually called equitable easements, since they give an equitable interest in the land which is not subject to the rule against perpetuities and is binding on a subsequent equitable purchaser of the land even when he bought without notice, on the principle that as between equitable interests the first in time is the first in right {Rogers v. Hosegood, [1900] 2 Ch. 388. See also sect. 2 L. of P. Act, 1925). Equitable easements differ from common law easements in two ways. In the first place, like every other equitable interest they are liable to be defeated by the legal estate in the land being acquired by a purchaser for value without notice of their existence, whereas a common law easement, like other legal interests, is binding on a purchaser of the land subject to it whether he has notice of it or not. In the second place the nature of common law easements is more or less strictly defined by law (see Attorney-General Southern Nigeria v. John Holt, [1915] A. C. 599), while the nature and extent of negative covenants is a matter of express agreement among the parties. The only legal limitation upon them is that they must be negative. On the other hand, they resemble common law easements in this, that they cannot be enjoyed in gross but only in connection with the ownership of other land (see London County Council v. Allen, [1914] 3 K. B. 642). " Negative covenants in conveyances in fee restricting the right of the purchaser to use the land purchased may, for the purposes of a case like the present, be considered as falling under three classes : (i) where the covenant is entered into simply for the vendor's benefit ; (ii) where Injunctions and Contracts. 485 the covenant is for the benefit of the vendor in his capacity of owner of a particular property ; and (iii)' where the covenant is for the benefit of the vendor, in so far as he reserves unsold property, and also for the benefit of other purchasers, as part of what is called a building scheme. To all three classes the rule enunciated by Lord Caiens in Doherty v. Allman (supra) applies — that is to say, where there are negative covenants which are binding on the defendant the court has, speaking generally, no discretion to consider the balance of convenience or matters of that nature, but is bound to give effect to the contract between the parties, unless the plaintiff seeking to enforce the covenant has by his own conduct, or by that of the persons through whom he claims, become disentitled to sue " (per Parwell, J., in Osborne v. Bradley, [1903] 2 Ch. 446, at p. 450). What will disentitle a covenantee to sue in each of these classes differs. In the first class, nothing but the acquiescence of the covenantee in the breach of the covenant will suffice {Craig v. Greer, [1899] 1 I. E. 258 ; and see Oshorne v. Bradley, [1903] 2 Ch. 446). In the second class, the fact that the object which the covenant was intended to secure is gone will be enough to invalidate the covenant. Thus, where the object is to secure the status of a district, and the district has altogether changed in status since the covenant was made renders the cove- nant void (Duke of Bedford v. Trustees of the British Museum (1822), 2 My. & K. 552). In the third class, not merely the grantor but all persons purchasing parts of the estate subject to the same covenants can enforce them : the vendor against the purchaser and the purchaser against the vendor and anyone purchasing from him, so long as the plaintiff has himself observed the covenants. This third class is the most important and commonest of the three. It is what is called the case of the building scheme. The conditions of a building scheme are : (i) that both plaintiff and defendant derived their titles from the same source, (ii) that before either of them purchased the vendor had laid out a definite parcel of land to be sold subject to the same restrictive covenants, and 486 A Digest of Equity. (iii) that these restrictive covenants were intended to be not merely for the benefit of the vendor, but also for the benefit of anyone purchasing a part of the definite parcel of land from him (see Soley v. Sainsbury, [1913] 2 Oh. 513). In none of these cases is it necessary to support the action to prove damage. The equitable principle here stated applies only to covenants relating to land, except so far as it has been extended by statute to articles protected by patents {McGruther v. Pitcher, [1904] 2 Ch. 306). Not infrequently vendors enter into express covenants with purchasers not to use some of the land not included in the purchase for anything except a special object, ex. gr., not to build on the portion of the land retained as a garden in a square. Where this is the case, this restrictive covenant does not appear in the grantor's title-deeds, and accordingly a purchaser of the land retained might buy it without notice of the covenant. To' prevent this it is now enacted by sect. 11 of the Conveyancing Act, 1911 [now sect. 200, L. of P. Act, 1925], that where a purchaser does not obtain the title-deeds to land held under the same title as the land purchased, he is entitled to have indorsed a memorandum of any covenants restrict- ing the user of such lands or giving him rights over them for the purpose of giving notice to subsequent purchasers of such land. [The L. of P. Act, 1925, now iy a very long section (84) confers upon the court powers to discharge or modify restrictive covenants under conditions much the same as are stated in the above text to discharge them in equity. The chief use of these powers seems to be to give the servient owner the right to have the restrictive covenants altered or declared void and to give the dominant owner the right in certain cases to claim compensation. These powers can {without prejudice to the jurisdiction of the court) be exercised by one or more official arbitrators appointed for the purposes of the Acquisition of Land {Assessment of Compensation) Act, 1919.] BOOK II. EQUITABLE REMEDIES. B. SECOND DIVISION OF SUBJECT - MATTER OF EQUITABLE REMEDIES. TORTS. SUMMARY SECTION I. Injunctions to Restrain Wrongs. PAGE Article 184. Ordinary or negative injunctions to restrain threatened, recurring or continuing torts 489 185. Interim, iaterlocutory and perpetual injunctions 491 186. Undertakings as to damages 494 187. Mandatory or positive injunctions 495 188. Damages in lieu of injunction 498 189. Account in lieu of an interlocutory injunction - 499 190. Account in lieu of damages 500 SECTION II. Injunctions to Prevent the Abuse of Rights. Article 191. Equitable waste 501 ,, 192. Confidential and private information 505 193. Passing off - 507 ,, 194. Threatened proceedings against a patentee 511 ( 489 ) Section I. Injunctions to Restrain Wrongs. SUMMARY. PAGE Abticle 184. Ordinary or negative injunctions to restrain threatened, recurring or continuing torts 489 185. Interim, interlocutory and perpetual injunctions 491 186. Undertakings as to damages - - 494 187. Mandatory or positive injunctions - - 495 188. Damages in lieu of injunction - - 498 189. Account in lieu of an interlocutory injunction 499 190. Account in lieu of damages .... 500 Article 184. Injunctions to Restrain Threatened, Recurring or Continuing Torts. Equity will grant an ordinary or negative injunction to restrain the commission of a threatened act or the repetition or continuance of an act already committed or commenced, where it is proved to the satisfaction of the court that the defendant intends to commit or to repeat or to continue committing the act in question, and that such act if done or repeated or continued must interfere with the plaintiff's legal or equitable rights and inflict on him substantial damage. Before the court will grant an injunction to restrain a contemplated act it must be shown to its satisfaction that the inevitable result of the act will be a substantial 490 A Digest of Equity. interference with the plaintiff's rights. Thus, in Pattison V. Gilford (1874), 18 Eq. 259, the plaintiff had acquired certain sporting rights over the defendant's land. The defendant advertised the sale of his land in plots for building purposes ; but in the advertisements stated that the plaintiff had sporting rights over the land. The plaintiff applied for an injunction to restrain the sale on the ground that building houses on the land must destroy his sporting rights : — Held, that the sale of the land would not interfere with these rights ; but if the land after sale was used for building without the plaintiff's consent that would amount to an interference with his rights which the court would confirm. The first point to be noted is that, like other equitable remedies, the grant of an injunction is always in the discretion of the court. This seems to have been occasion- ally forgotten, and in Martin v. Price, [1894] 1 Ch. 276, the Court of Appeal went very close to affirming that where the plaintiff proved that his rights would be interfered with by the contemplated action of the plaintiff the court was bound to grant an injunction, although special circumstances might, in particular cases, justify the court in letting the defendant proceed and leaving the plaintiff to claim at common law his damages. However, since that decision the trend of cases has been the other way. Thus, in Behrens v. Richards, [1905] 2 Ch. 614, where the defendant was held liable in nominal damages for trespass on the plaintiff's land, the court refused an injunction to restrain future trespass on the ground that trespass under the circumstances of this case could do the plaintiff no material injury. Interlocutory and Perpetual Injunctions. 491 Article 185. Interim, Interlocutory and Perpetual Injunctions. Injunctions for any of the above purposes may be issued at any of three stages in an action for an injunction — (i) In cases of great emergency where irre- parable damage may be done to the plaintiff if the defendant is permitted to proceed with his act, an injunction may be granted on the application ex parte of the plaintiff together with leave to serve the defendant with notice of a motion for an injunction immediately after the writ is issued. Such injunctions are called interim injunctions, and continue in force only until the motion is heard, (ii) On hearing of the motion for an injunc- tion the court, on prima facie evidence that the act of the defendant is illegal and will inflict substantial damage on the plaintiff, may grant a temporary injunction. Such injunctions are called inter- locutory injunctions, and continue in force until the trial of the action. (iii) At the trial of the action the court may dissolve, amend or confirm the inter- locutory injunction, or where no inter- locutory injunction has been granted, may grant an original injunction. 492 A Digest of Equity. Such injunctions are called perpetual injunctions, and continue in force for ever. (iv) The parties to an action for an injunction may agree to treat the motion for an interlocutory injunction as the trial of the action, in which case the injunc- tion granted by the court (if any) on the motion will be a perpetual injunction. Paragraph (1). Formerly injunctions were granted by the Court of Chancery to restrain proceedings in other courts. These were known as " common injunctions," as distinguished from " special injunctions " to restrain the commission or continuance of wrongful acts uncoimected with judicial proceedings. Common injunctions were granted to pre- vent the institution, or continuance of proceedings at law, which were opposed to the principles of equity, e.g., when a claim resting on a bare legal title was asserted in the Common Law Courts against a defendant who had an equitable estate or title, or when an action was brought at law upon a contract or instrument obtained by fraud or undue influence. This jurisdiction, the exercise of which not infrequently resulted in confhct between the Court of Chancery and the Courts of Common Law, was, in effect, abolished by sect. 24 (5) of the Judicature Act, 1873. In modern practice, since this legislation, a stay of proceedings may be directed by the court before which an action is pending, upon any ground which, under the earlier practice, would have justified the Court of Chancery in granting an injunction to restrain the legal proceedings. In any cause or matter in which an injunction has been, or might have been claimed, the plaintiff may, before or after judgment, apply for an injunction to restrain the defendant or respondent from the repetition or continuance Interlocutory and Perpetual Injunctions. 493 of the wrongful act or breach of contract complained of, or from the commission of any injury of a like kind, relating to the same property or right, and the court or a judge may grant the injunction either upon or without terms, as may be just (Order 50, rule 12). An interlocutory injunction is one that is granted only up to judgment in the action in which the interlocutory order is made. An interim order is, technically, an order granted until an ensuing motion day. Under sect. 25 (8) of the Judicature Act, 1873, the court has a wide jurisdiction to grant an injunction by an interlocutory order in all cases in which it shall appear to be just or convenient. By an " interlocutory order " is meant any order other than one made by way of final judgment at the hearing of a cause {Salt v. Cooper (1880), 16 Ch. D. 544). In granting or refusing an interlocutory injunction, the court will not attempt to finally decide upon the legality or otherwise of the act complained of. But an inter- locutory injunction will only be granted when the plaintiff has made out a prima facie case, so that it is probable that at the hearing of the action he will get a decree in his favour (see Challender,r. Boyle (1887), 36 Ch. D. 425, at p. 436, per Cotton, L.J.). The interlocutory order is, however, by no means conclusive as to the plaintiff's right. Its object is to preserve mattel:s in statu quo, so that the relief claimed, and to which a prima facie title has been shown, may be effective if granted at the trial. In applying for an interim or interlocutory injunction it is necessary to prove that the threatened action of the defendant must inevitably result, if allowed to proceed, in a substantial interference with the plaintiff's rights. This was forgotten by courts so far as libel was concerned. Since Fox's Act, however defamatory any pubHcation may be, it is only a libel when a jury finds it to be a libel ; but for a time the common law courts took it on them to grant interlocutory injunctions to restrain defamation which possibly, when the action was tried, might be found by the jury to be justified, and therefore no interference 494 A Digest of Equity. with the plaintiff's rights. This practice came before the Court of Appeal in Bonnard v. Ferryynan, [1891] 2 Ch. 269, when the court, while holding that it had jurisdiction to grant an interim or interlocutory injunction to restrain the continued publication of defamatory matter, declared that the jurisdiction was a very delicate one and should not be exercised unless where it was clear there was no substantial defence. Article 186. Undertakings as to Damages. (1) When granting an interim or interlocutory ordinary injimction the court always requires the plaintiff to enter into an undertaking to compensate the defendant for any damages resulting to him from the issue of the injunction should it appear on trial that there were no sufficient grounds to support the issue of the temporary injunction. (2) In doubtful cases the court may, on the application for an interlocutory injunction, re- fuse to grant it on the defendant entering into an undertaking to undo the results of any act threatened, if when done the results are such as will interfere with the plaintiff's legal or equit- able rights and inflict substantial damage on the plaintiff. This undertaking by the plaintiff as to damages ought, as a rule, to be given whenever an interlocutory injunc- tion is granted, unless such injunction is in the nature of a final order. The object is to secure to the defendant the payment of proper damages in any case where an interlocutory injunction has been granted, which, as it ultimately turns out at the trial, ought not to have been granted, or in other words to protect a defendant against Injunctions : Undertakings as to Damages. 495 the damage he may suffer by the wrongful issue of an injunction (see Smith v. Day (1882), 21 Ch. D. 421, at p. 424, per Jessel, M.E. ; Fenner v. Wilson, [1893] 2 Ch. 656). But such an undertaking is not generally required when an interlocutory injunction is granted on behalf of the Crown (Attorney-General v. Albany Hotel Company, [1896] 2 Ch. 696). Where an undertaking by the defendant is accepted in lieu of an interim injunction a cross-undertaking as to damages by the plaintiff will now be inserted unless it is excluded by express agreement (see Practice Note, [1904] W. N. 203 ; and Oherrheinische Metallwerke v. Cocks, [1906] W. N. 127). When it is established at the trial that the plaintiff is not entitled to an injunction, an inquiry as to the amount of damages sustained by the defendant may be directed, even though there was no misrepresentation or other default by the plaintiff in obtaining the injunction (see Griffith v. Blake (1884), 27 Ch. D. 474 ; Bileys v. Mayor of Halifax (1907), 97 L. T. 278). Article 187. Mandatory or Positive Injunctions. As a rule a mandatory injunction will be granted to remove any work interfering with the plaintiff's rights which has been carried out after an action to restrain its being carried out has been commenced or notice has been re- ceived by the defendant that if he continues carrying out the work an action wiU be com- menced ; and where the defendant knowing that a writ commencing an action for an in- junction has issued avoids service of it and hurries forward the completion of the work, the court will grant a mandatory injunction for its 496 A Digest of Equity. removal without inquiring whether in fact the work interferes with the plaintiff's rights or not. Where, however, the work was completed before complaint was made or action brought, the court will generally not grant a mandatory injunction to remove it except where the de- fendant is shown to have taken an unfair advantage of the plaintiff by carrying out the work in such a way as to prevent the plaintiff having an opportunity of applying in time for an ordinary injunction to restrain the defendant from carrying it out, or where it was not evident that the work would interfere with the plaintiff's rights until it was completed. A mandatory injunction is an order which not only requires the defendant to refrain from future illegal acts, but also directs him to restore matters to the condition in which they were when the claim arose, so as to place the plaintiff in the same position as he was in before the act complained of was done. The jurisdiction to grant a mandatory injunction is exercised with extreme caution, and only in cases where the injury, although infringing a legal right, could not be adequately compensated by damages (see Colls v. Home and Colonial Stores, [1904] A. C. 179, at pp. 192, 193, 212 ; Kine v. Jolly, [1907] A. C. 1). Such an injunction as a rule will be granted before the establishment of the plaintiff's right, only where irrepar- able injury would otherwise result, or where the defendant continues the acts complained of after direct notice, or after proceedings have been commenced. When, for example, a defendant in an action to restrain him from building so as to infringe the plaintiff's right to light, after receiving notice of motion for an injunction, endeavoured to anticipate the action of the court by hurrying on the building complained of, an injunction was granted ordering him to pull down the building so erected (see Daniel v. Ferguson, [1891] 2 Ch. 27). Mandatory Injunctions. 497 So also, in an action for an injunction to restrain the defendant from building so as to obstruct the plaintiff's ancient lights, where the defendant evaded service of the writ, and, after having been previously warned by the plaintiff, continued to build, an interlocutory mandatory injunction was granted, ordering the defendant to pull down so much of the building as had been erected sub- sequently to the warning (Van Joel v. Hornsey, [1895] 2 Ch. 774). Since the Judicature Acts the courts have full power to award damages in lieu of granting an injunction. Thus in an action for an injunction to restrain a trespass where the actual damage amounted to less than the cost of removal of the works complained of, the court, in exercise of its discretion, gave damages in lieu of an injunction (Bileys v. Mayor of Halifax (1907), 97 L. T. 278). On the other hand, as the House of Lords pointed out in a recent important decision, " an injunction is necessary if, for instance, the injury cannot fairly be compensated by money, if the defendant has acted in a high-handed manner, if he has endeavoured to steal a march upon the plaintiff or to evade the jurisdiction of the court " (Colls V. Home and Colonial Stores, Limited, [1904] A. C. 179, at p. 193, per Lord Macnaghtbn ; see also Kine v. Jolly, [1907] A. C. 1). A mandatory injunction formerly took the form of an order restraining the defendant from allowing the con- tinuance of the matter complained of, e.g., " from allowing the buildings to remain on the land." The practice in this respect was not long ago altered, and an injunction which in effect requires the performance of some act, such as the demolition and removal of a building, is now to be expressed in a direct and mandatory form (see Davies v. Gas Light and Coke Company, [1909] 1 Ch. 248). A mandatory injunction is not usually granted before the hearing of the action, but the court has jurisdiction to grant a mandatory injunction on an interlocutory applica- tion, and in an exceptional case it will be so granted (Collison V. Warren, [1901] 1 Ch. 812). r.E. 2 k 498 A Digest of Equity. Akticle 188. Damages in lieu of Injunction. The court has jurisdiction in any application for an ordinary injunction to grant damages in lieu thereof ; but it will not do so unless the damages likely to result from the refusal of the injunction are small and capable of being estimated in money. While this work was going through the press the case of Slack V. Leeds Industrial Co-operative Society, Ltd., [1923] 2 Ch. 431, was reported. In this case the judge of first instance (Eussell, J.) and the Court of Appeal (Younger, L.J., dissenting) felt compelled to hold that the Court had no jurisdiction under Lord Cairns's Act, 1858, to grant damages in lieu of an injunction where the interference with the plaintiff's legal rights was merely threatened. Some actual interference, it was held, must have taken place before Lord Cairns's Act appUed. Once such actual interference had taken place then the Court was at liberty to refuse an injunction and to assess the damages suffered by the plaintiff ■ before action brought, and also the damages which might result in the future ; and, on allowing these damages, it might refuse to forbid the defendant from further trespassing on the plaintiff's legal rights. It seems clear that, but for authorities which they felt binding on them, the judges would not have given this decision ; and it is to be hoped that the case will be taken to the House of Lords, where it is very likely that the authorities in question will be overruled. Those authori- ties seem to turn on the fact that Lord Cairns's Act gives damages only to " the person injured." This was held to mean the person who had suffered damage. That, it is submitted, is wrong. Injuria means cause of action : and it may be actionable without damage as in the case of libel. In civil law there is no injuria till the right is violated. But in equity there is often injuria where a Account in Lieu of Damages. 499 right is threatened, though in criminal law a threat of a crime is often itself a crime. Indeed in equity, so far as ancient lights are concerned, and the case dealt with was one of ancient hghts, it may be said that the equitable injuria usually ends the moment the legal injuria arises : if the owner does not take action until the defendant's works actually obstruct his lights, as a rule the Court will, independently of Caims's Act, refuse an injunction and give him damages merely. So the effect of the construc- tion put upon Caims's Act is to make it practically meaningless. It will also, as Younger, L.J., pointed out, open the gate to that flood of what are really blackmaihng actions which Lord Macnaghten denounced in Colls v. Home and Colonial Stores, Ltd., [1904] A. C. 179, at p. 193, and which that decision did so much to dam. Since the above appeared in the fourth edition of this work the decision of the Court of Appeal has been reversed by the House of Lords substantially on the grounds stated above (see Leeds Industrial Co-operative Society, Ltd. v. Slack, [1924] A. C. 851). One argument used to support the decision of the Court of Appeal seems based on a mis- conception of the function of equitable remedies. To refuse an injunction, it was contended, would amount to the authorisation of an illegal act. The refusal of an equitable remedy authorises nothing. It merely amounts to saying that Equity sees no sufficient grounds for interfering with the Law. Here Equity was entitled to give damages such as the Law would give when the injury due to the breach was completed. The only difference was that it could give them before while the Law could only give them after completion. Article 189, Account in lieu of an Interlocutory Injunction. On application for an interlocutory injunc- tion in an action to restrain a breach of a monopoly the court may, in Heu of an injunction, 500 A Digest of Equity. make an order directing the defendant to keep an account of all the profits made by him through the act complained of until the hearing of the action. If, on the hearing, a perpetual injunc- tion is granted the defendant will be ordered to pay over such profits to the plaintiff. Article 190. Account in lieu of Damages. In matters coming within the concurrent jurisdiction of equity a person who has been damaged by another's wrongdoing can claim an account and also damages, but when judgment is given he is put to his election which remedy he wiU take. (501) Section II. Injunctions to Prevent the Abuse of Rights. SUMMARY. PAGE Abticle 191. Equitable waste - - - 501 „ 192: Confidential and private information 505 „ 193. Passing off .... - 507 ,. 194. Threatened proceedings against a patentee - 511 Article 191. Equitable Waste, (1) Any act or omission by a tenant for life or certain other limited owners which involves a material alteration of the inheritance, is technically termed "waste. 5) (2) Waste is either " voluntary," e.g., the destruction of buildings, removal of fixtures, cutting timber, opening mines ; or " permis- sive," e.g., allowing buildings to faU into dis- repair. Voluntary waste may be restrained by injunction, but an injunction will not be granted to restrain permissive waste. (3) A tenant for hfe or for any other Umited interest in land, who by the terms of his grant is entitled to commit waste on the land granted, wiU be restrained by injunction from using his right to commit waste in an unconscionable manner so as to injure the inheritance to an unreasonable extent when it vests in the 502 A Digest of Equity. person or persons entitled to the land on the determination of his life or other limited interest. (4) Any person may apply for an injunction to restrain waste who has an interest in the land on which the waste is committed. Paragraph (1). Tenants for life, or for years, unless by the terms of the settlement they are unimpeachable for (i.e., not liable for) waste, may by injunction be restrained from doing any acts amounting to waste. An incumbent is in the same position as a tenant for life impeachable for waste, except where his disability has been removed by the Ecclesias- tical Commissioners under their statutory powers (see Ecclesiastical Commissioners v. Wodehouse, [1895] 1 Ch. 552). Any alteration of the inheritance is at common law regarded as waste. Thus the conversion of pasture into arable land, or of wood into pasture, was waste, and as such was formerly restrained by injunction (see Coke, Lit. 53a ; Lord Darcy v. Askwith (1617), Hob. 234). Now, however, it is established that no act will be restrained as waste which is not injurious to the inheritance, either by diminishing the value of the estate, or by increasing the burden upon the estate, or by impairing the evidence of title (West Ham Central Charity Board v. East London Waterworks, [1900] 1 Ch. 624, at p. 636). In Doherty v. Allman (1878), 3 App. Cas. 709, the court refused to grant an injunction to restrain a lessee from converting certain store buildings, which were in disrepair, into dwelling- houses, which would increase the value of the premises. And it is now well settled that no act will be restrained by injunction as waste unless it is prejudicial to the inheritance, and what has been termed " ameliorating waste " will not be restrained {Meux v. Cohley, [1892] 2 Ch. 253). Injunctions : Waste. 