Notes- Maxims of Equity

I – CHAPTER 3 3. MAXIMS OF EQUITY Reading • McGhee J., Snell’s Equity (Sweet and Maxwell, 2000) Ch 3 • Hanbury , Maudsley & Martin, Modern Equity (Sweet & Maxwell, 2001) Ch 1 • Dal Pont, G & Chalmers, Equity and Trusts in Australia and New Zealand (LBC Information Services, 2000) Ch 1 3.1 Introduction Maxims of equity are general principles which guide the court in the exercise of its jurisdiction. These maxims : • Are not positive laws of equity to be applied literally, • Do not cover comprehensively the whole field of equity, but • Each maxim embodies some peculiar function of equity. The maxims often overlap and are inter-related. 3.2 Equity will not suffer a wrong to be without a remedy This maxim was the basis for the development of the courts equity jurisdiction. No wrong should be allowed to go unredressed if it is capable of being remedied by a court of justice. A plaintiff can pray for the court’s good conscience by showing how unconscionable it would be if the plaintiff is not given the appropriate remedy. The wrong here does not mean moral wrong, but a wrong capable of judicial enforcement, but was not enforced by a court of law. . 3.3 Equity follows the law Equity follows the law unless there are circumstances disregarded by the common law that warrants equity’s intervention. The court of equity will not over ride the statute. Where a rule of either of the common or statute law, is direct, and governs the case with all its circumstances on the particular point, a court of equity is as much bound by it as a court of law, and can as little justify a departure from it. Story, Equity, (3rd Eng Edn) (1920) 34 Case: Abdulrahim v Drahman (1867) 1 Ky. 171 3.4 He who seeks equity must do equity To obtain equitable relief, the claimant must be prepared to do equity or to fulfill his obligation towards the defendant. Cases • Lodge v National Union Investment Co. [1907] 1 Ch 300 A void contract under the Money Lender’s Act 1900. Parker J refused to make the order except upon the terms that B (who borrowed the money from M) should repay the money

which had been advance to him; for B was seeking equitable relief and must therefore do what was right and fair). • Chillingworth v Chambers (1896) 1 Ch 685 (In a breach of trust by joint trustees, a beneficiary who is also a trustee is required to pay indemnity to a defendant, to the extent of his share in the trust property. • Hardoon v Belilios [1901] AC 118 3.5 He who seeks equity must come with clean hands This maxim looks to the past conduct of the plaintiff. Not only must the claimant be prepared to do what is right and fair, but he must also show that his past record in the transaction is clean. Access to the court will be denied if the plaintiff’s actions are fraudulent or unconscionable. Cases • Arunaselam Chetty v Mohamed Nina Marican & Anor (1864) Leic 251 • Palaniappa Chettiar v Arunaselam Chettiar (No.2) [ 1962] MLJ 143 • Suntoso Jacob v Kong Miao Ming [1986] 2 MLJ 170 • Neo Tai Kim v Foo Stie Wah [1985] 1 MLJ 397 • Gascoigne v Gascoigne [1918] 1 KB 223, DC • Overton v Bannister (1844) 3 Hare 503 • Nail v Punter (1832) 5 Sim. 555 • Aik Ming (M) Sdn Bhd & Ors v Chang Ching Chuen & Anor [1995] 2 MLJ 770 • Fusing Construction Sdn Bhd v EON Finance Bhd [2000] 2 AMR 2216 The “clean hands” requirement must have a direct relationship with the transaction at hand. See: Dering v Earl of Winchelsea (1787) 1 Cox Eq. 318, per Eyre LCB: A man must come into a court of equity with clean hands; but when this is said, it does not mean a genaral depravity: it must have an immediate and necessary relation to the equity sued for, it must be a depravity in a legal as well as a moral sense. See also • Tinsley v Milligan [1994] AC 340 H/L – One can insist on an equitable ownership as long as he or she is not claiming or relying on an illegal act. • Bowmaker v Barnet Instruments [1944] 2 All ER 579. 3.6 Where there is equity, the law shall prevail Where the rights of both parties are the same, the party with the right in law has priority. See: S 206 (1) and (3) the National Land Code 1965 In a claim for land where equities are equal, the court will give priority to the party holding the registered title. Case: Langan & Others v Lee Cheng Keat (1886) 4 Ky 154

