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Equity Exam Template | Assignments to Tracing...

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EQUITY EQUITABLE ASSIGNMENTS -Chose-in-action: Intangible personal right of property that can only be enforced by an action and not by taking physical possession Torkington v McGee o To assign your ownership of a chose in action, the legal system must be the means of enforcement -Assignment: the immediate transfer of existing property from the assignor to assignee -Obligor: The person who is obliged to fulfil the right being assigned -Assignor: Person assigning the right -Assignee: Person receiving the right Introduction: Start who is obligor, assignor, and assignee. What the property is, and then if it is legal or equitable chose Rights that are not assignable 1. Bare promise is not assignable in equity or in law 2. Rights under a purely personal contract of service are not assignable (e.g. the right to have my picture painted, where identity is critical) 3.You cannot assign obligations e.g. to repay mortgages 4.You cannot assign bare rights of action as a claim in tort to unliquidated damages ( Glegg v Bromley) (e.g. if you get run over, you can’t assign the right to damages for that injury) or unliquidated damages for breach of contract Note: You can assign the right to receive the damages after the party has sued Glegg v Bromley o Glegg v Bromley facts: defamation action, wife assigned to husband ‘all that the interest sum of money or premises to which she is or may become entitled under or by virtue of . . . any verdict, compromise or agreement which she may obtain or to which she may become a party in or consequent upon the said action [for slander against Bromley]’ o The underlying rationale as to why all of these rights that are not assignable is a view of public policy that we don't want to encourage ‘maintenance’, we don't want to encourage the ongoing litigation of issues, third parties shouldn't be encouraging litigation, if we could assign bare rights we might encourage that matters are not settled but rather that they continue to be potentially litigated Distinction between Common Law Rights and Equitable Rights -Certain rights are common law and certain rights are equitable, listed below are examples Common law and statutory rights/legal chose: o Debts

rights to sums of money payable or property transferrable under contracts o company shares -Equitable rights/equitable chose: o beneficiary’s interest under a trust o mortgagor’s equity of redemption under a legal mortgage of personal property o legatee’s right in an unadministered estate Schultz o partner’s interests in partnership assets on winding up o interest of equitable mortgagee Rules Start Here: Is it a legal chose in action or is it an equitable chose in action? (Or is it future property). Identify the parties. o

Is it an absolute right? o Must be absolute assignment of the whole right o Must be unconditional Legal chose in action (1) ® assignable at law under statute (must be absolute assignment, ie not part only of chose in action or assigned for a limited term) (s199 PLA (Qld)) ® no consideration needed ® effective at law if elements satisfied. Needs: o Assignment in writing; o Signed by assignor; o Express written notice to obligor that the assignment has taken place (debtor etc). Following Oceanic Life the statement has to be a direct and definite statement as opposed to supplying materials from which an obligor has to determine themselves; o assigned absolutely and not by way of “charge”. Conclusion: Therefore, as s199 (has/has not) been complied with the assignment (is/is not) effective at law. (If an assignment is effective in law that means the assignee can sue the obligor directly) The statute applies (PLA or Corps Act), but was not complied with: The notice can be given

(2) (a) if statute applies but is not complied with (eg not in writing, not signed, no adequate notice) ® assignment effective in equity if ® consideration: Clear intention to assign and consideration has passed (Holroyd v Marshall), equity will enforce this assignment as it is unconscionable for the formalities to be put ahead of good conscious. Assignor then holds chose on CT for assignee. Consider how to remedy the first shortcoming and make it effective at law (e.g. put it in writing, give notice) or ® gift: Equity will only complete the gift if the donor has done everything necessary to be done (Milroy v Lord). Following Corrin v Patton this means the only acts remaining can be done by the donee, the gift is beyond the donor’s recall. This has been codified in s200 PLA to mean that the assignment will be effective in equity as soon as the assignor has done everything necessary to be done to effect the transfer (even if s199 not wholly satisfied). Note, express written notice to the obligor is not required for it to be effective in equity/equitable title to pass. The obligor is bound to the assignee (if it is an otherwise effective assignment) who holds it on constructive trust until notice is given (Norman v FCT) (assignee can give notice instead of assignor). The assignment is only part of the right or for a limited time or is conditional (Not absolute) (E.g. of conditional: “After your wedding day, I assign you exsiting property” = must get married first) (E.g. of partial = one quarter of the debt) o Not assignable at law, so must look to equity (2) (b) legal chose in action (or equitable chose in action) not assignable by statute (eg part only or for a limited term or conditional) ® assignment effective in equity if: ® consideration: clear intention to assign and consideration has passed (Holroyd v Marshall), writing is not required and notice is not required by prudent (as it can effect priority) Equity will enforce this assignment as it would be unconscionable for equity to put formalities ahead of good conscious. or ® gift: clear intention to assign, to make immediate and irrevocable transfer of present property of the chose in action (Norman v FCT,