503 Paragraph (2). At common law the cutting of timber, or of trees which would become timber, by a tenant for life, except periodical cutting on a timber estate, was waste. By " timber " is technically meant oak, ash, and elm, at least twenty years old, and such other trees as by local custom are regarded as timber {Dashwood v. Magniac, [1891] 3 Ch. 306). Under the Settled Land Act, 1882, sect. 35 (now s. 66 Set. L. Act, 1925), a tenant for life impeachable for waste is empowered to cut and sell timber on the settled land which is ripe and fit for cutting, with the consent of the trustees, or under order of the court. Three-fourths of the net proceeds of sale are to be set aside as capital money arising under the Act, and the other fourth part is to go as rents and profits. The opening of new mines or quarries by a tenant for life amounts to waste, but where mines or quarries have already been opened and worked a tenant for life may continue working them and take the profits (see Elias v. Snowden Slate Quarries Company (1879), 4 App. Cas. 454 ; Greville-Nugent v. Mackenzie, [1900] A. C. 83). Under the Settled Land Act, 1882, sects. 6-11 (now sects. 41-47 S. L. Act, 1925), a tenant for Hfe may grant mining leases not exceeding sixty years (now a hundred years) in length, and is entitled if impeachable for waste to one-fourth, or, if unimpeachable, to three-fourths of the rent of such mining leases, the residue of the rent being set aside as capital money arising under the Act. Permissive waste by a tenant for life will not be restrained by injunction, nor can a remainderman recover damages ia respect of it {In re Parry and Hopkin, [1900] 1 Ch. 160). Paragraph (3). A tenant for life " without impeachment of waste " would, notwithstanding his wide powers, be restrained in equity from the commission of certain acts of waste, upon 504 A Digest of Equity. the principle that such acts would constitute an unfair and unconscientious use of his powers. For instance, a tenant for hfe unimpeachable for waste might, quite apart from the modern statutory powers, legally cut and sell timber. But he would not be allowed, without special reason, to cut down ornamental trees or timber, and any such attempt to exercise his legal powers would be restrained as " equit- able waste." In Vane v. Lord Barnard (1716), 2 Vern. 738, the tenant for life, though not impeachable for waste, was, upon the ground that he was using his legal powers unfairly, restrained from taking off the roof of Eaby Castle in order to spite the remainderman. A tenant for life may, however, cut timber and retain the proceeds, when, though ornamental, it is injurious to adjoining trees {Baker v. Sebright (1879), 13 Ch. D. 179). The Judicature Act, 1878, sect. 25 (3) (now sect. 135 L. of P. Act, 1925), enacts that an estate for Hfe without impeachment of waste shall not confer or be deemed to have conferred upon the tenant for Hfe any legal right to commit waste of the description known as equitable waste, unless an intention to confer such right expressly appear by the instrument creating such estate. An injunction may be granted to prevent any threatened or apprehended waste under sect. 25 (8) of the same Act. Paragraph (4). Any person whose estate or interest would be prejudiced by the waste which it is sought to restrain is entitled to an injunction. Any reversioner or remainderman, whether the owner of the inheritance or merely entitled to a hfe ■estate, may sue to restrain waste. An injunction may be granted at the instance of trustees to preserve contingent remainders to prevent waste by a tenant for life and a remote remainderman in collusion {Garth v. Cotton (1753), 3 Atk. 751). And a private individual may apply for an injunction to restrain the pollution of a river passing through his land by local authorities, even though these Injunctions : Unauthorised Publications. 505 have a statutory right to discharge sewage from their sewers {Jones v. Llanrwst Urban Council, [1911] 1 Ch. 393). In all cases of actions for the prevention of waste, one person may sue on behalf of himself and all persons having the same interest (Order 16, rule 37). Aeticle 192. Confidential and Private Information. Where one person obtains while in the service of another confidential information as to the business in which he is employed or where one person obtains information from another on the impUed understanding that he is to use such information only for his own instruction, equity wiU, by injunction, restrain such person from communicating such information to others in a way that may be detrimental to the person from whom the information was obtained. The Copyright Act, 1911, expressly abolishes common law rights so far as copyright is concerned — ^if any such rights ever existed — but it also expressly reserves all rights and jurisdiction to restrain breaches of trust and confidence (sect. 31). Formerly it was on the ground of breach of confidence that the publication or other improper use of private letters was restrained on application of the writer or his personal representatives (see Pope v. Curl (1741), 2 Atk. 341 ; Earl of Lytton v. Devey and Swan Sonnenschein and Company (1884), 52 L. T. 121). Now, however, since copyright is given to unpublished literary work, and such copyright cannot be transferred except by written assignment, it is no longer necessary to rely on this ground 506 A Digest of Equity. The publication may be restrained as an infringement of copyright. The old rule, however, as to breach of confidence has still many applications outside the Copyright Act. Thus, the publication of lectures delivered by a University pro- fessor to students in his class-room has been restrained upon the ground that such delivery of the lectures was not equivalent to a communication of them to the public, and that the lecturer was entitled to restrain their un- authorised publication {Caird v. Sime (1887), 12 App. Cas. 326). Publication of information obtained under circumstances of confidence, as where persons in the course of employ- ment obtain information, or where information is acquired under an express or implied promise not to divulge or make use of it, will be restrained (see Lamb v. Evans, [1893] 1 Ch. 218). Thus, where a person apprenticed to, and in the employment of, a firm of engine-makers acquired certain trade secrets, and, without their consent, in breach of confidence, compiled a table of dimensions of various types of engines, the employers were granted an injunction restraining him from publishing or com- municating the table or its contents to any one (Merry- weather V. Moore, [1892] 2 Ch. 518). .In Rohl v. Green, [1895] 2 Q. B. 315, where a person employed as manager of a business surreptitiously copied a Ust of names and addresses of customers, with the object of soliciting orders from them after he had set up a similar business of his own, which he subsequently did, it was held that his conduct was a breach of an implied term in his contract of service, and he was restrained by injunction from using information so obtained by him (see also Kirchner and Company v. Gruban, [1909] 1 Ch. 413, at p. 422). In Exchange Telegraph Company v. Central News, [1897] 2 Ch. 48, a subscriber to a news agency who had acquired news and information on condition of not communicating the same to third parties, was restrained by injunction from acting in breach of his contract, and a third party was restrained from inducing a subscriber to break his contract by Injunctions : Passing Off. 507 supplying him with such information for pubhcation (see also Exchange Telegraph Company v. Gregory and Company, [1896] 1 Q. B. 147). Article 193. Passing Off. Where one person has acqiaired by long usage in the open market a special name or descrip- tion for his business or his goods, equity wiU grant an injunction to restrain a second person from using a name or description for his business or his goods so similar to that of the acquired name or description of the business or the goods of the first person as to lead the pubUc to believe that they are deaUng with him or buying his goods when in fact they are deahng with the second person or buying his goods. Apart altogether from any question of infringement of a registered trade mark, an action will lie for an injunc- tion to restrain a trader from " passing off " his goods as those of another. In order to obtain an injunction in this class of cases there must either be evidence of a fraudu- lent intent to deceive, or alternatively evidence that the conduct of the defendant {e.g., owing to similarity of the "get-up" of the goods, resemblance of the symbols, marks, or names, etc.) is such as to be calculated to deceive buyers (see Singer Manufacturing Company v. Loog (1880), 18 Ch. D. 395, at p. 412 ; 8 App. Gas. 15 ; Payton and Company v. Snelling, Lampard and Company, [1901] A. 0. 308). A trader will be restrained from passing off his goods as the goods of another trader by selling them under a name which is likely to deceive immediate or ultimate purchasers into the belief that they are buying the goods of that other trader. Upon this principle, in Beddaway v. 508 A Digest of Equity. Banham, [1896] A. C. 199, where the plaintiff had for some years made and sold goods as "Camel Hair Belting," which name in the trade designated the plaintiff's goods only, he was held to be entitled to an injunction restraining the defendant from using the words " camel hair " as descriptive of belting sold by him, and manufactured by persons other than the plaintiff, without clearly distin- guishing such belting from the belting of the plaintiff. So, in the case of The Birmingham Vinegar Brewery Com- pany V. Powell, [1897] A. C. 710, where the respondent had manufactured and sold as " Yorkshire Eelish " a sauce which had become identified with that name, and the appellants sold another similar sauce under the same name, so as to induce persons to believe it was of the respondent's manufacture, an injunction was granted restraining the use by the appellants of the words " York- shire Eelish " without clearly distinguishing their sauce from that of the respondent. In Singer Manufacturing Company v. British Empire Manufacturing Company (1903), 20 E. P. C. 313, the defendants were restrained from advertising or using the name " Singer " in connec- tion with sewing machines not of the plaintiffs' make, in any way calculated to induce the belief that such machines were of the plaintiffs' manufacture, it being held that the defendants' advertisements were calculated and intended to deceive intending purchasers into the belief that the machines advertised were manufactured by the plaintiffs. On the same principle in Rey v. Leconturier, [1908] 2 Ch. 715, an injunction was granted to restrain the defendants from using the name of " Chartreuse " as the name of their liqueur and from passing off their liqueur as the liqueur made by the plaintiffs. An intention to deceive may be inferred from the cir- cumstances of the case, and an injunction granted although there is no proof of any actual case of deception, if there be a probability of deception {County Chemical Company v. Frankenburg (1904), 21 E. P. C. 722). The eyesight of the judge is in the class of case grounded on colourable imitation the ultimate test (per Farwbll, J., in Bourne v. Swan and Edgar, Limited, [1903] 1 Ch. 211, at p. 225). Injunctions : Passing Off. ' 509 On the other hand, if the probabihty of deception be not estabUshed, as where the get-up of the goods is not calculated to deceive, an injunction will not be granted. Moreover, where the descriptive word, the use of which is complained of by the plaintiff, is not proved to have acquired a secondary meaning so as to denote only the goods of the plaintiff's manufacture, the plaintiff will not be entitled to an injunction {Rommel v. Bauer and Com- pany (1905), 22 E. P. C. 43). So in Electromdbile Company v. British Electromdbile Company, Limited (1908), 26 E. P. C. 149, an injunction to restrain the defendants from carrying on business under the name of the " British Electromobile Company " was refused, on the ground that the word " electromobile " was descriptive of a motor car driven by electricity, and had acquired no secondary meaning as indicating the motor cars of the plaintiff company only. Nor will an injrmction be granted in the case of one instance only of passing off being proved when there is no proof of fraudulent intent, or of intention to repeat the act, or of damage to the plaintiff {John Knight and Sons v. Crisp and Company (1904), 21 E. P. C. 670). The use of a trade name or designation applied to a business or to goods which is as a matter of fact reason- ably calculated to deceive, is restrainable by injunction. Upon this principle, where a long-established brewery company had carried on business under the name of " The Manchester Brewery Company, Limited," and a new com- pany, without any intention to deceive, was incorporated and registered as " The North Cheshire and Manchester Brewery Company, Limited," the latter company were, upon evidence that as a matter of fact the use of that name was calculated to deceive, by injunction restrained " from using the name, style, or title of the North Cheshire and Manchester Brewery Company, Limited, or any other style or name which includes the plaintiff company's name, or so nearly resembles the same as to be calculated to induce the belief that the business carried on by the defendant company is the same as the business carried on by the plaintiff company, or in any way connected 510 A Digest of Equity. therewith " (North Cheshire and Manchester Brewery Company v. Manchester Brewery Company, [1899] A. 0. 83. The assumption of a trade name which was calculated to deceive was also restrained in F. Pinet et Cie v. Maison Louis Pinet, Limited, [1898] 1 Ch. 179, where a trader had adopted a business name in order to pass off boots manufactured by him as the goods of the plaintiffs, whose real name it was. And a trader may be restrained even from using his own name, where it is such that it has become so identified with the business or goods of another as to be deceptive when used without quahfication. In this respect the use of a name is on the same footing as the use of any other descriptive word. For example, Messrs. J. and J. Cash having for many years made and sold at Coventry goods known as " Cash's Frilliags," etc., one Joseph Cash was restrained from carrying on in the same town the business of a manufacturer or seller of frillings, etc., under the name of " Joseph Cash and Company," or under the name of " Cash," or under any name so as to mislead (J. and J. Cash, Limited v. Cash (1901), 18 E. P. C. 213 ; see also Fine Cotton Spinners' Association and John Cash and Sons v. Harwood Cash and Company, [1907] 2 Ch. 184). On the same ground, in the case of Valentine Meat Juice Company v. Valentine Extract Company (1900), 17 E. P. C. 673, the defendants, who had attempted to get the benefit of the old-established reputation of the plaintiffs' preparation of meat juice, and had so put their goods on the market that they would be mistaken for the goods of the plaintiffs, were restrained from carrying on business under the name of " Valentine," or offering their goods for sale under the name of " Valen- tine," or offering their goods for sale under any such name, or from carrying on any such business under any such name, without clearly distinguishing such business from the business of the plaintiffs. But where there is no proof of any actual deception, or probability of deception, an injunction will not be granted. Thus in Macmillan v. Ehrmann Brothers (1904), Injunctions : Patents. 511 21 E. P. C. 647, the court refused to restrain the use of a name which was not the name of the plaintiff or of the defendants, there being no proof of probable deception, or that the conduct of the defendants had intercepted or was likely to intercept the plaintiff's trade. In Dunlop Pneumatic Tyre Company v. Dunlop Motor Company, [1907] A. C. 430, an injunction to restrain the defen- dant company from carrying on business on the ground of thei similarity of the name to the trade name of the plaintiff company was refused, there being no proof that any one would be misled by such use and the plaintiff company not being entitled to the exclusive use of the name " Dunlop." It may be noted here that there is no copyright in titles of books or newspapers and the use of any such title can be restrained only on the ground of passing off. See Borthwick v. TJie Evening Post (1888), 37 Ch.D. 449. Article 194. Threatened Proceedings against a Patentee. In an action to restrain the continuance of threats of legal proceedings or HabiUty in respect of any alleged manufacture, use, sale, or purchase of an invention, by a person claiming to be a patentee of such invention, an injunction may be granted to restrain the continuance of such threats, unless such person with due dih- gence commences and prosecutes an action for infringement of his patent. The remedy in the case of groundless threats of legal proceedings concerning the user of a patent is by injunc- tion. Section 36 of the Patents and Designs Act, 1907, enacts that " where any person claiming to be the patentee of an invention, by circulars, advertisements, or otherwise, threatens any other person with any legal proceedings. 512 A Digest of Equity. or liability, in respect of any alleged infringement of the patent, any person aggrieved thereby may bring an action against him, and may obtain an injunction against the continuance of such threats, and may recover such damage (if any) as he has sustained thereby, if the alleged infringe- ment to which the threats related was not in fact an infringement of any legal rights of the person making such threats : Provided that this section shall not apply if the person making such threats with due diligence commences and prosecutes an action for infringement of his patent " (see Craig v. Dowding (1908), 98 L. T. 231). A letter to a third party threatening litigation has been held to be a threat within the meaning of this section, which entitled the patentee to an injunction {Douglass v. Pintsch's Patent Lighting Comfany, [1897] 1 Ch. 176). It has been held that threats of legal proceedings for infringement of patent rights are none the less " threats " within the meaning of the enactment because made in answer to the infringer or to a third person {Skinner and Company v. Shew and Company, [1893] 1 Ch. 413). An injunction may be granted to restrain the publica- tion of a libel or slander of title even when no damage has actually accrued to the owner of the patent, provided that damage is imminent, and likely to follow as the natural and direct result of the defamation of title {Dunlop Pneumatic Tyre Company v. Maison Talbot (1904), 52 W. E. 254). BOOK II. EQUITABLE REMEDIES. C. THIRD DIVISION OF SUBJECT - MATTER OF EQUITABLE REMEDIES. ADMINISTRATION. 2l SUMMARY SECTION I. Administration Generally. PAKE Article 195. Purposes for which accounts are issued 516 196. Ordering accounts 521 197. WiUul default 523 198. Receivers and managers 525 199. Jurisdiction to appoint receiver 528 200. Objects of appointment 530 201. How appointed 535 SECTION II. Administration of Assets. Chaptbe 1. Assets. Aktiolb 202. Meanings of " assets " and of " administration " 538 „ 203. Assets and their devolution 539 „ 204. Assets of a person having a foreign domicile 544 Chapter 2. Executors and Administrators. Aeticlb 205. Origin of executors' and administrators' authority 546 „ 206. 0£&ces of executors and administrators 548 „ 207. Executors may act separately 548 ,, 208. Executor de son tort 552 ,, 209. Who may claim letters of administration on intestacy 553 „ 210. Who may be granted letters of administration where there is a wiU 555 „ 211. Powers of personal representatives over assets - 556 Chapter 3. Payment of Liabilities and Debts. Article 212. Krst charges on assets 560 „ 213. Payment of debts : order when estate is solvent 661 „ 214. Payment of debts : order when estate is insolvent 565 Summary. 515 PAGE Article 215. Insolvent estate : administered by the personal representatives 566 „ 216. Insolvent estate 567 „ 217. Arrears of rent 570 „ 218. Secured creditors 571 219. Statute-barred debts 572 220. Eetainer of debts 573 221. Right to prefer debts 577 ,, 222. Right to retain legacy against a legatee's debt - 578 „ 223. Creditors' right to foUow assets 579 „ 224. Creditors' right to donationes mortis causa, 580 Chapter 4. Distribution of Assets. Aeticlk 225. Notice by advertisement to creditors 582 226. Future and contingent liabilities 583 227. Kinds of legacies 585 228. Order of distribution of a testator's estate - 587 229. Order of distribution of an intestate's estate 593 230. Rights of legatees to foUow assets 596 231. Pa3rment of interest or income upon legacies 598 Chapter 5. The Liabilities of Personal Ebpresentatives. Article 232. Actions against personal representatives - 601 „ 233. Liabilities similar to those of trustees 605 ( 516 ) Section I. Administration Generally. SUMMARY. PAGE Aeticlb 195. Purposes fm which accounts are issued - 516 „ 196. Ordering accounts • - 521 197. Wilful default - 523 „ 198. Receivers and managers - 525 „ 199; Jurisdiction to appoint receiver 628 „ 200. Objects of appointment 530 „ 201. How appointed 535 Article 195. Purposes for which Accounts are Issued. The court has jurisdiction to order accounts to he taken in cases of equitable claims or in aid of legal rights ; and in particular, this jurisdiction is frequently exercised in cases of trusts, mortgages, partnership, and administration of estates. The taking of accounts formed an important branch of the jurisdiction of the Court of Chancery. In the Common Law Courts no adequate machinery existed for the taking of accounts ; matters of account were usually referred to arbitration, and in the old action of account at law the account was taken by auditors, which lengthened the litigation and deterred litigants (see Ex parte Bax (1751), 2 Ves. sen. 388). On the other hand, in the Court of Chancery the taking of accounts was formerly referred to Masters in Chancery, and was a regular part of the jurisdiction. In matters based upon purely equitable claims, such as trusts, redemption of mortgages, or equitable waste, an order for the taking of an account was a species of equitable relief necessarily incidental to the jurisdiction. Moreover, the Court of Chancery exer- Accounts : Jurisdiction. 517 cised a concurrent jurisdiction with the Courts of Law in matters of account in aid of legal claims. The law as to accounts and receivers specifically relating to the two subjects which are most important in an elementary treatise on equity — trusts and mortgages — have already been dealt with. "What follows is merely a statement of the general principles affecting these two remedies independently of the subject-matter to which they relate. Cases in which accounts are ordered in aid of legal rights. — Shortly, it may be stated that accounts will be ordered in aid of legal rights (1) where there are " mutual accounts " between the parties, i.e., not merely where one of two parties has received money and paid it on account of the other, but where each of two parties has received and paid on the other's account (see Phillips v. Phillips (1852), 9 Hare, 471, at p. 473) ; (2) where the accounts are of so complicated a nature as to be incapable of proper adjustment in an action at law (see Taff Vale Bailway Company v. Nixon (1847), 1 H. L. C. Ill) ; (3) where a fiduciary relation exists between the parties as in cases of executorship, administration, partnership, and as between principal and agent or principal and factor, but not as between banker and customer which does not involve relation of a fiduciary character (see Foley v. Hill (1848), 2 H. L. C. 28) ; (4) in cases of fraud in which the plaintiff has been prevented from enforcing a legal right by the conduct of the defendant (see Mcintosh v. Great Western Bailway (1850), 2 Mac. & G. 74) ; (5) as ancillary to injunctions for the protection of legal rights, as in cases of infringement of copyright, patents, trade marks, etc., in which, as we have seen, accounts of the profits accruing from the illegal acts are frequently ordered. Accounts based on equitable and legal claims distin- guished. — The distinction between the cases of accounts arising out of equitable claims {e.g., in trusts, redemption, or equitable waste) and accounts arising out of legal claims is still of practical importance with regard to the rules affecting : 518 A Digest of Equity. (1) The effect of lapse of time upon the claim. — The right to an account based upon an equitable claim may be barred by laches or acquiescence on the part of the defendant ; in the case of a legal claim the right to an account is barred only by such lapse of time as would have barred the legal remedy. But see In re Bichardson, [1919] 2 Ch. 50. (2) The liability of personal representatives. — In the case of equitable claims the personal representatives of the party liable (e.g., trustee, mortgagee, or a person who has committed equitable waste) are themselves liable to account. In the case of legal claims the maxim Actio personalis moritur cum persona applies, unless the estate of the delinquent has been enriched by property, or the proceeds thereof, belonging to another, in which case the amount to the extent of which the estate has been so enriched is recoverable from the personal representa- tives (see Phillips v. Homfray (1883), 24 Ch. D. 439 ; see also In re Duncan, [1899] 1 Ch. 387, at p. 391). (3) The allowance of interest. — Interest upon moneys which have or ought to have been received by the defen- dant is allowed upon the taking of accounts in cases of purely equitable demands. So a trustee in an action by a cestui que trust for misapplication of trust funds, a mortgagor in a redemption action, or a defendant who has received proceeds of equitable waste, is usually charged with interest. But in accounts based upon legal claims only such interest is allowable as would have been allowed at law, and in such cases, therefore, interest is generally only allowable when it is due under an express contract or under a contract implied from the course of dealing or mercantile usage, or under sects. 28 and 29 of the Civil Procedure Act, 1833 (see London, Chatham and Dover Railway Company v. South Eastern Bailway Company, [1893] A. C. 429). This difference in the rules applicable to accounts arising out of equitable and legal claims is attributable to the principle that in dealing with legal claims the Court of Chancery followed the rules of law, whereas Accounts : Jurisdiction. 