3.7 Where the equities are equal, the first in time shall prevail (Qui prior est tempore, potoir est jure) Where equities are equal,in the absence of any other factors that determines the rights between the parties, the first in time has priority. Cases • Vallipuram Silvaguru v Palaniappa Chetty [1937] MLJ 59 • Quah Hong Lian Neo v Seow Teong Teck & Ors [1936] MLJ 203 • United Malayan Banking Corporation Bhd v Goh Tuan Laye & Ors [1976] 1 MLJ 169 • Abigail v Lapin (1934) 51 CLR 58 This maxim is only applicable where equities are equal. It cannot be used against a bona fide purchaser for value without notice of a prior interest. Cases • Zeno Ltd v Prefabricated Construction Company [1967] 2 MLJ 104 • Goh Keng How v Raja Zainal Abidin [1995] 3 MLJ 6 • Haroon bin Guriaman v Nik Mah bte Nik Mat & Anor [1951] MLJ 209 • Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265 Kitto J held that the maxim que est prior tempore does not apply because it only applies where equities are equal A bona fide purchaser for value without notice is a good defence.. 3.8 Delay defeats equity The modern application of this maxim is illustrated in the concept of laches and acquiescence. Equitable claims can be limited by the Limitation Act 1953 directly or by analogy. Lord Camden in Smith v Clay (1767) 3 Bro CC 639 said: A court of equity has always refused its aid to stale demands where a party has slept upon his rights and acquiesced for a great length of time. Nothing can call forth this court into activity but conscience, good faith and reasonable diligence. See also Yong Nyee Fan & Sons v Kim Guan & Co.Sdn Bhd [1979] 1 MLJ 182 However, delay in itself does not restrict the right to claim where it is not related or relevant to the claim. Case: Lindsay Petroleum Company v Hurd (1874) LR 5 PC 221 (PC): The doctrine of laches in the Courts of Equity is not an arbitrary or 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 waiver of it, or where by his conduct and neglect he has, though perhaps not waived 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. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, the validity of the defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are the length of the delay and the nature of the acts done during the interval, which might affect either party and cause the balance of justice or injustice in taking the one course or the other, so far as it relates to the remedy. Delays that are material – see the following cases: • Erlanger v New Sombrero Phosphate Co (1878) 3 App. Cas 1218 • Re Len Chee Omnibus Co. Ltd. Chin Sow Lan v Lee Chee Omnibus Co. Ltd & Ors [1969] 2 MLJ 202 • Allcard v Skinner (1887) 36 Ch D 145 • Gov’t of Selangor v The Reciever of the Estate of Yap Ah Loy (1903) 9 SSLR 26 • Bourne v Swan & Edgar Ltd (1903) 1 Ch 219 • Goh Keng How v Raja Zainal Abidin bin Raja Hussin [1995] 3 MLJ 6 Laches is a personal disqualification. It does not bind the successors of title. 3.9 Equality is equity In circumstances of conflicting claims, where there is not other basis of division, all who are entitled to the property should the equal division. This maxim is the basis of presumption of tenancy in common and partnership.. Cases • Tai Kwong Goldsmiths & Jewellers (under recievership) v Yap Kooi Hee & Ors [1995] 1 MLJ 1 No provision in the Partnership Act that provide for the order of priority of payment of debts and liability of a partnership. As such, it should be divided equally. Section 46 (b) (i) and s 47 (1) Partnership Act 1960 refers. • Mac Donald v Mac Donald ( 1957) 2 All ER 690 (equal division between the husband, wife and the mother in law who had contributed to the purchase of home furnishings.) • Lau Choong Choo v Chau We Chuan [1980] 1 MLJ 6 • Jones v Maynard [1951] Ch 572 • Re Dickens (1935) Ch 267 3.10 Equity looks to the intent rather than the form Generally equity does not look to the form but the substance. In certain circumstances equity will not allow a transaction to be set aside on grounds of technicality.