Kitto J in Shepherd); that is, not an assignment by way of security. Note, no writing required (Shepherd) and notice is not necessary but prudent (as it can effect priority). Can assign in part (Norman) but this will never be effective at law. Equitable chose in action (3) equitable chose in action (eg beneficiary’s interest under trust; interest of equitable mortgagee; partner’s interest in partnership assets, legatee’s right in an unadministered estate) ® can be assigned by complying with statute (s 199 PLA) but not mandatory or ® assignment in equity ® clear intention to assign, to make an immediate and irrevocable transfer of present property of the chose in action (e.g. ‘I hereby’, there needs to be immediacy) ® notice not required but is useful (as it informs the “trustee” as to who to pay and priority rule in Dearle v Hall applies: where competing equitable claims, the claimant that first notifies the trustee of the assignment will get priority) ® s11(1)(c) PLA: disposition must be manifested and proved in some writing signed by the person disposing, or their agent. Absence of a signature will not make it invalid, just unenforceable until this is remedied Conclusion: Thus, the assignment (is/is not) effective in equity (If assignment is effective in equity, the assignee would generally require the assistance of the assignor in order to enforce their right) Consider: Is there a tree (a right e.g. contractual)? And if there is a tree, has the assignor assigned the tree or the fruit? (If assignment of right (tree), use rules above, (also note if partial or whole assignment), and if future property (fruit) look below to 4) Future property or expectancy (4) future property or expectancy ® not assignable under statute/law or equity as a present entitlement, as assignment takes effect from date of transfer. Assignment cannot take place retrospectively. Irrelevant if some particular event has materialised (e.g. transfer once I receive insurance payout, then later receives the insurance payout) ® therefore, if no consideration, equity does not assist volunteer and purported the transfer fails (Norman v FCT)

® if consideration, equity will seize on the conscious of assignor and the assignment takes effect as agreement to assign the property when it vests. It does so by means of a constructive trust (Palette Shoes Pty Ltd Dixon J, Norman v FCT) If legal chose in action was for transfer of shares -Requirements under the Corporations Act for transfer of shares o Ownership in shares transfers in law when the new owner has been registered o In order to get registered there are a number of ways in which this can happen. o In order to get registered what do the directors of the company need s1072F(2): a) Transfer documents (This document needs to be in a particular form and needs to refer to the relevant details in relation to the company. Needs to be ‘a proper instrument of transfer’ that refers to the relevant details of the company) b) Share Certificate (Most companies don't issue share certificates) c) Any fees paid (e.g. stamp duty and any other fees must have been paid) d) And this has to be lodged with the directors and then can register the new owner Case Summaries -When statute applies but has not been applied with, equity cases: Milroy v Lord Facts: Mr Medley signed a deed whereby he was signing 50 shares in the bank to Mr Lord on trust for Milroy. That is all he did and then inconveniently he passed away. Lord held the share certificate already. (Under the Corporations Act for the assignment to be assignable at law you need a transfer document in the relevant form, a share certificate and then the transfer document would have to be signed, lodged at banks registered office and then the directors would then register you) The question then was when would this transfer be valid in equity Held: The court had to consider when will it be effective in equitable. The court said the rule will be that a voluntary settlement (that is by way of gift) will be effective in equity if the settlor (the assignor) has done everything necessary to be done in order to transfer the property, and this is a general rule as they say it is according to the nature of the property. -This case caused issues, as this statement everything necessary to be done was very ambiguous. The court said in this instance the assignment was not valid, the transfer document couldn't be filled out.