519 in purely equitable claims the court granted such relief as the nature of the case demanded in order to secure complete justice and avoid multiplicity of litigation. Four classes of cases in which, prior to the Judicature Acts, a suit for an account could have been maintained in equity have been judicially pointed out (see London, Chatham and Dover Railway Company v. South Eastern Bailway Company, [1892] 1 Oh. 120, at p. 140, per LiNDLEY, L.J.). (1) Where the plaintiff had a legal right to have money payable to him ascertained and paid, but which right, owing to defective legal machinery, he could not prac- tically enforce at law. Suits for an account between principal and agent, and between partners, are familiar instances of this class of case. (2) Where the plaintiff would have had a legal right to have money ascertained and paid to him by the defendant if the defendant had not wrongfully prevented such right from accruing to the plaintiff. In such a case a court of law could only give unliquidated damages for the defen- dant's wrongful act, and there was often no machinery for satisfactorily ascertaining what would have been due and payable if the defendant had acted properly. A Court of Equity, however, in such a case decreed an account, ascer- tained what would have been payable if the defendant had acted as he ought to have done, and ordered him to pay the amount. Mcintosh v. Great Western Bailway Com- pany (1850), 2 Mac. & G. 74, is the leading authority upon this class of case. (3) Where the plaintiff had no legal but only equitable rights against the defendant, and where an account was necessary to give effect to those equitable rights. Ordinary suits by cestuis que trust against their trustees and suits for equitable waste fell within this class. (4) Combination of the above cases. The jurisdiction in equity in suits for accounts was based, therefore, either upon the absence of any legal remedy or the incomplete- ness of the remedy by action at law. 520 A Digest of Equity. Actions for Accounts. — As we have already seen, all causes for the purpose of taking partnership or other accounts were expressly assigned to the Chancery Division by sect. 34 (3) of the Judicature Act, 1873. Since this enactment, therefore, there being no suitable machinery for the taking of lengthy or complicated accounts in the King's Bench Division, otherwise than by reference to a special or official referee, all actions involving such accounts, which previously would have been maintainable in Chancery, should be commenced by writ in the Chancery Division (see Leslie v. Clifford (1884), 50 L. T. 590). An action for an account in the Chancery Division is an action for the balance found to be due after taking the account (see Manners v. Pearson and Son, [1898] 1 Ch. 581). But cases not involving the taking of an account, in which an action at law would have been the proper remedy, as for instance actions for debt or a balance due, or for liquidated damages, or mere cases of set-off or cross-demands, may be assigned to any division of the High Court, including the Chancery Division. In all cases in which the plaintiff in the first instance desires to have an account taken, the writ of summons must be indorsed with a claim that such account be taken (E. S. C. 1883, Order 3, rule 8). Where a writ of sum- mons has been so indorsed for an account, or where the indorsement on a writ of summons involves taking an account, if the defendant either fails to appear, or does not after appearance by affidavit or otherwise satisfy the court that there is some preliminary question to be tried, an order for the proper accounts, with all necessary inquiries and directions now usual in the Chancery Division in similar cases, will be forthwith made (see Order 15, rule 1). It should also be observed that under Order 33, rule 2, the court or a judge may at any stage of the proceedings in a cause or matter direct any necessary inquiries or accounts to be made or taken, although there is some special or further relief sought for, or some special issue to be tried, as to which it may be proper that the cause or matter should proceed in the ordinary manner. Accounts : Jurisdiction. 521 This rule, however, merely authorises the court to direct before trial accounts or inquiries which would otherwise have been directed at the trial (see Garnham v. Skipper (1885), 29 Ch. D. 566). Accounts are taken at judges' chambers, and must be verified by affidavit, and must be taken and vouched in the mode prescribed by Order 33, rules 4-9. Where an account cannot be taken in the ordinary way, as, for instance, where vouchers have been lost, special directions may be given as to the mode of taking the account, and, in particular, the court may direct that the books of account shall be taken as prima facie evidence of the truth of the matters therein contained {ibid., rule 3). In taking accounts, all "just allowances" are to be made without any direction for that purpose {ibid., rule 8). See, further, as to the prosecution in chambers of a judg- ment, or order directing accounts, Order 55, rules 28-64. We have already said all that is necessary as to accounts between trustees and cestuis que trust, mort- gagees and mortgagors and partners. What we will deal with now concerns merely administration generally. Article 196. Ordering Accounts. (1) In the absence of fraud the court will order an account ab initio only where the party bound to account has delivered no account or has delivered an account which the other party has not either expressly or by acquiescence accepted. In such cases the matter is said to be one of an open account. (2) Where an account has been delivered by the party bound to account and it has been accepted expressly or by acquiescence the matter is said to be one of an account stated and when the other party has accepted payment 522 A Digest of Equity. of the balance shown to be due on the account delivered by the party bound to account the matter is said to be one of an account settled. (3) When an account is open the court has a free hand as to how far it should be re-taken by the master. When it is stated or settled the court will not order a new account to be taken except fraud is proved (this is called re-opening the account); but on proof of serious errors on the part of the accounting party will order that the other party shall have liberty to prove that certain items contained in the account rendered should be deleted or that certain items not contained in the account should be so contained therein and charged against the accounting party. This is called surcharging and falsifying. Stated and settled accounts are to be distinguished from open accounts. An account stated or settled is regarded as an account impliedly or expressly agreed between the parties. Whether an account is a settled account depends on the circumstances of the particular case, and the mode of dealing of the parties, but generally when there is evidence that the parties have treated an account as settled the court will regard it as a settled account. So an account which has been delivered by one party to the other, who does not raise any objection to it within a reasonable time, is a settled account (see Willis V. Jernegan (1741), 2 Atk. 251). The fact that there has been a stated or settled account as a rule constitutes a defence to a claim for an account. The order in an action for an account usually directs that settled accounts are not to be disturbed, and gives leave to " surcharge and falsify." And even though these direc- tions are not contained in the order for an account, the accounting party is entitled to set up settled accounts (see Holgate v. Shutt (1884), 28 Ch. D. 111). In an action for an account the plaintiff may " surcharge," that is, prove that an item has been omitted from the defendant's Accounts : Wilful Default. 523 account, for which credit ought to have been given, or " falsify," that is, prove that an item has been erroneously or fraudulently inserted in the account. In the absence of fraud a settled account will not generally be allowed to be reopened. Thus, if a settled account be impeached, and a single important error be established, the court will not order the whole account to be reopened, except in the case of fraud, but will merely give the plaintiff liberty to surcharge and falsify (see GetUng v. Keighley (1878), 9 Ch. D. 547). On the other hand, on proof of fraud a settled account may be reopened. So accounts containing errors considerable in number and amount, whether caused by fraud or even mistake, may be ordered to be reopened (see Williamson v. Barbour (1877), 9 Ch. D. 529). As to the reopening of a closed account in a money-lending transaction under the Money- lenders Act, 1900, see Saunders v. Newbold, [1905] 1 Ch. 260. Article 197. Wilful Default. An account is generally limited to items which have been actually received or paid by the party directed to account, but an account may, in a proper case, be ordered to be taken on the footing of wilful default, that is to say, that the accounting party may in addition be required to account for such moneys as would have been received but for his wilful neglect or default. An administrator, executor, or trustee, may, for in- stance, where the circumstances so justify, be charged with wilful neglect or default in not getting in moneys due whereby assets are lost to the estate. It is to be observed that such neglect or default may be wilful even though it may have been quite unintentional and have arisen from mere forgetfulness (see Elliott v. Turner (1843), 13 Sim. 477). 624 A Digest of Equity. When it is sought to charge an executor, or trustee, or other accounting party, with loss attributable to his wilful default or breach of duty, there must be some prima facie evidence of such breach of duty before any declaration of liability, or even an inquiry as to liability, based upon such supposed breach of duty, will be inserted in the judgment (see In re Stevens, [1898] 1 Ch. 162, at p. 168, 'per Lindley, M.E.). The omission of executors or trustees to press for payment of trust funds or, if not paid within a reasonable time, to enforce payment by prompt legal proceedings, would usually amount to such a breach of duty (see In re Brogden (1888) 38 Ch. D. 546 ; see, however, sect. 22, T. Act, 1925). Where wilful default is alleged on the pleadings, and evidence of it is adduced, under the modern practice, an account on the footing of wilful default may be directed either at the hearing, or trial, or at any subsequent stage of the proceedings (In re Symons (1882), 21 Ch. D. 757). In the course of an ordinary administration action a case of wilful default, even though not alleged on the pleadings, may by leave of the court be raised at any time during the action, but allegations of wilful default or fraud are usually disposed of at the hearing (see Smith v. Armitage (1882), 24 Ch. D. 727). A plaintiff charging wilful default must prove not only a loss but also that it was attributable to the default of the accounting party (see In re Brier (1884), 26 Ch. D. 238). In an administration action when wilful default is alleged on the pleadings and one instance of it is proved, an account on the footing of wilful default will be directed, but this rule does not apply to an active breach of trust {In re Wrightson, [1908] 1 Ch. 789 ; Stra. Lead. Cas. 175). It is in practice important to recollect that in all cases in which wilful default, breach of trust, or fraud is charged, particulars, with dates and items if necessary, must be stated in the pleading (see Order 19, rule 6). Afpointment of Beceivers. 525 Article 198. Receivers and Managers. A receiver may be appointed as receiver and manager to carry on. a business, but unless expressly appointed as manager a receiver as such has no powers of management. A receiver is, for present purposes, an iadividual, frequently an accountant, sometimes the liquidator of a company, appointed by the court for the benefit of all the creditors in certain cases, especially in actions by debenture-holders or mortgagees. (As to the ap- pointment of receivers by mortgagees by deed, see supra, Article 132.) The chief duties of a receiver are to take possession of the estate or property, and to collect and to receive the rents or profits of land or the income of any property or of a business or undertaking, and generally to get in out- standing assets, and also, if the order appointing him so directs, to pay or discharge ascertained debts or liabilities and take proper receipts therefor. A receiver appointed by the court is a person in a fiduciary relation, and will not, therefore, be allowed to buy any property of which he is receiver unless he obtain the leave of the court (see Nugent v. Nugent, [1908] 1 Ch. 546). The person appointed receiver is regarded as an officer of the court as from the date of his appointment. His possession is the possession of the court, and any inter- ference by any third party with such possession will be restrained by injunction and involves liability to com- mittal for contempt of court (see Dixon v. Dixon, [1904] 1 Ch. 161). Any party, therefore, who claims a right or title paramount to that of the party who has obtained the appointment of a receiver ought to make an application to the court before taking legal pro- ceedings affectiog the possession for leave to do so, 626 A Digest of Equity. notwithstanding the possession of the receiver (see, for example, Ex parte Cochrane (1875), L. E. 20 Eq. 282). A receiver is entitled to be indemnified out of the estate against all loss incurred in the proper discharge of his duty (see Davy v. Scarth, [1906] 1 Ch. 55), and he is entitled to priority in respect of his costs, charges, and expenses properly incurred {In re Glasdir Copper Mines, [1906] 1 Ch. 365). Before defending an action, however, he must obtain the sanction of the court, other- wise he will not be entitled to an indemnity in respect of costs so incurred (see In re Dunn, [1904] 1 Ch. 648). So, also, he should as a rule obtain the leave of the court before borrowing money or incurring liabilities for the purposes of a business {In re British Power, etc.. Company, [1907] 1 Ch. 528). When a receiver is appointed, as is often the case, for the assets of a business which it is intended to wind up, he has, as receiver, no power whatever to carry on or manage the business. In such a case his functions are merely to receive rents and profits and get in debts, and the actual business itself must cease on his appointment. The court, however, may, in its direction, appoint a person to be not only receiver, but also manager, of a business which is a going concern. In practice a receiver and manager is frequently appointed to a business, whether carried on by an individual, a partnership, or a company, in order to preserve the assets and goodwill, wind up the business or undertaking, and sell it as a going concern {In re Joshua Stuhbs, [1891] 1 Ch. 475). When such an appointment is made, the receiver and manager has power to carry into effect existing contracts, and enter into new contracts, such as contracts for sale and purchase, which may be necessary for the general conduct of the business in the way in which it is usually carried on. On the other hand, he has no power to speculate with the business (see Taylor v. iVeaie (1888), 39 Ch. D. 538). Appointment of Beceivers. 527 The court appoints a manager of a business, as dis- tinguished from a mere receiver, only with a view to a sale or realisation, for the court will not assume the permanent management of a business or undertaking (see Gardner v. London, Chatham and Dover Bailway Company (1867), L. E. 2 Ch. 201, at p. 212). Hence if a mortgagee obtains the appointment of a receiver over property on which the mortgagor carries on business, the receiver will not be appointed as manager of the business imless the business or goodwill is expressly or by implication charged or included in the security (see Whitley v. Challis, [1892] 1 Ch. 64). In a debenture-holder's action — that is, an action by debenture-holders of a company to enforce their security ■ — a person may be appointed not only receiver of the property of the company, but also manager of its business and undertaking, for a limited period, when the security is in jeopardy owing to the insolvency of the company, even though the security has not " crystallised" by the debenture debt having become actually due (In re London Pressed Hinge Company, [1905] 1 Ch. 576). The court, however, will not appoint a manager, as distinguished from a receiver, in the case of a company incorporated with statutory powers for the purpose of carrying on a business or undertaking of a public character or for public purposes, such as a tramway or waterworks company {Marshall v. South Staffordshire Tramways Company, [1895] 2 Ch. 36), though a creditor who has recovered judgment against a railway company can, under sect. 4 of the EaUway Companies Act, 1867, if necessary, obtain the appointment of a manager of the undertaking {In re Liskeard and Caradon Railway Company, [1903] 2 Ch. 681). 528 A Digest of Equity. Abticle 199. Jurisdiction to Appoint Receiver. The court has a discretionary power to make an order for the appointment of a receiver in all cases in which it appears to the court to be just or convenient that such an order should be made. The jurisdiction to appoint a receiver is regulated by the Judicature Act, 1873, sect. 25 (8) (re-enacted sect. 45 Jud. Act, 1925), which provides that a receiver may be appointed by an interlocutory order of the court in all cases in which it shall appear to the court to be just or convenient that such order should be made, and any such order may be made either unconditionally or upon such terms and conditions as the court shall think just. The words of the statute are enabling and not obligatory, hence the appointment of a receiver is a matter of dis- cretion in each case, and cannot be claimed as of right. So, though a receiver may be appointed at the instance of a legal mortgagee, he has no absolute right to a receiver, and if he has once taken possession of the mortgaged property, and assumed the consequent respon- sibilities, the court will not appoint a receiver to enable him to relinquish the position and liabilities of a mortgagee in possession (see In re Prytherch (1889), 42 Ch. D. 690). In the same way, the appointment of a receiver at the instance of an equitable incumbrancer with a view to the protection of the security, though nothiag may be immediately payable, is also a matter of discretion. Thus, the holder of a debenture creating a floating charge upon the property of a company may, when the security is in jeopardy, obtain the appointment of a receiver though there has been no default in payment {In re London Pressed Hinge Company, [1905] 1 Ch. 576). In such a case the real question to be considered is whether, as between the company and the debenture-holder, it is just Afpointment of Receivers. 529 and convenient that the company's authority to dispose of its assets in the ordinary course of business should be stopped, and it is reasonable, as between those parties, that the authority should be stopped if its continuance would injure the debenture- holder. A legal mortgagee may take possession simply because he chooses, and in so doing accepts the responsibility of a mortgagee in possession. But an equitable mortgagee must show good reason why the court should at his instance take possession by its receiver, and danger to the security by anticipated acts of an execution creditor is good reason {In re London Pressed Hinge Company, [1905] 1 Ch. 576, at pp. 582, 583). Section 25 (8) of the Judicature Act, 1873 (now sect. 45 Jud. Act, 1925) enabling the court to appoint a receiver whenever just and convenient, has enlarged the power of the court by enabhng it to appoint receivers in cases in which previously to the Act it used not to do so (see Cummins v. Perkins, [1899] 1 Ch. 16, at p. 20, per Lindley, M.E.). The principles upon which the jurisdiction of the Court of Chancery to appoint receivers was based have not, however, been altered by the Act. The court, therefore, will not appoint a receiver by way of equitable execution in any case in which before the Act it would not have had jurisdiction to do so. " We cannot," said Chitty, L.J., " judicially hold the appointment of a receiver in a case in which no court could grant a receiver before the Act to be ' just or convenient,' within the true meaning of the Judi- cature Act, 1878, sect. 25 (8) " {Holmes v. Millage, [1893] 1 Q. B. 551, at p. 558). It follows that there is no jurisdiction to appoint a receiver at the instance of a judgment creditor by way of equitable execution in any case in which prior to the Act no court would have had jurisdiction, merely because the appointment of a receiver would be of more convenience in the particular circumstances than the ordinary modes of legal execution (see Harris v. Beauchamp Brothers, [1894] 1 Q. B. 801). The court has jurisdiction to appoint a receiver of pro- perty situate out of the jurisdiction (see In re Maudslay, Sons and Field, [1900] 1 Ch. 602). D.B. 2m 530 A Digest of Equity. Article 200. Objects of Appointment. A receiver is in general appointed — (1) With a view to the protection of the property, and especially with the view of preserving property pending the decision of litigation regarding it ; or (2) By way of equitable execution where legal execution is in the circumstances not available or is difficult of attain- ment. Paragraph (1). The court has a discretionary jurisdiction to appoint receivers for the protection of property from the im- proper acts of persons who have the legal, but no, or only partial, beneficial interests therein. Where, for example, the estate of an infant is likely to be seriously prejudiced by the acts of the infant's guardian or parent a receiver may be appointed (see Duke of Beaufort v. Berty (1721), 1 P. W. 703, at p. 705). Property in the possession of trustees or executors may when necessary be protected by the appointment of a receiver, though the court will not upon slight grounds interfere with the possession of the persons in whom the legal estate is vested. A receiver may be appointed to an estate in the hands of a trustee or executor in a case of necessity, where there is danger to the estate owing to improper management, breach of trust, or other mis- conduct, as where an executor neglects to get in the personal estate or leaves it outstanding in improper securities ; so also in the case of the bankruptcy of a sole trustee or executor, and, generally, where it can be proved that the assets are in danger. But unless the assets are being wasted, a receiver will not be appointed so as to prevent an executor from exercising his right of retainer {In re Stevens, [1898] 1 Ch. 162, at p. 173). Affointment of Receivers. 531 On a dissolution of partnership in a proper case a receiver of the partnership business may be appointed on the application of one partner as against his co-partners {Davy V. Scarth, [1906] 1 Oh. 55). The protection of property which was the subject- matter of litigation was the basis of the early jurisdiction. The Court of Chancery appointed a receiver upon the principle of preserving property pending litigation which was to decide the right of the litigant parties. In such cases the court of necessity exercised a discretion as to whether it would or would not take possession of the property by its officer, and no positive unvarying rule could be laid down as to whether the court would or would not interfere by that kind of interim protection of the property. In all cases, therefore, where the court interfered by appointing a receiver of property in the possession of a defendant before the title of the defen- dant was established by decree, it exercised a discretion governed by all the circumstances of the case (see Owen v. Homan (1853), 4 L. H. C. 997, at pp. 1032, 1088). Since the Judicature Act the same principles are applied, and in a case of sufficient urgency the court will appoint a receiver for the protection of property which is the subject of litigation. For instance, when there is an action pending for the recovery of possession of land there is jurisdiction to appoint a receiver where the plaintiff is seeking to recover the land by a legal title and the defendant is in possession, but in exercising its dis- cretion the court will have regard to all the circumstances of the case (see Foxwell v. Van Grutten, [1897] 1 Ch. 64 ; John V. John, [1898] 2 Ch. 578). So where the tenant of a publichouse in breach of his agreement of tenancy closed and left the premises, thereby jeopardising the licences, in an action by the landlords for the recovery of possession, a receiver of the licences and of the rents and profits was appointed pending the litigation and given possession of the premises so far as was necessary for the preservation of the licences (Charrington v. Camp, [1902] 1 Ch. 386). In an appropriate case it is possible to . obtain the 532 A Digest of Equity. appointment of a receiver pending litigation regarding probate or administration, or, when necessary, to protect an estate before an administrator is appointed. The appointment of a receiver as between mortgagor and mortgagee is a form of equitable remedy in frequent use, and is of especial importance in actions by debenture- holders for the realisation of their security. As we have already seen, since the Judicature Act, 1873, a receiver may be appointed at the instance of a legal, as well as of an equitable mortgagee, including a debenture-holder. The winding up of a company does not prevent the debenture-holders from realising their security and obtaining the appointment of a receiver or manager, though it may influence the selection of the person appointed to act in such capacity. Generally when a company is in course of being wound up by the court, and an application for a receiver is made in a debenture- holder's action, the same person is appointed to act as liquidator and also as receiver (see In re Stubbs, [1891] 1 Ch. 475), but a receiver previously appointed by the debenture-holders under power given by their security will not usually be displaced by the liquidator, unless the assets are such that they can be more conveniently dealt with by the liquidator (ibid. ; see also British Linen Com- pany V. South American and Mexican Company, [1894] 1 Ch. 108). Under the Companies (Consolidation) Act, 1908, sect. 162, where an application is made to the court to appoint a receiver on behalf of the debenture- holders of a company the Official Eeceiver may be so appointed. Paragraph (2). Receivers are frequently appointed at the instance of judgment creditors in order to obtain satisfaction of their judgments against their debtors, or, as it is usually termed, by way of " equitable execution." In cases where the circumstances render the ordinary forms of legal execution impossible, as where a judgment Equitable Executions. 533 debtor has merely an equitable interest in property, such as an equitable reversionary interest, which from its nature is not available in legal execution, a receiver may be appointed, whereby the judgment creditor will obtain the benefit of the judgment which could not have been enforced at law {Tijrrell v. Painton, [1895] 1 Q. B. 202). In other words, when by reason of a judgment debtor having only an equitable interest there is a legal im- pediment to the creditor's remedy at law, he is entitled to come to a Court of Equity, which will give him precisely the same remedy in equity as he would have obtained at law if the debtor's interest had been legal instead of equitable (see Cadogan v. Lyric Theatre, Limited, [1894] 3 Ch. BBS, at p. 344, per Davey, L.J.)- A receiver may be appointed where an impediment exists to ordinary execution, as where the judgment debtor is outside the jurisdiction (see Goldschmidt v. Oberrheinische Metallwerke, [1906] 1 K. B. 373). It should be observed that though the appointment of a receiver is commonly known as " equitable execution" it is not strictly execution. The term " equitable execu- tion " is misleading. It has often been used by judges, and occurs in some orders as a short expression indicating that the person who obtains the order gets the same benefit as he would have got from legal execution. But what he gets by the appointment of a receiver is not execution, but equitable relief, which is granted on the ground that there is no remedy by execution at law ; it is a taking out of the way a hindrance which prevents execution at common law (see In re Shephard (1889), 43 Ch. D. 131, at p. 135, per Cotton, L.J.). A receiver was appointed by the Court of Chancery in aid of a judg- ment at law, when the plaintiff showed that he had sued out the proper writ of execution, and was met by certain difficulties arising from the nature of the property, which prevented his obtaining possession at law, and in these circumstances only did the Court of Chancery interfere in aid of a legal judgment for a legal debt. Eelief by the 534 A Digest of Equity. appointment of a receiver went on the ground that execu- tion could not be had, and, therefore, it was not execution {ibid., at p. 138, per Fry, L.J.). The appointment of a receiver by way of equitable execution operates as an injunction to restrain the judg- ment debtor from himself receiving the moneys in respect of which the receiver is appointed (see Tyrrell v. Painton, [1895] 1 Q. B., at p. 206 ; see also Lloyd's Bank v. Medway Upper Navigation Company, [1905] 2 K. B. 359). It has the effect of preventing the debtor from dealing with the moneys to the prejudice of the judgment creditor, and it also prevents any subsequent judgment creditor from gaining priority over the creditor ohtaining the order, if at the date when obtained the property of the judgment debtor cannot be taken in execution, or made available by any other legal process (see In re Marquis of Anglesey, [1903] 2 Ch. 727, at p. 731, per Swinfen Bady, J.). It must, however, be remembered that a receiver cannot be appointed by way of equitable execution in cases in which, before the Judicature Act, 1873, there would have been no jurisdiction. When there is no legal impediment to obtaining the execution of a judgment in the ordinary course of law in the absence of special circumstances a receiver will not be appointed (see Manchester, etc. Banking Company v. Parkinson (1888), 22 Q. B. D. 173). If, therefore, legal execution be possible, the equitable remedy by receiver will not be granted merely because it would afford a convenient mode of satisfying the judgment, unless indeed by reason of the conduct of the judgment debtor legal execution is extremely difficult to effect (see Harris v. Beauchamp Brothers, [1894] 1 Q. B. 801). Nor could a receiver be appointed in respect of any pro- perty or interest, such as the future earnings of a judgment debtor, which was not formerly available either in legal or equitable execution {Ridout v. Fowler, [1904] 1 Ch. 658 ; [1904] 2 Ch. 93). So in Cadogan v. Lyric Theatre, Limited, [1894] 3 Ch. 338, the court refused to appoint a receiver by way of equitable execution to receive the Mode of Ap'pointing Beceiver. 