Romilly MR said in Parkin v Thorold (1852) 16 Beav. 59:

Courts of Equity make a distinction in all cases between that which is matter of substance and that which is a matter of form: and if it finds that by insisting on the form, the substance will be defeated, it holds it inequitable to allow a person to insist on such form, and thereby defeat the substance. See also: Yong Nyee Fan v Kim Guan & Co [1979] MLJ 182, 190 This maxim is the basis of the equitable doctrine that in construction of wills or trusts, what is of utmost importance is the intention of the settler or the testator as expressed in the will. Cases • Re Adam’s and the Kensington Vestry (1884) 27 Ch. D 394 • Wan Naimah v Wan Mohd Nawawi [1974] 1 MLJ 41 3.11 Equity will not permit the provisions of a statute intended to prevent fraud to be used as an instrument for fraud Although equity will not go against the statutory provisions, it will not allow a party to insist on his legal rights under a statute to cause detriment or to avoid the performance of his obligation to the other party. Cases • Sia Siew Hong & Ors v Lim Gim Chian & Anor [1995] 3 MLJ 141 • Aik Ming (M) Sdn Bhd v Chang Ching Chuen & Ors [1995] 2 MLJ 770 3.12 Equity looks on that as done which ought to be done Where there is a specifically enforceable obligation equity regards the parties as already in the position which they would be in after performance of the obligation. For instance a specifically enforceable contract for sale of land transfer4s the equitable interest to the purchaser, the vendor holding the legal title on constructive trust until completion. Case: Lysaght v Edwards (1876) 2 Ch D 499 It appears to me that the effect of a contract for sale has been settled ... it is that the moment you have a valid contrct for sale the vendor becomes in equity a trustee for the purchaser of the estate sold, and the beneficial ownership passes to the purchaser, the vendor having a right to the purchase money, a charge or lien on the estate for the security of that purchase money, and a right to retain possession of the estate until the purchase money is paid, in the absence of express contract as to the time of delivering possession. • Re Lind [1915] 2 Ch 354 • Napier and Ettrick (Lord) v Hunter [1993] AC 713 • AG of HongKong v Reid [1994] 1 AC 324 • Borneo Housing Mortgage Finance Bhd v Time Engineering Bhd [1996] 2 CLJ 561

3.13 Equity will not perfect and imperfect gift / Equity will not assist a volunteer. An undertaking to convey or to transfer something without consideration cannot be enforced because it is a gratuitous. Unless there has been an outright transfer, the donee cannot enforce the promise. In there is an agreement to create a trust, the trust property must be vested in the trustee for equity will not perfect an imperfect gift. Note: This is subject to a number of exceptions which will be discussed through the cases under the chapter on Incompletely Constituted Trusts (Part II, Ch 4). This will be discussed under cases like Milroy v Lord (1862) 4 De GF & J 264, Inwards v Baker [1965] 2 QB 29, Cheng Hang Guan v Perumahan Farlim [1993] 3 MLJ 352.

3.14

Equity Acts in Personam

This maxims shows the difference between the procedure at equity and common law. The enforcement at common law is through the writ of execution whereas the Chancery court has jurisdiction over the defendant personally – and the order of the court of equity is directed on the person personally such that the failure to comply is a contempt of court punishable by imprisonment. Claims at common law is a claim in rem whereas the claim at equity is in personam. Case • Penn v Lord Baltimore (1750) 1 Ves Sen 444; ER 1132 (specific performance was ordered of an agreement relating to land boundaries in Pennsylvania and Maryland the defendant being in England.)

Lord Harwicke said: the conscience of the party was bound by this agreement, and being under the jurisdiction of the court, which acts in personam, the court may properly decree it as an agreement.