-Corrin v Patton resolved the ambiguity in Milroy In Corrin v Patton said rule in Milroy v Lord is meant that the assignor (settlor) would have to do everything he/she alone must do to give effect to the assignment. Deane J said they have put it beyond their recall so as to render it binding upon them. Have they put the donnee (the person getting the property) in the position to complete any remaining steps? -s200 Property Law Act rule from Milroy v Lord an is the same interpretation from Corrin v Patton. As long as anything that remains to be done can be done by the assignee without the assistance of or input of the assignor. -Future Property Notes Two basic principles (we are focused on assignments and immediate transfers) 1. Cannot assign immediately future property. Property that I do not have. Neither in law or equity is that a valid assignment 2. However, if consideration has passed (if I purport to assign future property to you now and consideration has passed) then equity seizes upon my conscious and says we treat it as an agreement to assign, but it is more than it would be unconscionable for me to refuse to do what I said I would. When do I have to give effect to the statement that I am assigning this future property? Not only as soon as it vests do I have an obligation to transfer it to you, equity goes further and says I hold it on constructive trust for you as soon as it vests in me Norman v FCT Facts: Mr Norman by deed assigned (which in equity doesn't count as consideration, so it doesn't mean consideration has passed equity looks to the substance not to the form) his “right, title and interest to all of the interest on a loan that he had made to his partnership, all of the dividends on shares to which he may be entitled for the years of 1956 and 1957.” And in 1955 he signed a deed saying “I hereby assign all my rights title and interest to all of the interest on a loan that I have made to a partnership and all dividends on certain shares that I own for the years 1956 and 1957.” He assigned it to certain family members to avoid paying income tax. The federal commissioner of tax wanted him to pay it, and Mr Norman said no I have assigned that it is not my income. There was no consideration given by the family members. Did Mr Norman successfully assign his interest on the loan and dividends on the shares that he received in 1956 and 1957? Held: o The dividends of the shares The assignment on the dividends in the years of 1956 and 1957, the High Court said this was not a valid assignment as you have no right to dividends until they are declared by the company

directors (it is future property). Once they are declared you have a legal chose in action you have the right to receive payment of the dividends, a right to a future payment. From the date of declaration of dividends you would be able to assign your right to the dividends. Because it was future property the assignees needed to give consideration because otherwise the conscious of the assignor was not bound, it was a bare promise to make a gift not enforceable in law, not enforceable in equity as equity does not assist the volunteer. (Applying Shepherd here there was no tree to give because there was no right to dividends) o The interest on the loan The majority said that there was not an effective assignment of the interest on the loan (It was a 32 majority). The key fact that the loan was repayable by x and y at will they could repay it at any time under the contract and so the High Court said in 1955 we don't even know if there will be an outstanding or existing obligation to pay interest on 1956 or 1957 as they may have repaid the loan. Minority said that this was a valid assignment. They argued that there was a contract, a contract which contained the right to receive interest, that is a current chose in action, that is present property, you can assign that by way of gift and that had been done. (Applying Shepard here on a loan which may be terminated prior to those years there was no tree) -The interest on the loan is a problematic part of Normans case -Shepherd (on its facts it is almost identical to Norman and yet reaches a different conclusion) Facts: The assignor (tax payer) had assigned his right, title and interest to an amount equal to 90% of his income from royalties for the future three years. There was no consideration. He had a contract with a third party Mr Cowen and under that contract Cowen agreed to pay royalties for every castor that he manufactured and sold. Mr Sheppard owned the patent on the castor. Was this a valid assignment? Held: The question was, was it future or present property because there was no consideration and therefore it had to be present property. Was there any present property to assign? There was a right under a contract with a third party to pay royalties and that right was an existing right it was a legal chose in action and he had assigned 90% of that legal chose in action. Does it matter that he might not get any royalties in that given year? No because we are focused on the right, we are focused on the chose in action not whether that chose in action is worth much or how much it is worth