535 future profits of the business of the defendant company, such as moneys paid by the public for entrance to a theatre, though a receiver was appointed of the rents and profits of the company's lands by way of equitable execution without prejudice to the rights of any prior incumbrancers. Under sect. 23 of the Partnership Act, 1890, on the application by summons of any judgment creditor of a partner, the court may make an order charging that partner's interest in the partnership property and profits with payment of the amount of the judgment debt and ■interest thereon, and may by the same, or a subsequent order, appoint a receiver of that partner's share of profits, whether already declared or accruing, and of any other money which may be coming to him in respect of the partnership (see also Order 46, rules 1a and 1b). Order 50, rule 15a, provides that in every case in which an application is made for the appointment of a receiver by way of equitable execution, the court or a judge, in determining whether it is just or convenient that such appointment should be made, shall have regard to the amount of the debt claimed by the applicant, to the amount which may probably be obtained by the receiver, and to the probable costs of his appointment, and may, if they or he shall so think fit, direct any inquiries on these or other matters before making the appointment. Article 201. How Appointed. An order for the appointment of a receiver is made by the court either upon interlocutory application or at the trial of an action. The apph cation is usually made by motion, but in some special cases may be made by summons. 686 A Digest of Equity. In proceedings commenced by originating summons a receiver may be appointed on appli- cation either in court or at chambers, at any time after service of the summons. In cases of urgency an order for the appoint- ment of a receiver may be made ex parte. The jurisdiction to appoint a receiver by an inter- locutory order is expressly asserted by sect. 25 (8) of the Judicature Act, 1873. The court has the same power with regard to the appointment of a receiver at the trial of an action as it would have upon an inter- locutory application (In re Prytherch (1889), 42 Ch. D. 590). The appointment of a receiver in the course of an action is obtained on application to the court by motion. In certain cases, however, as where the parties consent to the appointment, or where a receiver previously appointed is dead, or, for other reasons, there is a vacancy in the office, the application may be by sum- mons at chambers. In the case of proceedings by originating summons, e.g., for administration, or foreclosure, a receiver may be appointed at any time after the service of the summons, either on application by motion in court, or by summons at chambers (see Order 55, rule 5a ; In re Francke (1888), 58 L. T. 305). The appointment of a receiver by way of equitable execution may be made upon an ex parte application when the circumstances are exceptional and the case is urgent (see Minter v. Kent, etc. Land Society (1895), 72 L. T. 186), but where there is no actual danger to the property such an order will not be made ex parte {In re Potts, [1893] 1 Q. B. 648). Unless otherwise ordered security by recognisance must be given by the person to be appointed receiver, duly to Mode of A'ppointing Beceiver. 537 account for what he shall receive as such receiver, and to pay the same as the court shall direct, and unless otherwise ordered he is to be allowed a proper salary or allowance (see Order 50, rule 16). When the appoint- ment of a receiver at the instance of a judgment creditor is conditional upon giving secujity it does not effectually operate by way of equitable execution upon the personal (as distinguished from the real) estate of the judgment debtor until the receiver has given security, and unless he has completed his title by so doing he cannot compel pay- ment of the money (see Bidout v. Fowler, [1904] 1 Ch. 658, affirmed by the Court of Appeal, [1904] 2 Ch. 93). On the other hand, the appointment of a receiver of the rents of land at the instance of a judgment creditor, though conditional upon his giving security, operates as an immediate delivery of the land in execution (see Ex parte Evans (1879), 13 Ch. D. 252), the appointment of a receiver by way of equitable execution being now obtain- able by a judgment creditor against the debtor's equitable interest in land, • without commencing a new action or issuing a writ of elegit, as was formerly necessary (ibid. ; see also Salt v. Cooper (1880), 16 Ch. D. 544). As tb the procedure with regard to the passing of accounts by a receiver and the payment of balances due on accounts, see Order 50, rules 18-22. ( 538 ) Section II. Administration of Assets. CHAPTEE 1. Assets. SUMMARY. PAGE Aeticle 202. Meanings of " assets " and of " administration " 538 ,, 203. Assets and their devolution - 539 „ 204. Assets of a person having a foreign domicile 544 Article 202. Meanings of "Assets " and of* " Administration." For present purposes by assets is meant all the estate of a deceased person which is liable for the payment of his debts. By administration of assets is meant the ap- plication of such assets to the payment of the deceased person's funeral and testamentary expenses and debts, and the transfer of the balance to the persons by law entitled to it. The term " assets," which is derived from the French assez, enough, is appHed also to the effects of an insolvent person or company which are available for the payment of his or its debts. " Assets " and " Administration." 639 Donationes mortis causa are also liable for the deceased's debts on his assets proving insufficient for the payment of his debts in full. (See Article 224.) But they cannot themselves be called assets, since they operate not from the deceased's death but from his delivery of them to the donees {Solicitor to the Treasury v. Lends, [1900] 2 Ch. 812). Thus at his death they form no part of the deceased's estate, and are only made liable for his debts for the purpose of preventing frauds on creditors. Article 203. Assets and their Devolution. (1) Under the old law all property which be- longed beneficially to the deceased person at his death or in which he had a beneficial interest not determining with his life or over which he had a general power of appointment which he exercised by his will, were assets after his death, subject to this proviso, that an estate in fee tail was after the tenant in tail's death regarded as an interest in property determining with his life, except as to specialty debts due to the Crown and as to judgment debts which had during the tenant's life been made charges on his estate. [(2) Under the new law estates tail may he disposed of by will and when so disposed of they are assets for the payment of the tenant in taiVs debts, just as if they were property over which he had a power of appointment which he executed by his will. When not disposed of by will the old law applies. [(3) Under the new law all a deceased person's property which is liable for the payment of his 540 A Digest of Equity. debts devolves on his death on his personal representatives. These are if he dies leaving a will the persons appointed by the will to ad- minister his estate, called his executors, and if he dies without appointing any such persons, the persons appointed by the court to administer his estate, called his administrators. In the case of intestacy his estate real and personal devolves on the Probate Judge till an administrator is appointed.] Paragraph (1). At common law a deceased person's personalty was at all times liable for his debts, and his personalty of course included his leaseholds. The liability of his pure realty was, however, partial and limited. In the first place, his estates pur autre vie seem not to have been liable at all. If there was a special occupant, he, on the tenant's death, took them absolutely ; if there was none, then, on the tenant's death, they became res nullius until they were seised by a general occupant. In both cases the occupant took by a new title, and was not and could not be made liable for the deceased tenant's debts. This was altered by the Statute of Frauds, 1677, which made estates pur autre vie devisable, and enacted that if there was no devise and they went to the heir as special occupant, they were to be assets by descent to the same extent as if they were fees simple, and if there were no special occupant they should go to the executors or administrators of the deceased tenant and be assets in their hands (sect. 12). This enactment was amended by sect. 9 of 14 Geo. 2, c. 20, which declared that where the estates went to the executors and administrators they were to administer them as if they were personalty. Both these enactments are repealed and re-enacted and extended to estates pur autre vie in copyholds and incor- poreal hereditaments by sects. 2, 3 and 6 of the Wills Act, 1837. Administration of Assets. 541 Fee simple estates were liable to the owner's debts to the Crown and judgments recovered against him which were incumbrances on the land. They were also liable for the other debts of the deceased owner where these were secured by deed in which the owner's heirs were bound — • that is, the heir was liable personally for such debts to the value of the land which came to him as heir. This liability did not attach where the fee simple was equitable, and it could be defeated by the debtor devising his land away from the heir. It was extended to equitable fees simple by sect. 10 of the Statute of Frauds, and to a devisee by the Statute of Fraudulent Devises, 1830. Finally, by 3 & 4 Will. 4, c. 104, all real estate, whether copyhold or freehold, and whether corporeal or incorporeal, not devised for or charged with the payment of debts, was made assets in the hands of the heir or devisee of its late owner, to be administered in Courts of Equity for the payment of his just debts by simple contract as well as by specialty, but debts by specialty in which the heir was bound were to retain priority over debts by specialty in which the heir was not bound and simple contract debts. Though the words of the Act are all the deceased's " real estate," yet they did not include his estates in fee tail. These were liable for all specialty debts due by him to the Crown (33 Hen. 8, c. 89, sect. 75) and for his judgment debts, but only for the latter when they had actually been made charges on the land during his life (Land Charges Acts, 1888 and 1900). Property over which a person has a general power of appointment— that is, a power to appoint to any one, including himself — is not strictly such person's property, but it is treated in many respects as if it were (see Stra. Property, Part III., S. III. (4) ). Thus when a testator exercised by his will a general power of appointment, equity treated this as having the effect of making the property so appointed the testator's own, and so assets for the payment of his debts ; and even where without expressly exercising such power he attaches to his will a residuary gift (see 542 A Digest of Equity. Under, and Stra. Inter, of Wills, p. 147), or even gives legacies which after payment of his debts his estate is in- sufficient to satisfy (In re Seabrook, Gray v. Baddeley, [1911] 1 Ch. 151), this will be held to be an execution of the power as to the whole property included in the general power, or as to so much of it as is necessary to enable the legacies to be satisfied, as the case may be. Since the Land Transfer Act, 1897, realty so appointed vests in the testator's executors. But if the deceased does not by his will exercise the general power of appointment, the property over which it subsisted belongs to the persons who are to take in default of appointment, and does not form any part of the deceased's assets (Holmes v. Coghill (1806), 7 Ves. 498 ; Vaughan v. Vanderstegen (1854), 2 Drew. 363). Paragraph (2). [Under sect. 32 of the Ad. of E. Act, 1925, notwithstanding any disposition made by the will of the owner all the real and 'personal property of a deceased person dying testate or intestate including property over which he had a general power of appointment (including property in which he had an estate tail) which he exercised by his will, is assets in the hands of the personal representatives for the payment of his debts simple and special. If, however, whether by devolution or by gift property vests in any other person if such person alienates to a bond fide buyer such property the buyer takes a good title to it and the person selling it is liable for its value.] Paragraph (3). The state of the law as set out in the above paragraph has only been arrived at by many steps and com- paratively recently. By the common law all the assets which devolved upon an executor or administrator were the deceased's per- sonalty. Then by sect. 12 of the Statute of Frauds, 1 677, estates pur autre vie in freeholds were, in case they had not been devised and where there was no special occupant, to vest in the deceased tenant's executors Administration of Assets. 543 or administrators, but if there was a special occupant they were to be assets by descent in his hands. This enactment was repealed and re-enacted and extended by the Wills Act. These are still called legal assets. The 3 & 4 Will. 4, c. 104, which made all real estate liable for all the debts of deceased, left its devolution to the heir or devisee untouched. The only way in which a creditor not by specialty in which the heir was bound could make it liable in fact was by an administration action {In re Illidge, Davidson v. Illidge (1884), 27 Ch. D. 478). It would seem, however, that a creditor by specialty in which the heir was bound could sue the heir or devisee in debt after, just as he isould before, that Act {In re Illidge; David- son V. Illidge, swpra). There seems no reason yet why he should not do so if the executor or administrator transferred the real estate without paying the creditor's debt. Then by the Land Transfer Act, 1897, the real estate of a deceased person and real estate appointed by him devolved on his executor or administrator. The Act, however, did not extend to legal estates in copyholds (sect. 1), but it did extend to equitable estates in them {Re Somerville and Turner's Contract, [1903] 2 Ch. 683). Where the owner in fee simple died intestate his freeholds devolved on his heir until an administrator was appointed {In re Griggs, [1914] 2 Ch. 547). All assets except legal assets were called equitable assets. [Now cofyholds have been abolished and under sect. 32 o/ the Ad. of E. Act, 1925, all property of a deceased person which is liable for the payment of Ms debts vests in his personal representatives. An heir has now no right to his ancestor's estate except as a persona designata under a will or settlement ; and where an owner dies intestate his whole estate liable for the payment of his debts devolves on the Probate judge until an administrator is appointed (sect. 9, Ad. of E. Act, 1925). [Thus the ancient distinction between legal and equitable assets is for practical purposes ended for the future.] It is to be noted that once appointed the property over which a power subsisted becomes ordinary assets 544 A Digest of Equity. and subject to the payment of the testator's debts generally. Thus in Bey f us v. Lawley, [1903] A. C. 411, A. borrowed funds from B. and covenanted with B. to make a will appointing certaia property over which he had a general power in such a way as to make the loan a first charge on the property. He made a will appointing it and declaring B. to be entitled to a first charge : — Held, notwithstanding, that the property was distributable among A.'s creditors generally, and that B. was not entitled to any priority. Article 204. Assets of a Person having a Foreign Domicile. Where a person domiciled in a foreign coTintry dies leaving assets in England, then (i) So far as the assets are pure personalty, for purposes of representation, of collec- tion and of administration, the law governing them will be the law of England, while for the purposes of dis- tribution it wiU be the law of the deceased person's domicile. (ii) So far as the assets are realty or chattels real they wiU be governed for all pur- poses by the law of England. (i) The general rule is that the law affecting movables is the lex domicilii, while the law affecting immovables is the lex situs. This rule, however, is subject to the further one that all property of every kind must be recovered according to the law of the place where it is, and the person recovering it must be the person entitled to it by the law of the place where it is. The rule used to be thought to go further, and to make the pro- perty recovered subject primarily to the debts and Person having a Foreign Domicile. 545 liabilities incurred in the place where it is. It was generally held that all debts contracted in England were payable out of assets situate in England before foreign debts were payable out of such assets (see Black- wood V. The Queen (1882), 8 App. Cas. 82). This view, however, was dissented from in Be Kloebe, Kannreuther v. Geiselhrecht (1884), 28 Oh. D. 175. There it was held that the true rule was that English assets must be administered according to English law, and as a debt contracted out of England is payable equally by English law with a debt contracted in England, both debts were payable fari jpassu out of English assets. If, however, foreign law gave foreign creditors a priority, the English court would see that the English creditors would receive compensation therefor out of the English assets {ibid., p. 177 ; and see Be Doetsch, Matheson v. Ludwig, [1896] 2 Ch. 836^. In this connection it is to be remembered that debts for which judgment has been recovered in a foreign court are in England merely debts by simple contract. (ii) The division in international law is not into realty and personalty but into immovables and movables. Thus leaseholds, though under Lord Kingsdown's Act wills of leaseholds may be proved as if they were wills of mere personalty, are, just as much as freehold, distributed after the payment of the deceased's owner's debts among the • persons entitled by the lex situs (Pepin v. Bruyere, [1902] 1 Ch. 24), quite regardless of the place of his domicile (In re Moses, [1908] 2 Oh. 235). And if in any way the disposition attempted to be made by the will of English leaseholds is contrary to the English law, it is so far void {In re Grassi, Stubberfield v. Grassi, [1905] 1 Ch. 584 ; Stra. Wills, pp. 72, 78). Sn ( 546 ) CHAPTEE 2. Executors and Administrators. SUMMARY. PAGE Abticlb 205. Origin of executors' and administrators' authority 546 „ 206. Offices of executors and administrators - 548 ,, 207. Executors may act separately - 548 „ 208. Executor de son tort - 552 „ 209. Who may claim letters of administration on intestacy - 553 ,, 210. Who may be granted letters of administration where there is a will ■ - 555 „ 211. Powers of personal representatives over assets 556 Article 205. Origin of Executors' and Administrators' Authority. (1) An executor's authority arises under the will, but he cannot give legal proof of his autho- rity until he has proved the will, since a probate copy of the will is the only evidence of the will's contents which the court will admit. It follows from this — (i) That an executor who does not join in proof of the will does not thereby cease to be an executor. To cease to be an executor he must renounce. (ii) That he may validly do without taking out probate any acts of administra- tion that it is possible to do with- Executors and Administrators. 547 out proving in a court that he is executor. (iii) That he cannot xuitil he has proved the will sue as executor, and (iv) That until he has proved the will he cannot be sued as executor unless he has made himself executor de facto independently of the will by actually administering, or, as it is called, inter- meddling, with the assets. (2) An administrator's authority arises from and only from the grant of letters of adminis- tration by the Court of Probate, and such grant once made relates back to the death of the deceased, and renders valid all acts done in due course of administration by the adminis- trator before the grant. Where, however, a person entitled to letters of administration does acts in due course of administration, but dies without taking letters of administration, such acts become void. "It is common knowledge that an executor derives his title from the will, and not from the grant of probate, and that he can in his representative character do many- things, notwith- standing that he has not proved the will " {per Kbke- wiCH, J., in Ee Pawley and London and Provincial Bank, [1900] 1 Ch. 58, at p. 64). " A creditor of a deceased debtor cannot Sue a person named as executor in a will of the deceased unless he has either administered, that is, intermeddled with the estate, or proved the will," that is, has not merely applied for, but has been granted, probate by the proper court (per Lord Macnaghtbn, Mohamidu Mohideen Hadjiar v. Pitchey, [1894] A. C. 437, at p. 442). 548 A Digest of Equity. As evidence that the distinction is not without practical importance, see Be Pawley and London and Provincial Bank {infra, at p. 551). Abticle 206. Offices of Executors and Administrators. (1) On the death of a sole executor before he has fully administered the assets of his testator, his executor (who is called an admini- strator de bonis nan) is entitled to complete such administration ; and he has the same rights and is subject to the same obUgations as the original executor. (2) On the death of a sole executor intestate or of a sole administrator testate or intestate before he has fuUy administered, his office determines and new letters of administration have to be apphed for. Paragraph (1). The law as to succession to executors set out very shortly above is set out fully in sect. 7 of the Ad. of Est. Act, 1925. Article 207. Executors may act Separately. (1) Where there are several co-executors they are not bound to act jointly, and any act done by one of them [in his character of executor] is as valid at law as if it had *been done by all subject to the following exceptions and qualifications : Executors and Administrators. 549 , (i) Under sect. 18 of the Companies Clauses Act, 1846, stock governed by that Act cannot be dealt with by executors as owners till it is registered in the names of all those who prove the will, and a transfer has no effect unless it is executed by them all and under sect. 23 of the National Debt Act, 1870, the Banks of England and Ireland respectively may require transfers of Government stock to be executed by all the executors who have proved the will. (ii) A sale of a testator's real estate which now for administration purposes in- cludes chattels real cannot, without the consent of the court, be made, except by all his administrators or all the executors who have proved the will. (iii) Where a person has contracted with one only of several executors, if the contract is not carried out the court may refuse such person equitable rehef . (2) The above exceptions to and qualification of the power of one of several executors to act alone apply equally in the case of joint administrators, but it is doubtful whether in any case the act of one only of several administrators is valid. Formerly it was only a will of personalty which needed proof, just as it was only over personalty that the executor had any control by virtue of his of&ce. If a will disposed of pure realty only, it could not be proved. 550 A Digest of Equity. This was altered by sect. 2 of the Land Transfer Act, 1897, which gives executors and administrators control over pure realty and provides (sub-sect. (2) ) that all enactments and rules of law relating to the effect of probate and letters of administration as respects chattels real and as respects the dealing with chattels real before probate or administration, shall apply to real estate. See now s. 2 (1) Ad. of Est. Act, 1925. Paragraph (1). The qualification that one co-trustee caimot act alone unless he purports to act as executor is founded on the decision of the Court of Appeal in Solomon v. Attenborough, [1912] 1 Oh. 451. There two persons were co-executors and co-trustees of a will. After the estate had been administered so far as payment of debts and legacies was concerned, one of them without the other's know- ledge pawned part of the testator's plate for his own benefit, and without disclosing to the pawnbroker that he held it as executor. Joyce, J. ([1911] 2 Ch. 159), held that the pawnbroker took a good legal charge as against the other executor. The majority of the Court of Appeal reversed this decision on the ground that to give a good title one co-executor must act in giving it in his character of executor. No authority whatever was cited in support of this view. The court's decision has been affirmed in the House of Lords (sub nam. George Attenborough and Son v. Solomon, [1913] A. C. 76), but solely on the ground that the testator's debts having been paid and the duties of the executors having been fulfilled at the time the plate was pawned, the pawner though still an executor, for once an executor always an executor, was in fact acting as a trustee. And see In re Ponder, [1921] 2 Oh. 59. (i) and (ii) The provisions of the Companies Clauses Act, 1845, and the National Debt Act, 1870, apply to executors who have proved, while those of the Land Transfer Act, 1897, applied to all his personal representa- tives. Accordingly, it was held that where several persons were appointed executors by the will, and only some of Executors and Aihidyvisirators. 551 them proved, the others who did not prove, but who had not renounced, had to join in seHing the realty {Be Pawley and London and Provincial Bank, [1900] 1 Ch. 58). Where, however, a testator who had assets in England and assets abroad appointed one set of executors for his English estate and another set for his foreign estate, the former alone were all " his personal representatives " within sect. 2 of the Land Transfer Act, 1897, and could dispose of his English realty without the concurrence of the latter {Be Cohen's Trustees, [1902] 1 Ch. 187). The necessity for all executors joining in transferring a testator's real estate has been abohshed by sect. 12 of the Conveyancing Act, 1911, and only those need join who have proved the will. [Under sect. 8 of the Ad. of Est. Act, 1925, all the powers conferred by law on personal representatives may be exercised effectually by the executors or executors who have proved the will.] Subject to the limitation that all the executors who have proved must join in a sale of their testator's interests in land the executors have all the powers over them so far as disposing of it' is concerned that they have at common law over the testator's personalty (see In re Kemnal, [1923] 1 Ch. 294). (iii) Thus where one executor contracts unknown to the others for the sale of a specific chattel, and after- wards, on failure to carry out the contract, the purchaser sues for specific performance, the court may, and, if the purchaser knew the executor was acting against the wishes of his colleagues, will, refuse him relief (see Be Ingham, [1893] 1 Ch. 352, at p. 360). Paragraph (2). It was not customary to appoint joint administrators, and it was not very clear whether when they were ap- pointed they must act jointly or were capable of acting separately like executors. Jacomb v. Howard (1751), 2 Ves. sen. 265, would seem to decide that they may act 552 A Digest oj Equity. separately. But see Hudson v. Hudson (1737), West. t. Hard. 155. [For the future this seems to he settled by sect. 21 of the Ad. of Est. Act, 1925, which enacts that every person to whom administration is granted is to have the same rights and liabilities as if he were executor.'