Summary Notes on Law of Trust & Equity : Equitable Interests in Property

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Equity & Trust : Equitable Interests in Property

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è    EQUITABLE INTERESTS IN PROPERTY.

ü   THERE ARE 6 SITUATIONS WHERE EQ. INTERESTS IN PROP. IS RECOGNIZED.

v  In general, beneficial interests refer to the situation of equitable right of a person possessed in a contract made with another.

1.    Beneficial interest under an express trust :

Ø  Here, the express trust means as trust created or declared in direct, explicit and written terms by its maker (the trustor).

Ø  This opposed the concept of constructive trust which is obtain via process of law.

Ø  So here, in the perfection of the express trust, the beneficiary interests will be secured by the equity.

ü  MILROY v ROY

·         PRINCIPLE : Acc. to this case, there are  situation in which the beneficial interests of an express trust can be protected by the equitable principle. There are :

                           i.            Transfer of prop.

                         ii.            Declaration of trust.

                        iii.            Direction of 3^rd party to hold the prop. for the benefit of another.

ü  WAN NAIMAH v MOHD NAWAWI

·         PRINCIPLE : The exception to the gen. rule stated in the case of Milroy is that, the trust can be done quite informally but the words used must be very clear & not unambiguous.

2.    Beneficial interest under a deceased estate :

Ø  Here, it refer to the right if the beneficiary trusted by the trustor upon the death of him/her.

Ø  The right focus here is not a specified right to the asset or in another words its not a right protected by law, until such asset is distributed.

Ø  So, the period during the time of when the trust is created until its distributed, the beneficiary interest/right is protected by the eq. principles.

Ø  Regarding the issue of which beneficiary trust will prevails if there are many of them, the rule is that, the 1^st in time (that give notice to trustee) will prevails. – UNITED MALAYAN BANKING v GOH TOH YEE

Ø  It must be noted that the registered trust and the equitable trust is at par, and not any of them prevail in right unless they had done more than others.

Ø  This is further subjected to the future assignment.

ü  KHAW POH CHHUAN v NG GAIK PENG

·         ISSUE : Whether an assignor can assign the beneficiary interest to the assignor?

·         PRINCIPLE : Yes, but such assignment is limited to the amount related only.

3.    Contract for sale of land :

Ø  Eg : There is a piece of land that wanted to be sold by Ali. Ali had sold it to Siti, and Siti had paid a whole price of the land. Here, Ali was known as VENDOR. Under a ‘bare-trust’ concept, Ali would hold the land for the benefits of Siti until the day of registration.

Ø  This had been recognized under S.206(3) NLC which stated that the contractual operation of any transaction relating to alienated land is recognized by the Code.

ü  LYSAGHT v EDWARDS

·         FOC : The vendor in the transaction for the sale of land dies before the contract can be completed, i.e. registered.

·         PRINCIPLE : The vendor had become trustee for the purchased land over the as the full payment had been made. Here, the purchaser had an equitable interest over the land.

ü  BORNEO HOUSING MORTGAGE FINANCE BHD v TIME ENGINEERING BHD

·         FOC : The developer took a loan from bank to build prop. on a land. He later got into contract with the purchaser who wanted to buy such building. The developer register for charge to secure the loan made with bank. Later, the purchaser paid full price for the building.

·         ISSUE : Whether there is any bare trust applicable to protect the interest of the purchaser?

PRINCIPLE : It is true that there is a bare trust concept existed when the purchaser paid a full price, but unfortunately for them, in this case the register of charge had come into existence first before the payment. The court said in order for the bare trust to be existed, a full payment on the purchase price must exist.

4.    Beneficial interests that arise by the implication of law :

Ø  There are 2 concepts under this situation.

            i.        Resulting trust / Floating trust.

v  It is defined as the creation of an implied trust by the operation of law, where here, prop. is transferred to someone who pays nothing for it & it is implied to have held the prop. for benefits of others.

v  The resulting trust means that the trusted prop. jump back / result back to the transferor.

v  The words ‘results’ means in the result / remain with.

v  In the case of automatic resulting trust, there is no mention of any expression of intention to create such interest, but the resulting takes effect by operation of law which holds that the prop. will reverts back to you.

ü  RE VANDERVELL TRUST NO. 2

·         FOC : In this case, the opt to stop the trust had been exercised so there was a resulting trust.  Later there is an oral instruction to transfer the share.

·         ISSUE : Whether oral instruction to transfer an equitable interests in shares complied with the law.

·         PRINCIPLE : In this case, such instruction had make the children as the equitable owner of the shares. Here, the Vandervell had divested into keeping the share of the shares.

 ii.        Equitable lien.

v  Lien is a form of security for interests granted over an item of prop. & it is used to secure the payment of debt / for other performance of some other obligation.

v  The owner of prop. who granted the lien is known as lienee & the person gain benefit from it is known as lien-holder.

v  Equitable lien is defined as a non-possessory security right conferred by the operation of law. It may be applicable in limited circumstance ; Unpaid vendor has equitable lien over the land for the purchase price notwithstanding that the purchaser has gone into the possession of the prop.

ü  LANGEN & WING v BELL

·         PRINCIPLE : A director’s service co. agreement required him to assign his share in co. upon the his termination & later received the price for the transferred share. It was held that he has the equitable lien over the transferred share until he obtained full price payment.