because that is a matter for the market. The majority of the High Court said that was a valid assignment and therefore he did not have to pay tax on that income because the right to receive it had already been transferred to his assignees and therefore they had to pay any tax on that income. There was a dissenting judge and the dissenting judge said it doesn't look like an assignment of a current right, he said the language of 90% of his income, suggests that he is assigning the royalties themselves. The problem with this is because the royalties are for the future we don't know if he is going to get any and we don't know how much that it just something that we will find out overtime but he does not have the right to royalties yet. The High Court then struggled to explain Norman because on the facts it seems very similar to the interest loan but the way they explained Norman was to say that the focus on that case was on the fact that the loan was repayable at will and therefore there was no existing right. This was not that convincing. Kitto J establishes a distinction between capital and income the tree and the fruit. Effectively the majority of the High Court including Kitto J said that the Mr Sheppard was assigning 90% of the tree. The difference between the majority and the minority was purely a linguistic one. It is a question of whether the intention of the tax payer was to assign the tree which existed or the fruit which did not yet exist. You can assign 90% of the right to receive the royalties, you cannot assign 90% of the future royalties themselves without consideration.

EXPRESS TRUSTS Trusts for Beneficiaries - Fixed trust – beneficiary has fixed interest - Discretionary trust – trustee has power to allocate interests of the parties Trust for a Purpose - Charitable purpose Creating an Express Trust - Settlor settles property onto T for trust to X. o Transfer of property to the trustee à completion of the trust - Declaration o Settlor declares themselves the trustee. Valid Creation of an Express Trust: - A certainty of intention - A certainty of subject matter (trust property) - A certainty of object - Formalities: writing, etc. - Complete constitution of the trust à settlement - Illegality CERTAINTY OF INTENTION Look to language used – no precatory language or ‘magic’ words. Paul v Constance [1977] 1 All ER 195 – Held: Oral statement of ‘the money is as much yours as it is mine’ was sufficient to create a trust, even though not in writing. Dean v Cole (1921) 30 CLR 1 – HELD: Trusting to her that she will decide in fair, just and equal shares between my children...” in will was not sufficient to create trust because n earlier part of will, testator directed two sums of money should be at absolute disposal of widow (gave to her) but same sums of money referred to later. Words were not directive they were hoping she’d deal with it in a certain way. Hayes v National Heart Foundation of Australia, NSW Division [1976] 1 NSWLR 29 Father left residue of estate to daughter “on the understanding that she will write in her will that on her death the shares are to be sold and the proceeds divided between 3 named charities”. HELD: “On the understanding that” meant that daughter subject to obligation to deal with shares in a specific way. Therefore, sufficient to create trust. Byrnes v Kendle (2011) 243 CLR 253: FACTS: Husband and wife execute acknowledgement of trust document, declaring H held a 1/2 interest of house on trust for wife. Broke up – H argued that didn’t intend to create trust even though signed document. HELD: intention of the settlor/trustee is determined objectively not subjectively.

CERTAINTY OF SUBJECT MATTER Needs to be ascertainable personal property

other than members of my family” was sufficiently certain as the list could have been made.

Palmer v Simmons: HELD: “the bulk of my estate” is unascertainable, so the subject matter was uncertain.

West v Weston (1998) 44 NSWLR 657: FACTS: “To divide the balance then remaining equally amongst such of the issue living at my death of my 4 grandparents as attained the age of 21”. HELD: List certainty test satisfied as long as within reasonable time after gift in effect the Court is satisfied that on the balance of probabilities the substantial majority of beneficiaries were identified and no reasonable inquires could be made that would improve situation.

Re Golay (Decd) [1965] 2 All ER 660: HELD: “reasonable income” is sufficient as the Court found the testator intended the Court to use it as a yardstick. As the Court’s function is frequently to determine what is reasonable, it was held that the subject matter was ascertainable. Hunter v Moss [1994] 3 Al ER 215: FACTS: D promised P 5% of s...