^ Article 208. Executor de son tort. (1) An executor de son tort is one who inter- meddles with a deceased person's assets, and who, upon being sued as executor, is unable to prove his title to administer under the deceased's wills or letters of administration. (2) An executor de son tort has none of the rights of an executor, but he is subject to aU an executor's duties save that he is not Hable for assets which he has not received owing to his own wilful default {as to neiv law quaere). As is said in Carmichael v. Carmichael (1846), 2 Phil. 101, an executor de son tort had all the liabiHties of a lawful executor, but none of the advantages. Thus he had no right to retain his own debt (see infra, Article 220). [It is hard to say how far this has been altered by the strange frovision in the Ad. of Est. Act, 1925, sect. 28, which seems frimd facie to give a right of retainer to a person who even fraudulently obtains possession of a deceased pet-son's estate. Such person is to account for the estate received by him after " deducting any debt for valuable consideration and without fraud due to him from the deceased person at the time of his death." By the same section the old right of an executor de son tort to receive credit for all payments made by him which might properly be made by a personal representative is preserved^] Letters of Administration. 553 On the other hand, he is liable to pay death duties as far as the assets have come into his hands (New York Breweries Company v. Attorney-General, [1899] A. C. 62). He is also hke a legal personal representative Uable for any waste or conversion to his own use of the deceased's assets (see now sect. 29 Ad. of Est. Act, 1925). He differs from an executor who has taken probate in this respect, that he is not hable for assets lost to the estate through his default (see Be Stevens, Cooke v. Stevens, [1898] 1 Ch. 162, at p. 176), and he cannot be compelled to take probate as an executor who has intermeddled with his testator's assets may be (see Bowsell v. Morris (1873), L. E. 17 Bq. 20). A person who intermeddles with a testator's assets as the agent of a lawful executor who has not taken pro- bate, is not an executor de son tort, but if he is called to account and is unable to prove the lawful executor's title he is in the same position as if he were an executor de son tort (New York Breweries Company v. Attorney- General, supra). A lawful executor himself who has not taken probate is in the same position except that he can be compelled to take or renounce probate (see s. 169, Jud. Act, 1925). Article 209. Who may claim Letters of Administration on Intestacy. (1) Under the old law in case of intestacy a husband was entitled to claim letters of admini- stration to the estate of his deceased wife, or even to administer it without letters. Subject to this, administration was granted to the next of kin, but where the deceased left a widow she ranked with and in general was preferred to the next of kin of the deceased. 554 A Digest of Equity. (2) Where fee simple land formed part of the assets and the heir was not the next of kin, the heir was equally entitled to administration with the next of kin, (3) In case neither next of kin nor heir applied for letters of administration, a creditor might claim the grant of them. (4) In any case the Public Trustee may apply for administration (Public Trustee Act, 1906, sect. 6). [(5) Under the new law the court is given a complete discretion to grant administration as it thinks proper to all persons interested in the estate real or personal, subject to some limitations the chief of which are (i) where the estate is not in- solvent or there are no other special circumstances the court should appoint some person interested in the residuary estate if such person applies : (ii) where land is settled by another instrument than the will the court should appoint the trustees of the settlement. (6) Representation of a deceased person {which includes probate of wills) is to be granted to not more than four persons and where there are life estates or infant beneficiaries to not less than two, unless the person appointed is a trust corporation. (7) Representation may be granted separately or conjointly as regards real and personal estate. (8) Where representation has been granted to others the executors right to act as executor is suspended till the grant is revoked.] The law as stated in paragraphs 1 and 2 was to a large extent superseded by sect. 73 of the Court of Probate Act, 1857, which gave the court a discretion as to the Letters of Administration. 555 person to whom administration should be granted. The new law merely accentuates this discretion subject to the limitations set out in paragraph 5. {See sect. 10, Ad. of Est. Act, 1925.) The rule in paragraph 6 depends now on sect. 160 Jud. Act, 1925, and is part of the scheme, applicable also to trustees of land, for facilitating dealings with property held in trust for sale. Paragraph 7 is the effect of sect. 13 of the Ad. of Est. Act, 1926, and has the same object. Paragraph 8 is the effect of sect. 15 (idem.) Article 210. Who may be granted Letters of Adminis- tration where there is a Will. (1) Where a deceased person leaves a will but through any cause there is no executor, or no executor wilhng or able to administer the assets, the Court of Probate will appoint an administrator cum testamento annexo. Such an administrator has so long as his office con- tinues all the powers and rights of an executor. The court usually appoints as administrator cum testamento annexo the residuary legatee under the will. (2) Where the sole executor appointed is an infant, the court will appoint an adminis- trator durante minore cetate to administer the assets until the infant attains full age. The court usually appoints as administrator durante minore cetate the infant executor's guardian. (3) Where an action respecting the validity of an alleged will of the deceased or of the obtaining, recalhng, or revoking any probate or any grant of administration is pending, the Court of Probate may appoint an adminis- 556 A Digest of Equity. trator pendente lite. Such an administrator has all the powers of an executor except the right to distribute the assets among the beneficiaries, and he may be allowed such remuneration out of the assets as the court thinks proper. The paragraphs simply state shortly the law as laid down now in sect. 166 Jud. Act, 1925 (as to grants with will annexed), sect. 20 Ad. of Est. Act, 1925 (as to grants during an infant's minority), and sect. 163 Jud. Act, 1925 (as to grants pending litigation). These merely enact the previous law, subject to this trifling alteration, that since an infant cannot now be a trustee or a personal repre- sentative no interest in his testator's estate vests in him till probate is granted to him after he has attained full age. Article 211. Powers of Personal Representatives over Assets. (1) As regards common law assets the power of personal representatives was absolute. They could give a good title to them by sale, where no sale was necessary, or by gift. In equity, however, as against creditors and beneficiaries, a gift of assets is void, and so is a sale where to the knowledge of the purchaser the sale was made by the personal representative for the purpose of misapplying the purchase money. (2) As regards freehold land the powers of personal representatives vary according as the deceased owner died before or after the commencement of the Land Transfer Act, 1897 (January 1, 1898). Personal Be'presentatives' Powers. 557 (i) Where the deceased owner died before the Act the executor had power to sell his land : (a) Where the will contained a direc- tion to him to sell it ; or (&) Where it contained a direction that the land should be sold, and he was directed to dis- tribute the proceeds. (c) Where the land was devised to him for the payment, or charged with the payment, of debts and not merely legacies. {d) Since the Finance Act, 1894, to recoup himself for estate duty upon it where he pays such duty at the request of the persons accountable for the estate duty so paid (sect. 9 (5)). (ii) Where the deceased owner died since the Land Transfer Act the personal representatives have the same powers over real estate which now includes not merely chattels real hut mortgage and settled land as they have over per- sonal estate vesting in them, save that it is not lawful for some or one only of several joint personal representa- tives, without the authority of the court, to sell or transfer land (except where they could have disposed of real estate before the Act). (3) A personal representative has the same powers to pay or allow any debt or claim on any 558 A Digest of Equity. evidence that he thinks sufficient, and to arrange or compromise any debt or claim in the same way as two trustees or a trust corporation are entitled to do. Paragraph (1). The common law rule was that the executor or adminis- trator was absolute master of the deceased's goods subject to a personal liability to account for them or their proceeds. Equity constituted him a trustee of the goods and applied the rules as to trust estates to the assets and his dealiugs with them (see Scott v. Tyler (1788), 2 Dick. 712). But in many respects his position is still different from that of an express trustee. Thus he can plead the Statute of Limitations in an action against him for devastavit or for the recovery of a legacy {infra. Article 233), and he can favour his own or another's debt (see infra, Articles 220, 221). For the differences between trustees and executors generally, see Stra. Wills, pp. 98-108. Paragraph (2). (i) Where a purchaser from the executors of a person dying before January 1st, 1898, purchases within twenty years of the death of the testator, he is entitled to assume that the executors are selling in due course of administra- tion and is not put to inquiries whether there are any debts still owing {Be Tanqueray-Willaume and Landau (1881), 20 Ch. D. 465). [Under the Conveyancing Act, 1881, mortgage and trust estates devolved as if they were leaseholds, therefc/re were alienable as by one of two or more co-executors. This seems to be altered by s. 2, Ad. of Est. Act, 1925.] (ii) As to the statutory right of sale given to executors and administrators over freehold land, see swpra. Article 207. Paragraph (3). The powers depend on sect. 21 of the T. Act, 1893, now repealed and re-enacted by sect. 15 of the T, Act, 1925. See supra, p. 152. Personal Be-presentatives' Powers. 559 The wide reading of sect. 21 (1) adopted by the courts is shown in the case of Be Houghton, Hawley v. Blake, [1904] 1 Ch. 622. There the widow of a testator was joint executrix with another person. The widow claimed that certain investments standing in the testator's name had really been made with her money and on her behalf. The other executor having investigated the matter and come honestly to the conclusion that the widow's claim was just, transferred the investments to her : — Held, that he was entitled so to do. It sometimes happens that a person appointed executor by one will obtains probate of it being unaware of a later will made by the testator, or that the court appoints a person administrator of a deceased's estate under the belief that he died intestate when in fact he left a will appointing an executor. In such cases all acts done by the executor or administrator in the due administration of the deceased's assets are legally binding on all parties to them, and his authority to act legally as executor or administrator continues till probate or the letters of administration are revoked {Hewson v. Shelley, [1914] 2 Ch. 13). [And now see sect. 37 Ad. of Est. Act, 1925 which gives statutory authority to this decision.] ( 560 ) OHAPTEE 3. Payment of Liabilities and Debts. SUMMARY. PAGE Abticlb 212. First charges on assets - - 560 2\Z. Payment of debts : order when estate is solvent - 561 214. Payment of debts : order when estate is insolvent 565 215. Insolvent estate : administered hy the personal representatives 566 216. Insolvent estate 567 217. Arrears of rent 570 218. Secured creditors 571 219. Statute-barred debts 572 220. Retainer of debts 573 221. Right to prefer debts .... 577 222. Right to retain legacy against a legatee's debt 578 223. Creditors' right to follow assets - 579 224. Creditors' right to donationes mortis causa 580 Article 212. First Charges on Assets. The following constitute first charges upon the assets of a deceased person : (i) The expenses incurred in burjdng the deceased in a manner suitable to his condition in hfe. (ii) Testamentary expenses and aU other costs properly incurred by the personal representatives in the due administra- tion of the assets. The law is now set out in s. 33 Ad. of Est. Act, 1925. Administration : Payment of Debts. 561 Though there can be, by the law of England, no pro- perty in a human body living or dead {B. v. Sharp (1857), Dear. & Bell. C. C. 160), yet the executor has a right to the custody of his testator's body for the purpose of burial. And he is entitled to bury it in a manner suitable to the testator's condition whatever may be the directions (if any) given by the testator,, by will or other- wise, on the subject (see Williams v. Williams (1882), 20 Ch. D. 659). For expenses so incurred and for the costs of ad- ministration the personal representatives are personally liable, but are entitled to an indemnity out of tlie estate just as are trustees (Article 62). And the court is solicitous to provide this indemnity. Thus, in Be Griffith, Jones V. Owen, [1904] 1 Ch. 807, the court in an ad- ministration action ordered the costs of all parties to be paid out of the estate. The assets proved insufficient to pay all the costs. Ordered that those of the administra- tion should be a first charge on the assets. This right is in no way affected by the insolvency of the deceased's estate (see Bankruptcy Act, 1883, sect. 125 (7) ). As to what are now testamentary expenses, see In re Betts, [1907] 2 Ch. 149. Article 213. Payment of Debts : Order when Estate is Solvent. A. Common Law Assets. — Whether a person dies testate or intestate and whether his assets are administered by his personal representa- tives or by the Court of Chancery, if his assets are sufficient to pay his debts and liabilities in full (and his liabilities include his funeral expenses, his testamentary expenses and the D.E. 2 O 562 A Digest of Equity. interest which the law allows on his debts), the order in which his debts should be paid is as follows : (1) Debts to which particular statutes give priority. (2) Debts due under judgments of Courts of Record recovered against the deceased during his life and duly registered according to the Land Charges Act, 1900. (3) Debts due by recognizances duly en- rolled. (4) Debts based on valuable consideration and due by specialty or by simple con- tract or under unregistered judgments subject to this, that a debt for which judgment is recovered against the personal representatives ranks before other debts. (5) Debts due on voluntary bonds, but not on negotiable instruments not made for value, provided — (i) That such a voluntary bond if assigned to an assignee for value without notice that the bond was voluntary ranks as a specialty debt for value. (ii) That a debt due on a negotiable instru- ment not made for value, though unrecoverable in the original credi- tor's hands, if assigned by him to an assignee for value without notice ranks as a simple contract debt for value. Administration : Payment of Debts. 563 (6) Crown debts must always be paid in priority to other debts of the same class. B. Equitable Assets. — All debts due by the deceased, subject to the priority given to Crown debts and debts preferred by particular statutes, are to be paid pari passu. Where the deceased's assets are at his death sufficient fully to discharge all the liabilities affecting his estate, the order in which such liabilities are payable is a matter of slight importance. Sometimes, however, an estate quite solvent at the owner's death becomes insolvent before all the liabilities are discharged, in which event the order of payment becomes important. Paragraph (1). The most important of the debts to which priority is given by particular statutes are debts due to a friendly society by a deceased officer (sect. 35, Friendly Societies Act, 1896). And by the Regimental Debts Act, 1893, certain debts are given priority in case the debtor, when he died, was subject to military law. Paragraph (2). Unregistered judgments against the deceased were by the Law of Property Amendment Act, 1860, deprived of all priority and ranked with simple contract debts. That Act has now been repealed by the Land Charges Act, 1900, and priority seems to depend on the registration under that Act. Paragraph (4). Previous to Hinde Palmer's Act, 1869, debts due by specialty — ^that is, by bond or covenant under seal — ^were entitled to be paid in full out of legal assets in priority to simple contract debts, while both were paid pari passu out 564 A Digest of Equity. of equitable assets on the principle that equality is equity. By Hinde Palmer's Act it is provided that in the ad- ministration of the estate of every person who shall die on or after January 1st, 1870, no debt or liability of such person shall be entitled to any priority or preference by reason merely that the same is secured by or arises under a bond, deed, or other instrument under seal, or is other- wise made or constituted a specialty debt ; but all the creditors of such person, as well specialty as simple contract, shall be treated as standing in equal degree, and be paid accordingly out of the assets of such deceased person, whether such assets are legal or equitable, any statute or other law to the contrary notwithstanding. Formerly it was held that this Act did not abolish the distinction between specialty and simple contract debts, but merely made them as between themselves payable pari passu. This view of the effect of the Act created many difficulties in administration and was itself very difficult to understand (see In re Bentinck, [1897] 1 Ch. 673). Practically it has been altogether swept away by the decision of the Court of Appeal in In re Samson, Bobbins v. Alexander, [1906] 2 Ch. 684. And now all ordinary debts rank together for all purposes subject to the priorities stated in the Article. Eent is an ordinary debt payable pari passu with other debts (In re Hastings (1877), 6 Ch. D. 610). Paragraph (5). Voluntary bonds were payable in equity after all debts for value, but where the bond had, before the death of the debtor, been transferred for value without notice, it ranked as a specialty debt (Payne v. Mortimer (1859), 4 De G. & J. 447). Paragraph (6). This is the rule as laid down in New South Wales Taxa- tion Commissioners v. Palmer, [1907] A. C. 179. Administration : Payment of Debts. 565 B. Equitable assets were regarded as trust moneys in equity, which applied to them in administration the principle that equality is equity. [In England this distinc- tion is henceforth abolished at any rate when the estate is insolvent. See Article 216.] Article 214. Payment of Debts : Order when Estate is Insolvent. (1) Under the old law when a person died insolvent the order for the payment of his debts stated in Article 213 was varied according as his assets were administered — (a) by his personal representatives ; or (6) by the court. [(2) Now where a person dies insolvent this distinction is abolished.] In view of the new enactment it is now necessary only to notice one or two points. By sect. 130 of the Bankruptcy Act, 1914, a creditor of a deceased debtor whose debt would have been sufficient to support a petition in bank- ruptcy had the debtor been Uving, may present a petition as if the debtor were living, and the Court of Bankruptcy may, unless it is satisfied that there is a reasonable prob- ability that the estate will be sufficient for the payment of the debts owing by the deceased, make an order for the administration in bankruptcy of the deceased's estate. A petition in bankruptcy cannot be presented after pro- ceedings have been commenced in another court for the administration of the estate, but the court administering it may, if it thinks fit, transfer the administration to the Court of Bankruptcy. This power of transfer is discretionary, and the court in exercising it will have regard chiefly to considerations of 566 A Digest of Equity. convenience and expense (Re Balcer (1890), 44 Ch. D. 262). Generally speaking, however, the court will grant a transfer unless the Chancery proceedings are far advanced or difficult points of law are likely to arise {In re Kenward (1906), 94 L. T. 277 ; and see In re Hay, [1915] 2 Ch. 199). Further, by sect. 33 of the Bankruptcy Act, 1914, the law as to preferential payments in the bankruptcy of a living person is to apply in the case of a deceased person who dies insolvent as if he were bankrupt, and as if the date of his death were substituted for the date of the receiving order. Abticle 215. Insolvent Estate : Administered by the Personal Representatives. Under the old law when a deceased insolvent's assets were administered by his personal repre- sentatives his debts were payable in the order set out in the preceding articles, subject to this modification : (i) Debts arising from a loan to a person enaged or about to engage in any business on a contract that the lender shall receive a rate of interest varying with the profits or shall receive a share of the profits of the business ; (ii) debts in respect of a share of the profits contracted for by the seller of the goodwill of a business in consideration of a share of the profits ; (iii) debts due to a wife in respect of any money or other estate lent or entrusted to her husband for the purpose of any trade or business carried on by him, were postponed until the claims of all the other creditors for valuable consideration have been satisfied. The priority for debts due to the Crown under the old law does not appear to be taken away by sect. 151 of the Administration : Tayment of Debts. 567 Bankruptcy Act, 1914, even when the estate is insolvent if the administration is allowed to remain in the hands of the personal representatives (see In re LaycocJc, [1919] 1 Ch. 24). The difference between solvent and insolvent estates is due to sect. 3 of the Partnership Act, 1890, which postpones debts of the kind mentioned in the Article. Article 216. Insolvent Estate. When a deceased insolvent's assets are ad- ministered by the court [and under the new law when they are administered by the personal repre- sentatives] all debts other than debts to which particular statutes give priority are payable pari passu, whether they are Crown, judgment, specialty, or simple contract debts or debts due on voluntary bonds which have not been assigned for value, and whether they are present or future or contingent debts or liabilities subject to these provisions. (1) By sect. 33 of the Bankruptcy Act, 1914, the following debts are given preference over all other debts except those within the Friendly Societies Act, 1896, and the Trustee Savings Bank Act, 1863 :— (a) All parochial or other local rates due from the deceased at his death and having become due and payable within twelve months next before that time, and all assessed taxes, land tax, pro- perty or income tax assessed on the deceased up to the 5th of April next 568 A Digest oj Equity. before his death and not exceeding in the whole one year's assessment. (&) All wages or salary of any clerk or servant in respect of services rendered to the deceased during four months before his death, not exceeding £50. (See sect. 2 Bankruptcy (Amendment) Act, 1926.) (c) All wages of any labourer or work- man not exceeding £25 whether pay- able for time or for piece-work in respect of services rendered to the deceased during two months before his death ; provided that where any labourer in husbandry has entered into a contract for the payment of a portion of his wages in a lump sum at the end of the year of hiring, he shall have priority in respect of the whole of such sum, or a part thereof, as the court may decide to be due under the contract proportionate to the time of service up to the death. (cZ) Valid claims, each not exceeding £100, under the Workmen's Compensation Act, 1906. (e) Contributions to the National Insurance Act, 1911, for four months before the death. (2) These debts are to rank equally between themselves and to be paid in full unless the property of the deceased is insufficient so to pay them, in which case they are to abate in equal proportions between themselves. They must be discharged forthwith so far as there are assets in hand. Administration : Payment oj Debts. 569 (3) By sect. 30 of the Bankruptcy Act, 1914, provision is made for the valuation of future and contingent liabilities. (4) By sect. 36 of the same Act, where a husband or wife dies insolvent, then any loan the survivor may have made to the deceased for business purposes is to be postponed until the claims of aU the other creditors for valuable consideration have been satisfied. The mode in which an insolvent estate is to be apphed whether administered \hy the 'personal representatives] or by the court is now set out in Part I of the First Schedule of the Ad. of Est. Act, 1925, as follows :— (1) The funeral, testamentary, and administration expenses. (2) Subject as aforesaid, the same rules shall prevail and be observed as to the respective rights of secured and unsecured creditors and as to debts and Habilities provable and as to valuation of annuities and future and contingent liabihties respectively, and as to the priorities of debts and liabilities as may be in force for the time being under the law of bankruptcy with respect to the assets of persons adjudged bankrupt. This section is a re-enact- ment of sect. 10 of the Jud. Act, 1875. Two points may be noted. In the first place it is not explained when a deceased person's estate is to be regarded as insolvent. That may cause difficulties. Thus in In re Whitaker. And see In re Pink, Elvin v. Nightingale, [1927] 1 Ch. 237, where it was held that an estate was insolvent where an annuity charged on it would render it insolvent provided the annuitant hved to the normal age. In Whitaker Y. Palmer, [1904] 1 Ch. 299, a deceased person's estate was at his death insolvent. Subsequently it realised enough to pay all his debts and liabilities in full, but not sufficient to pay aU the interest which in bankruptcy is allowed on all provable debts. The estate was being administered by the court, and Farwbll, J., held that it 570 A Digest oj Equity. was insufficient to pay in full the deceased's debts and liabilities, as the interest in question was a liability. His lordship said that the fact that the estate was insolvent at the deceased's death was, in his view of the law, immaterial, and he would have held as he did had it then been solvent. This seems very like reasoning in a circle — the estate should be subject to the rules of bankruptcy because it is insufficient to pay all debts and liabilities, and it is insufficient to pay all debts and liabilities because it is made subject to the rules of bankruptcy. In the second place the parts of the law of bankru^cy which are to apply are set out and these do not include the sections of the Bankruptcy Act which go to make property which is no part of a bankrupt's estate assets for the payment oi his debts. Thus the rules as to property within the bankrupt's order and disposition, fraudulent preferences and voluntary settlements, do not appear to apply to the administration of the assets of a deceased insolvent (see Hasluck v. Glarh, [1899] 1 Q. B. 699). Article 217. Arrears of Rent. (1) Until an order is made for the adminis- tration of a deceased person's assets in bank- ruptcy a landlord is entitled to distrain for arrears of rent due to him by the deceased. But if the deceased died insolvent, and the distress was levied within three months of the deceased's death, then on the estate being wound up by the court, the debts preferred in bankruptcy will be a first charge on the goods taken in distraint. (2) After an order for administration in bankruptcy is made a landlord can distrain Administration : Payment of Debts. 571 only for six months' arrears of rent accrued due before the order, subject to the same priority for preferred debts. This seems to be the effect of sect. 30 (4 & 5) and sect. 35 (2) of the Bankruptcy Act, 1914. Article 218. Secured Creditors. Where a deceased person's estate is insol- vent and the assets are being administered by the Court of Chancery or Bankruptcy, a credi- tor holding a charge, lien, or mortgage on the assets or any part of them for a debt due to him may (i) Rely on his security and not prove for the debt ; or (ii) Realise his security and prove for the ■ balance remaining unsatisfied ; or (iii) Surrender his security and prove for the whole debt ; or (iv) Set a value on his security, and prove for the balance. This depends upon rules 10 to 18 of the Second Schedule to the Bankruptcy Act, 1914. Before the Bankruptcy Act, 1883, a secured creditor was entitled to prove for his whole debt, and then if his security when realised brought his dividend to more than twenty shillings in the pound, he was obliged to return to the executor or receiver in bankruptcy the surplus. 