5.          Equitable interests imposed by the court:

Ø  The concept available here is the constructive trust.

Ø  Constructive trust is a trust which imposed by the ct wherever the df knows that he has dealt with the prop. in an ‘unconscionable manner’.

Ø  Eg of unconscionable manner : fraud, bribe, steal & etc.

Ø  Aim : It is intended to take the prop. from the df control, preventing them to causing additional harm to it.

Ø  The alternative that ct served to the injured beneficiary is that it give right to that party to recover the amount of money amounting of the equal amount to the value of the prop. hold and negatively abused by the owner.

ü  PARAGON FINACE PLC v DB THAKERAR

·         PRINCIPLE : In the constructive trust, wherever the circumstances are such that it would be unconscionable for the owner of the prop. to hold still the prop., & use it for his personal interest, the trust imposed by the court would exist.

6.          Assignment of future prop. in equity:

Ø  Def. : Is a process of transferring rights over a prop. by one party the assignor to another party, the assignee.

Ø  For this right to be recognized in equity, the assignor must receive consideration for the agreement, otherwise the agreement will be ineffective.

Ø  Only for an absolute assignment, there is no requirement for the consideration to be given.

ü  NORMAN v FCT

FOC : A tax payer attempted to assign by deed, to his wife certain money which he was eventually going to receive on specific day in future. This included the dividens & interests due on loans.

PRINCIPLE : The dividens & interests were expectancies / possibilities which could not be assigned without any consideration. The ct concern was that an assignment without consideration might be used as an instrument of fraud, to avoid creditors & tax collection. Thus, such assignment is unenforceable under the equity.

è  COMPETING EQUITABLE INTEREST

            i.            First in time who gives notice to the trustee will prevail. - UNITED MALAYAN BANKING v GOH TOH YEE

          ii.            Such priority must be displaced / postponed by later equitable interests in a number of situations.

a)     Estoppel – The conduct of the holder of the prior interest indicated that the earlier interest did not exist.

b)     Waiver by the prior holder of the prior interests.

c)      The holder of the earlier equity is a volunteer & the later equity had given consideration without noticing the existence of the earlier equity.

d)     Between assignees – Priority belongs to the party who gives notice to the trustees.

è  ASSIGNMENT OF PROPERTY

Ø  REQUIREMENT FOR STATUTORY ASSIGNMENT :

Ø  S.4 of Civil Law Act 1956 -

1)    Absolute & Unconditional

       Such assignment cannot contain any conditions, or else it would fall into the equitable assignment and not the statutory one.

2)    In writing & Signed by the assignor

3)    Notice in writing to the debtor

ü  DEARLE v HALL

·         PRINCIPLE : An assignee must give notice to the debtor in order to secure his title vs other assignee.

ü  HARRIS ADACOM v PERKOM

·         FOC : Debt had arouse in this case as per the agreement between the df & the Harris Corp. Via the agreement, the products had been delivered by pf to the df. This delivery had risen a debt of RM538000 of part of df. Later, harris Corp had assigned all rights to the pf. Df failed to pay the debt, pf filed a claim in court. Df tried to argue that the assignment is void since due notice had not been given to the df.

·         PRINCIPLE : Under S.4 CLA, for legal assignment to be valid, express notice in writing must be given to the debtor, but this does not mean to be a formal one. Suffice if the notice given in the form of letter of demand for the df to pay the debt. Besides, there is no requirement for the assignor to convey such notice to the debtor, as any 3^rd party also can do so. The importance here is only for the notice to be given not on who should give the notice.

4)    Consideration not necessary if all requirements of the statute are fulfilled.

Ø  If this S.4 requirements is fulfilled, the assignee would be the holder of legal title to the right assigned & this would enable him to sue without the need to join the assignor as a party. (CATOR v CRYDON CORAL)

ü  MBF FACTORS v TAY HING JU

·         PRINCIPLE : The right to sue without the need to joint with the assignor is available after the fulfilment of the S.4 of CLA. But this only opens to the assignment of the prop., land and debt.

è  EQUITABLE ASSIGNMENT

Ø  In the situation where the S.4 is unfulfilled, this does not cease the assignment. Its only put such assignment under the equitable assignment. Under equitable assignment, there is a need to joint with the assignor to sue the other party.

Ø  This is the difference between the assignment in equity and the statutory.

Ø  Here, there is no particular form required.

Ø  There is no need for the serving of notice to the debtor.

Ø  REQUIREMENT:

1)    Intention.

       Once there is a clear intention, the equitable assignment is created.

       There is no need for consideration.

2)    Act of assignment.

Ø  MALAYSIAN INTERNATIONAL MERCHANT BANKERS v MALAYSIAN AIRLINES SYSTEM

Ø  PRINCIPLE : For the debtor who had received the notice in the equitable assignment, (although there is no need to serve such notice), such debtor must hold all the payment made to the assignor, unless it is done with the assignee’s consent. If there is no such consent obtained, and still the payment done is not stop, the debtor has to pay to assignee the same amount paid to the assignor.

è  PRIORITY BETWEEN THE EQUTABLE & STATUTORY ASSIGNMENT

Ø  Both are at par.

Ø  Factor to determine : Who send the notice to the debtor first in time will prevails vs another.