572 A Digest of Equity. Abticle 219. Statute -barred Debts. (1) Personal representatives are entitled to pay any debt of the deceased which but for the Statutes of Limitations would be recoverable against his estate, provided such debt has not been adjudicated upon and held statute- barred. (2) This right is not lost upon an order for administration being made, but after such order or upon any appUcation being made to the court in respect of such debt, then if any one interested in the estate objects to the payment of the statute-barred debt, the court will restrain the personal representatives from paying it. Paragraph (1). The debt must be one which would be recoverable but for the Statutes of Limitations. If for some other reason it would not be recoverable the right to pay it is gone. Thus in Be Bownson (1885), 29 Ch. D. 358, the father of a lady about to marry promised verbally to settle a certain amount upon her. By sect. 4 of the Statute of Frauds, 1677, this promise, being one made in consideration of marriage, could not be enforced unless it was reduced into writing and signed by the father. The father died more than six years after the promise : — Held, that his personal representatives had no right to pay over the sum promised to be settled. And see Be Wheeler, HanJdn- son V. Hayter, [1904] 2 Ch. 66. And the statute-barred debt to be payable by the personal representatives must not have been adjudicated irrecoverable. Thus in Midgley v. Midgley, [1893] 3 Ch. 252, a creditor whose debt was statute-barred sued the executors. The court held it was irrecoverable. After- Administration : Payment of Belts. 573 wards one of the executors wished to pay it: — Held, that he had no right so to do. Paragraph (2). When an order for administration is made the court will permit statute-barred debts to be paid only when no one interested in the assets objects. And this rule applies when any application is made to the court which could formerly have been made only in an administration action. Thus in Be Wenham, Runt v. Wenham, [1892] 3 Ch. 59, a summons under Order 55, rule 3 (a), was taken out by personal representatives to determine what was owing to a certain creditor. This creditor's debt was in fact statute- barred. The residuary legatee appeared on the summons and objected to the personal representatives paying the debt : — Held, that the objection was good. It may, perhaps, be added that the executors' affidavit for probate including among the testator's debts one due to the plaintiff is not such an acknowledgment as will prevent the statute running against the plaintiff {In re Beavan, [1912] 1 Ch. 196). And further, that where the will charges the testator's debts on land the period of limitation of a simple contract debt is as against the land, not six but twelve years [In re Balls, Trewby v. Balls, [1909] 1 Ch. 791). Article 220. Retainer of Debts. (1) A personal representative is entitled to pay to himself out of the common law assets a debt, whether recoverable or statute-barred, due to him, in priority to paying a debt of the same degree due to another creditor. This right exists whether the debt is due to him personally or to him as trustee for another 574 A Digest of Equity. person, and it is possessed by an administrator durante minore cetate in respect of debts due to himself or to the executor for whom he is administrator durante minore cetate. Where it is possessed in right of another person it seems that that person is entitled to insist on its being exercised. (2) This right is not lost by an order for administration or by payment of the assets into court or by the appointment of a receiver, in so far as the common law assets actually came into the possession of the personal representatives before the order. (3) In the case of testators dying before January 1, 1898, a devisee to whom the testator owed a debt by specialty in which the heir was bound could pay his debt out of the land de- vised to him in priority to that of any other specialty or other creditor. [(4) The right of retainer under the new law applies to all the assets of the testator whether common law or equitable, but can be exercised only to repay a debt owing to himself personally or jointly with another person {or, I suppose, other persons).] This right to prefer himself given to a personal repre- sentative is not regarded with favour by the court, which never permits it where it can prevent it. Thus where a creditor as creditor obtains a grant of letters of ad- ministration the court insists that he shall enter into an undertaking not to prefer his own debt (see W. N. (1899), p. 262 ; In re Belham, [1901] 2 Ch. 52). In the same way it has been held that the sole justification of the rule is that it prevents a creditor of equal degree with the personal representative or devisee getting priority for his debt by obtaining judgment against the personal repre- Administration : Payment of Debts, 575 sentative or devisee. Accordingly where there is no possibility of his obtaining such priority it is held that there is no right of retainer. Thus it has been held that an executor or administrator has now no right to retain out of land vested in him as assets under the Land Transfer Act, 1897 {In re Williams, Holder v. Williams, [1904] 1 Ch. 52). The personal representative may retain not merely in respect of a debt due at the death of the testator, but also of a debt accrued due since {Boyd v. Brookes (1864), 34 Beav. 7), but not in respect of a contingent liability {In re Beeman, [1896] 1 Ch. 48), or unliquidated damages {In re Compton (1885), 30 Ch. D. 15). He can also retain against statute-barred debts, provided such debts would be re- coverable but for the Statutes of Limitations. Thus in In re Wheeler, Hankinson v. Hayter, [1904] 2 Ch. 66, a person who afterwards became the executor of a married woman made a loan to her before 1882. The loan was therefore at the time it was made not recoverable, since, before the Married Women's Property Act, 1882, a married woman could not render herself liable on contract. She, how- ever, subsequently to 1882 gave an acknowledgment of the debt : — Held, that the executor after her death was not entitled to retain, since the debt was not a legal debt when the loan was made, and the subsequent acknowledg- ment could not make it one. And a widow who is executrix of her husband's will, may retain against a debt- due to her even if the estate is insolvent {In re Ambler, [1905] 1 Ch. 697). A surety cannot retain unless he has actually paid the debt {In re Beavan, [1913] 2 Ch. 595). The right arises out of the possession of the assets by the personal representative. Once the personal represen- tative has obtained possession, his right to retain is not lost by his paying them into court {Pulman v. Meadows, [1901] 1 Ch. 233), or by an order for administration {In re Belham, [1901] 2 Ch. 52). It is defeated by an order in bankruptcy in so far as the assets are received by the receiver, but not in respect of assets actually received by 576 A Digest of Equity. the personal representative (In re Wells (1890), 45 Ch. D. 569). He need not declare his intention to retain until a claim is made by another creditor against the assets (Be Bhoades, [1899] 2 Q. B. 347). If he does not then plead it or plene administravit, he cannot, after the creditor has obtained judgment, set his right up {In re Marvvn, [1905] 2 Ch. 490). If the debt due to him is larger than the value of the assets, he may retain the assets in specie (In re Gilbert, [1898] 1 Q. B. 282). The decision of In re Samson, [1906] 2 Ch. 584 (see p. 577), made it doubtful whether a personal representa- tive could not retain a simple contract debt due to himself in priority to a specialty debt due to another ; but the point was expressly left open in that decision. In an Irish decision (Olpherts v. Corydon, [1913] 1 I. E. 211, followed by In re Harris, [1914] 2 Ch. 895), it has now been decided that he can so retain. Paragraph (4). [This depends on sect. 34 (2) of the Ad. of Est. Act 1925, which while it takes away an executor's right to retain as against a debt due to an estate of which he is trustee extends his right over all the assets real and personal of his testator. The same section enacts that when an estate is insolvent it is to be administered by the executor according to the rules of bankruptcy.] Administration : Payment of Debts. 577 Article 221. Right to Prefer Debts. (1) Personal representatives are entitled to pay the debt out of common law assets, whether recoverable or statute-barred, due to one creditor of the deceased in preference or priority to a debt of the same degree due to another creditor. (2) This right is lost upon an order for administration being made or upon a creditor obtaining judgment against the personal repre- sentatives for his debt. [(3) Under the new law the right to prefer extends to all assets vesting in the personal representatives. J Paragraphs (1) and (2). " The right of an executor to prefer one creditor and the right to retain his own debt are in many respects the same thing in substance and in principle, though no doubt the latter can, while the former cannot, be exercised after an administration order " (per North, J., In re Hankey, Cunliffe Smith v. Hankey, [1899] 1 Ch. 541). Formerly it was held {In re Hankey, supra) that the distinction between specialty and simple contract debts was not abolished by Hinde Palmer's Act, 1869, so far as the right to prefer was concerned. That view has now been dissented from by the Court of Appeal in In re Samson, Bobbins v. Alexander, [1906] 2 Ch. 584. There an executor, knowing that his testator owed a specialty debt to one creditor, paid a simple contract debt due to another creditor without reserving funds to pay the specialty debt. The testator's estate in the result proved insufficient, and the specialty debt was not paid : — Held, D.-R. 2 P 578 A Digest of Equity. that the executor was not liable in devastavit to the specialty creditor. Even when the executor has notice that an adminis- tration action has been commenced he can prefer until judgment for administration is given (Vihart v. Coles (1890), 24 Q. B. D. 364). An executor may pay a non-interest-bearing debt before an interest-bearing debt of the same degree {Bobinson v. Gumming (1742), 2 Atk. 409). And he can pay debts out of his own money and subsequently prefer his own debt so arising to that of other creditors (In re Jones, [1914] 1 Ch. 742). Paragraph (3). [This right of 'preference is expressly retained as to all the deceased's assets by sect. 34 of the Ad. of Est. Act, 1925. See note to preceding article.] Abticle 222. Right to retain Legacy against a Legatee's Debt. Where a legacy of money is bequeathed to a person who is indebted to the testator's estate or who is under a liabihty to the testator's estate which may ripen into a debt, the executor may retain for the benefit of the estate so much of the legacy as may be necessary to discharge the debt or secure the liabihty. This right to retain against a legatee's debt or hability applies only to legacies of money. Thus legacies of shares (In re Savage, [1908] 2 Ch. 146), or leaseholds and devises of freeholds are not within it (Ex parte Barff (1849), De G. 613). It apphes, like the personal represen- tative's right of retainer, to statute-barred debts [Courtenay V. Williams (1844), 8 Hare, 539), and as against the legatee's assignee {Be Knapman (1881), 18 Ch. D. 300), Administration : Payment of Debts. 579 and his trustee in bankruptcy {Re Watson, [1896] 1 Ch. 925), unless in the latter case the executor proves in the bankruptcy for the whole debt (Be Binns, [1896] 2 Ch. 584 ; and see In re Melton, [1918] 1 Ch. 37). But it does not apply where the legatee was never under any legal obligation to the testator, although he had funds in his possession which, apart from the Statute of Limitations, the executor would have been entitled to follow {In re Bruce, [1908] 2 Ch. 682) ; nor where the debt owed by the legatee is owed by him as a member of a partnership {Turner v. Turner, [1911] 1 Ch. 716) ; nor can it be relied on where the debt is a debt payable only by instalments {In re Abrahams, [1908] 2 Ch. 69) ; nor where the executor has accepted a dividend on it on the legatee's bankruptcy {In re Sewell, White v. Sewell, [1909] 1 Ch. 806). Article 223. Creditors' Right to follow Assets. A creditor whose debt has not been paid when the assets of a deceased person are distributed among the beneficiaries or are given away by the personal representative, is entitled to follow such assets into the beneficiaries' or donees' hands, even where, in the former case, the personal representative has made the distribu- tion by the order of the court. But this right may be lost by acquiescence or delay on the part of the creditor or by the sale of the asset by the beneficiary or donee to a bona fide purchaser for value without notice that the deceased's debts were not completely discharged. Like the right of a cestui que trust to follow trust funds, the right of a creditor to follow assets continues until the assets have been sold to a purchaser for value without notice. This is the case no matter whether the 580 A Digest of Equity. assets were paid away to the legatees or were given away by the personal representative, and no matter whether the executor paid the assets away of his own motion or by direction of the court {David v. Frowd (1833), 1 My. & K. 200). But as the right to follow assets is one given not by the common law but only by equity (Russell v. Plaice (1854),, 18 Beav. 21) an equitable defence is allowed. Therefore delay or acquiescence on the creditor's part may bar his right {Blake v. Gale (1886), 32 Ch. D. 571, and see Be Brogden (1888), 38 Ch. D. 546), as does a sale of the assets to a purchaser for value without notice. And see In re Eustace, [1912] 1 Ch. 561, cited p. 384, supra. [This right of following assets is now- recognised and defined by sect. 38 of the Ad. of Est. Act, 1925.]" Article 224. Creditors' Right to Donationes Mortis Causa. In case the assets prove insufficient for the payment of the deceased's debts and liabilities in full the creditors are entitled to resort to property which the deceased during his life gave away as donationes mortis caiisd. By donatio mortis causa is meant a gift of pure personalty made by the deceased, either personally or by an agent acting in his presence and completed by delivery to the donee. The gift may be of the property itself or of the means of obtaining possession of the property or of the documents of title to the property. It must have been made when the donor was in expectation of dissolution, and be conditioned to be void in case of his recovery, and to be Creditors' Bight to Donationes Mortis Causa. 581 absolute in case of his death as he expected when he made the gift. It has been already pointed out that though a deceased person's donationes mortis causd are liable on deficiency of assets for the payment of his debts, yet they form no part of his assets. This is because they operate not from his death but from their delivery during his life to the donee {Solicitor to the Treasury v. Lewis, [1900] 2 Ch. 812). A good example of a donatio mortis causd is that in Re Dillon (1890), 44 Ch. D. 76. There a person momentarily expecting death gave his sister-in-law a banker's deposit note, saying, " I am going to give it you conditionally. If I get well you will give it me back ; if not you are all right." Here the deceased expressed precisely the con- dition attached to a donatio mortis causd ; but it is not necessary that this condition should be actually expressed if, from the surrounding circumstances, it is clear that the gift was intended to be absolute only on the donor's 'death. The gift must be evidenced by delivery either of the thing given or of the means of obtaining it — such as the keys of a box in which it is contained (Mustapha v. Wedlake, W. N. (1891) 201)— or of the documents of title to it — such as securities for a mortgage debt, bills of exchange payable to order even though not endorsed, but not promissory notes {In re Leader, [1916] 1 Ch. 579), post-office orders, etc. {Beddington v. Baumann, [1903] A. C. 13, at p. 19). And the gift may be made subject to a condition that the donee shall do something, such as pay for the donor's funeral {Hills v. Hills (1841), 8 M. & W. 401 ; and see Stra. Property, p. 270). [It is ferhafs worth noting that no place is given in Part II of the First Schedule of the Ad. of Est. Act, 1925, to the liability of donationes mortis causd for debts. See infra, p. 593.] ( 582 ) CHAPTEE 4. Distribution of Assets. SUMMARY. PAGE ABTlcyLE 225. Notice bi/ advertisement to creditors - 582 ,, 226. Future and contingent liabilities - - 583 227. Kinds of legacies - - 585 ,, 228. Order of distribution of a testator's estate 587 „ 229. Order of distribution of an intestate's estate 593 ,, 230. Rights of legatees to follow assets 596 „ 231. Payment of interest or income upon legacies - 598 Article 225. Notice by Advertisement to Creditors (1) Where personal representatives give such notice [by advertisement in the Gazette and in a newspaper {when the estate is land) circulating in the district where the land is situated] to creditors and others to send in their claims against the assets as, in the opinion of the court in which such personal representatives are charged, would have been given by the Chancery Division in an administration suit, the personal representatives, after the expiration of the time fixed in such notice for sending in claims [not being less than three months], may distribute the assets among those entitled to them, without incurring any personal liability for claims of which they had no notice at the time of distribution. [(2) This privilege is now extended to all trustees {see supra, p. 162).] This power is conferred upon personal representatives by sect. 29 of the Law of Property Amendment Act, Distribution of Assets. 583 1859 [repealed and re-enacted by sect. 27, T. Act, 1925, amended by L. of P. Act, 1926]. The notice should be sent out as soon as possible after the deceased's death (per EoMER, L.J., Be Kay, Mosley v. Kay, [1897] 2 Ch. 518, at p. 522). What is sufficient notice within the section depends on the facts of each case. Thus in Be Bracken, Doughty v. Townson (1889), 43 Ch. D. 1, in the case of a testator who had farmed fifty-two acres of land and followed no other occupation, the executors published a notice requiring creditors to send in their claims within a month. This was inserted in the London Gazette and in three local newspapers : — Held, that the advertisement and length of notice were sufficient. This enactment does not in any way prejudice the right of creditors and claimants to follow the assets if necessary into the hands of the beneficiaries. It merely protects the personal representative. [Under the new law, sect. 27, T. Act, 1925, the advertise- ment must appear in the London Gazette and in the case of land only (J suppose) in a newspaper circulating in the district where the land lies, with the reservation as to what the court would consider proper notice in special cases'}. Abticle 226. Future and Contingent Liabilities. Personal representatives will not be liable personally for future or contingent liabilities of their testator or intestate provided that before distributing the assets among the bene- ficiaries — (1) Where being liable as such to rents, covenants, or agreements contained in a lease or an agreement for a lease granted or assigned to their testator or intestate, they set apart a sufficient amount of assets to satisfy any cove- nant to expend a definite sum of money on the property demised and then assign the lease or agreement to a purchaser ; 584 A Digest of Equity. (2) Where being liable as such to any other future or contingent liability, they set apart an amount of assets reasonably sufficient to meet it or obtain an order of administration under which they are directed to distribute the assets among the beneficiaries without setting apart such amount of assets. [(3) These privileges are now extended to trustees.] Paragraph (1). This power is conferred upon personal representatives by sects. 27 and 28 of the Law of Property Amendment Act, 1859. It can be exercised only when there is privity between the personal representatives and the lessor. Thus where a testator had held leaseholds subject to onerous covenants but had assigned them before his death, the executors were not entitled to set apart assets against any liability which might arise (In re Nixon, Gray v. Bell, [1904] 1 Ch. 638). The word " purchaser " under these sections means a person who buys the leasehold and pays a price for it ; and accordingly where a transferee receives payment for taking it and the burden of the covenants over, there is no sale of the leasehold within them {In re Lawley, Jackson v. Leighton, [1911] 2 Ch. 530, per SwiNFBN Eady, J., at p. 533). This enactment does not in any way prejudice the right of landlords in case of breach of covenant to follow the assets if necessary into the hands of the beneficiaries. Where the estate is being administered in bankruptcy, sect. 54 of the Bankruptcy Act, 1914, applies, and the trustee is entitled to disclaim property subject to onerous covenants {In re Mellison, [1906] 1 K. B. 68). Paragraph (2). It is not the custom of the court to retain funds for the purpose of meeting contingent liabilities, but personal Distribution oj Assets. 585 representatives must do so to esca]»e liability for devas- tavit in case such liabilities become actual in the future. An order of administration, however, will protect them [In re King, [1907] 1 Ch. 72). If, however, the con- tingent hability does not become absolute within six years after the personal representatives have distributed the assets it will be barred as against them personally {Lacms v. Warmoll, [1907] 2 K. B. 350, In re Blow, [1914] 1 Ch. 233). Paragraph (3). [See sect. 26 of the T. Act, 1925, as amended by Law of Propertij {Amendment) Act, 1926, Sch.] Article 227. Kinds of Legacies. (1) A legacy is a gift by will of personal estate ; a devise is a gift by will of real estate. (2) Legacies are either specific or general. They are specific when the estate given is specifically identified ; they are general when the estate given is not specifically identified. When a general legacy is of money payable out of the general estate it is called a pecuniary legacy. When it is of money payable out of specifically identified estate it is called a demonstrative legacy ; when it is of the re- mainder of the personal estate after payment of the testator's debts and satisfaction of the other legacies, it is called a residuary legacy. (3) A specific legacy is adeemed (or defeated) so far as the testator disposed of the specific estate included in it during his life ; a general legacy is not liable to ademption in this way. (4) All devises were specific [but it would seem a devise if made by way of a residuary gift is to be treated for administrative purposes as merely residuary.'] 686 A Digest of Equity. Paragraph (2). As ordinary examples of the different kinds of legacies the following may be given : " My gold watch to A.," a specific legacy ; " £1,000 to B.," a general pecuniary legacy ; " £1,000 out of the proceeds of the sale of my Midland Stock to C," a general demonstrative legacy ; "all the rest of my personal estate to D.," a general residuary legacy. But a sum of money may be a specific legacy if it is specifically identified. Thus, " I leave to X. the £1,000 owed by X. to me," is a specific legacy {In re Wedmore, [1907] 2 Ch. 277). And a specific part of a residuary bequest may also be so {In re Maddock, [1902] 2 Ch. 220), and so may a gift generally described, as " all my stock in the Midland Eailway," even though that will include not merely the stock the testator had at the time he made his will, but any subsequently bought by him {In re Slater, [1907] 1 Ch. 665). On the other hand, what is in effect a legacy of specific property may be a general legacy. Thus, a gift of " £1,000 in Midland Eailway Stock " is a general legacy even though at the time the testator made his will he had just £1,000 Midland Eail- way Stock {Sihley v. Perry (1802), 7 Ves. 523). If the gift had been of " mj/ £1,000 Midland Eailway Stock " the gift would have been specific. Paragraph (3). This division of legacies is made for two purposes. The first is in connection with their liability to be defeated. If a testator before his death disposes of an article which he has specifically bequeathed, that bequest is adeemed or cut out of his will, there being nothing among his assets at his death on which it can operate {In re Slater, [1907] 1 Ch. 665). But general or demonstrative legacies are not liable to be defeated in this way. A general legacy is not adeemable since it is the bequest of nothing except a payment out of the assets, and so is payable as long as there are assets to pay it. A demonstrative legacy is not adeemed by the disposal of the property out of which it is to be paid during the testator's life : after, such disposal Distribution of Assets. 587 it ranks simply as a general legacy (see Strahan's Wills, pp. 25-27). As to residuary legacies, see In re Walker, [1921] 2 Ch. 63. The second piu-pose for which this division of legacies is made is in connection with what is called abatement, that is, the reduction or defeat of legacies when there are not sufficient assets to pay both them and the testator's debts and liabilities in full. This is dealt with in the next Article. Paragraph (4). There is no division of devises into specific and general devises. A gift by will of real estate, no matter in what terms it is described, is always specific. Thus a residuary devise — " all the rest of my freeholds I devise to B." — is treated as a specific devise of all the freeholds not otherwise disposed of {Lancefield v. Iggulden (1874), L. E. 10 Ch. 136). [But now it appears that for the purpose of prior liability for the payment of a testator's debts, a residuary devise ranks with a residuary bequest {see infra, p. 588).] Article 228. Order of Distribution of a Testator's Estate. (1) Under the old law when a person died solvent leaving a will, so soon as his executor had paid all the debts and discharged or provided for aU the Uabihties, his duty was to transfer the personalty and realty remaining to the persons by law entitled to it respectively. In order to ascertain who these persons were he is bound to "marshall" the deceased's assets, that is, to hold that as between the beneficiaries 588 A Digest of Equity. the debts and liabilities have been paid out of the assets in the following order : (i) The general personal estate not be- queathed at all or bequeathed by Avay of residue only. (ii) Real estate devised for the payment of debts. (iii) Real estate descended. (iv) Real estate devised either specifically or by way of residue and charged with the payment of debts. (v) General pecuniary legacies including annuities. (vi) Specific legacies, and real estate devised either specifically or by way of residue and not charged with the payment of debts. (vii) Property specifically appointed by the will under a general power of appoint- ment. [(2) Under the new law the order is : (i) Property undisposed of by the will. (ii) Property not specifically devised or be- queathed but included {either by a specific or general description) in a residuary gift. (iii) Property specifically appropriated by the will for the payment of debts. (iv) Property charged with or devised or be- queathed {either by a specific or general description) subject to a charge for the payment of debts. Distribution of Assets. 589 (v) The fund reserved for the payment {if any) of pecuniary legacies. (vi) Property specifically devised or bequeathed rateably according to value. (vii) Property appointed by will under a general power, including the statutory power to dispose of entailed interests rateably and according to value.] It is to be noted that the order of Uability stated in this Article obtains only as between the beneficiaries them- selves. A creditor who obtains judgment against an executor or administrator is entitled to resort to any part of the estate to satisfy the judgment debt. If he seizes, for example, property specifically bequeathed, then the legatee to whom it is bequeathed is entitled to be com- pensated at the expense of all those entitled to any of the property ranking after, and therefore liable before, specific legacies. And also it applies only in so far as the testator does not indicate an intention to the contrary. Thus a direction in the will that certain legacies shall be first paid in full gives such legacies priority over all others {Be Hardy (1881), 17 Ch. D. 798). There is this qualification. A widow's right to dower out of her husband's real estate if not defeated under the Dower Act, 1833, still takes precedence of the claims of both creditors and beneficiaries {Northern Bank v. McMackin, [1909] 1 I. E. 874). This, however, can now only arise when the husband dies intestate in respect of the land in question. [Under the neiv law the widow's right to dower is abolisJied. See Article 229b.] Paragraph (1). (i) The residuary personalty — together with personalty not disposed of at all by the will — was primarily hable for the payment of the testator's debts as between the bene- ficiaries under his will. And in order to relieve it of this primary hability it was not sufiicient that other property 590 A Digest of Equity. is charged with or given in trust for the payment of debts ; the residuary personalty must be specifically exonerated from them [Powell v. Biley (1871), L. E. 12 Eq. 175 ; Be Banks, Banks v. Bushridge, [1905] 1 Ch. 547). But what is in form a general residuary bequest may by qualifying words be changed as to all or part into a specific bequest. Thus in Be Maddock, Llewelyn v. Washington, [1902] 2 Ch. 220, a testatrix devised and bequeathed all the residue of her property to A. and B., her executors, to pay her debts and then for the benefit of A. By a secret agreement made with A., A. was to hold such part of the residue as consisted of savings out of income made by the testatrix during her hfe in trust for C. : — Held, that this agreement must be read into the will, and that the legacy to C. was a specific legacy. This rule was carried so far formerly that it was held that where the testator had mortgaged freeholds or chattels real or where he had contracted to purchase them and had not paid the purchase money, then the heir, devisee, or legatee who took such freeholds or chattels real was entitled to have the mortgage debt or the purchase money paid out of the general residuary personalty unless the mortgage debt was " ancestral," that is, the deceased was not the person who contracted it, but had hiniself succeeded to the property subject to the debt. The law as to that was altered by Locke King's Act, 1854, as amended by the Acts of 1867 and 1877. These Acts make the freeholds and chattels real devolve cum onere, unless a contrary intention appears from the will. A mere direction to pay the testator's debts is not a sufiicient indication of such a contrary intention. The indication must be specific. But it need not be express. Thus a direction that the devisees of some mortgaged properties shall take them subject to the mortgage debts will be a sufficient indication that the devisees of other mortgaged properties as to which there is no such direction are intended to take them free from debt (In re Valpy, [1906] 1 Ch. 531), and a direction to pay mortgages does not amount to a direction to pay a Distribution oj Assets. 591 vendor's lien {Barnett v. Beirnstein, [1925] Ch. 12) ; and again an express direction need not be a general exonera- tion. Thus a direction that the mortgage debt in one property shall be paid out of a certain fund is an exonera- tion of the mortgaged property only so far as the fund is sufficient to pay the mortgage debt {In re Birch, Hunt v. Thorn, [1909] 1 Ch. 787 ; and see In re Major, [1914] 1 Ch. 278). [These acts and the effect o/ these decisions are now incor- porated in sect. 35, Ad. of Est. Act, 1925.] In order, however, that these Acts may apply there must be a charge or lien on the freehold or chattel real. For example, if A. sells land to B. and agrees to convey on receiving half the purchase money and to accept B.'s personal security for the remainder, then there is no lien for the unpaid purchase money on the land, and on B.'s death his debt to A. will be payable primarily out of his general personalty (see Be Cockcroft (1883), 24 Ch. D. 94). A rent issuing out of a leasehold estate is a chattel real within this Act {Be Fraser, Lowther v. Fraser, [1904] 1 Ch. 111). These Acts do not interfere with a mortgagee's right to sue the executors on the deceased's covenant. When he does so the legatees have a Uen on the land so far as the personalty has been taken away by payment of the mortgage debt (Webh v. Smith (1885), 30 Ch. D. 192). The right to sue the executors personally is barred after six years from the distribution of assets, but it is kept aHve against the mortgagor's estate by the fact that the devisee of the mortgaged land has paid the interest as it accrued due {In re Eustace, [1907] 1 Ch. 330). And the Acts have application only to successions to mortgaged property mortis causd. Where the mortgaged property was con- veyed by the deceased inter vivos, even though the conveyance was voluntary, then, unless it was expressly conveyed subject to the mortgage debt, the grantee is entitled on the death of the grantor to have the mortgage debt paid out of his personal estate {In re Darby's Estate, [1907] 2 Ch. 465 ; and see In re Wilson, [1908] 1 Ch. 839). 592 A Digest of Equity. (ii), (iii), (iv), and (v) The order in which these different properties become liable for debts is well shown in Be Eoberts, Boberts v. Boherts, [1902] 2 Ch. 834. There a testator after appointing two executors directed that his debts should be paid as soon as possible. Then he made a specific bequest of certain farm stock, and " the following pecuniary legacies," to X. £500 and to Y. £200. The residue of his personal estate he bequeathed to his executors. He then devised one farm to A. and another to B. He owned at his death a third farm which was not disposed of by his will. His residuary personalty and the proceeds of the undevised farm, which the executors sold, being insufficient for the payment of the testator's debts and liabilities, the rest of the personal estate was applied for this purpose. Then X. and Y. claimed that A. and B. should make up to them their legacies on the ground that, as they had taken the farms subject to the direction to pay the testator's debts, the devisees were under a prior liability for such payment : — Held, that the claim of X. and Y. was good. Two further points with regard to general or pecuniary legacies are to be noted. In the first place they were payable out of the personal estate only unless they were expressly charged upon the land (Bobertson v. Broadbent (1883), 8 App. Gas. 812, at p. 815). And when they were expressly charged upon land and payable exclusively out of such land, they became specific legacies, and were adeemed by the testator disposing of such land during his life (Newbold v. Boadknight (1830), 1 R. & My. 677). Paragraph (2). [It will be observed that tlie new law follows very closely on the heels of the old law as to the order of liability for the payment of the deceased's debts subject to this great difference that realty and personalty are now under the same liability for such payment. That probably was all that was intended by the legislature, but one or two points where difficulties may arise may be noted. Distribution of Assets. 593 (1)^5 to (ii) is property subject to a general power of appointment (including property held in tail by the deceased) if executed by a residuary clause in the will (the new general power over fees tail seems to come within sect. 30 of the Wills Act, 1837) now to be treated as formerly as a residuary gift ? If so (vii) is extremely badly drafted. (2) Formerly pecuniary legacies were not payable out of realty unless charged expressly upon it. Apparently they are henceforth to be payable out of realty equally with personalty without any such charge. (3) There is no mention of donationes mortis causd or the widow's paraphernalia. Are these henceforth to be free from liability on the deceased's debts or are they not mentioned because strictly speaking they — or at any rate donationes mortis causd form no part of the deceased's estate '! (4) Formerly property appointed under a power occupied this privileged position {see vii) only when it was specifically appointed by the donee's will. This is the order set out in Part II of the First Schedule of Ad. of Est. Act, 1925.] Article 229. Order of Distribution of an Intestate's Estate. A. Under the old law : (1) When a person died intestate and letters of administration were granted, it was the duty of his administrator to pay his liabihties, applying all the personal estate for that purpose before appljdng any of the real estate, and he could apply the real estate to the payment of the intestate's debts only subject to the intestate's widow's right to dower out of it. So soon as the debts were paid, he should pay the widow (if any) if the intestate had died cMldless, £500, raised rateably out of the personal and real estate and then distribute the personalty among the widow (if any) and the next of kin of the D.E. 2 Q 594 A Digest of Equity. deceased according to the Statutes of Distribu- tions, and convey the real estate subject to the widow's right to dower to the heir. (2) Where a testator died partially intestate and without next of kin, then in the absence of any indication to the contrary, his executors were as against the Crown entitled to his un- disposed of personalty. B. Under the new law : [(3) On the death of a property owner intestate all his real and personal property is equally liable for his debts which are to be paid pari passu out of a joint fund to arise from the sale of his realty and the conversion of his personalty. The widow's right of dower is abolished and a first charge is made on the joint fund after his debts have been paid of £1,000, free of death duties, whether the deceased left children him surviving or not. The personal representatives are then to distribute the residue of the joint fund among the widow and the statutory next of kin subject to this that no infant next of kin shall take an indefeasible share of the residue until he or she attains twenty-one or murries under that age. Until then the share of such infant is to be held in trust for him or her by the administrators or by trustees appointed for this purpose. The common law heir of the intestate has no claim to any share of the realty, but if he takes any interest in any part of the intestate's estate it must be as one of the next of kin. [(4) The Executors Act, 1830, is repealed and where there is no next of kin any residue in case of a deceased person fully intestate after payment of his debts and in case of a deceased person partially intestate after payment of his debts and legacies Distribution of Assets. 695 goes to the Crown as bona vacantia, unless it appears from the will that the testator intended the executors to take.] Paragraph (1). On intestacy the personal estate of the deceased was primarily liable for his debts, subject to the provisions of the Land Charges Acts, 1854 to 1877 (now sect. 35 Ad. of Est. Act, 1925), which apply to cases of intestacy as well as where the deceased left a will. The £500 payable to the widow of a childless intestate was a charge on the deceased's realty and personalty created by the Intestates' Estates Act, 1890. It was a first charge and is payable rateably out of his net realty and personalty {In re Heath, [1907] 2 Ch. 270), and was in addition to her right to a half share of the personalty and to dower out of the realty. The Act does not apply where there is only a partial intestacy, but it does apply where the deceased made a will, if such will had no effect owing to all the beneficiaries predeceasing the testator (In re Cuffe, [1908] 2 Ch. 500). Paragraph (2). Formerly the executors were entitled to the undis- posed of personalty even as against the testator's next of kin, but this was altered by the Executors Act, 1830. That Act did not affect their claim as against the Crown when the testator left no next of kin unless the testator indicated in his will that he did not intend the executors to benefit. Such an indication was inferred from his leaving them as executors equal legacies but not from his leaving them unequal legacies [Attorney-General v. Jeffreys, [1908] A. C. 411). Paragraph (3). [Under the new law realty and personalty are made a joint fund for the payment of debts and for distribution among the statutory next of hin of the intestate. On the death of an owner of realty and personalty intestate his realty and personalty vest in the judge of the Court of Probate. On 596 A Digest of Equity. the apfointment of an administrator the whole estate vests in him, the realty on a trust for sale, the personalty on a trust to call in and convert to money {sect. 33, Ad. of Est. Act, 1925) with power to postpone such sale and conversion as the administrator may thinh fit. (This rule applies to cases of partial intestacy when the executors of the will are in the same position as the administrators in case of complete intestacy.) Out of this fund the debts are to be paid without distinction as to whether the fund arises from the sale of realty or the conversion of personal investments. Hereditary succession is altogether abolished and any claim the common law heir can have to a share of the intestate's estate must henceforth be as one of his statutory next of kin. Estates by the curtesy in a deceased wife's estate are also abolished and so is escheat to the Crown or the Duchy of Lancaster or the Duhe of Cornwall or to any mesne lord (sect. 45 Ad. of Est. Act, 1925).] Paragraph (4). [The Executors' Act is repealed by the Ad. of Est. Act, 1925, Second Schedule, and so all undisposed of residue of the estate of a testator ivho dies without next of kin will go to the Crown as bona vacantia. "Intestate " in the Ad. of Est. Act, 1925, includes not merely a person who dies without a valid will but one who dies leaving a vnll which does not dispose of his whole estate so far as the estate is not disposed of by the will {sect. 55, vi). The case of partial intestacy however differs from com- plete intestacy in one respect : Where there are issue of the testator taking interests under the will they must bring these into hotchpot when the undisposed of assets are distributed. Where there are no issue it now lies on the executors who claim the undisposed of estate to show that the testator intended them to take. Formerly it lay on the Crown to show they were not intended to take.] Article 230. Rights of Legatees to follow Assets. (1) Where the assets are insufficient, after the payment of the debts, to pay the legacies in Distribution of Assets. 597 full, then a legatee whose legacy was Uable to abate but has been paid in full must return to the other legatees the amount by which it should abate. (2) Where a pecuniary legacy is postponed and the executors set apart and invest a por- tion of the assets to meet it and distribute the rest, then, if when the time for payment arrives the investments are not in value equal to the amount of the legacy, the legatee is entitled to recover the difference from the residuary legatee. (3) Any legatee whose legacy has not been paid in fuU is entitled to follow the assets into the hands of a voluntary assignee of the per- sonal representatives or a purchaser for value who knew that the assignment to him was intended to be in fraud of the legatees. Paragraph (1). This right to follow assets paid away to co-legatees arises only where the assets are ah initio insufficient to pay all the legatees in full. When the assets were sufficient to do so at the time the co-legatees were paid, and the subsequent deficiency arose through the default of the executor, no such right exists {Fenwick v. Clarke (1862), 4 De G. F. & J. 240 ; Be Wilson (1890), 45 Ch. D. 249). Paragraph (2). A legacy was given to a person contingently on his attaining a certain age. No interest was given in the meantime. The executor set aside what he thought would be sufficient to pay the legacy at the time of payment. He invested this sum. The securities depreciated, and when the legatee reached the age in question the securities were not sufficient to realise the amount of the legacy : — 598 A Digest of Equity. Held, that the legatee was entitled to have that amount made up by the residuary legatee, and that the executor, having acted reasonably, was not personally liable {Be Hall, Foster v. Metcalfe, [1903] 2 Ch. 226). Article 231. Payment of Interest or Income upon Legacies. (1) An immediate devise or an immediate specific legacy carries with it all income accru- ing upon the property devised or bequeathed from the death of the testator, and it must bear all the expenses reasonably incurred by the executors in preserving it tiU their assent to it can be given. An immediate general or demonstrative legacy carries no income or interest till the end of a year after the testator's death. If it is then stiU unpaid, the legatee is entitled to interest at the rate of 4 per cent, upon it from that time until payment, even though being a demon- strative legacy it is made payable out of a reversionary fund. (2) A contingent devise or legacy (except a contingent residuary [devise or] legacy) carries neither income nor interest until the time arrives to which it is postponed. (3) The above rules are subject to the further rule that a general legacy carries interest from the death of the testator : Distribution of Assets. 599 (i) Where the legacy (whether vested or contingent) is expressly given for the maintenance of an infant or on condi- tion the legatee maintains the infant. (ii) Where it is given by a father or person in loco parentis to the legatee and the legatee is an infant, then, in the absence of any other provision for the maintenance of the infant, interest on the legacy wiU be given for mainten- ance, whether the legacy is vested or contingent on the infant attaining twenty-one. (iii) Where it is given expressly or by con- struction of law in satisfaction of a debt due by the testator to the legatee. The year following the death is called the " executor's year." It is the period allowed to him to administer the assets, during which the legatees have no right prima facie to claim payment of their legacies. If, however, the executor has in fact got in and reahsed all the assets and paid all the debts, it is his duty to pay the legacies whether the year has expired or not. But this is subject, of course, to the provisions of the will. Thus if the will contains a direction to pay the legacy at a certain time, interest runs from that time, or to pay it out of a reversionary fund, interest runs from the time the fund falls into possession {In re Gyles, [1907] 1 1. E. 65 ; of. In re Yates (1907), 96 L. T. 758). Paragraph (1). In In re Pearce, [1909] 1 Ch. 819, the testator left certain large residences with their furniture, horses, car- riages, etc., to a devisee. The executors, while winding up the estate, incurred certain expenses through keeping a number of servants to preserve and care for these 600 A Digest of Equity. residences and chattels : — Held, that these must be paid not out of the residuary estate but by the devisee. General and demonstrative legacies do not carry interest in the absence of express direction until the end of the executor's year, but then in the absence of express direction they do bear it, even when in the case of demon- strative legacies they are made payable out of a fund which has not at the end of the year vested in possession {Walford v. Walford, [1912] A. C. 658 ; and see In re Palfreeman, [1914] 1 Ch. 877). Paragraph (2). A contingent residuary bequest carries intermediate interest or income unless this is expressly given to some other legateee since, in the absence of such a gift, the intermediate interest or income forms part of the residuary personalty (Be Adams, [1893] 1 Ch. 329). A contingent devise did not for the same reason {Lord Bective v. Hodgson (1864), 12 W. R. 625). A contingent residuary gift of mixed realty and personalty carries the inter- mediate income {Be Burton, Banks v. Heaven, [1892] 2 Ch. 38). See Under, and Stra. Inter, of Wills, p. 214. As an example of a legacy left on condition the legatee maintained infants, see In re Bamsay, [1917] 2 Ch. 64. [Under the new law a contingent devise of residuary realty primd facie carries the income, L. of Prop. Act, 1925, s. 175.] Paragraph (3). (i) As regards a legacy expressly left for the main- tenance of an infant, see In re Churchill, Hiscoch v. Lodder, [1909] 2 Ch. 481. (ii) As regards a contingent legacy by a parent to an infant but not expressly given for maintenance, see In re Abrahams, Abrahams v. Bendon, [1911] 1 Ch. 108. There the contingencies on which parts of the legacy were to become vested were the legatees attaining the ages of twenty-five and thirty. The court held that as these contingencies had nothing to do with infancy, the legacy did not carry interest from the testator's death. (iii) See supra, Article 101. ( 601 ) CHAPTER 5. The Liability of Personal Representatives. SUMMARY. PAGE Aeeicle 232. Actions against personal representatives 601 „ 233. Liabilities similar to those of trustees ■ 605 Article 232. Actions against Personal Representatives. (1) An action for the administration of the assets of a deceased person by the Chancery Division (as reUef against executors or adminis- trators) may be brought — (i) By any creditor whose debt is actually due. (ii) Where the deceased left a will by any legatee or devisee whose interest under the will is not merely expectant. (iii) Where the deceased died whoUy or partly intestate by any of his next of kin or heir-at-law. (2) When such an action is brought the personal representatives may — (i) Pay the debt or legacy (if specific or pecuniary) with costs, when the action will be dismissed. 602 A Digest of Equity. (ii) Admit assets, when judgment for the debt or legacy (if specific or pecuniary) will be given. (iii) Contest the plaintiff's right to judgment for administration, when the court wiU grant such judgment only if it appears such a course is desirable. (iv) Submit to a judgment for administra- tion. (3) Upon an application to the Chancery Division the court may — (i) Order that the application shall stand over for a certain time and that mean- while the personal representatives shall render to the appHcant a proper state- ment of their accounts, with an inti- mation that if this is not done they may be made to pay the costs of the proceedings. (ii) When necessary to prevent proceedings by other creditors or by persons bene- ficially interested, make the usual judg- ment or order for administration with a proviso that no proceedings are to be taken under such judgment or order without leave of the judge in person. Formerly the administration of the estates of deceased persons lay within the jurisdiction of the Ecclesiastical Courts. The Court of Chancery early acquired con- current jurisdiction which Lord Hardwiokb rendered practically exclusive by restraining proceedings before an Ecclesiastical Court where there were pending pro- ceedings in Chancery. By the end of the eighteenth century the jurisdiction of Ecclesiastical Courts as to administration had become obsolete, though it continued Liabilities of Personal Befresentatives. 603 as to probate and letters of administration till the passing of the Court of Probate Act, 1857, which (sect. 3) aboHshed the jurisdiction as to these matters of " all eccle- siastical, royal pecuhar, peculiar, manorial and other courts and persons in England," and vested it in the Court of Probate, now merged in the Probate, Divorce, and Admiralty Division of the High Court of Justice (Judicature Act, 1873, sects. 3 and 16). Under the jurisdiction of the Court of Chancery, the liability of personal representatives and the nature of the relief given against them (see note to paragraph (1) ) have been closely approximated to those of trustees. Paragraph (1). The procedure with regard to administration actions is regulated by Order 55 of the Eules of the Supreme Court. An administration action may be commenced either by writ or by originating summons (rules 3 and 4). When it is commenced by writ the decision is called a judgment, when by originating summons an order. Under rule 3 the persons named in paragraph (1) and also the personal representatives can, without asking for general administration, apply to the court by originating summons for (a) the determination of any question affect- ing the rights or interests of the person claiming to be creditor, devisee, legatee, next of kin or heic-at-law or cestui que trust, (&) the ascertainment of any class of creditors, legatees, devisees, next of kin, or others, (c) the furnishing of any particular accounts by the executors or administrators, and the vouching (when necessary) of such accounts, {d) the payment into court of any money in the hands of the executors or administrators or trustees, (e) a direction to the executors or administrators or trustees to do or abstain from doing any particular act in their character as such executors, administrators, or trustees, (/) the approval of any sale, purchase, compromise, or other transaction, (g) the determination of any question arising in the administration of the estate or trust. 604 A Digest of Equity All these matters are now usually decided without any administration order being made. It is nevertheless customary to ask in summonses under rule 3 for adminis- tration " as far as the same may be necessary " in order to give the court a wider power to deal with the specific matters raised in the summons. Since the Land Transfer Act, 1897, a creditor suing for administration of his deceased debtor's real estate need not sue on behalf of himself and all the other creditors {In re James, James v. James, [1911] 2 Ch. 348). Paragraph (2). (i) and (ii) As to payment by personal representatives and dismissal of action, see Be Greaves (1881), 18 Ch. D. 551 ; Manton v. Boe (1844), 14 Sim. 353. As to judg- ment for the plaintiff for the amount of the legacy or debt when the personal representative admits he has assets to meet it, see Seton on " Judgments and Orders," chap. XLIV. sect. III. (iii) Formerly there was no discretion in the court to refuse an order or judgment for administration (per Sel- BORNE, L.C., Ewing v. Orr Ewing (1883), 9 App. Cas. 34 ; Stra. L. C, p. 11). Now by rule 10 of Order 55, E. S. C, it is not obligatory on the court to make such order or judgment if the questions between the parties can be properly determined without it. Paragraph (3). Where the administration suit is due solely to the fact that the personal representatives or trustees wrongfully refused to produce proper accounts, the court may, at the hearing, direct that the costs of the application be borne by them personally {Be Skinner, Cooper v. Skinner, [1904] 1 Ch, 289 ; Stra. Lead. Cas., p. 138). Liabilities of Personal Bepresentatives. 605 Aetiole 233, Liabilities similar to those of Trustees. (1) Generally the UabiKties of executors who have taken probate and of administrators are those of other trustees, that is : (i) They are chargeable only with assets which they have actually received or which they might have received but for their own wilful default. (ii) Once they are chargeable with assets they can discharge themselves only by showing that they disposed of the same in regular course of administration, subject to this — (a) that in an action against executors to recover a legacy they can after twelve years plead isect. 8 of the Real Property Limitation Act, 1874, although they have not disposed of the same in due course of adminis- tration ; (6) in an action of devastavit they can, when six years have elapsed since the devastavit, plead sect. 3 of the Statute of Limitations, 1623. (2) The rights to consult the court and to claim a discharge on completion of their duties given to trustees are given equally to personal representatives. 606 A Digest of Equity. (3) The protection given to trustees in case of innocent breach of trust by way of — (i) limitation of action, (ii) indemnity, and (iii) excuse, apphes equally in the case of personal repre- sentatives. Paragraph (1). It seems uncertain whether an executor who has acted in fact as executor, but who has not taken probate, can be held liable for assets lost through his wilful default. Thus, in Be Stevens, Cooke v. Stevens, [1898] 1 Ch. 162, a testator died leaving as part of his effects a pohcy of insurance. This policy was pledged by him for more than its value. The debt bore interest at 5 per cent. The insurance company refused to pay the amount of the insurance until the testator's will was proved, and the executors delayed taking probate for seven years. During this time they never had sufficient assets to pay off the debt on the policy. When they t^ok probate the insurance company paid the amount insured for, with interest at the rate of 1 per cent, per annum for the seven years. A residuary legatee attempted to make the executors liable for the difference between the 1 per cent, received and the 5 per cent, paid : — Held, that they were not liable. (i) Any improper dealing by which assets are lost to the deceased's creditors or beneficiaries is called a devas- tavit on the part of the personal representative. When he is proceeded against for devastavit and it is alleged that the devastavit arose through fraud or wilful default, the action should be brought by writ and the question should be decided before judgment. If the judgment is against the personal representative, a decree is made for Liabilities of Personal Bepresentatives. 607 him to account on the footing of wilful default. On the other hand, if no such allegation is proved, the court orders merely a common account. But where a devastavit appears on the face of a common account it may he charged against him {Be Stevens, Cooke v. Stevens, supra, per LiNDLBY, L.J., at p. 172). (ii) When a personal representative is sued for a deht or legacy which he admits but denies he has assets to meet, he pleads either plene administravit or plene administravit prceter. By the first is meant that he has entirely disposed of the assets in due course of adminis- tration ; by the second that he has so disposed of them all, except a portion which he reserves against a liability having priority to the plaintiff. It is to be remembered that besides the right to plead the Statutes of Limitations (as to which see Stra. Wills, pp. 100, 101), due course of administration is different in the case of a personal representative from what it is in the case of a trustee. A trustee has not the power to retain his own debt, to prefer one creditor's debt to another's, to pay a debt not bearing interest while leaving unpaid one bearing interest, etc. And executors, unlike trustees, need not necessarily act jointly.. Paragraph (2). As to the right of an executor to consult the court, see Sharp v. Lush (1879), 10 Ch. D. 468. Paragraph (3). Thus, in Be Kay, Mosley v. Kay, [1897] 2 Ch. 518, the testator died in June, 1894. His assets amounted to £22,000, and his debts as then ascertained to about £100. By his will he left a legacy of £300 to be paid at once to his widow and an annuity of £100. In August M. made an indefinite claim for rents which the testator had received as his agent and not accounted for. In 608 A Digest of Equity. November advertisements for creditors to send in their claims were issued. In December M. commenced an action against the executor claiming an account on the footing of wilful default on the part of the testator. The executor without obtaining the consent of the court defended the action, continuing meanwhile to pay the widow the £100 annuity. In April, 1896, judgment for £26,000 was given in the action against the executor : — Held, that sect. 3 of the Judicial Trustees Act, 1896 {supra, Article 77) applied ; that the payment of the £300 immediate legacy to the widow and of the £100 annuity till action brought was reasonable ; but that the payment of the annuity after action brought was unreasonable and a devastavit and should not be relieved against. [Note : Sects. 4, 12, 14, 10, 16, 18, 20, 19 and 11, of the Ad. of Est. Act, 1925, have been repealed and re-enacted by sects. 159-167 Jud. Act, 1925.] INDEX A. ABATEMENT, legacy, of, 587. specific performance with, 463, 464. ACCOUNT, action for, 516 — 521. annual rests, with, 373. damages, in lieu of, 500. equitable remedy by, 418, 429. interest, allowance of, 499. interlocutory injunction, in lieu of, 499. jurisdiction to order, 499. mortgagor and mortgagee, between, 372. open, 521. order of court for, 521 — 523. purposes for which ordered, 516 — 521. settled, 621. stated, 521. surcharging and falsifying, 522. trustee's duty to render, 140. wilful default, on footing of, 523, 524. ACQUIESCENCE, account, right to, barred by, 522. breach of trust, in, 199. executor carrying on business, in, 392. laches, by. See Delay ; Laches. ACTION, account, for, 516 — 521. personal representative, against, 601 — 604. trustee, against, limitation of, 196 — 200. ACT OE PARLIAMENT, rendering property unassignable, effect of, 88 — 89. D.B. 609 2 b 610 Index. ADEMPTION, legacies, of, 272. parol evidence as to, 281, 282. portion, of, 274—277. what it is, 265. ADMINISTRATION, assets, of. See Administeation op Assets. cum testamento annexo, 555. de bonis rum, 548. durante minora (state, 555. • - effect of order on trustee's powers, 164, 165. generally, 516 — 537. limited, 555. who may claim, 555. ADMINISTRATION OF ASSETS, action for, 601 arrears of rent, 570. assets, meaning of, etc. See Assets. court, by, 561—566. creditors' rights in, 558, 560 — 580. devolution of assets, 539. distribution of assets, 582 — 600. donationes mortis causd, creditor's right to, 580. following assets, creditor's right as to, 577. legatee's right as to, 596. futiu^e and contingent liabilities, 583. generally, 538 — 545. insolvent estate, of, 566 — 570. legatee's right to foUow assets, 596 — 598. order of distribution of assets, 587 — 596. payment of liabihties and debts, 560 — 581. person of foreign domicile, of, 544. preferring debts, 577. retainer of debt against legatee, 578. retainer of debt by personal representative, 573. secured creditors, rights of, 571. statute-barred debts, 572. And see Exeoutoes and Administratoes. ADOPTION, breach of trust, of, by cestui que trust, 177. ADVANCEMENT, child, to, 274—277. powers of trustees, 156. AFTER-ACQUIRED PROPERTY, assignment of, 311. Index. 611 AGENT, improper profits, is trustee in respect of, 233. misrepresentation by, 396 — 398. notice to, effect of, 27. trustee's liability for act of, 179 — 184. AGREEMENT, in writing, variation by parol of, 463. not in writing, etc., specific performance of, 455—462, 463. AMBULATORY, trust, meaning of, 66. ANNUAL RESTS, accounts with, 373. APPOINTMENT, judicial trustee, of, 108. ordinary trustees, of, 96 — 98. public trustee, of, 109 — 115. receiver, of, 535. ARREARS OF RENT, in administration of assets, 570. ASSETS, administration of. See Administkation of Assbts. charges on, 560. creditors' rights over, 579 — 581. devolution of, 539 — 544. distribution of, 587, 596. legal and equitable, distinction abolished, 596. what are, 538. ASSIGNMENT, after-acquired property, of, 311. equitable interests, "jf, 41 — 47. ASSURANCE, charitable trust, on, 218 — ^220. infant, by, 407. voluntary, 407. ATTACHMENT, process of, 415, 476 — 477. 612 Index. B. BANKRUPTCY, administration of assets in, 666 — 570. married woman, of, 401. payment of deceased insolvent's debts, 570. settlor, of, 311. BARGAIN, expectant heirs, with, 312 — 314. BEARER SECURITIES, new law, 131. BENEFICIAL ESTATE, defined, 62. BENEEICIARY, defined, 62. BREACH OP TRUST, adoption by cestui que trust of, 177. cestui que trust party to, impounding interest of, 200. contribution as between co-trustees towards loss through, 190. generally, 178—204. limitation of actions by cestui que trust for, 196. relief against, 201. trustee's liability for, 184. criminal, 202. And see Tbust ; Trustee. C. CERTAINTY, charitable trust, in, 209 — 214. declaration of trust, in, 69 — 73. CESTUI QUE TRUST, adoption of breach of trust by, effect of, 177. breach of trust, party to, 200. defined, 62. determination of trust, by, 168. following trust property by, 173 — 177. impoimding interest of, when party to breach of trust, 200. infant, maintenance of, 154. life tenant, as, 166. trustee's Uability to, duration of, 200. volunteer, position of, 81, 82. And see Tetjst ; Trustee. Index. 618 CHANCERY DIVISION, jurisdiction of, 3—17, 314^317, 435. And see Court of Chanceby. CHARITY, certainty as to object of charitable trust, 209. charitable purposes, meaniag of, 205. enforcement of charitable trust, 220. land as subject-matter of charitable trust, 218. non-charitable purposes, trust for, position of, 84, 86. principles applicable to charitable trusts, 208. rule against perpetuities as applied to charitable trusts, 214. trust for purposes of, generally, 205 — 220. CHATTELS, specific performance of contract for sale of, 445. CLEAN HANDS, doctrine of, 419. CLOG ON RIGHT TO REDEEM, points with regard to, 338. COMPENSATION, specific performance with, 464 — 467 COMPROMISE, effect of non-disclosure on, 301. CONDITIONAL SALE, enforcement of, 342. mortgage, distinguished from, 342. CONEIDENCE, breach of, injunction to restrain, 505. CONFIRMATION, infant's contract, etc., of, 407. voidable gift, of, 318. CONSCIENCE, equity acts on, 6, 21, 413. CONSOLIDATION OF MORTGAGES, rules as to, 378. CONSTRUCTIVE TRUST, defined, 55, 56. generaUy, 229—236. 614 Index. CONTEMPT OF COURT, equitable remedy in case of, 415. CONTINGENT LEGACY, position of, 599, 600. CONTINGENT LIABILITIES, in administration, 576, 583. CONTRACT, breach of, injunction to restrain, 478 — 486. enforcement of, in equity, 440 — 486. fraud in connection with, effect of, 306. infant, of, 407. land, relating to, 444, 456. parol, 455—462. part performance of. See Paet Peefobmance. rescission of, 294, 305. specific performance of, 443 — 477. trust when a, 82. uberrimoB fidei, 299, 303. CONTRIBUTION, between trustees, 190 — 193. CONTRIBUTORY MORTGAGE, law as to, 131, 335. what is a, 333. CONVERSION, equitable, devolution on, 243 — ^264. doctrine of, 35. election to take property in actual state, 256. failure of purposes of, 250. Law of Property Act, 1925, effect of, xvi, 244. modes in which it arises, 243. times at which it arises, 246. trust for, xvi, 245. securities, of, by trustee, 131. COPYHOLD, abolition of, 49, 107. devolution on death of, 102, 543. CORPORATION, executor, 554. trustee, as, 91, 93, 97, 108, 109, 148, 153. COUNSEL, advice of, provision in settlement for, 72. Index. 615 COURT, administration of insolvent estate by, 567. COURT OF CHANCERY, abolition of, 14. court of conscience, was, 6, 21, 413. grant of equitable relief by, 4, 414. COVENANT, after-acquired property, to settle, 82, 311, 392. injunction to restrain breach of, 478 — 486. mortgage debt, to repay, 355. purchase and settle lands, to, 267. restrictive, 483. new powers of court, 486. CREDITORS, action by, against personal representatives, 601. administration granted to, 553. danationes mortis causd, right to, 580, 593. legatees, as, 272. notice to, to send in claims on distribution of assets, 582. now applies also to trustees, 582. preferential payment of, 567. trust for, position of, 84. trust to delay or defeat, 310. And see Debt. CRIMINAL LIABILITY, of fraudulent trustee, 202. CUM TESTAMENTO ANNEXO, grant of administration, 555. CURTESY, ESTATE BY THE, abolition of, 107. CY-PRS!S, meaning of, 210, 213. D. DAMAGES, equitable remedy by, 433. inadequate remedy, specific performance where, 443. injunction, in case of, 496, 498. inquiry as to, in specific performance, 470, 474. 616 Index. DEATH, conversion of trust property, after, 246. executor or administrator, of, devolution on, 548. trustee, of, devolution on, 123. DE BENE ESSE, original and equitable remedy, 426. DEBT, equitable, 235. infant's, 408. insolvent estate, 567. legatee, due by, retainer by executor against, 578. married woman, of, 398. preferential payment by personal representative of, 577. retainer of, by personal representative, 573. satisfaction of, 270. statute-barred, payment of, in administration of assets, 572. subrogation, right of, 391. DECLARATION OP TRUST, ambulatory till death, intended to be, 66. defined, 59. formalities in case of, 69. immediate operation of, 64. interpretation of, 73. inter vivos, 64. oral, validity of, 64. three certainties, necessity of, 73. will, by, 66. And see Trust ; Trusteb. DECLARED TRUST. See Trust. DEED, equity does not import consideration, in, 81. equity, in, position of, 83. not necessary for declaration of trust, 64. DEFAMATION, restraint of publication of Ubel, 512. DEFENCE, action against personal representative, to, 605. DELAY, defeats equity, 421. DELEGATION, trustee's power to delegate his duties, 146. new law, 147, 149. Index. 617 DEMANDANT, meaning of, 7. DEMONSTRATIVE LEGACY. See Legacy. DE SON TORT, EXECUTOR. See Exbcutoks and Adminis- trators. DEVASTAVIT, action of, 605. DEVOLUTION, assets, of, 539. executor or administrator, on death of, 548. trustee's death, on, 107. DISCHARGE, trustee's right to, 164. DISCLAIMER, trust, of, 99. DISCOVERY, originally within auxiliary jurisdiction, 13. DISCRETION OF COURT, amplify trustee's powers, to, 156. new law, 157. cestui que trust in possession, to put, 166. impound interest of cestui que trust, to, 200. injunction, to grant, 490. relieve trustee liable for breach of trust, to, 201. specific performance, to order, 434. DISCRETION OE TRUSTEE. See Trustee. DOMICILE, in relation to assets, 544. DONATIO MORTIS CAUSA, assets, how far, 539. creditor's right to, 580, 593. DOWER, abolition of, 594. 618 Index. E. EASEMENT, equitable, nature of, 23, 483. injunction to protect, 483. new law, 486. itsus and ususfructus compared with, 24. ELECTION, breach of trust, to adopt, 177. converted property, as to, 256. equitable doctrine of, 258. intention, how far based on, 262. EMERGENCY, grant of injunction in case of, 491. jurisdiction of court to give trustee special powers in case of, 156. EQUAL EQUITIES, law shall prevail in case of, 30. new law, 377. EQUITABLE CONVERSION. See Conveesion. EQUITABLE DEBT, improper profit is sometimes, 233. EQUITABLE EASEMENT. See Easement. EQUITABLE EXECUTION, by appointment of receiver, 528. EQUITABLE INTERESTS, assignment of, 41. defined, 23. determination of, 25. devolution of, 48. equitable personalty, 40. general rule as to, 48. incidents of, 48. married women, might be held by, 35. purposes for which created, 49. usus and ususfructus and, 24. who are bound by, 26. EQUITABLE LIEN, nature of, 386. vendors' and purchasers' liens, 388. Index. 619 EQUITABLE MORTGAGE, how created, 345. nature of, 333. subsequent legal mortgage may be defeated by, 29, 30. tacking abolished, 378. tacking, to legal mortgage, 377. EQUITABLE POWERS, of trustee, 149. EQUITABLE REMEDIES, characteristics of, 413 — 439. chief classes of, 426 — 439. damages as, 432. obtainable chiefly in Court of Chancery, 1 4, 424. subject-matter of, 436. And see Aooount ; Administration ; Damages ; Injunc- tion ; Receiver ; Rectification or Instkuments ; Specific Performance. EQUITABLE RIGHTS, nature of, 21 — 49. EQUITABLE WASTE, injunction to restrain, 501. EQUITY, acts in personam, 414. authority by which created, 4. auxiliary jurisdiction of, 12. concurrent jurisdiction of, 11. conscience, acts on, 413. deed in, position of, 81. delay defeats, 421. equities equal, law shall prevail, 30. exclusive jurisdiction of, 11, 12. follows the law, 48. fraud in, 240. fusion of law and, 14, 15. he who comes for equity must do equity and come with clean hands, 419. meaning of, 3. EQUITY OF REDEMPTION. See Mortgage ; Redemption. EQUITY TO A SETTLEMENT, of wife, 402. ESCHEAT, abolished, 49. 620 Index. ESTATE, equitable, 21 — 49. taken by trustees, 103. EVIDENCE, declaration of trust, of, 64. fraudulent prevention of furnishing of, 461. parol, as to satisfaction, etc., 281. presumed trust, to rebut or support, 223. EXECUTORS AND ADMINISTRATORS, authority, etc., of, 546. carrying on testator's business, 391. death of, devolution on, 548. executor de son tort, 552. letters of administration, grant of, 553. personal representative. See Pbbsonai, Repkbsentative. retainer of legacy against debt of legatee, 578. separate action of, 548. EXECUTORY AND EXECUTED TRUSTS, different interpretation of, 73. EXPECTANT INTEREST, agreement with reference to, position of, 314. P FACT, misrepresentation of, 297. mistake of, 289. FALSE REPRESENTATION, nature of, 306. when non-disclosure amounts to, 299. PEE SIMPLE, Law of Property Act, 1926, under, 40. PEE TAIL, incidents of, 40, 42. Law of Property Act, 1925, under, 539. PINE, enforcement of judgment by, 414. FOLLOWING ASSETS, cestui que trust's right as to, 173. creditor's right as to, 579. legatee's right as to, 596. Index. 621 FORECLOSURE, extent of right to foreclose, 382. interest allowed on, 383. jurisdiction of court to order a sale, 384. order of, 382. right of, meaning of, 343. when complete, 385. FORFEITURE, reUef against, 324—332. FRAUD, corrupt bargain for exercise of power, 315. equity, in, 312. law, in, 309. misrepresentation accompanied by, 306. passing off. See Passing Opf. preventing legal proof by, 461. repudiation of trust, in, 67. trustee, of, criminal liabiUty in case of, 202. FUNERAL EXPENSES, a first charge on assets, 560. G. GENERAL LEGACY, income and interest in case of, 598. what it is, 585. H. HARDSHIP, specific performance, with reference to, 451. HEIRS, bargains with expectant, 314. HIGH COURT OF JUSTICE, appointment of trustee by, 91 — 95. Chancery Division of. See Chakcery Division. I. ILLEGALITY, public poHcy, on grounds of. See Public Policy. trust tainted by, position of, 87. IMPERFECT OBLIGATION, trusts of, 84. 622 Index. IMPLIED TRUST. See Trust. IMPOUNDING cestui que trust's interest, in case of breach of trust, 200. IMPRISONMENT, enforcement of judgment by, 414. IMPROPER PROFITS, constructive trust in respect of, 233. trustee's duty not to make, 142. INCOMPLETELY CONSTITUTED TRUST, enforcement of, 80. INDEMNITY, executor's right to, 606. married women's property, from, 200. trustee's right to, 158. INFANT, advancement of, 656. cestui que trust, maintenance of, 154. contract, etc., of, 407. legacy to, 598. property of, care of, 404. trustee, not to be, 96. INFORMATION, cases where full disclosure required, 299. injunction to restrain disclosure of confidential, 505. trustee's duty to give cestui que trust, 140. INJUNCTION, abuse of rights, to prevent, 501 — 511. account and damages, election between, 500. account in lieu of, 499. breach of contract, to restrain, 478 — 486. confidential and private information, to prevent communica- tion of, 605 . damages in action for, 498. damages in lieu of, 433, 498. damages, undertaking as to, 494. equitable remedy by, 427. interim, interlocutory, and perpetual, 491. mandatory or positive, 427. passing ofi, against, 507. threats of proceedings, against, 511. undertalting as to damages, 498. waste, in case of, 501. wrongs, to restrain, 489 — 500. Index. 623 IN LOCO PARENTIS, effect of relationship of, 226, 277. INSOLVENT ESTATE, administration of, 567. new law, 567. INSURANCE, contract of, nature of, 299. mortgaged property, of, 364. trust property, of, 154. INTEREST, breach of trust, payable on, 185. foreclosure, allowed on, 383. legacy, on, 598. redemption of mortgage, payable on, 372. specific performance, in case of, 446. INTERESTS, EQUITABLE. See Equitable Inteeests. INTERMEDDLING, assets of deceased person, with, effect of, 552. trust property, with, effect of, 229. INTESTATE SUCCESSION, letters of administration on, 593. INVESTMENTS, trustee's duty as to, 125. J. JUDGMENT, debts, position in administration of, 562, 567. enforcement of, 414. interim and interlocutory, 491. specific performance, in case of, 470. trustee's powers, effect on, 164. JUDICATURE ACTS, effect of, 16. legal and equitable remedies under, 498. JUDICIAL TRUSTEE, appointment, etc., of, 108. JURISDICTION, in equity, generally, 16. 624 Index. LACHES, defeats equity, 421. LAND, assurance of, on charitable trusts, 218. LAW, equity and, auxiliary jurisdiction of, 12 — 14. equity and, concurrent jurisdiction of, 11, 12. fusion of equity and, 14, 15. misrepresentation and mistake, of, 287. LEASE, mortgagor's and mortgagee's powers to, 350, 351. trustee's power to, 150. LEASEHOLD, trustee's power to sell, 151. LEGACY, ademption of, 272. kinds of, 585. limitation of actions in case of, 605. payment of interest or income upon, 598. retainer by executor of, against debt of legatee, 578. And see Lboatbe. LEGAL ESTATE, equitable interests in relation to, 23. LEGAL RELIEF, grant of, 433, 498. LEGATEE, interest payable to, 598. marshalling assets in case of, 587. right to follow assets of, 596. And see Legacy. LIABILITY, deceased person, of, discharge of, 560—580. executor or administrator, of, 601, 605. trustee, of, 179. Index. 625 LIEN, common law, 386, 387. equitable. See Eqititablb Lien. vendor's and purchaser's, 391. AtvI see Retainer. LIMITATION OF ACTIONS, breach of trust, for, 196. co-trustees, between, 190. equity, in, 421. LIMITATION, WORDS OF, in executory trust, 76. new law, 39, 76. LIQUIDATED DAMAGES, penalty and, 324—332. LOCKE KING'S ACTS, liability of mortgaged land for mortgage debt, 590. M. MAINTENANCE. See Infant. MANAGER. See Receiver. MANDATORY INJUNCTION, nature of, 495. when issued, 497. MARRIAGE, brocage agreements, fraud by, 315. marital rights, fraud on, 315. trust in consideration of, formation of, 80 — 82. MARRIED WOMAN, election by, 260, 263. equitable interest, may hold, 35. equity to a settlement of, 402. mortgage of property of, 404. property of, Law of Property Act, 1925, and, 401. restraint on anticipation. See Restraint on Anticipation. trust for benefit of, 394. D.E. 2 S 626 Index. MARSHALLING ASSETS, beneficiaries, as between, 587 — 593. MAXIMS, delay defeats equity, 42 L equity acts in personam, 414 equity acts on the conscience, 413. equity follows the law, 48. equity regards that as done which ought to have been done, 243. he who comes for equity must come with clean hands, 419. once a mortgage always a mortgage, 337. only when equities are equal shall the law prevail, 30. qui prior est tempore potior est jure, 45. redeem up, foreclose down, 370. vigilantibus non dormientibus cequitas suhvenit, 421. volenti non fit injuria, 200. who seeks equity must do equity, 419. MISREPRESENTATION, agent, by, 306. cause of action, as, 306. fact, of, 296. fraudulent, 306. innocent, 305. law, of, 289. mistake and, 283. negative, 299. MISTAICE, fact, of, 283. fundamental mistake, 289. law, of, 287. misrepresentation, and, 283. MORTGAGE, consolidation of mortgages, 378. contributory, what it is, 333. debt, what it is, 333. deed, by, incidents implied when, 360. defined, 333. equitable, what it is, 333. equity, in, 333—335. of redemption defined, 334. now a legal estate, 335. foreclosure, generally, 343. when complete, 385. incidents express and implied of, 337 — 344. interest allowed on foreclosure, 383. and costs payable on redemption, 372. Index. 627 MORTGAGE— cowiiMMed law, at, 345. Law of Property Act, 1925, and, xxi, 335, 346, 347, 355, 381. legal, defined, 333. married woman's property, of, 404. notice of equitable, effect of, 26, 373. power of sale, 361. to appoint receiver, 365. to insure, 364. redemption, conditions of, 371. extent of right of, 368. interest and costs payable on, 372. reconveyance on, 380. right to redeem, 368—380. sale, order of court for, 384. sub-mortgage, what it is, 333. tacking, 376. new law, 377. MORTGAGEE, defined, 333. foreclosure by, 382. in possession, rights, etc., of, 352. insurance of property by, 364. personal remedy against mortgagor of, 355. position of, generally, 352. power of sale of, 361. receiver appointed by, 364. right to foreclose of, 382. MORTGAGOR, defined, 333. equity of redemption of, 337. in possession, rights, etc., of, 349. insurance of property by, 364. mortgagee's remedies against, 382 — 385. new law, xxi. position of, generally, 349. right to redeem of, 368—372. MORTMAIN, Mortmain and Charitable Uses Acts, 1888 and 1891, 218. N. NOTICE, actual and constructive, 31 — 37. assignment, of, effect of, 45. as to new law, 47. creditors, to, on distribution of assets, 582. 628 , Index. NOTICE— continued imputed, what it is, 33. new law as to, 34. purchaser, to, effect of, 26 — 34. solicitor of purchaser, to, effect of, 34. trust, of, effect of, 34. OPEN ACCOUNT, account stated, distinguished from, 521. P. PARLIAMENT, money voted by, vahdity of trust of, 84. PAROL AGREEMENT. See Spbcifio Pertoemance. PAROL EVIDENCE. See Evidence. PARTNERSHIP, causes conversion of property, 246, 248. uberrimoB fidei, is a contract, 299. PART PERFORMANCE, doctrine of, 455. evidence of, 458. PASSING OEE, restraint of, 507. PATENTEE, restraint of threatened proceedings against, 511. PECUNIARY LEGACY. See General Legacy. PENALTY, liquidated damages, and, 324 — 332. PENDENTE LITE, ADMINISTRATOR. See Administration OP Assets. Index. 629 PERFORMANCE, defined, 265. parol evidence as to, 281. part. See Pabt PERjORMAiiOB. presumption as to, 267. PERPETUITIES, RULE AGAINST. See Rule against Pekpetuities. PETITIONER, plaintifE distinguished from, 7. PLAINTIFF, petitioner or suitor, distinguished from, 7. PORTION, ademption of, 277—282. advancement, given by way of, 274 — 277. defined, 277. double, presumption against, 279. satisfaction of, 279. POWER, estates tail, to appoint, 589. fraud, on, 313. general, property appointed under, as assets, 593. property subject to, position of, 593. POWER OF ATTORNEY, payment by trustee under, 132. PRECATORY TRUST, use of the phrase, 69. PREFERENTIAL PAYMENTS. (See Administration of Assets. PRESUMED TRUST, principles appHcable to, 221 — 228. PRESUMPTION. See Double Portions. PROFIT. See Improper Profits. PROTECTION OF COURT, trustee's right to, 162. 630 Index. PUBLIC POLICY, trust contrary to, position of, 87. PUBLIC TRUSTEE, position and powers of, 109 — 115. PURCHASE, cestui que trust, from, by trustee, 299. third person's name, in, presumption in case of, 223. trustee's duty not to, from co-trustees, 144 — 146. PURCHASER, lien of, 373—376. notice to agent of, effect of, 27, 33. value, for, position of, 26 — 33. QUI PRIOR EST TEMPORE, POTIOR EST JURE, application of maxim of, 45. QUIA TIMET BILL, remedy by, 426. R. REAL PROPERTY, administration of assets, in, 518, 520 — 523. assimilation of law of, to that of personal property, Foreword, equitable interest in, as personalty, 35, 36. law, in, 35. Law of Property Act, 1925, and, 49, 50. REAL REPRESENTATIVE, executor is, since Land Transfer Act, 1896, 522, 523. RECEIVER, appointment of, 528. equitable remedy by, 428. jurisdiction to appoint, 525. mortgagee's power to appoint, 365. objects of appointing, 528. receiver and manager, appointed as, 525. RECONVEYANCE, on redemption of mortgage, 380. Index. 631 RECTIFICATION OF INSTRUMENTS, equitable remedy by, 430. REDEMPTION, clog on right of, 368. conditions of, 371. equity of, meaning of, 345. essential characteristic of mortgage, 337 — 344. extent of right of, 368. interest and costs payable on, 372. reconveyance on, 380. redeem up, foreclose down, maxim of, 371. right to redeem, 368. time of, 343. RELIEF AGAINST FORFEITURE, generally, 324—332. mortgage, under, 326, 333. RELIEF, EQUITABLE. See Equitable Relief; Equitable Remedies. REMEDIES, legal and equitable, 413 — 436. And see Action ; Equitable Remedies. RENT. arrears of, on administration, 570. RESIDUARY DEVISE, now ranks with residuary bequest, 588, 592. RESIDUARY LEGACY, primarily hable for debts, formerly, 588. RESTRAINT ON ANTICIPATION, law as to, 398. RESTRICTIVE COVENANT, injunction to enforce, 483. new law, 486. RESULTING TRUST, meaning of, 56. RETAINER. See Exeoutok. REVERSIONARY SECURITIES. /See Tbustbe. RIGHTS, EQUITABLE. See Equitable Rights. 632 Index. ROMAN LAW, personal servitude in, 24. Roman equity, basis of, 7. usus and ususfnictiis in, 24. RULE AGAINST PERPETUITIES, application of, 80. charitable trusts, and, 214. S. SATISFACTION, debt, of, 270. defined, 265. parol evidence as to, 281. portion, of, 277, SEORET TRUSTS, how they arise, 67. SETTLED ACCOUNT, meaning of, 522, surcharge and falsify, meaning of, 522. SOLICITOR, neghgent advice of, 9, 10, 240. trustee, remuneration of, 142. SPECIFIC LEGACY. ;See Legacy. SPECIFIC PERFORMANCE, abatement, with, 467. agreements which may be the subject of, 441, 445. compensation, with, 464. conditions under which granted, 443. damages an inadequate remedy, where, 440. declaration of unpaid vendor's Hen, 470. default of compliance, enforcement where, 475. efEective remedy, an, 448. equitable remedy by, 426. execution of conveyance and delivery of title deeds, 475. fraudulent withholding of evidence, how dealt with, 461. hardship preventing, 451. inquiry as to damages, 470. judgment and incidental relief, 470. order for, 470. reciprocity of remedies, 453. return of deposit, 470. variation, with, 463. Index. 633 STATED ACCOUNT. See Accotjnt. STATUTE OF USES, operation of, Foreword. repeal of, Foreword, 106. STATUTE-BARRED DEBT. See Administeation of Assets. SUB-MORTGAGE, defined, 333. not a trust investment, 336. SUBROGATION, defined, 391. SUITOR, plaintiff distinguished from, 7. SURCHARGE AND FALSIFY. See Account. T. TACKING, mortgage, with reference to, 376. abolished, 377, 378. TAIL, ESTATES, power to dispose by will, 539. TENURE, nature of, 37. abolished, 39. TERRE-TENANT, owner of legal interest, 38. TESTAMENTARY EXPENSES, a first charge on assets, 560. TESTATE SUCCESSION.